10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2017

Or

☐ 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: 333- 209052

PARKWAY ACQUISITION CORP.

(Exact Name of Registrant as Specified in Its Charter)

Virginia	47-5486027
(State or Other Jurisdiction of Incorporation)	(I.R.S. Employer Identification Number)
101 Jacksonville Circle Floyd, Virginia	24091
(Address of Principal Executive Offices)	(Zip Code)

(540) 745-4191

(Registrant’s Telephone Number, Including Area Code)

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

Indicate by checkmark whether the Registrant has submitted electronically and posted on its corporate website, if any, any Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (Section 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

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

The registrant had 5,021,376 shares of Common Stock, no par value per share, outstanding as of November 14, 2017.

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets—September 30, 2017 (Unaudited) and December 31, 2016 (Audited)	3
	Unaudited Consolidated Statements of Income—Nine Months Ended September 30, 2017 and September 30, 2016	4
	Unaudited Consolidated Statements of Income—Three Months Ended September 30, 2017 and September 30, 2016	5
	Unaudited Consolidated Statements of Comprehensive Income—Nine and Three Months Ended September 30, 2017 and September 30, 2016	6
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity—Nine Months Ended September 30, 2017 and September 30, 2016	7
	Unaudited Consolidated Statements of Cash Flows—Nine Months Ended September 30, 2017 and September 30, 2016	8
	Notes to Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 4.	Controls and Procedures	45
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	46
Signatures		48

Part I. Financial Information

Item 1. Financial Statements

Parkway Acquisition Corp. and Subsidiary

Consolidated Balance Sheets

September 30, 2017 and December 31, 2016

	September 30,			December 31,
(dollars in thousands except share amounts)	2017			2016
	(Unaudited)			(Audited)
Assets
Cash and due from banks	$	6,978		$	7,215
Interest-bearing deposits with banks		8,968			19,399
Federal funds sold		4,478			9,294
Investment securities available for sale		51,933			62,540
Restricted equity securities		1,388			1,149
Loans, net of allowance for loan losses of $3,530 at September 30, 2017 and $3,420 at December 31, 2016		419,743			408,548
Cash value of life insurance		17,237			16,850
Foreclosed assets		—			70
Property and equipment, net		17,713			17,970
Accrued interest receivable		1,579			1,732
Core deposit intangible		2,115			2,327
Deferred tax assets, net		4,598			5,872
Other assets		9,739			5,890
	$	546,469		$	558,856
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Noninterest-bearing	$	126,944		$	127,224
Interest-bearing		359,255			372,163
Total deposits		486,199			499,387
Accrued interest payable		140			57
Other liabilities		2,333			3,946
		488,672			503,390
Commitments and contingencies (Note 6)
Stockholders’ equity
Preferred stock, no par value; 5,000,000 shares authorized; none issued		—			—
Common stock, no par value; 25,000,000 shares authorized; 5,021,376 issued and outstanding at September 30, 2017 and December 31, 2016		—			—
Surplus		26,166			26,166
Retained earnings		32,492			30,654
Accumulated other comprehensive loss		(861	)		(1,354	)
		57,797			55,466
	$	546,469		$	558,856

See Notes to Consolidated Financial Statements

3

Parkway Acquisition Corp. and Subsidiary

Consolidated Statements of Income

For the Nine Months ended September 30, 2017 and 2016

	Nine Months Ended September 30,
(dollars in thousands except share amounts)	2017		2016
	(Unaudited)		(Unaudited)
Interest income
Loans and fees on loans	$	15,390	$	11,185
Interest-bearing deposits in banks		36		16
Federal funds sold		80		26
Investment securities:
Taxable		993		814
Exempt from federal income tax		—		1
Dividends		62		52
		16,561		12,094
Interest expense
Deposits		1,107		981
Interest on borrowings		1		346
		1,108		1,327
Net interest income		15,453		10,767
Provision for loan losses		233		14
Net interest income after provision for loan losses		15,220		10,753
Noninterest income
Service charges on deposit accounts		987		889
Other service charges and fees		1,187		956
Net realized gains on securities		126		364
Mortgage loan origination fees		203		124
Increase in cash value of life insurance		333		256
Bargain purchase gain		—		182
Other income		95		134
		2,931		2,905
Noninterest expense
Salaries and employee benefits		7,529		5,561
Occupancy and equipment		1,652		1,145
Foreclosed asset expense, net		33		63
Data processing expense		885		551
FDIC assessments		225		222
Advertising		471		141
Bank franchise tax		250		171
Director fees		190		119
Merger related expense		698		720
Other expense		2,430		1,928
		14,363		10,621
Income before income taxes		3,788		3,037
Income tax expense		1,147		1,016
Net income	$	2,641	$	2,021
Basic earnings per share	$	0.53	$	0.55
Weighted average shares outstanding		5,021,376		3,695,571
Dividends declared per share	$	0.16	$	0.13

See Notes to Consolidated Financial Statements

4

Parkway Acquisition Corp. and Subsidiary

Consolidated Statements of Income

For the Three Months ended September 30, 2017 and 2016

	Three Months Ended
	September 30,
(dollars in thousands except share amounts)	2017		2016
	(Unaudited)		(Unaudited)
Interest income
Loans and fees on loans	$	5,222	$	5,390
Interest-bearing deposits in banks		14		16
Federal funds sold		21		12
Investment securities:
Taxable		319		294
Dividends		6		30
		5,582		5,742
Interest expense
Deposits		370		460
Interest on borrowings		1		99
		371		559
Net interest income		5,211		5,183
Provision for loan losses		75		109
Net interest income after provision for loan losses		5,136		5,074
Noninterest income
Service charges on deposit accounts		350		372
Other service charges and fees		417		396
Net realized gains on securities		13		(1	)
Mortgage loan origination fees		91		81
Increase in cash value of life insurance		111		112
Bargain purchase gain		—		182
Other income		39		125
		1,021		1,267
Noninterest expense
Salaries and employee benefits		2,489		2,579
Occupancy and equipment		555		600
Foreclosed asset expense, net		17		10
Data processing expense		306		305
FDIC assessments		75		102
Advertising		138		38
Bank franchise tax		82		81
Director fees		52		51
Merger related expense		56		484
Other expense		710		581
		4,480		4,831
Income before income taxes		1,677		1,510
Income tax expense		520		464
Net income	$	1,157	$	1,046
Basic earnings per share	$	0.23	$	0.21
Weighted average shares outstanding		5,021,376		5,021,376
Dividends declared per share	$	0.08	$	0.06

See Notes to Consolidated Financial Statements

5

Parkway Acquisition Corp. and Subsidiary

Consolidated Statements of Comprehensive Income

For the Nine Months and Three Months ended September 30, 2017 and 2016

	Nine Months ended September 30,
(dollars in thousands)	2017			2016
	(Unaudited)			(Unaudited)
Net income	$	2,641		$	2,021
Other comprehensive income:
Unrealized gains on investment securities:
Unrealized gains arising during the period		872			1,319
Tax related to unrealized gains		(296	)		(447	)
Reclassification of realized gains during the period		(126	)		(364	)
Tax related to realized gains		43			123
Total other comprehensive income		493			631
Total comprehensive income	$	3,134		$	2,652
	Three Months ended September 30,
(dollars in thousands)	2017			2016
	(Unaudited)			(Unaudited)
Net income	$	1,157		$	1,046
Other comprehensive income:
Unrealized gains on investment securities:
Unrealized gains arising during the period		148			163
Tax related to unrealized gains		(50	)		(54	)
Reclassification of realized gains during the period		(13	)		(1	)
Tax related to realized gains		4			—
Total other comprehensive income		89			108
Total comprehensive income	$	1,246		$	1,154

See Notes to Consolidated Financial Statements

6

Parkway Acquisition Corp. and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity

For the Nine Months ended September 30, 2017 and 2016 (unaudited)

(dollars in thousands except share amounts)

	Common Stock									Retained			Accumulated Comprehensive
	Shares			Amount			Surplus			Earnings			Loss			Total
Balance, December 31, 2015		1,718,968		$	2,149		$	522		$	28,709		$	(724	)	$	30,656
Net income		—			—			—			2,021			—			2,021
Other comprehensive income		—			—			—			—			631			631
Conversion of common stock in connection with new holding company on July 1, 2016:
Exchange of Grayson common stock, $1.25 par value		(1,718,968	)		(2,149	)		—			—			—			(2,149	)
For Parkway common stock, no par value		3,025,384			—			2,149			—			—			2,149
Issuance of common stock in connection with acquisition of Cardinal Bankshares Corp		1,996,453			—			23,500			—			—			23,500
Redemption of fractional shares issued in acquisition of Cardinal Bankshares Corp		(461	)		—			(5	)		—			—			(5	)
Dividends paid prior to conversion		—			—			—			(173	)		—			(173	)
Dividends paid ($0.06 per share)		—			—			—			(301	)		—			(301	)
Balance, September 30, 2016		5,021,376		$	—		$	26,166		$	30,256		$	(93	)	$	56,329
Balance, December 31, 2016		5,021,376		$	—		$	26,166		$	30,654		$	(1,354	)	$	55,466
Net income		—			—			—			2,641			—			2,641
Other comprehensive income		—			—			—			—			493			493
Dividends paid ($0.16 per share)		—			—			—			(803	)		—			(803	)
Balance, September 30, 2017		5,021,376		$	—		$	26,166		$	32,492		$	(861	)	$	57,797

See Notes to Consolidated Financial Statements

7

Parkway Acquisition Corp. and Subsidiary

Consolidated Statements of Cash Flows

For the Nine Months ended September 30, 2017 and 2016

	Nine Months Ended September 30,
(dollars in thousands)	2017			2016
	(Unaudited)			(Unaudited)
Cash flows from operating activities
Net income	$	2,641		$	2,021
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization		975			587
Amortization of core deposit intangibles		212			71
Accretion of loan discount and deposit premium		(995	)		(658	)
Bargain purchase gain		—			(182	)
Provision for loan losses		233			14
Deferred income taxes		1,021			1,341
Net realized gains on securities		(126	)		(364	)
Accretion of discount on securities, net of amortization of premiums		531			410
Deferred compensation		(64	)		(54	)
Net realized loss on foreclosed assets		23			37
Life insurance income		—			(97	)
Changes in assets and liabilities:
Cash value of life insurance		(387	)		(256	)
Accrued interest receivable		153			299
Other assets		(3,849	)		16
Accrued interest payable		83			22
Other liabilities		(1,549	)		(550	)
Net cash (used in) provided by operating activities		(1,098	)		2,657
Cash flows from investing activities
Activity in available for sale securities:
Purchases		(1,914	)		(11,912	)
Sales		8,523			55,115
Maturities/calls/paydowns		4,339			13,492
Sales (purchases) of restricted equity securities		(239	)		681
Net increase in loans		(10,625	)		(8,945	)
Proceeds from life insurance contracts		—			321
Proceeds from the sale of foreclosed assets		47			326
Purchases of property and equipment, net of sales		(718	)		(551	)
Cash received in business combination		—			11,698
Net cash (used in) provided by investing activities		(587	)		60,225
Cash flows from financing activities
Net decrease in deposits		(12,996	)		(8,415	)
Net decrease in borrowings		—			(18,000	)
Cash paid for fractional shares		—			(5	)
Dividends paid		(803	)		(474	)
Net cash used in financing activities		(13,799	)		(26,894	)
Net (decrease) increase in cash and cash equivalents		(15,484	)		35,988
Cash and cash equivalents, beginning		35,908			8,055
Cash and cash equivalents, ending	$	20,424		$	44,043

See Notes to Consolidated Financial Statements

8

Parkway Acquisition Corp. and Subsidiary

Consolidated Statements of Cash Flows, continued

For the Nine Months ended September 30, 2017 and 2016

Supplemental disclosure of cash flow information
Interest paid	$	1,025	$	1,306
Taxes paid	$	—	$	60
Supplemental disclosure of noncash investing activities
Effect on equity of change in net unrealized gain on available for sale securities	$	493	$	631
Transfers of loans to foreclosed properties	$	—	$	25
Business combinations
Assets acquired	$	—	$	252,426
Liabilities assumed		—		228,744
Net assets	$	—	$	23,682
Bargain purchase gain	$	—	$	182
Stock issued to acquire Cardinal Bankshares Corp.	$	—	$	23,500

See Notes to Consolidated Financial Statements

9

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 1. Organization and Summary of Significant Accounting Policies

Organization

Parkway Acquisition Corp. (“Parkway”) was incorporated as a Virginia corporation on November 2, 2015. Parkway was formed as a business combination shell for the purpose of completing a business combination transaction between Grayson Bankshares, Inc. (“Grayson”) and Cardinal Bankshares Corporation (“Cardinal”). On November 6, 2015, Grayson, Cardinal and Parkway entered into an Agreement and Plan of Merger (the “merger agreement”), providing for the combination of the three companies. Terms of the merger agreement called for Grayson and Cardinal to merge with and into Parkway, with Parkway as the surviving corporation (the “merger”). The merger agreement established exchange ratios under which each share of Grayson common stock was converted to the right to receive 1.76 shares of common stock of Parkway, while each share of Cardinal common stock was converted to the right to receive 1.30 shares of common stock of Parkway. The exchange ratios resulted in Grayson shareholders receiving approximately 60% of the newly issued Parkway shares and Cardinal shareholders receiving approximately 40% of the newly issued Parkway shares. The merger was completed on July 1, 2016. Grayson is considered the acquiror and Cardinal is considered the acquiree in the transaction for accounting purposes.

Upon completion of the merger, the Bank of Floyd, a wholly-owned subsidiary of Cardinal, was merged with and into Grayson National Bank (the “Bank’), a wholly-owned subsidiary of Grayson. The Bank was organized under the laws of the United States in 1900 and now serves the Virginia counties of Grayson, Floyd, Carroll, Wythe, Montgomery and Roanoke, and the surrounding areas through sixteen full-service banking offices and two loan production offices. Effective March 13, 2017, the Bank changed its name to Skyline National Bank. As an FDIC-insured National Banking Association, the Bank is subject to regulation by the Comptroller of the Currency. Parkway is regulated by the Board of Governors of the Federal Reserve System.

For purposes of this quarterly report on Form 10-Q, all information contained herein as of and for periods prior to July 1, 2016 reflects the operations of Grayson prior to the merger. Unless this report otherwise indicates or the context otherwise requires, all references to “Parkway” or the “Company” as of and for periods subsequent to July 1, 2016 refer to the combined company and its subsidiary as a combined entity after the merger, and all references to the “Company” as of and for periods prior to July 1, 2016 are references to Grayson and its subsidiary as a combined entity prior to the merger.

The consolidated financial statements as of September 30, 2017 and for the periods ended September 30, 2017 and 2016 included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the information furnished in the interim consolidated financial statements reflects all adjustments necessary to present fairly the Company’s consolidated financial position, results of operations, changes in stockholders’ equity and cash flows for such interim periods. Management believes that all interim period adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto as of December 31, 2016, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. The results of operations for the three-month or nine-month periods ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year.

Critical Accounting Policies

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

10

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

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

Principles of Consolidation

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

Business Segments

The Company reports its activities as a single business segment. In determining the appropriateness of segment definition, the Company considers components of the business about which financial information is available and regularly evaluated relative to resource allocation and performance assessment.

Business Combinations

Generally, acquisitions are accounted for under the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations. A business combination occurs when the Company acquires net assets that constitute a business, or acquires equity interests in one or more other entities that are businesses and obtains control over those entities. Business combinations are effected through the transfer of consideration consisting of cash and/or common stock and are accounted for using the acquisition method. Accordingly, the assets and liabilities of the acquired entity are recorded at their respective fair values as of the closing date of the acquisition. Determining the fair value of assets and liabilities, especially the loan portfolio, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are subject to refinement for up to one year after the closing date of the acquisition as information relative to closing date fair values becomes available. The results of operations of an acquired entity are included in our consolidated results from the closing date of the merger, and prior periods are not restated. No allowance for loan losses related to the acquired loans is recorded on the acquisition date because the fair value of the loans acquired incorporates assumptions regarding future credit losses. The fair value estimates associated with the acquired loans include estimates related to expected prepayments and the amount and timing of expected principal, interest and other cash flows.

Use of Estimates

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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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

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

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

11

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

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

Use of Estimates, continued

The Company seeks strategies that minimize the tax effect of implementing their business strategies. As such, judgments are made regarding the ultimate consequence of long-term tax planning strategies, including the likelihood of future recognition of deferred tax benefits. The Company’s tax returns are subject to examination by both Federal and State authorities. Such examinations may result in the assessment of additional taxes, interest and penalties. As a result, the ultimate outcome, and the corresponding financial statement impact, can be difficult to predict with accuracy.

Accounting for pension benefits, costs and related liabilities are developed using actuarial valuations. These valuations include key assumptions determined by management, including the discount rate and expected long-term rate of return on plan assets. Material changes in pension costs may occur in the future due to changes in these assumptions.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents includes cash and amounts due from banks (including cash items in process of collection), interest-bearing deposits with banks and federal funds sold.

Trading Securities

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

Securities Held to Maturity

Bonds, notes, and debentures for which the Company has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity. The Company does not currently hold any securities classified as held to maturity.

Securities Available for Sale

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

Unrealized holding gains and losses, net of tax, on available for sale securities are reported as a net amount in a separate component of accumulated other comprehensive income. Realized gains and losses on the sale of available for sale securities are determined using the specific-identification method. Premiums and discounts are recognized in interest income using the interest method over the period to maturity.

Declines in the fair value of individual held to maturity and available for sale securities below cost that are other than temporary are reflected as write-downs of the individual securities to fair value. Related write-downs are included in earnings as realized losses.

12

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

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

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal amount adjusted for any charge-offs and the allowance for loan losses. Loan origination costs are capitalized and recognized as an adjustment to yield over the life of the related loan.

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

Purchased Performing Loans – The Company accounts for performing loans acquired in business combinations using the contractual cash flows method of recognizing discount accretion based on the acquired loans’ contractual cash flows. Purchased performing loans are recorded at fair value, including a credit discount. The fair value discount is accreted as an adjustment to yield over the estimated lives of the loans. There is no allowance for loan losses established at the acquisition date for purchased performing loans. A provision for loan losses is recorded for any further deterioration in these loans subsequent to the acquisition

Purchased Credit-Impaired (“PCI”) Loans – Loans purchased with evidence of credit deterioration since origination, and for which it is probable that all contractually required payments will not be collected, are considered credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as internal risk grade and past due and nonaccrual status. Purchased impaired loans generally meet the Company’s definition for nonaccrual status. PCI loans are initially measured at fair value, which reflects estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date. Any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference, and is available to absorb credit losses on those loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent significant increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or a reclassification of the nonaccretable difference with a positive impact on future interest income.

Allowance for Loan Losses

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

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

13

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

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

Allowance for Loan Losses, continued

The allowance consists of specific, general and unallocated components. The specific component is calculated on an individual basis for larger-balance, non-homogeneous loans, which are considered impaired. A specific allowance is established when the discounted cash flows, collateral value (less disposal costs), or observable market price of the impaired loan is lower than its carrying value. The specific component of the allowance for smaller- balance loans whose terms have been modified in a troubled debt restructuring (TDR) is calculated on a pooled basis considering historical experience adjusted for qualitative factors. The general component covers non-impaired loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

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

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are the subject of a restructuring agreement.

Troubled Debt Restructurings

Under GAAP, the Bank is required to account for certain loan modifications or restructurings as “troubled debt restructurings” or “troubled debt restructured loans.” In general, the modification or restructuring of a debt constitutes a troubled debt restructuring if the Bank for economic or legal reasons related to the borrower’s financial difficulties grants a concession to the borrower that the Bank would not otherwise consider. Debt restructuring or loan modifications for a borrower do not necessarily always constitute a troubled debt restructuring, however, and troubled debt restructurings do not necessarily result in non-accrual loans. Troubled debt restructured loans are maintained in nonaccrual status until they have been performing in accordance with modified terms for a period of at least six months.

Property and Equipment

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

	Years
Buildings and improvements		10-40
Furniture and equipment		5-12

14

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

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

Foreclosed Assets

Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value less anticipated cost to sell at the date of foreclosure, establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in foreclosure expense on the consolidated statements of income.

Pension Plan

Prior to the merger, both Grayson National Bank (Grayson) and Bank of Floyd (Floyd) had qualified noncontributory defined benefit pension plans in place which covered substantially all of each bank’s employees. The benefits in each plan are primarily based on years of service and earnings. Both Grayson and Floyd plans were amended to freeze benefit accruals for all eligible employees prior to the effective date of the merger. Grayson’s plan is a single-employer plan, the funded status of which is measured as the difference between the fair value of plan assets and the projected benefit obligation. Floyd’s plan is a multi-employer plan for accounting purposes and is a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code.

Transfers of Financial Assets

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

Core Deposit Intangible

Core deposit intangibles represent the value of long-term deposit relationships acquired in a business combination. Core deposit intangibles are amortized over the estimated useful lives of the deposit accounts acquired (generally twenty years on an accelerated basis).

Income Taxes

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

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more likely than not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more likely than not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

15

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

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

Advertising Expense

The Company expenses advertising costs as they are incurred. Advertising expense for the years presented is not material.

Basic Earnings per Share

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

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income includes unrealized gains and losses on securities available for sale and changes in the funded status of the pension plan which are also recognized as separate components of equity. The accumulated balances related to each component of other comprehensive income (loss) are as follows:

(dollars in thousands)	Unrealized Gains And (Losses) On Available for Sale Securities			Defined Benefit Pension Items			Total
Balance, December 31, 2015	$	(116	)	$	(608	)	$	(724	)
Other comprehensive gain before reclassifications		872			—			872
Amounts reclassified from accumulated other comprehensive gain		(241	)		—			(241	)
Balance September 30, 2016	$	515		$	(608	)	$	(93	)
Balance, December 31, 2016	$	(574	)	$	(780	)	$	(1,354	)
Other comprehensive gain before reclassifications		576			—			576
Amounts reclassified from accumulated other comprehensive gain		(83	)		—			(83	)
Balance September 30, 2017	$	(81	)	$	(780	)	$	(861	)

Off-Balance Sheet Credit Related Financial Instruments

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

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 7. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates.

Reclassification

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

16

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

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

Recent Accounting Pronouncements

The following accounting standards may affect the future financial reporting by the Company:

In May 2014, the 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 full retrospective approach. The Company does not expect these amendments to have a material effect on its consolidated 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 reposting periods beginning after December 15, 2017. The Company will apply the guidance using a full retrospective approach. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In November 2015, the FASB amended the Income Taxes topic of the Accounting Standards Codification to simplify the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments will be effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted as of the beginning of an interim or annual reporting period. The Company applied the guidance prospectively. These amendments did not have a material effect on the Company’s consolidated financial statements.

In January 2016, the FASB amended the Financial Instruments topic of the Accounting Standards Codification 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 consolidated financial statements.

In February 2016, the FASB amended the Leases topic of the Accounting Standards Codification 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. Early adoption is permitted. 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 March 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification 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 April 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to identifying performance obligations and accounting for licenses of intellectual property. 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.

17

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

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

Recent Accounting Pronouncements, continued

In May 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. 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. 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 August 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements.

In October 2016, the FASB amended the Income Taxes topic of the Accounting Standards Codification to modify the accounting for intra-entity transfers of assets other than inventory. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In November 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how restricted cash is presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

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 full retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2017, the FASB issued guidance to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendment to the Business Combinations Topic is intended to address concerns that the existing definition of a business has been applied too broadly and has resulted in many transactions being recorded as business acquisitions that in substance are more akin to asset acquisitions. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. Early adoption is permitted. 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.

18

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

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

Recent Accounting Pronouncements, continued

In January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In February 2017, the FASB amended the Other Income Topic of the Accounting Standards Codification 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.

In March 2017, the FASB amended the requirements in the Compensation—Retirement Benefits Topic of the Accounting Standards Codification related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2017, the FASB amended the requirements in the Receivables—Nonrefundable Fees and Other Costs Topic of the Accounting Standards Codification related to the amortization period for certain purchased callable debt securities held at a premium. The amendments shorten the amortization period for the premium to the earliest call date. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. 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 consolidated financial position, results of operations or cash flows.

19

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 2. Investment Securities

Debt and equity securities have been classified in the consolidated balance sheets according to management’s intent. The amortized cost of securities and their approximate fair values at September 30, 2017 and December 31, 2016 follow:

(dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2017
Available for sale:
Government sponsored enterprises	$	25	$	95	$	—		$	120
Mortgage-backed securities		29,359		5		(349	)		29,015
Corporate securities		3,027		—		(70	)		2,957
State and municipal securities		19,646		250		(55	)		19,841
	$	52,057	$	350	$	(474	)	$	51,933
December 31, 2016
Available for sale:
Government sponsored enterprises	$	2,046	$	236	$	(73	)	$	2,209
Mortgage-backed securities		36,021		4		(823	)		35,202
Corporate securities		3,061		—		(87	)		2,974
State and municipal securities		22,282		97		(224	)		22,155
	$	63,410	$	337	$	(1,207	)	$	62,540

Restricted equity securities were $1.4 million and $1.1 million at September 30, 2017 and December 31, 2016, respectively. Restricted equity securities consist of investments in stock of the Federal Home Loan Bank of Atlanta (FHLB), Community Bankers Bank, Pacific Coast Bankers Bank, and the Federal Reserve Bank of Richmond, all of which are carried at cost. All of these entities are upstream correspondents of the Bank. The FHLB requires financial institutions to make equity investments in the FHLB in order to borrow money. The Bank is required to hold that stock so long as it borrows from the FHLB. The Federal Reserve requires Banks to purchase stock as a condition for membership in the Federal Reserve System. The Bank’s stock in Community Bankers Bank and Pacific Coast Bankers Bank is restricted only in the fact that the stock may only be repurchased by the respective banks.

The following tables details unrealized losses and related fair values in the Company’s held to maturity and available for sale investment securities portfolios. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2017 and December 31, 2016.

	Less Than 12 Months					12 Months or More					Total
(dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2017
Available for sale:
Government sponsored enterprises	$	—	$	—		$	—	$	—		$	—	$	—
Mortgage-backed securities		23,487		(331	)		650		(18	)		24,137		(349	)
Corporate securities		1,526		(1	)		1,431		(69	)		2,957		(70	)
State and municipal securities		4,058		(26	)		1,741		(29	)		5,799		(55	)
Total securities available for sale	$	29,071	$	(358	)	$	3,822	$	(116	)	$	32,893	$	(474	)
December 31, 2016
Available for sale:
Government sponsored enterprises	$	—	$	—		$	1,924	$	(73	)	$	1,924	$	(73	)
Mortgage-backed securities		31,759		(789	)		688		(34	)		32,447		(823	)
Corporate securities		1,548		(12	)		1,425		(75	)		2,973		(87	)
State and municipal securities		12,208		(224	)		—		—			12,208		(224	)
Total securities available for sale	$	45,515	$	(1,025	)	$	4,037	$	(182	)	$	49,552	$	(1,207	)

20

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 2. Investment Securities, continued

At September 30, 2017, debt securities with unrealized losses had combined losses of $474 thousand, or 1.42 percent of their amortized cost basis. 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 the length of time and the extent to which the fair value has been less than cost, and the financial condition and near-term prospects of the issuer. The relative significance of these and other factors will vary on a case by case basis. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition and the issuer’s anticipated ability to pay the contractual cash flows of the investments. Since the Company has the ability to hold all of its investment securities until maturity, and it is more likely than not that the Company will not have to sell any of its investment securities before unrealized losses have been recovered, and the Company expects to recover the entire amount of the amortized cost basis of all its securities, none of the securities are deemed other than temporarily impaired at September 30, 2017. Management continues to monitor all of these securities with a high degree of scrutiny. There can be no assurance that the Company will not conclude in future periods that conditions existing at that time indicate some or all of these securities are other than temporarily impaired, which could require a charge to earnings in such periods.

Proceeds from sales of investment securities available for sale were $8.5 million and $55.1 million for the nine month periods ended September 30, 2017 and 2016, respectively and $7.9 million and $37.2 million for the three month periods ended September 30, 2017 and 2016, respectively. Gains and losses on the sale of investment securities are recorded on the trade date and are determined using the specific identification method. Gross realized gains and losses for the nine-month and three-month periods ended September 30, 2017 and 2016 are as follows:

	Nine Months Ended September 30,						Three Months Ended September 30,
(dollars in thousands)	2017			2016			2017			2016
Realized gains	$	141		$	369		$	28		$	—
Realized losses		(15	)		(5	)		(15	)		(1	)
	$	126		$	364		$	13		$	(1	)

There were no securities transferred between the available for sale and held to maturity portfolios or other sales of held to maturity securities during the periods presented. In the future management may elect to classify securities as held to maturity based upon such considerations as the nature of the security, the Bank’s ability to hold the security until maturity, and general economic conditions.

The scheduled maturities of securities available for sale at September 30, 2017, were as follows:

(dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	733	$	736
Due after one year through five years		8,491		8,522
Due after five years through ten years		21,403		21,200
Due after ten years		21,430		21,475
	$	52,057	$	51,933

Maturities of mortgage backed securities are based on contractual amounts. Actual maturity will vary as loans underlying the securities are prepaid.

Investment securities with amortized cost of approximately $11.3 million and $11.2 million at September 30, 2017 and December 31, 2016, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

21

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 3. Loans Receivable

The major components of loans in the consolidated balance sheets at September 30, 2017 and December 31, 2016 are as follows:

	2017			2016
Commercial & agricultural	$	28,605		$	26,086
Commercial mortgage		125,149			128,515
Construction & development		25,557			26,464
Farmland		34,096			33,531
Residential		198,141			187,188
Consumer & other		11,725			10,184
Total loans		423,273			411,968
Allowance for loan losses		(3,530	)		(3,420	)
Loans, net of allowance for loan losses	$	419,743		$	408,548

As of September 30, 2017 and December 31, 2016, substantially all of the Bank’s residential 1-4 family loans were pledged as collateral toward borrowings with the Federal Home Loan Bank.

Note 4. Allowance for Loan Losses and Impaired Loans

Allowance for Loan Losses

The allowance for loan losses is maintained at a level believed to be sufficient to provide for estimated loan losses based on evaluating known and inherent risks in the loan portfolio. The allowance is provided based upon management’s comprehensive analysis of the pertinent factors underlying the quality of the loan portfolio. These factors include changes in the amount and composition of the loan portfolio, delinquency levels, actual loss experience, current economic conditions, and detailed analysis of individual loans for which the full collectability may not be assured. The detailed analysis includes methods to estimate the fair value of loan collateral and the existence of potential alternative sources of repayment. The allowance consists of specific and general components. The specific component is calculated on an individual basis for larger-balance, non-homogeneous loans, which are considered impaired. A specific allowance is established when the discounted cash flows, collateral value (less disposal costs), or observable market price of the impaired loan is lower than its carrying value. The specific component of the allowance for smaller-balance loans whose terms have been modified in a troubled debt restructuring (TDR) is calculated on a pooled basis considering historical experience adjusted for qualitative factors. These smaller-balance TDRs were collectively evaluated for impairment. The general component covers the remaining loan portfolio, and is based on historical loss experience adjusted for qualitative factors. The appropriateness of the allowance for loan losses on loans is estimated based upon these factors and trends identified by management at the time financial statements are prepared.

A provision for loan losses is charged against operations and is added to the allowance for loan losses based on quarterly comprehensive analyses of the loan portfolio. The allowance for loan losses is allocated to certain loan categories based on the relative risk characteristics, asset classifications and actual loss experience of the loan portfolio. While management has allocated the allowance for loan losses to various loan portfolio segments, the allowance is general in nature and is available for the loan portfolio in its entirety.

As of September 30, 2017 and December 31, 2016, the Bank had no unallocated reserves included in the allowance for loan losses.

22

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

Allowance for Loan Losses, continued

The following table presents activity in the allowance for loan losses by loan category three months ended September 30, 2017 and 2016 and the related asset balances as of September 30, 2017 and December 31, 2016:

Allowance for Loan Losses and Recorded Investment in Loans

	Commercial						Construction
	&			Commercial			&									Consumer
(dollars in thousands)	Agricultural			Mortgage			Development			Farmland			Residential			& Other			Total
For the Three Months Ended September 30, 2017
Allowance for loan losses:
Balance, June 30, 2017	$	214		$	620		$	329		$	393		$	1,938		$	74		$	3,568
Charge-offs		—			—			—			(34	)		(76	)		(13	)		(123	)
Recoveries		2			—			—			—			4			4			10
Provision		57			28			(75	)		8			46			11			75
Balance, September 30, 2017	$	273		$	648		$	254		$	367		$	1,912		$	76		$	3,530
For the Three Months Ended September 30, 2016
Allowance for loan losses:
Balance, June 30, 2016	$	188		$	571		$	269		$	522		$	1,717		$	42		$	3,309
Charge-offs		—			(10	)		(20	)		—			(19	)		(19	)		(68	)
Recoveries		2			—			49			55			6			18			130
Provision		35			45			(52	)		(5	)		61			25			109
Balance, September 30, 2016	$	225		$	606		$	246		$	572		$	1,765		$	66		$	3,480
For the Nine Months Ended September 30, 2017
Allowance for loan losses:
Balance, December 31, 2016	$	210		$	600		$	319		$	342		$	1,841		$	108		$	3,420
Charge-offs		(27	)		(42	)		—			(34	)		(89	)		(51	)		(243	)
Recoveries		31			—			56			—			19			14			120
Provision		59			90			(121	)		59			141			5			233
Balance, September 30, 2017	$	273		$	648		$	254		$	367		$	1,912		$	76		$	3,530
For the Nine Months Ended September 30, 2016
Allowance for loan losses:
Balance, December 31, 2015	$	136		$	578		$	344		$	435		$	1,887		$	38		$	3,418
Charge-offs		(19	)		(21	)		(20	)		—			(44	)		(56	)		(160	)
Recoveries		6			—			93			55			22			32			208
Provision		102			49			(171	)		82			(100	)		52			14
Balance, September 30, 2016	$	225		$	606		$	246		$	572		$	1,765		$	66		$	3,480
September 30, 2017
Allowance for loan losses:
Ending balance	$	273		$	648		$	254		$	367		$	1,912		$	76		$	3,530
Ending balance: individually evaluated for impairment	$	—		$	—		$	—		$	47		$	86		$	—		$	133
Ending balance: collectively evaluated for impairment	$	273		$	648		$	254		$	320		$	1,826		$	76		$	3,397
Loans outstanding:
Ending balance	$	28,605		$	125,149		$	25,557		$	34,096		$	198,141		$	11,725		$	423,273
Ending balance: individually evaluated for impairment	$	—		$	113		$	180		$	5,435		$	1,565		$	—		$	7,293
Ending balance: collectively evaluated for impairment	$	28,605		$	125,036		$	25,377		$	28,661		$	196,576		$	11,725		$	415,980
December 31, 2016
Allowance for loan losses:
Ending balance	$	210		$	600		$	319		$	342		$	1,841		$	108		$	3,420
Ending balance: individually evaluated for impairment	$	—		$	—		$	—		$	57		$	184		$	—		$	241
Ending balance: collectively evaluated for impairment	$	210		$	600		$	319		$	285		$	1,657		$	108		$	3,179
Loans outstanding:
Ending balance	$	26,086		$	128,515		$	26,464		$	33,531		$	187,188		$	10,184		$	411,968
Ending balance: individually evaluated for impairment	$	—		$	114		$	580		$	5,030		$	1,533		$	—		$	7,257
Ending balance: collectively evaluated for impairment	$	26,086		$	128,401		$	25,884		$	28,501		$	185,655		$	10,184		$	404,711

23

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

Allowance for Loan Losses, continued

Management closely monitors the quality of the loan portfolio and has established a loan review process designed to help grade the quality of the Bank’s loan portfolio. The Bank’s loan ratings coincide with the “Substandard,” “Doubtful” and “Loss” classifications used by federal regulators in their examination of financial institutions. Generally, an asset is considered Substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. Substandard assets include those characterized by the distinct possibility that the insured financial institution will sustain some loss if the deficiencies are not corrected. Assets classified as Doubtful have all the weaknesses inherent in assets classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable. Assets classified as Loss are those considered uncollectible, and of such little value that its continuance on the books is not warranted. Assets that do not currently expose the insured financial institutions to sufficient risk to warrant classification in one of the aforementioned categories but otherwise possess weaknesses are designated “Special Mention.” Management also maintains a listing of loans designated “Watch”. These loans represent borrowers with declining earnings, strained cash flow, increasing leverage and/or weakening market fundamentals that indicate above average risk. As of September 30, 2017 and December 31, 2016, respectively, the Bank had no loans graded “Doubtful” or “Loss” included in the balance of total loans outstanding.

The following table lists the loan grades utilized by the Bank and the corresponding total of outstanding loans in each category as of September 30, 2017 and December 31, 2016:

Credit Risk Profile by Internally Assigned Grades

	Loan Grades
					Special
(dollars in thousands)	Pass		Watch		Mention		Substandard		Total
September 30, 2017
Real Estate Secured:
1-4 residential construction	$	2,860	$	—	$	—	$	—	$	2,860
Commercial construction		2,446		—		—		—		2,446
Land development & other land		19,093		615		—		543		20,251
Farmland		23,436		5,790		8		4,862		34,096
1-4 residential mortgage		127,760		10,155		258		2,668		140,841
Multifamily		28,360		1,095		—		—		29,455
Home equity and second mortgage		25,832		1,883		—		130		27,845
Commercial mortgage		105,056		12,938		1,815		5,340		125,149
Non-Real Estate Secured:
Commercial & agricultural		25,563		1,866		640		536		28,605
Civic organizations		4,166		—		—		—		4,166
Consumer-auto		1,689		81		—		—		1,770
Consumer-other		5,632		157		—		—		5,789
Total	$	371,893	$	34,580	$	2,721	$	14,079	$	423,273

24

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

Allowance for Loan Losses, continued

	Loan Grades
(dollars in thousands)	Pass		Watch		Special Mention		Substandard		Total
December 31, 2016
Real Estate Secured:
1-4 residential construction	$	4,056	$	370	$	—	$	—	$	4,426
Commercial construction		2,603		—		—		—		2,603
Land development & other land		18,000		532		—		903		19,435
Farmland		23,201		5,276		—		5,054		33,531
1-4 residential mortgage		122,301		11,517		—		2,111		135,929
Multifamily		25,365		1,321		—		—		26,686
Home equity and second mortgage		23,219		1,243		—		111		24,573
Commercial mortgage		105,317		13,449		3,353		6,396		128,515
Non-Real Estate Secured:
Commercial & agricultural		22,719		2,333		485		549		26,086
Civic organizations		3,603		—		—		—		3,603
Consumer-auto		1,400		21		—		—		1,421
Consumer-other		5,015		105		—		40		5,160
Total	$	356,799	$	36,167	$	3,838	$	15,164	$	411,968

Loans may be placed in nonaccrual status when, in management’s opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received. Payments received are first applied to principal, and any remaining funds are then applied to interest. Loans are removed from nonaccrual status when they are deemed a loss and charged to the allowance, transferred to foreclosed assets, or returned to accrual status based upon performance consistent with the original terms of the loan or a subsequent restructuring thereof.

The following table presents an age analysis of nonaccrual and past due loans by category as of September 30, 2017 and December 31, 2016:

Analysis of Past Due and Nonaccrual Loans

(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total loans		90+ Days Past Due and Still Accruing		Nonaccrual Loans
September 30, 2017
Real Estate Secured:
1-4 residential construction	$	—	$	—	$	—	$	—	$	2,860	$	2,860	$	—	$	—
Commercial construction		—		—		—		—		2,446		2,446		—		—
Land development & other land		—		33		475		508		19,743		20,251		—		475
Farmland		—		—		728		728		33,368		34,096		—		4,031
1-4 residential mortgage		433		145		607		1,185		139,656		140,841		—		795
Multifamily		—		—		—		—		29,455		29,455		—		—
Home equity and second mortgage		149		214		125		488		27,357		27,845		—		130
Commercial mortgage		—		—		203		203		124,946		125,149		—		211
Non-Real Estate Secured:
Commercial & agricultural		26		20		23		69		28,536		28,605		—		96
Civic organizations		—		—		—		—		4,166		4,166		—		—
Consumer-auto		—		—		—		—		1,770		1,770		—		—
Consumer-other		9		—		—		9		5,780		5,789		—		—
Total	$	617	$	412	$	2,161	$	3,190	$	420,083	$	423,273	$	—	$	5,738

25

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

Allowance for Loan Losses, continued

(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total loans		90+ Days Past Due and Still Accruing		Nonaccrual Loans
December 31, 2016
Real Estate Secured:
1-4 residential construction	$	—	$	—	$	—	$	—	$	4,426	$	4,426	$	—	$	—
Commercial construction		—		—		—		—		2,603		2,603		—		—
Land development & other land		—		—		390		390		19,045		19,435		—		647
Farmland		343		—		—		343		33,188		33,531		—		3,310
1-4 residential mortgage		315		48		14		377		135,552		135,929		—		26
Multifamily		—		—		—		—		26,686		26,686		—		—
Home equity and second mortgage		98		—		5		103		24,470		24,573		—		5
Commercial mortgage		25		227		426		678		127,837		128,515		—		640
Non-Real Estate Secured:
Commercial & agricultural		67		—		25		92		25,994		26,086		—		31
Civic organizations		—		—		—		—		3,603		3,603		—		—
Consumer-auto		5		—		—		5		1,416		1,421		—		—
Consumer-other		—		6		—		6		5,154		5,160		—		5
Total	$	853	$	281	$	860	$	1,994	$	409,974	$	411,968	$	—	$	4,664

Impaired Loans

A loan is considered impaired when it is probable that the Bank will be unable to collect all contractual principal and interest payments due in accordance with the original or modified terms of the loan agreement. Smaller balance homogenous loans may be collectively evaluated for impairment. Non-homogenous impaired loans are either measured based on the estimated fair value of the collateral less estimated cost to sell if the loan is considered collateral dependent, or measured based on the present value of expected future cash flows if not collateral dependent. The valuation of real estate collateral is subjective in nature and may be adjusted in future periods because of changes in economic conditions. Management considers third-party appraisals, as well as independent fair market value assessments in determining the estimated fair value of particular properties. In addition, as certain of these third-party appraisals and independent fair market value assessments are only updated periodically, changes in the values of specific properties may have occurred subsequent to the most recent appraisals. Accordingly, the amounts of any such potential changes and any related adjustments are generally recorded at the time such information is received. When the measurement of the impaired loan is less than the recorded investment in the loan, impairment is recognized by creating or adjusting an allocation of the allowance for loan losses and uncollected accrued interest is reversed against interest income. If ultimate collection of principal is in doubt, all cash receipts on impaired loans are applied to reduce the principal balance.

As of September 30, 2017 and December 31, 2016, respectively, the recorded investment in impaired loans totaled $13.2 million and $13.3 million. The total amount of collateral-dependent impaired loans at September 30, 2017 and December 31, 2016, respectively, was $4.4 million and $4.0 million. As of September 30, 2017 and December 31, 2016, respectively, $4.1 million and $4.4 million of the recorded investment in impaired loans did not have a related allowance. The Bank had $9.1 million and $10.0 million in troubled debt restructured loans included in impaired loans at September 30, 2017 and December 31, 2016, respectively.

The categories of non-accrual loans and impaired loans overlap, although they are not coextensive. The Bank considers all circumstances regarding the loan and borrower on an individual basis when determining whether an impaired loan should be placed on non-accrual status, such as the financial strength of the borrower, the estimated collateral value, reasons for the delay, payment record, the amount past due and the number of days past due.

26

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Loans and the Allowance for Loan Losses, continued

Impaired Loans, continued

In 2015, management began collectively evaluating performing TDRs with a loan balance of $250,000 or less for impairment. As of September 30, 2017 and December 31, 2016, respectively, $5.9 million and $6.1 million of TDRs included in the following table were evaluated collectively for impairment and were deemed to have $328 thousand and $315 thousand of related allowance.

The following table is a summary of information related to impaired loans as of September 30, 2017 and December 31, 2016:

Impaired Loans

							Nine months ended				Three months ended
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
(dollars in thousands)	Investment1		Balance		Allowance		Investment		Recognized		Investment		Recognized
September 30, 2017
With no related allowance recorded:
1-4 Residential Construction	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Land development & other land		181		181		—		336		—		238		—
Farmland		3,778		3,812		—		3,895		1		3,861		—
1-4 residential mortgage		—		—		—		—		—		—		—
Home equity and second mortgage		—		—		—		—		—		—		—
Commercial mortgage		113		113		—		114		—		113		—
Commercial & agricultural		—		—		—		—		—		—		—
Consumer & other		—		—		—		—		—		—		—
Subtotal		4,072		4,106		—		4,345		1		4,212		—
With an allowance recorded:
1-4 Residential Construction		—		—		—		—		—		—		—
Land development & other land		398		398		22		417		10		406		3
Farmland		2,096		2,096		73		2,234		95		2,106		28
1-4 residential mortgage		5,732		5,917		309		6,246		220		6,185		70
Home equity and second mortgage		291		291		26		298		6		297		2
Commercial mortgage		496		632		27		910		49		720		6
Commercial & agricultural		69		95		4		121		9		99		1
Consumer & other		—		—		—		2		2		—		1
Subtotal		9,082		9,429		461		10,228		391		9,813		111
Totals:
1-4 Residential Construction		—		—		—		—		—		—		—
Land development & other land		579		579		22		753		10		644		3
Farmland		5,874		5,908		73		6,129		96		5,967		28
1-4 residential mortgage		5,732		5,917		309		6,246		220		6,185		70
Home equity and second mortgage		291		291		26		298		6		297		2
Commercial mortgage		609		745		27		1,024		49		833		6
Commercial & agricultural		69		95		4		121		9		99		1
Consumer & other		—		—		—		2		2		—		1
Total	$	13,154	$	13,535	$	461	$	14,573	$	392	$	14,025	$	111

¹  Recorded investment is the loan balance, net of any charge-offs

27

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

Impaired Loans, continued

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
(dollars in thousands)	Investment1		Balance		Allowance		Investment		Recognized
December 31, 2016
With no related allowance recorded:
1-4 Residential Construction	$	—	$	—	$	—	$	—	$	—
Land development & other land		581		581		—		840		17
Farmland		3,660		3,660		—		4,170		18
1-4 residential mortgage		—		—		—		347		10
Home equity and second mortgage		—		—		—		—		—
Commercial mortgage		114		114		—		115		4
Commercial & agricultural		—		—		—		—		—
Consumer & other		—		—		—		—		1
Subtotal		4,355		4,355		—		5,472		50
With an allowance recorded:
1-4 Residential Construction		—		—		—		—		—
Land development & other land		193		193		10		201		16
Farmland		1,679		1,679		73		1,705		84
1-4 residential mortgage		5,964		6,121		414		6,375		294
Home equity and second mortgage		174		179		9		254		8
Commercial mortgage		838		974		44		1,035		39
Commercial & agricultural		113		113		6		155		9
Consumer & other		4		4		—		10		1
Subtotal		8,965		9,263		556		9,735		451
Totals:
1-4 Residential Construction		—		—		—		—		—
Land development & other land		774		774		10		1,041		33
Farmland		5,339		5,339		73		5,875		102
1-4 residential mortgage		5,964		6,121		414		6,722		304
Home equity and second mortgage		174		179		9		254		8
Commercial mortgage		952		1,088		44		1,150		43
Commercial & agricultural		113		113		6		155		9
Consumer & other		4		4		—		10		2
Total	$	13,320	$	13,618	$	556	$	15,207	$	501

¹  Recorded investment is the loan balance, net of any charge-offs

Troubled Debt Restructuring

A troubled debt restructured loan is a loan for which the Bank, for reasons related to the borrower’s financial difficulties, grants a concession to the borrower that the Bank would not otherwise consider.

The loan terms which have been modified or restructured due to a borrower’s financial difficulty, include but are not limited to: a reduction in the stated interest rate; an extension of the maturity at an interest rate below current market; a reduction in the face amount of the debt; a reduction in the accrued interest; or re-aging, extensions, deferrals and renewals. Troubled debt restructured loans are considered impaired loans.

28

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

Troubled Debt Restructuring, continued

The following table sets forth information with respect to the Bank’s troubled debt restructurings as of September 30, 2017 and September 30, 2016:

For the Nine Months Ended September 30, 2017

							TDRs identified in the last twelve
(dollars in thousands)	TDRs identified during the period						months that subsequently defaulted(1)
			Pre-		Post-				Pre-		Post-
			modification		modification				modification		modification
	Number		outstanding		outstanding		Number		outstanding		outstanding
	of		recorded		recorded		of		recorded		recorded
	contracts		investment		investment		contracts		investment		investment
Land development & other land		—	$	—	$	—		—	$	—	$	—
Farmland		2		298		298		—		—		—
1-4 residential mortgage		1		48		48		—		—		—
Commercial mortgage		—		—		—		—		—		—
Commercial & agricultural		—		—		—		—		—		—
Consumer & other		—		—		—		—		—		—
Total		3	$	346	$	346		—	$	—	$	—

During the nine months ended September 30, 2017, three loans were modified that were considered to be TDRs. Term concessions only were granted and no additional funds were advanced. No TDRs identified in the last twelve months subsequently defaulted in the quarter ended September 30, 2017.

⁽¹⁾ Loans past due 30 days or more are considered to be in default.

During the three months ended September 30, 2017, no loans were modified that were considered to be a TDR.

⁽¹⁾ Loans past due 30 days or more are considered to be in default.

29

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

Troubled Debt Restructuring, continued

For the Nine Months Ended September 30, 2016

							TDRs identified in the last twelve
(dollars in thousands)	TDRs identified during the period						months that subsequently defaulted(1)
			Pre-		Post-				Pre-		Post-
			modification		modification				modification		modification
	Number		outstanding		outstanding		Number		outstanding		outstanding
	of		recorded		recorded		of		recorded		recorded
	contracts		investment		investment		contracts		investment		investment
Land development & other land		—	$	—	$	—		—	$	—	$	—
Farmland		—		—		—		—		—		—
1-4 residential mortgage		5		565		588		—		—		—
Commercial mortgage		—		—		—		—		—		—
Commercial & agricultural		—		—		—		—		—		—
Consumer & other		—		—		—		—		—		—
Total		5	$	565	$	588		—	$	—	$	—

During the nine months ended September 30, 2016, five loans were modified that were considered to be TDRs. Term concessions only were granted for five loans; and additional funds were advanced on two loans to pay real estate taxes and closing costs. No TDRs identified in twelve months prior to September 30, 2016 subsequently defaulted in the quarter ended September 30, 2016.

During the three months ended September 30, 2016, no loans were modified that were considered to be a TDR.

⁽¹⁾ Loans past due 30 days or more are considered to be in default.

30

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 5. Employee Benefit Plan

The Bank has a qualified noncontributory defined benefit pension plan that covers substantially all of its employees. Effective December 31, 2012, the pension plan was amended to freeze benefit accruals for all eligible employees. The following is a summary of net periodic pension costs for the nine-month and three-month periods ended September 30, 2017 and 2016.

	Nine Months Ended September 30,						Three Months Ended September 30,
(dollars in thousands)	2017			2016			2017			2016
Service cost	$	—		$	—		$	—		$	—
Interest cost		144			147			48			49
Expected return on plan assets		(414	)		(419	)		(138	)		(140	)
Amortization of prior service cost		—			—			—			—
Recognized net loss due to settlement		—			—			—			—
Recognized net actuarial (gain)/loss		21			8			7			3
Net periodic benefit cost	$	(249	)	$	(264	)	$	(83	)	$	(88	)

It has been Bank practice to contribute the maximum tax-deductible amount each year as determined by the plan administrator. As a result of prior year contributions exceeding the minimum requirements, a Prefunding Balance existed as of December 31, 2016 and there is no required contribution for 2017. Based on this we do not anticipate making a contribution to the plan in 2017.

Note 6. Commitments and Contingencies

Litigation

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

Financial Instruments with Off-Balance Sheet Risk

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

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as for on-balance sheet instruments. A summary of the Bank’s commitments at September 30, 2017 and December 31, 2016 is as follows:

	September 30,		December 31,
(dollars in thousands)	2017		2016
Commitments to extend credit	$	50,562	$	54,667
Standby letters of credit		1,118		—
	$	51,680	$	54,667

31

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 6. Commitments and Contingencies, continued

Financial Instruments with Off-Balance Sheet Risk, continued

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

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

Concentrations of Credit Risk

Substantially all of the Bank’s loans, commitments to extend credit, and standby letters of credit have been granted to customers in the Bank’s market area and such customers are generally depositors of the Bank. Investments in state and municipal securities involve governmental entities within and outside the Bank’s market area. The concentrations of credit by type of loan are set forth in Note 5. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Standby letters of credit are granted primarily to commercial borrowers. The Bank’s primary focus is toward small business and consumer transactions, and accordingly, it does not have a significant number of credits to any single borrower or group of related borrowers in excess of $5,000,000. The Bank has cash and cash equivalents on deposit with financial institutions which exceed federally insured limits.

32

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 7. Financial Instruments

FASB ASC 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value of future cash flows or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. FASB ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of September 30, 2017 and December 31, 2016. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

					Fair Value Measurements
					Quoted Prices in
					Active Markets		Significant
					for Identical		Other		Significant
					Assets or		Observable		Unobservable
	Carrying		Fair		Liabilities		Inputs		Inputs
(dollars in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2017
Financial Instruments - Assets
Net Loans	$	419,743	$	417,044	$	—	$	415,867	$	1,177
Financial Instruments – Liabilities
Time Deposits		151,929		149,711		—		149,711		—
December 31, 2016
Financial Instruments - Assets
Net Loans	$	408,548	$	405,876	$	—	$	405,410	$	466
Financial Instruments – Liabilities
Time Deposits		167,355		165,257		—		165,257		—

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

33

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 7. Financial Instruments, continued

Fair Value Hierarchy

Under FASB ASC 820, “Fair Value Measurements and Disclosures”, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

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

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

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

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

Investment Securities Available for Sale

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

Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. If a loan is identified as individually impaired, management measures impairment in accordance with applicable accounting guidance. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value, and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At September 30, 2017, a small percentage of the total impaired loans were evaluated based on the fair value of the collateral. In accordance with accounting standards, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price the Company records the impaired loan as nonrecurring Level 2. When the fair value is based on either an external or internal appraisal and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.

34

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 7. Financial Instruments, continued

Foreclosed Assets

Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price the Company records the foreclosed asset as nonrecurring Level 2. When the fair value of the collateral is based on either an external or internal appraisal and there is no observable market price, the Company records the foreclosed asset as nonrecurring Level 3.

Assets Recorded at Fair Value on a Recurring Basis

(dollars in thousands)	Total		Level 1		Level 2		Level 3
September 30, 2017
Investment securities available for sale
Government sponsored enterprises	$	120	$	—	$	120	$	—
Mortgage-backed securities		29,015		—		29,015		—
Corporate securities		2,957		—		2,957		—
State and municipal securities		19,841		—		19,841		—
Total assets at fair value	$	51,933	$	—	$	51,933	$	—
December 31, 2016
Investment securities available for sale
Government sponsored enterprises	$	2,209	$	—	$	2,209	$	—
Mortgage-backed securities		35,202		—		35,202		—
Corporate securities		2,974		—		2,974		—
State and municipal securities		22,155		—		22,155		—
Total assets at fair value	$	62,540	$	—	$	62,540	$	—

No liabilities were recorded at fair value on a recurring basis as of September 30, 2017 and December 31, 2016. There were no significant transfers between levels during the years ended September 30, 2017 and December 31, 2016.

Assets Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets and liabilities that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. No liabilities were recorded at fair value on a nonrecurring basis at September 30, 2017 and December 31, 2016. Assets measured at fair value on a nonrecurring basis are included in the table below.

September 30, 2017	Total		Level 1		Level 2		Level 3
(dollars in thousands)
Impaired loans	$	1,177	$	—	$	—	$	1,177
Foreclosed assets		—		—		—		—
Total assets at fair value	$	1,177	$	—	$	—	$	1,177
December 31, 2016	Total		Level 1		Level 2		Level 3
(dollars in thousands)
Impaired loans	$	466	$	—	$	—	$	466
Foreclosed assets		70		—		—		70
Total assets at fair value	$	536	$	—	$	—	$	536

35

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 7. Financial Instruments, continued

Assets Recorded at Fair Value on a Nonrecurring Basis

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

	Fair Value at September 30, 2017		Fair Value at December 31, 2016		Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired loans	$	1,177	$	466	Appraised Value/Discounted Cash Flows/Market Value of Note	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0 – 10%
Foreclosed assets	$	—	$	70	Appraised Value/Comparable Sales/Other Estimates from Independent Sources	Discounts to reflect current market conditions and estimated costs to sell	0 – 10%

Note 8. Intangible Assets

The following table presents the gross carrying amount and accumulated amortization for the Company’s core deposit intangible assets, which are the only identifiable intangible assets subject to amortization. Core deposit intangibles at September 30, 2017 and December 31, 2016 is as follows:

	September 30,		December 31,
(dollars in thousands)	2017		2016
Gross carrying amount	$	2,469	$	2,469
Accumulated amortization		354		142
Net book value	$	2,115	$	2,327

36

Parkway Acquisition Corp. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 9. Capital Requirements

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 September 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.

						For Capital					To Be Well-
	Actual					Adequacy Purposes					Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2017
Total capital
(to risk weighted assets)	$	56,037		13.07	%	$	34,302		8.00	%	$	42,878		10.00	%
Tier 1 Capital
(to risk weighted assets)	$	52,433		12.23	%	$	25,727		6.00	%	$	34,302		8.00	%
Common Equity Tier 1
(to risk weighted assets)	$	52,433		12.23	%	$	19,295		4.50	%	$	27,851		6.50	%
Tier 1 Capital
(to average total assets)	$	52,433		9.67	%	$	21,693		4.00	%	$	27,116		5.00	%
December 31, 2016
Total capital
(to risk weighted assets)	$	53,657		12.72	%	$	33,744		8.00	%	$	42,180		10.00	%
Tier 1 Capital
(to risk weighted assets)	$	50,111		11.88	%	$	25,308		6.00	%	$	33,744		8.00	%
Common Equity Tier 1
(to risk weighted assets)	$	50,111		11.88	%	$	18,981		4.50	%	$	27,417		6.50	%
Tier 1 Capital
(to average total assets)	$	50,111		9.01	%	$	22,242		4.00	%	$	27,803		5.00	%

Note 10. Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has evaluated events occurring subsequent to the balance sheet date through the date these financial statements were issued, determining no events require additional disclosure in these consolidated financial statements.

37

Part I. Financial Information

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

General

The following discussion provides information about the major components of the results of operations and financial condition of the Company. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this report.

Critical Accounting Policies

For a discussion of the Company’s critical accounting policies, including its allowance for loan losses, see Note 1 in the Notes to Consolidated Financial Statements above, or the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Results of Operations

Results of Operations for the Three Months ended September 30, 2017 and 2016

The Company recorded pre-tax earnings of $1.7 million for the quarter ended September 30, 2017 compared to pre-tax earnings of $1.5 million for the same period in 2016. Income tax expense increased by $56 thousand from the third quarter of 2016 to 2017 resulting net income of $1.2 million for the third quarter of 2017 compared to net income of $1.0 million for the same period in 2016. The increase in pretax earnings of $167 thousand from the third quarter of 2016 to the third quarter of 2017 was due primarily to a reduction of pre-tax merger related expenses which totaled $484 thousand in the third quarter of 2016 compared to $56 thousand in the third quarter of 2017.

Total interest income decreased by $160 thousand for the quarter ended September 30, 2017 compared to the quarter ended September 30, 2016, while interest expense on deposits decreased by $90 thousand over the same period. The decrease in interest income was attributable primarily to a reduction in the accretion of purchase discounts applied to the Cardinal loan portfolio. Accretion of purchased loan discounts increased interest income by $535 in the third quarter of 2016 compared to an increase of only $227 thousand in the third quarter of 2017, representing a decrease of $308 thousand. Excluding the change in discount accretion, interest income increased by $143 thousand for the quarter ended September 30, 2017 compared to the same period last year due mainly to continued growth in the bank’s loan portfolio. Interest expense on deposits decreased by $90 thousand due to a reduction in the level of higher-yielding time deposits while interest expense on borrowings decreased by $98 thousand due to a reduction in borrowings of $10.0 million in the fourth quarter of 2016. The result was an increase in net interest income of $28 thousand for the quarter ended September 30, 2017, compared to the same quarter last year.

The provision for loan losses was $75 thousand for the quarter ended September 30, 2017, compared to $109 thousand for the quarter ended September 30, 2016. The reserve for loan losses at September 30, 2017 was approximately 0.83% of total loans, compared to 0.86% at September 30, 2016. Management’s estimate of probable credit losses inherent in the acquired Cardinal loan portfolio was reflected as a purchase discount which will continue to be accreted into income over the remaining life of the acquired loans. As of September 30, 2017 the remaining unaccreted discount on the acquired loan portfolio totaled $4.2 million. Management believes the provision and the resulting allowance for loan losses are adequate.

Total noninterest income was $1.0 million in the third quarter of 2017 compared to $1.3 million in the third quarter of 2016. The decrease was due primarily to nonrecurring income items recognized in the third quarter of 2016, including $97 thousand of life insurance proceeds and the recognition of a bargain purchase gain of $182 thousand resulting from the Cardinal acquisition. Excluding these nonrecurring items in 2016, noninterest income increased by $33 thousand for the quarter ended September 30, 2017 compared to the same period last year.

38

Part I. Financial Information

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

Results of Operations, continued

Results of Operations for the Three Months ended September 30, 2017 and 2016, continued

Total noninterest expenses decreased by $351 thousand for the quarter ended September 30, 2017 compared to the quarter ended September 30, 2016 due mainly to a reduction in merger related expenses resulting from the Cardinal acquisition. Salaries and employee benefit expenses decreased by $90 thousand as reductions in the total number of employees offset normal increases in salaries and other benefit costs. Merger related expenses totaled $56 thousand for the quarter ended September 30, 2017 compared to $484 thousand for the quarter ended September 30, 2016.

Results of Operations for the Nine Months ended September 30, 2017 and 2016

For the nine months ended September 30, 2017, total interest income increased by $4.4 million compared to the nine-month period ended September 30, 2016. The Cardinal merger was completed on July 1, 2016; therefore, the operating results for the nine months ended September 30, 2016 include only three months of combined earnings along with six months of Grayson earnings prior to the merger. Accordingly, the increases in interest income on loans and investment securities for the nine-month period ended September 30, 2017 were due primarily to the increased volume resulting from the merger. The increases in interest income on federal funds sold and interest-bearing deposits in banks were due more to increases in overnight borrowing rates established by the Federal Reserve. Interest expense on deposits increased by $126 thousand for the nine-month period ended September 30, 2017 compared to the same period in 2016 as interest expense on acquired deposit balances was partially offset by continued decreases in deposit rates as higher-yielding time deposits repriced to lower rates or migrated to lower-yielding non-maturity deposits. Interest on borrowings decreased by $345 thousand due to the repayment of $10 million in borrowings in February of 2016.

The provision for loan losses for the nine-month period ended September 30, 2017 was $233 thousand, compared $14 thousand for the nine-month period ended September 30, 2016. Asset quality has remained relatively consistent over the past year therefore the noted increase in loan loss provisions was due primarily to overall growth in the loan portfolio.

Noninterest income increased by $26 thousand for the first nine months of 2017, compared to the same period in 2016. Income from service charges and fees increased primarily as result of the merger with Cardinal. Noninterest income for the nine months ended September 30, 2016 included the following nonrecurring items: a $182 thousand bargain purchase gain resulting from the Cardinal acquisition, $97 thousand in life insurance proceeds, and an increase in nonrecurring securities gains of $238 thousand compared to 2017. Excluding the impact of these nonrecurring items, core noninterest income increased by $543 thousand for the first nine months of 2017 as compared to the same period in 2016.

Total noninterest expenses increased by $3.7 million, or 35.23% for the nine-month period ended September 30, 2017, compared to the same period in 2016. As noted above, the overall increase in expenses for the comparative nine-month periods was due primarily to the effective date of the Cardinal merger as the 2016 expenses reflect only three months of combined operations and six months of Grayson’s operating expenses prior to the merger date.    Accordingly, salaries and employee benefits increased by $2.0 million due to the increase in the number of employees, and occupancy and equipment costs increased by $507 thousand due to the addition of seven banking facilities.

In total, income before taxes increased by $751 thousand over the first nine months of 2017 compared to the first nine months of 2016. Income tax expense increased by $131 thousand over the prior year, resulting in an increase in net income of $620 thousand for the nine months ended September 30, 2017.

39

Part I. Financial Information

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

Financial Condition

Total assets decreased by $12.4 million from December 31, 2016 to September 30, 2017, due to continued reductions in interest-bearing deposits. Cash and cash equivalent balances decreased by $15.5 million and investment securities decreased by $10.6 million. The reduction in cash and investments was used to fund loan growth of $11.2 million as well as the aforementioned reduction in deposits.

Noninterest bearing deposits decreased by $280 thousand from December 31, 2016 to September 30, 2017, while interest bearing deposits decreased by $12.9 million over the same time period. The decrease in interest bearing deposits came primarily in the form of higher yielding certificates of deposit and individual retirement accounts. This reflected the continuation of a management strategy to allow the run-off of legacy higher-yielding deposits which were on the books of Grayson and Cardinal prior to the merger.

Nonperforming assets, including nonaccrual loans, loans past due more than ninety days and foreclosed assets, increased from $4.7 million at December 31, 2016 to $5.7 million at September 30, 2017. There were no foreclosed assets as of September 30, 2017. There were no loans past due more than ninety days and still accruing interest at September 30, 2017 and December 31, 2016.

Nonaccrual loans increased from $4.7 million at December 31, 2016 to $5.7 million at September 30, 2017. During the first nine months of 2017, loans totaling $2.2 million were added to nonaccrual status while loans totaling $1.2 million were repaid or returned to accrual status. Loans are generally placed in nonaccrual status when principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection.

The following table summarizes nonperforming assets:

(dollars in thousands)	September 30, 2017			December 31, 2016
Nonperforming Assets
Nonaccrual loans	$	5,738		$	4,664
Loans past due 90 days or more and still accruing interest		—			—
Total nonperforming loans		5,738			4,664
Foreclosed assets		—			70
Total nonperforming assets	$	5,738		$	4,734
Nonperforming assets to total assets		1.05	%		0.85	%
Nonperforming loans to total loans		1.36	%		1.13	%

Loans less than 90 days past due may be placed in nonaccrual status if management determines that payment in full of principal or interest is not expected. Loans are removed from nonaccrual status when they are deemed a loss and charged to the allowance, transferred to foreclosed assets, or returned to accrual status based upon performance consistent with the original terms of the loan or a subsequent restructuring thereof. Management continues to closely monitor nonperforming assets and their impact on earnings and loan loss reserves.

40

Part I. Financial Information

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

Financial Condition, continued

At September 30, 2017, the allowance for loan losses included $461 thousand specifically reserved for impaired loans in the amount of $9.1 million. Based on impairment analysis, loans totaling $4.1 million were also considered to be impaired but did not require a specific reserve or the related reserve had previously been charged-off. Impaired loans at December 31, 2016 totaled $13.3 million, of which $9.0 million required specific reserves of $556 thousand.

Summary of Loan Loss Experience	Nine			Nine
	months			months			Year
	ended			ended			ended
(dollars in thousands)	September 30,			September 30,			December 31,
	2017			2016			2016
Total loans outstanding at end of period	$	423,273		$	408,566		$	411,968
Allowance for loan losses, beginning of period	$	3,420		$	3,418		$	3,418
Charge offs:
Commercial & agricultural		(27	)		(19	)		(19	)
Commercial mortgage		(42	)		(21	)		(21	)
Construction & development		—			(20	)		(20	)
Farmland		(34	)		—			—
Residential		(89	)		(44	)		(84	)
Consumer & other		(51	)		(56	)		(70	)
Total charge-offs		(243	)		(160	)		(214	)
Recoveries:
Commercial & agricultural		31			6			8
Commercial mortgage		—			—			—
Construction & development		56			93			98
Farmland		—			55			59
Residential		19			22			22
Consumer & other		14			32			34
Total recoveries		120			208			221
Net (charge-offs) recoveries		(123	)		48			7
Provision for (recovery of) allowance		233			14			(5	)
Allowance for loan losses at end of period	$	3,530		$	3,480		$	3,420
Ratios:
Allowance for loan losses to loans at end of period		0.83	%		0.85	%		0.83	%
Net charge-offs (recoveries) to allowance for loan losses		3.48	%		(1.38	)%		(0.20	)%
Net charge-offs (recoveries) to provisions for loan losses		52.79	%		(342.86	)%		n/a

Certain types of loans, such as option ARM (adjustable rate mortgage) products, interest-only loans, subprime loans and loans with initial teaser rates, can have a greater risk of non-collection than other loans. The Bank has not offered these types of loans in the past and does not offer them currently. Junior-lien mortgages can also be considered higher risk loans. Our junior-lien portfolio at September 30, 2017 totaled $5.5 million, or 1.31% of total loans. Historical charge-off rates in this category have not varied significantly from other real estate secured loans.

41

Part I. Financial Information

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

Financial Condition, continued

Stockholders’ equity totaled $57.8 million at September 30, 2017 compared to $55.5 million at December 31, 2016. The increase in equity resulted from earnings of $2.6 million plus a net increase in unrealized gains on investment securities classified as available for sale totaling $493 thousand, less the payment of dividends of $803 thousand.

Liquidity

Liquidity is the ability to convert assets to cash to fund depositors’ withdrawals or borrowers’ loans without significant loss. Unsecured federal fund lines available from correspondent banks totaled $28.0 million at September 30, 2017. No balances were outstanding on these lines at September 30, 2017 or December 31, 2016. In addition, the Bank has the ability to borrow up to approximately $138.3 million from the Federal Home Loan Bank, subject to the pledging of collateral. The Bank had no debt outstanding classified as long-term at September 30, 2017 or December 31, 2016.

The Bank uses cash and federal funds sold to meet its daily funding needs. If funding needs are met through holdings of excess cash and federal funds, then profits might be sacrificed as higher-yielding investments are foregone in the interest of liquidity. Therefore management determines, based on such items as loan demand and deposit activity, an appropriate level of cash and federal funds and seeks to maintain that level.

The Bank’s investment security portfolio also serves as a source of liquidity. The primary goals of the investment portfolio are liquidity management and maturity gap management. As investment securities mature, the proceeds are reinvested in federal funds sold if the federal funds level needs to be increased; otherwise the proceeds are reinvested in similar investment securities. The majority of investment security transactions consist of replacing securities that have been called or matured. The Bank keeps a portion of its investment portfolio in unpledged assets with average lives or repricing terms of less than 60 months. These investments are a preferred source of funds because their market value is not as sensitive to changes in interest rates as investments with longer durations.

As a result of the steps described above, management believes that the Company maintains overall liquidity sufficient to satisfy its depositors’ requirements and meet its customers’ credit needs.

Capital Resources

A significant measure of the strength of a financial institution is its capital base. Federal regulations have classified and defined capital into the following components: (1) Tier 1 capital, which includes common shareholders’ equity and qualifying preferred equity, and (2) Tier 2 capital, which includes a portion of the allowance for loan losses, certain qualifying long-term debt and preferred stock which does not qualify as Tier 1 capital. Financial institutions and holding companies were also subject to the new BASEL III requirements starting the first quarter of 2016. A new part of the capital ratios profile is the Common Equity Tier 1 risk-based ratio. Minimum capital levels are regulated by risk-based capital adequacy guidelines, which require a financial institution to maintain capital as a percentage of its assets, and certain off-balance sheet items adjusted for predefined credit risk factors (risk-adjusted assets).

Regulatory guidelines relating to capital adequacy provide minimum risk-based ratios at the Bank level which assess capital adequacy while encompassing all credit risks, including those related to off-balance sheet activities. At September 30, 2017, the Company and the Bank both exceeded minimum regulatory capital requirements and are considered to be “well capitalized.”

42

Part I. Financial Information

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

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 are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import. Such forward-looking statements involve known and unknown risks including, but not limited to, changes in general economic and business conditions, the Company’s ability to successfully integrate the businesses of Grayson and Cardinal and achieve the expected cost savings, 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, changes in laws and regulations applicable to the Company and other factors described in Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

43

Part I. Financial Information

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required.

44

Part I. Financial Information

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including our Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

45

Part II. Other Information

Item 1. Legal Proceedings

There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which Parkway is a party or of which any of its property is subject.

Item 1A. Risk Factors

In connection with the information set forth in this Form 10-Q, the factors discussed under “Risk Factors” in our Form 10-K for the year ended December 31, 2016 should be considered. These risks could materially and adversely affect our business, financial condition and results of operations. There have been no material changes to the factors discussed in our Form 10-K.

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

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

Item 6. Exhibits

31.1	Rule 15(d)-14(a) Certification of Chief Executive Officer.
31.2	Rule 15(d)-14(a) Certification of Chief Financial Officer.
32.1	Statement of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.Section 1350.
101	The following materials from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Unaudited Consolidated Financial Statements.

46

Exhibit Index

Exhibit No.	Description
31.1	Rule 15(d)-14(a) Certification of Chief Executive Officer.
31.2	Rule 15(d)-14(a) Certification of Chief Financial Officer.
32.1	Statement of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.Section 1350.
101	The following materials from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Unaudited Consolidated Financial Statements.

47

Part II. Other Information

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.

	Parkway Acquisition Corp.
Date: November 14, 2017	By:	/s/ J. Allan Funk
		J. Allan Funk
		President and Chief Executive Officer
	By:	/s/ Blake M. Edwards
		Blake M. Edwards
		Chief Financial Officer

48

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 15d-14(a)

I, J. Allan Funk certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Parkway Acquisition Corp. for the period ended September 30, 2017;

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)) 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) 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

c) 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: November 14, 2017	By:	/s/ J. Allan Funk
		J. Allan Funk
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 15d-14(a)

I, Blake M. Edwards certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Parkway Acquisition Corp. for the period ended September 30, 2017;

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)) 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) 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

c) 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: November 14, 2017	By:	/s/ Blake M. Edwards
		Blake M. Edwards
		Chief Financial Officer

EX-32.1

Exhibit 32.1

STATEMENT OF CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. § 1350

In connection with the Quarterly Report on Form 10-Q for the period ended September 30, 2017 (the “Form 10-Q”) of Parkway Acquisition Corp. (the “Company”), we, J. Allan Funk, Chief Executive Officer of the Company, and Blake M. Edwards, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to our knowledge:

(a) the Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(b) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the Form 10-Q.

By:	/s/ J. Allan Funk	Date:	November 14, 2017
	J. Allan Funk
	Chief Executive Officer
By:	/s/ Blake M. Edwards	Date:	November 14, 2017
	Blake M. Edwards
	Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 14, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Trading Symbol	PKKW
Entity Registrant Name	Parkway Acquisition Corp.
Entity Central Index Key	0001657642
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,021,376

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Assets
Cash and due from banks	$ 6,978	$ 7,215
Interest-bearing deposits with banks	8,968	19,399
Federal funds sold	4,478	9,294
Investment securities available for sale	51,933	62,540
Restricted equity securities	1,388	1,149
Loans, net of allowance for loan losses of $3,530 at September 30, 2017 and $3,420 at December 31, 2016	419,743	408,548
Cash value of life insurance	17,237	16,850
Foreclosed assets		70
Property and equipment, net	17,713	17,970
Accrued interest receivable	1,579	1,732
Core deposit intangible	2,115	2,327
Deferred tax assets, net	4,598	5,872
Other assets	9,739	5,890
Total Assets	546,469	558,856
Deposits
Noninterest-bearing	126,944	127,224
Interest-bearing	359,255	372,163
Total deposits	486,199	499,387
Accrued interest payable	140	57
Other liabilities	2,333	3,946
Total Liabilities	488,672	503,390
Commitments and contingencies (Note 6)
Stockholders' equity
Preferred stock value
Common stock value	0	0
Surplus	26,166	26,166
Retained earnings	32,492	30,654
Accumulated other comprehensive loss	(861)	(1,354)
Total Stockholders' Equity	57,797	55,466
Total Liabilities and Stockholders' Equity	$ 546,469	$ 558,856

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Allowance for loan losses	$ 3,530	$ 3,420
Preferred stock, no par value
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, issued	0	0
Common stock, no par value
Common stock, shares authorized	25,000,000	25,000,000
Common stock, issued	5,021,376	5,021,376
Common stock, outstanding	5,021,376	5,021,376

XML

Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Interest income
Loans and fees on loans	$ 5,222	$ 5,390	$ 15,390	$ 11,185
Interest-bearing deposits in banks	14	16	36	16
Federal funds sold	21	12	80	26
Investment securities:
Taxable	319	294	993	814
Exempt from federal income tax				1
Dividends	6	30	62	52
Interest and Dividend Income, Operating, Total	5,582	5,742	16,561	12,094
Interest expense
Deposits	370	460	1,107	981
Interest on borrowings	1	99	1	346
Interest Expense, Total	371	559	1,108	1,327
Net interest income	5,211	5,183	15,453	10,767
Provision for loan losses	75	109	233	14
Net interest income after provision for loan losses	5,136	5,074	15,220	10,753
Noninterest income
Service charges on deposit accounts	350	372	987	889
Other service charges and fees	417	396	1,187	956
Net realized gains on securities	13	(1)	126	364
Mortgage loan origination fees	91	81	203	124
Increase in cash value of life insurance	111	112	333	256
Bargain purchase gain		182		182
Other income	39	125	95	134
Non interest income	1,021	1,267	2,931	2,905
Noninterest expense
Salaries and employee benefits	2,489	2,579	7,529	5,561
Occupancy and equipment	555	600	1,652	1,145
Foreclosed asset expense, net	17	10	33	63
Data processing expense	306	305	885	551
FDIC assessments	75	102	225	222
Advertising	138	38	471	141
Bank franchise tax	82	81	250	171
Director fees	52	51	190	119
Merger related expense	56	484	698	720
Other expense	710	581	2,430	1,928
Noninterest Expense, Total	4,480	4,831	14,363	10,621
Income before income taxes	1,677	1,510	3,788	3,037
Income tax expense	520	464	1,147	1,016
Net income	$ 1,157	$ 1,046	$ 2,641	$ 2,021
Basic earnings per share	$ 0.23	$ 0.21	$ 0.53	$ 0.55
Weighted average shares outstanding	5,021,376	5,021,376	5,021,376	3,695,571
Dividends declared per share	$ 0.08	$ 0.06	$ 0.16	$ 0.13

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income	$ 1,157	$ 1,046	$ 2,641	$ 2,021
Unrealized gains on investment securities:
Unrealized gains arising during the period	148	163	872	1,319
Tax related to unrealized gains	(50)	(54)	(296)	(447)
Reclassification of realized gains during the period	(13)	(1)	(126)	(364)
Tax related to realized gains	4		43	123
Total other comprehensive income	89	108	493	631
Total comprehensive income	$ 1,246	$ 1,154	$ 3,134	$ 2,652

XML

Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Surplus	Retained Earnings	Accumulated Comprehensive Loss
Beginning balance at Dec. 31, 2015	$ 30,656	$ 2,149	$ 522	$ 28,709	$ (724)
Beginning balance (in shares) at Dec. 31, 2015		1,718,968
Net income	2,021			2,021
Other comprehensive income	631				631
Conversion of common stock in connection with new holding company on July 1, 2016:
Exchange of Grayson common stock, $1.25 par value	(2,149)	$ (2,149)
Exchange of Grayson common stock, $1.25 par value (in shares)		(1,718,968)
For Parkway common stock, no par value	2,149		2,149
For Parkway common stock, no par value (in shares)		3,025,384
Issuance of common stock in connection with acquisition of Cardinal Bankshares Corp	23,500		23,500
Issuance of common stock in connection with acquisition of Cardinal Bankshares Corp (in shares)		1,996,453
Redemption of fractional shares issued in acquisition of Cardinal Bankshares Corp	(5)		(5)
Redemption of fractional shares issued in acquisition of Cardinal Bankshares Corp (in shares)		(461)
Dividends paid prior to conversion	(173)			(173)
Dividends paid	(301)			(301)
Ending balance at Sep. 30, 2016	56,329		26,166	30,256	(93)
Ending balance (in shares) at Sep. 30, 2016		5,021,376
Beginning balance at Dec. 31, 2016	$ 55,466		26,166	30,654	(1,354)
Beginning balance (in shares) at Dec. 31, 2016	5,021,376	5,021,376
Net income	$ 2,641			2,641
Other comprehensive income	493				493
Conversion of common stock in connection with new holding company on July 1, 2016:
Dividends paid	(803)			(803)
Ending balance at Sep. 30, 2017	$ 57,797		$ 26,166	$ 32,492	$ (861)
Ending balance (in shares) at Sep. 30, 2017	5,021,376	5,021,376

XML

Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - $ / shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Parkway common stock, no par value
Dividends paid per share	$ 0.16	$ 0.06
Common Stock
Exchange of Grayson common stock, par value		1.25
Parkway common stock, no par value

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows from operating activities
Net income	$ 2,641	$ 2,021
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization	975	587
Amortization of core deposit intangibles	212	71
Accretion of loan discount and deposit premium	(995)	(658)
Bargain purchase gain		(182)
Provision for loan losses	233	14
Deferred income taxes	1,021	1,341
Net realized gains on securities	(126)	(364)
Accretion of discount on securities, net of amortization of premiums	531	410
Deferred compensation	(64)	(54)
Net realized loss on foreclosed assets	23	37
Life insurance income		(97)
Changes in assets and liabilities:
Cash value of life insurance	(387)	(256)
Accrued interest receivable	153	299
Other assets	(3,849)	16
Accrued interest payable	83	22
Other liabilities	(1,549)	(550)
Net cash (used in) provided by operating activities	(1,098)	2,657
Activity in available for sale securities:
Purchases	(1,914)	(11,912)
Sales	8,523	55,115
Maturities/calls/paydowns	4,339	13,492
Sales (purchases) of restricted equity securities	(239)	681
Net increase in loans	(10,625)	(8,945)
Proceeds from life insurance contracts		321
Proceeds from the sale of foreclosed assets	47	326
Purchases of property and equipment, net of sales	(718)	(551)
Cash received in business combination		11,698
Net cash (used in) provided by investing activities	(587)	60,225
Cash flows from financing activities
Net decrease in deposits	(12,996)	(8,415)
Net decrease in borrowings		(18,000)
Cash paid for fractional shares		(5)
Dividends paid	(803)	(474)
Net cash used in financing activities	(13,799)	(26,894)
Net (decrease) increase in cash and cash equivalents	(15,484)	35,988
Cash and cash equivalents, beginning	35,908	8,055
Cash and cash equivalents, ending	20,424	44,043
Supplemental disclosure of cash flow information
Interest paid	1,025	1,306
Taxes paid		60
Supplemental disclosure of noncash investing activities
Effect on equity of change in net unrealized gain on available for sale securities	$ 493	631
Transfers of loans to foreclosed properties		25
Business combinations
Assets acquired		252,426
Liabilities assumed		228,744
Net assets		23,682
Bargain purchase gain		182
Stock issued to acquire Cardinal Bankshares Corp.		$ 23,500

XML

Organization and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Organization and Summary of Significant Accounting Policies

Note 1. Organization and Summary of Significant Accounting Policies

Organization

Parkway Acquisition Corp. (“Parkway”) was incorporated as a Virginia corporation on November 2, 2015. Parkway was formed as a business combination shell for the purpose of completing a business combination transaction between Grayson Bankshares, Inc. (“Grayson”) and Cardinal Bankshares Corporation (“Cardinal”). On November 6, 2015, Grayson, Cardinal and Parkway entered into an Agreement and Plan of Merger (the “merger agreement”), providing for the combination of the three companies. Terms of the merger agreement called for Grayson and Cardinal to merge with and into Parkway, with Parkway as the surviving corporation (the “merger”). The merger agreement established exchange ratios under which each share of Grayson common stock was converted to the right to receive 1.76 shares of common stock of Parkway, while each share of Cardinal common stock was converted to the right to receive 1.30 shares of common stock of Parkway. The exchange ratios resulted in Grayson shareholders receiving approximately 60% of the newly issued Parkway shares and Cardinal shareholders receiving approximately 40% of the newly issued Parkway shares. The merger was completed on July 1, 2016. Grayson is considered the acquiror and Cardinal is considered the acquiree in the transaction for accounting purposes.

Upon completion of the merger, the Bank of Floyd, a wholly-owned subsidiary of Cardinal, was merged with and into Grayson National Bank (the “Bank’), a wholly-owned subsidiary of Grayson. The Bank was organized under the laws of the United States in 1900 and now serves the Virginia counties of Grayson, Floyd, Carroll, Wythe, Montgomery and Roanoke, and the surrounding areas through sixteen full-service banking offices and two loan production offices. Effective March 13, 2017, the Bank changed its name to Skyline National Bank. As an FDIC-insured National Banking Association, the Bank is subject to regulation by the Comptroller of the Currency. Parkway is regulated by the Board of Governors of the Federal Reserve System.

For purposes of this quarterly report on Form 10-Q, all information contained herein as of and for periods prior to July 1, 2016 reflects the operations of Grayson prior to the merger. Unless this report otherwise indicates or the context otherwise requires, all references to “Parkway” or the “Company” as of and for periods subsequent to July 1, 2016 refer to the combined company and its subsidiary as a combined entity after the merger, and all references to the “Company” as of and for periods prior to July 1, 2016 are references to Grayson and its subsidiary as a combined entity prior to the merger.

The consolidated financial statements as of September 30, 2017 and for the periods ended September 30, 2017 and 2016 included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the information furnished in the interim consolidated financial statements reflects all adjustments necessary to present fairly the Company’s consolidated financial position, results of operations, changes in stockholders’ equity and cash flows for such interim periods. Management believes that all interim period adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto as of December 31, 2016, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. The results of operations for the three-month or nine-month periods ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year.

Critical Accounting Policies

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

Principles of Consolidation

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

Business Segments

The Company reports its activities as a single business segment. In determining the appropriateness of segment definition, the Company considers components of the business about which financial information is available and regularly evaluated relative to resource allocation and performance assessment.

Business Combinations

Generally, acquisitions are accounted for under the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations. A business combination occurs when the Company acquires net assets that constitute a business, or acquires equity interests in one or more other entities that are businesses and obtains control over those entities. Business combinations are effected through the transfer of consideration consisting of cash and/or common stock and are accounted for using the acquisition method. Accordingly, the assets and liabilities of the acquired entity are recorded at their respective fair values as of the closing date of the acquisition. Determining the fair value of assets and liabilities, especially the loan portfolio, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are subject to refinement for up to one year after the closing date of the acquisition as information relative to closing date fair values becomes available. The results of operations of an acquired entity are included in our consolidated results from the closing date of the merger, and prior periods are not restated. No allowance for loan losses related to the acquired loans is recorded on the acquisition date because the fair value of the loans acquired incorporates assumptions regarding future credit losses. The fair value estimates associated with the acquired loans include estimates related to expected prepayments and the amount and timing of expected principal, interest and other cash flows.

Use of Estimates

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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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

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

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

The Company seeks strategies that minimize the tax effect of implementing their business strategies. As such, judgments are made regarding the ultimate consequence of long-term tax planning strategies, including the likelihood of future recognition of deferred tax benefits. The Company’s tax returns are subject to examination by both Federal and State authorities. Such examinations may result in the assessment of additional taxes, interest and penalties. As a result, the ultimate outcome, and the corresponding financial statement impact, can be difficult to predict with accuracy.

Accounting for pension benefits, costs and related liabilities are developed using actuarial valuations. These valuations include key assumptions determined by management, including the discount rate and expected long-term rate of return on plan assets. Material changes in pension costs may occur in the future due to changes in these assumptions.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents includes cash and amounts due from banks (including cash items in process of collection), interest-bearing deposits with banks and federal funds sold.

Trading Securities

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

Securities Held to Maturity

Bonds, notes, and debentures for which the Company has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity. The Company does not currently hold any securities classified as held to maturity.

Securities Available for Sale

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

Unrealized holding gains and losses, net of tax, on available for sale securities are reported as a net amount in a separate component of accumulated other comprehensive income. Realized gains and losses on the sale of available for sale securities are determined using the specific-identification method. Premiums and discounts are recognized in interest income using the interest method over the period to maturity.

Declines in the fair value of individual held to maturity and available for sale securities below cost that are other than temporary are reflected as write-downs of the individual securities to fair value. Related write-downs are included in earnings as realized losses.

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal amount adjusted for any charge-offs and the allowance for loan losses. Loan origination costs are capitalized and recognized as an adjustment to yield over the life of the related loan.

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

Purchased Performing Loans – The Company accounts for performing loans acquired in business combinations using the contractual cash flows method of recognizing discount accretion based on the acquired loans’ contractual cash flows. Purchased performing loans are recorded at fair value, including a credit discount. The fair value discount is accreted as an adjustment to yield over the estimated lives of the loans. There is no allowance for loan losses established at the acquisition date for purchased performing loans. A provision for loan losses is recorded for any further deterioration in these loans subsequent to the acquisition

Purchased Credit-Impaired (“PCI”) Loans – Loans purchased with evidence of credit deterioration since origination, and for which it is probable that all contractually required payments will not be collected, are considered credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as internal risk grade and past due and nonaccrual status. Purchased impaired loans generally meet the Company’s definition for nonaccrual status. PCI loans are initially measured at fair value, which reflects estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date. Any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference, and is available to absorb credit losses on those loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent significant increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or a reclassification of the nonaccretable difference with a positive impact on future interest income.

Allowance for Loan Losses

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

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

The allowance consists of specific, general and unallocated components. The specific component is calculated on an individual basis for larger-balance, non-homogeneous loans, which are considered impaired. A specific allowance is established when the discounted cash flows, collateral value (less disposal costs), or observable market price of the impaired loan is lower than its carrying value. The specific component of the allowance for smaller- balance loans whose terms have been modified in a troubled debt restructuring (TDR) is calculated on a pooled basis considering historical experience adjusted for qualitative factors. The general component covers non-impaired loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

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

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are the subject of a restructuring agreement.

Troubled Debt Restructurings

Under GAAP, the Bank is required to account for certain loan modifications or restructurings as “troubled debt restructurings” or “troubled debt restructured loans.” In general, the modification or restructuring of a debt constitutes a troubled debt restructuring if the Bank for economic or legal reasons related to the borrower’s financial difficulties grants a concession to the borrower that the Bank would not otherwise consider. Debt restructuring or loan modifications for a borrower do not necessarily always constitute a troubled debt restructuring, however, and troubled debt restructurings do not necessarily result in non-accrual loans. Troubled debt restructured loans are maintained in nonaccrual status until they have been performing in accordance with modified terms for a period of at least six months.

Property and Equipment

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

	Years
Buildings and improvements		10-40
Furniture and equipment		5-12

Foreclosed Assets

Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value less anticipated cost to sell at the date of foreclosure, establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in foreclosure expense on the consolidated statements of income.

Pension Plan

Prior to the merger, both Grayson National Bank (Grayson) and Bank of Floyd (Floyd) had qualified noncontributory defined benefit pension plans in place which covered substantially all of each bank’s employees. The benefits in each plan are primarily based on years of service and earnings. Both Grayson and Floyd plans were amended to freeze benefit accruals for all eligible employees prior to the effective date of the merger. Grayson’s plan is a single-employer plan, the funded status of which is measured as the difference between the fair value of plan assets and the projected benefit obligation. Floyd’s plan is a multi-employer plan for accounting purposes and is a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code.

Transfers of Financial Assets

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

Core Deposit Intangible

Core deposit intangibles represent the value of long-term deposit relationships acquired in a business combination. Core deposit intangibles are amortized over the estimated useful lives of the deposit accounts acquired (generally twenty years on an accelerated basis).

Income Taxes

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

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more likely than not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more likely than not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Advertising Expense

The Company expenses advertising costs as they are incurred. Advertising expense for the years presented is not material.

Basic Earnings per Share

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

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income includes unrealized gains and losses on securities available for sale and changes in the funded status of the pension plan which are also recognized as separate components of equity. The accumulated balances related to each component of other comprehensive income (loss) are as follows:

(dollars in thousands)	Unrealized Gains And (Losses) On Available for Sale Securities			Defined Benefit Pension Items			Total
Balance, December 31, 2015	$	(116	)	$	(608	)	$	(724	)
Other comprehensive gain before reclassifications		872			—			872
Amounts reclassified from accumulated other comprehensive gain		(241	)		—			(241	)
Balance September 30, 2016	$	515		$	(608	)	$	(93	)
Balance, December 31, 2016	$	(574	)	$	(780	)	$	(1,354	)
Other comprehensive gain before reclassifications		576			—			576
Amounts reclassified from accumulated other comprehensive gain		(83	)		—			(83	)
Balance September 30, 2017	$	(81	)	$	(780	)	$	(861	)

Off-Balance Sheet Credit Related Financial Instruments

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

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 7. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates.

Reclassification

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

Recent Accounting Pronouncements

The following accounting standards may affect the future financial reporting by the Company:

In May 2014, the 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 full retrospective approach. The Company does not expect these amendments to have a material effect on its consolidated 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 reposting periods beginning after December 15, 2017. The Company will apply the guidance using a full retrospective approach. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In November 2015, the FASB amended the Income Taxes topic of the Accounting Standards Codification to simplify the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments will be effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted as of the beginning of an interim or annual reporting period. The Company applied the guidance prospectively. These amendments did not have a material effect on the Company’s consolidated financial statements.

In January 2016, the FASB amended the Financial Instruments topic of the Accounting Standards Codification 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 consolidated financial statements.

In February 2016, the FASB amended the Leases topic of the Accounting Standards Codification 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. Early adoption is permitted. 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 March 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification 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 April 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to identifying performance obligations and accounting for licenses of intellectual property. 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 May 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. 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. 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 August 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements.

In October 2016, the FASB amended the Income Taxes topic of the Accounting Standards Codification to modify the accounting for intra-entity transfers of assets other than inventory. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In November 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how restricted cash is presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

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 full retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2017, the FASB issued guidance to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendment to the Business Combinations Topic is intended to address concerns that the existing definition of a business has been applied too broadly and has resulted in many transactions being recorded as business acquisitions that in substance are more akin to asset acquisitions. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. Early adoption is permitted. 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 January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In February 2017, the FASB amended the Other Income Topic of the Accounting Standards Codification 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.

In March 2017, the FASB amended the requirements in the Compensation—Retirement Benefits Topic of the Accounting Standards Codification related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2017, the FASB amended the requirements in the Receivables—Nonrefundable Fees and Other Costs Topic of the Accounting Standards Codification related to the amortization period for certain purchased callable debt securities held at a premium. The amendments shorten the amortization period for the premium to the earliest call date. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. 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 consolidated financial position, results of operations or cash flows.

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Investment Securities

9 Months Ended

Sep. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Note 2. Investment Securities

Debt and equity securities have been classified in the consolidated balance sheets according to management’s intent. The amortized cost of securities and their approximate fair values at September 30, 2017 and December 31, 2016 follow:

(dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2017
Available for sale:
Government sponsored enterprises	$	25	$	95	$	—		$	120
Mortgage-backed securities		29,359		5		(349	)		29,015
Corporate securities		3,027		—		(70	)		2,957
State and municipal securities		19,646		250		(55	)		19,841
	$	52,057	$	350	$	(474	)	$	51,933
December 31, 2016
Available for sale:
Government sponsored enterprises	$	2,046	$	236	$	(73	)	$	2,209
Mortgage-backed securities		36,021		4		(823	)		35,202
Corporate securities		3,061		—		(87	)		2,974
State and municipal securities		22,282		97		(224	)		22,155
	$	63,410	$	337	$	(1,207	)	$	62,540

Restricted equity securities were $1.4 million and $1.1 million at September 30, 2017 and December 31, 2016, respectively. Restricted equity securities consist of investments in stock of the Federal Home Loan Bank of Atlanta (FHLB), Community Bankers Bank, Pacific Coast Bankers Bank, and the Federal Reserve Bank of Richmond, all of which are carried at cost. All of these entities are upstream correspondents of the Bank. The FHLB requires financial institutions to make equity investments in the FHLB in order to borrow money. The Bank is required to hold that stock so long as it borrows from the FHLB. The Federal Reserve requires Banks to purchase stock as a condition for membership in the Federal Reserve System. The Bank’s stock in Community Bankers Bank and Pacific Coast Bankers Bank is restricted only in the fact that the stock may only be repurchased by the respective banks.

The following tables details unrealized losses and related fair values in the Company’s held to maturity and available for sale investment securities portfolios. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2017 and December 31, 2016.

	Less Than 12 Months					12 Months or More					Total
(dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2017
Available for sale:
Government sponsored enterprises	$	—	$	—		$	—	$	—		$	—	$	—
Mortgage-backed securities		23,487		(331	)		650		(18	)		24,137		(349	)
Corporate securities		1,526		(1	)		1,431		(69	)		2,957		(70	)
State and municipal securities		4,058		(26	)		1,741		(29	)		5,799		(55	)
Total securities available for sale	$	29,071	$	(358	)	$	3,822	$	(116	)	$	32,893	$	(474	)
December 31, 2016
Available for sale:
Government sponsored enterprises	$	—	$	—		$	1,924	$	(73	)	$	1,924	$	(73	)
Mortgage-backed securities		31,759		(789	)		688		(34	)		32,447		(823	)
Corporate securities		1,548		(12	)		1,425		(75	)		2,973		(87	)
State and municipal securities		12,208		(224	)		—		—			12,208		(224	)
Total securities available for sale	$	45,515	$	(1,025	)	$	4,037	$	(182	)	$	49,552	$	(1,207	)

At September 30, 2017, debt securities with unrealized losses had combined losses of $474 thousand, or 1.42 percent of their amortized cost basis. 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 the length of time and the extent to which the fair value has been less than cost, and the financial condition and near-term prospects of the issuer. The relative significance of these and other factors will vary on a case by case basis. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition and the issuer’s anticipated ability to pay the contractual cash flows of the investments. Since the Company has the ability to hold all of its investment securities until maturity, and it is more likely than not that the Company will not have to sell any of its investment securities before unrealized losses have been recovered, and the Company expects to recover the entire amount of the amortized cost basis of all its securities, none of the securities are deemed other than temporarily impaired at September 30, 2017. Management continues to monitor all of these securities with a high degree of scrutiny. There can be no assurance that the Company will not conclude in future periods that conditions existing at that time indicate some or all of these securities are other than temporarily impaired, which could require a charge to earnings in such periods.

Proceeds from sales of investment securities available for sale were $8.5 million and $55.1 million for the nine month periods ended September 30, 2017 and 2016, respectively and $7.9 million and $37.2 million for the three month periods ended September 30, 2017 and 2016, respectively. Gains and losses on the sale of investment securities are recorded on the trade date and are determined using the specific identification method. Gross realized gains and losses for the nine-month and three-month periods ended September 30, 2017 and 2016 are as follows:

	Nine Months Ended September 30,						Three Months Ended September 30,
(dollars in thousands)	2017			2016			2017			2016
Realized gains	$	141		$	369		$	28		$	—
Realized losses		(15	)		(5	)		(15	)		(1	)
	$	126		$	364		$	13		$	(1	)

There were no securities transferred between the available for sale and held to maturity portfolios or other sales of held to maturity securities during the periods presented. In the future management may elect to classify securities as held to maturity based upon such considerations as the nature of the security, the Bank’s ability to hold the security until maturity, and general economic conditions.

The scheduled maturities of securities available for sale at September 30, 2017, were as follows:

(dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	733	$	736
Due after one year through five years		8,491		8,522
Due after five years through ten years		21,403		21,200
Due after ten years		21,430		21,475
	$	52,057	$	51,933

Maturities of mortgage backed securities are based on contractual amounts. Actual maturity will vary as loans underlying the securities are prepaid.

Investment securities with amortized cost of approximately $11.3 million and $11.2 million at September 30, 2017 and December 31, 2016, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

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Loans Receivable

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Loans Receivable

Note 3. Loans Receivable

The major components of loans in the consolidated balance sheets at September 30, 2017 and December 31, 2016 are as follows:

	2017			2016
Commercial & agricultural	$	28,605		$	26,086
Commercial mortgage		125,149			128,515
Construction & development		25,557			26,464
Farmland		34,096			33,531
Residential		198,141			187,188
Consumer & other		11,725			10,184
Total loans		423,273			411,968
Allowance for loan losses		(3,530	)		(3,420	)
Loans, net of allowance for loan losses	$	419,743		$	408,548

As of September 30, 2017 and December 31, 2016, substantially all of the Bank’s residential 1-4 family loans were pledged as collateral toward borrowings with the Federal Home Loan Bank.

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Allowance for Loan Losses and Impaired Loans

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Allowance for Loan Losses and Impaired Loans

Note 4. Allowance for Loan Losses and Impaired Loans

Allowance for Loan Losses

The allowance for loan losses is maintained at a level believed to be sufficient to provide for estimated loan losses based on evaluating known and inherent risks in the loan portfolio. The allowance is provided based upon management’s comprehensive analysis of the pertinent factors underlying the quality of the loan portfolio. These factors include changes in the amount and composition of the loan portfolio, delinquency levels, actual loss experience, current economic conditions, and detailed analysis of individual loans for which the full collectability may not be assured. The detailed analysis includes methods to estimate the fair value of loan collateral and the existence of potential alternative sources of repayment. The allowance consists of specific and general components. The specific component is calculated on an individual basis for larger-balance, non-homogeneous loans, which are considered impaired. A specific allowance is established when the discounted cash flows, collateral value (less disposal costs), or observable market price of the impaired loan is lower than its carrying value. The specific component of the allowance for smaller-balance loans whose terms have been modified in a troubled debt restructuring (TDR) is calculated on a pooled basis considering historical experience adjusted for qualitative factors. These smaller-balance TDRs were collectively evaluated for impairment. The general component covers the remaining loan portfolio, and is based on historical loss experience adjusted for qualitative factors. The appropriateness of the allowance for loan losses on loans is estimated based upon these factors and trends identified by management at the time financial statements are prepared.

A provision for loan losses is charged against operations and is added to the allowance for loan losses based on quarterly comprehensive analyses of the loan portfolio. The allowance for loan losses is allocated to certain loan categories based on the relative risk characteristics, asset classifications and actual loss experience of the loan portfolio. While management has allocated the allowance for loan losses to various loan portfolio segments, the allowance is general in nature and is available for the loan portfolio in its entirety.

As of September 30, 2017 and December 31, 2016, the Bank had no unallocated reserves included in the allowance for loan losses.

The following table presents activity in the allowance for loan losses by loan category three months ended September 30, 2017 and 2016 and the related asset balances as of September 30, 2017 and December 31, 2016:

Allowance for Loan Losses and Recorded Investment in Loans

	Commercial						Construction
	&			Commercial			&									Consumer
(dollars in thousands)	Agricultural			Mortgage			Development			Farmland			Residential			& Other			Total
For the Three Months Ended September 30, 2017
Allowance for loan losses:
Balance, June 30, 2017	$	214		$	620		$	329		$	393		$	1,938		$	74		$	3,568
Charge-offs		—			—			—			(34	)		(76	)		(13	)		(123	)
Recoveries		2			—			—			—			4			4			10
Provision		57			28			(75	)		8			46			11			75
Balance, September 30, 2017	$	273		$	648		$	254		$	367		$	1,912		$	76		$	3,530
For the Three Months Ended September 30, 2016
Allowance for loan losses:
Balance, June 30, 2016	$	188		$	571		$	269		$	522		$	1,717		$	42		$	3,309
Charge-offs		—			(10	)		(20	)		—			(19	)		(19	)		(68	)
Recoveries		2			—			49			55			6			18			130
Provision		35			45			(52	)		(5	)		61			25			109
Balance, September 30, 2016	$	225		$	606		$	246		$	572		$	1,765		$	66		$	3,480
For the Nine Months Ended September 30, 2017
Allowance for loan losses:
Balance, December 31, 2016	$	210		$	600		$	319		$	342		$	1,841		$	108		$	3,420
Charge-offs		(27	)		(42	)		—			(34	)		(89	)		(51	)		(243	)
Recoveries		31			—			56			—			19			14			120
Provision		59			90			(121	)		59			141			5			233
Balance, September 30, 2017	$	273		$	648		$	254		$	367		$	1,912		$	76		$	3,530
For the Nine Months Ended September 30, 2016
Allowance for loan losses:
Balance, December 31, 2015	$	136		$	578		$	344		$	435		$	1,887		$	38		$	3,418
Charge-offs		(19	)		(21	)		(20	)		—			(44	)		(56	)		(160	)
Recoveries		6			—			93			55			22			32			208
Provision		102			49			(171	)		82			(100	)		52			14
Balance, September 30, 2016	$	225		$	606		$	246		$	572		$	1,765		$	66		$	3,480
September 30, 2017
Allowance for loan losses:
Ending balance	$	273		$	648		$	254		$	367		$	1,912		$	76		$	3,530
Ending balance: individually evaluated for impairment	$	—		$	—		$	—		$	47		$	86		$	—		$	133
Ending balance: collectively evaluated for impairment	$	273		$	648		$	254		$	320		$	1,826		$	76		$	3,397
Loans outstanding:
Ending balance	$	28,605		$	125,149		$	25,557		$	34,096		$	198,141		$	11,725		$	423,273
Ending balance: individually evaluated for impairment	$	—		$	113		$	180		$	5,435		$	1,565		$	—		$	7,293
Ending balance: collectively evaluated for impairment	$	28,605		$	125,036		$	25,377		$	28,661		$	196,576		$	11,725		$	415,980
December 31, 2016
Allowance for loan losses:
Ending balance	$	210		$	600		$	319		$	342		$	1,841		$	108		$	3,420
Ending balance: individually evaluated for impairment	$	—		$	—		$	—		$	57		$	184		$	—		$	241
Ending balance: collectively evaluated for impairment	$	210		$	600		$	319		$	285		$	1,657		$	108		$	3,179
Loans outstanding:
Ending balance	$	26,086		$	128,515		$	26,464		$	33,531		$	187,188		$	10,184		$	411,968
Ending balance: individually evaluated for impairment	$	—		$	114		$	580		$	5,030		$	1,533		$	—		$	7,257
Ending balance: collectively evaluated for impairment	$	26,086		$	128,401		$	25,884		$	28,501		$	185,655		$	10,184		$	404,711

Management closely monitors the quality of the loan portfolio and has established a loan review process designed to help grade the quality of the Bank’s loan portfolio. The Bank’s loan ratings coincide with the “Substandard,” “Doubtful” and “Loss” classifications used by federal regulators in their examination of financial institutions. Generally, an asset is considered Substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. Substandard assets include those characterized by the distinct possibility that the insured financial institution will sustain some loss if the deficiencies are not corrected. Assets classified as Doubtful have all the weaknesses inherent in assets classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable. Assets classified as Loss are those considered uncollectible, and of such little value that its continuance on the books is not warranted. Assets that do not currently expose the insured financial institutions to sufficient risk to warrant classification in one of the aforementioned categories but otherwise possess weaknesses are designated “Special Mention.” Management also maintains a listing of loans designated “Watch”. These loans represent borrowers with declining earnings, strained cash flow, increasing leverage and/or weakening market fundamentals that indicate above average risk. As of September 30, 2017 and December 31, 2016, respectively, the Bank had no loans graded “Doubtful” or “Loss” included in the balance of total loans outstanding.

The following table lists the loan grades utilized by the Bank and the corresponding total of outstanding loans in each category as of September 30, 2017 and December 31, 2016:

Credit Risk Profile by Internally Assigned Grades

	Loan Grades
					Special
(dollars in thousands)	Pass		Watch		Mention		Substandard		Total
September 30, 2017
Real Estate Secured:
1-4 residential construction	$	2,860	$	—	$	—	$	—	$	2,860
Commercial construction		2,446		—		—		—		2,446
Land development & other land		19,093		615		—		543		20,251
Farmland		23,436		5,790		8		4,862		34,096
1-4 residential mortgage		127,760		10,155		258		2,668		140,841
Multifamily		28,360		1,095		—		—		29,455
Home equity and second mortgage		25,832		1,883		—		130		27,845
Commercial mortgage		105,056		12,938		1,815		5,340		125,149
Non-Real Estate Secured:
Commercial & agricultural		25,563		1,866		640		536		28,605
Civic organizations		4,166		—		—		—		4,166
Consumer-auto		1,689		81		—		—		1,770
Consumer-other		5,632		157		—		—		5,789
Total	$	371,893	$	34,580	$	2,721	$	14,079	$	423,273

	Loan Grades
(dollars in thousands)	Pass		Watch		Special Mention		Substandard		Total
December 31, 2016
Real Estate Secured:
1-4 residential construction	$	4,056	$	370	$	—	$	—	$	4,426
Commercial construction		2,603		—		—		—		2,603
Land development & other land		18,000		532		—		903		19,435
Farmland		23,201		5,276		—		5,054		33,531
1-4 residential mortgage		122,301		11,517		—		2,111		135,929
Multifamily		25,365		1,321		—		—		26,686
Home equity and second mortgage		23,219		1,243		—		111		24,573
Commercial mortgage		105,317		13,449		3,353		6,396		128,515
Non-Real Estate Secured:
Commercial & agricultural		22,719		2,333		485		549		26,086
Civic organizations		3,603		—		—		—		3,603
Consumer-auto		1,400		21		—		—		1,421
Consumer-other		5,015		105		—		40		5,160
Total	$	356,799	$	36,167	$	3,838	$	15,164	$	411,968

Loans may be placed in nonaccrual status when, in management’s opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received. Payments received are first applied to principal, and any remaining funds are then applied to interest. Loans are removed from nonaccrual status when they are deemed a loss and charged to the allowance, transferred to foreclosed assets, or returned to accrual status based upon performance consistent with the original terms of the loan or a subsequent restructuring thereof.

The following table presents an age analysis of nonaccrual and past due loans by category as of September 30, 2017 and December 31, 2016:

Analysis of Past Due and Nonaccrual Loans

(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total loans		90+ Days Past Due and Still Accruing		Nonaccrual Loans
September 30, 2017
Real Estate Secured:
1-4 residential construction	$	—	$	—	$	—	$	—	$	2,860	$	2,860	$	—	$	—
Commercial construction		—		—		—		—		2,446		2,446		—		—
Land development & other land		—		33		475		508		19,743		20,251		—		475
Farmland		—		—		728		728		33,368		34,096		—		4,031
1-4 residential mortgage		433		145		607		1,185		139,656		140,841		—		795
Multifamily		—		—		—		—		29,455		29,455		—		—
Home equity and second mortgage		149		214		125		488		27,357		27,845		—		130
Commercial mortgage		—		—		203		203		124,946		125,149		—		211
Non-Real Estate Secured:
Commercial & agricultural		26		20		23		69		28,536		28,605		—		96
Civic organizations		—		—		—		—		4,166		4,166		—		—
Consumer-auto		—		—		—		—		1,770		1,770		—		—
Consumer-other		9		—		—		9		5,780		5,789		—		—
Total	$	617	$	412	$	2,161	$	3,190	$	420,083	$	423,273	$	—	$	5,738

(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total loans		90+ Days Past Due and Still Accruing		Nonaccrual Loans
December 31, 2016
Real Estate Secured:
1-4 residential construction	$	—	$	—	$	—	$	—	$	4,426	$	4,426	$	—	$	—
Commercial construction		—		—		—		—		2,603		2,603		—		—
Land development & other land		—		—		390		390		19,045		19,435		—		647
Farmland		343		—		—		343		33,188		33,531		—		3,310
1-4 residential mortgage		315		48		14		377		135,552		135,929		—		26
Multifamily		—		—		—		—		26,686		26,686		—		—
Home equity and second mortgage		98		—		5		103		24,470		24,573		—		5
Commercial mortgage		25		227		426		678		127,837		128,515		—		640
Non-Real Estate Secured:
Commercial & agricultural		67		—		25		92		25,994		26,086		—		31
Civic organizations		—		—		—		—		3,603		3,603		—		—
Consumer-auto		5		—		—		5		1,416		1,421		—		—
Consumer-other		—		6		—		6		5,154		5,160		—		5
Total	$	853	$	281	$	860	$	1,994	$	409,974	$	411,968	$	—	$	4,664

Impaired Loans

A loan is considered impaired when it is probable that the Bank will be unable to collect all contractual principal and interest payments due in accordance with the original or modified terms of the loan agreement. Smaller balance homogenous loans may be collectively evaluated for impairment. Non-homogenous impaired loans are either measured based on the estimated fair value of the collateral less estimated cost to sell if the loan is considered collateral dependent, or measured based on the present value of expected future cash flows if not collateral dependent. The valuation of real estate collateral is subjective in nature and may be adjusted in future periods because of changes in economic conditions. Management considers third-party appraisals, as well as independent fair market value assessments in determining the estimated fair value of particular properties. In addition, as certain of these third-party appraisals and independent fair market value assessments are only updated periodically, changes in the values of specific properties may have occurred subsequent to the most recent appraisals. Accordingly, the amounts of any such potential changes and any related adjustments are generally recorded at the time such information is received. When the measurement of the impaired loan is less than the recorded investment in the loan, impairment is recognized by creating or adjusting an allocation of the allowance for loan losses and uncollected accrued interest is reversed against interest income. If ultimate collection of principal is in doubt, all cash receipts on impaired loans are applied to reduce the principal balance.

As of September 30, 2017 and December 31, 2016, respectively, the recorded investment in impaired loans totaled $13.2 million and $13.3 million. The total amount of collateral-dependent impaired loans at September 30, 2017 and December 31, 2016, respectively, was $4.4 million and $4.0 million. As of September 30, 2017 and December 31, 2016, respectively, $4.1 million and $4.4 million of the recorded investment in impaired loans did not have a related allowance. The Bank had $9.1 million and $10.0 million in troubled debt restructured loans included in impaired loans at September 30, 2017 and December 31, 2016, respectively.

The categories of non-accrual loans and impaired loans overlap, although they are not coextensive. The Bank considers all circumstances regarding the loan and borrower on an individual basis when determining whether an impaired loan should be placed on non-accrual status, such as the financial strength of the borrower, the estimated collateral value, reasons for the delay, payment record, the amount past due and the number of days past due.

In 2015, management began collectively evaluating performing TDRs with a loan balance of $250,000 or less for impairment. As of September 30, 2017 and December 31, 2016, respectively, $5.9 million and $6.1 million of TDRs included in the following table were evaluated collectively for impairment and were deemed to have $328 thousand and $315 thousand of related allowance.

The following table is a summary of information related to impaired loans as of September 30, 2017 and December 31, 2016:

Impaired Loans

							Nine months ended				Three months ended
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
(dollars in thousands)	Investment1		Balance		Allowance		Investment		Recognized		Investment		Recognized
September 30, 2017
With no related allowance recorded:
1-4 Residential Construction	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Land development & other land		181		181		—		336		—		238		—
Farmland		3,778		3,812		—		3,895		1		3,861		—
1-4 residential mortgage		—		—		—		—		—		—		—
Home equity and second mortgage		—		—		—		—		—		—		—
Commercial mortgage		113		113		—		114		—		113		—
Commercial & agricultural		—		—		—		—		—		—		—
Consumer & other		—		—		—		—		—		—		—
Subtotal		4,072		4,106		—		4,345		1		4,212		—
With an allowance recorded:
1-4 Residential Construction		—		—		—		—		—		—		—
Land development & other land		398		398		22		417		10		406		3
Farmland		2,096		2,096		73		2,234		95		2,106		28
1-4 residential mortgage		5,732		5,917		309		6,246		220		6,185		70
Home equity and second mortgage		291		291		26		298		6		297		2
Commercial mortgage		496		632		27		910		49		720		6
Commercial & agricultural		69		95		4		121		9		99		1
Consumer & other		—		—		—		2		2		—		1
Subtotal		9,082		9,429		461		10,228		391		9,813		111
Totals:
1-4 Residential Construction		—		—		—		—		—		—		—
Land development & other land		579		579		22		753		10		644		3
Farmland		5,874		5,908		73		6,129		96		5,967		28
1-4 residential mortgage		5,732		5,917		309		6,246		220		6,185		70
Home equity and second mortgage		291		291		26		298		6		297		2
Commercial mortgage		609		745		27		1,024		49		833		6
Commercial & agricultural		69		95		4		121		9		99		1
Consumer & other		—		—		—		2		2		—		1
Total	$	13,154	$	13,535	$	461	$	14,573	$	392	$	14,025	$	111

¹  Recorded investment is the loan balance, net of any charge-offs

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
(dollars in thousands)	Investment1		Balance		Allowance		Investment		Recognized
December 31, 2016
With no related allowance recorded:
1-4 Residential Construction	$	—	$	—	$	—	$	—	$	—
Land development & other land		581		581		—		840		17
Farmland		3,660		3,660		—		4,170		18
1-4 residential mortgage		—		—		—		347		10
Home equity and second mortgage		—		—		—		—		—
Commercial mortgage		114		114		—		115		4
Commercial & agricultural		—		—		—		—		—
Consumer & other		—		—		—		—		1
Subtotal		4,355		4,355		—		5,472		50
With an allowance recorded:
1-4 Residential Construction		—		—		—		—		—
Land development & other land		193		193		10		201		16
Farmland		1,679		1,679		73		1,705		84
1-4 residential mortgage		5,964		6,121		414		6,375		294
Home equity and second mortgage		174		179		9		254		8
Commercial mortgage		838		974		44		1,035		39
Commercial & agricultural		113		113		6		155		9
Consumer & other		4		4		—		10		1
Subtotal		8,965		9,263		556		9,735		451
Totals:
1-4 Residential Construction		—		—		—		—		—
Land development & other land		774		774		10		1,041		33
Farmland		5,339		5,339		73		5,875		102
1-4 residential mortgage		5,964		6,121		414		6,722		304
Home equity and second mortgage		174		179		9		254		8
Commercial mortgage		952		1,088		44		1,150		43
Commercial & agricultural		113		113		6		155		9
Consumer & other		4		4		—		10		2
Total	$	13,320	$	13,618	$	556	$	15,207	$	501

¹  Recorded investment is the loan balance, net of any charge-offs

Troubled Debt Restructuring

A troubled debt restructured loan is a loan for which the Bank, for reasons related to the borrower’s financial difficulties, grants a concession to the borrower that the Bank would not otherwise consider.

The loan terms which have been modified or restructured due to a borrower’s financial difficulty, include but are not limited to: a reduction in the stated interest rate; an extension of the maturity at an interest rate below current market; a reduction in the face amount of the debt; a reduction in the accrued interest; or re-aging, extensions, deferrals and renewals. Troubled debt restructured loans are considered impaired loans.

The following table sets forth information with respect to the Bank’s troubled debt restructurings as of September 30, 2017 and September 30, 2016:

For the Nine Months Ended September 30, 2017

							TDRs identified in the last twelve
(dollars in thousands)	TDRs identified during the period						months that subsequently defaulted(1)
			Pre-		Post-				Pre-		Post-
			modification		modification				modification		modification
	Number		outstanding		outstanding		Number		outstanding		outstanding
	of		recorded		recorded		of		recorded		recorded
	contracts		investment		investment		contracts		investment		investment
Land development & other land		—	$	—	$	—		—	$	—	$	—
Farmland		2		298		298		—		—		—
1-4 residential mortgage		1		48		48		—		—		—
Commercial mortgage		—		—		—		—		—		—
Commercial & agricultural		—		—		—		—		—		—
Consumer & other		—		—		—		—		—		—
Total		3	$	346	$	346		—	$	—	$	—

During the nine months ended September 30, 2017, three loans were modified that were considered to be TDRs. Term concessions only were granted and no additional funds were advanced. No TDRs identified in the last twelve months subsequently defaulted in the quarter ended September 30, 2017.

⁽¹⁾ Loans past due 30 days or more are considered to be in default.

During the three months ended September 30, 2017, no loans were modified that were considered to be a TDR.

⁽¹⁾ Loans past due 30 days or more are considered to be in default.

For the Nine Months Ended September 30, 2016

							TDRs identified in the last twelve
(dollars in thousands)	TDRs identified during the period						months that subsequently defaulted(1)
			Pre-		Post-				Pre-		Post-
			modification		modification				modification		modification
	Number		outstanding		outstanding		Number		outstanding		outstanding
	of		recorded		recorded		of		recorded		recorded
	contracts		investment		investment		contracts		investment		investment
Land development & other land		—	$	—	$	—		—	$	—	$	—
Farmland		—		—		—		—		—		—
1-4 residential mortgage		5		565		588		—		—		—
Commercial mortgage		—		—		—		—		—		—
Commercial & agricultural		—		—		—		—		—		—
Consumer & other		—		—		—		—		—		—
Total		5	$	565	$	588		—	$	—	$	—

During the nine months ended September 30, 2016, five loans were modified that were considered to be TDRs. Term concessions only were granted for five loans; and additional funds were advanced on two loans to pay real estate taxes and closing costs. No TDRs identified in twelve months prior to September 30, 2016 subsequently defaulted in the quarter ended September 30, 2016.

During the three months ended September 30, 2016, no loans were modified that were considered to be a TDR.

⁽¹⁾ Loans past due 30 days or more are considered to be in default.

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Employee Benefit Plan

9 Months Ended

Sep. 30, 2017

Retirement Benefits [Abstract]

Employee Benefit Plan

Note 5. Employee Benefit Plan

The Bank has a qualified noncontributory defined benefit pension plan that covers substantially all of its employees. Effective December 31, 2012, the pension plan was amended to freeze benefit accruals for all eligible employees. The following is a summary of net periodic pension costs for the nine-month and three-month periods ended September 30, 2017 and 2016.

	Nine Months Ended September 30,						Three Months Ended September 30,
(dollars in thousands)	2017			2016			2017			2016
Service cost	$	—		$	—		$	—		$	—
Interest cost		144			147			48			49
Expected return on plan assets		(414	)		(419	)		(138	)		(140	)
Amortization of prior service cost		—			—			—			—
Recognized net loss due to settlement		—			—			—			—
Recognized net actuarial (gain)/loss		21			8			7			3
Net periodic benefit cost	$	(249	)	$	(264	)	$	(83	)	$	(88	)

It has been Bank practice to contribute the maximum tax-deductible amount each year as determined by the plan administrator. As a result of prior year contributions exceeding the minimum requirements, a Prefunding Balance existed as of December 31, 2016 and there is no required contribution for 2017. Based on this we do not anticipate making a contribution to the plan in 2017.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 6. Commitments and Contingencies

Litigation

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

Financial Instruments with Off-Balance Sheet Risk

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

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as for on-balance sheet instruments. A summary of the Bank’s commitments at September 30, 2017 and December 31, 2016 is as follows:

	September 30,		December 31,
(dollars in thousands)	2017		2016
Commitments to extend credit	$	50,562	$	54,667
Standby letters of credit		1,118		—
	$	51,680	$	54,667

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

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

Concentrations of Credit Risk

Substantially all of the Bank’s loans, commitments to extend credit, and standby letters of credit have been granted to customers in the Bank’s market area and such customers are generally depositors of the Bank. Investments in state and municipal securities involve governmental entities within and outside the Bank’s market area. The concentrations of credit by type of loan are set forth in Note 5. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Standby letters of credit are granted primarily to commercial borrowers. The Bank’s primary focus is toward small business and consumer transactions, and accordingly, it does not have a significant number of credits to any single borrower or group of related borrowers in excess of $5,000,000. The Bank has cash and cash equivalents on deposit with financial institutions which exceed federally insured limits.

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Financial Instruments

9 Months Ended

Sep. 30, 2017

Investments, All Other Investments [Abstract]

Financial Instruments

Note 7. Financial Instruments

FASB ASC 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value of future cash flows or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. FASB ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of September 30, 2017 and December 31, 2016. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

					Fair Value Measurements
					Quoted Prices in
					Active Markets		Significant
					for Identical		Other		Significant
					Assets or		Observable		Unobservable
	Carrying		Fair		Liabilities		Inputs		Inputs
(dollars in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2017
Financial Instruments - Assets
Net Loans	$	419,743	$	417,044	$	—	$	415,867	$	1,177
Financial Instruments – Liabilities
Time Deposits		151,929		149,711		—		149,711		—
December 31, 2016
Financial Instruments - Assets
Net Loans	$	408,548	$	405,876	$	—	$	405,410	$	466
Financial Instruments – Liabilities
Time Deposits		167,355		165,257		—		165,257		—

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

Fair Value Hierarchy

Under FASB ASC 820, “Fair Value Measurements and Disclosures”, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

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

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

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

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

Investment Securities Available for Sale

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

Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. If a loan is identified as individually impaired, management measures impairment in accordance with applicable accounting guidance. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value, and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At September 30, 2017, a small percentage of the total impaired loans were evaluated based on the fair value of the collateral. In accordance with accounting standards, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price the Company records the impaired loan as nonrecurring Level 2. When the fair value is based on either an external or internal appraisal and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.

Foreclosed Assets

Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price the Company records the foreclosed asset as nonrecurring Level 2. When the fair value of the collateral is based on either an external or internal appraisal and there is no observable market price, the Company records the foreclosed asset as nonrecurring Level 3.

Assets Recorded at Fair Value on a Recurring Basis

(dollars in thousands)	Total		Level 1		Level 2		Level 3
September 30, 2017
Investment securities available for sale
Government sponsored enterprises	$	120	$	—	$	120	$	—
Mortgage-backed securities		29,015		—		29,015		—
Corporate securities		2,957		—		2,957		—
State and municipal securities		19,841		—		19,841		—
Total assets at fair value	$	51,933	$	—	$	51,933	$	—
December 31, 2016
Investment securities available for sale
Government sponsored enterprises	$	2,209	$	—	$	2,209	$	—
Mortgage-backed securities		35,202		—		35,202		—
Corporate securities		2,974		—		2,974		—
State and municipal securities		22,155		—		22,155		—
Total assets at fair value	$	62,540	$	—	$	62,540	$	—

No liabilities were recorded at fair value on a recurring basis as of September 30, 2017 and December 31, 2016. There were no significant transfers between levels during the years ended September 30, 2017 and December 31, 2016.

Assets Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets and liabilities that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. No liabilities were recorded at fair value on a nonrecurring basis at September 30, 2017 and December 31, 2016. Assets measured at fair value on a nonrecurring basis are included in the table below.

September 30, 2017	Total		Level 1		Level 2		Level 3
(dollars in thousands)
Impaired loans	$	1,177	$	—	$	—	$	1,177
Foreclosed assets		—		—		—		—
Total assets at fair value	$	1,177	$	—	$	—	$	1,177
December 31, 2016	Total		Level 1		Level 2		Level 3
(dollars in thousands)
Impaired loans	$	466	$	—	$	—	$	466
Foreclosed assets		70		—		—		70
Total assets at fair value	$	536	$	—	$	—	$	536

Assets Recorded at Fair Value on a Nonrecurring Basis

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

	Fair Value at September 30, 2017		Fair Value at December 31, 2016		Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired loans	$	1,177	$	466	Appraised Value/Discounted Cash Flows/Market Value of Note	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0 – 10%
Foreclosed assets	$	—	$	70	Appraised Value/Comparable Sales/Other Estimates from Independent Sources	Discounts to reflect current market conditions and estimated costs to sell	0 – 10%

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Intangible Assets

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Note 8. Intangible Assets

The following table presents the gross carrying amount and accumulated amortization for the Company’s core deposit intangible assets, which are the only identifiable intangible assets subject to amortization. Core deposit intangibles at September 30, 2017 and December 31, 2016 is as follows:

	September 30,		December 31,
(dollars in thousands)	2017		2016
Gross carrying amount	$	2,469	$	2,469
Accumulated amortization		354		142
Net book value	$	2,115	$	2,327

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Capital Requirements

9 Months Ended

Sep. 30, 2017

Banking and Thrift [Abstract]

Capital Requirements

Note 9. Capital Requirements

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 September 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.

						For Capital					To Be Well-
	Actual					Adequacy Purposes					Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2017
Total capital
(to risk weighted assets)	$	56,037		13.07	%	$	34,302		8.00	%	$	42,878		10.00	%
Tier 1 Capital
(to risk weighted assets)	$	52,433		12.23	%	$	25,727		6.00	%	$	34,302		8.00	%
Common Equity Tier 1
(to risk weighted assets)	$	52,433		12.23	%	$	19,295		4.50	%	$	27,851		6.50	%
Tier 1 Capital
(to average total assets)	$	52,433		9.67	%	$	21,693		4.00	%	$	27,116		5.00	%
December 31, 2016
Total capital
(to risk weighted assets)	$	53,657		12.72	%	$	33,744		8.00	%	$	42,180		10.00	%
Tier 1 Capital
(to risk weighted assets)	$	50,111		11.88	%	$	25,308		6.00	%	$	33,744		8.00	%
Common Equity Tier 1
(to risk weighted assets)	$	50,111		11.88	%	$	18,981		4.50	%	$	27,417		6.50	%
Tier 1 Capital
(to average total assets)	$	50,111		9.01	%	$	22,242		4.00	%	$	27,803		5.00	%

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Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

Note 10. Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has evaluated events occurring subsequent to the balance sheet date through the date these financial statements were issued, determining no events require additional disclosure in these consolidated financial statements.

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Organization and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Critical Accounting Policies

Critical Accounting Policies

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

Principles of Consolidation

Principles of Consolidation

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

Business Segments

Business Segments

The Company reports its activities as a single business segment. In determining the appropriateness of segment definition, the Company considers components of the business about which financial information is available and regularly evaluated relative to resource allocation and performance assessment.

Business Combinations

Business Combinations

Generally, acquisitions are accounted for under the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations. A business combination occurs when the Company acquires net assets that constitute a business, or acquires equity interests in one or more other entities that are businesses and obtains control over those entities. Business combinations are effected through the transfer of consideration consisting of cash and/or common stock and are accounted for using the acquisition method. Accordingly, the assets and liabilities of the acquired entity are recorded at their respective fair values as of the closing date of the acquisition. Determining the fair value of assets and liabilities, especially the loan portfolio, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are subject to refinement for up to one year after the closing date of the acquisition as information relative to closing date fair values becomes available. The results of operations of an acquired entity are included in our consolidated results from the closing date of the merger, and prior periods are not restated. No allowance for loan losses related to the acquired loans is recorded on the acquisition date because the fair value of the loans acquired incorporates assumptions regarding future credit losses. The fair value estimates associated with the acquired loans include estimates related to expected prepayments and the amount and timing of expected principal, interest and other cash flows.

Use of Estimates

Use of Estimates

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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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

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

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

The Company seeks strategies that minimize the tax effect of implementing their business strategies. As such, judgments are made regarding the ultimate consequence of long-term tax planning strategies, including the likelihood of future recognition of deferred tax benefits. The Company’s tax returns are subject to examination by both Federal and State authorities. Such examinations may result in the assessment of additional taxes, interest and penalties. As a result, the ultimate outcome, and the corresponding financial statement impact, can be difficult to predict with accuracy.

Accounting for pension benefits, costs and related liabilities are developed using actuarial valuations. These valuations include key assumptions determined by management, including the discount rate and expected long-term rate of return on plan assets. Material changes in pension costs may occur in the future due to changes in these assumptions.

Cash and Cash Equivalents

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents includes cash and amounts due from banks (including cash items in process of collection), interest-bearing deposits with banks and federal funds sold.

Trading Securities

Trading Securities

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

Securities Held to Maturity

Securities Held to Maturity

Bonds, notes, and debentures for which the Company has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity. The Company does not currently hold any securities classified as held to maturity.

Securities Available for Sale

Securities Available for Sale

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

Unrealized holding gains and losses, net of tax, on available for sale securities are reported as a net amount in a separate component of accumulated other comprehensive income. Realized gains and losses on the sale of available for sale securities are determined using the specific-identification method. Premiums and discounts are recognized in interest income using the interest method over the period to maturity.

Declines in the fair value of individual held to maturity and available for sale securities below cost that are other than temporary are reflected as write-downs of the individual securities to fair value. Related write-downs are included in earnings as realized losses.

Loans Receivable

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal amount adjusted for any charge-offs and the allowance for loan losses. Loan origination costs are capitalized and recognized as an adjustment to yield over the life of the related loan.

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

Purchased Performing Loans – The Company accounts for performing loans acquired in business combinations using the contractual cash flows method of recognizing discount accretion based on the acquired loans’ contractual cash flows. Purchased performing loans are recorded at fair value, including a credit discount. The fair value discount is accreted as an adjustment to yield over the estimated lives of the loans. There is no allowance for loan losses established at the acquisition date for purchased performing loans. A provision for loan losses is recorded for any further deterioration in these loans subsequent to the acquisition

Purchased Credit-Impaired (“PCI”) Loans – Loans purchased with evidence of credit deterioration since origination, and for which it is probable that all contractually required payments will not be collected, are considered credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as internal risk grade and past due and nonaccrual status. Purchased impaired loans generally meet the Company’s definition for nonaccrual status. PCI loans are initially measured at fair value, which reflects estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date. Any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference, and is available to absorb credit losses on those loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent significant increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or a reclassification of the nonaccretable difference with a positive impact on future interest income.

Allowance for Loan Losses

Allowance for Loan Losses

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

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

The allowance consists of specific, general and unallocated components. The specific component is calculated on an individual basis for larger-balance, non-homogeneous loans, which are considered impaired. A specific allowance is established when the discounted cash flows, collateral value (less disposal costs), or observable market price of the impaired loan is lower than its carrying value. The specific component of the allowance for smaller- balance loans whose terms have been modified in a troubled debt restructuring (TDR) is calculated on a pooled basis considering historical experience adjusted for qualitative factors. The general component covers non-impaired loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

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

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are the subject of a restructuring agreement.

Troubled Debt Restructurings

Troubled Debt Restructurings

Under GAAP, the Bank is required to account for certain loan modifications or restructurings as “troubled debt restructurings” or “troubled debt restructured loans.” In general, the modification or restructuring of a debt constitutes a troubled debt restructuring if the Bank for economic or legal reasons related to the borrower’s financial difficulties grants a concession to the borrower that the Bank would not otherwise consider. Debt restructuring or loan modifications for a borrower do not necessarily always constitute a troubled debt restructuring, however, and troubled debt restructurings do not necessarily result in non-accrual loans. Troubled debt restructured loans are maintained in nonaccrual status until they have been performing in accordance with modified terms for a period of at least six months.

Property and Equipment

Property and Equipment

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

	Years
Buildings and improvements		10-40
Furniture and equipment		5-12

Foreclosed Assets

Foreclosed Assets

Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value less anticipated cost to sell at the date of foreclosure, establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in foreclosure expense on the consolidated statements of income.

Pension Plan

Pension Plan

Prior to the merger, both Grayson National Bank (Grayson) and Bank of Floyd (Floyd) had qualified noncontributory defined benefit pension plans in place which covered substantially all of each bank’s employees. The benefits in each plan are primarily based on years of service and earnings. Both Grayson and Floyd plans were amended to freeze benefit accruals for all eligible employees prior to the effective date of the merger. Grayson’s plan is a single-employer plan, the funded status of which is measured as the difference between the fair value of plan assets and the projected benefit obligation. Floyd’s plan is a multi-employer plan for accounting purposes and is a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code.

Transfers of Financial Assets

Transfers of Financial Assets

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

Core Deposit Intangible

Core Deposit Intangible

Core deposit intangibles represent the value of long-term deposit relationships acquired in a business combination. Core deposit intangibles are amortized over the estimated useful lives of the deposit accounts acquired (generally twenty years on an accelerated basis).

Income Taxes

Income Taxes

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

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more likely than not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more likely than not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Advertising Expense

Advertising Expense

The Company expenses advertising costs as they are incurred. Advertising expense for the years presented is not material.

Basic Earnings per Share

Basic Earnings per Share

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

Comprehensive Income

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income includes unrealized gains and losses on securities available for sale and changes in the funded status of the pension plan which are also recognized as separate components of equity. The accumulated balances related to each component of other comprehensive income (loss) are as follows:

(dollars in thousands)	Unrealized Gains And (Losses) On Available for Sale Securities			Defined Benefit Pension Items			Total
Balance, December 31, 2015	$	(116	)	$	(608	)	$	(724	)
Other comprehensive gain before reclassifications		872			—			872
Amounts reclassified from accumulated other comprehensive gain		(241	)		—			(241	)
Balance September 30, 2016	$	515		$	(608	)	$	(93	)
Balance, December 31, 2016	$	(574	)	$	(780	)	$	(1,354	)
Other comprehensive gain before reclassifications		576			—			576
Amounts reclassified from accumulated other comprehensive gain		(83	)		—			(83	)
Balance September 30, 2017	$	(81	)	$	(780	)	$	(861	)

Off-Balance Sheet Credit Related Financial Instruments

Off-Balance Sheet Credit Related Financial Instruments

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

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 7. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates.

Reclassification

Reclassification

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

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The following accounting standards may affect the future financial reporting by the Company:

In May 2014, the 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 full retrospective approach. The Company does not expect these amendments to have a material effect on its consolidated 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 reposting periods beginning after December 15, 2017. The Company will apply the guidance using a full retrospective approach. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In November 2015, the FASB amended the Income Taxes topic of the Accounting Standards Codification to simplify the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments will be effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted as of the beginning of an interim or annual reporting period. The Company applied the guidance prospectively. These amendments did not have a material effect on the Company’s consolidated financial statements.

In January 2016, the FASB amended the Financial Instruments topic of the Accounting Standards Codification 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 consolidated financial statements.

In February 2016, the FASB amended the Leases topic of the Accounting Standards Codification 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. Early adoption is permitted. 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 March 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification 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 April 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to identifying performance obligations and accounting for licenses of intellectual property. 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 May 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. 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. 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 August 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements.

In October 2016, the FASB amended the Income Taxes topic of the Accounting Standards Codification to modify the accounting for intra-entity transfers of assets other than inventory. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In November 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how restricted cash is presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

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 full retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2017, the FASB issued guidance to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendment to the Business Combinations Topic is intended to address concerns that the existing definition of a business has been applied too broadly and has resulted in many transactions being recorded as business acquisitions that in substance are more akin to asset acquisitions. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. Early adoption is permitted. 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 January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In February 2017, the FASB amended the Other Income Topic of the Accounting Standards Codification 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.

In March 2017, the FASB amended the requirements in the Compensation—Retirement Benefits Topic of the Accounting Standards Codification related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2017, the FASB amended the requirements in the Receivables—Nonrefundable Fees and Other Costs Topic of the Accounting Standards Codification related to the amortization period for certain purchased callable debt securities held at a premium. The amendments shorten the amortization period for the premium to the earliest call date. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. 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 consolidated financial position, results of operations or cash flows.

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Organization and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Property and Equipment, Estimated Useful Lives

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

	Years
Buildings and improvements		10-40
Furniture and equipment		5-12

Accumulated Balances Related Component of Other Comprehensive Income (Loss)

The accumulated balances related to each component of other comprehensive income (loss) are as follows:

(dollars in thousands)	Unrealized Gains And (Losses) On Available for Sale Securities			Defined Benefit Pension Items			Total
Balance, December 31, 2015	$	(116	)	$	(608	)	$	(724	)
Other comprehensive gain before reclassifications		872			—			872
Amounts reclassified from accumulated other comprehensive gain		(241	)		—			(241	)
Balance September 30, 2016	$	515		$	(608	)	$	(93	)
Balance, December 31, 2016	$	(574	)	$	(780	)	$	(1,354	)
Other comprehensive gain before reclassifications		576			—			576
Amounts reclassified from accumulated other comprehensive gain		(83	)		—			(83	)
Balance September 30, 2017	$	(81	)	$	(780	)	$	(861	)

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Amortized Cost and Aggregate Fair Value of Available for Sale Securities

The amortized cost of securities and their approximate fair values at September 30, 2017 and December 31, 2016 follow:

(dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2017
Available for sale:
Government sponsored enterprises	$	25	$	95	$	—		$	120
Mortgage-backed securities		29,359		5		(349	)		29,015
Corporate securities		3,027		—		(70	)		2,957
State and municipal securities		19,646		250		(55	)		19,841
	$	52,057	$	350	$	(474	)	$	51,933
December 31, 2016
Available for sale:
Government sponsored enterprises	$	2,046	$	236	$	(73	)	$	2,209
Mortgage-backed securities		36,021		4		(823	)		35,202
Corporate securities		3,061		—		(87	)		2,974
State and municipal securities		22,282		97		(224	)		22,155
	$	63,410	$	337	$	(1,207	)	$	62,540

Unrealized Losses and Related Fair Values in Company's Held to Maturity and Available for Sale Investment Securities Portfolios

The following tables details unrealized losses and related fair values in the Company’s held to maturity and available for sale investment securities portfolios. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2017 and December 31, 2016.

	Less Than 12 Months					12 Months or More					Total
(dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2017
Available for sale:
Government sponsored enterprises	$	—	$	—		$	—	$	—		$	—	$	—
Mortgage-backed securities		23,487		(331	)		650		(18	)		24,137		(349	)
Corporate securities		1,526		(1	)		1,431		(69	)		2,957		(70	)
State and municipal securities		4,058		(26	)		1,741		(29	)		5,799		(55	)
Total securities available for sale	$	29,071	$	(358	)	$	3,822	$	(116	)	$	32,893	$	(474	)
December 31, 2016
Available for sale:
Government sponsored enterprises	$	—	$	—		$	1,924	$	(73	)	$	1,924	$	(73	)
Mortgage-backed securities		31,759		(789	)		688		(34	)		32,447		(823	)
Corporate securities		1,548		(12	)		1,425		(75	)		2,973		(87	)
State and municipal securities		12,208		(224	)		—		—			12,208		(224	)
Total securities available for sale	$	45,515	$	(1,025	)	$	4,037	$	(182	)	$	49,552	$	(1,207	)

Gross Realized Gains and Losses on Sale of Investment Securities

Gross realized gains and losses for the nine-month and three-month periods ended September 30, 2017 and 2016 are as follows:

	Nine Months Ended September 30,						Three Months Ended September 30,
(dollars in thousands)	2017			2016			2017			2016
Realized gains	$	141		$	369		$	28		$	—
Realized losses		(15	)		(5	)		(15	)		(1	)
	$	126		$	364		$	13		$	(1	)

Scheduled Maturities of Securities Available for Sale

The scheduled maturities of securities available for sale at September 30, 2017, were as follows:

(dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	733	$	736
Due after one year through five years		8,491		8,522
Due after five years through ten years		21,403		21,200
Due after ten years		21,430		21,475
	$	52,057	$	51,933

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Loans Receivable (Tables)

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Major Components of Loans in Consolidated Balance Sheets

The major components of loans in the consolidated balance sheets at September 30, 2017 and December 31, 2016 are as follows:

	2017			2016
Commercial & agricultural	$	28,605		$	26,086
Commercial mortgage		125,149			128,515
Construction & development		25,557			26,464
Farmland		34,096			33,531
Residential		198,141			187,188
Consumer & other		11,725			10,184
Total loans		423,273			411,968
Allowance for loan losses		(3,530	)		(3,420	)
Loans, net of allowance for loan losses	$	419,743		$	408,548

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Allowance for Loan Losses and Impaired Loans (Tables)

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Allowance for Loan Losses and Recorded Investment in Loans

The following table presents activity in the allowance for loan losses by loan category three months ended September 30, 2017 and 2016 and the related asset balances as of September 30, 2017 and December 31, 2016:

Allowance for Loan Losses and Recorded Investment in Loans

	Commercial						Construction
	&			Commercial			&									Consumer
(dollars in thousands)	Agricultural			Mortgage			Development			Farmland			Residential			& Other			Total
For the Three Months Ended September 30, 2017
Allowance for loan losses:
Balance, June 30, 2017	$	214		$	620		$	329		$	393		$	1,938		$	74		$	3,568
Charge-offs		—			—			—			(34	)		(76	)		(13	)		(123	)
Recoveries		2			—			—			—			4			4			10
Provision		57			28			(75	)		8			46			11			75
Balance, September 30, 2017	$	273		$	648		$	254		$	367		$	1,912		$	76		$	3,530
For the Three Months Ended September 30, 2016
Allowance for loan losses:
Balance, June 30, 2016	$	188		$	571		$	269		$	522		$	1,717		$	42		$	3,309
Charge-offs		—			(10	)		(20	)		—			(19	)		(19	)		(68	)
Recoveries		2			—			49			55			6			18			130
Provision		35			45			(52	)		(5	)		61			25			109
Balance, September 30, 2016	$	225		$	606		$	246		$	572		$	1,765		$	66		$	3,480
For the Nine Months Ended September 30, 2017
Allowance for loan losses:
Balance, December 31, 2016	$	210		$	600		$	319		$	342		$	1,841		$	108		$	3,420
Charge-offs		(27	)		(42	)		—			(34	)		(89	)		(51	)		(243	)
Recoveries		31			—			56			—			19			14			120
Provision		59			90			(121	)		59			141			5			233
Balance, September 30, 2017	$	273		$	648		$	254		$	367		$	1,912		$	76		$	3,530
For the Nine Months Ended September 30, 2016
Allowance for loan losses:
Balance, December 31, 2015	$	136		$	578		$	344		$	435		$	1,887		$	38		$	3,418
Charge-offs		(19	)		(21	)		(20	)		—			(44	)		(56	)		(160	)
Recoveries		6			—			93			55			22			32			208
Provision		102			49			(171	)		82			(100	)		52			14
Balance, September 30, 2016	$	225		$	606		$	246		$	572		$	1,765		$	66		$	3,480
September 30, 2017
Allowance for loan losses:
Ending balance	$	273		$	648		$	254		$	367		$	1,912		$	76		$	3,530
Ending balance: individually evaluated for impairment	$	—		$	—		$	—		$	47		$	86		$	—		$	133
Ending balance: collectively evaluated for impairment	$	273		$	648		$	254		$	320		$	1,826		$	76		$	3,397
Loans outstanding:
Ending balance	$	28,605		$	125,149		$	25,557		$	34,096		$	198,141		$	11,725		$	423,273
Ending balance: individually evaluated for impairment	$	—		$	113		$	180		$	5,435		$	1,565		$	—		$	7,293
Ending balance: collectively evaluated for impairment	$	28,605		$	125,036		$	25,377		$	28,661		$	196,576		$	11,725		$	415,980
December 31, 2016
Allowance for loan losses:
Ending balance	$	210		$	600		$	319		$	342		$	1,841		$	108		$	3,420
Ending balance: individually evaluated for impairment	$	—		$	—		$	—		$	57		$	184		$	—		$	241
Ending balance: collectively evaluated for impairment	$	210		$	600		$	319		$	285		$	1,657		$	108		$	3,179
Loans outstanding:
Ending balance	$	26,086		$	128,515		$	26,464		$	33,531		$	187,188		$	10,184		$	411,968
Ending balance: individually evaluated for impairment	$	—		$	114		$	580		$	5,030		$	1,533		$	—		$	7,257
Ending balance: collectively evaluated for impairment	$	26,086		$	128,401		$	25,884		$	28,501		$	185,655		$	10,184		$	404,711

Credit Risk Profile by Internally Assigned Grades

The following table lists the loan grades utilized by the Bank and the corresponding total of outstanding loans in each category as of September 30, 2017 and December 31, 2016:

Credit Risk Profile by Internally Assigned Grades

	Loan Grades
					Special
(dollars in thousands)	Pass		Watch		Mention		Substandard		Total
September 30, 2017
Real Estate Secured:
1-4 residential construction	$	2,860	$	—	$	—	$	—	$	2,860
Commercial construction		2,446		—		—		—		2,446
Land development & other land		19,093		615		—		543		20,251
Farmland		23,436		5,790		8		4,862		34,096
1-4 residential mortgage		127,760		10,155		258		2,668		140,841
Multifamily		28,360		1,095		—		—		29,455
Home equity and second mortgage		25,832		1,883		—		130		27,845
Commercial mortgage		105,056		12,938		1,815		5,340		125,149
Non-Real Estate Secured:
Commercial & agricultural		25,563		1,866		640		536		28,605
Civic organizations		4,166		—		—		—		4,166
Consumer-auto		1,689		81		—		—		1,770
Consumer-other		5,632		157		—		—		5,789
Total	$	371,893	$	34,580	$	2,721	$	14,079	$	423,273

	Loan Grades
(dollars in thousands)	Pass		Watch		Special Mention		Substandard		Total
December 31, 2016
Real Estate Secured:
1-4 residential construction	$	4,056	$	370	$	—	$	—	$	4,426
Commercial construction		2,603		—		—		—		2,603
Land development & other land		18,000		532		—		903		19,435
Farmland		23,201		5,276		—		5,054		33,531
1-4 residential mortgage		122,301		11,517		—		2,111		135,929
Multifamily		25,365		1,321		—		—		26,686
Home equity and second mortgage		23,219		1,243		—		111		24,573
Commercial mortgage		105,317		13,449		3,353		6,396		128,515
Non-Real Estate Secured:
Commercial & agricultural		22,719		2,333		485		549		26,086
Civic organizations		3,603		—		—		—		3,603
Consumer-auto		1,400		21		—		—		1,421
Consumer-other		5,015		105		—		40		5,160
Total	$	356,799	$	36,167	$	3,838	$	15,164	$	411,968

Analysis of Past Due and Nonaccrual Loans

The following table presents an age analysis of nonaccrual and past due loans by category as of September 30, 2017 and December 31, 2016:

Analysis of Past Due and Nonaccrual Loans

(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total loans		90+ Days Past Due and Still Accruing		Nonaccrual Loans
September 30, 2017
Real Estate Secured:
1-4 residential construction	$	—	$	—	$	—	$	—	$	2,860	$	2,860	$	—	$	—
Commercial construction		—		—		—		—		2,446		2,446		—		—
Land development & other land		—		33		475		508		19,743		20,251		—		475
Farmland		—		—		728		728		33,368		34,096		—		4,031
1-4 residential mortgage		433		145		607		1,185		139,656		140,841		—		795
Multifamily		—		—		—		—		29,455		29,455		—		—
Home equity and second mortgage		149		214		125		488		27,357		27,845		—		130
Commercial mortgage		—		—		203		203		124,946		125,149		—		211
Non-Real Estate Secured:
Commercial & agricultural		26		20		23		69		28,536		28,605		—		96
Civic organizations		—		—		—		—		4,166		4,166		—		—
Consumer-auto		—		—		—		—		1,770		1,770		—		—
Consumer-other		9		—		—		9		5,780		5,789		—		—
Total	$	617	$	412	$	2,161	$	3,190	$	420,083	$	423,273	$	—	$	5,738

(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total loans		90+ Days Past Due and Still Accruing		Nonaccrual Loans
December 31, 2016
Real Estate Secured:
1-4 residential construction	$	—	$	—	$	—	$	—	$	4,426	$	4,426	$	—	$	—
Commercial construction		—		—		—		—		2,603		2,603		—		—
Land development & other land		—		—		390		390		19,045		19,435		—		647
Farmland		343		—		—		343		33,188		33,531		—		3,310
1-4 residential mortgage		315		48		14		377		135,552		135,929		—		26
Multifamily		—		—		—		—		26,686		26,686		—		—
Home equity and second mortgage		98		—		5		103		24,470		24,573		—		5
Commercial mortgage		25		227		426		678		127,837		128,515		—		640
Non-Real Estate Secured:
Commercial & agricultural		67		—		25		92		25,994		26,086		—		31
Civic organizations		—		—		—		—		3,603		3,603		—		—
Consumer-auto		5		—		—		5		1,416		1,421		—		—
Consumer-other		—		6		—		6		5,154		5,160		—		5
Total	$	853	$	281	$	860	$	1,994	$	409,974	$	411,968	$	—	$	4,664

Impaired Loans

The following table is a summary of information related to impaired loans as of September 30, 2017 and December 31, 2016:

Impaired Loans

							Nine months ended				Three months ended
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
(dollars in thousands)	Investment1		Balance		Allowance		Investment		Recognized		Investment		Recognized
September 30, 2017
With no related allowance recorded:
1-4 Residential Construction	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Land development & other land		181		181		—		336		—		238		—
Farmland		3,778		3,812		—		3,895		1		3,861		—
1-4 residential mortgage		—		—		—		—		—		—		—
Home equity and second mortgage		—		—		—		—		—		—		—
Commercial mortgage		113		113		—		114		—		113		—
Commercial & agricultural		—		—		—		—		—		—		—
Consumer & other		—		—		—		—		—		—		—
Subtotal		4,072		4,106		—		4,345		1		4,212		—
With an allowance recorded:
1-4 Residential Construction		—		—		—		—		—		—		—
Land development & other land		398		398		22		417		10		406		3
Farmland		2,096		2,096		73		2,234		95		2,106		28
1-4 residential mortgage		5,732		5,917		309		6,246		220		6,185		70
Home equity and second mortgage		291		291		26		298		6		297		2
Commercial mortgage		496		632		27		910		49		720		6
Commercial & agricultural		69		95		4		121		9		99		1
Consumer & other		—		—		—		2		2		—		1
Subtotal		9,082		9,429		461		10,228		391		9,813		111
Totals:
1-4 Residential Construction		—		—		—		—		—		—		—
Land development & other land		579		579		22		753		10		644		3
Farmland		5,874		5,908		73		6,129		96		5,967		28
1-4 residential mortgage		5,732		5,917		309		6,246		220		6,185		70
Home equity and second mortgage		291		291		26		298		6		297		2
Commercial mortgage		609		745		27		1,024		49		833		6
Commercial & agricultural		69		95		4		121		9		99		1
Consumer & other		—		—		—		2		2		—		1
Total	$	13,154	$	13,535	$	461	$	14,573	$	392	$	14,025	$	111

¹  Recorded investment is the loan balance, net of any charge-offs

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
(dollars in thousands)	Investment1		Balance		Allowance		Investment		Recognized
December 31, 2016
With no related allowance recorded:
1-4 Residential Construction	$	—	$	—	$	—	$	—	$	—
Land development & other land		581		581		—		840		17
Farmland		3,660		3,660		—		4,170		18
1-4 residential mortgage		—		—		—		347		10
Home equity and second mortgage		—		—		—		—		—
Commercial mortgage		114		114		—		115		4
Commercial & agricultural		—		—		—		—		—
Consumer & other		—		—		—		—		1
Subtotal		4,355		4,355		—		5,472		50
With an allowance recorded:
1-4 Residential Construction		—		—		—		—		—
Land development & other land		193		193		10		201		16
Farmland		1,679		1,679		73		1,705		84
1-4 residential mortgage		5,964		6,121		414		6,375		294
Home equity and second mortgage		174		179		9		254		8
Commercial mortgage		838		974		44		1,035		39
Commercial & agricultural		113		113		6		155		9
Consumer & other		4		4		—		10		1
Subtotal		8,965		9,263		556		9,735		451
Totals:
1-4 Residential Construction		—		—		—		—		—
Land development & other land		774		774		10		1,041		33
Farmland		5,339		5,339		73		5,875		102
1-4 residential mortgage		5,964		6,121		414		6,722		304
Home equity and second mortgage		174		179		9		254		8
Commercial mortgage		952		1,088		44		1,150		43
Commercial & agricultural		113		113		6		155		9
Consumer & other		4		4		—		10		2
Total	$	13,320	$	13,618	$	556	$	15,207	$	501

Troubled Debt Restructurings

The following table sets forth information with respect to the Bank’s troubled debt restructurings as of September 30, 2017 and September 30, 2016:

For the Nine Months Ended September 30, 2017

							TDRs identified in the last twelve
(dollars in thousands)	TDRs identified during the period						months that subsequently defaulted(1)
			Pre-		Post-				Pre-		Post-
			modification		modification				modification		modification
	Number		outstanding		outstanding		Number		outstanding		outstanding
	of		recorded		recorded		of		recorded		recorded
	contracts		investment		investment		contracts		investment		investment
Land development & other land		—	$	—	$	—		—	$	—	$	—
Farmland		2		298		298		—		—		—
1-4 residential mortgage		1		48		48		—		—		—
Commercial mortgage		—		—		—		—		—		—
Commercial & agricultural		—		—		—		—		—		—
Consumer & other		—		—		—		—		—		—
Total		3	$	346	$	346		—	$	—	$	—

During the nine months ended September 30, 2017, three loans were modified that were considered to be TDRs. Term concessions only were granted and no additional funds were advanced. No TDRs identified in the last twelve months subsequently defaulted in the quarter ended September 30, 2017.

⁽¹⁾ Loans past due 30 days or more are considered to be in default.

During the three months ended September 30, 2017, no loans were modified that were considered to be a TDR.

⁽¹⁾ Loans past due 30 days or more are considered to be in default.

For the Nine Months Ended September 30, 2016

							TDRs identified in the last twelve
(dollars in thousands)	TDRs identified during the period						months that subsequently defaulted(1)
			Pre-		Post-				Pre-		Post-
			modification		modification				modification		modification
	Number		outstanding		outstanding		Number		outstanding		outstanding
	of		recorded		recorded		of		recorded		recorded
	contracts		investment		investment		contracts		investment		investment
Land development & other land		—	$	—	$	—		—	$	—	$	—
Farmland		—		—		—		—		—		—
1-4 residential mortgage		5		565		588		—		—		—
Commercial mortgage		—		—		—		—		—		—
Commercial & agricultural		—		—		—		—		—		—
Consumer & other		—		—		—		—		—		—
Total		5	$	565	$	588		—	$	—	$	—

During the nine months ended September 30, 2016, five loans were modified that were considered to be TDRs. Term concessions only were granted for five loans; and additional funds were advanced on two loans to pay real estate taxes and closing costs. No TDRs identified in twelve months prior to September 30, 2016 subsequently defaulted in the quarter ended September 30, 2016.

During the three months ended September 30, 2016, no loans were modified that were considered to be a TDR.

⁽¹⁾ Loans past due 30 days or more are considered to be in default.

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Employee Benefit Plan (Tables)

9 Months Ended

Sep. 30, 2017

Retirement Benefits [Abstract]

Components of Net Periodic Pension Cost

The following is a summary of net periodic pension costs for the nine-month and three-month periods ended September 30, 2017 and 2016.

	Nine Months Ended September 30,						Three Months Ended September 30,
(dollars in thousands)	2017			2016			2017			2016
Service cost	$	—		$	—		$	—		$	—
Interest cost		144			147			48			49
Expected return on plan assets		(414	)		(419	)		(138	)		(140	)
Amortization of prior service cost		—			—			—			—
Recognized net loss due to settlement		—			—			—			—
Recognized net actuarial (gain)/loss		21			8			7			3
Net periodic benefit cost	$	(249	)	$	(264	)	$	(83	)	$	(88	)

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Summary of Bank's Commitments

obligations as for on-balance sheet instruments. A summary of the Bank’s commitments at September 30, 2017 and December 31, 2016 is as follows:

	September 30,		December 31,
(dollars in thousands)	2017		2016
Commitments to extend credit	$	50,562	$	54,667
Standby letters of credit		1,118		—
	$	51,680	$	54,667

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Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

Investments, All Other Investments [Abstract]

Schedule of Carrying Amount, Fair Value, and Placement in Fair Value Hierarchy of Company's Financial Instruments, Excluding Financial Instruments, which the Carrying Amount Approximates Fair Value

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of September 30, 2017 and December 31, 2016. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

					Fair Value Measurements
					Quoted Prices in
					Active Markets		Significant
					for Identical		Other		Significant
					Assets or		Observable		Unobservable
	Carrying		Fair		Liabilities		Inputs		Inputs
(dollars in thousands)	Amount		Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2017
Financial Instruments - Assets
Net Loans	$	419,743	$	417,044	$	—	$	415,867	$	1,177
Financial Instruments – Liabilities
Time Deposits		151,929		149,711		—		149,711		—
December 31, 2016
Financial Instruments - Assets
Net Loans	$	408,548	$	405,876	$	—	$	405,410	$	466
Financial Instruments – Liabilities
Time Deposits		167,355		165,257		—		165,257		—

Schedule of Assets Recorded at Fair Value on Recurring Basis

Assets Recorded at Fair Value on a Recurring Basis

(dollars in thousands)	Total		Level 1		Level 2		Level 3
September 30, 2017
Investment securities available for sale
Government sponsored enterprises	$	120	$	—	$	120	$	—
Mortgage-backed securities		29,015		—		29,015		—
Corporate securities		2,957		—		2,957		—
State and municipal securities		19,841		—		19,841		—
Total assets at fair value	$	51,933	$	—	$	51,933	$	—
December 31, 2016
Investment securities available for sale
Government sponsored enterprises	$	2,209	$	—	$	2,209	$	—
Mortgage-backed securities		35,202		—		35,202		—
Corporate securities		2,974		—		2,974		—
State and municipal securities		22,155		—		22,155		—
Total assets at fair value	$	62,540	$	—	$	62,540	$	—

Schedule of Assets Recorded at Fair Value on Nonrecurring Basis

Assets measured at fair value on a nonrecurring basis are included in the table below.

September 30, 2017	Total		Level 1		Level 2		Level 3
(dollars in thousands)
Impaired loans	$	1,177	$	—	$	—	$	1,177
Foreclosed assets		—		—		—		—
Total assets at fair value	$	1,177	$	—	$	—	$	1,177
December 31, 2016	Total		Level 1		Level 2		Level 3
(dollars in thousands)
Impaired loans	$	466	$	—	$	—	$	466
Foreclosed assets		70		—		—		70
Total assets at fair value	$	536	$	—	$	—	$	536

Schedule of Assets Recorded at Fair Value on Recurring and Nonrecurring Basis

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

	Fair Value at September 30, 2017		Fair Value at December 31, 2016		Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired loans	$	1,177	$	466	Appraised Value/Discounted Cash Flows/Market Value of Note	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0 – 10%
Foreclosed assets	$	—	$	70	Appraised Value/Comparable Sales/Other Estimates from Independent Sources	Discounts to reflect current market conditions and estimated costs to sell	0 – 10%

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Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Core Deposit Intangible Assets

The following table presents the gross carrying amount and accumulated amortization for the Company’s core deposit intangible assets, which are the only identifiable intangible assets subject to amortization. Core deposit intangibles at September 30, 2017 and December 31, 2016 is as follows:

	September 30,		December 31,
(dollars in thousands)	2017		2016
Gross carrying amount	$	2,469	$	2,469
Accumulated amortization		354		142
Net book value	$	2,115	$	2,327

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Capital Requirements (Tables)

9 Months Ended

Sep. 30, 2017

Banking and Thrift [Abstract]

Capital Requirements Actual Capital Amounts and Ratios

The Bank’s actual capital amounts and ratios are presented in the following table as of September 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.

						For Capital					To Be Well-
	Actual					Adequacy Purposes					Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2017
Total capital
(to risk weighted assets)	$	56,037		13.07	%	$	34,302		8.00	%	$	42,878		10.00	%
Tier 1 Capital
(to risk weighted assets)	$	52,433		12.23	%	$	25,727		6.00	%	$	34,302		8.00	%
Common Equity Tier 1
(to risk weighted assets)	$	52,433		12.23	%	$	19,295		4.50	%	$	27,851		6.50	%
Tier 1 Capital
(to average total assets)	$	52,433		9.67	%	$	21,693		4.00	%	$	27,116		5.00	%
December 31, 2016
Total capital
(to risk weighted assets)	$	53,657		12.72	%	$	33,744		8.00	%	$	42,180		10.00	%
Tier 1 Capital
(to risk weighted assets)	$	50,111		11.88	%	$	25,308		6.00	%	$	33,744		8.00	%
Common Equity Tier 1
(to risk weighted assets)	$	50,111		11.88	%	$	18,981		4.50	%	$	27,417		6.50	%
Tier 1 Capital
(to average total assets)	$	50,111		9.01	%	$	22,242		4.00	%	$	27,803		5.00	%

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Organization - Additional Information (Detail)		9 Months Ended
	Jul. 01, 2016 USD ($)	Sep. 30, 2017 USD ($)
Business Acquisition [Line Items]
Date of incorporation		Nov. 02, 2015
Date of merger agreement entered		Nov. 06, 2015
Refinement period		1 year
Purchased Performing Loans
Business Acquisition [Line Items]
Allowance for loan losses		$ 0
Grayson Bankshares, Inc.
Business Acquisition [Line Items]
Exchange ratio	1.76
Ownership percentage in newly issued shares	60.00%
Cardinal Bankshares Corporation
Business Acquisition [Line Items]
Exchange ratio	1.30
Ownership percentage in newly issued shares	40.00%
Allowance for loan losses	$ 0

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Property and Equipment, Estimated Useful Lives (Detail)	9 Months Ended
	Sep. 30, 2017
Minimum | Buildings and improvements
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	10 years
Minimum | Furniture and equipment
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	5 years
Maximum | Buildings and improvements
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	40 years
Maximum | Furniture and equipment
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	12 years

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Accumulated Balances Related Component of Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ 55,466	$ 30,656
Ending balance	57,797	56,329
Unrealized Gains And Losses On Available for Sale Securities
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(574)	(116)
Other comprehensive gain before reclassifications	576	872
Amounts reclassified from accumulated other comprehensive gain	(83)	(241)
Ending balance	(81)	515
Defined Benefit Pension Items
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(780)	(608)
Ending balance	(780)	(608)
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(1,354)	(724)
Other comprehensive gain before reclassifications	576	872
Amounts reclassified from accumulated other comprehensive gain	(83)	(241)
Ending balance	$ (861)	$ (93)

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Investment Securities (Amortized Cost and Aggregate Fair Value of Available for Sale Securities) (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	$ 52,057	$ 63,410
Available for sale, unrealized gains	350	337
Available for sale, unrealized losses	(474)	(1,207)
Available for sale, fair value	51,933	62,540
Government sponsored enterprises
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	25	2,046
Available for sale, unrealized gains	95	236
Available for sale, unrealized losses		(73)
Available for sale, fair value	120	2,209
Collateralized Mortgage Backed Securities
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	29,359	36,021
Available for sale, unrealized gains	5	4
Available for sale, unrealized losses	(349)	(823)
Available for sale, fair value	29,015	35,202
Corporate securities
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	3,027	3,061
Available for sale, unrealized losses	(70)	(87)
Available for sale, fair value	2,957	2,974
State and municipal securities
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	19,646	22,282
Available for sale, unrealized gains	250	97
Available for sale, unrealized losses	(55)	(224)
Available for sale, fair value	$ 19,841	$ 22,155

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Investment Securities - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]
Restricted equity securities	$ 1,388,000		$ 1,388,000		$ 1,149,000
Debt securities with unrealized losses had combined losses	$ 474,000		$ 474,000		1,207,000
Percentage of debt securities with unrealized losses depreciated	1.42%		1.42%
Proceeds from sales of investment securities available for sale	$ 7,900,000	$ 37,200,000	$ 8,500,000	$ 55,100,000
Securities transferred from held to maturity portfolios or other sales of held to maturity securities to available for sale	0		0
Investment securities, pledged as collateral on public deposits and for other purposes	$ 11,300,000		$ 11,300,000		$ 11,200,000

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Investment Securities (Unrealized Losses and Related Fair Values in Company's Held to Maturity and Available for Sale Investment Securities Portfolios) (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, fair value	$ 29,071	$ 45,515
Less than 12 months, unrealized losses	(358)	(1,025)
12 months or more, fair value	3,822	4,037
12 months or more, unrealized losses	(116)	(182)
Total, fair value	32,893	49,552
Total, unrealized losses	(474)	(1,207)
Government sponsored enterprises
Schedule of Available-for-sale Securities [Line Items]
12 months or more, fair value		1,924
12 months or more, unrealized losses		(73)
Total, fair value		1,924
Total, unrealized losses		(73)
Collateralized Mortgage Backed Securities
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, fair value	23,487	31,759
Less than 12 months, unrealized losses	(331)	(789)
12 months or more, fair value	650	688
12 months or more, unrealized losses	(18)	(34)
Total, fair value	24,137	32,447
Total, unrealized losses	(349)	(823)
Corporate securities
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, fair value	1,526	1,548
Less than 12 months, unrealized losses	(1)	(12)
12 months or more, fair value	1,431	1,425
12 months or more, unrealized losses	(69)	(75)
Total, fair value	2,957	2,973
Total, unrealized losses	(70)	(87)
State and municipal securities
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, fair value	4,058	12,208
Less than 12 months, unrealized losses	(26)	(224)
12 months or more, fair value	1,741
12 months or more, unrealized losses	(29)
Total, fair value	5,799	12,208
Total, unrealized losses	$ (55)	$ (224)

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Investment Securities (Gross Realized Gains and Losses on Sale of Investment Securities) (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Investments, Debt and Equity Securities [Abstract]
Realized gains	$ 28		$ 141	$ 369
Realized losses	(15)	$ (1)	(15)	(5)
Net realized gains on securities	$ 13	$ (1)	$ 126	$ 364

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Investment Securities (Scheduled Maturities of Securities Available for Sale) (Detail) $ in Thousands	Sep. 30, 2017 USD ($)
Available for sale securities, amortized cost
Due in one year or less, amortized cost	$ 733
Due after one year through five years, amortized cost	8,491
Due after five years through ten years, amortized cost	21,403
Due after ten years, amortized cost	21,430
Available for sale securities, amortized cost	52,057
Available for sale securities, fair value
Due in one year or less, fair value	736
Due after one year through five years, fair value	8,522
Due after five years through ten years, fair value	21,200
Due after ten years, fair value	21,475
Available for sale securities, fair value	$ 51,933

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Major Components of Loans in Consolidated Balance Sheets (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016	Sep. 30, 2016	Jul. 01, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 423,273		$ 411,968
Allowance for loan losses	(3,530)	$ (3,568)	(3,420)	$ (3,480)	$ (3,309)	$ (3,418)
Loans, net of allowance for loan losses	419,743		408,548
Commercial & agricultural
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	28,605		26,086
Allowance for loan losses	(273)	(214)	(210)	(225)	(188)	(136)
Commercial Mortgage
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	125,149		128,515
Allowance for loan losses	(648)	(620)	(600)	(606)	(571)	(578)
Construction and Development
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	25,557		26,464
Allowance for loan losses	(254)	(329)	(319)	(246)	(269)	(344)
Farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	34,096		33,531
Allowance for loan losses	(367)	(393)	(342)	(572)	(522)	(435)
Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	198,141		187,188
Allowance for loan losses	(1,912)	(1,938)	(1,841)	(1,765)	(1,717)	(1,887)
Consumer & Other
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	11,725		10,184
Allowance for loan losses	$ (76)	$ (74)	$ (108)	$ (66)	$ (42)	$ (38)

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Allowance for Loan Losses and Impaired Loans - Additional Information (Detail)		3 Months Ended		9 Months Ended		12 Months Ended
		Sep. 30, 2017 USD ($) Loan	Sep. 30, 2016 Loan	Sep. 30, 2017 USD ($) Loan	Sep. 30, 2016 Loan	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Financing Receivable, Allowance for Credit Losses [Line Items]
Total of outstanding loans		$ 423,273,000		$ 423,273,000		$ 411,968,000
Investment in impaired loans	[1]	13,154,000		13,154,000		13,320,000
Investment in impaired loans, with no related allowance	[1]	4,072,000		4,072,000		4,355,000
Troubled debt restructured loans		5,900,000		5,900,000		6,100,000
Troubled debt restructured loans, related allowance		$ 328,000		$ 328,000		315,000
Loans modified that considered to be TDRs | Loan		0	0	3	5
Unallocated Financing Receivables
Financing Receivable, Allowance for Credit Losses [Line Items]
Provision for loan losses				$ 0		0
Collateral Pledged
Financing Receivable, Allowance for Credit Losses [Line Items]
Investment in impaired loans		$ 4,400,000		4,400,000		4,000,000
Doubtful
Financing Receivable, Allowance for Credit Losses [Line Items]
Total of outstanding loans		0		0		0
Loss
Financing Receivable, Allowance for Credit Losses [Line Items]
Total of outstanding loans		0		0		0
Maximum
Financing Receivable, Allowance for Credit Losses [Line Items]
Troubled debt restructured loans							$ 250,000
Impaired loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Troubled debt restructured loans		$ 9,100,000		$ 9,100,000		$ 10,000,000
Term Concessions Granted Loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Number of loans | Loan				3	5
Additional Funds Advanced Loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Number of loans | Loan				0	2

[1] Recorded investment is the loan balance, net of any charge-offs

XML

Allowance for Loan Losses and Impaired Loans (Allowance for Loan Losses and Recorded Investment in Loans) (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Allowance for loan losses:
Allowance for loan losses, beginning balance	$ 3,568	$ 3,309	$ 3,420	$ 3,418
Charge-offs	(123)	(68)	(243)	(160)
Recoveries	10	130	120	208
Provision	75	109	233	14
Allowance for loan losses, ending balance	3,530	3,480	3,530	3,480
Allowance for loan losses, ending balance: individually evaluated for impairment	133		133		$ 241
Allowance for loan losses, ending balance: collectively evaluated for impairment	3,397		3,397		3,179
Loans outstanding, ending balance	423,273		423,273		411,968
Loans outstanding, ending balance: individually evaluated for impairment	7,293		7,293		7,257
Loans outstanding, ending balance: collectively evaluated for impairment	415,980		415,980		404,711
Commercial & agricultural
Allowance for loan losses:
Allowance for loan losses, beginning balance	214	188	210	136
Charge-offs			(27)	(19)
Recoveries	2	2	31	6
Provision	57	35	59	102
Allowance for loan losses, ending balance	273	225	273	225
Allowance for loan losses, ending balance: collectively evaluated for impairment	273		273		210
Loans outstanding, ending balance	28,605		28,605		26,086
Loans outstanding, ending balance: collectively evaluated for impairment	28,605		28,605		26,086
Commercial Mortgage
Allowance for loan losses:
Allowance for loan losses, beginning balance	620	571	600	578
Charge-offs		(10)	(42)	(21)
Provision	28	45	90	49
Allowance for loan losses, ending balance	648	606	648	606
Allowance for loan losses, ending balance: collectively evaluated for impairment	648		648		600
Loans outstanding, ending balance	125,149		125,149		128,515
Loans outstanding, ending balance: individually evaluated for impairment	113		113		114
Loans outstanding, ending balance: collectively evaluated for impairment	125,036		125,036		128,401
Construction and Development
Allowance for loan losses:
Allowance for loan losses, beginning balance	329	269	319	344
Charge-offs		(20)		(20)
Recoveries		49	56	93
Provision	(75)	(52)	(121)	(171)
Allowance for loan losses, ending balance	254	246	254	246
Allowance for loan losses, ending balance: collectively evaluated for impairment	254		254		319
Loans outstanding, ending balance	25,557		25,557		26,464
Loans outstanding, ending balance: individually evaluated for impairment	180		180		580
Loans outstanding, ending balance: collectively evaluated for impairment	25,377		25,377		25,884
Farmland
Allowance for loan losses:
Allowance for loan losses, beginning balance	393	522	342	435
Charge-offs	(34)		(34)
Recoveries		55		55
Provision	8	(5)	59	82
Allowance for loan losses, ending balance	367	572	367	572
Allowance for loan losses, ending balance: individually evaluated for impairment	47		47		57
Allowance for loan losses, ending balance: collectively evaluated for impairment	320		320		285
Loans outstanding, ending balance	34,096		34,096		33,531
Loans outstanding, ending balance: individually evaluated for impairment	5,435		5,435		5,030
Loans outstanding, ending balance: collectively evaluated for impairment	28,661		28,661		28,501
Residential
Allowance for loan losses:
Allowance for loan losses, beginning balance	1,938	1,717	1,841	1,887
Charge-offs	(76)	(19)	(89)	(44)
Recoveries	4	6	19	22
Provision	46	61	141	(100)
Allowance for loan losses, ending balance	1,912	1,765	1,912	1,765
Allowance for loan losses, ending balance: individually evaluated for impairment	86		86		184
Allowance for loan losses, ending balance: collectively evaluated for impairment	1,826		1,826		1,657
Loans outstanding, ending balance	198,141		198,141		187,188
Loans outstanding, ending balance: individually evaluated for impairment	1,565		1,565		1,533
Loans outstanding, ending balance: collectively evaluated for impairment	196,576		196,576		185,655
Consumer & Other
Allowance for loan losses:
Allowance for loan losses, beginning balance	74	42	108	38
Charge-offs	(13)	(19)	(51)	(56)
Recoveries	4	18	14	32
Provision	11	25	5	52
Allowance for loan losses, ending balance	76	$ 66	76	$ 66
Allowance for loan losses, ending balance: collectively evaluated for impairment	76		76		108
Loans outstanding, ending balance	11,725		11,725		10,184
Loans outstanding, ending balance: collectively evaluated for impairment	$ 11,725		$ 11,725		$ 10,184

XML

Allowance for Loan Losses and Impaired Loans (Credit Risk Profile by Internally Assigned Grades) (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	$ 423,273	$ 411,968
Farmland
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	34,096	33,531
Commercial & agricultural
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	28,605	26,086
Real Estate Secured | 1-4 residential construction
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	2,860	4,426
Real Estate Secured | Commercial Construction
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	2,446	2,603
Real Estate Secured | Land development & other land
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	20,251	19,435
Real Estate Secured | Farmland
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	34,096	33,531
Real Estate Secured | 1-4 residential mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	140,841	135,929
Real Estate Secured | Multifamily
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	29,455	26,686
Real Estate Secured | Home equity and second mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	27,845	24,573
Real Estate Secured | Commercial Mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	125,149	128,515
Non-Real Estate Secured | Commercial & agricultural
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	28,605	26,086
Non-Real Estate Secured | Civic organizations
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	4,166	3,603
Non-Real Estate Secured | Consumer-auto
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	1,770	1,421
Non-Real Estate Secured | Consumer-other
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	5,789	5,160
Pass
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	371,893	356,799
Pass | Real Estate Secured | 1-4 residential construction
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	2,860	4,056
Pass | Real Estate Secured | Commercial Construction
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	2,446	2,603
Pass | Real Estate Secured | Land development & other land
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	19,093	18,000
Pass | Real Estate Secured | Farmland
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	23,436	23,201
Pass | Real Estate Secured | 1-4 residential mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	127,760	122,301
Pass | Real Estate Secured | Multifamily
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	28,360	25,365
Pass | Real Estate Secured | Home equity and second mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	25,832	23,219
Pass | Real Estate Secured | Commercial Mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	105,056	105,317
Pass | Non-Real Estate Secured | Commercial & agricultural
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	25,563	22,719
Pass | Non-Real Estate Secured | Civic organizations
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	4,166	3,603
Pass | Non-Real Estate Secured | Consumer-auto
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	1,689	1,400
Pass | Non-Real Estate Secured | Consumer-other
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	5,632	5,015
Watch
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	34,580	36,167
Watch | Real Estate Secured | 1-4 residential construction
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans		370
Watch | Real Estate Secured | Land development & other land
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	615	532
Watch | Real Estate Secured | Farmland
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	5,790	5,276
Watch | Real Estate Secured | 1-4 residential mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	10,155	11,517
Watch | Real Estate Secured | Multifamily
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	1,095	1,321
Watch | Real Estate Secured | Home equity and second mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	1,883	1,243
Watch | Real Estate Secured | Commercial Mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	12,938	13,449
Watch | Non-Real Estate Secured | Commercial & agricultural
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	1,866	2,333
Watch | Non-Real Estate Secured | Consumer-auto
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	81	21
Watch | Non-Real Estate Secured | Consumer-other
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	157	105
Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	2,721	3,838
Special Mention | Real Estate Secured | Farmland
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	8
Special Mention | Real Estate Secured | 1-4 residential mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	258
Special Mention | Real Estate Secured | Commercial Mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	1,815	3,353
Special Mention | Non-Real Estate Secured | Commercial & agricultural
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	640	485
Substandard
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	14,079	15,164
Substandard | Real Estate Secured | Land development & other land
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	543	903
Substandard | Real Estate Secured | Farmland
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	4,862	5,054
Substandard | Real Estate Secured | 1-4 residential mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	2,668	2,111
Substandard | Real Estate Secured | Home equity and second mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	130	111
Substandard | Real Estate Secured | Commercial Mortgage
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	5,340	6,396
Substandard | Non-Real Estate Secured | Commercial & agricultural
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans	$ 536	549
Substandard | Non-Real Estate Secured | Consumer-other
Financing Receivable, Recorded Investment [Line Items]
Total of outstanding loans		$ 40

XML

Allowance for Loan Losses and Impaired Loans (Analysis of Past Due and Nonaccrual Loans) (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	$ 3,190	$ 1,994
Current	420,083	409,974
Total loans	423,273	411,968
90+ Days Past Due and Still Accruing	0	0
Nonaccrual Loans	5,738	4,664
Farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total loans	34,096	33,531
Commercial & agricultural
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total loans	28,605	26,086
Real Estate Secured | 1-4 residential construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	2,860	4,426
Total loans	2,860	4,426
90+ Days Past Due and Still Accruing	0	0
Real Estate Secured | Commercial Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	2,446	2,603
Total loans	2,446	2,603
90+ Days Past Due and Still Accruing	0	0
Real Estate Secured | Land development & other land
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	508	390
Current	19,743	19,045
Total loans	20,251	19,435
90+ Days Past Due and Still Accruing	0	0
Nonaccrual Loans	475	647
Real Estate Secured | Farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	728	343
Current	33,368	33,188
Total loans	34,096	33,531
90+ Days Past Due and Still Accruing	0	0
Nonaccrual Loans	4,031	3,310
Real Estate Secured | 1-4 residential mortgage
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	1,185	377
Current	139,656	135,552
Total loans	140,841	135,929
90+ Days Past Due and Still Accruing	0	0
Nonaccrual Loans	795	26
Real Estate Secured | Multifamily
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	29,455	26,686
Total loans	29,455	26,686
90+ Days Past Due and Still Accruing	0	0
Real Estate Secured | Home equity and second mortgage
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	488	103
Current	27,357	24,470
Total loans	27,845	24,573
90+ Days Past Due and Still Accruing	0	0
Nonaccrual Loans	130	5
Real Estate Secured | Commercial Mortgage
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	203	678
Current	124,946	127,837
Total loans	125,149	128,515
90+ Days Past Due and Still Accruing	0	0
Nonaccrual Loans	211	640
Non-Real Estate Secured | Commercial & agricultural
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	69	92
Current	28,536	25,994
Total loans	28,605	26,086
90+ Days Past Due and Still Accruing	0	0
Nonaccrual Loans	96	31
Non-Real Estate Secured | Civic organizations
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	4,166	3,603
Total loans	4,166	3,603
90+ Days Past Due and Still Accruing	0	0
Non-Real Estate Secured | Consumer-auto
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due		5
Current	1,770	1,416
Total loans	1,770	1,421
90+ Days Past Due and Still Accruing	0	0
Non-Real Estate Secured | Consumer-other
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	9	6
Current	5,780	5,154
Total loans	5,789	5,160
90+ Days Past Due and Still Accruing	0	0
Nonaccrual Loans		5
30 to 59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	617	853
30 to 59 Days Past Due | Real Estate Secured | Farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due		343
30 to 59 Days Past Due | Real Estate Secured | 1-4 residential mortgage
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	433	315
30 to 59 Days Past Due | Real Estate Secured | Home equity and second mortgage
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	149	98
30 to 59 Days Past Due | Real Estate Secured | Commercial Mortgage
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due		25
30 to 59 Days Past Due | Non-Real Estate Secured | Commercial & agricultural
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	26	67
30 to 59 Days Past Due | Non-Real Estate Secured | Consumer-auto
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due		5
30 to 59 Days Past Due | Non-Real Estate Secured | Consumer-other
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	9
60 to 89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	412	281
60 to 89 Days Past Due | Real Estate Secured | Land development & other land
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	33
60 to 89 Days Past Due | Real Estate Secured | 1-4 residential mortgage
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	145	48
60 to 89 Days Past Due | Real Estate Secured | Home equity and second mortgage
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	214
60 to 89 Days Past Due | Real Estate Secured | Commercial Mortgage
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due		227
60 to 89 Days Past Due | Non-Real Estate Secured | Commercial & agricultural
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	20
60 to 89 Days Past Due | Non-Real Estate Secured | Consumer-other
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due		6
90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	2,161	860
90 Days or More Past Due | Real Estate Secured | Land development & other land
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	475	390
90 Days or More Past Due | Real Estate Secured | Farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	728
90 Days or More Past Due | Real Estate Secured | 1-4 residential mortgage
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	607	14
90 Days or More Past Due | Real Estate Secured | Home equity and second mortgage
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	125	5
90 Days or More Past Due | Real Estate Secured | Commercial Mortgage
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	203	426
90 Days or More Past Due | Non-Real Estate Secured | Commercial & agricultural
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	$ 23	$ 25

XML

Allowance for Loan Losses and Impaired Loans (Impaired Loans) (Detail) - USD ($) $ in Thousands		3 Months Ended	9 Months Ended	12 Months Ended
		Sep. 30, 2017	Sep. 30, 2017	Dec. 31, 2016
Financing Receivable, Impaired [Line Items]
Recorded investment, with no related allowance	[1]	$ 4,072	$ 4,072	$ 4,355
Unpaid principal balance, with no related allowance		4,106	4,106	4,355
Average recorded investment, with no related allowance		4,212	4,345	5,472
Interest income recognized, with no related allowance			1	50
Recorded investment, with allowance	[1]	9,082	9,082	8,965
Unpaid principal balance, with allowance		9,429	9,429	9,263
Related allowance		461	461	556
Average recorded investment, with allowance		9,813	10,228	9,735
Interest income recognized, with allowance		111	391	451
Recorded investment, totals	[1]	13,154	13,154	13,320
Unpaid principal balance, totals		13,535	13,535	13,618
Related allowance, totals		461	461	556
Average recorded investment, totals		14,025	14,573	15,207
Interest income recognized, totals		111	392	501
Land development & other land
Financing Receivable, Impaired [Line Items]
Recorded investment, with no related allowance	[1]	181	181	581
Unpaid principal balance, with no related allowance		181	181	581
Average recorded investment, with no related allowance		238	336	840
Interest income recognized, with no related allowance				17
Recorded investment, with allowance	[1]	398	398	193
Unpaid principal balance, with allowance		398	398	193
Related allowance		22	22	10
Average recorded investment, with allowance		406	417	201
Interest income recognized, with allowance		3	10	16
Recorded investment, totals	[1]	579	579	774
Unpaid principal balance, totals		579	579	774
Related allowance, totals		22	22	10
Average recorded investment, totals		644	753	1,041
Interest income recognized, totals		3	10	33
Farmland
Financing Receivable, Impaired [Line Items]
Recorded investment, with no related allowance	[1]	3,778	3,778	3,660
Unpaid principal balance, with no related allowance		3,812	3,812	3,660
Average recorded investment, with no related allowance		3,861	3,895	4,170
Interest income recognized, with no related allowance			1	18
Recorded investment, with allowance	[1]	2,096	2,096	1,679
Unpaid principal balance, with allowance		2,096	2,096	1,679
Related allowance		73	73	73
Average recorded investment, with allowance		2,106	2,234	1,705
Interest income recognized, with allowance		28	95	84
Recorded investment, totals	[1]	5,874	5,874	5,339
Unpaid principal balance, totals		5,908	5,908	5,339
Related allowance, totals		73	73	73
Average recorded investment, totals		5,967	6,129	5,875
Interest income recognized, totals		28	96	102
1-4 residential mortgage
Financing Receivable, Impaired [Line Items]
Average recorded investment, with no related allowance				347
Interest income recognized, with no related allowance				10
Recorded investment, with allowance	[1]	5,732	5,732	5,964
Unpaid principal balance, with allowance		5,917	5,917	6,121
Related allowance		309	309	414
Average recorded investment, with allowance		6,185	6,246	6,375
Interest income recognized, with allowance		70	220	294
Recorded investment, totals	[1]	5,732	5,732	5,964
Unpaid principal balance, totals		5,917	5,917	6,121
Related allowance, totals		309	309	414
Average recorded investment, totals		6,185	6,246	6,722
Interest income recognized, totals		70	220	304
Home equity and second mortgage
Financing Receivable, Impaired [Line Items]
Recorded investment, with allowance	[1]	291	291	174
Unpaid principal balance, with allowance		291	291	179
Related allowance		26	26	9
Average recorded investment, with allowance		297	298	254
Interest income recognized, with allowance		2	6	8
Recorded investment, totals	[1]	291	291	174
Unpaid principal balance, totals		291	291	179
Related allowance, totals		26	26	9
Average recorded investment, totals		297	298	254
Interest income recognized, totals		2	6	8
Commercial Mortgage
Financing Receivable, Impaired [Line Items]
Recorded investment, with no related allowance	[1]	113	113	114
Unpaid principal balance, with no related allowance		113	113	114
Average recorded investment, with no related allowance		113	114	115
Interest income recognized, with no related allowance				4
Recorded investment, with allowance	[1]	496	496	838
Unpaid principal balance, with allowance		632	632	974
Related allowance		27	27	44
Average recorded investment, with allowance		720	910	1,035
Interest income recognized, with allowance		6	49	39
Recorded investment, totals	[1]	609	609	952
Unpaid principal balance, totals		745	745	1,088
Related allowance, totals		27	27	44
Average recorded investment, totals		833	1,024	1,150
Interest income recognized, totals		6	49	43
Commercial & agricultural
Financing Receivable, Impaired [Line Items]
Recorded investment, with allowance	[1]	69	69	113
Unpaid principal balance, with allowance		95	95	113
Related allowance		4	4	6
Average recorded investment, with allowance		99	121	155
Interest income recognized, with allowance		1	9	9
Recorded investment, totals	[1]	69	69	113
Unpaid principal balance, totals		95	95	113
Related allowance, totals		4	4	6
Average recorded investment, totals		99	121	155
Interest income recognized, totals		1	9	9
Consumer & Other
Financing Receivable, Impaired [Line Items]
Interest income recognized, with no related allowance				1
Recorded investment, with allowance	[1]			4
Unpaid principal balance, with allowance				4
Average recorded investment, with allowance			2	10
Interest income recognized, with allowance		1	2	1
Recorded investment, totals	[1]			4
Unpaid principal balance, totals				4
Average recorded investment, totals			2	10
Interest income recognized, totals		$ 1	$ 2	$ 2

[1] Recorded investment is the loan balance, net of any charge-offs

XML

Allowance for Loan Losses and Impaired Loans (Troubled Debt Restructurings) (Detail) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2017 Loan	Sep. 30, 2016 Loan	Sep. 30, 2017 USD ($) Loan	Sep. 30, 2016 USD ($) Loan
Financing Receivable, Modifications [Line Items]
TDRs identified during the period, number of contracts | Loan		0	0	3	5
TDRs identified during the period, pre-modification outstanding recorded investment				$ 346	$ 565
TDRs identified during the period, post-modification outstanding recorded investment				$ 346	$ 588
TDRs identified in last twelve months that subsequently defaulted, number of contracts | Loan	[1]			0	0
TDRs identified in last twelve months that subsequently defaulted, pre-modification outstanding recorded investment	[1]			$ 0	$ 0
TDRs identified in last twelve months that subsequently defaulted, post-modification outstanding recorded investment	[1]			$ 0	$ 0
Land development & other land
Financing Receivable, Modifications [Line Items]
TDRs identified in last twelve months that subsequently defaulted, number of contracts | Loan	[1]			0	0
TDRs identified in last twelve months that subsequently defaulted, pre-modification outstanding recorded investment	[1]			$ 0	$ 0
TDRs identified in last twelve months that subsequently defaulted, post-modification outstanding recorded investment	[1]			$ 0	$ 0
Farmland
Financing Receivable, Modifications [Line Items]
TDRs identified during the period, number of contracts | Loan				2
TDRs identified during the period, pre-modification outstanding recorded investment				$ 298
TDRs identified during the period, post-modification outstanding recorded investment				$ 298
TDRs identified in last twelve months that subsequently defaulted, number of contracts | Loan	[1]			0	0
TDRs identified in last twelve months that subsequently defaulted, pre-modification outstanding recorded investment	[1]			$ 0	$ 0
TDRs identified in last twelve months that subsequently defaulted, post-modification outstanding recorded investment	[1]			$ 0	$ 0
1-4 residential mortgage
Financing Receivable, Modifications [Line Items]
TDRs identified during the period, number of contracts | Loan				1	5
TDRs identified during the period, pre-modification outstanding recorded investment				$ 48	$ 565
TDRs identified during the period, post-modification outstanding recorded investment				$ 48	$ 588
TDRs identified in last twelve months that subsequently defaulted, number of contracts | Loan	[1]			0	0
TDRs identified in last twelve months that subsequently defaulted, pre-modification outstanding recorded investment	[1]			$ 0	$ 0
TDRs identified in last twelve months that subsequently defaulted, post-modification outstanding recorded investment	[1]			$ 0	$ 0
Commercial Mortgage
Financing Receivable, Modifications [Line Items]
TDRs identified in last twelve months that subsequently defaulted, number of contracts | Loan	[1]			0	0
TDRs identified in last twelve months that subsequently defaulted, pre-modification outstanding recorded investment	[1]			$ 0	$ 0
TDRs identified in last twelve months that subsequently defaulted, post-modification outstanding recorded investment	[1]			$ 0	$ 0
Commercial & agricultural
Financing Receivable, Modifications [Line Items]
TDRs identified in last twelve months that subsequently defaulted, number of contracts | Loan	[1]			0	0
TDRs identified in last twelve months that subsequently defaulted, pre-modification outstanding recorded investment	[1]			$ 0	$ 0
TDRs identified in last twelve months that subsequently defaulted, post-modification outstanding recorded investment	[1]			$ 0	$ 0
Consumer & Other
Financing Receivable, Modifications [Line Items]
TDRs identified in last twelve months that subsequently defaulted, number of contracts | Loan	[1]			0	0
TDRs identified in last twelve months that subsequently defaulted, pre-modification outstanding recorded investment	[1]			$ 0	$ 0
TDRs identified in last twelve months that subsequently defaulted, post-modification outstanding recorded investment	[1]			$ 0	$ 0

[1] Loans past due 30 days or more are considered to be in default.

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Allowance for Loan Losses and Impaired Loans (Troubled Debt Restructurings) (Parenthetical) (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017
Receivables [Abstract]
TDRs identified in last twelve months that subsequently defaulted, period to consider the loan to be default	30 days	30 days	30 days

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Employee Benefit Plan (Components of Net Periodic Pension Cost) (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Retirement Benefits [Abstract]
Service cost	$ 0	$ 0	$ 0	$ 0
Interest cost	48	49	144	147
Expected return on plan assets	(138)	(140)	(414)	(419)
Amortization of prior service cost	0	0	0	0
Recognized net loss due to settlement	0	0	0	0
Recognized net actuarial (gain)/loss	7	3	21	8
Net periodic benefit cost	$ (83)	$ (88)	$ (249)	$ (264)

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Employee Benefit Plan - Additional Information (Detail)	Dec. 31, 2016 USD ($)
Retirement Benefits [Abstract]
Defined Benefit Plan, contributions by employer for 2017	$ 0

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Commitments and Contingencies (Summary of Bank's Commitments) (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Financial instruments with off balance sheet risk	$ 51,680	$ 54,667
Standby Letters of Credit
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Financial instruments with off balance sheet risk	1,118
Commitments to Extend Credit
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Financial instruments with off balance sheet risk	$ 50,562	$ 54,667

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Commitments and Contingencies - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2017 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Maximum potential credits	$ 5,000,000

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Financial Instruments (Schedule of Carrying Amount, Fair Value, and Placement in Fair Value Hierarchy of Company's Financial Instruments, Excluding Financial Instruments, which the Carrying Amount Approximates Fair Value) (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Financial Instruments-Assets
Net Loans	$ 419,743	$ 408,548
Financial Instruments - Liabilities
Time Deposits	151,929	167,355
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Net Loans	417,044	405,876
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Time Deposits	149,711	165,257
Significant Other Observable Inputs (Level 2)
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Net Loans	415,867	405,410
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Time Deposits	149,711	165,257
Significant Unobservable Inputs (Level 3)
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Net Loans	$ 1,177	$ 466

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Financial Instruments (Schedule of Assets Recorded at Fair Value on Recurring Basis) (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, recurring basis	$ 51,933	$ 62,540
Government sponsored enterprises
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, recurring basis	120	2,209
Collateralized Mortgage Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, recurring basis	29,015	35,202
Corporate securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, recurring basis	2,957	2,974
State and municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, recurring basis	19,841	22,155
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, recurring basis	51,933	62,540
Significant Other Observable Inputs (Level 2) | Government sponsored enterprises
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, recurring basis	120	2,209
Significant Other Observable Inputs (Level 2) | Collateralized Mortgage Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, recurring basis	29,015	35,202
Significant Other Observable Inputs (Level 2) | Corporate securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, recurring basis	2,957	2,974
Significant Other Observable Inputs (Level 2) | State and municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, recurring basis	$ 19,841	$ 22,155

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Financial Instruments - Additional Information (Detail) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Transfers From (To) Parent [Abstract]
Fair value of liabilities, recurring basis	$ 0	$ 0
Fair value assets transfer from level 1 to level 2	0	0
Fair value assets transfer from level 2 to level 1	0	0
Fair value of liabilities, recurring basis	$ 0	$ 0

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Financial Instruments (Schedule of Assets Recorded at Fair Value on Nonrecurring Basis) (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, nonrecurring basis	$ 1,177	$ 536
Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, nonrecurring basis	1,177	466
Foreclosed assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, nonrecurring basis		70
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, nonrecurring basis	1,177	536
Significant Unobservable Inputs (Level 3) | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, nonrecurring basis	$ 1,177	466
Significant Unobservable Inputs (Level 3) | Foreclosed assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets, nonrecurring basis		$ 70

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Financial Instruments (Assets Measured at Fair Value on a Recurring or Non-Recurring Basis and Significant Unobservable Inputs Used in Fair Value Measurements) (Detail) - Significant Unobservable Inputs (Level 3) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Impaired loans
Fair Value Inputs, Assets, Quantitative Information [Line Items]
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
Fair Value	$ 1,177	$ 466
Impaired loans | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
General Range of Significant Unobservable Input Values	0.00%
Impaired loans | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
General Range of Significant Unobservable Input Values	10.00%
Foreclosed assets
Fair Value Inputs, Assets, Quantitative Information [Line Items]
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
Fair Value		$ 70
Foreclosed assets | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
General Range of Significant Unobservable Input Values	0.00%
Foreclosed assets | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
General Range of Significant Unobservable Input Values	10.00%

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Intangible Assets (Schedule of Core Deposit Intangible Assets) (Detail) - Core Deposits - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Finite-Lived Intangible Liabilities [Line Items]
Gross carrying amount	$ 2,469	$ 2,469
Accumulated amortization	354	142
Net book value	$ 2,115	$ 2,327

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Capital Requirements Actual Capital Amounts and Ratios (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Banking and Thrift [Abstract]
Total Capital to Risk Weighted Assets, Actual Amount	$ 56,037	$ 53,657
Total Capital to Risk Weighted Assets, Actual Ratio	13.07%	12.72%
Total Capital to Risk Weighted Assets, Minimum For Capital Adequacy Purposes Amount	$ 34,302	$ 33,744
Total Capital to Risk Weighted Assets, Minimum For Capital Adequacy Purposes Ratio	8.00%	8.00%
Total Capital to Risk Weighted Assets, Minimum To Be Well Capitalized Amount	$ 42,878	$ 42,180
Total Capital to Risk Weighted Assets, Minimum To Be Well Capitalized Ratio	10.00%	10.00%
Tier 1 Capital to Risk Weighted Assets, Actual Amount	$ 52,433	$ 50,111
Tier 1 Capital to Risk Weighted Assets, Actual Ratio	12.23%	11.88%
Tier 1 Capital to Risk Weighted Assets, Minimum For Capital Adequacy Purposes Amount	$ 25,727	$ 25,308
Tier 1 Capital to Risk Weighted Assets, Minimum For Capital Adequacy Purposes Ratio	6.00%	6.00%
Tier 1 Capital to Risk Weighted Assets, Minimum To Be Well Capitalized Amount	$ 34,302	$ 33,744
Tier 1 Capital to Risk Weighted Assets, Minimum To Be Well Capitalized Ratio	8.00%	8.00%
Common Equity Tier 1 Capital to Risk Weighted Assets, Actual Amount	$ 52,433	$ 50,111
Common Equity Tier 1 Capital to Risk Weighted Assets, Actual Ratio	12.23%	11.88%
Common Equity Tier 1 Capital to Risk Weighted Assets, Minimum For Capital Adequacy Purposes Amount	$ 19,295	$ 18,981
Common Equity Tier 1 Capital to Risk Weighted Assets, Minimum For Capital Adequacy Purposes Ratio	4.50%	4.50%
Common Equity Tier 1 Capital to Risk Weighted Assets, Minimum To Be Well Capitalized Amount	$ 27,851	$ 27,417
Common Equity Tier 1 Capital to Risk Weighted Assets, Minimum To Be Well Capitalized Ratio	6.50%	6.50%
Tier 1 Capital to Average Assets, Actual Amount	$ 52,433	$ 50,111
Tier 1 Capital to Average Assets, Actual Ratio	9.67%	9.01%
Tier 1 Capital to Average Assets, Minimum For Capital Adequacy Purposes Amount	$ 21,693	$ 22,242
Tier 1 Capital to Average Assets, Minimum For Capital Adequacy Purposes Ratio	4.00%	4.00%
Tier 1 Capital to Average Assets, Minimum To Be Well Capitalized Under Amount	$ 27,116	$ 27,803
Tier 1 Capital to Average Assets, Minimum To Be Well Capitalized Ratio	5.00%	5.00%