10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20429

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 UNDER SECTION 13 OR 15(b) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to                     

                         Commission file number   000-50313

SURREY BANCORP

(Exact Name of Registrant as Specified in Its Charter)

NORTH CAROLINA	59-3772016
(State or Other Jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

145 North Renfro Street (P.O. Box 1227); Mount Airy, NC 27030

(Address of principal executive office)

(336) 783-3900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

NONE

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, NO 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 x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ¨    No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes x    No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x    No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) 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.

x

Indicate by checkmark whether the registrant is a larger 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 x

The aggregate market value of the voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second quarter was $20.2 million.

3,542,984 shares of the Registrant’s common stock were issued and outstanding as of March 7, 2014.

DOCUMENTS INCORPORATED BY REFERENCE

The annual report to security holders for fiscal year ended December 31, 2013, is incorporated by reference into Form 10-K Part II, Items 6, 7 and 8, and Part IV, Item 15. The registrant’s Proxy Statement dated April 2, 2014, is incorporated by reference into Form 10-K Part III, Items 10, 11, 12, 13 and 14.

PART I

ITEM 1.   BUSINESS

General

Surrey Bancorp (the “Company”) began operations on May 1, 2003 and was created for the purpose of acquiring all the outstanding shares of common stock of Surrey Bank & Trust. The Company is subject to regulation by the Federal Reserve.

Surrey Bank & Trust (the “Bank”) was incorporated on July 15, 1996 as a North Carolina banking corporation and opened for business on July 22, 1996. As such, the Bank operates under the laws of the State of North Carolina. As a state chartered, nonmember bank, the Bank is subject to regulation, supervision and regular examination by the North Carolina Banking Commission (the “Commission”) through the North Carolina Commissioner of Banks (the “Commissioner”) and its applicable federal regulator is the Federal Deposit Insurance Corporation (the “FDIC”). The North Carolina Banking Commission and the FDIC have the power to enforce compliance with applicable banking statutes and regulations.

The principal business of the Company is to provide comprehensive individual and corporate financial services through its main and branch offices in Mount Airy, North Carolina and branch offices in Stuart, Virginia and Pilot Mountain, North Carolina. These services include demand and time deposits as well as commercial, installment, mortgage and other consumer lending services, insurance and investment services.

Competitive Conditions

The principal areas and methods of competition in the banking industry are the services that are offered, the pricing of those services, the convenience and availability of the services and the degree of expertise and personal manner with which those services are offered. The Company encounters strong competition from other commercial banks, including the largest North Carolina banks, operating in Mount Airy, North Carolina, and the surrounding area. In the conduct of certain aspects of its business, the Bank also competes with credit unions, insurance companies, money market mutual funds, and other non-bank financial institutions, some of which are not subject to the same degree of regulation as the Company. Many of these competitors have substantially greater resources and lending abilities than the Company and offer certain services, such as investment banking, trust, interstate and international banking services, that the Company does not provide.

Material Customers

Deposits are derived from a broad base of customers in the Company’s trade area. No material portion of deposits have been obtained from a single person or a few persons (including Federal, State, and local governments and agencies thereunder), the loss of which would have a materially adverse effect on the business of the Company.

The majority of loans and commitments to extend credit have been granted to customers in the Company’s market area. The majority of such customers are depositors. The Company generally does not extend credit to any single borrower or group of related borrowers in excess of approximately $5,300,000. Although the Company has a reasonably diversified portfolio, it has loan concentrations relating to customers who are in the following industries: residential real estate, real estate leasing and development, fabricated metal products manufacturing, accommodations, utilities, heavy construction, repairs and maintenance industries, nursing and residential care facilities, motion picture and sound recording industries, trucking, amusement facilities and various manufacturing industries. Total loans and loan commitments to these industry groups at December 31, 2013 and 2012 are summarized in the table below:

	Loans and Commitments December 31,
Industry	2013		2012
Real Estate	$	20,635,000	$	21,511,000
Fabricated Metal Products Manufacturing		10,622,000		11,259,000

Accommodations	10,401,000	8,061,000
Utilities	7,786,000	4,194,000
Heavy and Civil Engineering Construction	7,007,000	2,952,000
Repair and Maintenance Industries	6,839,000	6,745,000
Nursing and Residential Care Facilities	6,567,000	5,976,000
Motion Picture and Sound Recording Industries	6,358,000	11,116,000
Truck Transportation	6,352,000	6,278,000
Amusement, Gambling, and Recreation Industries	5,732,000	4,774,000
Construction of Buildings	4,570,000	3,731,000
Miscellaneous Manufacturing	4,556,000	—
Wood Product Manufacturing	4,235,000	3,313,000
Motor Vehicle and Parts Dealers	4,190,000	4,767,000
Specialty Trade Contractors	3,159,000	2,546,000
Personal and Laundry Services	2,518,000	2,283,000
Nonmetallic Mineral Product Manufacturing	2,461,000	2,585,000
Offices of Physicians	2,254,000	2,570,000
Merchant Wholesalers, Nondurable Goods	2,231,000	1,776,000
Animal Production	1,942,000	2,087,000
Food Service and Drinking Places	1,918,000	2,267,000

Rights

No patents, trademarks, licenses, franchises or concessions held are of material significance to the Company.

New Services

No new services were added to the Company’s operations in 2013.

Supervision and Regulation

Banking is a complex, highly regulated industry. The primary goals of banking regulations are to maintain a safe and sound banking system and to facilitate the conduct of sound monetary policy. In furtherance of these goals, Congress and the North Carolina General Assembly have created largely autonomous regulatory agencies and enacted numerous laws that govern banks, their holding companies and the banking industry. The descriptions of and references to the statutes and regulations below are brief summaries and do not purport to be complete. The descriptions are qualified in their entirety by reference to the specific statutes and regulations discussed.

As a North Carolina bank, Surrey Bank & Trust is subject to regulation, supervision and regular examination by the Commissioner and the FDIC. The Commissioner and the FDIC have the power to enforce compliance with applicable banking statutes and regulations.

Federal Regulation

As a bank holding company, Surrey Bancorp is subject to regulation, supervision and regular examinations by the Federal Reserve. The Bank Holding Company Act provides that a bank holding company must obtain the prior approval of the Federal Reserve for the acquisition of more than five percent of the voting stock or substantially all the assets of any bank or bank holding company. In addition, the Bank Holding Company Act restricts the extension of credit to any bank holding company by its subsidiary bank. The Bank Holding Company Act also provides that, with certain exceptions, a bank holding company may not engage in any activities other than those of banking or managing or controlling banks and other authorized subsidiaries or own or control more than five percent of the voting shares of any company that is not a bank. The Federal Reserve has deemed limited activities to be closely related to banking and therefore permissible for a bank holding company.

As a North Carolina bank, Surrey Bank & Trust is subject to regulation, supervision and regular examination by the FDIC. The FDIC is required to conduct regular on-site examinations of the operations of the Bank and enforces

federal laws that set specific requirements for bank capital, the payment of dividends, loans to officers and directors, and types and amounts of loans and investments made by commercial banks. Among other things, the FDIC must approve the establishment of branch offices, conversions, mergers, assumption of deposit liabilities between insured banks and uninsured banks or institutions, and the acquisition or establishment of certain subsidiary corporations. The FDIC can also prevent capital or surplus diminution in transactions where the deposit accounts of the resulting, continuing or assumed bank are insured by the FDIC.

Transactions with Affiliates.   A bank may not engage in specified transactions (including, for example, loans) with its affiliates unless the terms and conditions of those transactions are substantially the same or at least as favorable to the bank as those prevailing at the time for comparable transactions with or involving other nonaffiliated entities. In the absence of comparable transactions, any transaction between a bank and its affiliates must be on terms and under circumstances, including credit standards, which in good faith would be offered or would apply to nonaffiliated companies. In addition, transactions referred to as “covered transactions” between a bank and its affiliates may not exceed 10% of the bank’s capital and surplus per affiliate and an aggregate of 20% of its capital and surplus for covered transactions with all affiliates. Certain transactions with affiliates, such as loans, also must be secured by collateral of specific types and amounts. The Bank also is prohibited from purchasing low quality assets from an affiliate. Every company under common control with the Bank is deemed to be an affiliate of the Bank.

Loans to Insiders.   Federal law also constrains the types and amounts of loans that the Bank may make to its executive officers, directors and principal shareholders. Among other things, these loans are limited in amount, must be approved by the Bank’s board of directors in advance, and must be on terms and conditions as favorable to the Bank as those available to an unrelated person.

Regulation of Lending Activities.   Loans made by the Bank are also subject to numerous federal and state laws and regulations, including the Truth-In-Lending Act, Federal Consumer Credit Protection Act, the Equal Credit Opportunity Act, the Real Estate Settlement Procedures Act and adjustable rate mortgage disclosure requirements. Remedies to the borrower or consumer and penalties to the Bank are provided if the Bank fails to comply with these laws and regulations. The scope and requirements of these laws and regulations have expanded significantly in recent years.

Branch Banking.   All banks located in North Carolina are authorized to branch statewide. Accordingly, a bank located anywhere in North Carolina has the ability, subject to regulatory approval, to establish branch facilities near any of our facilities and within our market area. If other banks were to establish branch facilities near our facilities, it is uncertain whether these branch facilities would have a material adverse effect on our business. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), national and state banks may branch within the state where the head office is located, to the extent permitted by that state. National and state banks may also branch de novo into another state to the same extent a bank headquartered in that state could branch within that state, subject to certain deposit concentration limits. Federal regulations prohibit an out-of-state bank from using interstate branching authority primarily for the purpose of deposit production. These regulations include guidelines to insure that interstate branches operated by an out-of-state bank in a host state are reasonably helping to meet the credit needs of the host state communities served by the out-of-state bank.

Reserve Requirements.   Pursuant to regulations of the Federal Reserve, the Bank must maintain average daily reserves against its transaction accounts. During 2013, no reserves were required to be maintained on the first $12.4 million of transaction accounts, but reserves equal to 3.0% were required to be maintained on the aggregate balances of those accounts between $12.4 million and $79.5 million, and additional reserves were required to be maintained on aggregate balances in excess of $79.5 million in an amount equal to 10.0% of the excess. These percentages are subject to annual adjustment by the Federal Reserve, which has advised that for 2014, no reserves will be required to be maintained on the first $13.3 million of transaction accounts, but reserves equal to 3.0% must be maintained on the aggregate balances of those accounts between $13.3 million and $89.0 million, and additional reserves are required on aggregate balances in excess of $89.0 million in an amount equal to 10.0% of the excess. Because required reserves must be maintained in the form of vault cash or in an account at a Federal Reserve Bank bearing nominal interest, the effect of the reserve requirement is to reduce the amount of the institution’s interest-earning assets and interest income. As of December 31, 2013, the Bank met its reserve requirements.

Community Reinvestment.   Under the Community Reinvestment Act (“CRA”), as implemented by regulations of the federal bank regulatory agencies, an insured bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for banks, nor does it limit a bank’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the federal bank regulatory agencies, in connection with their examination of insured banks, to assess the banks’ records of meeting the credit needs of their communities, using the ratings of “outstanding,” “satisfactory,” “needs to improve,” or “substantial noncompliance,” and to take that record into account in its evaluation of certain applications by those banks. All banks are required to make public disclosure of their CRA performance ratings. The Bank received a “satisfactory” rating in its most recent CRA examination.

Governmental Monetary Policies.   The commercial banking business is affected not only by general economic conditions but also by the monetary policies of the Federal Reserve, a federal banking regulatory agency that regulates the money supply in order to mitigate recessionary and inflationary pressures. Among the techniques used to implement these objectives are open market transactions in United States government securities, changes in the rate paid by banks on bank borrowings, and changes in reserve requirements against bank deposits. These techniques are used in varying combinations to influence overall growth and distribution of bank loans, investments, and deposits, and their use may also affect interest rates charged on loans or paid for deposits. The monetary policies of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. In view of changing conditions in the national economy and money markets, as well as the effect of actions by monetary and fiscal authorities, 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.

Dividends.   As a bank holding company that does not, as an entity, currently engage in separate business activities of a material nature, the Company’s ability to pay cash dividends depends upon the cash dividends the Company receives from the Bank. The Company’s primary source of income is dividends paid by the Bank. The Company must pay all of its operating expenses from funds it receives from the Bank. North Carolina banking law permits the payment of dividends if the distribution will not reduce the bank’s capital below applicable capital requirements. Also, under federal banking law, no cash dividend may be paid if the Bank is undercapitalized or insolvent or if payment of the cash dividend would render the Bank undercapitalized or insolvent and no cash dividend may be paid by the Bank if it is in default of any deposit insurance assessment due to the FDIC. Therefore, shareholders may receive dividends from the Company only to the extent that funds are available at the holding company or from the Bank. In addition, the Federal Reserve generally prohibits bank holding companies from paying dividends except out of operating earnings, and the prospective rate of earnings retention appears consistent with the bank holding company’s capital needs, asset quality and overall financial condition. The Federal Reserve may impose restrictions on the Company’s payment of cash dividends since it is required to maintain its own adequate regulatory capital and is expected to serve as a source of financial strength and to commit resources to the Bank.

Deposit Insurance Assessments.   The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 permanently raised the basic limit on federal deposit insurance coverage from $100,000 to $250,000 per depositor. To obtain this deposit protection, banks must pay assessments to the FDIC. The FDIC assesses insurance premiums on a bank’s deposits at a variable rate depending on the probability that the Deposit Insurance Fund will incur a loss with respect to that bank. Banks assigned to higher risk classifications (that is, banks that pose a higher risk of loss to their respective deposit insurance funds) pay assessments at higher rates than institutions that pose a lower risk. The FDIC determines the deposit insurance assessment rates on the basis of a bank’s capital classification and supervisory evaluations. Each of these categories has three subcategories, resulting in nine assessment risk classifications. The three subcategories with respect to capital are “well-capitalized,” “adequately capitalized” and “less than adequately capitalized” (that would include “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized” banks). The three subcategories with respect to supervisory concerns are “healthy,” “supervisory concern” and “substantial supervisory concern.” A bank is deemed “healthy” if it is financially sound with only a few minor weaknesses. A bank is deemed subject to “supervisory concern” if it has weaknesses that, if not corrected, could result in significant deterioration of the bank and increased risk to the DIF of the FDIC. A bank is deemed subject to “substantial supervisory concern” if it poses a substantial probability of loss to the DIF. In addition, the FDIC can impose special assessments in certain instances. Until 2010, a bank’s assessment base was roughly equal to its total domestic deposits. As required by the Dodd-Frank Act, however, the FDIC amended its regulations effective April 2011 to define a bank’s assessment base as its average consolidated total assets minus its average tangible equity. This amendment also revised the insurance assessment rate schedule for banks. The new schedule charges a rate of from 0.025% to 0.09% at the lowest assessment category up to a maximum assessment of 0.45% on a bank’s average deposit base. In an effort to encourage banks to limit the FDIC’s exposure, the new insurance assessment rate formula also:

— Reduces the assessment rate paid by a bank by up to 0.05% based on the amount of unsecured debt held by the institution; and

— Increases a bank’s assessment if it is already considered risky and brokered deposits make up more than 10% of the institution’s domestic deposits.

The Bank’s deposit insurance assessments may increase depending upon the risk category and subcategory, if any, to which it is assigned. Any increase in insurance assessments could have an adverse effect on the Company’s earnings.

The Dodd-Frank Act established a statutory minimum reserve ratio of 1.35% of insured deposits for the Deposit Insurance Fund by September 30, 2020. On December 20, 2010, the FDIC increased the minimum reserve ratio to 2.0%. In order achieve these levels, the FDIC has issued special deposit insurance assessments and raised deposit insurance rates. In addition, the Dodd-Frank Act authorizes the FDIC to make additional special assessments and, for the first time in its history, charge examination fees.

Changes in Management.   Any depository institution that has been chartered less than two years, is not in compliance with the minimum capital requirements of its primary federal banking regulator, or is otherwise in a troubled condition must notify its primary federal banking regulator of the proposed addition of any person to the board of directors or the employment of any person as a senior executive officer of the institution at least 30 days before such addition or employment becomes effective. During this 30-day period, the applicable federal banking regulatory agency may disapprove of the addition of such director or employment of such officer. The Bank is not subject to any such requirements.

Enforcement Authority.   The federal banking laws also contain civil and criminal penalties available for use by the appropriate regulatory agency against certain “institution-affiliated parties” including management, employees and agents of a financial institution, as well as independent contractors such as attorneys and accountants and others who participate in the conduct of the financial institution’s affairs and who caused or are likely to cause more than minimum financial loss to or a significant adverse affect on the institution, who knowingly or recklessly violate a law or regulation, breach a fiduciary duty or engage in unsafe or unsound practices. These practices can include the failure of an institution to timely file required reports or the submission of inaccurate reports. These laws authorize the appropriate banking agency to issue cease and desist orders that 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 or take other action as determined by the primary federal banking agency to be appropriate.

Capital Adequacy.   The Federal Reserve has promulgated capital adequacy regulations for all bank holding companies with assets in excess of $150 million. The Bank is also subject to capital requirements and limits on activities established by the FDIC. The Federal Reserve’s and the FDIC’s capital adequacy regulations are based upon a risk based capital determination, whereby an institution’s adequacy is determined in light of the risk, both on- and off-balance sheet, contained in the company’s assets. Different categories of assets are assigned risk weightings and are counted at a percentage of their book value.

The regulations divide capital between Tier 1 capital (core capital) and Tier 2 capital. For a bank holding company, Tier 1 capital consists primarily of common stock, related surplus, noncumulative perpetual preferred stock, minority interests in consolidated subsidiaries and a limited amount of qualifying cumulative preferred securities. Goodwill and certain other intangibles are excluded from Tier 1 capital. Tier 2 capital consists of an amount equal to the allowance for loan and lease losses up to a maximum of 1.25% of risk weighted assets, limited other types of preferred stock not included in Tier 1 capital, hybrid capital instruments and term subordinated debt. Investments in and loans to unconsolidated banking and finance subsidiaries that constitute capital of those subsidiaries are excluded from capital. The sum of Tier 1 and Tier 2 capital constitutes qualifying total capital. The Tier 1 component must comprise at least 50% of qualifying total capital.

Every bank holding company and bank has to achieve and maintain a minimum Tier 1 capital ratio of at least 4.0% and a minimum total capital ratio of at least 8.0%. In addition, banks and bank holding companies are required to maintain a minimum leverage ratio of Tier 1 capital to average total consolidated assets (leverage capital ratio) of at least 3.0% for the most highly-rated, financially sound banks and bank holding companies and a minimum leverage ratio of at least 4.0% for all other banks. The Federal Deposit Insurance Corporation and the Federal Reserve define Tier 1 capital for banks in the same manner for both the leverage ratio and the risk-based capital ratio. However, the Federal Reserve defines Tier 1 capital for bank holding companies in a slightly different manner. As of December 31, 2013, the Company’s leverage capital ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio were 13.58%, 20.64% and 21.90%, respectively.

The guidelines also provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory level, without significant reliance on intangible assets. The guidelines also indicate that the Federal Reserve will continue to consider a “Tangible Tier 1 Leverage Ratio” in evaluating proposals for expansion or new activities. The Tangible Tier 1 Leverage Ratio is the ratio of Tier 1 capital, less intangibles not deducted from Tier 1 capital, to quarterly average total assets. As of December 31, 2013, the Federal Reserve had not advised the Company of any specific minimum Tangible Tier 1 Leverage Ratio applicable to it.

Prompt Corrective Action.   Banks are subject to restrictions on their activities depending on their level of capital. Federal “prompt corrective action” regulations divide banks into five different categories, depending on their level of capital. Under these regulations, a bank is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10% or more, a core capital ratio of 6% or more and a leverage ratio of 5% or more, and if the bank is not subject to an order or capital directive to meet and maintain a certain capital level. Under these regulations, a bank is deemed to be “adequately capitalized” if it has a total risk-based capital ratio of 8% or more, a core capital ratio of 4% or more and a leverage ratio of 4% or more (unless it receives the highest composite rating at its most recent examination and is not experiencing or anticipating significant growth, in which instance it must maintain a leverage ratio of 3% or more). Under these regulations, a bank is deemed to be “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a core capital ratio of less than 4% or a leverage ratio of less than 3%. Under these regulations, a bank is deemed to be “significantly undercapitalized” if it has a risk-based capital ratio of less than 6%, a core capital ratio of less than 3% and a leverage ratio of less than 3%. Under such regulations, a bank is deemed to be “critically undercapitalized” if it has a leverage ratio of less than or equal to 2%. In addition, the applicable federal banking agency has the ability to downgrade a bank’s classification (but not to “critically undercapitalized”) based on other considerations even if the bank meets the capital guidelines.

If a bank is classified as undercapitalized, the bank is required to submit a capital restoration plan to the FDIC and the FDIC may also take certain actions to correct the capital position of the bank. An undercapitalized bank is

prohibited from increasing its assets, engaging in a new line of business, acquiring any interest in any company or insured depository institution, or opening or acquiring a new branch office, except under certain circumstances, including the acceptance by the FDIC of a capital restoration plan for the bank.

If a state bank is classified as significantly undercapitalized, the FDIC would be required to take one or more prompt corrective actions. These actions would include, among other things, requiring sales of new securities to bolster capital, changes in management, limits on interest rates paid, prohibitions on transactions with affiliates, termination of certain risky activities and restrictions on compensation paid to executive officers. If a bank is classified as critically undercapitalized, the bank must be placed into conservatorship or receivership within 90 days, unless the FDIC determines otherwise.

The capital classification of a bank affects the frequency of regulatory examinations of the bank and impacts the ability of the bank to engage in certain activities and affects the deposit insurance premiums paid by the bank. The FDIC is required to conduct a full-scope, on-site examination of every bank on a periodic basis.

Banks also may be restricted in their ability to accept brokered deposits, depending on their capital classification. “Well capitalized” banks are permitted to accept brokered deposits, but all banks that are not well capitalized are not permitted to accept such deposits. The FDIC may, on a case-by-case basis, permit banks that are adequately capitalized to accept brokered deposits if the FDIC determines that acceptance of such deposits would not constitute an unsafe or unsound banking practice with respect to the bank.

State Regulation

As a North Carolina-chartered bank, the Bank is also subject to extensive supervision and regulation by the Commissioner. Effective October 1, 2012, the North Carolina banking laws were rewritten and recodified. Under the revised banking laws, the Commissioner continues to enforce specific requirements for bank capital, the payment of dividends, loans to officers and directors, record keeping, and types and amounts of loans and investments made by commercial banks. Among other things, the approval of the Commissioner is generally required before a North Carolina-chartered commercial bank may establish branch offices, merge with another financial institution, or liquidate or sell substantially all of its assets.

Change of control.   North Carolina banking laws provide that no person may directly or indirectly purchase or acquire voting stock of the Bank that would result in the change in control of the Bank unless the Commissioner has approved the acquisition. A person will be deemed to have acquired “control” of the Bank if that person directly or indirectly (i) owns, controls or has power to vote 10% or more of the voting stock of the Bank, or (ii) otherwise possesses the power to direct or cause the direction of the management and policy of the Bank.

Loans.   In its lending activities, the Bank is subject to North Carolina usury laws which generally limit or restrict the rates of interest, fees and charges and other terms and conditions in connection with various types of loans. North Carolina banking law also limits the amount that may be loaned to any one borrower.

Dividends.   The ability of the Bank to pay dividends is restricted under applicable law and regulations. North Carolina banking law permits the payment of dividends if the distribution will not reduce the bank’s capital below applicable capital requirements.

Holding companies.   North Carolina banking law requires that bank holding companies register with the Commissioner and maintain that registration annually. The Commissioner must also approve any acquisition of control of a state-chartered bank by a bank holding company.

Recent Legislation

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

The Dodd-Frank Act has had and will continue to have a broad impact on the financial services industry, including significant regulatory and compliance changes as such, including, among other things, (i) enhanced resolution authority of troubled and failing banks and their holding companies; (ii) increased capital and liquidity requirements; (iii) increased regulatory examination fees; (iv) changes to assessments to be paid to the FDIC for federal deposit insurance; and (v) numerous other provisions designed to improve supervision and oversight of, and strengthening safety and soundness for, the financial services sector. Additionally, the Dodd-Frank Act established a new framework for systemic risk oversight within the financial system to be distributed among new and existing federal regulatory agencies, including the Financial Stability Oversight Council, the Federal Reserve, the Office of the Comptroller of the Currency, and the FDIC. A summary of certain provisions of the Dodd-Frank Act that are expected to have an effect on the Company is set forth below.

• Increased Capital Standards and Enhanced Supervision. In July 2013, the Board of Governors of the Federal Reserve System announced its approval of a final rule to implement the Basel III regulatory capital reforms, among other changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule requires banking organizations to hold more and higher quality capital to act as a financial cushion to absorb losses, taking into account the impact of risk. The rule includes a new minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5% as well as a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets. The rule also raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and includes a minimum leverage ratio of 4% for all banking institutions. In terms of quality of capital, the rule emphasizes common equity Tier 1 capital and implements strict eligibility criteria for regulatory capital instruments. It also improves the methodology for calculating risk-weighted assets to enhance risk sensitivity. The phase-in for smaller banking organizations, such as the Company and the Bank, will not begin until January 2015, while the phase-in period for larger banks starts in January 2014. Increases in capital requirements could result in a material impact on the Company and the Bank.

• The Consumer Financial Protection Bureau (“Bureau”). The Dodd-Frank Act created the Bureau within the Federal Reserve. The Bureau is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services. The Bureau has rulemaking authority over many of the statutes governing products and services offered to bank consumers, and is expected to standardize certain consumer products and to require banks to provide expanded access to account, transaction and fee information. In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are more stringent than those regulations promulgated by the Bureau and state attorneys general are permitted to enforce consumer protection rules adopted by the Bureau against state-chartered institutions.

• Deposit Insurance. The Dodd-Frank Act makes permanent the $250,000 deposit insurance limit for insured deposits. Amendments to the Federal Deposit Insurance Act also revise the assessment base against which an insured depository institution’s deposit insurance premiums paid to the Deposit Insurance Fund (“DIF”) will be calculated. Under the amendments, the assessment base will no longer be the institution’s deposit base, but rather its average consolidated total assets less its average tangible equity during the assessment period. Additionally, the Dodd-Frank Act makes changes to the minimum designated reserve ratio of the DIF, increasing the minimum from 1.15 percent to 1.35 percent of the estimated amount of total insured deposits and eliminating the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds. The Dodd- Frank Act also allows depository institutions to pay interest on demand deposits.

• Transactions with Affiliates. The Dodd-Frank Act enhances 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.

• Transactions with Insiders. Insider transaction limitations are expanded through the strengthening of loan restrictions to insiders and the expansion of the types of transactions subject to the various limits, including derivative transactions, repurchase agreements, reverse repurchase agreements and securities lending or borrowing transactions. Restrictions are also placed on certain asset sales to and from an insider to an institution, including requirements that such sales be on market terms and, in certain circumstances, approved by the institution’s board of directors.

• Enhanced Lending Limits. The Dodd-Frank Act strengthens the existing limits on a depository institution’s credit exposure to one borrower. Current banking law limits 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 expands 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 could lead to a material financial loss to such firm. The Company does not believe the Dodd-Frank Act will materially impact the current compensation policies at the Company and Bank.

• Holding Company Capital Levels. The Dodd-Frank Act requires bank regulators to establish minimum capital levels for holding companies that are at least of the same nature as those applicable to financial institutions. All trust preferred securities, or TRUPs, issued by bank or thrift holding companies after May 19, 2010 will be counted as Tier II Capital (with an exception for certain small bank holding companies). TRUPs issued prior to May 19, 2010 by bank holding companies with less than $15 billion in assets as of December 31, 2009, such as the Company, are exempt from these capital deductions.

• De Novo Interstate Branching. The Dodd-Frank Act removes restrictions on interstate branching and allows banks to establish branch offices in any state if the laws of that state permit a bank chartered in that state to establish the branch office. This provision may increase competition with the Bank by out-of-state financial institutions.

• Shareholder Voting. The Dodd-Frank Act requires, at least once every three years, a non-binding shareholder vote on executive compensation. Shareholders must also be given a non-binding vote on the frequency of such “say-on-pay” votes. If shareholders are asked to vote on a merger transaction, they must also be permitted a non-binding vote on any compensation paid to the company’s named executive officers in connection with the transaction. The Act also prohibits brokers from voting on any of these proposals without customer instructions.

While approximately two thirds of the required regulations have been adopted, drafting the rules called for in the Dodd-Frank Act remains in process and the associated rule-making process will likely take place over the course of several more 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 regulations will have on the operations of financial institutions generally and the Company, specifically, is unclear. The changes resulting from the Dodd-Frank Act may impact the profitability of the Company’s business activities, require changes to certain of the Company’s business practices, impose upon the Company and Bank more stringent capital, liquidity

and leverage ratio requirements or otherwise adversely affect the Company’s business. These changes may also require the Company to invest significant management attention and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements.

Future Legislation and Regulations

The Company cannot predict what new legislation might be enacted or what regulations might be adopted or amended, or if enacted, adopted or amended, their effect on its operations. Any change in applicable law or regulation, state or federal, may have a material adverse effect on its business.

Environmental Laws

Compliance with federal, state, or local provisions regulating the discharge of materials into the environment has not had, nor is it expected to have in the future, a material effect upon the Bank’s capital expenditures, earnings or competitive position.

Employees

All employees of the Company are compensated by the Company’s subsidiary, the Bank. The Bank had ten (10) officers, fifty-nine (59) full-time employees (including the officers), and thirteen (13) part-time employees as of December 31, 2013.

ITEM 1A. RISK FACTORS

Not Applicable as a “Smaller Reporting Company.”

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Company’s permanent headquarters is a two-story brick building, with approximately 8,500 square feet of space located at 145 North Renfro Street, Mount Airy, North Carolina, which is also the headquarters of the Bank. The building has drive-up facilities. The Bank’s finance, operations, mortgage lending and insurance departments are housed in a one-story brick building with approximately 7,500 square feet of space located at 199 North Renfro Street in Mount Airy, North Carolina.

The Company has a modular training facility located at 143 North Renfro Street, Mount Airy, North Carolina. The modular unit has approximately 1,600 square feet of floor space.

The Bank owns a one-story brick building at 165 North Renfro Street that serves as the offices for its sales finance subsidiary, Freedom Finance, LLC. The building has approximately 1,600 square feet of floor space.

The Bank has two branch locations in Mount Airy, North Carolina. The 1280 West Pine Street branch is a two-story brick building with approximately 4,500 square feet of floor space. The branch also has drive-up facilities and is leased under a five-year agreement, which extends through March of 2015. The 2050 Rockford Street branch is a one-story brick building with approximately 2,400 square feet of floor space with drive-up facilities.

The Bank has a branch location in Stuart, Virginia located at 940 Woodland Drive. The branch is a one-story brick building with approximately 2,800 square feet of floor space. The building has drive-up facilities.

The Bank has a branch location in Pilot Mountain, North Carolina at 653 South Key Street. The branch is a one-story brick building with approximately 2,800 square feet of floor space. The building has drive-up facilities.

The Bank has a Loan Production Office (LPO) Elkin, North Carolina at 1328 North Bridge Street. The LPO office space is approximately 1,300 square feet and is leased under a one-year agreement with an option to extend the lease until July of 2015.

The Bank owns all of its facilities except for the West Pine Street branch and the Elkin Loan Production Office, which are leased as described above.

ITEM 3. LEGAL PROCEEDINGS

The Company is involved a as plaintiff or defendant in various legal actions arising in the course of business. It is the opinion of management, after consultation with counsel, that the resolution of these legal actions will not have a material adverse effect on the Company’s financial condition and results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock is traded in the over the counter market, and is listed in the National Daily Quotation Service “Bulletin Board” under the symbol “SRYB.” The following table shows the high and low prices for each quarter of the fiscal years, and reflects inter-dealer prices, without retail mark-up, mark-down or commissions and may not represent actual transactions:

	2013– Price Per Share		2012 – Price Per Share
	High	Low	High	Low
First Quarter	$8.75	$7.50	$9.94	$8.45
Second Quarter	$8.25	$7.65	$9.94	$8.50
Third Quarter	$11.00	$7.00	$9.00	$8.65
Fourth Quarter	$12.25	$9.10	$8.75	$8.08

The last sales price of the common stock on March 10, 2014 was $12.00. The approximate number of holders of the Company’s 3,542,984 shares of Common Stock as of December 31, 2013 is 1,500. There are 189,356 shares of the Company’s Series A Preferred Stock issued and outstanding as of December 31, 2013. The preferred stock is non-cumulative and each share is convertible into 2.2955 shares of common stock. The preferred stock carries a dividend rate of 4.5% and has a liquidation value of $14.00 per share. The preferred stock was issued under a private placement in the second quarter of 2003. There are 181,154 shares of the Company’s Series D Preferred Stock issued and outstanding as of December 31, 2013. The preferred stock is non-cumulative and each share is convertible into 1.1000 shares of common stock. The preferred stock carries a dividend rate of 5.0% and has a liquidation value of $7.08 per share. The preferred stock was issued under a private placement in the fourth quarter of 2010.

Each holder of Common Stock is entitled to dividends paid by the Company when and if declared by the Board of Directors from funds legally available. The determination and declaration of dividends is within the discretion of the Board of Directors subject to legal conditions. As a bank holding company that does not, as an entity, currently engage in separate business activities of a material nature, the ability to pay cash dividends depends upon the cash dividends received from the subsidiary bank (Surrey Bank & Trust). The Company’s only source of income is dividends paid by the Bank and interest income from excess funds invested in time deposits with the Bank. The

Company must pay all of its operating expenses from funds that are received from the Bank. North Carolina banking requires that dividends from a bank be paid out of the Bank’s retained earnings and prohibits the payment of cash dividends if payment of the dividend would cause the Bank’s surplus to be less than 50% of its paid-in capital. Also, under federal banking law, no cash dividend may be paid if the Bank is undercapitalized or insolvent or if payment of the cash dividend would render the Bank undercapitalized or insolvent, and no cash dividend may be paid by the Bank if it is in default of any deposit insurance assessment due to the FDIC. Therefore, shareholders may receive dividends from the Company only to the extent that funds are available from the Bank. In addition, the Federal Reserve generally prohibits bank holding companies from paying dividends except out of operating earnings, and the prospective rate of earnings retention appears consistent with the bank holding company’s capital needs, asset quality and overall financial condition. Subject to these restrictions, the Board of Directors will consider the payment of dividends when it is deemed prudent to do so.

On December 17, 2013, the Company declared a special cash dividend of $0.21 per share on its common stock, payable January 8, 2014, to shareholders of record as of the close of business on December 27, 2013. This dividend was paid out of an $867,000 dividend payment to the Company from Surrey Bank & Trust.

On November 28, 2012, the Company declared a special cash dividend of $0.18 per share on its common stock, payable December 27, 2012, to shareholders of record as of the close of business on December 7, 2012. This dividend was paid out of a $686,000 dividend payment to the Company from Surrey Bank & Trust.

On December 16, 2011, the Company declared a special cash dividend of $0.15 per share on its common stock, payable January 6, 2012, to shareholders of record as of the close of business on December 27, 2011. This dividend was paid out of excess funds in the bank holding company and a $350,000 dividend payment to the Company from Surrey Bank & Trust.

ITEM 6. SELECTED FINANCIAL DATA

Incorporated by reference from the registrant’s annual report to security holders for the fiscal year ended December 31, 2013 attached as Exhibit 15 to this Form 10-K.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Incorporated by reference from the registrant’s annual report to security holders for the fiscal year ended December 31, 2013 attached as Exhibit 15 to this Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable as a “Smaller Reporting Company.”

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Incorporated by reference from the registrant’s annual report to security holders for the fiscal year ended December 31, 2013 attached as Exhibit 15 to this Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

As of the end of the period covered by this Annual Report on Form 10-K, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goal under every potential condition, regardless of how remote. In addition, the operation of any system of controls and procedures is dependent upon the employees responsible for executing it. While we have evaluated the operation of our disclosure controls and procedures and found them effective, there can be no assurance that they will succeed in every instance to achieve their objective.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of the inherent limitations in any internal control, no matter how well designed, misstatements may occur and not be prevented or detected. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may decline.

Management conducted an evaluation of the effectiveness of our system of internal control over financial reporting as of December 31, 2013, based on the 1992 framework set forth in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation, management concluded that, as of December 31, 2013, Surrey Bancorp’s internal control over financial reporting was effective.

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to a provision in the Dodd-Frank Act that exempts smaller reporting companies, like the Company, from the requirement to provide the auditor’s attestation report in this annual report.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting during the fourth fiscal quarter of the fiscal year covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Incorporated by reference from the registrant’s definitive proxy statement to be filed with the SEC by April 30, 2014.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference from the registrant’s definitive proxy statement to be filed with the SEC by April 30, 2014.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Incorporated by reference from the registrant’s definitive proxy statement to be filed with the SEC by April 30, 2014.

The following table sets forth equity compensation plan information at December 31, 2013.

Equity Compensation Plan Information
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	41,190	$12.06	-
Equity compensation plans not approved by security holders	NA	NA	NA
Total	41,190	$12.06	-

A description of the Company’s equity compensation plans is presented in Note 15 to the financial statements in the Registrant’s annual report to shareholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Incorporated by reference from the registrant’s definitive proxy statement to be filed with the SEC by April 30, 2014.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Incorporated by reference from the registrant’s definitive proxy statement to be filed with the SEC by April 30, 2014.

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of the report:

		2013 Annual Report To Stockholders Pages*
1.	Consolidated Financial Statements
	Consolidated Balance Sheets
	December 31, 2013 and 2012	3
	Consolidated Statements of Income
	Years ended December 31, 2013 and 2012	4
	Consolidated Statements of Comprehensive Income
	Years ended December 31, 2013 and 2012	5
	Consolidated Statements of Changes in Stockholders’
	Equity Years ended December 31, 2013 and 2012	6
	Consolidated Statements of Cash Flows	7 – 8
	Years ended December 31, 2013 and 2012
	Notes to Consolidated Financial Statements	9 – 39
	Report of Independent Registered Public Accounting Firm	40
*   Incorporated by reference from the indicated pages of the 2013 Annual Report to Stockholders
2.	Consolidated Financial Statement Schedules
	All schedules are omitted as the required information is inapplicable or the information is presented in the Consolidated Financial Statements or related notes.
3.	Exhibits

Exhibit	Description
3.1	Surrey Bancorp Articles of Incorporation	Incorporated by reference to Exhibit 3.1 to the Registrant’s form 10K dated March 28, 2011.
3.2	Surrey Bancorp Bylaws	Incorporated by reference to Exhibit 3(i) to the Registrant’s form 8K dated May 1, 2003
10.1	1997 Incentive Stock Option Plan	Incorporated by reference to Exhibit 4.1 to the Registrant’s Form S-8 dated September 11, 2003
10.2	1997 Nonstatutory Stock Option Plan	Incorporated by reference to Exhibit 4.1 to the Registrant’s Form S-8 dated September 11, 2003
10.3	Executive Salary Continuation Agreement of Edward C. Ashby, III	Incorporated by reference to Exhibit 10.1 to the Registrant’s 2005 2nd Quarter Form 10Q

10.4	Executive Salary Continuation Agreement of Mark H. Towe	Incorporated by reference to Exhibit 10.3 to the Registrant’s 2005 2nd Quarter Form 10Q
10.5	Executive Salary Continuation Agreement of Pedro A. Pequeno, II	Incorporated by reference to Exhibit 10.2 to the Registrant’s 2005 2nd Quarter Form 10Q
10.6	409A Amendment to Surrey Bank & Trust Executive Salary Continuation Plan between the Bank and Edward C. Ashby, III	Incorporated by reference to Exhibit 10.3 to the Registrant’s 2008 2nd Quarter Form 10Q
10.7	409A Amendment to Surrey Bank & Trust Executive Salary Continuation Plan between the Bank and Mark H. Towe	Incorporated by reference to Exhibit 10.3 to the Registrant’s 2008 2nd Quarter Form 10Q
10.8	409A Amendment to Surrey Bank & Trust Executive Salary Continuation Plan between the Bank and Pedro A. Pequeno, II	Incorporated by reference to Exhibit 10.3 to the Registrant’s 2008 2nd Quarter Form 10Q
10.9	Amendment No. One to Employment Agreement of Edward C. Ashby, III	Incorporated by reference to Exhibit 10.3 to the Registrant’s 2007 Form 10-K
10.10	Amendment No. One to Employment Agreement of Mark H. Towe	Incorporated by reference to Exhibit 10.4 to the Registrant’s 2007 Form 10-K
10.11	Amendment No. One to Employment Agreement of Pedro A. Pequeno, II	Incorporated by reference to Exhibit 10.6 to the Registrant’s 2007 Form 10-K
10.12	Amendment No. Two to Employment Agreement of Edward C. Ashby, III	Incorporated by reference to Exhibit 10.12 to the Registrant’s 2008 Form 10-K
10.13	Amendment No. Two to Employment Agreement of Mark H. Towe	Incorporated by reference to Exhibit 10.13 to the Registrant’s 2008 Form 10-K
10.14	Amendment No. Two to Employment Agreement of Pedro A. Pequeno, II	Incorporated by reference to Exhibit 10.14 to the Registrant’s 2008 Form 10-K
13.1	2013 Annual Report to Stockholders (such report, except to the extent incorporated herein by reference, is being furnished for the information of the SEC only and is not deemed to be filed as part of the Report on Form 10-K)	Filed herewith
21	Subsidiaries of the Registrant	Filed herewith
23	Consent of Elliott Davis, PLLC	Filed herewith
31.1	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer	Filed herewith
31.2	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer	Filed herewith
32	Section 1350 Certifications	Filed herewith
101	Interactive Data Files	Filed herewith

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on behalf by the undersigned, thereunto duly authorized

	SURREY BANCORP
3/28/14      Date	s/ Edward C. Ashby, III
	Edward C. Ashby, III
	President and Chief Executive Officer
	(Principal Executive Officer)

In accordance with the Exchange Act, this report has to be signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.

Signature	Title	Date
s/ Edward C. Ashby, III	Director, President and	3/28/14
Edward C. Ashby, III	Chief Executive Officer
	(Principal Executive Officer)
s/ Mark H. Towe	Sr. Vice President and	3/28/14
Mark H. Towe	Chief Financial Officer
	(Principal Financial Officer)
s/ Robert H. Moody	Chairman of the Board	3/28/14
Robert H. Moody
s/ Elizabeth Johnson Lovill	Director	3/28/14
Elizabeth Johnson Lovill
s/ Gene Rees	Director	3/28/14
Gene Rees
s/ Tamra W. Thomas	Director	3/28/14
Tamra W. Thomas
s/ Tom G. Webb	Director	3/28/14
Tom G. Webb
s/ Buddy Williams	Director	3/28/14
Buddy Williams

EX-13

Exhibit 13

2013 Annual Report

Table of Contents

Letter to Stockholders	1
Financial Highlights Summary	2
Consolidated Balance Sheets	3
Consolidated Statements of Income	4
Consolidated Statements of Comprehensive Income	5
Consolidated Statements of Changes in Stockholders’ Equity	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	9
Report of Independent Registered Public Accounting Firm	40
Management’s Discussion and Analysis	41
Board of Directors and Officers	59
Stockholder Information	60

Dear Shareholder:

I am pleased to report that 2013 was the most profitable year in the history of the organization. Improved asset quality and higher levels of non-interest income underpinned record earnings. Surrey Bancorp continues to rank among the most profitable banks in North Carolina, with a return on average assets of 1.22 percent and a return on average equity of 8.59 percent. Additionally, our capital ratios on a tangible book and regulatory basis make us among the highest capitalized banks in the nation. In response to our record earnings, the Board of Directors declared a special dividend of $.21 per common share prior to year-end, compared to a $.18 per common share dividend in 2012. The dividend payout totaled 25.75 percent of 2013 earnings.

The Company reported net income of $2,889,351 or $.69 per fully diluted common share in 2013. This represents a 3.83 percent increase over the 2012 profit of $2,782,880. Net interest income for the year totaled $9,033,671, a decline of $249,739 or 2.69 percent from 2012. The decline was the result of a reduction in the yield on loans, attributable to strong competition for loans and the prolonged low interest rate monetary policy employed by federal policymakers. The 2013 provision for loan loss reserves totaled $319,565, a decrease of $151,727 or 32.19 percent from 2012, a reflection of improvements in asset quality. Non-interest income increased 11.22 percent in 2013, totaling $2,906,844. This significant increase was the result of the sale of a government guaranteed loan into the secondary market and higher revenues associated with SB&T Insurance, a subsidiary of the Company. Non-interest expense increased a modest 0.73 percent during the year to $6,971,932.

Total assets as of December 31, 2013, were $240,918,977, an increase of 4.79 percent over 2012. Total deposits increased 4.25 percent to $195,800,961, primarily in non-interest bearing demand deposits. Loans, net of the allowance for losses, increased 3.65 percent to $179,908,825. Net loans outstanding have now recovered to pre-recession levels. Our allowance for loan losses ended the year at $3,375,350, equaling 1.84 percent of total loans. Loan quality continued to improve in 2013. The percentage of outstanding loans enhanced with government guarantees increased to 26 percent while non-performing assets declined to 1.59 percent.

The Company faces many opportunities and challenges in 2014 and beyond. Our immediate focus will be increasing interest income, which has been stagnant for five years, through growth of the loan portfolio. We are well positioned for growth, given our expertise in government lending programs, high capital ratios, good asset quality and experienced loan staff. In addition, we are finalizing plans to open a full service branch operation in the Elkin market, which will increase our share of the banking market in Surry County and create opportunities in Wilkes and Yadkin counties.

Our biggest concern this year will be managing the costs associated with the Dodd-Frank Act, which increases the amount and complexity of bank regulation. In response to that challenge, we are going to work harder, work smarter, and remain a high performing community bank.

On behalf of the employees, management and Board of Directors, thank you for your continued support.

Edward C. Ashby, III

President and CEO

1

Financial Highlights Summary¹

	2013			2012			2011			2010			2009
Summary of Operations
Interest income	$	10,539		$	10,954		$	10,936		$	11,150		$	10,847
Interest expense		1,505			1,671			2,116			2,472			3,226
Net interest income		9,034			9,283			8,820			8,678			7,621
Provision for loan losses		320			471			744			3,004			1,605
Other income		2,907			2,614			2,571			2,739			3,511
Other expense		6,972			6,922			7,031			6,481			6,584
Income taxes		1,760			1,721			1,369			694			711
Net income		2,889			2,783			2,247			1,238			2,232
Preferred stock dividends declared		(183	)		(183	)		(183	)		(301	)		(258	)
Net income available to common stockholders	$	2,706		$	2,600		$	2,064		$	937		$	1,974
Per Common Share Data2
Net income:
Basic	$	0.76		$	0.73		$	0.58		$	0.27		$	0.56
Diluted		0.69			0.67			0.54			0.27			0.53
Cash dividends declared		0.21			0.18			0.15			n/a			n/a
Book value per common share		8.57			8.01			7.45			7.03			6.76
Balance Sheet
Loans, net	$	179,909		$	173,578		$	175,446		$	171,794		$	180,442
Investment securities		4,550			3,503			2,506			2,012			2,012
Total assets		240,919			229,912			224,728			213,652			216,950
Deposits		195,801			187,823			183,938			173,960			173,975
Stockholders’ equity		34,218			32,237			30,227			28,644			28,425
Interest-earning assets		223,497			213,560			213,301			194,936			206,604
Interest-bearing liabilities		160,838			158,594			161,287			155,455			162,215
Selected Ratios
Return on average assets		1.22	%		1.23	%		1.00	%		0.57	%		1.07	%
Return on average equity		8.59	%		8.86	%		7.53	%		4.26	%		8.07	%
Dividends declared on common stock as a percent of net income available to common stockholders		25.75	%		22.92	%		23.60	%		n/a			n/a

1. In thousands of dollars, except per share data.

2. Adjusted for the effects of a common stock split affected in the form of a 10% common stock dividend declared on November 28, 2011.

2

Consolidated Balance Sheets

December 31, 2013 and 2012

	2013			2012
Assets
Cash and due from banks	$	7,424,593		$	5,973,042
Interest-bearing deposits with banks		34,351,505			32,366,318
Federal funds sold		1,311,641			710,588
Investment securities available for sale		4,549,702			3,502,852
Restricted equity securities		676,799			738,324
Loans, net of allowance for loan losses of $3,375,350 in 2013 and $3,403,098 in 2012		179,908,825			173,577,565
Property and equipment, net		4,440,215			4,543,738
Foreclosed assets		—			491,424
Accrued interest and other income		966,042			979,098
Goodwill		120,000			120,000
Bank owned life insurance		5,462,336			5,298,354
Other assets		1,707,319			1,611,129
Total assets	$	240,918,977		$	229,912,432
Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	42,713,122		$	36,979,419
Interest-bearing		153,087,839			150,843,618
Total deposits		195,800,961			187,823,037
Federal Home Loan Bank advances		7,750,000			7,750,000
Dividends payable		790,259			46,106
Accrued interest payable		123,558			135,801
Other liabilities		2,236,573			1,920,187
Total liabilities		206,701,351			197,675,131
Commitments and contingencies
Stockholders’ equity
Preferred stock, 1,000,000 shares authorized, 189,356 shares of Series A, issued and outstanding with no par value, 4.5% convertible non-cumulative, perpetual; with a liquidation value of $14 per share;		2,620,325			2,620,325
181,154 shares of Series D, issued and outstanding with no par value, 5.0% convertible non-cumulative, perpetual; with a liquidation value of $7.08 per share;		1,248,482			1,248,482
Common stock, 10,000,000 shares authorized at no par value; 3,542,984 shares issued and outstanding		12,061,153			12,061,153
Retained earnings		18,329,089			16,367,187
Accumulated other comprehensive loss		(41,423	)		(59,846	)
Total stockholders’ equity		34,217,626			32,237,301
Total liabilities and stockholders’ equity	$	240,918,977		$	229,912,432

See Notes to Consolidated Financial Statements

3

Consolidated Statements of Income

For the years ended December 31, 2013 and 2012

	2013			2012
Interest income
Loans and fees on loans	$	10,377,342		$	10,842,085
Federal funds sold		2,286			1,568
Investment securities, taxable		55,648			51,721
Investment securities, dividends		22,190			9,679
Deposits with banks		81,449			49,495
Total interest income		10,538,915			10,954,548
Interest expense
Deposits		1,175,130			1,372,369
Federal funds purchased and securities sold under agreements to repurchase		80			150
Short-term debt		38,543			—
Federal Home Loan Bank advances		291,491			298,619
Total interest expense		1,505,244			1,671,138
Net interest income		9,033,671			9,283,410
Provision for loan losses		319,565			471,292
Net interest income after provision for loan losses		8,714,106			8,812,118
Noninterest income
Service charges on deposit accounts		863,862			919,963
Gain on the sale of government guaranteed loans		229,130			—
Fees on loans delivered to correspondents		78,763			145,239
Other service charges and fees		576,993			527,634
Gain on sale of investment securities		9,206			700
Income from Bank Owned Life Insurance		163,982			158,907
Other operating income		984,908			861,184
Total noninterest income		2,906,844			2,613,627
Noninterest expense
Salaries and employee benefits		3,762,207			3,632,214
Occupancy expense		429,536			428,542
Equipment expense		237,229			240,836
Data processing		414,309			379,093
Foreclosed assets, net		(3,312	)		46,047
Postage, printing and supplies		190,985			196,775
Professional fees		389,338			394,814
FDIC insurance premiums		104,317			149,304
Other expense		1,447,323			1,453,956
Total noninterest expense		6,971,932			6,921,581
Net income before income taxes		4,649,018			4,504,164
Income tax expense		1,759,667			1,721,284
Net income		2,889,351			2,782,880
Preferred stock dividends		(183,423	)		(183,423	)
Net income available to common stockholders	$	2,705,928		$	2,599,457
Basic earnings per common share	$	0.76		$	0.73
Diluted earnings per common share	$	0.69		$	0.67
Basic weighted average common shares outstanding		3,542,984			3,540,914
Diluted weighted average common shares outstanding		4,176,919			4,174,849
Dividends declared per common share	$	0.21		$	0.18

See Notes to Consolidated Financial Statements

4

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2013 and 2012

	2013			2012
Net income	$	2,889,351		$	2,782,880
Other comprehensive income (loss):
Investment securities available-for-sale
Unrealized holding gains (losses)		39,126			(3,697	)
Tax effect		(14,627	)		1,613
Reclassification of gains recognized in net income		(9,206	)		(700	)
Tax effect		3,130			238
		18,423			(2,546	)
Comprehensive income	$	2,907,774		$	2,780,334

See Notes to Consolidated Financial Statements

5

Consolidated Statements of Changes in Stockholders’ Equity

For the years ended December 31, 2013 and 2012

	Preferred Stock		Common Stock				Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
	Amount		Shares		Amount
Balance, January 1, 2012	$	3,868,807		3,536,724	$	12,009,588	$	14,405,467		$	(57,300	)	$	30,226,562
Net income		—		—		—		2,782,880			—			2,782,880
Other comprehensive loss		—		—		—		—			(2,546	)		(2,546	)
Common stock options exercised		—		6,260		30,111		—			—			30,111
Stock-based compensation, net of tax benefit		—		—		21,454		—			—			21,454
Dividends declared on Series A convertible preferred stock ($.63 per share)		—		—		—		(119,294	)		—			(119,294	)
Dividends declared on Series D convertible preferred stock ($.35 per share)		—		—		—		(64,129	)		—			(64,129	)
Dividends declared on common stock ($.18 per share)		—		—		—		(637,737	)		—			(637,737	)
Balance, December 31, 2012		3,868,807		3,542,984		12,061,153		16,367,187			(59,846	)		32,237,301
Net income		—		—		—		2,889,351			—			2,889,351
Other comprehensive income		—		—		—		—			18,423			18,423
Dividends declared on Series A convertible preferred stock ($.63 per share)		—		—		—		(119,294	)		—			(119,294	)
Dividends declared on Series D convertible preferred stock ($.35 per share)		—		—		—		(64,129	)		—			(64,129	)
Dividends declared on common stock ($.21 per share)		—		—		—		(744,026	)		—			(744,026	)
Balance, December 31, 2013	$	3,868,807		3,542,984	$	12,061,153	$	18,329,089		$	(41,423	)	$	34,217,626

See Notes to Consolidated Financial Statements

6

Consolidated Statements of Cash Flows

For the years ended December 31, 2013 and 2012

	2013			2012
Cash flows from operating activities
Net income	$	2,889,351		$	2,782,880
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization		257,213			244,363
Provision for loan losses		319,565			471,292
Gain on the sale of foreclosed assets		(65,786	)		(95,394	)
Write-downs on foreclosed assets		—			19,430
Gain on the sale of government guaranteed loans		(229,130	)		—
Gain on the sale of investments		(9,206	)		(700	)
Stock-based compensation		—			21,454
(Gain) loss on disposal of property and equipment		452			(1,075	)
Deferred income taxes		(25,498	)		276,492
Amortization of premiums on securities, net of accretion of discounts		40			421
Changes in assets and liabilities:
Accrued income		13,056			(16,484	)
Increase in cash surrender value of life insurance		(163,982	)		(158,907	)
Other assets		(82,189	)		741,640
Accrued interest payable		(12,243	)		(49,561	)
Other liabilities		545,516			219,464
Net cash provided by operating activities		3,437,159			4,455,315
Cash flows from investing activities
Net increase in interest-bearing deposits with banks		(1,985,187	)		(1,608,682	)
Net increase in federal funds sold		(601,053	)		(752	)
Purchases of investment securities		(2,081,221	)		(3,053,658	)
Maturities of investment securities		1,009,520			2,007,592
Purchases of restricted equity securities		(275	)		(2,170	)
Redemption of restricted equity securities		61,800			73,600
Net (increase) decrease in loans		(6,697,105	)		851,124
Proceeds from the sale of investments		63,937			45,522
Proceeds from the sale of foreclosed assets		603,490			690,783
Proceeds from sale of property and equipment		100			1,075
Purchases of property and equipment		(154,242	)		(218,800	)
Purchases of Bank Owned Life Insurance		—			(1,750,000	)
Net cash used in investing activities		(9,780,236	)		(2,964,366	)
Cash flows from financing activities
Net increase in deposits		7,977,924			3,884,661
Maturities of long-term debt		—			(350,000	)
Dividends paid on preferred stock		(183,296	)		(183,550	)
Dividends paid on common stock		—			(1,168,245	)
Common stock options exercised		—			30,111
Net cash provided by financing activities		7,794,628			2,212,977
Net increase in cash and due from banks		1,451,551			3,703,926
Cash and due from banks, beginning		5,973,042			2,269,116
Cash and due from banks, ending	$	7,424,593		$	5,973,042

Continued

7

Consolidated Statements of Cash Flows, continued

For the years ended December 31, 2013 and 2012

	2013		2012
Supplemental disclosures
Interest paid	$	1,517,487	$	1,720,699
Income taxes paid	$	1,819,472	$	918,821
Loans transferred to foreclosed properties	$	46,280	$	546,225
Cash dividends declared but not paid	$	790,259	$	46,106

See Notes to Consolidated Financial Statements

8

Notes to Consolidated Financial Statements

Note 1. Organization and Summary of Significant Accounting Policies

Organization

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

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

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

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

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

Critical Accounting Policies

Management believes the policies with respect to the methodology for the determination of the allowance for loan losses, and asset impairment judgments, including the recoverability of intangible assets involve a higher degree of complexity and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could cause reported results to differ materially. These critical policies and their application are periodically reviewed with the Audit Committee and the Board of Directors.

Principles of Consolidation

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

Use of Estimates

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

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowances for loan and foreclosed real estate losses, management obtains independent appraisals for significant properties.

9

Notes to Consolidated Financial Statements

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

Use of Estimates, continued

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

While management uses available information to recognize loan and foreclosed real estate losses, future additions to the allowances may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as a part of their routine examination process, periodically review the Company’s allowances for loan and foreclosed real estate losses. Such agencies may require the Company to recognize additions to the allowances based on their judgments about information available to them at the time of their examinations. Because of these factors, it is reasonably possible that the allowances for loan and foreclosed real estate losses may change materially in the near term.

Cash and Due from Banks

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

Interest-bearing Deposits with Banks

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

Trading Securities

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

Securities Held to Maturity

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

Securities Available for Sale

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

Unrealized holding gains and losses, net of tax, on available for sale securities are reported as a net amount in a separate component of stockholders’ equity. Realized gains and losses on the sale of available for sale securities are determined using the specific-identification method and are recorded on a trade-date basis. Premiums and discounts are recognized in interest income using the interest method over the period to maturity or to call dates. Declines in the fair value of individual held to maturity and available for sale securities below cost that are other than temporary are reflected as write-downs of the individual securities to fair value.

10

Notes to Consolidated Financial Statements

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

Securities Available for Sale, continued

Related write-downs are included in earnings as realized losses. In determining whether other than temporary impairment exists, management considers many factors, including (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and the ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Loans Held for Sale

Government guaranteed loans originated in the normal course of business are sometimes sold into the secondary market. These sales are of the guaranteed portion of the loans only. Loans that carry variable rates, which eliminate the market risk to the Bank, are carried at cost. Fixed rate loans are carried the lower of cost or market. There were no loans held for sale at December 31, 2013 and 2012.

Loans Receivable

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

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

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

Allowance for Loan Losses

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

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

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

11

Notes to Consolidated Financial Statements

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

Allowance for Loan Losses, continued

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

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

Property and Equipment

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

	Years
Buildings and improvements		10-40
Furniture and equipment		3-25

Foreclosed Assets

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

Goodwill

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

Employee Benefit Plans

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

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

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

12

Notes to Consolidated Financial Statements

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

Stock-based Compensation

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

Transfers of Financial Assets

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

Income Taxes

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

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

Basic Earnings per Common Share

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

Diluted Earnings per Common Share

The computation of diluted earnings per common share is similar to the computation of basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. The numerator is adjusted for any changes in income that would result from the assumed conversion of those potential common shares.

13

Notes to Consolidated Financial Statements

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

Comprehensive Income

Comprehensive income consists of net income plus certain other changes in assets and liabilities that are reported as separate components of stockholders’ equity rather than as income or expense. The Company’s other comprehensive income only consist of adjustments for unrealized gains or losses on investment securities available-for-sale.

Advertising Cost

The Company incurred marketing and advertising cost of $129,048 and $107,110 for the years ended December 31, 2013 and 2012, respectively. The amounts are expensed as incurred and included in the statements of income under other expense.

Off-Balance Sheet Credit Related Financial Instruments

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

Fair Value of Financial Instruments

FASB ASC 820, Fair Value Measurement and Disclosure, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

Reclassification

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

Recent Accounting Pronouncements

The following is a summary of recent authoritative pronouncements:

In July 2012, the Intangibles topic was amended to permit an entity to consider qualitative factors to determine whether it is more likely than not that indefinite-lived intangible assets are impaired. If it is determined to be more likely than not that indefinite-lived intangible assets are impaired, then the entity is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount. The amendments were effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The amendments did not have a material effect on the Company’s financial statements.

The Comprehensive Income topic of the ASC was amended in September 2011. The amendment eliminated the option to present other comprehensive income as a part of the statement of changes in stockholders’ equity and required consecutive presentation of the statement of net income and other comprehensive income. The amendments were applicable to the Company January 1, 2012 and have been applied retrospectively. In December 2011, the topic was further amended to defer the effective date of presenting reclassification adjustments from other comprehensive income to net income on the face of the financial statements while the FASB redeliberated

14

Notes to Consolidated Financial Statements

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

Recent Accounting Pronouncements, continued

income to net income on the face of the financial statements while the FASB redeliberated the presentation requirements for the reclassification adjustments. In February 2013, the FASB further amended the Comprehensive Income topic clarifying the conclusions from such redeliberations. Specifically, the amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments do require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, in certain circumstances an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The amendments were effective for the Company on a prospective basis beginning January 1, 2013. These amendments did not have a material effect on the Company’s financial statements.

On April 22, 2013, the FASB issued guidance addressing application of the liquidation basis of accounting. The guidance is intended to clarify when an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The amendments will be effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein and those requirements should be applied prospectively from the day that liquidation becomes imminent. Early adoption is permitted. The Company does not expect these amendments to have any effect on its financial statements.

In December 2013, the FASB amended the Master Glossary of the FASB Codification to define “Public Business Entity” to minimize the inconsistency and complexity of having multiple definitions of, or a diversity in practice as to what constitutes, a nonpublic entity and public entity within U.S. GAAP. The amendment does not affect existing requirements, however will be used by the FASB, the Private Company Council (“PCC”), and the Emerging Issues Task Force (“EITF”) in specifying the scope of future financial accounting and reporting guidance. The Company does not expect this amendment to have any effect on its financial statements.

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

Note 2. Restrictions on Cash

To comply with banking regulations, the Company is required to maintain certain average cash reserve balances. The daily average cash reserve requirement was approximately $1,689,000 and $1,453,000 for the periods including December 31, 2013 and 2012, respectively.

15

Notes to Consolidated Financial Statements

Note 3. Securities

Debt and equity securities have been classified in the balance sheets according to management’s intent. The amortized costs of securities available for sale and their approximate fair values at December 31, 2013 and 2012 follow:

	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
2013
Government-sponsored enterprises	$	3,500,000	$	795	$	2,030	$	3,498,765
Mortgage-backed securities		32,099		1,022		—		33,121
Corporate bonds		550,000		—		99,000		451,000
Equities and mutual funds		535,326		43,260		11,770		566,816
	$	4,617,425	$	45,077	$	112,800	$	4,549,702

	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
2012
Government-sponsored enterprises	$	2,500,000	$	4,875	$	—	$	2,504,875
Mortgage-backed securities		41,659		1,316		—		42,975
Corporate bonds		550,000		—		107,250		442,750
Equities and mutual funds		508,836		3,416		—		512,252
	$	3,600,495	$	9,607	$	107,250	$	3,502,852

Restricted equity securities were $676,799 and $738,324 at December 31, 2013 and 2012, respectively. Restricted equity securities primarily consist of investments in stock of the Federal Home Loan Bank of Atlanta (“FHLB”) and Community Bankers Bank (“CBB”). These investments are carried at cost. The FHLB requires financial institutions to make equity investments in the FHLB in order to borrow money. The Company is required to hold that stock so long as it borrows from the FHLB. CBB stock is classified as restricted due to the transfer restrictions placed on the ownership of the stock by the issuer.

At December 31, 2013 and 2012, substantially all government-sponsored enterprises securities were pledged as collateral on public deposits and for other purposes as required or permitted by law. The mortgage-backed securities were pledged to the FHLB.

Maturities of mortgage-backed bonds are stated based on contractual maturities. Actual maturities of these bonds may vary as the underlying mortgages are prepaid. The investment in equities and mutual funds by nature have no maturity date and are classified as due in one year or less.

The scheduled maturities of securities (all available for sale) at December 31, 2013, were as follows:

	Amortized Cost		Fair Value
Due in one year or less	$	535,326	$	566,816
Due after one year through five years		4,056,427		3,956,252
Due after five years through ten years		15,094		15,694
Due after ten years		10,578		10,940
	$	4,617,425	$	4,549,702

For the years ended December 31, 2013 and 2012, the Company had realized gains from the sale of investment securities totaling $9,206 and $700, respectively. All debt securities were held to their scheduled maturity dates or call date.

16

Notes to Consolidated Financial Statements

Note 3. Securities, continued

The following tables show investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at December 31, 2013 and 2012. These unrealized losses on investment securities are a result of volatility in interest rates and market fluctuations and relate to government-sponsored enterprises, corporate bonds issued by other banks and equities and mutual funds at December 31, 2013, and corporate bonds issued by other banks at December 31, 2012.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
2013
Government-sponsored enterprises	$	1,497,970	$	2,030	$	—	$	—	$	1,497,970	$	2,030
Corporate bonds		—		—		451,000		99,000		451,000		99,000
Equities and mutual funds		245,218		11,770		—		—		245,218		11,770
	$	1,743,188	$	13,800	$	451,000	$	99,000	$	2,194,188	$	112,800
2012
Corporate bonds	$	—	$	—	$	442,750	$	107,250	$	442,750	$	107,250
	$	—	$	—	$	442,750	$	107,250	$	451,000	$	107,250

Management considers the nature of the investment, the underlying causes of the decline in the market value and the severity and duration of the decline in market value in determining if impairment is other than temporary. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Based upon this evaluation, there are two securities in the portfolio with unrealized losses for a period greater than 12 months. We have analyzed each individual security for Other Than Temporary Impairment (“OTTI”) purposes by reviewing delinquencies, loan-to-value ratios, and credit quality and concluded that all unrealized losses presented in the tables above are not related to an issuer’s financial condition but are due to changes in the level of interest rates and no declines are deemed to be other than temporary in nature.

Note 4. Loans Receivable

The major components of loans in the balance sheets at December 31, 2013 and 2012 are below.

	2013			2012
Commercial and industrial	$	66,612,984		$	75,914,072
Real estate:
Construction and land development		6,353,787			4,873,512
Residential, 1-4 families		40,203,978			36,091,051
Residential, 5 or more families		1,515,239			1,676,449
Farmland		2,219,688			2,284,155
Nonfarm, nonresidential		60,316,018			48,993,867
Agricultural		107,974			147,860
Consumer, net of discounts of $10,931 in 2013 and $17,764 in 2012		5,685,407			6,703,363
Other		—			3,000
		183,015,075			176,687,329
Net, deferred loan origination costs (fees)		269,100			293,334
		183,284,175			176,980,663
Allowance for loan losses		(3,375,350	)		(3,403,098	)
	$	179,908,825		$	173,577,565

Residential, 1-4 family loans pledged as collateral against FHLB advances approximated $17,376,000 and $17,765,000 at December 31, 2013 and 2012, respectively.

17

Notes to Consolidated Financial Statements

Note 5. Allowance for Loan Losses

The allocation of the allowance for loan losses by loan components at December 31, 2013 and 2012 was as follows:

	Construction & Development			1-4 Family Residential			Nonfarm, Nonresidential			Commercial and Industrial			Consumer			Other			Total
2013
Allowance for credit losses:
Beginning balance	$	86,300		$	668,700		$	801,999		$	1,604,510		$	198,789		$	42,800		$	3,403,098
Charge-offs		—			(26,967	)		(238,541	)		(87,374	)		(79,667	)		—			(432,549	)
Recoveries		587			401			2,426			52,433			29,389			—			85,236
Provision		(13,887	)		(24,505	)		187,166			139,393			32,798			(1,400	)		319,565
Ending balance	$	73,000		$	617,629		$	753,050		$	1,708,962		$	181,309		$	41,400		$	3,375,350
Ending balance: individually evaluated for impairment	$	—		$	10,829		$	131,950		$	206,162		$	—		$	—		$	348,941
Ending balance: collectively evaluated for impairment	$	73,000		$	606,800		$	621,100		$	1,502,800		$	181,309		$	41,400		$	3,026,409
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Loans Receivable:
Ending balance	$	6,353,787		$	40,203,978		$	60,316,018		$	66,612,984		$	5,685,407		$	3,842,901		$	183,015,075
Ending balance: individually evaluated for impairment	$	318,111		$	337,767		$	2,912,421		$	2,499,531		$	—		$	—		$	6,067,830
Ending balance: collectively evaluated for impairment	$	6,035,676		$	39,866,211		$	57,403,597		$	64,113,453		$	5,685,407		$	3,842,901		$	176,947,245
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—		$	—
2012
Allowance for credit losses:
Beginning balance	$	103,200		$	836,860		$	865,854		$	1,808,260		$	210,807		$	55,600		$	3,880,581
Charge-offs		(7,286	)		(298,012	)		(21,831	)		(710,645	)		(165,914	)		—			(1,203,688	)
Recoveries		379			872			84,340			150,462			18,860			—			254,913
Provision		(9,993	)		128,980			(126,364	)		356,433			135,036			(12,800	)		471,292
Ending balance	$	86,300		$	668,700		$	801,999		$	1,604,510		$	198,789		$	42,800		$	3,403,098
Ending balance: individually evaluated for impairment	$	—		$	—		$	319,699		$	195,410		$	—		$	—		$	515,109
Ending balance: collectively evaluated for impairment	$	86,300		$	668,700		$	482,300		$	1,409,100		$	198,789		$	42,800		$	2,887,989
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Loans Receivable:
Ending balance	$	4,873,512		$	36,091,051		$	48,993,867		$	75,914,072		$	6,703,363		$	4,111,464		$	176,687,329
Ending balance: individually evaluated for impairment	$	86,567		$	284,884		$	3,185,880		$	2,373,175		$	—		$	195,989		$	6,126,495
Ending balance: collectively evaluated for impairment	$	4,786,945		$	35,806,167		$	45,807,987		$	73,540,897		$	6,703,363		$	3,915,475		$	170,560,834
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—		$	—

18

Notes to Consolidated Financial Statements

Note 5. Allowance for Loan Losses, continued

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2013 and 2012:

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2013
With no related allowance recorded:
Construction and development	$	318,111	$	318,111	$	—	$	320,260	$	21,825
1-4 family residential		263,562		263,562		—		261,364		21,295
Nonfarm, nonresidential		2,095,645		2,165,883		—		2,144,605		120,322
Commercial and industrial		1,359,371		1,561,253		—		1,393,077		71,409
Consumer		—		—		—		—		—
Other loans		—		—		—		—		—
		4,036,689		4,308,809		—		4,119,306		234,851
With an allowance recorded:
Construction and development	$	—	$	—	$	—	$	—	$	—
1-4 family residential		74,205		74,205		10,829		77,144		4,300
Nonfarm, nonresidential		816,776		816,776		131,950		930,060		24,653
Commercial and industrial		1,140,160		1,140,160		206,162		1,163,698		47,393
Consumer		—		—		—		—		—
Other loans		—		—		—		—		—
		2,031,141		2,031,141		348,941		2,170,902		76,346
Combined:
Construction and development	$	318,111	$	318,111	$	—	$	320,260	$	21,825
1-4 family residential		337,767		337,767		10,829		338,508		25,595
Nonfarm, nonresidential		2,912,421		2,982,659		131,950		3,074,665		144,975
Commercial and industrial		2,499,531		2,701,413		206,162		2,556,775		118,802
Consumer		—		—		—		—		—
Other loans		—		—		—		—		—
	$	6,067,830	$	6,339,950	$	348,941	$	6,290,208	$	311,197
2012
With no related allowance recorded:
Construction and development	$	86,567	$	86,567	$	—	$	87,668	$	4,898
1-4 family residential		284,884		284,884		—		287,802		19,798
Nonfarm, nonresidential		1,381,111		1,381,111		—		1,396,123		81,741
Commercial and industrial		1,372,796		1,547,284		—		1,312,662		67,194
Consumer		—		—		—		—		—
Other loans		195,989		195,989		—		199,895		18,025
		3,321,347		3,495,835		—		3,284,150		191,656
With an allowance recorded:
Construction and development	$	—	$	—	$	—	$	—	$	—
1-4 family residential		—		—		—		—		—
Nonfarm, nonresidential		1,804,769		1,826,600		319,699		1,813,156		70,705
Commercial and industrial		1,000,379		1,000,379		195,410		1,006,640		39,320
Consumer		—		—		—		—		—
Other loans		—		—		—		—		—
		2,805,148		2,826,979		515,109		2,819,796		110,025
Combined:
Construction and development	$	86,567	$	86,567	$	—	$	87,668	$	4,898
1-4 family residential		284,884		284,884		—		287,802		19,798
Nonfarm, nonresidential		3,185,880		3,207,711		319,699		3,209,279		152,446
Commercial and industrial		2,373,175		2,547,663		195,410		2,319,302		106,514
Consumer		—		—		—		—		—
Other loans		195,989		195,989		—		199,895		18,025
	$	6,126,495	$	6,322,814	$	515,109	$	6,103,946	$	301,681

19

Notes to Consolidated Financial Statements

Note 5. Allowance for Loan Losses, continued

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

The following table presents an age analysis of past due loans as of December 31, 2013 and 2012:

	30-59 Days Past Due			60-89 Days Past Due			90 Days Plus Past Due			Total Past Due			Current			Total Financing Receivables			Recorded Investment > 90 Days and Accruing
2013
Construction and development	$	—		$	—		$	—		$	—		$	6,353,787		$	6,353,787		$	—
1-4 family residential		544,559			165,244			173,786			883,589			39,320,389			40,203,978			—
Nonfarm, nonresidential		193,411			336,036			791,148			1,320,595			58,995,423			60,316,018			—
Commercial and industrial		84,145			2,528			929,552			1,016,225			65,596,759			66,612,984			15,837
Consumer		103,463			68,767			20,742			192,972			5,492,435			5,685,407			19,602
Other loans		—			—			—			—			3,842,901			3,842,901			—
Total	$	925,578		$	572,575		$	1,915,228		$	3,413,381		$	179,601,694		$	183,015,075		$	35,439
Percentage of total loans		0.51	%		0.31	%		1.05	%		1.87	%		98.13	%		100.00	%
Non-accruals included above
Construction and development	$	—		$	—		$	—		$	—		$	70,058		$	70,058
1-4 family residential		29,269			—			173,786			203,055			190,032			393,087
Nonfarm, nonresidential		85,646			—			791,148			876,794			1,222,090			2,098,884
Commercial and industrial		—			—			913,715			913,715			321,592			1,235,307
Consumer		259			547			1,141			1,947			1,044			2,991
Other loans		—			—			—			—			—			—
	$	115,174		$	547		$	1,879,790		$	1,995,511		$	1,804,816		$	3,800,327
2012
Construction and development	$	73,572		$	—		$	—		$	73,572		$	4,799,940		$	4,873,512		$	—
1-4 family residential		380,731			—			324,357			705,088			35,385,963			36,091,051			292,583
Nonfarm, nonresidential		711,408			197,479			386,160			1,295,047			47,698,820			48,993,867			—
Commercial and industrial		256,672			53,391			429,226			739,289			75,174,783			75,914,072			377,494
Consumer		172,379			28,922			13,643			214,944			6,488,419			6,703,363			13,643
Other loans		—			—			—			—			4,111,464			4,111,464			—
Total	$	1,594,762		$	279,792		$	1,153,386		$	3,027,940		$	173,659,389		$	176,687,329		$	683,720
Percentage of total loans		0.90	%		0.16	%		0.65	%		1.71	%		98.29	%		100.00	%
Non-accruals included above
Construction and development	$	73,572		$	—		$	—		$	73,572		$	12,995		$	86,567
1-4 family residential		84,838			—			31,775			116,613			359,129			475,742
Nonfarm, nonresidential		—			89,322			386,160			475,482			1,690,633			2,166,115
Commercial and industrial		—			—			51,731			51,731			760,662			812,393
Consumer		1,612			—			—			1,612			2,306			3,918
Other loans		—			—			—			—			195,990			195,990
	$	160,022		$	89,322		$	469,666		$	719,010		$	3,021,715		$	3,740,725

20

Notes to Consolidated Financial Statements

Note 5. Allowance for Loan Losses, continued

Credit Quality Indicators:

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

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

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

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

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

21

Notes to Consolidated Financial Statements

Note 5. Allowance for Loan Losses, continued

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

	Total			Pass Credits			Special Mention			Substandard			Doubtful
December 31, 2013
Construction and development	$	6,353,787		$	6,283,729		$	70,058		$	—		$	—
1-4 family residential		40,203,978			39,586,647			617,331			—			—
Nonfarm, nonresidential		60,316,018			58,188,799			2,022,868			104,351			—
Commercial and industrial		66,612,984			64,556,331			2,056,653			—			—
Consumer		5,685,407			5,684,245			1,162			—			—
Other loans		3,842,901			3,842,901			—			—			—
	$	183,015,075		$	178,142,652		$	4,768,072		$	104,351		$	—
		100.0	%		97.3	%		2.6	%		0.1	%		—	%
Guaranteed portion of loans
Construction and development	$	73,000		$	73,000		$	—		$	—		$	—
1-4 family residential		673,854			629,939			43,915			—
Nonfarm, nonresidential		26,835,404			26,063,658			771,746			—			—
Commercial and industrial		19,589,284			18,737,759			851,525			—			—
Consumer		—			—			—			—			—
Other loans		544,195			544,195			—			—			—
	$	47,715,737		$	46,048,551		$	1,667,186		$	—		$	—
	Total			Pass Credits			Special Mention			Substandard			Doubtful
December 31, 2012
Construction and development	$	4,873,512		$	4,786,945		$	86,567		$	—		$	—
1-4 family residential		36,091,051			35,755,061			335,990			—			—
Nonfarm, nonresidential		48,993,867			47,500,758			1,230,275			262,834			—
Commercial and industrial		75,914,072			74,878,901			1,035,171			—			—
Consumer		6,703,363			6,696,475			6,888			—			—
Other loans		4,111,464			3,915,474			195,990			—			—
	$	176,687,329		$	173,533,614		$	2,890,881		$	262,834		$	—
		100.0	%		98.2	%		1.6	%		0.2	%		—	%
Guaranteed portion of loans
Construction and development	$	—		$	—		$	—		$	—		$	—
1-4 family residential		752,677			752,677			—			—			—
Nonfarm, nonresidential		19,855,775			19,654,773			201,002			—			—
Commercial and industrial		22,001,515			21,354,422			647,093			—			—
Consumer		—			—			—			—			—
Other loans		508,363			508,363			—			—			—
	$	43,118,330		$	42,270,235		$	848,095		$	—		$	—

22

Notes to Consolidated Financial Statements

Note 5. Allowance for Loan Losses, continued

	For the year ended December 31, 2013								For the year ended December 31, 2012
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Construction and development		—	$	—	$	—		1	$	237,883	$	237,883
1-4 Family residential		1		55,336		55,336		1		113,743		116,438
Nonfarm, nonresidential		1		145,219		145,219		1		96,028		96,028
Commercial and industrial		1		22,065		22,065		2		343,060		343,060

During the year ended December 31, 2013, the Bank modified three loans that were considered to be troubled debt restructurings. The terms for these loans were extended. The interest rate and payment were lowered on one loan and the payment was modified on another loan.

During the year ended December 31, 2012, the Bank modified five loans that were considered to be troubled debt restructurings. The terms for these loans were extended. The interest rate was lowered on one loan.

	For the year ended December 31, 2012				For the year ended December 31, 2011
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Troubled Debt Restructurings That
Subsequently Defaulted During the Period:
Construction and development		—	$	—		—	$	—
1-4 Family residential		—		—		—		—
Nonfarm, nonresidential		—		—		1		262,832
Commercial and industrial		—		—		—		—

In the determination of the allowance for loan losses, management considers troubled debt restructurings and subsequent defaults in these restructurings by adjusting the loan grades of such loans, which influence the environmental factors associated with the allowance. Defaults resulting in charge-offs affect the historical loss experience ratios which are a component of the allowance calculation. Additionally, specific reserves may be established on restructured loans evaluated individually.

Note 6. Loan Servicing

The Company occasionally sells the guaranteed portion of certain government guaranteed loans in the secondary market. The Company continues to service these loans that totaled $9,157,496 and $7,603,644 at December 31, 2013 and 2012, respectively. The Company recognizes a servicing rights asset upon the sale of the guaranteed portion of government guaranteed loans for which the Company retains the underlying servicing obligation. Servicing rights assets are initially measured at fair value and amortized to expense over the estimated life of the servicing obligation. The fair value of servicing rights is determined at the date of sale of the underlying loan using the present value of estimated future net servicing income on assumptions that market participants use in their valuation estimates. The Company presents its servicing rights assets gross at the lower of cost or fair value in the Consolidated Balance Sheets. Servicing rights are included in other assets in the Consolidated Balance Sheets.

23

Notes to Consolidated Financial Statements

Note 6. Loan Servicing, continued

The following table presents a rollforward of loan servicing rights for the years 2013 and 2012 and shows that the loan servicing rights are classified as Level 3 as discussed below.

	Level 3
	2013			2012
	Fair Value			Fair Value
Balance, January 1	$	63,017		$	92,682
Capitalized		200,839			—
Amortization included in other income		(2,994	)		(29,665	)
Balance, December 31	$	260,862		$	63,017

Note 7. Property and Equipment

Components of property and equipment and total accumulated depreciation at December 31, 2013 and 2012 are as follows:

	2013			2012
Land and improvements	$	1,625,879		$	1,625,879
Buildings and improvements		3,845,457			3,845,457
Furniture and equipment		2,703,601			2,614,801
		8,174,937			8,086,137
Less accumulated depreciation		(3,734,722	)		(3,542,399	)
	$	4,440,215		$	4,543,738

Depreciation expense amounted to $257,213, and $244,363 for the years ended December 31, 2013 and 2012, respectively.

The Company’s West Pine Street branch is leased under a five-year operating lease at a monthly rental of $2,215. The lease expires March 31, 2015. The Company has the option to renew the lease for two additional five-year terms. Each five-year term will carry a 12.5% increase in the monthly rental over the previous five-year term. In addition, the Company rents space for a loan production office under a one-year operating lease at a monthly rental of $925. The Company has the option to renew the lease for two additional six-month terms. Rental expense was $37,528 and $31,078 for 2013 and 2012, respectively.

Pursuant to the terms of non-cancelable lease agreements in effect at December 31, 2013, and leases expected to renew, pertaining to banking premises and equipment, future minimum rent commitments under various operating leases are as follows:

2014	$	37,898
2015		35,685
2016		29,900
2017		29,900
2018		29,900
	$	163,283

24

Notes to Consolidated Financial Statements

Note 8. Deposits

The aggregate amount of time deposits in denominations of $100,000 or more at December 31, 2013 and 2012, was $32,846,552 and $33,247,833, respectively. At December 31, 2013, the scheduled maturities of total time deposits are as follows:

2014	$	50,476,152
2015		18,994,065
2016		6,311,408
2017		3,366,344
2018		4,750,294
	$	83,898,263

Note 9. Short-Term Debt

Short-term debt consists of Federal Home Loan Bank advances that have original maturities of 12 months or less, short-term secured borrowings associated with the sale of government guaranteed loans and federal funds purchased and securities sold under agreements to repurchase, which generally mature within one to four days from the transaction date. Additional information at December 31, 2013 and 2012 and for the periods then ended is summarized below:

	2013			2012
Outstanding balance at December 31	$	—		$	—
Year-end weighted average rate		—	%		—	%
Daily average outstanding during the year	$	950,544		$	15,412
Average rate for the year		4.09	%		0.97	%
Maximum outstanding at any month-end during the year	$	3,743,820		$	—

Lines of Credit

The Company has established various credit facilities to provide additional liquidity if and as needed. These include unsecured lines of credit with correspondent banks totaling $35,500,000 and a secured line of credit with the Federal Home Loan Bank of Atlanta of approximately $9,609,000. At December 31, 2013, there were no amounts outstanding on the unsecured lines with correspondent banks. Advances due to the Federal Home Loan Bank of Atlanta on the secured line of credit at December 31, 2013 and 2012 amounted to $7,750,000.

Note 10. Federal Home Loan Bank Advances

The Company’s Federal Home Loan Bank advances include instruments bearing fixed rates ranging from 2.94% to 4.95%. The weighted average rate of all long-term debt at December 31, 2013 and December 31, 2012 was 3.73%. Collateral consists of eligible real estate, 1-4 family first and second lien and revolving residential real estate loans and certain investment securities. The contractual maturities of long-term debt are as follows:

2014	$	1,500,000
2015		3,500,000
2016		1,000,000
2017		1,750,000
2018		—
	$	7,750,000

25

Notes to Consolidated Financial Statements

Note 11. Fair Value

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, trading securities and derivatives, if present, are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment, servicing assets and foreclosed properties. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Fair Value Hierarchy

Under the Fair Value Measurements and Disclosures Topic of FASB ASC, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures the impairment in accordance with the Receivables Topic of the FASB ASC. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2013 and 2012, substantially all of the total impaired loans were evaluated based on the fair value of the collateral and discounted cash flows. In accordance with the Fair Value and Measurement Topic of the FASB ASC, impaired loans, where an allowance is established based on the fair value of collateral; require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price the Company records the impaired loan as nonrecurring Level 2. When an appraised value is available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.

26

Notes to Consolidated Financial Statements

Note 11. Fair Value, continued

Servicing Assets

A valuation of loan servicing rights is performed on an individual basis due to the small number of loans serviced. Loans are evaluated on a discounted earnings basis to determine the present value of future earnings. The present value of the future earnings is the estimated market value for the loan, calculated using consensus assumptions that a third party purchaser would utilize in evaluating a potential acquisition of the servicing. As such, the Company classifies loan servicing rights as Level 3.

Foreclosed Assets

Foreclosed assets are recorded at the lower of investment in the loan or fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

(in thousands)
December 31, 2013	Total		Level 1		Level 2		Level 3
Government-sponsored enterprises	$	3,499	$	—	$	3,499	$	—
Mortgage-backed securities		33		—		33		—
Corporate bonds		451		—		—		451
Equities and mutual funds		567		567		—		—
Total assets at fair value	$	4,550	$	567	$	3,532	$	451
Total liabilities at fair value	$	—	$	—	$	—	$	—
(in thousands)
December 31, 2012	Total		Level 1		Level 2		Level 3
Government-sponsored enterprises	$	2,505	$	—	$	2,505	$	—
Mortgage-backed securities		43		—		43		—
Corporate bonds		443		—		—		443
Equities and mutual funds		512		512		—		—
Total assets at fair value	$	3,503	$	512	$	2,548	$	443
Total liabilities at fair value	$	—	$	—	$	—	$	—

The changes in Level 3 assets measured at fair value on a recurring basis were:

(in thousands)	2013		2012
Corporate Bonds-Available for Sale
Balance, January 1	$	443	$	451
Total realized gain (losses) included in income		—		—
Total unrealized gain (losses) included in other comprehensive income		8		(8	)
Net purchases, sales, calls and maturities		—		—
Net transfers in/out of Level 3		—		—
Balance, December 31	$	451	$	443

Of the Level 3 assets that were held by the Company at December 31, 2013, the unrealized gain for the year was $8,000. That gain is recognized in other comprehensive income in the consolidated statements of financial condition. The Company did not have any purchases, sales, calls or maturities of Level 3 available for sale corporate bonds during 2013 or 2012. Both observable and unobservable inputs may be used to determine the fair value of positions classified as Level 3 assets. As a result, the unrealized gains and losses for these assets presented in the tables above may include changes in fair value that were attributable to both observable and unobservable inputs.

27

Notes to Consolidated Financial Statements

Note 11. Fair Value, continued

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets or liabilities at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets and liabilities that are required to be measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets and liabilities recorded at fair value on a nonrecurring basis are included in the table below.

(in thousands)
December 31, 2013	Total		Level 1		Level 2		Level 3
Loans-commercial and industrial	$	934	$	—	$	—	$	934
Loans-nonfarm, non-residential		685		—		—		685
Loans- 1- 4 family residential		63		—		—		63
Loans-other		—		—		—		—
Foreclosed assets		—		—		—		—
Servicing assets		261		—		—		261
Total assets at fair value	$	1,943	$	—	$	—	$	1,943
Total liabilities at fair value	$	—	$	—	$	—	$	—
(in thousands)
December 31, 2012	Total		Level 1		Level 2		Level 3
Loans-commercial and industrial	$	805	$	—	$	—	$	805
Loans-nonfarm, non-residential		1,485		—		—		1,485
Loans- 1- 4 family residential		—		—		—		—
Loans-other		—		—		—		—
Foreclosed assets		491		—		—		491
Servicing assets		63		—		—		63
Total assets at fair value	$	2,844	$	—	$	—	$	2,844
Total liabilities at fair value	$	—	$	—	$	—	$	—

For level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2013, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair Value at December 31, 2013		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Corporate bonds	$	451	Third party estimate	Sales of comparable instruments		n/a
Servicing assets	$	261	Management estimate	Present value of future payments/useful life		n/a
Impaired loans	$	1,682	Management estimate	Appraisals and/or sales of comparable properties		n/a
Foreclosed assets	$	—	Management estimate	Appraisals and/or sales of comparable properties		n/a

Accounting standards for financial instruments require disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. These accounting standards exclude certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

28

Notes to Consolidated Financial Statements

Note 11. Fair Value, continued

The methodologies for estimating fair value of financial assets and liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The estimated fair value approximates carrying value for cash and cash equivalents, accrued interest and the cash surrender value of life insurance policies. The methodologies for other financial assets and liabilities are discussed below:

Financial Instruments

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

Cash and due from banks: The carrying amounts reported in the balance sheet for cash and due from banks approximate their fair values.

Interest-bearing deposits with banks: Fair values for interest-bearing demand deposits and time deposits are estimated using a discounted cash flow analysis that applies interest rates currently being offered on certificates to a schedule of aggregated contractual maturities on such time deposits.

Federal funds sold: Due to the short-term nature of these assets, the carrying value approximates fair value.

Securities: Fair values for securities, excluding restricted equity securities, are based on quoted market prices, where available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. The carrying values of restricted equity securities approximate fair values.

Loans receivable: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying amounts. The fair values for other loans are estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. The carrying amount of accrued interest receivable approximates its fair value.

Bank owned life insurance: The carrying amount reported in the balance sheet approximates the fair value as it represents the cash surrender value of the life insurance.

Deposit liabilities: The fair values disclosed for demand and savings deposits are, by definition, equal to the amount payable on demand at the reporting date. The fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated contractual maturities on such time deposits. The carrying amount of accrued interest payable approximates fair value.

Federal funds purchased, securities sold under agreements to repurchase and short-term debt: The carrying amounts of federal funds purchased, securities sold under agreements to repurchase and short-term debt approximate their fair values.

Long-term debt: The fair value of long-term debt is estimated using a discounted cash flow calculation that applies interest rates currently available on similar instruments.

Other liabilities: For fixed-rate loan commitments, fair value considers the difference between current levels of interest rates and the committed rates. The carrying amounts of other liabilities approximate fair value.

29

Notes to Consolidated Financial Statements

Note 11. Fair Value, continued

Fair Values

The estimated fair values of the Company’s financial instruments are as follows (dollars in thousands):

					Fair Value Measurements
(dollars in thousands)	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2013
Financial Instruments - Assets
Loans	$	179,909	$	179,531	$	—	$	—	$	179,531
Financial Instruments - Liabilities
Deposits		195,801		171,649		—		171,649		—
Federal Home Loan Bank advances		7,750		8,100		—		8,100		—
December 31, 2012
Financial Instruments - Assets
Loans	$	173,578	$	173,813	$	—	$	—	$	173,813
Financial Instruments - Liabilities
Deposits		187,823		180,777		—		180,777		—
Federal Home Loan Bank advances		7,750		8,291		—		8,291		—

30

Notes to Consolidated Financial Statements

Note 12. Earnings Per Common Share

The following table details the computation of basic and diluted earnings per share for the years ended December 31, 2013 and 2012:

	2013			2012
Net income	$	2,889,351		$	2,782,880
Convertible preferred stock dividends (Series A and D)		(183,423	)		(183,423	)
Net income available to common shareholders	$	2,705,928		$	2,599,457
Weighted average common shares outstanding		3,542,984			3,540,914
Effect of dilutive securities:
Options		—			—
Convertible preferred stock (Series A and D)		633,935			633,935
Weighted average common shares outstanding, diluted		4,176,919			4,174,849
Basic earnings per common share	$	0.76		$	0.73
Diluted earnings per common share	$	0.69		$	0.67

The Company has 41,190 shares of common stock available for exercise in its qualified incentive stock option plan. None of these shares were “in the money” at December 31, 2013 and 2012, therefore had no effect on fully diluted earnings per share.

Note 13. Employee Benefit Plans

The Company has a defined contribution plan (the Plan) qualifying under IRS Code Section 401(k). Eligible participants in the Plan can contribute up to the maximum percentage allowable not to exceed the dollar limit under IRC Section 401(k). The Company matches 100% of the first six percent of an employee’s contribution. For the years ended December 31, 2013 and 2012, the Company contributed $130,805 and $134,019 to the Plan, respectively.

The Company has a Supplemental Retirement Benefit Plan (SERP) to provide future compensation to certain members of management upon retirement. Under plan provisions, payments projected to range from $19,838 to $89,914, per year, are payable for the life of the executive, generally beginning at age 65. The liability accrued for the compensation under the plan was $783,041 and $669,648 at December 31, 2013 and 2012, respectively. Employee benefits expense, an actuarially determined amount, was $133,229 and $98,823 for the years ended December 31, 2013 and 2012, respectively. Benefits paid during the years ended December 31, 2013 and 2012, amounted to $19,836 and $8,265, respectively. The assumed discount rate for the plan was 5.5% and 6.0% at December 31, 2013 and 2012, respectively.

The Company also has a deferred compensation plan under which directors may elect to defer their directors’ fees. Participating directors receive an additional 30% matching contribution and will be paid an annual benefit for a specified number of years after retirement, generally beginning at age 65. The maximum payout period is ten years. The liability accrued for deferred directors’ fees was $851,751 and $725,399 at December 31, 2013 and 2012, respectively. Deferred directors’ fees expensed under the plan for the years ended December 31, 2013 and 2012 were $141,166 and $104,795, respectively. Benefits of $14,814 and $124,503 were paid out during the years ended December 31, 2013 and 2012, respectively.

The Company has purchased and is the primary beneficiary of life insurance policies indirectly related to the Supplemental Retirement Benefit Plan and the directors’ deferred compensation liability. The cash value of the life insurance policies totaled $5,462,336 and $5,298,354 at December 31, 2013 and 2012, respectively. During the year ended December 31, 2012, the Bank purchased $1,750,000 of additional life insurance policies on certain employees of the Bank.

31

Notes to Consolidated Financial Statements

Note 14. Stock Based Compensation

The Company has two share-based compensation plans, which are described below. No compensation cost has been charged against income during the year ended December 31, 2013, as the vesting period ended in 2012. The compensation cost that has been charged against income for those plans was approximately $32,507 the year ended December 31, 2012. The income tax benefit recognized for share-based compensation arrangements was approximately $11,052 for the year ended December 31, 2012.

The Company’s qualified incentive stock option plan which expired on June 1, 2007 reserved shares for purchase by eligible employees. Options granted under this plan vest at the rate of 20% per year, expire not more than ten years from the date of grant, and are exercisable at not less than the fair market value of the stock at the date of the grant.

The Company’s non-qualified stock option plan, which expired on June 1, 2007, reserved shares for purchase by non-employee directors. Options granted under this plan were exercisable after six months from the date of the grant at not less than the fair market value of the stock at the date of the grant. The life of such options shall not extend more than ten years from the date of the grant.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The risk-free interest rate is based on the U.S. Treasury rate for the expected life at the time of grant. Volatility is based on the volatilities of our trading history. The expected life is based on the average life of the options of ten years and the weighted average graded vesting period of five years, and forfeitures are considered immaterial based on the historical data of the Company.

A summary of option activity under the stock option plans during the years ended December 31, 2013 and 2012 is presented below:

	Options Available		Options Outstanding			Weighted Average Exercise Price
Balance at December 31, 2011		—		49,100		$	11.14
Exercised		—		(6,260	)		4.81
Authorized		—		—			—
Forfeited		—		(1,650	)		12.06
Granted		—		—			—
Expired		—		—			—
Balance at December 31, 2012		—		41,190			12.06
Exercised		—		—			—
Authorized		—		—			—
Forfeited		—		—			—
Granted		—		—			—
Expired		—		—
Balance at December 31, 2013		—		41,190		$	12.06

32

Notes to Consolidated Financial Statements

Note 14. Stock Based Compensation, continued

The following table sets forth the exercise prices, the number of options outstanding and the number of options exercisable at December 31, 2013:

Exercise Price		Number of Options Outstanding		Weighted Average Exercise Price		Weighted Average Contractual Life Remaining (Years)	Number of Options Exercisable		Weighted Average Exercise Price
$	12.06		41,190		12.06	3.4		41,190		12.06
	Total/Average		41,190	$	12.06	3.4		41,190	$	12.06

As of December 31, 2013, there was no unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s stock option plans. The total fair value of shares vested during the year ended December 31, 2012 was $61,512.

Note 15. Income Taxes

Current and Deferred Income Tax Components

The components of income tax expense are as follows:

	2013			2012
Current	$	1,785,165		$	1,444,792
Deferred		(25,498	)		276,492
	$	1,759,667		$	1,721,284

Rate Reconciliation

A reconciliation of expected income tax expense computed at the statutory federal income tax rate of 34% to income tax expense included in the statements of income is as follows:

	2013			2012
Expected tax expense	$	1,580,666		$	1,531,416
State income tax, net of federal tax benefit		207,817			195,474
Tax exempt income		(75,568	)		(69,724	)
Nondeductible and other items		46,752			64,118
	$	1,759,667		$	1,721,284

33

Notes to Consolidated Financial Statements

Note 15. Income Taxes, continued

Deferred Income Tax Analysis

Net deferred tax assets are included in other assets in the consolidated balance sheets. The significant components of net deferred tax assets at December 31, 2013 and 2012 are summarized as follows:

	2013		2012
Deferred tax assets
Allowance for loan losses	$	878,918	$	941,475
Deferred compensation liability		609,777		537,791
Net unrealized loss on securities available for sale		26,301		37,796
Write down and expenses of foreclosed assets		—		25,095
Interest income on non-accrual loans		162,335		126,334
Lower of cost or market adjustment on loans transferred from available for sale to portfolio		15,322		19,834
		1,692,653		1,688,325
Deferred tax liabilities
Depreciation		305,985		302,314
Net deferred loan cost		100,374		113,080
Other		19,091		19,731
		425,450		435,125
Net deferred tax asset	$	1,267,203	$	1,253,200

The Company files tax returns in the United States Federal jurisdiction and the states of North Carolina and Virginia.

The Company classifies interest and penalties related to income tax assessments, if any, in interest expense or non-interest expense, respectively in the consolidated statements of income. Tax years 2010 through 2012 are subject to examination by the Internal Revenue Service, North Carolina Department of Revenue, and the Virginia Department of Taxation. The Company has analyzed the tax positions taken or expected to be taken in its tax returns and has concluded it has no liability related to uncertain tax positions.

Note 16. Commitments and Contingencies

Litigation

In the normal course of business the Company is involved in various legal proceedings. After consultation with legal counsel, management believes that any liability resulting from such proceedings will not be material to the financial statements.

Financial Instruments with Off-Balance-Sheet Risk

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, credit risk in excess of the amount recognized in the balance sheets.

34

Notes to Consolidated Financial Statements

Note 16. Commitments and Contingencies, continued

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as for on-balance-sheet instruments. A summary of the Company’s commitments at December 31, 2013 and 2012 is as follows:

	2013		2012
Commitments to extend credit, including unused lines of credit	$	34,138,058	$	34,794,892
Standby letters of credit		1,601,847		1,524,713
	$	35,739,905	$	36,319,605

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the party. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held varies as specified above and is required in instances which the Company deems necessary. The commitments carry both fixed and variable rates of interest.

Concentrations of Credit Risk

Substantially all of the Company’s loans, commitments to extend credit, and standby letters of credit have been granted to customers in the Company’s market area and such customers are generally depositors of the Company. The concentrations of credit by type of loan are set forth in Note 4. The distribution of commitments to extend credit approximates the distribution of loans outstanding. The Company, as a matter of policy, does not extend credit to any single borrower or group of related borrowers in excess of approximately $5,100,000 unless guaranteed by SBA or USDA Rural Development Corporation. Although the Company has a reasonably diversified loan portfolio, the following industries are considered concentrations: real estate, motion picture and sound recording, truck transportation, fabricated metal product manufacturing, heavy and civil engineering construction and building construction.

Other Commitments

The Company has entered into employment agreements with certain of its key officers covering duties, salary, benefits, provisions for termination and Company obligations in the event of merger or acquisition. The Bank also has lease commitments summarized in Note 7 to these financial statements.

Note 17. Regulatory Restrictions

Dividends

The Company’s principal source of funds for dividend payments is dividends received from the Bank. The Bank, as a North Carolina banking corporation, may pay cash dividends only out of undivided profits as determined pursuant to North Carolina banking laws. However, regulatory authorities may limit payment of dividends by a bank when it is determined that such a limitation is in the public interest and is necessary to ensure financial soundness of the bank.

35

Notes to Consolidated Financial Statements

Note 17. Regulatory Restrictions, continued

Intercompany Transactions

The Bank’s legal lending limit on loans to the Company is governed by Federal Reserve Act 23A, and differs from legal lending limits on loans to external customers. Generally, a bank may lend up to 10% of its capital and surplus to its Parent, if the loan is secured. Under this definition, the legal lending limit for the Bank on loans to the Company was approximately $3,348,000 at December 31, 2013. No 23A transactions were deemed to exist between the Company and the Bank at December 31, 2013 or 2012.

Capital Requirements

The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate 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.

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 to risk-weighted assets, and of Tier I capital to average assets, as all those terms are defined in the regulations. Management believes, as of December 31, 2013, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2013, the most recent notification from the Federal Deposit Insurance Corporation 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 following table. There are no conditions or events after that notification that management believes to have changed the institution’s category.

On July 7, 2013 the Federal Reserve Board approved Basel III Final Rule to begin implementation January 1, 2015. The desired overall objective of Basel III is to improve the banking sector’s ability to absorb shocks arising from financial and economic stress. The Final Rule changes minimum capital ratios and raises the Tier 1 Risk Weighted Assets to 6% from 4%. In addition, the new rules require a bank to maintain a capital conservation buffer of between 2 and 2  ¹/₂ % beginning in 2016. The new rules will be phased in beginning in 2015 with complete compliance required by 2019. Generally, the Basel III Final Rule will require banks to maintain higher levels of common equity and regulatory capital.

36

Notes to Consolidated Financial Statements

Note 17. Regulatory Restrictions, continued

The Company’s and Bank’s actual capital amounts and minimum required amounts (dollars in thousands) and ratios are also presented in the following table.

	Actual					Minimum Required For Capital Adequacy Purposes					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2013
Total Capital
(to Risk-Weighted Assets) Consolidated	$	34,880		21.90	%	$	12,740		8.00	%	$	n/a		n/a
Surrey Bank & Trust	$	34,154		21.46	%	$	12,730		8.00	%	$	15,913		10.00	%
Tier I Capital
(to Risk-Weighted Assets) Consolidated	$	32,872		20.64	%	$	6,370		4.00	%	$	n/a		n/a
Surrey Bank & Trust	$	32,148		20.20	%	$	6,365		4.00	%	$	9,548		6.00	%
Tier I Capital
(to Average Assets) Consolidated	$	32,872		13.58	%	$	9,685		4.00	%	$	n/a		n/a
Surrey Bank & Trust	$	32,148		13.31	%	$	9,663		4.00	%	$	12,079		5.00	%
December 31, 2012
Total Capital
(to Risk-Weighted Assets) Consolidated	$	32,923		20.77	%	$	12,679		8.00	%	$	n/a		n/a
Surrey Bank & Trust	$	32,373		20.49	%	$	12,637		8.00	%	$	15,796		10.00	%
Tier I Capital
(to Risk-Weighted Assets) Consolidated	$	30,924		19.51	%	$	6,340		4.00	%	$	n/a		n/a
Surrey Bank & Trust	$	30,381		19.23	%	$	6,318		4.00	%	$	9,478		6.00	%
Tier I Capital
(to Average Assets) Consolidated	$	30,924		13.49	%	$	9,172		4.00	%	$	n/a		n/a
Surrey Bank & Trust	$	30,381		13.28	%	$	9,153		4.00	%	$	11,442		5.00	%

Note 18. Transactions with Related Parties

The Company has entered into transactions with its directors, significant shareholders and their affiliates (related parties). Such transactions were made in the ordinary course of business on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers, and did not, in the opinion of management, involve more than normal credit risk or present other unfavorable features.

Aggregate loan transactions with related parties were as follows:

	2013			2012
Balance, beginning	$	4,060,425		$	4,491,059
New loans		684,223			2,203,459
Repayments		(1,790,548	)		(2,634,093	)
Balance, ending	$	2,954,100		$	4,060,425

Deposit transactions with related parties at December 31, 2013 and 2012 were insignificant.

37

Notes to Consolidated Financial Statements

Note 19. Parent Company Activity

Surrey Bancorp owns all of the outstanding shares of the Bank. Condensed financial statements of Surrey Bancorp follow:

Condensed Balance Sheets

December 31, 2013 and 2012

	2013			2012
Assets
Cash and due from banks	$	89,528		$	59,625
Dividends receivable from subsidiary		867,000			—
Investment securities available for sale		566,816			512,252
Other assets		11,972			20,840
Investment in subsidiaries		33,483,275			31,692,793
	$	35,018,591		$	32,285,510
Liabilities and Capital
Liabilities
Dividends payable	$	790,259		$	46,106
Other liabilities		10,706			2,103
		800,965			48,209
Capital
Preferred stock		3,868,807			3,868,807
Common stock		12,061,153			12,061,153
Retained earnings		18,329,089			16,367,187
Accumulated other comprehensive loss		(41,423	)		(59,846	)
		34,217,626			32,237,301
	$	35,018,591		$	32,285,510

Condensed Statements of Income

For the years ended December 31, 2013 and 2012

	2013			2012
Income
Equity in undistributed income of subsidiary	$	1,790,589		$	1,468,334
Dividends from subsidiary		1,122,000			1,355,000
Gain on the sale of investment securities		9,206			700
Interest income		8			80
Dividend income		22,190			9,679
Other operating income		—			12
Total income		2,943,993			2,833,805
Expenses
Other expense		66,614			71,765
Total expense		66,614			71,765
Income before income taxes		2,877,379			2,762,040
Income tax benefit		(11,972	)		(20,840	)
Net income		2,889,351			2,782,880
Preferred stock dividends		(183,423	)		(183,423	)
Net income available to common stockholders	$	2,705,928		$	2,599,457

38

Notes to Consolidated Financial Statements

Note 19. Parent Company Activity, continued

Condensed Statements of Cash Flows

For the years ended December 31, 2013 and 2012

	2013			2012
Cash flows from operating activities
Net income	$	2,889,351		$	2,782,880
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiary		(1,790,589	)		(1,468,334	)
Gain on the sale of investment securities		(9,206	)		(700	)
Increase in dividends receivable from subsidiary		(867,000	)		—
Net (increase) decrease in other assets		8,868			(20,840	)
Net (decrease) increase in other liabilities		(942	)		942
Net cash provided by operating activities		230,482			1,293,948
Cash flows from investing activities
Net decrease in interest-bearing deposits with banks		—			130,000
Purchase of investment securities		(81,221	)		(553,659	)
Proceeds from the sale of investment securities		63,938			45,522
Net cash used by investing activities		(17,283	)		(378,137	)
Cash flows from financing activities
Common stock options exercised		—			30,111
Dividends paid		(183,296	)		(1,351,795	)
Net used by financing activities		(183,296	)		(1,321,684	)
Net increase (decrease) in cash and due from banks		29,903			(405,873	)
Cash and due from banks, beginning		59,625			465,498
Cash and due from banks, ending	$	89,528		$	59,625

Note 20. Subsequent Events

The Company has evaluated events and transactions through the date these financial statements were filed for potential recognition and disclosure.

39

Report of Independent Registered Public Accounting Firm

To the Board of Directors

Surrey Bancorp

Mount Airy, North Carolina

We have audited the accompanying consolidated balance sheets of Surrey Bancorp and subsidiaries (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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 audit to obtain reasonable assurance about whether the 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 audits 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 financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall 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 Surrey Bancorp and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Elliott Davis, PLLC

Charlotte, North Carolina

March 28, 2014

Elliott Davis PLLC | www.elliottdavis.com

Management’s Discussion and Analysis

General

Surrey Bancorp was formed on May 1, 2003, and was created for the purpose of acquiring all the outstanding shares of common stock of Surrey Bank & Trust.

Surrey Bank & Trust was incorporated on July 15, 1996, as a North Carolina banking corporation and opened for business on July 22, 1996. The Bank operates for the primary purpose of serving the banking needs of individuals and small to medium sized businesses in Surry County, North Carolina and Patrick County, Virginia and the surrounding area, while developing personal, hometown associations with these customers. The Bank offers a wide range of banking services including checking and savings accounts; commercial, consumer and mortgage loans; safe deposit boxes; and other associated services. Through its subsidiaries, Surrey Investment Services, Inc. and Freedom Finance, LLC, the Bank offers insurance and investment products and sales finance services, respectively. The Bank’s primary sources of revenue are interest income from its commercial and real estate lending activities and, to a lesser extent, from its investment portfolio. The Bank also earns fees from lending and deposit activities. The major expenses of the Bank are interest on deposit accounts and general and administrative expenses, such as salaries, occupancy and related expenses.

Primary Market Area

The Bank’s market area consists of an area extending from Surry County, with branches in Mount Airy and Pilot Mountain and a loan production office in Elkin, North Carolina, north into the southern portions of Carroll and Patrick Counties, Virginia. Mount Airy is the industrial and trading center of Surry County with a population of approximately 8,500 people living in the city limits and 30,000 in the metropolitan area. The total population of Surry County is approximately 73,000 people. Mount Airy is served by Interstate Highways 77 and 74 and U.S. Highways 52 and 601. Surry County has a civilian labor force of over 32,000. Major industries include manufacturing, construction, fabricated metals, and lumber and wood. The Bank has a branch office in Stuart, Virginia, which is located in Patrick County, Virginia. The primary industries found in Patrick County are lumber and wood, textiles and agricultural.

Management’s Discussion and Analysis of Operations

Management’s Discussion and Analysis is provided to assist in the understanding and evaluation of the Company’s financial condition and its results of operations. The following discussion should be read in conjunction with the Company’s financial statements and related notes.

Certain information contained in this discussion may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import. Such forward-looking statements involve known and unknown risks including, but not limited to, changes in general economic and business conditions, interest rate fluctuations, competition within and from outside the banking industry, new products and services in the banking industry, risk inherent in making loans such as repayment risks and fluctuating collateral values, problems with technology utilized by the Company, changing trends in customer profiles and changes in laws and regulations applicable to the Company. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

Critical Accounting Policies

Surrey Bancorp’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). The notes to the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2013 contain a summary of its significant accounting policies. Management believes the Company’s policies with respect to the methodology for the determination of the allowance for loan losses, and asset impairment judgments, involve a higher degree of complexity and require management to make difficult and subjective judgments that often require assumptions or estimates about highly uncertain matters. Accordingly, management considers the policies related to those areas as critical.

41

Management’s Discussion and Analysis

Critical Accounting Policies, continued

The allowance for loan losses is an estimate of the losses that may be sustained in the loan portfolio. The allowance is based on two basic principles of accounting: (i) Accounting for Contingencies, which requires that losses be accrued when they are probable of occurring and determinable, and (ii) Accounting by Creditors for Impairment of a Loan, which requires that losses be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market, and the Bank’s investment in the loan.

The allowance for loan losses has three basic components: (i) the formula allowance, (ii) the specific allowance, and (iii) the qualitative allowance. Each of these components is determined based upon estimates that can and do change when the actual events occur. The formula allowance uses a historical loss view as an indicator of future losses and, as a result, could differ from the loss incurred in the future. However, since this history is updated with the most recent loss information, the errors that might otherwise occur are mitigated. The specific allowance uses various techniques to arrive at an estimate of loss. Historical loss information, expected cash flows and fair market value of collateral are used to estimate these losses. The use of these values is inherently subjective and our actual losses could be greater or less than the estimates. The qualitative allowance captures losses that are attributable to various economic environmental factors or changes in industry or geographic sectors whose impact on the portfolio have occurred but have yet to be recognized in either the formula or specific allowance.

42

Management’s Discussion and Analysis

Net Interest Income and Average Balances

Net interest income is the Company’s principal source of earnings. Net interest income is the amount of income generated by earning assets (primarily loans and investment securities) less the interest expense incurred on interest-bearing liabilities (primarily deposits and FHLB Advances used to fund earning assets). Changes in the volume and mix of earning assets and interest-bearing liabilities, as well as their respective yields and rates, have a significant impact on the level of net interest income. Changes in the interest rate environment and the Company’s cost of funds also affect net interest income. Table 1 summarizes the major components of net interest income for the years ended December 31, 2013, 2012 and 2011.

Table 1. Net Interest Income and Average Balances (dollars in thousands)

	Periods Ended December 31,
	2013								2012								2011
	Average Balance			Interest Income/ Expense		Yield/ Cost			Average Balance			Interest Income/ Expense		Yield/ Cost			Average Balance			Interest Income/ Expense		Yield/ Cost
Interest-earning assets
Deposits in other banks	$	32,398		$	82		0.25	%	$	24,253		$	49		0.20	%	$	29,790		$	14		0.05	%
Taxable investment securities		5,103			78		1.53	%		3,775			61		1.63	%		3,302			54		1.65	%
Federal funds sold		1,049			2		0.22	%		713			2		0.22	%		708			2		0.23	%
Loans 1 2		181,895			10,377		5.71	%		180,342			10,842		6.01	%		180,256			10,866		6.03	%
Total interest-earning assets		220,445			10,539					209,083			10,954					214,056			10,936
Yield on average interest-earning assets							4.78	%							5.24	%							5.11	%
Noninterest-earning assets
Cash and due from banks		6,987								6,371								2,507
Property and equipment		4,470								4,546								4,661
Foreclosed assets		228								477								355
Interest receivable and other		8,873								8,698								7,619
Allowance for loan losses		(3,344	)							(3,800	)							(4,938	)
Total noninterest-earning assets		17,214								16,292								10,204
Total assets	$	237,659							$	225,375							$	224,260
Interest-bearing liabilities
Demand deposits	$	27,445		$	67		0.24	%	$	23,510		$	71		0.30	%	$	22,329		$	95		0.43	%
Savings deposits		37,363			187		0.50	%		34,847			218		0.63	%		30,181			248		0.82	%
Time deposits		84,312			921		1.09	%		87,086			1,083		1.24	%		98,296			1,431		1.46	%
Fed funds purchased/repurchase agreements		9			1		0.93	%		15			1		0.97	%		—			—		—	%
Short-term debt		942			38		4.09	%		—			—		—	%		—			—		—	%
Long-term debt		7,750			291		3.76	%		7,898			298		3.78	%		8,826			342		3.87	%
Total interest-bearing liabilities		157,821			1,505					153,356			1,671					159,632			2,116
Cost of average interest bearing liabilities							0.95	%							1.09	%							1.33	%
Noninterest-bearing liabilities
Demand deposits		43,072								37,851								32,582
Interest payable and other		3,132								2,746								2,214
Total noninterest-bearing liabilities		46,204								40,597								34,796
Total liabilities		204,025								193,953								194,428
Stockholders’ equity		33,634								31,422								29,832
Total liabilities and stockholders’ equity	$	237,659							$	225,375							$	224,260
Net interest income				$	9,034							$	9,283							$	8,820
Net yield on interest-earning assets							4.10	%							4.44	%							4.12	%

1. Includes non-accrual loans.

2. Amortization of deferred loan fees are included in interest income.

43

Management’s Discussion and Analysis

Net Interest Income and Average Balances, continued

Yields on interest-earning assets decreased during the year ended December 31, 2013, primarily due to a change in asset mix during the year compared to 2012 and a decrease in yields from loans. The cost of interest bearing liabilities also decreased in 2013, as deposit costs continue to fall, but was not enough to offset the decrease in asset yields. As a result the net yield on interest earning assets decreased from 4.44% in 2012 to 4.10% for the year ended December 31, 2013.

Table 2. Rate/Volume Variance Analysis (dollars in thousands)

	2013 Compared to 2012									2012 Compared to 2011
	Interest Income/ Expense Variance			Variance Rate			Attributed To Volume			Interest Income/ Expense Variance			Variance Rate			Attributed To Volume
Interest-earning assets
Deposits in other banks	$	32		$	13		$	19		$	35		$	37		$	(2	)
Taxable investments securities		16			(3	)		19			7			(1	)		8
Federal funds sold		1			—			1			—			—			—
Loans		(465	)		(559	)		94			(24	)		(29	)		5
Total		(416	)		(549	)		133			18			7			11
Interest-bearing liabilities
Demand deposits		(5	)		(16	)		11			(24	)		(29	)		5
Savings deposits		(31	)		(46	)		15			(30	)		(65	)		35
Time deposits		(161	)		(127	)		(34	)		(348	)		(195	)		(153	)
Federal funds purchased/
Repurchase agreements		—			—			—			—			—			—
Short-term debt		38			—			38						—			—
Long-term debt		(7	)		(2	)		(5	)		(43	)		(8	)		(35	)
Total		(166	)		(191	)		25			(445	)		(297	)		(148	)
Net interest income	$	(250	)	$	(358	)	$	108		$	463		$	304		$	159

As discussed above, the Company’s net interest income is affected by the change in the amount and mix of interest-earning assets and interest-bearing liabilities (referred to as “volume change”) as well as by changes in yields earned on interest-earning assets and rates paid on deposits and borrowed funds (referred to as “rate change”). The table above presents, for the periods indicated, a summary of changes in interest income and interest expense for the major categories of interest-earning assets and interest-bearing liabilities and the amounts of change attributable to variations in volumes and rates. Changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and rate, respectively.

Provision for Loan Losses

The allowance for loan losses is established to provide for expected losses in the Bank’s loan portfolio. Loan losses and recoveries are charged or credited directly to the allowance. Management determines the provision for loan losses required to maintain an allowance adequate to provide for probable losses. Management regularly reviews asset quality and re-evaluates the allowance for loan losses. However, no assurance can be given as to unforeseen adverse economic conditions or other circumstances that could result in increased provisions in the future. Additionally, regulatory examiners may require the Company to recognize additions to the allowance based upon their judgment about the loan portfolio and other information available to them at the time of their examinations.

44

Management’s Discussion and Analysis

Provision for Loan Losses, continued

A consolidated provision for loan losses of $319,565 was made during 2013, a decrease of $151,727 or 32.2% from the $471,292 provision made during 2012. The decrease is in recognition of the current economic environment, our estimate of inherent risk associated with lending activities and to changes in the guaranteed loan portfolio. The provision attributable to the Bank decreased from $454,914 in 2012 to $293,042 in 2013. This decrease is primarily attributable to increased loan guarantee enhancements during 2013. Approximately $60,864,000 of the total loans outstanding at December 31, 2013, carry government guarantees which reduce the Bank’s credit exposure. The guaranteed portion of these loans amounts to approximately $47,716,000, or 26.0% of total loans outstanding. This compares to a guaranteed portion of $43,118,000, or 24.4% of loans outstanding at December 31, 2012. The provision attributable to Freedom Finance, LLC increased from $16,378 in 2012 to $26,523 for the year ended December 31, 2013. The increase in the Freedom Finance, LLC provision was due to an increase in loan charge-offs. A provision for loan losses of $471,292 was made in 2012, a decrease of $272,425, or 36.6% from the $743,717 provided during 2011.

The allowance for loan losses was $3,375,350 or 1.84% of total loans outstanding at December 31, 2013. This compares to an allowance for loan losses of $3,403,098, or 1.93% of total loans outstanding at December 31, 2012. The decrease in the reserve, as a percentage of total loans in 2013, was due to a reduction in reserves on impaired loans and increases in government guaranteed loans. Reserves on impaired loans decreased from approximately $515,000 at December 31, 2012 to $349,000 at the end of 2013. The decrease to the reserves on impaired loans during 2013 is primarily due to the liquidation and charge off of specific loans rather than a homogenous pool of small loans. Loan loss reserves on non-impaired loans increased due to loan growth during the period. Overall loans outstanding increased 3.58% from $176,687,329 at December 31, 2012 to $183,015,075 at December 31, 2013. Additionally, a higher concentration of government guaranteed loans, as a percentage of total loans, had an impact on the allowance for loan losses. These guaranteed loans, for which the Bank’s exposure ranges from 10% to 49% of the outstanding balance, increased approximately $5,764,000 or 10.5 % during 2013. When the guaranteed portion of the loans, which amounts to $47,716,000, are factored into the equation the loan loss reserve is approximately 2.49% of the net credit exposure of the loan portfolio at December 31, 2013. At December 31, 2012, government guaranteed loans amounted to approximately $55,100,000 of total outstanding loans, of which $43,118,000 represented the guaranteed portion. The reserve for loan losses at December 31, 2012, after the effect of guaranteed loans, was 2.54% of net loan credit exposure.

The level of reserve is established based upon management’s evaluation of historical loss data and the effects of certain environmental factors on the loan portfolio. The historical loss portion of the reserve is computed using the average loss data from the past three years applied to its corresponding category of loans. However, historical losses only reflect a portion of the Bank’s loan loss reserve. The environmental factors represent risk from external economic influences on the credit quality of the loan portfolio. These factors include the movement of interest rates, unemployment rates, past due and charge off trends, loan grading migrations, movement in collateral values and the Bank’s exposure to certain loan concentrations. Positive or negative movements in any of these factors have an effect on the credit quality of the loan portfolio. As a result, management continues to actively monitor the Bank’s asset quality affected by these environmental factors. Table 3 is a summary of loans past due, inclusive of nonaccrual loans, at December 31, 2013 and December 31, 2012.

Table 3. Past Due Loans

	December 31, 2013						December 31, 2012
	30-89 Days			90 Days Plus			30-89 Days			90 Days Plus
Construction and development	$	—		$	—		$	73,572		$	—
1-4 Family residential		709,803			173,786			380,731			380,731
Nonfarm, non-residential		529,447			791,148			908,887			908,887
Commercial and industrial		86,673			929,552			310,063			310,063
Consumer		172,230			20,742			201,301			201,301
Other loans		—			—			—			—
	$	1,498,153		$	1,915,228		$	1,874,554		$	1,153,386
Percentage of total loans		0.82	%		1.05	%		1.06	%		0.65	%
Guaranteed portion of past dues	$	288,601		$	1,193,581		$	512,623		$	432,239

45

Management’s Discussion and Analysis

Provision for Loan Losses, continued

Past due loans are reviewed weekly and the situation assessed to determine potential problems arising in the loan portfolio. Proactive management of past due accounts allows management to anticipate trends within the portfolio and make appropriate adjustments to collection efforts and to the allowance for loan losses. Collectively, past dues increased 12.7% from $3,027,940 at December 31, 2012 to $3,413,381 at December 31, 2013. Most of the increase is associated with commercial loans. Total commercial past dues increased from $739,289 at December 31, 2012 to $1,016,225 at the end of 2013. Past dues on non-accrual status at the end of 2013 amount to 58.5% of total past dues compared to 23.7% in non-accrual status at the end of 2012. At December 31, 2013 total past dues amount to 1.87% of total loans compared to 1.71% at the end of 2012. Loans past due 30-89 days are considered potential problem loans and amounted to $1,498,153 at December 31, 2013 compared to $ 1,874,554 at December 31, 2012. The government guaranteed portion of 2013 past dues totals $1,482,182, or 43.4% of total past dues compared to $944,862, or 31.2% of 2012 past dues.

Management believes that its loan portfolio is diversified so that a downturn in a particular market or industry will not have a significant impact on the loan portfolio or the Bank’s financial condition. Management believes that its provision and reserve offer an adequate allowance for loan losses.

Noninterest Income

Noninterest income consists of revenues generated from a broad range of financial services and activities. The majority of noninterest income is a result of service charges on deposit accounts, including charges for insufficient funds; debit and ATM exchange fees; fees charged for non-deposit services; insurance commissions and fees on mortgage loans delivered to correspondents.

Table 4 discloses noninterest income for the periods ended December 31, 2013 and 2012.

Table 4. Sources of Noninterest Income

	For the Period Ended
	December 31,
	2013		2012
Service charges on deposit accounts	$	863,862	$	919,963
Gain on the sale of government guaranteed loans		229,130		—
Fees on mortgage loans delivered to correspondents		78,763		145,239
Gain on the sale of investment securities		9,206		700
Other service charges and fees		156,172		133,290
Debit/ATM card income		420,821		394,344
Insurance commissions		666,704		588,780
Brokerage commissions		160,562		117,166
Other income		321,624		314,145
	$	2,906,844	$	2,613,627

Activity in the deposit related noninterest income accounts decreased in 2013 primarily as the result of decreases in insufficient funds fees due to the sluggish economy and regulatory changes. The Bank had a gain from the sale of government guaranteed loans of $229,130 in 2013 compared to no gains in 2012. Activity in mortgage lending decreased compared to 2012 activity, as the refinancing of mortgage loans decreased, resulting in an decrease in fees on mortgage loans delivered to correspondents of approximately 46%. Other service charges and fees increased primarily due to an increase in loan servicing fees associated with government guaranteed loans. Debit/ATM card income increased as usage of cards continues to increase. Revenue from the Bank’s insurance subsidiary increased by 13.2% as its commercial business continues to grow. Brokerage commissions increased due to an increase in fixed and variable annuity sales. Other income increased slightly in 2013 primarily from income from Bank Owned Life Insurance.

46

Management’s Discussion and Analysis

Noninterest Expense

The major components of noninterest expense for the periods ended December 31, 2013 and 2012 are as follows:

Table 5. Sources of Noninterest Expense

	For the Period Ended December 31,
	2013			2012
Salary and benefits	$	3,762,207		$	3,632,214
Occupancy expenses		429,536			428,542
Furniture/equipment expenses		237,229			240,836
Data processing		414,309			379,093
Foreclosed assets, net		(3,312	)		46,047
Postage, printing and supplies		190,985			196,775
Advertising and business promotion		129,048			107,110
Professional fees		389,338			394,814
FDIC insurance premiums		104,317			149,304
Other expenses		1,318,275			1,346,846
	$	6,971,932		$	6,921,581

Salaries and employee benefits of $3,762,207 increased $129,993 or 3.6% over the 2012 total of $3,632,214. This increase is primarily due to normal salary adjustments and increased deferred compensation expense. Occupancy expenses increase minimally in 2013. Furniture and equipment expenses decreased slightly in 2013 due to reduced maintenance expenses. Data processing expense increased 9.3% to $414,309 as a result of increased processing activity and software enhancements. Cost associated with foreclosed assets decreased as several properties were sold during the year resulting in gains. The net amount in 2013 consist of gains from the sale of foreclosed properties of $65,786 and expenses of $62,474, compared to 2012 gains on sales of $73,964 and expenses of $120,011. Postage/printing and supplies decreased as the Company continues its tighter control over the ordering of supplies and usage of paper. Advertising cost increased as the Company increased its marketing efforts. Professional fees decreased slightly primarily due to a reduction in legal fees. FDIC insurance premiums expense decreased in 2013 due to changes in the insurance calculation. Other expenses decreased 2.1% during 2013 as the Company continues to contain operating cost.

The overhead ratio of noninterest expense to adjusted total revenue (net interest income plus noninterest income) increased slightly from 58.2% in 2012 to 58.4% for the year ended December 31, 2013. Adjusted total revenue increased from $11,897,037 in 2012 to $11,940,515 in 2013, and noninterest expense increased 0.7% to $6,971,932 in 2013 from $6,921,581 in 2012.

Analysis of Financial Condition

Average earning assets increased 5.4% from December 31, 2012, to December 31, 2013. Total earning assets represented 92.8% of total average assets at December 31, 2013, the same as at the end of 2012. The mix of average earning assets changed moderately from December 31, 2012, to December 31, 2013. Average net loans decreased in relationship to total average assets and as a percent of average earning assets in 2013. Average loans as a percentage of average earning assets decreased from 86.2% in 2012 to 82.5% in 2013. This change in the average earning asset mix contributed to the reduction in the yield on average earning assets to 4.78% in 2013 from 5.24% in 2012. The average cost of funds decreased 12 basis points, including noninterest bearing deposits during 2013. The decrease in asset yields resulted in a net decrease in the net yield on interest earning assets as shown in Table 1.

47

Management’s Discussion and Analysis

Analysis of Financial Condition, continued

Table 6. Average Asset Mix

	For the Year Ended December 31, 2013						For the Year Ended December 31, 2012
	Average Balance			%			Average Balance			%
Interest earning assets
Loans, net	$	181,895,084			76.54	%	$	180,341,822			80.02	%
Investment securities		5,103,188			2.15	%		3,774,827			1.67	%
Federal funds sold		1,049,132			0.44	%		713,025			0.32	%
Interest-bearing bank balances		32,397,555			13.63	%		24,252,999			10.76	%
Total earning assets		220,444,959			92.76	%		209,082,673			92.77	%
Nonearning assets
Cash and due from banks		6,986,618			2.94	%		6,370,642			2.83	%
Property and equipment		4,470,613			1.88	%		4,546,188			2.02	%
Foreclosed assets		227,602			0.10	%		477,054			0.21	%
Other assets		8,873,679			3.73	%		8,698,533			3.86	%
Allowance for loan losses		(3,344,026	)		(1.41	)%		(3,800,459	)		(1.69	)%
Total nonearning assets		17,214,486			7.24	%		16,291,958			7.23	%
Total assets	$	237,659,445			100.00	%	$	225,374,631			100.00	%

For the year ended December 31, 2012, average net loans represented 76.54% of total average assets compared to 80.02% for the year ended 2012. Investments increased from 1.67% of average assets to 2.15% of average assets over the same time period. Interest-bearing bank balances increased over the period from 10.76% to 13.63% of average assets. The increase in nonearning assets in 2013 comes from an increase in cash and due from banks, a reduction in the allowance for loan losses and an increase in other assets. Cash and due from banks increased due to adding an additional correspondent bank in 2013 and increasing clearing balances at other correspondent banks. The decrease in reserves resulted from decreased reserves associated with impaired loans and increased guarantee enhancements. Averages in other assets, which include deferred income taxes, prepaid FDIC insurance premiums, interest receivable on loans and Bank Owned Life Insurance (BOLI) increased due to the Bank’s increased investment in BOLI in 2013, increasing $370,101, or 7.4% from 2012 to 2013. The BOLI average increased due to the purchase of additional insurance during 2012 and increased cash value from earnings. Even though the BOLI does produce income, its revenue is classified as other non-interest income and therefore is grouped with nonearning assets in the table above.

Loans

Average net loans totaled $181,895,084 for the year ended December 31, 2013. This represents an increase of 0.86% over the average net loans for 2012. Loan demand rebounded in 2013 as general economic conditions, while not recovering fully, did improve. Loan production was also boosted by the Bank’s Loan Production Office (LPO) in Elkin, North Carolina. The LPO opened in August of 2012, therefore 2013 was its first entire year of operation.

The loan portfolio is dominated by real estate and commercial loans. These loans make up 96.84% of the total loan portfolio at December 31, 2013. This is up from the 96.13% that the two categories maintained at December 31, 2012. The amount of loans outstanding by type at December 31, 2013, and December 31, 2012, and the maturity distribution for variable and fixed rate loans as of December 31, 2013 are presented in Tables 7 and 8, respectively.

48

Management’s Discussion and Analysis

Loans, continued

Table 7. Loan Portfolio Summary

	December 31, 2013					December 31, 2012					December 31, 2011
	Amount		%			Amount		%			Amount		%
Construction and development	$	6,353,787		3.47	%	$	4,873,512		2.76	%	$	6,213,443		3.46	%
1-4 family residential		40,203,978		21.97	%		36,091,051		20.43	%		39,499,189		22.02	%
5 or more family residential		1,515,239		0.83	%		1,676,449		0.95	%		2,214,365		1.23	%
Farmland		2,219,688		1.21	%		2,284,155		1.29	%		2,722,872		1.52	%
Nonfarm, nonresidential		60,316,018		32.96	%		48,993,867		27.73	%		47,867,333		26.69	%
Total real estate		110,608,710		60.44	%		93,919,034		53.16	%		98,517,202		54.92	%
Agricultural		107,974		0.06	%		147,860		0.08	%		29,493		0.02	%
Commercial and industrial		66,612,984		36.40	%		75,914,072		42.97	%		73,756,422		41.13	%
Consumer		5,685,407		3.10	%		6,703,363		3.79	%		7,041,846		3.93	%
Other		—		—	%		3,000		—	%		—		—	%
Total	$	183,015,075		100.00	%	$	176,687,329		100.00	%	$	179,344,963		100.00	%

	December 31, 2010					December 31, 2009
	Amount		%			Amount		%
Construction and development	$	5,986,045		3.35	%	$	8,044,967		4.35	%
1-4 family residential		46,356,711		25.98	%		46,355,854		25.05	%
5 or more family residential		1,853,346		1.04	%		2,005,142		1.08	%
Farmland		2,854,481		1.60	%		2,458,748		1.33	%
Nonfarm, nonresidential		48,170,698		27.00	%		51,527,856		27.84	%
Total real estate		105,221,281		58.97	%		110,392,567		59.65	%
Agricultural		73,852		0.04	%		—		—	%
Commercial and industrial		66,377,076		37.20	%		67,428,438		36.44	%
Consumer		6,759,770		3.79	%		7,085,464		3.83	%
Other		—		—	%		115,653		0.08	%
Total	$	178,431,979		100.00	%	$	185,062,122		100.00	%

The concentrations represented above do not, based on managements’ assessment, expose the Bank to any unusual concentration risk. Based on the Bank’s size the only concentration that is above area peer group analysis is commercial and industrial loans. Management recognizes the inherent risk associated with commercial lending, including whether or not a borrower’s actual results of operations will correspond to those projected by the borrower when the loan was funded; economic factors such as the number of housing starts and increases in interest rates, etc.; depression of collateral values; and completion of projects within the original cost and time estimates. The Bank mitigates some of that risk by actively seeking government guarantees on these loans. As mentioned above, the Bank has approximately $60,864,000 in loans that carry government guarantees at December 31, 2013. The guaranteed portion of these loans amounts to $47,716,000, much of which are classified as commercial and industrial loans and nonfarm, nonresidential loans.

Loans in higher risk categories, such as non-owner occupied nonfarm, non-residential property and commercial real estate construction represent a small segment of our loan portfolio. Commercial construction loans included in construction and development loans amounted to $3,433,279 and $2,512,213 at December 31, 2013 and 2012, respectively. Non-owner occupied nonfarm, non-residential properties included in nonfarm, non-residential loans above amounted to $9,327,226 and $8,821,357 at December 31, 2013 and 2012, respectively.

49

Management’s Discussion and Analysis

Loans, continued

Table 8. Maturity Schedule of Loans as of December 31, 2013

	Commercial Financial and Agricultural		Real Estate		Others		Total
							Amount		%
Fixed rate loans
Three months or less	$	11,416,092	$	14,645,406	$	768,863	$	26,830,361		14.66	%
Over three months to twelve months		13,445,025		8,933,980		1,542,695		23,921,700		13.07	%
Over one year to five years		20,700,771		29,132,777		2,348,843		52,182,391		28.51	%
Over five years		1,145,496		5,780,347		21,521		6,947,364		3.80	%
Total fixed rate loans	$	46,707,384	$	58,492,510	$	4,681,922	$	109,881,816		60.04	%
Variable rate loans
Three months or less	$	922,526	$	571,113	$	495,952	$	1,989,591		1.09	%
Over three months to twelve months		960,030		2,247,580		129,456		3,337,066		1.82	%
Over one year to five years		2,604,145		4,715,719		378,077		7,697,941		4.21	%
Over five years		15,526,873		44,581,788		—		60,108,661		32.84	%
Total variable rate loans	$	20,013,574	$	52,116,200	$	1,003,485	$	73,133,259		39.96	%
Total loans
Three months or less	$	12,338,618	$	15,216,518	$	1,264,815	$	28,819,951		15.75	%
Over three months to twelve months		14,405,055		11,181,560		1,672,151		27,258,766		14.89	%
Over one year to five years		23,304,916		33,848,496		2,726,920		59,880,332		32.72	%
Over five years		16,672,369		50,362,135		21,521		67,056,025		36.64	%
Total loans	$	66,720,958	$	110,608,710	$	5,685,407	$	183,015,075		100.00	%

Interest rates charged on loans vary with the degree of risk, maturity and amount of the loan. Competitive pressures, money market rates, availability of funds, and government regulation also influence interest rates. On average, loans yielded 5.71% for the year ended December 31, 2013, compared to an average yield of 6.01% in 2012. This decrease in yields is attributable to a change in loan mix as average prime rates during 2013 and 2012 remained virtually unchanged. Commercial loans decreased to 36.40% of loans outstanding at December 31, 2013, compared to 42.97% at the end of 2012. Total real estate loans increased from 53.16% of total loans at December 31, 2012, to 60.44% of total loans at December 31, 2013. An increase in nonfarm nonresidential loans was a contributing factor in this increase. Nonfarm nonresidential loans increased to 32.96% of total loans at December 31, 2013, from 27.73% at December 31, 2012. Much of this increase involved loans that carry government loan guarantees.

Investment Securities

The Company uses its investment portfolio to provide for unexpected deposit decreases or loan generation, to meet the Company’s interest rate sensitivity goals, and to generate income.

50

Management’s Discussion and Analysis

Investment Securities, continued

Management of the investment portfolio has been conservative with virtually all investments taking the form of purchases of government-sponsored enterprises and mortgage-backed securities. Management views the investment portfolio as a source of income, and purchases securities with that in mind. However, adjustments are necessary in the portfolio to provide an adequate source of liquidity, which can be used to meet funding requirements for loan demand and deposit fluctuations and to control interest rate risk. Therefore, from time to time management may sell certain securities prior to their maturity. Table 9 presents the investment portfolio at December 31, 2013 by major type of investment and maturity ranges. The investment portfolio by major type is also presented for December 31, 2012 and 2011.

The low rate environment experienced in 2013 caused the average yield of the investment portfolio to decrease to 1.53% for the year ended December 31, 2013, compared to 1.63% for 2012. At December 31, 2013 the market value of the investment portfolio was $4,549,702, which was $67,723 less than book value. At December 31, 2012, the market value of the investment portfolio was $97,643 below book value.

The Company has an investment in FHLB stock of $624,100 at December 31, 2013 and $685,900 at December 31, 2012, which is included in restricted equity securities. The Company carries its investment in FHLB at its cost which is the par value of the stock. The level of investment in FHLB stock is based on the asset size of the Bank and the amount of borrowings outstanding. The FHLB evaluates on a quarterly basis whether to repurchase excess capital stock from its members. FHLB paid a cash dividend for the fourth quarter of 2012 at an annualized rate of 2.32% on March 28, 2013, a first quarter dividend at an annualized rate of 2.29% on May 30, 2013, a second quarter dividend at an annualized rate of 2.53% on July 30, 2013, and a third quarter dividend at an annualized dividend rate of 2.76% paid October 30, 2013. At September 30, 2013 (the most recent date available), the FHLB was in compliance with all of its regulatory capital requirements as its total regulatory capital-to-assets ratio was 5.31% exceeding the 4% requirement, and its risk-based capital was $5.95 billion, exceeding its $2.17 billion requirement. Management believes that our investment in FHLB stock was not impaired as of December 31, 2013 or December 31, 2012. There can be no assurance that the impact of recent or future legislation on the Federal Home Loan Banks will not cause a decrease in the value of the Company’s investment in FHLB stock.

Table 9. Investment Securities

December 31, 2013, Available for Sale and Restricted

	In One Year or Less			One Year Through Five Years			After Five Through Ten Years			After Ten Years			Total			Market Value
Investment securities
Government-sponsored enterprises	$	—		$	3,500,000		$	—		$	—		$	3,500,000		$	3,498,765
Government-sponsored enterprises pools (MBS)		—			—			21,521			10,578			32,099			33,121
Corporate securities		—			550,000			—			—			550,000			451,000
Equities and mutual funds		535,326			—			—			—			535,326			566,816
Restricted		676,799			—			—			—			676,799			676,799
Total	$	1,212,125		$	4,050,000		$	21,521		$	10,578		$	5,294,224		$	5,226,501
Weighted average yields
Government-sponsored enterprises		—	%		0.52	%		—	%		—	%		0.52	%
Government-sponsored enterprises pools (MBS)		—	%		—	%		2.96	%		1.58	%		2.50	%
Corporate securities		—	%		4.02	%		—	%		—	%		4.02	%
Equities and mutual funds		6.08	%		—	%		—	%		—	%		6.08	%
Restricted		2.37	%		—	%		—	%		—	%		2.37	%
Consolidated		4.01	%		0.99	%		2.96	%		1.58	%		1.69	%

51

Management’s Discussion and Analysis

Table 9. Investment Securities, continued

December 31, 2012 and December 31, 2011, Available for Sale and Restricted

	December 31, 2012				December 31, 2011
	Total		Market Value		Total		Market Value
Investment securities
Government-sponsored enterprises	$	2,500,000	$	2,504,875	$	2,000,374	$	2,004,685
Government-sponsored enterprises pools (MBS)		41,659		42,975		49,298		50,741
Corporate securities		550,000		442,750		550,000		451,000
Equities and mutual funds		508,836		512,252		550,000		451,000
Restricted		738,324		738,324		809,754		809,754
Total	$	4,338,819	$	4,241,176	$	3,409,426	$	3,316,180

Fed Funds Sold and Interest-bearing Bank Balances

Average federal funds sold totaled $1,049,132 for the year ended December 31, 2013, which was up from the 2012 average. Federal funds represent the most liquid portion of the Bank’s invested funds and generally the lowest yielding portion of earning assets. Deposits in other banks primarily represent deposits at the Federal Reserve Bank, which pay an overnight rate on those deposits. These rates usually mirror the federal funds rate. Occasionally, included in these deposits are short-term time deposit investments in other banks through the Certificate of Deposit Account Registry Service (“CDARS”). These time deposits generally are for terms less than one month and carry market rates. No short-term time deposits were included in interest-bearing bank balances at other banks at December 31, 2013. Management has made an effort to maintain interest-bearing bank balances at the lowest level possible consistent with prudent risk management strategies, while having available resources to fund loan demand and the maturity of time deposits. Large average demand deposit balances also make it necessary to retain funds in more liquid investments. During the year ended December 31, 2013, average federal funds and deposits in other banks represented 0.44% and 13.63% of average assets, respectively. This compares to 0.32% and 10.76% in 2012, respectively.

Deposits

The Bank relies on deposits generated in its market area to provide the majority of funds needed to support lending activities and for investment in liquid assets. More specifically, core deposits (total deposits less certificates of deposit in denominations of $100,000 or more) are the primary funding source. The Bank’s balance sheet growth is largely determined by the availability of deposits in its markets, the cost of attracting the deposits, and the prospects of profitably utilizing the available deposits by increasing loans or investment portfolios. Market conditions have resulted in depositors shopping for deposit rates more than in the past. An increased customer awareness of interest rates adds to the importance of rate management. The Bank’s management must continually monitor market pricing, competitor’s rates, and internal interest rate spreads to maintain the Bank’s growth and profitability. The Bank attempts to structure rates so as to promote deposit and asset growth, while at the same time, increasing overall profitability of the Bank.

52

Management’s Discussion and Analysis

Deposits, continued

Average deposits for the year ended December 31, 2013, amounted to $192,192,001 which was an increase of $8,898,508 or 4.85% from the 2012 averages. Average core deposits (total deposits less large denomination and brokered certificates) totaled $156,502,591 for the year ended December 31, 2013, an increase of $11,835,335, or 8.2% over the 2012 average of $144,667,256. The percentage of the Bank’s average deposits that are interest bearing decreased to 77.59% for the year ended December 31, 2013, from 79.35% in 2012. Average demand deposits, which earn no interest, increased 13.8% from $37,851,154 in 2012 to $43,072,005 in 2013. Average deposits for the periods ended December 31, 2013, December 31, 2012 and December 31, 2011 are summarized in Table 10 below:

Table 10. Deposit Mix

	For the Year Ended December 31, 2013					For the Year Ended December 31, 2012					For the Year Ended December 31, 2011
	Average Balance		%			Average Balance		%			Average Balance		%
Interest-bearing deposits
NOW Accounts	$	27,444,968		14.28	%	$	23,509,879		12.83	%	$	22,328,917		12.18	%
Money Market		28,762,185		14.97	%		27,917,572		15.23	%		24,103,413		13.14	%
Savings		8,601,190		4.48	%		6,928,659		3.78	%		6,077,572		3.31	%
Small denomination certificates		48,622,243		25.29	%		48,459,992		26.43	%		51,522,743		28.10	%
Large denomination certificates		32,576,002		16.95	%		34,360,587		18.75	%		41,465,335		22.61	%
Brokered certificates		3,113,408		1.62	%		4,265,650		2.33	%		5,308,000		2.89	%
Repurchase agreements		—		—	%		—		—	%		—		—	%
Total interest-bearing deposits		149,119,996		77.59	%		145,442,339		79.35	%		150,805,980		82.23	%
Noninterest-bearing deposits		43,072,005		22.41	%		37,851,154		20.65	%		32,581,754		17.77	%
Total deposits	$	192,192,001		100.00	%	$	183,293,493		100.00	%	$	183,387,734		100.00	%

The average balance of certificates of deposit issued in denominations of $100,000 or more decreased by $1,784,585, or 5.2% for the year ended December 31, 2013. The strategy of management has been to support loan and investment growth with core deposits and not to aggressively solicit the more volatile, large denomination certificates of deposit. Due to the influx of non-interest bearing deposits in 2013, management was able to reduce the Bank’s reliance on large denomination certificates of deposit. The average balance in brokered certificates of deposit in 2013 amounted to $3,113,408 compared to $4,265,650 in 2012. These deposits are not considered core deposits. Table 11 provides maturity information relating to certificates of deposit of $100,000 or more at December 31, 2013.

Table 11. Large Time Deposit Maturities

Analysis of time deposits of $100,000 or more at December 31, 2013:

Remaining maturity of three months or less	$	7,764,674
Remaining maturity of three through six months		8,133,716
Remaining maturity over six through twelve months		3,056,264
Remaining maturity over twelve months		13,891,898
Total time deposits of $100,000 or more	$	32,846,552

Borrowings

From time to time the Bank will find that funds gathered through deposits and repurchase agreements will not fully satisfy the Bank’s liquidity needs. When this occurs, the Bank uses borrowings from correspondent banks and the Federal Home Loan Bank (FHLB) to fund the shortfall. At year-end 2013, the Bank had no short-term borrowings from correspondent banks or the FHLB.

53

Management’s Discussion and Analysis

Borrowings, continued

Federal Home Loan Bank advances are relatively cost-effective funding sources and provide the Company with the flexibility to structure borrowings in a manner that aids in the management of interest rate risk and liquidity. Long-term debt consists of fixed, variable and convertible rate advances from the FHLB. The average interest rate paid on long-term debt for the year ended December 31, 2013 and 2012, was 3.76% and 3.78%, respectively. See Note 10 of the Company’s Consolidated Financial Statements for more information on the long-term advances.

Capital Adequacy

Stockholders’ equity amounted to $34,217,626 at December 31, 2013, a 6.14% increase over the 2012 year-end total of $32,237,301. Average stockholders’ equity as a percentage of average total assets amounted to 14.15% for the year ended December 31, 2013, and 13.94% in 2012.

Regulatory guidelines relating to capital adequacy provide minimum risk-based ratios which assess capital adequacy while encompassing all credit risks, including those related to off-balance sheet activities. Capital ratios under these guidelines are computed by weighing the relative risk of each asset category to derive risk-adjusted assets. The risk-based capital guidelines require minimum ratios of core (Tier 1) capital (common stockholders’ equity) to risk-weighted assets of 4.0% and total regulatory capital (core capital plus allowance for loan losses up to 1.25% of risk-weighted assets) to risk-weighted assets of 8.0%. As of December 31, 2013, the Bank has a ratio of Tier 1 capital to risk-weighted assets of 20.20% and a ratio of total capital to risk-weighted assets of 21.46%. All capital ratio levels indicate that the Bank is well capitalized.

At December 31, 2013, the Company had 3,542,984 shares of common stock outstanding, which were held by approximately 1,500 stockholders of record.

Additionally, the Company had 189,356 shares of Series A 4.5% Convertible Non-Cumulative Perpetual Preferred Stock outstanding at December 31, 2013. The shares have a liquidation value of $14 per share. The shares were issued in a private placement and are held by approximately 49 stockholders of record. The shares are non-voting and are each convertible into 2.2955 shares of common stock.

The Company also had 181,154 shares of Series D 5.0% Convertible Non-Cumulative Perpetual Preferred Stock outstanding at December 31, 2013. The shares have a liquidation value of $7.08 per share and are convertible into 1.10 shares of common stock at the election of the holder, but are not redeemable at the option of the holder. Provided that the market value of the Company’s common stock is $8.85 on or after January 1, 2014, Surrey may redeem all or a portion of the outstanding shares of Series D Preferred Stock at a redemption price of $7.08 per share. The non-voting shares were issued in a private placement and are held by approximately 15 stockholders of record.

Nonperforming and Problem Assets

Certain credit risks are inherent in making loans, particularly commercial and consumer loans. Management prudently assesses these risks and attempts to manage them effectively. The Bank also attempts to reduce repayment risks by adhering to internal credit policies and procedures. These policies and procedures include officer and customer limits, periodic loan documentation review and follow up on exceptions to credit policies.

The Company actively monitors delinquencies, nonperforming assets and potential problem loans. Unsecured loans that are past due more than 90 days are placed into nonaccrual status. Secured loans reach nonaccrual status when they surpass 120 days past due. When facts and circumstances indicate the borrower has regained the ability to meet the required payments, the loan is returned to accrual status.

Management reviews all criticized loans on a periodic basis for possible charge offs. Any unsecured loans that are 90+ days past due must be charged off in full. If secured, a reserve equal to the potential loss is established. Any charge off is reported to the Board of Directors within 30 days. On a monthly basis, recovery actions are provided to the Board of Directors.

54

Management’s Discussion and Analysis

Nonperforming and Problem Assets, continued

The table below shows the amount of non-performing assets.

Table 12. Nonperforming Assets

	2013			2012			2011			2010			2009
Nonaccrual loans	$	3,800,327		$	3,740,725		$	4,395,210		$	6,362,127		$	983,043
Loans past due 90 days and still accruing		35,439			683,720			49,881			—			2,825
Troubled debt restructured loans		—			—			—			—			384,584
Foreclosed assets		—			491,424			560,018			450,532			53,336
Total	$	3,835,766		$	4,915,869		$	5,005,109		$	6,812,659		$	1,423,788
Total assets	$	240,918,977		$	229,912,432		$	224,727,764		$	213,652,484		$	216,949,782
Ratio		1.59	%		2.14	%		2.23	%		3.19	%		0.66	%
Interest receivable on original note terms	$	435,214		$	327,714		$	201,828		$	127,836		$	78,566
Interest actually recorded in income	$	27,463		$	7,733		$	11,646		$	38,271		$	45,686

At December 31, 2013 and 2012, the Bank had loans in nonaccrual status of $3,800,327 and $3,740,725, respectively. There were no foreclosed assets at December 31, 2013. Loans that were considered impaired but were still accruing interest at December 31, 2013 and 2012, totaled $2,319,291 and $2,385,770, respectively. A loan is considered 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. The number of loans in nonaccrual status at December 31, 2013 was thirty-eight. The average nonaccrual loan balance was approximately $100,009. At the end of 2012 nonaccrual loans numbered thirty-three and averaged $113,355. Approximately $2,891,064 or 76% of the nonaccrual loans at December 31, 2013 consisted of eleven loans ranging in value from $104,000 to $618,000. Approximately $2,931,890 or 78% of the nonaccrual loans at December 31, 2012 consisted of ten loans ranging in value from $123,000 to $655,000. Impaired loans still accruing numbered twenty-seven at December 31, 2013, with an average balance of $89,204. Six of these loans amounted to $1,781,000 or approximately 77% of the total. At December 31, 2012, impaired loans still accruing numbered seventeen with an average balance of $151,800. Eight loans totaled $2,182,000 or 85% of the total impaired. Specific reserves on nonaccrual and impaired loans totaled $348,941 at December 31, 2013, or 5.7% of the balances outstanding compared to $515,109 or 8.2% of the balances outstanding at December 31, 2012. Many of these loans also carry government guaranties. The guaranteed portions of nonaccrual and impaired loans at December 31, 2013 and 2012 are $2,235,481 and $2,381,400, respectively. Combined, specific reserves and loan guarantees amount to approximately 42% and 46% of nonaccrual and impaired loans at December 31, 2013 and 2012, respectively.

All nonaccrual loans are considered to be impaired. The following table summarizes nonaccrual and impaired loans still accruing:

Table 13. Nonaccrual and Impaired Loans

	December 31, 2013		December 31, 2012
Construction and development	$	318,111	$	86,567
1-4 family residential		386,564		475,742
Nonfarm, non-residential		2,912,421		3,185,880
Commercial and industrial		2,499,531		2,373,175
Consumer		2,991		3,918
Other loans		—		195,990
Total impaired and nonaccrual	$	6,119,618	$	6,321,272

55

Management’s Discussion and Analysis

Loan Losses

The allowance for loan losses is maintained at a level adequate to absorb probable losses. Some of the factors which management considers in determining the appropriate level of the allowance for credit losses are: past loss experience, an evaluation of the current loan portfolio, identified loan problems, the loan volume outstanding, the present and expected economic conditions in general, and in particular, how such conditions relate to the market area that the Bank serves. Bank regulators also periodically review the Bank’s loans and other assets to assess their quality. Loans deemed uncollectible are charged to the allowance. Provisions for loan losses and recoveries on loans previously charged off are added to the allowance.

Net loans charged off as a percentage of average loans were 0.19% and 0.53% in 2013 and 2012, respectively.

The provision for loan losses and the activity in the allowance for loan losses are detailed in Table 14.

Table 14. Loan Losses (dollars in thousands)

	December 31,
	2013			2012			2011			2010			2009
Balance at January 1	$	3,403		$	3,881		$	6,684		$	4,670		$	3,365
Recoveries
Commercial		52			151			91			151			93
Residential, 1-4 family		1			1			63			2			—
Nonfarm, nonresidential property		3			84			109			21			—
Loans to individuals		29			19			24			28			23
Total recoveries		85			255			287			202			116
Charged-off loans
Commercial		(87	)		(711	)		(2,258	)		(546	)		(133	)
Residential, 1-4 family		(27	)		(305	)		(1,249	)		(27	)		—
Nonfarm, nonresidential property		(239	)		(22	)		(271	)		(110	)		—
Loans to individuals		(80	)		(166	)		(56	)		(509	)		(283	)
Total charge-off loans		(433	)		(1,204	)		(3,834	)		(1,192	)		(416	)
Net charge-offs		(348	)		(949	)		(3,547	)		(990	)		(300	)
Provision for loan losses		320			471			744			3,004			1,605
Balance at December 31	$	3,375		$	3,403		$	3,881		$	6,684		$	4,670
Total loans outstanding	$	183,015		$	176,687		$	179,345		$	178,432		$	185,062
Average outstanding loans during period	$	181,895		$	180,342		$	180,256		$	181,184		$	177,919
Allowance for loan losses to loans outstanding		1.84	%		1.93	%		2.16	%		3.74	%		2.52	%
Ratio of net charge-offs to average loans outstanding		0.19	%		0.53	%		1.97	%		0.55	%		0.17	%

56

Management’s Discussion and Analysis

Liquidity and Sensitivity

The principal goals of the Bank’s asset and liability management strategy are the maintenance of adequate liquidity and the management of interest rate risk. Liquidity is the ability to convert assets to cash in order to fund depositors’ withdrawals or borrowers’ loans without significant loss. Interest rate risk management balances the effects of interest rate changes on assets that earn interest or liabilities on which interest is paid, to protect the Bank from wide fluctuations in its net interest income which could result from interest rate changes.

Management must ensure that adequate funds are available at all times to meet the needs of its customers. On the asset side of the balance sheet, maturing investments, loan payments, maturing loans, federal funds sold, and unpledged investment securities are principal sources of liquidity. On the liability side of the balance sheet, liquidity sources include core deposits, the ability to increase large denomination certificates, federal fund lines from correspondent banks, borrowings from the Federal Home Loan Bank, as well as the ability to generate funds through the issuance of long-term debt and equity.

The liquidity ratio (the level of liquid assets divided by total deposits plus short-term liabilities) was 24.14% at December 31, 2013, compared to 22.66% at December 31, 2012. The liquidity ratio at December 31, 2013 is considered adequate by management.

Interest rate risk is the effect that changes in interest rates would have on interest income and interest expense as interest-sensitive assets and interest-sensitive liabilities either reprice or mature. Management attempts to maintain the portfolios of interest-earning assets and interest-bearing liabilities with maturities or repricing opportunities at levels that will afford protection from erosion of net interest margin, to the extent practical, from changes in interest rates. Table 15 shows the sensitivity of the Bank’s balance sheet as of that specific date and is not necessarily indicative of the position on other dates. At December 31, 2013, the Bank appeared to be cumulatively asset-sensitive (earning assets subject to interest rate changes exceeding interest-bearing liabilities subject to changes in interest rates). However, in the four to twelve month window, liabilities subject to change in interest rates exceed assets subject to interest rate changes (non-asset sensitive).

Matching sensitive positions alone does not ensure the Bank has no interest rate risk. The repricing characteristics of assets are different from the repricing characteristics of funding sources. Thus, net interest income can be impacted by changes in interest rates even if the repricing opportunities of assets and liabilities are perfectly matched.

57

Management’s Discussion and Analysis

Table 15. Interest Rate Sensitivity

	December 31, 2013
	1 - 3 Months			4 - 12 Months			13 - 60 Months			Over 60 Months			Total
Earning Assets
Loans	$	53,297,874		$	24,936,413		$	87,782,037		$	16,998,751		$	183,015,075
Investments		1,024,303			26,634			3,498,765			—			4,549,702
Interest-bearing balances with banks		34,351,505			—			—			—			34,351,505
Federal funds sold		1,311,641			—			—			—			1,311,641
Total	$	89,985,323		$	24,963,047		$	91,280,802		$	16,998,751		$	223,227,923
Interest-bearing deposits
NOW accounts	$	30,917,403		$	—		$	—		$	—		$	30,917,403
Money market		28,285,845			—			—			—			28,385,845
Savings		9,886,328			—			—			—			9,886,328
Certificates of deposit		18,875,539			31,600,614			33,422,110			—			83,898,263
Long-term debt		—			1,500,000			6,250,000			—			7,750,000
Total	$	88,065,115		$	33,100,614		$	39,672,110		$	—		$	160,837,839
Interest sensitivity gap	$	1,920,208		$	(8,137,567	)	$	51,608,692		$	16,998,751		$	—
Cumulative interest sensitivity gap	$	1,920,208		$	(6,217,359	)	$	45,391,333		$	62,390,084		$	62,390,084
Ratio of sensitive assets to sensitive liabilities		102.18	%		75.42	%		230.09	%		—	%		138.79	%
Cumulative ratio of sensitive assets to sensitive liabilities		102.18	%		94.87	%		128.22	%		138.79	%		138.79	%

Table 16. Key Financial Ratios

	December 31,
	2013			2012			2011
Return on average assets		1.22	%		1.23	%		1.00	%
Return on average equity		8.59	%		8.86	%		7.53	%
Average equity to average assets		14.15	%		13.94	%		13.30	%
Dividends declared on common stock as a percent of net income		25.75	%		22.92	%		23.60	%

58

Board of Directors and Officers

Board of Directors

Edward C. Ashby, III	Surrey Bank & Trust
Elizabeth Johnson Lovill	Town and Country Builders of Mount Airy, Inc.
Robert H. Moody	Moody Funeral Services, Inc.
Gene Rees	F. Rees Company, Inc.
Tamra W. Thomas	Retired
Tom G. Webb	Westwood Partners, LLC
Buddy Williams	Ten Oaks, LLC
Bank Officers
Robert H. Moody	Chairman
Edward C. Ashby, III	President and CEO
Peter A. Pequeno	Senior Vice President and CLO
Mark H. Towe	Senior Vice President, Treasurer and CFO
John Canosa	Vice President
Lesa Hensley	Vice President
William Johnson	Vice President
Jared Moser	Vice President
Kenneth Shelton	Vice President
J. Cory Tucker	Vice President

59

Stockholder Information

Annual Meeting

The annual meeting of stockholders will be held Thursday, April 24, 2014, at 10:00 a.m. at Cross Creek Country Club, 1129 Greenhill Road, Mount Airy, North Carolina.

Requests for Information

Requests for information should be directed to Mr. Mark H. Towe, Senior Vice President and CFO, at Surrey Bank & Trust, Post Office Box 1227, Mount Airy, North Carolina, 27030; telephone (336) 783-3900. A copy of the Company’s Form 10-K for 2013 will be furnished, without charge, after March 31, 2014, upon written request, or will be available on the internet at www.surreybank.com.

Independent Auditors	Stock Transfer Agent
Elliott Davis, PLLC	Broadridge Corporate Issuer Solutions, Inc.
Certified Public Accountants	51 Mercedes Way
700 East Morehead Street, Suite 400	Edgewood, NY 11717
Charlotte, North Carolina 28202

Federal Deposit Insurance Corporation

The Bank is a member of the FDIC. This statement has not been reviewed, or confirmed for accuracy or relevance by the Federal Deposit Insurance Corporation.

	Banking Offices
145 North Renfro Street	1280 West Pine Street	940 Woodland Drive
Mount Airy, North Carolina	Mount Airy, North Carolina	Stuart Virginia
(336) 783-3900	(336) 783-3920	(276) 694-4825
	Loan Production Office
2050 Rockford Street	1328 North Bridge Street	653 South Key Street
Mount Airy, North Carolina	Elkin, North Carolina	Pilot Mountain, North Carolina
(336) 783-3940	(336) 526-1803	(336) 368-1122
	Mortgage Lending Office
	199 North Renfro Street
	Mount Airy, North Carolina
	(336) 783-3933
Freedom Finance, LLC	SB & T Insurance	Surrey Investment Services, Inc.
165 North Renfro Street	199 North Renfro Street	145 North Renfro Street
Mount Airy, North Carolina	Mount Airy, North Carolina	Mount Airy, North Carolina
(336) 783-3980	(336) 783-3939	(336) 783-3938

60

EX-21

Exhibit 21

Subsidiaries

Name	State of Incorporation
Surrey Bank & Trust	North Carolina

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Surrey Bancorp

145 North Renfro Street

Mount Airy, North Carolina 27030-8038

We consent to the incorporation by reference in Registration Statements (Nos. 333-108676 and 333-108677) on Forms S-8 of Surrey Bancorp of our report dated March 28, 2014, relating to our audit of the consolidated financial statements which appear in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K of Surrey Bancorp for the years ended December 31, 2013 and 2012.

/s/ Elliott Davis, PLLC

Charlotte, North Carolina

March 28, 2014

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to Rule 13a-14(d)/15d-14(d)

I, Edward C, Ashby, III, certify that:

(1) I have reviewed this annual report on Form 10-K of Surrey Bancorp, a North Carolina company (the “registrant”);

(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 officer 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 controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(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 quarter in 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 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:

(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 28, 2014	s/ Edward C. Ashby, III
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to Rule 13a-14(d)/15d-14(d)

I, Mark H. Towe, certify that:

(1) I have reviewed this annual report on Form 10-K of Surrey Bancorp, a North Carolina company (the “registrant”);

(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 officer 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 controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(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 quarter in 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 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:

(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 28, 2014	s/ Mark H. Towe
	Chief Financial Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

Section 1350 Certifications

Each of the undersigned hereby certifies that, to his knowledge, (i) the Form 10-K filed by Surrey Bancorp (the “Issuer”) for the year ended December 31, 2013, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein.

	SURREY BANCORP
Date: March 28, 2014	By:
		s/ Edward C. Ashby, III
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: March 28, 2014	By:
		s/ Mark H. Towe
		Chief Financial Officer
		(Principal Financial Officer)

XML

Fair Value (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Recorded Amount of Assets and Liabilities Measured at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

(in thousands)
December 31, 2013	Total		Level 1		Level 2		Level 3
Government-sponsored enterprises	$	3,499	$	—	$	3,499	$	—
Mortgage-backed securities		33		—		33		—
Corporate bonds		451		—		—		451
Equities and mutual funds		567		567		—		—
Total assets at fair value	$	4,550	$	567	$	3,532	$	451
Total liabilities at fair value	$	—	$	—	$	—	$	—
(in thousands)
December 31, 2012	Total		Level 1		Level 2		Level 3
Government-sponsored enterprises	$	2,505	$	—	$	2,505	$	—
Mortgage-backed securities		43		—		43		—
Corporate bonds		443		—		—		443
Equities and mutual funds		512		512		—		—
Total assets at fair value	$	3,503	$	512	$	2,548	$	443
Total liabilities at fair value	$	—	$	—	$	—	$	—

Assets Measured at Fair Value on a Recurring Basis

The changes in Level 3 assets measured at fair value on a recurring basis were:

(in thousands)	2013		2012
Corporate Bonds-Available for Sale
Balance, January 1	$	443	$	451
Total realized gain (losses) included in income		—		—
Total unrealized gain (losses) included in other comprehensive income		8		(8	)
Net purchases, sales, calls and maturities		—		—
Net transfers in/out of Level 3		—		—
Balance, December 31	$	451	$	443

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

Assets and liabilities recorded at fair value on a nonrecurring basis are included in the table below.

(in thousands)
December 31, 2013	Total		Level 1		Level 2		Level 3
Loans-commercial and industrial	$	934	$	—	$	—	$	934
Loans-nonfarm, non-residential		685		—		—		685
Loans- 1- 4 family residential		63		—		—		63
Loans-other		—		—		—		—
Foreclosed assets		—		—		—		—
Servicing assets		261		—		—		261
Total assets at fair value	$	1,943	$	—	$	—	$	1,943
Total liabilities at fair value	$	—	$	—	$	—	$	—
(in thousands)
December 31, 2012	Total		Level 1		Level 2		Level 3
Loans-commercial and industrial	$	805	$	—	$	—	$	805
Loans-nonfarm, non-residential		1,485		—		—		1,485
Loans- 1- 4 family residential		—		—		—		—
Loans-other		—		—		—		—
Foreclosed assets		491		—		—		491
Servicing assets		63		—		—		63
Total assets at fair value	$	2,844	$	—	$	—	$	2,844
Total liabilities at fair value	$	—	$	—	$	—	$	—

Schedule of Unobservable Inputs Used in Fair Value Measurements of Assets and Liabilities Measured on Recurring and Non-Recurring Basis

For level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2013, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair Value at December 31, 2013		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Corporate bonds	$	451	Third party estimate	Sales of comparable instruments		n/a
Servicing assets	$	261	Management estimate	Present value of future payments/useful life		n/a
Impaired loans	$	1,682	Management estimate	Appraisals and/or sales of comparable properties		n/a
Foreclosed assets	$	—	Management estimate	Appraisals and/or sales of comparable properties		n/a

Estimated Fair Values of Financial Instruments

The estimated fair values of the Company’s financial instruments are as follows (dollars in thousands):

					Fair Value Measurements
(dollars in thousands)	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2013
Financial Instruments - Assets
Loans	$	179,909	$	179,531	$	—	$	—	$	179,531
Financial Instruments - Liabilities
Deposits		195,801		171,649		—		171,649		—
Federal Home Loan Bank advances		7,750		8,100		—		8,100		—
December 31, 2012
Financial Instruments - Assets
Loans	$	173,578	$	173,813	$	—	$	—	$	173,813
Financial Instruments - Liabilities
Deposits		187,823		180,777		—		180,777		—
Federal Home Loan Bank advances		7,750		8,291		—		8,291		—

XML

Loans Receivable - Major Components of Loans (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross carrying value / Loans by credit quality	$ 183,015,075	$ 176,687,329
Net, deferred loan origination costs (fees)	269,100	293,334
Net Loans	183,284,175	176,980,663
Allowance for loan losses	(3,375,350)	(3,403,098)
Accounts, Notes, Loans and Financing Receivable, Net	179,908,825	173,577,565
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross carrying value / Loans by credit quality	66,612,984	75,914,072
Construction and Land Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross carrying value / Loans by credit quality	6,353,787	4,873,512
Residential, 1-4 Families [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross carrying value / Loans by credit quality	40,203,978	36,091,051
Residential, 5 or More Families [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross carrying value / Loans by credit quality	1,515,239	1,676,449
Farmland [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross carrying value / Loans by credit quality	2,219,688	2,284,155
Nonfarm, Nonresidential [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross carrying value / Loans by credit quality	60,316,018	48,993,867
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross carrying value / Loans by credit quality	107,974	147,860
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross carrying value / Loans by credit quality	5,685,407	6,703,363
Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross carrying value / Loans by credit quality		$ 3,000

XML

Organization and Summary of Significant Accounting Policies - Summary of Estimated Useful Lives of Property and Equipment (Detail)	12 Months Ended
	Dec. 31, 2013
Buildings and Improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Summary of estimated useful lives of property and equipment	10 years
Buildings and Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Summary of estimated useful lives of property and equipment	40 years
Furniture and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Summary of estimated useful lives of property and equipment	3 years
Furniture and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Summary of estimated useful lives of property and equipment	25 years

XML

Deposits - Schedule of Time Deposit Maturities (Detail) (USD $)	Dec. 31, 2013
Deposits [Abstract]
2014	$ 50,476,152
2015	18,994,065
2016	6,311,408
2017	3,366,344
2018	4,750,294
Total	$ 83,898,263

XML

Loans Receivable - Major Components of Loans (Parenthetical) (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Loans And Leases Receivable Disclosure [Abstract]
Consumer loans, net of discounts	$ 10,931	$ 17,764

XML

Fair Value - Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis (Detail) (Fair Value, Measurements, Nonrecurring [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Foreclosed assets		$ 491
Servicing assets	261	63
Total assets at fair value	1,943	2,844
Total liabilities at fair value
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Foreclosed assets
Servicing assets
Total assets at fair value
Total liabilities at fair value
Significant Other Observable Inputs (Level 2) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Foreclosed assets
Servicing assets
Total assets at fair value
Total liabilities at fair value
Significant Unobservable Inputs (Level 3) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Foreclosed assets		491
Servicing assets	261	63
Total assets at fair value	1,943	2,844
Total liabilities at fair value
Commercial and Industrial [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value	934	805
Commercial and Industrial [Member] | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value
Commercial and Industrial [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value
Commercial and Industrial [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value	934	805
Nonfarm, Nonresidential [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value	685	1,485
Nonfarm, Nonresidential [Member] | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value
Nonfarm, Nonresidential [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value
Nonfarm, Nonresidential [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value	685	1,485
Residential, 1-4 Families [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value	63
Residential, 1-4 Families [Member] | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value
Residential, 1-4 Families [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value
Residential, 1-4 Families [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value	63
Other [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value
Other [Member] | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value
Other [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value
Other [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value of Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total assets at fair value

XML

Parent Company Activity (Tables)

12 Months Ended

Dec. 31, 2013

Text Block [Abstract]

Summary of Condensed Balance Sheet

Condensed financial statements of Surrey Bancorp follow:

Condensed Balance Sheets

December 31, 2013 and 2012

	2013			2012
Assets
Cash and due from banks	$	89,528		$	59,625
Dividends receivable from subsidiary		867,000			—
Investment securities available for sale		566,816			512,252
Other assets		11,972			20,840
Investment in subsidiaries		33,483,275			31,692,793
	$	35,018,591		$	32,285,510
Liabilities and Capital
Liabilities
Dividends payable	$	790,259		$	46,106
Other liabilities		10,706			2,103
		800,965			48,209
Capital
Preferred stock		3,868,807			3,868,807
Common stock		12,061,153			12,061,153
Retained earnings		18,329,089			16,367,187
Accumulated other comprehensive loss		(41,423	)		(59,846	)
		34,217,626			32,237,301
	$	35,018,591		$	32,285,510

Summary of Condensed Statements of Income

Condensed Statements of Income

For the years ended December 31, 2013 and 2012

	2013			2012
Income
Equity in undistributed income of subsidiary	$	1,790,589		$	1,468,334
Dividends from subsidiary		1,122,000			1,355,000
Gain on the sale of investment securities		9,206			700
Interest income		8			80
Dividend income		22,190			9,679
Other operating income		—			12
Total income		2,943,993			2,833,805
Expenses
Other expense		66,614			71,765
Total expense		66,614			71,765
Income before income taxes		2,877,379			2,762,040
Income tax benefit		(11,972	)		(20,840	)
Net income		2,889,351			2,782,880
Preferred stock dividends		(183,423	)		(183,423	)
Net income available to common stockholders	$	2,705,928		$	2,599,457

Summary of Condensed Statements of Cash Flows

Condensed Statements of Cash Flows

For the years ended December 31, 2013 and 2012

	2013			2012
Cash flows from operating activities
Net income	$	2,889,351		$	2,782,880
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiary		(1,790,589	)		(1,468,334	)
Gain on the sale of investment securities		(9,206	)		(700	)
Increase in dividends receivable from subsidiary		(867,000	)		—
Net (increase) decrease in other assets		8,868			(20,840	)
Net (decrease) increase in other liabilities		(942	)		942
Net cash provided by operating activities		230,482			1,293,948
Cash flows from investing activities
Net decrease in interest-bearing deposits with banks		—			130,000
Purchase of investment securities		(81,221	)		(553,659	)
Proceeds from the sale of investment securities		63,938			45,522
Net cash used by investing activities		(17,283	)		(378,137	)
Cash flows from financing activities
Common stock options exercised		—			30,111
Dividends paid		(183,296	)		(1,351,795	)
Net used by financing activities		(183,296	)		(1,321,684	)
Net increase (decrease) in cash and due from banks		29,903			(405,873	)
Cash and due from banks, beginning		59,625			465,498
Cash and due from banks, ending	$	89,528		$	59,625

XML

Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2013

Receivables [Abstract]

Allowance for Loan Losses by Loan Components

The allocation of the allowance for loan losses by loan components at December 31, 2013 and 2012 was as follows:

	Construction & Development			1-4 Family Residential			Nonfarm, Nonresidential			Commercial and Industrial			Consumer			Other			Total
2013
Allowance for credit losses:
Beginning balance	$	86,300		$	668,700		$	801,999		$	1,604,510		$	198,789		$	42,800		$	3,403,098
Charge-offs		—			(26,967	)		(238,541	)		(87,374	)		(79,667	)		—			(432,549	)
Recoveries		587			401			2,426			52,433			29,389			—			85,236
Provision		(13,887	)		(24,505	)		187,166			139,393			32,798			(1,400	)		319,565
Ending balance	$	73,000		$	617,629		$	753,050		$	1,708,962		$	181,309		$	41,400		$	3,375,350
Ending balance: individually evaluated for impairment	$	—		$	10,829		$	131,950		$	206,162		$	—		$	—		$	348,941
Ending balance: collectively evaluated for impairment	$	73,000		$	606,800		$	621,100		$	1,502,800		$	181,309		$	41,400		$	3,026,409
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Loans Receivable:
Ending balance	$	6,353,787		$	40,203,978		$	60,316,018		$	66,612,984		$	5,685,407		$	3,842,901		$	183,015,075
Ending balance: individually evaluated for impairment	$	318,111		$	337,767		$	2,912,421		$	2,499,531		$	—		$	—		$	6,067,830
Ending balance: collectively evaluated for impairment	$	6,035,676		$	39,866,211		$	57,403,597		$	64,113,453		$	5,685,407		$	3,842,901		$	176,947,245
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—		$	—
2012
Allowance for credit losses:
Beginning balance	$	103,200		$	836,860		$	865,854		$	1,808,260		$	210,807		$	55,600		$	3,880,581
Charge-offs		(7,286	)		(298,012	)		(21,831	)		(710,645	)		(165,914	)		—			(1,203,688	)
Recoveries		379			872			84,340			150,462			18,860			—			254,913
Provision		(9,993	)		128,980			(126,364	)		356,433			135,036			(12,800	)		471,292
Ending balance	$	86,300		$	668,700		$	801,999		$	1,604,510		$	198,789		$	42,800		$	3,403,098
Ending balance: individually evaluated for impairment	$	—		$	—		$	319,699		$	195,410		$	—		$	—		$	515,109
Ending balance: collectively evaluated for impairment	$	86,300		$	668,700		$	482,300		$	1,409,100		$	198,789		$	42,800		$	2,887,989
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Loans Receivable:
Ending balance	$	4,873,512		$	36,091,051		$	48,993,867		$	75,914,072		$	6,703,363		$	4,111,464		$	176,687,329
Ending balance: individually evaluated for impairment	$	86,567		$	284,884		$	3,185,880		$	2,373,175		$	—		$	195,989		$	6,126,495
Ending balance: collectively evaluated for impairment	$	4,786,945		$	35,806,167		$	45,807,987		$	73,540,897		$	6,703,363		$	3,915,475		$	170,560,834
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—		$	—

Impaired Loans Individually Evaluated by Class of Loan

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2013 and 2012:

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2013
With no related allowance recorded:
Construction and development	$	318,111	$	318,111	$	—	$	320,260	$	21,825
1-4 family residential		263,562		263,562		—		261,364		21,295
Nonfarm, nonresidential		2,095,645		2,165,883		—		2,144,605		120,322
Commercial and industrial		1,359,371		1,561,253		—		1,393,077		71,409
Consumer		—		—		—		—		—
Other loans		—		—		—		—		—
		4,036,689		4,308,809		—		4,119,306		234,851
With an allowance recorded:
Construction and development	$	—	$	—	$	—	$	—	$	—
1-4 family residential		74,205		74,205		10,829		77,144		4,300
Nonfarm, nonresidential		816,776		816,776		131,950		930,060		24,653
Commercial and industrial		1,140,160		1,140,160		206,162		1,163,698		47,393
Consumer		—		—		—		—		—
Other loans		—		—		—		—		—
		2,031,141		2,031,141		348,941		2,170,902		76,346
Combined:
Construction and development	$	318,111	$	318,111	$	—	$	320,260	$	21,825
1-4 family residential		337,767		337,767		10,829		338,508		25,595
Nonfarm, nonresidential		2,912,421		2,982,659		131,950		3,074,665		144,975
Commercial and industrial		2,499,531		2,701,413		206,162		2,556,775		118,802
Consumer		—		—		—		—		—
Other loans		—		—		—		—		—
	$	6,067,830	$	6,339,950	$	348,941	$	6,290,208	$	311,197
2012
With no related allowance recorded:
Construction and development	$	86,567	$	86,567	$	—	$	87,668	$	4,898
1-4 family residential		284,884		284,884		—		287,802		19,798
Nonfarm, nonresidential		1,381,111		1,381,111		—		1,396,123		81,741
Commercial and industrial		1,372,796		1,547,284		—		1,312,662		67,194
Consumer		—		—		—		—		—
Other loans		195,989		195,989		—		199,895		18,025
		3,321,347		3,495,835		—		3,284,150		191,656
With an allowance recorded:
Construction and development	$	—	$	—	$	—	$	—	$	—
1-4 family residential		—		—		—		—		—
Nonfarm, nonresidential		1,804,769		1,826,600		319,699		1,813,156		70,705
Commercial and industrial		1,000,379		1,000,379		195,410		1,006,640		39,320
Consumer		—		—		—		—		—
Other loans		—		—		—		—		—
		2,805,148		2,826,979		515,109		2,819,796		110,025
Combined:
Construction and development	$	86,567	$	86,567	$	—	$	87,668	$	4,898
1-4 family residential		284,884		284,884		—		287,802		19,798
Nonfarm, nonresidential		3,185,880		3,207,711		319,699		3,209,279		152,446
Commercial and industrial		2,373,175		2,547,663		195,410		2,319,302		106,514
Consumer		—		—		—		—		—
Other loans		195,989		195,989		—		199,895		18,025
	$	6,126,495	$	6,322,814	$	515,109	$	6,103,946	$	301,681

Class of Aging Analysis Recorded Investment in Loans

The following table presents an age analysis of past due loans as of December 31, 2013 and 2012:

	30-59 Days Past Due			60-89 Days Past Due			90 Days Plus Past Due			Total Past Due			Current			Total Financing Receivables			Recorded Investment > 90 Days and Accruing
2013
Construction and development	$	—		$	—		$	—		$	—		$	6,353,787		$	6,353,787		$	—
1-4 family residential		544,559			165,244			173,786			883,589			39,320,389			40,203,978			—
Nonfarm, nonresidential		193,411			336,036			791,148			1,320,595			58,995,423			60,316,018			—
Commercial and industrial		84,145			2,528			929,552			1,016,225			65,596,759			66,612,984			15,837
Consumer		103,463			68,767			20,742			192,972			5,492,435			5,685,407			19,602
Other loans		—			—			—			—			3,842,901			3,842,901			—
Total	$	925,578		$	572,575		$	1,915,228		$	3,413,381		$	179,601,694		$	183,015,075		$	35,439
Percentage of total loans		0.51	%		0.31	%		1.05	%		1.87	%		98.13	%		100.00	%
Non-accruals included above
Construction and development	$	—		$	—		$	—		$	—		$	70,058		$	70,058
1-4 family residential		29,269			—			173,786			203,055			190,032			393,087
Nonfarm, nonresidential		85,646			—			791,148			876,794			1,222,090			2,098,884
Commercial and industrial		—			—			913,715			913,715			321,592			1,235,307
Consumer		259			547			1,141			1,947			1,044			2,991
Other loans		—			—			—			—			—			—
	$	115,174		$	547		$	1,879,790		$	1,995,511		$	1,804,816		$	3,800,327
2012
Construction and development	$	73,572		$	—		$	—		$	73,572		$	4,799,940		$	4,873,512		$	—
1-4 family residential		380,731			—			324,357			705,088			35,385,963			36,091,051			292,583
Nonfarm, nonresidential		711,408			197,479			386,160			1,295,047			47,698,820			48,993,867			—
Commercial and industrial		256,672			53,391			429,226			739,289			75,174,783			75,914,072			377,494
Consumer		172,379			28,922			13,643			214,944			6,488,419			6,703,363			13,643
Other loans		—			—			—			—			4,111,464			4,111,464			—
Total	$	1,594,762		$	279,792		$	1,153,386		$	3,027,940		$	173,659,389		$	176,687,329		$	683,720
Percentage of total loans		0.90	%		0.16	%		0.65	%		1.71	%		98.29	%		100.00	%
Non-accruals included above
Construction and development	$	73,572		$	—		$	—		$	73,572		$	12,995		$	86,567
1-4 family residential		84,838			—			31,775			116,613			359,129			475,742
Nonfarm, nonresidential		—			89,322			386,160			475,482			1,690,633			2,166,115
Commercial and industrial		—			—			51,731			51,731			760,662			812,393
Consumer		1,612			—			—			1,612			2,306			3,918
Other loans		—			—			—			—			195,990			195,990
	$	160,022		$	89,322		$	469,666		$	719,010		$	3,021,715		$	3,740,725

Loans by Credit Quality Indicator

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

	Total			Pass Credits			Special Mention			Substandard			Doubtful
December 31, 2013
Construction and development	$	6,353,787		$	6,283,729		$	70,058		$	—		$	—
1-4 family residential		40,203,978			39,586,647			617,331			—			—
Nonfarm, nonresidential		60,316,018			58,188,799			2,022,868			104,351			—
Commercial and industrial		66,612,984			64,556,331			2,056,653			—			—
Consumer		5,685,407			5,684,245			1,162			—			—
Other loans		3,842,901			3,842,901			—			—			—
	$	183,015,075		$	178,142,652		$	4,768,072		$	104,351		$	—
		100.0	%		97.3	%		2.6	%		0.1	%		—	%
Guaranteed portion of loans
Construction and development	$	73,000		$	73,000		$	—		$	—		$	—
1-4 family residential		673,854			629,939			43,915			—
Nonfarm, nonresidential		26,835,404			26,063,658			771,746			—			—
Commercial and industrial		19,589,284			18,737,759			851,525			—			—
Consumer		—			—			—			—			—
Other loans		544,195			544,195			—			—			—
	$	47,715,737		$	46,048,551		$	1,667,186		$	—		$	—
	Total			Pass Credits			Special Mention			Substandard			Doubtful
December 31, 2012
Construction and development	$	4,873,512		$	4,786,945		$	86,567		$	—		$	—
1-4 family residential		36,091,051			35,755,061			335,990			—			—
Nonfarm, nonresidential		48,993,867			47,500,758			1,230,275			262,834			—
Commercial and industrial		75,914,072			74,878,901			1,035,171			—			—
Consumer		6,703,363			6,696,475			6,888			—			—
Other loans		4,111,464			3,915,474			195,990			—			—
	$	176,687,329		$	173,533,614		$	2,890,881		$	262,834		$	—
		100.0	%		98.2	%		1.6	%		0.2	%		—	%
Guaranteed portion of loans
Construction and development	$	—		$	—		$	—		$	—		$	—
1-4 family residential		752,677			752,677			—			—			—
Nonfarm, nonresidential		19,855,775			19,654,773			201,002			—			—
Commercial and industrial		22,001,515			21,354,422			647,093			—			—
Consumer		—			—			—			—			—
Other loans		508,363			508,363			—			—			—
	$	43,118,330		$	42,270,235		$	848,095		$	—		$	—

TDRs for which Allowance for Loan Losses Measured

	For the year ended December 31, 2013								For the year ended December 31, 2012
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Construction and development		—	$	—	$	—		1	$	237,883	$	237,883
1-4 Family residential		1		55,336		55,336		1		113,743		116,438
Nonfarm, nonresidential		1		145,219		145,219		1		96,028		96,028
Commercial and industrial		1		22,065		22,065		2		343,060		343,060

Summary of Troubled Debt Restructurings on Financing Receivables Subsequent Default

	For the year ended December 31, 2012				For the year ended December 31, 2011
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Troubled Debt Restructurings That
Subsequently Defaulted During the Period:
Construction and development		—	$	—		—	$	—
1-4 Family residential		—		—		—		—
Nonfarm, nonresidential		—		—		1		262,832
Commercial and industrial		—		—		—		—

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Fair Value - Schedule of Unobservable Inputs Used in Fair Value Measurements of Assets and Liabilities Measured on Recurring and Non-recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Corporate Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value at December 31, 2013	$ 451
Valuation technique	Third party estimate
Significant Unobservable Inputs	Sales of comparable instruments
Significant Unobservable Input Value
Servicing Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value at December 31, 2013	261
Valuation technique	Management estimate
Significant Unobservable Inputs	Present value of future payments/useful life
Significant Unobservable Input Value
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value at December 31, 2013	1,682
Valuation technique	Management estimate
Significant Unobservable Inputs	Appraisals and/or sales of comparable properties
Significant Unobservable Input Value
Foreclosed Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation technique	Management estimate
Significant Unobservable Inputs	Appraisals and/or sales of comparable properties
Significant Unobservable Input Value

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Federal Home Loan Bank Advances - Additional Information (Detail)	Dec. 31, 2013	Dec. 31, 2012
Banking And Thrift [Abstract]
Federal Home Loan Bank advances instruments, fixed interest rate minimum	2.94%
Federal Home Loan Bank advances instruments, fixed interest rate maximum	4.95%
Long term debt weighted average rate	3.73%	3.73%

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Income Taxes - Summary of Reconciliation of Expected Income Tax Expense Computed at Statutory Federal Income Tax Rate (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Income Tax Disclosure [Abstract]
Expected tax expense	$ 1,580,666	$ 1,531,416
State income tax, net of federal tax benefit	207,817	195,474
Tax exempt income	(75,568)	(69,724)
Nondeductible and other items	46,752	64,118
Total income tax expense	$ 1,759,667	$ 1,721,284

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Allowance for Loan Losses - Allowance for Loan Losses by Loan Components (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Allowance for credit losses:
Beginning balance	$ 3,403,098	$ 3,880,581
Charge-offs	(432,549)	(1,203,688)
Recoveries	85,236	254,913
Provision	319,565	471,292
Ending balance	3,375,350	3,403,098
Ending balance: individually evaluated for impairment	348,941	515,109
Ending balance: collectively evaluated for impairment	3,026,409	2,887,989
Ending balance: loans acquired with deteriorated credit quality
Loans Receivable:
Ending balance	183,015,075	176,687,329
Ending balance: individually evaluated for impairment	6,067,830	6,126,495
Ending balance: collectively evaluated for impairment	176,947,245	170,560,834
Ending balance: loans acquired with deteriorated credit quality
Construction and Land Development [Member]
Allowance for credit losses:
Beginning balance	86,300	103,200
Charge-offs		(7,286)
Recoveries	587	379
Provision	(13,887)	(9,993)
Ending balance	73,000	86,300
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	73,000	86,300
Ending balance: loans acquired with deteriorated credit quality
Loans Receivable:
Ending balance	6,353,787	4,873,512
Ending balance: individually evaluated for impairment	318,111	86,567
Ending balance: collectively evaluated for impairment	6,035,676	4,786,945
Ending balance: loans acquired with deteriorated credit quality
Residential, 1-4 Families [Member]
Allowance for credit losses:
Beginning balance	668,700	836,860
Charge-offs	(26,967)	(298,012)
Recoveries	401	872
Provision	(24,505)	128,980
Ending balance	617,629	668,700
Ending balance: individually evaluated for impairment	10,829
Ending balance: collectively evaluated for impairment	606,800	668,700
Ending balance: loans acquired with deteriorated credit quality
Loans Receivable:
Ending balance	40,203,978	36,091,051
Ending balance: individually evaluated for impairment	337,767	284,884
Ending balance: collectively evaluated for impairment	39,866,211	35,806,167
Ending balance: loans acquired with deteriorated credit quality
Nonfarm, Nonresidential [Member]
Allowance for credit losses:
Beginning balance	801,999	865,854
Charge-offs	(238,541)	(21,831)
Recoveries	2,426	84,340
Provision	187,166	(126,364)
Ending balance	753,050	801,999
Ending balance: individually evaluated for impairment	131,950	319,699
Ending balance: collectively evaluated for impairment	621,100	482,300
Ending balance: loans acquired with deteriorated credit quality
Loans Receivable:
Ending balance	60,316,018	48,993,867
Ending balance: individually evaluated for impairment	2,912,421	3,185,880
Ending balance: collectively evaluated for impairment	57,403,597	45,807,987
Ending balance: loans acquired with deteriorated credit quality
Commercial and Industrial [Member]
Allowance for credit losses:
Beginning balance	1,604,510	1,808,260
Charge-offs	(87,374)	(710,645)
Recoveries	52,433	150,462
Provision	139,393	356,433
Ending balance	1,708,962	1,604,510
Ending balance: individually evaluated for impairment	206,162	195,410
Ending balance: collectively evaluated for impairment	1,502,800	1,409,100
Ending balance: loans acquired with deteriorated credit quality
Loans Receivable:
Ending balance	66,612,984	75,914,072
Ending balance: individually evaluated for impairment	2,499,531	2,373,175
Ending balance: collectively evaluated for impairment	64,113,453	73,540,897
Ending balance: loans acquired with deteriorated credit quality
Consumer [Member]
Allowance for credit losses:
Beginning balance	198,789	210,807
Charge-offs	(79,667)	(165,914)
Recoveries	29,389	18,860
Provision	32,798	135,036
Ending balance	181,309	198,789
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	181,309	198,789
Ending balance: loans acquired with deteriorated credit quality
Loans Receivable:
Ending balance	5,685,407	6,703,363
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	5,685,407	6,703,363
Ending balance: loans acquired with deteriorated credit quality
Other [Member]
Allowance for credit losses:
Beginning balance	42,800	55,600
Charge-offs
Recoveries
Provision	(1,400)	(12,800)
Ending balance	41,400	42,800
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	41,400	42,800
Ending balance: loans acquired with deteriorated credit quality
Loans Receivable:
Ending balance	3,842,901	4,111,464
Ending balance: individually evaluated for impairment		195,989
Ending balance: collectively evaluated for impairment	3,842,901	3,915,475
Ending balance: loans acquired with deteriorated credit quality

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Fair Value - Assets Measured at Fair Value on a Recurring Basis (Detail) (Fair Value, Measurements, Recurring [Member], Significant Unobservable Inputs (Level 3) [Member], Corporate Bonds Available for Sale [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Corporate Bonds Available for Sale [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance, January 1	$ 443	$ 451
Total realized gain (losses) included in income
Total unrealized gain (losses) included in other comprehensive income	8	(8)
Net purchases, sales, calls and maturities
Net transfers in/out of Level 3
Balance, December 31	$ 451	$ 443

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Stock Based Compensation - Summary of Exercise Prices, Number of Options Outstanding and Number of Options Exercisable (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Number of Options Outstanding	41,190
Weighted Average Exercise Price	$ 12.06
Weighted Average Contractual Life Remaining (Years)	3 years 4 months 24 days
Number of Options Exercisable	41,190
Weighted Average Exercise Price	$ 12.06
Exercise Price 1 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price	$ 12.06
Number of Options Outstanding	41,190
Weighted Average Exercise Price	$ 12.06
Weighted Average Contractual Life Remaining (Years)	3 years 4 months 24 days
Number of Options Exercisable	41,190
Weighted Average Exercise Price	$ 12.06

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Earnings Per Share - Schedule of Computation of Basic and Diluted Earnings Per Share (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Earnings Per Share [Abstract]
Net income	$ 2,889,351	$ 2,782,880
Convertible preferred stock dividends (Series A and D)	(183,423)	(183,423)
Net income available to common stockholders	$ 2,705,928	$ 2,599,457
Weighted average common shares outstanding	3,542,984	3,540,914
Effect of dilutive securities:
Options
Convertible preferred stock (Series A and D)	633,935	633,935
Weighted average common shares outstanding, diluted	4,176,919	4,174,849
Basic earnings per common share	$ 0.76	$ 0.73
Diluted earnings per common share	$ 0.69	$ 0.67

XML

Income Taxes - Schedule of Components of Income Tax Expense (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Income Tax Disclosure [Abstract]
Current	$ 1,785,165	$ 1,444,792
Deferred	(25,498)	276,492
Total income tax expense	$ 1,759,667	$ 1,721,284

XML

Fair Value - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013
Fair Value Disclosures [Abstract]
Unrealized gain	$ 8,000

XML

Short-Term Debt - Additional Information (Detail) (USD $)				12 Months Ended
	Dec. 31, 2013 Correspondent Banks [Member]	Dec. 31, 2013 Federal Home Loan Bank Borrowings [Member]	Dec. 31, 2012 Federal Home Loan Bank Borrowings [Member]	Dec. 31, 2013 Maximum [Member]	Dec. 31, 2013 Minimum [Member]
Short-term Debt [Line Items]
Securities maturity period from transaction date				4 days	1 day
Line of credit facility, Maximum borrowing capacity	$ 35,500,000	$ 9,609,000
Long term debt amount outstanding	$ 0	$ 7,750,000	$ 7,750,000

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Regulatory Restrictions

12 Months Ended

Dec. 31, 2013

Text Block [Abstract]

Regulatory Restrictions

Note 17. Regulatory Restrictions

Dividends

The Company’s principal source of funds for dividend payments is dividends received from the Bank. The Bank, as a North Carolina banking corporation, may pay cash dividends only out of undivided profits as determined pursuant to North Carolina banking laws. However, regulatory authorities may limit payment of dividends by a bank when it is determined that such a limitation is in the public interest and is necessary to ensure financial soundness of the bank.

Intercompany Transactions

The Bank’s legal lending limit on loans to the Company is governed by Federal Reserve Act 23A, and differs from legal lending limits on loans to external customers. Generally, a bank may lend up to 10% of its capital and surplus to its Parent, if the loan is secured. Under this definition, the legal lending limit for the Bank on loans to the Company was approximately $3,348,000 at December 31, 2013. No 23A transactions were deemed to exist between the Company and the Bank at December 31, 2013 or 2012.

Capital Requirements

The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate 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.

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 to risk-weighted assets, and of Tier I capital to average assets, as all those terms are defined in the regulations. Management believes, as of December 31, 2013, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2013, the most recent notification from the Federal Deposit Insurance Corporation 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 following table. There are no conditions or events after that notification that management believes to have changed the institution’s category.

On July 7, 2013 the Federal Reserve Board approved Basel III Final Rule to begin implementation January 1, 2015. The desired overall objective of Basel III is to improve the banking sector’s ability to absorb shocks arising from financial and economic stress. The Final Rule changes minimum capital ratios and raises the Tier 1 Risk Weighted Assets to 6% from 4%. In addition, the new rules require a bank to maintain a capital conservation buffer of between 2 and 2  ¹/₂ % beginning in 2016. The new rules will be phased in beginning in 2015 with complete compliance required by 2019. Generally, the Basel III Final Rule will require banks to maintain higher levels of common equity and regulatory capital.

The Company’s and Bank’s actual capital amounts and minimum required amounts (dollars in thousands) and ratios are also presented in the following table.

	Actual					Minimum Required For Capital Adequacy Purposes					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2013
Total Capital
(to Risk-Weighted Assets) Consolidated	$	34,880		21.90	%	$	12,740		8.00	%	$	n/a		n/a
Surrey Bank & Trust	$	34,154		21.46	%	$	12,730		8.00	%	$	15,913		10.00	%
Tier I Capital
(to Risk-Weighted Assets) Consolidated	$	32,872		20.64	%	$	6,370		4.00	%	$	n/a		n/a
Surrey Bank & Trust	$	32,148		20.20	%	$	6,365		4.00	%	$	9,548		6.00	%
Tier I Capital
(to Average Assets) Consolidated	$	32,872		13.58	%	$	9,685		4.00	%	$	n/a		n/a
Surrey Bank & Trust	$	32,148		13.31	%	$	9,663		4.00	%	$	12,079		5.00	%
December 31, 2012
Total Capital
(to Risk-Weighted Assets) Consolidated	$	32,923		20.77	%	$	12,679		8.00	%	$	n/a		n/a
Surrey Bank & Trust	$	32,373		20.49	%	$	12,637		8.00	%	$	15,796		10.00	%
Tier I Capital
(to Risk-Weighted Assets) Consolidated	$	30,924		19.51	%	$	6,340		4.00	%	$	n/a		n/a
Surrey Bank & Trust	$	30,381		19.23	%	$	6,318		4.00	%	$	9,478		6.00	%
Tier I Capital
(to Average Assets) Consolidated	$	30,924		13.49	%	$	9,172		4.00	%	$	n/a		n/a
Surrey Bank & Trust	$	30,381		13.28	%	$	9,153		4.00	%	$	11,442		5.00	%

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Securities - Amortized Cost and Fair Value of Available for Sale Securities (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 4,617,425	$ 3,600,495
Unrealized Gains	45,077	9,607
Unrealized Losses	112,800	107,250
Fair Value, Total	4,549,702	3,502,852
Government-Sponsored Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	3,500,000	2,500,000
Unrealized Gains	795	4,875
Unrealized Losses	2,030
Fair Value, Total	3,498,765	2,504,875
Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	32,099	41,659
Unrealized Gains	1,022	1,316
Unrealized Losses
Fair Value, Total	33,121	42,975
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	550,000	550,000
Unrealized Gains
Unrealized Losses	99,000	107,250
Fair Value, Total	451,000	442,750
Equities and Mutual Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	535,326	508,836
Unrealized Gains	43,260	3,416
Unrealized Losses	11,770
Fair Value, Total	$ 566,816	$ 512,252

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense

The components of income tax expense are as follows:

	2013			2012
Current	$	1,785,165		$	1,444,792
Deferred		(25,498	)		276,492
	$	1,759,667		$	1,721,284

Summary of Reconciliation of Expected Income Tax Expense Computed at Statutory Federal Income Tax Rate

A reconciliation of expected income tax expense computed at the statutory federal income tax rate of 34% to income tax expense included in the statements of income is as follows:

	2013			2012
Expected tax expense	$	1,580,666		$	1,531,416
State income tax, net of federal tax benefit		207,817			195,474
Tax exempt income		(75,568	)		(69,724	)
Nondeductible and other items		46,752			64,118
	$	1,759,667		$	1,721,284

Summary of Significant Components of Net Deferred Tax Assets

Net deferred tax assets are included in other assets in the consolidated balance sheets. The significant components of net deferred tax assets at December 31, 2013 and 2012 are summarized as follows:

	2013		2012
Deferred tax assets
Allowance for loan losses	$	878,918	$	941,475
Deferred compensation liability		609,777		537,791
Net unrealized loss on securities available for sale		26,301		37,796
Write down and expenses of foreclosed assets		—		25,095
Interest income on non-accrual loans		162,335		126,334
Lower of cost or market adjustment on loans transferred from available for sale to portfolio		15,322		19,834
		1,692,653		1,688,325
Deferred tax liabilities
Depreciation		305,985		302,314
Net deferred loan cost		100,374		113,080
Other		19,091		19,731
		425,450		435,125
Net deferred tax asset	$	1,267,203	$	1,253,200

XML

Fair Value - Recorded Amount of Assets and Liabilities Measured at Fair Value on a Recurring Basis (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	$ 4,549,702	$ 3,502,852
Government-Sponsored Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	3,498,765	2,504,875
Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	33,121	42,975
Corporate Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	451,000	442,750
Equities and Mutual Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	566,816	512,252
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	4,550,000	3,503,000
Total liabilities at fair value
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	567,000	512,000
Total liabilities at fair value
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	3,532,000	2,548,000
Total liabilities at fair value
Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	451,000	443,000
Total liabilities at fair value
Fair Value, Measurements, Recurring [Member] | Government-Sponsored Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	3,499,000	2,505,000
Fair Value, Measurements, Recurring [Member] | Government-Sponsored Enterprises [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	3,499,000	2,505,000
Fair Value, Measurements, Recurring [Member] | Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	33,000	43,000
Fair Value, Measurements, Recurring [Member] | Mortgage-Backed Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	33,000	43,000
Fair Value, Measurements, Recurring [Member] | Corporate Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	451,000	443,000
Fair Value, Measurements, Recurring [Member] | Corporate Bonds [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	451,000	443,000
Fair Value, Measurements, Recurring [Member] | Equities and Mutual Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	567,000	512,000
Fair Value, Measurements, Recurring [Member] | Equities and Mutual Funds [Member] | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	$ 567,000	$ 512,000

XML

Parent Company Activity - Summary of Condensed Statements of Income (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Income
Gain on the sale of investment securities	$ 9,206	$ 700
Dividend income	22,190	9,679
Expenses
Income tax benefit	1,759,667	1,721,284
Net income	2,889,351	2,782,880
Net income available to common stockholders	2,705,928	2,599,457
Parent Company [Member]
Income
Equity in undistributed income of subsidiary	1,790,589	1,468,334
Dividends from subsidiary	1,122,000	1,355,000
Gain on the sale of investment securities	9,206	700
Interest income	8	80
Dividend income	22,190	9,679
Other operating income		12
Total income	2,943,993	2,833,805
Expenses
Other expense	66,614	71,765
Total expense	66,614	71,765
Income before income taxes	2,877,379	2,762,040
Income tax benefit	(11,972)	(20,840)
Net income	2,889,351	2,782,880
Preferred stock dividends	(183,423)	(183,423)
Net income available to common stockholders	$ 2,705,928	$ 2,599,457

XML

Short-Term Debt (Tables)

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Summary of Short-Term Debt

Additional information at December 31, 2013 and 2012 and for the periods then ended is summarized below:

	2013			2012
Outstanding balance at December 31	$	—		$	—
Year-end weighted average rate		—	%		—	%
Daily average outstanding during the year	$	950,544		$	15,412
Average rate for the year		4.09	%		0.97	%
Maximum outstanding at any month-end during the year	$	3,743,820		$	—

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Securities - Scheduled Maturities of Available for Sale Securities (Detail) (USD $)	Dec. 31, 2013
Available For Sale Securities Continuous Unrealized Loss Position [Abstract]
Due in one year or less, Amortized Cost	$ 535,326
Due after one year through five years, Amortized Cost	4,056,427
Due after five years through ten years, Amortized Cost	15,094
Due after ten years, Amortized Cost	10,578
Amortized Cost, Total	4,617,425
Due in one year or less, Fair Value	566,816
Due after one year through five years, Fair Value	3,956,252
Due after five years through ten years, Fair Value	15,694
Due after ten years, Fair Value	10,940
Fair Value, Total	$ 4,549,702

XML

Property and Equipment - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Depreciation expense related to plant and equipment	$ 257,213	$ 244,363
Lease expiration date	Mar. 31, 2015
Operating lease monthly rent incremental rate	12.50%
Rental expense	37,528	31,078
Five Year Operating Lease [Member]
Property, Plant and Equipment [Line Items]
Operating lease term period	5 years
Monthly rental payment related to operating lease	2,215
Number of additional lease terms option to renew	2
Period of additional lease terms option to renew	5 years
One Year Operating Lease [Member]
Property, Plant and Equipment [Line Items]
Operating lease term period	1 year
Monthly rental payment related to operating lease	$ 925
Number of additional lease terms option to renew	2
Period of additional lease terms option to renew	6 months

XML

Allowance for Loan Losses - Loans by Credit Quality Indicator (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	$ 183,015,075	$ 176,687,329
Guaranteed portion of loans	47,715,737	43,118,330
Financing Receivable, Aggregate Rate	100.00%	100.00%
Construction and Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	6,353,787	4,873,512
Guaranteed portion of loans	73,000
Residential, 1-4 Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	40,203,978	36,091,051
Guaranteed portion of loans	673,854	752,677
Nonfarm, Nonresidential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	60,316,018	48,993,867
Guaranteed portion of loans	26,835,404	19,855,775
Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	66,612,984	75,914,072
Guaranteed portion of loans	19,589,284	22,001,515
Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	5,685,407	6,703,363
Guaranteed portion of loans
Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	3,842,901	4,111,464
Guaranteed portion of loans	544,195	508,363
Pass Credits [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	178,142,652	173,533,614
Guaranteed portion of loans	46,048,551	42,270,235
Financing Receivable, Aggregate Rate	97.30%	98.20%
Pass Credits [Member] | Construction and Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	6,283,729	4,786,945
Guaranteed portion of loans	73,000
Pass Credits [Member] | Residential, 1-4 Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	39,586,647	35,755,061
Guaranteed portion of loans	629,939	752,677
Pass Credits [Member] | Nonfarm, Nonresidential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	58,188,799	47,500,758
Guaranteed portion of loans	26,063,658	19,654,773
Pass Credits [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	64,556,331	74,878,901
Guaranteed portion of loans	18,737,759	21,354,422
Pass Credits [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	5,684,245	6,696,475
Guaranteed portion of loans
Pass Credits [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	3,842,901	3,915,474
Guaranteed portion of loans	544,195	508,363
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	4,768,072	2,890,881
Guaranteed portion of loans	1,667,186	848,095
Financing Receivable, Aggregate Rate	2.60%	1.60%
Special Mention [Member] | Construction and Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	70,058	86,567
Guaranteed portion of loans
Special Mention [Member] | Residential, 1-4 Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	617,331	335,990
Guaranteed portion of loans	43,915
Special Mention [Member] | Nonfarm, Nonresidential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	2,022,868	1,230,275
Guaranteed portion of loans	771,746	201,002
Special Mention [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	2,056,653	1,035,171
Guaranteed portion of loans	851,525	647,093
Special Mention [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	1,162	6,888
Guaranteed portion of loans
Special Mention [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality		195,990
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	104,351	262,834
Financing Receivable, Aggregate Rate	0.10%	0.20%
Substandard [Member] | Construction and Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality
Guaranteed portion of loans
Substandard [Member] | Residential, 1-4 Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality
Substandard [Member] | Nonfarm, Nonresidential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality	104,351	262,834
Substandard [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality
Substandard [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality
Guaranteed portion of loans
Substandard [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality
Doubtful [Member] | Construction and Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality
Guaranteed portion of loans
Doubtful [Member] | Residential, 1-4 Families [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality
Doubtful [Member] | Nonfarm, Nonresidential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality
Doubtful [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality
Doubtful [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality
Guaranteed portion of loans
Doubtful [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, Gross carrying value / Loans by credit quality

XML

Organization and Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013 Office	Dec. 31, 2012
Subsidiary of Limited Liability Company or Limited Partnership [Line Items]
Commencement of operation	May 01, 2003
Shares received by bank shareholders description	six shares for every five shares held
Number of banking offices	5
Held to maturity investments	$ 0
Originate guaranteed loans for sales	0	0
Employee contribution matching contribution percent	6.00%
Maximum age of employee to eligible under SERP plan	65 years
Deferred compensation plan, additional matching contribution percentage	30.00%
Marketing and advertising cost incurred	$ 129,048	$ 107,110
Interim impairment test beginning date	Sep. 15, 2012
Surrey Bank & Trust [Member]
Subsidiary of Limited Liability Company or Limited Partnership [Line Items]
Commencement of operation	Jul. 22, 1996
Date of incorporation	Jul. 15, 1996
Surrey Investment Services Inc. [Member]
Subsidiary of Limited Liability Company or Limited Partnership [Line Items]
Date of incorporation	Feb. 10, 1998
Freedom Finance, LLC [Member]
Subsidiary of Limited Liability Company or Limited Partnership [Line Items]
Date of incorporation	Jul. 31, 2000

XML

Organization and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Organization and Summary of Significant Accounting Policies

Note 1. Organization and Summary of Significant Accounting Policies

Organization

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

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

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

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

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

Critical Accounting Policies

Management believes the policies with respect to the methodology for the determination of the allowance for loan losses, and asset impairment judgments, including the recoverability of intangible assets involve a higher degree of complexity and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could cause reported results to differ materially. These critical policies and their application are periodically reviewed with the Audit Committee and the Board of Directors.

Principles of Consolidation

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

Use of Estimates

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

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowances for loan and foreclosed real estate losses, management obtains independent appraisals for significant properties.

Use of Estimates, continued

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

While management uses available information to recognize loan and foreclosed real estate losses, future additions to the allowances may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as a part of their routine examination process, periodically review the Company’s allowances for loan and foreclosed real estate losses. Such agencies may require the Company to recognize additions to the allowances based on their judgments about information available to them at the time of their examinations. Because of these factors, it is reasonably possible that the allowances for loan and foreclosed real estate losses may change materially in the near term.

Cash and Due from Banks

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

Interest-bearing Deposits with Banks

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

Trading Securities

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

Securities Held to Maturity

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

Securities Available for Sale

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

Unrealized holding gains and losses, net of tax, on available for sale securities are reported as a net amount in a separate component of stockholders’ equity. Realized gains and losses on the sale of available for sale securities are determined using the specific-identification method and are recorded on a trade-date basis. Premiums and discounts are recognized in interest income using the interest method over the period to maturity or to call dates. Declines in the fair value of individual held to maturity and available for sale securities below cost that are other than temporary are reflected as write-downs of the individual securities to fair value.

Securities Available for Sale, continued

Related write-downs are included in earnings as realized losses. In determining whether other than temporary impairment exists, management considers many factors, including (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and the ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Loans Held for Sale

Government guaranteed loans originated in the normal course of business are sometimes sold into the secondary market. These sales are of the guaranteed portion of the loans only. Loans that carry variable rates, which eliminate the market risk to the Bank, are carried at cost. Fixed rate loans are carried the lower of cost or market. There were no loans held for sale at December 31, 2013 and 2012.

Loans Receivable

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

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

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

Allowance for Loan Losses

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

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

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

Allowance for Loan Losses, continued

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

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

Property and Equipment

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

	Years
Buildings and improvements		10-40
Furniture and equipment		3-25

Foreclosed Assets

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

Goodwill

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

Employee Benefit Plans

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

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

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

Stock-based Compensation

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

Transfers of Financial Assets

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

Income Taxes

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

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

Basic Earnings per Common Share

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

Diluted Earnings per Common Share

The computation of diluted earnings per common share is similar to the computation of basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. The numerator is adjusted for any changes in income that would result from the assumed conversion of those potential common shares.

Comprehensive Income

Comprehensive income consists of net income plus certain other changes in assets and liabilities that are reported as separate components of stockholders’ equity rather than as income or expense. The Company’s other comprehensive income only consist of adjustments for unrealized gains or losses on investment securities available-for-sale.

Advertising Cost

The Company incurred marketing and advertising cost of $129,048 and $107,110 for the years ended December 31, 2013 and 2012, respectively. The amounts are expensed as incurred and included in the statements of income under other expense.

Off-Balance Sheet Credit Related Financial Instruments

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

Fair Value of Financial Instruments

FASB ASC 820, Fair Value Measurement and Disclosure, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

Reclassification

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

Recent Accounting Pronouncements

The following is a summary of recent authoritative pronouncements:

In July 2012, the Intangibles topic was amended to permit an entity to consider qualitative factors to determine whether it is more likely than not that indefinite-lived intangible assets are impaired. If it is determined to be more likely than not that indefinite-lived intangible assets are impaired, then the entity is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount. The amendments were effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The amendments did not have a material effect on the Company’s financial statements.

The Comprehensive Income topic of the ASC was amended in September 2011. The amendment eliminated the option to present other comprehensive income as a part of the statement of changes in stockholders’ equity and required consecutive presentation of the statement of net income and other comprehensive income. The amendments were applicable to the Company January 1, 2012 and have been applied retrospectively. In December 2011, the topic was further amended to defer the effective date of presenting reclassification adjustments from other comprehensive income to net income on the face of the financial statements while the FASB redeliberated

Recent Accounting Pronouncements, continued

income to net income on the face of the financial statements while the FASB redeliberated the presentation requirements for the reclassification adjustments. In February 2013, the FASB further amended the Comprehensive Income topic clarifying the conclusions from such redeliberations. Specifically, the amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments do require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, in certain circumstances an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The amendments were effective for the Company on a prospective basis beginning January 1, 2013. These amendments did not have a material effect on the Company’s financial statements.

On April 22, 2013, the FASB issued guidance addressing application of the liquidation basis of accounting. The guidance is intended to clarify when an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The amendments will be effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein and those requirements should be applied prospectively from the day that liquidation becomes imminent. Early adoption is permitted. The Company does not expect these amendments to have any effect on its financial statements.

In December 2013, the FASB amended the Master Glossary of the FASB Codification to define “Public Business Entity” to minimize the inconsistency and complexity of having multiple definitions of, or a diversity in practice as to what constitutes, a nonpublic entity and public entity within U.S. GAAP. The amendment does not affect existing requirements, however will be used by the FASB, the Private Company Council (“PCC”), and the Emerging Issues Task Force (“EITF”) in specifying the scope of future financial accounting and reporting guidance. The Company does not expect this amendment to have any effect on its financial statements.

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

XML

Allowance for Loan Losses - TDRs for which Allowance for Loan Losses Measured (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013 Contract	Dec. 31, 2012 Contract
Construction and Land Development [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts		1
Pre-Modification Outstanding Recorded Investment		$ 237,883
Post-Modification Outstanding Recorded Investment		237,883
Residential, 1-4 Families [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	1
Pre-Modification Outstanding Recorded Investment	55,336	113,743
Post-Modification Outstanding Recorded Investment	55,336	116,438
Nonfarm, Nonresidential [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	1
Pre-Modification Outstanding Recorded Investment	145,219	96,028
Post-Modification Outstanding Recorded Investment	145,219	96,028
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	2
Pre-Modification Outstanding Recorded Investment	22,065	343,060
Post-Modification Outstanding Recorded Investment	$ 22,065	$ 343,060

XML

Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2013

Commitments And Contingencies Disclosure [Abstract]

Summary of Company's Commitments

A summary of the Company’s commitments at December 31, 2013 and 2012 is as follows:

	2013		2012
Commitments to extend credit, including unused lines of credit	$	34,138,058	$	34,794,892
Standby letters of credit		1,601,847		1,524,713
	$	35,739,905	$	36,319,605

XML

Organization and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Organization

Organization

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

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

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

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

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

Critical Accounting Policies

Critical Accounting Policies

Management believes the policies with respect to the methodology for the determination of the allowance for loan losses, and asset impairment judgments, including the recoverability of intangible assets involve a higher degree of complexity and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could cause reported results to differ materially. These critical policies and their application are periodically reviewed with the Audit Committee and the Board of Directors.

Principles of Consolidation

Principles of Consolidation

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

Use of Estimates

Use of Estimates

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

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowances for loan and foreclosed real estate losses, management obtains independent appraisals for significant properties.

Use of Estimates, continued

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

While management uses available information to recognize loan and foreclosed real estate losses, future additions to the allowances may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as a part of their routine examination process, periodically review the Company’s allowances for loan and foreclosed real estate losses. Such agencies may require the Company to recognize additions to the allowances based on their judgments about information available to them at the time of their examinations. Because of these factors, it is reasonably possible that the allowances for loan and foreclosed real estate losses may change materially in the near term.

Cash and Due from Banks

Cash and Due from Banks

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

Interest-Bearing Deposits with Banks

Interest-bearing Deposits with Banks

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

Trading Securities

Trading Securities

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

Securities Held to Maturity

Securities Held to Maturity

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

Securities Available for Sale

Securities Available for Sale

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

Unrealized holding gains and losses, net of tax, on available for sale securities are reported as a net amount in a separate component of stockholders’ equity. Realized gains and losses on the sale of available for sale securities are determined using the specific-identification method and are recorded on a trade-date basis. Premiums and discounts are recognized in interest income using the interest method over the period to maturity or to call dates. Declines in the fair value of individual held to maturity and available for sale securities below cost that are other than temporary are reflected as write-downs of the individual securities to fair value.

Securities Available for Sale, continued

Related write-downs are included in earnings as realized losses. In determining whether other than temporary impairment exists, management considers many factors, including (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and the ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Loans Held for Sale

Loans Held for Sale

Government guaranteed loans originated in the normal course of business are sometimes sold into the secondary market. These sales are of the guaranteed portion of the loans only. Loans that carry variable rates, which eliminate the market risk to the Bank, are carried at cost. Fixed rate loans are carried the lower of cost or market. There were no loans held for sale at December 31, 2013 and 2012.

Loans Receivable

Loans Receivable

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

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

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

Allowance for Loan Losses

Allowance for Loan Losses

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

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

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

Allowance for Loan Losses, continued

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

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

Property and Equipment

Property and Equipment

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

	Years
Buildings and improvements		10-40
Furniture and equipment		3-25

Foreclosed Assets

Foreclosed Assets

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

Goodwill

Goodwill

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

Employee Benefit Plans

Employee Benefit Plans

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

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

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

Stock-Based Compensation

Stock-based Compensation

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

Transfers of Financial Assets

Transfers of Financial Assets

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

Income Taxes

Income Taxes

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

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

Basic Earnings Per Common Share

Basic Earnings per Common Share

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

Diluted Earnings Per Common Share

Diluted Earnings per Common Share

The computation of diluted earnings per common share is similar to the computation of basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. The numerator is adjusted for any changes in income that would result from the assumed conversion of those potential common shares.

Comprehensive Income

Comprehensive Income

Comprehensive income consists of net income plus certain other changes in assets and liabilities that are reported as separate components of stockholders’ equity rather than as income or expense. The Company’s other comprehensive income only consist of adjustments for unrealized gains or losses on investment securities available-for-sale.

Advertising Cost

Advertising Cost

The Company incurred marketing and advertising cost of $129,048 and $107,110 for the years ended December 31, 2013 and 2012, respectively. The amounts are expensed as incurred and included in the statements of income under other expense.

Off-Balance Sheet Credit Related Financial Instruments

Off-Balance Sheet Credit Related Financial Instruments

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

Fair Value of Financial Instruments

Fair Value of Financial Instruments

FASB ASC 820, Fair Value Measurement and Disclosure, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

Reclassification

Reclassification

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

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The following is a summary of recent authoritative pronouncements:

In July 2012, the Intangibles topic was amended to permit an entity to consider qualitative factors to determine whether it is more likely than not that indefinite-lived intangible assets are impaired. If it is determined to be more likely than not that indefinite-lived intangible assets are impaired, then the entity is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount. The amendments were effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The amendments did not have a material effect on the Company’s financial statements.

The Comprehensive Income topic of the ASC was amended in September 2011. The amendment eliminated the option to present other comprehensive income as a part of the statement of changes in stockholders’ equity and required consecutive presentation of the statement of net income and other comprehensive income. The amendments were applicable to the Company January 1, 2012 and have been applied retrospectively. In December 2011, the topic was further amended to defer the effective date of presenting reclassification adjustments from other comprehensive income to net income on the face of the financial statements while the FASB redeliberated

Recent Accounting Pronouncements, continued

income to net income on the face of the financial statements while the FASB redeliberated the presentation requirements for the reclassification adjustments. In February 2013, the FASB further amended the Comprehensive Income topic clarifying the conclusions from such redeliberations. Specifically, the amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments do require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, in certain circumstances an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The amendments were effective for the Company on a prospective basis beginning January 1, 2013. These amendments did not have a material effect on the Company’s financial statements.

On April 22, 2013, the FASB issued guidance addressing application of the liquidation basis of accounting. The guidance is intended to clarify when an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The amendments will be effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein and those requirements should be applied prospectively from the day that liquidation becomes imminent. Early adoption is permitted. The Company does not expect these amendments to have any effect on its financial statements.

In December 2013, the FASB amended the Master Glossary of the FASB Codification to define “Public Business Entity” to minimize the inconsistency and complexity of having multiple definitions of, or a diversity in practice as to what constitutes, a nonpublic entity and public entity within U.S. GAAP. The amendment does not affect existing requirements, however will be used by the FASB, the Private Company Council (“PCC”), and the Emerging Issues Task Force (“EITF”) in specifying the scope of future financial accounting and reporting guidance. The Company does not expect this amendment to have any effect on its financial statements.

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

Fair Value Hierarchy

Fair Value Hierarchy

Under the Fair Value Measurements and Disclosures Topic of FASB ASC, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures the impairment in accordance with the Receivables Topic of the FASB ASC. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2013 and 2012, substantially all of the total impaired loans were evaluated based on the fair value of the collateral and discounted cash flows. In accordance with the Fair Value and Measurement Topic of the FASB ASC, impaired loans, where an allowance is established based on the fair value of collateral; require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price the Company records the impaired loan as nonrecurring Level 2. When an appraised value is available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.

XML

Subsequent Events

12 Months Ended

Dec. 31, 2013

Subsequent Events [Abstract]

Subsequent Events

Note 20. Subsequent Events

The Company has evaluated events and transactions through the date these financial statements were filed for potential recognition and disclosure.

XML

Loans Receivable - Additional Information (Detail) (Residential, 1-4 Families [Member], USD $)	Dec. 31, 2013	Dec. 31, 2012
Residential, 1-4 Families [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Residential, 1-4 family loans, pledged against FHLB advances	$ 17,376,000	$ 17,765,000

XML

Regulatory Restrictions (Tables)

12 Months Ended

Dec. 31, 2013

Text Block [Abstract]

Summary of Company's and Banks Actual and Minimum Capital Required Amounts and Ratios

The Company’s and Bank’s actual capital amounts and minimum required amounts (dollars in thousands) and ratios are also presented in the following table.

	Actual					Minimum Required For Capital Adequacy Purposes					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2013
Total Capital
(to Risk-Weighted Assets) Consolidated	$	34,880		21.90	%	$	12,740		8.00	%	$	n/a		n/a
Surrey Bank & Trust	$	34,154		21.46	%	$	12,730		8.00	%	$	15,913		10.00	%
Tier I Capital
(to Risk-Weighted Assets) Consolidated	$	32,872		20.64	%	$	6,370		4.00	%	$	n/a		n/a
Surrey Bank & Trust	$	32,148		20.20	%	$	6,365		4.00	%	$	9,548		6.00	%
Tier I Capital
(to Average Assets) Consolidated	$	32,872		13.58	%	$	9,685		4.00	%	$	n/a		n/a
Surrey Bank & Trust	$	32,148		13.31	%	$	9,663		4.00	%	$	12,079		5.00	%
December 31, 2012
Total Capital
(to Risk-Weighted Assets) Consolidated	$	32,923		20.77	%	$	12,679		8.00	%	$	n/a		n/a
Surrey Bank & Trust	$	32,373		20.49	%	$	12,637		8.00	%	$	15,796		10.00	%
Tier I Capital
(to Risk-Weighted Assets) Consolidated	$	30,924		19.51	%	$	6,340		4.00	%	$	n/a		n/a
Surrey Bank & Trust	$	30,381		19.23	%	$	6,318		4.00	%	$	9,478		6.00	%
Tier I Capital
(to Average Assets) Consolidated	$	30,924		13.49	%	$	9,172		4.00	%	$	n/a		n/a
Surrey Bank & Trust	$	30,381		13.28	%	$	9,153		4.00	%	$	11,442		5.00	%

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Organization and Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Summary of Estimated Useful Lives of Property and Equipment

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

	Years
Buildings and improvements		10-40
Furniture and equipment		3-25

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Securities (Tables)

12 Months Ended

Dec. 31, 2013

Investments Debt And Equity Securities [Abstract]

Amortized Cost and Fair Value of Available for Sale Securities

Debt and equity securities have been classified in the balance sheets according to management’s intent. The amortized costs of securities available for sale and their approximate fair values at December 31, 2013 and 2012 follow:

	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
2013
Government-sponsored enterprises	$	3,500,000	$	795	$	2,030	$	3,498,765
Mortgage-backed securities		32,099		1,022		—		33,121
Corporate bonds		550,000		—		99,000		451,000
Equities and mutual funds		535,326		43,260		11,770		566,816
	$	4,617,425	$	45,077	$	112,800	$	4,549,702

	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
2012
Government-sponsored enterprises	$	2,500,000	$	4,875	$	—	$	2,504,875
Mortgage-backed securities		41,659		1,316		—		42,975
Corporate bonds		550,000		—		107,250		442,750
Equities and mutual funds		508,836		3,416		—		512,252
	$	3,600,495	$	9,607	$	107,250	$	3,502,852

Scheduled Maturities of Available for Sale Securities

The scheduled maturities of securities (all available for sale) at December 31, 2013, were as follows:

	Amortized Cost		Fair Value
Due in one year or less	$	535,326	$	566,816
Due after one year through five years		4,056,427		3,956,252
Due after five years through ten years		15,094		15,694
Due after ten years		10,578		10,940
	$	4,617,425	$	4,549,702

Unrealized Losses on Investment Securities

The following tables show investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at December 31, 2013 and 2012. These unrealized losses on investment securities are a result of volatility in interest rates and market fluctuations and relate to government-sponsored enterprises, corporate bonds issued by other banks and equities and mutual funds at December 31, 2013, and corporate bonds issued by other banks at December 31, 2012.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
2013
Government-sponsored enterprises	$	1,497,970	$	2,030	$	—	$	—	$	1,497,970	$	2,030
Corporate bonds		—		—		451,000		99,000		451,000		99,000
Equities and mutual funds		245,218		11,770		—		—		245,218		11,770
	$	1,743,188	$	13,800	$	451,000	$	99,000	$	2,194,188	$	112,800
2012
Corporate bonds	$	—	$	—	$	442,750	$	107,250	$	442,750	$	107,250
	$	—	$	—	$	442,750	$	107,250	$	451,000	$	107,250

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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	$ 2,889,351	$ 2,782,880
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization	257,213	244,363
Provision for loan losses	319,565	471,292
Gain on the sale of foreclosed assets	(65,786)	(95,394)
Write-downs on foreclosed assets		19,430
Gain on the sale of government guaranteed loans	(229,130)
Gain on the sale of investments	(9,206)	(700)
Stock-based compensation		21,454
(Gain) loss on disposal of property and equipment	452	(1,075)
Deferred income taxes	(25,498)	276,492
Amortization of premiums on securities, net of accretion of discounts	40	421
Changes in assets and liabilities:
Accrued income	13,056	(16,484)
Increase in cash surrender value of life insurance	(163,982)	(158,907)
Other assets	(82,189)	741,640
Accrued interest payable	(12,243)	(49,561)
Other liabilities	545,516	219,464
Net cash provided by operating activities	3,437,159	4,455,315
Cash flows from investing activities
Net increase in interest-bearing deposits with banks	(1,985,187)	(1,608,682)
Net increase in federal funds sold	(601,053)	(752)
Purchases of investment securities	(2,081,221)	(3,053,658)
Maturities of investment securities	1,009,520	2,007,592
Purchases of restricted equity securities	(275)	(2,170)
Redemption of restricted equity securities	61,800	73,600
Net (increase) decrease in loans	(6,697,105)	851,124
Proceeds from the sale of investments	63,937	45,522
Proceeds from the sale of foreclosed assets	603,490	690,783
Proceeds from sale of property and equipment	100	1,075
Purchases of property and equipment	(154,242)	(218,800)
Purchases of Bank Owned Life Insurance		(1,750,000)
Net cash used in investing activities	(9,780,236)	(2,964,366)
Cash flows from financing activities
Net increase in deposits	7,977,924	3,884,661
Maturities of long-term debt		(350,000)
Dividends paid on preferred stock	(183,296)	(183,550)
Dividends paid on common stock		(1,168,245)
Common stock options exercised		30,111
Net cash provided by financing activities	7,794,628	2,212,977
Net increase in cash and due from banks	1,451,551	3,703,926
Cash and due from banks, beginning	5,973,042	2,269,116
Cash and due from banks, ending	7,424,593	5,973,042
Supplemental disclosures
Interest paid	1,517,487	1,720,699
Income taxes paid	1,819,472	918,821
Loans transferred to foreclosed properties	46,280	546,225
Cash dividends declared but not paid	$ 790,259	$ 46,106

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Loans Receivable (Tables)

12 Months Ended

Dec. 31, 2013

Receivables [Abstract]

Major Components of Loans

The major components of loans in the balance sheets at December 31, 2013 and 2012 are below.

	2013			2012
Commercial and industrial	$	66,612,984		$	75,914,072
Real estate:
Construction and land development		6,353,787			4,873,512
Residential, 1-4 families		40,203,978			36,091,051
Residential, 5 or more families		1,515,239			1,676,449
Farmland		2,219,688			2,284,155
Nonfarm, nonresidential		60,316,018			48,993,867
Agricultural		107,974			147,860
Consumer, net of discounts of $10,931 in 2013 and $17,764 in 2012		5,685,407			6,703,363
Other		—			3,000
		183,015,075			176,687,329
Net, deferred loan origination costs (fees)		269,100			293,334
		183,284,175			176,980,663
Allowance for loan losses		(3,375,350	)		(3,403,098	)
	$	179,908,825		$	173,577,565

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Employee Benefit Plans - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Defined Benefit Plan Disclosure [Line Items]
Employee contribution	6.00%
Employer contribution to plan amount	$ 130,805	$ 134,019
Employer contribution to plan	30.00%
Defined contribution plan payout period	10 years
Accrued liability for deferred director fees	851,751	725,399
Deferred director fees	141,166	104,795
Cash value of life insurance policies	5,462,336	5,298,354
Additional life insurance policies purchased by bank		1,750,000
Director [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined benefits paid	14,814	124,503
Employer contribution to plan	30.00%
SERP [Member]
Defined Benefit Plan Disclosure [Line Items]
Beginning age of executive for the plan	65
Accrued compensation liability	783,041	669,648
Employee benefit expense	133,229	98,823
Defined benefits paid	19,836	8,265
Discount rate for the plan	5.50%	6.00%
SERP [Member] | Minimum [Member]
Defined Benefit Plan Disclosure [Line Items]
Future compensation payments	19,838
SERP [Member] | Maximum [Member]
Defined Benefit Plan Disclosure [Line Items]
Future compensation payments	$ 89,914

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Earnings Per Common Share (Tables)

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Schedule of Computation of Basic and Diluted Earnings Per Share

The following table details the computation of basic and diluted earnings per share for the years ended December 31, 2013 and 2012:

	2013			2012
Net income	$	2,889,351		$	2,782,880
Convertible preferred stock dividends (Series A and D)		(183,423	)		(183,423	)
Net income available to common shareholders	$	2,705,928		$	2,599,457
Weighted average common shares outstanding		3,542,984			3,540,914
Effect of dilutive securities:
Options		—			—
Convertible preferred stock (Series A and D)		633,935			633,935
Weighted average common shares outstanding, diluted		4,176,919			4,174,849
Basic earnings per common share	$	0.76		$	0.73
Diluted earnings per common share	$	0.69		$	0.67

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Securities - Unrealized Losses on Investment Securities (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value	$ 1,743,188
12 Months or More, Fair Value	451,000	442,750
Total, Fair Value	2,194,188	451,000
Less Than 12 Months, Unrealized Losses	13,800
12 Months or More, Unrealized Losses	99,000	107,250
Total, Unrealized Losses	112,800	107,250
Government-Sponsored Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value	1,497,970
12 Months or More, Fair Value
Total, Fair Value	1,497,970
Less Than 12 Months, Unrealized Losses	2,030
12 Months or More, Unrealized Losses
Total, Unrealized Losses	2,030
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value
12 Months or More, Fair Value	451,000	442,750
Total, Fair Value	451,000	442,750
Less Than 12 Months, Unrealized Losses
12 Months or More, Unrealized Losses	99,000	107,250
Total, Unrealized Losses	99,000	107,250
Equities and Mutual Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value	245,218
12 Months or More, Fair Value
Total, Fair Value	245,218
Less Than 12 Months, Unrealized Losses	11,770
12 Months or More, Unrealized Losses
Total, Unrealized Losses	$ 11,770

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Short-Term Debt - Summary of Short-Term Debt (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Debt Disclosure [Abstract]
Outstanding balance at December 31
Year-end weighted average rate
Daily average outstanding during the year	950,544	15,412
Average rate for the year	4.09%	0.97%
Maximum outstanding at any month-end during the year	$ 3,743,820

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Consolidated Balance Sheets (USD $)	Dec. 31, 2013	Dec. 31, 2012
Assets
Cash and due from banks	$ 7,424,593	$ 5,973,042
Interest-bearing deposits with banks	34,351,505	32,366,318
Federal funds sold	1,311,641	710,588
Investment securities available for sale	4,549,702	3,502,852
Restricted equity securities	676,799	738,324
Loans, net of allowance for loan losses of $3,375,350 in 2013 and $3,403,098 in 2012	179,908,825	173,577,565
Property and equipment, net	4,440,215	4,543,738
Foreclosed assets		491,424
Accrued interest and other income	966,042	979,098
Goodwill	120,000	120,000
Bank owned life insurance	5,462,336	5,298,354
Other assets	1,707,319	1,611,129
Total assets	240,918,977	229,912,432
Deposits:
Noninterest-bearing	42,713,122	36,979,419
Interest-bearing	153,087,839	150,843,618
Total deposits	195,800,961	187,823,037
Federal Home Loan Bank advances	7,750,000	7,750,000
Dividends payable	790,259	46,106
Accrued interest payable	123,558	135,801
Other liabilities	2,236,573	1,920,187
Total liabilities	206,701,351	197,675,131
Commitments and contingencies
Stockholders' equity
Common stock, 10,000,000 shares authorized at no par value; 3,542,984 shares issued and outstanding	12,061,153	12,061,153
Retained earnings	18,329,089	16,367,187
Accumulated other comprehensive loss	(41,423)	(59,846)
Total stockholders' equity	34,217,626	32,237,301
Total liabilities and stockholders' equity	240,918,977	229,912,432
Preferred Stock Series A [Member]
Stockholders' equity
Preferred stock	2,620,325	2,620,325
Preferred Stock Series D [Member]
Stockholders' equity
Preferred stock	$ 1,248,482	$ 1,248,482

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Transactions with Related Parties (Tables)

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

Summary of Aggregate Loan Transactions with Related Parties

Aggregate loan transactions with related parties were as follows:

	2013			2012
Balance, beginning	$	4,060,425		$	4,491,059
New loans		684,223			2,203,459
Repayments		(1,790,548	)		(2,634,093	)
Balance, ending	$	2,954,100		$	4,060,425

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Parent Company Activity - Summary of Condensed Balance Sheet (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Assets
Cash and due from banks	$ 7,424,593	$ 5,973,042	$ 2,269,116
Investment securities available for sale	4,549,702	3,502,852
Other assets	1,707,319	1,611,129
Total assets	240,918,977	229,912,432
Liabilities
Dividends payable	790,259	46,106
Other liabilities	2,236,573	1,920,187
Total liabilities	206,701,351	197,675,131
Capital
Common stock	12,061,153	12,061,153
Retained earnings	18,329,089	16,367,187
Accumulated other comprehensive loss	(41,423)	(59,846)
Total stockholders' equity	34,217,626	32,237,301	30,226,562
Total liabilities and stockholders' equity	240,918,977	229,912,432
Parent Company [Member]
Assets
Cash and due from banks	89,528	59,625
Dividends receivable from subsidiary	867,000
Investment securities available for sale	566,816	512,252
Other assets	11,972	20,840
Investment in subsidiaries	33,483,275	31,692,793
Total assets	35,018,591	32,285,510
Liabilities
Dividends payable	790,259	46,106
Other liabilities	10,706	2,103
Total liabilities	800,965	48,209
Capital
Preferred stock	3,868,807	3,868,807
Common stock	12,061,153	12,061,153
Retained earnings	18,329,089	16,367,187
Accumulated other comprehensive loss	(41,423)	(59,846)
Total stockholders' equity	34,217,626	32,237,301
Total liabilities and stockholders' equity	$ 35,018,591	$ 32,285,510

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Consolidated Statements of Changes in Stockholders' Equity (USD $)	Total	Preferred Stock Series A [Member]	Preferred Stock Series D [Member]	Preferred Stock [Member]	Common Stock [Member]	Retained Earnings [Member]	Retained Earnings [Member] Preferred Stock Series A [Member]	Retained Earnings [Member] Preferred Stock Series D [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Balance, value at Dec. 31, 2011	$ 30,226,562			$ 3,868,807	$ 12,009,588	$ 14,405,467			$ (57,300)
Balance, shares at Dec. 31, 2011					3,536,724
Net income	2,782,880					2,782,880
Other comprehensive income (loss)	(2,546)								(2,546)
Common stock options exercised, value	30,111				30,111
Dividends declared on Series A & D convertible preferred stock ($.63 & $.35 per share)		(119,294)	(64,129)				(119,294)	(64,129)
Common stock options exercised, shares	6,260				6,260
Stock-based compensation, net of tax benefit	21,454				21,454
Dividends declared on common stock	(637,737)					(637,737)
Balance, value at Dec. 31, 2012	32,237,301			3,868,807	12,061,153	16,367,187			(59,846)
Balance, shares at Dec. 31, 2012					3,542,984
Net income	2,889,351					2,889,351
Other comprehensive income (loss)	18,423								18,423
Dividends declared on Series A & D convertible preferred stock ($.63 & $.35 per share)		(119,294)	(64,129)				(119,294)	(64,129)
Common stock options exercised, shares
Dividends declared on common stock	(744,026)					(744,026)
Balance, value at Dec. 31, 2013	$ 34,217,626			$ 3,868,807	$ 12,061,153	$ 18,329,089			$ (41,423)
Balance, shares at Dec. 31, 2013					3,542,984

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Regulatory Restrictions - Summary of Company's and Banks Actual and Minimum Capital Required Amounts and Ratios (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Capital (to Risk-Weighted Assets) Consolidated, Actual Amount	$ 34,880	$ 32,923
Tier I Capital (to Risk-Weighted Assets) Consolidated, Actual Amount	32,872	30,924
Tier I Capital (to Average Assets) Consolidated, Actual Amount	32,872	30,924
Total Capital (to Risk-Weighted Assets) Consolidated, Actual Ratio	21.90%	20.77%
Tier I Capital (to Risk-Weighted Assets) Consolidated, Actual Ratio	20.64%	19.51%
Tier I Capital (to Average Assets) Consolidated, Actual Ratio	13.58%	13.49%
Total Capital (to Risk-Weighted Assets) Consolidated Minimum Required For Capital Adequacy Purposes, Amount	12,740	12,679
Tier I Capital (to Risk-Weighted Assets) Consolidated Minimum Required For Capital Adequacy Purposes, Amount	6,370	6,340
Tier I Capital (to Average Assets) Consolidated Minimum Required For Capital Adequacy Purposes, Amount	9,685	9,172
Total Capital (to Risk-Weighted Assets) Consolidated, Minimum Required For Capital Adequacy Purposes, Ratio	8.00%	8.00%
Tier I Capital (to Risk-Weighted Assets) Consolidated Minimum Required For Capital Adequacy Purposes, Ratio	4.00%	4.00%
Tier I Capital (to Average Assets) Consolidated Minimum Required For Capital Adequacy Purposes, Ratio	4.00%	4.00%
Surrey Bank & Trust [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Capital (to Risk-Weighted Assets) Consolidated, Actual Amount	34,154	32,373
Tier I Capital (to Risk-Weighted Assets) Consolidated, Actual Amount	32,148	30,381
Tier I Capital (to Average Assets) Consolidated, Actual Amount	32,148	30,381
Total Capital (to Risk-Weighted Assets) Consolidated, Actual Ratio	21.46%	20.49%
Tier I Capital (to Risk-Weighted Assets) Consolidated, Actual Ratio	20.20%	19.23%
Tier I Capital (to Average Assets) Consolidated, Actual Ratio	13.31%	13.28%
Total Capital (to Risk-Weighted Assets) Consolidated Minimum Required For Capital Adequacy Purposes, Amount	12,730	12,637
Tier I Capital (to Risk-Weighted Assets) Consolidated Minimum Required For Capital Adequacy Purposes, Amount	6,365	6,318
Tier I Capital (to Average Assets) Consolidated Minimum Required For Capital Adequacy Purposes, Amount	9,663	9,153
Total Capital (to Risk-Weighted Assets) Consolidated, Minimum Required For Capital Adequacy Purposes, Ratio	8.00%	8.00%
Tier I Capital (to Risk-Weighted Assets) Consolidated Minimum Required For Capital Adequacy Purposes, Ratio	4.00%	4.00%
Tier I Capital (to Average Assets) Consolidated Minimum Required For Capital Adequacy Purposes, Ratio	4.00%	4.00%
Total Capital (to Risk-Weighted Assets) Consolidated Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	15,913	15,796
Tier I Capital (to Risk-Weighted Assets) Consolidated Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	9,548	9,478
Tier I Capital (to Average Assets) Consolidated, Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 12,079	$ 11,442
Total Capital (to Risk-Weighted Assets) Consolidated Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	10.00%	10.00%
Tier I Capital (to Risk-Weighted Assets) Consolidated Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	6.00%	6.00%
Tier I Capital (to Average Assets) Consolidated, Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	5.00%	5.00%

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Allowance for Loan Losses - Class of Aging Analysis Recorded Investment in Loans (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	$ 925,578	$ 1,594,762
60-89 Days Past Due	572,575	279,792
90 Days Plus Past Due	1,915,228	1,153,386
Total Past Due	3,413,381	3,027,940
Current	179,601,694	173,659,389
Ending balance	183,015,075	176,687,329
Recorded Investment > 90 Days and Accruing	35,439	683,720
30-59 Days Past Due, Percentage	0.51%	0.90%
60-89 Days Past Due, Percentage	0.31%	0.16%
90 Days Plus Past Due, Percentage	1.05%	0.65%
Total Past Due, Percentage	1.87%	1.71%
Current, Percentage	98.13%	98.29%
Total Financing Receivables, Percentage	100.00%	100.00%
Construction and Land Development [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due		73,572
60-89 Days Past Due
90 Days Plus Past Due
Total Past Due		73,572
Current	6,353,787	4,799,940
Ending balance	6,353,787	4,873,512
Recorded Investment > 90 Days and Accruing
Residential, 1-4 Families [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	544,559	380,731
60-89 Days Past Due	165,244
90 Days Plus Past Due	173,786	324,357
Total Past Due	883,589	705,088
Current	39,320,389	35,385,963
Ending balance	40,203,978	36,091,051
Recorded Investment > 90 Days and Accruing		292,583
Nonfarm, Nonresidential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	193,411	711,408
60-89 Days Past Due	336,036	197,479
90 Days Plus Past Due	791,148	386,160
Total Past Due	1,320,595	1,295,047
Current	58,995,423	47,698,820
Ending balance	60,316,018	48,993,867
Recorded Investment > 90 Days and Accruing
Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	84,145	256,672
60-89 Days Past Due	2,528	53,391
90 Days Plus Past Due	929,552	429,226
Total Past Due	1,016,225	739,289
Current	65,596,759	75,174,783
Ending balance	66,612,984	75,914,072
Recorded Investment > 90 Days and Accruing	15,837	377,494
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	103,463	172,379
60-89 Days Past Due	68,767	28,922
90 Days Plus Past Due	20,742	13,643
Total Past Due	192,972	214,944
Current	5,492,435	6,488,419
Ending balance	5,685,407	6,703,363
Recorded Investment > 90 Days and Accruing	19,602	13,643
Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due
60-89 Days Past Due
90 Days Plus Past Due
Total Past Due
Current	3,842,901	4,111,464
Ending balance	3,842,901	4,111,464
Recorded Investment > 90 Days and Accruing
Non Accruals [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	115,174	160,022
60-89 Days Past Due	547	89,322
90 Days Plus Past Due	1,879,790	469,666
Total Past Due	1,995,511	719,010
Current	1,804,816	3,021,715
Ending balance	3,800,327	3,740,725
Non Accruals [Member] | Construction and Land Development [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due		73,572
60-89 Days Past Due
90 Days Plus Past Due
Total Past Due		73,572
Current	70,058	12,995
Ending balance	70,058	86,567
Non Accruals [Member] | Residential, 1-4 Families [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	29,269	84,838
60-89 Days Past Due
90 Days Plus Past Due	173,786	31,775
Total Past Due	203,055	116,613
Current	190,032	359,129
Ending balance	393,087	475,742
Non Accruals [Member] | Nonfarm, Nonresidential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	85,646
60-89 Days Past Due		89,322
90 Days Plus Past Due	791,148	386,160
Total Past Due	876,794	475,482
Current	1,222,090	1,690,633
Ending balance	2,098,884	2,166,115
Non Accruals [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due
60-89 Days Past Due
90 Days Plus Past Due	913,715	51,731
Total Past Due	913,715	51,731
Current	321,592	760,662
Ending balance	1,235,307	812,393
Non Accruals [Member] | Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	259	1,612
60-89 Days Past Due	547
90 Days Plus Past Due	1,141
Total Past Due	1,947	1,612
Current	1,044	2,306
Ending balance	2,991	3,918
Non Accruals [Member] | Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due
60-89 Days Past Due
90 Days Plus Past Due
Total Past Due
Current		195,990
Ending balance		$ 195,990

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Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2013

Property Plant And Equipment [Abstract]

Schedule of Components of Property and Equipment and Total Accumulated Depreciation

Components of property and equipment and total accumulated depreciation at December 31, 2013 and 2012 are as follows:

	2013			2012
Land and improvements	$	1,625,879		$	1,625,879
Buildings and improvements		3,845,457			3,845,457
Furniture and equipment		2,703,601			2,614,801
		8,174,937			8,086,137
Less accumulated depreciation		(3,734,722	)		(3,542,399	)
	$	4,440,215		$	4,543,738

Schedule of Operating Leases

Pursuant to the terms of non-cancelable lease agreements in effect at December 31, 2013, and leases expected to renew, pertaining to banking premises and equipment, future minimum rent commitments under various operating leases are as follows:

2014	$	37,898
2015		35,685
2016		29,900
2017		29,900
2018		29,900
	$	163,283

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Loan Servicing - Schedule of Roll Forward of Loan Servicing Rights (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance, December 31	$ 9,157,496	$ 7,603,644
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance, January 1	63,017	92,682
Capitalized	200,839
Amortization included in other income	(2,994)	(29,665)
Balance, December 31	$ 260,862	$ 63,017

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Stock Based Compensation

12 Months Ended

Dec. 31, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Based Compensation

Note 14. Stock Based Compensation

The Company has two share-based compensation plans, which are described below. No compensation cost has been charged against income during the year ended December 31, 2013, as the vesting period ended in 2012. The compensation cost that has been charged against income for those plans was approximately $32,507 the year ended December 31, 2012. The income tax benefit recognized for share-based compensation arrangements was approximately $11,052 for the year ended December 31, 2012.

The Company’s qualified incentive stock option plan which expired on June 1, 2007 reserved shares for purchase by eligible employees. Options granted under this plan vest at the rate of 20% per year, expire not more than ten years from the date of grant, and are exercisable at not less than the fair market value of the stock at the date of the grant.

The Company’s non-qualified stock option plan, which expired on June 1, 2007, reserved shares for purchase by non-employee directors. Options granted under this plan were exercisable after six months from the date of the grant at not less than the fair market value of the stock at the date of the grant. The life of such options shall not extend more than ten years from the date of the grant.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The risk-free interest rate is based on the U.S. Treasury rate for the expected life at the time of grant. Volatility is based on the volatilities of our trading history. The expected life is based on the average life of the options of ten years and the weighted average graded vesting period of five years, and forfeitures are considered immaterial based on the historical data of the Company.

A summary of option activity under the stock option plans during the years ended December 31, 2013 and 2012 is presented below:

	Options Available		Options Outstanding			Weighted Average Exercise Price
Balance at December 31, 2011		—		49,100		$	11.14
Exercised		—		(6,260	)		4.81
Authorized		—		—			—
Forfeited		—		(1,650	)		12.06
Granted		—		—			—
Expired		—		—			—
Balance at December 31, 2012		—		41,190			12.06
Exercised		—		—			—
Authorized		—		—			—
Forfeited		—		—			—
Granted		—		—			—
Expired		—		—
Balance at December 31, 2013		—		41,190		$	12.06

The following table sets forth the exercise prices, the number of options outstanding and the number of options exercisable at December 31, 2013:

Exercise Price		Number of Options Outstanding		Weighted Average Exercise Price		Weighted Average Contractual Life Remaining (Years)	Number of Options Exercisable		Weighted Average Exercise Price
$	12.06		41,190		12.06	3.4		41,190		12.06
	Total/Average		41,190	$	12.06	3.4		41,190	$	12.06

As of December 31, 2013, there was no unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s stock option plans. The total fair value of shares vested during the year ended December 31, 2012 was $61,512.

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Deposits (Tables)

12 Months Ended

Dec. 31, 2013

Text Block [Abstract]

Schedule of Time Deposit Maturities

At December 31, 2013, the scheduled maturities of total time deposits are as follows:

2014	$	50,476,152
2015		18,994,065
2016		6,311,408
2017		3,366,344
2018		4,750,294
	$	83,898,263

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Parent Company Activity - Summary of Condensed Statements of Cash Flows (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Cash flows from operating activities
Net income	$ 2,889,351	$ 2,782,880
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on the sale of investment securities	(9,206)	(700)
Net (increase) decrease in other assets	(82,189)	741,640
Net (decrease) increase in other liabilities	545,516	219,464
Net cash provided by operating activities	3,437,159	4,455,315
Cash flows from investing activities
Net decrease in interest-bearing deposits with banks	(1,985,187)	(1,608,682)
Purchase of investment securities	(2,081,221)	(3,053,658)
Net cash used in investing activities	(9,780,236)	(2,964,366)
Cash flows from financing activities
Common stock options exercised		30,111
Net cash provided by financing activities	7,794,628	2,212,977
Net increase (decrease) in cash and due from banks	1,451,551	3,703,926
Parent Company [Member]
Cash flows from operating activities
Net income	2,889,351	2,782,880
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiary	(1,790,589)	(1,468,334)
Gain on the sale of investment securities	(9,206)	(700)
Increase in dividends receivable from subsidiary	(867,000)
Net (increase) decrease in other assets	8,868	(20,840)
Net (decrease) increase in other liabilities	(942)	942
Net cash provided by operating activities	230,482	1,293,948
Cash flows from investing activities
Net decrease in interest-bearing deposits with banks		130,000
Purchase of investment securities	(81,221)	(553,659)
Proceeds from the sale of investment securities	63,938	45,522
Net cash used in investing activities	(17,283)	(378,137)
Cash flows from financing activities
Common stock options exercised		30,111
Dividends paid	(183,296)	(1,351,795)
Net cash provided by financing activities	(183,296)	(1,321,684)
Net increase (decrease) in cash and due from banks	29,903	(405,873)
Cash and due from banks, beginning	59,625	465,498
Cash and due from banks, ending	$ 89,528	$ 59,625

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 16. Commitments and Contingencies

Litigation

In the normal course of business the Company is involved in various legal proceedings. After consultation with legal counsel, management believes that any liability resulting from such proceedings will not be material to the financial statements.

Financial Instruments with Off-Balance-Sheet Risk

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, credit risk in excess of the amount recognized in the balance sheets.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as for on-balance-sheet instruments. A summary of the Company’s commitments at December 31, 2013 and 2012 is as follows:

	2013		2012
Commitments to extend credit, including unused lines of credit	$	34,138,058	$	34,794,892
Standby letters of credit		1,601,847		1,524,713
	$	35,739,905	$	36,319,605

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the party. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held varies as specified above and is required in instances which the Company deems necessary. The commitments carry both fixed and variable rates of interest.

Concentrations of Credit Risk

Substantially all of the Company’s loans, commitments to extend credit, and standby letters of credit have been granted to customers in the Company’s market area and such customers are generally depositors of the Company. The concentrations of credit by type of loan are set forth in Note 4. The distribution of commitments to extend credit approximates the distribution of loans outstanding. The Company, as a matter of policy, does not extend credit to any single borrower or group of related borrowers in excess of approximately $5,100,000 unless guaranteed by SBA or USDA Rural Development Corporation. Although the Company has a reasonably diversified loan portfolio, the following industries are considered concentrations: real estate, motion picture and sound recording, truck transportation, fabricated metal product manufacturing, heavy and civil engineering construction and building construction.

Other Commitments

The Company has entered into employment agreements with certain of its key officers covering duties, salary, benefits, provisions for termination and Company obligations in the event of merger or acquisition. The Bank also has lease commitments summarized in Note 7 to these financial statements.

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Property and Equipment - Schedule of Operating Leases (Detail) (USD $)	Dec. 31, 2013
Property Plant And Equipment [Abstract]
2014	$ 37,898
2015	35,685
2016	29,900
2017	29,900
2018	29,900
Total	$ 163,283

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Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Dividends declared per common share	$ 0.21	$ 0.18
Preferred Stock Series A [Member]
Dividends declared	$ 0.63	$ 0.63
Preferred Stock Series D [Member]
Dividends declared	$ 0.35	$ 0.35
Retained Earnings [Member]
Dividends declared per common share	$ 0.21	$ 0.18
Retained Earnings [Member] | Preferred Stock Series A [Member]
Dividends declared	$ 0.63	$ 0.63
Retained Earnings [Member] | Preferred Stock Series D [Member]
Dividends declared	$ 0.35	$ 0.35

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Consolidated Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Allowance for loan losses	$ 3,375,350	$ 3,403,098
Preferred stock, shares authorized	1,000,000	1,000,000
Common stock, shares authorized	10,000,000	10,000,000
Common stock, par value
Common stock, shares issued	3,542,984	3,542,984
Common stock, shares outstanding	3,542,984	3,542,984
Preferred Stock Series A [Member]
Preferred stock, shares issued	189,356	189,356
Preferred stock, shares outstanding	189,356	189,356
Preferred stock, par value
Preferred stock, fixed percentage rate	4.50%	4.50%
Preferred stock, liquidation value	$ 14	$ 14
Preferred Stock Series D [Member]
Preferred stock, shares issued	181,154	181,154
Preferred stock, shares outstanding	181,154	181,154
Preferred stock, par value
Preferred stock, fixed percentage rate	5.00%	5.00%
Preferred stock, liquidation value	$ 7.08	$ 7.08

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Short-Term Debt

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Short-Term Debt

Note 9. Short-Term Debt

Short-term debt consists of Federal Home Loan Bank advances that have original maturities of 12 months or less, short-term secured borrowings associated with the sale of government guaranteed loans and federal funds purchased and securities sold under agreements to repurchase, which generally mature within one to four days from the transaction date. Additional information at December 31, 2013 and 2012 and for the periods then ended is summarized below:

	2013			2012
Outstanding balance at December 31	$	—		$	—
Year-end weighted average rate		—	%		—	%
Daily average outstanding during the year	$	950,544		$	15,412
Average rate for the year		4.09	%		0.97	%
Maximum outstanding at any month-end during the year	$	3,743,820		$	—

Lines of Credit

The Company has established various credit facilities to provide additional liquidity if and as needed. These include unsecured lines of credit with correspondent banks totaling $35,500,000 and a secured line of credit with the Federal Home Loan Bank of Atlanta of approximately $9,609,000. At December 31, 2013, there were no amounts outstanding on the unsecured lines with correspondent banks. Advances due to the Federal Home Loan Bank of Atlanta on the secured line of credit at December 31, 2013 and 2012 amounted to $7,750,000.

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Regulatory Restrictions - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013 Section_23A_Transaction	Dec. 31, 2012 Section_23A_Transaction	Jul. 07, 2013 Maximum [Member]	Jul. 07, 2013 Minimum [Member]	Jul. 07, 2013 Minimum [Member] Scenario, Forecast [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Percentage of legal lending limit on capital and surplus	10.00%
Legal lending limit on secured loan	$ 3,348,000
Intercompany transaction under section 23A related to lending limit to parent, number of transactions	0	0
Weighted Assets minimum capital ratios	4.00%	4.00%	6.00%		4.00%
Capital conservation ratios			2.50%	2.00%

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Commitments and Contingencies - Summary of Company's Commitments (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Commitments And Contingencies Disclosure [Abstract]
Commitments to extend credit, including unused lines of credit	$ 34,138,058	$ 34,794,892
Standby letters of credit	1,601,847	1,524,713
Company's commitments, Total	$ 35,739,905	$ 36,319,605

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Document and Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Mar. 07, 2014	Jun. 30, 2013
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Entity Registrant Name	SURREY BANCORP
Entity Central Index Key	0001229146
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		3,542,984
Entity Public Float			$ 20.2

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Federal Home Loan Bank Advances

12 Months Ended

Dec. 31, 2013

Banking And Thrift [Abstract]

Federal Home Loan Bank Advances

Note 10. Federal Home Loan Bank Advances

The Company’s Federal Home Loan Bank advances include instruments bearing fixed rates ranging from 2.94% to 4.95%. The weighted average rate of all long-term debt at December 31, 2013 and December 31, 2012 was 3.73%. Collateral consists of eligible real estate, 1-4 family first and second lien and revolving residential real estate loans and certain investment securities. The contractual maturities of long-term debt are as follows:

2014	$	1,500,000
2015		3,500,000
2016		1,000,000
2017		1,750,000
2018		—
	$	7,750,000

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Fair Value - Estimated Fair Values of Financial Instruments (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Fair Value Assets Liabilities Quantitative Information [Line Items]
Financial Instruments-Assets Loans Carrying Amount	$ 179,908,825	$ 173,577,565
Financial Instrument-Liabilities Deposits Carrying Amount	195,800,961	187,823,037
Financial Instrument-Liabilities Federal Home Loan Bank advances Carrying Amount	7,750,000	7,750,000
Carrying Amount [Member]
Fair Value Assets Liabilities Quantitative Information [Line Items]
Financial Instruments-Assets Loans Carrying Amount	179,909,000	173,578,000
Financial Instrument-Liabilities Deposits Carrying Amount	195,801,000	187,823,000
Financial Instrument-Liabilities Federal Home Loan Bank advances Carrying Amount	7,750,000	7,750,000
Fair Value [Member]
Fair Value Assets Liabilities Quantitative Information [Line Items]
Financial Instruments-Assets Loans Fair Value	179,531,000	173,813,000
Financial Instrument-Liabilities Deposits Fair Value	171,649,000	180,777,000
Financial Instrument-Liabilities Federal Home Loan Bank advances Fair Value	8,100,000	8,291,000
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) [Member]
Fair Value Assets Liabilities Quantitative Information [Line Items]
Financial Instruments-Assets Loans Fair Value
Financial Instrument-Liabilities Deposits Fair Value
Financial Instrument-Liabilities Federal Home Loan Bank advances Fair Value
Significant Other Observable Inputs (Level 2) [Member]
Fair Value Assets Liabilities Quantitative Information [Line Items]
Financial Instrument-Liabilities Deposits Fair Value	171,649,000	180,777,000
Financial Instrument-Liabilities Federal Home Loan Bank advances Fair Value	8,100,000	8,291,000
Significant Unobservable Inputs (Level 3) [Member]
Fair Value Assets Liabilities Quantitative Information [Line Items]
Financial Instruments-Assets Loans Fair Value	$ 179,531,000	$ 173,813,000

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Income Taxes - Summary of Significant Components of Net Deferred Tax Assets (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Deferred tax assets
Allowance for loan losses	$ 878,918	$ 941,475
Deferred compensation liability	609,777	537,791
Net unrealized loss on securities available for sale	26,301	37,796
Write down and expenses of foreclosed assets		25,095
Interest income on non-accrual loans	162,335	126,334
Lower of cost or market adjustment on loans transferred from available for sale to portfolio	15,322	19,834
Deferred tax assets, gross, Total	1,692,653	1,688,325
Deferred tax liabilities
Depreciation	305,985	302,314
Net deferred loan cost	100,374	113,080
Other	19,091	19,731
Deferred tax liabilities, gross, Total	425,450	435,125
Net deferred tax asset	$ 1,267,203	$ 1,253,200

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Consolidated Statements of Income (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Interest income
Loans and fees on loans	$ 10,377,342	$ 10,842,085
Federal funds sold	2,286	1,568
Investment securities, taxable	55,648	51,721
Investment securities, dividends	22,190	9,679
Deposits with banks	81,449	49,495
Total interest income	10,538,915	10,954,548
Interest expense
Deposits	1,175,130	1,372,369
Federal funds purchased and securities sold under agreements to repurchase	80	150
Short-term debt	38,543
Federal Home Loan Bank advances	291,491	298,619
Total interest expense	1,505,244	1,671,138
Net interest income	9,033,671	9,283,410
Provision for loan losses	319,565	471,292
Net interest income after provision for loan losses	8,714,106	8,812,118
Noninterest income
Service charges on deposit accounts	863,862	919,963
Gain on the sale of government guaranteed loans	229,130
Fees on loans delivered to correspondents	78,763	145,239
Other service charges and fees	576,993	527,634
Gain on sale of investment securities	9,206	700
Income from Bank Owned Life Insurance	163,982	158,907
Other operating income	984,908	861,184
Total noninterest income	2,906,844	2,613,627
Noninterest expense
Salaries and employee benefits	3,762,207	3,632,214
Occupancy expense	429,536	428,542
Equipment expense	237,229	240,836
Data processing	414,309	379,093
Foreclosed assets, net	(3,312)	46,047
Postage, printing and supplies	190,985	196,775
Professional fees	389,338	394,814
FDIC insurance premiums	104,317	149,304
Other expense	1,447,323	1,453,956
Total noninterest expense	6,971,932	6,921,581
Net income before income taxes	4,649,018	4,504,164
Income tax expense	1,759,667	1,721,284
Net income	2,889,351	2,782,880
Preferred stock dividends	(183,423)	(183,423)
Net income available to common stockholders	$ 2,705,928	$ 2,599,457
Basic earnings per common share	$ 0.76	$ 0.73
Diluted earnings per common share	$ 0.69	$ 0.67
Basic weighted average common shares outstanding	3,542,984	3,540,914
Diluted weighted average common shares outstanding	4,176,919	4,174,849
Dividends declared per common share	$ 0.21	$ 0.18

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Loans Receivable

12 Months Ended

Dec. 31, 2013

Receivables [Abstract]

Loans Receivable

Note 4. Loans Receivable

The major components of loans in the balance sheets at December 31, 2013 and 2012 are below.

	2013			2012
Commercial and industrial	$	66,612,984		$	75,914,072
Real estate:
Construction and land development		6,353,787			4,873,512
Residential, 1-4 families		40,203,978			36,091,051
Residential, 5 or more families		1,515,239			1,676,449
Farmland		2,219,688			2,284,155
Nonfarm, nonresidential		60,316,018			48,993,867
Agricultural		107,974			147,860
Consumer, net of discounts of $10,931 in 2013 and $17,764 in 2012		5,685,407			6,703,363
Other		—			3,000
		183,015,075			176,687,329
Net, deferred loan origination costs (fees)		269,100			293,334
		183,284,175			176,980,663
Allowance for loan losses		(3,375,350	)		(3,403,098	)
	$	179,908,825		$	173,577,565

Residential, 1-4 family loans pledged as collateral against FHLB advances approximated $17,376,000 and $17,765,000 at December 31, 2013 and 2012, respectively.

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Securities

12 Months Ended

Dec. 31, 2013

Investments Debt And Equity Securities [Abstract]

Securities

Note 3. Securities

Debt and equity securities have been classified in the balance sheets according to management’s intent. The amortized costs of securities available for sale and their approximate fair values at December 31, 2013 and 2012 follow:

	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
2013
Government-sponsored enterprises	$	3,500,000	$	795	$	2,030	$	3,498,765
Mortgage-backed securities		32,099		1,022		—		33,121
Corporate bonds		550,000		—		99,000		451,000
Equities and mutual funds		535,326		43,260		11,770		566,816
	$	4,617,425	$	45,077	$	112,800	$	4,549,702

	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
2012
Government-sponsored enterprises	$	2,500,000	$	4,875	$	—	$	2,504,875
Mortgage-backed securities		41,659		1,316		—		42,975
Corporate bonds		550,000		—		107,250		442,750
Equities and mutual funds		508,836		3,416		—		512,252
	$	3,600,495	$	9,607	$	107,250	$	3,502,852

Restricted equity securities were $676,799 and $738,324 at December 31, 2013 and 2012, respectively. Restricted equity securities primarily consist of investments in stock of the Federal Home Loan Bank of Atlanta (“FHLB”) and Community Bankers Bank (“CBB”). These investments are carried at cost. The FHLB requires financial institutions to make equity investments in the FHLB in order to borrow money. The Company is required to hold that stock so long as it borrows from the FHLB. CBB stock is classified as restricted due to the transfer restrictions placed on the ownership of the stock by the issuer.

At December 31, 2013 and 2012, substantially all government-sponsored enterprises securities were pledged as collateral on public deposits and for other purposes as required or permitted by law. The mortgage-backed securities were pledged to the FHLB.

Maturities of mortgage-backed bonds are stated based on contractual maturities. Actual maturities of these bonds may vary as the underlying mortgages are prepaid. The investment in equities and mutual funds by nature have no maturity date and are classified as due in one year or less.

The scheduled maturities of securities (all available for sale) at December 31, 2013, were as follows:

	Amortized Cost		Fair Value
Due in one year or less	$	535,326	$	566,816
Due after one year through five years		4,056,427		3,956,252
Due after five years through ten years		15,094		15,694
Due after ten years		10,578		10,940
	$	4,617,425	$	4,549,702

For the years ended December 31, 2013 and 2012, the Company had realized gains from the sale of investment securities totaling $9,206 and $700, respectively. All debt securities were held to their scheduled maturity dates or call date.

The following tables show investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at December 31, 2013 and 2012. These unrealized losses on investment securities are a result of volatility in interest rates and market fluctuations and relate to government-sponsored enterprises, corporate bonds issued by other banks and equities and mutual funds at December 31, 2013, and corporate bonds issued by other banks at December 31, 2012.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
2013
Government-sponsored enterprises	$	1,497,970	$	2,030	$	—	$	—	$	1,497,970	$	2,030
Corporate bonds		—		—		451,000		99,000		451,000		99,000
Equities and mutual funds		245,218		11,770		—		—		245,218		11,770
	$	1,743,188	$	13,800	$	451,000	$	99,000	$	2,194,188	$	112,800
2012
Corporate bonds	$	—	$	—	$	442,750	$	107,250	$	442,750	$	107,250
	$	—	$	—	$	442,750	$	107,250	$	451,000	$	107,250

Management considers the nature of the investment, the underlying causes of the decline in the market value and the severity and duration of the decline in market value in determining if impairment is other than temporary. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Based upon this evaluation, there are two securities in the portfolio with unrealized losses for a period greater than 12 months. We have analyzed each individual security for Other Than Temporary Impairment (“OTTI”) purposes by reviewing delinquencies, loan-to-value ratios, and credit quality and concluded that all unrealized losses presented in the tables above are not related to an issuer’s financial condition but are due to changes in the level of interest rates and no declines are deemed to be other than temporary in nature.

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Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Taxes

Note 15. Income Taxes

Current and Deferred Income Tax Components

The components of income tax expense are as follows:

	2013			2012
Current	$	1,785,165		$	1,444,792
Deferred		(25,498	)		276,492
	$	1,759,667		$	1,721,284

Rate Reconciliation

A reconciliation of expected income tax expense computed at the statutory federal income tax rate of 34% to income tax expense included in the statements of income is as follows:

	2013			2012
Expected tax expense	$	1,580,666		$	1,531,416
State income tax, net of federal tax benefit		207,817			195,474
Tax exempt income		(75,568	)		(69,724	)
Nondeductible and other items		46,752			64,118
	$	1,759,667		$	1,721,284

Deferred Income Tax Analysis

Net deferred tax assets are included in other assets in the consolidated balance sheets. The significant components of net deferred tax assets at December 31, 2013 and 2012 are summarized as follows:

	2013		2012
Deferred tax assets
Allowance for loan losses	$	878,918	$	941,475
Deferred compensation liability		609,777		537,791
Net unrealized loss on securities available for sale		26,301		37,796
Write down and expenses of foreclosed assets		—		25,095
Interest income on non-accrual loans		162,335		126,334
Lower of cost or market adjustment on loans transferred from available for sale to portfolio		15,322		19,834
		1,692,653		1,688,325
Deferred tax liabilities
Depreciation		305,985		302,314
Net deferred loan cost		100,374		113,080
Other		19,091		19,731
		425,450		435,125
Net deferred tax asset	$	1,267,203	$	1,253,200

The Company files tax returns in the United States Federal jurisdiction and the states of North Carolina and Virginia.

The Company classifies interest and penalties related to income tax assessments, if any, in interest expense or non-interest expense, respectively in the consolidated statements of income. Tax years 2010 through 2012 are subject to examination by the Internal Revenue Service, North Carolina Department of Revenue, and the Virginia Department of Taxation. The Company has analyzed the tax positions taken or expected to be taken in its tax returns and has concluded it has no liability related to uncertain tax positions.

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Fair Value

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value

Note 11. Fair Value

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, trading securities and derivatives, if present, are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment, servicing assets and foreclosed properties. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Fair Value Hierarchy

Under the Fair Value Measurements and Disclosures Topic of FASB ASC, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures the impairment in accordance with the Receivables Topic of the FASB ASC. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2013 and 2012, substantially all of the total impaired loans were evaluated based on the fair value of the collateral and discounted cash flows. In accordance with the Fair Value and Measurement Topic of the FASB ASC, impaired loans, where an allowance is established based on the fair value of collateral; require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price the Company records the impaired loan as nonrecurring Level 2. When an appraised value is available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.

Servicing Assets

A valuation of loan servicing rights is performed on an individual basis due to the small number of loans serviced. Loans are evaluated on a discounted earnings basis to determine the present value of future earnings. The present value of the future earnings is the estimated market value for the loan, calculated using consensus assumptions that a third party purchaser would utilize in evaluating a potential acquisition of the servicing. As such, the Company classifies loan servicing rights as Level 3.

Foreclosed Assets

Foreclosed assets are recorded at the lower of investment in the loan or fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

(in thousands)
December 31, 2013	Total		Level 1		Level 2		Level 3
Government-sponsored enterprises	$	3,499	$	—	$	3,499	$	—
Mortgage-backed securities		33		—		33		—
Corporate bonds		451		—		—		451
Equities and mutual funds		567		567		—		—
Total assets at fair value	$	4,550	$	567	$	3,532	$	451
Total liabilities at fair value	$	—	$	—	$	—	$	—
(in thousands)
December 31, 2012	Total		Level 1		Level 2		Level 3
Government-sponsored enterprises	$	2,505	$	—	$	2,505	$	—
Mortgage-backed securities		43		—		43		—
Corporate bonds		443		—		—		443
Equities and mutual funds		512		512		—		—
Total assets at fair value	$	3,503	$	512	$	2,548	$	443
Total liabilities at fair value	$	—	$	—	$	—	$	—

The changes in Level 3 assets measured at fair value on a recurring basis were:

(in thousands)	2013		2012
Corporate Bonds-Available for Sale
Balance, January 1	$	443	$	451
Total realized gain (losses) included in income		—		—
Total unrealized gain (losses) included in other comprehensive income		8		(8	)
Net purchases, sales, calls and maturities		—		—
Net transfers in/out of Level 3		—		—
Balance, December 31	$	451	$	443

Of the Level 3 assets that were held by the Company at December 31, 2013, the unrealized gain for the year was $8,000. That gain is recognized in other comprehensive income in the consolidated statements of financial condition. The Company did not have any purchases, sales, calls or maturities of Level 3 available for sale corporate bonds during 2013 or 2012. Both observable and unobservable inputs may be used to determine the fair value of positions classified as Level 3 assets. As a result, the unrealized gains and losses for these assets presented in the tables above may include changes in fair value that were attributable to both observable and unobservable inputs.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets or liabilities at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets and liabilities that are required to be measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets and liabilities recorded at fair value on a nonrecurring basis are included in the table below.

(in thousands)
December 31, 2013	Total		Level 1		Level 2		Level 3
Loans-commercial and industrial	$	934	$	—	$	—	$	934
Loans-nonfarm, non-residential		685		—		—		685
Loans- 1- 4 family residential		63		—		—		63
Loans-other		—		—		—		—
Foreclosed assets		—		—		—		—
Servicing assets		261		—		—		261
Total assets at fair value	$	1,943	$	—	$	—	$	1,943
Total liabilities at fair value	$	—	$	—	$	—	$	—
(in thousands)
December 31, 2012	Total		Level 1		Level 2		Level 3
Loans-commercial and industrial	$	805	$	—	$	—	$	805
Loans-nonfarm, non-residential		1,485		—		—		1,485
Loans- 1- 4 family residential		—		—		—		—
Loans-other		—		—		—		—
Foreclosed assets		491		—		—		491
Servicing assets		63		—		—		63
Total assets at fair value	$	2,844	$	—	$	—	$	2,844
Total liabilities at fair value	$	—	$	—	$	—	$	—

For level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2013, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair Value at December 31, 2013		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Corporate bonds	$	451	Third party estimate	Sales of comparable instruments		n/a
Servicing assets	$	261	Management estimate	Present value of future payments/useful life		n/a
Impaired loans	$	1,682	Management estimate	Appraisals and/or sales of comparable properties		n/a
Foreclosed assets	$	—	Management estimate	Appraisals and/or sales of comparable properties		n/a

Accounting standards for financial instruments require disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. These accounting standards exclude certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The methodologies for estimating fair value of financial assets and liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The estimated fair value approximates carrying value for cash and cash equivalents, accrued interest and the cash surrender value of life insurance policies. The methodologies for other financial assets and liabilities are discussed below:

Financial Instruments

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

Cash and due from banks: The carrying amounts reported in the balance sheet for cash and due from banks approximate their fair values.

Interest-bearing deposits with banks: Fair values for interest-bearing demand deposits and time deposits are estimated using a discounted cash flow analysis that applies interest rates currently being offered on certificates to a schedule of aggregated contractual maturities on such time deposits.

Federal funds sold: Due to the short-term nature of these assets, the carrying value approximates fair value.

Securities: Fair values for securities, excluding restricted equity securities, are based on quoted market prices, where available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. The carrying values of restricted equity securities approximate fair values.

Loans receivable: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying amounts. The fair values for other loans are estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. The carrying amount of accrued interest receivable approximates its fair value.

Bank owned life insurance: The carrying amount reported in the balance sheet approximates the fair value as it represents the cash surrender value of the life insurance.

Deposit liabilities: The fair values disclosed for demand and savings deposits are, by definition, equal to the amount payable on demand at the reporting date. The fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated contractual maturities on such time deposits. The carrying amount of accrued interest payable approximates fair value.

Federal funds purchased, securities sold under agreements to repurchase and short-term debt: The carrying amounts of federal funds purchased, securities sold under agreements to repurchase and short-term debt approximate their fair values.

Long-term debt: The fair value of long-term debt is estimated using a discounted cash flow calculation that applies interest rates currently available on similar instruments.

Other liabilities: For fixed-rate loan commitments, fair value considers the difference between current levels of interest rates and the committed rates. The carrying amounts of other liabilities approximate fair value.

Fair Values

The estimated fair values of the Company’s financial instruments are as follows (dollars in thousands):

					Fair Value Measurements
(dollars in thousands)	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2013
Financial Instruments - Assets
Loans	$	179,909	$	179,531	$	—	$	—	$	179,531
Financial Instruments - Liabilities
Deposits		195,801		171,649		—		171,649		—
Federal Home Loan Bank advances		7,750		8,100		—		8,100		—
December 31, 2012
Financial Instruments - Assets
Loans	$	173,578	$	173,813	$	—	$	—	$	173,813
Financial Instruments - Liabilities
Deposits		187,823		180,777		—		180,777		—
Federal Home Loan Bank advances		7,750		8,291		—		8,291		—

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Stock Based Compensation - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013 CompensationPlan	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of share based compensation plans	2
Compensation cost that has been charged against income	$ 0	$ 32,507
Income tax benefit recognized for share-based compensation arrangements		11,052
Expected average life of stock option	10 years
Weighted average remaining life of vested options expected to vest	5 years
Total unrecognized compensation cost related	0
Total fair value of shares vested		$ 61,512
Qualified Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of exercisable option granted per year under vest plan	20.00%
Stock option plan expiration, maximum period	10 years
Non-Qualified Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option plan expiration, maximum period	10 years
Non-qualified stock option granted exercisable period	6 months

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Property and Equipment

12 Months Ended

Dec. 31, 2013

Property Plant And Equipment [Abstract]

Property and Equipment

Note 7. Property and Equipment

Components of property and equipment and total accumulated depreciation at December 31, 2013 and 2012 are as follows:

	2013			2012
Land and improvements	$	1,625,879		$	1,625,879
Buildings and improvements		3,845,457			3,845,457
Furniture and equipment		2,703,601			2,614,801
		8,174,937			8,086,137
Less accumulated depreciation		(3,734,722	)		(3,542,399	)
	$	4,440,215		$	4,543,738

Depreciation expense amounted to $257,213, and $244,363 for the years ended December 31, 2013 and 2012, respectively.

The Company’s West Pine Street branch is leased under a five-year operating lease at a monthly rental of $2,215. The lease expires March 31, 2015. The Company has the option to renew the lease for two additional five-year terms. Each five-year term will carry a 12.5% increase in the monthly rental over the previous five-year term. In addition, the Company rents space for a loan production office under a one-year operating lease at a monthly rental of $925. The Company has the option to renew the lease for two additional six-month terms. Rental expense was $37,528 and $31,078 for 2013 and 2012, respectively.

Pursuant to the terms of non-cancelable lease agreements in effect at December 31, 2013, and leases expected to renew, pertaining to banking premises and equipment, future minimum rent commitments under various operating leases are as follows:

2014	$	37,898
2015		35,685
2016		29,900
2017		29,900
2018		29,900
	$	163,283

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Allowance for Loan Losses - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013 Loans	Dec. 31, 2012 Loans
Receivables [Abstract]
All other loans greater	$ 500,000
Commercial lines greater	250,000
Personal lines of credit greater	100,000
Unsecured loans greater	$ 100,000
Number of contracts	3	5
Number of loans terms extended	3	5
Number of loans on which interest rate was lowered	1	1

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Allowance for Loan Losses

12 Months Ended

Dec. 31, 2013

Receivables [Abstract]

Allowance for Loan Losses

Note 5. Allowance for Loan Losses

The allocation of the allowance for loan losses by loan components at December 31, 2013 and 2012 was as follows:

	Construction & Development			1-4 Family Residential			Nonfarm, Nonresidential			Commercial and Industrial			Consumer			Other			Total
2013
Allowance for credit losses:
Beginning balance	$	86,300		$	668,700		$	801,999		$	1,604,510		$	198,789		$	42,800		$	3,403,098
Charge-offs		—			(26,967	)		(238,541	)		(87,374	)		(79,667	)		—			(432,549	)
Recoveries		587			401			2,426			52,433			29,389			—			85,236
Provision		(13,887	)		(24,505	)		187,166			139,393			32,798			(1,400	)		319,565
Ending balance	$	73,000		$	617,629		$	753,050		$	1,708,962		$	181,309		$	41,400		$	3,375,350
Ending balance: individually evaluated for impairment	$	—		$	10,829		$	131,950		$	206,162		$	—		$	—		$	348,941
Ending balance: collectively evaluated for impairment	$	73,000		$	606,800		$	621,100		$	1,502,800		$	181,309		$	41,400		$	3,026,409
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Loans Receivable:
Ending balance	$	6,353,787		$	40,203,978		$	60,316,018		$	66,612,984		$	5,685,407		$	3,842,901		$	183,015,075
Ending balance: individually evaluated for impairment	$	318,111		$	337,767		$	2,912,421		$	2,499,531		$	—		$	—		$	6,067,830
Ending balance: collectively evaluated for impairment	$	6,035,676		$	39,866,211		$	57,403,597		$	64,113,453		$	5,685,407		$	3,842,901		$	176,947,245
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—		$	—
2012
Allowance for credit losses:
Beginning balance	$	103,200		$	836,860		$	865,854		$	1,808,260		$	210,807		$	55,600		$	3,880,581
Charge-offs		(7,286	)		(298,012	)		(21,831	)		(710,645	)		(165,914	)		—			(1,203,688	)
Recoveries		379			872			84,340			150,462			18,860			—			254,913
Provision		(9,993	)		128,980			(126,364	)		356,433			135,036			(12,800	)		471,292
Ending balance	$	86,300		$	668,700		$	801,999		$	1,604,510		$	198,789		$	42,800		$	3,403,098
Ending balance: individually evaluated for impairment	$	—		$	—		$	319,699		$	195,410		$	—		$	—		$	515,109
Ending balance: collectively evaluated for impairment	$	86,300		$	668,700		$	482,300		$	1,409,100		$	198,789		$	42,800		$	2,887,989
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Loans Receivable:
Ending balance	$	4,873,512		$	36,091,051		$	48,993,867		$	75,914,072		$	6,703,363		$	4,111,464		$	176,687,329
Ending balance: individually evaluated for impairment	$	86,567		$	284,884		$	3,185,880		$	2,373,175		$	—		$	195,989		$	6,126,495
Ending balance: collectively evaluated for impairment	$	4,786,945		$	35,806,167		$	45,807,987		$	73,540,897		$	6,703,363		$	3,915,475		$	170,560,834
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—		$	—

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2013 and 2012:

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2013
With no related allowance recorded:
Construction and development	$	318,111	$	318,111	$	—	$	320,260	$	21,825
1-4 family residential		263,562		263,562		—		261,364		21,295
Nonfarm, nonresidential		2,095,645		2,165,883		—		2,144,605		120,322
Commercial and industrial		1,359,371		1,561,253		—		1,393,077		71,409
Consumer		—		—		—		—		—
Other loans		—		—		—		—		—
		4,036,689		4,308,809		—		4,119,306		234,851
With an allowance recorded:
Construction and development	$	—	$	—	$	—	$	—	$	—
1-4 family residential		74,205		74,205		10,829		77,144		4,300
Nonfarm, nonresidential		816,776		816,776		131,950		930,060		24,653
Commercial and industrial		1,140,160		1,140,160		206,162		1,163,698		47,393
Consumer		—		—		—		—		—
Other loans		—		—		—		—		—
		2,031,141		2,031,141		348,941		2,170,902		76,346
Combined:
Construction and development	$	318,111	$	318,111	$	—	$	320,260	$	21,825
1-4 family residential		337,767		337,767		10,829		338,508		25,595
Nonfarm, nonresidential		2,912,421		2,982,659		131,950		3,074,665		144,975
Commercial and industrial		2,499,531		2,701,413		206,162		2,556,775		118,802
Consumer		—		—		—		—		—
Other loans		—		—		—		—		—
	$	6,067,830	$	6,339,950	$	348,941	$	6,290,208	$	311,197
2012
With no related allowance recorded:
Construction and development	$	86,567	$	86,567	$	—	$	87,668	$	4,898
1-4 family residential		284,884		284,884		—		287,802		19,798
Nonfarm, nonresidential		1,381,111		1,381,111		—		1,396,123		81,741
Commercial and industrial		1,372,796		1,547,284		—		1,312,662		67,194
Consumer		—		—		—		—		—
Other loans		195,989		195,989		—		199,895		18,025
		3,321,347		3,495,835		—		3,284,150		191,656
With an allowance recorded:
Construction and development	$	—	$	—	$	—	$	—	$	—
1-4 family residential		—		—		—		—		—
Nonfarm, nonresidential		1,804,769		1,826,600		319,699		1,813,156		70,705
Commercial and industrial		1,000,379		1,000,379		195,410		1,006,640		39,320
Consumer		—		—		—		—		—
Other loans		—		—		—		—		—
		2,805,148		2,826,979		515,109		2,819,796		110,025
Combined:
Construction and development	$	86,567	$	86,567	$	—	$	87,668	$	4,898
1-4 family residential		284,884		284,884		—		287,802		19,798
Nonfarm, nonresidential		3,185,880		3,207,711		319,699		3,209,279		152,446
Commercial and industrial		2,373,175		2,547,663		195,410		2,319,302		106,514
Consumer		—		—		—		—		—
Other loans		195,989		195,989		—		199,895		18,025
	$	6,126,495	$	6,322,814	$	515,109	$	6,103,946	$	301,681

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

The following table presents an age analysis of past due loans as of December 31, 2013 and 2012:

	30-59 Days Past Due			60-89 Days Past Due			90 Days Plus Past Due			Total Past Due			Current			Total Financing Receivables			Recorded Investment > 90 Days and Accruing
2013
Construction and development	$	—		$	—		$	—		$	—		$	6,353,787		$	6,353,787		$	—
1-4 family residential		544,559			165,244			173,786			883,589			39,320,389			40,203,978			—
Nonfarm, nonresidential		193,411			336,036			791,148			1,320,595			58,995,423			60,316,018			—
Commercial and industrial		84,145			2,528			929,552			1,016,225			65,596,759			66,612,984			15,837
Consumer		103,463			68,767			20,742			192,972			5,492,435			5,685,407			19,602
Other loans		—			—			—			—			3,842,901			3,842,901			—
Total	$	925,578		$	572,575		$	1,915,228		$	3,413,381		$	179,601,694		$	183,015,075		$	35,439
Percentage of total loans		0.51	%		0.31	%		1.05	%		1.87	%		98.13	%		100.00	%
Non-accruals included above
Construction and development	$	—		$	—		$	—		$	—		$	70,058		$	70,058
1-4 family residential		29,269			—			173,786			203,055			190,032			393,087
Nonfarm, nonresidential		85,646			—			791,148			876,794			1,222,090			2,098,884
Commercial and industrial		—			—			913,715			913,715			321,592			1,235,307
Consumer		259			547			1,141			1,947			1,044			2,991
Other loans		—			—			—			—			—			—
	$	115,174		$	547		$	1,879,790		$	1,995,511		$	1,804,816		$	3,800,327
2012
Construction and development	$	73,572		$	—		$	—		$	73,572		$	4,799,940		$	4,873,512		$	—
1-4 family residential		380,731			—			324,357			705,088			35,385,963			36,091,051			292,583
Nonfarm, nonresidential		711,408			197,479			386,160			1,295,047			47,698,820			48,993,867			—
Commercial and industrial		256,672			53,391			429,226			739,289			75,174,783			75,914,072			377,494
Consumer		172,379			28,922			13,643			214,944			6,488,419			6,703,363			13,643
Other loans		—			—			—			—			4,111,464			4,111,464			—
Total	$	1,594,762		$	279,792		$	1,153,386		$	3,027,940		$	173,659,389		$	176,687,329		$	683,720
Percentage of total loans		0.90	%		0.16	%		0.65	%		1.71	%		98.29	%		100.00	%
Non-accruals included above
Construction and development	$	73,572		$	—		$	—		$	73,572		$	12,995		$	86,567
1-4 family residential		84,838			—			31,775			116,613			359,129			475,742
Nonfarm, nonresidential		—			89,322			386,160			475,482			1,690,633			2,166,115
Commercial and industrial		—			—			51,731			51,731			760,662			812,393
Consumer		1,612			—			—			1,612			2,306			3,918
Other loans		—			—			—			—			195,990			195,990
	$	160,022		$	89,322		$	469,666		$	719,010		$	3,021,715		$	3,740,725

Credit Quality Indicators:

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

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

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

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

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

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

	Total			Pass Credits			Special Mention			Substandard			Doubtful
December 31, 2013
Construction and development	$	6,353,787		$	6,283,729		$	70,058		$	—		$	—
1-4 family residential		40,203,978			39,586,647			617,331			—			—
Nonfarm, nonresidential		60,316,018			58,188,799			2,022,868			104,351			—
Commercial and industrial		66,612,984			64,556,331			2,056,653			—			—
Consumer		5,685,407			5,684,245			1,162			—			—
Other loans		3,842,901			3,842,901			—			—			—
	$	183,015,075		$	178,142,652		$	4,768,072		$	104,351		$	—
		100.0	%		97.3	%		2.6	%		0.1	%		—	%
Guaranteed portion of loans
Construction and development	$	73,000		$	73,000		$	—		$	—		$	—
1-4 family residential		673,854			629,939			43,915			—
Nonfarm, nonresidential		26,835,404			26,063,658			771,746			—			—
Commercial and industrial		19,589,284			18,737,759			851,525			—			—
Consumer		—			—			—			—			—
Other loans		544,195			544,195			—			—			—
	$	47,715,737		$	46,048,551		$	1,667,186		$	—		$	—
	Total			Pass Credits			Special Mention			Substandard			Doubtful
December 31, 2012
Construction and development	$	4,873,512		$	4,786,945		$	86,567		$	—		$	—
1-4 family residential		36,091,051			35,755,061			335,990			—			—
Nonfarm, nonresidential		48,993,867			47,500,758			1,230,275			262,834			—
Commercial and industrial		75,914,072			74,878,901			1,035,171			—			—
Consumer		6,703,363			6,696,475			6,888			—			—
Other loans		4,111,464			3,915,474			195,990			—			—
	$	176,687,329		$	173,533,614		$	2,890,881		$	262,834		$	—
		100.0	%		98.2	%		1.6	%		0.2	%		—	%
Guaranteed portion of loans
Construction and development	$	—		$	—		$	—		$	—		$	—
1-4 family residential		752,677			752,677			—			—			—
Nonfarm, nonresidential		19,855,775			19,654,773			201,002			—			—
Commercial and industrial		22,001,515			21,354,422			647,093			—			—
Consumer		—			—			—			—			—
Other loans		508,363			508,363			—			—			—
	$	43,118,330		$	42,270,235		$	848,095		$	—		$	—

	For the year ended December 31, 2013								For the year ended December 31, 2012
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Construction and development		—	$	—	$	—		1	$	237,883	$	237,883
1-4 Family residential		1		55,336		55,336		1		113,743		116,438
Nonfarm, nonresidential		1		145,219		145,219		1		96,028		96,028
Commercial and industrial		1		22,065		22,065		2		343,060		343,060

During the year ended December 31, 2013, the Bank modified three loans that were considered to be troubled debt restructurings. The terms for these loans were extended. The interest rate and payment were lowered on one loan and the payment was modified on another loan.

During the year ended December 31, 2012, the Bank modified five loans that were considered to be troubled debt restructurings. The terms for these loans were extended. The interest rate was lowered on one loan.

	For the year ended December 31, 2012				For the year ended December 31, 2011
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Troubled Debt Restructurings That
Subsequently Defaulted During the Period:
Construction and development		—	$	—		—	$	—
1-4 Family residential		—		—		—		—
Nonfarm, nonresidential		—		—		1		262,832
Commercial and industrial		—		—		—		—

In the determination of the allowance for loan losses, management considers troubled debt restructurings and subsequent defaults in these restructurings by adjusting the loan grades of such loans, which influence the environmental factors associated with the allowance. Defaults resulting in charge-offs affect the historical loss experience ratios which are a component of the allowance calculation. Additionally, specific reserves may be established on restructured loans evaluated individually.

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Loan Servicing

12 Months Ended

Dec. 31, 2013

Transfers And Servicing [Abstract]

Loan Servicing

Note 6. Loan Servicing

The Company occasionally sells the guaranteed portion of certain government guaranteed loans in the secondary market. The Company continues to service these loans that totaled $9,157,496 and $7,603,644 at December 31, 2013 and 2012, respectively. The Company recognizes a servicing rights asset upon the sale of the guaranteed portion of government guaranteed loans for which the Company retains the underlying servicing obligation. Servicing rights assets are initially measured at fair value and amortized to expense over the estimated life of the servicing obligation. The fair value of servicing rights is determined at the date of sale of the underlying loan using the present value of estimated future net servicing income on assumptions that market participants use in their valuation estimates. The Company presents its servicing rights assets gross at the lower of cost or fair value in the Consolidated Balance Sheets. Servicing rights are included in other assets in the Consolidated Balance Sheets.

The following table presents a rollforward of loan servicing rights for the years 2013 and 2012 and shows that the loan servicing rights are classified as Level 3 as discussed below.

	Level 3
	2013			2012
	Fair Value			Fair Value
Balance, January 1	$	63,017		$	92,682
Capitalized		200,839			—
Amortization included in other income		(2,994	)		(29,665	)
Balance, December 31	$	260,862		$	63,017

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Deposits

12 Months Ended

Dec. 31, 2013

Text Block [Abstract]

Deposits

Note 8. Deposits

The aggregate amount of time deposits in denominations of $100,000 or more at December 31, 2013 and 2012, was $32,846,552 and $33,247,833, respectively. At December 31, 2013, the scheduled maturities of total time deposits are as follows:

2014	$	50,476,152
2015		18,994,065
2016		6,311,408
2017		3,366,344
2018		4,750,294
	$	83,898,263

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Loan Servicing - Additional Information (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Transfers And Servicing [Abstract]
Total loans services	$ 9,157,496	$ 7,603,644

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Stock Based Compensation - Summary of Option Activity (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Options Available, Beginning Balance
Options Available, Exercised
Options Available, Authorized
Options Available, Forfeited
Options Available, Granted
Options Available, Expired
Options Available, Ending Balance
Options Outstanding, Beginning Balance	41,190	49,100
Options Outstanding, Exercised		(6,260)
Options Outstanding, Authorized
Options Outstanding, Forfeited		(1,650)
Options Outstanding, Granted
Options Outstanding, Expired
Options Outstanding, Ending Balance	41,190	41,190
Weighted Average Exercise Price, Beginning Balance	$ 12.06	$ 11.14
Weighted Average Exercise Price, Options Exercised		$ 4.81
Weighted Average Exercise Price, Options Forfeited		$ 12.06
Weighted Average Exercise Price, Ending Balance	$ 12.06	$ 12.06

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Property and Equipment - Schedule of Components of Property and Equipment and Total Accumulated Depreciation (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 8,174,937	$ 8,086,137
Less accumulated depreciation	(3,734,722)	(3,542,399)
Property and equipment, net	4,440,215	4,543,738
Land and Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,625,879	1,625,879
Buildings and Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	3,845,457	3,845,457
Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 2,703,601	$ 2,614,801

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Allowance for Loan Losses - Summary of Troubled Debt Restructurings on Financing Receivables Subsequent Default (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013 Contract	Dec. 31, 2012 Contract
Construction and Land Development [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts, Subsequent default
Recorded Investment, Subsequent default
Residential, 1-4 Families [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts, Subsequent default
Recorded Investment, Subsequent default
Nonfarm, Nonresidential [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts, Subsequent default		1
Recorded Investment, Subsequent default		262,832
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts, Subsequent default
Recorded Investment, Subsequent default

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Commitments and Contingencies - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013
Commitments And Contingencies Disclosure [Abstract]
Credit to single borrower	$ 5,100,000

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Loan Servicing (Tables)

12 Months Ended

Dec. 31, 2013

Transfers And Servicing [Abstract]

Schedule of Roll Forward of Loan Servicing Rights

The following table presents a rollforward of loan servicing rights for the years 2013 and 2012 and shows that the loan servicing rights are classified as Level 3 as discussed below.

	Level 3
	2013			2012
	Fair Value			Fair Value
Balance, January 1	$	63,017		$	92,682
Capitalized		200,839			—
Amortization included in other income		(2,994	)		(29,665	)
Balance, December 31	$	260,862		$	63,017

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Securities - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013 Securities	Dec. 31, 2012
Available For Sale Securities Continuous Unrealized Loss Position [Abstract]
Restricted equity securities	$ 676,799	$ 738,324
Gross realized gains or losses from the sales of investment securities	$ 9,206	$ 700
Number of securities in portfolio	2
Unrealized losses for portfolio for the period, description	greater than 12 months

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2013

Postemployment Benefits [Abstract]

Employee Benefit Plans

Note 13. Employee Benefit Plans

The Company has a defined contribution plan (the Plan) qualifying under IRS Code Section 401(k). Eligible participants in the Plan can contribute up to the maximum percentage allowable not to exceed the dollar limit under IRC Section 401(k). The Company matches 100% of the first six percent of an employee’s contribution. For the years ended December 31, 2013 and 2012, the Company contributed $130,805 and $134,019 to the Plan, respectively.

The Company has a Supplemental Retirement Benefit Plan (SERP) to provide future compensation to certain members of management upon retirement. Under plan provisions, payments projected to range from $19,838 to $89,914, per year, are payable for the life of the executive, generally beginning at age 65. The liability accrued for the compensation under the plan was $783,041 and $669,648 at December 31, 2013 and 2012, respectively. Employee benefits expense, an actuarially determined amount, was $133,229 and $98,823 for the years ended December 31, 2013 and 2012, respectively. Benefits paid during the years ended December 31, 2013 and 2012, amounted to $19,836 and $8,265, respectively. The assumed discount rate for the plan was 5.5% and 6.0% at December 31, 2013 and 2012, respectively.

The Company also has a deferred compensation plan under which directors may elect to defer their directors’ fees. Participating directors receive an additional 30% matching contribution and will be paid an annual benefit for a specified number of years after retirement, generally beginning at age 65. The maximum payout period is ten years. The liability accrued for deferred directors’ fees was $851,751 and $725,399 at December 31, 2013 and 2012, respectively. Deferred directors’ fees expensed under the plan for the years ended December 31, 2013 and 2012 were $141,166 and $104,795, respectively. Benefits of $14,814 and $124,503 were paid out during the years ended December 31, 2013 and 2012, respectively.

The Company has purchased and is the primary beneficiary of life insurance policies indirectly related to the Supplemental Retirement Benefit Plan and the directors’ deferred compensation liability. The cash value of the life insurance policies totaled $5,462,336 and $5,298,354 at December 31, 2013 and 2012, respectively. During the year ended December 31, 2012, the Bank purchased $1,750,000 of additional life insurance policies on certain employees of the Bank.

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Transactions with Related Parties

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

Transactions with Related Parties

Note 18. Transactions with Related Parties

The Company has entered into transactions with its directors, significant shareholders and their affiliates (related parties). Such transactions were made in the ordinary course of business on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers, and did not, in the opinion of management, involve more than normal credit risk or present other unfavorable features.

Aggregate loan transactions with related parties were as follows:

	2013			2012
Balance, beginning	$	4,060,425		$	4,491,059
New loans		684,223			2,203,459
Repayments		(1,790,548	)		(2,634,093	)
Balance, ending	$	2,954,100		$	4,060,425

Deposit transactions with related parties at December 31, 2013 and 2012 were insignificant.

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Transactions with Related Parties - Summary of Aggregate Loan Transactions with Related Parties (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Related Party Transactions [Abstract]
Balance, beginning	$ 4,060,425	$ 4,491,059
New loans	684,223	2,203,459
Repayments	(1,790,548)	(2,634,093)
Balance, ending	$ 2,954,100	$ 4,060,425

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Restrictions on Cash - Additional Information (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Restrictions On Cash [Abstract]
Daily average cash reserve requirement	$ 1,689,000	$ 1,453,000

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Stock Based Compensation (Tables)

12 Months Ended

Dec. 31, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Option Activity

A summary of option activity under the stock option plans during the years ended December 31, 2013 and 2012 is presented below:

	Options Available		Options Outstanding			Weighted Average Exercise Price
Balance at December 31, 2011		—		49,100		$	11.14
Exercised		—		(6,260	)		4.81
Authorized		—		—			—
Forfeited		—		(1,650	)		12.06
Granted		—		—			—
Expired		—		—			—
Balance at December 31, 2012		—		41,190			12.06
Exercised		—		—			—
Authorized		—		—			—
Forfeited		—		—			—
Granted		—		—			—
Expired		—		—
Balance at December 31, 2013		—		41,190		$	12.06

Summary of Exercise Prices, Number of Options Outstanding and Number of Options Exercisable

The following table sets forth the exercise prices, the number of options outstanding and the number of options exercisable at December 31, 2013:

Exercise Price		Number of Options Outstanding		Weighted Average Exercise Price		Weighted Average Contractual Life Remaining (Years)	Number of Options Exercisable		Weighted Average Exercise Price
$	12.06		41,190		12.06	3.4		41,190		12.06
	Total/Average		41,190	$	12.06	3.4		41,190	$	12.06

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Consolidated Statements of Comprehensive Income (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 2,889,351	$ 2,782,880
Investment securities available-for-sale
Unrealized holding gains (losses)	39,126	(3,697)
Tax effect	(14,627)	1,613
Reclassification of gains recognized in net income	(9,206)	(700)
Tax effect	3,130	238
Total other comprehensive income (loss)	18,423	(2,546)
Comprehensive income	$ 2,907,774	$ 2,780,334

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Income Taxes - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Statutory federal income tax rate	34.00%
Liability related to uncertain tax positions	$ 0

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Restrictions on Cash

12 Months Ended

Dec. 31, 2013

Text Block [Abstract]

Restrictions on Cash

Note 2. Restrictions on Cash

To comply with banking regulations, the Company is required to maintain certain average cash reserve balances. The daily average cash reserve requirement was approximately $1,689,000 and $1,453,000 for the periods including December 31, 2013 and 2012, respectively.

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Allowance for Loan Losses - Impaired Loans Individually Evaluated by Class of Loan (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
Recorded Investment With no related allowance	$ 4,036,689	$ 3,321,347
Unpaid Principal Balance With no related allowance	4,308,809	3,495,835
Average Recorded Investment With no related allowance	4,119,306	3,284,150
Interest Income Recognized With no related allowance	234,851	191,656
Recorded Investment With an allowance	2,031,141	2,805,148
Unpaid Principal Balance With an allowance	2,031,141	2,826,979
Related Allowance	348,941	515,109
Average Recorded Investment With an allowance	2,170,902	2,819,796
Interest Income Recognized With an allowance	76,346	110,025
Recorded Investment Combined	6,067,830	6,126,495
Unpaid Principal Balance Combined	6,339,950	6,322,814
Related Allowance Combined	348,941	515,109
Average Recorded Investment Combined	6,290,208	6,103,946
Interest Income Recognized Combined	311,197	301,681
Construction and Land Development [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With no related allowance	318,111	86,567
Unpaid Principal Balance With no related allowance	318,111	86,567
Average Recorded Investment With no related allowance	320,260	87,668
Interest Income Recognized With no related allowance	21,825	4,898
Recorded Investment With an allowance
Unpaid Principal Balance With an allowance
Related Allowance
Average Recorded Investment With an allowance
Interest Income Recognized With an allowance
Recorded Investment Combined	318,111	86,567
Unpaid Principal Balance Combined	318,111	86,567
Related Allowance Combined
Average Recorded Investment Combined	320,260	87,668
Interest Income Recognized Combined	21,825	4,898
Residential, 1-4 Families [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With no related allowance	263,562	284,884
Unpaid Principal Balance With no related allowance	263,562	284,884
Average Recorded Investment With no related allowance	261,364	287,802
Interest Income Recognized With no related allowance	21,295	19,798
Recorded Investment With an allowance	74,205
Unpaid Principal Balance With an allowance	74,205
Related Allowance	10,829
Average Recorded Investment With an allowance	77,144
Interest Income Recognized With an allowance	4,300
Recorded Investment Combined	337,767	284,884
Unpaid Principal Balance Combined	337,767	284,884
Related Allowance Combined	10,829
Average Recorded Investment Combined	338,508	287,802
Interest Income Recognized Combined	25,595	19,798
Nonfarm, Nonresidential [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With no related allowance	2,095,645	1,381,111
Unpaid Principal Balance With no related allowance	2,165,883	1,381,111
Average Recorded Investment With no related allowance	2,144,605	1,396,123
Interest Income Recognized With no related allowance	120,322	81,741
Recorded Investment With an allowance	816,776	1,804,769
Unpaid Principal Balance With an allowance	816,776	1,826,600
Related Allowance	131,950	319,699
Average Recorded Investment With an allowance	930,060	1,813,156
Interest Income Recognized With an allowance	24,653	70,705
Recorded Investment Combined	2,912,421	3,185,880
Unpaid Principal Balance Combined	2,982,659	3,207,711
Related Allowance Combined	131,950	319,699
Average Recorded Investment Combined	3,074,665	3,209,279
Interest Income Recognized Combined	144,975	152,446
Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With no related allowance	1,359,371	1,372,796
Unpaid Principal Balance With no related allowance	1,561,253	1,547,284
Average Recorded Investment With no related allowance	1,393,077	1,312,662
Interest Income Recognized With no related allowance	71,409	67,194
Recorded Investment With an allowance	1,140,160	1,000,379
Unpaid Principal Balance With an allowance	1,140,160	1,000,379
Related Allowance	206,162	195,410
Average Recorded Investment With an allowance	1,163,698	1,006,640
Interest Income Recognized With an allowance	47,393	39,320
Recorded Investment Combined	2,499,531	2,373,175
Unpaid Principal Balance Combined	2,701,413	2,547,663
Related Allowance Combined	206,162	195,410
Average Recorded Investment Combined	2,556,775	2,319,302
Interest Income Recognized Combined	118,802	106,514
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With no related allowance
Unpaid Principal Balance With no related allowance
Average Recorded Investment With no related allowance
Interest Income Recognized With no related allowance
Recorded Investment With an allowance
Unpaid Principal Balance With an allowance
Related Allowance
Average Recorded Investment With an allowance
Interest Income Recognized With an allowance
Recorded Investment Combined
Unpaid Principal Balance Combined
Related Allowance Combined
Average Recorded Investment Combined
Interest Income Recognized Combined
Other [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With no related allowance		195,989
Unpaid Principal Balance With no related allowance		195,989
Average Recorded Investment With no related allowance		199,895
Interest Income Recognized With no related allowance		18,025
Recorded Investment With an allowance
Unpaid Principal Balance With an allowance
Related Allowance
Average Recorded Investment With an allowance
Interest Income Recognized With an allowance
Recorded Investment Combined		195,989
Unpaid Principal Balance Combined		195,989
Related Allowance Combined
Average Recorded Investment Combined		199,895
Interest Income Recognized Combined		$ 18,025

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Earnings Per Common Share - Additional Information (Detail)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Earnings Per Share [Abstract]
Shares of common stock available	41,190	41,190	49,100
Shares in the money	0	0

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Deposits - Additional Information (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Deposits [Abstract]
Time deposits in denominations of $100,000 or more	$ 32,846,552	$ 33,247,833

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Parent Company Activity

12 Months Ended

Dec. 31, 2013

Text Block [Abstract]

Parent Company Activity

Note 19. Parent Company Activity

Surrey Bancorp owns all of the outstanding shares of the Bank. Condensed financial statements of Surrey Bancorp follow:

Condensed Balance Sheets

December 31, 2013 and 2012

	2013			2012
Assets
Cash and due from banks	$	89,528		$	59,625
Dividends receivable from subsidiary		867,000			—
Investment securities available for sale		566,816			512,252
Other assets		11,972			20,840
Investment in subsidiaries		33,483,275			31,692,793
	$	35,018,591		$	32,285,510
Liabilities and Capital
Liabilities
Dividends payable	$	790,259		$	46,106
Other liabilities		10,706			2,103
		800,965			48,209
Capital
Preferred stock		3,868,807			3,868,807
Common stock		12,061,153			12,061,153
Retained earnings		18,329,089			16,367,187
Accumulated other comprehensive loss		(41,423	)		(59,846	)
		34,217,626			32,237,301
	$	35,018,591		$	32,285,510

Condensed Statements of Income

For the years ended December 31, 2013 and 2012

	2013			2012
Income
Equity in undistributed income of subsidiary	$	1,790,589		$	1,468,334
Dividends from subsidiary		1,122,000			1,355,000
Gain on the sale of investment securities		9,206			700
Interest income		8			80
Dividend income		22,190			9,679
Other operating income		—			12
Total income		2,943,993			2,833,805
Expenses
Other expense		66,614			71,765
Total expense		66,614			71,765
Income before income taxes		2,877,379			2,762,040
Income tax benefit		(11,972	)		(20,840	)
Net income		2,889,351			2,782,880
Preferred stock dividends		(183,423	)		(183,423	)
Net income available to common stockholders	$	2,705,928		$	2,599,457

Condensed Statements of Cash Flows

For the years ended December 31, 2013 and 2012

	2013			2012
Cash flows from operating activities
Net income	$	2,889,351		$	2,782,880
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiary		(1,790,589	)		(1,468,334	)
Gain on the sale of investment securities		(9,206	)		(700	)
Increase in dividends receivable from subsidiary		(867,000	)		—
Net (increase) decrease in other assets		8,868			(20,840	)
Net (decrease) increase in other liabilities		(942	)		942
Net cash provided by operating activities		230,482			1,293,948
Cash flows from investing activities
Net decrease in interest-bearing deposits with banks		—			130,000
Purchase of investment securities		(81,221	)		(553,659	)
Proceeds from the sale of investment securities		63,938			45,522
Net cash used by investing activities		(17,283	)		(378,137	)
Cash flows from financing activities
Common stock options exercised		—			30,111
Dividends paid		(183,296	)		(1,351,795	)
Net used by financing activities		(183,296	)		(1,321,684	)
Net increase (decrease) in cash and due from banks		29,903			(405,873	)
Cash and due from banks, beginning		59,625			465,498
Cash and due from banks, ending	$	89,528		$	59,625

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Federal Home Loan Bank Advances - Schedule of Contractual Maturities of Long-Term Debt (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Banking And Thrift [Abstract]
2014	$ 1,500,000
2015	3,500,000
2016	1,000,000
2017	1,750,000
2018
Total	$ 7,750,000	$ 7,750,000

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Federal Home Loan Bank Advances (Tables)

12 Months Ended

Dec. 31, 2013

Banking And Thrift [Abstract]

Schedule of Contractual Maturities of Long-Term Debt

The contractual maturities of long-term debt are as follows:

2014	$	1,500,000
2015		3,500,000
2016		1,000,000
2017		1,750,000
2018		—
	$	7,750,000

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Earnings Per Common Share

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Earnings Per Common Share

Note 12. Earnings Per Common Share

The following table details the computation of basic and diluted earnings per share for the years ended December 31, 2013 and 2012:

	2013			2012
Net income	$	2,889,351		$	2,782,880
Convertible preferred stock dividends (Series A and D)		(183,423	)		(183,423	)
Net income available to common shareholders	$	2,705,928		$	2,599,457
Weighted average common shares outstanding		3,542,984			3,540,914
Effect of dilutive securities:
Options		—			—
Convertible preferred stock (Series A and D)		633,935			633,935
Weighted average common shares outstanding, diluted		4,176,919			4,174,849
Basic earnings per common share	$	0.76		$	0.73
Diluted earnings per common share	$	0.69		$	0.67

The Company has 41,190 shares of common stock available for exercise in its qualified incentive stock option plan. None of these shares were “in the money” at December 31, 2013 and 2012, therefore had no effect on fully diluted earnings per share.