10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2017

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

COMMISSION FILE NUMBER: 0-22955

BAY BANKS OF VIRGINIA, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

VIRGINIA	54-1838100
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	(I.R.S. EMPLOYER IDENTIFICATION NO.)

100 SOUTH MAIN STREET, KILMARNOCK, VA 22482

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(804) 435-1171

(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    ☐  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    ☐  no

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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. (Check one)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

9,373,577 shares of common stock on April 30, 2017

FORM 10-Q

For the interim period ending March 31, 2017

INDEX

PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS MARCH  31, 2017 (UNAUDITED) AND DECEMBER 31, 2016		3
CONSOLIDATED STATEMENTS OF (LOSS) INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016 (UNAUDITED)		4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016 (UNAUDITED)		5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2017 (UNAUDITED)		6
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016 (UNAUDITED)		7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)		8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	32
ITEM 4.	CONTROLS AND PROCEDURES	32
PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	32
ITEM 1A.	RISK FACTORS	32
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	32
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	32
ITEM 4.	MINE SAFETY DISCLOSURES	32
ITEM 5.	OTHER INFORMATION	33
ITEM 6.	EXHIBITS	33

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED BALANCE SHEETS

	March 31, 2017			December 31, 2016 (1)
(Dollars in thousands)	(unaudited)
ASSETS
Cash and due from banks	$	5,087		$	4,851
Interest-bearing deposits		6,826			7,501
Certificates of deposit		3,472			4,216
Federal funds sold		336			2,350
Securities available-for-sale, at fair value		49,826			51,173
Restricted securities		3,756			2,649
Loans receivable, net of allowance for loan losses of $3,993 and $3,863		401,268			381,537
Loans held for sale		—			276
Premises and equipment, net		10,859			10,844
Accrued interest receivable		1,321			1,372
Other real estate owned, net		2,436			2,494
Bank owned life insurance		9,944			9,869
Goodwill		2,808			2,808
Mortgage servicing rights		692			671
Other assets		5,576			4,099
Total assets	$	504,207		$	486,710
LIABILITIES
Noninterest-bearing deposits	$	77,369		$	74,799
Savings and interest-bearing demand deposits		169,027			178,869
Time deposits		136,104			128,050
Total deposits		382,500			381,718
Securities sold under repurchase agreements		8,489			18,310
Federal Home Loan Bank advances		60,000			35,000
Subordinated debt, net of issuance costs		6,864			6,860
Other liabilities		4,737			3,117
Total liabilities		462,590			445,005
SHAREHOLDERS’ EQUITY
Common stock ($5 par value; authorized - 30,000,000 shares; outstanding - 4,787,356 and 4,774,856 shares, respectively)		23,937			23,874
Additional paid-in capital		2,868			2,872
Retained earnings		16,017			16,194
Accumulated other comprehensive loss, net		(1,205	)		(1,235	)
Total shareholders’ equity		41,617			41,705
Total liabilities and shareholders’ equity	$	504,207		$	486,710

(1) Derived from the audited December 31, 2016 Consolidated Financial Statements

See Notes to Consolidated Financial Statements.

3

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(unaudited)

	For the three months ended
(Dollars in thousands except per share amounts)	March 31, 2017			March 31, 2016
INTEREST INCOME
Loans, including fees	$	4,388		$	3,974
Securities:
Taxable		269			207
Tax-exempt		114			136
Federal funds sold		1			—
Interest-bearing deposit accounts		7			15
Certificates of deposit		19			22
Total interest income		4,798			4,354
INTEREST EXPENSE
Deposits		630			645
Federal funds purchased		10			—
Securities sold under repurchase agreements		3			2
Subordinated debt		117			118
FHLB advances		154			125
Total interest expense		914			890
Net interest income		3,884			3,464
Provision for (recovery of) loan losses		190			(35	)
Net interest income after provision for loan losses		3,694			3,499
NON-INTEREST INCOME
Income from fiduciary activities		245			207
Service charges and fees on deposit accounts		212			227
VISA-related fees		(1	)		46
Non-deposit product income		80			106
Other service charges and fees		171			148
Secondary market lending income		115			77
Increase in cash surrender value of life insurance		75			63
Net (losses) gains on sale of securities available for sale		(5	)		6
Other real estate losses		(96	)		(35	)
Other income		61			13
Total non-interest income		857			858
NON-INTEREST EXPENSES
Salaries and employee benefits		2,824			2,055
Occupancy expense		439			448
Software maintenance		204			161
Bank franchise tax		76			60
VISA expense		20			39
Telephone expense		28			31
FDIC assessments		85			81
Foreclosure property expense		10			12
Consulting expense		54			55
Merger expense		300			—
Other expense		809			738
Total non-interest expenses		4,849			3,680
Net (loss) income before income taxes		(298	)		677
Income tax (benefit) expense		(121	)		153
Net (loss) income	$	(177	)	$	524
Basic (Loss) Earnings Per Share
Average basic shares outstanding		4,776,800			4,774,856
(Loss) earnings per share, basic	$	(0.04	)	$	0.11
Diluted (Loss) Earnings Per Share
Average diluted shares outstanding		4,776,800			4,791,139
(Loss) earnings per share, diluted	$	(0.04	)	$	0.11

See Notes to Consolidated Financial Statements.

4

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(unaudited)

	For the three months ended
	March 31,
(Dollars in thousands)	2017			2016
Net (loss) income	$	(177	)	$	524
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains arising during the period		40			508
Deferred tax expense		(13	)		(173	)
Reclassification of net securities losses (gains) recognized in net (loss) income		5			(6	)
Deferred tax (benefit) expense		(2	)		2
Unrealized gains adjustment, net of tax		30			331
Total other comprehensive income		30			331
Comprehensive (loss) income	$	(147	)	$	855

See Notes to Consolidated Financial Statements.

5

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(unaudited)

											Accumulated
	Shares of				Additional						Other			Total
(Dollars in thousands, except	Common		Common		Paid-in			Retained			Comprehensive			Shareholders’
share data or amounts)	Stock		Stock		Capital			Earnings			Loss			Equity
Three Months ended March 31, 2017
Balance at beginning of period		4,774,856	$	23,874	$	2,872		$	16,194		$	(1,235	)	$	41,705
Net loss		—		—		—			(177	)		—			(177	)
Other comprehensive income		—		—		—			—			30			30
Stock-based compensation expense		12,500		63		(4	)		—			—			59
Balance at end of period		4,787,356	$	23,937	$	2,868		$	16,017		$	(1,205	)	$	41,617

See Notes to Consolidated Financial Statements.

6

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the Three Months Ended
	March 31,
(Dollars in thousands)	2017			2016
Cash Flows From Operating Activities
Net income	$	(177	)	$	524
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		274			265
Net premium amortization and discount accretion of securities		92			107
Amortization of subordinated debt issuance costs		4			4
Provision for (recovery of) loan losses		190			(35	)
Stock compensation expense		59			16
Deferred tax benefit		(5	)		(6	)
Loss (gains) on securities available-for-sale		5			(6	)
Increase in OREO valuation allowance		97			—
(Gain) loss on sale of other real estate		(1	)		35
(Increase) decrease in mortgage servicing rights		(21	)		10
Loan originations for sale		(3,471	)		(2,727	)
Loan sales		3,766			2,086
Gain on sold loans		(19	)		(34	)
Increase in cash surrender value of life insurance		(75	)		(63	)
Decrease in accrued income and other assets		38			112
Increase in other liabilities		146			60
Net cash provided by operating activities		902			348
Cash Flows From Investing Activities
Proceeds from maturities and principal paydowns of available-for-sale securities		993			842
Proceeds from sales and calls of available-for-sale securities		995			2,702
Maturities of certificates of deposit		744			248
Purchases of available-for-sale securities and certificates of deposit		(693	)		(1,175	)
(Purchases) sales of restricted securities		(1,107	)		157
Decrease (increase) in federal funds sold		2,014			(59	)
Loan (originations) and principal collections, net		(19,971	)		(3,429	)
Proceeds from sale of other real estate		12			228
Proceeds from sale of equipment		6			—
Purchases of premises and equipment		(295	)		(99	)
Net cash used in investing activities		(17,302	)		(585	)
Cash Flows From Financing Activities
Net decrease in demand, savings, and other interest-bearing deposits		(7,272	)		(4,463	)
Net increase in time deposits		8,054			1,218
Net decrease in securities sold under repurchase agreements		(9,821	)		(1,149	)
Increase (decrease) in Federal Home Loan Bank advances		25,000			(5,000	)
Net cash provided by (used in) financing activities		15,961			(9,394	)
Net decrease in cash and due from banks		(439	)		(9,631	)
Cash and cash equivalents (including interest-earning deposits) at beginning of period		12,352			20,299
Cash and cash equivalents (including interest-earning deposits) at end of period	$	11,913		$	10,668
Supplemental Schedule of Cash Flow Information
Cash paid for:
Interest	$	1,019		$	987
Income taxes		—			—
Non-cash investing and financing:
Unrealized gain on investment securities		45			502
Change in fair value of pension and post-retirement obligation		—			—
Loans transferred to other real estate owned		50			1,352
Loans originated to facilitate sale of OREO		—			117
Changes in deferred taxes resulting from OCI transactions		15			171

See Notes to Consolidated Financial Statements.

7

Notes to Consolidated Financial Statements (Unaudited)

Note 1: General

Bay Banks of Virginia, Inc. (the “Company”) owns 100% of Virginia Commonwealth Bank, formerly named Bank of Lancaster (refer to Note 2) (the “Bank”), 100% of Bay Trust Company, Inc. (the “Trust Company”) and 100% of Steptoes Holdings, LLC (“Steptoes Holdings”). The consolidated financial statements include the accounts of the Bank, the Trust Company, Steptoes Holdings and Bay Banks of Virginia, Inc. Since the business combination was effective on April 1, 2017 these March 31, 2017 consolidated financial statements do not yet reflect combined operations.

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”) and to the general practices within the banking industry. In management’s opinion, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the consolidated financial statements, have been included. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or for any other interim periods. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Certain amounts presented in the consolidated financial statements of prior periods have been reclassified to conform to current year presentations. The reclassifications had no effect on net income, net income per share or shareholders’ equity as previously reported.

Note 2: Business Combination

On April 1, 2017, the Company and Virginia BanCorp, Inc. (“Virginia BanCorp”), a bank holding company conducting substantially all of its operations through its subsidiary Virginia Commonwealth Bank, completed a merger pursuant to the Agreement and Plan of Merger, dated as of November 2, 2016, by and between the Company and Virginia BanCorp. The Company is the surviving corporation in the merger and the former shareholders of Virginia BanCorp received 1.178 shares of the Company’s common stock for each share of Virginia BanCorp common stock they owned immediately prior to the merger, for a total issuance of 4,586,221 shares of the Company’s common stock valued at approximately $40.5 million. As of the completion of the merger, the Company’s legacy shareholders owned approximately 51% of the outstanding common stock of the Company and Virginia BanCorp’s former shareholders owned approximately 49% of the outstanding common stock of the Company. After the merger of Virginia BanCorp with and into the Company, Virginia BanCorp’s subsidiary bank was merged with and into Bank of Lancaster, and immediately thereafter Bank of Lancaster changed its name to Virginia Commonwealth Bank. Bank operating systems are being consolidated and are expected to be completed during the fourth quarter of 2017.

Note 3: Significant Accounting Policies

Loans

The Company grants mortgage loans on real estate, commercial and industrial loans, and consumer and other loans to customers. A substantial portion of the loan portfolio is represented by mortgage loans on real estate. The ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in the Company’s market areas.

Loans are reported at their recorded investment, which is the outstanding principal balance net of any unearned income, such as deferred fees and costs, and charge-offs. Interest on loans is recognized over the term of the loan and is calculated using the interest method on principal amounts outstanding. Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment of the related loan yield over the contractual term of the loan, adjusted for early pay-offs, where applicable.

The accrual of interest is generally discontinued at the time a loan is 90 days or more past due, or earlier, if collection is uncertain based on an evaluation of the net realizable value of the collateral and the financial strength of the borrower. Payments received for loans no longer accruing interest are applied to the unpaid principal balance. Loans greater than 90 days past due may remain on accrual status if the credit is well-secured and in process of collection. Personal loans are typically charged off no later than 180 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are charged off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual and past due policies are materially the same for all types of loans.

All interest accrued but not collected for loans that are placed on non-accrual or charged off are reversed against interest income. Any subsequent interest received on these loans is accounted for on the cash basis or cost recovery method until qualifying for return to accrual. Generally, a loan is returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured, or it becomes well secured and in the process of collection.

Allowance for loan losses (“ALL”)

The ALL reflects management’s judgment of probable loan losses inherent in the portfolio at the balance sheet date. Management uses a disciplined process and methodology to establish the ALL each quarter. To determine the total ALL, the Company estimates the reserves needed for each homogenous segment and class of the portfolio, plus any loans analyzed individually for impairment. Depending on the nature of each segment and class, considerations include historical loss experience, adverse situations that may affect a borrower’s ability to repay, credit scores, past due history, estimated value of any underlying collateral, prevailing local and national economic conditions, and internal policies and procedures including credit risk management and underwriting. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as conditions change.

8

Management employs a risk rating system to evaluate and consistently categorize loan portfolio credit risk. Loans assigned risk rating grades include all commercial loans not secured by real estate, commercial mortgages, residential mortgages greater than $1 million, smaller residential mortgages which are impaired, loans to real estate developers and contractors, consumer loans greater than $250 thousand with chronic delinquency, and troubled debt restructures (“TDRs”). The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled. Risk grades are evaluated as new information becomes available for each borrowing relationship or at least quarterly. All other loans not specifically assigned a risk rating grade are monitored as a discrete pool of loans generally based on delinquency status. Risk rating categories are as follows:

Pass – Borrower is strong or sound and collateral securing the loan, if any, is adequate.

Watch – Borrower exhibits some signs of financial stress but is generally believed to be a satisfactory customer and collateral, if any, may be in excess of 90% of the loan balance.

Special Mention – Adverse trends in the borrower’s financial position are evident and warrant management’s close attention. Any collateral may not be fully adequate to secure the loan balance.

Substandard – A loan in this category has a well-defined weakness in the primary repayment source that jeopardizes the timely collection of the debt. There is a distinct possibility that a loss may result if the weakness is not corrected.

Doubtful – Default has already occurred and it is likely that foreclosure or repossession procedures have begun or will begin in the near future. Weaknesses make collection or liquidation in full, based on currently existing information, highly questionable and improbable.

Loss – Uncollectible and of such little value that continuance as a bankable asset is not warranted.

The ALL consists of specific, general, and unallocated components. The specific component is determined by identifying impaired loans (as described below) then evaluating each one to calculate the amount of impairment. Impaired loans measured for impairment generally include: (1) non-accruing Special mention, Substandard and Doubtful loans in excess of $250,000; (2) Substandard and Doubtful loans in excess of $500,000; (3) Special Mention loans in excess of $500,000 if any of the loans in the relationship are more than 30 days past due or if the borrower has filed for bankruptcy; and (4) all TDRs. A specific allowance arises when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component collectively evaluates smaller commercial loans, residential mortgages and consumer loans, grouped into segments and classes. Historical loss experience is calculated and applied to each segment or class, then adjusted for qualitative factors. Qualitative factors include changes in local and national economic indicators, such as unemployment rates, interest rates, gross domestic product growth and real estate market trends; the level of past due and nonaccrual loans; risk ratings on individual loans; strength of credit policies and procedures; loan officer experience; borrower credit scores; and other intrinsic risks related to the types and geographic locations of loans. These qualitative adjustments reflect management’s judgment of risks inherent in the segments. An unallocated component is maintained if needed to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. Changes in the allowance for loan losses and the related provision expense can materially affect net income.

The specific component of the ALL calculation accounts for the loan loss reserve necessary on impaired loans. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not considered impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Accrual of interest may or may not be discontinued for any given impaired loan. Impairment is measured by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Because large groups of smaller balance homogeneous loans are collectively evaluated for impairment, the Company does not generally separately identify smaller balance individual consumer and residential loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.

The general component of the ALL calculation collectively evaluates groups of loans in segments and classes, as noted above. The segments are: (1) Mortgage loans on real estate; (2) Commercial and industrial loans; and (3) Consumer and other loans. The segment for Mortgage loans on real estate is disaggregated into the following classes: (1) Construction, land and land development; (2) Farmland; (3) Residential first mortgages; (4) Residential revolving and junior mortgages; (5) Commercial mortgages (non-owner-occupied); and (6) Commercial mortgages (owner-occupied). Loans in segment 1 are secured by real estate. Loans in segments 2 and 3 are secured by other types of collateral or are unsecured. A given segment or class may not reflect the purpose of a loan. For example, a business owner may provide his residence as collateral for a loan to his company, in which case the loan would be grouped in a residential mortgage class. Historical loss factors are calculated for the prior 20 quarters by segment and class, and then applied to the current balances in each segment and class. Finally, qualitative factors are applied to each segment and class.

9

Construction and development loans carry risks that the project will not be finished according to schedule or according to budget and the value of the collateral, at any point in time, may be less than the principal amount of the loan. These loans also bear the risk that the general contractor may face financial pressure unrelated to the project. Loans secured by land, farmland and residential mortgages carry the risk of continued credit-worthiness of the borrower and changes in value of the underlying real estate collateral. Commercial mortgages and commercial and industrial loans carry risks associated with the profitable operation of a business and its related cash flows. Additionally, commercial and industrial loans carry risks associated with the value of collateral other than real estate which may depreciate over time. Consumer loans carry risks associated with the continuing credit-worthiness of the borrower and are more likely than real estate loans to be adversely affected by divorce, unemployment, personal illness or bankruptcy of an individual. Consumer loans secured by automobiles carry risks associated with rapidly depreciating collateral. Consumer loans have historically included credit cards, which are unsecured. The credit card portfolio was sold to an unaffiliated third party in the third quarter of 2016.

The summation of the specific, general and unallocated components results in the total estimated ALL. Management may also include an unallocated component to cover uncertainties in the level of probable losses. This estimate is inherently subjective and actual losses could be greater or less than the estimates.

Additions to the ALL are made by charges to earnings through the provision for loan losses. Charge-offs result from credit exposures deemed to be uncollectible and the ALL is reduced by these. Recoveries of previously charged off amounts are credited back to the ALL. Charge-off policies are materially the same for all types of loans.

Note 4: Amendments to the Accounting Standards Codification

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Update Standard (“ASU”) 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. This ASU requires Securities and Exchange Commission (“SEC”) registrants to disclose the effect that recently issued accounting standards will have on their financial statements when adopted in a future period. In cases where a registrant cannot reasonably estimate the impact of the adoption, additional qualitative disclosures should be considered to assist the reader in assessing the significance of the standard’s impact on its financial statements. The Company adopted ASU 2017-03 in the first quarter of 2017. The adoption of the standard resulted in enhanced disclosures regarding the impact that recently issued accounting standards adopted in a future period will have on the Company’s financial statements and disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which is new guidance for the accounting for credit losses on instruments within its scope. It introduces a new model for current expected credit losses (“CECL”) which will apply to financial assets subject to credit losses and measured at amortized cost and certain off-balance sheet credit exposures. This will include loans, held-to-maturity debt securities, loan commitments, financial guarantees, net investments in leases, reinsurance and trade receivables. The CECL model requires an entity to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses should consider historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. In addition, ASU 2016-13 replaces the current available-for-sale debt securities other-than-temporary impairment model with an estimate of expected credit losses only when the fair value falls below the amortized cost of the asset. Credit losses on available-for-sale debt securities will be limited to the difference between the security’s amortized cost basis and its fair value. The available-for-sale debt security model will also require the use of an allowance to record estimated credit losses and subsequent recoveries. The ASU also addresses purchased financial assets with credit deterioration. Disclosure requirements are expanded regarding an entity’s assumptions, models and methods for estimating the ALL. The ASU is effective for interim and annual reporting periods beginning after December 15, 2019. The Company is evaluating the impact that ASU 2016-13 will have on its consolidated financial statements. Periodic historical loan data is being accumulated which will allow for migration analysis of risk ratings, past due and non-accrual status, plus other various individual loan characteristics.

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Shares-Based Payment Accounting.” The amendments in this ASU simplify several aspects of the accounting for share-based payment award transactions including: (1) income tax consequences; (2) classification of awards as either equity or liabilities; (3) diluted earnings per share; and (4) classification on the statement of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of ASU 2016-09 did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requiring more disclosures related to leasing transactions. ASU 2016-02 will be effective for the Company for the fiscal years beginning after December 15, 2018, with early adoption permitted. The Company expects to adopt ASU 2016-02 in the first quarter of 2019. The Company is evaluating the impact of the standard and expects a minimal increase in assets and liabilities; however, the Company does not expect the guidance to have a material effect on its financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10) which requires equity investments, other than those accounted for using the equity method, to be measured at fair value through earnings. There will no longer be an available-for-sale classification measured (changes in fair value reported in other comprehensive income) for equity securities with readily determinable fair values. The cost method is also eliminated for equity instruments without a readily determinable fair value. For these

10

investments, companies can elect to record the investment at cost, less impairment, plus or minus subsequent adjustments for observable price changes. This election only applies to equity investments that do not qualify for the net asset value practical expedient. Public companies will be required to use the exit price when measuring the fair value of financial instruments measured at amortized cost for disclosure purposes. In addition, the ASU requires financial assets and financial liabilities to be presented separately in the notes to the financial statements, grouped by measurement category and form of financial asset. The classification and measurement guidance is effective for periods beginning after December 15, 2017. The Company’s primary available-for sale investments are debt securities and are therefore not included in the scope of ASU 2016-01. The Company is continuing to evaluate the impact that ASU 2016-01 will have on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in this ASU modify the guidance companies use to recognize revenue from contracts with customers for transfers of goods or services and transfers of nonfinancial assets, unless those contracts are within the scope of other standards. The ASU requires that entities apply a specific method to recognize revenue reflecting the consideration expected from customers in exchange for the transfer of goods and services. The guidance also requires new qualitative and quantitative disclosures, including information about contract balances and performance obligations. Entities are also required to disclose significant judgments and changes in judgments for determining the satisfaction of performance obligations. In August 2015, the FASB issued ASU 2014-09 changing the effective date for ASU 2014-09 to annual reporting periods beginning after December 15, 2017 from December 15, 2016. The Company’s primary source of revenue is interest income from loans and their fees and investments. As these items are outside the scope of the guidance, this income is not expected to be impacted by implementation of ASU 2014-09. The Company is still reviewing other sources of income such as fiduciary fees, secondary market lending fees and other deposit account fees to evaluate the impact of ASU 2014-09. The Company continues to evaluate the impact that ASU 2014-09 will have on its consolidated financial statements.

Note 5: Securities

The aggregate amortized costs and fair values of the available-for-sale securities portfolio are as follows:

(Dollars in thousands)
Available-for-sale securities March 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Corporate bonds	$	6,695	$	20	$	—		$	6,715
U.S. Government agencies		24,615		49		(429	)		24,235
State and municipal obligations		19,229		77		(430	)		18,876
	$	50,539	$	146	$	(859	)	$	49,826
Available-for-sale securities December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Corporate bonds	$	7,695	$	14	$	(5	)	$	7,704
U.S. Government agencies		25,668		53		(408	)		25,313
State and municipal obligations		18,566		49		(459	)		18,156
	$	51,929	$	116	$	(872	)	$	51,173

Gross realized gains and gross realized losses on sales and calls of securities were as follows:

	For the three months ended
	March 31,
(Dollars in thousands)	2017			2016
Gross realized gains	$	—		$	15
Gross realized losses		(5	)		(9	)
Net realized (losses) gains	$	(5	)	$	6
Aggregate proceeds	$	995		$	2,702

Average yields (taxable equivalent) on securities were 3.22% and 3.03% for the three months ended March 31, 2017 and 2016, respectively.

Securities with a market value of $10.7 million and $19.1 million were pledged as collateral for repurchase agreements and for other purposes as required by law as of March 31, 2017 and December 31, 2016, respectively. As of March 31, 2017 and December 31, 2016, all the securities pledged to repurchase agreements were state and municipal obligations. All the repurchase agreements had remaining contractual maturities that were overnight and continuous. Securities sold under repurchase agreements were $8.5 million and $18.3 million as of March 31, 2017 and December 31, 2016, respectively, and included in liabilities on the consolidated balance sheets. The securities pledged to each agreement are reviewed daily and can be changed at the option of the Bank with minimal risk of loss due to fair value.

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Securities in an unrealized loss position at March 31, 2017 and December 31, 2016, by duration of the unrealized loss, are shown below. The unrealized loss positions were directly related to interest rate movements as there is minimal credit risk exposure in these investments. All agency securities, and states and municipal securities, are investment grade or better and their losses are considered temporary. Management does not intend to sell the securities and does not expect to be required to sell the securities. Furthermore, all amortized cost bases are expected to be recovered. Bonds with unrealized loss positions at March 31, 2017 included 39 federal agencies and 35 municipals. Bonds with unrealized loss positions at December 31, 2016 included 37 federal agencies, one corporate bond and 39 municipals. The tables are shown below.

(Dollars in thousands)	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
March 31, 2017	Value		Loss			Value		Loss			Value		Loss
U.S. Government agencies	$	21,463	$	(418	)	$	1,248	$	(11	)	$	22,711	$	(429	)
States and municipal obligations		12,409		(430	)		—		—			12,409		(430	)
Total temporarily impaired securities	$	33,872	$	(848	)	$	1,248	$	(11	)	$	35,120	$	(859	)
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2016	Value		Loss			Value		Loss			Value		Loss
Corporate bonds	$	995	$	(5	)	$	—	$	—		$	995	$	(5	)
U.S. Government agencies		20,933		(396	)		1,308		(12	)		22,241		(408	)
States and municipal obligations		12,888		(459	)		—		—			12,888		(459	)
Total temporarily impaired securities	$	34,816	$	(860	)	$	1,308	$	(12	)	$	36,124	$	(872	)

The Company’s investment in Federal Home Loan Bank of Atlanta (“FHLB”) stock totaled $3.0 million and $1.9 million at March 31, 2017 and December 31, 2016, respectively. The Company also had an investment in Federal Reserve Bank of Richmond (“FRB”) stock which totaled $595 thousand and $580 thousand at March 31, 2017 and December 31, 2016, respectively. The investments in both FHLB and FRB stock are required investments related to the Bank’s membership with the FHLB and FRB. These securities do not have a readily determinable fair value as their ownership is restricted, and they lack an active market for trading. Additionally, per charter provisions related to the FHLB and FRB stock, all repurchase transactions of such stock must occur at par. Accordingly, these securities are carried at cost, and are periodically evaluated for impairment. The Company’s determination as to whether its investment in FHLB and FRB stock is impaired is based on management’s assessment of the ultimate recoverability of its par value rather than recognizing temporary declines in its value. The determination of whether the decline affects the ultimate recoverability of the investments is influenced by available information regarding various factors. These factors include, among others, the significance of the decline in net assets of the issuing banks as compared to the capital stock amount reported by these banks, and the length of time a decline has persisted; commitments by such banks to make payments required by law or regulation and the level of such payments in relation to the operating performance of the issuing bank; and the overall liquidity position of the issuing bank. Based on its most recent analysis of publicly available information regarding the financial condition of the issuing banks, management concluded that no impairment existed in the carrying value of FHLB and FRB stock.

Note 6: Low Income Housing Tax Credits

The Company had investments in three separate housing equity funds at March 31, 2017. The general purpose of these funds is to encourage and assist participants in investing in low-income residential rental properties located in the Commonwealth of Virginia, develop and implement strategies to maintain projects as low-income housing, deliver federal low income housing tax credits to investors, allocate tax losses and other possible tax benefits to investors, and to preserve and protect project assets. The investments in these funds were recorded as other assets on the consolidated balance sheets and were $1.5 million as of March 31, 2017. These investments and related tax benefits have expected terms through 2029. Tax credits and other tax benefits recognized related to these investments during the three months ended March 31, 2017 was $17 thousand. Total projected tax credits to be received for 2017 are $68 thousand, which is based on the most recent quarterly estimates received from the funds. Additional capital calls expected for the funds totaled $1.5 million at March 31, 2017 and are included in other liabilities on the consolidated balance sheets.

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Note 7: Loans

The following is a summary of the balances of loans:

(Dollars in thousands)	March 31, 2017			December 31, 2016
Mortgage loans on real estate:
Construction, Land and Land Development	$	44,119		$	39,818
Farmland		994			1,023
Commercial Mortgages (Non-Owner Occupied)		35,464			35,343
Commercial Mortgages (Owner Occupied)		42,550			41,825
Residential First Mortgages		205,106			194,007
Residential Revolving and Junior Mortgages		27,090			26,425
Commercial and Industrial loans		46,205			43,024
Consumer Loans		3,324			3,544
Total loans		404,852			385,009
Net unamortized deferred loan costs		409			391
Allowance for loan losses		(3,993	)		(3,863	)
Loans, net	$	401,268		$	381,537

The recorded investment in past due and non-accruing loans is shown in the following table. A loan past due by more than 90 days is generally placed on nonaccrual unless it is both well secured and in the process of collection.

			90 Days or
	30-89		More Past				Total Past
(Dollars in thousands)	Days		Due and				Due and				Total
March 31, 2017	Past Due		Still Accruing		Nonaccruals		Nonaccruals		Current		Loans
Mortgage Loans on Real Estate:
Construction, Land and Land Development	$	—	$	—	$	547	$	547	$	43,572	$	44,119
Farmland		—		—		—		—		994		994
Commercial Mortgages (Non-Owner Occupied)		—		—		—		—		35,464		35,464
Commercial Mortgages (Owner Occupied)		—		—		2,148		2,148		40,402		42,550
Residential First Mortgages		402		—		1,975		2,377		202,729		205,106
Residential Revolving and Junior Mortgages		—		—		1,039		1,039		26,051		27,090
Commercial and Industrial		603		—		111		714		45,491		46,205
Consumer Loans		—		—		—		—		3,324		3,324
Total	$	1,005	$	—	$	5,820	$	6,825	$	398,027	$	404,852
			90 Days or
	30-89		More Past				Total Past
	Days		Due and				Due and				Total
December 31, 2016	Past Due		Still Accruing		Nonaccruals		Nonaccruals		Current		Loans
Mortgage Loans on Real Estate:
Construction, Land and Land Development	$	—	$	—	$	623	$	623	$	39,195	$	39,818
Farmland		57		—		—		57		966		1,023
Commercial Mortgages (Non-Owner Occupied)		—		—		—		—		35,343		35,343
Commercial Mortgages (Owner Occupied)		188		—		2,270		2,458		39,367		41,825
Residential First Mortgages		1,546		—		2,155		3,701		190,306		194,007
Residential Revolving and Junior Mortgages		480		—		160		640		25,785		26,425
Commercial and Industrial		408		—		92		500		42,524		43,024
Consumer Loans		—		—		—		—		3,544		3,544
Total	$	2,679	$	—	$	5,300	$	7,979	$	377,030	$	385,009

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Note 8: Allowance for Loan Losses

Loans Evaluated for Impairment

Loan receivables evaluated for impairment individually and collectively by segment as of March 31, 2017 and December 31, 2016 are as follows:

(Dollars in thousands)	Mortgage Loans		Commercial and		Consumer and Other
As of March 31, 2017	on Real Estate		Industrial		Loans		Total
Individually evaluated for impairment	$	9,940	$	92	$	—	$	10,032
Collectively evaluated for impairment		345,383		46,113		3,324		394,820
Total Gross Loans	$	355,323	$	46,205	$	3,324	$	404,852
As of December 31, 2016
Individually evaluated for impairment	$	10,323	$	92	$	—	$	10,415
Collectively evaluated for impairment		328,118		42,932		3,544		374,594
Total Gross Loans	$	338,441	$	43,024	$	3,544	$	385,009

Allowance for Loan Losses

The allowance for loan losses disaggregated based on loan receivables evaluated for impairment individually and collectively by segment as of March 31, 2017 and December 31, 2016 are as follows:

(Dollars in thousands)	Mortgage Loans		Commercial and		Consumer
As of March 31, 2017	on Real Estate		Industrial		Loans		Total
Individually evaluated for impairment	$	694	$	92	$	—	$	786
Collectively evaluated for impairment		2,727		436		44		3,207
Total allowance for loan losses	$	3,421	$	528	$	44	$	3,993
As of December 31, 2016	Mortgage Loans on Real Estate		Commercial and Industrial		Consumer Loans		Total
Individually evaluated for impairment	$	803	$	92	$	—	$	895
Collectively evaluated for impairment		2,515		401		52		2,968
Total allowance for loan losses	$	3,318	$	493	$	52	$	3,863

A disaggregation and an analysis of the change in the allowance for loan losses by segment is shown below.

(Dollars in thousands) For the Three Months Ended March 31, 2017	Mortgage Loans on Real Estate			Commercial and Industrial			Consumer Loans			Total
ALLOWANCE FOR LOAN LOSSES:
Beginning Balance	$	3,318		$	493		$	52		$	3,863
(Charge-offs)		(132	)		—			(8	)		(140	)
Recoveries		78			—			2			80
Provision		157			35			(2	)		190
Ending Balance	$	3,421		$	528		$	44		$	3,993
For the Three Months Ended March 31, 2016	Mortgage Loans on Real Estate			Commercial and Industrial			Consumer Loans			Total
ALLOWANCE FOR LOAN LOSSES:
Beginning Balance	$	3,502		$	599		$	122		$	4,223
(Charge-offs)		(83	)		—			(11	)		(94	)
Recoveries		6			5			2			13
(Recovery) provision		(15	)		(25	)		5			(35	)
Ending Balance	$	3,410		$	579		$	118		$	4,107

Internal Risk Rating Grades

Internal risk rating grades are generally assigned to commercial loans not secured by real estate, commercial mortgages, residential mortgages greater than $1 million, smaller residential mortgages which are impaired, loans to real estate developers and contractors, consumer loans greater than $250,000 with chronic delinquency, and TDRs, as shown in the following table. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled. Risk grades (refer to Note 3) are evaluated as new information becomes available for each borrowing relationship or at least quarterly.

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	Construction,				Commercial		Commercial
	Land and				Mortgages		Mortgages		Commercial
(Dollars in thousands)	Land				(Non-Owner		(Owner		and
As of March 31, 2017	Development		Farmland		Occupied)		Occupied)		Industrial		Total
Grade:
Pass	$	36,423	$	994	$	30,571	$	32,412	$	44,441	$	144,841
Watch		5,762		—		4,375		7,732		1,538		19,407
Special mention		179		—		270		—		40		489
Substandard		1,755		—		248		2,406		186		4,595
Doubtful		—		—		—		—		—		—
Total	$	44,119	$	994	$	35,464	$	42,550	$	46,205	$	169,332
	Construction,				Commercial		Commercial
	Land and				Mortgages		Mortgages		Commercial
	Land				(Non-Owner		(Owner		and
As of December 31, 2016	Development		Farmland		Occupied)		Occupied)		Industrial		Total
Grade:
Pass	$	32,009	$	1,023	$	30,639	$	31,191	$	40,841	$	135,703
Watch		5,795		—		4,184		6,652		1,891		18,522
Special mention		180		—		272		1,453		125		2,030
Substandard		1,834		—		248		2,529		167		4,778
Doubtful		—		—		—		—		—		—
Total	$	39,818	$	1,023	$	35,343	$	41,825	$	43,024	$	161,033

Loans not assigned internal risk rating grades are comprised of smaller residential mortgages and smaller consumer loans. Payment activity of these loans is reviewed monthly by management. However, some of these loans are graded when the borrower’s total exposure to the Bank exceeds the limits noted above. Loans are considered to be nonperforming when they are delinquent by 90 days or more or non-accruing and credit risk is primarily evaluated by delinquency status, as shown in the table below.

			Residential
(Dollars in thousands)	Residential		Revolving
As of March 31, 2017	First		and Junior		Consumer
PAYMENT ACTIVITY STATUS	Mortgages (1)		Mortgages (2)		Loans (3)		Total
Performing	$	203,131	$	26,051	$	3,324	$	232,506
Nonperforming		1,975		1,039		—		3,014
Total	$	205,106	$	27,090	$	3,324	$	235,520
			Residential
	Residential		Revolving
As of December 31, 2016	First		and Junior		Consumer
PAYMENT ACTIVITY STATUS	Mortgages (4)		Mortgages (5)		Loans (6)		Total
Performing	$	191,852	$	26,265	$	3,544	$	221,661
Nonperforming		2,155		160		—		2,315
Total	$	194,007	$	26,425	$	3,544	$	223,976

(1) Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.1million as of March 31, 2017.

(2) Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.9 million as of March 31, 2017.

(3) No Consumer Loans had been assigned a risk rating grade of Substandard as of March 31, 2017.

(4) Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.3 million as of December 31, 2016.

(5) Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.1 million as of December 31, 2016.

(6) No Consumer Loans had been assigned a risk rating grade of Substandard as of December 31, 2016.

Impaired Loans

The following tables show the Company’s recorded investment and the customers’ unpaid principal balances for impaired loans, with the associated allowance amount, if applicable, as of March 31, 2017 and December 31, 2016, along with the average recorded investment and interest income recognized for the three months ended March 31, 2017 and 2016, respectively.

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	As of March 31, 2017						As of December 31, 2016
(Dollars in thousands) IMPAIRED LOANS	Recorded Investment		Customers’ Unpaid Principal Balance		Related Allowance		Recorded Investment		Customers’ Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction, Land and Land Development	$	1,455	$	1,535	$	—	$	1,531	$	1,539	$	—
Residential First Mortgages		2,104		2,171		—		2,112		2,176		—
Residential Revolving and Junior Mortgages (1)		995		999		—		995		999		—
Commercial Mortgages (Non-owner occupied)		248		248		—		248		248		—
Commercial Mortgages (Owner occupied)		2,030		2,351		—		1,860		2,178		—
Commercial and Industrial		—		—		—		—		—		—
		6,832		7,304		—		6,746		7,140		—
With an allowance recorded:
Construction, Land and Land Development		239		285		140		243		286		145
Residential First Mortgages		1,942		1,942		338		1,951		1,951		367
Residential Revolving and Junior Mortgages (1)		526		528		175		544		546		199
Commercial Mortgages (Non-owner occupied)		—		—		—		—		—		—
Commercial Mortgages (Owner occupied)		401		421		41		839		854		92
Commercial and Industrial		92		101		92		92		101		92
		3,200		3,277		786		3,669		3,738		895
Total Impaired Loans:
Construction, Land and Land Development		1,694		1,820		140		1,774		1,825		145
Residential First Mortgages		4,046		4,113		338		4,063		4,127		367
Residential Revolving and Junior Mortgages (1)		1,521		1,527		175		1,539		1,545		199
Commercial Mortgages (Non-owner occupied)		248		248		—		248		248		—
Commercial Mortgages (Owner occupied)		2,431		2,772		41		2,699		3,032		92
Commercial and Industrial		92		101		92		92		101		92
	$	10,032	$	10,581	$	786	$	10,415	$	10,878	$	895

Notes:

(1) Junior mortgages include equity lines.

	For the three months ended
	March 31, 2017				March 31, 2016
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Construction, land and land development	$	1,493	$	13	$	991	$	14
Residential First Mortgages		2,108		5		2,783		26
Residential Revolving and Junior Mortgages (1)		995		10		468		9
Commercial Mortgages (Non-owner occupied)		248		4		256		4
Commercial Mortgages (Owner occupied)		2,159		5		1,090		17
Commercial and Industrial		—		—		—		—
		7,003		37		5,588		70
With an allowance recorded:
Construction, land and land development		241		1		260		1
Residential First Mortgages		1,946		24		2,905		21
Residential Revolving and Junior Mortgages (1)		527		5		309		4
Commercial Mortgages (Non-owner occupied)		—		—		—		—
Commercial Mortgages (Owner occupied)		406		—		2,208		14
Commercial and Industrial		92		—		280		1
		3,212		30		5,962		41
Total
Construction, land and land development		1,734		14		1,251		15
Residential First Mortgages		4,054		29		5,688		47
Residential Revolving and Junior Mortgages (1)		1,522		15		777		13
Commercial Mortgages (Non-owner occupied)		248		4		256		4
Commercial Mortgages (Owner occupied)		2,565		5		3,298		31
Commercial and Industrial		92		—		280		1
	$	10,215	$	67	$	11,550	$	111

(1) Junior mortgages include equity lines.

Smaller non-accruing loans and non-accruing loans that are not graded because they are included in homogenous pools generally do not meet the criteria for impairment testing, and are therefore excluded from impaired loan disclosures. At March 31, 2017 and December 31, 2016, non-accruing loans excluded from impaired loan disclosure totaled $671 thousand and $465 thousand, respectively. If interest on these non-accruing loans had been accrued, such income would have totaled $6 thousand and $2 thousand during the three months ended March 31, 2017 and 2016, respectively.

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Loan Modifications

Loans modified as TDRs are considered impaired and are individually evaluated for the amount of impairment in the ALL. There were no new loans modified as TDRs in the first quarter of 2017 or the first quarter of 2016. In addition, no TDRs subsequently defaulted in the first quarter of 2017 or the first quarter of 2016.

Other Real Estate Owned

The table below details the properties included in other real estate owned (“OREO”) as of March 31, 2017 and December 31, 2016. There were no collateralized consumer residential mortgage loans in the process of foreclosure as of March 31, 2017.

	As of March 31, 2017				As of December 31, 2016
	No. of		Carrying		No. of		Carrying
(Dollars in thousands)	Properties		Value		Properties		Value
Residential		2	$	831		2	$	891
Land lots		7		586		7		547
Convenience store		1		60		1		59
Restaurant		1		55		1		55
Commerical properties		3		904		3		942
Total		14	$	2,436		14	$	2,494

Included in other assets as of March 31, 2017 and December 31, 2016, is one residential property purchased in 2013 from a related party with a value of $708 thousand and a former branch, which was closed April 30, 2015, with a value of $403 thousand.

Note 9: Earnings per share

The following table shows the weighted average number of shares used in computing earnings per share and the effect on the weighted average number of shares of dilutive potential common stock.

	For the three months ended
	March 31, 2017					March 31, 2016
	Average		Per share			Average		Per share
	Shares		Amount			Shares		Amount
Basic earnings per share		4,776,800	$	(0.04	)		4,774,856	$	0.11
Effect of dilutive securities:
Stock options		—					16,283
Diluted earnings per share		4,776,800	$	(0.04	)		4,791,139	$	0.11

For the three months ended March 31, 2017 and 2016, options on 91,368 and 68,473 shares, respectively, were not included in computing diluted earnings per share because their effects were anti-dilutive.

Note 10: Stock-Based Compensation

On June 28, 2013, the Company registered with the SEC a stock-based compensation plan, which superseded all other plans. There are 317,209 shares available for grant under this plan at March 31, 2017.

Stock-based compensation expense related to stock awards for the three month periods ended March 31, 2017 and 2016 was $59 thousand and $16 thousand, respectively. Compensation expense for stock options is the estimated fair value of options on the date granted using the Black-Scholes Model amortized on a straight-line basis over the vesting period of the award. There was no unrecognized compensation expense related to stock options as of March 31, 2017.

Options for a total of 8,500 shares were granted and vested during the three months ended March 31, 2017. The aggregate fair value of options granted during the three months ended March 31, 2017 was $16 thousand. Options for a total of 7,500 shares were granted and vested during the three months ended March 31, 2016. The aggregate fair value of options granted during the three months ended March 31, 2016 was $16 thousand.

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The variables used in these calculations of the fair value of the options are as follows:

	For the three months ended March 31,
	2017			2016
Risk free interest rate (5 year Treasury)		1.93	%		1.49	%
Expected dividend yield		0	%		0	%
Expected term (years)		5			5
Expected volatility		21.7	%		40.1	%

Stock option activity for the three months ended March 31, 2017 is summarized below:

						Weighted
						Average
				Weighted Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Life (in years)		Value (1)
Options outstanding, January 1, 2017		218,300		$	6.35		5.9
Granted		8,500			8.30
Forfeited		(1,195	)		8.43
Exercised		—			—
Expired		—			—
Options outstanding and exercisable, March 31, 2017		225,605		$	6.41		5.9	$	737,512

(1) The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on March 31, 2017. This amount changes based on changes in the market value of the Company’s common stock.

In the first quarter of 2017, 12,500 shares of restricted stock were granted to two executives. Of these shares, 5,000 shares vested immediately and $43 thousand of compensation expense was recorded. Another 2,500 shares of restricted stock will vest over two years and $20 thousand of compensation expense is expected to be recorded over that period. The final 5,000 shares of restricted stock will vest over three years and $40 thousand of compensation expense is expected to be recorded over that period.

Note 11: Employee Benefit Plans

The Company has a non-contributory, defined benefit pension plan for full-time employees who were over 21 years of age and vested in the plan as of December 31, 2012, when the plan was frozen. Each participant’s account balance grows based on monthly interest credits. The Company funds pension costs in accordance with the funding provisions of the Employee Retirement Income Security Act.

The Company sponsors a post-retirement benefit plan covering current and future retirees who acquire age 55 and 10 years of service or age 65 and 5 years of service. The post-retirement benefit plan provides coverage toward a retiree’s eligible medical and life insurance benefits expenses. The plan is unfunded and funded as benefits are due.

Components of Net Periodic (Benefit) Cost

(Dollars in thousands)	Pension Benefits						Post-Retirement Benefits
Three months ended March 31,	2017			2016			2017			2016
Service cost	$	—		$	—		$	5		$	6
Interest cost		31			35			5			7
Expected return on plan assets		(45	)		(48	)		—			—
Settlement loss		13			—			—			—
Amortization of net gain		—			—			(2	)		—
Recognized net actuarial loss		19			19			—			—
Net periodic cost	$	18		$	6		$	8		$	13

The Company expects to make no contribution to its pension plan and $5 thousand to its post-retirement benefit plan during the remainder of 2017. The Company has contributed $1 thousand towards the post-retirement plan during the first three months of 2017.

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Note 12: Long Term Debt

FHLB Debt

As of March 31, 2017, the Bank had $60.0 million of outstanding FHLB debt, consisting of nine advances. As of December 31, 2016, five advances totaling $35.0 million were outstanding. The Company drew four new advances totaling $25.0 million during the first quarter of 2017.

The nine advances are shown in the following table.

Description	Balance		Originated		Current Interest Rate			Maturity Date
Adjustable Rate Hybrid	$	10,000,000		4/12/2013		3.40178	%		4/13/2020
Fixed Rate Credit		5,000,000		12/21/2015		0.99000	%		6/15/2017
Fixed Rate Credit		5,000,000		12/22/2015		1.08000	%		9/15/2017
Fixed Rate Credit		5,000,000		1/17/2017		0.91000	%		10/1/2017
Fixed Rate Credit		5,000,000		1/20/2017		0.99500	%		12/20/2017
Fixed Rate Credit		10,000,000		3/1/2017		0.79000	%		5/29/2017
Fixed Rate Credit		5,000,000		3/6/2017		0.71000	%		4/5/2017
Fixed Rate Credit		10,000,000		3/30/2017		0.90000	%		4/28/2017
Fixed Rate Credit		5,000,000		3/31/2017		0.89000	%		5/1/2017
	$	60,000,000

Advances on the FHLB lines are secured by a blanket lien on qualified 1 to 4 family residential real estate loans. Immediate available credit, as of March 31, 2017, was $54.8 million against a total line of credit of $120.8 million.

As of March 31, 2017 and December 31, 2016, the Company had $60.0 million and $35.0 million, respectively, in FHLB debt outstanding with a weighted average interest rate of 1.31% and 1.49%, respectively.

Subordinated Debt

On May 28, 2015, the Company issued an aggregate of $7,000,000 of subordinated notes (the “Notes”). The Notes have a maturity date of May 28, 2025. The Notes bear interest, payable on the 1st of March and September of each year, commencing September 1, 2015, at a fixed interest rate of 6.50% per year. The Notes are not convertible into common stock or preferred stock, and are not callable by the holders. The Company has the right to redeem the Notes, in whole or in part, without premium or penalty, at any interest payment date on or after May 28, 2020 and prior to the maturity date, but in all cases in a principal amount with integral multiples of $1,000, plus interest accrued and unpaid through the date of redemption. If an event of default occurs, such as the bankruptcy of the Company, the holder of a Note may declare the principal amount of the Note to be due and immediately payable. The Notes are unsecured, subordinated obligations of the Company and will rank junior in right of payment to the Company’s existing and future senior indebtedness. The Notes qualify as Tier 2 capital for regulatory reporting.

(Dollars in thousands)	Balance as of
	March 31, 2017
6.5% Subordinated Debt	$	7,000
Less: Issuance costs		(136	)
	$	6,864

Note 13: Fair Value Measurements

The Company uses fair value to record certain assets and liabilities and to determine fair value disclosures. Authoritative accounting guidance clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Authoritative accounting guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The three levels of the fair value hierarchy based on these two types of inputs are as follows:

Level 1 –	Valuation is based on quoted prices in active markets for identical assets and liabilities.
Level 2 –	Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market.
Level 3 –	Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.

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The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements:

Securities available-for-sale: Securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2). In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

Defined benefit plan assets: Defined benefit plan assets are recorded at fair value on an annual basis at year end.

Mortgage servicing rights: MSRs are recorded at fair value on a recurring basis, with changes in fair value recorded in the results of operations. A model is used to determine fair value, which establishes pools of performing loans, calculates cash flows for each pool and applies a discount rate to each pool. Loans are segregated into 14 pools based on each loan’s term and seasoning (age). All loans have fixed interest rates. Cash flows are then estimated by utilizing assumed service costs and prepayment speeds. Service costs were assumed to be $6.00 per loan as of both March 31, 2017 and December 31, 2016. Prepayment speeds are determined primarily based on the average interest rate of the loans in each pool. The prepayment scale used is the Public Securities Association (“PSA”) model, where “100% PSA” means prepayments are zero in the first month, then increase by 0.2% of the loan balance each month until reaching 6.0% in month 30. Thereafter, the 100% PSA model assumes an annual prepayment of 6.0% of the remaining loan balance. The average PSA speed assumption in the fair value model is 139% and 150% as of March 31, 2017 and December 31, 2016, respectively. A discount rate of 14% was then applied to each pool as of March 31, 2017 and 14.0% as of December 31, 2016. This discount rate is intended to represent the estimated market yield for the highest quality grade of comparable servicing. MSRs are classified as Level 3.

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The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis as of

March 31, 2017 and December 31, 2016:

(Dollars in thousands)	Fair Value Measurements at March 31, 2017 Using
Description	Balance		Level 1		Level 2		Level 3
Securities available-for-sale:
Corporate bonds	$	6,715	$	—	$	—	$	6,715
U. S. Government agencies		24,235		—		24,235		—
State and municipal obligations		18,876		—		18,876		—
Total securities available-for-sale:	$	49,826	$	—	$	43,111	$	6,715
Mortgage servicing rights	$	692	$	—	$	—	$	692
Defined benefit plan assets:
Cash and cash equivalents	$	3	$	3	$	—	$	—
Mutual funds - fixed income		1,043		1,043	$	—	$	—
Mutual funds - equity		1,577		1,577		—		—
Total defined benefit plan assets	$	2,623	$	2,623	$	—	$	—
	Fair Value Measurements at December 31, 2016 Using
Description	Balance		Level 1		Level 2		Level 3
Securities available-for-sale:
Corporate bonds	$	7,704	$	—	$	—	$	7,704
U. S. Government agencies		25,313		—		25,313		—
State and municipal obligations		18,156		—		18,156		—
Total securities available-for-sale:	$	51,173	$	—	$	43,469	$	7,704
Mortgage servicing rights	$	671	$	—	$	—	$	671
Defined benefit plan assets:
Mutual funds - fixed income	$	1,041	$	1,041	$	—	$	—
Mutual funds - equity		1,649		1,649		—		—
Total defined benefit plan assets	$	2,690	$	2,690	$	—	$	—

The reconciliation of items using Level 3 inputs is as follows:

			Corporate
(Dollars in thousands)	MSRs		Bonds
Balance, January 1, 2017	$	671	$	7,704
Purchases		—		—
Impairments		—		—
Fair value adjustments		21		11
Sales		—		(1,000	)
Balance, March 31, 2017	$	692	$	6,715

Certain assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.

The following describes the valuation techniques used by the Company to measure certain assets recorded at fair value on a nonrecurring basis in the financial statements:

Impaired Loans: Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. Any given loan may have multiple types of collateral. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’ financial statements if not considered

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significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Impaired loans allocated to the ALL are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.

Other Real Estate Owned: OREO is measured at fair value less estimated costs to sell, based on an appraisal conducted by an independent, licensed appraiser outside of the Company. If the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level 3. OREO is measured at fair value on a nonrecurring basis. The initial fair value of OREO is based on an appraisal done at the time of foreclosure. Subsequent fair value adjustments are recorded in the period incurred and included in other noninterest income on the Consolidated Statements of Income.

The following table summarizes the Company’s assets that were measured at fair value on a nonrecurring basis at the end of the respective period.

			Fair Value Measurements at March 31, 2017 Using
(Dollars in thousands) Description	Balance as of March 31, 2017		Level 1		Level 2		Level 3
Impaired Loans, net	$	2,414	$	—	$	—	$	2,414
Other real estate owned, net		2,436		—		—		2,436
			Fair Value Measurements at December 31, 2016 Using
Description	Balance as of December 31, 2016		Level 1		Level 2		Level 3
Impaired loans, net		2,774		—		—		2,774
Other real estate owned, net	$	2,494	$	—	$	—	$	2,494

The following table displays quantitative information about Level 3 Fair Value Measurements as of March 31, 2017:

							Range
	Balance as of		Valuation		Unobservable		(Weighted
(Dollars in thousands)	March 31, 2017		Technique		Input		Average)
Impaired Loans, net	$	2,414		Discounted appraised value		Selling Cost		0% - 20% (15%	)
						Lack of Marketability		50% - 100% (96%	)
Other real estate owned, net		2,436		Discounted appraised value		Selling Cost		3% - 13% (5%	)
						Lack of Marketability		10% -20% (11%	)

The following table displays quantitative information about Level 3 Fair Value Measurements as of December 31, 2016:

							Range
	Balance as of		Valuation		Unobservable		(Weighted
(Dollars in thousands)	December 31, 2016		Technique		Input		Average)
Impaired Loans, net	$	2,774		Discounted appraised value		Selling Cost		10% - 20% (16%	)
						Lack of Marketability		50% (50%	)
Other real estate owned, net	$	2,494		Discounted appraised value		Selling Cost		3% - 13% (5%	)
						Lack of Marketability		10% - 20% (11%	)

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The estimated fair values of financial instruments are shown in the following table. The carrying amounts in the table are included in the balance sheet under the applicable captions.

					Fair Value Measurements at March 31, 2017 Using
(Dollars in thousands) Description	Balance as of March 31, 2017		Fair Value as of March 31, 2017		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	5,087	$	5,087	$	5,087	$	—	$	—
Interest-bearing deposits		6,826		6,826		6,826		—		—
Certificates of deposit		3,472		3,472		—		3,472		—
Federal funds sold		336		336		336		—		—
Securities available-for-sale		49,826		49,826		—		43,111		6,715
Restricted securities		3,756		3,756		—		—		3,756
Loans, net		401,268		400,988		—		—		400,988
Accrued interest receivable		1,321		1,321		—		1,321		—
Bank owned life insurance		9,944		9,944		9,944		—		—
Mortgage servicing rights		692		692		—		—		692
Financial Liabilities:
Non-interest-bearing liabilities	$	77,369	$	77,369	$	77,369	$	—	$	—
Savings and other interest-bearing deposits		169,027		167,027		—		167,027		—
Time deposits		136,104		135,662		—		—		135,662
Securities sold under repurchase agreements		8,489		8,489		—		8,489		—
FHLB advances		60,000		59,352		—		59,352		—
Subordinated debt		6,864		7,000		—		—		7,000
Accrued interest payable		225		225		—		225		—
					Fair Value Measurements at December 31, 2016 Using
(Dollars in thousands) Description	Balance as of December 31, 2016		Fair Value as of December 31, 2016		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	4,851	$	4,851	$	4,851	$	—	$	—
Interest-bearing deposits		7,501		7,501		7,501		—		—
Certificates of deposit		4,216		4,216		—		4,216		—
Federal funds sold		2,350		2,350		2,350		—		—
Securities available-for-sale		51,173		51,173		—		43,469		7,704
Restricted securities		2,649		2,649		—		—		2,649
Loans, net		381,537		384,468		—		—		384,468
Loans held for sale		276		276		—		—		276
Accrued interest receivable		1,372		1,372		—		1,372		—
Bank owned life insurance		9,869		9,869		9,869		—		—
Mortgage servicing rights		671		671		—		—		671
Financial Liabilities:
Non-interest-bearing liabilities	$	74,799	$	74,799	$	74,799	$	—	$	—
Savings and other interest-bearing deposits		178,869		178,869		—		178,869		—
Time deposits		128,050		127,497		—		—		127,497
Securities sold under repurchase agreements		18,310		18,310		—		18,310		—
FHLB advances		35,000		35,668		—		35,668		—
Subordinated debt		6,860		7,000		—		—		7,000
Accrued interest payable		331		331		—		331		—

The carrying amounts of cash and due from banks, interest-bearing deposits, federal funds sold or purchased, accrued interest receivable, loans held for sale and non-interest-bearing deposits, are payable on demand, or are of such short duration that carrying value approximates market value.

Securities available-for-sale are carried at quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2). In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

The carrying value of restricted securities approximates fair value based on the redemption provisions of the issuer.

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Bank owned life insurance is carried at its cash surrender value.

MSRs are carried at fair value. As described above, a valuation model is used to determine fair value. This model utilizes a discounted cash flow analysis with servicing costs and prepayment assumptions based on comparable instruments and a discount rate.

The fair value of performing loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar remaining maturities. This calculation ignores loan fees and certain factors affecting the interest rates charged on various loans such as the borrower’s creditworthiness and compensating balances and dissimilar types of real estate held as collateral. The fair value of impaired loans is measured as described within the Impaired Loans section of this note. The fair value of loans does not consider the lack of liquidity and uncertainty in the market that would affect the valuation.

Time deposits are presented at estimated fair value by discounting the future cash flows using interest rates offered for deposits of similar remaining maturities.

The fair value of the Company’s subordinated debt is estimated by utilizing observable market prices for comparable securities. Qualitative factors like asset quality, market factors and liquidity are also considered.

The fair value of the FHLB advances is estimated by discounting the future cash flows using the current interest rates offered for similar advances.

The fair value of commitments to extend credit is estimated using the fees currently charged to enter similar agreements, taking into account the remaining terms of the agreements and the present credit worthiness of the counter parties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of standby letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counter parties at the reporting date. At March 31, 2017 and December 31, 2016, the fair value of loan commitments and standby letters of credit was immaterial and therefore, they are not included in the table above.

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair value of the Company’s financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely to prepay in a rising rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

Note 14: Changes in Accumulated Other Comprehensive Income (Loss)

The balances in accumulated other comprehensive income (loss) are shown in the following tables:

	For the Three Months Ended March 31, 2017
	Net Unrealized			Pension and			Accumulated Other
	Gains (Losses)			Post-retirement			Comprehensive
(Dollars in thousands)	on Securities			Benefit Plans			Income (Loss)
Balance January 1, 2017	$	(520	)	$	(715	)	$	(1,235	)
Change in net unrealized holding gains on securities, before reclassification, net of tax expense of $13		27			—			27
Reclassification for previously unrealized net losses recognized in income, net of tax benefit of $2		3			—			3
Balance March 31, 2017	$	(490	)	$	(715	)	$	(1,205	)
	For the Three Months Ended March 31, 2016
	Net Unrealized			Pension and			Accumulated Other
	Gains (Losses)			Post-retirement			Comprehensive
(Dollars in thousands)	on Securities			Benefit Plans			Income (Loss)
Balance January 1, 2016	$	107		$	(883	)	$	(776	)
Change in net unrealized holding gains on securities, before reclassification, net of tax expense of $173		335			—			335
Reclassification for previously unrealized net gains recognized in income, net of tax expense of $2		(4	)		—			(4	)
Balance March 31, 2016	$	438		$	(883	)	$	(445	)

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Reclassification for previously unrealized gains (losses) and impairments on securities are reported in the Consolidated Statements of (Loss) Income as follows. No unrealized gains (losses) on pension and post-employment related costs were reclassified to the Consolidated Statements of (Loss) Income in the three months ended March 31, 2017 and 2016.

Accumulated Other Comprehensive Income (Loss)

Reclassification for the Three Months Ended

Holding (Losses) Gains on Securities

(Dollars in thousands)	March 31, 2017			March 31, 2016
Net (losses) gains on sale of securities available-for-securities	$	(5	)	$	6
Tax benefit (expense)		2			(2	)
Impact on net (loss) income	$	(3	)	$	4

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to assist in understanding the results of operations and the financial condition of Bay Banks of Virginia, Inc. This discussion should be read in conjunction with the above consolidated financial statements and the notes thereto.

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains statements concerning the Company’s expectations, plans, objectives, future financial performance and other statements that are not historical facts. These statements may constitute “forward-looking statements” as defined by federal securities laws. These statements may address issues that involve estimates and assumptions made by management, risks and uncertainties, and actual results could differ materially from historical results or those anticipated by such statements. These forward-looking statements include statements about the benefits of the merger between the Company and Virginia BanCorp, the Company’s and Virginia BanCorp’s plans, obligations, expectations and intentions and other statements that are not historical facts. Words such as “anticipates,” “believes,” “intends,” “should,” “expects,” “will,” and variations of similar expressions are intended to identify forward-looking statements. Factors that could have a material adverse effect on the operations and future prospects of the Company include, but are not limited to, disruptions to customer and employee relationships and business operations caused by the merger; the ability to implement integration plans associated with the transaction in which integration may be more difficult, time-consuming or costly than expected; the ability to achieve the cost savings and synergies contemplated by the merger within the expected timeframe, or at all; changes in interest rates, general economic conditions, the legislative/regulatory climate, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System; the quality or composition of the loan or investment portfolios; demand for loan products; deposit flows; competition; expansion activities; demand for financial services in the Company’s market area, accounting principles, policies and guidelines and the other factors detailed in Bay Banks’s publicly filed documents, including its Annual Report on Form 10-K for the year ended December 31, 2016. These risks and uncertainties should be considered in evaluating the forward-looking statements contained herein, and readers are cautioned not to place undue reliance on such statements, which speak only as of the date they are made.

EXECUTIVE SUMMARY

MERGER WITH VIRGINIA BANCORP

On April 1, 2017, the Company and Virginia BanCorp, a bank holding company conducting substantially all of its operations through its subsidiary Virginia Commonwealth Bank (“VCB”), completed a merger pursuant to the Agreement and Plan of Merger, dated as of November 2, 2016, by and between the Company and Virginia BanCorp. The Company is the surviving corporation in the merger and the former shareholders of Virginia BanCorp received 1.178 shares of the Company’s common stock for each share of Virginia BanCorp common stock they owned immediately prior to the merger, for a total issuance of 4,586,221 shares of the Company’s common stock valued at approximately $40.5 million. As of the completion of the merger, the Company’s legacy shareholders owned approximately 51% of the outstanding common stock of the Company and Virginia BanCorp’s former shareholders owned approximately 49% of the outstanding common stock of the Company.

After the merger of Virginia BanCorp with and into the Company, Virginia BanCorp’s subsidiary bank was merged with and into Bank of Lancaster, and immediately thereafter Bank of Lancaster changed its name to Virginia Commonwealth Bank. Immediately prior to the merger, VCB had total loans of $274.8 million, total deposits of $266.1 million, and total assets of $326.7 million. Bank operating systems are currently being consolidated, which is expected to be completed during the fourth quarter of 2017.

Merger-related costs during the first quarter of 2017 were $471 thousand, and accumulated merger-related costs including the fourth quarter of 2016 were $1.0 million. Annual cost savings of the combined companies are anticipated to be approximately 14% of non-interest expense from 2016 levels.

GENERAL

Net (loss) earnings for the three months ended March 31, 2017 and 2016 were $(177) thousand and $524 thousand, respectively. This is a decline of $701 thousand, or 133.8 %, year over year. Net interest income grew by $420 thousand, non-interest income was unchanged and provision for loan losses increased by $225 thousand. Non-interest expenses increased by $1.2 million or 32%, mainly due to merger-related costs and non-recurring items. Refer to the Earnings Summation section later in this Item 2 for explanations. (Loss) return on average assets declined to (0.14)% from 0.46% for the comparable prior-year period, and (loss) return on average equity declined to (1.70)% from 5.24%.

The in-house loan portfolio grew by $19.7 million, or 5.2%, during the first three months of 2017. The portfolio of loans serviced for Fannie Mae totaled $82.9 million as of March 31, 2017 compared to $82.3 million as of December 31, 2016 and $72.4 million as of March 31, 2016.

The net interest margin improved to 3.45% for the first three months of 2017 compared to 3.35% for the same period in 2016 as costs of money market and time deposit accounts declined. Loan growth was primarily funded by Federal home loan bank advances.

Loans past due or non-accruing have declined by $1.2 million to $6.8 million in the three months ended March 31, 2017. Asset quality remains stable with non-performing assets at 1.6% of total assets at March 31, 2017 compared to 1.6% at December 31, 2016.

Finally, the Company’s core capital levels and regulatory ratios remain well above what is considered “well capitalized” by the Company’s regulators.

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For more information, visit the Company’s website at www.baybanks.com. Information contained on the Company’s website is not a part of or incorporated into this report.

EARNINGS SUMMATION

For the three months ended March 31, 2017 and 2016, net (loss) income was $(177) thousand and $524 thousand, respectively, a decrease of $701 thousand or 133.8%. Diluted (loss) earnings per average share for the three months ended March 31, 2017 and 2016 were $(0.04) and $0.11, respectively. The primary factors in the decrease were as follows:

• $769 thousand increase in salaries and employee benefits related to bonuses, one-time severance related to the merger, a change in payroll processes, and new hires;

• $300 thousand in other one-time merger related expenses;

• $225 thousand increase in provision for loan losses; partially offset by

• $420 thousand in additional net interest income related to loan growth.

Annualized (loss) return on average assets was (0.14)% for the first quarter of 2017 compared to 0.46% for the first quarter of 2016. Annualized (loss) return on average equity was (1.70)% and 5.24% for the three months ended March 31, 2017 and 2016, respectively.

RESULTS OF OPERATIONS

The principal source of earnings for the Company is net interest income. Net interest income is the amount by which interest income exceeds interest expense. The net interest margin is net interest income expressed as a percentage of assets which earn interest. Changes in the volume and mix of assets which earn interest and liabilities that bear interest, the associated yields and rates, and the volume of non-performing assets have an effect on net interest income, the net interest margin, and net income.

FOR THE THREE MONTHS ENDED MARCH 31, 2017 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2016

NET INTEREST INCOME

	Average Balances, Income and Expense, Yields and Rates
Net Interest Income Analysis	Three months ended 3/31/2017							Three months ended 3/31/2016
Fully taxable equivalent basis) (Dollars in Thousands)	Average Balance		Income/ Expense		Yield/ Cost			Average Balance		Income/ Expense		Yield/ Cost
INTEREST EARNING ASSETS:
Taxable investments	$	35,705	$	269		3.01	%	$	30,152	$	207		2.72	%
Tax-exempt investments (1)		19,157		173		3.61	%		24,358		206		3.35	%
Total investments		54,862		442		3.22	%		54,510		413		3.03	%
Gross loans (2)		393,051		4,388		4.47	%		347,894		3,974		4.57	%
Interest-bearing deposits		4,451		7		0.63	%		15,727		15		0.51	%
Certificates of deposits		4,051		19		1.88	%		3,059		22		2.13	%
Federal funds sold		542		1		0.74	%		516		—		0.31	%
Total Interest Earning Assets	$	456,957	$	4,857		4.25	%	$	421,706	$	4,424		4.20	%
INTEREST-BEARING LIABILITIES:
Savings deposits	$	44,430	$	25		0.23	%	$	41,961	$	20		0.19	%
NOW deposits		44,771		23		0.21	%		39,234		15		0.15	%
Time deposits => $100,000		65,126		221		1.36	%		62,701		229		1.42	%
Time deposits < $100,000		66,104		217		1.31	%		62,130		215		1.39	%
Time deposits - Wholesale		—		—		—			5,504		7		0.49	%
Money market deposit accounts		89,493		144		0.64	%		83,203		159		0.77	%
Total Deposits		309,924		630		0.81	%		294,733		645		0.89	%
Federal funds purchased		2,677		10		1.49	%		—		—		—
Securities sold under repurchase agreements		8,234		3		0.15	%		5,829		2		0.17	%
Subordinated debt		6,862		117		6.82	%		6,846		118		6.93	%
FHLB advances		42,500		154		1.45	%		37,874		125		1.32	%
Total Interest-Bearing Liabilities	$	370,197	$	914		0.99	%	$	345,282	$	890		1.05	%
Net interest income and net interest margin			$	3,943		3.45	%			$	3,534		3.35	%
Non-interest-bearing deposits	$	73,485		—		0.00	%	$	63,525		—		0.00	%
Total Cost of funds						0.82	%						0.88	%
Net interest rate spread						3.43	%						3.32	%

Notes:

(1) Income and yield assumes a federal tax rate of 34%.

(2) Includes loan fees and nonaccrual loans.

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Interest income for the three months ended March 31, 2017, on a tax-equivalent basis, was $4.9 million, an increase of $433 thousand from the first quarter of 2016, due mainly to increases in loan balances and higher yields on investments. Interest expense for the three months ended March 31, 2017 was $914 thousand, an increase of $24 thousand from the first quarter of 2016, due primarily to an increase in FHLB advances which supported loan growth. Net interest income for the three months ended March 31, 2017, on a tax-equivalent basis, was $3.9 million, an increase of $409 thousand from the first quarter of 2016.

The annualized net interest margin was 3.45% and 3.35% for the three months ended March 31, 2017 and 2016, respectively. This increase is due primarily to higher investment yields of 3.22% in the first quarter of 2017 compared to 3.03% in the first quarter of 2016, plus reduced costs of money market accounts and time deposits. The net interest margin increase was partially offset by reductions in loan yields, to 4.47% for the first quarter of 2017 from 4.57% for the first quarter of 2016. The cost of funds declined to 0.82% for the first quarter of 2017 from 0.88% for the first quarter of 2016, a result of higher non-interest bearing deposit balances and lower costs of time and money market deposits.

The net interest spread, which is the difference between the annualized yield on earning assets and the total cost of funds, increased to 3.43% for the three months ended March 31, 2017, compared to 3.32% for the three months ended March 31, 2016.

NON-INTEREST INCOME

Non-interest income for the first quarter of 2017 was $857 thousand compared to $858 thousand for the first quarter of 2016. Primary changes in non-interest income were as follows:

• $61 thousand increase in other real estate losses due to an increase in the valuation allowance;

• $49 thousand increase in gains on deferred compensation plan assets;

• $38 thousand increase in fiduciary fees;

• $38 thousand increase in secondary market lending fees; and

• $47 thousand decrease in VISA related fees due to the sale of that portfolio in June 2016.

NON-INTEREST EXPENSE

For the three months ended March 31, 2017 and 2016, non-interest expenses totaled $4.8 million and $3.7 million, respectively. Contributing to the increase in non-interest expense was:

• $769 thousand increase in salaries and benefits due primarily to $250 thousand in bonuses consisting of performance related and hiring bonuses, $171 thousand related to one-time severance associated with the merger, $164 thousand related to payroll processing changes, $102 thousand primarily for new hires in the Richmond market, $69 thousand in deferred compensation expense and $42 thousand in residential lending commissions as the result of loan growth;

• $300 thousand in other one-time merger related expenses.

AVERAGE INTEREST-EARNING ASSETS AND AVERAGE INTEREST-BEARING LIABILITIES

Average interest-earning assets increased 8.4% to $457.0 million for the three months ended March 31, 2017, as compared to $421.7 million for the three months ended March 31, 2016, due mainly to higher loan balances. Average interest-earning assets as a percent of total average assets were 93.4% for the three months ended March 31, 2017 as compared to 93.3% for the same period in 2016. The loan portfolio, with $393.1 million in average balances as of March 31, 2017, is the largest category of interest-earning assets.

Average interest-bearing liabilities increased 7.2% to $370.2 million for the three months ended March 31, 2017, as compared to $345.3 million for the three months ended March 31, 2017. The largest category of interest-bearing liabilities is time deposits, with combined average balances of $131.2 million for the three months ended March 31, 2017, up from $124.8 million for the similar period in 2016. Average balances of money market deposit accounts increased by $6.3 million to $89.5 million for the first three months of 2017 compared to the same period in 2016.

ASSET QUALITY

Asset quality remains stable. Loans charged off during the first three months of 2017, net of recoveries, totaled $60 thousand compared to $81 thousand for the first three months of 2016. This represents a decrease in the annualized net charge-off ratio to 0.06% for the first three months of 2017 compared to 0.09% for the first three months of 2016. The majority of those charge-offs were anticipated and specific reserves had been provided for them in the ALL. Management believes it is maintaining an adequate level of the ALL at 0.99% of total loans at March 31, 2017 and 1.00% at December 31, 2016.

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Non-performing assets, which include OREO and non-performing loans, increased by $462 thousand to $8.3 million, or 1.6% of total assets as of March 31, 2017 compared to $7.8 million as of December 31, 2016. This increase is primarily related to an increase of $520 thousand in non-accruing loans partially offset by a decrease of $58 thousand in OREO.

Non-Performing Assets

(Dollars in Thousands)	March 31, 2017			December 31, 2016
Loans past due 90 days or more and still accruing	$	—		$	—
Non-accruing loans		5,820			5,300
Total non-performing loans		5,820			5,300
Other real estate owned		2,436			2,494
Total non-performing assets	$	8,256		$	7,794
Allowance for loan losses	$	3,993		$	3,863
Allowance to non-performing loans		68.6	%		72.9	%
Non-performing assets to total assets		1.6	%		1.6	%

Classified assets, which include loans with risk rating grades of substandard, doubtful and loss, plus OREO, increased by $393 thousand during the first three months of 2017 to $12.1 million, or 26.86% of Tier 1 capital plus the allowance for loan losses. Risk rating grades are assigned conservatively, causing some homogenous loans, such as residential mortgages, to fall into the pool of adversely risk rated loans and thereby evaluated for impairment, even though they may be performing as agreed and therefore not impaired.

As of March 31, 2017, loans valued at $10.2 million were considered impaired, whereas $10.4 million were considered impaired as of December 31, 2016. Between December 31, 2016 and March 31, 2017, no new loans were identified as impaired and none were dispensed through foreclosure and charged-off. Management has reviewed the impaired credits and the underlying collateral and the current losses have been specifically reserved.

FINANCIAL CONDITION

Total assets increased to $504.2 million as of March 31, 2017 compared to $486.7 million as of December 31, 2017. Cash and due from banks, which produces no income was $5.1 million and $4.9 million as of March 31, 2017 and December 31, 2016, respectively. Interest-bearing deposits at other banks, which is mainly the Bank’s cash on deposit at the Federal Reserve Bank of Richmond, has decreased by $675 thousand to $6.8 million since year end 2016.

During the three months ended March 31, 2017, gross loans increased by $19.9 million or 5.2%, to $404.9 million from $385.0 million at year-end 2016. The largest components of this increase were $4.3 million related to construction and land, $11.1 million related to residential mortgages and $3.2 million related to commercial and industrial loans.

The Bank had $2.4 million and $2.5 million of OREO at March 31, 2017 and December 31, 2016, respectively. As of March 31, 2017, OREO consists of two residences, seven lots, one former convenience store, one former restaurant and three commercial business properties. During the first three months of 2017, one property with a book value of $50 thousand from one borrower was added through foreclosure, and one property with a total book value of $11 thousand was sold. There was $97 thousand in write-downs of OREO properties during the first three months of 2017, compared to none to the same period in 2016. All properties maintained as OREO are valued at the lesser of cost or fair value less estimated costs to sell and are actively marketed.

As of March 31, 2017, securities available-for-sale at fair value totaled $49.8 million as compared to $51.2 million on December 31, 2016. This represents a net decrease of $1.3 million or 2.6% for the three months ended March 31, 2017. As of March 31, 2017, available-for-sale securities represented 9.9% of total assets and 10.58% of earning assets. All securities in the Company’s investment portfolio are classified as available-for-sale and marked to market on a monthly basis. Unrealized gains or losses, net of tax, are booked as an adjustment to shareholders’ equity, and are not realized as an adjustment to earnings until the securities are actually sold or an other than temporary impairment occurs.

The bank owned life insurance’s cash surrender value as of March 31, 2017 was $9.9 million. The insurance’s purpose is to offset the cost of employee benefits.

As of March 31, 2017, total deposits were $382.5 million compared to $381.7 million at year-end 2016. This represents an increase in balances of $782 thousand or 0.2% during the first three months of 2017. The increase was driven by increases of $8.1 million in time deposits and $2.5 million in noninterest-bearing deposits offset by a decrease of $9.8 million in savings and interest-bearing deposits.

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FHLB advances have increased by $25.0 million since December 31, 2016, to $60.0 million as of March 31, 2017 in order to fund loan growth.

On May 28, 2015, the Company entered into a Purchase Agreement with 29 accredited investors under which the Company issued an aggregate of $7,000,000 of subordinated notes to the accredited investors. The Notes have a maturity date of May 28, 2025. The Notes bear interest, payable on the 1st of March and September of each year, commencing September 1, 2015, at a fixed interest rate of 6.50% per year. The Notes are not convertible into common stock or preferred stock, and are not callable by the holders. The Company has the right to redeem the Notes, in whole or in part, without premium or penalty, on any interest payment date on or after May 28, 2020 and prior to the maturity date, but in all cases in a principal amount with integral multiples of $1,000, plus interest accrued and unpaid through the date of redemption. If an event of default occurs, such as the bankruptcy of the Company, the holder of a Note may declare the principal amount of the Note to be due and immediately payable. The Notes are unsecured, subordinated obligations of the Company and will rank junior in right of payment to the Company’s existing and future senior indebtedness. The Notes qualify as Tier 2 capital for regulatory reporting.

As of March 31, 2017, securities sold under repurchase agreements decreased by $9.8 million to $8.5 million from $18.3 million at December 31, 2016. This decrease was the result of normal seasonality for these customers.

LIQUIDITY

Liquidity represents an institution’s ability to meet present and future financial obligations (such as commitments to fund loans) through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. Liquid assets include cash, interest-bearing deposits with other banks, federal funds sold and investments and loans maturing within one year. The Company’s ability to obtain deposits and purchase funds at favorable rates are major factors for liquidity. Management believes that the Company maintains overall liquidity that is sufficient to satisfy its depositors’ requirements and to meet its customers’ credit needs.

At March 31, 2017, cash totaled $5.1 million, federal funds sold totaled $336 thousand, interest-bearing deposits totaled $6.8 million, securities and certificates of deposit maturing in one year or less totaled $620 thousand and loans maturing in one year or less totaled $29.0 million. This results in a liquidity ratio as of March 31, 2017 of 8.3% as compared to 7.8% as of December 31, 2016. The Company determines this ratio by dividing the sum of cash and cash equivalents, investment securities maturing in one year or less, loans maturing in one year or less and federal funds sold, by total assets. The Bank has a formal liquidity management policy and contingency plan, which includes periodic evaluation of cash flow projections.

In addition, the Company has a line of credit with the FHLB of $120.8 million, with $54.8 million available, plus federal funds lines of credit with correspondent banks totaling $21.5 million.

As of March 31, 2017, the Company was not aware of any other known trends, events or uncertainties that have or are reasonably likely to have a material impact on liquidity.

CAPITAL RESOURCES

Capital resources represent funds, earned or obtained, over which a financial institution can exercise greater long-term control in comparison with deposits and borrowed funds. The adequacy of the Company’s capital is reviewed by management on an ongoing basis with reference to size, composition and quality of the Company’s resources, and consistency with regulatory requirements and industry standards. Management seeks to maintain a capital structure that will assure an adequate level of capital to support anticipated asset growth and to absorb potential losses, yet allows management to effectively leverage its capital to maximize return to shareholders. The Company’s capital, also known as shareholders’ equity, is comprised mainly of outstanding common stock and retained earnings. Capital can be increased with securities offerings or through earnings.

Several factors impact shareholders’ equity, including net income and regulatory capital requirements. The Company’s capital resources are also impacted by net unrealized gains or losses on securities. The available-for-sale securities portfolio is marked to market monthly and unrealized gains or losses, net of taxes, are recognized as accumulated other comprehensive income (loss) on the balance sheets and statement of changes in shareholders’ equity. Another factor affecting accumulated other comprehensive income (loss) is changes in the market value of the Company’s pension and post-retirement benefit plans and changes in the plan obligations. The Company’s shareholders’ equity before accumulated other comprehensive loss was $42.8 million as of March 31, 2017 compared to $42.9 million as of December 31, 2016. Accumulated other comprehensive loss decreased by $30 thousand between December 31, 2016 and March 31, 2017, primarily as a result of decreases in unrealized net losses in the investment portfolio.

Book value per share, before accumulated other comprehensive loss, as of March 31, 2017, compared to December 31, 2016, decreased to $8.94 from $8.99. Book value per share, including accumulated other comprehensive loss, decreased to $8.69 as of March 31, 2017 from $8.73 as of December 31, 2016. No cash dividends were paid for the three month period ended March 31, 2017, nor for the comparable period ended March 31, 2016.

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The parent company has no substantial operations of its own, so its primary sources of liquidity are fees received from the Bank, interest on investments and borrowings. The parent company’s liquid assets consisted of cash and investment securities totaling $1.9 million as of March 31, 2017. The parent company has sufficient liquidity to meet its obligations and provide a source of capital for the Bank.

The Bank is subject to minimum regulatory capital ratios as defined by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). As of March 31, 2017, the Bank’s capital ratios continue to be well in excess of regulatory minimums.

In July 2013, the Federal Reserve issued final rules that made changes to its capital rules to align them with the Basel III regulatory capital framework and meet certain requirements of the Dodd-Frank Act. Effective January 1, 2015, the final rules require the Bank to comply with the following minimum capital ratios: (i) a new Common Equity Tier 1 capital ratio of 4.5% of risk-weighted assets; (ii) a Tier 1 capital ratio of 6.0% of risk-weighted assets (increased from the prior requirement of 4.0%); (iii) a total capital ratio of 8.0% of risk-weighted assets (unchanged from the prior requirement); and (iv) a leverage ratio of 4.0% of total assets (unchanged from the prior requirement). The following additional capital requirements related to the capital conservation buffer are being phased in over a four year period, which began on January 1, 2016. When fully phased in on January 1, 2019, the rules will require the Bank to maintain (i) a minimum ratio of Common Equity Tier 1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% Common Equity Tier 1 ratio as that buffer is phased in, effectively resulting in a minimum ratio of Common Equity Tier 1 to risk-weighted assets of at least 7.0% upon full implementation), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation), (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital ratio of 10.5% upon full implementation), and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average assets. The capital conservation buffer requirement is being phased in as of January 1, 2016, at 0.625% of risk-weighted assets, increasing by the same amount each year until fully implemented at 2.5% on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of Common Equity Tier 1 to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. As of March 31, 2017, the Bank maintained Common Equity Tier 1 capital of $43.5 million, Tier 1 capital of $43.5 million, risk weighted assets of $361.0 million, and total capital of $47.5 million. As of March 31, 2017, all ratios were in excess of the fully phased-in requirements, with the Common Equity Tier 1 ratio at 12.04% of risk-weighted assets, the Tier 1 capital ratio at 12.04% of risk-weighted assets, the total capital ratio at 13.15% of risk-weighted assets, and the Tier 1 leverage ratio at 8.99% of total assets.

OFF BALANCE SHEET COMMITMENTS

In the normal course of business, the Company offers various financial products to its customers to meet their credit and liquidity needs. These instruments may involve elements of liquidity, credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby-letters of credit is represented by the contractual amount of these instruments. Subject to its normal credit standards and risk monitoring procedures, the Company makes contractual commitments to extend credit. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Conditional commitments are issued by the Company in the form of performance stand-by letters of credit, which guarantee the performance of a customer to a third-party. The credit risk of issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Off Balance Sheet Arrangements

(In thousands)	March 31, 2017		December 31, 2016
Total Loan Commitments Outstanding	$	39,933	$	38,152
Standby-by Letters of Credit		462		452

The Company maintains liquidity and credit facilities with non-affiliated banks in excess of the total loan commitments and stand-by letters of credit. As these commitments are earning assets only upon takedown of the instrument by the customer, thereby increasing loan balances, management expects the revenue of the Company to be enhanced as these credit facilities are utilized.

There have been no material changes to the off balance sheet items disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

CONTRACTUAL OBLIGATIONS

On February 28, 2017, the Company entered into a 63 month lease related to office space in Richmond, Virginia. The total lease payments are expected to be $1.3 million over the term of the lease. There have been no other material changes outside the ordinary course of business to the contractual obligations disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

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RECENT ACCOUNTING PRONOUNCEMENTS

Refer to Note 4, Amendments to the Accounting Standards Codification, in the Notes to the Consolidated Financial Statements contained in Item 1 of this report, for information related to the adoption of new amendments to the Accounting Standards Codification.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period to which this report relates, the Company has carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. In designing and evaluating its disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that objectives of the disclosure controls and procedures are met. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential conditions. Based upon their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic Securities and Exchange Commission filings as of March 31, 2017.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There was no change to the Company’s internal control over financial reporting during the three months ended March 31, 2017 that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of its operations, the Company is a party to various legal proceedings. Based upon information currently available, management believes that such legal proceedings, in the aggregate, will not have a material adverse effect on the business, financial condition, or results of operations of the Company.

ITEM 1A. RISK FACTORS

Not required.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None to report.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

None to report.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

32

ITEM 5. OTHER INFORMATION

None to report.

ITEM 6. EXHIBITS

2.1	Agreement and Plan of Merger, dated November 2, 2016, by and between Bay Banks of Virginia, Inc. and Virginia BanCorp, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 8, 2016).
3.1	Articles of Incorporation of Bay Banks of Virginia, Inc., as amended effective April 1, 2017 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 6, 2017).
3.2	Bylaws of Bay Banks of Virginia, Inc., as amended effective April 1, 2017 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on April 6, 2017).
10.1	Employment Agreement, dated November 2, 2016 and effective upon the merger of Bay Banks of Virginia, Inc. and Virginia BanCorp, Inc., between Bay Banks of Virginia, Inc. and C. Frank Scott, III (incorporated by reference to Exhibit 10.9 to Pre-Effective Amendment No. 1 to the Registration Statement on Form S-4 filed on January 30, 2017).
10.2	Employment Agreement, dated November 2, 2016 and effective upon the merger of Bay Banks of Virginia, Inc. and Virginia BanCorp, Inc., between Bay Banks of Virginia, Inc. and James A. Wilson, Jr. (incorporated by reference to Exhibit 10.10 to Pre-Effective Amendment No. 1 to the Registration Statement on Form S-4 filed on January 30, 2017).
31.1	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016, (ii) Consolidated Statements of Income for the three months ended March 31, 2017 and 2016, (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016, (iv) Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2017, (v) Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016, and (vi) Notes to Consolidated Financial Statements.

33

SIGNATURES

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

	Bay Banks of Virginia, Inc.
	(Registrant)
May 15, 2017		By:	/s/ Randal R. Greene
			Randal R. Greene
			Chief Executive Officer
			(Principal Executive Officer)
		By:	/s/ James A. Wilson, Jr.
			James A. Wilson, Jr.
			Executive Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer)

34

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Randal R. Greene, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Bay Banks of Virginia Inc.;

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

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

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

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, 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 officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (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, 2017

/s/ Randal R. Greene

Randal R. Greene

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, James A. Wilson, Jr., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Bay Banks of Virginia, Inc.;

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

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

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

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, 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 officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (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 controls over financial reporting.

Date: May 15, 2017

/s/ James A. Wilson, Jr.

James A. Wilson, Jr.

Executive Vice President and 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 for the period ended March 31, 2017 of Bay Banks of Virginia, Inc. (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Executive Officer and Chief Financial Officer of the Company hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002 that based on their knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) 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 as of and for the periods covered in the Report.

/s/ Randal R. Greene

Randal R. Greene, Chief Executive Officer

/s/ James A. Wilson, Jr.

James A. Wilson, Jr., Executive Vice President and Chief Financial Officer

May 15, 2017

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	Apr. 30, 2017
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Trading Symbol	BAYK
Entity Registrant Name	BAY BANKS OF VIRGINIA INC
Entity Central Index Key	0001034594
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		9,373,577

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
ASSETS
Cash and due from banks	$ 5,087	$ 4,851
Interest-bearing deposits	6,826	7,501
Certificates of deposit	3,472	4,216
Federal funds sold	336	2,350
Securities available-for-sale, at fair value	49,826	51,173
Restricted securities	3,756	2,649
Loans receivable, net of allowance for loan losses of $3,993 and $3,863	401,268	381,537
Loans held for sale		276
Premises and equipment, net	10,859	10,844
Accrued interest receivable	1,321	1,372
Other real estate owned, net	2,436	2,494
Bank owned life insurance	9,944	9,869
Goodwill	2,808	2,808
Mortgage servicing rights	692	671
Other assets	5,576	4,099
Total assets	504,207	486,710
LIABILITIES
Noninterest-bearing deposits	77,369	74,799
Savings and interest-bearing demand deposits	169,027	178,869
Time deposits	136,104	128,050
Total deposits	382,500	381,718
Securities sold under repurchase agreements	8,489	18,310
Federal Home Loan Bank advances	60,000	35,000
Subordinated debt, net of issuance costs	6,864	6,860
Other liabilities	4,737	3,117
Total liabilities	462,590	445,005
SHAREHOLDERS' EQUITY
Common stock ($5 par value; authorized - 30,000,000 shares; outstanding - 4,787,356 and 4,774,856 shares, respectively)	23,937	23,874
Additional paid-in capital	2,868	2,872
Retained earnings	16,017	16,194
Accumulated other comprehensive loss, net	(1,205)	(1,235)
Total shareholders' equity	41,617	41,705
Total liabilities and shareholders' equity	$ 504,207	$ 486,710

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Loans, allowance for loan losses	$ 3,993	$ 3,863
Common stock, par value	$ 5	$ 5
Common stock, authorized shares	30,000,000	30,000,000
Common stock, outstanding shares	4,787,356	4,774,856

XML

Consolidated Statements of (Loss) Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
INTEREST INCOME
Loans, including fees	$ 4,388	$ 3,974
Securities:
Taxable	269	207
Tax-exempt	114	136
Federal funds sold	1
Interest-bearing deposit accounts	7	15
Certificates of deposit	19	22
Total interest income	4,798	4,354
INTEREST EXPENSE
Deposits	630	645
Federal funds purchased	10
Securities sold under repurchase agreements	3	2
Subordinated debt	117	118
FHLB advances	154	125
Total interest expense	914	890
Net interest income	3,884	3,464
Provision for (recovery of) loan losses	190	(35)
Net interest income after provision for loan losses	3,694	3,499
NON-INTEREST INCOME
Income from fiduciary activities	245	207
Service charges and fees on deposit accounts	212	227
VISA-related fees	(1)	46
Non-deposit product income	80	106
Other service charges and fees	171	148
Secondary market lending income	115	77
Increase in cash surrender value of life insurance	75	63
Net (losses) gains on sale of securities available for sale	(5)	6
Other real estate losses	(96)	(35)
Other income	61	13
Total non-interest income	857	858
NON-INTEREST EXPENSES
Salaries and employee benefits	2,824	2,055
Occupancy expense	439	448
Software maintenance	204	161
Bank franchise tax	76	60
VISA expense	20	39
Telephone expense	28	31
FDIC assessments	85	81
Foreclosure property expense	10	12
Consulting expense	54	55
Merger expense	300
Other expense	809	738
Total non-interest expenses	4,849	3,680
Net (loss) income before income taxes	(298)	677
Income tax (benefit) expense	(121)	153
Net (loss) income	$ (177)	$ 524
Basic (Loss) Earnings Per Share
Average basic shares outstanding	4,776,800	4,774,856
(Loss) earnings per share, basic	$ (0.04)	$ 0.11
Diluted (Loss) Earnings Per Share
Average diluted shares outstanding	4,776,800	4,791,139
(Loss) earnings per share, diluted	$ (0.04)	$ 0.11

XML

Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Net (loss) income	$ (177)	$ 524
Unrealized gains (losses) on securities:
Unrealized holding gains arising during the period	40	508
Deferred tax expense	(13)	(173)
Reclassification of net securities losses (gains) recognized in net (loss) income	5	(6)
Deferred tax (benefit) expense	(2)	2
Unrealized gains adjustment, net of tax	30	331
Total other comprehensive income	30	331
Comprehensive (loss) income	$ (147)	$ 855

XML

Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period at Dec. 31, 2015					$ (776)
Net loss	$ 524
Other comprehensive income	331
Balance at end of period at Mar. 31, 2016					(445)
Balance at beginning of period at Dec. 31, 2016	$ 41,705	$ 23,874	$ 2,872	$ 16,194	(1,235)
Balance at beginning of period, Shares at Dec. 31, 2016	4,774,856	4,774,856
Net loss	$ (177)			(177)
Other comprehensive income	30				30
Stock-based compensation expense	59	$ 63	(4)
Stock-based compensation expense, Shares		12,500
Balance at end of period at Mar. 31, 2017	$ 41,617	$ 23,937	$ 2,868	$ 16,017	$ (1,205)
Balance at end of period, Shares at Mar. 31, 2017	4,787,356	4,787,356

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash Flows From Operating Activities
Net income	$ (177)	$ 524
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	274	265
Net premium amortization and discount accretion of securities	92	107
Amortization of subordinated debt issuance costs	4	4
Provision for (recovery of) loan losses	190	(35)
Stock compensation expense	59	16
Deferred tax benefit	(5)	(6)
Loss (gains) on securities available-for-sale	5	(6)
Increase in OREO valuation allowance	97
(Gain) loss on sale of other real estate	(1)	35
(Increase) decrease in mortgage servicing rights	(21)	10
Loan originations for sale	(3,471)	(2,727)
Loan sales	3,766	2,086
Gain on sold loans	(19)	(34)
Increase in cash surrender value of life insurance	(75)	(63)
Decrease in accrued income and other assets	38	112
Increase in other liabilities	146	60
Net cash provided by operating activities	902	348
Cash Flows From Investing Activities
Proceeds from maturities and principal paydowns of available-for-sale securities	993	842
Proceeds from sales and calls of available-for-sale securities	995	2,702
Maturities of certificates of deposit	744	248
Purchases of available-for-sale securities and certificates of deposit	(693)	(1,175)
(Purchases) sales of restricted securities	(1,107)	157
Decrease (increase) in federal funds sold	2,014	(59)
Loan (originations) and principal collections, net	(19,971)	(3,429)
Proceeds from sale of other real estate	12	228
Proceeds from sale of equipment	6
Purchases of premises and equipment	(295)	(99)
Net cash used in investing activities	(17,302)	(585)
Cash Flows From Financing Activities
Net decrease in demand, savings, and other interest-bearing deposits	(7,272)	(4,463)
Net increase in time deposits	8,054	1,218
Net decrease in securities sold under repurchase agreements	(9,821)	(1,149)
Increase (decrease) in Federal Home Loan Bank advances	25,000	(5,000)
Net cash provided by (used in) financing activities	15,961	(9,394)
Net decrease in cash and due from banks	(439)	(9,631)
Cash and cash equivalents (including interest-earning deposits) at beginning of period	12,352	20,299
Cash and cash equivalents (including interest-earning deposits) at end of period	11,913	10,668
Cash paid for:
Interest	1,019	987
Income taxes	0	0
Non-cash investing and financing:
Unrealized gain on investment securities	45	502
Change in fair value of pension and post-retirement obligation	0	0
Loans transferred to other real estate owned	50	1,352
Loans originated to facilitate sale of OREO		117
Changes in deferred taxes resulting from OCI transactions	$ 15	$ 171

XML

General

3 Months Ended

Mar. 31, 2017

General

Note 1: General

Bay Banks of Virginia, Inc. (the “Company”) owns 100% of Virginia Commonwealth Bank, formerly named Bank of Lancaster (refer to Note 2) (the “Bank”), 100% of Bay Trust Company, Inc. (the “Trust Company”) and 100% of Steptoes Holdings, LLC (“Steptoes Holdings”). The consolidated financial statements include the accounts of the Bank, the Trust Company, Steptoes Holdings and Bay Banks of Virginia, Inc. Since the business combination was effective on April 1, 2017 these March 31, 2017 consolidated financial statements do not yet reflect combined operations.

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”) and to the general practices within the banking industry. In management’s opinion, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the consolidated financial statements, have been included. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or for any other interim periods. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Certain amounts presented in the consolidated financial statements of prior periods have been reclassified to conform to current year presentations. The reclassifications had no effect on net income, net income per share or shareholders’ equity as previously reported.

XML

Business Combination

3 Months Ended

Mar. 31, 2017

Business Combination

Note 2: Business Combination

On April 1, 2017, the Company and Virginia BanCorp, Inc. (“Virginia BanCorp”), a bank holding company conducting substantially all of its operations through its subsidiary Virginia Commonwealth Bank, completed a merger pursuant to the Agreement and Plan of Merger, dated as of November 2, 2016, by and between the Company and Virginia BanCorp. The Company is the surviving corporation in the merger and the former shareholders of Virginia BanCorp received 1.178 shares of the Company’s common stock for each share of Virginia BanCorp common stock they owned immediately prior to the merger, for a total issuance of 4,586,221 shares of the Company’s common stock valued at approximately $40.5 million. As of the completion of the merger, the Company’s legacy shareholders owned approximately 51% of the outstanding common stock of the Company and Virginia BanCorp’s former shareholders owned approximately 49% of the outstanding common stock of the Company. After the merger of Virginia BanCorp with and into the Company, Virginia BanCorp’s subsidiary bank was merged with and into Bank of Lancaster, and immediately thereafter Bank of Lancaster changed its name to Virginia Commonwealth Bank. Bank operating systems are being consolidated and are expected to be completed during the fourth quarter of 2017.

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Significant Accounting Policies

3 Months Ended

Mar. 31, 2017

Significant Accounting Policies

Note 3: Significant Accounting Policies

Loans

The Company grants mortgage loans on real estate, commercial and industrial loans, and consumer and other loans to customers. A substantial portion of the loan portfolio is represented by mortgage loans on real estate. The ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in the Company’s market areas.

Loans are reported at their recorded investment, which is the outstanding principal balance net of any unearned income, such as deferred fees and costs, and charge-offs. Interest on loans is recognized over the term of the loan and is calculated using the interest method on principal amounts outstanding. Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment of the related loan yield over the contractual term of the loan, adjusted for early pay-offs, where applicable.

The accrual of interest is generally discontinued at the time a loan is 90 days or more past due, or earlier, if collection is uncertain based on an evaluation of the net realizable value of the collateral and the financial strength of the borrower. Payments received for loans no longer accruing interest are applied to the unpaid principal balance. Loans greater than 90 days past due may remain on accrual status if the credit is well-secured and in process of collection. Personal loans are typically charged off no later than 180 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are charged off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual and past due policies are materially the same for all types of loans.

All interest accrued but not collected for loans that are placed on non-accrual or charged off are reversed against interest income. Any subsequent interest received on these loans is accounted for on the cash basis or cost recovery method until qualifying for return to accrual. Generally, a loan is returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured, or it becomes well secured and in the process of collection.

Allowance for loan losses (“ALL”)

The ALL reflects management’s judgment of probable loan losses inherent in the portfolio at the balance sheet date. Management uses a disciplined process and methodology to establish the ALL each quarter. To determine the total ALL, the Company estimates the reserves needed for each homogenous segment and class of the portfolio, plus any loans analyzed individually for impairment. Depending on the nature of each segment and class, considerations include historical loss experience, adverse situations that may affect a borrower’s ability to repay, credit scores, past due history, estimated value of any underlying collateral, prevailing local and national economic conditions, and internal policies and procedures including credit risk management and underwriting. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as conditions change.

Management employs a risk rating system to evaluate and consistently categorize loan portfolio credit risk. Loans assigned risk rating grades include all commercial loans not secured by real estate, commercial mortgages, residential mortgages greater than $1 million, smaller residential mortgages which are impaired, loans to real estate developers and contractors, consumer loans greater than $250 thousand with chronic delinquency, and troubled debt restructures (“TDRs”). The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled. Risk grades are evaluated as new information becomes available for each borrowing relationship or at least quarterly. All other loans not specifically assigned a risk rating grade are monitored as a discrete pool of loans generally based on delinquency status. Risk rating categories are as follows:

Pass – Borrower is strong or sound and collateral securing the loan, if any, is adequate.

Watch – Borrower exhibits some signs of financial stress but is generally believed to be a satisfactory customer and collateral, if any, may be in excess of 90% of the loan balance.

Special Mention – Adverse trends in the borrower’s financial position are evident and warrant management’s close attention. Any collateral may not be fully adequate to secure the loan balance.

Substandard – A loan in this category has a well-defined weakness in the primary repayment source that jeopardizes the timely collection of the debt. There is a distinct possibility that a loss may result if the weakness is not corrected.

Doubtful – Default has already occurred and it is likely that foreclosure or repossession procedures have begun or will begin in the near future. Weaknesses make collection or liquidation in full, based on currently existing information, highly questionable and improbable.

Loss – Uncollectible and of such little value that continuance as a bankable asset is not warranted.

The ALL consists of specific, general, and unallocated components. The specific component is determined by identifying impaired loans (as described below) then evaluating each one to calculate the amount of impairment. Impaired loans measured for impairment generally include: (1) non-accruing Special mention, Substandard and Doubtful loans in excess of $250,000; (2) Substandard and Doubtful loans in excess of $500,000; (3) Special Mention loans in excess of $500,000 if any of the loans in the relationship are more than 30 days past due or if the borrower has filed for bankruptcy; and (4) all TDRs. A specific allowance arises when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component collectively evaluates smaller commercial loans, residential mortgages and consumer loans, grouped into segments and classes. Historical loss experience is calculated and applied to each segment or class, then adjusted for qualitative factors. Qualitative factors include changes in local and national economic indicators, such as unemployment rates, interest rates, gross domestic product growth and real estate market trends; the level of past due and nonaccrual loans; risk ratings on individual loans; strength of credit policies and procedures; loan officer experience; borrower credit scores; and other intrinsic risks related to the types and geographic locations of loans. These qualitative adjustments reflect management’s judgment of risks inherent in the segments. An unallocated component is maintained if needed to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. Changes in the allowance for loan losses and the related provision expense can materially affect net income.

The specific component of the ALL calculation accounts for the loan loss reserve necessary on impaired loans. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not considered impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Accrual of interest may or may not be discontinued for any given impaired loan. Impairment is measured by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Because large groups of smaller balance homogeneous loans are collectively evaluated for impairment, the Company does not generally separately identify smaller balance individual consumer and residential loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.

The general component of the ALL calculation collectively evaluates groups of loans in segments and classes, as noted above. The segments are: (1) Mortgage loans on real estate; (2) Commercial and industrial loans; and (3) Consumer and other loans. The segment for Mortgage loans on real estate is disaggregated into the following classes: (1) Construction, land and land development; (2) Farmland; (3) Residential first mortgages; (4) Residential revolving and junior mortgages; (5) Commercial mortgages (non-owner-occupied); and (6) Commercial mortgages (owner-occupied). Loans in segment 1 are secured by real estate. Loans in segments 2 and 3 are secured by other types of collateral or are unsecured. A given segment or class may not reflect the purpose of a loan. For example, a business owner may provide his residence as collateral for a loan to his company, in which case the loan would be grouped in a residential mortgage class. Historical loss factors are calculated for the prior 20 quarters by segment and class, and then applied to the current balances in each segment and class. Finally, qualitative factors are applied to each segment and class.

Construction and development loans carry risks that the project will not be finished according to schedule or according to budget and the value of the collateral, at any point in time, may be less than the principal amount of the loan. These loans also bear the risk that the general contractor may face financial pressure unrelated to the project. Loans secured by land, farmland and residential mortgages carry the risk of continued credit-worthiness of the borrower and changes in value of the underlying real estate collateral. Commercial mortgages and commercial and industrial loans carry risks associated with the profitable operation of a business and its related cash flows. Additionally, commercial and industrial loans carry risks associated with the value of collateral other than real estate which may depreciate over time. Consumer loans carry risks associated with the continuing credit-worthiness of the borrower and are more likely than real estate loans to be adversely affected by divorce, unemployment, personal illness or bankruptcy of an individual. Consumer loans secured by automobiles carry risks associated with rapidly depreciating collateral. Consumer loans have historically included credit cards, which are unsecured. The credit card portfolio was sold to an unaffiliated third party in the third quarter of 2016.

The summation of the specific, general and unallocated components results in the total estimated ALL. Management may also include an unallocated component to cover uncertainties in the level of probable losses. This estimate is inherently subjective and actual losses could be greater or less than the estimates.

Additions to the ALL are made by charges to earnings through the provision for loan losses. Charge-offs result from credit exposures deemed to be uncollectible and the ALL is reduced by these. Recoveries of previously charged off amounts are credited back to the ALL. Charge-off policies are materially the same for all types of loans.

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Amendments to the Accounting Standards Codification

3 Months Ended

Mar. 31, 2017

Amendments to the Accounting Standards Codification

Note 4: Amendments to the Accounting Standards Codification

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Update Standard (“ASU”) 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. This ASU requires Securities and Exchange Commission (“SEC”) registrants to disclose the effect that recently issued accounting standards will have on their financial statements when adopted in a future period. In cases where a registrant cannot reasonably estimate the impact of the adoption, additional qualitative disclosures should be considered to assist the reader in assessing the significance of the standard’s impact on its financial statements. The Company adopted ASU 2017-03 in the first quarter of 2017. The adoption of the standard resulted in enhanced disclosures regarding the impact that recently issued accounting standards adopted in a future period will have on the Company’s financial statements and disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which is new guidance for the accounting for credit losses on instruments within its scope. It introduces a new model for current expected credit losses (“CECL”) which will apply to financial assets subject to credit losses and measured at amortized cost and certain off-balance sheet credit exposures. This will include loans, held-to-maturity debt securities, loan commitments, financial guarantees, net investments in leases, reinsurance and trade receivables. The CECL model requires an entity to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses should consider historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. In addition, ASU 2016-13 replaces the current available-for-sale debt securities other-than-temporary impairment model with an estimate of expected credit losses only when the fair value falls below the amortized cost of the asset. Credit losses on available-for-sale debt securities will be limited to the difference between the security’s amortized cost basis and its fair value. The available-for-sale debt security model will also require the use of an allowance to record estimated credit losses and subsequent recoveries. The ASU also addresses purchased financial assets with credit deterioration. Disclosure requirements are expanded regarding an entity’s assumptions, models and methods for estimating the ALL. The ASU is effective for interim and annual reporting periods beginning after December 15, 2019. The Company is evaluating the impact that ASU 2016-13 will have on its consolidated financial statements. Periodic historical loan data is being accumulated which will allow for migration analysis of risk ratings, past due and non-accrual status, plus other various individual loan characteristics.

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Shares-Based Payment Accounting.” The amendments in this ASU simplify several aspects of the accounting for share-based payment award transactions including: (1) income tax consequences; (2) classification of awards as either equity or liabilities; (3) diluted earnings per share; and (4) classification on the statement of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of ASU 2016-09 did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requiring more disclosures related to leasing transactions. ASU 2016-02 will be effective for the Company for the fiscal years beginning after December 15, 2018, with early adoption permitted. The Company expects to adopt ASU 2016-02 in the first quarter of 2019. The Company is evaluating the impact of the standard and expects a minimal increase in assets and liabilities; however, the Company does not expect the guidance to have a material effect on its financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10) which requires equity investments, other than those accounted for using the equity method, to be measured at fair value through earnings. There will no longer be an available-for-sale classification measured (changes in fair value reported in other comprehensive income) for equity securities with readily determinable fair values. The cost method is also eliminated for equity instruments without a readily determinable fair value. For these investments, companies can elect to record the investment at cost, less impairment, plus or minus subsequent adjustments for observable price changes. This election only applies to equity investments that do not qualify for the net asset value practical expedient. Public companies will be required to use the exit price when measuring the fair value of financial instruments measured at amortized cost for disclosure purposes. In addition, the ASU requires financial assets and financial liabilities to be presented separately in the notes to the financial statements, grouped by measurement category and form of financial asset. The classification and measurement guidance is effective for periods beginning after December 15, 2017. The Company’s primary available-for sale investments are debt securities and are therefore not included in the scope of ASU 2016-01. The Company is continuing to evaluate the impact that ASU 2016-01 will have on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in this ASU modify the guidance companies use to recognize revenue from contracts with customers for transfers of goods or services and transfers of nonfinancial assets, unless those contracts are within the scope of other standards. The ASU requires that entities apply a specific method to recognize revenue reflecting the consideration expected from customers in exchange for the transfer of goods and services. The guidance also requires new qualitative and quantitative disclosures, including information about contract balances and performance obligations. Entities are also required to disclose significant judgments and changes in judgments for determining the satisfaction of performance obligations. In August 2015, the FASB issued ASU 2014-09 changing the effective date for ASU 2014-09 to annual reporting periods beginning after December 15, 2017 from December 15, 2016. The Company’s primary source of revenue is interest income from loans and their fees and investments. As these items are outside the scope of the guidance, this income is not expected to be impacted by implementation of ASU 2014-09. The Company is still reviewing other sources of income such as fiduciary fees, secondary market lending fees and other deposit account fees to evaluate the impact of ASU 2014-09. The Company continues to evaluate the impact that ASU 2014-09 will have on its consolidated financial statements.

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Securities

3 Months Ended

Mar. 31, 2017

Securities

Note 5: Securities

The aggregate amortized costs and fair values of the available-for-sale securities portfolio are as follows:

(Dollars in thousands)
Available-for-sale securities March 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Corporate bonds	$	6,695	$	20	$	—		$	6,715
U.S. Government agencies		24,615		49		(429	)		24,235
State and municipal obligations		19,229		77		(430	)		18,876
	$	50,539	$	146	$	(859	)	$	49,826
Available-for-sale securities December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Corporate bonds	$	7,695	$	14	$	(5	)	$	7,704
U.S. Government agencies		25,668		53		(408	)		25,313
State and municipal obligations		18,566		49		(459	)		18,156
	$	51,929	$	116	$	(872	)	$	51,173

Gross realized gains and gross realized losses on sales and calls of securities were as follows:

	For the three months ended
	March 31,
(Dollars in thousands)	2017			2016
Gross realized gains	$	—		$	15
Gross realized losses		(5	)		(9	)
Net realized (losses) gains	$	(5	)	$	6
Aggregate proceeds	$	995		$	2,702

Average yields (taxable equivalent) on securities were 3.22% and 3.03% for the three months ended March 31, 2017 and 2016, respectively.

Securities with a market value of $10.7 million and $19.1 million were pledged as collateral for repurchase agreements and for other purposes as required by law as of March 31, 2017 and December 31, 2016, respectively. As of March 31, 2017 and December 31, 2016, all the securities pledged to repurchase agreements were state and municipal obligations. All the repurchase agreements had remaining contractual maturities that were overnight and continuous. Securities sold under repurchase agreements were $8.5 million and $18.3 million as of March 31, 2017 and December 31, 2016, respectively, and included in liabilities on the consolidated balance sheets. The securities pledged to each agreement are reviewed daily and can be changed at the option of the Bank with minimal risk of loss due to fair value.

Securities in an unrealized loss position at March 31, 2017 and December 31, 2016, by duration of the unrealized loss, are shown below. The unrealized loss positions were directly related to interest rate movements as there is minimal credit risk exposure in these investments. All agency securities, and states and municipal securities, are investment grade or better and their losses are considered temporary. Management does not intend to sell the securities and does not expect to be required to sell the securities. Furthermore, all amortized cost bases are expected to be recovered. Bonds with unrealized loss positions at March 31, 2017 included 39 federal agencies and 35 municipals. Bonds with unrealized loss positions at December 31, 2016 included 37 federal agencies, one corporate bond and 39 municipals. The tables are shown below.

(Dollars in thousands)	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
March 31, 2017	Value		Loss			Value		Loss			Value		Loss
U.S. Government agencies	$	21,463	$	(418	)	$	1,248	$	(11	)	$	22,711	$	(429	)
States and municipal obligations		12,409		(430	)		—		—			12,409		(430	)
Total temporarily impaired securities	$	33,872	$	(848	)	$	1,248	$	(11	)	$	35,120	$	(859	)
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2016	Value		Loss			Value		Loss			Value		Loss
Corporate bonds	$	995	$	(5	)	$	—	$	—		$	995	$	(5	)
U.S. Government agencies		20,933		(396	)		1,308		(12	)		22,241		(408	)
States and municipal obligations		12,888		(459	)		—		—			12,888		(459	)
Total temporarily impaired securities	$	34,816	$	(860	)	$	1,308	$	(12	)	$	36,124	$	(872	)

The Company’s investment in Federal Home Loan Bank of Atlanta (“FHLB”) stock totaled $3.0 million and $1.9 million at March 31, 2017 and December 31, 2016, respectively. The Company also had an investment in Federal Reserve Bank of Richmond (“FRB”) stock which totaled $595 thousand and $580 thousand at March 31, 2017 and December 31, 2016, respectively. The investments in both FHLB and FRB stock are required investments related to the Bank’s membership with the FHLB and FRB. These securities do not have a readily determinable fair value as their ownership is restricted, and they lack an active market for trading. Additionally, per charter provisions related to the FHLB and FRB stock, all repurchase transactions of such stock must occur at par. Accordingly, these securities are carried at cost, and are periodically evaluated for impairment. The Company’s determination as to whether its investment in FHLB and FRB stock is impaired is based on management’s assessment of the ultimate recoverability of its par value rather than recognizing temporary declines in its value. The determination of whether the decline affects the ultimate recoverability of the investments is influenced by available information regarding various factors. These factors include, among others, the significance of the decline in net assets of the issuing banks as compared to the capital stock amount reported by these banks, and the length of time a decline has persisted; commitments by such banks to make payments required by law or regulation and the level of such payments in relation to the operating performance of the issuing bank; and the overall liquidity position of the issuing bank. Based on its most recent analysis of publicly available information regarding the financial condition of the issuing banks, management concluded that no impairment existed in the carrying value of FHLB and FRB stock.

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Low Income Housing Tax Credits

3 Months Ended

Mar. 31, 2017

Low Income Housing Tax Credits

Note 6: Low Income Housing Tax Credits

The Company had investments in three separate housing equity funds at March 31, 2017. The general purpose of these funds is to encourage and assist participants in investing in low-income residential rental properties located in the Commonwealth of Virginia, develop and implement strategies to maintain projects as low-income housing, deliver federal low income housing tax credits to investors, allocate tax losses and other possible tax benefits to investors, and to preserve and protect project assets. The investments in these funds were recorded as other assets on the consolidated balance sheets and were $1.5 million as of March 31, 2017. These investments and related tax benefits have expected terms through 2029. Tax credits and other tax benefits recognized related to these investments during the three months ended March 31, 2017 was $17 thousand. Total projected tax credits to be received for 2017 are $68 thousand, which is based on the most recent quarterly estimates received from the funds. Additional capital calls expected for the funds totaled $1.5 million at March 31, 2017 and are included in other liabilities on the consolidated balance sheets.

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Loans

3 Months Ended

Mar. 31, 2017

Loans

Note 7: Loans

The following is a summary of the balances of loans:

(Dollars in thousands)	March 31, 2017			December 31, 2016
Mortgage loans on real estate:
Construction, Land and Land Development	$	44,119		$	39,818
Farmland		994			1,023
Commercial Mortgages (Non-Owner Occupied)		35,464			35,343
Commercial Mortgages (Owner Occupied)		42,550			41,825
Residential First Mortgages		205,106			194,007
Residential Revolving and Junior Mortgages		27,090			26,425
Commercial and Industrial loans		46,205			43,024
Consumer Loans		3,324			3,544
Total loans		404,852			385,009
Net unamortized deferred loan costs		409			391
Allowance for loan losses		(3,993	)		(3,863	)
Loans, net	$	401,268		$	381,537

The recorded investment in past due and non-accruing loans is shown in the following table. A loan past due by more than 90 days is generally placed on nonaccrual unless it is both well secured and in the process of collection.

			90 Days or
	30-89		More Past				Total Past
(Dollars in thousands)	Days		Due and				Due and				Total
March 31, 2017	Past Due		Still Accruing		Nonaccruals		Nonaccruals		Current		Loans
Mortgage Loans on Real Estate:
Construction, Land and Land Development	$	—	$	—	$	547	$	547	$	43,572	$	44,119
Farmland		—		—		—		—		994		994
Commercial Mortgages (Non-Owner Occupied)		—		—		—		—		35,464		35,464
Commercial Mortgages (Owner Occupied)		—		—		2,148		2,148		40,402		42,550
Residential First Mortgages		402		—		1,975		2,377		202,729		205,106
Residential Revolving and Junior Mortgages		—		—		1,039		1,039		26,051		27,090
Commercial and Industrial		603		—		111		714		45,491		46,205
Consumer Loans		—		—		—		—		3,324		3,324
Total	$	1,005	$	—	$	5,820	$	6,825	$	398,027	$	404,852
			90 Days or
	30-89		More Past				Total Past
	Days		Due and				Due and				Total
December 31, 2016	Past Due		Still Accruing		Nonaccruals		Nonaccruals		Current		Loans
Mortgage Loans on Real Estate:
Construction, Land and Land Development	$	—	$	—	$	623	$	623	$	39,195	$	39,818
Farmland		57		—		—		57		966		1,023
Commercial Mortgages (Non-Owner Occupied)		—		—		—		—		35,343		35,343
Commercial Mortgages (Owner Occupied)		188		—		2,270		2,458		39,367		41,825
Residential First Mortgages		1,546		—		2,155		3,701		190,306		194,007
Residential Revolving and Junior Mortgages		480		—		160		640		25,785		26,425
Commercial and Industrial		408		—		92		500		42,524		43,024
Consumer Loans		—		—		—		—		3,544		3,544
Total	$	2,679	$	—	$	5,300	$	7,979	$	377,030	$	385,009

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Allowance for Loan Losses

3 Months Ended

Mar. 31, 2017

Allowance for Loan Losses

Note 8: Allowance for Loan Losses

Loans Evaluated for Impairment

Loan receivables evaluated for impairment individually and collectively by segment as of March 31, 2017 and December 31, 2016 are as follows:

(Dollars in thousands)	Mortgage Loans		Commercial and		Consumer and Other
As of March 31, 2017	on Real Estate		Industrial		Loans		Total
Individually evaluated for impairment	$	9,940	$	92	$	—	$	10,032
Collectively evaluated for impairment		345,383		46,113		3,324		394,820
Total Gross Loans	$	355,323	$	46,205	$	3,324	$	404,852
As of December 31, 2016
Individually evaluated for impairment	$	10,323	$	92	$	—	$	10,415
Collectively evaluated for impairment		328,118		42,932		3,544		374,594
Total Gross Loans	$	338,441	$	43,024	$	3,544	$	385,009

Allowance for Loan Losses

The allowance for loan losses disaggregated based on loan receivables evaluated for impairment individually and collectively by segment as of March 31, 2017 and December 31, 2016 are as follows:

(Dollars in thousands)	Mortgage Loans		Commercial and		Consumer
As of March 31, 2017	on Real Estate		Industrial		Loans		Total
Individually evaluated for impairment	$	694	$	92	$	—	$	786
Collectively evaluated for impairment		2,727		436		44		3,207
Total allowance for loan losses	$	3,421	$	528	$	44	$	3,993
As of December 31, 2016	Mortgage Loans on Real Estate		Commercial and Industrial		Consumer Loans		Total
Individually evaluated for impairment	$	803	$	92	$	—	$	895
Collectively evaluated for impairment		2,515		401		52		2,968
Total allowance for loan losses	$	3,318	$	493	$	52	$	3,863

A disaggregation and an analysis of the change in the allowance for loan losses by segment is shown below.

(Dollars in thousands) For the Three Months Ended March 31, 2017	Mortgage Loans on Real Estate			Commercial and Industrial			Consumer Loans			Total
ALLOWANCE FOR LOAN LOSSES:
Beginning Balance	$	3,318		$	493		$	52		$	3,863
(Charge-offs)		(132	)		—			(8	)		(140	)
Recoveries		78			—			2			80
Provision		157			35			(2	)		190
Ending Balance	$	3,421		$	528		$	44		$	3,993
For the Three Months Ended March 31, 2016	Mortgage Loans on Real Estate			Commercial and Industrial			Consumer Loans			Total
ALLOWANCE FOR LOAN LOSSES:
Beginning Balance	$	3,502		$	599		$	122		$	4,223
(Charge-offs)		(83	)		—			(11	)		(94	)
Recoveries		6			5			2			13
(Recovery) provision		(15	)		(25	)		5			(35	)
Ending Balance	$	3,410		$	579		$	118		$	4,107

Internal Risk Rating Grades

Internal risk rating grades are generally assigned to commercial loans not secured by real estate, commercial mortgages, residential mortgages greater than $1 million, smaller residential mortgages which are impaired, loans to real estate developers and contractors, consumer loans greater than $250,000 with chronic delinquency, and TDRs, as shown in the following table. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled. Risk grades (refer to Note 3) are evaluated as new information becomes available for each borrowing relationship or at least quarterly.

	Construction,				Commercial		Commercial
	Land and				Mortgages		Mortgages		Commercial
(Dollars in thousands)	Land				(Non-Owner		(Owner		and
As of March 31, 2017	Development		Farmland		Occupied)		Occupied)		Industrial		Total
Grade:
Pass	$	36,423	$	994	$	30,571	$	32,412	$	44,441	$	144,841
Watch		5,762		—		4,375		7,732		1,538		19,407
Special mention		179		—		270		—		40		489
Substandard		1,755		—		248		2,406		186		4,595
Doubtful		—		—		—		—		—		—
Total	$	44,119	$	994	$	35,464	$	42,550	$	46,205	$	169,332
	Construction,				Commercial		Commercial
	Land and				Mortgages		Mortgages		Commercial
	Land				(Non-Owner		(Owner		and
As of December 31, 2016	Development		Farmland		Occupied)		Occupied)		Industrial		Total
Grade:
Pass	$	32,009	$	1,023	$	30,639	$	31,191	$	40,841	$	135,703
Watch		5,795		—		4,184		6,652		1,891		18,522
Special mention		180		—		272		1,453		125		2,030
Substandard		1,834		—		248		2,529		167		4,778
Doubtful		—		—		—		—		—		—
Total	$	39,818	$	1,023	$	35,343	$	41,825	$	43,024	$	161,033

Loans not assigned internal risk rating grades are comprised of smaller residential mortgages and smaller consumer loans. Payment activity of these loans is reviewed monthly by management. However, some of these loans are graded when the borrower’s total exposure to the Bank exceeds the limits noted above. Loans are considered to be nonperforming when they are delinquent by 90 days or more or non-accruing and credit risk is primarily evaluated by delinquency status, as shown in the table below.

			Residential
(Dollars in thousands)	Residential		Revolving
As of March 31, 2017	First		and Junior		Consumer
PAYMENT ACTIVITY STATUS	Mortgages (1)		Mortgages (2)		Loans (3)		Total
Performing	$	203,131	$	26,051	$	3,324	$	232,506
Nonperforming		1,975		1,039		—		3,014
Total	$	205,106	$	27,090	$	3,324	$	235,520
			Residential
	Residential		Revolving
As of December 31, 2016	First		and Junior		Consumer
PAYMENT ACTIVITY STATUS	Mortgages (4)		Mortgages (5)		Loans (6)		Total
Performing	$	191,852	$	26,265	$	3,544	$	221,661
Nonperforming		2,155		160		—		2,315
Total	$	194,007	$	26,425	$	3,544	$	223,976

(1) Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.1million as of March 31, 2017.

(2) Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.9 million as of March 31, 2017.

(3) No Consumer Loans had been assigned a risk rating grade of Substandard as of March 31, 2017.

(4) Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.3 million as of December 31, 2016.

(5) Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.1 million as of December 31, 2016.

(6) No Consumer Loans had been assigned a risk rating grade of Substandard as of December 31, 2016.

Impaired Loans

The following tables show the Company’s recorded investment and the customers’ unpaid principal balances for impaired loans, with the associated allowance amount, if applicable, as of March 31, 2017 and December 31, 2016, along with the average recorded investment and interest income recognized for the three months ended March 31, 2017 and 2016, respectively.

	As of March 31, 2017						As of December 31, 2016
(Dollars in thousands) IMPAIRED LOANS	Recorded Investment		Customers’ Unpaid Principal Balance		Related Allowance		Recorded Investment		Customers’ Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction, Land and Land Development	$	1,455	$	1,535	$	—	$	1,531	$	1,539	$	—
Residential First Mortgages		2,104		2,171		—		2,112		2,176		—
Residential Revolving and Junior Mortgages (1)		995		999		—		995		999		—
Commercial Mortgages (Non-owner occupied)		248		248		—		248		248		—
Commercial Mortgages (Owner occupied)		2,030		2,351		—		1,860		2,178		—
Commercial and Industrial		—		—		—		—		—		—
		6,832		7,304		—		6,746		7,140		—
With an allowance recorded:
Construction, Land and Land Development		239		285		140		243		286		145
Residential First Mortgages		1,942		1,942		338		1,951		1,951		367
Residential Revolving and Junior Mortgages (1)		526		528		175		544		546		199
Commercial Mortgages (Non-owner occupied)		—		—		—		—		—		—
Commercial Mortgages (Owner occupied)		401		421		41		839		854		92
Commercial and Industrial		92		101		92		92		101		92
		3,200		3,277		786		3,669		3,738		895
Total Impaired Loans:
Construction, Land and Land Development		1,694		1,820		140		1,774		1,825		145
Residential First Mortgages		4,046		4,113		338		4,063		4,127		367
Residential Revolving and Junior Mortgages (1)		1,521		1,527		175		1,539		1,545		199
Commercial Mortgages (Non-owner occupied)		248		248		—		248		248		—
Commercial Mortgages (Owner occupied)		2,431		2,772		41		2,699		3,032		92
Commercial and Industrial		92		101		92		92		101		92
	$	10,032	$	10,581	$	786	$	10,415	$	10,878	$	895

Notes:

(1) Junior mortgages include equity lines.

	For the three months ended
	March 31, 2017				March 31, 2016
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Construction, land and land development	$	1,493	$	13	$	991	$	14
Residential First Mortgages		2,108		5		2,783		26
Residential Revolving and Junior Mortgages (1)		995		10		468		9
Commercial Mortgages (Non-owner occupied)		248		4		256		4
Commercial Mortgages (Owner occupied)		2,159		5		1,090		17
Commercial and Industrial		—		—		—		—
		7,003		37		5,588		70
With an allowance recorded:
Construction, land and land development		241		1		260		1
Residential First Mortgages		1,946		24		2,905		21
Residential Revolving and Junior Mortgages (1)		527		5		309		4
Commercial Mortgages (Non-owner occupied)		—		—		—		—
Commercial Mortgages (Owner occupied)		406		—		2,208		14
Commercial and Industrial		92		—		280		1
		3,212		30		5,962		41
Total
Construction, land and land development		1,734		14		1,251		15
Residential First Mortgages		4,054		29		5,688		47
Residential Revolving and Junior Mortgages (1)		1,522		15		777		13
Commercial Mortgages (Non-owner occupied)		248		4		256		4
Commercial Mortgages (Owner occupied)		2,565		5		3,298		31
Commercial and Industrial		92		—		280		1
	$	10,215	$	67	$	11,550	$	111

(1) Junior mortgages include equity lines.

Smaller non-accruing loans and non-accruing loans that are not graded because they are included in homogenous pools generally do not meet the criteria for impairment testing, and are therefore excluded from impaired loan disclosures. At March 31, 2017 and December 31, 2016, non-accruing loans excluded from impaired loan disclosure totaled $671 thousand and $465 thousand, respectively. If interest on these non-accruing loans had been accrued, such income would have totaled $6 thousand and $2 thousand during the three months ended March 31, 2017 and 2016, respectively.

Loan Modifications

Loans modified as TDRs are considered impaired and are individually evaluated for the amount of impairment in the ALL. There were no new loans modified as TDRs in the first quarter of 2017 or the first quarter of 2016. In addition, no TDRs subsequently defaulted in the first quarter of 2017 or the first quarter of 2016.

Other Real Estate Owned

The table below details the properties included in other real estate owned (“OREO”) as of March 31, 2017 and December 31, 2016. There were no collateralized consumer residential mortgage loans in the process of foreclosure as of March 31, 2017.

	As of March 31, 2017				As of December 31, 2016
	No. of		Carrying		No. of		Carrying
(Dollars in thousands)	Properties		Value		Properties		Value
Residential		2	$	831		2	$	891
Land lots		7		586		7		547
Convenience store		1		60		1		59
Restaurant		1		55		1		55
Commerical properties		3		904		3		942
Total		14	$	2,436		14	$	2,494

Included in other assets as of March 31, 2017 and December 31, 2016, is one residential property purchased in 2013 from a related party with a value of $708 thousand and a former branch, which was closed April 30, 2015, with a value of $403 thousand.

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Earnings per share

3 Months Ended

Mar. 31, 2017

Earnings per share

Note 9: Earnings per share

The following table shows the weighted average number of shares used in computing earnings per share and the effect on the weighted average number of shares of dilutive potential common stock.

	For the three months ended
	March 31, 2017					March 31, 2016
	Average		Per share			Average		Per share
	Shares		Amount			Shares		Amount
Basic earnings per share		4,776,800	$	(0.04	)		4,774,856	$	0.11
Effect of dilutive securities:
Stock options		—					16,283
Diluted earnings per share		4,776,800	$	(0.04	)		4,791,139	$	0.11

For the three months ended March 31, 2017 and 2016, options on 91,368 and 68,473 shares, respectively, were not included in computing diluted earnings per share because their effects were anti-dilutive.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2017

Stock-Based Compensation

Note 10: Stock-Based Compensation

On June 28, 2013, the Company registered with the SEC a stock-based compensation plan, which superseded all other plans. There are 317,209 shares available for grant under this plan at March 31, 2017.

Stock-based compensation expense related to stock awards for the three month periods ended March 31, 2017 and 2016 was $59 thousand and $16 thousand, respectively. Compensation expense for stock options is the estimated fair value of options on the date granted using the Black-Scholes Model amortized on a straight-line basis over the vesting period of the award. There was no unrecognized compensation expense related to stock options as of March 31, 2017.

Options for a total of 8,500 shares were granted and vested during the three months ended March 31, 2017. The aggregate fair value of options granted during the three months ended March 31, 2017 was $16 thousand. Options for a total of 7,500 shares were granted and vested during the three months ended March 31, 2016. The aggregate fair value of options granted during the three months ended March 31, 2016 was $16 thousand.

The variables used in these calculations of the fair value of the options are as follows:

	For the three months ended March 31,
	2017			2016
Risk free interest rate (5 year Treasury)		1.93	%		1.49	%
Expected dividend yield		0	%		0	%
Expected term (years)		5			5
Expected volatility		21.7	%		40.1	%

Stock option activity for the three months ended March 31, 2017 is summarized below:

						Weighted
						Average
				Weighted Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Life (in years)		Value (1)
Options outstanding, January 1, 2017		218,300		$	6.35		5.9
Granted		8,500			8.30
Forfeited		(1,195	)		8.43
Exercised		—			—
Expired		—			—
Options outstanding and exercisable, March 31, 2017		225,605		$	6.41		5.9	$	737,512

(1) The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on March 31, 2017. This amount changes based on changes in the market value of the Company’s common stock.

In the first quarter of 2017, 12,500 shares of restricted stock were granted to two executives. Of these shares, 5,000 shares vested immediately and $43 thousand of compensation expense was recorded. Another 2,500 shares of restricted stock will vest over two years and $20 thousand of compensation expense is expected to be recorded over that period. The final 5,000 shares of restricted stock will vest over three years and $40 thousand of compensation expense is expected to be recorded over that period.

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Employee Benefit Plans

3 Months Ended

Mar. 31, 2017

Employee Benefit Plans

Note 11: Employee Benefit Plans

The Company has a non-contributory, defined benefit pension plan for full-time employees who were over 21 years of age and vested in the plan as of December 31, 2012, when the plan was frozen. Each participant’s account balance grows based on monthly interest credits. The Company funds pension costs in accordance with the funding provisions of the Employee Retirement Income Security Act.

The Company sponsors a post-retirement benefit plan covering current and future retirees who acquire age 55 and 10 years of service or age 65 and 5 years of service. The post-retirement benefit plan provides coverage toward a retiree’s eligible medical and life insurance benefits expenses. The plan is unfunded and funded as benefits are due.

Components of Net Periodic (Benefit) Cost

(Dollars in thousands)	Pension Benefits						Post-Retirement Benefits
Three months ended March 31,	2017			2016			2017			2016
Service cost	$	—		$	—		$	5		$	6
Interest cost		31			35			5			7
Expected return on plan assets		(45	)		(48	)		—			—
Settlement loss		13			—			—			—
Amortization of net gain		—			—			(2	)		—
Recognized net actuarial loss		19			19			—			—
Net periodic cost	$	18		$	6		$	8		$	13

The Company expects to make no contribution to its pension plan and $5 thousand to its post-retirement benefit plan during the remainder of 2017. The Company has contributed $1 thousand towards the post-retirement plan during the first three months of 2017.

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Long Term Debt

3 Months Ended

Mar. 31, 2017

Long Term Debt

Note 12: Long Term Debt

FHLB Debt

As of March 31, 2017, the Bank had $60.0 million of outstanding FHLB debt, consisting of nine advances. As of December 31, 2016, five advances totaling $35.0 million were outstanding. The Company drew four new advances totaling $25.0 million during the first quarter of 2017.

The nine advances are shown in the following table.

Description	Balance		Originated		Current Interest Rate			Maturity Date
Adjustable Rate Hybrid	$	10,000,000		4/12/2013		3.40178	%		4/13/2020
Fixed Rate Credit		5,000,000		12/21/2015		0.99000	%		6/15/2017
Fixed Rate Credit		5,000,000		12/22/2015		1.08000	%		9/15/2017
Fixed Rate Credit		5,000,000		1/17/2017		0.91000	%		10/1/2017
Fixed Rate Credit		5,000,000		1/20/2017		0.99500	%		12/20/2017
Fixed Rate Credit		10,000,000		3/1/2017		0.79000	%		5/29/2017
Fixed Rate Credit		5,000,000		3/6/2017		0.71000	%		4/5/2017
Fixed Rate Credit		10,000,000		3/30/2017		0.90000	%		4/28/2017
Fixed Rate Credit		5,000,000		3/31/2017		0.89000	%		5/1/2017
	$	60,000,000

Advances on the FHLB lines are secured by a blanket lien on qualified 1 to 4 family residential real estate loans. Immediate available credit, as of March 31, 2017, was $54.8 million against a total line of credit of $120.8 million.

As of March 31, 2017 and December 31, 2016, the Company had $60.0 million and $35.0 million, respectively, in FHLB debt outstanding with a weighted average interest rate of 1.31% and 1.49%, respectively.

Subordinated Debt

On May 28, 2015, the Company issued an aggregate of $7,000,000 of subordinated notes (the “Notes”). The Notes have a maturity date of May 28, 2025. The Notes bear interest, payable on the 1st of March and September of each year, commencing September 1, 2015, at a fixed interest rate of 6.50% per year. The Notes are not convertible into common stock or preferred stock, and are not callable by the holders. The Company has the right to redeem the Notes, in whole or in part, without premium or penalty, at any interest payment date on or after May 28, 2020 and prior to the maturity date, but in all cases in a principal amount with integral multiples of $1,000, plus interest accrued and unpaid through the date of redemption. If an event of default occurs, such as the bankruptcy of the Company, the holder of a Note may declare the principal amount of the Note to be due and immediately payable. The Notes are unsecured, subordinated obligations of the Company and will rank junior in right of payment to the Company’s existing and future senior indebtedness. The Notes qualify as Tier 2 capital for regulatory reporting.

(Dollars in thousands)	Balance as of
	March 31, 2017
6.5% Subordinated Debt	$	7,000
Less: Issuance costs		(136	)
	$	6,864

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Fair Value Measurements

3 Months Ended

Mar. 31, 2017

Fair Value Measurements

Note 13: Fair Value Measurements

The Company uses fair value to record certain assets and liabilities and to determine fair value disclosures. Authoritative accounting guidance clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Authoritative accounting guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The three levels of the fair value hierarchy based on these two types of inputs are as follows:

Level 1 –	Valuation is based on quoted prices in active markets for identical assets and liabilities.
Level 2 –	Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market.
Level 3 –	Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.

The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements:

Securities available-for-sale: Securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2). In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

Defined benefit plan assets: Defined benefit plan assets are recorded at fair value on an annual basis at year end.

Mortgage servicing rights: MSRs are recorded at fair value on a recurring basis, with changes in fair value recorded in the results of operations. A model is used to determine fair value, which establishes pools of performing loans, calculates cash flows for each pool and applies a discount rate to each pool. Loans are segregated into 14 pools based on each loan’s term and seasoning (age). All loans have fixed interest rates. Cash flows are then estimated by utilizing assumed service costs and prepayment speeds. Service costs were assumed to be $6.00 per loan as of both March 31, 2017 and December 31, 2016. Prepayment speeds are determined primarily based on the average interest rate of the loans in each pool. The prepayment scale used is the Public Securities Association (“PSA”) model, where “100% PSA” means prepayments are zero in the first month, then increase by 0.2% of the loan balance each month until reaching 6.0% in month 30. Thereafter, the 100% PSA model assumes an annual prepayment of 6.0% of the remaining loan balance. The average PSA speed assumption in the fair value model is 139% and 150% as of March 31, 2017 and December 31, 2016, respectively. A discount rate of 14% was then applied to each pool as of March 31, 2017 and 14.0% as of December 31, 2016. This discount rate is intended to represent the estimated market yield for the highest quality grade of comparable servicing. MSRs are classified as Level 3.

The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis as of

March 31, 2017 and December 31, 2016:

(Dollars in thousands)	Fair Value Measurements at March 31, 2017 Using
Description	Balance		Level 1		Level 2		Level 3
Securities available-for-sale:
Corporate bonds	$	6,715	$	—	$	—	$	6,715
U. S. Government agencies		24,235		—		24,235		—
State and municipal obligations		18,876		—		18,876		—
Total securities available-for-sale:	$	49,826	$	—	$	43,111	$	6,715
Mortgage servicing rights	$	692	$	—	$	—	$	692
Defined benefit plan assets:
Cash and cash equivalents	$	3	$	3	$	—	$	—
Mutual funds - fixed income		1,043		1,043	$	—	$	—
Mutual funds - equity		1,577		1,577		—		—
Total defined benefit plan assets	$	2,623	$	2,623	$	—	$	—
	Fair Value Measurements at December 31, 2016 Using
Description	Balance		Level 1		Level 2		Level 3
Securities available-for-sale:
Corporate bonds	$	7,704	$	—	$	—	$	7,704
U. S. Government agencies		25,313		—		25,313		—
State and municipal obligations		18,156		—		18,156		—
Total securities available-for-sale:	$	51,173	$	—	$	43,469	$	7,704
Mortgage servicing rights	$	671	$	—	$	—	$	671
Defined benefit plan assets:
Mutual funds - fixed income	$	1,041	$	1,041	$	—	$	—
Mutual funds - equity		1,649		1,649		—		—
Total defined benefit plan assets	$	2,690	$	2,690	$	—	$	—

The reconciliation of items using Level 3 inputs is as follows:

			Corporate
(Dollars in thousands)	MSRs		Bonds
Balance, January 1, 2017	$	671	$	7,704
Purchases		—		—
Impairments		—		—
Fair value adjustments		21		11
Sales		—		(1,000	)
Balance, March 31, 2017	$	692	$	6,715

Certain assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.

The following describes the valuation techniques used by the Company to measure certain assets recorded at fair value on a nonrecurring basis in the financial statements:

Impaired Loans: Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. Any given loan may have multiple types of collateral. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’ financial statements if not considered significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Impaired loans allocated to the ALL are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.

Other Real Estate Owned: OREO is measured at fair value less estimated costs to sell, based on an appraisal conducted by an independent, licensed appraiser outside of the Company. If the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level 3. OREO is measured at fair value on a nonrecurring basis. The initial fair value of OREO is based on an appraisal done at the time of foreclosure. Subsequent fair value adjustments are recorded in the period incurred and included in other noninterest income on the Consolidated Statements of Income.

The following table summarizes the Company’s assets that were measured at fair value on a nonrecurring basis at the end of the respective period.

			Fair Value Measurements at March 31, 2017 Using
(Dollars in thousands) Description	Balance as of March 31, 2017		Level 1		Level 2		Level 3
Impaired Loans, net	$	2,414	$	—	$	—	$	2,414
Other real estate owned, net		2,436		—		—		2,436
			Fair Value Measurements at December 31, 2016 Using
Description	Balance as of December 31, 2016		Level 1		Level 2		Level 3
Impaired loans, net		2,774		—		—		2,774
Other real estate owned, net	$	2,494	$	—	$	—	$	2,494

The following table displays quantitative information about Level 3 Fair Value Measurements as of March 31, 2017:

							Range
	Balance as of		Valuation		Unobservable		(Weighted
(Dollars in thousands)	March 31, 2017		Technique		Input		Average)
Impaired Loans, net	$	2,414		Discounted appraised value		Selling Cost		0% - 20% (15%	)
						Lack of Marketability		50% - 100% (96%	)
Other real estate owned, net		2,436		Discounted appraised value		Selling Cost		3% - 13% (5%	)
						Lack of Marketability		10% -20% (11%	)

The following table displays quantitative information about Level 3 Fair Value Measurements as of December 31, 2016:

							Range
	Balance as of		Valuation		Unobservable		(Weighted
(Dollars in thousands)	December 31, 2016		Technique		Input		Average)
Impaired Loans, net	$	2,774		Discounted appraised value		Selling Cost		10% - 20% (16%	)
						Lack of Marketability		50% (50%	)
Other real estate owned, net	$	2,494		Discounted appraised value		Selling Cost		3% - 13% (5%	)
						Lack of Marketability		10% - 20% (11%	)

The estimated fair values of financial instruments are shown in the following table. The carrying amounts in the table are included in the balance sheet under the applicable captions.

					Fair Value Measurements at March 31, 2017 Using
(Dollars in thousands) Description	Balance as of March 31, 2017		Fair Value as of March 31, 2017		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	5,087	$	5,087	$	5,087	$	—	$	—
Interest-bearing deposits		6,826		6,826		6,826		—		—
Certificates of deposit		3,472		3,472		—		3,472		—
Federal funds sold		336		336		336		—		—
Securities available-for-sale		49,826		49,826		—		43,111		6,715
Restricted securities		3,756		3,756		—		—		3,756
Loans, net		401,268		400,988		—		—		400,988
Accrued interest receivable		1,321		1,321		—		1,321		—
Bank owned life insurance		9,944		9,944		9,944		—		—
Mortgage servicing rights		692		692		—		—		692
Financial Liabilities:
Non-interest-bearing liabilities	$	77,369	$	77,369	$	77,369	$	—	$	—
Savings and other interest-bearing deposits		169,027		167,027		—		167,027		—
Time deposits		136,104		135,662		—		—		135,662
Securities sold under repurchase agreements		8,489		8,489		—		8,489		—
FHLB advances		60,000		59,352		—		59,352		—
Subordinated debt		6,864		7,000		—		—		7,000
Accrued interest payable		225		225		—		225		—
					Fair Value Measurements at December 31, 2016 Using
(Dollars in thousands) Description	Balance as of December 31, 2016		Fair Value as of December 31, 2016		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	4,851	$	4,851	$	4,851	$	—	$	—
Interest-bearing deposits		7,501		7,501		7,501		—		—
Certificates of deposit		4,216		4,216		—		4,216		—
Federal funds sold		2,350		2,350		2,350		—		—
Securities available-for-sale		51,173		51,173		—		43,469		7,704
Restricted securities		2,649		2,649		—		—		2,649
Loans, net		381,537		384,468		—		—		384,468
Loans held for sale		276		276		—		—		276
Accrued interest receivable		1,372		1,372		—		1,372		—
Bank owned life insurance		9,869		9,869		9,869		—		—
Mortgage servicing rights		671		671		—		—		671
Financial Liabilities:
Non-interest-bearing liabilities	$	74,799	$	74,799	$	74,799	$	—	$	—
Savings and other interest-bearing deposits		178,869		178,869		—		178,869		—
Time deposits		128,050		127,497		—		—		127,497
Securities sold under repurchase agreements		18,310		18,310		—		18,310		—
FHLB advances		35,000		35,668		—		35,668		—
Subordinated debt		6,860		7,000		—		—		7,000
Accrued interest payable		331		331		—		331		—

The carrying amounts of cash and due from banks, interest-bearing deposits, federal funds sold or purchased, accrued interest receivable, loans held for sale and non-interest-bearing deposits, are payable on demand, or are of such short duration that carrying value approximates market value.

Securities available-for-sale are carried at quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2). In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

The carrying value of restricted securities approximates fair value based on the redemption provisions of the issuer.

Bank owned life insurance is carried at its cash surrender value.

MSRs are carried at fair value. As described above, a valuation model is used to determine fair value. This model utilizes a discounted cash flow analysis with servicing costs and prepayment assumptions based on comparable instruments and a discount rate.

The fair value of performing loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar remaining maturities. This calculation ignores loan fees and certain factors affecting the interest rates charged on various loans such as the borrower’s creditworthiness and compensating balances and dissimilar types of real estate held as collateral. The fair value of impaired loans is measured as described within the Impaired Loans section of this note. The fair value of loans does not consider the lack of liquidity and uncertainty in the market that would affect the valuation.

Time deposits are presented at estimated fair value by discounting the future cash flows using interest rates offered for deposits of similar remaining maturities.

The fair value of the Company’s subordinated debt is estimated by utilizing observable market prices for comparable securities. Qualitative factors like asset quality, market factors and liquidity are also considered.

The fair value of the FHLB advances is estimated by discounting the future cash flows using the current interest rates offered for similar advances.

The fair value of commitments to extend credit is estimated using the fees currently charged to enter similar agreements, taking into account the remaining terms of the agreements and the present credit worthiness of the counter parties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of standby letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counter parties at the reporting date. At March 31, 2017 and December 31, 2016, the fair value of loan commitments and standby letters of credit was immaterial and therefore, they are not included in the table above.

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair value of the Company’s financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely to prepay in a rising rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

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Changes in Accumulated Other Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2017

Changes in Accumulated Other Comprehensive Income (Loss)

Note 14: Changes in Accumulated Other Comprehensive Income (Loss)

The balances in accumulated other comprehensive income (loss) are shown in the following tables:

	For the Three Months Ended March 31, 2017
	Net Unrealized			Pension and			Accumulated Other
	Gains (Losses)			Post-retirement			Comprehensive
(Dollars in thousands)	on Securities			Benefit Plans			Income (Loss)
Balance January 1, 2017	$	(520	)	$	(715	)	$	(1,235	)
Change in net unrealized holding gains on securities, before reclassification, net of tax expense of $13		27			—			27
Reclassification for previously unrealized net losses recognized in income, net of tax benefit of $2		3			—			3
Balance March 31, 2017	$	(490	)	$	(715	)	$	(1,205	)
	For the Three Months Ended March 31, 2016
	Net Unrealized			Pension and			Accumulated Other
	Gains (Losses)			Post-retirement			Comprehensive
(Dollars in thousands)	on Securities			Benefit Plans			Income (Loss)
Balance January 1, 2016	$	107		$	(883	)	$	(776	)
Change in net unrealized holding gains on securities, before reclassification, net of tax expense of $173		335			—			335
Reclassification for previously unrealized net gains recognized in income, net of tax expense of $2		(4	)		—			(4	)
Balance March 31, 2016	$	438		$	(883	)	$	(445	)

Reclassification for previously unrealized gains (losses) and impairments on securities are reported in the Consolidated Statements of (Loss) Income as follows. No unrealized gains (losses) on pension and post-employment related costs were reclassified to the Consolidated Statements of (Loss) Income in the three months ended March 31, 2017 and 2016.

Accumulated Other Comprehensive Income (Loss)

Reclassification for the Three Months Ended

Holding (Losses) Gains on Securities

(Dollars in thousands)	March 31, 2017			March 31, 2016
Net (losses) gains on sale of securities available-for-securities	$	(5	)	$	6
Tax benefit (expense)		2			(2	)
Impact on net (loss) income	$	(3	)	$	4

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2017

Loans

Loans

The Company grants mortgage loans on real estate, commercial and industrial loans, and consumer and other loans to customers. A substantial portion of the loan portfolio is represented by mortgage loans on real estate. The ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in the Company’s market areas.

Loans are reported at their recorded investment, which is the outstanding principal balance net of any unearned income, such as deferred fees and costs, and charge-offs. Interest on loans is recognized over the term of the loan and is calculated using the interest method on principal amounts outstanding. Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment of the related loan yield over the contractual term of the loan, adjusted for early pay-offs, where applicable.

The accrual of interest is generally discontinued at the time a loan is 90 days or more past due, or earlier, if collection is uncertain based on an evaluation of the net realizable value of the collateral and the financial strength of the borrower. Payments received for loans no longer accruing interest are applied to the unpaid principal balance. Loans greater than 90 days past due may remain on accrual status if the credit is well-secured and in process of collection. Personal loans are typically charged off no later than 180 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are charged off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual and past due policies are materially the same for all types of loans.

All interest accrued but not collected for loans that are placed on non-accrual or charged off are reversed against interest income. Any subsequent interest received on these loans is accounted for on the cash basis or cost recovery method until qualifying for return to accrual. Generally, a loan is returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured, or it becomes well secured and in the process of collection.

Allowance for loan losses ("ALL")

Allowance for loan losses (“ALL”)

The ALL reflects management’s judgment of probable loan losses inherent in the portfolio at the balance sheet date. Management uses a disciplined process and methodology to establish the ALL each quarter. To determine the total ALL, the Company estimates the reserves needed for each homogenous segment and class of the portfolio, plus any loans analyzed individually for impairment. Depending on the nature of each segment and class, considerations include historical loss experience, adverse situations that may affect a borrower’s ability to repay, credit scores, past due history, estimated value of any underlying collateral, prevailing local and national economic conditions, and internal policies and procedures including credit risk management and underwriting. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as conditions change.

Management employs a risk rating system to evaluate and consistently categorize loan portfolio credit risk. Loans assigned risk rating grades include all commercial loans not secured by real estate, commercial mortgages, residential mortgages greater than $1 million, smaller residential mortgages which are impaired, loans to real estate developers and contractors, consumer loans greater than $250 thousand with chronic delinquency, and troubled debt restructures (“TDRs”). The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled. Risk grades are evaluated as new information becomes available for each borrowing relationship or at least quarterly. All other loans not specifically assigned a risk rating grade are monitored as a discrete pool of loans generally based on delinquency status. Risk rating categories are as follows:

Pass – Borrower is strong or sound and collateral securing the loan, if any, is adequate.

Watch – Borrower exhibits some signs of financial stress but is generally believed to be a satisfactory customer and collateral, if any, may be in excess of 90% of the loan balance.

Special Mention – Adverse trends in the borrower’s financial position are evident and warrant management’s close attention. Any collateral may not be fully adequate to secure the loan balance.

Substandard – A loan in this category has a well-defined weakness in the primary repayment source that jeopardizes the timely collection of the debt. There is a distinct possibility that a loss may result if the weakness is not corrected.

Doubtful – Default has already occurred and it is likely that foreclosure or repossession procedures have begun or will begin in the near future. Weaknesses make collection or liquidation in full, based on currently existing information, highly questionable and improbable.

Loss – Uncollectible and of such little value that continuance as a bankable asset is not warranted.

The ALL consists of specific, general, and unallocated components. The specific component is determined by identifying impaired loans (as described below) then evaluating each one to calculate the amount of impairment. Impaired loans measured for impairment generally include: (1) non-accruing Special mention, Substandard and Doubtful loans in excess of $250,000; (2) Substandard and Doubtful loans in excess of $500,000; (3) Special Mention loans in excess of $500,000 if any of the loans in the relationship are more than 30 days past due or if the borrower has filed for bankruptcy; and (4) all TDRs. A specific allowance arises when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component collectively evaluates smaller commercial loans, residential mortgages and consumer loans, grouped into segments and classes. Historical loss experience is calculated and applied to each segment or class, then adjusted for qualitative factors. Qualitative factors include changes in local and national economic indicators, such as unemployment rates, interest rates, gross domestic product growth and real estate market trends; the level of past due and nonaccrual loans; risk ratings on individual loans; strength of credit policies and procedures; loan officer experience; borrower credit scores; and other intrinsic risks related to the types and geographic locations of loans. These qualitative adjustments reflect management’s judgment of risks inherent in the segments. An unallocated component is maintained if needed to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. Changes in the allowance for loan losses and the related provision expense can materially affect net income.

The specific component of the ALL calculation accounts for the loan loss reserve necessary on impaired loans. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not considered impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Accrual of interest may or may not be discontinued for any given impaired loan. Impairment is measured by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Because large groups of smaller balance homogeneous loans are collectively evaluated for impairment, the Company does not generally separately identify smaller balance individual consumer and residential loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.

The general component of the ALL calculation collectively evaluates groups of loans in segments and classes, as noted above. The segments are: (1) Mortgage loans on real estate; (2) Commercial and industrial loans; and (3) Consumer and other loans. The segment for Mortgage loans on real estate is disaggregated into the following classes: (1) Construction, land and land development; (2) Farmland; (3) Residential first mortgages; (4) Residential revolving and junior mortgages; (5) Commercial mortgages (non-owner-occupied); and (6) Commercial mortgages (owner-occupied). Loans in segment 1 are secured by real estate. Loans in segments 2 and 3 are secured by other types of collateral or are unsecured. A given segment or class may not reflect the purpose of a loan. For example, a business owner may provide his residence as collateral for a loan to his company, in which case the loan would be grouped in a residential mortgage class. Historical loss factors are calculated for the prior 20 quarters by segment and class, and then applied to the current balances in each segment and class. Finally, qualitative factors are applied to each segment and class.

Construction and development loans carry risks that the project will not be finished according to schedule or according to budget and the value of the collateral, at any point in time, may be less than the principal amount of the loan. These loans also bear the risk that the general contractor may face financial pressure unrelated to the project. Loans secured by land, farmland and residential mortgages carry the risk of continued credit-worthiness of the borrower and changes in value of the underlying real estate collateral. Commercial mortgages and commercial and industrial loans carry risks associated with the profitable operation of a business and its related cash flows. Additionally, commercial and industrial loans carry risks associated with the value of collateral other than real estate which may depreciate over time. Consumer loans carry risks associated with the continuing credit-worthiness of the borrower and are more likely than real estate loans to be adversely affected by divorce, unemployment, personal illness or bankruptcy of an individual. Consumer loans secured by automobiles carry risks associated with rapidly depreciating collateral. Consumer loans have historically included credit cards, which are unsecured. The credit card portfolio was sold to an unaffiliated third party in the third quarter of 2016.

The summation of the specific, general and unallocated components results in the total estimated ALL. Management may also include an unallocated component to cover uncertainties in the level of probable losses. This estimate is inherently subjective and actual losses could be greater or less than the estimates.

Additions to the ALL are made by charges to earnings through the provision for loan losses. Charge-offs result from credit exposures deemed to be uncollectible and the ALL is reduced by these. Recoveries of previously charged off amounts are credited back to the ALL. Charge-off policies are materially the same for all types of loans.

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Securities (Tables)

3 Months Ended

Mar. 31, 2017

Aggregate Amortized Cost and Fair Values of Available-for-Sale Securities Portfolio

The aggregate amortized costs and fair values of the available-for-sale securities portfolio are as follows:

(Dollars in thousands)
Available-for-sale securities March 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Corporate bonds	$	6,695	$	20	$	—		$	6,715
U.S. Government agencies		24,615		49		(429	)		24,235
State and municipal obligations		19,229		77		(430	)		18,876
	$	50,539	$	146	$	(859	)	$	49,826
Available-for-sale securities December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Corporate bonds	$	7,695	$	14	$	(5	)	$	7,704
U.S. Government agencies		25,668		53		(408	)		25,313
State and municipal obligations		18,566		49		(459	)		18,156
	$	51,929	$	116	$	(872	)	$	51,173

Gross Realized Gains and Gross Realized Losses on Sales of Securities

Gross realized gains and gross realized losses on sales and calls of securities were as follows:

	For the three months ended
	March 31,
(Dollars in thousands)	2017			2016
Gross realized gains	$	—		$	15
Gross realized losses		(5	)		(9	)
Net realized (losses) gains	$	(5	)	$	6
Aggregate proceeds	$	995		$	2,702

Unrealized Loss Positions

Bonds with unrealized loss positions at December 31, 2016 included 37 federal agencies, one corporate bond and 39 municipals. The tables are shown below.

(Dollars in thousands)	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
March 31, 2017	Value		Loss			Value		Loss			Value		Loss
U.S. Government agencies	$	21,463	$	(418	)	$	1,248	$	(11	)	$	22,711	$	(429	)
States and municipal obligations		12,409		(430	)		—		—			12,409		(430	)
Total temporarily impaired securities	$	33,872	$	(848	)	$	1,248	$	(11	)	$	35,120	$	(859	)
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2016	Value		Loss			Value		Loss			Value		Loss
Corporate bonds	$	995	$	(5	)	$	—	$	—		$	995	$	(5	)
U.S. Government agencies		20,933		(396	)		1,308		(12	)		22,241		(408	)
States and municipal obligations		12,888		(459	)		—		—			12,888		(459	)
Total temporarily impaired securities	$	34,816	$	(860	)	$	1,308	$	(12	)	$	36,124	$	(872	)

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Loans (Tables)

3 Months Ended

Mar. 31, 2017

Summary of Balances of Loans

The following is a summary of the balances of loans:

(Dollars in thousands)	March 31, 2017			December 31, 2016
Mortgage loans on real estate:
Construction, Land and Land Development	$	44,119		$	39,818
Farmland		994			1,023
Commercial Mortgages (Non-Owner Occupied)		35,464			35,343
Commercial Mortgages (Owner Occupied)		42,550			41,825
Residential First Mortgages		205,106			194,007
Residential Revolving and Junior Mortgages		27,090			26,425
Commercial and Industrial loans		46,205			43,024
Consumer Loans		3,324			3,544
Total loans		404,852			385,009
Net unamortized deferred loan costs		409			391
Allowance for loan losses		(3,993	)		(3,863	)
Loans, net	$	401,268		$	381,537

Recorded Investment in Past Due and Non-accruing Loans

The recorded investment in past due and non-accruing loans is shown in the following table. A loan past due by more than 90 days is generally placed on nonaccrual unless it is both well secured and in the process of collection.

			90 Days or
	30-89		More Past				Total Past
(Dollars in thousands)	Days		Due and				Due and				Total
March 31, 2017	Past Due		Still Accruing		Nonaccruals		Nonaccruals		Current		Loans
Mortgage Loans on Real Estate:
Construction, Land and Land Development	$	—	$	—	$	547	$	547	$	43,572	$	44,119
Farmland		—		—		—		—		994		994
Commercial Mortgages (Non-Owner Occupied)		—		—		—		—		35,464		35,464
Commercial Mortgages (Owner Occupied)		—		—		2,148		2,148		40,402		42,550
Residential First Mortgages		402		—		1,975		2,377		202,729		205,106
Residential Revolving and Junior Mortgages		—		—		1,039		1,039		26,051		27,090
Commercial and Industrial		603		—		111		714		45,491		46,205
Consumer Loans		—		—		—		—		3,324		3,324
Total	$	1,005	$	—	$	5,820	$	6,825	$	398,027	$	404,852
			90 Days or
	30-89		More Past				Total Past
	Days		Due and				Due and				Total
December 31, 2016	Past Due		Still Accruing		Nonaccruals		Nonaccruals		Current		Loans
Mortgage Loans on Real Estate:
Construction, Land and Land Development	$	—	$	—	$	623	$	623	$	39,195	$	39,818
Farmland		57		—		—		57		966		1,023
Commercial Mortgages (Non-Owner Occupied)		—		—		—		—		35,343		35,343
Commercial Mortgages (Owner Occupied)		188		—		2,270		2,458		39,367		41,825
Residential First Mortgages		1,546		—		2,155		3,701		190,306		194,007
Residential Revolving and Junior Mortgages		480		—		160		640		25,785		26,425
Commercial and Industrial		408		—		92		500		42,524		43,024
Consumer Loans		—		—		—		—		3,544		3,544
Total	$	2,679	$	—	$	5,300	$	7,979	$	377,030	$	385,009

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Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2017

Loan Receivables Evaluated for Impairment Individually and Collectively by Segment

Loan receivables evaluated for impairment individually and collectively by segment as of March 31, 2017 and December 31, 2016 are as follows:

(Dollars in thousands)	Mortgage Loans		Commercial and		Consumer and Other
As of March 31, 2017	on Real Estate		Industrial		Loans		Total
Individually evaluated for impairment	$	9,940	$	92	$	—	$	10,032
Collectively evaluated for impairment		345,383		46,113		3,324		394,820
Total Gross Loans	$	355,323	$	46,205	$	3,324	$	404,852
As of December 31, 2016
Individually evaluated for impairment	$	10,323	$	92	$	—	$	10,415
Collectively evaluated for impairment		328,118		42,932		3,544		374,594
Total Gross Loans	$	338,441	$	43,024	$	3,544	$	385,009

Allowance for Loan Losses by Portfolio Segment

Allowance for Loan Losses

The allowance for loan losses disaggregated based on loan receivables evaluated for impairment individually and collectively by segment as of March 31, 2017 and December 31, 2016 are as follows:

(Dollars in thousands)	Mortgage Loans		Commercial and		Consumer
As of March 31, 2017	on Real Estate		Industrial		Loans		Total
Individually evaluated for impairment	$	694	$	92	$	—	$	786
Collectively evaluated for impairment		2,727		436		44		3,207
Total allowance for loan losses	$	3,421	$	528	$	44	$	3,993
As of December 31, 2016	Mortgage Loans on Real Estate		Commercial and Industrial		Consumer Loans		Total
Individually evaluated for impairment	$	803	$	92	$	—	$	895
Collectively evaluated for impairment		2,515		401		52		2,968
Total allowance for loan losses	$	3,318	$	493	$	52	$	3,863

A disaggregation and an analysis of the change in the allowance for loan losses by segment is shown below.

(Dollars in thousands) For the Three Months Ended March 31, 2017	Mortgage Loans on Real Estate			Commercial and Industrial			Consumer Loans			Total
ALLOWANCE FOR LOAN LOSSES:
Beginning Balance	$	3,318		$	493		$	52		$	3,863
(Charge-offs)		(132	)		—			(8	)		(140	)
Recoveries		78			—			2			80
Provision		157			35			(2	)		190
Ending Balance	$	3,421		$	528		$	44		$	3,993
For the Three Months Ended March 31, 2016	Mortgage Loans on Real Estate			Commercial and Industrial			Consumer Loans			Total
ALLOWANCE FOR LOAN LOSSES:
Beginning Balance	$	3,502		$	599		$	122		$	4,223
(Charge-offs)		(83	)		—			(11	)		(94	)
Recoveries		6			5			2			13
(Recovery) provision		(15	)		(25	)		5			(35	)
Ending Balance	$	3,410		$	579		$	118		$	4,107

Internal Risk Rating Grades

Internal Risk Rating Grades

Internal risk rating grades are generally assigned to commercial loans not secured by real estate, commercial mortgages, residential mortgages greater than $1 million, smaller residential mortgages which are impaired, loans to real estate developers and contractors, consumer loans greater than $250,000 with chronic delinquency, and TDRs, as shown in the following table. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled. Risk grades (refer to Note 3) are evaluated as new information becomes available for each borrowing relationship or at least quarterly.

	Construction,				Commercial		Commercial
	Land and				Mortgages		Mortgages		Commercial
(Dollars in thousands)	Land				(Non-Owner		(Owner		and
As of March 31, 2017	Development		Farmland		Occupied)		Occupied)		Industrial		Total
Grade:
Pass	$	36,423	$	994	$	30,571	$	32,412	$	44,441	$	144,841
Watch		5,762		—		4,375		7,732		1,538		19,407
Special mention		179		—		270		—		40		489
Substandard		1,755		—		248		2,406		186		4,595
Doubtful		—		—		—		—		—		—
Total	$	44,119	$	994	$	35,464	$	42,550	$	46,205	$	169,332
	Construction,				Commercial		Commercial
	Land and				Mortgages		Mortgages		Commercial
	Land				(Non-Owner		(Owner		and
As of December 31, 2016	Development		Farmland		Occupied)		Occupied)		Industrial		Total
Grade:
Pass	$	32,009	$	1,023	$	30,639	$	31,191	$	40,841	$	135,703
Watch		5,795		—		4,184		6,652		1,891		18,522
Special mention		180		—		272		1,453		125		2,030
Substandard		1,834		—		248		2,529		167		4,778
Doubtful		—		—		—		—		—		—
Total	$	39,818	$	1,023	$	35,343	$	41,825	$	43,024	$	161,033

Performing and Non Performing Loans

Loans are considered to be nonperforming when they are delinquent by 90 days or more or non-accruing and credit risk is primarily evaluated by delinquency status, as shown in the table below.

			Residential
(Dollars in thousands)	Residential		Revolving
As of March 31, 2017	First		and Junior		Consumer
PAYMENT ACTIVITY STATUS	Mortgages (1)		Mortgages (2)		Loans (3)		Total
Performing	$	203,131	$	26,051	$	3,324	$	232,506
Nonperforming		1,975		1,039		—		3,014
Total	$	205,106	$	27,090	$	3,324	$	235,520
			Residential
	Residential		Revolving
As of December 31, 2016	First		and Junior		Consumer
PAYMENT ACTIVITY STATUS	Mortgages (4)		Mortgages (5)		Loans (6)		Total
Performing	$	191,852	$	26,265	$	3,544	$	221,661
Nonperforming		2,155		160		—		2,315
Total	$	194,007	$	26,425	$	3,544	$	223,976

(1) Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.1million as of March 31, 2017.

(2) Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.9 million as of March 31, 2017.

(3) No Consumer Loans had been assigned a risk rating grade of Substandard as of March 31, 2017.

(4) Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.3 million as of December 31, 2016.

(5) Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.1 million as of December 31, 2016.

(6) No Consumer Loans had been assigned a risk rating grade of Substandard as of December 31, 2016.

Company's Recorded Investment and Customers Unpaid Principal Balances for Impaired Loans, with Associated Allowance Amount

The following tables show the Company’s recorded investment and the customers’ unpaid principal balances for impaired loans, with the associated allowance amount, if applicable, as of March 31, 2017 and December 31, 2016, along with the average recorded investment and interest income recognized for the three months ended March 31, 2017 and 2016, respectively.

	As of March 31, 2017						As of December 31, 2016
(Dollars in thousands) IMPAIRED LOANS	Recorded Investment		Customers’ Unpaid Principal Balance		Related Allowance		Recorded Investment		Customers’ Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction, Land and Land Development	$	1,455	$	1,535	$	—	$	1,531	$	1,539	$	—
Residential First Mortgages		2,104		2,171		—		2,112		2,176		—
Residential Revolving and Junior Mortgages (1)		995		999		—		995		999		—
Commercial Mortgages (Non-owner occupied)		248		248		—		248		248		—
Commercial Mortgages (Owner occupied)		2,030		2,351		—		1,860		2,178		—
Commercial and Industrial		—		—		—		—		—		—
		6,832		7,304		—		6,746		7,140		—
With an allowance recorded:
Construction, Land and Land Development		239		285		140		243		286		145
Residential First Mortgages		1,942		1,942		338		1,951		1,951		367
Residential Revolving and Junior Mortgages (1)		526		528		175		544		546		199
Commercial Mortgages (Non-owner occupied)		—		—		—		—		—		—
Commercial Mortgages (Owner occupied)		401		421		41		839		854		92
Commercial and Industrial		92		101		92		92		101		92
		3,200		3,277		786		3,669		3,738		895
Total Impaired Loans:
Construction, Land and Land Development		1,694		1,820		140		1,774		1,825		145
Residential First Mortgages		4,046		4,113		338		4,063		4,127		367
Residential Revolving and Junior Mortgages (1)		1,521		1,527		175		1,539		1,545		199
Commercial Mortgages (Non-owner occupied)		248		248		—		248		248		—
Commercial Mortgages (Owner occupied)		2,431		2,772		41		2,699		3,032		92
Commercial and Industrial		92		101		92		92		101		92
	$	10,032	$	10,581	$	786	$	10,415	$	10,878	$	895

Notes:

(1) Junior mortgages include equity lines.

	For the three months ended
	March 31, 2017				March 31, 2016
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Construction, land and land development	$	1,493	$	13	$	991	$	14
Residential First Mortgages		2,108		5		2,783		26
Residential Revolving and Junior Mortgages (1)		995		10		468		9
Commercial Mortgages (Non-owner occupied)		248		4		256		4
Commercial Mortgages (Owner occupied)		2,159		5		1,090		17
Commercial and Industrial		—		—		—		—
		7,003		37		5,588		70
With an allowance recorded:
Construction, land and land development		241		1		260		1
Residential First Mortgages		1,946		24		2,905		21
Residential Revolving and Junior Mortgages (1)		527		5		309		4
Commercial Mortgages (Non-owner occupied)		—		—		—		—
Commercial Mortgages (Owner occupied)		406		—		2,208		14
Commercial and Industrial		92		—		280		1
		3,212		30		5,962		41
Total
Construction, land and land development		1,734		14		1,251		15
Residential First Mortgages		4,054		29		5,688		47
Residential Revolving and Junior Mortgages (1)		1,522		15		777		13
Commercial Mortgages (Non-owner occupied)		248		4		256		4
Commercial Mortgages (Owner occupied)		2,565		5		3,298		31
Commercial and Industrial		92		—		280		1
	$	10,215	$	67	$	11,550	$	111

(1) Junior mortgages include equity lines.

Summary of Properties Included in Other Real Estate Owned (OREO)

The table below details the properties included in other real estate owned (“OREO”) as of March 31, 2017 and December 31, 2016. There were no collateralized consumer residential mortgage loans in the process of foreclosure as of March 31, 2017.

	As of March 31, 2017				As of December 31, 2016
	No. of		Carrying		No. of		Carrying
(Dollars in thousands)	Properties		Value		Properties		Value
Residential		2	$	831		2	$	891
Land lots		7		586		7		547
Convenience store		1		60		1		59
Restaurant		1		55		1		55
Commerical properties		3		904		3		942
Total		14	$	2,436		14	$	2,494

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Earnings per share (Tables)

3 Months Ended

Mar. 31, 2017

Weighted Average Number of Shares Used in Computing Earnings per Share

The following table shows the weighted average number of shares used in computing earnings per share and the effect on the weighted average number of shares of dilutive potential common stock.

	For the three months ended
	March 31, 2017					March 31, 2016
	Average		Per share			Average		Per share
	Shares		Amount			Shares		Amount
Basic earnings per share		4,776,800	$	(0.04	)		4,774,856	$	0.11
Effect of dilutive securities:
Stock options		—					16,283
Diluted earnings per share		4,776,800	$	(0.04	)		4,791,139	$	0.11

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2017

Fair Value of Options

The variables used in these calculations of the fair value of the options are as follows:

	For the three months ended March 31,
	2017			2016
Risk free interest rate (5 year Treasury)		1.93	%		1.49	%
Expected dividend yield		0	%		0	%
Expected term (years)		5			5
Expected volatility		21.7	%		40.1	%

Summary of Stock Option Activity

Stock option activity for the three months ended March 31, 2017 is summarized below:

						Weighted
						Average
				Weighted Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Life (in years)		Value (1)
Options outstanding, January 1, 2017		218,300		$	6.35		5.9
Granted		8,500			8.30
Forfeited		(1,195	)		8.43
Exercised		—			—
Expired		—			—
Options outstanding and exercisable, March 31, 2017		225,605		$	6.41		5.9	$	737,512

(1) The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on March 31, 2017. This amount changes based on changes in the market value of the Company’s common stock.

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Employee Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2017

Components of Net Periodic (Benefit) Cost

Components of Net Periodic (Benefit) Cost

(Dollars in thousands)	Pension Benefits						Post-Retirement Benefits
Three months ended March 31,	2017			2016			2017			2016
Service cost	$	—		$	—		$	5		$	6
Interest cost		31			35			5			7
Expected return on plan assets		(45	)		(48	)		—			—
Settlement loss		13			—			—			—
Amortization of net gain		—			—			(2	)		—
Recognized net actuarial loss		19			19			—			—
Net periodic cost	$	18		$	6		$	8		$	13

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Long Term Debt (Tables)

3 Months Ended

Mar. 31, 2017

Advances of Long Term Debt

The nine advances are shown in the following table.

Description	Balance		Originated		Current Interest Rate			Maturity Date
Adjustable Rate Hybrid	$	10,000,000		4/12/2013		3.40178	%		4/13/2020
Fixed Rate Credit		5,000,000		12/21/2015		0.99000	%		6/15/2017
Fixed Rate Credit		5,000,000		12/22/2015		1.08000	%		9/15/2017
Fixed Rate Credit		5,000,000		1/17/2017		0.91000	%		10/1/2017
Fixed Rate Credit		5,000,000		1/20/2017		0.99500	%		12/20/2017
Fixed Rate Credit		10,000,000		3/1/2017		0.79000	%		5/29/2017
Fixed Rate Credit		5,000,000		3/6/2017		0.71000	%		4/5/2017
Fixed Rate Credit		10,000,000		3/30/2017		0.90000	%		4/28/2017
Fixed Rate Credit		5,000,000		3/31/2017		0.89000	%		5/1/2017
	$	60,000,000

Subordinated Debt

(Dollars in thousands)	Balance as of
	March 31, 2017
6.5% Subordinated Debt	$	7,000
Less: Issuance costs		(136	)
	$	6,864

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2017

Schedule of Balances of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis as of

March 31, 2017 and December 31, 2016:

(Dollars in thousands)	Fair Value Measurements at March 31, 2017 Using
Description	Balance		Level 1		Level 2		Level 3
Securities available-for-sale:
Corporate bonds	$	6,715	$	—	$	—	$	6,715
U. S. Government agencies		24,235		—		24,235		—
State and municipal obligations		18,876		—		18,876		—
Total securities available-for-sale:	$	49,826	$	—	$	43,111	$	6,715
Mortgage servicing rights	$	692	$	—	$	—	$	692
Defined benefit plan assets:
Cash and cash equivalents	$	3	$	3	$	—	$	—
Mutual funds - fixed income		1,043		1,043	$	—	$	—
Mutual funds - equity		1,577		1,577		—		—
Total defined benefit plan assets	$	2,623	$	2,623	$	—	$	—
	Fair Value Measurements at December 31, 2016 Using
Description	Balance		Level 1		Level 2		Level 3
Securities available-for-sale:
Corporate bonds	$	7,704	$	—	$	—	$	7,704
U. S. Government agencies		25,313		—		25,313		—
State and municipal obligations		18,156		—		18,156		—
Total securities available-for-sale:	$	51,173	$	—	$	43,469	$	7,704
Mortgage servicing rights	$	671	$	—	$	—	$	671
Defined benefit plan assets:
Mutual funds - fixed income	$	1,041	$	1,041	$	—	$	—
Mutual funds - equity		1,649		1,649		—		—
Total defined benefit plan assets	$	2,690	$	2,690	$	—	$	—

Reconciliation of Items Using Level Three Inputs

The reconciliation of items using Level 3 inputs is as follows:

			Corporate
(Dollars in thousands)	MSRs		Bonds
Balance, January 1, 2017	$	671	$	7,704
Purchases		—		—
Impairments		—		—
Fair value adjustments		21		11
Sales		—		(1,000	)
Balance, March 31, 2017	$	692	$	6,715

Summary of Assets Measured at Fair Value on Nonrecurring Basis

The following table summarizes the Company’s assets that were measured at fair value on a nonrecurring basis at the end of the respective period.

			Fair Value Measurements at March 31, 2017 Using
(Dollars in thousands) Description	Balance as of March 31, 2017		Level 1		Level 2		Level 3
Impaired Loans, net	$	2,414	$	—	$	—	$	2,414
Other real estate owned, net		2,436		—		—		2,436
			Fair Value Measurements at December 31, 2016 Using
Description	Balance as of December 31, 2016		Level 1		Level 2		Level 3
Impaired loans, net		2,774		—		—		2,774
Other real estate owned, net	$	2,494	$	—	$	—	$	2,494

Summary of Quantitative Fair Value Measurements for Level 3

The following table displays quantitative information about Level 3 Fair Value Measurements as of March 31, 2017:

							Range
	Balance as of		Valuation		Unobservable		(Weighted
(Dollars in thousands)	March 31, 2017		Technique		Input		Average)
Impaired Loans, net	$	2,414		Discounted appraised value		Selling Cost		0% - 20% (15%	)
						Lack of Marketability		50% - 100% (96%	)
Other real estate owned, net		2,436		Discounted appraised value		Selling Cost		3% - 13% (5%	)
						Lack of Marketability		10% -20% (11%	)

The following table displays quantitative information about Level 3 Fair Value Measurements as of December 31, 2016:

							Range
	Balance as of		Valuation		Unobservable		(Weighted
(Dollars in thousands)	December 31, 2016		Technique		Input		Average)
Impaired Loans, net	$	2,774		Discounted appraised value		Selling Cost		10% - 20% (16%	)
						Lack of Marketability		50% (50%	)
Other real estate owned, net	$	2,494		Discounted appraised value		Selling Cost		3% - 13% (5%	)
						Lack of Marketability		10% - 20% (11%	)

Estimated Fair Values of Financial Instruments

The estimated fair values of financial instruments are shown in the following table. The carrying amounts in the table are included in the balance sheet under the applicable captions.

					Fair Value Measurements at March 31, 2017 Using
(Dollars in thousands) Description	Balance as of March 31, 2017		Fair Value as of March 31, 2017		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	5,087	$	5,087	$	5,087	$	—	$	—
Interest-bearing deposits		6,826		6,826		6,826		—		—
Certificates of deposit		3,472		3,472		—		3,472		—
Federal funds sold		336		336		336		—		—
Securities available-for-sale		49,826		49,826		—		43,111		6,715
Restricted securities		3,756		3,756		—		—		3,756
Loans, net		401,268		400,988		—		—		400,988
Accrued interest receivable		1,321		1,321		—		1,321		—
Bank owned life insurance		9,944		9,944		9,944		—		—
Mortgage servicing rights		692		692		—		—		692
Financial Liabilities:
Non-interest-bearing liabilities	$	77,369	$	77,369	$	77,369	$	—	$	—
Savings and other interest-bearing deposits		169,027		167,027		—		167,027		—
Time deposits		136,104		135,662		—		—		135,662
Securities sold under repurchase agreements		8,489		8,489		—		8,489		—
FHLB advances		60,000		59,352		—		59,352		—
Subordinated debt		6,864		7,000		—		—		7,000
Accrued interest payable		225		225		—		225		—
					Fair Value Measurements at December 31, 2016 Using
(Dollars in thousands) Description	Balance as of December 31, 2016		Fair Value as of December 31, 2016		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	4,851	$	4,851	$	4,851	$	—	$	—
Interest-bearing deposits		7,501		7,501		7,501		—		—
Certificates of deposit		4,216		4,216		—		4,216		—
Federal funds sold		2,350		2,350		2,350		—		—
Securities available-for-sale		51,173		51,173		—		43,469		7,704
Restricted securities		2,649		2,649		—		—		2,649
Loans, net		381,537		384,468		—		—		384,468
Loans held for sale		276		276		—		—		276
Accrued interest receivable		1,372		1,372		—		1,372		—
Bank owned life insurance		9,869		9,869		9,869		—		—
Mortgage servicing rights		671		671		—		—		671
Financial Liabilities:
Non-interest-bearing liabilities	$	74,799	$	74,799	$	74,799	$	—	$	—
Savings and other interest-bearing deposits		178,869		178,869		—		178,869		—
Time deposits		128,050		127,497		—		—		127,497
Securities sold under repurchase agreements		18,310		18,310		—		18,310		—
FHLB advances		35,000		35,668		—		35,668		—
Subordinated debt		6,860		7,000		—		—		7,000
Accrued interest payable		331		331		—		331		—

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Changes in Accumulated Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2017

Balances in Accumulated Other Comprehensive Income (Loss)

The balances in accumulated other comprehensive income (loss) are shown in the following tables:

	For the Three Months Ended March 31, 2017
	Net Unrealized			Pension and			Accumulated Other
	Gains (Losses)			Post-retirement			Comprehensive
(Dollars in thousands)	on Securities			Benefit Plans			Income (Loss)
Balance January 1, 2017	$	(520	)	$	(715	)	$	(1,235	)
Change in net unrealized holding gains on securities, before reclassification, net of tax expense of $13		27			—			27
Reclassification for previously unrealized net losses recognized in income, net of tax benefit of $2		3			—			3
Balance March 31, 2017	$	(490	)	$	(715	)	$	(1,205	)
	For the Three Months Ended March 31, 2016
	Net Unrealized			Pension and			Accumulated Other
	Gains (Losses)			Post-retirement			Comprehensive
(Dollars in thousands)	on Securities			Benefit Plans			Income (Loss)
Balance January 1, 2016	$	107		$	(883	)	$	(776	)
Change in net unrealized holding gains on securities, before reclassification, net of tax expense of $173		335			—			335
Reclassification for previously unrealized net gains recognized in income, net of tax expense of $2		(4	)		—			(4	)
Balance March 31, 2016	$	438		$	(883	)	$	(445	)

Reclassification of Unrealized Gains (Losses) and Impairments on Securities

Reclassification for previously unrealized gains (losses) and impairments on securities are reported in the Consolidated Statements of (Loss) Income as follows. No unrealized gains (losses) on pension and post-employment related costs were reclassified to the Consolidated Statements of (Loss) Income in the three months ended March 31, 2017 and 2016.

Accumulated Other Comprehensive Income (Loss)

Reclassification for the Three Months Ended

Holding (Losses) Gains on Securities

(Dollars in thousands)	March 31, 2017			March 31, 2016
Net (losses) gains on sale of securities available-for-securities	$	(5	)	$	6
Tax benefit (expense)		2			(2	)
Impact on net (loss) income	$	(3	)	$	4

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General - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2017
Organization Presentation And General [Line Items]
Business combination effective date	Apr. 01, 2017
Virginia Commonwealth Bank
Organization Presentation And General [Line Items]
Percent of ownership	100.00%
Bay Trust Company
Organization Presentation And General [Line Items]
Percent of ownership	100.00%
Steptoes Holdings
Organization Presentation And General [Line Items]
Percent of ownership	100.00%

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Business Combination - Additional Information (Detail) - Subsequent Event - Virginia BanCorp $ in Millions	Apr. 01, 2017 USD ($) shares
Business Acquisition [Line Items]
Ownership percentage by shareholders of acquiring entity	51.00%
Ownership percentage by shareholders of acquired entity	49.00%
Common stock exchange ratio	1.178
Business combination, number of shares exchanged | shares	4,586,221
Business combination, value of shares exchanged | $	$ 40.5

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Significant Accounting Policies - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Significant Accounting Policies [Line Items]
Personal loans charged off period no later than period	180 days
Percentage of excess loan balance for watch category	90.00%
Impaired loans measurement	Impaired loans measured for impairment generally include (1) non-accruing Special mention, Substandard and Doubtful loans in excess of $250,000; (2) Substandard and Doubtful loans in excess of $500,000; (3) Special Mention loans in excess of $500,000 if any of the loans in the relationship are more than 30 days past due or if the borrower has filed for bankruptcy; and (4) all TDRs.
Loan Receivables	$ 169,332,000	$ 161,033,000
Special Mention
Significant Accounting Policies [Line Items]
Loan Receivables	$ 489,000	$ 2,030,000
Loan due days	30 days
Residential First Mortgages
Significant Accounting Policies [Line Items]
Minimum balance in order to assign a risk rating grade	$ 1,000,000
Consumer and Other Loans
Significant Accounting Policies [Line Items]
Minimum balance in order to assign a risk rating grade	$ 250,000
Minimum
Significant Accounting Policies [Line Items]
Number of days past due for a loan to remain on accrual status	90 days
Minimum | Non-accruing Special mention, Substandard and Doubtful loans
Significant Accounting Policies [Line Items]
Loan Receivables	$ 250,000
Minimum | Substandard and Doubtful loans
Significant Accounting Policies [Line Items]
Loan Receivables	500,000
Minimum | Special Mention
Significant Accounting Policies [Line Items]
Loan Receivables	$ 500,000

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Securities - Aggregate Amortized Costs and Fair Values of Available-for-Sale Securities Portfolio (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 50,539	$ 51,929
Gross Unrealized Gains	146	116
Gross Unrealized (Losses)	(859)	(872)
Fair Value	49,826	51,173
Corporate Bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	6,695	7,695
Gross Unrealized Gains	20	14
Gross Unrealized (Losses)		(5)
Fair Value	6,715	7,704
US Government Agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	24,615	25,668
Gross Unrealized Gains	49	53
Gross Unrealized (Losses)	(429)	(408)
Fair Value	24,235	25,313
State and Municipal Obligations
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	19,229	18,566
Gross Unrealized Gains	77	49
Gross Unrealized (Losses)	(430)	(459)
Fair Value	$ 18,876	$ 18,156

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Securities - Gross Realized Gains and Gross Realized Losses on Sales of Securities (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Gross realized gains		$ 15
Gross realized losses	$ (5)	(9)
Net realized (losses) gains	(5)	6
Aggregate proceeds	$ 995	$ 2,702

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Securities - Additional Information (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($) Bond	Mar. 31, 2016	Dec. 31, 2016 USD ($) Bond
Schedule of Available-for-sale Securities [Line Items]
Average yields (taxable equivalent) on securities	3.22%	3.03%
Market value of securities	$ 10,700		$ 19,100
Securities sold under repurchase agreements	8,489		18,310
Company's investment in Federal Home Loan Bank stock	3,000		1,900
Company's investment in Federal Reserve Bank stock	$ 595		$ 580
Municipal Securities
Schedule of Available-for-sale Securities [Line Items]
Bonds with unrealized loss positions | Bond	35		39
US Government Agencies
Schedule of Available-for-sale Securities [Line Items]
Bonds with unrealized loss positions | Bond	39		37
Corporate Bonds
Schedule of Available-for-sale Securities [Line Items]
Bonds with unrealized loss positions | Bond			1

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Securities - Unrealized Loss Positions (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	$ 33,872	$ 34,816
Less than 12 months, Unrealized Loss	(848)	(860)
12 months or more, Fair Value	1,248	1,308
12 months or more, Unrealized Loss	(11)	(12)
Fair Value, Total	35,120	36,124
Total Unrealized Loss	(859)	(872)
Corporate Bonds
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value		995
Less than 12 months, Unrealized Loss		(5)
Fair Value, Total		995
Total Unrealized Loss		(5)
US Government Agencies
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	21,463	20,933
Less than 12 months, Unrealized Loss	(418)	(396)
12 months or more, Fair Value	1,248	1,308
12 months or more, Unrealized Loss	(11)	(12)
Fair Value, Total	22,711	22,241
Total Unrealized Loss	(429)	(408)
State and Municipal Obligations
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	12,409	12,888
Less than 12 months, Unrealized Loss	(430)	(459)
Fair Value, Total	12,409	12,888
Total Unrealized Loss	$ (430)	$ (459)

XML

Low Income Housing Tax Credits - Additional Information (Detail) - Housing Equity Funds $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($) Investment
Schedule of Equity Method Investments [Line Items]
Number of investments in housing equity funds | Investment	3
Affordable housing investments and related tax benefits term	2029
Tax credits and other tax benefits recognized related to investments	$ 17
Total projected tax credits to be received from investments	68
Other assets
Schedule of Equity Method Investments [Line Items]
Investments in housing equity funds	1,500
Other Liabilities
Schedule of Equity Method Investments [Line Items]
Additional capital calls expected for the fund	$ 1,500

XML

Loans - Summary of Balances of Loans (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Summary of balances of loans
Total loans	$ 404,852	$ 385,009
Net unamortized deferred loan costs	409	391
Allowance for loan losses	(3,993)	(3,863)
Loans, net	401,268	381,537
Construction, Land and Land Development
Summary of balances of loans
Total loans	44,119	39,818
Farmland
Summary of balances of loans
Total loans	994	1,023
Commercial Mortgages (Non-Owner Occupied)
Summary of balances of loans
Total loans	35,464	35,343
Commercial Mortgages (Owner Occupied)
Summary of balances of loans
Total loans	42,550	41,825
Residential First Mortgages
Summary of balances of loans
Total loans	205,106	194,007
Residential Revolving and Junior Mortgages
Summary of balances of loans
Total loans	27,090	26,425
Commercial and Industrial
Summary of balances of loans
Total loans	46,205	43,024
Allowance for loan losses	(528)	(493)
Consumer and Other Loans
Summary of balances of loans
Total loans	3,324	3,544
Allowance for loan losses	$ (44)	$ (52)

XML

Loans - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2017
Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of days past due for a loan to remain on accrual status	90 days

XML

Loans - Recorded Investment in Past Due and Non-accruing Loans (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-89 Days Past Due	$ 1,005	$ 2,679
90 Days or More Past Due and Still Accruing	0	0
Nonaccruals	5,820	5,300
Total Past Due and Nonaccruals	6,825	7,979
Current	398,027	377,030
Total Gross Loans	404,852	385,009
Construction, Land and Land Development
Accounts, Notes, Loans and Financing Receivable [Line Items]
90 Days or More Past Due and Still Accruing	0	0
Nonaccruals	547	623
Total Past Due and Nonaccruals	547	623
Current	43,572	39,195
Total Gross Loans	44,119	39,818
Farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-89 Days Past Due		57
90 Days or More Past Due and Still Accruing	0	0
Total Past Due and Nonaccruals		57
Current	994	966
Total Gross Loans	994	1,023
Commercial Mortgages (Non-Owner Occupied)
Accounts, Notes, Loans and Financing Receivable [Line Items]
90 Days or More Past Due and Still Accruing	0	0
Current	35,464	35,343
Total Gross Loans	35,464	35,343
Commercial Mortgages (Owner Occupied)
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-89 Days Past Due		188
90 Days or More Past Due and Still Accruing	0	0
Nonaccruals	2,148	2,270
Total Past Due and Nonaccruals	2,148	2,458
Current	40,402	39,367
Total Gross Loans	42,550	41,825
Residential First Mortgages
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-89 Days Past Due	402	1,546
90 Days or More Past Due and Still Accruing	0	0
Nonaccruals	1,975	2,155
Total Past Due and Nonaccruals	2,377	3,701
Current	202,729	190,306
Total Gross Loans	205,106	194,007
Residential Revolving and Junior Mortgages
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-89 Days Past Due		480
90 Days or More Past Due and Still Accruing	0	0
Nonaccruals	1,039	160
Total Past Due and Nonaccruals	1,039	640
Current	26,051	25,785
Total Gross Loans	27,090	26,425
Commercial and Industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-89 Days Past Due	603	408
90 Days or More Past Due and Still Accruing	0	0
Nonaccruals	111	92
Total Past Due and Nonaccruals	714	500
Current	45,491	42,524
Total Gross Loans	46,205	43,024
Consumer and Other Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
90 Days or More Past Due and Still Accruing	0	0
Current	3,324	3,544
Total Gross Loans	$ 3,324	$ 3,544

XML

Allowance for Loan Losses - Loan Receivables Evaluated for Impairment Individually and Collectively by Segment (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	$ 10,032	$ 10,415
Collectively evaluated for impairment	394,820	374,594
Total Gross Loans	404,852	385,009
Mortgage Loans on Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	9,940	10,323
Collectively evaluated for impairment	345,383	328,118
Total Gross Loans	355,323	338,441
Commercial and Industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	92	92
Collectively evaluated for impairment	46,113	42,932
Total Gross Loans	46,205	43,024
Consumer and Other Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Collectively evaluated for impairment	3,324	3,544
Total Gross Loans	$ 3,324	$ 3,544

XML

Allowance for Loan Losses - Allowance for Loan Losses Disaggregated Based on Loan Receivables Evaluated for Impairment Individually and Collectively by Segment (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	$ 786	$ 895
Collectively evaluated for impairment	3,207	2,968
Total allowance for loan losses	3,993	3,863
Mortgage Loans on Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	694	803
Collectively evaluated for impairment	2,727	2,515
Total allowance for loan losses	3,421	3,318
Commercial and Industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	92	92
Collectively evaluated for impairment	436	401
Total allowance for loan losses	528	493
Consumer and Other Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Collectively evaluated for impairment	44	52
Total allowance for loan losses	$ 44	$ 52

XML

Allowance for Loan Losses - Allowance for Loan Losses by Portfolio Segment (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
ALLOWANCE FOR LOAN LOSSES:
Beginning Balance	$ 3,863	$ 4,223
(Charge-offs)	(140)	(94)
Recoveries	80	13
(Recovery) provision	190	(35)
Ending Balance	3,993	4,107
Mortgage Loans on Real Estate
ALLOWANCE FOR LOAN LOSSES:
Beginning Balance	3,318	3,502
(Charge-offs)	(132)	(83)
Recoveries	78	6
(Recovery) provision	157	(15)
Ending Balance	3,421	3,410
Commercial and Industrial
ALLOWANCE FOR LOAN LOSSES:
Beginning Balance	493	599
Recoveries		5
(Recovery) provision	35	(25)
Ending Balance	528	579
Consumer and Other Loans
ALLOWANCE FOR LOAN LOSSES:
Beginning Balance	52	122
(Charge-offs)	(8)	(11)
Recoveries	2	2
(Recovery) provision	(2)	5
Ending Balance	$ 44	$ 118

XML

Allowance for Loan Losses - Additional Information (Detail)	3 Months Ended		12 Months Ended
	Mar. 31, 2017 USD ($) Property	Mar. 31, 2016 USD ($)	Dec. 31, 2016 USD ($) Property
Accounts, Notes, Loans and Financing Receivable [Line Items]
Period of nonperforming loans	90 days
Non-accruing loans excluded from impaired loan	$ 671,000		$ 465,000
Non-accruing loans accrued interest	6,000		$ 2,000
Loans modified as TDRs	0	$ 0
Troubled debt restructuring subsequently defaulted	$ 0	$ 0
No. of Properties | Property	14		14
Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Residential properties collateralized with loan | Property	0
No. of Properties | Property	2		2
Residential | Other assets
Accounts, Notes, Loans and Financing Receivable [Line Items]
Properties marketed for sale, value	$ 708,000
No. of Properties | Property	1
Branch Office | Other assets
Accounts, Notes, Loans and Financing Receivable [Line Items]
Properties marketed for sale, value			$ 403,000
No. of Properties | Property			1
Residential First Mortgages
Accounts, Notes, Loans and Financing Receivable [Line Items]
Minimum balance in order to assign a risk rating grade	$ 1,000,000
Consumer and Other Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Minimum balance in order to assign a risk rating grade	$ 250,000

XML

Allowance for Loan Losses - Internal Risk Rating Grades (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
INTERNAL RISK RATING GRADES
Loan Receivables	$ 169,332	$ 161,033
Pass
INTERNAL RISK RATING GRADES
Loan Receivables	144,841	135,703
Watch
INTERNAL RISK RATING GRADES
Loan Receivables	19,407	18,522
Special Mention
INTERNAL RISK RATING GRADES
Loan Receivables	489	2,030
Substandard
INTERNAL RISK RATING GRADES
Loan Receivables	4,595	4,778
Construction, Land and Land Development
INTERNAL RISK RATING GRADES
Loan Receivables	44,119	39,818
Construction, Land and Land Development | Pass
INTERNAL RISK RATING GRADES
Loan Receivables	36,423	32,009
Construction, Land and Land Development | Watch
INTERNAL RISK RATING GRADES
Loan Receivables	5,762	5,795
Construction, Land and Land Development | Special Mention
INTERNAL RISK RATING GRADES
Loan Receivables	179	180
Construction, Land and Land Development | Substandard
INTERNAL RISK RATING GRADES
Loan Receivables	1,755	1,834
Farmland
INTERNAL RISK RATING GRADES
Loan Receivables	994	1,023
Farmland | Pass
INTERNAL RISK RATING GRADES
Loan Receivables	994	1,023
Commercial Mortgages (Non-Owner Occupied)
INTERNAL RISK RATING GRADES
Loan Receivables	35,464	35,343
Commercial Mortgages (Non-Owner Occupied) | Pass
INTERNAL RISK RATING GRADES
Loan Receivables	30,571	30,639
Commercial Mortgages (Non-Owner Occupied) | Watch
INTERNAL RISK RATING GRADES
Loan Receivables	4,375	4,184
Commercial Mortgages (Non-Owner Occupied) | Special Mention
INTERNAL RISK RATING GRADES
Loan Receivables	270	272
Commercial Mortgages (Non-Owner Occupied) | Substandard
INTERNAL RISK RATING GRADES
Loan Receivables	248	248
Commercial Mortgages (Owner Occupied)
INTERNAL RISK RATING GRADES
Loan Receivables	42,550	41,825
Commercial Mortgages (Owner Occupied) | Pass
INTERNAL RISK RATING GRADES
Loan Receivables	32,412	31,191
Commercial Mortgages (Owner Occupied) | Watch
INTERNAL RISK RATING GRADES
Loan Receivables	7,732	6,652
Commercial Mortgages (Owner Occupied) | Special Mention
INTERNAL RISK RATING GRADES
Loan Receivables		1,453
Commercial Mortgages (Owner Occupied) | Substandard
INTERNAL RISK RATING GRADES
Loan Receivables	2,406	2,529
Commercial and Industrial
INTERNAL RISK RATING GRADES
Loan Receivables	46,205	43,024
Commercial and Industrial | Pass
INTERNAL RISK RATING GRADES
Loan Receivables	44,441	40,841
Commercial and Industrial | Watch
INTERNAL RISK RATING GRADES
Loan Receivables	1,538	1,891
Commercial and Industrial | Special Mention
INTERNAL RISK RATING GRADES
Loan Receivables	40	125
Commercial and Industrial | Substandard
INTERNAL RISK RATING GRADES
Loan Receivables	$ 186	$ 167

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Allowance for Loan Losses - Performing and Non Performing Loans (Detail) - USD ($) $ in Thousands	Mar. 31, 2017		Dec. 31, 2016
Performing and non performing loans
Loan receivables	$ 235,520		$ 223,976
Performing
Performing and non performing loans
Loan receivables	232,506		221,661
Nonperforming
Performing and non performing loans
Loan receivables	3,014		2,315
Residential First Mortgages
Performing and non performing loans
Loan receivables	205,106	[1]	194,007	[2]
Residential First Mortgages | Performing
Performing and non performing loans
Loan receivables	203,131	[1]	191,852	[2]
Residential First Mortgages | Nonperforming
Performing and non performing loans
Loan receivables	1,975	[1]	2,155	[2]
Residential Revolving and Junior Mortgages
Performing and non performing loans
Loan receivables	27,090	[3]	26,425	[4]
Residential Revolving and Junior Mortgages | Performing
Performing and non performing loans
Loan receivables	26,051	[3]	26,265	[4]
Residential Revolving and Junior Mortgages | Nonperforming
Performing and non performing loans
Loan receivables	1,039	[3]	160	[4]
Consumer and Other Loans
Performing and non performing loans
Loan receivables	3,324	[5]	3,544	[6]
Consumer and Other Loans | Performing
Performing and non performing loans
Loan receivables	$ 3,324	[5]	$ 3,544	[6]

[1] Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.1million as of March 31, 2017.

[2] Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.3 million as of December 31, 2016.

[3] Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.9 million as of March 31, 2017.

[4] Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.1 million as of December 31, 2016.

[5] No Consumer Loans had been assigned a risk rating grade of Substandard as of March 31, 2017.

[6] No Consumer Loans had been assigned a risk rating grade of Substandard as of December 31, 2016.

XML

Allowance for Loan Losses - Performing and Non Performing Loans (Parenthetical) (Detail) - USD ($) $ in Thousands	Mar. 31, 2017		Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Risk rating grade totaled	$ 235,520		$ 223,976
Residential First Mortgages
Accounts, Notes, Loans and Financing Receivable [Line Items]
Risk rating grade totaled	205,106	[1]	194,007	[2]
Residential First Mortgages | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Risk rating grade totaled	3,100		3,300
Residential Revolving and Junior Mortgages
Accounts, Notes, Loans and Financing Receivable [Line Items]
Risk rating grade totaled	27,090	[3]	26,425	[4]
Residential Revolving and Junior Mortgages | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Risk rating grade totaled	1,900		1,100
Consumer and Other Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Risk rating grade totaled	3,324	[5]	3,544	[6]
Consumer and Other Loans | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Risk rating grade totaled	$ 0		$ 0

[1] Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.1million as of March 31, 2017.

[2] Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.3 million as of December 31, 2016.

[3] Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.9 million as of March 31, 2017.

[4] Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.1 million as of December 31, 2016.

[5] No Consumer Loans had been assigned a risk rating grade of Substandard as of March 31, 2017.

[6] No Consumer Loans had been assigned a risk rating grade of Substandard as of December 31, 2016.

XML

Allowance for Loan Losses - Company's Recorded Investment and Customers' Unpaid Principal Balances for Impaired Loans, with Associated Allowance Amount (Detail) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
With no related allowance, Recorded Investment		$ 6,832		$ 6,746
With no related allowance, Customers' Unpaid Principal Balance		7,304		7,140
With an allowance recorded, Recorded Investment		3,200		3,669
With an allowance recorded, Customers' Unpaid Principal Balance		3,277		3,738
With an allowance recorded, Related Allowance		786		895
Total Impaired Loans, Recorded Investment		10,032		10,415
Total Impaired Loans, Customers' Unpaid Principal Balance		10,581		10,878
Total Impaired Loans, Related Allowance		786		895
With no related allowance, Average Recorded Investment		7,003	$ 5,588
With no related allowance, Interest Income Recognized		37	70
With an allowance recorded, Average Recorded Investment		3,212	5,962
With an allowance recorded, Interest Income Recognized		30	41
Total, Average Recorded Investment		10,215	11,550
Total, Interest Income Recognized		67	111
Construction, Land and Land Development
Accounts, Notes, Loans and Financing Receivable [Line Items]
With no related allowance, Recorded Investment		1,455		1,531
With no related allowance, Customers' Unpaid Principal Balance		1,535		1,539
With an allowance recorded, Recorded Investment		239		243
With an allowance recorded, Customers' Unpaid Principal Balance		285		286
With an allowance recorded, Related Allowance		140		145
Total Impaired Loans, Recorded Investment		1,694		1,774
Total Impaired Loans, Customers' Unpaid Principal Balance		1,820		1,825
Total Impaired Loans, Related Allowance		140		145
With no related allowance, Average Recorded Investment		1,493	991
With no related allowance, Interest Income Recognized		13	14
With an allowance recorded, Average Recorded Investment		241	260
With an allowance recorded, Interest Income Recognized		1	1
Total, Average Recorded Investment		1,734	1,251
Total, Interest Income Recognized		14	15
Residential First Mortgages
Accounts, Notes, Loans and Financing Receivable [Line Items]
With no related allowance, Recorded Investment		2,104		2,112
With no related allowance, Customers' Unpaid Principal Balance		2,171		2,176
With an allowance recorded, Recorded Investment		1,942		1,951
With an allowance recorded, Customers' Unpaid Principal Balance		1,942		1,951
With an allowance recorded, Related Allowance		338		367
Total Impaired Loans, Recorded Investment		4,046		4,063
Total Impaired Loans, Customers' Unpaid Principal Balance		4,113		4,127
Total Impaired Loans, Related Allowance		338		367
With no related allowance, Average Recorded Investment		2,108	2,783
With no related allowance, Interest Income Recognized		5	26
With an allowance recorded, Average Recorded Investment		1,946	2,905
With an allowance recorded, Interest Income Recognized		24	21
Total, Average Recorded Investment		4,054	5,688
Total, Interest Income Recognized		29	47
Residential Revolving and Junior Mortgages
Accounts, Notes, Loans and Financing Receivable [Line Items]
With no related allowance, Recorded Investment	[1]	995		995
With no related allowance, Customers' Unpaid Principal Balance	[1]	999		999
With an allowance recorded, Recorded Investment	[1]	526		544
With an allowance recorded, Customers' Unpaid Principal Balance	[1]	528		546
With an allowance recorded, Related Allowance	[1]	175		199
Total Impaired Loans, Recorded Investment	[1]	1,521		1,539
Total Impaired Loans, Customers' Unpaid Principal Balance	[1]	1,527		1,545
Total Impaired Loans, Related Allowance	[1]	175		199
With no related allowance, Average Recorded Investment	[1]	995	468
With no related allowance, Interest Income Recognized	[1]	10	9
With an allowance recorded, Average Recorded Investment	[1]	527	309
With an allowance recorded, Interest Income Recognized	[1]	5	4
Total, Average Recorded Investment	[1]	1,522	777
Total, Interest Income Recognized	[1]	15	13
Commercial Mortgages (Non-Owner Occupied)
Accounts, Notes, Loans and Financing Receivable [Line Items]
With no related allowance, Recorded Investment		248		248
With no related allowance, Customers' Unpaid Principal Balance		248		248
Total Impaired Loans, Recorded Investment		248		248
Total Impaired Loans, Customers' Unpaid Principal Balance		248		248
With no related allowance, Average Recorded Investment		248	256
With no related allowance, Interest Income Recognized		4	4
Total, Average Recorded Investment		248	256
Total, Interest Income Recognized		4	4
Commercial Mortgages (Owner Occupied)
Accounts, Notes, Loans and Financing Receivable [Line Items]
With no related allowance, Recorded Investment		2,030		1,860
With no related allowance, Customers' Unpaid Principal Balance		2,351		2,178
With an allowance recorded, Recorded Investment		401		839
With an allowance recorded, Customers' Unpaid Principal Balance		421		854
With an allowance recorded, Related Allowance		41		92
Total Impaired Loans, Recorded Investment		2,431		2,699
Total Impaired Loans, Customers' Unpaid Principal Balance		2,772		3,032
Total Impaired Loans, Related Allowance		41		92
With no related allowance, Average Recorded Investment		2,159	1,090
With no related allowance, Interest Income Recognized		5	17
With an allowance recorded, Average Recorded Investment		406	2,208
With an allowance recorded, Interest Income Recognized			14
Total, Average Recorded Investment		2,565	3,298
Total, Interest Income Recognized		5	31
Commercial and Industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
With an allowance recorded, Recorded Investment		92		92
With an allowance recorded, Customers' Unpaid Principal Balance		101		101
With an allowance recorded, Related Allowance		92		92
Total Impaired Loans, Recorded Investment		92		92
Total Impaired Loans, Customers' Unpaid Principal Balance		101		101
Total Impaired Loans, Related Allowance		92		$ 92
With an allowance recorded, Average Recorded Investment		92	280
With an allowance recorded, Interest Income Recognized			1
Total, Average Recorded Investment		$ 92	280
Total, Interest Income Recognized			$ 1

[1] Junior mortgages include equity lines.

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Other Real Estate Owned Net - Summary of Properties Included in Other Real Estate Owned (OREO) (Detail) $ in Thousands	Mar. 31, 2017 USD ($) Property	Dec. 31, 2016 USD ($) Property
Real Estate Properties [Line Items]
No. of Properties | Property	14	14
Carrying Value | $	$ 2,436	$ 2,494
Land lots
Real Estate Properties [Line Items]
No. of Properties | Property	7	7
Carrying Value | $	$ 586	$ 547
Convenience Stores
Real Estate Properties [Line Items]
No. of Properties | Property	1	1
Carrying Value | $	$ 60	$ 59
Restaurant
Real Estate Properties [Line Items]
No. of Properties | Property	1	1
Carrying Value | $	$ 55	$ 55
Commercial properties
Real Estate Properties [Line Items]
No. of Properties | Property	3	3
Carrying Value | $	$ 904	$ 942
Residential
Real Estate Properties [Line Items]
No. of Properties | Property	2	2
Carrying Value | $	$ 831	$ 891

XML

Earnings per share - Weighted Average Number of Shares Used in Computing Earnings Per Share (Detail) - $ / shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Basic earnings per share	4,776,800	4,774,856
Effect of dilutive securities:
Stock options		16,283
Diluted earnings per share	4,776,800	4,791,139
Basic earnings per share	$ (0.04)	$ 0.11
Diluted earnings per share	$ (0.04)	$ 0.11

XML

Earnings Per Share - Additional Information (Detail) - shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Computation Of Earnings Per Share Line Items
Shares not included in computing diluted earnings per share because effects were anti-dilutive	91,368	68,473

XML

Stock-Based Compensation Plans - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for grant	317,209
Stock-based compensation expense	$ 59,000	$ 16,000
Unrecognized compensation expenses related to stock award	$ 0
Options granted	8,500	7,500
Options vested	8,500	7,500
Aggregate fair value of options granted	$ 16,000	$ 16,000
Executive | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation, restricted stock granted	12,500
Executive | Restricted Stock | Share-based Compensation Award, Tranche One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation, restricted stock granted	5,000
Compensation expense	$ 43,000
Executive | Restricted Stock | Share-based Compensation Award, Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation, restricted stock granted	2,500
Option Vesting period	2 years
Compensation expense that will be recorded in the future	$ 20,000
Executive | Restricted Stock | Share-based Compensation Award, Tranche Three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation, restricted stock granted	5,000
Option Vesting period	3 years
Compensation expense that will be recorded in the future	$ 40,000

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Stock-Based Compensation - Fair Value of Options (Detail)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate (5 year Treasury)	1.93%	1.49%
Expected dividend yield	0.00%	0.00%
Expected term (years)	5 years	5 years
Expected volatility	21.70%	40.10%

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Stock-Based Compensation - Fair Value of Options (Parenthetical) (Detail)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock price volatility, risk free interest period	5 years	5 years

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Stock-Based Compensation - Summary of Stock Option Activity (Detail) - USD ($)		3 Months Ended		12 Months Ended
		Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options outstanding, beginning		218,300
Granted, shares		8,500	7,500
Forfeited, shares		(1,195)
Exercised, shares		0
Expired, shares		0
Options outstanding and exercisable, ending		225,605		218,300
Options outstanding, beginning, Weighted Average Exercise Price		$ 6.35
Granted, Weighted Average Exercise Price		8.30
Forfeited, Weighted Average Exercise Price		8.43
Exercised, Weighted Average Exercise Price		0
Expired, Weighted Average Exercise Price		0
Options outstanding and exercisable, ending, Weighted Average Exercise Price		$ 6.41		$ 6.35
Options outstanding and exercisable, ending, Weighted Average Remaining Contractual Life		5 years 10 months 24 days		5 years 10 months 24 days
Options outstanding, ending, Aggregate Intrinsic Value	[1]	$ 737,512

[1] The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on March 31, 2017. This amount changes based on changes in the market value of the Company's common stock.

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Employee Benefit Plans - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2017 USD ($)
Defined Contribution Plan Disclosure [Line Items]
Minimum age of full-time employees	21 years
Conditional age-1 for availing plan	55 years
Conditional age-2 for availing plan	65 years
Conditional years of service -1 for availing plan	10 years
Conditional years of service-2 for availing plan	5 years
Pension Plan, Defined Benefit
Defined Contribution Plan Disclosure [Line Items]
Expected employer contribution	$ 0
Other Postretirement Benefit Plan, Defined Benefit
Defined Contribution Plan Disclosure [Line Items]
Expected employer contribution	5,000
Employer contribution	$ 1,000

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Employee Benefit Plans - Components of Net Periodic Benefit Cost (Gain) (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Pension Plan, Defined Benefit
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost	$ 31	$ 35
Expected return on plan assets	(45)	(48)
Settlement loss	13
Recognized net actuarial loss	19	19
Net periodic cost	18	6
Other Postretirement Benefit Plan, Defined Benefit
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost	5	6
Interest cost	5	7
Amortization of net gain	(2)
Net periodic cost	$ 8	$ 13

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Long Term Debt - Additional Information (Detail)		3 Months Ended
	May 28, 2015 USD ($)	Mar. 31, 2017 USD ($) Loan	Dec. 31, 2016 USD ($) Loan
Debt Instrument [Line Items]
Federal Home Loan Bank advances		$ 60,000,000	$ 35,000,000
Number of FHLB debt advances | Loan		9	5
Immediate available credit		$ 54,800,000
Total line of credit		$ 120,800,000
Weighted average interest rate		1.31%	1.49%
Fixed Rate Credit | Federal Home Loan Bank Advances Drew in 2017
Debt Instrument [Line Items]
Federal Home Loan Bank advances		$ 25,000,000
Number of FHLB debt advances | Loan		4
Subordinated Debt Due May 2025
Debt Instrument [Line Items]
Debt instrument, face amount	$ 7,000,000	$ 7,000,000
Debt instrument, coupon percentage	6.50%	6.50%
Debt instrument, maturity date	May 28, 2025
Debt instrument, frequency of payment		1st of March and September of each year, commencing September 1, 2015

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Long Term Debt - Advances of Debt (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Federal Home Loan Bank advances	$ 60,000	$ 35,000
Adjustable Rate Hybrid | Federal Home Loan Bank Advances One
Debt Instrument [Line Items]
Federal Home Loan Bank advances	$ 10,000
Originated	Apr. 12, 2013
Current Interest Rate	3.40178%
Maturity Date	Apr. 13, 2020
Fixed Rate Credit | Federal Home Loan Bank Advances Two
Debt Instrument [Line Items]
Federal Home Loan Bank advances	$ 5,000
Originated	Dec. 21, 2015
Current Interest Rate	0.99%
Maturity Date	Jun. 15, 2017
Fixed Rate Credit | Federal Home Loan Bank Advances Three
Debt Instrument [Line Items]
Federal Home Loan Bank advances	$ 5,000
Originated	Dec. 22, 2015
Current Interest Rate	1.08%
Maturity Date	Sep. 15, 2017
Fixed Rate Credit | Federal Home Loan Bank Advances Four
Debt Instrument [Line Items]
Federal Home Loan Bank advances	$ 5,000
Originated	Jan. 17, 2017
Current Interest Rate	0.91%
Maturity Date	Oct. 01, 2017
Fixed Rate Credit | Federal Home Loan Bank Advances Five
Debt Instrument [Line Items]
Federal Home Loan Bank advances	$ 5,000
Originated	Jan. 20, 2017
Current Interest Rate	0.995%
Maturity Date	Dec. 20, 2017
Fixed Rate Credit | Federal Home Loan Bank Advances Six
Debt Instrument [Line Items]
Federal Home Loan Bank advances	$ 10,000
Originated	Mar. 01, 2017
Current Interest Rate	0.79%
Maturity Date	May 29, 2017
Fixed Rate Credit | Federal Home Loan Bank Advances Seven
Debt Instrument [Line Items]
Federal Home Loan Bank advances	$ 5,000
Originated	Mar. 06, 2017
Current Interest Rate	0.71%
Maturity Date	Apr. 05, 2017
Fixed Rate Credit | Federal Home Loan Bank Advances Eight
Debt Instrument [Line Items]
Federal Home Loan Bank advances	$ 10,000
Originated	Mar. 30, 2017
Current Interest Rate	0.90%
Maturity Date	Apr. 28, 2017
Fixed Rate Credit | Federal Home Loan Bank Advances Nine
Debt Instrument [Line Items]
Federal Home Loan Bank advances	$ 5,000
Originated	Mar. 31, 2017
Current Interest Rate	0.89%
Maturity Date	May 01, 2017

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Subordinated Debt (Detail) - USD ($)	Mar. 31, 2017	Dec. 31, 2016	May 28, 2015
Debt and Financial Instruments [Line Items]
Subordinated debt	$ 6,864,000	$ 6,860,000
Subordinated Debt Due May 2025
Debt and Financial Instruments [Line Items]
Debt instrument, face amount	7,000,000		$ 7,000,000
Less: Issuance costs	(136,000)
Subordinated debt	$ 6,864,000

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Subordinated Debt (Parenthetical) (Detail)	Mar. 31, 2017	May 28, 2015
Subordinated Debt Due May 2025
Debt and Financial Instruments [Line Items]
Debt instrument, coupon percentage	6.50%	6.50%

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Fair Value Measurements - Additional Information (Detail) - Fair Value, Measurements, Recurring - Fair Value, Inputs, Level 3 - Mortgage Servicing Rights	3 Months Ended	12 Months Ended
	Mar. 31, 2017 $ / Loan	Dec. 31, 2016 Loan $ / Loan
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loan segregated, number of pools | Loan		14
Service costs assumed, per loan | $ / Loan	6.00	6.00
Average PSA assumed rate	139.00%	150.00%
Discount rate	14.00%	14.00%
100% PSA | First Month
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Prepayment rate	0.00%
100% PSA | Between First Month and Month 30
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Prepayment rate increase, each month	0.20%
100% PSA | Month 30
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Prepayment rate	6.00%
100% PSA | Thereafter
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Prepayment rate	6.00%

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Fair Value Measurements - Schedule of Balances of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Securities available for sale:
Securities available-for-sale	$ 49,826	$ 51,173
Mortgage servicing rights	692	671
Defined benefit plan assets:
Defined Benefit Plan Fair Value Of Plan Assets	2,623	2,690
Corporate Bonds
Securities available for sale:
Securities available-for-sale	6,715	7,704
US Government Agencies
Securities available for sale:
Securities available-for-sale	24,235	25,313
State and Municipal Obligations
Securities available for sale:
Securities available-for-sale	18,876	18,156
Cash and Cash Equivalents
Defined benefit plan assets:
Defined Benefit Plan Fair Value Of Plan Assets	3
Fixed Income Funds
Defined benefit plan assets:
Defined Benefit Plan Fair Value Of Plan Assets	1,043	1,041
Equity Funds
Defined benefit plan assets:
Defined Benefit Plan Fair Value Of Plan Assets	1,577	1,649
Fair Value, Inputs, Level 1
Defined benefit plan assets:
Defined Benefit Plan Fair Value Of Plan Assets	2,623	2,690
Fair Value, Inputs, Level 1 | Cash and Cash Equivalents
Defined benefit plan assets:
Defined Benefit Plan Fair Value Of Plan Assets	3
Fair Value, Inputs, Level 1 | Fixed Income Funds
Defined benefit plan assets:
Defined Benefit Plan Fair Value Of Plan Assets	1,043	1,041
Fair Value, Inputs, Level 1 | Equity Funds
Defined benefit plan assets:
Defined Benefit Plan Fair Value Of Plan Assets	1,577	1,649
Fair Value, Inputs, Level 2
Securities available for sale:
Securities available-for-sale	43,111	43,469
Fair Value, Inputs, Level 2 | US Government Agencies
Securities available for sale:
Securities available-for-sale	24,235	25,313
Fair Value, Inputs, Level 2 | State and Municipal Obligations
Securities available for sale:
Securities available-for-sale	18,876	18,156
Fair Value, Inputs, Level 3
Securities available for sale:
Securities available-for-sale	6,715	7,704
Mortgage servicing rights	692	671
Fair Value, Inputs, Level 3 | Corporate Bonds
Securities available for sale:
Securities available-for-sale	$ 6,715	$ 7,704

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Fair Value Measurements - Reconciliation of Items Using Level Three Inputs (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)
Mortgage Servicing Rights
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	$ 671
Purchases	0
Impairments	0
Fair value adjustments	21
Ending balance	692
Corporate Bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	7,704
Purchases	0
Impairments	0
Fair value adjustments	11
Sales	(1,000)
Ending balance	$ 6,715

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Fair Value Measurements - Summary of Assets Measured at Fair Value on Nonrecurring Basis (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans, net	$ 2,414	$ 2,774
Other real estate owned, net	2,436	2,494
Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans, net	2,414	2,774
Other real estate owned, net	$ 2,436	$ 2,494

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Fair Value Measurements - Summary of Quantitative Fair Value Measurements for Level 3 (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired Loans, net	$ 2,414	$ 2,774
Other real estate owned, net	$ 2,436	$ 2,494
Impaired Loans
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Unobservable Input, Lack of Marketability		50.00%
Minimum | Impaired Loans
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Unobservable Input, Selling Cost	0.00%	10.00%
Unobservable Input, Lack of Marketability	50.00%
Minimum | Other Real Estate Owned
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Unobservable Input, Selling Cost	3.00%	3.00%
Unobservable Input, Lack of Marketability	10.00%	10.00%
Maximum | Impaired Loans
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Unobservable Input, Selling Cost	20.00%	20.00%
Unobservable Input, Lack of Marketability	100.00%
Maximum | Other Real Estate Owned
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Unobservable Input, Selling Cost	13.00%	13.00%
Unobservable Input, Lack of Marketability	20.00%	20.00%
Weighted Average | Impaired Loans
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Unobservable Input, Selling Cost	15.00%	16.00%
Unobservable Input, Lack of Marketability	96.00%	50.00%
Weighted Average | Other Real Estate Owned
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Unobservable Input, Selling Cost	5.00%	5.00%
Unobservable Input, Lack of Marketability	11.00%	11.00%

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Fair Value Measurements - Estimated Fair Values of Financial Instruments (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Financial Assets:
Cash and due from banks	$ 5,087	$ 4,851
Interest-bearing deposits	6,826	7,501
Certificates of deposit	3,472	4,216
Federal funds sold	336	2,350
Securities available-for-sale	49,826	51,173
Restricted securities	3,756	2,649
Loans, net	401,268	381,537
Loans held for sale		276
Accrued interest receivable	1,321	1,372
Bank owned life insurance	9,944	9,869
Mortgage servicing rights	692	671
Financial Liabilities:
Non-interest-bearing liabilities	77,369	74,799
Savings and other interest-bearing deposits	169,027	178,869
Time deposits	136,104	128,050
Securities sold under repurchase agreements	8,489	18,310
FHLB advances	60,000	35,000
Subordinated debt	6,864	6,860
Accrued interest payable	225	331
Financial Assets:
Cash and due from banks	5,087	4,851
Interest-bearing deposits	6,826	7,501
Certificates of deposit	3,472	4,216
Federal funds sold	336	2,350
Securities available-for-sale	49,826	51,173
Restricted securities	3,756	2,649
Loans, net	400,988	384,468
Loans held for sale		276
Accrued interest receivable	1,321	1,372
Bank owned life insurance	9,944	9,869
Mortgage servicing rights	692	671
Financial Liabilities:
Non-interest-bearing liabilities	77,369	74,799
Savings and other interest-bearing deposits	167,027	178,869
Time deposits	135,662	127,497
Securities sold under repurchase agreements	8,489	18,310
FHLB advances	59,352	35,668
Subordinated debt	7,000	7,000
Accrued interest payable	225	331
Fair Value, Inputs, Level 1
Financial Assets:
Cash and due from banks	5,087	4,851
Interest-bearing deposits	6,826	7,501
Federal funds sold	336	2,350
Bank owned life insurance	9,944	9,869
Financial Liabilities:
Non-interest-bearing liabilities	77,369	74,799
Fair Value, Inputs, Level 2
Financial Assets:
Securities available-for-sale	43,111	43,469
Financial Assets:
Certificates of deposit	3,472	4,216
Securities available-for-sale	43,111	43,469
Accrued interest receivable	1,321	1,372
Financial Liabilities:
Savings and other interest-bearing deposits	167,027	178,869
Securities sold under repurchase agreements	8,489	18,310
FHLB advances	59,352	35,668
Accrued interest payable	225	331
Fair Value, Inputs, Level 3
Financial Assets:
Securities available-for-sale	6,715	7,704
Financial Assets:
Securities available-for-sale	6,715	7,704
Restricted securities	3,756	2,649
Loans, net	400,988	384,468
Loans held for sale		276
Mortgage servicing rights	692	671
Financial Liabilities:
Time deposits	135,662	127,497
Subordinated debt	$ 7,000	$ 7,000

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Changes in Accumulated Other Comprehensive Income (Loss) - Balances in Accumulated Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	$ 41,705
Change in net unrealized holding gains on securities, before reclassification, net of tax expense	27	$ 335
Reclassification for previously unrealized net (gains) losses recognized in income, net of tax expense (benefit)	3	(4)
Balance at end of period	41,617
Net Unrealized Gains (Losses) on Securities
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	(520)	107
Change in net unrealized holding gains on securities, before reclassification, net of tax expense	27	335
Reclassification for previously unrealized net (gains) losses recognized in income, net of tax expense (benefit)	3	(4)
Balance at end of period	(490)	438
Pension and Post employment costs
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	(715)	(883)
Balance at end of period	(715)	(883)
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	(1,235)	(776)
Balance at end of period	$ (1,205)	$ (445)

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Changes in Accumulated Other Comprehensive Income (Loss) - Balances in Accumulated Other Comprehensive Income (Loss) (Parenthetical) (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Change in net unrealized holding gains on securities, before reclassification, tax expense	$ 13	$ 173
Reclassification for previously unrealized net (gains) losses recognized in income, tax expense (benefit)	$ (2)	$ 2

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Changes in Accumulated Other Comprehensive Income (Loss) - Reclassification of Unrealized Gains (Losses) and Impairments on Securities (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax benefit (expense)	$ 121	$ (153)
Net Unrealized Gains (Losses) on Securities | Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net (losses) gains on sale of securities available-for-securities	(5)	6
Tax benefit (expense)	2	(2)
Impact on net (loss) income	$ (3)	$ 4