XML 47 R30.htm IDEA: XBRL DOCUMENT

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2020

Basis of Accounting, Policy [Policy Text Block]

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, such as the recoverability of intangible assets and other-than-temporary impairment of investment securities, involve a higher degree of complexity and require management to make difficult and subjective judgements that 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.

Consolidation, Policy [Policy Text Block]

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.

Segment Reporting, Policy [Policy Text Block]

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 Policy [Policy Text Block]

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.

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, Policy [Policy Text Block]

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, Policy [Policy Text Block]

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.

Marketable Securities, Trading Securities [Policy Text Block]

Trading Securities

The Company does

not

hold securities for short-term resale and therefore does

not

maintain a trading securities portfolio.

Marketable Securities, Held-to-maturity Securities [Policy Text Block]

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 amortized cost. The Company does

not

currently hold any securities classified as held to maturity.

Marketable Securities, Available-for-sale Securities [Policy Text Block]

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. The amortization of premiums and accretion of discounts are recognized in interest income using the effective interest method over the period to maturity for discounts and the earlier of call date or maturity for premiums.

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.

Policy Loans Receivable, Policy [Policy Text Block]

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

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.

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

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 Restructuring [Policy Text Block]

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.

Operating, Accounting and Reporting Considerations Related to COVID-19 [Policy Text Block]

Operating, Accounting and Reporting Considerations related to COVID-

The COVID-

pandemic has negatively impacted the global economy, including our market area. In response to this crisis, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed by Congress and signed into law on

March 27, 2020.

The CARES Act provided an estimated

$2.2

trillion to fight the COVID-

pandemic and stimulate the economy by supporting individuals and businesses through loans, grants, tax changes, and other types of relief. Some of the provisions applicable to the Company include, but are

not

limited to:

Accounting for Loan Modifications

– Section

4013

of the CARES Act provides that a financial institution

may

elect to suspend (

) the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and (

) any determination that such loan modifications would be considered a TDR, including the related impairment for accounting purposes. See Note

Allowance for Loan Losses and Impaired Loans for more information.

Paycheck Protection Program

- The CARES Act established the Small Business Administration Paycheck Protection Program (“SBA-PPP”), an expansion of the Small Business Administration's (“SBA”)

(a) loan program and the Economic Injury Disaster Loan Program (“EIDL”), administered directly by the SBA. On

December 27, 2020

the Consolidated Appropriations Act (“CAA”),

2021

was signed into law. The CAA provides several amendments to the SBA-PPP, including additional funding for

first

and

second

draws of SBA-PPP loans up to

March 31, 2021.

The Company is a participant in the SBA-PPP. See Note

Loans Receivable for more information.

Also in response to the COVID-

pandemic, the Board of Governors of the Federal Reserve System (“FRB”), the FDIC, the National Credit Union Administration, the Office of the Comptroller of the Currency (“OCC”), and the Consumer Financial Protection Bureau, in consultation with the state financial regulators (collectively, the “agencies”) issued a joint interagency statement (issued

March 22, 2020;

revised statement issued

April 7, 2020).

Some of the provisions applicable to the Company include, but are

not

limited to:

Accounting for Loan Modifications

- Loan modifications that do

not

meet the conditions of the CARES Act

may

still qualify as a modification that does

not

need to be accounted for as a TDR. The agencies confirmed with FASB staff that short-term modifications made on a good faith basis in response to COVID-

to borrowers who were current prior to any relief are

not

TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extensions of repayment terms, or insignificant delays in payment. See Note

Allowance for Loan Losses and Impaired Loans for more information.

Past Due Reporting

- With regard to loans

not

otherwise reportable as past due, financial institutions are

not

expected to designate loans with deferrals granted due to COVID-

as past due because of the deferrals. A loan's payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would

not

be considered past due during the period of the deferral.

Nonaccrual Status and Charge-offs

- During short-term COVID-

modifications, these loans generally should

not

be reported as nonaccrual or as classified.

The Company began offering short-term loan modifications to assist borrowers during the COVID-

pandemic. These modifications generally involve principal and/or interest payment deferrals for up to

six

months. These modifications generally meet the criteria of both Section

4013

of the CARES Act and the joint interagency statement, and therefore, the Company does

not

account for such loan modifications as TDRs. As the COVID-

pandemic persists in negatively impacting the economy, the Company continues to offer additional loan modifications to borrowers struggling as a result of COVID-

19.

Similar to the initial modifications granted, the additional round of loan modifications are granted specifically under Section

4013

of the CARES Act and generally involve principal and/or interest payment deferrals for up to an additional

six

months for commercial and consumer loans, and principal-only deferrals for up to an additional

months for selected commercial loans. On

August 3, 2020,

the Federal Financial Institutions Examination Council on behalf of its members (collectively “the FFIEC members”) issued a joint statement on additional loan accommodations related to COVID-

19.

The joint statement clarifies that for loan modifications in which Section

4013

is being applied, subsequent modifications could also be eligible under Section

4013.

To be eligible, each loan modification must be (

) related to the COVID-

event; (

) executed on a loan that was

not

more than

days past due as of

December 31, 2019;

and (

) executed between

March 1, 2020,

and the earlier of (A)

days after the date of termination of the National Emergency or (B)

December 31, 2020.

The

December 31, 2020

deadline was subsequently extended to

January 1, 2022

by the Consolidated Appropriations Act (“CAA”),

2021,

which was signed into law on

December 27, 2020.

Substantially all of the Company's additional round of loan modifications granted under Section

4013

of the CARES Act are in compliance with the aforementioned FFIEC requirements. Accordingly, the Company does

not

account for such loan modifications as TDRs.

SBA CARES Act Paycheck Protection Program, Policy [Policy Text Block]

Small Business Administration Paycheck Protection Program

The SBA-PPP is

one

of the centerpieces of the CARES Act, which was passed on

March 27, 2020

in response to the outbreak of COVID-

and was supplemented with subsequent legislation. Overseen by the U.S. Treasury Department, the SBA-PPP offers cash-flow assistance to nonprofit and small business employers through guaranteed loans for expenses incurred between

February 15, 2020,

and

August 8, 2020.

Borrowers are eligible for forgiveness of principal and accrued interest on SBA-PPP loans to the extent that the proceeds are used to cover eligible payroll costs, interest costs, rent, and utility costs over a period between

eight

and

-weeks after the loan is made as long as the borrower retains its employees and their compensation levels. The CARES Act authorized the SBA to temporarily guarantee these loans.

As a qualified SBA lender, we were automatically authorized to originate SBA-PPP loans and began taking applications on

April 3, 2020.

An eligible business can apply for a SBA-PPP loan up to the lesser of: (

)

2.5

times its average monthly “payroll costs;” or (

)

$10.0

million. SBA-PPP loans will have: (a) an interest rate of

1.0%,

(b) a

two

-year or

five

-year term to maturity; and (c) principal and interest payments deferred for

six

months from the date of disbursement. The SBA will guarantee

100%

of the SBA-PPP loans made to eligible borrowers. The entire principal amount of the borrower's SBA-PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the SBA-PPP, subject to certain eligibility requirements and conditions.

Due to the unique nature of these provisions, SBA-PPP loans have been disclosed as a separate loan class. Origination fees received by the SBA are capitalized into the carrying amount of the loans. The deferred fee income, net of origination costs, is recognized over the life of the loan as an adjustment to yield using the straight-line method.

The allowance for loan losses for SBA-PPP loans originated during

2020

were separately evaluated given the explicit government guarantee. This analysis, which incorporated historical experience with similar SBA guarantees and underwriting, concluded the likelihood of loss was remote and therefore these loans were assigned a

zero

expected credit loss in the allowance for loan losses.

Property, Plant and Equipment, Policy [Policy Text Block]

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

Financing Receivable, Held-for-investment, Foreclosed Asset [Policy Text Block]

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 and Other Postretirement Plans, Pensions, Policy [Policy Text Block]

Pension Plan

Prior to the Cardinal 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 Cardinal 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 and Servicing of Financial Assets, Transfers of Financial Assets, Policy [Policy Text Block]

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 (

) the assets have been isolated from the Bank; (

) 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 (

) 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.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Other Intangible Assets

Goodwill arises from business combinations and is generally determined as the excess of fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquire, over the fair value of the nets assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are

not

amortized, but tested for impairment at least annually or more frequently in events and circumstances exists that indicate that a goodwill impairment test should be performed. The Company has selected

July 1

as the date to perform the annual impairment test. The annual impairment test was performed for

July 1, 2020,

with

impairment found on the goodwill. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on our balance sheet.

Other intangible assets consist of core deposit intangibles that 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. The core deposit intangible as a result of the Cardinal merger, is amortized over an estimated useful life of

twenty

years on an accelerated basis. For the core deposit intangible as a result of the Great State merger, we used an estimated useful life of

seven

years on an accelerated basis for the amortization.

Cash Value of Life Insurance [Policy Text Block]

Cash Value of Life Insurance

The Bank is owner and beneficiary of life insurance policies on certain current and former employees and directors. The Company records these policies in the consolidated balance sheets at cash surrender value, with changes recorded in noninterest income in the consolidated statements of income.

Revenue [Policy Text Block]

Revenue Recognition

Service Charges on Deposit Accounts -

Service charges on deposit accounts consist of monthly service fees, overdraft and nonsufficient funds fees, ATM fees, wire transfer fees and other deposit account related fees. The Company's performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers' accounts. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. Wire transfer fees, overdraft and nonsufficient funds fees, and other deposit account related fees are transactional based, and therefore, the Company's performance obligation is satisfied, and related revenue recognized, at a point in time.

Other Service Charges and Fees -

Other service charges include safety deposit box rental fees, check ordering charges, and other service charges. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment. The Company determined that since rentals and renewals occur fairly consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation. Check ordering charges are transactional based, and therefore, the Company's performance obligation is satisfied, and related revenue recognized, at a point in time. In addition, the following items are also included in other service charges and fees on the consolidated statements of income:

●

Credit and Debit Card Fees

Credit and debit card fees are primarily comprised of interchange fee income and merchant services income. Interchange fees are earned whenever the Company's debit and credit cards are processed through card payment networks such as Visa or Mastercard. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. The Company's performance obligation for interchange fee income and merchant services income are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month. Fees for these services for the years ended

December 31, 2020

and

2019

amounted to

$377

thousand and

$386

thousand, respectively.

●

Insurance and Investment

Insurance income primarily consists of commissions received on insurance product sales. The Company acts as an intermediary between the Company's customer and the insurance carrier. The Company's performance obligation is generally satisfied upon the issuance of the insurance policy. Shortly after the insurance policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue. Investment income consists of recurring revenue streams such as commissions from sales of mutual funds and other investments. Commissions from the sale of mutual funds and other investments are recognized on trade date, which is when the Company has satisfied its performance obligation. The Company also receives periodic service fees (i.e., trailers) from mutual fund companies typically based on a percentage of net asset value. Trailer revenue is recorded over time, usually monthly or quarterly, as net asset value is determined. For the years ended

December 31, 2020

and

2019

the Company received

$35

thousand and

$62

thousand, respectively in income from these services.

Mortgage Origination Fees

–

Mortgage origination fees consist of commissions received on mortgage loans closed in the secondary market. The Company acts as an intermediary between the Company's customer and companies that specialize in mortgage lending in the secondary market. The Company's performance obligation is generally satisfied when the mortgage loan is closed and funded and the Company receives its commission at that time.

Lessee, Leases [Policy Text Block]

Leases

February 2016,

the FASB amended the Leases topic of the ASC to revise certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. The amendments were effective for fiscal years beginning after

December 15, 2018,

includ‐ing interim periods within those fiscal years.

Effective

January 1, 2019,

we adopted the guidance using the modified retrospective method and practical expedients for transition. The practical expedients allow us to largely account for our existing leases consistent with current guidance except for the incremental balance sheet recognition for lessees. We have performed an evaluation of our leasing contracts and activities. We have developed our methodology to estimate the right-of use assets and lease liabilities, which is based on the present value of lease payments. There was

not

a material change to the timing of expense recognition. See additional discussion of leases in Note

to the consolidated financial statements.

Income Tax, Policy [Policy Text Block]

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

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

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 Cost [Policy Text Block]

Advertising Expense

The Company expenses advertising costs as they are incurred. Advertising expense for the years ended

December 31, 2020

and

2019

amounted to

$683

thousand and

$603

thousand, respectively.

Earnings Per Share, Policy [Policy Text Block]

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. For the years ended

December 31, 2020

and

2019,

there were

dilutive instruments.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) 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, 2018	$	(929	)	$	(1,038	)	$	(1,967	)
Other comprehensive income before reclassifications		1,019			63			1,082
Amounts reclassified from accumulated other comprehensive loss		(39	)		-			(39	)
Balance, December 31, 2019	$	51		$	(975	)	$	(924	)

Balance, December 31, 2019	$	51		$	(975	)	$	(924	)
Other comprehensive income (loss) before Reclassifications		780			(128	)		652
Amounts reclassified from accumulated other comprehensive loss		(249	)		-			(249	)
Balance, December 31, 2020	$	582		$	(1,103	)	$	(521	)

Off-Balance-Sheet Credit Exposure, Policy [Policy Text Block]

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, Policy [Policy Text Block]

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

12.

Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates.

Reclassification, Comparability Adjustment [Policy Text Block]

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.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

The following accounting standards

may

affect the future financial reporting by the Company:

June 2016,

the FASB issued ASU

No.

2016

to change the accounting for credit losses and modify the impairment model for certain debt securities. The Company will apply the amendments to the ASU through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. We are currently evaluating the impact of the ASU on our consolidated financial statements. We expect the ASU will result in an increase in the recorded allowance for loan losses given the change to estimated losses over the contractual life of the loans adjusted for expected prepayments. The majority of the increase results from longer duration portfolios. In addition to our allowance for loan losses, we will also record an allowance for credit losses on debt securities instead of applying the impairment model currently utilized. The amount of the adjustments will be impacted by each portfolio's composition and credit quality at the adoption date as well as economic conditions and forecasts at that time. In

July 2019,

the FASB proposed changes to the effective date of the ASU for smaller reporting companies, as defined by the SEC, and other non-SEC reporting entities. The proposal delayed the effective date to fiscal years beginning after

December 31, 2022,

including interim periods within those fiscal periods. On

October 16, 2019

the proposed changes were approved by the FASB. As the Company is a smaller reporting company, the delay is applicable to the Company.

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

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, 2022.

Early adoption is permitted for interim and annual goodwill impairment tests performed on testing dates after

January 1, 2017.

May 2019,

the FASB issued guidance to provide entities with an option to irrevocably elect the fair value option, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of ASU

2016

13,

Measurement of Credit Losses on Financial Instruments. The amendments will be effective for the Company for reporting periods beginning after

December 15, 2022.

The Company does

not

expect these amendments to have a material effect on its financial statements.

November 2019,

the FASB issued guidance that addresses issues raised by stakeholders during the implementation of ASU

2016

13,

Financial Instruments

—

Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments

. The amendments affect a variety of Topics in the Accounting Standards Codification. For entities that have

not

yet adopted the amendments in ASU

2016

13,

the amendments are effective for fiscal years beginning after

December 15, 2022,

including interim periods within those fiscal. Early adoption is permitted in any interim period as long as an entity has adopted the amendments in ASU

2016

13.

The Company does

not

expect these amendments to have a material effect on its financial statements.

November 2019,

the FASB issued guidance to defer the effective dates for private companies,

not

-for-profit organizations, and certain smaller reporting companies applying standards on current expected credit losses (“CECL”). Since the Company is a smaller reporting company, the new effect date for CECL will be fiscal years beginning after

December 15, 2022,

including interim periods within those fiscal years.

December 2019,

the FASB issued guidance to simplify accounting for income taxes by removing specific technical exceptions that often produce information investors have a hard time understanding. The amendments also improve consistent application of and simplify GAAP for other areas of Topic

740

by clarifying and amending existing guidance. The amendments are effective for fiscal years beginning after

December 15, 2020,

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.

February 2020,

the FASB issued guidance to add and amend SEC paragraphs in the ASC to reflect the issuance of SEC Staff Accounting Bulletin

No.

119

related to the new credit losses standard and comments by the SEC staff related to the revised effective date of the new leases standard. The amendments were effective upon issuance. The Company does

not

expect these amendments to have a material effect on its financial statements.

March 2020,

the FASB issued guidance that makes narrow-scope improvements to various aspects of the financial instrument guidance, including the CECL guidance issued in

2016.

Since the Company is a smaller reporting company, it should adopt the amendments in ASU

2016

during

2023.

The Company does

not

expect these amendments to have a material effect on its financial statements.

March 2020,

the FASB issued guidance to provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The amendments are effective as of

March 12, 2020

through

December 31, 2022.

The Company does

not

expect these amendments to have a material effect on its financial statements.

August 2020,

the FASB issued guidance to improve financial reporting associated with accounting for convertible instruments and contracts in an entity's own equity. The amendments are effective for fiscal years beginning after

December 15, 2023,

including interim periods within those fiscal years. Early adoption is permitted, but

earlier than fiscal years beginning after

December 15, 2020,

including interim periods within those fiscal years. The Company does

not

expect these amendments to have a material effect on its financial statements.

October 2020,

the FASB updated various Topics of the ASC to align the guidance in various SEC sections of the Codification with the requirements of certain SEC final rules. The amendments were effective upon issuance and did

not

have a material effect on the financial statements.

October 2020,

the FASB issued amendments to clarify the ASC and make minor improvements that are

not

expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments are effective for annual periods beginning after

December 15, 2020.

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.