10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2019

[   ] Transition Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the transition period from ____________ to _____________

Commission File Number:  0-27622

HIGHLANDS BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

Virginia (State or other jurisdiction of incorporation or organization)	54-1796693 (I.R.S. Employer Identification No.)
P.O. Box 1128 Abingdon, Virginia (Address of principal executive offices)	24212-1128 (Zip Code)

276-628-9181

(Registrant's telephone number, including area code)

 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes [ X ]        No [    ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☐	Accelerated filer  ☐	Non-accelerated filer  þ  (Do not check if a smaller reporting company)
Smaller reporting company  þ	Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 8,250,728 shares of common stock, par value $0.625 per share, outstanding as of May 15, 2019.

Highlands Bankshares, Inc.

Form 10-Q

For the Quarter Ended March 31, 2019

INDEX

PART I. FINANCIAL INFORMATION	PAGE
Item 1.  Financial Statements
Consolidated Balance Sheets at March 31, 2019 (Unaudited) and December 31, 2018	3
Consolidated Statements of Income (Unaudited) for the three-month periods ended March 31, 2019 and 2018	4
Consolidated Statements of Comprehensive Income (Unaudited) for the three-month periods ended March 31, 2019 and 2018	5
Consolidated Statements of Cash Flows (Unaudited) for the three-month periods ended March 31, 2019 and 2018	6
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) for the three-month periods ended March 31, 2019 and 2018	7
Notes to Consolidated Financial Statements (Unaudited)	8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3. Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.  Controls and Procedures	33
PART II.  OTHER INFORMATION
Item 1.  Legal Proceedings	34
Item 1A. Risk Factors	34
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.  Defaults Upon Senior Securities	34
Item 4.  Mine Safety Disclosures	34
Item 5.  Other Information	34
Item 6.  Exhibits	34
SIGNATURES AND CERTIFICATIONS	35

2

PART I.

FINANCIAL INFORMATION

ITEM 1.  Financial Statements

Consolidated Balance Sheets

(Amounts in thousands) 

	(Unaudited) March 31, 2019			December 31, 2018
ASSETS
Cash and due from banks	$	23,544		$	19,965
Federal funds sold	31,634			10,101
Total cash and cash equivalents	55,178			30,066
Investment securities available for sale (amortized cost $69,104 at March 31, 2019, $71,260 at December 31, 2018)	67,558			68,631
Other investments, at cost	2,770			2,774
Loans held for sale	1,727			265
Loans	442,236			448,121
Allowance for loan losses	(4,096		)	(4,373		)
Net loans	438,140			443,748
Premises and equipment, net	17,367			17,447
Real estate held for sale	600			817
Deferred tax assets	6,017			6,526
Interest receivable	1,706			1,617
Bank-owned life insurance	15,113			15,022
Other real estate owned	2,886			2,212
Other assets	3,306			2,816
Total assets	$	612,368		$	591,941
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing	$	149,876		$	156,408
Interest bearing	370,823			346,408
Total deposits	520,699			502,816
Interest, taxes and other liabilities	3,033			2,391
Short-term borrowings	30,000			30,000
Long-term debt	80			93
Total liabilities	553,812			535,300
STOCKHOLDERS' EQUITY
Common stock (8,251 shares issued and outstanding at March 31, 2019 and December 31, 2018)	5,156			5,156
Preferred stock (2,092 shares issued and outstanding at March 31, 2019 and December 31, 2018)	4,184			4,184
Additional paid-in capital	19,292			19,277
Retained earnings	31,191			30,131
Accumulated other comprehensive loss	(1,267		)	(2,107		)
Total stockholders' equity	58,556			56,641
Total liabilities and stockholders' equity	$	612,368		$	591,941

See accompanying Notes to Consolidated Financial Statements

3

Consolidated Statements of Income

(Amounts in thousands, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2019		2018
INTEREST INCOME
Loans receivable and fees on loans	$	5,653	$	5,315
Investment securities	412		478
Federal funds sold	141		70
Total interest income	6,206		5,863
INTEREST EXPENSE
Deposits	824		463
Other borrowed funds	273		364
Total interest expense	1,097		827
Net interest income	5,109		5,036
Provision for loan losses	103		172
Net interest income after provision for loan losses	5,006		4,864
NONINTEREST INCOME
Service charges on deposit accounts	342		337
Other service charges, commissions and fees	339		419
Mortgage banking income	48		100
Other operating income	161		226
Total noninterest income	890		1,082
NONINTEREST EXPENSE
Salaries and employee benefits	2,416		2,403
Occupancy and equipment expense	615		731
Foreclosed assets – write-down and operating expenses	50		131
Other operating expense	1,473		1,901
Total noninterest expense	4,554		5,166
Income before income taxes	1,342		780
Income tax expense (Note 5)	282		170
Net income	$	1,060	$	610
Net income per common share (Note 7)
Basic	$	0.13	$	0.07
Fully diluted	0.10		0.06

See accompanying Notes to Consolidated Financial Statements

4

Consolidated Statements of Comprehensive Income

(Amounts in thousands)

(Unaudited) 

	Three Months Ended March 31,
	2019			2018
Net income	$	1,060		$	610
Other comprehensive income (loss)
Unrealized gains (losses) on securities during the period	1,083			(1,297		)
Less: reclassification adjustment	—			—
Other comprehensive income (loss) before tax	1,083			(1,297		)
Income tax (expense) benefit related to other comprehensive income (loss)	(243		)	271
Other comprehensive income (loss)	840			(1,026		)
Comprehensive income (loss)	$	1,900		$	(416	)

See accompanying Notes to Consolidated Financial Statements

5

Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited) 

	Three Months Ended March 31,
	2019			2018
CASH FLOWS FROM OPERATING  ACTIVITIES:
Net income	$	1,060		$	610
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	103			172
Depreciation and amortization	342			401
Provision for deferred tax assets	266			170
Restricted stock expense	15			56
Originations of loans held for sale	(2,656		)	(7,651		)
Proceeds from loans held for sale	1,194			10,664
Increase (decrease) in interest receivable	(89		)	210
Valuation adjustment of real estate held for sale	—			60
Valuation adjustment of other real estate owned	—			90
(Increase) decrease in other assets	(590		)	52
Increase in interest, taxes and other liabilities	642			590
Net cash provided by operating activities	287			5,424
CASH FLOWS FROM INVESTING ACTIVITIES:
Securities available for sale:
Proceeds from maturities of securities	2,052			2,965
Redemptions of other investments	—			323
Net decrease in loans	4,751			117
Proceeds from sales of other real estate owned	90			156
Proceeds from sale of real estate held for sale	217			—
Premises and equipment expenditures	(155		)	(82		)
Net cash provided by investing activities	6,955			3,479
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in time deposits	14,293			(13,922		)
Net increase in demand, savings and other deposits	3,590			25,137
Net change in short-term borrowings	—			(10,000		)
Decrease in long-term debt	(13		)	(13		)
Net cash provided by financing activities	17,870			1,202
Net change in cash and cash equivalents	25,112			10,105
Cash and cash equivalents at beginning of period	30,066			30,797
Cash and cash equivalents at end of period	$	55,178		$	40,902
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments during the period for interest	$	2,183		$	860
Cash payments during the period for income taxes	—			—
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Transfer of loans to other real estate owned	754			65

See accompanying Notes to Consolidated Financial Statements

6

Consolidated Statements of Changes in Stockholders' Equity

(Amounts in thousands)

(Unaudited)

	Common stock shares	Common stock par value		Preferred stock shares	Preferred stock par value		Additional paid-in-capital		Retained earnings		Accumulated other comprehensive income (loss)			Stockholders' equity
Balance December 31, 2017	8,199	$	5,124	2,092	$	4,184	$	19,113	$	26,539	$	(1,156	)	$	53,804
Net income	—	—		—	—		—		610		—			610
Other comprehensive income	—	—		—	—		—		—		(1,026		)	(1,026		)
Stock-based compensation	—	—		—	—		56		—		—			56
Balance March 31, 2018	8,199	$	5,124	2,092	$	4,184	$	19,169	$	27,149	$	(2,182	)	$	53,444
Balance December 31, 2018	8,251	$	5,156	2,092	$	4,184	$	19,277	$	30,131	$	(2,107	)	$	56,641
Net income	—	—		—	—		—		1,060		—			1,060
Other comprehensive income	—	—		—	—		—		—		840			840
Stock-based compensation	—	—		—	—		15		—		—			15
Balance March 31, 2019	8,251	$	5,156	2,092	$	4,184	$	19,292	$	31,191	$	(1,267	)	$	58,556

See accompanying Notes to Consolidated Financial Statements

7

Notes to Consolidated Financial Statements

(Unaudited)

(in thousands, except share, per share and percentage data)

Note 1  -  General

The consolidated financial statements of Highlands Bankshares, Inc. (the "Company") conform to United States generally accepted accounting principles and to banking industry practices. The accompanying consolidated interim financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included. All such adjustments are of a normal and recurring nature. The consolidated balance sheet as of December 31, 2018 has been extracted from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 (the "2018 Form 10-K"). The notes included herein should be read in conjunction with the notes to the consolidated financial statements included in the 2018 Form 10-K. The results of operations for the three-month period ended March 31, 2019, are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements 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.

Note 2 – Summary of Significant Accounting Policy Update For Certain Required Disclosures

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09, as subsequently amended by ASU No. 2015-14 issued in August 2015, required adoption in annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company adopted ASU 2014-09 effective January 1, 2018.

Application of ASU 2014-09 requires identification of customer contracts, identification of the performance obligations within those contracts, identification of the transaction price, allocation of the transaction price to the performance obligations, and recognition of revenue once the performance obligation is satisfied. ASU 2014-09 requires disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

The Company’s primary source of revenue is interest income, which is excluded from the scope of this guidance; however, the Company evaluated the impact on noninterest income, which includes fees for services, commissions on sales, and various deposit service charges. The Company concluded that no cumulative-effect adjustment to retained earnings was necessary. The adoption of the standard did not have a material effect on the Company’s financial position or results of operations.

In June 2016, ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments was issued by the FASB. This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). The Company continues to evaluate the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.

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.

8

Note 3 - Investment Securities Available For Sale

The amortized cost and market value of securities available for sale are as follows:

	March 31, 2019
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
State and political subdivisions	$	13,583	$	48	$	426	$	13,205
Mortgage backed securities	50,355		21		1,041		49,335
SBA pools	5,166		—		148		5,018
	$	69,104	$	69	$	1,615	$	67,558

	December 31, 2018
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
State and political subdivisions	$	13,590	$	9	$	763	$	12,836
Mortgage backed securities	52,344		8		1,798		50,554
SBA pools	5,326		—		85		5,241
	$	71,260	$	17	$	2,646	$	68,631

Investment securities available for sale with a fair value of $37,923 and $37,448 at March 31, 2019 and December 31, 2018, respectively, were pledged as collateral on public deposits, FHLB advances and for other purposes as required or permitted by law.

The following table presents the age of gross unrealized losses and fair value by investment category:

	March 31, 2019
	Less than 12 months				12 months or more				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
State and political subdivisions	$	—	$	—	$	8,857	$	426	$	8,857	$	426
Mortgage-backed securities	228		—		45,766		1,041		45,994		1,041
SBA pools	—		—		5,053		148		5,053		148
Total	$	228	$	—	$	59,676	$	1,615	$	59,904	$	1,615

	December 31, 2018
	Less than 12 months				12 months or more				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
State and political subdivisions	$	3,608	$	73	$	7,791	$	690	$	11,399	$	763
Mortgage-backed securities	2,319		8		46,661		1,790		48,980		1,798
SBA pools	—		—		5,218		85		5,218		85
Total	$	5,927	$	81	$	59,670	$	2,565	$	65,597	$	2,646

The Company assesses its securities for OTTI quarterly by reviewing credit ratings, financial and regulatory reports as well as other pertinent published financial data. As of March 31, 2019 and December 31, 2018, the Company's assessment revealed no impairment other than that deemed temporary on those securities.

The amortized cost and estimated fair value of securities available for sale at March 31, 2019 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

9

	March 31, 2019				December 31, 2018
	Amortized cost		Fair value		Amortized cost		Fair value
Investment securities with scheduled maturities:
Due in one year or less	$	87	$	88	$	98	$	100
Due after one year through five years	394		394		367		366
Due after five years through ten years	3,280		3,175		2,782		2,638
Due after ten years	14,988		14,566		15,669		14,973
Total investment securities with scheduled maturities	18,749		18,223		18,916		18,077
Mortgage-backed securities	50,355		49,335		52,344		50,554
Total investment securities available for sale	$	69,104	$	67,558	$	71,260	$	68,631

There were no gains or losses on the sales of investment securities during the first three months of 2019 or 2018.

Note 4  -  Loans and Allowance for Loan Losses

The composition of net loans is as follows:

	March 31, 2019		December 31, 2018
Real estate secured:
Residential 1-4 family	$	165,506	$	165,109
Multifamily	18,704		18,378
Construction and land loans	22,051		21,029
Commercial, owner occupied	95,301		96,224
Commercial, non-owner occupied	38,731		39,869
Second mortgages	4,019		4,054
Equity lines of credit	29,179		30,221
Farmland	10,047		12,149
Total real estate secured	383,538		387,033
Non-real estate secured
Personal	11,447		12,754
Commercial	44,825		46,202
Agricultural	3,107		2,830
Total non-real estate secured	59,379		61,786
Gross loans	442,917		448,819
Less:
Allowance for loan losses	4,096		4,373
Net deferred fees	681		698
Loans, net	$	438,140	$	443,748

10

The following table is an analysis of past due loans as of March 31, 2019:

	Past Due
	30-89 days		90 days and over		Total		Current		Total		> 90 Days and Accruing
Real estate secured
Residential 1-4 family	$	1,840	$	604	$	2,444	$	163,062	$	165,506	$	212
Equity lines of credit	83		—		83		29,096		29,179		—
Multifamily	—		402		402		18,302		18,704		—
Farmland	215		341		556		9,491		10,047		—
Construction, land development, other land loans	70		15		85		21,966		22,051		—
Commercial real estate:
Owner-occupied	27		606		633		94,668		95,301		—
Non-owner-occupied	—		1,316		1,316		37,415		38,731		—
Second mortgages	—		—		—		4,019		4,019		—
Non-real estate secured
Personal	111		27		138		11,309		11,447		2
Commercial	235		106		341		44,484		44,825		—
Agricultural	—		—		—		3,107		3,107		—
Total	$	2,581	$	3,417	$	5,998	$	436,919	$	442,917	$	214

The following table is an analysis of past due loans as of December 31, 2018:

	Past Due
	30-89 days		90 days and over		Total		Current		Total		> 90 Days and Accruing
Real estate secured
Residential 1-4 family	$	1,481	$	819	$	2,300	$	162,809	$	165,109	$	105
Equity lines of credit	218		75		293		29,928		30,221		—
Multifamily	402		—		402		17,976		18,378		—
Farmland	754		—		754		11,395		12,149		—
Construction, land development, other land loans	16		—		16		21,013		21,029		—
Commercial real estate:
Owner-occupied	9		756		765		95,459		96,224		—
Non-owner-occupied	—		1,859		1,859		38,010		39,869		—
Second mortgages	—		—		—		4,054		4,054		—
Non-real estate secured
Personal	186		4		190		12,564		12,754		—
Commercial	82		114		196		46,006		46,202		2
Agricultural	—		—		—		2,830		2,830		—
Total	$	3,148	$	3,627	$	6,775	$	442,044	$	448,819	$	107

Loans are considered delinquent when payments have not been made according to the terms of the contract. The accrual of interest on loans is discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection.  Additionally, in certain instances, loans that have been restructured or modified may also be classified as non-accrual per regulatory guidance until a satisfactory payment history has been established. Credit card loans and other personal loans are typically charged off no later than 180 days past due. In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

11

The following is a summary of non-accrual loans at March 31, 2019 and December 31, 2018: 

	March 31, 2019		December 31, 2018
Real estate secured
Residential 1-4 family	$	726	$	1,196
Multifamily	402		—
Construction and land loans	15		8
Commercial real estate:
Owner-occupied	1,874		2,038
Non-owner-occupied	1,460		2,004
Farmland	484		142
Non-real estate secured
Personal	26		26
Commercial and agricultural	407		431
Total	$	5,394	$	5,920

The following is a summary of residential real estate currently in the process of foreclosure as well as foreclosed residential real estate as of March 31, 2019.

	Number	Balance
Real estate in the process of foreclosure	6	$	1,488
Foreclosed residential real estate	13	997

The following tables represent a summary of credit quality indicators of the Company's loan portfolio at March 31, 2019 and December 31, 2018. The grades are assigned and/or modified by the Company's credit review and credit analysis departments based on the creditworthiness of the borrower and the overall strength of the loan.

The following tables provide the credit risk profile by internally assigned grade as of March 31, 2019 and December 31, 2018: 

March 31, 2019	Residential 1-4 Family		Multifamily		Farmland		Construction, Land Loans		Commercial Real Estate- Owner Occupied		Commercial Real Estate Non-Owner Occupied
Quality	$	12,403	$	—	$	—	$	595	$	185	$	128
Satisfactory	92,109		5,249		2,243		4,949		39,114		12,699
Acceptable	54,685		12,301		2,796		14,857		49,622		20,562
Special Mention	1,206		752		—		1,565		2,330		3,882
Substandard	5,103		402		5,008		85		4,050		1,460
Doubtful	—		—		—		—		—		—
Total	$	165,506	$	18,704	$	10,047	$	22,051	$	95,301	$	38,731

December 31, 2018	Residential 1-4 Family		Multifamily		Farmland		Construction, Land Loans		Commercial Real Estate- Owner Occupied		Commercial Real Estate Non-Owner Occupied
Quality	$	12,991	$	—	$	—	$	724	$	1,632	$	131
Satisfactory	107,925		4,276		2,736		5,314		39,679		13,046
Acceptable	37,036		13,700		3,617		13,349		47,963		21,073
Special Mention	1,696		402		—		1,565		2,720		3,615
Substandard	5,461		—		5,796		77		4,230		2,004
Doubtful	—		—		—		—		—		—
Total	$	165,109	$	18,378	$	12,149	$	21,029	$	96,224	$	39,869

12

Explanation of credit grades:

Quality-This grade is reserved for the Bank's top quality loans. These loans have excellent sources of repayment, with no significant identifiable risk of collection.  Generally, loans assigned this rating will demonstrate the following characteristics:

• Conformity in all respects with Bank policy, guidelines, underwriting standards, and Federal and State regulations (no exceptions of any kind).

• Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources.

• Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor.

For existing loans, all of the requirements above apply plus all payments have been made as agreed, current financial information on all borrowers and guarantors has been obtained and analyzed, and overall business operating trends are either stable or improving.

Satisfactory-This grade is given to performing loans. These loans have adequate sources of repayment, with little identifiable risk of collection. Loans assigned this rating will demonstrate the following characteristics:

• General conformity to the Bank's policy requirements, product guidelines and underwriting standards.  Any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors.

• Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources.  

• Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor.

For existing loans, all of the requirements outlined above will apply, plus all payments have been made as agreed, current financial information on all borrowers and guarantors has been obtained and analyzed, and overall business operating trends are stable with any declines considered minor and temporary.

Acceptable-This grade is given to loans that show signs of weakness in either adequate sources of repayment or collateral, but have demonstrated mitigating factors that minimize the risk of delinquency or loss.  Loans assigned this rating may demonstrate some or all of the following characteristics:

• Additional exceptions to the Bank's policy requirements, product guidelines or underwriting standards that present a higher degree of risk to the Bank.  Although the combination and/or severity of identified exceptions is greater, all exceptions have been properly mitigated by other factors.

• Unproved, insufficient or marginal primary sources of repayment that appear sufficient to service the debt at this time.  Repayment weaknesses may be due to minor operational issues, financial trends, or reliance on projected (not historic) performance.

• Marginal or unproven secondary sources to liquidate the debt, including combinations of liquidation of collateral and liquidation value to the net worth of the borrower or guarantor.

For existing loans, payments have generally been made as agreed with only minor and isolated delinquencies.

Special Mention-This grade is given to Watch List loans that include the following characteristics:

• Loans with underwriting guideline tolerances and/or exceptions with no identifiable mitigating factors.

• Extending loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank's position at some future date. Potential weaknesses are the result of deviations from prudent lending practices.

• Loans where adverse economic conditions that develop subsequent to the loan origination do not jeopardize liquidation of the debt, but do substantially increase the level of risk may also warrant this rating.

Substandard-Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action. A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must 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.

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The weaknesses may include, but are not limited to:

• High debt to worth ratios and or declining or negative earnings trends

• Declining or inadequate liquidity

• Improper loan structure  or questionable repayment sources

• Lack of well-defined secondary repayment source, and

• Unfavorable competitive comparisons.

Such loans are no longer considered to be adequately protected due to the borrower's declining net worth, lack of earnings capacity, declining collateral margins and/or unperfected collateral positions. A possibility of loss of a portion of the loan balance cannot be ruled out. The repayment ability of the borrower is marginal or weak and the loan may have exhibited excessive overdue status or extensions and/or renewals.

Doubtful-Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus 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. The ability of the borrower to service the debt is extremely weak, overdue status is constant, the debt has been placed on non-accrual status, and no definite repayment schedule exists.

However, these loans are not yet rated as loss because certain events may occur which would salvage the debt. Among these events are:

• Injection of capital

• Alternative financing

• Liquidation of assets or the pledging of additional collateral.

Credit Risk Profile based on payment activity as of March 31, 2019:

	Consumer - Non Real Estate		Equity Line of Credit /Second Mortgages		Commercial - Non Real Estate		Agricultural - Non Real Estate
Performing	$	11,420	$	33,198	$	44,719	$	3,107
Nonperforming (>90 days past due)	27		—		106		—
Total	$	11,447	$	33,198	$	44,825	$	3,107

Credit Risk Profile based on payment activity as of December 31, 2018:

	Consumer - Non Real Estate		Equity Line of Credit /Second Mortgages		Commercial - Non Real Estate		Agricultural - Non Real Estate
Performing	$	12,750	$	34,200	$	46,088	$	2,830
Nonperforming (>90 days past due)	4		75		114		—
Total	$	12,754	$	34,275	$	46,202	$	2,830

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The following tables reflect the Bank's impaired loans at March 31, 2019:

March 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance
Real estate secured
Residential 1-4 family	$	4,338	$	4,338	$	—	$	4,332	$	4
Equity lines of credit	—		—		—		4		—
Multifamily	—		—		—		201		—
Farmland	5,008		5,008		—		5,345		—
Construction, land development, other land loans	1,635		1,635		—		1,635		1
Commercial real estate- owner occupied	3,606		3,606		—		4,469		—
Commercial real estate- non owner occupied	—		—		—		—		—
Second mortgages	285		285		—		193		—
Non-real estate secured
Personal	—		—		—		—		12
Commercial and agricultural	306		306		—		312		1
Total	$	15,178	$	15,178	$	—	$	16,491	$	18

March 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With an allowance recorded
Real estate secured
Residential 1-4 family	$	529	$	529	$	91	$	302	$	—
Equity lines of credit	67		67		26		34		—
Multifamily	422		422		65		211		—
Farmland	—		—		—		866		—
Construction, land development, other land loans	—		—		—		—		—
Commercial real estate- owner occupied	1,702		1,702		549		1,788		—
Commercial real estate- non owner occupied	3,062		3,062		871		3,477		—
Second mortgages	35		35		6		18		—
Non-real estate secured
Personal	17		17		6		10		—
Commercial and agricultural	1,181		1,181		895		842		—
Total	$	7,015	$	7,015	$	2,509	$	7,548	$	—

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The following tables reflect the Bank's impaired loans at December 31, 2018:

December 31, 2018	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance
Real estate secured
Residential 1-4 family	$	4,325	$	4,325	$	—	$	5,862	$	134
Equity lines of credit	7		7		—		28		—
Multifamily	402		402		—		201		—
Farmland	5,681		5,681		—		3,084		10
Construction, land development, other land loans	1,635		1,635		—		1,700		2
Commercial real estate- owner occupied	5,332		5,332		—		3,442		9
Commercial real estate- non owner occupied	—		—		—		32		—
Second mortgages	100		100		—		155		—
Non real estate secured
Personal	—		—		—		48		9
Commercial and agricultural	317		317		—		411		20
Total	$	17,799	$	17,799	$	—	$	14,963	$	184

December 31, 2018	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With an allowance recorded
Real estate secured
Residential 1-4 family	$	631	$	631	$	191	$	353	$	307
Equity lines of credit	105		105		80		53		6
Multifamily	—		—		—		—		—
Farmland	122		122		2		927		—
Construction, land development, other land loans	—		—		—		—		—
Commercial real estate- owner occupied	1,704		1,704		351		1,789		—
Commercial real estate- non owner occupied	3,686		3,686		844		3,789		45
Second mortgages	35		35		7		18		—
Non real estate secured
Personal	18		18		7		10		—
Commercial and agricultural	1,161		1,161		880		832		—
Total	$	7,462	$	7,462	$	2,362	$	7,771	$	358

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The following tables present the balance in the allowance for loan losses and the recorded investment in loans by loan category and is segregated by impairment evaluation method as of and for the three-month periods ended March 31, 2019 and March 31, 2018.

Three months ended March 31, 2019	Residential 1-4 Family			Multifamily		Construction and Land Loans			Commercial Owner Occupied		Commercial Non-Owner Occupied			Second Mortgages			Equity Line of Credit		Farmland			Personal and  Overdrafts			Commercial and Agricultural			Unallocated			Total
Allowance for loan losses:
Balance at December 31, 2018	$	492		$	25	$	27		$	1,022	$	895		$	13		$	127	$	11		$	114		$	957		$	690		$	4,373
Provision expense (credit) for credit losses	136			65		(1		)	67		166			(3		)	62		(4		)	(10		)	53			(428		)	103
Charge-offs	167			—		—			—		92			—			75		—			42			156			—			532
Recoveries	(5		)	—		(2		)	—		(1		)	(1		)	—		—			(29		)	(114		)	—			(152		)
Net charge-offs (recoveries)	162			—		(2		)	—		91			(1		)	75		—			13			42			—			380
Balance at March 31, 2019	$	466		$	90	$	28		$	1,089	$	970		$	11		$	114	$	7		$	91		$	968		$	262		$	4,096
Allowance allocated by impairment method:
Individually evaluated	$	91		$	65	$	—		$	549	$	871		$	6		$	26	$	—		$	6		$	895		$	—		$	2,509
Collectively evaluated	375			25		28			540		99			5			88		7			85			73			262			1,587
Loan balances by impairment method used:
Individually evaluated	$	4,867		$	422	$	1,635		$	5,308	$	3,062		$	320		$	67	$	5,008		$	17		$	1,487		$	—		$	22,193
Collectively evaluated	160,639			18,282		20,416			89,993		35,669			3,699			29,112		5,039			11,430			46,445			—			420,724
Balance at March 31, 2019	$	165,506		$	18,704	$	22,051		$	95,301	$	38,731		$	4,019		$	29,179	$	10,047		$	11,447		$	47,932		—			$	442,917

17

Three months ended March 31, 2018	Residential 1-4 Family			Multifamily		Construction and Land Loans			Commercial Owner Occupied			Commercial Non-Owner Occupied			Second Mortgages			Equity Line of Credit		Farmland			Personal and  Overdrafts			Commercial and Agricultural			Unallocated		Total
Allowance for loan losses:
Balance at December 31, 2017	$	133		$	—	$	1		$	1,636		$	955		$	12		$	—	$	54		$	265		$	383		$	515	$	3,954
Provision for credit losses	3			3		2			(219		)	(167		)	(3		)	6		139			21			(136		)	523		172
Charge-offs	—			—		—			95			—			5			—		—			88			149			—		337
Recoveries	(8		)	—		(1		)	(17		)	—			—			—		(1		)	(30		)	(154		)	—		(211		)
Net charge-offs (recoveries)	(8		)	—		(1		)	78			—			5			—		(1		)	58			(5		)	—		126
Balance at March 31, 2018	$	144		$	3	$	4		$	1,339		$	788		$	4		$	6	$	194		$	228		$	252		$	1,038	$	4,000
Allowance allocated by impairment method:
Individually evaluated	$	19		$	—	$	—		$	516		$	782		$	—		$	—	$	192		$	24		$	233		$	—	$	1,766
Collectively evaluated	125			3		4			823			6			4			6		2			204			19			1,038		2,234
Loan balances by impairment method used:
Individually evaluated	$	5,269		$	—	$	1,677		$	3,194		$	3,835		$	122		$	35	$	2,200		$	21		$	1,509		$	—	$	17,862
Collectively evaluated	166,462			18,157		15,256			78,957			30,602			4,548			35,533		10,777			13,596			40,227			—		414,115
Balance at March 31, 2018	$	171,731		$	18,157	$	16,933		$	82,151		$	34,437		$	4,670		$	35,568	$	12,977		$	13,617		$	41,736		—		$	431,977

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The Company's credit administration personnel and senior financial officers are responsible for tracking, coding, and monitoring loans that become Troubled Debt Restructurings ("TDRs"). Concessions are made to existing borrowers in the form of modified interest rates and / or payment terms. The loans are segregated for regulatory and external reporting. Each specific TDR is reviewed to determine if the accrual of interest should be discontinued and also reviewed for impairment. The Company's senior credit officer performs this analysis on a quarterly basis in addition to determining any other loans that are impaired within the loan portfolio. The Company had a total of $9,255 and $11,546 of loans categorized as troubled debt restructurings as of March 31, 2019 and December 31, 2018, respectively. Interest is accrued on TDRs if the loan is otherwise not impaired and the full collection of principal and interest under the modified terms is still deemed probable.

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. 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.

The following table identifies restructurings completed during the three-month period ended March 31, 2019 that represent new TDRs.

Number Pre-Modification Recorded Investment Post-Modification Recorded Investment

Below Market Rate
Farmland	1	$	754	$	754

Total restructurings 1 $ 754 $ 754

The following table identifies restructurings completed during the three-month period ended March 31, 2018 that represented new TDRs.

Below Market Rate
Residential 1-4 family	1	$	162	$	162
Commercial real estate-owner occupied	1	1,479		1,479
Total	2	$	1,641	$	1,641

There were no defaults in the three-month periods ending March 31, 2019 and March 31, 2018 of TDRs modified in the previous 12 months.

The Bank has engaged an external third party to perform its loan review function in order to identify weaknesses within the loan portfolio. The review, which seeks to cover 25 percent of loan balances each year, considers collateral, repayment history, guarantor strength, debt service coverage, and other relevant information on an individual and global level. These reviews consider borrower cash flow capacity, using financial statements, income tax returns and internally prepared interim statements for borrowers and guarantors. Debt service coverage (DSC) is calculated on each individual customer, or guarantor, as well as the aggregate or global DSC. Collateral evaluation includes an inspection of the collateral file to determine if the Bank is properly secured. Collateral is discounted, when appropriate, to determine a stressed loan to value (LTV) ratio.

The Company also seeks to identify potential problem relationships through watch list reviews, which include reviews of past due data and other information that might be helpful in evaluating a particular loan relationship that is exhibiting stress. Watch list relationships display distinct characteristics including, but not limited to, late payments greater than 60 days, a low DSC calculation, bankruptcy filings, casualty losses, or other issues that would cause a perceived increase in the risk of loss to the Bank.

The segments of the Company's loan portfolio are disaggregated to a level that allows management to monitor risk and performance. In reviewing risk, management has determined there to be several different risk categories within the loan portfolio. The allowance for loan losses consists of amounts applicable to: (i) the commercial loan portfolio; (ii) the commercial real estate loan portfolio; (iii) the construction loan portfolio; (iv) the consumer loan portfolio; and, (v) the residential loan portfolio. The commercial real estate ("CRE") loan segment is further disaggregated into two classes. Non-owner occupied CRE loans, which include loans secured by non-owner occupied nonfarm nonresidential properties, generally have a greater risk profile than all other CRE loans, which include multifamily structures and owner-occupied commercial structures. The construction loan segment is further disaggregated into two classes. One-to-four family residential construction loans are generally made to individuals for the

19

acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built. Commercial construction loans are generally made to developers or investors for the purpose of acquiring, developing and constructing residential or commercial structures. Construction lending is generally considered to involve a higher degree of credit risk than long-term permanent financing.

The following describes the Company's basic methodology for computing its ALLL.

On a quarterly basis, the ALLL methodology begins with the identification of loans subject to ASC 310. All loans that are rated "7" (Doubtful) are assessed as impaired based on the expectation that the full collection of principal and interest is in doubt. All loans that are rated "6" (Substandard) or are expected to be downgraded to "6", require additional analysis to determine whether they may be impaired under ASC 310. All loans that are rated "5" (Special Mention) are presumed not to be impaired. However, "5" rated loans, together with any Troubled Debt Restructured (TDR) loan, may warrant further analysis before completing an assessment of impairment.

A loan is considered impaired and an allowance for loan losses is established on loans for which it is probable that the full collection of principal and interest is in doubt. Once a loan is identified as individually impaired, management measures impairment using one of several methods, including collateral value based on a recent appraisal, liquidation value and/or discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At March 31, 2019 and December 31, 2018, all impaired loans were evaluated based on either the fair value of the collateral or the discounted cash flows.

For ASC 310 loans that are individually evaluated and found to be impaired (primarily those designated as Substandard and Doubtful), the associated ALLL will be based upon one of the three impairment measurement methods specified within ASC 310:

• the present value of expected future cash flows discounted at the loans' effective interest rate;

• the loan's observable fair value; or

• the fair value of the collateral

For impaired loans valued based on collateral value, the collateral value is adjusted for age and condition of the security, and, for real estate, adjusted for condition, location, and age of the most current appraisal. If the adjusted value of the collateral is less than the current principal balance, the difference is designated as direct exposure for loan loss calculations. The total balance of unsecured loans is considered as direct exposure.

For all other loans, including individual loans determined not to be impaired under ASC 310, the associated ALLL is calculated in accordance with ASC 450 that provides for estimated credit losses likely to be realized on groups of loans with similar risk characteristics. The Company uses standard call report categories to segregate loans into groups with similar risk characteristics. Estimated credit losses reflect significant factors that affect the collectability of the portfolio as of the evaluation date. Key factors that influence risk within the Company's loan portfolio are divided into three major categories:

• Historical loss factors - To calculate the anticipated loan loss in each call report category for ASC 450 loans, the Company begins with the net loss in each category for each of the last twelve quarters. The Company uses a rolling twelve quarter weighted historical loss average where the most recent quarters are weighted heavier than the earlier quarters so that the calculation reflects current risk trends within the portfolio. The weighting used by the Company is similar to the Rule of 78's with the net losses of the most recent quarter weighted at 12/78ths and those in the first quarter in the twelve quarter period weighted at 1/78th. Therefore, the net losses of the most recent year represent approximately 54% of the calculation compared with 33% if a simple average of losses over the three-year period was used.  The total of weighted factors for each call report category is applied to the current outstanding loan balance in each category to calculate expected loss based on historical data for a group of loans with similar risk characteristics. The same weighting is applied to all loan types.

• External economic factors - Economic conditions have a significant impact on Company's loan portfolio because deteriorating conditions can adversely impact both collateral values and the customer's ability to service debt. Management has selected the following external factors as indicators of economic conditions:

a. National GDP growth rate

b. Local unemployment rates

c. Prime interest rate

The values for external factors are updated on a quarterly basis based on current data.

20

• Internal process factors - Internal factors that influence loss rates as a result of risk management and control practices include the following:

a. Past-due loans

b. Non-accrual loans

c. Commercial real estate concentrations

d. Loan volume

e. Level and trend of classified loans

The values for internal factors are updated on a quarterly basis based on current portfolio metrics.

Once the quarterly ALLL is computed, the calculations are reviewed by the Company's management. The ALLL is then reviewed and approved by the Board of Directors.

Loans Held for Sale

The Company's mortgage division originates certain single family, residential first mortgage loans for sale to a third party broker. Loan sale activity is summarized below. Loans are typically sold to investors within 20 days of closing. Management feels the carrying amounts approximate the fair values of loans held for sale.

	Three months ended March 31,
	2019		2018
Loans held for sale at end of period	$	1,727	$	1,795
Proceeds from sales of mortgage loans originated for sale	1,194		10,664
Gain on sales of mortgage loans originated for sale	48		100

Note 5  -  Income Taxes

Income tax expense at statutory rates for the three-month periods ended March 31, is provided below, with adjustments needed to determine income tax expense recorded in the consolidated statements of income.

	Three months ended March 31,
	2019			2018
Tax expense (benefit) at statutory rate	$	282		$	164
Increase (decrease) in tax expense resulting from:
Tax-exempt interest	(29		)	(27		)
Other, net	29			33
Income tax expense	$	282		$	170
Statutory corporate federal income tax rate	21		%	21		%

Note 6  - Capital Requirements

Regulators of the Company and its subsidiary, Highlands Union Bank (the "Bank"), have implemented risk-based capital guidelines which require compliance with certain minimum capital ratios as a percent of assets and other certain off-balance sheet items that are adjusted for predefined credit risk factors. On July 7, 2013 the Federal Reserve Board approved Basel III final rules to improve the banking sector's ability to absorb shocks arising from financial and economic stress. The final rules include a new common equity tier 1 minimum ratio and raise the tier 1 risk-weighted assets ratio to 6 percent from 4 percent. In addition, beginning in 2016, the new rules required banks to maintain a capital conservation buffer between 2 and 2 ½ %. Additionally, the new rules increased the risk weighting of various assets. The new rules are being phased in between 2015 and 2019. Generally, the Basel III final rules require banks to maintain higher levels of common equity and regulatory capital.

21

On February 5, 2015 the Company received notification from the Federal Reserve Bank that it would no longer be required to report holding company consolidated capital ratios.

The following table presents the capital ratios for the Bank only.

	March 31, 2019		December 31, 2018
Tier 1 leverage	9.22	%	9.14	%
Tier 1 risk-based	12.94	%	12.31	%
Total risk-based	13.90	%	13.30	%
Common equity tier 1	12.94	%	12.31	%

Note 7 – Stock and Earnings Per Share

Earnings per common share is computed using the weighted average outstanding shares for the three month periods ended March 31, 2019 and 2018. The following provides information for the calculation of basic and diluted earnings per common share:

	Three months ended March 31,
(thousands, except per share information)	2019		2018
Net income available to common stockholders	$	1,060	$	610
Weighted average common shares outstanding	8,199		8,199
Total shares outstanding including assumed conversion of preferred securities	10,343		10,292
Basic earnings per common share	$	0.13	$	0.07
Fully diluted earnings per share (including convertible preferred shares outstanding and restricted stock)	0.10		0.06

At the 2018 annual meeting, stockholders approved the 2018 Restricted Stock Plan, which authorized the board's Compensation Committee to issue up to 250,000 shares of Common Stock in grants of restricted stock and restricted stock unit awards to eligible employees. A total of 51,500 shares have been issued under the 2018 Restricted Stock Plan as of March 31, 2019.

Note 8 – Commitments and Contingencies

The Bank is a party to various financial instruments with off-balance sheet risk arising in the normal course of business to meet the financing needs of its customers. Those financial instruments include commitments to extend credit and standby letters of credit.

At March 31, 2019, unused commitments totaled $58,165, compared to $56,726 at December 31, 2018. Standby letters of credit totaled $1,977 at March 31, 2019 and $3,477 at December 31, 2018.

Note 9 – Fair Value

The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record financial instruments at fair value on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

22

Fair Value Hierarchy

Under ASC Topic 820 on Fair Value Measurements and Disclosures, 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.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon third party models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to determine fair value. These adjustments may include amounts to reflect counterparty credit quality, the borrower's creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company's valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company's valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Recurring - Investment Securities Available for Sale

Securities classified as available for sale are reported at fair value utilizing level 2. For level 2 securities, the Company obtains fair value measurements from multiple independent third party sources. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond's terms and conditions, among other things.

The following tables summarize the Company's available for sale securities portfolio measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018, segregated by the level of the valuation inputs within the fair value hierarchy.

March 31, 2019
	Level 1		Level 2		Level 3		Total Fair Value
State and political subdivisions	$	—	$	13,205	$	—	$	13,205
Mortgage backed securities	—		49,335		—		49,335
SBA pools	—		5,018		—		5,018
Total available for sale securities	$	—	$	67,558	$	—	$	67,558

December 31, 2018
	Level 1		Level 2		Level 3		Total Fair Value
State and political subdivisions	$	—	$	12,836	$	—	$	12,836
Mortgage backed securities	—		50,554		—		50,554
SBA pools	—		5,241		—		5,241
Total available for sale securities	$	—	$	68,631	$	—	$	68,631

Recurring - Derivatives

The Company has entered into interest rate swaps related to customer loan transactions to manage its interest rate risk. Interest rate swaps, which had a notional value of $12,890 as of March 31, 2019 and December 31, 2018, are recorded at fair value, based on third party pricing models that are sensitive to market observable data and are therefore classified as level 2 values. The fair value of derivative financial instruments as of March 31, 2019 totaled $83, compared to $38 at December 31, 2018.

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Non Recurring - 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 loss is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment using one of several methods, including recently appraised collateral value and /or tax assessed value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At March 31, 2019 and December 31, 2018, all of the total impaired loans were evaluated based on the fair value of the collateral or the present value of the future cash flows. The Company frequently obtains appraisals prepared by external professional appraisers and applies discounts ranging from 8% to 40% depending on type of property, condition, location, etc. The Company also, in certain instances, prepares internally generated valuations from on-site inspections, third-party valuation models or other information.

Non Recurring – Loans Held for Sale

Loans held for sale are carried at the lower of cost or market value. The fair value of loans held for sale is based on inputs derived from secondary markets for loans with similar characteristics. The Company considers loans held for sale as non-recurring level 2.

Non Recurring –Other Real Estate Owned  / Repossessions / Real Estate Held for Sale

Other real estate owned and repossessions are adjusted to fair value upon transfer of the loans to other real estate owned and repossessions. Subsequently, foreclosed assets and repossessions are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices or recent appraised values of the collateral which the Company considers as nonrecurring level 2.  When the current appraised value is not available or is further discounted below the most recent appraised value less selling costs due to absorption rates and market conditions, the Company records the foreclosed assets within level 3 of the fair value hierarchy.

Real estate held for sale is adjusted to fair value upon transfer from fixed assets or when no longer being used for banking purposes.

The following table summarizes the Company's assets at fair value on a non-recurring basis as of March 31, 2019 and December 31, 2018, segregated by the level of the valuation inputs within the fair value hierarchy. The tables disclose the recorded investment of impaired loans requiring a specific allowance.

March 31, 2019	Level 1		Level 2		Level 3		Fair Value
Impaired loans	$	—	$	—	$	4,506	$	4,506
OREO	—		—		2,886		2,886
Real estate held for sale	—		—		600		600

December 31, 2018	Level 1		Level 2		Level 3		Fair Value
Impaired loans	$	—	$	—	$	5,100	$	5,100
OREO	—		—		2,212		2,212
Real estate held for sale	—		—		817		817

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The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis for which the Company uses level 3 inputs to determine fair value:

			Quantitative Information about Level 3 Fair Value Measurements
	12/31/18		3/31/2019		Valuation Techniques	Unobservable Input (2)	Range
OREO, net	$	2,212	$	2,886	Appraisal of collateral (1)	Appraisal adjustments	0% to 20%
						Liquidation expenses	0% to 10%
Real estate held for sale	$	817	$	600	Appraisal of collateral (1)	Appraisal adjustments	0% to 20%
						Liquidation expenses	0% to 10%
Impaired loans	$	5,100	$	4,506	Fair value of collateral –real estate  (1), (3)	Appraisal adjustments	0% to 100%
					Fair value of collateral –equipment, inventory, other  (1), (3)	Appraisal adjustments	25% to 80%
						Liquidation expenses	0% to 12%

Valuation adjustments and liquidation cost adjustments represent unobservable inputs for OREO and impaired loans.  The ranges of discounts applied are based on age of independent appraisals, type and condition of collateral, current market conditions, and experience with the local market.

(1)  Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

(2)  Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.  The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

(3)  Includes qualitative adjustments by management.

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices.  However, in many instances, there are no quoted market prices for the Company's various financial instruments.  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. Accordingly, the fair value estimates may not be realized in an immediate settlement.  Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

Cash and Cash Equivalents

The carrying amount reported in the balance sheets for cash, short-term investments and federal funds sold approximates fair value.

Securities Available for Sale

Fair values are determined in the manner as described above.

Other Investments

Other investments include Federal Home Loan Bank stock, Federal Reserve Bank stock, Community Bankers Bank stock, and Pacific Coast Bankers Bank.  The carrying value of those securities approximates fair value based on the redemption provisions of those Banks. Also included in other investments are certificates of deposit purchased from other FDIC insured banks in which the carrying amount approximates fair value.

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Loans

The fair value of loans represent the amount at which the loans of the Bank could be exchanged on the open market, based upon the current lending rate for similar types of lending arrangements discounted over the remaining life of the loans .  For fixed rate loans and for variable rate loans with infrequent re-pricing or re-pricing limits, fair value is based on discounted cash flows using current market rates applied to the cash flow analysis.

Deposits

The fair value of time deposits is based on discounted cash flows using current market rates applied to the cash flow analysis for each time deposit. Other non-maturity deposits are reported at their carrying values.

Other Short-Term Borrowings

Fair values of other short-term borrowings are estimated using discounted cash flow analyses based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Estimated maturity dates are also included in the calculation of fair value for these borrowings.

Long-term Debt and Capital Securities

Rates currently available to the Company for debt with similar terms and remaining maturities or established call prices are used to estimate fair value of existing debt.

Off-Balance Sheet Instruments

The carrying value of off-balance sheet commitments to extend credit, standby letters of credit, and financial guarantees, is considered equal to fair value.  Because of the uncertainty involved in attempting to assess the likelihood and timing of commitments being drawn upon, coupled with the lack of an established market and the wide diversity of fee structures, the Company does not believe it is meaningful to provide an estimate of fair value that differs from the given value of the commitment.

The carrying amounts and fair values of the Company's financial instruments at March 31, 2019 and December 31, 2018 were as follows:

	March 31, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	55,178	$	55,178	$	30,066	$	30,066
Securities available for sale	67,558		67,558		68,631		68,631
Other investments	2,770		2,770		2,774		2,774
Loans, net	438,140		425,870		443,748		429,289
Interest rate swaps	83		83		38		38
Deposits	520,699		451,312		502,816		422,570
Other short-term borrowings	30,000		30,106		30,000		30,142
Long-term debt	80		77		93		89

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Note 10–Formal Written Agreement

On October 13, 2010, the Company and Bank entered into a written agreement ("Written Agreement") with the Federal Reserve Bank of Richmond (the "Reserve Bank").  Under the terms of the Written Agreement, the Bank has agreed to develop and submit to the Reserve Bank for approval within the time periods specified therein written plans or programs to:

• strengthen board oversight of the management and operations of the Bank;

• strengthen credit risk management and administration;

• provide for the effective grading of the Bank's loan portfolio;

• summarize the findings of its review of the adequacy of the staffing of its loan review function;

• improve the Bank's position with respect to loans, relationships, or other assets in excess of $500 that currently are, or in the future become past due more than 90 days, on the Bank's problem loan list, or adversely classified in any report of examination of the Bank;

• review and revise the Bank's methodology for determining the allowance for loan and lease losses ("ALLL") and maintain an adequate ALLL;

• maintain sufficient capital at the Company and the Bank;

• establish a revised written contingency funding plan;

• establish a revised written strategic and capital plan;

• establish a revised investment policy;

• improve the Bank's earnings and overall condition;

• revise the Bank's information technology program;

• establish a disaster recovery and business continuity program; and,

• establish a committee to monitor compliance with all aspects of the written agreement.

Further, both the Company and the Bank have agreed to refrain from declaring or paying dividends without prior regulatory approval. The Company has agreed that it will not take any other form of payment representing a reduction in Bank's capital or make any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities without prior regulatory approval. The Company also has agreed not to incur, increase or guarantee any debt or not to purchase or redeem any shares of its stock without prior regulatory approval.

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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is provided to address information about the Company's financial condition and results of operations that is not otherwise apparent from the Consolidated Financial Statements and the notes thereto or included in this report. Reference should be made to those statements and the notes thereto for an understanding of the following discussion and analysis.

The Company generates a significant amount of its income from the net interest income earned by the Bank. Net interest income is the difference between interest income and interest expense. Interest income depends on the amount of interest-earning assets outstanding during the period and the interest rates earned thereon. The Company's cost of money is a function of the average amount of deposits and borrowed money outstanding during the period and the interest rates paid thereon. Asset quality affects the amount of interest income lost on non-accrual loans and the amount of the allowance for loan losses. Highlands Union Insurance Services and Highlands Union Financial Services, which are subsidiaries of Highlands Union Bank, generate fee income by providing insurance and financial service products to its clients. Russell Road Properties, LLC is also an entity in which the Bank has a significant interest and was created to hold and manage certain properties acquired by the Bank through foreclosure or deed in lieu of foreclosure.

Critical Accounting Policies

The financial condition and results of operations presented in the Consolidated Financial Statements, accompanying Notes to Consolidated Financial Statements and management's discussion and analysis are, to a large degree, dependent upon the accounting policies of the Company. The selection and application of these accounting policies involve judgments, estimates, and uncertainties that are susceptible to change. For a discussion of the Company's critical accounting policies related to its allowance for loan losses and other than temporary impairment, see the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

Results of Operations

Consolidated net income totaled $1.1 million for the three-month period ended March 31, 2019, compared to $610,000 for the three-month period ended March 31, 2018.

The following table provides summarized income statements for the three-month periods ended March 31, 2019.

	Three months ended March 31,
	2019		2018
Net interest income	$	5,109	$	5,036
Provision expense	103		172
Noninterest income	890		1,082
Noninterest expense	4,554		5,166
Income before income taxes	1,342		780
Income tax expense	282		170
Net income	$	1,060	$	610

Comparison of First Quarter 2019 to First Quarter 2018

Net interest income for the three-month period ended March 31, 2019 increased $73,000 or 1.4 percent compared to the three months ended March 31, 2018 primarily due to improved loan interest income and lower FHLB interest expense. 

Average loan balances for the three months ended March 31, 2019 increased $13.7 million or 3.2 percent compared to the three month period ended March 31, 2018. Average securities balances declined $9.9 million or 12.48 percent during the same period. The yield on average interest-earning assets was 4.69 percent for the three-month period ended March 31, 2019 compared to 4.41 percent in the same period of 2018. 

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Average interest-bearing liabilities increased $3.6 million in the three months ended March 31, 2019,when compared to the same period of 2018 due to deposit growth, which more than offset the impact of FHLB advances repayments. The average rate on interest-bearing liabilities increased from 0.86 percent in the three month period ended March 31, 2018, to 1.13 percent for the three months ended March 31, 2019 due to upward pressure on deposit rates during 2018.

The net interest margin improved from 3.78 percent in the three month period ended March 31, 2018, to 3.86 percent for the three months ended March 31, 2019, the combined impact of repayment of the FHLB advances, favorable changes in asset mix, and higher market rates.

The provision for loan losses for the three-month period ended March 31, 2019 totaled $103,000, compared to $172,000 during the corresponding period of 2018. Net charge-offs for the three-month period ended March 31, 2019 totaled $380,000 compared to net charge-offs of $126,000 recorded during the same period of 2018. Net charge-offs during the first quarter of 2019 represent 0.34 percent of loans outstanding.

During the first quarter of 2019, noninterest income decreased $192,000 compared to the corresponding period for 2018, due to lower service charge, credit card and merchant income. Service charges on deposit accounts declined due to lower overdraft fees. Other service charges, commissions and fees decreased $80,000 as compared to the same period of 2018, primarily due to lower credit card interchange and merchant income.

Total noninterest expense for the three-month period ended March 31, 2019 decreased $612,000 from the comparable period in 2018. Salaries and employee benefits increased $13,000 for the three months ended March 31, 2019 as compared to the prior year period. Occupancy expense was down due to lower rental expense associated with the mortgage origination offices. The Company also benefited from lower OREO-related expenses and legal expense.

The annualized return on average equity was 7.53 percent for the three-month period ended March 31, 2019, compared to 4.49 percent for the corresponding period of 2018. Annualized return on average assets for the three months ended March 31, 2019 was 0.71 percent compared to 0.41 percent for the three months ended March 31, 2018. While both operating ratios remain below peer averages, the improvements reflect ongoing efforts to achieve stable and increasing profitability. The Company continues to identify and implement strategies to improve core operating results.

Financial Position

Investment securities available for sale totaled $67.6 million at March 31, 2019, compared to $68.6 million at December 31, 2018. Investment securities available for sale at March 31, 2019 included mortgage-backed securities/CMOs (73.0 percent of the total securities portfolio), municipal securities (19.5 percent), and SBA loan pools (7.4 percent).  There were no investment securities held to maturity at March 31, 2019 or December 31, 2018.

Other investments include investments in the Federal Reserve Bank of Richmond, Federal Home Loan Bank of Atlanta, Pacific Coast Bankers Bank, and Community Bankers Bank. These investments had a carrying value of $2.8 million at March 31, 2019, and are considered to be non-marketable as the Company is required to hold these investments, and the only market for these investments is the issuer.

Loans, net of deferred fees, totaled $442.2 million at March 31, 2019, compared to $448.1 million at December 31, 2018. Loan demand was relatively weak during the three-month period ended March 31, 2019, with customer payments exceeding loan origination activity, resulting in lower period-end balances.

Deposits at March 31, 2019 totaled $520.7 million, a $17.9 million increase since December 31, 2018. Despite the increase in total deposits during 2019, the Company has experienced reductions among non-interest bearing deposits, which have declined $6.5 millionsince December 31, 2018.

The Company's loan to deposit ratio was 84.9 percent at March 31, 2019 compared to 89.1 percent at December 31, 2018, reflecting the combined impact of loan shrinkage and deposit growth during the first quarter.

As of March 31, 2019, the Company has $30.0 million in FHLB advances with scheduled maturities within the next twelve months. The Company secures all of its existing and future advances from the FHLB with 1-4 family residential mortgage, commercial real estate, equity lines of credit and multi-family loans.

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Non-performing assets include non-accrual loans, loans contractually past due 90 days or more and still accruing interest and other real estate owned. Non-performing assets were $8.4 million or 1.90 percent of loans held for investment and OREO at March 31, 2019, compared to $8.2 million or 1.83 percent of loans held for investment and OREO at December 31, 2018. Notwithstanding the slight increase in nonperforming assets, the Company continues its efforts to manage non-accrual exposures and liquidate other real estate owned.

At March 31, 2019, other real estate owned (OREO) totaled $2.9 million and consisted of 25 relationships. At December 31, 2018 OREO balances were $2.2 million and consisted of 20 relationships. The $674,000 increase in OREO since December 31, 2018 resulted from foreclosures of collateral securing a loan previously classified as nonaccrual.

As of March 31, 2019, the Company had loans with a total balance of $1.5million that were in process of foreclosure. The Company expects the balance of other real estate owned will increase significantly during the second quarter as these foreclosures occur. The Company believes the loans are generally well-secured, and any anticipated deficiencies in collateral values are offset by specific loan allowances that have been previously established. However, the ability to sell other real estate owned continues to be negatively affected by limited demand in certain of the Company's market areas, and future appraisal values may require additional writedowns once the properties are foreclosed.

The following chart details each category type, number of relationships, and balance.

	March 31, 2019			December 31, 2018
Balance in thousands	Number	Balance		Number	Balance
Land development/vacant land	7	$	158	8	$	308
1-4 family residential mortgage	13	997		9	785
Commercial real estate	5	1,731		3	1,119
Total	25	$	2,886	20	$	2,212

Marketability of OREO properties differs considerably between the Company's various market areas. The following table provides information about properties owned in each geographic area, the number of individual properties and book value.

	March 31, 2019			December 31, 2018
Balance in thousands	Number	Balance		Number	Balance
Sevierville and Knoxville TN	2	$	221	1	$	71
Southwest VA and Tri-City TN	20	2,545		17	2,089
Boone and Banner Elk NC	3	120		2	52
Total	25	$	2,886	20	$	2,212

The allowance for loan losses is calculated based on management's judgment and analysis of current and historical loss experience, risk characteristics of the loan portfolio, concentrations of credit and asset quality, as well as other internal and external factors, including general economic conditions. The calculation of the allowance for loan losses is reviewed by the senior credit officers, the chief risk officer, senior financial officers and the board of directors.

The Company continually monitors the loan portfolio for signs of credit weaknesses or developing collection problems. Loan loss provisions for each period are determined after evaluating the loan portfolio and determining the level necessary to absorb current charge-offs and maintain the reserve at adequate levels. The Company's allowance for loan losses at March 31, 2019 was 0.93 percent of total loans compared to 0.98 percent at December 31, 2018. The reduction in the allowance for loan losses since December 31, 2018 reflects the impact of charge-offs of previously impaired loans recorded during the first quarter of 2019. At March 31, 2019, management concluded that the Company's allowance for loan losses is adequate based on the requirements of accounting principles generally accepted in the United States of America.

30

Liquidity and Capital Resources

Total stockholders' equity of the Company was $58.6 million at March 31, 2019, compared to $56.6 million at December 31, 2018. The change in stockholders' equity during 2019 reflects current retained earnings and a reduction in accumulated other comprehensive loss related to the fair value of the Company's available for sale securities portfolio.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total risk-based capital and tier 1 capital to risk-weighted assets (as defined in the regulations), tier 1 capital to adjusted total assets (as defined), and tier 1 common equity (as defined). As of March 31, 2019, each of the Bank's capital ratios exceeded the required level to be classified as well-capitalized. See Note 6 for a more detailed discussion of the Bank's regulatory capital ratios.

Liquidity is the ability to provide sufficient cash levels to meet financial commitments and to fund loan demand and deposit withdrawals. The Company and subsidiary Bank maintain a significant level of liquidity in the form of cash and cash equivalents ($55.2 million as of March 31, 2019) and unrestricted investment securities available for sale ($29.6 million as of March 31, 2019). Cash and cash equivalents are immediately available for satisfaction of deposit withdrawals, customer credit needs, and operations of the Bank. The Bank also maintains access to credit with both the Federal Home Loan Bank and other correspondent financial institutions. Unencumbered investment securities available for sale represent a secondary level of liquidity available for conversion to liquid funds in the event of extraordinary needs. The Company believes that it maintains sufficient liquidity to meet its current and projected requirements and needs.

Risk Management

The Company is exposed to various risks resulting from its normal operations, including, but not limited to, credit risk, liquidity risk, interest rate risk, compliance risk and other operational risks. Through its reliance on technology, the Company has risks related to the performance of its technology and information security risks related to customer information and other data. Through its reliance on third parties, the Company also has vendor risk, and, by extension, exposure to the technology and information security risks of its vendors. Collectively, all of these risks contribute to the Company’s reputational risk. The Company seeks to manage and mitigate each of these risks and other risks through various risk management techniques including effective policies and procedures, internal and external monitoring, and risk transfer.

Despite these efforts, the volume of business conducted through electronic devices, our internet presence, and reliance on external vendors expose the Company to various attacks, including cybersecurity attacks from both domestic and international sources that seek to obtain customer information for fraudulent purposes or to disrupt business activities. The Company continues to dedicate significant attention to risk management, with a goal of preventing cybersecurity attacks and, if they occur, to quickly detect and correct any weakness to prevent future attacks.

31

Caution About Forward-Looking Statements

This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including certain plans, expectations, goals and projections, which are inherently subject to numerous assumptions, risks and uncertainties. The Company's actual results could differ materially from those set forth or implied in the forward-looking statements.

Such forward-looking statements involve known and unknown risks including, but not limited to, the following factors:

• adverse economic conditions in the market area and the impact on credit quality and risks inherent in the loan portfolio such as repayment risk and fluctuating collateral values;

• our inability to manage, dispose of and properly value non-performing assets and other real estate owned;

• further deterioration in the housing market and collateral values;

• our inability to assess the creditworthiness of our loan portfolio and maintain a sufficient allowance for loan losses;

• our inability to maintain adequate sources of funding and liquidity, including secondary sources such as Federal Home Loan Bank advances;

• our ability to attract and maintain capital levels adequate to support our asset levels and risk profile;

• our inability to comply with the written agreement, dated October 13, 2010, with the Federal Reserve Bank of Richmond;

• our successful management of interest rate risk and changes in interest rates and interest rate policies;

• reliance on our management team, including our ability to attract and retain key personnel;

• our ability to successfully manage our strategic plan;

• difficult market conditions in our industry;

• problems with technology utilized by us;

• our ability to successfully manage third-party vendors upon whom we are dependent;

• competition with other banks and financial institutions, and companies outside of the banking industry, including those companies that have substantially greater access to capital and other resources;

• potential impact on us of recently enacted legislation and future regulation;

• changes in accounting policies or standards;

• demand, development and acceptance of new products and services; and,

• changing trends in customer profiles and behavior.

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ITEM 3.Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

ITEM 4. Controls and Procedures

We have carried out an evaluation, under the supervision and the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in providing reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and (b) such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have not been any changes in the Company's internal controls over financial reporting during the first quarter of 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

33

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

The Company, the Bank and other subsidiaries are occasionally named as defendants in various legal actions arising from our normal business activities in which damages in various amounts are claimed. Although the amount of any ultimate liability with respect to those matters cannot be determined, in the opinion of management, no legal actions currently exist that are expected to have a material effect on the Company's consolidated financial statements.

On December 23, 2015, James M. Brock and Jean W. Brock (together, "Brock") filed a complaint in the Circuit Court of Grayson County, Virginia, alleging that the Bank acted negligently when it foreclosed on property adjacent to the Brock's property and allegedly failed to remediate the foreclosed property, allegedly causing damage to Brock's property. Brock seeks damages of $200,000 plus prejudgment interest, attorneys' fees, and costs. The Bank denies any wrongdoing in this matter and intends to vigorously defend itself. No trial date has yet been set. The Company is unable to estimate the likelihood of an unfavorable outcome or the amount or range of potential loss.

Item 1A. Risk Factors

Not applicable

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.  Defaults Upon Senior Securities

None

Item 4.  Mine Safety Disclosures

Not Applicable

Item 5.  Other Information

None

Item 6.  Exhibits

Exhibit Index
31.1	Rule 13a-14(a) Certification of President and Chief Executive Officer
312	Rule 13a-14(a) Certification of Chief Financial Officer
32.1	Certification Statement of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2	Certification Statement of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
101	The following materials from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, formatted in Extensible Business Reporting Language (XBRL), include: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows; (v) Consolidated Statements of Changes in Stockholders' Equity and (vi) related notes (furnished herewith).

34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HIGHLANDS BANKSHARES, INC
	(Registrant)
Date: May 15, 2019	By:	/s/ Bryan T. Booher
		Bryan T. Booher
		Interim Chief Executive Officer
Date: May 15, 2019		/s/ John H. Gray
		John H. Gray
		Chief Financial Officer

35

Exhibit Index
31.1	Rule 13a-14(a) Certification of President and Chief Executive Officer
31.2	Rule 13a-14(a) Certification of Chief Financial Officer
32.1	Certification Statement of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2	Certification Statement of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101	The following materials from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, formatted in Extensible Business Reporting Language (XBRL), include: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows; (v) Consolidated Statements of Changes in Stockholders' Equity and (vi) related notes (furnished herewith).

36

EX-31.1

Exhibit 31.1

Rule 13a-14(a) Certification of Interim Chief Executive Officer

I, Bryan T. Booher, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Highlands Bankshares, Inc. for the quarter ended March 31, 2019.
2.	Based on my  knowledge,  this  report  does not  contain any untrue statement of a material fact or omit to state a material fact  necessary to make the statements made, in light of the  circumstances  under which such statements were made,  not  misleading  with  respect to the period  covered by this report;
3.	Based on my  knowledge,  the  financial  statements,  and  other  financial information  included  in this  report,  fairly  present in all  material respects the financial  condition,  results of operations  and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's  other  certifying  officers  and  I are  responsible  for establishing and maintaining  disclosure  controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-a5(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,  including its consolidated  subsidiaries,  is made  known to us by  others  within  those entities,  particularly  during the period in which this   report is being prepared;
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;
c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our  conclusions  about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed  in  this   report  any  change  in the  registrant's internal  control  over  financial reporting  that  occurred  during  the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,  the registrant's  internal control  over financial reporting; and
5.	The registrant's other certifying  officers and I have disclosed,  based on our most recent evaluation of internal control over financial reporting,  to the registrant's  auditors  and the audit  committee  of the  registrant's  board of directors (or persons performing the equivalent functions):
a)	all significant  deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely  affect the  registrant's  ability to record,  process, summarize and report financial information; and
b)	any fraud, whether or not material,  that involves management or other employees who have a significant role in the registrant's  internal control over financial reporting.

Date: May 15, 2019

/s/ Bryan T. Booher

Bryan T. Booher

Interim Chief Executive Officer

EX-31.2

Exhibit 31.2

Rule 13a-14(a) Certification of Chief Financial Officer

I, John H. Gray, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Highlands Bankshares, Inc. for the quarter ended March 31, 2019.
2.	Based on my  knowledge,  this  report  does not  contain any untrue statement of a material fact or omit to state a material fact  necessary to make the statements made, in light of the  circumstances  under which such statements were made,  not  misleading  with  respect to the period  covered by this report;
3.	Based on my  knowledge,  the  financial  statements,  and  other  financial information  included  in this  report,  fairly  present in all  material respects the financial  condition,  results of operations  and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's  other  certifying  officers  and  I are  responsible  for establishing and maintaining  disclosure  controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-a5(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,  including its consolidated  subsidiaries,  is made  known to us by  others  within  those entities,  particularly  during the period in which this   report is being prepared;
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;
c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our  conclusions  about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed  in  this   report  any  change  in the  registrant's internal  control  over  financial reporting  that  occurred  during  the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,  the registrant's  internal control  over financial reporting; and
5.	The registrant's other certifying  officers and I have disclosed,  based on our most recent evaluation of internal control over financial reporting,  to the registrant's  auditors  and the audit  committee  of the  registrant's  board of directors (or persons performing the equivalent functions):
a)	all significant  deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely  affect the  registrant's  ability to record,  process, summarize and report financial information; and
b)	any fraud, whether or not material,  that involves management or other employees who have a significant role in the registrant's  internal control over financial reporting.

Date: May 15, 2019

/s/ John H. Gray

John H. Gray

Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification

Pursuant To 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of  The Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Highlands Bankshares, Inc. (the "Company") for the period ended March 31, 2019 as filed with the Securities and Exchange Commission (the "Report"), I, Bryan T. Booher, Interim Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.	The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Bryan T. Booher

Bryan T. Booher

Interim Chief Executive Officer

May 15, 2019

EX-32.2

Exhibit 32.2

Certification

Pursuant To 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of  The Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Highlands Bankshares, Inc. (the "Company") for the period ended March 31, 2019 as filed with the Securities and Exchange Commission (the "Report"), I, John H. Gray, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.	The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John H. Gray

John H. Gray

Chief Financial Officer

May 15, 2019

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 14, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	HIGHLANDS BANKSHARES INC /VA/
Entity Central Index Key	0001008579
Document Period End Date	Mar. 31, 2019
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		8,250,728
Entity Emerging Growth Company	false
Entity Emerging Growth Company	true
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
ASSETS
Cash and due from banks	$ 23,544	$ 19,965
Federal funds sold	31,634	10,101
Total cash and cash equivalents	55,178	30,066
Investment securities available for sale (amortized cost $69,104 at March 31, 2019, $71,260 at December 31, 2018)	67,558	68,631
Other investments, at cost	2,770	2,774
Loans held for sale	1,727	265
Loans	442,236	448,121
Allowance for loan losses	(4,096)	(4,373)
Net loans	438,140	443,748
Premises and equipment, net	17,367	17,447
Real estate held for sale	600	817
Deferred tax assets	6,017	6,526
Interest receivable	1,706	1,617
Bank-owned life insurance	15,113	15,022
Other real estate owned	2,886	2,212
Other assets	3,306	2,816
Total assets	612,368	591,941
Deposits:
Non-interest bearing	149,876	156,408
Interest bearing	370,823	346,408
Total deposits	520,699	502,816
Interest, taxes and other liabilities	3,033	2,391
Short-term borrowings	30,000	30,000
Long-term debt	80	93
Total liabilities	553,812	535,300
STOCKHOLDERS' EQUITY
Common stock (8,251 shares issued and outstanding at March 31, 2019 and December 31, 2018)	5,156	5,156
Preferred stock (2,092 shares issued and outstanding at March 31, 2019 and December 31, 2018)	4,184	4,184
Additional paid-in capital	19,292	19,277
Retained earnings	31,191	30,131
Accumulated other comprehensive loss	(1,267)	(2,107)
Total stockholders' equity	58,556	56,641
Total liabilities and stockholders' equity	$ 612,368	$ 591,941

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Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
ASSETS
Investment securities available for sale (amortized cost $69,104 at March 31, 2019, $71,260 at December 31, 2018)	$ 69,104	$ 71,260
STOCKHOLDERS' EQUITY
Common stock, shares issued (in shares)	8,251	8,251
Common stock, shares outstanding (in shares)	8,251	8,251
Preferred stock shares issued (in shares)	2,092	2,092
Preferred stock shares outstanding (in shares)	2,092	2,092

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Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
INTEREST INCOME
Loans receivable and fees on loans	$ 5,653	$ 5,315
Investment securities	412	478
Federal funds sold	141	70
Total interest income	6,206	5,863
INTEREST EXPENSE
Deposits	824	463
Other borrowed funds	273	364
Total interest expense	1,097	827
Net interest income	5,109	5,036
Provision for loan losses	103	172
Net interest income after provision for loan losses	5,006	4,864
NONINTEREST INCOME
Mortgage banking income	48	100
Total noninterest income	890	1,082
NONINTEREST EXPENSE
Salaries and employee benefits	2,416	2,403
Occupancy and equipment expense	615	731
Foreclosed assets – write-down and operating expenses	50	131
Other operating expense	1,473	1,901
Total noninterest expense	4,554	5,166
Income before income taxes	1,342	780
Income tax expense (Note 5)	282	170
Net income	$ 1,060	$ 610
Net income per common share (Note 7)
Basic (in dollars per share)	$ 0.13	$ 0.07
Fully diluted (in dollars per share)	$ 0.10	$ 0.06
Service charges on deposit accounts
NONINTEREST INCOME
Total noninterest income	$ 342	$ 337
Other service charges, commissions and fees
NONINTEREST INCOME
Total noninterest income	339	419
Other operating income
NONINTEREST INCOME
Total noninterest income	$ 161	$ 226

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 1,060	$ 610
Other comprehensive income (loss)
Unrealized gains (losses) on securities during the period	1,083	(1,297)
Less: reclassification adjustment	0	0
Other comprehensive income (loss) before tax	1,083	(1,297)
Income tax (expense) benefit related to other comprehensive income (loss)	(243)	271
Other comprehensive income (loss)	840	(1,026)
Comprehensive income (loss)	$ 1,900	$ (416)

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 1,060	$ 610
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	103	172
Depreciation and amortization	342	401
Provision for deferred tax assets	266	170
Restricted stock expense	15	56
Originations of loans held for sale	(2,656)	(7,651)
Proceeds from loans held for sale	1,194	10,664
Increase (decrease) in interest receivable	(89)	210
Valuation adjustment of real estate held for sale	0	60
Valuation adjustment of other real estate owned	0	90
(Increase) decrease in other assets	(590)	52
Increase in interest, taxes and other liabilities	642	590
Net cash provided by operating activities	287	5,424
Securities available for sale:
Proceeds from maturities of securities	2,052	2,965
Redemptions of other investments	0	323
Net decrease in loans	4,751	117
Proceeds from sales of other real estate owned	90	156
Proceeds from sale of real estate held for sale	217	0
Premises and equipment expenditures	(155)	(82)
Net cash provided by investing activities	6,955	3,479
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in time deposits	14,293	(13,922)
Net increase in demand, savings and other deposits	3,590	25,137
Net change in short-term borrowings	0	(10,000)
Decrease in long-term debt	(13)	(13)
Net cash provided by financing activities	17,870	1,202
Net change in cash and cash equivalents	25,112	10,105
Cash and cash equivalents at beginning of period	30,066	30,797
Cash and cash equivalents at end of period	55,178	40,902
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments during the period for interest	2,183	860
Cash payments during the period for income taxes	0	0
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Transfer of loans to other real estate owned	$ 754	$ 65

XML

Consolidated Statements of Changes in Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Preferred Stock	Additional paid-in-capital	Retained earnings	Accumulated other comprehensive income (loss)
Beginning balance (in shares) at Dec. 31, 2017		8,199	2,092
Beginning balance at Dec. 31, 2017	$ 53,804	$ 5,124	$ 4,184	$ 19,113	$ 26,539	$ (1,156)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	610				610
Other comprehensive income	(1,026)					(1,026)
Stock-based compensation	56			56
Ending balance (in shares) at Mar. 31, 2018		8,199	2,092
Ending balance at Mar. 31, 2018	53,444	$ 5,124	$ 4,184	19,169	27,149	(2,182)
Beginning balance (in shares) at Dec. 31, 2018		8,251	2,092
Beginning balance at Dec. 31, 2018	56,641	$ 5,156	$ 4,184	19,277	30,131	(2,107)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	1,060				1,060
Other comprehensive income	840					840
Stock-based compensation	15			15
Ending balance (in shares) at Mar. 31, 2019		8,251	2,092
Ending balance at Mar. 31, 2019	$ 58,556	$ 5,156	$ 4,184	$ 19,292	$ 31,191	$ (1,267)

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General

3 Months Ended

Mar. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General

General

The consolidated financial statements of Highlands Bankshares, Inc. (the "Company") conform to United States generally accepted accounting principles and to banking industry practices. The accompanying consolidated interim financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included. All such adjustments are of a normal and recurring nature. The consolidated balance sheet as of December 31, 2018 has been extracted from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 (the "2018 Form 10-K"). The notes included herein should be read in conjunction with the notes to the consolidated financial statements included in the 2018 Form 10-K. The results of operations for the three-month period ended March 31, 2019, are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements 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.

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Summary of Significant Accounting Policy Update For Certain Required Disclosures

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policy Update For Certain Required Disclosures

Summary of Significant Accounting Policy Update For Certain Required Disclosures

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09, as subsequently amended by ASU No. 2015-14 issued in August 2015, required adoption in annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company adopted ASU 2014-09 effective January 1, 2018.

Application of ASU 2014-09 requires identification of customer contracts, identification of the performance obligations within those contracts, identification of the transaction price, allocation of the transaction price to the performance obligations, and recognition of revenue once the performance obligation is satisfied. ASU 2014-09 requires disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

The Company’s primary source of revenue is interest income, which is excluded from the scope of this guidance; however, the Company evaluated the impact on noninterest income, which includes fees for services, commissions on sales, and various deposit service charges. The Company concluded that no cumulative-effect adjustment to retained earnings was necessary. The adoption of the standard did not have a material effect on the Company’s financial position or results of operations.

In June 2016, ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments was issued by the FASB. This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). The Company continues to evaluate the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.

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.

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Investment Securities Available For Sale

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Investment Securities Available For Sale

Investment Securities Available For Sale

The amortized cost and market value of securities available for sale are as follows:

	March 31, 2019
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
State and political subdivisions	$	13,583	$	48	$	426	$	13,205
Mortgage backed securities	50,355		21		1,041		49,335
SBA pools	5,166		—		148		5,018
	$	69,104	$	69	$	1,615	$	67,558

	December 31, 2018
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
State and political subdivisions	$	13,590	$	9	$	763	$	12,836
Mortgage backed securities	52,344		8		1,798		50,554
SBA pools	5,326		—		85		5,241
	$	71,260	$	17	$	2,646	$	68,631

Investment securities available for sale with a fair value of $37,923 and $37,448 at March 31, 2019 and December 31, 2018, respectively, were pledged as collateral on public deposits, FHLB advances and for other purposes as required or permitted by law.

The following table presents the age of gross unrealized losses and fair value by investment category:

	March 31, 2019
	Less than 12 months				12 months or more				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
State and political subdivisions	$	—	$	—	$	8,857	$	426	$	8,857	$	426
Mortgage-backed securities	228		—		45,766		1,041		45,994		1,041
SBA pools	—		—		5,053		148		5,053		148
Total	$	228	$	—	$	59,676	$	1,615	$	59,904	$	1,615

	December 31, 2018
	Less than 12 months				12 months or more				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
State and political subdivisions	$	3,608	$	73	$	7,791	$	690	$	11,399	$	763
Mortgage-backed securities	2,319		8		46,661		1,790		48,980		1,798
SBA pools	—		—		5,218		85		5,218		85
Total	$	5,927	$	81	$	59,670	$	2,565	$	65,597	$	2,646

The Company assesses its securities for OTTI quarterly by reviewing credit ratings, financial and regulatory reports as well as other pertinent published financial data. As of March 31, 2019 and December 31, 2018, the Company's assessment revealed no impairment other than that deemed temporary on those securities.

The amortized cost and estimated fair value of securities available for sale at March 31, 2019 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	March 31, 2019				December 31, 2018
	Amortized cost		Fair value		Amortized cost		Fair value
Investment securities with scheduled maturities:
Due in one year or less	$	87	$	88	$	98	$	100
Due after one year through five years	394		394		367		366
Due after five years through ten years	3,280		3,175		2,782		2,638
Due after ten years	14,988		14,566		15,669		14,973
Total investment securities with scheduled maturities	18,749		18,223		18,916		18,077
Mortgage-backed securities	50,355		49,335		52,344		50,554
Total investment securities available for sale	$	69,104	$	67,558	$	71,260	$	68,631

There were no gains or losses on the sales of investment securities during the first three months of 2019 or 2018.

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Loans and Allowance for Loan Losses

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

Loans and Allowance for Loan Losses

Loans and Allowance for Loan Losses

The composition of net loans is as follows:

	March 31, 2019		December 31, 2018
Real estate secured:
Residential 1-4 family	$	165,506	$	165,109
Multifamily	18,704		18,378
Construction and land loans	22,051		21,029
Commercial, owner occupied	95,301		96,224
Commercial, non-owner occupied	38,731		39,869
Second mortgages	4,019		4,054
Equity lines of credit	29,179		30,221
Farmland	10,047		12,149
Total real estate secured	383,538		387,033
Non-real estate secured
Personal	11,447		12,754
Commercial	44,825		46,202
Agricultural	3,107		2,830
Total non-real estate secured	59,379		61,786
Gross loans	442,917		448,819
Less:
Allowance for loan losses	4,096		4,373
Net deferred fees	681		698
Loans, net	$	438,140	$	443,748

The following table is an analysis of past due loans as of March 31, 2019:

	Past Due
	30-89 days		90 days and over		Total		Current		Total		> 90 Days and Accruing
Real estate secured
Residential 1-4 family	$	1,840	$	604	$	2,444	$	163,062	$	165,506	$	212
Equity lines of credit	83		—		83		29,096		29,179		—
Multifamily	—		402		402		18,302		18,704		—
Farmland	215		341		556		9,491		10,047		—
Construction, land development, other land loans	70		15		85		21,966		22,051		—
Commercial real estate:
Owner-occupied	27		606		633		94,668		95,301		—
Non-owner-occupied	—		1,316		1,316		37,415		38,731		—
Second mortgages	—		—		—		4,019		4,019		—
Non-real estate secured
Personal	111		27		138		11,309		11,447		2
Commercial	235		106		341		44,484		44,825		—
Agricultural	—		—		—		3,107		3,107		—
Total	$	2,581	$	3,417	$	5,998	$	436,919	$	442,917	$	214

The following table is an analysis of past due loans as of December 31, 2018:

	Past Due
	30-89 days		90 days and over		Total		Current		Total		> 90 Days and Accruing
Real estate secured
Residential 1-4 family	$	1,481	$	819	$	2,300	$	162,809	$	165,109	$	105
Equity lines of credit	218		75		293		29,928		30,221		—
Multifamily	402		—		402		17,976		18,378		—
Farmland	754		—		754		11,395		12,149		—
Construction, land development, other land loans	16		—		16		21,013		21,029		—
Commercial real estate:
Owner-occupied	9		756		765		95,459		96,224		—
Non-owner-occupied	—		1,859		1,859		38,010		39,869		—
Second mortgages	—		—		—		4,054		4,054		—
Non-real estate secured
Personal	186		4		190		12,564		12,754		—
Commercial	82		114		196		46,006		46,202		2
Agricultural	—		—		—		2,830		2,830		—
Total	$	3,148	$	3,627	$	6,775	$	442,044	$	448,819	$	107

Loans are considered delinquent when payments have not been made according to the terms of the contract. The accrual of interest on loans is discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection.  Additionally, in certain instances, loans that have been restructured or modified may also be classified as non-accrual per regulatory guidance until a satisfactory payment history has been established. Credit card loans and other personal loans are typically charged off no later than 180 days past due. In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

The following is a summary of non-accrual loans at March 31, 2019 and December 31, 2018: 

	March 31, 2019		December 31, 2018
Real estate secured
Residential 1-4 family	$	726	$	1,196
Multifamily	402		—
Construction and land loans	15		8
Commercial real estate:
Owner-occupied	1,874		2,038
Non-owner-occupied	1,460		2,004
Farmland	484		142
Non-real estate secured
Personal	26		26
Commercial and agricultural	407		431
Total	$	5,394	$	5,920

The following is a summary of residential real estate currently in the process of foreclosure as well as foreclosed residential real estate as of March 31, 2019.

	Number	Balance
Real estate in the process of foreclosure	6	$	1,488
Foreclosed residential real estate	13	997

The following tables represent a summary of credit quality indicators of the Company's loan portfolio at March 31, 2019 and December 31, 2018. The grades are assigned and/or modified by the Company's credit review and credit analysis departments based on the creditworthiness of the borrower and the overall strength of the loan.

The following tables provide the credit risk profile by internally assigned grade as of March 31, 2019 and December 31, 2018: 

March 31, 2019	Residential 1-4 Family		Multifamily		Farmland		Construction, Land Loans		Commercial Real Estate- Owner Occupied		Commercial Real Estate Non-Owner Occupied
Quality	$	12,403	$	—	$	—	$	595	$	185	$	128
Satisfactory	92,109		5,249		2,243		4,949		39,114		12,699
Acceptable	54,685		12,301		2,796		14,857		49,622		20,562
Special Mention	1,206		752		—		1,565		2,330		3,882
Substandard	5,103		402		5,008		85		4,050		1,460
Doubtful	—		—		—		—		—		—
Total	$	165,506	$	18,704	$	10,047	$	22,051	$	95,301	$	38,731

December 31, 2018	Residential 1-4 Family		Multifamily		Farmland		Construction, Land Loans		Commercial Real Estate- Owner Occupied		Commercial Real Estate Non-Owner Occupied
Quality	$	12,991	$	—	$	—	$	724	$	1,632	$	131
Satisfactory	107,925		4,276		2,736		5,314		39,679		13,046
Acceptable	37,036		13,700		3,617		13,349		47,963		21,073
Special Mention	1,696		402		—		1,565		2,720		3,615
Substandard	5,461		—		5,796		77		4,230		2,004
Doubtful	—		—		—		—		—		—
Total	$	165,109	$	18,378	$	12,149	$	21,029	$	96,224	$	39,869

Explanation of credit grades:

Quality-This grade is reserved for the Bank's top quality loans. These loans have excellent sources of repayment, with no significant identifiable risk of collection.  Generally, loans assigned this rating will demonstrate the following characteristics:

• Conformity in all respects with Bank policy, guidelines, underwriting standards, and Federal and State regulations (no exceptions of any kind).

• Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources.

• Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor.

For existing loans, all of the requirements above apply plus all payments have been made as agreed, current financial information on all borrowers and guarantors has been obtained and analyzed, and overall business operating trends are either stable or improving.

Satisfactory-This grade is given to performing loans. These loans have adequate sources of repayment, with little identifiable risk of collection. Loans assigned this rating will demonstrate the following characteristics:

• General conformity to the Bank's policy requirements, product guidelines and underwriting standards.  Any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors.

• Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources.  

• Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor.

For existing loans, all of the requirements outlined above will apply, plus all payments have been made as agreed, current financial information on all borrowers and guarantors has been obtained and analyzed, and overall business operating trends are stable with any declines considered minor and temporary.

Acceptable-This grade is given to loans that show signs of weakness in either adequate sources of repayment or collateral, but have demonstrated mitigating factors that minimize the risk of delinquency or loss.  Loans assigned this rating may demonstrate some or all of the following characteristics:

• Additional exceptions to the Bank's policy requirements, product guidelines or underwriting standards that present a higher degree of risk to the Bank.  Although the combination and/or severity of identified exceptions is greater, all exceptions have been properly mitigated by other factors.

• Unproved, insufficient or marginal primary sources of repayment that appear sufficient to service the debt at this time.  Repayment weaknesses may be due to minor operational issues, financial trends, or reliance on projected (not historic) performance.

• Marginal or unproven secondary sources to liquidate the debt, including combinations of liquidation of collateral and liquidation value to the net worth of the borrower or guarantor.

For existing loans, payments have generally been made as agreed with only minor and isolated delinquencies.

Special Mention-This grade is given to Watch List loans that include the following characteristics:

• Loans with underwriting guideline tolerances and/or exceptions with no identifiable mitigating factors.

• Extending loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank's position at some future date. Potential weaknesses are the result of deviations from prudent lending practices.

• Loans where adverse economic conditions that develop subsequent to the loan origination do not jeopardize liquidation of the debt, but do substantially increase the level of risk may also warrant this rating.

Substandard-Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action. A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must 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.

The weaknesses may include, but are not limited to:

• High debt to worth ratios and or declining or negative earnings trends

• Declining or inadequate liquidity

• Improper loan structure  or questionable repayment sources

• Lack of well-defined secondary repayment source, and

• Unfavorable competitive comparisons.

Such loans are no longer considered to be adequately protected due to the borrower's declining net worth, lack of earnings capacity, declining collateral margins and/or unperfected collateral positions. A possibility of loss of a portion of the loan balance cannot be ruled out. The repayment ability of the borrower is marginal or weak and the loan may have exhibited excessive overdue status or extensions and/or renewals.

Doubtful-Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus 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. The ability of the borrower to service the debt is extremely weak, overdue status is constant, the debt has been placed on non-accrual status, and no definite repayment schedule exists.

However, these loans are not yet rated as loss because certain events may occur which would salvage the debt. Among these events are:

• Injection of capital

• Alternative financing

• Liquidation of assets or the pledging of additional collateral.

Credit Risk Profile based on payment activity as of March 31, 2019:

	Consumer - Non Real Estate		Equity Line of Credit /Second Mortgages		Commercial - Non Real Estate		Agricultural - Non Real Estate
Performing	$	11,420	$	33,198	$	44,719	$	3,107
Nonperforming (>90 days past due)	27		—		106		—
Total	$	11,447	$	33,198	$	44,825	$	3,107

Credit Risk Profile based on payment activity as of December 31, 2018:

	Consumer - Non Real Estate		Equity Line of Credit /Second Mortgages		Commercial - Non Real Estate		Agricultural - Non Real Estate
Performing	$	12,750	$	34,200	$	46,088	$	2,830
Nonperforming (>90 days past due)	4		75		114		—
Total	$	12,754	$	34,275	$	46,202	$	2,830

The following tables reflect the Bank's impaired loans at March 31, 2019:

March 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance
Real estate secured
Residential 1-4 family	$	4,338	$	4,338	$	—	$	4,332	$	4
Equity lines of credit	—		—		—		4		—
Multifamily	—		—		—		201		—
Farmland	5,008		5,008		—		5,345		—
Construction, land development, other land loans	1,635		1,635		—		1,635		1
Commercial real estate- owner occupied	3,606		3,606		—		4,469		—
Commercial real estate- non owner occupied	—		—		—		—		—
Second mortgages	285		285		—		193		—
Non-real estate secured
Personal	—		—		—		—		12
Commercial and agricultural	306		306		—		312		1
Total	$	15,178	$	15,178	$	—	$	16,491	$	18

March 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With an allowance recorded
Real estate secured
Residential 1-4 family	$	529	$	529	$	91	$	302	$	—
Equity lines of credit	67		67		26		34		—
Multifamily	422		422		65		211		—
Farmland	—		—		—		866		—
Construction, land development, other land loans	—		—		—		—		—
Commercial real estate- owner occupied	1,702		1,702		549		1,788		—
Commercial real estate- non owner occupied	3,062		3,062		871		3,477		—
Second mortgages	35		35		6		18		—
Non-real estate secured
Personal	17		17		6		10		—
Commercial and agricultural	1,181		1,181		895		842		—
Total	$	7,015	$	7,015	$	2,509	$	7,548	$	—

The following tables reflect the Bank's impaired loans at December 31, 2018:

December 31, 2018	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance
Real estate secured
Residential 1-4 family	$	4,325	$	4,325	$	—	$	5,862	$	134
Equity lines of credit	7		7		—		28		—
Multifamily	402		402		—		201		—
Farmland	5,681		5,681		—		3,084		10
Construction, land development, other land loans	1,635		1,635		—		1,700		2
Commercial real estate- owner occupied	5,332		5,332		—		3,442		9
Commercial real estate- non owner occupied	—		—		—		32		—
Second mortgages	100		100		—		155		—
Non real estate secured
Personal	—		—		—		48		9
Commercial and agricultural	317		317		—		411		20
Total	$	17,799	$	17,799	$	—	$	14,963	$	184

December 31, 2018	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With an allowance recorded
Real estate secured
Residential 1-4 family	$	631	$	631	$	191	$	353	$	307
Equity lines of credit	105		105		80		53		6
Multifamily	—		—		—		—		—
Farmland	122		122		2		927		—
Construction, land development, other land loans	—		—		—		—		—
Commercial real estate- owner occupied	1,704		1,704		351		1,789		—
Commercial real estate- non owner occupied	3,686		3,686		844		3,789		45
Second mortgages	35		35		7		18		—
Non real estate secured
Personal	18		18		7		10		—
Commercial and agricultural	1,161		1,161		880		832		—
Total	$	7,462	$	7,462	$	2,362	$	7,771	$	358

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by loan category and is segregated by impairment evaluation method as of and for the three-month periods ended March 31, 2019 and March 31, 2018.

Three months ended March 31, 2019	Residential 1-4 Family			Multifamily		Construction and Land Loans			Commercial Owner Occupied		Commercial Non-Owner Occupied			Second Mortgages			Equity Line of Credit		Farmland			Personal and  Overdrafts			Commercial and Agricultural			Unallocated			Total
Allowance for loan losses:
Balance at December 31, 2018	$	492		$	25	$	27		$	1,022	$	895		$	13		$	127	$	11		$	114		$	957		$	690		$	4,373
Provision expense (credit) for credit losses	136			65		(1		)	67		166			(3		)	62		(4		)	(10		)	53			(428		)	103
Charge-offs	167			—		—			—		92			—			75		—			42			156			—			532
Recoveries	(5		)	—		(2		)	—		(1		)	(1		)	—		—			(29		)	(114		)	—			(152		)
Net charge-offs (recoveries)	162			—		(2		)	—		91			(1		)	75		—			13			42			—			380
Balance at March 31, 2019	$	466		$	90	$	28		$	1,089	$	970		$	11		$	114	$	7		$	91		$	968		$	262		$	4,096
Allowance allocated by impairment method:
Individually evaluated	$	91		$	65	$	—		$	549	$	871		$	6		$	26	$	—		$	6		$	895		$	—		$	2,509
Collectively evaluated	375			25		28			540		99			5			88		7			85			73			262			1,587
Loan balances by impairment method used:
Individually evaluated	$	4,867		$	422	$	1,635		$	5,308	$	3,062		$	320		$	67	$	5,008		$	17		$	1,487		$	—		$	22,193
Collectively evaluated	160,639			18,282		20,416			89,993		35,669			3,699			29,112		5,039			11,430			46,445			—			420,724
Balance at March 31, 2019	$	165,506		$	18,704	$	22,051		$	95,301	$	38,731		$	4,019		$	29,179	$	10,047		$	11,447		$	47,932		—			$	442,917

Three months ended March 31, 2018	Residential 1-4 Family			Multifamily		Construction and Land Loans			Commercial Owner Occupied			Commercial Non-Owner Occupied			Second Mortgages			Equity Line of Credit		Farmland			Personal and  Overdrafts			Commercial and Agricultural			Unallocated		Total
Allowance for loan losses:
Balance at December 31, 2017	$	133		$	—	$	1		$	1,636		$	955		$	12		$	—	$	54		$	265		$	383		$	515	$	3,954
Provision for credit losses	3			3		2			(219		)	(167		)	(3		)	6		139			21			(136		)	523		172
Charge-offs	—			—		—			95			—			5			—		—			88			149			—		337
Recoveries	(8		)	—		(1		)	(17		)	—			—			—		(1		)	(30		)	(154		)	—		(211		)
Net charge-offs (recoveries)	(8		)	—		(1		)	78			—			5			—		(1		)	58			(5		)	—		126
Balance at March 31, 2018	$	144		$	3	$	4		$	1,339		$	788		$	4		$	6	$	194		$	228		$	252		$	1,038	$	4,000
Allowance allocated by impairment method:
Individually evaluated	$	19		$	—	$	—		$	516		$	782		$	—		$	—	$	192		$	24		$	233		$	—	$	1,766
Collectively evaluated	125			3		4			823			6			4			6		2			204			19			1,038		2,234
Loan balances by impairment method used:
Individually evaluated	$	5,269		$	—	$	1,677		$	3,194		$	3,835		$	122		$	35	$	2,200		$	21		$	1,509		$	—	$	17,862
Collectively evaluated	166,462			18,157		15,256			78,957			30,602			4,548			35,533		10,777			13,596			40,227			—		414,115
Balance at March 31, 2018	$	171,731		$	18,157	$	16,933		$	82,151		$	34,437		$	4,670		$	35,568	$	12,977		$	13,617		$	41,736		—		$	431,977

The Company's credit administration personnel and senior financial officers are responsible for tracking, coding, and monitoring loans that become Troubled Debt Restructurings ("TDRs"). Concessions are made to existing borrowers in the form of modified interest rates and / or payment terms. The loans are segregated for regulatory and external reporting. Each specific TDR is reviewed to determine if the accrual of interest should be discontinued and also reviewed for impairment. The Company's senior credit officer performs this analysis on a quarterly basis in addition to determining any other loans that are impaired within the loan portfolio. The Company had a total of $9,255 and $11,546 of loans categorized as troubled debt restructurings as of March 31, 2019 and December 31, 2018, respectively. Interest is accrued on TDRs if the loan is otherwise not impaired and the full collection of principal and interest under the modified terms is still deemed probable.

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. 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.

The following table identifies restructurings completed during the three-month period ended March 31, 2019 that represent new TDRs.

Number Pre-Modification Recorded Investment Post-Modification Recorded Investment

Below Market Rate
Farmland	1	$	754	$	754

Total restructurings 1 $ 754 $ 754

The following table identifies restructurings completed during the three-month period ended March 31, 2018 that represented new TDRs.

Below Market Rate
Residential 1-4 family	1	$	162	$	162
Commercial real estate-owner occupied	1	1,479		1,479
Total	2	$	1,641	$	1,641

There were no defaults in the three-month periods ending March 31, 2019 and March 31, 2018 of TDRs modified in the previous 12 months.

The Bank has engaged an external third party to perform its loan review function in order to identify weaknesses within the loan portfolio. The review, which seeks to cover 25 percent of loan balances each year, considers collateral, repayment history, guarantor strength, debt service coverage, and other relevant information on an individual and global level. These reviews consider borrower cash flow capacity, using financial statements, income tax returns and internally prepared interim statements for borrowers and guarantors. Debt service coverage (DSC) is calculated on each individual customer, or guarantor, as well as the aggregate or global DSC. Collateral evaluation includes an inspection of the collateral file to determine if the Bank is properly secured. Collateral is discounted, when appropriate, to determine a stressed loan to value (LTV) ratio.

The Company also seeks to identify potential problem relationships through watch list reviews, which include reviews of past due data and other information that might be helpful in evaluating a particular loan relationship that is exhibiting stress. Watch list relationships display distinct characteristics including, but not limited to, late payments greater than 60 days, a low DSC calculation, bankruptcy filings, casualty losses, or other issues that would cause a perceived increase in the risk of loss to the Bank.

The segments of the Company's loan portfolio are disaggregated to a level that allows management to monitor risk and performance. In reviewing risk, management has determined there to be several different risk categories within the loan portfolio. The allowance for loan losses consists of amounts applicable to: (i) the commercial loan portfolio; (ii) the commercial real estate loan portfolio; (iii) the construction loan portfolio; (iv) the consumer loan portfolio; and, (v) the residential loan portfolio. The commercial real estate ("CRE") loan segment is further disaggregated into two classes. Non-owner occupied CRE loans, which include loans secured by non-owner occupied nonfarm nonresidential properties, generally have a greater risk profile than all other CRE loans, which include multifamily structures and owner-occupied commercial structures. The construction loan segment is further disaggregated into two classes. One-to-four family residential construction loans are generally made to individuals for the acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built. Commercial construction loans are generally made to developers or investors for the purpose of acquiring, developing and constructing residential or commercial structures. Construction lending is generally considered to involve a higher degree of credit risk than long-term permanent financing.

The following describes the Company's basic methodology for computing its ALLL.

On a quarterly basis, the ALLL methodology begins with the identification of loans subject to ASC 310. All loans that are rated "7" (Doubtful) are assessed as impaired based on the expectation that the full collection of principal and interest is in doubt. All loans that are rated "6" (Substandard) or are expected to be downgraded to "6", require additional analysis to determine whether they may be impaired under ASC 310. All loans that are rated "5" (Special Mention) are presumed not to be impaired. However, "5" rated loans, together with any Troubled Debt Restructured (TDR) loan, may warrant further analysis before completing an assessment of impairment.

A loan is considered impaired and an allowance for loan losses is established on loans for which it is probable that the full collection of principal and interest is in doubt. Once a loan is identified as individually impaired, management measures impairment using one of several methods, including collateral value based on a recent appraisal, liquidation value and/or discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At March 31, 2019 and December 31, 2018, all impaired loans were evaluated based on either the fair value of the collateral or the discounted cash flows.

For ASC 310 loans that are individually evaluated and found to be impaired (primarily those designated as Substandard and Doubtful), the associated ALLL will be based upon one of the three impairment measurement methods specified within ASC 310:

• the present value of expected future cash flows discounted at the loans' effective interest rate;

• the loan's observable fair value; or

• the fair value of the collateral

For impaired loans valued based on collateral value, the collateral value is adjusted for age and condition of the security, and, for real estate, adjusted for condition, location, and age of the most current appraisal. If the adjusted value of the collateral is less than the current principal balance, the difference is designated as direct exposure for loan loss calculations. The total balance of unsecured loans is considered as direct exposure.

For all other loans, including individual loans determined not to be impaired under ASC 310, the associated ALLL is calculated in accordance with ASC 450 that provides for estimated credit losses likely to be realized on groups of loans with similar risk characteristics. The Company uses standard call report categories to segregate loans into groups with similar risk characteristics. Estimated credit losses reflect significant factors that affect the collectability of the portfolio as of the evaluation date. Key factors that influence risk within the Company's loan portfolio are divided into three major categories:

• Historical loss factors - To calculate the anticipated loan loss in each call report category for ASC 450 loans, the Company begins with the net loss in each category for each of the last twelve quarters. The Company uses a rolling twelve quarter weighted historical loss average where the most recent quarters are weighted heavier than the earlier quarters so that the calculation reflects current risk trends within the portfolio. The weighting used by the Company is similar to the Rule of 78's with the net losses of the most recent quarter weighted at 12/78ths and those in the first quarter in the twelve quarter period weighted at 1/78th. Therefore, the net losses of the most recent year represent approximately 54% of the calculation compared with 33% if a simple average of losses over the three-year period was used.  The total of weighted factors for each call report category is applied to the current outstanding loan balance in each category to calculate expected loss based on historical data for a group of loans with similar risk characteristics. The same weighting is applied to all loan types.

• External economic factors - Economic conditions have a significant impact on Company's loan portfolio because deteriorating conditions can adversely impact both collateral values and the customer's ability to service debt. Management has selected the following external factors as indicators of economic conditions:

a. National GDP growth rate

b. Local unemployment rates

c. Prime interest rate

The values for external factors are updated on a quarterly basis based on current data.

• Internal process factors - Internal factors that influence loss rates as a result of risk management and control practices include the following:

a. Past-due loans

b. Non-accrual loans

c. Commercial real estate concentrations

d. Loan volume

e. Level and trend of classified loans

The values for internal factors are updated on a quarterly basis based on current portfolio metrics.

Once the quarterly ALLL is computed, the calculations are reviewed by the Company's management. The ALLL is then reviewed and approved by the Board of Directors.

Loans Held for Sale

The Company's mortgage division originates certain single family, residential first mortgage loans for sale to a third party broker. Loan sale activity is summarized below. Loans are typically sold to investors within 20 days of closing. Management feels the carrying amounts approximate the fair values of loans held for sale.

	Three months ended March 31,
	2019		2018
Loans held for sale at end of period	$	1,727	$	1,795
Proceeds from sales of mortgage loans originated for sale	1,194		10,664
Gain on sales of mortgage loans originated for sale	48		100

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Income Taxes

3 Months Ended

Mar. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense at statutory rates for the three-month periods ended March 31, is provided below, with adjustments needed to determine income tax expense recorded in the consolidated statements of income.

	Three months ended March 31,
	2019			2018
Tax expense (benefit) at statutory rate	$	282		$	164
Increase (decrease) in tax expense resulting from:
Tax-exempt interest	(29		)	(27		)
Other, net	29			33
Income tax expense	$	282		$	170
Statutory corporate federal income tax rate	21		%	21		%

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Capital Requirements

3 Months Ended

Mar. 31, 2019

Banking and Thrift [Abstract]

Capital Requirements

Capital Requirements

Regulators of the Company and its subsidiary, Highlands Union Bank (the "Bank"), have implemented risk-based capital guidelines which require compliance with certain minimum capital ratios as a percent of assets and other certain off-balance sheet items that are adjusted for predefined credit risk factors. On July 7, 2013 the Federal Reserve Board approved Basel III final rules to improve the banking sector's ability to absorb shocks arising from financial and economic stress. The final rules include a new common equity tier 1 minimum ratio and raise the tier 1 risk-weighted assets ratio to 6 percent from 4 percent. In addition, beginning in 2016, the new rules required banks to maintain a capital conservation buffer between 2 and 2 ½ %. Additionally, the new rules increased the risk weighting of various assets. The new rules are being phased in between 2015 and 2019. Generally, the Basel III final rules require banks to maintain higher levels of common equity and regulatory capital.

On February 5, 2015 the Company received notification from the Federal Reserve Bank that it would no longer be required to report holding company consolidated capital ratios.

The following table presents the capital ratios for the Bank only.

	March 31, 2019		December 31, 2018
Tier 1 leverage	9.22	%	9.14	%
Tier 1 risk-based	12.94	%	12.31	%
Total risk-based	13.90	%	13.30	%
Common equity tier 1	12.94	%	12.31	%

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Stock and Earnings Per Share

3 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

Stock and Earnings Per Share

Stock and Earnings Per Share

Earnings per common share is computed using the weighted average outstanding shares for the three month periods ended March 31, 2019 and 2018. The following provides information for the calculation of basic and diluted earnings per common share:

	Three months ended March 31,
(thousands, except per share information)	2019		2018
Net income available to common stockholders	$	1,060	$	610
Weighted average common shares outstanding	8,199		8,199
Total shares outstanding including assumed conversion of preferred securities	10,343		10,292
Basic earnings per common share	$	0.13	$	0.07
Fully diluted earnings per share (including convertible preferred shares outstanding and restricted stock)	0.10		0.06

At the 2018 annual meeting, stockholders approved the 2018 Restricted Stock Plan, which authorized the board's Compensation Committee to issue up to 250,000 shares of Common Stock in grants of restricted stock and restricted stock unit awards to eligible employees. A total of 51,500 shares have been issued under the 2018 Restricted Stock Plan as of March 31, 2019.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

The Bank is a party to various financial instruments with off-balance sheet risk arising in the normal course of business to meet the financing needs of its customers. Those financial instruments include commitments to extend credit and standby letters of credit.

At March 31, 2019, unused commitments totaled $58,165, compared to $56,726 at December 31, 2018. Standby letters of credit totaled $1,977 at March 31, 2019 and $3,477 at December 31, 2018.

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Fair Value

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value

Fair Value

The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record financial instruments at fair value on a nonrecurring basis. 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 ASC Topic 820 on Fair Value Measurements and Disclosures, 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.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon third party models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to determine fair value. These adjustments may include amounts to reflect counterparty credit quality, the borrower's creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company's valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company's valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Recurring - Investment Securities Available for Sale

Securities classified as available for sale are reported at fair value utilizing level 2. For level 2 securities, the Company obtains fair value measurements from multiple independent third party sources. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond's terms and conditions, among other things.

The following tables summarize the Company's available for sale securities portfolio measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018, segregated by the level of the valuation inputs within the fair value hierarchy.

March 31, 2019
	Level 1		Level 2		Level 3		Total Fair Value
State and political subdivisions	$	—	$	13,205	$	—	$	13,205
Mortgage backed securities	—		49,335		—		49,335
SBA pools	—		5,018		—		5,018
Total available for sale securities	$	—	$	67,558	$	—	$	67,558

December 31, 2018
	Level 1		Level 2		Level 3		Total Fair Value
State and political subdivisions	$	—	$	12,836	$	—	$	12,836
Mortgage backed securities	—		50,554		—		50,554
SBA pools	—		5,241		—		5,241
Total available for sale securities	$	—	$	68,631	$	—	$	68,631

Recurring - Derivatives

The Company has entered into interest rate swaps related to customer loan transactions to manage its interest rate risk. Interest rate swaps, which had a notional value of $12,890 as of March 31, 2019 and December 31, 2018, are recorded at fair value, based on third party pricing models that are sensitive to market observable data and are therefore classified as level 2 values. The fair value of derivative financial instruments as of March 31, 2019 totaled $83, compared to $38 at December 31, 2018.

Non Recurring - 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 loss is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment using one of several methods, including recently appraised collateral value and /or tax assessed value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At March 31, 2019 and December 31, 2018, all of the total impaired loans were evaluated based on the fair value of the collateral or the present value of the future cash flows. The Company frequently obtains appraisals prepared by external professional appraisers and applies discounts ranging from 8% to 40% depending on type of property, condition, location, etc. The Company also, in certain instances, prepares internally generated valuations from on-site inspections, third-party valuation models or other information.

Non Recurring – Loans Held for Sale

Loans held for sale are carried at the lower of cost or market value. The fair value of loans held for sale is based on inputs derived from secondary markets for loans with similar characteristics. The Company considers loans held for sale as non-recurring level 2.

Non Recurring –Other Real Estate Owned  / Repossessions / Real Estate Held for Sale

Other real estate owned and repossessions are adjusted to fair value upon transfer of the loans to other real estate owned and repossessions. Subsequently, foreclosed assets and repossessions are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices or recent appraised values of the collateral which the Company considers as nonrecurring level 2.  When the current appraised value is not available or is further discounted below the most recent appraised value less selling costs due to absorption rates and market conditions, the Company records the foreclosed assets within level 3 of the fair value hierarchy.

Real estate held for sale is adjusted to fair value upon transfer from fixed assets or when no longer being used for banking purposes.

The following table summarizes the Company's assets at fair value on a non-recurring basis as of March 31, 2019 and December 31, 2018, segregated by the level of the valuation inputs within the fair value hierarchy. The tables disclose the recorded investment of impaired loans requiring a specific allowance.

March 31, 2019	Level 1		Level 2		Level 3		Fair Value
Impaired loans	$	—	$	—	$	4,506	$	4,506
OREO	—		—		2,886		2,886
Real estate held for sale	—		—		600		600

December 31, 2018	Level 1		Level 2		Level 3		Fair Value
Impaired loans	$	—	$	—	$	5,100	$	5,100
OREO	—		—		2,212		2,212
Real estate held for sale	—		—		817		817

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis for which the Company uses level 3 inputs to determine fair value:

			Quantitative Information about Level 3 Fair Value Measurements
	12/31/18		3/31/2019		Valuation Techniques	Unobservable Input (2)	Range
OREO, net	$	2,212	$	2,886	Appraisal of collateral (1)	Appraisal adjustments	0% to 20%
						Liquidation expenses	0% to 10%
Real estate held for sale	$	817	$	600	Appraisal of collateral (1)	Appraisal adjustments	0% to 20%
						Liquidation expenses	0% to 10%
Impaired loans	$	5,100	$	4,506	Fair value of collateral –real estate  (1), (3)	Appraisal adjustments	0% to 100%
					Fair value of collateral –equipment, inventory, other  (1), (3)	Appraisal adjustments	25% to 80%
						Liquidation expenses	0% to 12%

Valuation adjustments and liquidation cost adjustments represent unobservable inputs for OREO and impaired loans.  The ranges of discounts applied are based on age of independent appraisals, type and condition of collateral, current market conditions, and experience with the local market.

(1)  Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

(2)  Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.  The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

(3)  Includes qualitative adjustments by management.

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices.  However, in many instances, there are no quoted market prices for the Company's various financial instruments.  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. Accordingly, the fair value estimates may not be realized in an immediate settlement.  Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

Cash and Cash Equivalents

The carrying amount reported in the balance sheets for cash, short-term investments and federal funds sold approximates fair value.

Securities Available for Sale

Fair values are determined in the manner as described above.

Other Investments

Other investments include Federal Home Loan Bank stock, Federal Reserve Bank stock, Community Bankers Bank stock, and Pacific Coast Bankers Bank.  The carrying value of those securities approximates fair value based on the redemption provisions of those Banks. Also included in other investments are certificates of deposit purchased from other FDIC insured banks in which the carrying amount approximates fair value.

Loans

The fair value of loans represent the amount at which the loans of the Bank could be exchanged on the open market, based upon the current lending rate for similar types of lending arrangements discounted over the remaining life of the loans .  For fixed rate loans and for variable rate loans with infrequent re-pricing or re-pricing limits, fair value is based on discounted cash flows using current market rates applied to the cash flow analysis.

Deposits

The fair value of time deposits is based on discounted cash flows using current market rates applied to the cash flow analysis for each time deposit. Other non-maturity deposits are reported at their carrying values.

Other Short-Term Borrowings

Fair values of other short-term borrowings are estimated using discounted cash flow analyses based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Estimated maturity dates are also included in the calculation of fair value for these borrowings.

Long-term Debt and Capital Securities

Rates currently available to the Company for debt with similar terms and remaining maturities or established call prices are used to estimate fair value of existing debt.

Off-Balance Sheet Instruments

The carrying value of off-balance sheet commitments to extend credit, standby letters of credit, and financial guarantees, is considered equal to fair value.  Because of the uncertainty involved in attempting to assess the likelihood and timing of commitments being drawn upon, coupled with the lack of an established market and the wide diversity of fee structures, the Company does not believe it is meaningful to provide an estimate of fair value that differs from the given value of the commitment.

The carrying amounts and fair values of the Company's financial instruments at March 31, 2019 and December 31, 2018 were as follows:

	March 31, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	55,178	$	55,178	$	30,066	$	30,066
Securities available for sale	67,558		67,558		68,631		68,631
Other investments	2,770		2,770		2,774		2,774
Loans, net	438,140		425,870		443,748		429,289
Interest rate swaps	83		83		38		38
Deposits	520,699		451,312		502,816		422,570
Other short-term borrowings	30,000		30,106		30,000		30,142
Long-term debt	80		77		93		89

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Formal Written Agreement

3 Months Ended

Mar. 31, 2019

Banking and Thrift [Abstract]

Formal Written Agreement

Formal Written Agreement

On October 13, 2010, the Company and Bank entered into a written agreement ("Written Agreement") with the Federal Reserve Bank of Richmond (the "Reserve Bank").  Under the terms of the Written Agreement, the Bank has agreed to develop and submit to the Reserve Bank for approval within the time periods specified therein written plans or programs to:

• strengthen board oversight of the management and operations of the Bank;

• strengthen credit risk management and administration;

• provide for the effective grading of the Bank's loan portfolio;

• summarize the findings of its review of the adequacy of the staffing of its loan review function;

• improve the Bank's position with respect to loans, relationships, or other assets in excess of $500 that currently are, or in the future become past due more than 90 days, on the Bank's problem loan list, or adversely classified in any report of examination of the Bank;

• review and revise the Bank's methodology for determining the allowance for loan and lease losses ("ALLL") and maintain an adequate ALLL;

• maintain sufficient capital at the Company and the Bank;

• establish a revised written contingency funding plan;

• establish a revised written strategic and capital plan;

• establish a revised investment policy;

• improve the Bank's earnings and overall condition;

• revise the Bank's information technology program;

• establish a disaster recovery and business continuity program; and,

• establish a committee to monitor compliance with all aspects of the written agreement.

Further, both the Company and the Bank have agreed to refrain from declaring or paying dividends without prior regulatory approval. The Company has agreed that it will not take any other form of payment representing a reduction in Bank's capital or make any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities without prior regulatory approval. The Company also has agreed not to incur, increase or guarantee any debt or not to purchase or redeem any shares of its stock without prior regulatory approval.

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Summary of Significant Accounting Policy Update For Certain Required Disclosures (Policies)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09, as subsequently amended by ASU No. 2015-14 issued in August 2015, required adoption in annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company adopted ASU 2014-09 effective January 1, 2018.

Application of ASU 2014-09 requires identification of customer contracts, identification of the performance obligations within those contracts, identification of the transaction price, allocation of the transaction price to the performance obligations, and recognition of revenue once the performance obligation is satisfied. ASU 2014-09 requires disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

The Company’s primary source of revenue is interest income, which is excluded from the scope of this guidance; however, the Company evaluated the impact on noninterest income, which includes fees for services, commissions on sales, and various deposit service charges. The Company concluded that no cumulative-effect adjustment to retained earnings was necessary. The adoption of the standard did not have a material effect on the Company’s financial position or results of operations.

In June 2016, ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments was issued by the FASB. This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). The Company continues to evaluate the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.

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

The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record financial instruments at fair value on a nonrecurring basis. 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 ASC Topic 820 on Fair Value Measurements and Disclosures, 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.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon third party models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to determine fair value. These adjustments may include amounts to reflect counterparty credit quality, the borrower's creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company's valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company's valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Recurring - Investment Securities Available for Sale

Securities classified as available for sale are reported at fair value utilizing level 2. For level 2 securities, the Company obtains fair value measurements from multiple independent third party sources. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond's terms and conditions, among other things.

Non Recurring - 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 loss is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment using one of several methods, including recently appraised collateral value and /or tax assessed value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At March 31, 2019 and December 31, 2018, all of the total impaired loans were evaluated based on the fair value of the collateral or the present value of the future cash flows. The Company frequently obtains appraisals prepared by external professional appraisers and applies discounts ranging from 8% to 40% depending on type of property, condition, location, etc. The Company also, in certain instances, prepares internally generated valuations from on-site inspections, third-party valuation models or other information.

Non Recurring – Loans Held for Sale

Loans held for sale are carried at the lower of cost or market value. The fair value of loans held for sale is based on inputs derived from secondary markets for loans with similar characteristics. The Company considers loans held for sale as non-recurring level 2.

Non Recurring –Other Real Estate Owned  / Repossessions / Real Estate Held for Sale

Other real estate owned and repossessions are adjusted to fair value upon transfer of the loans to other real estate owned and repossessions. Subsequently, foreclosed assets and repossessions are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices or recent appraised values of the collateral which the Company considers as nonrecurring level 2.  When the current appraised value is not available or is further discounted below the most recent appraised value less selling costs due to absorption rates and market conditions, the Company records the foreclosed assets within level 3 of the fair value hierarchy.

Real estate held for sale is adjusted to fair value upon transfer from fixed assets or when no longer being used for banking purposes.

Valuation adjustments and liquidation cost adjustments represent unobservable inputs for OREO and impaired loans.  The ranges of discounts applied are based on age of independent appraisals, type and condition of collateral, current market conditions, and experience with the local market.

(1)  Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

(2)  Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.  The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

(3)  Includes qualitative adjustments by management.

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices.  However, in many instances, there are no quoted market prices for the Company's various financial instruments.  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. Accordingly, the fair value estimates may not be realized in an immediate settlement.  Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

Cash and Cash Equivalents

The carrying amount reported in the balance sheets for cash, short-term investments and federal funds sold approximates fair value.

Securities Available for Sale

Fair values are determined in the manner as described above.

Other Investments

Other investments include Federal Home Loan Bank stock, Federal Reserve Bank stock, Community Bankers Bank stock, and Pacific Coast Bankers Bank.  The carrying value of those securities approximates fair value based on the redemption provisions of those Banks. Also included in other investments are certificates of deposit purchased from other FDIC insured banks in which the carrying amount approximates fair value.

Loans

The fair value of loans represent the amount at which the loans of the Bank could be exchanged on the open market, based upon the current lending rate for similar types of lending arrangements discounted over the remaining life of the loans .  For fixed rate loans and for variable rate loans with infrequent re-pricing or re-pricing limits, fair value is based on discounted cash flows using current market rates applied to the cash flow analysis.

Deposits

The fair value of time deposits is based on discounted cash flows using current market rates applied to the cash flow analysis for each time deposit. Other non-maturity deposits are reported at their carrying values.

Other Short-Term Borrowings

Fair values of other short-term borrowings are estimated using discounted cash flow analyses based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Estimated maturity dates are also included in the calculation of fair value for these borrowings.

Long-term Debt and Capital Securities

Rates currently available to the Company for debt with similar terms and remaining maturities or established call prices are used to estimate fair value of existing debt.

Off-Balance Sheet Instruments

The carrying value of off-balance sheet commitments to extend credit, standby letters of credit, and financial guarantees, is considered equal to fair value.  Because of the uncertainty involved in attempting to assess the likelihood and timing of commitments being drawn upon, coupled with the lack of an established market and the wide diversity of fee structures, the Company does not believe it is meaningful to provide an estimate of fair value that differs from the given value of the commitment.

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Investment Securities Available For Sale (Tables)

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Available-for-sale securities

The amortized cost and market value of securities available for sale are as follows:

	March 31, 2019
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
State and political subdivisions	$	13,583	$	48	$	426	$	13,205
Mortgage backed securities	50,355		21		1,041		49,335
SBA pools	5,166		—		148		5,018
	$	69,104	$	69	$	1,615	$	67,558

	December 31, 2018
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
State and political subdivisions	$	13,590	$	9	$	763	$	12,836
Mortgage backed securities	52,344		8		1,798		50,554
SBA pools	5,326		—		85		5,241
	$	71,260	$	17	$	2,646	$	68,631

The amortized cost and estimated fair value of securities available for sale at March 31, 2019 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	March 31, 2019				December 31, 2018
	Amortized cost		Fair value		Amortized cost		Fair value
Investment securities with scheduled maturities:
Due in one year or less	$	87	$	88	$	98	$	100
Due after one year through five years	394		394		367		366
Due after five years through ten years	3,280		3,175		2,782		2,638
Due after ten years	14,988		14,566		15,669		14,973
Total investment securities with scheduled maturities	18,749		18,223		18,916		18,077
Mortgage-backed securities	50,355		49,335		52,344		50,554
Total investment securities available for sale	$	69,104	$	67,558	$	71,260	$	68,631

Age of gross unrealized losses and fair value by investment category

The following table presents the age of gross unrealized losses and fair value by investment category:

	March 31, 2019
	Less than 12 months				12 months or more				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
State and political subdivisions	$	—	$	—	$	8,857	$	426	$	8,857	$	426
Mortgage-backed securities	228		—		45,766		1,041		45,994		1,041
SBA pools	—		—		5,053		148		5,053		148
Total	$	228	$	—	$	59,676	$	1,615	$	59,904	$	1,615

	December 31, 2018
	Less than 12 months				12 months or more				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
State and political subdivisions	$	3,608	$	73	$	7,791	$	690	$	11,399	$	763
Mortgage-backed securities	2,319		8		46,661		1,790		48,980		1,798
SBA pools	—		—		5,218		85		5,218		85
Total	$	5,927	$	81	$	59,670	$	2,565	$	65,597	$	2,646

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Loans and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

Composition of net loans

The composition of net loans is as follows:

	March 31, 2019		December 31, 2018
Real estate secured:
Residential 1-4 family	$	165,506	$	165,109
Multifamily	18,704		18,378
Construction and land loans	22,051		21,029
Commercial, owner occupied	95,301		96,224
Commercial, non-owner occupied	38,731		39,869
Second mortgages	4,019		4,054
Equity lines of credit	29,179		30,221
Farmland	10,047		12,149
Total real estate secured	383,538		387,033
Non-real estate secured
Personal	11,447		12,754
Commercial	44,825		46,202
Agricultural	3,107		2,830
Total non-real estate secured	59,379		61,786
Gross loans	442,917		448,819
Less:
Allowance for loan losses	4,096		4,373
Net deferred fees	681		698
Loans, net	$	438,140	$	443,748

Loan sale activity is summarized below. Loans are typically sold to investors within 20 days of closing. Management feels the carrying amounts approximate the fair values of loans held for sale.

	Three months ended March 31,
	2019		2018
Loans held for sale at end of period	$	1,727	$	1,795
Proceeds from sales of mortgage loans originated for sale	1,194		10,664
Gain on sales of mortgage loans originated for sale	48		100

Analysis of past due loans

The following table is an analysis of past due loans as of March 31, 2019:

	Past Due
	30-89 days		90 days and over		Total		Current		Total		> 90 Days and Accruing
Real estate secured
Residential 1-4 family	$	1,840	$	604	$	2,444	$	163,062	$	165,506	$	212
Equity lines of credit	83		—		83		29,096		29,179		—
Multifamily	—		402		402		18,302		18,704		—
Farmland	215		341		556		9,491		10,047		—
Construction, land development, other land loans	70		15		85		21,966		22,051		—
Commercial real estate:
Owner-occupied	27		606		633		94,668		95,301		—
Non-owner-occupied	—		1,316		1,316		37,415		38,731		—
Second mortgages	—		—		—		4,019		4,019		—
Non-real estate secured
Personal	111		27		138		11,309		11,447		2
Commercial	235		106		341		44,484		44,825		—
Agricultural	—		—		—		3,107		3,107		—
Total	$	2,581	$	3,417	$	5,998	$	436,919	$	442,917	$	214

The following table is an analysis of past due loans as of December 31, 2018:

	Past Due
	30-89 days		90 days and over		Total		Current		Total		> 90 Days and Accruing
Real estate secured
Residential 1-4 family	$	1,481	$	819	$	2,300	$	162,809	$	165,109	$	105
Equity lines of credit	218		75		293		29,928		30,221		—
Multifamily	402		—		402		17,976		18,378		—
Farmland	754		—		754		11,395		12,149		—
Construction, land development, other land loans	16		—		16		21,013		21,029		—
Commercial real estate:
Owner-occupied	9		756		765		95,459		96,224		—
Non-owner-occupied	—		1,859		1,859		38,010		39,869		—
Second mortgages	—		—		—		4,054		4,054		—
Non-real estate secured
Personal	186		4		190		12,564		12,754		—
Commercial	82		114		196		46,006		46,202		2
Agricultural	—		—		—		2,830		2,830		—
Total	$	3,148	$	3,627	$	6,775	$	442,044	$	448,819	$	107

Schedule of non-accrual loans

The following is a summary of non-accrual loans at March 31, 2019 and December 31, 2018: 

	March 31, 2019		December 31, 2018
Real estate secured
Residential 1-4 family	$	726	$	1,196
Multifamily	402		—
Construction and land loans	15		8
Commercial real estate:
Owner-occupied	1,874		2,038
Non-owner-occupied	1,460		2,004
Farmland	484		142
Non-real estate secured
Personal	26		26
Commercial and agricultural	407		431
Total	$	5,394	$	5,920

Summary of residential real estate in the process of foreclosure

The following is a summary of residential real estate currently in the process of foreclosure as well as foreclosed residential real estate as of March 31, 2019.

	Number	Balance
Real estate in the process of foreclosure	6	$	1,488
Foreclosed residential real estate	13	997

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by loan category and is segregated by impairment evaluation method as of and for the three-month periods ended March 31, 2019 and March 31, 2018.

Three months ended March 31, 2019	Residential 1-4 Family			Multifamily		Construction and Land Loans			Commercial Owner Occupied		Commercial Non-Owner Occupied			Second Mortgages			Equity Line of Credit		Farmland			Personal and  Overdrafts			Commercial and Agricultural			Unallocated			Total
Allowance for loan losses:
Balance at December 31, 2018	$	492		$	25	$	27		$	1,022	$	895		$	13		$	127	$	11		$	114		$	957		$	690		$	4,373
Provision expense (credit) for credit losses	136			65		(1		)	67		166			(3		)	62		(4		)	(10		)	53			(428		)	103
Charge-offs	167			—		—			—		92			—			75		—			42			156			—			532
Recoveries	(5		)	—		(2		)	—		(1		)	(1		)	—		—			(29		)	(114		)	—			(152		)
Net charge-offs (recoveries)	162			—		(2		)	—		91			(1		)	75		—			13			42			—			380
Balance at March 31, 2019	$	466		$	90	$	28		$	1,089	$	970		$	11		$	114	$	7		$	91		$	968		$	262		$	4,096
Allowance allocated by impairment method:
Individually evaluated	$	91		$	65	$	—		$	549	$	871		$	6		$	26	$	—		$	6		$	895		$	—		$	2,509
Collectively evaluated	375			25		28			540		99			5			88		7			85			73			262			1,587
Loan balances by impairment method used:
Individually evaluated	$	4,867		$	422	$	1,635		$	5,308	$	3,062		$	320		$	67	$	5,008		$	17		$	1,487		$	—		$	22,193
Collectively evaluated	160,639			18,282		20,416			89,993		35,669			3,699			29,112		5,039			11,430			46,445			—			420,724
Balance at March 31, 2019	$	165,506		$	18,704	$	22,051		$	95,301	$	38,731		$	4,019		$	29,179	$	10,047		$	11,447		$	47,932		—			$	442,917

Three months ended March 31, 2018	Residential 1-4 Family			Multifamily		Construction and Land Loans			Commercial Owner Occupied			Commercial Non-Owner Occupied			Second Mortgages			Equity Line of Credit		Farmland			Personal and  Overdrafts			Commercial and Agricultural			Unallocated		Total
Allowance for loan losses:
Balance at December 31, 2017	$	133		$	—	$	1		$	1,636		$	955		$	12		$	—	$	54		$	265		$	383		$	515	$	3,954
Provision for credit losses	3			3		2			(219		)	(167		)	(3		)	6		139			21			(136		)	523		172
Charge-offs	—			—		—			95			—			5			—		—			88			149			—		337
Recoveries	(8		)	—		(1		)	(17		)	—			—			—		(1		)	(30		)	(154		)	—		(211		)
Net charge-offs (recoveries)	(8		)	—		(1		)	78			—			5			—		(1		)	58			(5		)	—		126
Balance at March 31, 2018	$	144		$	3	$	4		$	1,339		$	788		$	4		$	6	$	194		$	228		$	252		$	1,038	$	4,000
Allowance allocated by impairment method:
Individually evaluated	$	19		$	—	$	—		$	516		$	782		$	—		$	—	$	192		$	24		$	233		$	—	$	1,766
Collectively evaluated	125			3		4			823			6			4			6		2			204			19			1,038		2,234
Loan balances by impairment method used:
Individually evaluated	$	5,269		$	—	$	1,677		$	3,194		$	3,835		$	122		$	35	$	2,200		$	21		$	1,509		$	—	$	17,862
Collectively evaluated	166,462			18,157		15,256			78,957			30,602			4,548			35,533		10,777			13,596			40,227			—		414,115
Balance at March 31, 2018	$	171,731		$	18,157	$	16,933		$	82,151		$	34,437		$	4,670		$	35,568	$	12,977		$	13,617		$	41,736		—		$	431,977

Credit risk profiles

Credit Risk Profile based on payment activity as of March 31, 2019:

	Consumer - Non Real Estate		Equity Line of Credit /Second Mortgages		Commercial - Non Real Estate		Agricultural - Non Real Estate
Performing	$	11,420	$	33,198	$	44,719	$	3,107
Nonperforming (>90 days past due)	27		—		106		—
Total	$	11,447	$	33,198	$	44,825	$	3,107

Credit Risk Profile based on payment activity as of December 31, 2018:

	Consumer - Non Real Estate		Equity Line of Credit /Second Mortgages		Commercial - Non Real Estate		Agricultural - Non Real Estate
Performing	$	12,750	$	34,200	$	46,088	$	2,830
Nonperforming (>90 days past due)	4		75		114		—
Total	$	12,754	$	34,275	$	46,202	$	2,830

The following tables represent a summary of credit quality indicators of the Company's loan portfolio at March 31, 2019 and December 31, 2018. The grades are assigned and/or modified by the Company's credit review and credit analysis departments based on the creditworthiness of the borrower and the overall strength of the loan.

The following tables provide the credit risk profile by internally assigned grade as of March 31, 2019 and December 31, 2018: 

March 31, 2019	Residential 1-4 Family		Multifamily		Farmland		Construction, Land Loans		Commercial Real Estate- Owner Occupied		Commercial Real Estate Non-Owner Occupied
Quality	$	12,403	$	—	$	—	$	595	$	185	$	128
Satisfactory	92,109		5,249		2,243		4,949		39,114		12,699
Acceptable	54,685		12,301		2,796		14,857		49,622		20,562
Special Mention	1,206		752		—		1,565		2,330		3,882
Substandard	5,103		402		5,008		85		4,050		1,460
Doubtful	—		—		—		—		—		—
Total	$	165,506	$	18,704	$	10,047	$	22,051	$	95,301	$	38,731

December 31, 2018	Residential 1-4 Family		Multifamily		Farmland		Construction, Land Loans		Commercial Real Estate- Owner Occupied		Commercial Real Estate Non-Owner Occupied
Quality	$	12,991	$	—	$	—	$	724	$	1,632	$	131
Satisfactory	107,925		4,276		2,736		5,314		39,679		13,046
Acceptable	37,036		13,700		3,617		13,349		47,963		21,073
Special Mention	1,696		402		—		1,565		2,720		3,615
Substandard	5,461		—		5,796		77		4,230		2,004
Doubtful	—		—		—		—		—		—
Total	$	165,109	$	18,378	$	12,149	$	21,029	$	96,224	$	39,869

Impaired loans

The following tables reflect the Bank's impaired loans at March 31, 2019:

March 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance
Real estate secured
Residential 1-4 family	$	4,338	$	4,338	$	—	$	4,332	$	4
Equity lines of credit	—		—		—		4		—
Multifamily	—		—		—		201		—
Farmland	5,008		5,008		—		5,345		—
Construction, land development, other land loans	1,635		1,635		—		1,635		1
Commercial real estate- owner occupied	3,606		3,606		—		4,469		—
Commercial real estate- non owner occupied	—		—		—		—		—
Second mortgages	285		285		—		193		—
Non-real estate secured
Personal	—		—		—		—		12
Commercial and agricultural	306		306		—		312		1
Total	$	15,178	$	15,178	$	—	$	16,491	$	18

March 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With an allowance recorded
Real estate secured
Residential 1-4 family	$	529	$	529	$	91	$	302	$	—
Equity lines of credit	67		67		26		34		—
Multifamily	422		422		65		211		—
Farmland	—		—		—		866		—
Construction, land development, other land loans	—		—		—		—		—
Commercial real estate- owner occupied	1,702		1,702		549		1,788		—
Commercial real estate- non owner occupied	3,062		3,062		871		3,477		—
Second mortgages	35		35		6		18		—
Non-real estate secured
Personal	17		17		6		10		—
Commercial and agricultural	1,181		1,181		895		842		—
Total	$	7,015	$	7,015	$	2,509	$	7,548	$	—

The following tables reflect the Bank's impaired loans at December 31, 2018:

December 31, 2018	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance
Real estate secured
Residential 1-4 family	$	4,325	$	4,325	$	—	$	5,862	$	134
Equity lines of credit	7		7		—		28		—
Multifamily	402		402		—		201		—
Farmland	5,681		5,681		—		3,084		10
Construction, land development, other land loans	1,635		1,635		—		1,700		2
Commercial real estate- owner occupied	5,332		5,332		—		3,442		9
Commercial real estate- non owner occupied	—		—		—		32		—
Second mortgages	100		100		—		155		—
Non real estate secured
Personal	—		—		—		48		9
Commercial and agricultural	317		317		—		411		20
Total	$	17,799	$	17,799	$	—	$	14,963	$	184

December 31, 2018	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With an allowance recorded
Real estate secured
Residential 1-4 family	$	631	$	631	$	191	$	353	$	307
Equity lines of credit	105		105		80		53		6
Multifamily	—		—		—		—		—
Farmland	122		122		2		927		—
Construction, land development, other land loans	—		—		—		—		—
Commercial real estate- owner occupied	1,704		1,704		351		1,789		—
Commercial real estate- non owner occupied	3,686		3,686		844		3,789		45
Second mortgages	35		35		7		18		—
Non real estate secured
Personal	18		18		7		10		—
Commercial and agricultural	1,161		1,161		880		832		—
Total	$	7,462	$	7,462	$	2,362	$	7,771	$	358

Troubled debt restructuring

The following table identifies restructurings completed during the three-month period ended March 31, 2019 that represent new TDRs.

Number Pre-Modification Recorded Investment Post-Modification Recorded Investment

Below Market Rate
Farmland	1	$	754	$	754

Total restructurings 1 $ 754 $ 754

The following table identifies restructurings completed during the three-month period ended March 31, 2018 that represented new TDRs.

Below Market Rate
Residential 1-4 family	1	$	162	$	162
Commercial real estate-owner occupied	1	1,479		1,479
Total	2	$	1,641	$	1,641

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2019

Income Tax Disclosure [Abstract]

Income tax reconciliation

Income tax expense at statutory rates for the three-month periods ended March 31, is provided below, with adjustments needed to determine income tax expense recorded in the consolidated statements of income.

	Three months ended March 31,
	2019			2018
Tax expense (benefit) at statutory rate	$	282		$	164
Increase (decrease) in tax expense resulting from:
Tax-exempt interest	(29		)	(27		)
Other, net	29			33
Income tax expense	$	282		$	170
Statutory corporate federal income tax rate	21		%	21		%

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Capital Requirements (Tables)

3 Months Ended

Mar. 31, 2019

Banking and Thrift [Abstract]

Schedule of capital ratios as required by regulators

The following table presents the capital ratios for the Bank only.

	March 31, 2019		December 31, 2018
Tier 1 leverage	9.22	%	9.14	%
Tier 1 risk-based	12.94	%	12.31	%
Total risk-based	13.90	%	13.30	%
Common equity tier 1	12.94	%	12.31	%

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Stock and Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

Reconciliation of the earnings per common share computation

The following provides information for the calculation of basic and diluted earnings per common share:

	Three months ended March 31,
(thousands, except per share information)	2019		2018
Net income available to common stockholders	$	1,060	$	610
Weighted average common shares outstanding	8,199		8,199
Total shares outstanding including assumed conversion of preferred securities	10,343		10,292
Basic earnings per common share	$	0.13	$	0.07
Fully diluted earnings per share (including convertible preferred shares outstanding and restricted stock)	0.10		0.06

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Fair Value (Tables)

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Available for sale securities portfolio measured at fair value on a recurring basis

The following tables summarize the Company's available for sale securities portfolio measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018, segregated by the level of the valuation inputs within the fair value hierarchy.

March 31, 2019
	Level 1		Level 2		Level 3		Total Fair Value
State and political subdivisions	$	—	$	13,205	$	—	$	13,205
Mortgage backed securities	—		49,335		—		49,335
SBA pools	—		5,018		—		5,018
Total available for sale securities	$	—	$	67,558	$	—	$	67,558

December 31, 2018
	Level 1		Level 2		Level 3		Total Fair Value
State and political subdivisions	$	—	$	12,836	$	—	$	12,836
Mortgage backed securities	—		50,554		—		50,554
SBA pools	—		5,241		—		5,241
Total available for sale securities	$	—	$	68,631	$	—	$	68,631

Assets at fair value on a non - recurring basis segregated by the level of the valuation inputs within the fair value hierarchy

The following table summarizes the Company's assets at fair value on a non-recurring basis as of March 31, 2019 and December 31, 2018, segregated by the level of the valuation inputs within the fair value hierarchy. The tables disclose the recorded investment of impaired loans requiring a specific allowance.

March 31, 2019	Level 1		Level 2		Level 3		Fair Value
Impaired loans	$	—	$	—	$	4,506	$	4,506
OREO	—		—		2,886		2,886
Real estate held for sale	—		—		600		600

December 31, 2018	Level 1		Level 2		Level 3		Fair Value
Impaired loans	$	—	$	—	$	5,100	$	5,100
OREO	—		—		2,212		2,212
Real estate held for sale	—		—		817		817

Level 3 inputs for assets measured on a nonrecurring basis

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis for which the Company uses level 3 inputs to determine fair value:

			Quantitative Information about Level 3 Fair Value Measurements
	12/31/18		3/31/2019		Valuation Techniques	Unobservable Input (2)	Range
OREO, net	$	2,212	$	2,886	Appraisal of collateral (1)	Appraisal adjustments	0% to 20%
						Liquidation expenses	0% to 10%
Real estate held for sale	$	817	$	600	Appraisal of collateral (1)	Appraisal adjustments	0% to 20%
						Liquidation expenses	0% to 10%
Impaired loans	$	5,100	$	4,506	Fair value of collateral –real estate  (1), (3)	Appraisal adjustments	0% to 100%
					Fair value of collateral –equipment, inventory, other  (1), (3)	Appraisal adjustments	25% to 80%
						Liquidation expenses	0% to 12%

Valuation adjustments and liquidation cost adjustments represent unobservable inputs for OREO and impaired loans.  The ranges of discounts applied are based on age of independent appraisals, type and condition of collateral, current market conditions, and experience with the local market.

(1)  Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

(2)  Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.  The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

(3)  Includes qualitative adjustments by management.

Carrying amounts and fair values of financial instruments

The carrying amounts and fair values of the Company's financial instruments at March 31, 2019 and December 31, 2018 were as follows:

	March 31, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	55,178	$	55,178	$	30,066	$	30,066
Securities available for sale	67,558		67,558		68,631		68,631
Other investments	2,770		2,770		2,774		2,774
Loans, net	438,140		425,870		443,748		429,289
Interest rate swaps	83		83		38		38
Deposits	520,699		451,312		502,816		422,570
Other short-term borrowings	30,000		30,106		30,000		30,142
Long-term debt	80		77		93		89

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Investment Securities Available For Sale - Amortized Cost and Market Value (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Amortized cost	$ 69,104	$ 71,260
Gross unrealized gains	69	17
Gross unrealized losses	1,615	2,646
Securities available for sale	67,558	68,631
State and political subdivisions
Debt Securities, Available-for-sale [Line Items]
Amortized cost	13,583	13,590
Gross unrealized gains	48	9
Gross unrealized losses	426	763
Securities available for sale	13,205	12,836
Mortgage backed securities
Debt Securities, Available-for-sale [Line Items]
Amortized cost	50,355	52,344
Gross unrealized gains	21	8
Gross unrealized losses	1,041	1,798
Securities available for sale	49,335	50,554
SBA pools
Debt Securities, Available-for-sale [Line Items]
Amortized cost	5,166	5,326
Gross unrealized gains	0	0
Gross unrealized losses	148	85
Securities available for sale	$ 5,018	$ 5,241

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Investment Securities Available For Sale - Narrative (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Other-than-temporary impairment loss	$ 0	$ 0
Net gains (losses)	0	$ 0
Collateral pledged
Debt Securities, Available-for-sale [Line Items]
Investment securities pledged as collateral on public deposits	$ 37,923,000		$ 37,448,000

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Investment Securities Available For Sale - Age of Gross Unrealized Losses and Fair Value by Investment Category (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Less than 12 months, Fair value	$ 228	$ 5,927
12 months or more, Fair value	59,676	59,670
Fair value	59,904	65,597
Less than 12 months, Unrealized losses	0	81
12 months or more, Unrealized losses	1,615	2,565
Unrealized losses	1,615	2,646
State and political subdivisions
Debt Securities, Available-for-sale [Line Items]
Less than 12 months, Fair value	0	3,608
12 months or more, Fair value	8,857	7,791
Fair value	8,857	11,399
Less than 12 months, Unrealized losses	0	73
12 months or more, Unrealized losses	426	690
Unrealized losses	426	763
Mortgage backed securities
Debt Securities, Available-for-sale [Line Items]
Less than 12 months, Fair value	228	2,319
12 months or more, Fair value	45,766	46,661
Fair value	45,994	48,980
Less than 12 months, Unrealized losses	0	8
12 months or more, Unrealized losses	1,041	1,790
Unrealized losses	1,041	1,798
SBA pools
Debt Securities, Available-for-sale [Line Items]
Less than 12 months, Fair value	0	0
12 months or more, Fair value	5,053	5,218
Fair value	5,053	5,218
Less than 12 months, Unrealized losses	0	0
12 months or more, Unrealized losses	148	85
Unrealized losses	$ 148	$ 85

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Investment Securities Available For Sale - Investments Securities with Scheduled Maturities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Amortized cost
Amortized cost - due in one year or less	$ 87	$ 98
Amortized cost - due after one year through five years	394	367
Amortized cost - due after five years through ten years	3,280	2,782
Amortized cost - due after ten years	14,988	15,669
Amortized cost - total	18,749	18,916
Amortized cost - mortgage-backed securities	50,355	52,344
Amortized cost	69,104	71,260
Fair value
Fair value - due in one year or less	88	100
Fair value - due after one year through five years	394	366
Fair value - due after five years through ten years	3,175	2,638
Fair value - due after ten years	14,566	14,973
Fair value - sub total	18,223	18,077
Fair value - mortgage-backed securities	49,335	50,554
Fair value - grand total	$ 67,558	$ 68,631

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Loans and Allowance for Loan Losses - Composition of Net Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 442,917	$ 448,819	$ 431,977
Allowance for loan losses	4,096	4,373
Net deferred fees	681	698
Net loans	438,140	443,748
Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	383,538	387,033
Non-real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	59,379	61,786
Residential 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	165,506	165,109	171,731
Residential 1-4 family | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	165,506	165,109
Multifamily
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	18,704	18,378	18,157
Multifamily | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	18,704	18,378
Construction and land loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	22,051	21,029
Construction and land loans | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	22,051	21,029
Commercial, owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	95,301		82,151
Commercial, owner occupied | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	95,301	96,224
Commercial, non-owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	38,731		34,437
Commercial, non-owner occupied | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	38,731	39,869
Second mortgages
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	4,019		4,670
Second mortgages | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	4,019	4,054
Equity lines of credit
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	29,179		35,568
Equity lines of credit | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	29,179	30,221
Farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	10,047	12,149	$ 12,977
Farmland | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	10,047	12,149
Personal | Non-real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	11,447	12,754
Commercial | Non-real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	44,825	46,202
Agricultural | Non-real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 3,107	$ 2,830

XML

Loans and Allowance for Loan Losses - Past Due Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	$ 5,998	$ 6,775
Current	436,919	442,044
Total	442,917	448,819	$ 431,977
90 Days and Accruing	214	107
Residential 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	165,506	165,109	171,731
Equity lines of credit
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	29,179		35,568
Multifamily
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	18,704	18,378	18,157
Farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	10,047	12,149	12,977
Construction and land loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	22,051	21,029
Commercial, owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	95,301		82,151
Commercial, non-owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	38,731		34,437
Second mortgages
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	4,019		$ 4,670
30-89 days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	2,581	3,148
90 days and over
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	3,417	3,627
Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	383,538	387,033
Real estate secured | Residential 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	2,444	2,300
Current	163,062	162,809
Total	165,506	165,109
90 Days and Accruing	212	105
Real estate secured | Equity lines of credit
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	83	293
Current	29,096	29,928
Total	29,179	30,221
90 Days and Accruing	0	0
Real estate secured | Multifamily
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	402	402
Current	18,302	17,976
Total	18,704	18,378
90 Days and Accruing	0	0
Real estate secured | Farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	556	754
Current	9,491	11,395
Total	10,047	12,149
90 Days and Accruing	0	0
Real estate secured | Construction and land loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	85	16
Current	21,966	21,013
Total	22,051	21,029
90 Days and Accruing	0	0
Real estate secured | Commercial, owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	633	765
Current	94,668	95,459
Total	95,301	96,224
90 Days and Accruing	0	0
Real estate secured | Commercial, non-owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	1,316	1,859
Current	37,415	38,010
Total	38,731	39,869
90 Days and Accruing	0	0
Real estate secured | Second mortgages
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	0	0
Current	4,019	4,054
Total	4,019	4,054
90 Days and Accruing	0	0
Real estate secured | 30-89 days | Residential 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	1,840	1,481
Real estate secured | 30-89 days | Equity lines of credit
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	83	218
Real estate secured | 30-89 days | Multifamily
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	0	402
Real estate secured | 30-89 days | Farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	215	754
Real estate secured | 30-89 days | Construction and land loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	70	16
Real estate secured | 30-89 days | Commercial, owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	27	9
Real estate secured | 30-89 days | Commercial, non-owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	0	0
Real estate secured | 30-89 days | Second mortgages
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	0	0
Real estate secured | 90 days and over | Residential 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	604	819
Real estate secured | 90 days and over | Equity lines of credit
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	0	75
Real estate secured | 90 days and over | Multifamily
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	402	0
Real estate secured | 90 days and over | Farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	341	0
Real estate secured | 90 days and over | Construction and land loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	15	0
Real estate secured | 90 days and over | Commercial, owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	606	756
Real estate secured | 90 days and over | Commercial, non-owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	1,316	1,859
Real estate secured | 90 days and over | Second mortgages
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	0	0
Non-real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	59,379	61,786
Non-real estate secured | Personal
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	138	190
Current	11,309	12,564
Total	11,447	12,754
90 Days and Accruing	2	0
Non-real estate secured | Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	341	196
Current	44,484	46,006
Total	44,825	46,202
90 Days and Accruing	0	2
Non-real estate secured | Agricultural
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	0	0
Current	3,107	2,830
Total	3,107	2,830
90 Days and Accruing	0	0
Non-real estate secured | 30-89 days | Personal
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	111	186
Non-real estate secured | 30-89 days | Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	235	82
Non-real estate secured | 30-89 days | Agricultural
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	0	0
Non-real estate secured | 90 days and over | Personal
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	27	4
Non-real estate secured | 90 days and over | Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	106	114
Non-real estate secured | 90 days and over | Agricultural
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due	$ 0	$ 0

XML

Loans and Allowance for Loan Losses - Summary of Non-Accrual Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	$ 5,394	$ 5,920
Residential 1-4 family | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	726	1,196
Multifamily | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	402	0
Construction and land loans | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	15	8
Commercial, owner occupied | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	1,874	2,038
Commercial, non-owner occupied | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	1,460	2,004
Farmland | Real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	484	142
Personal | Non-real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	26	26
Commercial and agricultural | Non-real estate secured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	$ 407	$ 431

XML

Loans and Allowance for Loan Losses - Foreclosed (Details) - Real estate secured - Residential 1-4 family $ in Thousands	Mar. 31, 2019 USD ($) loan
Real estate in the process of foreclosure, number | loan	6
Foreclosed residential real estate, number | loan	13
Real estate in the process of foreclosure | $	$ 1,488
Foreclosed residential real estate | $	$ 997

XML

Loans and Allowance for Loan Losses - Credit Risk Profile (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 442,917	$ 448,819	$ 431,977
Residential 1-4 family
Financing Receivable, Recorded Investment [Line Items]
Loans	165,506	165,109	171,731
Residential 1-4 family | Quality
Financing Receivable, Recorded Investment [Line Items]
Loans	12,403	12,991
Residential 1-4 family | Satisfactory
Financing Receivable, Recorded Investment [Line Items]
Loans	92,109	107,925
Residential 1-4 family | Acceptable
Financing Receivable, Recorded Investment [Line Items]
Loans	54,685	37,036
Residential 1-4 family | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans	1,206	1,696
Residential 1-4 family | Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans	5,103	5,461
Residential 1-4 family | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Multifamily
Financing Receivable, Recorded Investment [Line Items]
Loans	18,704	18,378	18,157
Multifamily | Quality
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Multifamily | Satisfactory
Financing Receivable, Recorded Investment [Line Items]
Loans	5,249	4,276
Multifamily | Acceptable
Financing Receivable, Recorded Investment [Line Items]
Loans	12,301	13,700
Multifamily | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans	752	402
Multifamily | Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans	402	0
Multifamily | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Farmland
Financing Receivable, Recorded Investment [Line Items]
Loans	10,047	12,149	$ 12,977
Farmland | Quality
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Farmland | Satisfactory
Financing Receivable, Recorded Investment [Line Items]
Loans	2,243	2,736
Farmland | Acceptable
Financing Receivable, Recorded Investment [Line Items]
Loans	2,796	3,617
Farmland | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Farmland | Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans	5,008	5,796
Farmland | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Construction and land loans
Financing Receivable, Recorded Investment [Line Items]
Loans	22,051	21,029
Construction and land loans | Quality
Financing Receivable, Recorded Investment [Line Items]
Loans	595	724
Construction and land loans | Satisfactory
Financing Receivable, Recorded Investment [Line Items]
Loans	4,949	5,314
Construction and land loans | Acceptable
Financing Receivable, Recorded Investment [Line Items]
Loans	14,857	13,349
Construction and land loans | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans	1,565	1,565
Construction and land loans | Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans	85	77
Construction and land loans | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Commercial Real Estate- Owner Occupied
Financing Receivable, Recorded Investment [Line Items]
Loans	95,301	96,224
Commercial Real Estate- Owner Occupied | Quality
Financing Receivable, Recorded Investment [Line Items]
Loans	185	1,632
Commercial Real Estate- Owner Occupied | Satisfactory
Financing Receivable, Recorded Investment [Line Items]
Loans	39,114	39,679
Commercial Real Estate- Owner Occupied | Acceptable
Financing Receivable, Recorded Investment [Line Items]
Loans	49,622	47,963
Commercial Real Estate- Owner Occupied | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans	2,330	2,720
Commercial Real Estate- Owner Occupied | Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans	4,050	4,230
Commercial Real Estate- Owner Occupied | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Commercial Real Estate Non-Owner Occupied
Financing Receivable, Recorded Investment [Line Items]
Loans	38,731	39,869
Commercial Real Estate Non-Owner Occupied | Quality
Financing Receivable, Recorded Investment [Line Items]
Loans	128	131
Commercial Real Estate Non-Owner Occupied | Satisfactory
Financing Receivable, Recorded Investment [Line Items]
Loans	12,699	13,046
Commercial Real Estate Non-Owner Occupied | Acceptable
Financing Receivable, Recorded Investment [Line Items]
Loans	20,562	21,073
Commercial Real Estate Non-Owner Occupied | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans	3,882	3,615
Commercial Real Estate Non-Owner Occupied | Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans	1,460	2,004
Commercial Real Estate Non-Owner Occupied | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Consumer - Non Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans	11,447	12,754
Consumer - Non Real Estate | Performing
Financing Receivable, Recorded Investment [Line Items]
Loans	11,420	12,750
Consumer - Non Real Estate | Nonperforming (90 days past due)
Financing Receivable, Recorded Investment [Line Items]
Loans	27	4
Equity Line of Credit /Second Mortgages
Financing Receivable, Recorded Investment [Line Items]
Loans	33,198	34,275
Equity Line of Credit /Second Mortgages | Performing
Financing Receivable, Recorded Investment [Line Items]
Loans	33,198	34,200
Equity Line of Credit /Second Mortgages | Nonperforming (90 days past due)
Financing Receivable, Recorded Investment [Line Items]
Loans	0	75
Commercial - Non Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans	44,825	46,202
Commercial - Non Real Estate | Performing
Financing Receivable, Recorded Investment [Line Items]
Loans	44,719	46,088
Commercial - Non Real Estate | Nonperforming (90 days past due)
Financing Receivable, Recorded Investment [Line Items]
Loans	106	114
Agricultural - Non Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans	3,107	2,830
Agricultural - Non Real Estate | Performing
Financing Receivable, Recorded Investment [Line Items]
Loans	3,107	2,830
Agricultural - Non Real Estate | Nonperforming (90 days past due)
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 0	$ 0

XML

Loans and Allowance for Loan Losses - Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Recorded Investment
With No Related Allowance	$ 15,178	$ 17,799
With Related Allowance	7,015	7,462
Unpaid Principal Balance
With No Related Allowance	15,178	17,799
With Related Allowance	7,015	7,462
Related Allowance	2,509	2,362
Average Recorded Investment
With No Related Allowance	16,491	14,963
With Related Allowance	7,548	7,771
Interest Income Recognized
With No Related Allowance	18	184
With Related Allowance	0	358
Real estate secured | Residential 1-4 family
Recorded Investment
With No Related Allowance	4,338	4,325
With Related Allowance	529	631
Unpaid Principal Balance
With No Related Allowance	4,338	4,325
With Related Allowance	529	631
Related Allowance	91	191
Average Recorded Investment
With No Related Allowance	4,332	5,862
With Related Allowance	302	353
Interest Income Recognized
With No Related Allowance	4	134
With Related Allowance	0	307
Real estate secured | Equity lines of credit
Recorded Investment
With No Related Allowance	0	7
With Related Allowance	67	105
Unpaid Principal Balance
With No Related Allowance	0	7
With Related Allowance	67	105
Related Allowance	26	80
Average Recorded Investment
With No Related Allowance	4	28
With Related Allowance	34	53
Interest Income Recognized
With No Related Allowance	0	0
With Related Allowance	0	6
Real estate secured | Multifamily
Recorded Investment
With No Related Allowance	0	402
With Related Allowance	422	0
Unpaid Principal Balance
With No Related Allowance	0	402
With Related Allowance	422	0
Related Allowance	65	0
Average Recorded Investment
With No Related Allowance	201	201
With Related Allowance	211	0
Interest Income Recognized
With No Related Allowance	0	0
With Related Allowance	0	0
Real estate secured | Farmland
Recorded Investment
With No Related Allowance	5,008	5,681
With Related Allowance	0	122
Unpaid Principal Balance
With No Related Allowance	5,008	5,681
With Related Allowance	0	122
Related Allowance	0	2
Average Recorded Investment
With No Related Allowance	5,345	3,084
With Related Allowance	866	927
Interest Income Recognized
With No Related Allowance	0	10
With Related Allowance	0	0
Real estate secured | Construction, land development, other land loans
Recorded Investment
With No Related Allowance	1,635	1,635
With Related Allowance	0	0
Unpaid Principal Balance
With No Related Allowance	1,635	1,635
With Related Allowance	0	0
Related Allowance	0	0
Average Recorded Investment
With No Related Allowance	1,635	1,700
With Related Allowance	0	0
Interest Income Recognized
With No Related Allowance	1	2
With Related Allowance	0	0
Real estate secured | Commercial real estate- owner occupied
Recorded Investment
With No Related Allowance	3,606	5,332
With Related Allowance	1,702	1,704
Unpaid Principal Balance
With No Related Allowance	3,606	5,332
With Related Allowance	1,702	1,704
Related Allowance	549	351
Average Recorded Investment
With No Related Allowance	4,469	3,442
With Related Allowance	1,788	1,789
Interest Income Recognized
With No Related Allowance	0	9
With Related Allowance	0	0
Real estate secured | Commercial real estate- non owner occupied
Recorded Investment
With No Related Allowance	0	0
With Related Allowance	3,062	3,686
Unpaid Principal Balance
With No Related Allowance	0	0
With Related Allowance	3,062	3,686
Related Allowance	871	844
Average Recorded Investment
With No Related Allowance	0	32
With Related Allowance	3,477	3,789
Interest Income Recognized
With No Related Allowance	0	0
With Related Allowance	0	45
Real estate secured | Second mortgages
Recorded Investment
With No Related Allowance	285	100
With Related Allowance	35	35
Unpaid Principal Balance
With No Related Allowance	285	100
With Related Allowance	35	35
Related Allowance	6	7
Average Recorded Investment
With No Related Allowance	193	155
With Related Allowance	18	18
Interest Income Recognized
With No Related Allowance	0	0
With Related Allowance	0	0
Non-real estate secured | Personal / Consumer
Recorded Investment
With No Related Allowance	0	0
With Related Allowance	17	18
Unpaid Principal Balance
With No Related Allowance	0	0
With Related Allowance	17	18
Related Allowance	6	7
Average Recorded Investment
With No Related Allowance	0	48
With Related Allowance	10	10
Interest Income Recognized
With No Related Allowance	12	9
With Related Allowance	0	0
Non-real estate secured | Commercial and Agricultural
Recorded Investment
With No Related Allowance	306	317
With Related Allowance	1,181	1,161
Unpaid Principal Balance
With No Related Allowance	306	317
With Related Allowance	1,181	1,161
Related Allowance	895	880
Average Recorded Investment
With No Related Allowance	312	411
With Related Allowance	842	832
Interest Income Recognized
With No Related Allowance	1	20
With Related Allowance	$ 0	$ 0

XML

Loans and Allowance for Loan Losses - Allowance for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	$ 4,373	$ 3,954
Provision expense (credit) for credit losses	103	172
Charge-offs	532	337
Recoveries	(152)	(211)
Net charge-offs (recoveries)	380	126
Ending Balance	4,096	4,000
Ending Balance: Individually evaluated	2,509	1,766
Ending Balance: Collectively evaluated	1,587	2,234
Loan balances by impairment method used:
Ending Balance: Individually evaluated	22,193	17,862
Ending Balance: Collectively evaluated	420,724	414,115
Total	442,917	431,977	$ 448,819
Residential 1-4 family
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	492	133
Provision expense (credit) for credit losses	136	3
Charge-offs	167	0
Recoveries	(5)	(8)
Net charge-offs (recoveries)	162	(8)
Ending Balance	466	144
Ending Balance: Individually evaluated	91	19
Ending Balance: Collectively evaluated	375	125
Loan balances by impairment method used:
Ending Balance: Individually evaluated	4,867	5,269
Ending Balance: Collectively evaluated	160,639	166,462
Total	165,506	171,731	165,109
Multifamily
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	25	0
Provision expense (credit) for credit losses	65	3
Charge-offs	0	0
Recoveries	0	0
Net charge-offs (recoveries)	0	0
Ending Balance	90	3
Ending Balance: Individually evaluated	65	0
Ending Balance: Collectively evaluated	25	3
Loan balances by impairment method used:
Ending Balance: Individually evaluated	422	0
Ending Balance: Collectively evaluated	18,282	18,157
Total	18,704	18,157	18,378
Construction and Land Loans
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	27	1
Provision expense (credit) for credit losses	(1)	2
Charge-offs	0	0
Recoveries	(2)	(1)
Net charge-offs (recoveries)	(2)	(1)
Ending Balance	28	4
Ending Balance: Individually evaluated	0	0
Ending Balance: Collectively evaluated	28	4
Loan balances by impairment method used:
Ending Balance: Individually evaluated	1,635	1,677
Ending Balance: Collectively evaluated	20,416	15,256
Total	22,051	16,933
Commercial Owner Occupied
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	1,022	1,636
Provision expense (credit) for credit losses	67	(219)
Charge-offs	0	95
Recoveries	0	(17)
Net charge-offs (recoveries)	0	78
Ending Balance	1,089	1,339
Ending Balance: Individually evaluated	549	516
Ending Balance: Collectively evaluated	540	823
Loan balances by impairment method used:
Ending Balance: Individually evaluated	5,308	3,194
Ending Balance: Collectively evaluated	89,993	78,957
Total	95,301	82,151
Commercial Non-Owner Occupied
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	895	955
Provision expense (credit) for credit losses	166	(167)
Charge-offs	92	0
Recoveries	(1)	0
Net charge-offs (recoveries)	91	0
Ending Balance	970	788
Ending Balance: Individually evaluated	871	782
Ending Balance: Collectively evaluated	99	6
Loan balances by impairment method used:
Ending Balance: Individually evaluated	3,062	3,835
Ending Balance: Collectively evaluated	35,669	30,602
Total	38,731	34,437
Second Mortgages
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	13	12
Provision expense (credit) for credit losses	(3)	(3)
Charge-offs	0	5
Recoveries	(1)	0
Net charge-offs (recoveries)	(1)	5
Ending Balance	11	4
Ending Balance: Individually evaluated	6	0
Ending Balance: Collectively evaluated	5	4
Loan balances by impairment method used:
Ending Balance: Individually evaluated	320	122
Ending Balance: Collectively evaluated	3,699	4,548
Total	4,019	4,670
Equity lines of credit
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	127	0
Provision expense (credit) for credit losses	62	6
Charge-offs	75	0
Recoveries	0	0
Net charge-offs (recoveries)	75	0
Ending Balance	114	6
Ending Balance: Individually evaluated	26	0
Ending Balance: Collectively evaluated	88	6
Loan balances by impairment method used:
Ending Balance: Individually evaluated	67	35
Ending Balance: Collectively evaluated	29,112	35,533
Total	29,179	35,568
Farmland
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	11	54
Provision expense (credit) for credit losses	(4)	139
Charge-offs	0	0
Recoveries	0	(1)
Net charge-offs (recoveries)	0	(1)
Ending Balance	7	194
Ending Balance: Individually evaluated	0	192
Ending Balance: Collectively evaluated	7	2
Loan balances by impairment method used:
Ending Balance: Individually evaluated	5,008	2,200
Ending Balance: Collectively evaluated	5,039	10,777
Total	10,047	12,977	$ 12,149
Personal and Overdrafts
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	114	265
Provision expense (credit) for credit losses	(10)	21
Charge-offs	42	88
Recoveries	(29)	(30)
Net charge-offs (recoveries)	13	58
Ending Balance	91	228
Ending Balance: Individually evaluated	6	24
Ending Balance: Collectively evaluated	85	204
Loan balances by impairment method used:
Ending Balance: Individually evaluated	17	21
Ending Balance: Collectively evaluated	11,430	13,596
Total	11,447	13,617
Commercial and Agricultural
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	957	383
Provision expense (credit) for credit losses	53	(136)
Charge-offs	156	149
Recoveries	(114)	(154)
Net charge-offs (recoveries)	42	(5)
Ending Balance	968	252
Ending Balance: Individually evaluated	895	233
Ending Balance: Collectively evaluated	73	19
Loan balances by impairment method used:
Ending Balance: Individually evaluated	1,487	1,509
Ending Balance: Collectively evaluated	46,445	40,227
Total	47,932	41,736
Unallocated
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	690	515
Provision expense (credit) for credit losses	(428)	523
Charge-offs	0	0
Recoveries	0	0
Net charge-offs (recoveries)	0	0
Ending Balance	262	1,038
Ending Balance: Individually evaluated	0	0
Ending Balance: Collectively evaluated	262	1,038
Loan balances by impairment method used:
Ending Balance: Individually evaluated	0	0
Ending Balance: Collectively evaluated	0	0
Total	$ 0	$ 0

XML

Loans and Allowance for Loan Losses - Narrative (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($) loan_class contract	Mar. 31, 2018 contract	Dec. 31, 2018 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructuring | $	$ 9,255		$ 11,546
Number of new TDR contracts | contract	1	2
Number of TDR contracts that subsequently defaulted | contract	0	0
Threshold period past due watch list relationship of financing receivable	60 days
Historical loss factor (as percent)	54.00%
Historical loss factor using simple average of losses (as percent)	33.00%
Period used to compute simple average of losses	3 years
Selling period for loans held for sale	20 days
Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of classes in loan segment | loan_class	2
Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of classes in loan segment | loan_class	2

XML

Loans and Allowance for Loan Losses - Troubled Debt Restructuring (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($) contract	Mar. 31, 2018 USD ($) contract
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract	1	2
Pre-Modification Recorded Investment	$ 754	$ 1,641
Post-Modification Recorded Investment	$ 754	$ 1,641
Farmland | Below market rate
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract	1
Pre-Modification Recorded Investment	$ 754
Post-Modification Recorded Investment	$ 754
Residential 1-4 family | Below market rate
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract		1
Pre-Modification Recorded Investment		$ 162
Post-Modification Recorded Investment		$ 162
Commercial, owner occupied | Below market rate
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract		1
Pre-Modification Recorded Investment		$ 1,479
Post-Modification Recorded Investment		$ 1,479

XML

Loans and Allowance for Loan Losses - Loans Held For Sale (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Receivables [Abstract]
Loans held for sale at end of period	$ 1,727	$ 1,795	$ 265
Proceeds from sales of mortgage loans originated for sale	1,194	10,664
Gain on sales of mortgage loans originated for sale	$ 48	$ 100

XML

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Income Tax Disclosure [Abstract]
Tax expense (benefit) at statutory rate	$ 282	$ 164
Increase (decrease) in tax expense resulting from:
Tax-exempt interest	(29)	(27)
Other, net	29	33
Income tax expense	$ 282	$ 170
Statutory corporate federal income tax rate (as percent)	21.00%	21.00%

XML

Capital Requirements (Details) - Highlands Union Bank	Mar. 31, 2019	Dec. 31, 2018
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier 1 leverage	9.22%	9.14%
Tier 1 risk-based	12.94%	12.31%
Total risk-based	13.90%	13.30%
Common equity tier 1	12.94%	12.31%

XML

Stock and Earnings Per Share - Computation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Earnings Per Share [Abstract]
Net income available to common stockholders	$ 1,060	$ 610
Weighted average common shares outstanding (in shares)	8,199	8,199
Total shares outstanding including assumed conversion of preferred securities (in shares)	10,343	10,292
Basic earnings per common share (in dollars per share)	$ 0.13	$ 0.07
Fully diluted earnings per share (including convertible preferred shares outstanding and restricted stock) (in dollars per share)	$ 0.10	$ 0.06

XML

Stock and Earnings Per Share - Narrative (Details) - 2018 Restricted Stock Plan	3 Months Ended
	Mar. 31, 2019 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized for issuance	250,000
Shares issued	51,500

XML

Commitments and Contingencies (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Loss Contingencies [Line Items]
Unused commitments to extend credit	$ 58,165	$ 56,726
Standby letters of credit
Loss Contingencies [Line Items]
Commitments, maximum exposure	$ 1,977	$ 3,477

XML

Fair Value - AFS (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 67,558	$ 68,631
Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	67,558	68,631
Level 1 | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0	0
Level 2 | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	67,558	68,631
Level 3 | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0	0
State and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	13,205	12,836
State and political subdivisions | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	13,205	12,836
State and political subdivisions | Level 1 | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0	0
State and political subdivisions | Level 2 | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	13,205	12,836
State and political subdivisions | Level 3 | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0	0
Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	49,335	50,554
Mortgage backed securities | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	49,335	50,554
Mortgage backed securities | Level 1 | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0	0
Mortgage backed securities | Level 2 | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	49,335	50,554
Mortgage backed securities | Level 3 | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0	0
SBA pools
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	5,018	5,241
SBA pools | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	5,018	5,241
SBA pools | Level 1 | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0	0
SBA pools | Level 2 | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	5,018	5,241
SBA pools | Level 3 | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 0	$ 0

XML

Fair Value - Narrative (Details)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Nonrecurring | Minimum | Discount rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans, measurement input (as percent)	0.08
Nonrecurring | Maximum | Discount rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans, measurement input (as percent)	0.40
Interest rate swaps | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative asset	$ 83,000	$ 38,000
Level 2 | Interest rate swaps | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Notional value	12,890,000	12,890,000
Derivative asset	$ 83,000	$ 38,000

XML

Fair Value - Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
OREO	$ 2,886	$ 2,212
Real estate held for sale	600	817
Nonrecurring
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired loans	4,506	5,100
OREO	2,886	2,212
Real estate held for sale	600	817
Nonrecurring | Level 1
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired loans	0	0
OREO	0	0
Real estate held for sale	0	0
Nonrecurring | Level 2
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired loans	0	0
OREO	0	0
Real estate held for sale	0	0
Nonrecurring | Level 3
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired loans	4,506	5,100
OREO	2,886	2,212
Real estate held for sale	$ 600	$ 817

XML

Fair Value - Quantitative Information about Level 3 Fair Value Measurements (Details) $ in Thousands	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
OREO	$ 2,886	$ 2,212
Real estate held for sale	600	817
Nonrecurring
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
OREO	2,886	2,212
Real estate held for sale	600	817
Impaired loans	4,506	5,100
Nonrecurring | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
OREO	2,886	2,212
Real estate held for sale	600	817
Impaired loans	$ 4,506	5,100
Nonrecurring | Level 3 | Appraisal of collateral
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
OREO		2,212
Real estate held for sale		817
Nonrecurring | Level 3 | Appraisal of collateral | Appraisal adjustments | Range Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
OREO, measurement input (as percent)	0.00
Real estate held for sale, measurement input (as percent)	0.00
Nonrecurring | Level 3 | Appraisal of collateral | Appraisal adjustments | Range Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
OREO, measurement input (as percent)	0.20
Real estate held for sale, measurement input (as percent)	0.20
Nonrecurring | Level 3 | Appraisal of collateral | Liquidation expenses | Range Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
OREO, measurement input (as percent)	0.00
Real estate held for sale, measurement input (as percent)	0.00
Nonrecurring | Level 3 | Appraisal of collateral | Liquidation expenses | Range Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
OREO, measurement input (as percent)	0.10
Real estate held for sale, measurement input (as percent)	0.10
Nonrecurring | Level 3 | Fair value of collateral
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Impaired loans	$ 4,506	$ 5,100
Nonrecurring | Level 3 | Fair value of collateral - real estate | Appraisal adjustments | Range Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Impaired loans, measurement input (as percent)	0.00
Nonrecurring | Level 3 | Fair value of collateral - real estate | Appraisal adjustments | Range Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Impaired loans, measurement input (as percent)	1.00
Nonrecurring | Level 3 | Fair value of collateral - equipment, inventory, other | Appraisal adjustments | Range Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Impaired loans, measurement input (as percent)	0.25
Nonrecurring | Level 3 | Fair value of collateral - equipment, inventory, other | Appraisal adjustments | Range Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Impaired loans, measurement input (as percent)	0.80
Nonrecurring | Level 3 | Fair value of collateral - equipment, inventory, other | Liquidation expenses | Range Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Impaired loans, measurement input (as percent)	0.00
Nonrecurring | Level 3 | Fair value of collateral - equipment, inventory, other | Liquidation expenses | Range Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Impaired loans, measurement input (as percent)	0.12

XML

Fair Value - Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 67,558	$ 68,631
Carrying Amount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	55,178	30,066
Securities available for sale	67,558	68,631
Other investments	2,770	2,774
Loans, net	438,140	443,748
Deposits	520,699	502,816
Other short-term borrowings	30,000	30,000
Long-term debt	80	93
Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	55,178	30,066
Securities available for sale	67,558	68,631
Other investments	2,770	2,774
Loans, net	425,870	429,289
Deposits	451,312	422,570
Other short-term borrowings	30,106	30,142
Long-term debt	77	89
Interest rate swaps | Carrying Amount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swaps	$ 83	$ 38

XML

Formal Written Agreement (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Banking and Thrift [Abstract]
Loan and other assets amount requiring improvement	$ 500
Past due days	90 days