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 June 30, 2017

☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____________ to _____________

Commission file number: 000-33411

NEW PEOPLES BANKSHARES, INC.

 (Exact name of registrant as specified in its charter) 

Virginia (State or other jurisdiction of incorporation or organization)	31-1804543  (I.R.S. Employer  Identification No.)
67 Commerce Drive  Honaker, Virginia  (Address of principal executive offices)	24260  (Zip Code)

(Registrant’s telephone number, including area code) (276) 873-7000

n/a 

(Former name, former address and former fiscal year, if changed since last report)

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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): 

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

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: 

Class	Outstanding at August 11, 2017
Common Stock, $2.00 par value	23,356,299

NEW PEOPLES BANKSHARES, INC.

INDEX

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Income – Six Months Ended June 30, 2017 and 2016 (Unaudited)	2
	Consolidated Statements of Income – Three Months Ended June 30, 2017 and 2016 (Unaudited)	3
	Consolidated Statements of Comprehensive Income (Loss) – Three and Six Months Ended June 30, 2017 and 2016 (Unaudited)	4
	Consolidated Balance Sheets – June 30, 2017 (Unaudited) and December 31, 2016	5
	Consolidated Statements of Changes in Stockholders’ Equity - Six Months Ended June 30, 2017 and 2016 (Unaudited)	6
	Consolidated Statements of Cash Flows – Six Months Ended June 30, 2017 and 2016 (Unaudited)	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38
PART II	OTHER INFORMATION	38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	39
SIGNATURES		40

Part I	Financial Information
Item 1	Financial Statements

NEW PEOPLES BANKSHARES, INC. 

CONSOLIDATED STATEMENTS OF INCOME 

FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016 

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) 

(UNAUDITED) 

INTEREST AND DIVIDEND INCOME	2017			2016
Loans including fees	$	11,779		$	11,178
Interest-earning deposits with banks		92			44
Investments		731			827
Dividends on equity securities (restricted)		66			64
Total Interest and Dividend Income		12,668			12,113
INTEREST EXPENSE
Deposits
Demand		25			24
Savings		93			78
Time deposits below $100,000		624			535
Time deposits above $100,000		403			312
FHLB advances		84			64
Federal funds purchased		—			2
Trust preferred securities		283			245
Total Interest Expense		1,512			1,260
NET INTEREST INCOME		11,156			10,853
PROVISION FOR LOAN LOSSES		—			(500	)
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		11,156			11,353
NONINTEREST INCOME
Gain on sale and leaseback transactions		2,619			—
Service charges		1,721			1,072
Fees, commissions and other income		1,622			1,663
Insurance and investment fees		106			301
Net realized gains on sale of investment securities		—			240
Life insurance investment income		55			63
Total Noninterest Income		6,123			3,339
NONINTEREST EXPENSES
Salaries and employee benefits		6,722			6,549
Occupancy and equipment expense		2,261			1,921
Lease expense – operating leases		38			—
Advertising and public relations		174			233
Data processing and telecommunications		1,223			1,157
FDIC insurance premiums		212			270
Other real estate owned and repossessed vehicles, net		1,053			252
Other operating expenses		2,918			2,731
Total Noninterest Expenses		14,601			13,113
INCOME BEFORE INCOME TAXES		2,678			1,579
INCOME TAX BENEFIT		(14	)		(1	)
NET INCOME	$	2,692		$	1,580
Income Per Share
Basic	$	0.12		$	0.07
Fully Diluted	$	0.12		$	0.07
Average Weighted Shares of Common Stock
Basic		23,355,198			23,354,082
Fully Diluted		23,355,198			23,354,082

The accompanying notes are an integral part of this statement.

Table Of Contents  2

NEW PEOPLES BANKSHARES, INC. 

CONSOLIDATED STATEMENTS OF INCOME 

FOR THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016 

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) 

(UNAUDITED) 

INTEREST AND DIVIDEND INCOME	2017		2016
Loans including fees	$	6,115	$	5,613
Interest-earning deposits with banks		49		23
Investments		381		363
Dividends on equity securities (restricted)		34		32
Total Interest and Dividend Income		6,579		6,031
INTEREST EXPENSE
Deposits
Demand		12		13
Savings		46		37
Time deposits below $100,000		335		270
Time deposits above $100,000		214		158
FHLB Advances		39		28
Trust Preferred Securities		142		123
Total Interest Expense		788		629
NET INTEREST INCOME		5,791		5,402
PROVISION FOR LOAN LOSSES		—		(500	)
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		5,791		5,902
NONINTEREST INCOME
Gain on sale and leaseback transactions		2,619		—
Service charges		888		584
Fees, commissions and other income		820		858
Insurance and investment fees		54		143
Net realized gains on sale of investment securities		—		135
Life insurance investment income		28		33
Total Noninterest Income		4,409		1,753
NONINTEREST EXPENSES
Salaries and employee benefits		3,341		3,339
Occupancy and equipment expense		1,134		1,068
Lease expense – operating leases		38		—
Advertising and public relations		81		129
Data processing and telecommunications		670		576
FDIC insurance premiums		110		136
Other real estate owned and repossessed vehicles, net		753		89
Other operating expenses		1,496		1,439
Total Noninterest Expenses		7,623		6,776
INCOME BEFORE INCOME TAXES		2,577		879
INCOME TAX BENEFIT		—		(3	)
NET INCOME	$	2,577	$	882
Income Per Share
Basic	$	0.11	$	0.04
Fully Diluted	$	0.11	$	0.04
Weighted Average Shares of Common Stock
Basic		23,355,503		23,354,082
Fully Diluted		23,355,503		23,354,082

The accompanying notes are an integral part of this statement.

Table Of Contents  3

NEW PEOPLES BANKSHARES, INC. 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016 

(IN THOUSANDS) 

(UNAUDITED) 

	For the three months ended  June 30,						For the six months ended  June 30,
	2017			2016			2017			2016
NET INCOME	$	2,577		$	882		$	2,692		$	1,580
Other comprehensive income:
Investment Securities Activity
Unrealized gains arising during the period		518			694			607			1,479
Tax related to unrealized gains		(176	)		(236	)		(206	)		(503	)
Reclassification of realized gains during the period		—			(135	)		—			(240	)
Tax related to realized gains		—			46			—			82
TOTAL OTHER COMPREHENSIVE INCOME		342			369			401			818
TOTAL COMPREHENSIVE INCOME	$	2,919		$	1,251		$	3,093		$	2,398

The accompanying notes are an integral part of this statement.

Table Of Contents  4

NEW PEOPLES BANKSHARES, INC. 

CONSOLIDATED BALANCE SHEETS 

(IN THOUSANDS EXCEPT PER SHARE AND SHARE DATA) 

ASSETS	June 30,			December 31,
	2017			2016
	(Unaudited)			(Audited)
Cash and due from banks	$	18,637		$	18,500
Interest-bearing deposits with banks		18,327			16,816
Federal funds sold		16			132
Total Cash and Cash Equivalents		36,980			35,448
Investment securities available-for-sale		75,795			70,011
Loans receivable		488,764			468,629
Allowance for loan losses		(6,307	)		(6,072	)
Net Loans		482,457			462,557
Bank premises and equipment, net		26,666			29,985
Equity securities (restricted)		2,570			2,802
Other real estate owned		7,248			10,655
Accrued interest receivable		1,780			1,848
Life insurance investments		12,329			12,274
Deferred taxes, net		5,079			5,285
Right-of-use assets – operating leases		5,321			—
Other assets		3,536			3,470
Total Assets	$	659,761		$	634,335
LIABILITIES
Deposits:
Demand deposits:
Noninterest bearing	$	156,802		$	151,914
Interest-bearing		32,537			40,213
Savings deposits		119,411			114,492
Time deposits		267,596			247,819
Total Deposits		576,346			554,438
Federal Home Loan Bank advances		8,158			13,758
Lease liabilities – operating leases		5,321			—
Accrued interest payable		359			331
Accrued expenses and other liabilities		3,068			2,395
Trust preferred securities		16,496			16,496
Total Liabilities		609,748			587,418
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock - $2.00 par value; 50,000,000 shares authorized; 23,356,299 and 23,354,457 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively		46,713			46,709
Common stock warrants		762			764
Additional paid-in-capital		13,966			13,965
Retained deficit		(11,373	)		(14,065	)
Accumulated other comprehensive loss		(55	)		(456	)
Total Stockholders’ Equity		50,013			46,917
Total Liabilities and Stockholders’ Equity	$	659,761		$	634,335

The accompanying notes are an integral part of this statement.

Table Of Contents  5

NEW PEOPLES BANKSHARES, INC. 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY 

FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016 

(IN THOUSANDS INCLUDING SHARE DATA) 

(UNAUDITED) 

	Shares of Common Stock		Common Stock		Common Stock Warrants			Additional Paid-in- Capital		Retained   Deficit			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance, December 31, 2015		23,354	$	46,708	$	764		$	13,965	$	(15,023	)	$	(327	)	$	46,087
Net income		—		—		—			—		1,580			—			1,580
Other comprehensive income, net of tax		—		—		—			—		—			818			818
Balance, June 30, 2016		23,354	$	46,708	$	764		$	13,965	$	(13,443	)	$	491		$	48,485
Balance, December 31, 2016		23,354	$	46,709	$	764		$	13,965	$	(14,065	)	$	(456	)	$	46,917
Net income		—		—		—			—		2,692			—			2,692
Exercise of common stock warrants		2		4		(2	)		1		—			—			3
Other comprehensive income, net of tax		—		—		—			—		—			401			401
Balance, June 30, 2017		23,356	$	46,713	$	762		$	13,966	$	(11,373	)	$	(55	)	$	50,013

The accompanying notes are an integral part of this statement.

Table Of Contents  6

NEW PEOPLES BANKSHARES, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016 

(IN THOUSANDS) 

(UNAUDITED)

	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,692		$	1,580
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,279			1,175
Provision for loan losses		—			(500	)
Income on life insurance		(55	)		(63	)
Gain on sale of securities available-for-sale		—			(240	)
Gain on sale and leaseback transactions		(2,619	)		—
Gain on sale of premises and equipment		(2	)		—
(Gain) loss on sale of foreclosed assets		4			(185	)
Adjustment of carrying value of foreclosed real estate		590			(28	)
Accretion of bond premiums/discounts		398			482
Deferred tax benefit		—			(70	)
Net change in:
Interest receivable		68			(70	)
Other assets		(66	)		(1,476	)
Accrued interest payable		28			4
Accrued expenses and other liabilities		629			546
Net Cash Provided by Operating Activities		2,946			1,155
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans		(15,944	)		(21,383	)
Purchase of securities available-for-sale		(13,032	)		(7,631	)
Proceeds from sales and maturities of securities available-for-sale		7,457			33,644
Net sale (purchase) of equity securities (restricted)		232			(172	)
Payments for the purchase of premises and equipment		(1,446	)		(4,130	)
Proceeds from sales and leaseback transactions		1,042			—
Proceeds from sale of premises and equipment		5			—
Proceeds from sales of other real estate owned		3,961			947
Net Cash Provided by (Used In) Investing Activities		(17,725	)		1,275
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of common stock warrants		3			—
Net increase (decrease) in Federal Home Loan Bank advances		(5,600	)		6,400
Net change in:
Demand deposits		(2,788	)		11,484
Savings deposits		4,919			(9,039	)
Time deposits		19,777			(5,380	)
Net Cash Provided by Financing Activities		16,311			3,465
Net increase in cash and cash equivalents		1,532			5,895
Cash and Cash Equivalents, Beginning of Period		35,448			26,338
Cash and Cash Equivalents, End of Period	$	36,980		$	32,233
Supplemental Disclosure of Cash Paid During the Period for:
Interest	$	1,484		$	1,256
Taxes	$	—		$	70
Supplemental Disclosure of Non Cash Transactions:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	5,321		$	—
Loan made to finance sale of premises and equipment	$	4,935		$	—
Other real estate acquired in settlement of foreclosed loans	$	2,071		$	3,098
Loans made to finance sale of foreclosed real estate	$	1,092		$	503
Transfer of premises and equipment to other real estate	$	125		$	—
Transfer of other real estate to premises and equipment	$	—		$	125
Change in unrealized gains (losses) on securities available-for-sale	$	607		$	1,239

The accompanying notes are an integral part of this statement.

Table Of Contents  7

NEW PEOPLES BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 NATURE OF OPERATIONS:

New Peoples Bankshares, Inc. (“The Company”) is a financial holding company whose principal activity is the ownership and management of a community bank. New Peoples Bank, Inc. (“Bank”) was organized and incorporated under the laws of the Commonwealth of Virginia on December 9, 1997. The Bank commenced operations on October 28, 1998, after receiving regulatory approval. As a state-chartered member bank, the Bank is subject to regulation by the Virginia Bureau of Financial Institutions, the Federal Deposit Insurance Corporation and the Federal Reserve Bank. The Bank provides general banking services to individuals, small and medium size businesses and the professional community of southwestern Virginia, southern West Virginia, and eastern Tennessee. On June 9, 2003, the Company formed two wholly-owned subsidiaries; NPB Financial Services, Inc. and NPB Web Services, Inc. On July 7, 2004 the Company established NPB Capital Trust I for the purpose of issuing trust preferred securities. On September 27, 2006, the Company established NPB Capital Trust 2 for the purpose of issuing additional trust preferred securities. NPB Financial Services, Inc. was a subsidiary of the Company until January 1, 2009 when it became a subsidiary of the Bank. In June 2012 the name of NPB Financial Services, Inc. was changed to NPB Insurance Services, Inc. which operates solely as an insurance agency. On March 4, 2016 the Federal Reserve Bank of Richmond approved the Company’s election to become a financial holding company. In July 2016, the Bank and its wholly-owned subsidiary NPB Insurance Services, Inc. announced by press release its teaming up with The Hilb Group of Virginia dba CSE Insurance Services, a division of the Hilb Group, LLC (“CSE”), located in Abingdon, Virginia, to provide insurance services for its current and future customers. Effective July 1, 2016, NPB Insurance Services, Inc. sold its existing book of business to CSE. These customers are now serviced by CSE and the Bank refers future insurance needs of its bank customers to CSE. On June 7, 2017, NPB Insurance Services, Inc. purchased a 39% membership interest in Lonesome Pine Title Agency, LLC, which provides title insurance. Another member of the agency is a related party to the Company.

NOTE 2 ACCOUNTING PRINCIPLES:

These consolidated financial statements conform to U. S. generally accepted accounting principles and to general industry practices. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position at June 30, 2017 and December 31, 2016, and the results of operations for the three and six month periods ended June 30, 2017 and 2016. The notes included herein should be read in conjunction with the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the three and six month periods ended June 30, 2017 and 2016 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The determination of the adequacy of the allowance for loan losses and the determination of the deferred tax asset and related valuation allowance are based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions.

Table Of Contents  8

NOTE 3 EARNINGS PER SHARE:

Basic earnings per share computations are based on the weighted average number of shares outstanding during each period. Dilutive earnings per share reflect the additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued related to outstanding common stock warrants are determined by the Treasury method. For the three and six months ended June 30, 2017 and 2016, potential common shares of 880,136 and 882,353, respectively, were anti-dilutive and were not included in the calculation. Basic and diluted net income per common share calculations follows:

(Amounts in Thousands, Except Share and Per Share Data)	For the three months  ended June 30,				For the six months  ended June 30,
	2017		2016		2017		2016
Net income	$	2,577	$	882	$	2,692	$	1,580
Weighted average shares outstanding		23,355,503		23,354,082		23,355,198		23,354,082
Dilutive shares for stock options and warrants		—		—		—		—
Weighted average dilutive shares outstanding		23,355,503		23,354,082		23,355,198		23,354,082
Basic and diluted income per share	$	0.11	$	0.04	$	0.12	$	0.07

NOTE 4 CAPITAL:

Capital Requirements and Ratios

The Bank is subject to various capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and, possibly, additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined) to risk-weighted assets (as defined), Tier 1 capital (as defined) to average assets (as defined), and Common Equity Tier 1 capital (as defined) to risk-weighted assets (as defined). As of June 30, 2017, the Bank meets all capital adequacy requirements to which it is subject.

The Company meets eligibility criteria of a small bank holding company in accordance with the Federal Reserve Board’s Small Bank Holding Company Policy Statement issued in February 2015, and is no longer obligated to report consolidated regulatory capital. The Bank’s actual capital amounts and ratios are presented in the following table as of June 30, 2017 and December 31, 2016, respectively. These ratios comply with Federal Reserve rules to align with the Basel III Capital requirements effective January 1, 2015.

Table Of Contents  9

	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars are in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2017:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.	$	69,284		16.22	%	$	34,162		8.0	%	$	42,702		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,934		14.97	%		25,621		6.0	%		34,162		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		63,934		9.86	%		25,929		4.0	%		32,411		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,934		14.97	%		19,216		4.5	%		27,756		6.5	%
December 31, 2016:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.	$	67,549		16.64	%	$	32,476		8.0	%	$	40,595		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		62,462		15.39	%		24,357		6.0	%		32,476		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		62,462		9.93	%		25,149		4.0	%		31,436		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		62,462		15.39	%		18,268		4.5	%		26,386		6.5	%

As of June 30, 2017, the Bank was well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage, and Common Equity Tier 1 ratios as set forth in the above tables. There are no conditions or events since the notification that management believes have changed the Bank’s category.

Under Basel III Capital requirements, a capital conservation buffer of 0.625% became effective beginning on January 1, 2016. The capital conservation buffer is 1.25% as of June 30, 2017 and the Bank met that requirement with a buffer of 8.22%. The capital conservation buffer will be gradually increased through January 1, 2019 to 2.50%. Banks will be required to maintain levels that meet the required minimum plus the capital conservation buffer in order to make distributions, such as dividends, or discretionary bonus payments.

Table Of Contents  10

NOTE 5 INVESTMENT SECURITIES:

The amortized cost and estimated fair value of securities (all available-for-sale (“AFS”)) are as follows:

			Gross		Gross		Approximate
	Amortized		Unrealized		Unrealized		Fair
(Dollars are in thousands)	Cost		Gains		Losses		Value
June 30, 2017
U.S. Government Agencies	$	26,789	$	182	$	126	$	26,845
Taxable municipals		2,325		14		24		2,315
Corporate bonds		4,860		230		—		5,090
Mortgage backed securities		41,905		43		403		41,545
Total Securities AFS	$	75,879	$	469	$	553	$	75,795
December 31, 2016
U.S. Government Agencies	$	24,821	$	80	$	269	$	24,632
Taxable municipals		2,340		2		50		2,292
Corporate bonds		3,600		149		—		3,749
Mortgage backed securities		39,941		25		628		39,338
Total Securities AFS	$	70,702	$	256	$	947	$	70,011

The following table details unrealized losses and related fair values in the available-for-sale portfolio. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2017 and December 31, 2016.

	Less than 12 Months				12 Months or More				Total
(Dollars are in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
June 30, 2017
U.S. Government Agencies	$	9,829	$	117	$	1,496	$	9	$	11,325	$	126
Taxable municipals		779		24		—		—		779		24
Corporate bonds		—		—		—		—		—		—
Mtg. backed securities		26,676		278		7,031		125		33,707		403
Total Securities AFS	$	37,284	$	419	$	8,527	$	134	$	45,811	$	553
December 31, 2016
U.S. Government Agencies	$	12,081	$	250	$	2,449	$	19	$	14,530	$	269
Taxable municipals		1,561		50		—		—		1,561		50
Corporate bonds		500		—		—		—		500		—
Mtg. backed securities		28,680		543		4,655		85		33,335		628
Total Securities AFS	$	42,822	$	843	$	7,104	$	104	$	49,926	$	947

Table Of Contents  11

At June 30, 2017, the available-for-sale portfolio included 99 investments for which the fair market value was less than amortized cost. At December 31, 2016, the available-for-sale portfolio included 107 investments for which the fair market value was less than amortized cost. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial conditions and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Based on the Company’s analysis, the Company concluded that no securities had an other-than-temporary impairment.

Investment securities with a carrying value of $10.7 million and $11.3 million at June 30, 2017 and December 31, 2016, respectively, were pledged as collateral to secure public deposits and for other purposes required by law.

There were no sales of investment securities during the six months ended June 30, 2017. Gross proceeds on the sale of investment securities were $24.8 million for the six months ended June 30, 2016. Gross realized gains and losses pertaining to the sale of investment securities available for sale are detailed as follows:

	For the three months ended June 30,					For the six months ended June 30,
(Dollars are in thousands)	2017		2016			2017		2016
Gross gains realized	$	—	$	156		$	—	$	275
Gross losses realized		—		(21	)		—		(35	)
Net realized gains	$	—	$	135		$	—	$	240

The amortized cost and fair value of investment securities at June 30, 2017, by contractual maturity, are shown in the following schedule. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

					Weighted
(Dollars are in thousands)	Amortized		Fair		Average
Securities Available-for-Sale	Cost		Value		Yield
Due in one year or less	$	—	$	—		—	%
Due after one year through five years		4,101		4,099		2.00	%
Due after five years through ten years		16,608		16,788		2.86	%
Due after ten years		55,170		54,908		2.09	%
Total	$	75,879	$	75,795		2.25	%

The Bank, as a member of the Federal Reserve Bank and the Federal Home Loan Bank, is required to hold stock in each. The Bank also owns stock in CBB Financial Corp., which is a correspondent of the Bank. These equity securities are restricted from trading and are recorded at a cost of $2.6 million and $2.8 million as of June 30, 2017 and December 31, 2016, respectively.

Table Of Contents  12

NOTE 6 LOANS:

Loans receivable outstanding are summarized as follows:

(Dollars are in thousands)	June 30, 2017		December 31, 2016
Real estate secured:
Commercial	$	109,467	$	103,331
Construction and land development		29,081		25,755
Residential 1-4 family		253,068		249,700
Multifamily		14,587		12,582
Farmland		24,303		24,948
Total real estate loans		430,506		416,316
Commercial		31,698		26,955
Agriculture		3,683		3,164
Consumer installment loans		22,173		22,188
All other loans		704		6
Total loans	$	488,764	$	468,629

Loans receivable on nonaccrual status are summarized as follows:

(Dollars are in thousands)	June 30, 2017		December 31, 2016
Real estate secured:
Commercial	$	2,084	$	3,403
Construction and land development		289		319
Residential 1-4 family		7,200		8,355
Multifamily		158		166
Farmland		838		1,003
Total real estate loans		10,569		13,246
Agriculture		3		83
Consumer installment loans		36		76
Total loans receivable on nonaccrual status	$	10,608	$	13,405

Total interest income not recognized on nonaccrual loans for the six months ended June 30, 2017 and 2016 was $280 thousand and $158 thousand, respectively.

The following table presents information concerning the Company’s investment in loans considered impaired as of June 30, 2017 and December 31, 2016:

Table Of Contents  13

As of June 30, 2017 (Dollars are in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial	$	3,017	$	3,108	$	—
Construction and land development		—		—		—
Residential 1-4 family		3,852		4,152		—
Multifamily		289		330		—
Farmland		884		1,261		—
Commercial		—		—		—
Agriculture		18		18		—
Consumer installment loans		9		9		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		709		800		99
Construction and land development		215		454		81
Residential 1-4 family		569		596		108
Multifamily		1,331		1,399		216
Farmland		902		918		328
Commercial		497		497		182
Agriculture		—		—		—
Consumer installment loans		—		—		—
All other loans		—		—		—
Total	$	12,292	$	13,542	$	1,014

As of December 31, 2016 (Dollars are in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial	$	3,636	$	4,055	$	—
Construction and land development		5		5		—
Residential 1-4 family		3,861		4,182		—
Multifamily		301		342		—
Farmland		3,895		4,601		—
Commercial		—		—		—
Agriculture		19		19		—
Consumer installment loans		26		43		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		1,191		1,270		65
Construction and land development		240		469		106
Residential 1-4 family		555		565		56
Multifamily		—		—		—
Farmland		591		602		299
Commercial		67		67		18
Agriculture		5		5		5
Consumer installment loans		9		9		3
All other loans		—		—		—
Total	$	14,401	$	16,234	$	552

Table Of Contents  14

The following table presents information concerning the Company’s average impaired loans and interest recognized on those impaired loans, for the periods indicated:

	Six Months Ended
	June 30, 2017				June 30, 2016
(Dollars are in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	3,136	$	64	$	4,451	$	73
Construction and land development		3		—		116		—
Residential 1-4 family		3,831		102		3,758		103
Multifamily		440		11		282		11
Farmland		2,884		26		4,162		102
Commercial		—		—		—		—
Agriculture		19		1		33		2
Consumer installment loans		15		—		32		2
All other loans		—		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		837		6		1,522		—
Construction and land development		228		—		277		—
Residential 1-4 family		657		9		1,037		11
Multifamily		444		32		133		4
Farmland		694		16		595		12
Commercial		210		16		72		2
Agriculture		2		—		139		(2	)
Consumer installment loans		3		—		22		—
All other loans		—		—		—		—
Total	$	13,403	$	283	$	16,631	$	320

Table Of Contents  15

	Three Months Ended
	June 30, 2017					June 30, 2016
(Dollars are in thousands)	Average  Recorded  Investment		Interest  Income  Recognized			Average  Recorded  Investment		Interest  Income  Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	2,886	$	39		$	4,571	$	38
Construction and land development		2		—			169		1
Residential 1-4 family		3,817		53			4,118		52
Multifamily		510		(1	)		208		9
Farmland		2,378		141			4,252		51
Commercial		—		—			—		—
Agriculture		19		1			31		1
Consumer installment loans		9		—			43		1
All other loans		—		—			—		—
With an allowance recorded:
Real estate secured:
Commercial		660		4			1,031		—
Construction and land development		222		—			271		—
Residential 1-4 family		708		—			595		6
Multifamily		666		32			199		2
Farmland		746		11			512		6
Commercial		282		16			73		1
Agriculture		1		—			200		—
Consumer installment loans		—		—			11		—
All other loans		—		—			—		—
Total	$	12,906	$	296		$	16,284	$	168

An age analysis of past due loans receivable is below. At June 30, 2017 and December 31, 2016, there were no loans over 90 days past due that were accruing.

Table Of Contents  16

As of June 30, 2017 (Dollars are in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans
Real estate secured:
Commercial	$	3,251	$	245	$	—	$	3,496	$	105,971	$	109,467
Construction and land development		367		—		43		410		28,671		29,081
Residential 1-4 family		2,335		1,151		1,483		4,969		248,099		253,068
Multifamily		98		—		—		98		14,489		14,587
Farmland		288		256		308		852		23,451		24,303
Total real estate loans		6,339		1,652		1,834		9,825		420,681		430,506
Commercial		4		—		—		4		31,694		31,698
Agriculture		—		—		—		—		3,683		3,683
Consumer installment Loans		116		10		7		133		22,040		22,173
All other loans		—		—		—		—		704		704
Total loans	$	6,459	$	1,662	$	1,841	$	9,962	$	478,802	$	488,764

As of December 31, 2016  (Dollars are in thousands)	Loans  30-59  Days  Past  Due		Loans  60-89  Days  Past  Due		Loans  90 or  More  Days  Past  Due		Total  Past  Due  Loans		Current  Loans		Total  Loans
Real estate secured:
Commercial	$	1,676	$	307	$	1,083	$	3,066	$	100,265	$	103,331
Construction and land development		103		17		44		164		25,591		25,755
Residential 1-4 family		4,237		1,547		2,233		8,017		241,683		249,700
Multifamily		1,367		—		—		1,367		11,215		12,582
Farmland		2,987		—		—		2,987		21,961		24,948
Total real estate loans		10,370		1,871		3,360		15,601		400,715		416,316
Commercial		20		—		—		20		26,935		26,955
Agriculture		19		—		78		97		3,067		3,164
Consumer installment Loans		110		15		36		161		22,027		22,188
All other loans		—		—		—		—		6		6
Total loans	$	10,519	$	1,886	$	3,474	$	15,879	$	452,750	$	468,629

The Company categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans receivable as to credit risk. The Company uses the following definitions for risk ratings:

Table Of Contents  17

Pass - Loans in this category are considered to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt and other factors.

Special Mention - Loans in this category are currently protected but are potentially weak, including adverse trends in borrower’s operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances.  Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s credit position at some future date.

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

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

Based on the most recent analysis performed, the risk category of loans receivable was as follows:

As of June 30, 2017 (Dollars are in thousands)	Pass		Special Mention		Substandard		Total
Real estate secured:
Commercial	$	100,308	$	6,444	$	2,715	$	109,467
Construction and land development		27,813		980		288		29,081
Residential 1-4 family		242,884		1,994		8,190		253,068
Multifamily		12,902		—		1,685		14,587
Farmland		20,282		2,256		1,765		24,303
Total real estate loans		404,189		11,674		14,643		430,506
Commercial		30,942		260		496		31,698
Agriculture		3,652		28		3		3,683
Consumer installment loans		22,125		3		45		22,173
All other loans		704		—		—		704
Total	$	461,612	$	11,965	$	15,187	$	488,764
As of December 31, 2016 (Dollars are in thousands)		Pass		Special Mention		Substandard		Total
Real estate secured:
Commercial	$	92,562	$	6,922	$	3,847	$	103,331
Construction and land development		23,905		1,531		319		25,755
Residential 1-4 family		238,400		2,117		9,183		249,700
Multifamily		10,848		1,367		367		12,582
Farmland		19,070		1,545		4,333		24,948
Total real estate loans		384,785		13,482		18,049		416,316
Commercial		26,197		691		67		26,955
Agriculture		3,076		—		88		3,164
Consumer installment loans		22,086		—		102		22,188
All other loans		6		—		—		6
Total	$	436,150	$	14,173		18,306	$	468,629

Table Of Contents  18

NOTE 7   ALLOWANCE FOR LOAN LOSSES:

The following table details activity in the allowance for loan losses by portfolio segment for the period ended June 30, 2017. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

As of June 30, 2017 (Dollars are in thousands)	Beginning Balance		Charge Offs			Recoveries		Provisions			Ending Balance
Real estate secured:
Commercial	$	1,625	$	(81	)	$	190	$	(173	)	$	1,561
Construction and land development		346		—			—		(42	)		304
Residential 1-4 family		2,376		(267	)		33		138			2,280
Multifamily		241		—			—		221			462
Farmland		428		—			356		(249	)		535
Total real estate loans		5,016		(348	)		579		(105	)		5,142
Commercial		163		(11	)		130		109			391
Agriculture		31		—			3		(9	)		25
Consumer installment loans		123		(133	)		15		160			165
All other loans		—		—			—		5			5
Unallocated		739		—			—		(160	)		579
Total	$	6,072	$	(492	)	$	727	$	—		$	6,307

	Allowance for Loan Losses						Recorded Investment in Loans
As of June 30, 2017 (Dollars are in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Real estate secured:
Commercial	$	99	$	1,462	$	1,561	$	3,726	$	105,741	$	109,467
Construction and land development		81		223		304		215		28,866		29,081
Residential 1-4 family		108		2,172		2,280		4,421		248,647		253,068
Multifamily		216		246		462		1,620		12,967		14,587
Farmland		328		207		535		1,786		22,517		24,303
Total real estate loans		832		4,310		5,142		11,768		418,738		430,506
Commercial		182		209		391		497		31,201		31,698
Agriculture		—		25		25		18		3,665		3,683
Consumer installment loans		—		165		165		9		22,164		22,173
All other loans		—		5		5		—		704		704
Unallocated		—		579		579		—		—		—
Total	$	1,014	$	5,293	$	6,307	$	12,292	$	476,472	$	488,764

Table Of Contents  19

The following table details activity in the allowance for loan losses by portfolio segment for the period ended December 31, 2016. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

As of December 31, 2016 (Dollars are in thousands)	Beginning Balance		Charge Offs			Recoveries		Provisions			Ending Balance
Real estate secured:
Commercial	$	2,384	$	(557	)	$	220	$	(422	)	$	1,625
Construction and land development		332		(5	)		26		(7	)		346
Residential 1-4 family		2,437		(720	)		87		572			2,376
Multifamily		232		(18	)		—		27			241
Farmland		675		(2	)		103		(348	)		428
Total real estate loans		6,060		(1,302	)		436		(178	)		5,016
Commercial		266		(65	)		62		(100	)		163
Agriculture		124		—			7		(100	)		31
Consumer installment loans		128		(83	)		24		54			123
All other loans		1		—			—		(1	)		—
Unallocated		914		—			—		(175	)		739
Total	$	7,493	$	(1,450	)	$	529	$	(500	)	$	6,072

	Allowance for Loan Losses						Recorded Investment in Loans
As of December 31, 2016 (Dollars are in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Real estate secured:
Commercial	$	65	$	1,560	$	1,625	$	4,827	$	98,504	$	103,331
Construction and land development		106		240		346		245		25,510		25,755
Residential 1-4 family		56		2,320		2,376		4,416		245,284		249,700
Multifamily		—		241		241		301		12,281		12,582
Farmland		299		129		428		4,486		20,462		24,948
Total real estate loans		526		4,490		5,016		14,275		402,041		416,316
Commercial		18		145		163		67		26,888		26,955
Agriculture		5		26		31		24		3,140		3,164
Consumer installment loans		3		120		123		35		22,153		22,188
All other loans		—		—		—		—		6		6
Unallocated		—		739		739		—		—		—
Total	$	552	$	5,520		6,072	$	14,401	$	454,228	$	468,629

Table Of Contents  20

In determining the amount of our allowance, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions, as well as the requirements of the written agreement and other regulatory input. If our assumptions prove to be incorrect, our current allowance may not be sufficient to cover future loan losses and we may experience significant increases to our provision.

NOTE 8   TROUBLED DEBT RESTRUCTURINGS:

At June 30, 2017 there were $7.4 million in loans that are classified as troubled debt restructurings compared to $9.6 million at December 31, 2016. The following table presents information related to loans modified as troubled debt restructurings during the six and three months ended June 30, 2017 and 2016.

	For the six months ended June 30, 2017						For the six months ended June 30, 2016
Troubled Debt Restructurings (Dollars are in thousands)	# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment
Real estate secured:
Commercial		—	$	—	$	—		1	$	341	$	339
Construction and land Development		—		—		—		—		—		—
Residential 1-4 family		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—
Farmland		—		—		—		1		291		291
Total real estate loans		—		—		—		2		632		630
Commercial		1		443		443		—		—		—
Agriculture		—		—		—		—		—		—
Consumer installment loans		—		—		—		—		—		—
All other loans		—		—		—		—		—		—
Total		1	$	443	$	443		2	$	632	$	630

	For the three months ended June 30, 2017						For the three months ended June 30, 2016
Troubled Debt Restructurings (Dollars are in thousands)	# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment
Real estate secured:
Commercial		—	$	—	$	—		—	$	—	$	—
Construction and land Development		—		—		—		—		—		—
Residential 1-4 family		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—
Farmland		—		—		—		1		291		291
Total real estate loans		—		—		—		1		291		291
Commercial		1		443		443		—		—		—
Agriculture		—		—		—		—		—		—
Consumer installment loans		—		—		—		—		—		—
All other loans		—		—		—		—		—		—
Total		1	$	443	$	443		1	$	291	$	291

Table Of Contents  21

During the six and three months ended June 30, 2017, the Company modified the terms of one loan for which the modification was considered to be a troubled debt restructuring. The interest rate was not modified on this loan; however, the payment terms and maturity date were changed.

During the six months ended June 30, 2016, the Company modified the terms of two loans for which the modification was considered to be a troubled debt restructuring. On one loan, the interest rate and maturity date were not modified; however, the payment terms were changed. On one loan, the interest rate was lowered and the payment terms and maturity date were changed.

During the three months ended June 30, 2016, the Company modified the terms of one loan for which the modification was considered to be a troubled debt restructuring. The interest rate was lowered and the payment terms and maturity date were changed.

No loans modified as troubled debt restructurings defaulted during the six months ended June 30, 2017. There was one commercial real estate loan with a recorded investment of $308 thousand that had been modified as a troubled debt restructuring that defaulted during the six months ended June 30, 2016, which was within twelve months of the loan’s modification date.

There were no loans modified as troubled debt restructurings that defaulted during the three months ended June 30, 2017 and 2016, which were within twelve months of their modification date. Generally, a troubled debt restructuring is considered to be in default once it becomes 90 days or more past due following a modification.

In determination of the allowance for loan losses, management considers troubled debt restructurings and subsequent defaults in these restructurings in its estimate. The Company evaluates all troubled debt restructurings for possible further impairment. As a result, the allowance may be increased, adjustments may be made in the allocation of the allowance, or charge-offs may be taken to further writedown the carrying value of the loan.

NOTE 9   OTHER REAL ESTATE OWNED:

The following table summarizes the activity in other real estate owned for the six months ended June 30, 2017 and the year ended December 31, 2016:

(Dollars are in thousands)	June 30, 2017			December 31, 2016
Balance, beginning of period	$	10,655		$	12,398
Additions		2,071			4,577
Purchases of/improvements to other real estate owned		—			48
Transfers of premises and equipment to other real estate owned		125			—
Transfers of other real estate owned to premises and equipment		—			(125	)
Proceeds from sales of other real estate owned		(3,961	)		(4,232	)
Loans made to finance sales of other real estate owned		(1,092	)		(818	)
Adjustment of carrying value		(590	)		(1,414	)
Deferred gain from sales		44			—
Gain (loss) from sales		(4	)		221
Balance, end of period	$	7,248		$	10,655

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NOTE 10   FAIR VALUES:

The financial reporting standard, “Fair Value Measurements and Disclosures” provides a framework for measuring fair value under generally accepted accounting principles and requires disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis (for example, available-for-sale investment securities) or on a nonrecurring basis (for example, impaired loans and other real estate acquired through foreclosure).

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair Value Measurements and Disclosures also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an exchange market, as well as U. S. Treasury, other U. S. Government and agency mortgage-backed debt securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain derivative contracts and impaired loans.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. For example, this category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, and highly structured or long-term derivative contracts.

Investment Securities Available-for-Sale – Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. The Company’s available-for-sale securities, totaling $75.8 million and $70.0 million at June 30, 2017 and December 31, 2016, respectively, are the only assets whose fair values are measured on a recurring basis using Level 2 inputs from an independent pricing service.

Loans - The Company does not record loans at fair value on a recurring basis. Real estate serves as collateral on a substantial majority of the Company’s loans. When a loan is considered impaired a specific reserve may be established. Loans which are deemed to be impaired and require a reserve are primarily valued on a non-recurring basis at the fair values of the underlying real estate collateral. Such fair values are obtained using independent appraisals, which management evaluates and determines whether or not the fair value of the collateral is further impaired below the appraised value and there is no observable market price, or whether or not an appraised value does not include estimated costs of disposition. The Company records impaired loans as nonrecurring Level 3 assets. The aggregate carrying amounts of impaired loans carried at fair value were $11.3 million and $13.8 million at June 30, 2017 and December 31, 2016, respectively.

Foreclosed Assets – Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets.  Foreclosed assets are carried at the lower of the carrying value or fair value.  Fair value is based upon independent observable market prices or appraised values of the collateral with a third party less an estimate of disposition costs, which the Company considers to be level 2 inputs. When the appraised value is not available, management determines the fair value of the collateral if further impaired below the appraised value and there is no observable market price, or an appraised value does not include estimated costs of disposition and management must make an estimate, the Company records the foreclosed asset as nonrecurring Level 3. The aggregate carrying amounts of foreclosed assets were $7.2 million and $10.7 million at June 30, 2017 and December 31, 2016, respectively.

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Assets and liabilities measured at fair value are as follows as of June 30, 2017 (for purpose of this table the impaired loans are shown net of the related allowance):

(Dollars are in thousands)	Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis)
Available-for-sale investments
U.S. Government Agencies	$	—	$	26,845	$	—
Taxable municipals		—		2,315		—
Corporate bonds		—		5,090		—
Mortgage backed securities		—		41,545		—
(On a non-recurring basis)
Other real estate owned		—		—		7,248
Impaired loans:
Real estate secured:
Commercial		—		—		3,627
Construction and land development		—		—		134
Residential 1-4 family		—		—		4,313
Multifamily		—		—		1,404
Farmland		—		—		1,458
Commercial		—		—		315
Agriculture		—		—		18
Consumer installment loans		—		—		9
All other loans		—		—		—
Total	$	—	$	75,795	$	18,526

Assets and liabilities measured at fair value are as follows as of December 31, 2016 (for purpose of this table the impaired loans are shown net of the related allowance): 

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(Dollars are in thousands)	Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis)
Available-for-sale investments
U.S. Government Agencies	$	—	$	24,632	$	—
Taxable municipals		—		2,292		—
Corporate bonds		—		3,749		—
Mortgage backed securities		—		39,338		—
(On a non-recurring basis)
Other real estate owned		—		—		10,655
Impaired loans:
Real estate secured:
Commercial		—		—		4,762
Construction and land development		—		—		139
Residential 1-4 family		—		—		4,360
Multifamily		—		—		301
Farmland		—		—		4,187
Commercial		—		—		49
Agriculture		—		—		19
Consumer installment loans		—		—		32
All other loans		—		—		—
Total	$	—	$	70,011	$	24,504

For Level 3 assets measured at fair value on a recurring or non-recurring basis as of June 30, 2017 and December 31, 2016, the significant unobservable inputs used in the fair value measurements were as follows:

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(Dollars in thousands)	Fair Value at June 30, 2017		Fair Value at December 31, 2016		Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired Loans	$	11,278	$	13,849	Appraised Value/Discounted Cash Flows/Market Value of Note	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0 – 18%
Other Real Estate Owned	$	7,248	$	10,655	Appraised Value/Comparable Sales/Other Estimates from Independent Sources	Discounts to reflect current market conditions and estimated costs to sell	0 – 18%

Fair Value of Financial Instruments

Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another financial instrument.

The following summary presents the methodologies and assumptions used to estimate the fair value of the Company’s financial instruments presented below. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of June 30, 2017 and December 31, 2016. This table excludes financial instruments for which the carrying amount approximates fair value. The carrying value of cash and due from banks, federal funds sold, interest-bearing deposits, deposits with no stated maturities, trust preferred securities and accrued interest approximates fair value. The remaining financial instruments were valued based on the present value of estimated future cash flows, discounted at various rates in effect for similar instruments as of June 30, 2017 and December 31, 2016.

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					Fair Value Measurements
(Dollars are in thousands)	Carrying Amount		Fair Value		Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
June 30, 2017
Financial Instruments – Assets
Net Loans	$	482,457	$	485,235	$	—	$	473,957	$	11,278
Financial Instruments – Liabilities
Time Deposits		267,596		267,293		—		267,293		—
FHLB Advances		8,158		8,356		—		8,356		—
December 31, 2016
Financial Instruments – Assets
Net Loans	$	462,557	$	467,707	$	—	$	453,858	$	13,849
Financial Instruments – Liabilities
Time Deposits		247,819		247,258		—		247,258		—
FHLB Advances		13,758		13,993		—		13,993		—

NOTE 11 SALE AND LEASEBACK TRANSACTIONS:

On May 31, 2017 the Bank, the wholly-owned subsidiary of the Company, sold four (4) of its properties, one each located in Abingdon, Bristol, Gate City and Castlewood, Virginia to NPB Good Steward Properties, LLC (“Good Steward”) for a total purchase price of $6.2 million. Good Steward is not an affiliate of the Company or the Bank. After selling expenses of $192 thousand, the net proceeds on the transactions were $6.0 million. The sales prices for the properties were based on outside appraisals obtained by the Bank. The Bank provided $4.9 million of financing to Good Steward for this transaction for a term of 10 years.

In connection with the sale of the four properties, the Bank on May 31, 2017 entered into commercial lease agreements with Good Steward for the properties (the “Leases”), which will allow the Bank to continue to service customers from these locations. The Leases, which commenced on June 1, 2017, provide the Bank with use of the properties for an initial term of fifteen (15) years.  Base rent payments for years 1 through 5 of the Leases are approximately $417 thousand a year.  The base rent payments will increase by 8% for years 6 thru 10 of the Leases and then by another 8% for years 11 thru 15 of the Leases.  The Bank has the option to renew the Leases five (5) times and each renewal would be for a term of five (5) years.  The base rent for the renewals would be negotiated at the time the renewal option is exercised by the Bank. While the cash lease payments are currently $417 thousand a year, the Company is required to straight-line the expense over the initial term of fifteen (15) years. As a result, the annual lease expense will be approximately $451 thousand.

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In anticipation of this transaction the Company adopted ASU No. 2016-02 Leases (Topic 842) early. This ASU revised certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. As a result of this transaction the Company recognized right-to-use assets – operating leases of approximately $5.3 million, along with corresponding lease liabilities of approximately $5.3 million. The $5.3 million was determined by calculating the present value of the annual cash lease payments using a discount rate of 3.25%. The 3.25% discount rate was determined to be our fifteen (15) year incremental borrowing rate as of May 31, 2017.

As a result of the sale and the determination that the corresponding leases were operating leases, the Company recognized a gain of $2.6 million on the sale and leaseback transactions. The Bank and its parent, New Peoples Bankshares, Inc. and affiliates have no relationship with Good Steward other than those discussed above.

The Company’s operating lease cost for the three and six months ended June 30, 2017 as a result of the transactions discussed above was approximately $38 thousand. All other operating leases the Company has were evaluated and determined that they are immaterial to the financial statements.

NOTE 12 RECENT ACCOUNTING DEVELOPMENTS:

The following is a summary of recent authoritative announcements:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In August 2015, the FASB deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers. As a result of the deferral the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2016, the FASB amended the Financial Instruments topic of the Accounting Standards Codification (“ASC”), to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect these amendments to have a material effect on its financial statements.

In February 2016, the FASB amended the Leases topic of the ASC to revise certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. As discussed in Note 11, the Company early adopted ASU No. 2016-02 Leases (Topic 842).

In March 2016, the FASB amended the Revenue from Contracts with Customers topic of the ASC to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

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In June 2016, the FASB issued guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. The amendments will be effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted for all organizations for periods beginning after December 15, 2018. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.

In December 2016, the FASB issued technical corrections and improvements to the Revenue from Contracts with Customers Topic. These corrections make a limited number of revisions to several pieces of the revenue recognition standard issued in 2014. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2017, the FASB updated the Accounting Changes and Error Corrections and the Investments—Equity Method and Joint Ventures Topics of the Accounting Standards Codification. The ASU incorporates into the Accounting Standards Codification recent SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. The ASU was effective upon issuance. The Company is currently evaluating the impact on additional disclosure requirements as each of the standards is adopted, however it does not expect these amendments to have a material effect on its financial position, results of operations or cash flows.

In February 2017, the FASB amended the Other Income Topic of the ASC to clarify the scope of the guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. The amendments conform the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

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

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Caution About Forward Looking Statements

We make forward looking statements in this quarterly report that are subject to risks and uncertainties. These forward looking statements include statements regarding our profitability, liquidity, allowance for loan losses, interest rate sensitivity, market risk, business strategy, and financial and other goals. The words “believes,” “expects,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward looking statements.

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

Because of these uncertainties, our actual future results may be materially different from the results indicated by these forward looking statements. In addition, our past results of operations do not necessarily indicate our future results.

Critical Accounting Policies

For discussion of our significant accounting policies see our Annual Report on Form 10-K for the year ended December 31, 2016. Certain critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements. Our most critical accounting policies relate to our provision for loan losses and the calculation of our deferred tax asset and related valuation allowance.

The provision for loan losses reflects the estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our borrowers were to further deteriorate, resulting in an impairment of their ability to make payments, our estimates would be updated, and additional provisions could be required.

Our deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. If all or a portion of the net deferred tax asset is determined to be unlikely to be realized in the foreseeable future, a valuation allowance is established to reduce the net deferred tax asset to the amount that is more likely than not to be realized. For further discussion of the deferred tax asset and valuation allowance, we refer you to the section on “Deferred Tax Asset and Income Taxes” below.

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Overview

During 2017, Management’s focus has been on reducing nonperforming assets and growing the core business of the Bank. We believe significant progress is being made on both fronts. Although both initiatives result in higher expenses in the short term, longer-term we anticipate net income to be comparable to peer banks our size. Expenses to resolve problem assets remain high but our nonperforming assets have decreased to the lowest levels that they have been for many years. In the past couple of years, we have begun growing the Bank’s loans and deposits again, our core earnings base. We currently are fine tuning our processes to substantially improve efficiency in the core operations of the Bank and we are preparing the Company for the future trends of the financial industry. We anticipate both a reduction in expenses and an increase in revenues in the upcoming years.

The Company had net income for the quarter ended June 30, 2017 of $2.6 million, or basic net income per share of $0.11, as compared to a net income of $882 thousand, or basic net income per share of $0.04, for the quarter ended June 30, 2016. This is an improvement of $1.7 million, or 192.18%. The improvement was mainly driven by the $2.6 million gain recognized on the sale and leaseback transactions the Company completed during the second quarter of 2017. The Company had net income for the six months ended June 30, 2017 of $2.7 million, or basic net income per share of $0.12, as compared to the six months ending June 30, 2016 whereby the Company had net income of $1.6 million, or $0.07 basic net income per share. This is an improvement of $1.1 million, or $0.05 per share.

Quarter-to-Date Results

Highlights from the second quarter of 2017 include:

● $2.6 million gain recognized on the sale and leaseback transactions;

● A $12.3 million, or 2.58%, increase in loans, during the quarter;

● No provision for loan losses taken in the second quarter;

● A decrease of $3.0 million, or 40.19%, in other real estate owned during the quarter;

● An increase of $3.5 million, or 0.63%, in total deposits during the quarter;

● A decrease of $1.4 million, or 8.26%, in substandard loans during the quarter;

● A decrease of $1.7 million, or 14.99%, in total past due loans during the quarter; and,

● Strong net interest margin of 4.04% for the quarter.

In the second quarter of 2017, our net interest margin was 4.04%, as compared to 3.94% for the same period in 2016, an improvement of 10 basis points. The Company’s primary source of income, net interest income, increased $389 thousand, or 7.20%, to $5.8 million for the second quarter of 2017 from $5.4 million for the same period in 2016. Loan interest income increased $502 thousand, or 8.94%, from $5.6 million for the second quarter of 2016 to $6.1 million for the second quarter of 2017. Investment interest income increased $18 thousand to $381 thousand for the second quarter of 2017 as compared to $363 thousand for the second quarter of 2016. Interest expense increased $159 thousand, or 25.28%, from $629 thousand for the quarter ended June 30, 2016 to $788 thousand for the same quarter of 2016 as a result of increases in our interest rates on time deposits.

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No provision for loan losses was recorded during the second quarter of 2017 as compare to a negative provision of $500 thousand for the second quarter of 2016.

Noninterest income for the second quarter of 2017 was $4.4 million, which is an increase of $2.6 million when compared to the $1.8 million for the same period in 2016, or 151.51%. This increase was primarily due to the $2.6 million gain recognized on the sale and leaseback transactions completed during the quarter. We also experienced a $308 thousand increase in nonsufficient funds / overdraft fee income during the second quarter of 2017 when compared to the same period in 2016. The increase in nonsufficient funds / overdraft fee income was the result of the Optional Overdraft Protection Services we began offering to our deposit customers in June 2016. The increase in nonsufficient funds / overdraft fee income offsets the $135 thousand decrease in gains on the sale of investment securities and $89 thousand decrease in insurance and investment fees.

Noninterest expense increased $847 thousand, or 12.50%, to $7.6 million for the second quarter 2017 as compared to $6.8 million for the second quarter of 2016. Salaries and employee benefits were $3.3 million for the second quarter of 2017 and 2016, respectively.

Occupancy and equipment expenses increased $104 thousand from $1.1 million for the second of 2016 to $1.2 million for the second quarter of 2017. The increase in occupancy and equipment expenses was mainly due to the rollout of the ITMs during 2016 in our 19 offices and 4 other locations. The ITMs, a new, state-of-the-art technology which replaced the Bank’s ATMs, help provide additional convenience by providing teller services from 7 AM to 7 PM Monday thru Saturday. We anticipate the addition of the ITMs will create efficiencies going forward. Advertising expense decreased $48 thousand in the quarter-to-quarter comparison. Other real estate owned and repossessed asset expenses increased $664 thousand, or 746.07%, to $753 thousand for the second quarter of 2017 as compared to $89 thousand for the same period in 2016. Writedowns on other real estate owned were $415 thousand during the second quarter of 2017 as compared to no writedowns for the same period in 2016. During the second quarter of 2017 we had net losses on the sale of other real estate owned of $28 thousand as compared to net gains on the sale of other real estate owned of $170 thousand for the same period in 2016.

Our efficiency ratio, a non-GAAP measure which is defined as noninterest expense divided by the sum of net interest income plus noninterest income, was 74.74% for the second quarter of 2017 as compared to 94.70% for the same period in 2016. Included in this calculation are the other real estate owned write-downs and the gain resulting from the sale-leaseback transaction which significantly impact the ratio.

Year-to-Date Results

Highlights from the first six months of 2017 include:

● A reduction in nonaccrual loans of $2.8 million, or 20.87% during the first six months of 2017;

● Net recoveries of $235 thousand for the six-months ended June 30, 2017, which is an improvement of $579 thousand, or 168.31%, versus net charges offs of $344 thousand reported for the six-months ended June 30, 2016;

● $20.2 million, or 4.30% increase in loans during the first six months of 2017;

● A decrease of $3.5 million, or 40.19%, in other real estate owned during the first six months of 2017;

● The Bank is considered well-capitalized under regulatory standards, and,

● Book value per share of $2.14 as of June 30, 2017.

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Net interest income year-to-date for June 30, 2017 was $11.2 million, which was an increase of $303 thousand, or 2.79% when compared to the same period in 2016. Loan interest income for the first six months of 2017 increased $601 thousand, or 5.38%, from $11.2 million as of June 30, 2016 to $11.8 million as of June 30, 2017. Interest expense increased $252 thousand, or 20.00%, from $1.3 million for the first six months of 2016 to $1.5 million for the same period in 2017 as a result of increases in our interest rates on time deposits.

No provision for loan losses was recorded during the first half of 2017 as compared to the negative provision of $500 thousand that was recorded in the first half of 2016.

Year-to-date June 30, 2017, noninterest income increased to $6.1 million from $3.3 million in 2016. This was an increase of $2.8 million, or 83.38%. This increase was primarily due to the $2.6 million gain recognized on the sale and leaseback transactions completed during the second quarter of 2017. We also experienced a $661 thousand increase in nonsufficient funds / overdraft fee income during the first six months of 2017 when compared to the same period in 2016. The increase in nonsufficient funds / overdraft fee income was the result of the Optional Overdraft Protection Services we began offering to our deposit customers in June 2016. The increase in nonsufficient funds / overdraft fee income offsets the $240 thousand decrease in gains on the sale of investment securities and $195 thousand decrease in insurance and investment fees.

Noninterest expense increased $1.5 million, or 11.35%, for the first six months of 2017 from $13.1 million as of June 30, 2016 to $14.6 million as of June 30, 2017. The increase was largely due to expenses associated with other real estate owned and repossessed assets as well as the acquisition of the Interactive Teller Machines. For the six months ended June 30, 2017, salaries and employee benefits increased $173 thousand, or 2.64%, to $6.7 million as compared to $6.5 million for the same period in 2016. This increase was primarily the result of seasoned commercial bankers hired throughout 2016 as a part of our strategy to grow the loan portfolio, the opening of a loan production office in Jonesborough, Tennessee to expand our market presence in the Tri-Cities, Tennessee area, as well as staff added to operate the Interactive Teller Machines (“ITMs”) and provide digital banking services. Occupancy and equipment expenses increased $378 thousand from $1.9 million for the first six months of 2016 to $2.3 million for the first six months of 2017. The increase in occupancy and equipment expenses was mainly due to the rollout of the ITMs during 2016 in our 19 offices and 4 other locations. Advertising expense decreased $59 thousand compared to the first six months of 2016. Other real estate owned and repossessed asset expenses increased $801 thousand, or 317.86%, to $1.1 million for the first six months of 2017 as compared to $252 thousand for the same period in 2017. During the first six months of 2017 we had net losses on the sale of other real estate owned of $4 thousand as compared to a net gains on the sale of other real estate owned of $185 thousand for the same period in 2016. Writedowns on other real estate owned were $590 thousand for the first six months of 2017 as compared to writedowns of $24 thousand for the same period in 2016. These writedowns were primarily the result of price reductions and auctions that helped us in being successful in reducing our other real estate owned by $3.5 million during the first six months of 2017.

Balance Sheet

Total assets increased $25.5 million, or 4.01%, to $659.8 million at June 30, 2017 from $634.3 million at December 31, 2016. The main driver in the increase was an increase of $20.2 million in loans as a result of our efforts to conservatively grow the loan portfolio. $4.9 million of the $20.2 million increase was related to the loan provided in the financing of the sale and lease back transactions previously discussed in Note 11. Going forward, we anticipate total assets increasing due to our plan to conservatively and prudently grow the loan portfolio, as we accomplished in the first six months of 2017.

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Total investments increased $5.8 million, or 8.26%, to $75.8 million at June 30, 2017 from $70.0 million at December 31, 2016. Interest bearing deposits with banks increased $1.5 million, or 8.99%, in the first six months of 2017 to $18.3 million from $16.8 million at December 31, 2016.

Total loans increased $20.2 million, or 4.30%, to $488.8 million at June 30, 2017 as compared to $468.6 million at December 31, 2016. We believe the focus on developing new and existing lending relationships should continue the pace of increasing total loans as experienced in the first six months of 2017, subject to the economy and heightened competition in our markets.

As discussed in Note 11, “Sale and Leaseback Transactions,” the Company recognized right-to-use assets – operating leases of approximately $5.3 million, along with corresponding lease liabilities of approximately $5.3 million.

Total deposits increased $21.9 million, or 3.95%, from $554.4 million at December 31, 2016 to $576.3 million at June 30, 2017 largely from an increase in time deposits. Noninterest-bearing demand deposits increased 3.22%, or $4.9 million, from $151.9 million at December 31, 2016 to $156.8 million at June 30, 2017. We experienced a decrease of $7.7 million, or 19.09%, in interest-bearing demand deposits during the first six months of 2017. The main reason for the decrease was due to one relationship that moved its funding out of its interest-bearing demand deposit product into certificate of deposit time deposits. We have experienced a $4.9 million, or 4.30%, increase in savings deposits. Time deposits increased by $19.8 million during the first six months of 2017. As previously discussed part of this increase was due to one relationship moving its funding from an interest-bearing demand deposit product into certificate of deposit time deposits. Also we obtained an additional $11.6 million of certificate of deposits funding with one relationship during the first six months of 2017. Due to competitive pressures, rising interest rates, and our need for funding, we expect to see an uptick on the interest we pay on time deposits in 2017. Overall, we continue to maintain core deposits through attractive consumer and commercial deposit products and strong ties with our customer base and communities.

Total borrowings decreased to $8.2 million at June 30, 2017, a decrease of $5.6 million from the $13.8 million outstanding balance at December 31, 2016. The decrease in advances from the Federal Home Loan Bank was due to a $5.0 million borrowing that matured in March 2017 and $600 thousand in regularly scheduled principal payments on the other borrowings.

Total equity at June 30, 2017 was $50.0 million. That represents an increase of $3.1 million, or 6.60%, when compared to the December 31, 2016 balance of $46.9 million. Net income of $2.7 million and the $401 thousand decrease in other comprehensive loss as a result of a decrease in net unrealized loss in the investment portfolio during the six months ended June 30, 2017 were the drivers of the increase in equity.

Asset Quality

We continue to make significant progress in reducing the levels of non-performing assets. Though asset quality is improving, the level of nonperforming assets remains elevated as we continue to work through foreclosed properties that are held over from the Great Recession and address nonaccrual loans. The ratio of nonperforming assets to total assets decreased to 2.71% at June 30, 2017 as compared to 3.79% at December 31, 2016. Nonperforming assets, which include nonaccrual loans, other real estate owned and past due loans greater than 90 days still accruing interest, were $17.9 million at June 30, 2017 compared to $24.1 million at December 31, 2016. This is a decrease of $6.2 million, or 25.79%. The makeup of these assets is primarily loans secured by commercial real estate, residential mortgages and other real estate owned properties. We continue undertaking extensive and more aggressive measures to work through problem credits and liquidate foreclosed properties in an effort to accelerate a reduction of nonperforming assets. Our goal is to reduce the nonperforming assets while being mindful of the impact to earnings and capital; however, we may recognize some losses and reductions in the allowance for loan loss as we expedite the resolution of these problem assets. Loans rated substandard decreased $3.1 million, or 17.04%, to $15.2 million at June 30, 2017 from $18.3 million at December 31, 2016 and delinquencies decreased in the first six months of 2017 as total past due loans decreased to $10.0 million at June 30, 2017 from $15.9 million at December 31, 2016, a decrease of $5.9 million, or 37.26%.

Table Of Contents  34

Other real estate owned (“OREO”) decreased $3.5 million, or 31.98%, to $7.2 million at June 30, 2017 from $10.7 million at December 31, 2016. All properties are available for sale by commercial and residential realtors under the direction of our Special Assets division. During the first six months of 2017, we acquired $2.1 million in other real estate owned as a result of settlement of foreclosed loans, which was offset by sales of $5.1 million of our properties with losses of $4 thousand realized as a result of the sales. During the first six months of 2017, we were successful in liquidating several of our older properties and $2.1 million of OREO is under contract to sale as of early August 2017. In an effort to reduce our level of foreclosed properties, we have taken an aggressive approach toward liquidating properties by making pricing adjustments and holding auctions on several of our older properties. We expect to continue these efforts during 2017 which could result in additional losses, while reducing future carrying costs. We do have lease agreements on certain OREO properties which are generating rental income at market rates pending disposition. Rental income on OREO properties was $125 thousand for the first six months of 2017, an increase of $2 thousand, or 1.63%, when compared to the $123 thousand recognized in the first six months of 2016.

Our allowance for loan losses at June 30, 2017 was $6.3 million, or 1.29% of total loans as compared to $6.1 million, or 1.30% of total loans at December 31, 2016. Impaired loans decreased $2.1 million, or 14.64%, to $12.3 million with an estimated related allowance of $1.0 million for potential losses at June 30, 2017 as compared to $14.4 million in impaired loans with an estimated related allowance of $552 thousand at the end of 2016. No provision for loan losses was recorded during first six months of 2017 and a negative provision of $500 thousand was recorded during the first six months of 2016. In the first six months of 2017, net recoveries were $235 thousand, or 0.10% of average loans, as compared to $344 thousand, or 0.15% of average loans, in net charge offs for the same period of 2016. The allowance for loan losses is being maintained at a level that management deems appropriate to absorb any potential future losses and known impairments within the loan portfolio whether or not the losses are actually ever realized. We continue to adjust the allowance for loan loss model to best reflect the risks in the portfolio and the improvements made in our internal policies and procedures; however, future provisions may be deemed necessary.

Capital Ratios

The Company meets the eligibility criteria for a small bank holding company in the Federal Reserve Board’s Small Bank Holding Company Policy Statement issued in February 2015, and therefore, is no longer obligated to report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies.

At June 30, 2017, the Bank is considered well capitalized under the regulatory capital framework for prompt corrective action. The following ratios existed at June 30, 2017 for the Bank: Tier 1 leverage ratio of 9.86%, Tier 1 risk based capital ratio of 14.97%, Total risk based capital ratio of 16.22%, and Common Equity Tier 1 ratio of 14.97%. The ratios were as follows at December 31, 2016: Tier 1 leverage ratio of 9.93%, Tier 1 risk based capital ratio of 15.39%, Total risk based capital ratio of 16.64%, and Common Equity Tier 1 ratio of 15.39%.

The ratios mentioned above comply with the Federal Reserve rules to align with the Basel III Capital requirements effective January 1, 2015. As a result of these new rules the Company and Bank are now subject to a Common Equity Tier 1 ratio set out above.

Table Of Contents  35

Deferred Tax Asset and Income Taxes

Due to timing differences between book and tax treatment of several income and expense items, a net deferred tax asset of $5.1 million existed at June 30, 2017 as compared to a net deferred tax asset of $5.3 million at December 31, 2016. At June 30, 2017 we had a valuation allowance of $4.5 million as compared to a valuation allowance of $5.3 million at December 31, 2016. As of June 30, 2017, the Company had $18.4 million of net operating loss carryforwards which will expire in 2031 thru 2037. Management expects to utilize all of these carryforwards prior to expiration. Direct charge-offs contributed to a reduction of the tax asset and are permitted as tax deductions. In addition, writedowns on other real estate owned property are expensed for book purposes but are not deductible for tax purposes until disposition of the property. Goodwill expense also was realized for book purposes in 2011 but continues to only be tax deductible based on the statutory requirements; thus, creating a deferred tax asset. When, and if, taxable income increases in the future and during the net operating loss carryforward period, this valuation allowance may be reversed and used to decrease tax obligations in the future. Our income tax expense was computed at the normal corporate income tax rate of 34% of taxable income included in net income. We do not have significant nontaxable income or nondeductible expenses.

Capital Resources

Our total capital at the end of the second quarter 2017 was $50.0 million compared to $46.9 million at December 31, 2016. The increase was $3.1 million, or 6.60%. The Bank was considered well capitalized as of June 30, 2017, under the regulatory capital framework for prompt corrective action. New Peoples equity as a percentage of total assets was 7.58% at June 30, 2017 compared to 7.40% at December 31, 2016. The tangible book value per common share was $2.14 at June 30, 2017 compared to $2.01 at December 31, 2016.

Total assets increased during the first six months of 2017 and we anticipate asset levels to increase in the future due to an emphasis on growing the loan portfolio and the core deposit base of the Bank. Under current economic conditions, we believe it is prudent to continue to increase capital to support planned asset growth while being able to absorb potential losses that may occur if asset quality deteriorates further. Based upon projections, we believe our current capital levels will be sufficient to support the Bank’s planned asset growth.

No cash dividends have been paid historically and we do not anticipate paying a cash dividend in the foreseeable future as the Company continues to have a retained deficit. Earnings will continue to be retained to build capital and position the Company to pay a dividend to its shareholders as soon as practicable.

Liquidity

We closely monitor our liquidity and our liquid assets in the form of cash, due from banks, federal funds sold, and unpledged available for sale investments. Collectively, those balances were $102.1 million at June 30, 2017, an increase from $94.2 million at December 31, 2016. A surplus of short-term assets are maintained at levels management deems adequate to meet potential liquidity needs during 2017.

At June 30, 2017, all of our investments are classified as available-for-sale. These investments provide an additional source of liquidity in the amount of $65.1 million, which is net of the $10.7 million of securities pledged as collateral. Investment securities available for sale serve as a source of liquidity while yielding a higher return versus other short-term investment options, such as federal funds sold and overnight deposits with the Federal Reserve Bank. Total investments increased $5.8 million, or 8.26%, to $75.8 million at June 30, 2017 from $70.0 million at December 31, 2016. An $607 thousand increase in the fair market value of the investment portfolio during the first six months of 2017 resulted in a net unrealized loss of $84 thousand at June 30, 2017 compared to the net unrealized loss of $691 thousand at December 31, 2016.

Table Of Contents  36

Our loan to deposit ratio was 84.80% at June 30, 2017 and 84.52% at December 31, 2016. We anticipate this ratio to remain at or below 85% in the near future.

Available third-party sources of liquidity at June 30, 2017 include the following: a line of credit with the Federal Home Loan Bank of Atlanta, access to brokered certificates of deposit markets and internet certificates of deposit, and the discount window at the Federal Reserve Bank of Richmond. We also had the ability to borrow $10.0 million in unsecured federal funds as of June 30, 2017, which gives us an additional source of liquidity.

At June 30, 2017, we had borrowings from the Federal Home Loan Bank (“FHLB”) totaling $8.2 million as compared to $13.8 million at December 31, 2016. The decrease of $5.6 million was due to a $5.0 million borrowing that matured in March 2017 and $600 thousand in regularly scheduled principal payments on the other borrowings. None of the FHLB advances are overnight borrowings and therefore none of the advances is subject to daily interest rate changes. At June 30, 2017, $1.2 million of these borrowings had fixed interest rates with an average rate of 4.07%, and a maturity date in 2018. In June 2016 the Bank borrowed $2.0 million with a maturity date in the year 2019 and $5.0 million with a maturity date in the year 2021. Both borrowings have fixed interest rates and interest is payable monthly, with an interest rate of 0.99% on the $2.0 million borrowing and an interest rate of 1.38% on the $5.0 million borrowing.

We have used our line of credit with the FHLB to issue a letters of credit for $19.0 million to the Treasury Board of Virginia as collateral on public deposits. An additional $117.7 million was available on June 30, 2017 on the $142.8 million line of credit, which is secured by a blanket lien on our residential real estate loans.

We have access to the brokered deposits market. Currently we have $2.7 million in 10-year term time deposits comprised of $3 thousand incremental deposits which yield an interest rate of 4.10%. With the exception of Certificate of Deposit Registry Service (“CDARS”) time deposits, we have no other brokered deposits. As of June 30, 2017 we had no CDARS one way buys outstanding.

We are a member of an internet certificate of deposit network whereby we may purchase funds from other financial institutions at auction. We may invest funds through this network as well. Currently, we only intend to use this source of liquidity in a liquidity crisis event.

The Bank has access to additional liquidity through the Federal Reserve Bank discount window for overnight funding needs. We may collateralize this line with investment securities and loans at our discretion; however, we do not anticipate using this funding source except as a last resort.

With the on-balance sheet liquidity and other external sources of funding, we believe the Bank has adequate liquidity and capital resources to meet our requirements and needs for the foreseeable future. However, liquidity can be further affected by a number of factors such as counterparty willingness or ability to extend credit, regulatory actions and customer preferences, etc., some of which are beyond our control.

The bank holding company has $460 thousand in cash on deposit at the Bank as of June 30, 2017. These funds will be used to pay operating expenses and trust preferred interest payments. The Company is making quarterly interest payments on the trust preferred securities.

Table Of Contents  37

During the capital raise in 2012, common stock warrants were issued to investors. The warrants are immediately exercisable through December 2017 at a price of $1.75 per share. 1,842 warrants were exercised during the first six months of 2017 and the number of warrants outstanding at June 30, 2017 was 880,136. If these warrants are exercised, additional funds will be received by the Company, which provides potentially up to $1.5 million in additional liquidity and capital to the holding company.

Off Balance Sheet Items and Contractual Obligations

As discussed in Note 11, “Sale and Leaseback Transactions,” in connection with the sale of the four properties referenced in the Note by the Bank to Good Steward, the Bank on May 31, 2017 entered into commercial lease agreements to lease back the properties (the “Leases”) from Good Steward in order for the Bank to continue to service customers from these locations.  The Leases, which commenced on June 1, 2017, provide the Bank with use of the properties for an initial term of fifteen (15) years.  Base rent payments for years 1 through 5 of the Leases are approximately $417 thousand a year.  The base rent payments will increase by 8% for years 6 thru 10 of the Leases and then by another 8% for years 11 thru 15 of the Leases.  The Bank has the option to renew the Leases five (5) times and each renewal would be for a term of five (5) years.  The base rent for the renewals would be negotiated at the time the renewal option is exercised by the Bank.  While the cash lease payments are currently $417 thousand a year, the Company is required to straight-line the expense over the initial term of fifteen (15) years.  As a result, the annual lease expense will be approximately $451 thousand. 

Other than the lease transactions discussed above, there have been no other material changes during the quarter ended June 30, 2017 to the off-balance sheet items and the contractual obligations disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2016.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

Item 4. Controls and Procedures

We have carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer (our “CEO”) and our Executive Vice President, Chief Operating Officer and Interim Chief Financial Officer (our “CFO”), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were operating effectively in providing reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (b) such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended June 30, 2017 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Part II Other Information

Item 1. Legal Proceedings

In the course of operations, we may become a party to legal proceedings.

There are no pending or threatened legal proceedings to which the Company or any of its subsidiaries is a party or to which the property of the Company or any of its subsidiaries is subject that, in the opinion of management, may materially impact the financial condition of the Company, except for the following:

Table Of Contents  38

On June 24, 2015 New Peoples Bank filed an Amended Complaint in the Circuit Court of Russell County, Virginia against Arthur Wayne Bostic, Michael W. Bostic, Sr. and Jeffrey C. Bostic to enforce guarantees of loans made to Bostic Ford Sales, Inc. and seeking judgment against the guarantors for $1,427,709.76 with interest and legal fees. On July 24, 2015 Arthur Bostic filed a counterclaim against the Bank. On March 8, 2016 Michael Bostic, Sr., and Jeffrey Bostic filed their counterclaims against the Bank. The counterclaims assert lender liability theories of recovery and arise from the refusal of the Bank to continue to extend credit to Bostic Ford Sales, Inc. in 2008-2009. The defendants seek a judgment against the Bank of at least $3 million. On December 16, 2016 the Court entered an Order sustaining New Peoples’ demurrers to the counterclaims filed by all three defendants and providing the defendants an opportunity to amend their counterclaims. On December 23, 2016, the defendants filed amended counterclaims seeking a judgment against the Bank of at least $3 million. Following the entry of the Court’s Order on December 16, 2016, the parties began certain discussions to narrow the issues in dispute and facilitate settlement. Settlement discussions are still ongoing at the time of this filing.

Item 1A. Risk Factors

Not Applicable.

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

Not Applicable

Item 3. Defaults Upon Senior Securities

Not Applicable

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

Not Applicable

Item 6. Exhibits

See Index of Exhibits.

Table Of Contents  39

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.

	NEW PEOPLES BANKSHARES, INC.
	(Registrant)
By:	/s/ C. TODD ASBURY
	C. Todd Asbury
	President and Chief Executive Officer
Date:	August 14, 2017
By:	/s/ FRANK SEXTON, JR.
	Frank Sexton, Jr.
	Executive Vice President, Chief Operating Officer
	and Interim Chief Financial Officer
Date:	August 14, 2017

Table Of Contents  40

Index of Exhibits

No.	Description
2.1	Agreement and Plan of Share Exchange dated August 15, 2011 (incorporated by reference to Exhibit 2 to Form 8-K filed December 17, 2011).
3.1	Amended Articles of Incorporation of New Peoples Bankshares, Inc. (incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarterly period ended June 30, 2008 filed on August 11, 2008).
3.2	Bylaws of New Peoples Bankshares, Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K filed on April 15, 2004).
4.1	Specimen Common Stock Certificate of New Peoples Bankshares, Inc. (incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarterly period ended June 30, 2012 filed on August 14, 2012).
4.2	Form of Warrant to Purchase Shares of Common Stock (incorporated by reference to Exhibit 4.2 to Form 10-Q for the quarterly period ended June 30, 2012 filed on August 14, 2012).
4.3	Form of Rights Certificate (incorporated by reference to Exhibit 4.3 to Form 10-Q for the quarterly period ended June 30, 2012 filed on August 14, 2012).
10.1*	New Peoples Bank, Inc. 2001 Stock Option Plan (incorporated by reference to Exhibit 10.1 to Annual Report on Form 10-KSB for the fiscal year ended December 31, 2001).
10.2*	Form of Non-Employee Director Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to Form 8-K filed November 30, 2004).
10.3*	Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.3 to Form 8-K filed November 30, 2004).
10.4*	Salary Continuation Agreement dated December 18, 2002 between New Peoples Bank, Inc. and Frank Sexton, Jr. (incorporated by reference to Exhibit 10.6 to Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
10.5*	First Amendment dated June 30, 2003 to Salary Continuation Agreement between New Peoples Bank, Inc. and Frank Sexton, Jr. (incorporated by reference to Exhibit 10.7 to Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
10.6*	Letter Agreement, dated as of June 29, 2009, between the Company and Kenneth D. Hart (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2009).
10.7	Written Agreement, effective August 4, 2010, by and among New Peoples Bankshares, Inc., New Peoples Bank, Inc., the Federal Reserve Bank of Richmond and the State Corporation Commission Bureau of Financial Institutions (incorporated by reference to Exhibit 10.1 to Form 8-K filed August 6, 2010).
10.8	Engagement Letters of Scott & Stringfellow, LLC (incorporated by reference to Exhibit 10.8 to Form 10-Q for the quarterly period ended June 30, 2012 filed on August 14, 2012).
10.9	Convertible Note Payable, B. Scott White, dated June 27, 2012 (incorporated by reference to Exhibit 10.1 to Form 8-K filed June 29, 2012).
10.10	Convertible Note Payable, Harold Lynn Keene, dated June 27, 2012 (incorporated by reference to Exhibit 10.2 to Form 8-K filed June 29, 2012).
10.11*	Employment Agreement dated December 1, 2016 between New Peoples Bankshares, Inc., New Peoples Bank, Inc., and C. Todd Asbury (incorporated by reference to Exhibit 10.1 to Form 8-K filed December 2, 2016).
31.1	Certification by Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
31.2	Certification by Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
32	Certification by Chief Executive Officer and Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials for the Company’s 10-Q Report for the quarterly period ended June 30, 2017, formatted in XBRL:  (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements, tagged as blocks of text.

* Denotes management contract.

Table Of Contents  41

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, C. Todd Asbury, certify that:

1.     I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2017 of New Peoples Bankshares, 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: August 14, 2017	/s/ C. TODD ASBURY
	C. Todd Asbury
	President & Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Frank Sexton, Jr., certify that:

1.     I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2017 of New Peoples Bankshares, 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: August 14, 2017	/s/ FRANK SEXTON, JR.
	Frank Sexton, Jr.
	Executive Vice President, Chief Operating Officer
	& Interim Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

The undersigned, as the Chief Executive Officer and Chief Financial Officer, respectively, of New Peoples Bankshares, Inc., certify that, to the best of their knowledge and belief, the Quarterly Report on Form 10-Q for the period ended June 30, 2017 which accompanies this certification fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of New Peoples Bankshares, Inc. at the dates and for the periods indicated. The foregoing certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) and shall not be relied upon for any other purpose. The undersigned expressly disclaim any obligation to update the foregoing certification except as required by law.

Date: August 14, 2017	/s/ C. TODD ASBURY
	C. Todd Asbury
	President & Chief Executive Officer

Date: August 14, 2017	/s/ FRANK SEXTON, JR.
	Frank Sexton, Jr.
	Executive Vice President, Chief Operating Officer
	& Interim Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 11, 2017
Document And Entity Information
Entity Registrant Name	NEW PEOPLES BANKSHARES INC
Entity Central Index Key	0001163389
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		23,356,299
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2017

XML

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
INTEREST AND DIVIDEND INCOME
Loans including fees	$ 6,115	$ 5,613	$ 11,779	$ 11,178
Interest-earning deposits with banks	49	23	92	44
Investments	381	363	731	827
Dividends on equity securities (restricted)	34	32	66	64
Total Interest and Dividend Income	6,579	6,031	12,668	12,113
Deposits
Demand	12	13	25	24
Savings	46	37	93	78
Time deposits below $100,000	335	270	624	535
Time deposits above $100,000	214	158	403	312
FHLB advances	39	28	84	64
Federal funds purchased				2
Trust Preferred Securities	142	123	283	245
Total Interest Expense	788	629	1,512	1,260
NET INTEREST INCOME	5,791	5,402	11,156	10,853
PROVISION FOR LOAN LOSSES		(500)		(500)
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	5,791	5,902	11,156	11,353
NONINTEREST INCOME
Gain on sale and leaseback transactions	2,619		2,619
Service charges	888	584	1,721	1,072
Fees, commissions and other income	820	858	1,622	1,663
Insurance and investment fees	54	143	106	301
Net realized gains on sale of investment securities		135		240
Life insurance investment income	28	33	55	63
Total Noninterest Income	4,409	1,753	6,123	3,339
NONINTEREST EXPENSES
Salaries and employee benefits	3,341	3,339	6,722	6,549
Occupancy and equipment expense	1,134	1,068	2,261	1,921
Lease expense - operating leases	38		38
Advertising and public relations	81	129	174	233
Data processing and telecommunications	670	576	1,223	1,157
FDIC insurance premiums	110	136	212	270
Other real estate owned and repossessed vehicles, net	753	89	1,053	252
Other operating expenses	1,496	1,439	2,918	2,731
Total Noninterest Expenses	7,623	6,776	14,601	13,113
INCOME BEFORE INCOME TAXES	2,577	879	2,678	1,579
INCOME TAX BENEFIT		(3)	(14)	(1)
NET INCOME	$ 2,577	$ 882	$ 2,692	$ 1,580
Income Per Share
Basic	$ 0.11	$ 0.04	$ 0.12	$ 0.07
Fully Diluted	$ 0.11	$ 0.04	$ 0.12	$ 0.07
Average Weighted Shares of Common Stock
Basic	23,355,503	23,354,082	23,355,198	23,354,082
Fully Diluted	23,355,503	23,354,082	23,355,198	23,354,082

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Consolidated Statements Of Comprehensive Income Loss
NET INCOME	$ 2,577	$ 882	$ 2,692	$ 1,580
Investment Securities Activity
Unrealized gains arising during the period	518	694	607	1,479
Tax related to unrealized gains	(176)	(236)	(206)	(503)
Reclassification of realized gains during the period		(135)		(240)
Tax related to realized gains		46		82
TOTAL OTHER COMPREHENSIVE INCOME	342	369	401	818
TOTAL COMPREHENSIVE INCOME	$ 2,919	$ 1,251	$ 3,093	$ 2,398

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CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
ASSETS
Cash and due from banks	$ 18,637	$ 18,500
Interest-bearing deposits with banks	18,327	16,816
Federal funds sold	16	132
Total Cash and Cash Equivalents	36,980	35,448
Investment securities available-for-sale	75,795	70,011
Loans receivable	488,764	468,629
Allowance for loan losses	(6,307)	(6,072)
Net Loans	482,457	462,557
Bank premises and equipment, net	26,666	29,985
Equity securities (restricted)	2,570	2,802
Other real estate owned	7,248	10,655
Accrued interest receivable	1,780	1,848
Life insurance investments	12,329	12,274
Deferred taxes, net	5,079	5,285
Right-of-use assets - operating leases	5,321
Other assets	3,536	3,470
Total Assets	659,761	634,335
Demand deposits:
Noninterest bearing	156,802	151,914
Interest-bearing	32,537	40,213
Savings deposits	119,411	114,492
Time deposits	267,596	247,819
Total Deposits	576,346	554,438
Federal Home Loan Bank advances	8,158	13,758
Lease liabilities - operating leases	5,321
Accrued interest payable	359	331
Accrued expenses and other liabilities	3,068	2,395
Trust preferred securities	16,496	16,496
Total Liabilities	609,748	587,418
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock - $2.00 par value; 50,000,000 shares authorized; 23,356,299 and 23,354,457 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively	46,713	46,709
Common stock warrants	762	764
Additional paid-in-capital	13,966	13,965
Retained deficit	(11,373)	(14,065)
Accumulated other comprehensive loss	(55)	(456)
Total Stockholders' Equity	50,013	46,917
Total Liabilities and Stockholders' Equity	$ 659,761	$ 634,335

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CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 2.00	$ 2.00
Common stock, authorized	50,000,000	50,000,000
Common stock, issued	23,356,299	23,354,457
Common stock, outstanding	23,356,299

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Common Stock Warrants [Member]	Additional Paid-in Capital [Member]	Retained Deficit [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Balance at beginning at Dec. 31, 2015	$ 46,708	$ 764	$ 13,965	$ (15,023)	$ (327)	$ 46,087
Balance at beginning (in shares) at Dec. 31, 2015	23,354
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income				1,580		1,580
Other comprehensive income, net of tax					818	818
Balance at end at Jun. 30, 2016	$ 46,708	764	13,965	(13,443)	491	48,485
Balance at end (in shares) at Jun. 30, 2016	23,354
Balance at beginning at Dec. 31, 2016	$ 46,709	764	13,965	(14,065)	(456)	46,917
Balance at beginning (in shares) at Dec. 31, 2016	23,354
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income				2,692		2,692
Exercise of common stock warrants	$ 4	(2)	1			3
Exercise of common stock warrants (in shares)	2
Other comprehensive income, net of tax					401	401
Balance at end at Jun. 30, 2017	$ 46,713	$ 762	$ 13,966	$ (11,373)	$ (55)	$ 50,013
Balance at end (in shares) at Jun. 30, 2017	23,356					23,356,299

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 2,692	$ 1,580
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	1,279	1,175
Provision for loan losses		(500)
Income on life insurance	(55)	(63)
Gain on sale of securities available-for-sale		(240)
Gain on sale and leaseback transactions	(2,619)
Gain on sale of premises and equipment	(2)
(Gain) loss on sale of foreclosed assets	4	(185)
Adjustment of carrying value of foreclosed real estate	590	(28)
Accretion of bond premiums/discounts	398	482
Deferred tax benefit		(70)
Net change in:
Interest receivable	68	(70)
Other assets	(66)	(1,476)
Accrued interest payable	28	4
Accrued expenses and other liabilities	629	546
Net Cash Provided by Operating Activities	2,946	1,155
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans	(15,944)	(21,383)
Purchase of securities available-for-sale	(13,032)	(7,631)
Proceeds from sales and maturities of securities available-for-sale	7,457	33,644
Net sale (purchase) of equity securities (restricted)	232	(172)
Payments for the purchase of premises and equipment	(1,446)	(4,130)
Proceeds from sales and leaseback transactions	1,042
Proceeds from sale of premises and equipment	5
Proceeds from sales of other real estate owned	3,961	947
Net Cash Provided by (Used In) Investing Activities	(17,725)	1,275
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of common stock warrants	3
Net increase (decrease) in Federal Home Loan Bank advances	(5,600)	6,400
Net change in:
Demand deposits	(2,788)	11,484
Savings deposits	4,919	(9,039)
Time deposits	19,777	(5,380)
Net Cash Provided by Financing Activities	16,311	3,465
Net increase in cash and cash equivalents	1,532	5,895
Cash and Cash Equivalents, Beginning of Period	35,448	26,338
Cash and Cash Equivalents, End of Period	36,980	32,233
Supplemental Disclosure of Cash Paid During the Period for:
Interest	1,484	1,256
Taxes		70
Supplemental Disclosure of Non Cash Transactions:
Right-of-use assets obtained in exchange for new operating lease liabilities	5,321
Loan made to finance sale of premises and equipment	4,935
Other real estate acquired in settlement of foreclosed loans	2,071	3,098
Loans made to finance sale of foreclosed real estate	1,092	503
Transfer of premises and equipment to other real estate	125
Transfer of other real estate to premises and equipment		125
Change in unrealized gains (losses) on securities available-for-sale	$ 607	$ 1,239

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NATURE OF OPERATIONS

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

NATURE OF OPERATIONS

NOTE 1 NATURE OF OPERATIONS:

New Peoples Bankshares, Inc. (“The Company”) is a financial holding company whose principal activity is the ownership and management of a community bank. New Peoples Bank, Inc. (“Bank”) was organized and incorporated under the laws of the Commonwealth of Virginia on December 9, 1997. The Bank commenced operations on October 28, 1998, after receiving regulatory approval. As a state-chartered member bank, the Bank is subject to regulation by the Virginia Bureau of Financial Institutions, the Federal Deposit Insurance Corporation and the Federal Reserve Bank. The Bank provides general banking services to individuals, small and medium size businesses and the professional community of southwestern Virginia, southern West Virginia, and eastern Tennessee. On June 9, 2003, the Company formed two wholly-owned subsidiaries; NPB Financial Services, Inc. and NPB Web Services, Inc. On July 7, 2004 the Company established NPB Capital Trust I for the purpose of issuing trust preferred securities. On September 27, 2006, the Company established NPB Capital Trust 2 for the purpose of issuing additional trust preferred securities. NPB Financial Services, Inc. was a subsidiary of the Company until January 1, 2009 when it became a subsidiary of the Bank. In June 2012 the name of NPB Financial Services, Inc. was changed to NPB Insurance Services, Inc. which operates solely as an insurance agency. On March 4, 2016 the Federal Reserve Bank of Richmond approved the Company’s election to become a financial holding company. In July 2016, the Bank and its wholly-owned subsidiary NPB Insurance Services, Inc. announced by press release its teaming up with The Hilb Group of Virginia dba CSE Insurance Services, a division of the Hilb Group, LLC (“CSE”), located in Abingdon, Virginia, to provide insurance services for its current and future customers. Effective July 1, 2016, NPB Insurance Services, Inc. sold its existing book of business to CSE. These customers are now serviced by CSE and the Bank refers future insurance needs of its bank customers to CSE. On June 7, 2017, NPB Insurance Services, Inc. purchased a 39% membership interest in Lonesome Pine Title Agency, LLC, which provides title insurance. Another member of the agency is a related party to the Company.

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ACCOUNTING PRINCIPLES

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

ACCOUNTING PRINCIPLES

NOTE 2 ACCOUNTING PRINCIPLES:

These consolidated financial statements conform to U. S. generally accepted accounting principles and to general industry practices. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position at June 30, 2017 and December 31, 2016, and the results of operations for the three and six month periods ended June 30, 2017 and 2016. The notes included herein should be read in conjunction with the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the three and six month periods ended June 30, 2017 and 2016 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The determination of the adequacy of the allowance for loan losses and the determination of the deferred tax asset and related valuation allowance are based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions.

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2017

Income Per Share

EARNINGS PER SHARE

NOTE 3 EARNINGS PER SHARE:

Basic earnings per share computations are based on the weighted average number of shares outstanding during each period. Dilutive earnings per share reflect the additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued related to outstanding common stock warrants are determined by the Treasury method. For the three and six months ended June 30, 2017 and 2016, potential common shares of 880,136 and 882,353, respectively, were anti-dilutive and were not included in the calculation. Basic and diluted net income per common share calculations follows:

(Amounts in Thousands, Except Share and Per Share Data)	For the three months  ended June 30,				For the six months  ended June 30,
	2017		2016		2017		2016
Net income	$	2,577	$	882	$	2,692	$	1,580
Weighted average shares outstanding		23,355,503		23,354,082		23,355,198		23,354,082
Dilutive shares for stock options and warrants		—		—		—		—
Weighted average dilutive shares outstanding		23,355,503		23,354,082		23,355,198		23,354,082
Basic and diluted income per share	$	0.11	$	0.04	$	0.12	$	0.07

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CAPITAL

6 Months Ended

Jun. 30, 2017

Capital [Abstract]

CAPITAL

NOTE 4 CAPITAL:

Capital Requirements and Ratios

The Bank is subject to various capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and, possibly, additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined) to risk-weighted assets (as defined), Tier 1 capital (as defined) to average assets (as defined), and Common Equity Tier 1 capital (as defined) to risk-weighted assets (as defined). As of June 30, 2017, the Bank meets all capital adequacy requirements to which it is subject.

The Company meets eligibility criteria of a small bank holding company in accordance with the Federal Reserve Board’s Small Bank Holding Company Policy Statement issued in February 2015, and is no longer obligated to report consolidated regulatory capital. The Bank’s actual capital amounts and ratios are presented in the following table as of June 30, 2017 and December 31, 2016, respectively. These ratios comply with Federal Reserve rules to align with the Basel III Capital requirements effective January 1, 2015.

	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars are in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2017:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.	$	69,284		16.22	%	$	34,162		8.0	%	$	42,702		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,934		14.97	%		25,621		6.0	%		34,162		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		63,934		9.86	%		25,929		4.0	%		32,411		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,934		14.97	%		19,216		4.5	%		27,756		6.5	%
December 31, 2016:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.	$	67,549		16.64	%	$	32,476		8.0	%	$	40,595		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		62,462		15.39	%		24,357		6.0	%		32,476		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		62,462		9.93	%		25,149		4.0	%		31,436		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		62,462		15.39	%		18,268		4.5	%		26,386		6.5	%

As of June 30, 2017, the Bank was well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage, and Common Equity Tier 1 ratios as set forth in the above tables. There are no conditions or events since the notification that management believes have changed the Bank’s category.

Under Basel III Capital requirements, a capital conservation buffer of 0.625% became effective beginning on January 1, 2016. The capital conservation buffer is 1.25% as of June 30, 2017 and the Bank met that requirement with a buffer of 8.22%. The capital conservation buffer will be gradually increased through January 1, 2019 to 2.50%. Banks will be required to maintain levels that meet the required minimum plus the capital conservation buffer in order to make distributions, such as dividends, or discretionary bonus payments.

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INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2017

Investment Securities Activity

INVESTMENT SECURITIES

NOTE 5 INVESTMENT SECURITIES:

The amortized cost and estimated fair value of securities (all available-for-sale (“AFS”)) are as follows:

			Gross		Gross		Approximate
	Amortized		Unrealized		Unrealized		Fair
(Dollars are in thousands)	Cost		Gains		Losses		Value
June 30, 2017
U.S. Government Agencies	$	26,789	$	182	$	126	$	26,845
Taxable municipals		2,325		14		24		2,315
Corporate bonds		4,860		230		—		5,090
Mortgage backed securities		41,905		43		403		41,545
Total Securities AFS	$	75,879	$	469	$	553	$	75,795
December 31, 2016
U.S. Government Agencies	$	24,821	$	80	$	269	$	24,632
Taxable municipals		2,340		2		50		2,292
Corporate bonds		3,600		149		—		3,749
Mortgage backed securities		39,941		25		628		39,338
Total Securities AFS	$	70,702	$	256	$	947	$	70,011

The following table details unrealized losses and related fair values in the available-for-sale portfolio. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2017 and December 31, 2016.

	Less than 12 Months				12 Months or More				Total
(Dollars are in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
June 30, 2017
U.S. Government Agencies	$	9,829	$	117	$	1,496	$	9	$	11,325	$	126
Taxable municipals		779		24		—		—		779		24
Corporate bonds		—		—		—		—		—		—
Mtg. backed securities		26,676		278		7,031		125		33,707		403
Total Securities AFS	$	37,284	$	419	$	8,527	$	134	$	45,811	$	553
December 31, 2016
U.S. Government Agencies	$	12,081	$	250	$	2,449	$	19	$	14,530	$	269
Taxable municipals		1,561		50		—		—		1,561		50
Corporate bonds		500		—		—		—		500		—
Mtg. backed securities		28,680		543		4,655		85		33,335		628
Total Securities AFS	$	42,822	$	843	$	7,104	$	104	$	49,926	$	947

At June 30, 2017, the available-for-sale portfolio included 99 investments for which the fair market value was less than amortized cost. At December 31, 2016, the available-for-sale portfolio included 107 investments for which the fair market value was less than amortized cost. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial conditions and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Based on the Company’s analysis, the Company concluded that no securities had an other-than-temporary impairment.

Investment securities with a carrying value of $10.7 million and $11.3 million at June 30, 2017 and December 31, 2016, respectively, were pledged as collateral to secure public deposits and for other purposes required by law.

There were no sales of investment securities during the six months ended June 30, 2017. Gross proceeds on the sale of investment securities were $24.8 million for the six months ended June 30, 2016. Gross realized gains and losses pertaining to the sale of investment securities available for sale are detailed as follows:

	For the three months ended June 30,					For the six months ended June 30,
(Dollars are in thousands)	2017		2016			2017		2016
Gross gains realized	$	—	$	156		$	—	$	275
Gross losses realized		—		(21	)		—		(35	)
Net realized gains	$	—	$	135		$	—	$	240

The amortized cost and fair value of investment securities at June 30, 2017, by contractual maturity, are shown in the following schedule. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

					Weighted
(Dollars are in thousands)	Amortized		Fair		Average
Securities Available-for-Sale	Cost		Value		Yield
Due in one year or less	$	—	$	—		—	%
Due after one year through five years		4,101		4,099		2.00	%
Due after five years through ten years		16,608		16,788		2.86	%
Due after ten years		55,170		54,908		2.09	%
Total	$	75,879	$	75,795		2.25	%

The Bank, as a member of the Federal Reserve Bank and the Federal Home Loan Bank, is required to hold stock in each. The Bank also owns stock in CBB Financial Corp., which is a correspondent of the Bank. These equity securities are restricted from trading and are recorded at a cost of $2.6 million and $2.8 million as of June 30, 2017 and December 31, 2016, respectively.

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LOANS

6 Months Ended

Jun. 30, 2017

Receivables [Abstract]

LOANS

NOTE 6 LOANS:

Loans receivable outstanding are summarized as follows:

(Dollars are in thousands)	June 30, 2017		December 31, 2016
Real estate secured:
Commercial	$	109,467	$	103,331
Construction and land development		29,081		25,755
Residential 1-4 family		253,068		249,700
Multifamily		14,587		12,582
Farmland		24,303		24,948
Total real estate loans		430,506		416,316
Commercial		31,698		26,955
Agriculture		3,683		3,164
Consumer installment loans		22,173		22,188
All other loans		704		6
Total loans	$	488,764	$	468,629

Loans receivable on nonaccrual status are summarized as follows:

(Dollars are in thousands)	June 30, 2017		December 31, 2016
Real estate secured:
Commercial	$	2,084	$	3,403
Construction and land development		289		319
Residential 1-4 family		7,200		8,355
Multifamily		158		166
Farmland		838		1,003
Total real estate loans		10,569		13,246
Agriculture		3		83
Consumer installment loans		36		76
Total loans receivable on nonaccrual status	$	10,608	$	13,405

Total interest income not recognized on nonaccrual loans for the six months ended June 30, 2017 and 2016 was $280 thousand and $158 thousand, respectively.

The following table presents information concerning the Company’s investment in loans considered impaired as of June 30, 2017 and December 31, 2016:

As of June 30, 2017 (Dollars are in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial	$	3,017	$	3,108	$	—
Construction and land development		—		—		—
Residential 1-4 family		3,852		4,152		—
Multifamily		289		330		—
Farmland		884		1,261		—
Commercial		—		—		—
Agriculture		18		18		—
Consumer installment loans		9		9		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		709		800		99
Construction and land development		215		454		81
Residential 1-4 family		569		596		108
Multifamily		1,331		1,399		216
Farmland		902		918		328
Commercial		497		497		182
Agriculture		—		—		—
Consumer installment loans		—		—		—
All other loans		—		—		—
Total	$	12,292	$	13,542	$	1,014

As of December 31, 2016 (Dollars are in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial	$	3,636	$	4,055	$	—
Construction and land development		5		5		—
Residential 1-4 family		3,861		4,182		—
Multifamily		301		342		—
Farmland		3,895		4,601		—
Commercial		—		—		—
Agriculture		19		19		—
Consumer installment loans		26		43		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		1,191		1,270		65
Construction and land development		240		469		106
Residential 1-4 family		555		565		56
Multifamily		—		—		—
Farmland		591		602		299
Commercial		67		67		18
Agriculture		5		5		5
Consumer installment loans		9		9		3
All other loans		—		—		—
Total	$	14,401	$	16,234	$	552

The following table presents information concerning the Company’s average impaired loans and interest recognized on those impaired loans, for the periods indicated:

	Six Months Ended
	June 30, 2017				June 30, 2016
(Dollars are in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	3,136	$	64	$	4,451	$	73
Construction and land development		3		—		116		—
Residential 1-4 family		3,831		102		3,758		103
Multifamily		440		11		282		11
Farmland		2,884		26		4,162		102
Commercial		—		—		—		—
Agriculture		19		1		33		2
Consumer installment loans		15		—		32		2
All other loans		—		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		837		6		1,522		—
Construction and land development		228		—		277		—
Residential 1-4 family		657		9		1,037		11
Multifamily		444		32		133		4
Farmland		694		16		595		12
Commercial		210		16		72		2
Agriculture		2		—		139		(2	)
Consumer installment loans		3		—		22		—
All other loans		—		—		—		—
Total	$	13,403	$	283	$	16,631	$	320

	Three Months Ended
	June 30, 2017					June 30, 2016
(Dollars are in thousands)	Average  Recorded  Investment		Interest  Income  Recognized			Average  Recorded  Investment		Interest  Income  Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	2,886	$	39		$	4,571	$	38
Construction and land development		2		—			169		1
Residential 1-4 family		3,817		53			4,118		52
Multifamily		510		(1	)		208		9
Farmland		2,378		141			4,252		51
Commercial		—		—			—		—
Agriculture		19		1			31		1
Consumer installment loans		9		—			43		1
All other loans		—		—			—		—
With an allowance recorded:
Real estate secured:
Commercial		660		4			1,031		—
Construction and land development		222		—			271		—
Residential 1-4 family		708		—			595		6
Multifamily		666		32			199		2
Farmland		746		11			512		6
Commercial		282		16			73		1
Agriculture		1		—			200		—
Consumer installment loans		—		—			11		—
All other loans		—		—			—		—
Total	$	12,906	$	296		$	16,284	$	168

An age analysis of past due loans receivable is below. At June 30, 2017 and December 31, 2016, there were no loans over 90 days past due that were accruing.

As of June 30, 2017 (Dollars are in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans
Real estate secured:
Commercial	$	3,251	$	245	$	—	$	3,496	$	105,971	$	109,467
Construction and land development		367		—		43		410		28,671		29,081
Residential 1-4 family		2,335		1,151		1,483		4,969		248,099		253,068
Multifamily		98		—		—		98		14,489		14,587
Farmland		288		256		308		852		23,451		24,303
Total real estate loans		6,339		1,652		1,834		9,825		420,681		430,506
Commercial		4		—		—		4		31,694		31,698
Agriculture		—		—		—		—		3,683		3,683
Consumer installment Loans		116		10		7		133		22,040		22,173
All other loans		—		—		—		—		704		704
Total loans	$	6,459	$	1,662	$	1,841	$	9,962	$	478,802	$	488,764

As of December 31, 2016  (Dollars are in thousands)	Loans  30-59  Days  Past  Due		Loans  60-89  Days  Past  Due		Loans  90 or  More  Days  Past  Due		Total  Past  Due  Loans		Current  Loans		Total  Loans
Real estate secured:
Commercial	$	1,676	$	307	$	1,083	$	3,066	$	100,265	$	103,331
Construction and land development		103		17		44		164		25,591		25,755
Residential 1-4 family		4,237		1,547		2,233		8,017		241,683		249,700
Multifamily		1,367		—		—		1,367		11,215		12,582
Farmland		2,987		—		—		2,987		21,961		24,948
Total real estate loans		10,370		1,871		3,360		15,601		400,715		416,316
Commercial		20		—		—		20		26,935		26,955
Agriculture		19		—		78		97		3,067		3,164
Consumer installment Loans		110		15		36		161		22,027		22,188
All other loans		—		—		—		—		6		6
Total loans	$	10,519	$	1,886	$	3,474	$	15,879	$	452,750	$	468,629

The Company categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans receivable as to credit risk. The Company uses the following definitions for risk ratings:

Pass - Loans in this category are considered to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt and other factors.

Special Mention - Loans in this category are currently protected but are potentially weak, including adverse trends in borrower’s operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances.  Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s credit position at some future date.

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

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

Based on the most recent analysis performed, the risk category of loans receivable was as follows:

As of June 30, 2017 (Dollars are in thousands)	Pass		Special Mention		Substandard		Total
Real estate secured:
Commercial	$	100,308	$	6,444	$	2,715	$	109,467
Construction and land development		27,813		980		288		29,081
Residential 1-4 family		242,884		1,994		8,190		253,068
Multifamily		12,902		—		1,685		14,587
Farmland		20,282		2,256		1,765		24,303
Total real estate loans		404,189		11,674		14,643		430,506
Commercial		30,942		260		496		31,698
Agriculture		3,652		28		3		3,683
Consumer installment loans		22,125		3		45		22,173
All other loans		704		—		—		704
Total	$	461,612	$	11,965	$	15,187	$	488,764
As of December 31, 2016 (Dollars are in thousands)		Pass		Special Mention		Substandard		Total
Real estate secured:
Commercial	$	92,562	$	6,922	$	3,847	$	103,331
Construction and land development		23,905		1,531		319		25,755
Residential 1-4 family		238,400		2,117		9,183		249,700
Multifamily		10,848		1,367		367		12,582
Farmland		19,070		1,545		4,333		24,948
Total real estate loans		384,785		13,482		18,049		416,316
Commercial		26,197		691		67		26,955
Agriculture		3,076		—		88		3,164
Consumer installment loans		22,086		—		102		22,188
All other loans		6		—		—		6
Total	$	436,150	$	14,173		18,306	$	468,629

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ALLOWANCE FOR LOAN LOSSES

6 Months Ended

Jun. 30, 2017

Receivables [Abstract]

ALLOWANCE FOR LOAN LOSSES

NOTE 7   ALLOWANCE FOR LOAN LOSSES:

The following table details activity in the allowance for loan losses by portfolio segment for the period ended June 30, 2017. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

As of June 30, 2017 (Dollars are in thousands)	Beginning Balance		Charge Offs			Recoveries		Provisions			Ending Balance
Real estate secured:
Commercial	$	1,625	$	(81	)	$	190	$	(173	)	$	1,561
Construction and land development		346		—			—		(42	)		304
Residential 1-4 family		2,376		(267	)		33		138			2,280
Multifamily		241		—			—		221			462
Farmland		428		—			356		(249	)		535
Total real estate loans		5,016		(348	)		579		(105	)		5,142
Commercial		163		(11	)		130		109			391
Agriculture		31		—			3		(9	)		25
Consumer installment loans		123		(133	)		15		160			165
All other loans		—		—			—		5			5
Unallocated		739		—			—		(160	)		579
Total	$	6,072	$	(492	)	$	727	$	—		$	6,307

	Allowance for Loan Losses						Recorded Investment in Loans
As of June 30, 2017 (Dollars are in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Real estate secured:
Commercial	$	99	$	1,462	$	1,561	$	3,726	$	105,741	$	109,467
Construction and land development		81		223		304		215		28,866		29,081
Residential 1-4 family		108		2,172		2,280		4,421		248,647		253,068
Multifamily		216		246		462		1,620		12,967		14,587
Farmland		328		207		535		1,786		22,517		24,303
Total real estate loans		832		4,310		5,142		11,768		418,738		430,506
Commercial		182		209		391		497		31,201		31,698
Agriculture		—		25		25		18		3,665		3,683
Consumer installment loans		—		165		165		9		22,164		22,173
All other loans		—		5		5		—		704		704
Unallocated		—		579		579		—		—		—
Total	$	1,014	$	5,293	$	6,307	$	12,292	$	476,472	$	488,764

The following table details activity in the allowance for loan losses by portfolio segment for the period ended December 31, 2016. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

As of December 31, 2016 (Dollars are in thousands)	Beginning Balance		Charge Offs			Recoveries		Provisions			Ending Balance
Real estate secured:
Commercial	$	2,384	$	(557	)	$	220	$	(422	)	$	1,625
Construction and land development		332		(5	)		26		(7	)		346
Residential 1-4 family		2,437		(720	)		87		572			2,376
Multifamily		232		(18	)		—		27			241
Farmland		675		(2	)		103		(348	)		428
Total real estate loans		6,060		(1,302	)		436		(178	)		5,016
Commercial		266		(65	)		62		(100	)		163
Agriculture		124		—			7		(100	)		31
Consumer installment loans		128		(83	)		24		54			123
All other loans		1		—			—		(1	)		—
Unallocated		914		—			—		(175	)		739
Total	$	7,493	$	(1,450	)	$	529	$	(500	)	$	6,072

	Allowance for Loan Losses						Recorded Investment in Loans
As of December 31, 2016 (Dollars are in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Real estate secured:
Commercial	$	65	$	1,560	$	1,625	$	4,827	$	98,504	$	103,331
Construction and land development		106		240		346		245		25,510		25,755
Residential 1-4 family		56		2,320		2,376		4,416		245,284		249,700
Multifamily		—		241		241		301		12,281		12,582
Farmland		299		129		428		4,486		20,462		24,948
Total real estate loans		526		4,490		5,016		14,275		402,041		416,316
Commercial		18		145		163		67		26,888		26,955
Agriculture		5		26		31		24		3,140		3,164
Consumer installment loans		3		120		123		35		22,153		22,188
All other loans		—		—		—		—		6		6
Unallocated		—		739		739		—		—		—
Total	$	552	$	5,520		6,072	$	14,401	$	454,228	$	468,629

In determining the amount of our allowance, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions, as well as the requirements of the written agreement and other regulatory input. If our assumptions prove to be incorrect, our current allowance may not be sufficient to cover future loan losses and we may experience significant increases to our provision.

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TROUBLED DEBT RESTRUCTURINGS

6 Months Ended

Jun. 30, 2017

Troubled Debt Restructurings

TROUBLED DEBT RESTRUCTURINGS

NOTE 8   TROUBLED DEBT RESTRUCTURINGS:

At June 30, 2017 there were $7.4 million in loans that are classified as troubled debt restructurings compared to $9.6 million at December 31, 2016. The following table presents information related to loans modified as troubled debt restructurings during the six and three months ended June 30, 2017 and 2016.

	For the six months ended June 30, 2017						For the six months ended June 30, 2016
Troubled Debt Restructurings (Dollars are in thousands)	# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment
Real estate secured:
Commercial		—	$	—	$	—		1	$	341	$	339
Construction and land Development		—		—		—		—		—		—
Residential 1-4 family		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—
Farmland		—		—		—		1		291		291
Total real estate loans		—		—		—		2		632		630
Commercial		1		443		443		—		—		—
Agriculture		—		—		—		—		—		—
Consumer installment loans		—		—		—		—		—		—
All other loans		—		—		—		—		—		—
Total		1	$	443	$	443		2	$	632	$	630

	For the three months ended June 30, 2017						For the three months ended June 30, 2016
Troubled Debt Restructurings (Dollars are in thousands)	# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment
Real estate secured:
Commercial		—	$	—	$	—		—	$	—	$	—
Construction and land Development		—		—		—		—		—		—
Residential 1-4 family		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—
Farmland		—		—		—		1		291		291
Total real estate loans		—		—		—		1		291		291
Commercial		1		443		443		—		—		—
Agriculture		—		—		—		—		—		—
Consumer installment loans		—		—		—		—		—		—
All other loans		—		—		—		—		—		—
Total		1	$	443	$	443		1	$	291	$	291

During the six and three months ended June 30, 2017, the Company modified the terms of one loan for which the modification was considered to be a troubled debt restructuring. The interest rate was not modified on this loan; however, the payment terms and maturity date were changed.

During the six months ended June 30, 2016, the Company modified the terms of two loans for which the modification was considered to be a troubled debt restructuring. On one loan, the interest rate and maturity date were not modified; however, the payment terms were changed. On one loan, the interest rate was lowered and the payment terms and maturity date were changed.

During the three months ended June 30, 2016, the Company modified the terms of one loan for which the modification was considered to be a troubled debt restructuring. The interest rate was lowered and the payment terms and maturity date were changed.

No loans modified as troubled debt restructurings defaulted during the six months ended June 30, 2017. There was one commercial real estate loan with a recorded investment of $308 thousand that had been modified as a troubled debt restructuring that defaulted during the six months ended June 30, 2016, which was within twelve months of the loan’s modification date.

There were no loans modified as troubled debt restructurings that defaulted during the three months ended June 30, 2017 and 2016, which were within twelve months of their modification date. Generally, a troubled debt restructuring is considered to be in default once it becomes 90 days or more past due following a modification.

In determination of the allowance for loan losses, management considers troubled debt restructurings and subsequent defaults in these restructurings in its estimate. The Company evaluates all troubled debt restructurings for possible further impairment. As a result, the allowance may be increased, adjustments may be made in the allocation of the allowance, or charge-offs may be taken to further writedown the carrying value of the loan.

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OTHER REAL ESTATE OWNED

6 Months Ended

Jun. 30, 2017

Property, Plant and Equipment [Abstract]

OTHER REAL ESTATE OWNED

NOTE 9   OTHER REAL ESTATE OWNED:

The following table summarizes the activity in other real estate owned for the six months ended June 30, 2017 and the year ended December 31, 2016:

(Dollars are in thousands)	June 30, 2017			December 31, 2016
Balance, beginning of period	$	10,655		$	12,398
Additions		2,071			4,577
Purchases of/improvements to other real estate owned		—			48
Transfers of premises and equipment to other real estate owned		125			—
Transfers of other real estate owned to premises and equipment		—			(125	)
Proceeds from sales of other real estate owned		(3,961	)		(4,232	)
Loans made to finance sales of other real estate owned		(1,092	)		(818	)
Adjustment of carrying value		(590	)		(1,414	)
Deferred gain from sales		44			—
Gain (loss) from sales		(4	)		221
Balance, end of period	$	7,248		$	10,655

XML

FAIR VALUES

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

FAIR VALUES

NOTE 10   FAIR VALUES:

The financial reporting standard, “Fair Value Measurements and Disclosures” provides a framework for measuring fair value under generally accepted accounting principles and requires disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis (for example, available-for-sale investment securities) or on a nonrecurring basis (for example, impaired loans and other real estate acquired through foreclosure).

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair Value Measurements and Disclosures also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an exchange market, as well as U. S. Treasury, other U. S. Government and agency mortgage-backed debt securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain derivative contracts and impaired loans.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. For example, this category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, and highly structured or long-term derivative contracts.

Investment Securities Available-for-Sale – Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. The Company’s available-for-sale securities, totaling $75.8 million and $70.0 million at June 30, 2017 and December 31, 2016, respectively, are the only assets whose fair values are measured on a recurring basis using Level 2 inputs from an independent pricing service.

Loans - The Company does not record loans at fair value on a recurring basis. Real estate serves as collateral on a substantial majority of the Company’s loans. When a loan is considered impaired a specific reserve may be established. Loans which are deemed to be impaired and require a reserve are primarily valued on a non-recurring basis at the fair values of the underlying real estate collateral. Such fair values are obtained using independent appraisals, which management evaluates and determines whether or not the fair value of the collateral is further impaired below the appraised value and there is no observable market price, or whether or not an appraised value does not include estimated costs of disposition. The Company records impaired loans as nonrecurring Level 3 assets. The aggregate carrying amounts of impaired loans carried at fair value were $11.3 million and $13.8 million at June 30, 2017 and December 31, 2016, respectively.

Foreclosed Assets – Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets.  Foreclosed assets are carried at the lower of the carrying value or fair value.  Fair value is based upon independent observable market prices or appraised values of the collateral with a third party less an estimate of disposition costs, which the Company considers to be level 2 inputs. When the appraised value is not available, management determines the fair value of the collateral if further impaired below the appraised value and there is no observable market price, or an appraised value does not include estimated costs of disposition and management must make an estimate, the Company records the foreclosed asset as nonrecurring Level 3. The aggregate carrying amounts of foreclosed assets were $7.2 million and $10.7 million at June 30, 2017 and December 31, 2016, respectively.

Assets and liabilities measured at fair value are as follows as of June 30, 2017 (for purpose of this table the impaired loans are shown net of the related allowance):

(Dollars are in thousands)	Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis)
Available-for-sale investments
U.S. Government Agencies	$	—	$	26,845	$	—
Taxable municipals		—		2,315		—
Corporate bonds		—		5,090		—
Mortgage backed securities		—		41,545		—
(On a non-recurring basis)
Other real estate owned		—		—		7,248
Impaired loans:
Real estate secured:
Commercial		—		—		3,627
Construction and land development		—		—		134
Residential 1-4 family		—		—		4,313
Multifamily		—		—		1,404
Farmland		—		—		1,458
Commercial		—		—		315
Agriculture		—		—		18
Consumer installment loans		—		—		9
All other loans		—		—		—
Total	$	—	$	75,795	$	18,526

Assets and liabilities measured at fair value are as follows as of December 31, 2016 (for purpose of this table the impaired loans are shown net of the related allowance): 

(Dollars are in thousands)	Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis)
Available-for-sale investments
U.S. Government Agencies	$	—	$	24,632	$	—
Taxable municipals		—		2,292		—
Corporate bonds		—		3,749		—
Mortgage backed securities		—		39,338		—
(On a non-recurring basis)
Other real estate owned		—		—		10,655
Impaired loans:
Real estate secured:
Commercial		—		—		4,762
Construction and land development		—		—		139
Residential 1-4 family		—		—		4,360
Multifamily		—		—		301
Farmland		—		—		4,187
Commercial		—		—		49
Agriculture		—		—		19
Consumer installment loans		—		—		32
All other loans		—		—		—
Total	$	—	$	70,011	$	24,504

For Level 3 assets measured at fair value on a recurring or non-recurring basis as of June 30, 2017 and December 31, 2016, the significant unobservable inputs used in the fair value measurements were as follows:

(Dollars in thousands)	Fair Value at June 30, 2017		Fair Value at December 31, 2016		Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired Loans	$	11,278	$	13,849	Appraised Value/Discounted Cash Flows/Market Value of Note	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0 – 18%
Other Real Estate Owned	$	7,248	$	10,655	Appraised Value/Comparable Sales/Other Estimates from Independent Sources	Discounts to reflect current market conditions and estimated costs to sell	0 – 18%

Fair Value of Financial Instruments

Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another financial instrument.

The following summary presents the methodologies and assumptions used to estimate the fair value of the Company’s financial instruments presented below. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of June 30, 2017 and December 31, 2016. This table excludes financial instruments for which the carrying amount approximates fair value. The carrying value of cash and due from banks, federal funds sold, interest-bearing deposits, deposits with no stated maturities, trust preferred securities and accrued interest approximates fair value. The remaining financial instruments were valued based on the present value of estimated future cash flows, discounted at various rates in effect for similar instruments as of June 30, 2017 and December 31, 2016.

					Fair Value Measurements
(Dollars are in thousands)	Carrying Amount		Fair Value		Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
June 30, 2017
Financial Instruments – Assets
Net Loans	$	482,457	$	485,235	$	—	$	473,957	$	11,278
Financial Instruments – Liabilities
Time Deposits		267,596		267,293		—		267,293		—
FHLB Advances		8,158		8,356		—		8,356		—
December 31, 2016
Financial Instruments – Assets
Net Loans	$	462,557	$	467,707	$	—	$	453,858	$	13,849
Financial Instruments – Liabilities
Time Deposits		247,819		247,258		—		247,258		—
FHLB Advances		13,758		13,993		—		13,993		—

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SALE AND LEASEBACK TRANSACTIONS

6 Months Ended

Jun. 30, 2017

Leases [Abstract]

SALE AND LEASEBACK TRANSACTIONS

NOTE 11 SALE AND LEASEBACK TRANSACTIONS:

On May 31, 2017 the Bank, the wholly-owned subsidiary of the Company, sold four (4) of its properties, one each located in Abingdon, Bristol, Gate City and Castlewood, Virginia to NPB Good Steward Properties, LLC (“Good Steward”) for a total purchase price of $6.2 million. Good Steward is not an affiliate of the Company or the Bank. After selling expenses of $192 thousand, the net proceeds on the transactions were $6.0 million. The sales prices for the properties were based on outside appraisals obtained by the Bank. The Bank provided $4.9 million of financing to Good Steward for this transaction for a term of 10 years.

In connection with the sale of the four properties, the Bank on May 31, 2017 entered into commercial lease agreements with Good Steward for the properties (the “Leases”), which will allow the Bank to continue to service customers from these locations. The Leases, which commenced on June 1, 2017, provide the Bank with use of the properties for an initial term of fifteen (15) years.  Base rent payments for years 1 through 5 of the Leases are approximately $417 thousand a year.  The base rent payments will increase by 8% for years 6 thru 10 of the Leases and then by another 8% for years 11 thru 15 of the Leases.  The Bank has the option to renew the Leases five (5) times and each renewal would be for a term of five (5) years.  The base rent for the renewals would be negotiated at the time the renewal option is exercised by the Bank. While the cash lease payments are currently $417 thousand a year, the Company is required to straight-line the expense over the initial term of fifteen (15) years. As a result, the annual lease expense will be approximately $451 thousand.

In anticipation of this transaction the Company adopted ASU No. 2016-02 Leases (Topic 842) early. This ASU revised certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. As a result of this transaction the Company recognized right-to-use assets – operating leases of approximately $5.3 million, along with corresponding lease liabilities of approximately $5.3 million. The $5.3 million was determined by calculating the present value of the annual cash lease payments using a discount rate of 3.25%. The 3.25% discount rate was determined to be our fifteen (15) year incremental borrowing rate as of May 31, 2017.

As a result of the sale and the determination that the corresponding leases were operating leases, the Company recognized a gain of $2.6 million on the sale and leaseback transactions. The Bank and its parent, New Peoples Bankshares, Inc. and affiliates have no relationship with Good Steward other than those discussed above.

The Company’s operating lease cost for the three and six months ended June 30, 2017 as a result of the transactions discussed above was approximately $38 thousand. All other operating leases the Company has were evaluated and determined that they are immaterial to the financial statements.

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RECENT ACCOUNTING DEVELOPMENTS

6 Months Ended

Jun. 30, 2017

Accounting Changes and Error Corrections [Abstract]

RECENT ACCOUNTING DEVELOPMENTS

NOTE 12 RECENT ACCOUNTING DEVELOPMENTS:

The following is a summary of recent authoritative announcements:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In August 2015, the FASB deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers. As a result of the deferral the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2016, the FASB amended the Financial Instruments topic of the Accounting Standards Codification (“ASC”), to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect these amendments to have a material effect on its financial statements.

In February 2016, the FASB amended the Leases topic of the ASC to revise certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. As discussed in Note 11, the Company early adopted ASU No. 2016-02 Leases (Topic 842).

In March 2016, the FASB amended the Revenue from Contracts with Customers topic of the ASC to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In June 2016, the FASB issued guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. The amendments will be effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted for all organizations for periods beginning after December 15, 2018. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.

In December 2016, the FASB issued technical corrections and improvements to the Revenue from Contracts with Customers Topic. These corrections make a limited number of revisions to several pieces of the revenue recognition standard issued in 2014. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2017, the FASB updated the Accounting Changes and Error Corrections and the Investments—Equity Method and Joint Ventures Topics of the Accounting Standards Codification. The ASU incorporates into the Accounting Standards Codification recent SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. The ASU was effective upon issuance. The Company is currently evaluating the impact on additional disclosure requirements as each of the standards is adopted, however it does not expect these amendments to have a material effect on its financial position, results of operations or cash flows.

In February 2017, the FASB amended the Other Income Topic of the ASC to clarify the scope of the guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. The amendments conform the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

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

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ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation

These consolidated financial statements conform to U. S. generally accepted accounting principles and to general industry practices. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position at June 30, 2017 and December 31, 2016, and the results of operations for the three and six month periods ended June 30, 2017 and 2016. The notes included herein should be read in conjunction with the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the three and six month periods ended June 30, 2017 and 2016 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The determination of the adequacy of the allowance for loan losses and the determination of the deferred tax asset and related valuation allowance are based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions.

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2017

Income Per Share

Schedule of anti-dilutive income per common share

Basic and diluted net income per common share calculations follows:

(Amounts in Thousands, Except Share and Per Share Data)	For the three months  ended June 30,				For the six months  ended June 30,
	2017		2016		2017		2016
Net income	$	2,577	$	882	$	2,692	$	1,580
Weighted average shares outstanding		23,355,503		23,354,082		23,355,198		23,354,082
Dilutive shares for stock options and warrants		—		—		—		—
Weighted average dilutive shares outstanding		23,355,503		23,354,082		23,355,198		23,354,082
Basic and diluted income per share	$	0.11	$	0.04	$	0.12	$	0.07

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CAPITAL (Tables)

6 Months Ended

Jun. 30, 2017

Capital [Abstract]

Schedule of capital requirements

	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars are in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2017:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.	$	69,284		16.22	%	$	34,162		8.0	%	$	42,702		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,934		14.97	%		25,621		6.0	%		34,162		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		63,934		9.86	%		25,929		4.0	%		32,411		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,934		14.97	%		19,216		4.5	%		27,756		6.5	%
December 31, 2016:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.	$	67,549		16.64	%	$	32,476		8.0	%	$	40,595		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		62,462		15.39	%		24,357		6.0	%		32,476		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		62,462		9.93	%		25,149		4.0	%		31,436		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		62,462		15.39	%		18,268		4.5	%		26,386		6.5	%

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INVESTMENT SECURITIES (Tables)

6 Months Ended

Jun. 30, 2017

Investment Securities Activity

Schedule of securities' amortized cost and estimated fair value

The amortized cost and estimated fair value of securities (all available-for-sale (“AFS”)) are as follows:

			Gross		Gross		Approximate
	Amortized		Unrealized		Unrealized		Fair
(Dollars are in thousands)	Cost		Gains		Losses		Value
June 30, 2017
U.S. Government Agencies	$	26,789	$	182	$	126	$	26,845
Taxable municipals		2,325		14		24		2,315
Corporate bonds		4,860		230		—		5,090
Mortgage backed securities		41,905		43		403		41,545
Total Securities AFS	$	75,879	$	469	$	553	$	75,795
December 31, 2016
U.S. Government Agencies	$	24,821	$	80	$	269	$	24,632
Taxable municipals		2,340		2		50		2,292
Corporate bonds		3,600		149		—		3,749
Mortgage backed securities		39,941		25		628		39,338
Total Securities AFS	$	70,702	$	256	$	947	$	70,011

Schedule of fair value and gross unrealized losses on investment securities in a continuous unrealized loss position

The following table details unrealized losses and related fair values in the available-for-sale portfolio. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2017 and December 31, 2016.

	Less than 12 Months				12 Months or More				Total
(Dollars are in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
June 30, 2017
U.S. Government Agencies	$	9,829	$	117	$	1,496	$	9	$	11,325	$	126
Taxable municipals		779		24		—		—		779		24
Corporate bonds		—		—		—		—		—		—
Mtg. backed securities		26,676		278		7,031		125		33,707		403
Total Securities AFS	$	37,284	$	419	$	8,527	$	134	$	45,811	$	553
December 31, 2016
U.S. Government Agencies	$	12,081	$	250	$	2,449	$	19	$	14,530	$	269
Taxable municipals		1,561		50		—		—		1,561		50
Corporate bonds		500		—		—		—		500		—
Mtg. backed securities		28,680		543		4,655		85		33,335		628
Total Securities AFS	$	42,822	$	843	$	7,104	$	104	$	49,926	$	947

Schedule of gross realized gains and losses

Gross realized gains and losses pertaining to the sale of investment securities available for sale are detailed as follows:

	For the three months ended June 30,					For the six months ended June 30,
(Dollars are in thousands)	2017		2016			2017		2016
Gross gains realized	$	—	$	156		$	—	$	275
Gross losses realized		—		(21	)		—		(35	)
Net realized gains	$	—	$	135		$	—	$	240

Schedule of amortized cost and fair value of investment securities' contractual maturity

The amortized cost and fair value of investment securities at June 30, 2017, by contractual maturity, are shown in the following schedule. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

					Weighted
(Dollars are in thousands)	Amortized		Fair		Average
Securities Available-for-Sale	Cost		Value		Yield
Due in one year or less	$	—	$	—		—	%
Due after one year through five years		4,101		4,099		2.00	%
Due after five years through ten years		16,608		16,788		2.86	%
Due after ten years		55,170		54,908		2.09	%
Total	$	75,879	$	75,795		2.25	%

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LOANS (Tables)

6 Months Ended

Jun. 30, 2017

Loans and Leases Receivable Disclosure [Abstract]

Summary of loans receivable outstanding

Loans receivable outstanding are summarized as follows:

(Dollars are in thousands)	June 30, 2017		December 31, 2016
Real estate secured:
Commercial	$	109,467	$	103,331
Construction and land development		29,081		25,755
Residential 1-4 family		253,068		249,700
Multifamily		14,587		12,582
Farmland		24,303		24,948
Total real estate loans		430,506		416,316
Commercial		31,698		26,955
Agriculture		3,683		3,164
Consumer installment loans		22,173		22,188
All other loans		704		6
Total loans	$	488,764	$	468,629

Summary of loans receivable on nonaccrual status

Loans receivable on nonaccrual status are summarized as follows:

(Dollars are in thousands)	June 30, 2017		December 31, 2016
Real estate secured:
Commercial	$	2,084	$	3,403
Construction and land development		289		319
Residential 1-4 family		7,200		8,355
Multifamily		158		166
Farmland		838		1,003
Total real estate loans		10,569		13,246
Agriculture		3		83
Consumer installment loans		36		76
Total loans receivable on nonaccrual status	$	10,608	$	13,405

Summary of impaired loans

The following table presents information concerning the Company’s investment in loans considered impaired as of June 30, 2017 and December 31, 2016:

As of June 30, 2017 (Dollars are in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial	$	3,017	$	3,108	$	—
Construction and land development		—		—		—
Residential 1-4 family		3,852		4,152		—
Multifamily		289		330		—
Farmland		884		1,261		—
Commercial		—		—		—
Agriculture		18		18		—
Consumer installment loans		9		9		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		709		800		99
Construction and land development		215		454		81
Residential 1-4 family		569		596		108
Multifamily		1,331		1,399		216
Farmland		902		918		328
Commercial		497		497		182
Agriculture		—		—		—
Consumer installment loans		—		—		—
All other loans		—		—		—
Total	$	12,292	$	13,542	$	1,014

As of December 31, 2016 (Dollars are in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial	$	3,636	$	4,055	$	—
Construction and land development		5		5		—
Residential 1-4 family		3,861		4,182		—
Multifamily		301		342		—
Farmland		3,895		4,601		—
Commercial		—		—		—
Agriculture		19		19		—
Consumer installment loans		26		43		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		1,191		1,270		65
Construction and land development		240		469		106
Residential 1-4 family		555		565		56
Multifamily		—		—		—
Farmland		591		602		299
Commercial		67		67		18
Agriculture		5		5		5
Consumer installment loans		9		9		3
All other loans		—		—		—
Total	$	14,401	$	16,234	$	552

Summary of average impaired loans

The following table presents information concerning the Company’s average impaired loans and interest recognized on those impaired loans, for the periods indicated:

	Six Months Ended
	June 30, 2017				June 30, 2016
(Dollars are in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	3,136	$	64	$	4,451	$	73
Construction and land development		3		—		116		—
Residential 1-4 family		3,831		102		3,758		103
Multifamily		440		11		282		11
Farmland		2,884		26		4,162		102
Commercial		—		—		—		—
Agriculture		19		1		33		2
Consumer installment loans		15		—		32		2
All other loans		—		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		837		6		1,522		—
Construction and land development		228		—		277		—
Residential 1-4 family		657		9		1,037		11
Multifamily		444		32		133		4
Farmland		694		16		595		12
Commercial		210		16		72		2
Agriculture		2		—		139		(2	)
Consumer installment loans		3		—		22		—
All other loans		—		—		—		—
Total	$	13,403	$	283	$	16,631	$	320

	Three Months Ended
	June 30, 2017					June 30, 2016
(Dollars are in thousands)	Average  Recorded  Investment		Interest  Income  Recognized			Average  Recorded  Investment		Interest  Income  Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	2,886	$	39		$	4,571	$	38
Construction and land development		2		—			169		1
Residential 1-4 family		3,817		53			4,118		52
Multifamily		510		(1	)		208		9
Farmland		2,378		141			4,252		51
Commercial		—		—			—		—
Agriculture		19		1			31		1
Consumer installment loans		9		—			43		1
All other loans		—		—			—		—
With an allowance recorded:
Real estate secured:
Commercial		660		4			1,031		—
Construction and land development		222		—			271		—
Residential 1-4 family		708		—			595		6
Multifamily		666		32			199		2
Farmland		746		11			512		6
Commercial		282		16			73		1
Agriculture		1		—			200		—
Consumer installment loans		—		—			11		—
All other loans		—		—			—		—
Total	$	12,906	$	296		$	16,284	$	168

Summary of age analysis of past due loans receivable

An age analysis of past due loans receivable is below. At June 30, 2017 and December 31, 2016, there were no loans over 90 days past due that were accruing.

As of June 30, 2017 (Dollars are in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans
Real estate secured:
Commercial	$	3,251	$	245	$	—	$	3,496	$	105,971	$	109,467
Construction and land development		367		—		43		410		28,671		29,081
Residential 1-4 family		2,335		1,151		1,483		4,969		248,099		253,068
Multifamily		98		—		—		98		14,489		14,587
Farmland		288		256		308		852		23,451		24,303
Total real estate loans		6,339		1,652		1,834		9,825		420,681		430,506
Commercial		4		—		—		4		31,694		31,698
Agriculture		—		—		—		—		3,683		3,683
Consumer installment Loans		116		10		7		133		22,040		22,173
All other loans		—		—		—		—		704		704
Total loans	$	6,459	$	1,662	$	1,841	$	9,962	$	478,802	$	488,764

As of December 31, 2016  (Dollars are in thousands)	Loans  30-59  Days  Past  Due		Loans  60-89  Days  Past  Due		Loans  90 or  More  Days  Past  Due		Total  Past  Due  Loans		Current  Loans		Total  Loans
Real estate secured:
Commercial	$	1,676	$	307	$	1,083	$	3,066	$	100,265	$	103,331
Construction and land development		103		17		44		164		25,591		25,755
Residential 1-4 family		4,237		1,547		2,233		8,017		241,683		249,700
Multifamily		1,367		—		—		1,367		11,215		12,582
Farmland		2,987		—		—		2,987		21,961		24,948
Total real estate loans		10,370		1,871		3,360		15,601		400,715		416,316
Commercial		20		—		—		20		26,935		26,955
Agriculture		19		—		78		97		3,067		3,164
Consumer installment Loans		110		15		36		161		22,027		22,188
All other loans		—		—		—		—		6		6
Total loans	$	10,519	$	1,886	$	3,474	$	15,879	$	452,750	$	468,629

Summary of risk category of loans receivable

Based on the most recent analysis performed, the risk category of loans receivable was as follows:

As of June 30, 2017 (Dollars are in thousands)	Pass		Special Mention		Substandard		Total
Real estate secured:
Commercial	$	100,308	$	6,444	$	2,715	$	109,467
Construction and land development		27,813		980		288		29,081
Residential 1-4 family		242,884		1,994		8,190		253,068
Multifamily		12,902		—		1,685		14,587
Farmland		20,282		2,256		1,765		24,303
Total real estate loans		404,189		11,674		14,643		430,506
Commercial		30,942		260		496		31,698
Agriculture		3,652		28		3		3,683
Consumer installment loans		22,125		3		45		22,173
All other loans		704		—		—		704
Total	$	461,612	$	11,965	$	15,187	$	488,764
As of December 31, 2016 (Dollars are in thousands)		Pass		Special Mention		Substandard		Total
Real estate secured:
Commercial	$	92,562	$	6,922	$	3,847	$	103,331
Construction and land development		23,905		1,531		319		25,755
Residential 1-4 family		238,400		2,117		9,183		249,700
Multifamily		10,848		1,367		367		12,582
Farmland		19,070		1,545		4,333		24,948
Total real estate loans		384,785		13,482		18,049		416,316
Commercial		26,197		691		67		26,955
Agriculture		3,076		—		88		3,164
Consumer installment loans		22,086		—		102		22,188
All other loans		6		—		—		6
Total	$	436,150	$	14,173		18,306	$	468,629

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ALLOWANCE FOR LOAN LOSSES (Tables)

6 Months Ended

Jun. 30, 2017

Receivables [Abstract]

Summary of activity in the allowance for loan losses by portfolio segment

The following table details activity in the allowance for loan losses by portfolio segment for the period ended June 30, 2017. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

As of June 30, 2017 (Dollars are in thousands)	Beginning Balance		Charge Offs			Recoveries		Provisions			Ending Balance
Real estate secured:
Commercial	$	1,625	$	(81	)	$	190	$	(173	)	$	1,561
Construction and land development		346		—			—		(42	)		304
Residential 1-4 family		2,376		(267	)		33		138			2,280
Multifamily		241		—			—		221			462
Farmland		428		—			356		(249	)		535
Total real estate loans		5,016		(348	)		579		(105	)		5,142
Commercial		163		(11	)		130		109			391
Agriculture		31		—			3		(9	)		25
Consumer installment loans		123		(133	)		15		160			165
All other loans		—		—			—		5			5
Unallocated		739		—			—		(160	)		579
Total	$	6,072	$	(492	)	$	727	$	—		$	6,307

	Allowance for Loan Losses						Recorded Investment in Loans
As of June 30, 2017 (Dollars are in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Real estate secured:
Commercial	$	99	$	1,462	$	1,561	$	3,726	$	105,741	$	109,467
Construction and land development		81		223		304		215		28,866		29,081
Residential 1-4 family		108		2,172		2,280		4,421		248,647		253,068
Multifamily		216		246		462		1,620		12,967		14,587
Farmland		328		207		535		1,786		22,517		24,303
Total real estate loans		832		4,310		5,142		11,768		418,738		430,506
Commercial		182		209		391		497		31,201		31,698
Agriculture		—		25		25		18		3,665		3,683
Consumer installment loans		—		165		165		9		22,164		22,173
All other loans		—		5		5		—		704		704
Unallocated		—		579		579		—		—		—
Total	$	1,014	$	5,293	$	6,307	$	12,292	$	476,472	$	488,764

Schedule of allocation of portion of allowance

The following table details activity in the allowance for loan losses by portfolio segment for the period ended December 31, 2016. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

As of December 31, 2016 (Dollars are in thousands)	Beginning Balance		Charge Offs			Recoveries		Provisions			Ending Balance
Real estate secured:
Commercial	$	2,384	$	(557	)	$	220	$	(422	)	$	1,625
Construction and land development		332		(5	)		26		(7	)		346
Residential 1-4 family		2,437		(720	)		87		572			2,376
Multifamily		232		(18	)		—		27			241
Farmland		675		(2	)		103		(348	)		428
Total real estate loans		6,060		(1,302	)		436		(178	)		5,016
Commercial		266		(65	)		62		(100	)		163
Agriculture		124		—			7		(100	)		31
Consumer installment loans		128		(83	)		24		54			123
All other loans		1		—			—		(1	)		—
Unallocated		914		—			—		(175	)		739
Total	$	7,493	$	(1,450	)	$	529	$	(500	)	$	6,072

	Allowance for Loan Losses						Recorded Investment in Loans
As of December 31, 2016 (Dollars are in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Real estate secured:
Commercial	$	65	$	1,560	$	1,625	$	4,827	$	98,504	$	103,331
Construction and land development		106		240		346		245		25,510		25,755
Residential 1-4 family		56		2,320		2,376		4,416		245,284		249,700
Multifamily		—		241		241		301		12,281		12,582
Farmland		299		129		428		4,486		20,462		24,948
Total real estate loans		526		4,490		5,016		14,275		402,041		416,316
Commercial		18		145		163		67		26,888		26,955
Agriculture		5		26		31		24		3,140		3,164
Consumer installment loans		3		120		123		35		22,153		22,188
All other loans		—		—		—		—		6		6
Unallocated		—		739		739		—		—		—
Total	$	552	$	5,520		6,072	$	14,401	$	454,228	$	468,629

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TROUBLED DEBT RESTRUCTURING (Tables)

6 Months Ended

Jun. 30, 2017

Troubled Debt Restructurings

Schedule of loans modified as troubled debt restructurings

The following table presents information related to loans modified as troubled debt restructurings during the six and three months ended June 30, 2017 and 2016.

	For the six months ended June 30, 2017						For the six months ended June 30, 2016
Troubled Debt Restructurings (Dollars are in thousands)	# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment
Real estate secured:
Commercial		—	$	—	$	—		1	$	341	$	339
Construction and land Development		—		—		—		—		—		—
Residential 1-4 family		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—
Farmland		—		—		—		1		291		291
Total real estate loans		—		—		—		2		632		630
Commercial		1		443		443		—		—		—
Agriculture		—		—		—		—		—		—
Consumer installment loans		—		—		—		—		—		—
All other loans		—		—		—		—		—		—
Total		1	$	443	$	443		2	$	632	$	630

	For the three months ended June 30, 2017						For the three months ended June 30, 2016
Troubled Debt Restructurings (Dollars are in thousands)	# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment
Real estate secured:
Commercial		—	$	—	$	—		—	$	—	$	—
Construction and land Development		—		—		—		—		—		—
Residential 1-4 family		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—
Farmland		—		—		—		1		291		291
Total real estate loans		—		—		—		1		291		291
Commercial		1		443		443		—		—		—
Agriculture		—		—		—		—		—		—
Consumer installment loans		—		—		—		—		—		—
All other loans		—		—		—		—		—		—
Total		1	$	443	$	443		1	$	291	$	291

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OTHER REAL ESTATE OWNED (Tables)

6 Months Ended

Jun. 30, 2017

Property, Plant and Equipment [Abstract]

Schedule of other real estate

The following table summarizes the activity in other real estate owned for the six months ended June 30, 2017 and the year ended December 31, 2016:

(Dollars are in thousands)	June 30, 2017			December 31, 2016
Balance, beginning of period	$	10,655		$	12,398
Additions		2,071			4,577
Purchases of/improvements to other real estate owned		—			48
Transfers of premises and equipment to other real estate owned		125			—
Transfers of other real estate owned to premises and equipment		—			(125	)
Proceeds from sales of other real estate owned		(3,961	)		(4,232	)
Loans made to finance sales of other real estate owned		(1,092	)		(818	)
Adjustment of carrying value		(590	)		(1,414	)
Deferred gain from sales		44			—
Gain (loss) from sales		(4	)		221
Balance, end of period	$	7,248		$	10,655

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FAIR VALUES (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Summary of assets and liabilities measured at fair value

Assets and liabilities measured at fair value are as follows as of June 30, 2017 (for purpose of this table the impaired loans are shown net of the related allowance):

(Dollars are in thousands)	Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis)
Available-for-sale investments
U.S. Government Agencies	$	—	$	26,845	$	—
Taxable municipals		—		2,315		—
Corporate bonds		—		5,090		—
Mortgage backed securities		—		41,545		—
(On a non-recurring basis)
Other real estate owned		—		—		7,248
Impaired loans:
Real estate secured:
Commercial		—		—		3,627
Construction and land development		—		—		134
Residential 1-4 family		—		—		4,313
Multifamily		—		—		1,404
Farmland		—		—		1,458
Commercial		—		—		315
Agriculture		—		—		18
Consumer installment loans		—		—		9
All other loans		—		—		—
Total	$	—	$	75,795	$	18,526

Assets and liabilities measured at fair value are as follows as of December 31, 2016 (for purpose of this table the impaired loans are shown net of the related allowance): 

(Dollars are in thousands)	Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis)
Available-for-sale investments
U.S. Government Agencies	$	—	$	24,632	$	—
Taxable municipals		—		2,292		—
Corporate bonds		—		3,749		—
Mortgage backed securities		—		39,338		—
(On a non-recurring basis)
Other real estate owned		—		—		10,655
Impaired loans:
Real estate secured:
Commercial		—		—		4,762
Construction and land development		—		—		139
Residential 1-4 family		—		—		4,360
Multifamily		—		—		301
Farmland		—		—		4,187
Commercial		—		—		49
Agriculture		—		—		19
Consumer installment loans		—		—		32
All other loans		—		—		—
Total	$	—	$	70,011	$	24,504

Schedule of significant unobservable inputs in level 3 assets

For Level 3 assets measured at fair value on a recurring or non-recurring basis as of June 30, 2017 and December 31, 2016, the significant unobservable inputs used in the fair value measurements were as follows:

(Dollars in thousands)	Fair Value at June 30, 2017		Fair Value at December 31, 2016		Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired Loans	$	11,278	$	13,849	Appraised Value/Discounted Cash Flows/Market Value of Note	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0 – 18%
Other Real Estate Owned	$	7,248	$	10,655	Appraised Value/Comparable Sales/Other Estimates from Independent Sources	Discounts to reflect current market conditions and estimated costs to sell	0 – 18%

Estimated fair value of financial instruments

The remaining financial instruments were valued based on the present value of estimated future cash flows, discounted at various rates in effect for similar instruments as of June 30, 2017 and December 31, 2016.

					Fair Value Measurements
(Dollars are in thousands)	Carrying Amount		Fair Value		Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
June 30, 2017
Financial Instruments – Assets
Net Loans	$	482,457	$	485,235	$	—	$	473,957	$	11,278
Financial Instruments – Liabilities
Time Deposits		267,596		267,293		—		267,293		—
FHLB Advances		8,158		8,356		—		8,356		—
December 31, 2016
Financial Instruments – Assets
Net Loans	$	462,557	$	467,707	$	—	$	453,858	$	13,849
Financial Instruments – Liabilities
Time Deposits		247,819		247,258		—		247,258		—
FHLB Advances		13,758		13,993		—		13,993		—

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Accounting Policies [Abstract]
Net income	$ 2,577	$ 882	$ 2,692	$ 1,580
Weighted average shares outstanding	23,355,503	23,354,082	23,355,198	23,354,082
Weighted average dilutive shares outstanding	23,355,503	23,354,082	23,355,198	23,354,082
Basic and diluted income per share	$ 0.11	$ 0.04	$ 0.12	$ 0.07

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CAPITAL (Details) - Bank - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Total Capital to Risk Weighted Assets, Actual, Amount	$ 69,284	$ 67,549
Total Capital to Risk Weighted Assets, Actual, Ratio	16.22%	16.64%
Total Capital to Risk Weighted Assets, Minimum Capital Requirement, Amount	$ 34,162	$ 32,476
Total Capital to Risk Weighted Assets, Minimum Capital Requirement, Ratio	8.00%	8.00%
Total Capital to Risk Weighted Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 42,702	$ 40,595
Total Capital to Risk Weighted Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	10.00%	10.00%
Tier 1 Capital Risk Weighted Assets, Actual, Amount	$ 63,934	$ 62,462
Tier 1 Capital Risk Weighted Assets, Actual, Ratio	14.97%	15.39%
Tier 1 Capital Risk Weighted Assets, Minimum Capital Requirement, Amount	$ 25,621	$ 24,357
Tier 1 Capital Risk Weighted Assets, Minimum Capital Requirement, Ratio	6.00%	6.00%
Tier 1 Capital Risk Weighted Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 34,162	$ 32,476
Tier 1 Capital Risk Weighted Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	8.00%	8.00%
Tier 1 Capital to Average Assets, Actual, Amount	$ 63,934	$ 62,462
Tier 1 Capital to Average Assets, Actual, Ratio	9.86%	9.93%
Tier 1 Capital to Average Assets, Minimum Capital Requirement, Amount	$ 25,929	$ 25,149
Tier 1 Capital to Average Assets, Minimum Capital Requirement, Ratio	4.00%	4.00%
Tier 1 Capital to Average Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 32,411	$ 31,436
Tier 1 Capital to Average Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	5.00%	5.00%
Common Equity Tier 1 Capital to Risk Weighted Assets, Actual, Amount	$ 63,934	$ 62,462
Common Equity Tier 1 Capital to Risk Weighted Assets, Actual, Ratio	14.97%	15.39%
Common Equity Tier 1 Capital to Risk Weighted Assets, Minimum Capital Requirement, Amount	$ 19,216	$ 18,268
Common Equity Tier 1 Capital to Risk Weighted Assets, Minimum Capital Requirement, Ratio	4.50%	4.50%
Common Equity Tier 1 Capital to Risk Weighted Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 27,756	$ 26,386
Common Equity Tier 1 Capital to Risk Weighted Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	6.50%	6.50%

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INVESTMENT SECURITIES (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Amortized Cost	$ 75,879	$ 70,702
Gross Unrealized Gains	469	256
Gross Unrealized Losses	553	947
Approximate Fair Value	75,795	70,011
US Government Agencies
Amortized Cost	26,789	24,821
Gross Unrealized Gains	182	80
Gross Unrealized Losses	126	269
Approximate Fair Value	26,845	24,632
Taxable Municipals
Amortized Cost	2,325	2,340
Gross Unrealized Gains	14	2
Gross Unrealized Losses	24	50
Approximate Fair Value	2,315	2,292
Corporate Bonds
Amortized Cost	4,860	3,600
Gross Unrealized Gains	230	149
Gross Unrealized Losses
Approximate Fair Value	5,090	3,749
Mortgage Backed Securities
Amortized Cost	41,905	39,941
Gross Unrealized Gains	43	25
Gross Unrealized Losses	403	628
Approximate Fair Value	$ 41,545	$ 39,338

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INVESTMENT SECURITIES (Details 1) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Fair Value, Less than 12 Months	$ 37,284	$ 42,822
Unrealized Losses, Less than 12 Months	419	843
Fair Value, 12 Months or More	8,527	7,104
Unrealized Losses, 12 Months or More	134	104
Fair Value, Total	45,811	49,926
Unrealized Losses, Total	553	947
US Government Agencies
Fair Value, Less than 12 Months	9,829	12,081
Unrealized Losses, Less than 12 Months	117	250
Fair Value, 12 Months or More	1,496	2,449
Unrealized Losses, 12 Months or More	9	19
Fair Value, Total	11,325	14,530
Unrealized Losses, Total	126	269
Taxable Municipals
Fair Value, Less than 12 Months	779	1,561
Unrealized Losses, Less than 12 Months	24	50
Fair Value, Total	779	1,561
Unrealized Losses, Total	24	50
Mortgage Backed Securities
Fair Value, Less than 12 Months	26,676	28,680
Unrealized Losses, Less than 12 Months	278	543
Fair Value, 12 Months or More	7,031	4,655
Unrealized Losses, 12 Months or More	125	85
Fair Value, Total	33,707	33,335
Unrealized Losses, Total	$ 403	628
Corporate Bonds
Fair Value, Less than 12 Months		500
Fair Value, Total		$ 500

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INVESTMENT SECURITIES (Details 2) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Investment Securities Activity
Gross gains realized		$ 156		$ 275
Gross losses realized		(21)		(35)
Net realized gains		$ 135		$ 240

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INVESTMENT SECURITIES (Details 3) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Investment Securities Activity
Due after one year through five years, Amortized Cost	$ 4,101
Due after five years through ten years, Amortized Cost	16,608
Due after ten years, Amortized Cost	55,170
Amortized Cost, Total	75,879	$ 70,702
Due after one year through five years, Fair Value	4,099
Due after five years through ten years, Fair Value	16,788
Due after ten years, Fair Value	54,908
Approximate Fair Value	$ 75,795	$ 70,011
Due after one year through five years, Weighted Average Yield	2.00%	1.85%
Due after five years through ten years, Weighted Average Yield	2.86%
Due after ten years, Weighted Average Yield	2.09%
Weighted Average Yield, Total	2.25%

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LOANS:(Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Total loans and leases	$ 488,764	$ 468,629
Real Estate [Member]
Total loans and leases	430,506	416,316
Commercial
Total loans and leases		26,955
Commercial | Real Estate [Member]
Total loans and leases	109,467	103,331
Construction and Land Development | Real Estate [Member]
Total loans and leases	29,081	25,755
Residential 1-4 Family | Real Estate [Member]
Total loans and leases	253,068	249,700
Multifamily | Real Estate [Member]
Total loans and leases	14,587	12,582
Farmland | Real Estate [Member]
Total loans and leases	24,303	24,948
Commercial Real Estate [Member]
Total loans and leases	31,698	26,955
Agriculture
Total loans and leases	3,683	3,164
Consumer Installment Loans
Total loans and leases	22,173	22,188
Other Loans
Total loans and leases	$ 704	$ 6

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LOANS: (Details 1) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016	Dec. 31, 2015
Total loans receivable on nonaccrual status	$ 10,608	$ 13,405
Real Estate [Member]
Total loans receivable on nonaccrual status	10,569	13,246
Commercial
Total loans receivable on nonaccrual status			$ 11
Commercial | Real Estate [Member]
Total loans receivable on nonaccrual status	2,084	3,403
Construction and Land Development | Real Estate [Member]
Total loans receivable on nonaccrual status	289	319
Residential 1-4 Family | Real Estate [Member]
Total loans receivable on nonaccrual status	7,200	8,355
Multifamily | Real Estate [Member]
Total loans receivable on nonaccrual status	158	166
Farmland | Real Estate [Member]
Total loans receivable on nonaccrual status	838	1,003
Agriculture
Total loans receivable on nonaccrual status	3	83
Consumer Installment Loans
Total loans receivable on nonaccrual status	$ 36	$ 76

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LOANS: (Details 2) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Recorded Investment	$ 12,292	$ 14,401
Unpaid Principal Balance	13,542	16,234
Related Allowance	1,014	552
Agriculture | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment	18	19
Unpaid Principal Balance	18	19
Related Allowance
Agriculture | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment		5
Unpaid Principal Balance		5
Related Allowance		5
Consumer Installment Loans | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment	9	26
Unpaid Principal Balance	9	43
Related Allowance
Consumer Installment Loans | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment		9
Unpaid Principal Balance		9
Related Allowance		3
Commercial Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment	497	67
Unpaid Principal Balance	497	67
Related Allowance	182	18
Commercial Real Estate [Member] | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment	3,017	3,636
Unpaid Principal Balance	3,108	4,055
Related Allowance
Commercial Real Estate [Member] | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment	709	1,191
Unpaid Principal Balance	800	1,270
Related Allowance	99	65
Construction and Land Development | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment		5
Unpaid Principal Balance		5
Related Allowance
Construction and Land Development | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment	215	240
Unpaid Principal Balance	454	469
Related Allowance	81	106
Residential 1-4 Family | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment	3,852	3,861
Unpaid Principal Balance	4,152	4,182
Related Allowance
Residential 1-4 Family | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment	569	555
Unpaid Principal Balance	596	565
Related Allowance	108	56
Multifamily | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment	289	301
Unpaid Principal Balance	330	342
Related Allowance
Multifamily | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment	1,331
Unpaid Principal Balance	1,399
Related Allowance	216
Farmland | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment	884	3,895
Unpaid Principal Balance	1,261	4,601
Related Allowance
Farmland | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment	902	591
Unpaid Principal Balance	918	602
Related Allowance	$ 328	$ 299

XML

LOANS: (Details 3) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2017
Impaired loans without a valuation allowance:
Average Recorded Investment	$ 12,906	$ 13,403
Interest Income Recognized	296	283
Impaired loans with valuation allowance:
Average Recorded Investment	16,284	16,631
Interest Income Recognized	168	320
Impaired Financing Receivables With No Related Allowance [Member] | Agriculture
Impaired loans without a valuation allowance:
Average Recorded Investment	19	19
Interest Income Recognized	1	1
Impaired loans with valuation allowance:
Average Recorded Investment	31	33
Interest Income Recognized	1	2
Impaired Financing Receivables With No Related Allowance [Member] | Consumer Installment Loans
Impaired loans without a valuation allowance:
Average Recorded Investment	9	15
Interest Income Recognized
Impaired loans with valuation allowance:
Average Recorded Investment	43	32
Interest Income Recognized	1	2
Impaired Financing Receivables With Related Allowance [Member] | Agriculture
Impaired loans without a valuation allowance:
Average Recorded Investment	1	2
Interest Income Recognized
Impaired loans with valuation allowance:
Average Recorded Investment	200	139
Interest Income Recognized		(2)
Impaired Financing Receivables With Related Allowance [Member] | Consumer Installment Loans
Impaired loans without a valuation allowance:
Average Recorded Investment		3
Interest Income Recognized
Impaired loans with valuation allowance:
Average Recorded Investment	11	22
Interest Income Recognized
Impaired Financing Receivables With Related Allowance [Member] | Commercial Real Estate [Member]
Impaired loans without a valuation allowance:
Average Recorded Investment	282	210
Interest Income Recognized	16	16
Impaired loans with valuation allowance:
Average Recorded Investment	73	72
Interest Income Recognized	1	2
Commercial Real Estate [Member] | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Impaired loans without a valuation allowance:
Average Recorded Investment	2,886	3,136
Interest Income Recognized	39	64
Impaired loans with valuation allowance:
Average Recorded Investment	4,571	4,451
Interest Income Recognized	38	73
Commercial Real Estate [Member] | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Impaired loans without a valuation allowance:
Average Recorded Investment	660	837
Interest Income Recognized	4	6
Impaired loans with valuation allowance:
Average Recorded Investment	1,031	1,522
Interest Income Recognized
Construction and Land Development | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Impaired loans without a valuation allowance:
Average Recorded Investment	2	3
Interest Income Recognized
Impaired loans with valuation allowance:
Average Recorded Investment	169	116
Interest Income Recognized	1
Construction and Land Development | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Impaired loans without a valuation allowance:
Average Recorded Investment	222	228
Interest Income Recognized
Impaired loans with valuation allowance:
Average Recorded Investment	271	277
Interest Income Recognized
Residential 1-4 Family | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Impaired loans without a valuation allowance:
Average Recorded Investment	3,817	3,831
Interest Income Recognized	53	102
Impaired loans with valuation allowance:
Average Recorded Investment	4,118	3,758
Interest Income Recognized	52	103
Residential 1-4 Family | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Impaired loans without a valuation allowance:
Average Recorded Investment	708	657
Interest Income Recognized		9
Impaired loans with valuation allowance:
Average Recorded Investment	595	1,037
Interest Income Recognized	6	11
Multifamily | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Impaired loans without a valuation allowance:
Average Recorded Investment	510	440
Interest Income Recognized	(1)	11
Impaired loans with valuation allowance:
Average Recorded Investment	208	282
Interest Income Recognized	9	11
Multifamily | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Impaired loans without a valuation allowance:
Average Recorded Investment	666	444
Interest Income Recognized	32	32
Impaired loans with valuation allowance:
Average Recorded Investment	199	133
Interest Income Recognized	2	4
Farmland | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Impaired loans without a valuation allowance:
Average Recorded Investment	2,378	2,884
Interest Income Recognized	141	26
Impaired loans with valuation allowance:
Average Recorded Investment	4,252	4,162
Interest Income Recognized	51	102
Farmland | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Impaired loans without a valuation allowance:
Average Recorded Investment	746	694
Interest Income Recognized	11	16
Impaired loans with valuation allowance:
Average Recorded Investment	512	595
Interest Income Recognized	$ 6	$ 12

XML

LOANS: (Details 4) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Loans 30-59 Days Past Due	$ 6,459	$ 10,519
Loans 60-89 Days Past Due	1,662	1,886
Loans 90 or More Days Past Due	1,841	3,474
Total Past Due Loans	9,962	15,879
Current Loans	478,802	452,750
Total loans and leases	488,764	468,629
Real Estate [Member]
Loans 30-59 Days Past Due	6,339	10,370
Loans 60-89 Days Past Due	1,652	1,871
Loans 90 or More Days Past Due	1,834	3,360
Total Past Due Loans	9,825	15,601
Current Loans	420,681	400,715
Total loans and leases	430,506	416,316
Commercial
Loans 30-59 Days Past Due		20
Total Past Due Loans		20
Current Loans		26,935
Total loans and leases		26,955
Commercial | Real Estate [Member]
Loans 30-59 Days Past Due	3,251	1,676
Loans 60-89 Days Past Due	245	307
Loans 90 or More Days Past Due		1,083
Total Past Due Loans	3,496	3,066
Current Loans	105,971	100,265
Total loans and leases	109,467	103,331
Construction and Land Development | Real Estate [Member]
Loans 30-59 Days Past Due	367	103
Loans 60-89 Days Past Due		17
Loans 90 or More Days Past Due	43	44
Total Past Due Loans	410	164
Current Loans	28,671	25,591
Total loans and leases	29,081	25,755
Residential 1-4 Family | Real Estate [Member]
Loans 30-59 Days Past Due	2,335	4,237
Loans 60-89 Days Past Due	1,151	1,547
Loans 90 or More Days Past Due	1,483	2,233
Total Past Due Loans	4,969	8,017
Current Loans	248,099	241,683
Total loans and leases	253,068	249,700
Multifamily | Real Estate [Member]
Loans 30-59 Days Past Due	98	1,367
Loans 60-89 Days Past Due
Loans 90 or More Days Past Due
Total Past Due Loans	98	1,367
Current Loans	14,489	11,215
Total loans and leases	14,587	12,582
Farmland | Real Estate [Member]
Loans 30-59 Days Past Due	288	2,987
Loans 60-89 Days Past Due	256
Loans 90 or More Days Past Due	308
Total Past Due Loans	852	2,987
Current Loans	23,451	21,961
Total loans and leases	24,303	24,948
Commercial Real Estate [Member]
Loans 30-59 Days Past Due	4	20
Loans 60-89 Days Past Due
Loans 90 or More Days Past Due
Total Past Due Loans	4	20
Current Loans	31,694	26,935
Total loans and leases	31,698	26,955
Agriculture
Loans 30-59 Days Past Due		19
Loans 60-89 Days Past Due
Loans 90 or More Days Past Due		78
Total Past Due Loans		97
Current Loans	3,683	3,067
Total loans and leases	3,683	3,164
Consumer Installment Loans
Loans 30-59 Days Past Due	116	110
Loans 60-89 Days Past Due	10	15
Loans 90 or More Days Past Due	7	36
Total Past Due Loans	133	161
Current Loans	22,040	22,027
Total loans and leases	22,173	22,188
Other Loans
Loans 30-59 Days Past Due
Loans 60-89 Days Past Due
Loans 90 or More Days Past Due
Total Past Due Loans
Current Loans	704	6
Total loans and leases	$ 704	$ 6

XML

LOANS: (Details 5) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Total	$ 488,764	$ 468,629
Real Estate [Member]
Total	430,506	416,316
Pass
Total	461,612	436,150
Special Mention
Total	11,965	14,173
Substandard
Total	15,187	18,306
Real Estate [Member] | Pass
Total	404,189	384,785
Real Estate [Member] | Special Mention
Total	11,674	13,482
Real Estate [Member] | Substandard
Total	14,643	18,049
Commercial Portfolio Segment [Member] | Pass
Total	30,942	26,197
Commercial Portfolio Segment [Member] | Special Mention
Total	260	691
Commercial Portfolio Segment [Member] | Substandard
Total	496	67
Commercial Portfolio Segment [Member] | Real Estate [Member] | Pass
Total	100,308	92,562
Commercial Portfolio Segment [Member] | Real Estate [Member] | Special Mention
Total	6,444	6,922
Commercial Portfolio Segment [Member] | Real Estate [Member] | Substandard
Total	2,715	3,847
Construction and Land Development | Real Estate [Member]
Total	29,081	25,755
Construction and Land Development | Real Estate [Member] | Pass
Total	27,813	23,905
Construction and Land Development | Real Estate [Member] | Special Mention
Total	980	1,531
Construction and Land Development | Real Estate [Member] | Substandard
Total	288	319
Residential 1-4 Family | Real Estate [Member]
Total	253,068	249,700
Residential 1-4 Family | Real Estate [Member] | Pass
Total	242,884	238,400
Residential 1-4 Family | Real Estate [Member] | Special Mention
Total	1,994	2,117
Residential 1-4 Family | Real Estate [Member] | Substandard
Total	8,190	9,183
Multifamily | Real Estate [Member]
Total	14,587	12,582
Multifamily | Real Estate [Member] | Pass
Total	12,902	10,848
Multifamily | Real Estate [Member] | Special Mention
Total		1,367
Multifamily | Real Estate [Member] | Substandard
Total	1,685	367
Farmland | Real Estate [Member]
Total	24,303	24,948
Farmland | Real Estate [Member] | Pass
Total	20,282	19,070
Farmland | Real Estate [Member] | Special Mention
Total	2,256	1,545
Farmland | Real Estate [Member] | Substandard
Total	1,765	4,333
Agriculture
Total	3,683	3,164
Agriculture | Pass
Total	3,652	3,076
Agriculture | Special Mention
Total	28
Agriculture | Substandard
Total	3	88
Consumer Installment Loans
Total	22,173	22,188
Consumer Installment Loans | Pass
Total	22,125	22,086
Consumer Installment Loans | Special Mention
Total	3
Consumer Installment Loans | Substandard
Total	45	102
Other Loans
Total	704	6
Other Loans | Pass
Total	704	6
Commercial
Total		26,955
Commercial | Real Estate [Member]
Total	109,467	103,331
Commercial Real Estate [Member]
Total	$ 31,698	$ 26,955

XML

ALLOWANCE FOR LOAN LOSSES (Details) - USD ($) $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Balance, beginning of year	$ 6,072	$ 7,493	$ 7,493
Charge Offs	(492)		(1,450)
Recoveries	727		529
Provision for loan losses		(500)	(500)
Balance, End of period	6,307		6,072
Consumer Installment Loans
Balance, beginning of year	123	128	128
Charge Offs	(133)		(83)
Recoveries	15		24
Provision for loan losses	160		54
Balance, End of period	165		123
Commercial Real Estate [Member]
Balance, beginning of year	163	266	266
Charge Offs	(11)		(65)
Recoveries	130		62
Provision for loan losses	109		(100)
Balance, End of period	391		163
Unallocated
Balance, beginning of year	739	914	914
Provision for loan losses	(160)		(175)
Balance, End of period	579		739
Agriculture
Balance, beginning of year	31	124	124
Recoveries	3		7
Provision for loan losses	(9)		(100)
Balance, End of period	25		31
Other Loans
Balance, beginning of year		1	1
Provision for loan losses	5		(1)
Balance, End of period	5
Real Estate [Member]
Balance, beginning of year	5,016	6,060	6,060
Charge Offs	(348)		(1,302)
Recoveries	579		436
Provision for loan losses	(105)		(178)
Balance, End of period	5,142		5,016
Real Estate [Member] | Multifamily
Balance, beginning of year	241	232	232
Charge Offs			(18)
Provision for loan losses	221		27
Balance, End of period	462		241
Real Estate [Member] | Commercial Real Estate [Member]
Balance, beginning of year	1,625	2,384	2,384
Charge Offs	(81)		(557)
Recoveries	190		220
Provision for loan losses	(173)		(422)
Balance, End of period	1,561		1,625
Real Estate [Member] | Residential 1-4 Family
Balance, beginning of year	2,376	2,437	2,437
Charge Offs	(267)		(720)
Recoveries	33		87
Provision for loan losses	138		572
Balance, End of period	2,280		2,376
Real Estate [Member] | Construction and Land Development
Balance, beginning of year	346	332	332
Charge Offs			(5)
Recoveries			26
Provision for loan losses	(42)		(7)
Balance, End of period	304		346
Real Estate [Member] | Farmland
Balance, beginning of year	428	$ 675	675
Charge Offs			(2)
Recoveries	356		103
Provision for loan losses	(249)		(348)
Balance, End of period	$ 535		$ 428

XML

ALLOWANCE FOR LOAN LOSSES (Details 1) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016	Dec. 31, 2015
Allowance for Loan Losses, Individually Evaluated for Impairment	$ 1,014	$ 552
Allowance for Loan Losses, Collectively Evaluated for Impairment	5,293	5,520
Allowance for Loan Losses, Total	6,307	6,072	$ 7,493
Recorded Investment in Loans, Individually Evaluated for Impairment	12,292	14,401
Recorded Investment in Loans, Collectively Evaluated for Impairment	476,472	454,228
Recorded Investment in Loans, Total	488,764	468,629
Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment	832	526
Allowance for Loan Losses, Collectively Evaluated for Impairment	4,310	4,490
Allowance for Loan Losses, Total	5,142	5,016
Recorded Investment in Loans, Individually Evaluated for Impairment	11,768	14,275
Recorded Investment in Loans, Collectively Evaluated for Impairment	418,738	402,041
Recorded Investment in Loans, Total	430,506	416,316
Commercial Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment	182	18
Allowance for Loan Losses, Collectively Evaluated for Impairment	209	145
Allowance for Loan Losses, Total	391	163	266
Recorded Investment in Loans, Individually Evaluated for Impairment	497	67
Recorded Investment in Loans, Collectively Evaluated for Impairment	31,201	26,888
Recorded Investment in Loans, Total	31,698	26,955
Other Loans
Allowance for Loan Losses, Collectively Evaluated for Impairment	5
Allowance for Loan Losses, Total	5		1
Recorded Investment in Loans, Collectively Evaluated for Impairment	704	6
Recorded Investment in Loans, Total	704	6
Construction and Land Development | Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment	81	106
Allowance for Loan Losses, Collectively Evaluated for Impairment	223	240
Allowance for Loan Losses, Total	304	346
Recorded Investment in Loans, Individually Evaluated for Impairment	215	245
Recorded Investment in Loans, Collectively Evaluated for Impairment	28,866	25,510
Recorded Investment in Loans, Total	29,081	25,755
Multifamily | Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment	216
Allowance for Loan Losses, Collectively Evaluated for Impairment	246	241
Allowance for Loan Losses, Total	462	241
Recorded Investment in Loans, Individually Evaluated for Impairment	1,620	301
Recorded Investment in Loans, Collectively Evaluated for Impairment	12,967	12,281
Recorded Investment in Loans, Total	14,587	12,582
Agriculture
Allowance for Loan Losses, Individually Evaluated for Impairment		5
Allowance for Loan Losses, Collectively Evaluated for Impairment	25	26
Allowance for Loan Losses, Total	25	31	124
Recorded Investment in Loans, Individually Evaluated for Impairment	18	24
Recorded Investment in Loans, Collectively Evaluated for Impairment	3,665	3,140
Recorded Investment in Loans, Total	3,683	3,164
Farmland | Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment	328	299
Allowance for Loan Losses, Collectively Evaluated for Impairment	207	129
Allowance for Loan Losses, Total	535	428
Recorded Investment in Loans, Individually Evaluated for Impairment	1,786	4,486
Recorded Investment in Loans, Collectively Evaluated for Impairment	22,517	20,462
Recorded Investment in Loans, Total	24,303	24,948
Consumer Installment Loans
Allowance for Loan Losses, Individually Evaluated for Impairment		3
Allowance for Loan Losses, Collectively Evaluated for Impairment	165	120
Allowance for Loan Losses, Total	165	123	128
Recorded Investment in Loans, Individually Evaluated for Impairment	9	35
Recorded Investment in Loans, Collectively Evaluated for Impairment	22,164	22,153
Recorded Investment in Loans, Total	22,173	22,188
Residential 1-4 Family | Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment	108	56
Allowance for Loan Losses, Collectively Evaluated for Impairment	2,172	2,320
Allowance for Loan Losses, Total	2,280	2,376
Recorded Investment in Loans, Individually Evaluated for Impairment	4,421	4,416
Recorded Investment in Loans, Collectively Evaluated for Impairment	248,647	245,284
Recorded Investment in Loans, Total	253,068	249,700
Commercial
Recorded Investment in Loans, Total		26,955
Commercial | Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment	99	65
Allowance for Loan Losses, Collectively Evaluated for Impairment	1,462	1,560
Allowance for Loan Losses, Total	1,561	1,625
Recorded Investment in Loans, Individually Evaluated for Impairment	3,726	4,827
Recorded Investment in Loans, Collectively Evaluated for Impairment	105,741	98,504
Recorded Investment in Loans, Total	109,467	103,331
Unallocated
Allowance for Loan Losses, Collectively Evaluated for Impairment	579	739
Allowance for Loan Losses, Total	$ 579	$ 739	$ 914

XML

TROUBLED DEBT RESTRUCTURINGS (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017 USD ($) loans	Jun. 30, 2016 USD ($) loans	Jun. 30, 2017 USD ($) loans	Jun. 30, 2016 USD ($) loans
# of Loans | loans	1	1	1	2
Pre-Mod. Recorded Investment	$ 443	$ 291	$ 443	$ 632
Post-Mod. Recorded Investment	$ 443	$ 291	$ 443	$ 630
Real Estate [Member]
# of Loans | loans		1		2
Pre-Mod. Recorded Investment		$ 291		$ 632
Post-Mod. Recorded Investment		$ 291		$ 630
Real Estate [Member] | Commercial Real Estate [Member]
# of Loans | loans				1
Pre-Mod. Recorded Investment				$ 341
Post-Mod. Recorded Investment				$ 339
Real Estate [Member] | Farmland
# of Loans | loans		1		1
Pre-Mod. Recorded Investment		$ 291		$ 291
Post-Mod. Recorded Investment		$ 291		$ 291
Commercial Real Estate [Member]
# of Loans | loans	1		1
Pre-Mod. Recorded Investment	$ 443		$ 443
Post-Mod. Recorded Investment	$ 443		$ 443

XML

TROUBLED DEBT RESTRUCTURINGS (Details Narrative) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Troubled Debt Restructurings
Total TDRs	$ 7,400	$ 9,600
Period loan is considered to be in default, days	90 days

XML

OTHER REAL ESTATE OWNED (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Real Estate [Abstract]
Balance, beginning of year	$ 10,655	$ 12,398
Additions	2,071	4,577
Purchases of other real estate owned		48
Transfers of premises and equipment to other real estate owned	(125)
Transfers of other real estate owned to premises and equipment		(125)
Proceeds from sales of other real estate owned	(3,961)	(4,232)
Loans made to finance sales of other real estate owned	(1,092)	(818)
Adjustment of carrying value	(590)	(1,414)
Deferred gain from sales	44
Gain (loss) from sales	(4)	221
Balance, end of year	$ 7,248	$ 10,655

XML

FAIR VALUES: (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Fair Value, Inputs, Level 2 [Member]
Impaired Loans	$ 75,795	$ 70,011
Fair Value, Inputs, Level 3 [Member]
Other real estate owned	7,248	10,655
Impaired Loans	18,526	24,504
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US Government Agencies
Available for sale investments	26,845	24,632
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | TaxableMunicipalsMember
Available for sale investments	2,315	2,292
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate Bond Securities [Member]
Available for sale investments	5,090	3,749
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage Backed Securities
Available for sale investments	41,545	39,338
Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member] | Commercial Real Estate [Member]
Impaired Loans	315	49
Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member] | Consumer Installment Loans
Impaired Loans	9	32
Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member] | Agriculture
Impaired Loans	18	19
Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member] | Real Estate [Member] | Construction and Land Development
Impaired Loans	134	139
Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member] | Real Estate [Member] | Residential 1-4 Family
Impaired Loans	4,313	4,360
Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member] | Real Estate [Member] | Commercial Real Estate [Member]
Impaired Loans	3,627	4,762
Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member] | Real Estate [Member] | Multifamily
Impaired Loans	1,404	301
Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member] | Real Estate [Member] | Farmland
Impaired Loans	$ 1,458	$ 4,187

XML

FAIR VALUES: (Details 1) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Impaired Loans
Fair Value at March 31, 2017	$ 11,278	$ 13,849
Valuation Technique	Appraised Value/Discounted Cash Flows/Market Value of Note
Significant Unobservable Inputs	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell
Impaired Loans | Minimum [Member]
Significant Unobservable Input Value	0.00%
Impaired Loans | Maximum [Member]
Significant Unobservable Input Value	18.00%
Other Real Estate Owned
Fair Value at March 31, 2017	$ 7,248	$ 10,655
Valuation Technique	Appraised Value/Comparable Sales/Other Estimates from Independent Sources
Significant Unobservable Inputs	Discounts to reflect current market conditions and estimated costs to sell
Other Real Estate Owned | Minimum [Member]
Significant Unobservable Input Value	0.00%
Other Real Estate Owned | Maximum [Member]
Significant Unobservable Input Value	18.00%

XML

FAIR VALUES: (Details 2) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Net Loans	$ 482,457	$ 462,557
Time deposits	267,596	247,819
Fair Value, Measurements, Recurring [Member]
Net Loans	475,354	467,707
Time deposits	267,293	247,258
FHLB advances	8,356	13,993
Fair Value, Inputs, Level 2 [Member]
Net Loans	473,957	453,858
Time deposits	267,293	247,258
FHLB advances	8,356	13,993
Fair Value, Inputs, Level 3 [Member]
Net Loans	11,278	13,849
Fair Value, Estimate Not Practicable, Carrying (Reported) Amount [Member]
Net Loans	482,457	462,557
Time deposits	267,596	247,819
FHLB advances	$ 8,158	$ 13,758