10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2013

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

For the transition period from ________ to ________

Commission File Number 0-15204

NATIONAL BANKSHARES, INC.

 (Exact name of registrant as specified in its charter)

Virginia (State or other jurisdiction of incorporation or organization) 54-1375874 (I.R.S. Employer Identification No.)

101 Hubbard Street P. O. Box 90002 Blacksburg, VA	24062-9002
(Address of principal executive offices)	(Zip Code)

(540) 951-6300

(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.  [x] Yes   [  ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [x] Yes   [ ] No

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

Large accelerated filer  [  ]      Accelerated filer  [x]      Non-accelerated filer  [  ]       Smaller reporting company  [  ]

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act).

[ ] Yes   [x] No

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

Class Common Stock, $1.25 Par Value Outstanding at October 31, 2013 6,947,974

(This report contains 59 pages)

1

NATIONAL BANKSHARES, INC. AND SUBSIDIARIES

Form 10-Q

Index

Part I – Financial Information		Page
Item 1	Financial Statements	3
	Consolidated Balance Sheets, September 30, 2013 (Unaudited) and December 31, 2012	3
	Consolidated Statements of Income for the Three Months Ended September 30, 2013 and 2012 (Unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2013 and 2012 (Unaudited)	5
	Consolidated Statements of Income for the Nine Months Ended September 30, 2013 and 2012 (Unaudited)	6
	Consolidated Statements of Comprehensive Income (Loss) for the Nine Months Ended September 30, 2013 and 2012 (Unaudited)	7
	Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2013 and 2012 (Unaudited)	8
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012 (Unaudited)	9
	Notes to Consolidated Financial Statements (Unaudited)	10 – 36
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37 – 49
Item 3	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4	Controls and Procedures	50
Part II – Other Information
Item 1	Legal Proceedings	50
Item 1A	Risk Factors	50
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3	Defaults Upon Senior Securities	51
Item 4	Mine Safety Disclosures	51
Item 5	Other Information	51
Item 6	Exhibits	51
Signatures		51
Index of Exhibits		52 – 53
Certifications		54 - 57

2

Part I

Item 1. Financial Statements Financial Information

National Bankshares, Inc. and Subsidiaries

Consolidated Balance Sheets

$ in thousands, except per share data	(Unaudited) September 30, 2013			December 31, 2012
Assets
Cash and due from banks	$	13,806		$	14,783
Interest-bearing deposits		62,776			96,597
Securities available for sale, at fair value		192,225			189,815
Securities held to maturity (fair value approximates $160,676 at September 30, 2013 and $170,846 at December 31, 2012)		164,752			160,539
Restricted stock, at cost		1,414			1,689
Mortgage loans held for sale		617			2,796
Loans:
Loans, net of unearned income and deferred fees		590,664			592,162
Less allowance for loan losses		(8,090	)		(8,349	)
Loans, net		582,574			583,813
Premises and equipment, net		10,025			10,401
Accrued interest receivable		6,044			6,247
Other real estate owned, net		973			1,435
Intangible assets and goodwill		8,568			9,377
Bank-owned life insurance		21,020			20,523
Other assets		12,609			6,346
Total assets	$	1,077,403		$	1,104,361
Liabilities and Stockholders' Equity
Noninterest-bearing demand deposits	$	147,928		$	144,252
Interest-bearing demand deposits		453,044			455,713
Savings deposits		73,952			69,063
Time deposits		248,574			277,738
Total deposits		923,498			946,766
Accrued interest payable		97			139
Other liabilities		7,514			7,347
Total liabilities		931,109			954,252
Commitments and contingencies		---			---
Stockholders' Equity
Preferred stock, no par value, 5,000,000 shares authorized; none issued and outstanding		---			---
Common stock of $1.25 par value. Authorized 10,000,000 shares; issued and outstanding 6,947,974 shares at September 30, 2013 and December 31, 2012		8,685			8,685
Retained earnings		153,578			144,162
Accumulated other comprehensive loss, net		(15,969	)		(2,738	)
Total stockholders' equity		146,294			150,109
Total liabilities and stockholders' equity	$	1,077,403		$	1,104,361

See accompanying notes to consolidated financial statements.

3

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income

Three Months Ended September 30, 2013 and 2012

(Unaudited)

$ in thousands, except per share data	September 30, 2013			September 30, 2012
Interest Income
Interest and fees on loans	$	8,196		$	8,923
Interest on interest-bearing deposits		45			60
Interest on securities – taxable		1,743			1,620
Interest on securities – nontaxable		1,581			1,634
Total interest income		11,565			12,237
Interest Expense
Interest on time deposits of $100 or more		196			355
Interest on other deposits		1,192			1,581
Total interest expense		1,388			1,936
Net interest income		10,177			10,301
Provision for loan losses		303			778
Net interest income after provision for loan losses		9,874			9,523
Noninterest Income
Service charges on deposit accounts		709			674
Other service charges and fees		37			40
Credit card fees		834			807
Trust income		267			271
BOLI income		182			205
Other income		162			130
Realized securities losses, net (includes accumulated other comprehensive income reclassification adjustments for unrealized net losses in available-for-sale securities of ($88) for the period ended September 30, 2013 and ($18) for the period ended September 30, 2012)		(82	)		(19	)
Total noninterest income		2,109			2,108
Noninterest Expense
Salaries and employee benefits		3,031			3,104
Occupancy and furniture and fixtures		394			387
Data processing and ATM		477			390
FDIC assessment		136			133
Credit card processing		656			607
Intangible assets amortization		269			270
Net costs of other real estate owned		52			58
Franchise taxes		280			258
Other operating expenses		828			881
Total noninterest expense		6,123			6,088
Income before income taxes		5,860			5,543
Income tax expense (includes income tax benefit from reclassification items of ($31) for the three months ended September 30, 2013 and ($6) for the three months ended September 30, 2012)		1,343			1,250
Net Income	$	4,517		$	4,293
Basic net income per common share	$	0.65		$	0.62
Fully diluted net income per common share	$	0.65		$	0.62
Weighted average number of common shares outstanding – basic		6,947,974			6,941,757
Weighted average number of common shares outstanding – diluted		6,972,769			6,962,852
Dividends declared per common share	$	---		$	---

See accompanying notes to consolidated financial statements.

4

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

Three Months Ended September 30, 2013 and 2012

(Unaudited)

$ in thousands	September 30, 2013			September 30, 2012
Net Income	$	4,517		$	4,293
Other Comprehensive Loss, Net of Tax
Unrealized holding losses on available for sale securities net of taxes of ($2,056) and ($351) for the periods ended September 30, 2013 and 2012, respectively		(3,818	)		(653	)
Reclassification adjustment, net of taxes of $31 and $6 for the periods ended September 30, 2013 and 2012, respectively		57			12
Other comprehensive loss, net of taxes of ($2,025) and ($345) for the periods ended September 30, 2013 and 2012, respectively		(3,761	)		(641	)
Total Comprehensive Income	$	756		$	3,652

See accompanying notes to consolidated financial statements.

5

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income

Nine Months Ended September 30, 2013 and 2012

(Unaudited)

$ in thousands, except per share data	September 30, 2013		September 30, 2012
Interest Income
Interest and fees on loans	$	24,707	$	26,554
Interest on interest-bearing deposits		161		187
Interest on securities – taxable		5,007		4,991
Interest on securities – nontaxable		4,847		4,801
Total interest income		34,722		36,533
Interest Expense
Interest on time deposits of $100 or more		694		1,171
Interest on other deposits		3,921		4,900
Total interest expense		4,615		6,071
Net interest income		30,107		30,462
Provision for loan losses		1,329		2,554
Net interest income after provision for loan losses		28,778		27,908
Noninterest Income
Service charges on deposit accounts		1,922		1,956
Other service charges and fees		139		130
Credit card fees		2,427		2,441
Trust income		867		1,037
BOLI income		546		605
Other income		502		341
Realized securities gains, net (includes accumulated other comprehensive income reclassification adjustments for unrealized net gains (losses) in available-for-sale securities of ($4) for the period ended September 30, 2013 and $20 for the period ended September 30, 2012)		2		33
Total noninterest income		6,405		6,543
Noninterest Expense
Salaries and employee benefits		8,963		9,014
Occupancy and furniture and fixtures		1,230		1,181
Data processing and ATM		1,288		1,206
FDIC assessment		408		343
Credit card processing		1,854		1,817
Intangible assets amortization		809		812
Net costs of other real estate owned		192		209
Franchise taxes		803		646
Other operating expenses		2,637		2,302
Total noninterest expense		18,184		17,530
Income before income taxes		16,999		16,921
Income tax expense (includes income tax expense (benefit) from reclassification items of ($1) for the period ended September 30, 2013 and $7 for the period ended September 30, 2012)		3,831		3,859
Net Income	$	13,168	$	13,062
Basic net income per common share	$	1.90	$	1.88
Fully diluted net income per common share	$	1.89	$	1.88
Weighted average number of common shares outstanding – basic		6,947,974		6,940,573
Weighted average number of common shares outstanding – diluted		6,970,063		6,958,316
Dividends declared per common share	$	0.54	$	0.53

See accompanying notes to consolidated financial statements.

6

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

Nine Months Ended September 30, 2013 and 2012

(Unaudited)

$ in thousands	September 30, 2013			September 30, 2012
Net Income	$	13,168		$	13,062
Other Comprehensive Loss, Net of Tax
Unrealized holding losses on available for sale securities net of taxes of ($7,126) and ($178) for the periods ended September 30, 2013 and 2012, respectively		(13,234	)		(331	)
Reclassification adjustment, net of taxes of $1 and ($7) for the periods ended September 30, 2013 and 2012, respectively		3			(13	)
Other comprehensive loss, net of taxes of ($7,125) and ($185) for the periods ended September 30, 2013 and 2012, respectively		(13,231	)		(344	)
Total Comprehensive Income (Loss)	$	(63	)	$	12,718

7

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

Nine Months Ended September 30, 2013 and 2012

(Unaudited)

$ in thousands	Common Stock		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balances at December 31, 2011	$	8,675	$	133,945		$	(1,321	)	$	141,299
Net income		---		13,062			---			13,062
Dividends $0.53 per share		---		(3,678	)		---			(3,678	)
Stock options exercised		5		54			---			59
Other comprehensive loss, net of tax( $185)		---		---			(344	)		(344	)
Balances at September 30, 2012	$	8,680	$	143,383		$	(1,665	)	$	150,398
Balances at December 31, 2012	$	8,685	$	144,162		$	(2,738	)	$	150,109
Net income		---		13,168			---			13,168
Dividends $0.54 per share		---		(3,752	)		---			(3,752	)
Other comprehensive loss, net of tax ($7,125)		---		---			(13,231	)		(13,231	)
Balances at September 30, 2013	$	8,685	$	153,578		$	(15,969	)	$	146,294

See accompanying notes to consolidated financial statements.

8

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2013 and 2012

(Unaudited)

$ in thousands	September 30, 2013			September 30, 2012
Cash Flows from Operating Activities
Net income	$	13,168		$	13,062
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,329			2,554
Depreciation of bank premises and equipment		546			571
Amortization of intangibles		809			812
Amortization of premiums and accretion of discounts, net		130			168
Gains on disposal of fixed assets		---			(2	)
(Gains) losses on sales and calls of securities available for sale, net		4			(20	)
Gains on calls of securities held to maturity, net		(6	)		(14	)
Losses and write-downs on other real estate owned, net		92			29
Increase in cash value of bank-owned life insurance		(497	)		(534	)
Net change in:
Mortgage loans held for sale		2,179			(392	)
Accrued interest receivable		203			13
Other assets		921			269
Accrued interest payable		(42	)		(28	)
Other liabilities		167			(251	)
Net cash provided by operating activities		19,003			16,237
Cash Flows from Investing Activities
Net change interest-bearing deposits		33,821			30,961
Proceeds from calls, principal payments, sales and maturities of securities available for sale		61,135			119,493
Proceeds from calls, principal payments and maturities of securities held to maturity		9,176			24,255
Purchases of securities available for sale		(83,993	)		(143,284	)
Purchases of securities held to maturity		(13,484	)		(42,063	)
Net change in restricted stock		275			(22	)
Purchases of loan participations		(900	)		(2,000	)
Collections of loan participations		127			4,656
Loan originations and principal collections, net		113			(9,699	)
Proceeds from disposal of other real estate owned		848			1,174
Recoveries on loans charged off		92			76
Additions to bank premises and equipment		(170	)		(667	)
Net cash provided by (used in) investing activities		7,040			(17,120	)
Cash Flows from Financing Activities
Net change in time deposits		(29,164	)		(19,092	)
Net change in other deposits		5,896			24,142
Cash dividends paid		(3,752	)		(3,678	)
Stock options exercised		---			59
Net cash provided by (used in) financing activities		(27,020	)		1,431
Net change in cash and due from banks		(977	)		548
Cash and due from banks at beginning of period		14,783			11,897
Cash and due from banks at end of period	$	13,806		$	12,445
Supplemental Disclosures of Cash Flow Information
Interest paid on deposits and borrowed funds	$	4,657		$	6,099
Income taxes paid		3,610			3,937
Supplemental Disclosure of Noncash Activities
Loans charged against the allowance for loan losses	$	1,680		$	2,444
Loans transferred to other real estate owned		478			1,608
Unrealized net losses on securities available for sale		(20,356	)		(529	)

See accompanying notes to consolidated financial statements.

9

National Bankshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2013

(Unaudited)

$ in thousands, except per share data

Note 1: General

The consolidated financial statements of National Bankshares, Inc. (“NBI”) and its wholly-owned subsidiaries, The National Bank of Blacksburg (“NBB”) and National Bankshares Financial Services, Inc. (“NBFS”) (collectively, the “Company”), conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. The accompanying interim period consolidated financial statements are unaudited; however, in the opinion of management, all adjustments consisting of normal recurring adjustments, which are necessary for a fair presentation of the consolidated financial statements, have been included.  The results of operations for the nine months ended September 30, 2013 are not necessarily indicative of results of operations for the full year or any other interim period.  The interim period consolidated financial statements and financial information included in this Form 10-Q should be read in conjunction with the notes to consolidated financial statements included in the Company’s 2012 Form 10-K/A.  The Company posts all reports required to be filed under the Securities and Exchange Act of 1934 on its web site at www.nationalbankshares.com.

Subsequent events have been considered through the date when the Form 10-Q was issued.

Note 2: Stock-Based Compensation

The Company had a stock option plan, the 1999 Stock Option Plan, that was adopted in 1999 and that was terminated on March 9, 2009. Incentive stock options were granted annually to key employees of NBI and its subsidiaries from 1999 to 2005 and none have been granted since 2005. All of the stock options are vested.

Options	Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2013		69,000	$	23.75
Exercised		---		---
Forfeited or expired		---		---
Outstanding September 30, 2013		69,000	$	23.75		1.11	$	838
Exercisable at September 30, 2013		69,000	$	23.75		1.11	$	838

There were no shares exercised during the nine months ended September 30, 2013. There were 4,000 shares with an intrinsic value of $74 exercised during the nine months ended September 30, 2012. As of September 30, 2013, there was no unrecognized compensation expense related to stock options.

10

Note 3:    Loan Portfolio

The loan portfolio, excluding loans held for sale, was comprised of the following.

	September 30, 2013			December 31, 2012
Real estate construction	$	55,022		$	50,313
Consumer real estate		146,447			143,262
Commercial real estate		301,890			304,308
Commercial non real estate		31,329			37,349
Public sector and IDA		28,332			26,169
Consumer non real estate		28,532			31,714
Gross loans		591,552			593,115
Less unearned income and deferred fees		(888	)		(953	)
Loans, net of unearned income and deferred fees	$	590,664		$	592,162

Note 4:    Allowance for Loan Losses, Nonperforming Assets and Impaired Loans

The allowance for loan losses methodology incorporates individual evaluation of impaired loans and collective evaluation of groups of non-impaired loans. The Company performs ongoing analysis of the loan portfolio to determine credit quality and to identify impaired loans. Credit quality is rated based on the loan’s payment history, the borrower’s current financial situation and value of the underlying collateral.

Impaired loans are those loans that have been modified in a troubled debt restructure (“TDR” or “restructure”) and larger, non-homogeneous loans that are in nonaccrual or exhibit payment history or financial status that indicate the probability that collection will not occur according to the loan’s terms. Generally, impaired loans are given risk ratings that indicate higher risk, such as “classified” or “other assets especially mentioned.” Impaired loans are individually evaluated to determine appropriate reserves and are measured at the lower of the invested amount or the fair market value. Impaired loans with an impairment loss are designated nonaccrual. Please refer to Note 2 of the Company’s 2012 Form 10-K/A, “Summary of Significant Accounting Policies” for additional information on evaluation of impaired loans and associated specific reserves, and policies regarding nonaccruals, past due status and charge-offs.

Troubled debt restructurings impact the estimation of the appropriate level of the allowance for loan losses. If the restructuring included forgiveness of a portion of principal or accrued interest, the charge-off is included in the historical charge-off rates applied to the collective evaluation methodology. Further, restructured loans are individually evaluated for impairment, with amounts below fair value accrued in the allowance for loan losses. TDRs that experience a payment default are examined to determine whether the default indicates collateral dependency or cash flows below those that were included in the fair value measurement. TDRs, as well as all impaired loans, that are determined to be collateral dependent are charged down to fair value. Deficiencies indicated by impairment measurements for TDRs that are not collateral dependent may be accrued in the allowance for loan losses or charged off if deemed uncollectible.

The Company evaluated characteristics in the loan portfolio and determined major segments and smaller classes within each segment. These characteristics include collateral type, repayment sources, and (if applicable) the borrower’s business model. The methodology for calculating reserves for collectively-evaluated loans is applied at the class level.

Portfolio Segments and Classes

Beginning January 1, 2013, the Company segregated certain loans that were included within the classes of the Residential Real Estate segment, including Equity lines, Residential closed-end first liens and Residential closed-end junior liens. The newly-segregated loans are secured by residential real estate collateral that is owned by investors and for which the primary repayment source is rental income. The new class in the Residential Real Estate segment allows the Company to address credit risks characteristic of investor-owned residential real estate. Segregating the investor-owned residential real estate did not have a significant impact on the calculation of the allowance for loan losses. Consistent with accounting guidance, prior periods have not been restated and are shown as originally published using the segments and classes in effect for the period.

11

The segments and classes used in determining the allowance for loan losses, beginning in 2013 are as follows.

Real Estate Construction		Commercial Non Real Estate
	Construction, residential		Commercial and Industrial
	Construction, other
		Public Sector and IDA
Consumer Real Estate			Public sector and IDA
	Equity lines
	Residential closed-end first liens	Consumer Non Real Estate
	Residential closed-end junior liens		Credit cards
	Investor-owned residential real estate		Automobile
			Other consumer loans
Commercial Real Estate
	Multifamily real estate
	Commercial real estate, owner-occupied
	Commercial real estate, other

Historical Loss Rates

The Company’s allowance methodology for collectively-evaluated loans applies historical loss rates by class to current class balances as part of the process of determining required reserves. Class loss rates are calculated as the net charge-offs for the class as a percentage of average class balance. The annualized current-year loss rate is averaged with that of prior periods to obtain the historical loss rate. Prior to the first quarter of 2013, one historical loss rate for each class was calculated and applied to current class balance to obtain the allocation for historical loss rates.

Beginning with the first quarter of 2013, two loss rates for each class are calculated: total net charge-offs for the class as a percentage of average class loan balance (“class loss rate”), and total net charge-offs for the class as a percentage of average classified loans in the class (“classified loss rate”). Classified loans are those with risk ratings of “substandard” or higher. Net charge-offs in both calculations include charge-offs and recoveries of classified and non-classified loans as well as those associated with impaired loans. Class historical loss rates are applied to non-classified loan balances at the reporting date, and classified historical loss rates are applied to classified balances at the reporting date.

The revised calculation and application of historical loss rates impacted the calculation of reserves for collectively-evaluated loans. Under the former methodology, the class historical loss rates were applied to all collectively-evaluated loans and would have resulted in a total allocation of $2,384. Under the revised methodology, class historical loss rates are applied to only non-classified loans, resulting in an allocation of $2,370. In addition, the classified historical loss rate resulted in an allocation of $452, for a total allocation based on historical loss rates of $2,822. Consistent with accounting guidance, prior periods have not been restated and are shown as originally published using the methodology in effect for the period.

Risk Factors

In addition to historical loss rates, risk factors pertinent to each class are analyzed to estimate reserves for collectively-evaluated loans. Factors include changes in national and local economic and business conditions, the nature and volume of classes within the portfolio, loan quality and loan officers’ experience. Prior to the first quarter of 2013, management also reviewed the Company’s lending policies and loan review system to determine whether changes had occurred during the quarter that affected credit risk. Until the first quarter of 2013, no changes were found to affect credit risk and no additional allocations were applied. During the first quarter of 2013, the Company incorporated to the allowance methodology a factor for changes in the Company’s lending policies and a factor for changes in the quality of the Company’s loan review, and set standard allocations for associated risk. The addition of the factors formalized and standardized a practice already in place and did not have a significant impact on the calculation of the allowance for loan losses.

The analysis of certain factors results in standard allocations to all segments and classes. These factors include loan officers’ average years of experience, the risk from changes in lending policies, and the risk from changes in loan review. Factors analyzed for each class, with resultant allocations based upon the level of risk assessed for each class, include levels of past due loans, nonaccrual loans, current class balance as a percentage of total loans, and the percentage of high risk loans within the class. Additionally, factors specific to each segment are analyzed and result in allocations to the segment.

Real estate construction loans are subject to general risks from changing commercial building and housing market trends and economic conditions that may impact demand for completed properties and the costs of completion. These risks are measured by market-area unemployment rates, bankruptcy rates, housing and commercial building market trends, and interest rates.

The credit quality of consumer real estate is subject to risks associated with the borrower’s repayment ability and collateral value, measured generally by analyzing local unemployment and bankruptcy trends, local housing market trends, and interest rates.

12

The commercial real estate segment includes loans secured by multifamily residential real estate, commercial real estate occupied by the owner/borrower, and commercial real estate leased to non-owners. Loans in the commercial real estate segment are impacted by economic risks from changing commercial real estate markets, rental markets for multi-family housing and commercial buildings, business bankruptcy rates, local unemployment and interest rate trends that would impact the businesses housed by the commercial real estate.

Commercial non real estate loans are secured by collateral other than real estate, or are unsecured. Credit risk for commercial non real estate loans is subject to economic conditions, generally monitored by local business bankruptcy trends, and interest rates. Public sector and IDA loans are extended to municipalities and related entities. Credit risk is based upon the entity’s ability to repay and interest rate trends.

Consumer non real estate includes credit cards, automobile and other consumer loans. Credit cards and certain other consumer loans are unsecured, while collateral is obtained for automobile loans and other consumer loans. Credit risk stems primarily from the borrower’s ability to repay, measured by average unemployment, average personal bankruptcy rates and interest rates.

Factor allocations applied to each class are increased for loans rated special mention and increased to a greater extent for loans rated classified. The Company allocates additional reserves for “high risk” loans, determined to be junior lien mortgages, high loan-to-value loans and interest-only loans.

A detailed analysis showing the allowance roll-forward by portfolio segment and related loan balance by segment follows.

	Activity in the Allowance for Loan Losses for the Three Months Ended September 30, 2013
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate		Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated			Total
Balance, June 30, 2013	$	1,032		$	1,670		$	3,029	$	1,481		$	111		$	513		$	116			7,952
Charge-offs		---			(120	)		---		(8	)		---			(68	)		---			(196	)
Recoveries		---			---			8		2			---			21			---			31
Provision for loan losses		(11	)		334			553		(472	)		(6	)		(59	)		(36	)		303
Balance, September 30, 2013	$	1,021		$	1,884		$	3,590	$	1,003		$	105		$	407		$	80		$	8,090

	Activity in the Allowance for Loan Losses for the Nine Months Ended September 30, 2013
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated		Total
Balance, December 31, 2012	$	1,070		$	2,263		$	3,442		$	959		$	142		$	424		$	49	$	8,349
Charge-offs		(184	)		(219	)		(35	)		(968	)		---			(274	)		---		(1,680	)
Recoveries		---			1			12			18			---			61			---		92
Provision for loan losses		135			(161	)		171			994			(37	)		196			31		1,329
Balance, September 30, 2013	$	1,021		$	1,884		$	3,590		$	1,003		$	105		$	407		$	80	$	8,090

	Activity in the Allowance for Loan Losses for the Three Months Ended September 30, 2012
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA		Consumer Non Real Estate			Unallocated			Total
Balance, June 30, 2012	$	1,396		$	1,910		$	3,257		$	909		$	111	$	422		$	163		$	8,168
Charge-offs		(51	)		(33	)		(592	)		---			---		(40	)		---			(716	)
Recoveries		---			---			---			1			---		23			---			24
Provision for loan losses		(158	)		95			872			(46	)		34		(5	)		(14	)		778
Balance, September 30, 2012	$	1,187		$	1,972		$	3,537		$	864		$	145	$	400		$	149		$	8,254

13

	Activity in the Allowance for Loan Losses for the Nine Months Ended September 30, 2012
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated		Total
Balance, December 31, 2011	$	1,079		$	1,245		$	3,515		$	1,473		$	232		$	403		$	121	$	8,068
Charge-offs		(640	)		(278	)		(1,329	)		(5	)		---			(192	)		---		(2,444	)
Recoveries		13			2			---			2			---			59			---		76
Provision for loan losses		735			1,003			1,351			(606	)		(87	)		130			28		2,554
Balance, September 30, 2012	$	1,187		$	1,972		$	3,537		$	864		$	145		$	400		$	149	$	8,254

	Allowance for Loan Losses as of September 30, 2013
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	---	$	11	$	617	$	3	$	---	$	---	$	---	$	631
Collectively evaluated for impairment		1,021		1,873		2,973		1,000		105		407		80		7,459
Total	$	1,021	$	1,884	$	3,590	$	1,003	$	105	$	407	$	80	$	8,090

	Allowance for Loan Losses as of December 31, 2012
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	---	$	43	$	273	$	231	$	---	$	7	$	---	$	554
Collectively evaluated for impairment		1,070		2,220		3,169		728		142		417		49		7,795
Total	$	1,070	$	2,263	$	3,442	$	959	$	142	$	424	$	49	$	8,349

	Loans as of September 30, 2013
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	2,992	$	1,199	$	12,719	$	112	$	---	$	24	$	---	$	17,046
Collectively evaluated for impairment		52,030		145,248		289,171		31,217		28,332		28,508		---		574,506
Total loans	$	55,022	$	146,447	$	301,890	$	31,329	$	28,332	$	28,532	$	---	$	591,552

	Loans as of December 31, 2012
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	6,643	$	864	$	10,329	$	574	$	---	$	46	$	---	$	18,456
Collectively evaluated for impairment		43,670		142,398		293,979		36,775		26,169		31,668		---		574,659
Total	$	50,313	$	143,262	$	304,308	$	37,349	$	26,169	$	31,714	$	---	$	593,115

14

A summary of ratios for the allowance for loan losses follows.

	Nine Months Ended September 30,				Year Ended December 31,
	2013		2012		2012
Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees		1.37 %		1.40 %		1.41 %
Ratio of net charge-offs to average loans, net of unearned income and deferred fees(1)		0.36 %		0.54 %		0.49 %

⁽¹⁾ Net charge-offs are on an annualized basis.

A summary of nonperforming assets follows.

	September 30,						December 31,
	2013			2012			2012
Nonperforming assets:
Nonaccrual loans	$	10,194		$	3,876		$	10,870
Restructured loans in nonaccrual		1,042			2,254			2,151
Total nonperforming loans		11,236			6,130			13,021
Other real estate owned, net		973			1,894			1,435
Total nonperforming assets	$	12,209		$	8,024		$	14,456
Ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned		2.06	%		1.35	%		2.44	%
Ratio of allowance for loan losses to nonperforming loans(1)		72.00	%		134.65	%		64.12	%

⁽¹⁾     The Company defines nonperforming loans as nonaccrual loans. Loans 90 days or more past due and still accruing and accruing restructured loans are excluded.

A summary of loans past due 90 days or more and impaired loans follows.

	September 30,						December 31,
	2013			2012			2012
Loans past due 90 days or more and still accruing	$	149		$	114		$	170
Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees		0.03	%		0.02	%		0.03	%
Accruing restructured loans	$	6,545		$	2,021		$	2,005
Impaired loans:
Impaired loans with no valuation allowance	$	14,874		$	11,063		$	16,974
Impaired loans with a valuation allowance		2,172			902			1,482
Total impaired loans	$	17,046		$	11,965		$	18,456
Valuation allowance		(631	)		(327	)		(554	)
Impaired loans, net of allowance	$	16,415		$	11,638		$	17,902
Average recorded investment in impaired loans(1)	$	17,357		$	13,831		$	13,540
Interest income recognized on impaired loans, after designation as impaired	$	159		$	292		$	9
Amount of income recognized on a cash basis	$	---		$	---		$	---

⁽¹⁾      Recorded investment includes principal, accrued interest and net deferred fees.

15

Nonaccrual loans that meet the Company’s balance threshold of $250 and TDRs are designated as impaired. No interest income was recognized on nonaccrual loans for the nine months ended September 30, 2013 or September 30, 2012 or for the year ended December 31, 2012.

A detailed analysis of investment in impaired loans, associated reserves and interest income recognized, segregated by loan class follows.     

	Impaired Loans as of September 30, 2013
	Principal Balance		(A) Total Recorded Investment(1)		Recorded Investment(1) in (A) for Which There is No Related Allowance		Recorded Investment(1) in (A) for Which There is a Related Allowance		Related Allowance
Real Estate Construction
Construction, residential	$	123	$	118	$	118	$	---	$	---
Construction, other		2,869		2,854		2,854		---		---
Consumer Real Estate
Equity lines		---		---		---		---		---
Residential closed-end first liens		760		762		214		548		4
Residential closed-end junior liens		310		312		48		264		7
Investor-owned residential real estate		129		131		131		---		---
Commercial Real Estate
Multifamily real estate		3,970		3,967		3,967		---		---
Commercial real estate, owner-occupied		5,271		5,274		3,713		1,561		617
Commercial real estate, other		3,478		3,478		3,478		---		---
Commercial Non Real Estate
Commercial and Industrial		112		112		4		108		3
Public Sector and IDA
Public sector and IDA		---		---		---		---		---
Consumer Non Real Estate
Credit cards		---		---		---		---		---
Automobile		24		24		24		---		---
Other consumer loans		---		---		---		---		---
Total	$	17,046	$	17,032	$	14,551	$	2,481	$	631

⁽¹⁾     Recorded investment includes the unpaid principal balance and any accrued interest and net deferred fees.

16

	Impaired Loans as of December 31, 2012
	Principal Balance		(A) Total Recorded Investment(1)		Recorded Investment(1) in (A) for Which There is No Related Allowance		Recorded Investment(1) in (A) for Which There is a Related Allowance		Related Allowance
Real Estate Construction
Construction, residential	$	123	$	118	$	118	$	---	$	---
Construction, other		6,520		6,487		6,487		---		---
Consumer Real Estate
Equity lines		---		---		---		---		---
Residential closed-end first liens		783		785		634		151		43
Residential closed-end junior liens		81		81		81		---		---
Commercial Real Estate
Multifamily real estate		5,284		5,288		5,288		---		---
Commercial real estate, owner-occupied		5,045		5,043		4,293		750		273
Commercial real estate, other		---		---		---		---		---
Commercial Non Real Estate
Commercial and Industrial		574		574		39		535		231
Public Sector and IDA
Public sector and IDA		---		---		---		---		---
Consumer Non Real Estate
Credit cards		---		---		---		---		---
Automobile		46		46		---		46		7
Other consumer loans		---		---		---		---		---
Total	$	18,456	$	18,422	$	16,940	$	1,482	$	554

⁽¹⁾     Recorded investment includes the unpaid principal balance, accrued interest and any accrued interest and deferred fees.

17

The following tables show the average investment and interest income recognized for impaired loans.

	Average Investment and Interest Income for Impaired Loans
	For the Three Months Ended September 30, 2013				For the Nine Months Ended September 30, 2013
	Average Recorded Investment(1)		Interest Income Recognized		Average Recorded Investment(1)		Interest Income Recognized
Real Estate Construction
Construction, residential	$	118	$	---	$	118	$	---
Construction, other		3,005		---		3,005		---
Consumer Real Estate
Equity lines		---		---		---		---
Residential closed-end first liens		863		2		729		4
Residential closed-end junior liens		410		2		238		2
Investor-owned residential real estate		131		2		100		4
Commercial Real Estate
Multifamily real estate		4,133		---		4,189		---
Commercial real estate, owner-occupied		5,424		28		5,073		82
Commercial real estate, other		3,489		22		3,492		65
Commercial Non Real Estate
Commercial and industrial		138		1		380		2
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		---		---		---		---
Automobile		26		---		33		---
Other consumer		---		---		---		---
Total	$	17,737	$	57	$	17,357	$	159

⁽¹⁾     Recorded investment includes the unpaid principal balance and any accrued interest and net deferred fees.

18

	Average Investment and Interest Income for Impaired Loans
	For the Year Ended December 31, 2012
	Average Recorded Investment(1)		Interest Income Recognized
Real Estate Construction
Construction, residential	$	1,171	$	---
Construction, other		4,290		1
Commercial Real Estate
Equity lines		101		---
Residential closed-end first liens		873		2
Residential closed-end junior liens		234		---
Commercial Real Estate
Multifamily real estate		1,466		5
Commercial real estate, owner-occupied		4,806		1
Commercial real estate, other		---		---
Commercial Non Real Estate
Commercial and Industrial		570		---
Public Sector and IDA
Public sector and IDA		---		---
Consumer Non Real Estate
Credit cards		---		---
Automobile		4		---
Other consumer		25		---
Total	$	13,540	$	9

⁽¹⁾ Recorded investment includes the unpaid principal balance and any accrued interest and deferred fees.

19

The Company reviews nonaccrual loans on an individual loan basis to determine whether future payments are reasonably assured. To satisfy this criteria, the Company’s evaluation must determine that the underlying cause of the original delinquency or weakness that indicated nonaccrual status has been resolved, such as receipt of new guarantees, increased cash flows that cover the debt service or other resolution. Nonaccrual loans that demonstrate reasonable assurance of future payments and that have made at least six consecutive payments in accordance with repayment terms and timeframes may be returned to accrual status.

A restructured loan for which impairment measurement does not indicate a loss and that maintains current status for at least six months may be returned to accrual status.

An analysis of past due and nonaccrual loans as of September 30, 2013 follows.

	30 – 89 Days Past Due		90 or More Days Past Due		90 or More Days Past Due and Still Accruing		Nonaccruals (Including Impaired Nonaccruals)
Real Estate Construction
Construction, residential	$	---	$	123	$	---	$	123
Construction, other		46		2,869		---		2,869
Consumer Real Estate
Equity lines		5		---		---		---
Residential closed-end first liens		1,045		338		146		447
Residential closed-end junior liens		54		77		---		78
Investor-owned residential real estate		170		53		---		52
Commercial Real Estate
Multifamily real estate		433		3,278		---		3,970
Commercial real estate, owner-occupied		573		3,540		---		3,540
Commercial real estate, other		35		---		---		---
Commercial Non Real Estate
Commercial and Industrial		182		43		---		133
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		20		2		2		---
Automobile		190		24		1		24
Other consumer loans		61		---		---		---
Total	$	2,814	$	10,347	$	149	$	11,236

20

An analysis of past due and nonaccrual loans follows.

December 31, 2012

	30 – 89 Days Past Due		90 or More Days Past Due		90 or More Days Past Due and Still Accruing		Nonaccruals (Including Impaired Nonaccruals)
Real Estate Construction
Construction, residential	$	---	$	123	$	---	$	123
Construction, other		31		89		---		3,109
Consumer Real Estate
Equity lines		22		30		30		98
Residential closed-end first liens		1,507		605		126		801
Residential closed-end junior liens		121		39		---		120
Commercial Real Estate
Multifamily real estate		671		261		---		4,624
Commercial real estate, owner-occupied		1,113		---		---		3,536
Commercial real estate, other		40		2,089		---		---
Commercial Non Real Estate
Commercial and Industrial		291		505		---		561
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		20		4		4		---
Automobile		142		10		10		49
Other consumer loans		132		---		---		---
Total	$	4,090	$	3,755	$	170	$	13,021

The estimate of credit risk for non-impaired loans is obtained by applying allocations for internal and external factors. The allocations are increased for loans that exhibit greater credit quality risk.

Credit quality indicators, which the Company terms risk grades, are assigned through the Company’s credit review function for larger loans and selective review of loans that fall below credit review thresholds. Loans that do not indicate heightened risk are graded as “pass.” Loans that appear to have elevated credit risk because of frequent or persistent past due status, which is less than 75 days, or that show weakness in the borrower’s financial condition are risk graded “special mention.” Loans with frequent or persistent delinquency exceeding 75 days or that have a higher level of weakness in the borrower’s financial condition are graded “classified.” Classified loans have regulatory risk ratings of “substandard” and “doubtful.” Allocations are increased by 50% and by 100% for loans with grades of “special mention” and “classified,” respectively.

Determination of risk grades was completed for the portfolio as of September 30, 2013 and 2012 and December 31, 2012.

21

The following displays collectively-evaluated loans by credit quality indicator.

September 30, 2013

	Pass		Special Mention		Classified (Excluding Impaired)
Real Estate Construction
Construction, 1-4 family residential	$	17,451	$	158	$	---
Construction, other		34,375		30		16
Consumer Real Estate
Equity lines		16,289		33		---
Closed-end first liens		81,171		1,446		1,605
Closed-end junior liens		4,856		166		35
Investor-owned residential real estate		39,550		---		97
Commercial Real Estate
Multifamily residential real estate		64,940		305		752
Commercial real estate owner-occupied		126,418		2,501		679
Commercial real estate, other		89,525		964		3,087
Commercial Non Real Estate
Commercial and Industrial		30,070		916		231
Public Sector and IDA
States and political subdivisions		28,332		---		---
Consumer Non Real Estate
Credit cards		7,054		---		---
Automobile		11,964		217		5
Other consumer		9,215		53		---
Total	$	561,210	$	6,789	$	6,507

22

The following displays collectively-evaluated loans by credit quality indicator.

December 31, 2012

	Pass		Special Mention		Classified (Excluding Impaired)
Real Estate Construction
Construction, 1-4 family residential	$	14,344	$	158	$	---
Construction, other		29,011		---		120
Consumer Real Estate
Equity lines		17,742		100		182
Closed-end first liens		113,893		652		2,413
Closed-end junior liens		6,713		119		138
Commercial Real Estate
Multifamily residential real estate		36,421		---		324
Commercial real estate owner-occupied		160,188		253		1,079
Commercial real estate, other		92,628		3,112		---
Commercial Non Real Estate
Commercial and Industrial		36,372		99		318
Public Sector and IDA
States and political subdivisions		26,170		---		---
Consumer Non Real Estate
Credit cards		6,690		---		---
Automobile		12,344		101		56
Other consumer		11,815		45		105
Total	$	564,331	$	4,639	$	4,735

Sales, Purchases and Reclassification of Loans

The Company finances mortgages under “best efforts” contracts with mortgage purchasers. The mortgages are designated as held for sale upon initiation. There have been no major reclassifications from portfolio loans to held for sale. Occasionally, the Company purchases or sells participations in loans. All participation loans purchased met the Company’s normal underwriting standards at the time the participation was entered. Participation loans are included in the appropriate portfolio balances to which the allowance methodology is applied.

23

Troubled Debt Restructurings

The Company modifies loans in troubled debt restructurings. Total troubled debt restructurings amounted to $7,587 at September 30, 2013, $4,246 at December 31, 2012, and $4,275 at September 30, 2012. The following tables present restructurings by class that occurred during three and nine month periods ended September 30, 2013, and the three and nine month periods ended September 30, 2012.

Note: Only classes with restructured loans are presented.

	Restructurings That Occurred During the Three Months Ended September 30, 2013
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post- Modification Outstanding Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		1	$	241	$	309	$	---
Commercial Non Real Estate
Commercial and industrial		1		32		45		1
Total		2	$	273	$	354	$	1

The loans restructured during the three months ended September 30, 2013 were designated and reported as troubled debt restructures in previous quarters. The loans received additional modifications during the third quarter of 2013, transitioning payments from interest-only to amortizing, and capitalizing accrued interest. The interest rate for the consumer real estate loan remained unchanged, while the interest rate for the commercial non real estate loan decreased.

	Restructurings That Occurred During the Nine Months Ended September 30, 2013
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		2	$	453	$	525	$	3
Residential closed-end junior liens		1		262		267		7
Commercial Real Estate
Commercial real estate, owner-occupied		1		154		239		---
Commercial real estate, other		1		3,500		3,500		---
Commercial Non Real Estate
Commercial and industrial		1		32		45		1
Total		6	$	4,401	$	4,576	$	11

The modifications that resulted in troubled debt restructurings between January 1, 2013 and September 30, 2013 provided payment relief to the borrowers without forgiveness of principal or accrued interest. The date of conversion from interest-only to amortizing payments for one commercial real estate loan was extended beyond the date specified by the contract, resulting in designation as a troubled debt restructuring. During the second quarter of 2013, the loan was converted to amortizing payments and moved from Real Estate Construction to Commercial Real Estate. The other commercial real estate loan was modified to extend the term, lower the interest rate and provide debt consolidation to allow the borrower increased debt service ability. The modifications of the consumer real estate loans capitalized accrued interest and for one loan reduced the interest rate, while the other loan transitioned from interest-only payments to amortizing payments. The term for one consumer real estate loan was shortened, resulting in a higher payment, while the term for the other consumer real estate loan was lengthened, resulting in a lower payment. The interest rate for the commercial non real estate loan decreased, the balance increased to capitalize accrued interest and the payment was changed from interest-only to amortizing.

24

	Restructurings That Occurred During the Three Months Ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance
Consumer Real Estate
Residential closed-end first liens		1	$	38	$	38
Commercial Real Estate
Commercial real estate, owner occupied		1		193		193
Total		2	$	231	$	231

	Restructurings That Occurred During the Nine Months Ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance
Consumer Real Estate
Residential closed-end first liens		5	$	383	$	402
Residential closed-end junior liens		1		143		147
Commercial Real Estate
Commercial real estate, owner occupied		3		890		895
Commercial Non Real Estate
Commercial and Industrial		1		400		400
Total		10	$	1,816	$	1,844

Loans modified in troubled debt restructurings during the three months ended September 30, 2012 received non-financial underwriting exceptions that reduced payments by changing maturities or amortization structures. The troubled debt restructurings for the nine months ended September 30, 2012 included partial charge offs of $109 for two consumer real estate loans; providing payment relief primarily by extending maturity dates or changing amortization structures without reducing interest rates or amounts owed; and adding a co-borrower to one consumer real estate loan. Restructured loans are designated impaired and measured for impairment. Collateral dependent restructured loans are measured using the fair value of collateral. Non-collateral dependent restructured loans are measured using the present value of cash flows. The impairment measurement resulted in no specific allocations for loans modified during the three months ended September 30, 2012 and $220 for loans modified during the nine months ended September 30, 2012.

25

The following tables present restructured loans that defaulted during the three and nine month periods ended September 30, 2013 and the three and nine month periods ended September 30, 2012, and that were modified within 12 months prior to default. The Company defines default as one or more payments that occur more than 90 days past the due date, or charge-offs after the date of restructuring.

	Restructured Loans That Defaulted And Were Modified Within 12 Months Prior to Default
	Default During the 3 Month Period Ended September 30, 2013						Default During the 9 Month Period Ended September 30, 2013
	Number of Contracts		Principal Balance		Impairment Accrued		Number of Contracts		Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		1	$	26	$	1		1	$	26	$	1
Residential closed-end junior liens		1		47		---		1		47		---
Commercial Real Estate
Commercial real estate owner-occupied		2		664		352		3		857		352
Commercial Non Real Estate
Commercial and industrial		1		137		---		1		137		---
Total		5	$	874	$	353		6	$	1,067	$	353

Restructured loans are individually evaluated for impairment. The fair value measurements for most of the restructured loans that defaulted during the three-month and nine-month periods ended September 30, 2013 were based upon the fair value of collateral and as such were not significantly affected by the default. One of the commercial real estate restructurings that defaulted during the three months ended September 31, 2013 was measured using the present value of cash flows, resulting in an impairment allocation of $352. In previous quarters, no allocation was recognized. One of the commercial real estate loans that defaulted in the first quarter of 2013 was placed into other real estate owned, and the commercial non real estate loan was partially paid off by the borrower, with the remainder of the principal charged against the allowance for loan losses. All of the restructurings that defaulted during the three-month and nine-month periods ended September 30, 2013 and that remain active loans are in nonaccrual status.

	Restructured Loans That Defaulted And Were Modified Within 12 Months Prior to Default
	Default During the 3 Month Period Ended September 30, 2012						Default During the 9 Month Period Ended September 30, 2012
	Number of Contracts		Principal Balance		Impairment Accrued		Number of Contracts		Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		1	$	96	$	---		1	$	96	$	---
Residential closed-end junior liens		1		84		---		1		84		---
Commercial Real Estate
Commercial real estate owner-occupied		2		861		21		2		861		21
Total		4	$	1,041	$	21		4	$	1,041	$	21

The fair value measurements for all of the restructured loans that defaulted during the three-month and nine-month periods ended September 30, 2012 were measured using the fair value of collateral and as such, were not significantly affected by the payment default. All were maintained on nonaccrual status as of September 30, 2012.

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Note 5: Securities

The amortized costs, gross unrealized gains, gross unrealized losses and fair values for securities available for sale by major security type are as follows.

	September 30, 2013
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
Available for Sale:
U.S. Treasury	$	2,001	$	11	$	---	$	2,012
U.S. Government agencies		169,815		253		17,925		152,143
Mortgage-backed securities		2,919		234		---		3,153
States and political subdivisions		23,742		785		123		24,404
Corporate		8,805		113		541		8,377
Other securities		2,151		---		15		2,136
Total	$	209,433	$	1,396	$	18,604	$	192,225

	December 31, 2012
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
Available for Sale:
U.S. Treasury	$	2,005	$	68	$	---	$	2,073
U.S. Government agencies		128,805		1,381		622		129,564
Mortgage-backed securities		4,202		367		---		4,569
States and political subdivisions		35,029		1,753		3		36,779
Corporate		14,207		368		---		14,575
Other securities		2,419		9		173		2,255
Total	$	186,667	$	3,946	$	798	$	189,815

27

The amortized costs, gross unrealized gains, gross unrealized losses and fair values for securities held to maturity by major security type are as follows.

	September 30, 2013
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
Held to Maturity:
U.S. Government agencies	$	13,977	$	315	$	1,025	$	13,267
Mortgage-backed securities		547		55		---		602
States and political subdivisions		150,228		3,158		6,579		146,807
Total	$	164,752	$	3,528	$	7,604	$	160,676

	December 31, 2012
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
Held to Maturity:
U.S. Government agencies	$	7,988	$	563	$	---	$	8,551
Mortgage-backed securities		691		73		---		764
States and political subdivisions		151,209		9,880		216		160,873
Corporate		651		7		---		658
Total	$	160,539	$	10,523	$	216	$	170,846

Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows.

	September 30, 2013
	Less Than 12 Months				12 Months or More
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Temporarily Impaired Securities:
U.S. Government agencies	$	156,170	$	18,542	$	2,608	$	408
States and political subdivisions		57,677		6,593		850		109
Corporate		5,477		541		---		---
Other securities		---		---		174		15
Total	$	219,324	$	25,676	$	3,632	$	532

	December 31, 2012
	Less Than 12 Months				12 Months or More
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Temporarily Impaired Securities:
U.S. Government agencies	$	44,351	$	622	$	---	$	---
States and political subdivisions		9,358		216		482		3
Other securities		---		---		133		172
Total	$	53,709	$	838	$	615	$	175

28

The Company had 278 securities with a fair value of $222,956 which were temporarily impaired at September 30, 2013.  The total unrealized loss on these securities was $26,208. Of the temporarily impaired total, five securities with a fair value of $3,632 and an unrealized loss of $532 have been in a continuous loss position for twelve months or more. The Company has determined that these securities are temporarily impaired at September 30, 2013 for the reasons set out below.

U.S. Government agencies. The unrealized losses in this category of investments were caused by interest rate and market fluctuations. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. The Company is monitoring bond market trends and developing strategies to address unrealized losses. At this time the unrealized losses are not considered to be other-than-temporarily impaired.

States and political subdivisions. This category’s unrealized losses are primarily the result of interest rate and market fluctuations. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and it is not likely that the Company will be required to sell any of the investments before recovery of its amortized cost basis, which may be at maturity, the Company does not consider these investments to be other-than-temporarily impaired.

Corporate. The Company’s unrealized losses in corporate debt securities are related to interest rate and market fluctuations. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments before recovery of its amortized cost basis, which may be at maturity, the Company does not consider these investments to be other-than-temporarily impaired.

Other securities. The Company holds an investment in an LLC and a small amount of community bank stock. The value of these investments has been negatively affected by market conditions. Because the Company does not intend to sell these investments before recovery of amortized cost basis, the Company does not consider these investments to be other-than-temporarily impaired.

As a member of the Federal Reserve and the Federal Home Loan Bank (“FHLB”) of Atlanta, NBB is required to maintain certain minimum investments in the common stock of those entities. Required levels of investment are based upon NBB’s capital and a percentage of qualifying assets. In addition, NBB is eligible to borrow from the FHLB with borrowings collateralized by qualifying assets, primarily residential mortgage loans and NBB’s capital stock investment in the FHLB. Redemption of FHLB stock is subject to certain limitations and conditions. At its discretion, the FHLB may declare dividends on the stock. Management reviews for impairment based upon the ultimate recoverability of the cost basis of the FHLB stock, and at September 30, 2013, management did not consider there to be any impairment.

Management regularly monitors the credit quality of the investment portfolio. Changes in ratings are noted and follow-up research on the issuer is undertaken when warranted. Management intends to carefully follow any changes in bond quality.

Note 6: Recent Accounting Pronouncements

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities.” This ASU requires entities to disclose both gross information and net information about both instruments and transactions eligible for offset in the balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements.

In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment.” The amendments in this ASU apply to all entities that have indefinite-lived intangible assets, other than goodwill, reported in their financial statements. The amendments in this ASU provide an entity with the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative impairment test. The amendments also enhance the consistency of impairment testing guidance among long-lived asset categories by permitting an entity to assess qualitative factors to determine whether it is necessary to calculate the asset’s fair value when testing an indefinite-lived intangible asset for impairment. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements.

In January 2013, the FASB issued ASU 2013-01, “Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” The amendments in this ASU clarify the scope for derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements and securities borrowing and securities lending transactions that are either offset or subject to netting arrangements. An entity is required to apply the amendments for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements.

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The amendments in this ASU require an entity to present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income. In addition, the amendments require a cross-reference to other disclosures currently required for other reclassification items to be reclassified directly to net income in their entirety in the same reporting period. Companies should apply these amendments for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. The Company has included the required disclosures from ASU 2013-02 in the consolidated financial statements.

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In July 2013, the FASB issued ASU 2013-10, “Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.” The amendments in this ASU permit the Fed Funds Effective Swap Rate (also referred to as the Overnight Index Swap Rate) to be used as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, in addition to interest rates on direct Treasury obligations of the U.S. government and the London Interbank Offered Rate. The amendments also remove the restriction on using different benchmark rates for similar hedges. The amendments apply to all entities that elect to apply hedge accounting of the benchmark interest rate under Topic 815. The amendments are effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” The amendments in this Update provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements.

Note 7: Defined Benefit Plan

Components of Net Periodic Benefit Cost

	Pension Benefits
	Nine Months Ended September 30,
	2013			2012
Service cost	$	447		$	351
Interest cost		462			555
Expected return on plan assets		(738	)		(807	)
Amortization of prior service cost		(75	)		(75	)
Recognized net actuarial loss		399			381
Net Periodic Benefit Cost	$	495		$	405

2013 Plan Year Employer Contribution

Without considering the prefunding balance, the Company’s minimum required contribution to the National Bankshares, Inc. Retirement Income Plan (the “Plan”) is $815. Considering the prefunding balance, the 2013 minimum required contribution is $0. The Company elected to contribute $519 to the Plan during the nine months ended September 30, 2013.

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Note 8: Fair Value Measurements

The Company records fair value adjustments to certain assets and liabilities and determines fair value disclosures utilizing a definition of fair value of assets and liabilities that states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Additional considerations come into play in determining the fair value of assets in markets that are not active.

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

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

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

Securities Available for Sale

Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2). The carrying value of restricted Federal Reserve Bank and Federal Home Loan Bank stock approximates fair value based upon the redemption provisions of each entity and is therefore excluded from the following table.

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

			Fair Value Measurements at September 30, 2013 Using
Description	Balance as of September 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury	$	2,012	$	---	$	2,012	$	---
U.S. Government agencies		152,143		---		152,143		---
States and political subdivisions		24,404		---		24,404		---
Mortgage-backed securities		3,153		---		3,153		---
Corporate		8,377		---		8,377		---
Other securities		2,136		---		2,136		---
Total Securities Available for Sale	$	192,225	$	---	$	192,225	$	---

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			Fair Value Measurements at December 31, 2012 Using
Description	Balance as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury	$	2,073	$	---	$	2,073	$	---
U.S. Government agencies		129,564		---		129,564		---
States and political subdivisions		36,779		---		36,779		---
Mortgage-backed securities		4,569		---		4,569		---
Corporate		14,575		---		14,575		---
Other securities		2,255		---		2,255		---
Total Securities Available for Sale	$	189,815	$	---	$	189,815	$	---

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

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

Loans Held for Sale

Loans held for sale are carried at the lower of cost or market value. These loans currently consist of one-to-four family residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). As such, the Company records any fair value adjustments on a nonrecurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale at September 30, 2013 or December 31, 2012. Gains and losses on the sale of loans are recorded within income from mortgage banking on the Consolidated Statements of Income.

Impaired Loans

Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that the Company will be unable to collect all the contractual interest and principal payments as scheduled in the loan agreement. Troubled debt restructurings are impaired loans. The measurement of loss associated with impaired loans may be based on either the observable market price of the loan, the present value of the expected cash flows or the fair value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral is a house or building in the process of construction, if an appraisal of the real estate property is over 12 months old or if the real estate market is considered by management to be experiencing volatility, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal using observable market data, if the collateral is deemed significant. If the collateral is not deemed significant, the value of business equipment is based on the net book value on the borrower’s financial statements. Likewise, values for inventory and accounts receivables collateral are based on the borrower’s financial statement balances or aging reports (Level 3). Estimated losses on impaired loans allocated to the allowance for loan losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.

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The following table summarizes the Company’s impaired loans that were measured at fair value on a nonrecurring basis at September 30, 2013 and at December 31, 2012.

				Carrying Value
Date	Description	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Assets:
September 30, 2013	Impaired loans net of valuation allowance	$	1,541	$	---	$	---	$	1,541
December 31, 2012	Impaired loans net of valuation allowance		928		---		---		928

Impaired loans are measured quarterly for impairment. The Company employs the most applicable valuation method for each loan based on current information at the time of valuation.

The following tables present information about Level 3 Fair Value Measurements for September 30, 2013 and December 31, 2012.

September 30, 2013	Valuation Technique	Unobservable Input	Range (Weighted Average)
Impaired loans	Discounted appraised value	Selling cost		10.00%(1)
Impaired loans	Present value of cash flows	Discount rate	6.25%	-	9.50%	(6.75%)

⁽¹⁾     Of the Company’s impaired loans with specific allocations based on Level 3 inputs, both loans valued using fair value of collateral utilized the same discount rate.

December 31, 2012	Valuation Technique	Unobservable Input	Range (Weighted Average)
Impaired loans	Discounted appraised value	Selling cost	0%	-	10.00%	(2.00%)
Impaired loans	Discounted appraised value	Discount for lack of marketability and age of appraisal	0%	-	60.00%	(52.00%)
Impaired loans	Present value of cash flows	Discount rate	6.00%	-	7.50%	(6.28%)

Other Real Estate Owned

Other real estate owned are real estate assets acquired in full or partial satisfaction of a loan. At acquisition, other real estate owned assets are measured at fair value. If the assets are marketed for sale by an outside party, the acquisition-date fair value is discounted by selling costs; if the assets are marketed for sale by the Company, no reduction to fair value for selling costs is made. Subsequent to acquisition, the assets are measured at the lower of initial measurement or current fair value, discounted for selling costs as appropriate.

The fair value of an other real estate owned asset is determined by an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). If the appraisal is discounted either for age or because management considers the real estate market to be experiencing volatility, then the fair value is considered Level 3. Discounts for selling costs also result in measurement based on Level 3 inputs. Fair value adjustments are measured on a nonrecurring basis and are recorded in the period incurred as valuation allowances to other real estate owned, and expensed through noninterest expense.

33

The following table summarizes the Company’s other real estate owned that was measured at fair value on a nonrecurring basis.

				Carrying Value
Date	Description	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Assets:
September 30, 2013	Other real estate owned net of valuation allowance	$	973	$	---	$	---	$	973
December 31, 2012	Other real estate owned net of valuation allowance		1,435		---		---		1,435

The following tables present information about Level 3 Fair Value Measurements for September 30, 2013 and December 31, 2012.

September 30, 2013	Valuation Technique	Unobservable Input	Range (Weighted Average)
Other real estate owned	Discounted appraised value	Selling cost	0.00%(1)	–	9.95%	2.99%)
Other real estate owned	Discounted appraised value	Discount for lack of marketability and age of appraisal	0.00%	–	20.71%	(3.48%)

December 31, 2012	Valuation Technique	Unobservable Input	Range (Weighted Average)
Other real estate owned	Discounted appraised value	Selling cost	0.00%(1)	–	6.00%	(4.30%)
Other real estate owned	Discounted appraised value	Discount for lack of marketability and age of appraisal	0.00%	–	30.90%	(4.68%)

⁽¹⁾      The Company markets other real estate owned both independently and with local realtors. Properties marketed by realtors are discounted by selling costs. Properties that the Company markets independently are not discounted by selling costs.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments.

Cash and Due from Banks and Interest-Bearing Deposits

The carrying amounts approximate fair value.

Securities

The fair value of securities, excluding restricted stock, is determined by quoted market prices or dealer quotes. The fair value of certain state and municipal securities is not readily available through market sources other than dealer quotations, so fair value estimates are based on quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued. The carrying value of restricted securities approximates fair value based upon the redemption provisions of the applicable entities.

Loans Held for Sale

The fair value of loans held for sale is based on commitments on hand from investors or prevailing market prices.

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Loans

Fair value for the loan portfolio is estimated on an account-level basis by discounting scheduled cash flows through the projected maturity for each loan. The calculation applies estimated market discount rates that reflect the credit and interest rate risk inherent in the loan. The estimate of maturity is based on the Company’s historical experience with repayments for loan classification, modified by an estimate of the effect of economic conditions on lending.

Impaired loans are individually evaluated for fair value. Fair value for the Company’s impaired loans is estimated by using either discounted cash flows or the appraised value of collateral. Any amount of principal balance that exceeds fair value is accrued in the allowance for loan losses. Assumptions regarding credit risk, cash flows and discount rates are determined within management’s judgment, using available market information and specific borrower information. Discount rates for cash flow analysis are based on the loan’s interest rate, and cash flows are estimated based upon the loan’s historical payment performance and the borrower’s current financial condition. Appraisals may be discounted for age, reasonableness, and selling costs.

Deposits

The fair value of demand and savings deposits is the amount payable on demand. The fair value of fixed maturity term deposits and certificates of deposit is estimated using the rates currently offered for deposits with similar remaining maturities.

Accrued Interest

The carrying amounts of accrued interest approximate fair value.

Bank-Owned Life Insurance

Bank owned life insurance represents insurance policies on officers of the Company and certain officers who are no longer employed by the Company.  The cash values of the policies are estimates using information provided by insurance carriers.  These policies are carried at their cash surrender value, which approximates the fair value.

Commitments to Extend Credit and Standby Letters of Credit

The only amounts recorded for commitments to extend credit, standby letters of credit and financial guarantees written are the deferred fees arising from these unrecognized financial instruments. These deferred fees are not deemed significant at September 30, 2013 and December 31, 2012, and, as such, the related fair values have not been estimated.

The estimated fair values and related carrying amounts of the Company’s financial instruments follow.

	September 30, 2013
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total Estimated Fair Value
Financial Assets:
Cash and due from banks	$	13,806	$	13,806	$	---	$	---	$	13,806
Interest-bearing deposits		62,776		62,776		---		---		62,776
Securities		356,977		---		352,901		---		352,901
Restricted securities		1,414		---		1,414		---		1,414
Mortgage loans held for sale		617		---		617		---		617
Loans, net		582,574		---		---		590,117		590,117
Accrued interest receivable		6,044		6,044		---		---		6,044
Bank-owned life insurance		21,020		21,020		---		---		21,020
Financial Liabilities:
Deposits	$	923,498	$	674,924	$	---	$	250,304	$	925,228
Accrued interest payable		97		97		---		---		97

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	December 31, 2012
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total Estimated Fair Value
Financial Assets:
Cash and due from banks	$	14,783	$	14,783	$	---	$	---	$	14,783
Interest-bearing deposits		96,597		96,597		---		---		96,597
Securities		350,354		---		360,661		---		360,661
Restricted securities		1,689		---		1,689		---		1,689
Mortgage loans held for sale		2,796		---		2,796		---		2,796
Loans, net		583,813		---		---		570,471		570,471
Accrued interest receivable		6,247		6,247		---		---		6,247
Bank-owned life insurance		20,523		20,523		---		---		20,523
Financial Liabilities:
Deposits	$	946,766	$	669,028	$	---	$	272,820	$	941,848
Accrued interest payable		139		139		---		---		139

Note 9: Components of Accumulated Other Comprehensive Loss

	Net Unrealized Gain (Loss) on Securities			Adjustments Related to Pension Benefits			Accumulated Other Comprehensive (Loss)
Balance at December 31, 2011	$	2,646		$	(3,967	)	$	(1,321	)
Unrealized holding loss on available for sale securities net of tax of ($178)		(331	)		---			(331	)
Reclassification adjustment, net of tax of ($7)		(13	)		---			(13	)
Balance at September 30, 2012		2,302			(3,967	)		(1,665	)
Balance at December 31, 2012		2,047			(4,785	)		(2,738	)
Unrealized holding loss on available for sale securities net of tax of ($7,126)		(13,234	)		---			(13,234	)
Reclassification adjustment, net of tax of $1		3			---			3
Balance at September 30, 2013	$	(11,184	)	$	(4,785	)	$	(15,969	)

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

$ in thousands, except per share data

The purpose of this discussion and analysis is to provide information about the financial condition and results of operations of National Bankshares, Inc. and its wholly-owned subsidiaries (the “Company”), which are not otherwise apparent from the consolidated financial statements and other information included in this report.  Please refer to the financial statements and other information included in this report as well as the 2012 Annual Report on Form 10-K/A for an understanding of the following discussion and analysis.

Cautionary Statement Regarding Forward-Looking Statements

We make forward-looking statements in this Form 10-Q that are subject to significant risks and uncertainties.  These forward-looking statements include statements regarding our profitability, liquidity, allowance for loan losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals, and are based upon our management’s views and assumptions as of the date of this report.  The words “believes,” “expects,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,”  “forecasts,” “intends,” or other similar words or terms are intended to identify forward-looking statements.

These forward-looking statements are based upon or are affected by factors that could cause our actual results to differ materially from historical results or from any results expressed or implied by such forward-looking statements. These factors include, but are not limited to, changes in:

●     interest rates,

●     general economic conditions,

●     the legislative/regulatory climate,

● monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury, the Office of the Comptroller of the Currency, the Federal Reserve Board and the Federal Deposit Insurance Corporation, and the impact of any policies or programs implemented pursuant to the Emergency Economic Stabilization Act of 2008 (“EESA”) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and other financial reform legislation,

●     unanticipated increases in the level of unemployment in the Company’s trade area,

●     the quality or composition of the loan and/or investment portfolios,

●     demand for loan products,

●     deposit flows,

●     competition,

●     demand for financial services in the Company’s trade area,

●     the real estate market in the Company’s trade area,

●     the Company’s technology initiatives,

●     threats from technology based frauds and scams,

●     loss or retirement of key executives,

●     adverse changes in the securities market, and

●     applicable accounting principles, policies and guidelines.

These risks and uncertainties should be considered in evaluating the forward-looking statements contained in this report. We caution readers not to place undue reliance on those statements, which speak only as of the date of this report. This discussion and analysis should be read in conjunction with the description of our “Risk Factors” in Item 1A. of our 2012 Annual Report on Form 10-K/A.

The effects of the recession continue to impact the national economy as well as the Company’s market. Signs of economic recovery are mixed with continued high unemployment and diminished real estate values. The Company’s trade area contains a diverse economy that includes large public colleges and universities, which somewhat insulated the Company’s market from the dramatic declines in real estate values seen in some other areas of the country. The Company’s market area experienced moderate declines in real estate values associated with the recession that appear to have stabilized within the past two years. If the economic recovery wavers or reverses, it is likely that unemployment will continue at higher-than-normal levels or rise in the Company’s trade area. Because of the importance to the Company’s markets of state-funded universities, any cutbacks in the funding provided by the State could also negatively impact employment. This could lead to an even higher rate of delinquent loans and a greater number of real estate foreclosures. Higher unemployment and the fear of layoffs causes reduced consumer demand for goods and services, which negatively impacts the Company’s business and professional customers. A slow economic recovery could have an adverse effect on all financial institutions, including the Company.

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 Critical Accounting Policies

General

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). The financial information contained within our statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained when earning income, recognizing an expense, recovering an asset or relieving a liability. The Company uses historical loss rates as one factor in determining the inherent loss that may be present in the loan portfolio. Actual losses could differ significantly from one previously acceptable method to another method. Although the economics of the Company’s transactions would be the same, the timing of events that would impact the transactions could change.

Allowance for Loan Losses

The allowance for loan losses is an accrual of estimated losses that have been sustained in our loan portfolio. The allowance is funded by the provision for loan losses, reduced by charge-offs of loans and increased by recoveries of previously charged-off loans. The determination of the allowance is based on two accounting principles, Accounting Standards Codification (“ASC”) Topic 450-20 (Contingencies) which requires that losses be accrued when occurrence is probable and the amount of the loss is reasonably estimable, and ASC Topic 310-10 (Receivables) which requires accrual of losses on impaired loans if the recorded investment exceeds fair value.

Probable losses are accrued through two calculations, individual evaluation of impaired loans and collective evaluation of the remainder of the portfolio. Impaired loans are larger non-homogeneous loans for which there is a probability that collection will not occur according to the loan terms, as well as loans whose terms have been modified in a troubled debt restructuring. Impaired loans with an estimated impairment loss are placed on nonaccrual status.

Impaired loans

Impaired loans are identified through the Company’s credit risk rating process. Estimated loss for an impaired loan is the amount of recorded investment that exceeds the loan’s fair value. Fair value of an impaired loan is measured by one of three methods: the fair value of collateral (“collateral method”), the present value of future cash flows (“cash flow method”), or observable market price. The Company applies the collateral method to collateral-dependent loans, loans for which foreclosure is eminent and to loans for which the fair value of collateral is a more reliable estimate of fair value. The cash flow method is applied to loans that are not collateral dependent and for which cash flows may be estimated.

The Company bases collateral method fair valuation upon the “as-is” value of independent appraisals or evaluations. Valuations for impaired loans with outstanding principal balances of $250 or more are based on a current appraisal. Appraisals are also used to value impaired loans with principal balances of $100 or greater and secured by one piece of collateral. Collateral-method impaired loans with principal balances below $100, or if secured by multiple pieces of collateral, below $250, are valued using an internal evaluation.

Appraisals and internal valuations provide an estimate of market value. Appraisals must conform to the Uniform Standards of Professional Appraisal Practice (“USPAP”) and are prepared by an independent third-party appraiser who is certified and licensed and who is approved by the Company. Appraisals incorporate market analysis, comparable sales analysis, cash flow analysis and market data pertinent to the property to determine market value. Internal evaluations are prepared and reviewed by employees of the Company who are independent of the loan origination, operation, management and collection functions. Evaluations provide a property’s market value based on the property’s current physical condition and characteristics and the economic market conditions that affect the collateral’s market value. Evaluations incorporate multiple sources of data to arrive at a property’s market value, including physical inspection, tax values, independent third-party automated tools, comparable sales analysis and local market information.

Updated appraisals or evaluations are ordered when the loan becomes impaired if the appraisal or evaluation on file is more than twelve months old. Appraisals and evaluations are reviewed for propriety and reasonableness and may be discounted if the Company determines that the value exceeds reasonable levels. If an updated appraisal or evaluation has been ordered but has not been received by a reporting date, the fair value may be based on the most recent available appraisal or evaluation, discounted for age.

The appraisal or evaluation value for a collateral-dependent loan for which recovery is expected solely from the sale of collateral is reduced by estimated selling costs. Estimated losses on collateral-dependent loans, as well as any other impairment loss considered uncollectible, are charged against the allowance for loan losses. For loans that are not collateral dependent, the impairment loss is accrued in the allowance. Impaired loans with partial charge-offs are maintained as impaired until the remaining balance is satisfied. Smaller homogeneous impaired loans that are not troubled debt restructurings or part of a larger impaired relationship are collectively evaluated.

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Troubled debt restructurings are impaired loans and are measured for impairment under the same valuation methods as other impaired loans. Troubled debt restructurings are maintained in nonaccrual status until the loan has demonstrated reasonable assurance of repayment with at least six months of consecutive timely payment performance, unless the impairment measurement indicates a loss. Troubled debt restructurings with impairment losses remain in nonaccrual status.

Collectively-evaluated loans

Non-impaired loans and smaller homogeneous impaired loans that are not troubled debt restructurings and not part of a larger impaired relationship are grouped by portfolio segments that are made up of smaller loan classes. Loans within a segment or class have similar risk characteristics.

Beginning January 1, 2013, the Company segregated certain loans that were included within the classes of the Residential Real Estate segment, including Equity lines, Residential closed-end first liens and Residential closed-end junior liens. The newly-segregated loans are secured by residential real estate collateral that is owned by investors and for which the primary repayment source is rental income. The new class in the Residential Real Estate segment allows the Company to address credit risks characteristic of investor-owned residential real estate. Segregating the investor-owned residential real estate did not have a significant impact on the calculation of the allowance for loan losses. Consistent with accounting guidance, prior periods have not been restated and are shown as originally published using the segments and classes in effect for the period.

Probable loss is determined by applying historical net charge-off rates as well as additional percentages for trends and current levels of quantitative and qualitative factors. Loss rates are calculated for and applied to individual classes and encompass losses for the current year and the previous year. The Company utilizes a two-year “look-back period”, by averaging loss rates from the current year and the previous year to apply to current collectively-evaluated classes. Calculations made for quarterly reporting use the annualized current-year loss rate averaged with the loss rate from the previous year. The look-back period is the same for all classes and segments, and for all periods reported.

Beginning with the first quarter of 2013, two loss rates for each class are calculated: total net charge-offs for the class as a percentage of average class loan balance (“class loss rate”), and total net charge-offs for the class as a percentage of average classified loans in the class (“classified loss rate”). Classified loans are those with risk ratings of “substandard” or higher. Net charge-offs in both calculations include charge-offs and recoveries of classified and non-classified loans as well as those associated with impaired loans. Class historical loss rates are applied to non-classified loan balances at the reporting date, and classified historical loss rates are applied to classified balances at the reporting date.

Trends and current levels of qualitative factors are evaluated and allocations are applied to each class. Delinquency rates, loan quality and concentrations are evaluated for individual classes, while factors for loan officers’ experience, changes in lending policies and changes in the loan review process are evaluated on a general level. Economic factors such as unemployment rates, bankruptcy rates and others are also evaluated, with standard allocations applied consistently to relevant classes.

The Company accrues additional estimated loss for criticized loans within each class and for loans designated high risk. High risk loans are defined as junior lien mortgages, loans with high loan-to-value ratios and loans with terms that require only interest payments. Both criticized loans and high risk loans are included in the base risk analysis for each class and are allocated additional reserves.

Estimation of the allowance for loan losses

The estimation of the allowance involves analysis of internal and external variables, methodologies, assumptions and our judgment and experience. Key judgments used in determining the allowance for loan losses include internal risk rating determinations, market and collateral values, discount rates, loss rates, and our view of current economic conditions. These judgments are inherently subjective and our actual losses could be greater or less than the estimate. Future estimates of the allowance could increase or decrease based on changes in the financial condition of individual borrowers, concentrations of various types of loans, economic conditions or the markets in which collateral may be sold. The estimate of the allowance accrual determines the amount of provision expense and directly affects our financial results.

The estimate of the allowance for September 30, 2013 considered market and portfolio conditions during the first nine months of 2013 as well as the elevated levels of delinquencies and net charge-offs in 2012. Given the continued economic difficulties, the ultimate amount of loss could vary from that estimate. For additional discussion of the allowance, see Note 4 to the financial statements and “Asset Quality,” and “Provision and Allowance for Loan Losses.”

Goodwill and Core Deposit Intangibles

Goodwill is subject to at least an annual assessment for impairment by applying a fair value based test. The Company performs impairment testing in the fourth quarter of each year. The Company’s most recent impairment test was performed in the fourth quarter of 2012. Accounting guidance provides the option of performing preliminary assessment of qualitative factors before performing more substantial testing for impairment. The Company opted not to perform the preliminary assessment. The Company’s goodwill impairment analysis considered three valuation techniques appropriate to the measurement. The first technique uses the Company’s market capitalization as an estimate of fair value; the second technique estimates fair value using current market pricing multiples for companies comparable to the Company; while the third technique uses current market pricing multiples for change-of-control transactions involving companies comparable to the Company. Each measure indicated that the Company’s fair value exceeded its book value, validating that goodwill is not impaired.

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Certain key judgments were used in the valuation measurement. Goodwill is held by the Company’s bank subsidiary. The bank subsidiary is 100% owned by the Company, and no market capitalization is available. Because most of the Company’s assets are comprised of the subsidiary bank’s equity, the Company’s market capitalization was used to estimate the Bank’s market capitalization. Other judgments include the assumption that the companies and transactions used as comparables for the second and third technique were appropriate to the estimate of the Company’s fair value, and that the comparable multiples are appropriate indicators of fair value, and compliant with accounting guidance.

Acquired intangible assets (such as core deposit intangibles) are recognized separately from goodwill if the benefit of the asset can be sold, transferred, licensed, rented, or exchanged, and amortized over its useful life. The Company amortizes intangible assets arising from branch transactions over their useful life. Core deposit intangibles are subject to a recoverability test based on undiscounted cash flows, and to the impairment recognition and measurement provisions required for other long-lived assets held and used. The impairment testing showed that the expected cash flows of the intangible assets exceeded the carrying value.

Overview

National Bankshares, Inc. (“NBI”) is a financial holding company incorporated under the laws of Virginia. Located in southwest Virginia, NBI has two wholly-owned subsidiaries, the National Bank of Blacksburg (“NBB” or “the Bank”) and National Bankshares Financial Services, Inc. (“NBFS”). NBB, which does business as National Bank from twenty-five office locations, is a community bank. NBB is the source of nearly all of the Company’s revenue. NBFS does business as National Bankshares Investment Services and National Bankshares Insurance Services. Income from NBFS is not significant at this time, nor is it expected to be so in the near future.

NBI common stock is listed on the NASDAQ Capital Market and is traded under the symbol “NKSH.” National Bankshares, Inc. has been included in the Russell Investments Russell 3000 and Russell 2000 Indexes since June 29, 2009.

Lending

NBB is community-oriented and offers a full range of retail and commercial banking services to individuals, small and mid-sized businesses, non-profits and local governments. Loan types include commercial and agricultural, commercial real estate, construction for commercial and residential properties, residential real estate, home equity and various consumer loan products. Of primary consideration in the Bank’s decision to extend credit is the repayment ability of the borrowers and (if secured) the collateral value in relation to the principal balance. Collateral value lowers risk and may be used as a secondary source of repayment. The credit decision is supported by documentation appropriate to the type of loan, including current financial information, income verification or cash flow analysis, tax returns, credit reports, collateral information, guarantor verification, title reports, appraisals (where appropriate), and other documents. A discussion of underwriting policies and procedures specific to the major loan products follows.

Commercial and agricultural loans primarily finance equipment acquisition, expansion, working capital, and other general business purposes. Because these loans have a higher degree of risk, the Bank generally obtains collateral such as inventories, accounts receivable or equipment, and personal guarantees from the borrowing entity’s principal owners. The Bank’s policy limits lending to 60% of the appraised value for inventory and equipment and up to 70% for accounts receivables less than 90 days old. Credit decisions are based upon an assessment of the financial capacity of the applicant, including the primary borrower’s ability to repay within proposed terms, a risk assessment, financial strength of guarantors and adequacy of collateral. Credit agency reports of individual owners’ credit history supplement the analysis.

Commercial mortgages and construction loans are offered to investors, developers and builders, primarily within the Bank’s market area in southwest Virginia. These loans are secured by first mortgages on real estate. The loan amount is generally limited to 80% of the collateral value, and is individually determined based on the property type, quality, location and sponsorship. Commercial properties include retail centers, apartments, and industrial properties.

Underwriting decisions are based upon an analysis of the economic viability of the collateral and creditworthiness of the borrower. The Bank obtains appraisals from qualified certified independent appraisers to establish the value of collateral properties. The property’s projected net cash flows compared to the debt service requirement (the “debt service coverage ratio” or “DSC” ratio) is required to be 110% or greater, and is computed after deduction for a vacancy factor and property expenses, as appropriate. Borrower cash flow may be supplemented by a personal guarantee from the principal(s) of the borrower, and guarantees from other parties. The Bank requires title insurance, fire, and extended coverage casualty insurance, and flood insurance, if appropriate, in order to protect the security interest in the underlying property. In addition, the Bank may employ stress testing techniques on higher balance loans to determine repayment ability in a changing rate environment before granting loan approval.

Construction loans are underwritten against projected cash flows from rental income, business and/or personal income from an owner-occupant or the sale of the property to an end-user. Associated risks may be mitigated by requiring fixed-price construction contracts, performance and payment bonding, controlled disbursements, and pre-sale contracts or pre-lease agreements.

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The Bank offers a variety of first mortgage and junior lien loans secured by 1-4 family residences to individuals within our markets. Credit decisions are primarily based on loan-to-value (“LTV”) ratios, debt-to-income (“DTI”) ratios, liquidity, net worth, and DSC ratios. Income and financial information is obtained from personal tax returns, personal financial statements and employment documentation. A maximum LTV ratio of 80% is generally required, although higher levels are permitted with mortgage insurance. The debt-to-income ratio is limited to 40% of gross income.

Consumer real estate mortgages may have fixed interest rates for the entire term of the loan or variable interest rates subject to change yearly after the first, third, or fifth year. Variable rates are based on the weekly average yield of United States Treasury Securities and are underwritten at fully-indexed rates. We do not offer consumer real estate interest-only loans, sub-prime loans, or any variation on sub-prime lending including hybrid loans and payment option ARMs, or any product with negative amortization. Sub-prime loans involve extending credit to borrowers who exhibit characteristics indicating a significantly higher risk of default than traditional bank lending customers. Hybrid loans are loans that start out as a fixed rate mortgage but after a set number of years automatically adjust to an adjustable rate mortgage. Payment option ARMs usually have adjustable rates, for which borrowers choose their monthly payment of either a full payment, interest only, or a minimum payment which may be lower than the payment required to reduce the balance of the loan in accordance with the originally underwritten amortization.

Home equity loans are secured primarily by second mortgages on residential property. The underwriting policy for home equity loans generally permits aggregate (the total of all liens secured by the collateral property) borrowing availability up to 80% of the appraised value of the collateral. We offer variable rate home equity loans, with variable rate loans underwritten at fully-indexed rates. Decisions are primarily based on LTV ratios, DTI ratios and liquidity. We do not offer home equity loan products with reduced documentation.

Automobile loans include loans secured by new or used automobiles. Automobile loans are originated either on a direct basis or on an indirect basis through selected dealerships. We require borrowers to maintain collision insurance on automobiles securing consumer loans. Our procedures for underwriting automobile loans include an assessment of an applicant’s overall financial capacity, including credit history and the ability to meet existing obligations and payments on the proposed loan. Although an applicant’s creditworthiness is the primary consideration, the underwriting process also includes a comparison of the value of the collateral security to the proposed loan amount.

Performance Summary

The following table presents the Company’s key performance ratios for the nine months ended September 30, 2013 and the year ended December 31, 2012. The measures for September 30, 2013 are annualized, except for basic earnings per share and fully diluted earnings per share.

	September 30, 2013			December 31, 2012
Return on average assets		1.61	%		1.64	%
Return on average equity		11.70	%		12.01	%
Basic earnings per share	$	1.90		$	2.56
Fully diluted earnings per share	$	1.89		$	2.55
Net interest margin (1)		4.27	%		4.38	%
Noninterest margin (2)		1.44	%		1.36	%

⁽¹⁾ Net interest margin: Year-to-date tax-equivalent net interest income divided by year-to-date average earning assets.

⁽²⁾ Noninterest margin: Noninterest expense (excluding the provision for bad debts and income taxes) less noninterest income (excluding securities gains and losses) divided by average year-to-date assets.

The annualized return on average assets declined 3 basis points for the nine months ended September 30, 2013 as compared to the year ended December 31, 2012. The annualized return on average equity declined 31 basis points for the same period.

The annualized net interest margin was 4.27% for the nine months ended September 30, 2013, down 11 basis points from the 4.38% reported for the year ended December 31, 2012. The primary factor driving the decrease in the net interest margin was the declining yield on earning assets offset by a smaller decline in the cost to fund earning assets.

The annualized noninterest margin increased 8 basis points from the year ended December 31, 2012 primarily because of a decrease in noninterest income. Please refer to the discussion under noninterest expense for further information.

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Growth

NBI’s key growth indicators are shown in the following table.

	September 30, 2013		December 31, 2012		Percent Change
Interest-bearing deposits	$	62,776	$	96,597		(35.01	)%
Securities		358,391		352,043		1.80	%
Loans, net		582,574		583,813		(0.21	)%
Deposits		923,498		946,766		(2.46	)%
Total assets		1,077,403		1,104,361		(2.44	)%

When compared with the balances at December 31, 2012, loans decreased 0.21%, interest-bearing deposits decreased 35.01% and customer deposits decreased 2.46%, while securities increased 1.80%.

Asset Quality

Key indicators of the Company’s asset quality are presented in the following table.

	September 30, 2013			September 30, 2012			December 31, 2012
Nonperforming loans	$	11,236		$	6,130		$	13,021
Loans past due 90 days or more, and still accruing		149			114			170
Other real estate owned		973			1,894			1,435
Allowance for loan losses to loans		1.37	%		1.40	%		1.41	%
Net charge-off ratio		0.36	%		0.54	%		0.49	%
Ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned		2.06	%		1.35	%		2.44	%
Ratio of allowance for loan losses to nonperforming loans		72.00	%		134.65	%		64.12	%

The Company monitors asset quality indicators in managing credit risk and in determining the allowance and provision for loan losses. The Company’s risk analysis for collectively-evaluated loans is based on historical charge-off rates, asset quality trends represented by past due and nonaccrual ratios, diversification of loans within the portfolio, the value of underlying collateral if secured, the risk of unsecured loans, and economic trends pertinent to the Company’s loan portfolio.

The Company’s risk analysis determined an allowance for loan losses of $8,090 at September 30, 2013, a decrease from $8,349 at December 31, 2012. The provision for the nine months ended September 30, 2013 was $1,329, a decline from $2,554 for the same period in 2012. The ratio of allowance for loan losses to loans was 1.37% as of September 30, 2013, lower than 1.41% at December 31, 2012 and 1.40% at September 30, 2012.

Contributing to decreases in the level of allowance for loan losses and provision were improvements in nonperforming loans, accruing loans past due 90 days or more, and improvements in economic indicators when compared to December 31, 2012. Nonperforming loans were $13,021 at December 31, 2012 and declined to $11,236 at September 30, 2013. The ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned was 2.06% as of September 30, 2013, a decrease from 2.44% at December 31, 2012. At September 30, 2012, nonperforming loans were $6,130 and the ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned was 1.35%.

Accruing loans past due 90 days or more improved from $170 at December 31, 2012 to $149 at September 30, 2013. The annualized net charge-off ratio for the nine months ended September 30, 2013 was 0.36%, a decline from 0.49% for the year ended December 31, 2012, and 0.54% for the nine months ended September 30, 2012.

Improvements in levels of high risk loans and economic indicators also contributed to the decline in the assessment of provision and allowance for loan losses. The percentage of high risk loans to total loans, defined by the Company to be junior lien mortgages, interest only loans and loans with high loan-to-value ratios, declined from 35.36% at September 30, 2012 and from 34.33% at December 31, 2012 to 27.67% at September 30, 2013. High risk loans are provided greater allocations than other loans within the same portfolio segment. Economic factors were analyzed to determine their impact on the credit risk of the loan portfolio. Within the Company’s market area, average unemployment, bankruptcy rates, and commercial and residential vacancy rates improved from September 30, 2012, though increased slightly from December 31, 2012.

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The recent economic recession and slow recovery have contributed to levels of asset quality measures that are higher than normal for the Company, however risk analyses showed signs of improvement. When September 30, 2013 is compared to December 31, 2012, improvements in charge-off trends, nonperforming loans, accruing loans past due 90 days or more and certain economic factors that affect real estate construction, consumer real estate and commercial real estate resulted in a lower allocation. The Company continues to monitor risk levels within the loan portfolio. Please refer to Note 4: Allowance for Loan Losses, Nonperforming Assets and Impaired Loans for further information on collectively-evaluated loans, individually-evaluated impaired loans and the unallocated portion of the allowance for loan losses.

Other real estate owned decreased $462 from December 31, 2012 and $921 from September 30, 2012. As of September 30, 2013, total properties approximating $3,784 are in various stages of foreclosure and may impact other real estate owned in future quarters. It is not possible to accurately predict the future total of other real estate owned because property sold at foreclosure may be acquired by third parties and NBB’s other real estate owned properties are regularly marketed and sold.

Modifications and Troubled Debt Restructurings (“TDRs”)

In the ordinary course of business, the Company modifies loan terms on a case-by-case basis, including both consumer and commercial loans, for a variety of reasons. Modifications to consumer loans generally involve short-term deferrals to accommodate specific, temporary circumstances. The Company may grant extensions to borrowers who have demonstrated a willingness and ability to repay their loan but who are dealing with the consequences of a specific unforeseen temporary hardship.

An extension defers monthly payments and requires a balloon payment at the original contractual maturity. Where the temporary event is not expected to impact a borrower’s ability to repay the debt, and where the Company expects to collect all amounts due including interest accrued at the contractual interest rate for the period of delay at contractual maturity, the modification is not designated a TDR.

Modifications to commercial loans may include, but are not limited to, changes in interest rate, maturity, amortization and financial covenants. In the original underwriting, loan terms are established that represent the then-current and projected financial condition of the borrower. If the modified terms are consistent with competitive market conditions and are representative of terms the borrower could otherwise obtain in the open market, the modified loan is not categorized as a TDR.

The Company began coding modification on the core processing system during the second quarter of 2013. The Company uses the coding to assist in identifying troubled debt restructurings. The majority of modifications completed since formal coding was implemented were granted for competitive reasons and did not constitute troubled debt restructurings. A description of modifications that did not result in troubled debt restructurings follows:

Modifications To Borrowers Not Experiencing Financial Difficulty	Number of Loans Modified		Total Amount Modified
Rate reductions for competitive purposes		26	$	11,648
Payment extensions for less than 3 months		138		5,908
Maturity date extensions of more than 3 months and up to 6 months		20		3,375
Maturity date extensions of more than 6 months and up to 12 months		113		2,939
Maturity date extensions of more than 12 months		12		671
Advances on non-revolving loans or recapitalization		4		845
Change in amortization term or method		23		4,496
Renewal of expired Home Equity Line of Credit loans to additional 10 years		19		284
Renewal of single-payment notes		73		1,622
Total modifications that do not constitute TDRs		428	$	31,788

Modifications in which the borrower is experiencing financial difficulty and in which the Company makes a concession to the original contractual loan terms are designated troubled debt restructurings.

Modifications of loan terms to borrowers experiencing financial difficulty are made in an attempt to protect as much of the Company’s investment in the loan as possible. The determination of whether a modification should be accounted for as a TDR requires significant judgment after consideration of all facts and circumstances surrounding the transaction.

The Company recognizes that the current economy, elevated levels of unemployment and depressed real estate values have resulted in financial difficulties for some customers. The Company has restructured loan terms for certain qualified financially distressed borrowers who have agreed to work in good faith and have demonstrated the ability to make the restructured payments in order to avoid a foreclosure. All TDR loans are individually evaluated for impairment for purposes of determining the allowance for loan losses. TDR loans with an impairment loss or that do not demonstrate current payments for at least six months are maintained on nonaccrual until the borrower demonstrates sustained repayment history under the restructured terms and continued repayment is not in doubt. Otherwise, interest income is recognized using a cost recovery method.

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The Company’s TDRs were $7,587 at September 30, 2013, an increase from $4,156 at December 31, 2012. Accruing TDR loans amounted to $6,545 at September 30, 2013 and $2,005 at December 31, 2012. TDRs with a current payment history of at least 6 months may accrue interest. Accruing restructured loans increased with the addition of six loans totaling $4,576 restructured in 2013 that maintained sufficient current status prior to restructuring. Two of the loans restructured during the nine months ended September 30, 2013, totaling $354, were reported as nonaccrual TDR’s in prior quarters. The loans demonstrated current repayment history for the required period and were granted additional modifications to change payments to amortizing. Because of the satisfactory repayment history the loans were placed in accruing status.

	TDR Status as of September 30, 2013
			Accruing
	Total TDR Loans		Current		30-89 Days Past Due		90+ Days Past Due		Nonaccrual
Real estate construction	$	123	$	---	$	---	$	---	$	123
Consumer real estate		1,152		898		---		---		254
Commercial real estate		6,243		5,578		---		---		665
Commercial non real estate		69		69		---		---		---
Public sector and IDA		---		---		---		---		---
Consumer non real estate		---		---		---		---		---
Total TDR Loans	$	7,587	$	6,545	$	---	$	---	$	1,042

	TDR Status as of December 31, 2012
			Accruing
	Total TDR Loans		Current		30-89 Days Past Due		90+ Days Past Due		Nonaccrual
Real estate construction	$	123	$	---	$	---	$	---	$	123
Consumer real estate		487		80		---		---		407
Commercial real estate		3,028		1,886		---		---		1,142
Commercial non real estate		518		39		---		---		479
Public sector and IDA		---		---		---		---		---
Consumer non real estate		---		---		---		---		---
Total TDR Loans	$	4,156	$	2,005	$	---	$	---	$	2,151

Restructuring generally results in loans with either lower payments or an extended maturity beyond that originally required, and are expected to have a lower risk of loss due to nonperformance than loans classified as nonperforming. During the first three quarters of 2013, the Company modified six loans totaling $4,576 in troubled debt restructurings, and during the first three quarters of 2012, the Company modified ten loans totaling $1,844. Please refer to Note 4 for information on troubled debt restructurings.

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Net Interest Income

The net interest income analysis for the nine months ended September 30, 2013 and 2012 follows:

	September 30, 2013							September 30, 2012
	Average Balance		Interest		Average Yield/ Rate			Average Balance		Interest		Average Yield/ Rate
Interest-earning assets:
Loans, net (1)(2)(3)(4)	$	585,230	$	25,067		5.73	%	$	588,844	$	26,820		6.08	%
Taxable securities (5)		197,752		5,007		3.39	%		163,070		4,991		4.09	%
Nontaxable securities (1)(5)(6)		173,442		7,504		5.78	%		164,432		7,431		6.04	%
Interest-bearing deposits		79,795		161		0.27	%		96,410		187		0.26	%
Total interest-earning assets	$	1,036,219	$	37,739		4.87	%	$	1,012,756	$	39,429		5.20	%
Interest-bearing liabilities:
Interest-bearing demand deposits	$	454,943	$	2,856		0.84	%	$	415,839	$	3,144		1.01	%
Savings deposits		72,226		26		0.05	%		64,323		28		0.06	%
Time deposits		264,771		1,733		0.88	%		302,887		2,899		1.28	%
Total interest-bearing liabilities	$	791,940	$	4,615		0.78	%	$	783,049	$	6,071		1.04	%
Net interest income and interest rate spread			$	33,124		4.09	%			$	33,358		4.16	%
Net yield on average interest-earning assets						4.27	%						4.40	%

⁽¹⁾ Interest on nontaxable loans and securities is computed on a fully taxable equivalent basis using a Federal income tax rate of 35% in the nine-month periods presented.

⁽²⁾ Included in interest income are loan fees of $698 and $642 for the nine months ended September 30, 2013 and 2012, respectively.

⁽³⁾ Nonaccrual loans are included in average balances for yield computations.

⁽⁴⁾ Includes mortgage loans held for sale.

⁽⁵⁾ Daily averages are shown at amortized cost.

⁽⁶⁾ Includes restricted stock.

The net interest margin for the nine months ended September 30, 2013 decreased 13 basis points from the nine months ended September 30, 2012. The decrease in interest rate spread was driven by a decline in the yield on earning assets of 33 basis points offset by a decline in the cost of interest-bearing liabilities of 26 basis points. Both loans and securities experienced a decline in yields. The 35 basis point decline in the yield on loans stemmed from contractual repricing terms and the renegotiation of loan interest rates in response to competition. The yield on taxable securities was 70 basis points lower for the nine months ended September 30, 2013, when compared with the same period in 2012, while the yield on nontaxable securities declined 26 basis points over the same period. The market yield for securities of a comparable term has declined over the past year, causing matured and called bonds to be replaced with lower yielding investments. The decline in the cost of interest-bearing liabilities came primarily from a 40 basis point reduction in the cost of time deposits when the nine month periods ended September 30, 2013 and September 30, 2012 are compared.

The Company’s yield on earning assets and cost of funds are largely dependent on the interest rate environment. In the recent past, historically low interest rates caused funding costs to decline at a faster pace than the yield on earning assets. The decline in deposit pricing has begun to slow while competitive and market forces continue to pressure the yield on earning assets. The Company’s cost of funding is more sensitive to interest rate changes than is the yield on earning assets.

Provision and Allowance for Loan Losses

The provision for loan losses for the nine month period ended September 30, 2013 was $1,329, compared with $2,554 for the nine months of 2012. The provision for loan losses is the result of a detailed analysis performed to estimate an appropriate and adequate allowance for loan losses. The ratio of the allowance for loan losses to total loans at September 30, 2013 was 1.37%, which compares to 1.41% at December 31, 2012. The net charge-off ratio was 0.36% at September 30, 2013 and 0.49% at December 31, 2012. The change in the provision for loan losses was largely attributable to improvements in credit quality trends and lower net charge-offs during the third quarter of 2013. See “Asset Quality” for additional information.

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Noninterest Income

	Nine Months Ended
	September 30, 2013		September 30, 2012		Percent Change
Service charges on deposits	$	1,922	$	1,956		(1.74	)%
Other service charges and fees		139		130		6.92	%
Credit card fees		2,427		2,441		(0.57	)%
Trust fees		867		1,037		(16.39	)%
BOLI income		546		605		(9.75	)%
Other income		502		341		47.21	%
Realized securities gains		2		33		(93.94	)%

Service charges on deposit accounts for the nine months ended September 30, 2013 declined $34 or 1.74% when compared with the same period in 2012.

Other service charges and fees includes charges for official checks, income from the sale of checks to customers, safe deposit box rent, fees for letters of credit and the income earned from commissions on the sale of credit life, accident and health insurance. Other service charges & fees for the nine months ended September 30, 2013 increased $9 from the same period in 2012, due to minor and routine fluctuations.

Credit card fees for the nine months of 2013 decreased $14, or 0.57%, when compared with the same period last year. The decrease was due to a lower volume of merchant transactions and credit card fees.

Income from trust fees decreased 16.39% or $170 from the $1,037 earned in the same period of 2012. Trust income varies depending on the total assets held in trust accounts, the type of accounts under management and financial market conditions. Estate fees contributed to the amount recognized in 2012.

BOLI income decreased $59 from September 30, 2012 to September 30, 2013.

Other income includes net gains from the sales of fixed assets, revenue from investment and insurance sales and other smaller miscellaneous components. Other income for the nine months ended September 30, 2013 increased $161 when compared with the nine months ended September 30, 2012. These areas fluctuate with market conditions and because of competitive factors.

Net realized securities gains for the nine months ended September 30, 2013 were $2, as compared with $33 for the same period in 2012. Net realized securities gains and losses are market driven and have resulted from calls and sales of securities.

Noninterest Expense

	Nine Months Ended
	September 30, 2013		September 30, 2012		Percent Change
Salaries and employee benefits	$	8,963	$	9,014		(0.57	)%
Occupancy, furniture and fixtures		1,230		1,181		4.15	%
Data processing and ATM		1,288		1,206		6.80	%
FDIC assessment		408		343		18.95	%
Credit card processing		1,854		1,817		2.04	%
Intangibles amortization		809		812		(0.37	)%
Net costs of other real estate owned		192		209		(8.13	)%
Franchise taxes		803		646		24.30	%
Other operating expenses		2,637		2,302		14.55	%

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Total noninterest expense increased $654 or 3.73% when the nine months ended September 30, 2013 are compared to the same period of 2012. Most of the increase was contributed by increases in franchise tax expense and other operating expense. Bank franchise tax expense for the nine months ended September 30, 2013 increased $157 or 24.30% over the same period in 2012. The tax is calculated based on equity. Bank franchise tax expense in 2012 benefitted from refunds of prior years’ tax.

The category of other operating expenses includes noninterest expense items such as professional services, stationery and supplies, telephone costs, postage, charitable donations and other expenses. Other operating expenses for the nine months ended September 30, 2013 increased $335 or 14.55% from same period in 2012. Contributing to the increase were higher marketing and business development expenses.

FDIC assessment expense for the nine months ended September 30, 2013 increased $65 or 18.95% over the same period for 2012. The calculation to determine the FDIC assessment uses assets as the assessment base.

Occupancy, furniture and fixtures expense increased 4.15%, from $1,181 for the nine months ended September 30, 2012 to $1,230 as of September 30, 2013.

Salary and benefits expense was $8,963 for the nine months ended September 30, 2013, similar to the $9,014 for the nine months ended September 30, 2012.

Credit card processing expense increased by 2.04% from the total for the nine months ended September 30, 2012. This expense is driven by volume and other factors and is subject to a degree of variability.

Net costs of other real estate owned decreased $17 from the nine months ended September 30, 2012 to $192 for the nine months ended September 30, 2013. This expense category includes maintenance costs as well as valuation write-downs and gains and losses on the sale of properties. The expense varies with the number of properties, the maintenance required and changes in the real estate market.

Data processing and ATM expense for the nine months ended September 30, 2013 increased $82 when compared with the expense for the nine months ended September 30, 2012, due to expenses related to system updates.

The expense for intangibles amortization is related to acquisitions. There were no acquisitions in the past year, with minimal change in expense between the nine month periods ended September 30, 2013 and September 30, 2012.

Balance Sheet

Year-to-date daily averages for the major balance sheet categories are as follows:

Assets	September 30, 2013		December 31, 2012		Percent Change
Interest-bearing deposits	$	79,795	$	94,724		(15.76	)%
Securities available for sale		200,770		188,167		6.70	%
Securities held to maturity		165,014		149,566		10.33	%
Loans, net		575,741		579,817		(0.70	)%
Total assets		1,090,630		1,080,351		0.95	%
Liabilities and stockholders’ equity
Noninterest-bearing demand deposits	$	140,680	$	141,269		(0.42	)%
Interest-bearing demand deposits		454,943		420,947		8.08	%
Savings deposits		72,226		64,973		11.16	%
Time deposits		264,771		298,797		(11.39	)%
Stockholders’ equity		150,425		147,812		1.77	%

Securities

Management regularly monitors the quality of the securities portfolio, and management closely follows the uncertainty in the economy and the volatility of financial markets.  The value of individual securities will be written down if the decline in fair value is considered to be other than temporary based upon the totality of circumstances. See Note 5 Securities for additional information.

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Loans

	September 30, 2013			December 31, 2012			Percent Change
Real estate construction loans	$	55,022		$	50,313			9.36	%
Consumer real estate loans		146,447			143,262			2.22	%
Commercial real estate loans		301,890			304,308			(0.79	)%
Commercial non real estate loans		31,329			37,349			(16.12	)%
Public sector and IDA		28,332			26,169			8.27	%
Consumer non real estate		28,532			31,714			(10.03	)%
Less: unearned income		(888	)		(953	)		(6.82	)%
Loans, net of unearned income	$	590,664		$	592,162			(0.25	)%

The Company’s loans net of unearned income decreased by $1,498 or 0.25%, from $592,162 at December 31, 2012 to $590,664 at September 30, 2013. Growth in real estate construction, consumer real estate and public sector loans was offset by declines in other categories. Real estate construction loans grew by $4,709 and public sector loans grew by $2,163 from December 31, 2012 to September 30, 2013.

The 10.03% decline in consumer non real estate loans continues a trend that has been evident over the past several years. The availability of low cost dealer auto loans and other products, such as home equity lines of credit, make traditional consumer installment loans less attractive to customers.

Commercial real estate loans declined $2,418 from December 31, 2012 while commercial non real estate loans decreased by $6,020 or 16.12% from December 31, 2012. The declines are due to market, economic and competitive forces and are not the result of changes in lending policies.

The Company does not now, nor has it ever, offered certain types of higher-risk loans such as subprime loans, option ARM products, reverse mortgages or loans with initial teaser rates.

Deposits

	September 30, 2013		December 31, 2012		Percent Change
Noninterest-bearing demand deposits	$	147,928	$	144,252		2.55	%
Interest-bearing demand deposits		453,044		455,713		(0.59	)%
Saving deposits		73,952		69,063		7.08	%
Time deposits		248,574		277,738		(10.50	)%
Total deposits	$	923,498	$	946,766		(2.46	)%

Total deposits decreased $23,268, or 2.46% from $946,766 at December 31, 2012 to $923,498 at September 30, 2013. Increases in noninterest bearing demand deposits and savings deposits totaled $8,565, or 4.02%. These increases were offset by a decline in interest bearing demand deposits and time deposits of $31,833, or 4.34%, when September 30, 2013 is compared with December 31, 2012. Historically low rates have caused a migration from time deposits to other types of deposits. As longer-term certificates of deposit mature, customers are unwilling to commit their funds for extended periods at low interest rates. Time deposits do not include any brokered deposits.

Liquidity

Liquidity measures the Company’s ability to meet its financial commitments at a reasonable cost. Demands on the Company’s liquidity include funding additional loan demand and accepting withdrawals of existing deposits. The Company has diverse sources of liquidity, including customer and purchased deposits, customer repayments of loan principal and interest, sales, calls and maturities of securities, Federal Reserve discount window borrowing, short-term borrowing, and Federal Home Loan Bank (“FHLB”) advances. At September 30, 2013, the bank did not have purchased deposits, discount window borrowings, short-term borrowings, or FHLB advances. To assure that short-term borrowing is readily available, the Company tests accessibility annually. 

Liquidity from securities is restricted by accounting and business considerations. The securities portfolio is segregated into available-for-sale and held-to-maturity. The Company considers only securities designated available-for-sale for typical liquidity needs. Further, portions of the securities portfolio are pledged to meet state requirements for public funds deposits. Discount window borrowings also require pledged securities. Increased or decreased liquidity from public funds deposits or discount window borrowings results in increased or decreased liquidity from pledging requirements. The Company monitors public funds pledging requirements and the amount of unpledged available-for-sale securities that are accessible for liquidity needs.

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Regulatory capital levels determine the Company’s ability to utilize purchased deposits and the Federal Reserve discount window for liquidity needs. At September 30, 2013, the Company is considered well capitalized and does not have any restrictions on purchased deposits or the Federal Reserve discount window.

The Company monitors factors that may increase its liquidity needs. Some of these factors include deposit trends, large depositor activity, maturing deposit promotions, interest rate sensitivity, maturity and repricing timing gaps between assets and liabilities, the level of unfunded loan commitments and loan growth. At September 30, 2013, the Company’s liquidity is sufficient to meet projected trends in these areas.

To monitor and estimate liquidity levels, the Company performs stress testing under varying assumptions on credit sensitive liabilities. It also tests the sources and amounts of balance sheet and external liquidity available to replace outflows. The Company’s Contingency Funding Plan sets forth avenues for rectifying liquidity shortfalls. At September 30, 2013, the analysis indicated adequate liquidity under the tested scenarios.

The Company utilizes several other strategies to maintain sufficient liquidity. Loan and deposit growth are managed to keep the loan to deposit ratio within the Company’s own policy range of 65% to 75%. At September 30, 2013, the loan to deposit ratio was 63.96%, slightly below the Company’s internal target. The investment strategy takes into consideration the term of the investment, and securities in the available for sale portfolio are laddered to account for projected funding needs.

Capital Resources

Total stockholders’ equity at September 30, 2013 was $146,294, a decrease of $3,815, or 2.54%, from the $150,109 at December 31, 2012. The Tier I and Tier II risk-based capital ratios at September 30, 2013 were 22.70% and 23.89%, respectively. Capital levels remain significantly above the regulatory minimum capital requirements of 4.0% for Tier I and 8.0% for Tier II capital.

Off-Balance Sheet Arrangements

In the normal course of business, NBB extends lines of credit and letters of credit to its customers. Depending on their needs, customers may draw upon lines of credit at any time in any amount up to a pre-approved limit. Standby letters of credit are issued for two purposes. Financial letters of credit guarantee payments to facilitate customer purchases. Performance letters of credit guarantee payment if the customer fails to complete a specific obligation.

Historically, the full approved amount of letters and lines of credit has not been drawn at any one time. The Company has developed plans to meet a sudden and substantial funding demand. These plans include accessing a line of credit with a correspondent bank, borrowing from the FHLB, selling available for sale investments or loans and raising additional deposits.

The Company sells mortgages on the secondary market for which there are recourse agreements should the borrower default. Mortgages must meet strict underwriting and documentation requirements for the sale to be completed. The Company has determined that its risk in this area is not significant because of a low volume of secondary market mortgage loans and high underwriting standards. The Company estimates a potential loss reserve for recourse provisions that is not material as of September 30, 2013. To date, no recourse provisions have been invoked. If funds were needed, the Company would access the same sources as noted above for funding lines and letters of credit.

There were no material changes in off-balance sheet arrangements during the nine months ended September 30, 2013, except for normal seasonal fluctuations in the total of mortgage loan commitments.

Contractual Obligations

The Company had no capital lease or purchase obligations and no long-term debt at September 30, 2013. Operating lease obligations, which are for buildings used in the Company’s day-to-day operations, were not material at the end of the nine months of 2013 and have not changed materially from those which were disclosed in the Company’s 2012 Form 10-K/A.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

The Company considers interest rate risk to be a significant market risk and has systems in place to measure the exposure of net interest income to adverse movement in interest rates. Interest rate shock analyses provide management with an indication of potential economic loss due to future rate changes. There have not been any changes which would significantly alter the results disclosed as of December 31, 2012 in the Company’s 2012 Form 10-K/A.

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Item 4.    Controls and Procedures

The Company’s management evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective as of September 30, 2013 to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There were changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the nine months ended September 30, 2013 that materially affected, or were reasonably likely to materially affect, the Corporation’s internal control over financial reporting. Additional information with respect to this issue is included in the discussion below.

Changes in Internal Control Over Financial Reporting

In March 2013, following the examination of the Company’s subsidiary, The National Bank of Blacksburg, by its primary federal regulator, the Company identified a material weakness in Company’s internal control over classifying certain loans as impaired and nonaccrual within the appropriate regulatory timeframe. After management discovered the material weakness in its internal control over financial reporting described above, management implemented additional internal control procedures to ensure that more thorough review procedures are in place over the determination of classifying certain loans as impaired and nonaccrual. In addition, the Company changed the workflow of the procedures and segregated duties among the lending department, credit administration department and accounting department to properly identify and disclose impaired loans. Also, following the examination of the Bank, and as a means of corrective action, the Company’s management, under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, established a task force of Company and Bank employees who reviewed all commercial relationships over $500,000 in the Bank’s portfolio to ensure compliance with Bank and regulatory policies relating to nonaccrual classification. This task force determined that the loans constituting the remaining portfolio of commercial relationships over $500,000 were properly classified.

These changes to the Company’s internal control over financial reporting procedures were implemented and deemed effective by management as of September 30, 2013.

Because of the inherent limitations in all control systems, the Company believes that no system of controls, no matter how well designed and operated, can provide absolute assurance that all control issues have been detected.

Part II

Other Information

Item 1.    Legal Proceedings

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

Item 1A. Risk Factors

Please refer to the “Risk Factors” previously disclosed in Item 1A of our 2012 Annual Report on Form 10-K/A and the factors discussed under “Cautionary Statement Regarding Forward-Looking Statements” in Part I. Item 2 of this Form 10-Q.

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

None.

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Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

Not applicable.          

Item 5.    Other Information

Subsequent Events

From September 30, 2013, the balance sheet date of this Form 10-Q, through the date of filing the Form 10-Q with the Securities and Exchange Commission, there have been no material subsequent events that 1) provide additional evidence about conditions that existed on the date of the balance sheet, or 2) provide evidence about conditions that did not exist at the date of the balance sheet, but arose after the balance sheet date.

Item 6.    Exhibits

See Index of Exhibits.     

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.

	NATIONAL BANKSHARES, INC.
Date: November 8, 2013		/s/ James G. Rakes
		James G. Rakes Chairman, President and Chief Executive Officer (Principal Executive Officer)
Date: November 8, 2013		/s/ David K. Skeens
		David K. Skeens Treasurer and Chief Financial Officer (Principal Financial Officer) (Principal Accounting Officer)

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Index of Exhibits

Exhibit No.	Description	Page No. in Sequential System
3(i)	Amended and Restated Articles of Incorporation of National Bankshares, Inc.	(incorporated herein by reference to Exhibit 3.1 of the Form 8K for filed on March 16, 2006)
3(ii)	Amended By-laws of National Bankshares, Inc.	(incorporated herein by reference to Exhibit 3(ii) of the Annual Report on Form 10K for fiscal year ended December 31, 2007)
4(i)	Specimen copy of certificate for National Bankshares, Inc. common stock	(incorporated herein by reference to Exhibit 4(a) of the Annual Report on Form 10K for fiscal year ended December 31, 1993)
*10(iii)(A)	National Bankshares, Inc. 1999 Stock Option Plan	(incorporated herein by reference to Exhibit 4.3 of the Form S-8, filed as Registration No. 333-79979 with the Commission on June 4, 1999)
*10(iii)(A)	Executive Employment Agreement dated December 17, 2008, between National Bankshares, Inc. and James G. Rakes	(incorporated herein by reference to Exhibit 10(iii)(A) of the Annual Report on Form 10K for the fiscal year ended December 31, 2008)
*10(iii)(A)	Executive Employment Agreement dated December 17, 2008, between National Bankshares, Inc. and F. Brad Denardo	(incorporated herein by reference to Exhibit 10(iii)(A) of the Annual Report on Form 10K for the fiscal year ended December 31, 2008)
*10(iii)(A)	Salary Continuation Agreement dated February 8, 2006, between The National Bank of Blacksburg and James G. Rakes	(incorporated herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on February 8, 2006)
*10(iii)(A)	Salary Continuation Agreement dated February 8, 2006, between The National Bank of Blacksburg and F. Brad Denardo	(incorporated herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on February 8, 2006)
*10(iii)(A)	Salary Continuation Agreement dated February 8, 2006, between The National Bank of Blacksburg and David K. Skeens	(incorporated herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on January 25, 2012)
*10(iii)(A)	First Amendment, dated December 19, 2007, to The National Bank of Blacksburg Salary Continuation Agreement for James G. Rakes	(incorporated herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on December 19, 2007)
*10(iii)(A)	First Amendment, dated December 19, 2007, to The National Bank of Blacksburg Salary Continuation Agreement for F. Brad Denardo	(incorporated herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on December 19, 2007)
*10(iii)(A)	First Amendment, dated December 19, 2007, to The National Bank of Blacksburg Salary Continuation Agreement for David K. Skeens	(incorporated herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on January 25, 2012)
*10(viii)(A)	Second Amendment, dated June 12, 2008, to The National Bank of Blacksburg Salary Continuation Agreement for F. Brad Denardo	(incorporated herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on June 12, 2008)

52

*10(viii)(A)	Second Amendment, dated December 17, 2008, to The National Bank of Blacksburg Salary Continuation Agreement for James G. Rakes	(incorporated herein by reference to Exhibit 10(iii)(A) of the Annual Report on Form 10K for the fiscal year ended December 31, 2008)
*10(iii)(A)	Second Amendment, dated June 12, 2008, to The National Bank of Blacksburg Salary Continuation Agreement for David K. Skeens	(incorporated herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on January 25, 2012)
*10(viii)(A)	Third Amendment, dated December 17, 2008, to The National Bank of Blacksburg Salary Continuation Agreement for F. Brad Denardo	(incorporated herein by reference to Exhibit 10(iii)(A) of the Annual Report on Form 10K for the fiscal year ended December 31, 2008)
*10(iii)(A)	Third Amendment, dated January 20, 2012, to The National Bank of Blacksburg Salary Continuation Agreement for David K. Skeens	(incorporated herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on January 25, 2012)
*10(iii)(A)	Salary Continuation Agreement dated January 20, 2012 between The National Bank of Blacksburg and Bryson J. Hunter	(incorporated herein by reference to Exhibit 10(iii)(A) of the Form 8K filed on January 25, 2012)
31(i)	Section 906 Certification of Chief Executive Officer	(included herewith)
31(ii)	Section 906 Certification of Chief Financial Officer	(included herewith)
32(i)	18 U.S.C. Section 1350 Certification of Chief Executive Officer	(included herewith)
32(ii)	18 U.S.C. Section 1350 Certification of Chief Financial Officer	(included herewith)
101	Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2013 is formatted in XBRL interactive data files: (i) Consolidated Statements of Income for the nine months ended September 30, 2013, and 2012; (ii) Consolidated Balance Sheets at September 30, 2013 and December 31, 2012; (iii) Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2013 and 2012; (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012; and (v) Notes to Financial Statements

*     Indicates a management contract or compensatory plan.          

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EX-31

Exhibit 31(i)

CERTIFICATIONS

I, James G. Rakes, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of National Bankshares, Inc.;

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

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

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

(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) 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 8, 2013

/s/ James G. Rakes

James G. Rakes
Chairman, President and Chief Executive Officer
(Principal Executive Officer)

 54

 

EX-31

Exhibit 31(ii)

CERTIFICATIONS

I, David K. Skeens, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of National Bankshares, Inc.;

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

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

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

(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) 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 8, 2013

/s/David K. Skeens

David K. Skeens
Treasurer and

Chief Financial Officer

(Principal Financial Officer)

 55

 

EX-32

Exhibit 32 (i)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Form 10-Q of National Bankshares, Inc. for the quarter ended September 30, 2013, I, James G. Rakes, Chairman, President and Chief Executive Officer (Principal Executive Officer) of National Bankshares, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

(1)     such Form 10-Q for the quarter ended September 30, 2013, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)      the information contained in such Form 10-Q for the quarter ended September 30, 2013, fairly presents, in all material respects, the financial condition and results of operations of National Bankshares, Inc.

/s/ James G. Rakes

James G. Rakes
Chairman, President and Chief Executive Officer
(Principal Executive Officer)

November 8, 2013

 56

 

EX-32

Exhibit 32 (ii)

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Form 10-Q of National Bankshares, Inc. for the quarter ended September 30, 2013, I, David K. Skeens, Treasurer and Chief Financial Officer (Principal Financial Officer) of National Bankshares, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

(1)     such Form 10-Q for the quarter ended September 30, 2013, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)     the information contained in such Form 10-Q for the quarter ended September 30, 2013, fairly presents, in all material respects, the financial condition and results of operations of National Bankshares, Inc.

/s/David K. Skeens

David K. Skeens
Treasurer and

Chief Financial Officer

(Principal Financial Officer)

November 8, 2013

 57

 

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Note 7 - Defined Benefit Plan

9 Months Ended

Sep. 30, 2013

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note 7: Defined Benefit Plan

Components of Net Periodic Benefit Cost

	Pension Benefits
	Nine Months Ended September 30,
	2013			2012
Service cost	$	447		$	351
Interest cost		462			555
Expected return on plan assets		(738	)		(807	)
Amortization of prior service cost		(75	)		(75	)
Recognized net actuarial loss		399			381
Net Periodic Benefit Cost	$	495		$	405

2013 Plan Year Employer Contribution

Without considering the prefunding balance, the Company’s minimum required contribution to the National Bankshares, Inc. Retirement Income Plan (the “Plan”) is $815. Considering the prefunding balance, the 2013 minimum required contribution is $0. The Company elected to contribute $519 to the Plan during the nine months ended September 30, 2013.

XML

Note 8 - Fair Value Measurements (Details) - Estimated Fair Values and Related Carrying Amounts of Financial Instruments (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Fair Value, Inputs, Level 1 [Member]
Financial Assets:
Cash and due from banks	$ 13,806	$ 14,783
Interest-bearing deposits	62,776	96,597
Accrued interest receivable	6,044	6,247
Bank-owned life insurance	21,020	20,523
Financial Liabilities:
Deposits	674,924	669,028
Accrued interest payable	97	139
Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Securities	352,901	360,661
Restricted securities	1,414	1,689
Mortgage loans held for sale	617	2,796
Fair Value, Inputs, Level 3 [Member]
Financial Assets:
Loans, net	590,117	570,471
Financial Liabilities:
Deposits	250,304	272,820
Reported Value Measurement [Member]
Financial Assets:
Cash and due from banks	13,806	14,783
Interest-bearing deposits	62,776	96,597
Securities	356,977	350,354
Restricted securities	1,414	1,689
Mortgage loans held for sale	617	2,796
Loans, net	582,574	583,813
Accrued interest receivable	6,044	6,247
Bank-owned life insurance	21,020	20,523
Financial Liabilities:
Deposits	923,498	946,766
Accrued interest payable	97	139
Estimate of Fair Value Measurement [Member]
Financial Assets:
Cash and due from banks	13,806	14,783
Interest-bearing deposits	62,776	96,597
Securities	352,901	360,661
Restricted securities	1,414	1,689
Mortgage loans held for sale	617	2,796
Loans, net	590,117	570,471
Accrued interest receivable	6,044	6,247
Bank-owned life insurance	21,020	20,523
Financial Liabilities:
Deposits	925,228	941,848
Accrued interest payable	$ 97	$ 139

XML

Consolidated Statements of Income (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Interest Income
Interest and fees on loans	$ 8,196	$ 8,923	$ 24,707	$ 26,554
Interest on interest-bearing deposits	45	60	161	187
Interest on securities – taxable	1,743	1,620	5,007	4,991
Interest on securities – nontaxable	1,581	1,634	4,847	4,801
Total interest income	11,565	12,237	34,722	36,533
Interest Expense
Interest on time deposits of $100 or more	196	355	694	1,171
Interest on other deposits	1,192	1,581	3,921	4,900
Total interest expense	1,388	1,936	4,615	6,071
Net interest income	10,177	10,301	30,107	30,462
Provision for loan losses	303	778	1,329	2,554
Net interest income after provision for loan losses	9,874	9,523	28,778	27,908
Noninterest Income
Service charges on deposit accounts	709	674	1,922	1,956
Other service charges and fees	37	40	139	130
Credit card fees	834	807	2,427	2,441
Trust income	267	271	867	1,037
BOLI income	182	205	546	605
Other income	162	130	502	341
Realized securities gains (losses), net (includes accumulated other comprehensive income reclassification adjustments for unrealized net losses in available-for-sale securities of ($88) and ($18) for three-month periods ended September 30, 2013 and 2012, and ($4) and $20 for nine-month periods ended September 30, 2013 and 2012, respectively )	(82)	(19)	2	33
Total noninterest income	2,109	2,108	6,405	6,543
Noninterest Expense
Salaries and employee benefits	3,031	3,104	8,963	9,014
Occupancy and furniture and fixtures	394	387	1,230	1,181
Data processing and ATM	477	390	1,288	1,206
FDIC assessment	136	133	408	343
Credit card processing	656	607	1,854	1,817
Intangible assets amortization	269	270	809	812
Net costs of other real estate owned	52	58	192	209
Franchise taxes	280	258	803	646
Other operating expenses	828	881	2,637	2,302
Total noninterest expense	6,123	6,088	18,184	17,530
Income before income taxes	5,860	5,543	16,999	16,921
Income tax expense (includes income tax expense (benefit) from reclassification items of ($31) and ($6) for three-month periods ended September 30, 2013 and 2012, and ($1) and $7 for nine-month periods ended September 30, 2013 and 2012, respectively)	1,343	1,250	3,831	3,859
Net Income	$ 4,517	$ 4,293	$ 13,168	$ 13,062
Basic net income per common share (in Dollars per share)	$ 0.65	$ 0.62	$ 1.90	$ 1.88
Fully diluted net income per common share (in Dollars per share)	$ 0.65	$ 0.62	$ 1.89	$ 1.88
Weighted average number of common shares outstanding – basic (in Shares)	6,947,974	6,941,757	6,947,974	6,940,573
Weighted average number of common shares outstanding – diluted (in Shares)	6,972,769	6,962,852	6,970,063	6,958,316
Dividends declared per common share (in Dollars per share)			$ 0.54	$ 0.53

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash Flows from Operating Activities
Net income	$ 13,168	$ 13,062
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	1,329	2,554
Depreciation of bank premises and equipment	546	571
Amortization of intangibles	809	812
Amortization of premiums and accretion of discounts, net	130	168
Gains on disposal of fixed assets		(2)
(Gains) losses on sales and calls of securities available for sale, net	4	(20)
Gains on calls of securities held to maturity, net	(6)	(14)
Losses and write-downs on other real estate owned, net	92	29
Increase in cash value of bank-owned life insurance	(497)	(534)
Net change in:
Mortgage loans held for sale	2,179	(392)
Accrued interest receivable	203	13
Other assets	921	269
Accrued interest payable	(42)	(28)
Other liabilities	167	(251)
Net cash provided by operating activities	19,003	16,237
Cash Flows from Investing Activities
Net change interest-bearing deposits	33,821	30,961
Proceeds from calls, principal payments, sales and maturities of securities available for sale	61,135	119,493
Proceeds from calls, principal payments and maturities of securities held to maturity	9,176	24,255
Purchases of securities available for sale	(83,993)	(143,284)
Purchases of securities held to maturity	(13,484)	(42,063)
Net change in restricted stock	275	(22)
Purchases of loan participations	(900)	(2,000)
Collections of loan participations	127	4,656
Loan originations and principal collections, net	113	(9,699)
Proceeds from disposal of other real estate owned	848	1,174
Recoveries on loans charged off	92	76
Additions to bank premises and equipment	(170)	(667)
Net cash provided by (used in) investing activities	7,040	(17,120)
Cash Flows from Financing Activities
Net change in time deposits	(29,164)	(19,092)
Net change in other deposits	5,896	24,142
Cash dividends paid	(3,752)	(3,678)
Stock options exercised		59
Net cash provided by (used in) financing activities	(27,020)	1,431
Net change in cash and due from banks	(977)	548
Cash and due from banks at beginning of period	14,783	11,897
Cash and due from banks at end of period	13,806	12,445
Supplemental Disclosures of Cash Flow Information
Interest paid on deposits and borrowed funds	4,657	6,099
Income taxes paid	3,610	3,937
Supplemental Disclosure of Noncash Activities
Loans charged against the allowance for loan losses	1,680	2,444
Loans transferred to other real estate owned	478	1,608
Unrealized net losses on securities available for sale	$ (20,356)	$ (529)

XML

Note 7 - Defined Benefit Plan (Tables)

9 Months Ended

Sep. 30, 2013

Compensation and Retirement Disclosure [Abstract]

Schedule of Defined Benefit Plans Disclosures [Table Text Block]

	Pension Benefits
	Nine Months Ended September 30,
	2013			2012
Service cost	$	447		$	351
Interest cost		462			555
Expected return on plan assets		(738	)		(807	)
Amortization of prior service cost		(75	)		(75	)
Recognized net actuarial loss		399			381
Net Periodic Benefit Cost	$	495		$	405

XML

Note 8 - Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Note 8: Fair Value Measurements

The Company records fair value adjustments to certain assets and liabilities and determines fair value disclosures utilizing a definition of fair value of assets and liabilities that states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Additional considerations come into play in determining the fair value of assets in markets that are not active.

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

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

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

Securities Available for Sale

Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2). The carrying value of restricted Federal Reserve Bank and Federal Home Loan Bank stock approximates fair value based upon the redemption provisions of each entity and is therefore excluded from the following table.

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

			Fair Value Measurements at September 30, 2013 Using
Description	Balance as of September 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury	$	2,012	$	---	$	2,012	$	---
U.S. Government agencies		152,143		---		152,143		---
States and political subdivisions		24,404		---		24,404		---
Mortgage-backed securities		3,153		---		3,153		---
Corporate		8,377		---		8,377		---
Other securities		2,136		---		2,136		---
Total Securities Available for Sale	$	192,225	$	---	$	192,225	$	---

			Fair Value Measurements at December 31, 2012 Using
Description	Balance as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury	$	2,073	$	---	$	2,073	$	---
U.S. Government agencies		129,564		---		129,564		---
States and political subdivisions		36,779		---		36,779		---
Mortgage-backed securities		4,569		---		4,569		---
Corporate		14,575		---		14,575		---
Other securities		2,255		---		2,255		---
Total Securities Available for Sale	$	189,815	$	---	$	189,815	$	---

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

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

Loans Held for Sale

Loans held for sale are carried at the lower of cost or market value. These loans currently consist of one-to-four family residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). As such, the Company records any fair value adjustments on a nonrecurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale at September 30, 2013 or December 31, 2012. Gains and losses on the sale of loans are recorded within income from mortgage banking on the Consolidated Statements of Income.

Impaired Loans

Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that the Company will be unable to collect all the contractual interest and principal payments as scheduled in the loan agreement. Troubled debt restructurings are impaired loans. The measurement of loss associated with impaired loans may be based on either the observable market price of the loan, the present value of the expected cash flows or the fair value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral is a house or building in the process of construction, if an appraisal of the real estate property is over 12 months old or if the real estate market is considered by management to be experiencing volatility, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal using observable market data, if the collateral is deemed significant. If the collateral is not deemed significant, the value of business equipment is based on the net book value on the borrower’s financial statements. Likewise, values for inventory and accounts receivables collateral are based on the borrower’s financial statement balances or aging reports (Level 3). Estimated losses on impaired loans allocated to the allowance for loan losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.

The following table summarizes the Company’s impaired loans that were measured at fair value on a nonrecurring basis at September 30, 2013 and at December 31, 2012.

				Carrying Value
Date	Description	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Assets:
September 30, 2013	Impaired loans net of valuation allowance	$	1,541	$	---	$	---	$	1,541
December 31, 2012	Impaired loans net of valuation allowance		928		---		---		928

Impaired loans are measured quarterly for impairment. The Company employs the most applicable valuation method for each loan based on current information at the time of valuation.

The following tables present information about Level 3 Fair Value Measurements for September 30, 2013 and December 31, 2012.

September 30, 2013	Valuation Technique	Unobservable Input	Range (Weighted Average)
Impaired loans	Discounted appraised value	Selling cost		10.00%(1)
Impaired loans	Present value of cash flows	Discount rate	6.25%	-	9.50%	(6.75%)

⁽¹⁾     Of the Company’s impaired loans with specific allocations based on Level 3 inputs, both loans valued using fair value of collateral utilized the same discount rate.

December 31, 2012	Valuation Technique	Unobservable Input	Range (Weighted Average)
Impaired loans	Discounted appraised value	Selling cost	0%	-	10.00%	(2.00%)
Impaired loans	Discounted appraised value	Discount for lack of marketability and age of appraisal	0%	-	60.00%	(52.00%)
Impaired loans	Present value of cash flows	Discount rate	6.00%	-	7.50%	(6.28%)

Other Real Estate Owned

Other real estate owned are real estate assets acquired in full or partial satisfaction of a loan. At acquisition, other real estate owned assets are measured at fair value. If the assets are marketed for sale by an outside party, the acquisition-date fair value is discounted by selling costs; if the assets are marketed for sale by the Company, no reduction to fair value for selling costs is made. Subsequent to acquisition, the assets are measured at the lower of initial measurement or current fair value, discounted for selling costs as appropriate.

The fair value of an other real estate owned asset is determined by an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). If the appraisal is discounted either for age or because management considers the real estate market to be experiencing volatility, then the fair value is considered Level 3. Discounts for selling costs also result in measurement based on Level 3 inputs. Fair value adjustments are measured on a nonrecurring basis and are recorded in the period incurred as valuation allowances to other real estate owned, and expensed through noninterest expense.

The following table summarizes the Company’s other real estate owned that was measured at fair value on a nonrecurring basis.

				Carrying Value
Date	Description	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Assets:
September 30, 2013	Other real estate owned net of valuation allowance	$	973	$	---	$	---	$	973
December 31, 2012	Other real estate owned net of valuation allowance		1,435		---		---		1,435

The following tables present information about Level 3 Fair Value Measurements for September 30, 2013 and December 31, 2012.

September 30, 2013	Valuation Technique	Unobservable Input	Range (Weighted Average)
Other real estate owned	Discounted appraised value	Selling cost	0.00%(1)	–	9.95%	2.99%)
Other real estate owned	Discounted appraised value	Discount for lack of marketability and age of appraisal	0.00%	–	20.71%	(3.48%)

December 31, 2012	Valuation Technique	Unobservable Input	Range (Weighted Average)
Other real estate owned	Discounted appraised value	Selling cost	0.00%(1)	–	6.00%	(4.30%)
Other real estate owned	Discounted appraised value	Discount for lack of marketability and age of appraisal	0.00%	–	30.90%	(4.68%)

⁽¹⁾      The Company markets other real estate owned both independently and with local realtors. Properties marketed by realtors are discounted by selling costs. Properties that the Company markets independently are not discounted by selling costs.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments.

Cash and Due from Banks and Interest-Bearing Deposits

The carrying amounts approximate fair value.

Securities

The fair value of securities, excluding restricted stock, is determined by quoted market prices or dealer quotes. The fair value of certain state and municipal securities is not readily available through market sources other than dealer quotations, so fair value estimates are based on quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued. The carrying value of restricted securities approximates fair value based upon the redemption provisions of the applicable entities.

Loans Held for Sale

The fair value of loans held for sale is based on commitments on hand from investors or prevailing market prices.

Loans

Fair value for the loan portfolio is estimated on an account-level basis by discounting scheduled cash flows through the projected maturity for each loan. The calculation applies estimated market discount rates that reflect the credit and interest rate risk inherent in the loan. The estimate of maturity is based on the Company’s historical experience with repayments for loan classification, modified by an estimate of the effect of economic conditions on lending.

Impaired loans are individually evaluated for fair value. Fair value for the Company’s impaired loans is estimated by using either discounted cash flows or the appraised value of collateral. Any amount of principal balance that exceeds fair value is accrued in the allowance for loan losses. Assumptions regarding credit risk, cash flows and discount rates are determined within management’s judgment, using available market information and specific borrower information. Discount rates for cash flow analysis are based on the loan’s interest rate, and cash flows are estimated based upon the loan’s historical payment performance and the borrower’s current financial condition. Appraisals may be discounted for age, reasonableness, and selling costs.

Deposits

The fair value of demand and savings deposits is the amount payable on demand. The fair value of fixed maturity term deposits and certificates of deposit is estimated using the rates currently offered for deposits with similar remaining maturities.

Accrued Interest

The carrying amounts of accrued interest approximate fair value.

Bank-Owned Life Insurance

Bank owned life insurance represents insurance policies on officers of the Company and certain officers who are no longer employed by the Company.  The cash values of the policies are estimates using information provided by insurance carriers.  These policies are carried at their cash surrender value, which approximates the fair value.

Commitments to Extend Credit and Standby Letters of Credit

The only amounts recorded for commitments to extend credit, standby letters of credit and financial guarantees written are the deferred fees arising from these unrecognized financial instruments. These deferred fees are not deemed significant at September 30, 2013 and December 31, 2012, and, as such, the related fair values have not been estimated.

The estimated fair values and related carrying amounts of the Company’s financial instruments follow.

	September 30, 2013
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total Estimated Fair Value
Financial Assets:
Cash and due from banks	$	13,806	$	13,806	$	---	$	---	$	13,806
Interest-bearing deposits		62,776		62,776		---		---		62,776
Securities		356,977		---		352,901		---		352,901
Restricted securities		1,414		---		1,414		---		1,414
Mortgage loans held for sale		617		---		617		---		617
Loans, net		582,574		---		---		590,117		590,117
Accrued interest receivable		6,044		6,044		---		---		6,044
Bank-owned life insurance		21,020		21,020		---		---		21,020
Financial Liabilities:
Deposits	$	923,498	$	674,924	$	---	$	250,304	$	925,228
Accrued interest payable		97		97		---		---		97

	December 31, 2012
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total Estimated Fair Value
Financial Assets:
Cash and due from banks	$	14,783	$	14,783	$	---	$	---	$	14,783
Interest-bearing deposits		96,597		96,597		---		---		96,597
Securities		350,354		---		360,661		---		360,661
Restricted securities		1,689		---		1,689		---		1,689
Mortgage loans held for sale		2,796		---		2,796		---		2,796
Loans, net		583,813		---		---		570,471		570,471
Accrued interest receivable		6,247		6,247		---		---		6,247
Bank-owned life insurance		20,523		20,523		---		---		20,523
Financial Liabilities:
Deposits	$	946,766	$	669,028	$	---	$	272,820	$	941,848
Accrued interest payable		139		139		---		---		139

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Note 7 - Defined Benefit Plan (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Compensation and Retirement Disclosure [Abstract]
Defined Benefit Plan Minimum Future Employer Contributions	$ 815
Defined Benefit Plans, Estimated Future Employer Contributions in Current Fiscal Year	0
Defined Benefit Plan, Contributions by Employer	$ 519

XML

Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) - Past Due and Nonaccrual Loans (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 – 89 Days Past Due	$ 2,814	$ 4,090
90 or More Days Past Due	10,347	3,755
90 or More Days Past Due and Still Accruing	149	170	114
Nonaccruals (Including Impaired Nonaccruals)	11,236	13,021	6,130
Real Estate Construction [Member] | Construction residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 or More Days Past Due	123	123
Nonaccruals (Including Impaired Nonaccruals)	123	123
Real Estate Construction [Member] | Construction other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 – 89 Days Past Due	46	31
90 or More Days Past Due	2,869	89
Nonaccruals (Including Impaired Nonaccruals)	2,869	3,109
Consumer Real Estate [Member] | Equity Lines [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 – 89 Days Past Due	5	22
90 or More Days Past Due		30
90 or More Days Past Due and Still Accruing		30
Nonaccruals (Including Impaired Nonaccruals)		98
Consumer Real Estate [Member] | Residential closed end first liens [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 – 89 Days Past Due	1,045	1,507
90 or More Days Past Due	338	605
90 or More Days Past Due and Still Accruing	146	126
Nonaccruals (Including Impaired Nonaccruals)	447	801
Consumer Real Estate [Member] | Residential closed end junior liens [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 – 89 Days Past Due	54	121
90 or More Days Past Due	77	39
Nonaccruals (Including Impaired Nonaccruals)	78	120
Consumer Real Estate [Member] | Investor-owned residential real estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 – 89 Days Past Due	170
90 or More Days Past Due	53
Nonaccruals (Including Impaired Nonaccruals)	52
Commercial Real Estate Loans [Member] | Multifamily real estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 – 89 Days Past Due	433	671
90 or More Days Past Due	3,278	261
Nonaccruals (Including Impaired Nonaccruals)	3,970	4,624
Commercial Real Estate Loans [Member] | Commercial real estate, owner occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 – 89 Days Past Due	573	1,113
90 or More Days Past Due	3,540
Nonaccruals (Including Impaired Nonaccruals)	3,540	3,536
Commercial Real Estate Loans [Member] | Commercial real estate, other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 – 89 Days Past Due	35	40
90 or More Days Past Due		2,089
Commercial Non Real Estate [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 – 89 Days Past Due	182	291
90 or More Days Past Due	43	505
Nonaccruals (Including Impaired Nonaccruals)	133	561
Consumer Non Real Estate [Member] | Credit Card Receivable [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 – 89 Days Past Due	20	20
90 or More Days Past Due	2	4
90 or More Days Past Due and Still Accruing	2	4
Consumer Non Real Estate [Member] | Automobile [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 – 89 Days Past Due	190	142
90 or More Days Past Due	24	10
90 or More Days Past Due and Still Accruing	1	10
Nonaccruals (Including Impaired Nonaccruals)	24	49
Consumer Non Real Estate [Member] | Other Consumer Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 – 89 Days Past Due	$ 61	$ 132

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Note 2 - Stock-Based Compensation (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period	0	4,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value (in Dollars)		$ 74
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options (in Dollars)	$ 0

XML

Note 9 - Components of Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Net Unrealized Gain (Loss) on Securities			Adjustments Related to Pension Benefits			Accumulated Other Comprehensive (Loss)
Balance at December 31, 2011	$	2,646		$	(3,967	)	$	(1,321	)
Unrealized holding loss on available for sale securities net of tax of ($178)		(331	)		---			(331	)
Reclassification adjustment, net of tax of ($7)		(13	)		---			(13	)
Balance at September 30, 2012		2,302			(3,967	)		(1,665	)
Balance at December 31, 2012		2,047			(4,785	)		(2,738	)
Unrealized holding loss on available for sale securities net of tax of ($7,126)		(13,234	)		---			(13,234	)
Reclassification adjustment, net of tax of $1		3			---			3
Balance at September 30, 2013	$	(11,184	)	$	(4,785	)	$	(15,969	)

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Note 5 - Securities (Details) - Held to Maturity Securities (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Held to Maturity:
Amortized Costs	$ 164,752	$ 160,539
Gross Unrealized Gains	3,528	10,523
Gross Unrealized Losses	7,604	216
Fair Values	160,676	170,846
US Government Agencies [Member]
Held to Maturity:
Amortized Costs	13,977	7,988
Gross Unrealized Gains	315	563
Gross Unrealized Losses	1,025
Fair Values	13,267	8,551
Mortgage-backed Securities [Member]
Held to Maturity:
Amortized Costs	547	691
Gross Unrealized Gains	55	73
Fair Values	602	764
States and Political Subdivisions [Member]
Held to Maturity:
Amortized Costs	150,228	151,209
Gross Unrealized Gains	3,158	9,880
Gross Unrealized Losses	6,579	216
Fair Values	146,807	160,873
Corporate Securities [Member]
Held to Maturity:
Amortized Costs		651
Gross Unrealized Gains		7
Fair Values		$ 658

XML

Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) - Summary of Loans Past Due 90 Days or More and Impaired Loans (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended				12 Months Ended
	Sep. 30, 2013		Sep. 30, 2013		Sep. 30, 2012		Dec. 31, 2012
Summary of Loans Past Due 90 Days or More and Impaired Loans [Abstract]
Loans past due 90 days or more and still accruing	$ 149		$ 149		$ 114		$ 170
Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees	0.03%		0.03%		0.02%		0.03%
Accruing restructured loans	6,545		6,545		2,021		2,005
Impaired loans with no valuation allowance	14,874		14,874		11,063		16,974
Impaired loans with a valuation allowance	2,172		2,172		902		1,482
Total impaired loans	17,046		17,046		11,965		18,456
Valuation allowance	(631)		(631)		(327)		(554)
Impaired loans, net of allowance	16,415		16,415		11,638		17,902
Average recorded investment in impaired loans(1)	17,737	[1]	17,357	[1],[2]	13,831	[2]	13,540	[2],[3]
Interest income recognized on impaired loans, after designation as impaired	$ 57		$ 159		$ 292		$ 9

[1] Recorded investment includes the unpaid principal balance and any accrued interest and net deferred fees.

[2] Recorded investment includes principal, accrued interest and net deferred fees.

[3] Recorded investment includes the unpaid principal balance and any accrued interest and deferred fees.

XML

Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) - Restructurings that Occurred during Reporting Peiod (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Financing Receivable, Modifications [Line Items]
Number of Contracts	2	2	6	10
Pre-Modification Outstanding Principal Balance	$ 273	$ 231	$ 4,401	$ 1,816
Post-Modification Outstanding Principal Balance	354	231	4,576	1,844
Impairment Accrued	1	0	11	220
Consumer Real Estate [Member] | Residential closed end first liens [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	1	2	5
Pre-Modification Outstanding Principal Balance	241	38	453	383
Post-Modification Outstanding Principal Balance	309	38	525	402
Impairment Accrued			3
Consumer Real Estate [Member] | Residential closed end junior liens [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts			1	1
Pre-Modification Outstanding Principal Balance			262	143
Post-Modification Outstanding Principal Balance			267	147
Impairment Accrued			7
Commercial Non Real Estate [Member] | Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1		1	1
Pre-Modification Outstanding Principal Balance	32		32	400
Post-Modification Outstanding Principal Balance	45		45	400
Impairment Accrued	1		1
Commercial Real Estate Loans [Member] | Commercial real estate, owner occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts		1	1	3
Pre-Modification Outstanding Principal Balance		193	154	890
Post-Modification Outstanding Principal Balance		193	239	895
Commercial Real Estate Loans [Member] | Commercial real estate, other [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts			1
Pre-Modification Outstanding Principal Balance			3,500
Post-Modification Outstanding Principal Balance			$ 3,500

XML

Note 7 - Defined Benefit Plan (Details) - Components of Net Periodic Benefit Cost (Pension Plan, Defined Benefit [Member], USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Pension Plan, Defined Benefit [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 447	$ 351
Interest cost	462	555
Expected return on plan assets	(738)	(807)
Amortization of prior service cost	(75)	(75)
Recognized net actuarial loss	399	381
Net Periodic Benefit Cost	$ 495	$ 405

XML

Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) - Allowance Roll-forward and Related Loan Balance by Portfolio Segments (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	$ 7,952	$ 8,168	$ 8,349	$ 8,068
Charge-offs	(196)	(716)	(1,680)	(2,444)
Recoveries	31	24	92	76
Provision for loan losses	303	778	1,329	2,554
Ending Balance	8,090	8,254	8,090	8,254
Allowance for Loan Losses, Individually evaluated for impairment	631		631		554
Allowance for Loan Losses, Collectively evaluated for impairment	7,459		7,459		7,795
Allowance for Loan Losses, Total	8,090	8,254	8,090	8,254
Loans, Individually evaluated for impairment	17,046		17,046		18,456
Loans, Collectively evaluated for impairment	574,506		574,506		574,659
Loans, Total	591,552		591,552		593,115
Real Estate Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	1,032	1,396	1,070	1,079
Charge-offs		(51)	(184)	(640)
Recoveries				13
Provision for loan losses	(11)	(158)	135	735
Ending Balance	1,021	1,187	1,021	1,187
Allowance for Loan Losses, Collectively evaluated for impairment	1,021		1,021		1,070
Allowance for Loan Losses, Total	1,021	1,187	1,021	1,187
Loans, Individually evaluated for impairment	2,992		2,992		6,643
Loans, Collectively evaluated for impairment	52,030		52,030		43,670
Loans, Total	55,022		55,022		50,313
Consumer Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	1,670	1,910	2,263	1,245
Charge-offs	(120)	(33)	(219)	(278)
Recoveries			1	2
Provision for loan losses	334	95	(161)	1,003
Ending Balance	1,884	1,972	1,884	1,972
Allowance for Loan Losses, Individually evaluated for impairment	11		11		43
Allowance for Loan Losses, Collectively evaluated for impairment	1,873		1,873		2,220
Allowance for Loan Losses, Total	1,884	1,972	1,884	1,972
Loans, Individually evaluated for impairment	1,199		1,199		864
Loans, Collectively evaluated for impairment	145,248		145,248		142,398
Loans, Total	146,447		146,447		143,262
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	3,029	3,257	3,442	3,515
Charge-offs		(592)	(35)	(1,329)
Recoveries	8		12
Provision for loan losses	553	872	171	1,351
Ending Balance	3,590	3,537	3,590	3,537
Allowance for Loan Losses, Individually evaluated for impairment	617		617		273
Allowance for Loan Losses, Collectively evaluated for impairment	2,973		2,973		3,169
Allowance for Loan Losses, Total	3,590	3,537	3,590	3,537
Loans, Individually evaluated for impairment	12,719		12,719		10,329
Loans, Collectively evaluated for impairment	289,171		289,171		293,979
Loans, Total	301,890		301,890		304,308
Commercial Non Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	1,481	909	959	1,473
Charge-offs	(8)		(968)	(5)
Recoveries	2	1	18	2
Provision for loan losses	(472)	(46)	994	(606)
Ending Balance	1,003	864	1,003	864
Allowance for Loan Losses, Individually evaluated for impairment	3		3		231
Allowance for Loan Losses, Collectively evaluated for impairment	1,000		1,000		728
Allowance for Loan Losses, Total	1,003	864	1,003	864
Loans, Individually evaluated for impairment	112		112		574
Loans, Collectively evaluated for impairment	31,217		31,217		36,775
Loans, Total	31,329		31,329		37,349
Public Sector and IDA [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	111	111	142	232
Provision for loan losses	(6)	34	(37)	(87)
Ending Balance	105	145	105	145
Allowance for Loan Losses, Collectively evaluated for impairment	105		105		142
Allowance for Loan Losses, Total	105	145	105	145
Loans, Collectively evaluated for impairment	28,332		28,332		26,169
Loans, Total	28,332		28,332		26,169
Consumer Non Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	513	422	424	403
Charge-offs	(68)	(40)	(274)	(192)
Recoveries	21	23	61	59
Provision for loan losses	(59)	(5)	196	130
Ending Balance	407	400	407	400
Allowance for Loan Losses, Individually evaluated for impairment					7
Allowance for Loan Losses, Collectively evaluated for impairment	407		407		417
Allowance for Loan Losses, Total	407	400	407	400
Loans, Individually evaluated for impairment	24		24		46
Loans, Collectively evaluated for impairment	28,508		28,508		31,668
Loans, Total	28,532		28,532		31,714
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	116	163	49	121
Provision for loan losses	(36)	(14)	31	28
Ending Balance	80	149	80	149
Allowance for Loan Losses, Collectively evaluated for impairment	80		80		49
Allowance for Loan Losses, Total	$ 80	$ 149	$ 80	$ 149

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Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) - Restructured Loans that Defaulted during Previous Periods (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Financing Receivable, Modifications [Line Items]
Number of Contracts	5	4	6	4
Principal Balance	$ 874	$ 1,041	$ 1,067	$ 1,041
Impairment Accrued	353	21	353	21
Consumer Real Estate [Member] | Residential closed end first liens [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	1	1	1
Principal Balance	26	96	26	96
Impairment Accrued	1		1
Consumer Real Estate [Member] | Residential closed end junior liens [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	1	1	1
Principal Balance	47	84	47	84
Commercial Real Estate Loans [Member] | Commercial real estate, owner occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	2	2	3	2
Principal Balance	664	861	857	861
Impairment Accrued	$ 352	$ 21	$ 352	$ 21

XML

Note 8 - Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

			Fair Value Measurements at September 30, 2013 Using
Description	Balance as of September 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury	$	2,012	$	---	$	2,012	$	---
U.S. Government agencies		152,143		---		152,143		---
States and political subdivisions		24,404		---		24,404		---
Mortgage-backed securities		3,153		---		3,153		---
Corporate		8,377		---		8,377		---
Other securities		2,136		---		2,136		---
Total Securities Available for Sale	$	192,225	$	---	$	192,225	$	---

			Fair Value Measurements at December 31, 2012 Using
Description	Balance as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury	$	2,073	$	---	$	2,073	$	---
U.S. Government agencies		129,564		---		129,564		---
States and political subdivisions		36,779		---		36,779		---
Mortgage-backed securities		4,569		---		4,569		---
Corporate		14,575		---		14,575		---
Other securities		2,255		---		2,255		---
Total Securities Available for Sale	$	189,815	$	---	$	189,815	$	---

Fair Value Measurements, Nonrecurring [Table Text Block]

				Carrying Value
Date	Description	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Assets:
September 30, 2013	Impaired loans net of valuation allowance	$	1,541	$	---	$	---	$	1,541
December 31, 2012	Impaired loans net of valuation allowance		928		---		---		928

				Carrying Value
Date	Description	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Assets:
September 30, 2013	Other real estate owned net of valuation allowance	$	973	$	---	$	---	$	973
December 31, 2012	Other real estate owned net of valuation allowance		1,435		---		---		1,435

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

September 30, 2013	Valuation Technique	Unobservable Input	Range (Weighted Average)
Impaired loans	Discounted appraised value	Selling cost		10.00%(1)
Impaired loans	Present value of cash flows	Discount rate	6.25%	-	9.50%	(6.75%)

December 31, 2012	Valuation Technique	Unobservable Input	Range (Weighted Average)
Impaired loans	Discounted appraised value	Selling cost	0%	-	10.00%	(2.00%)
Impaired loans	Discounted appraised value	Discount for lack of marketability and age of appraisal	0%	-	60.00%	(52.00%)
Impaired loans	Present value of cash flows	Discount rate	6.00%	-	7.50%	(6.28%)

September 30, 2013	Valuation Technique	Unobservable Input	Range (Weighted Average)
Other real estate owned	Discounted appraised value	Selling cost	0.00%(1)	–	9.95%	2.99%)
Other real estate owned	Discounted appraised value	Discount for lack of marketability and age of appraisal	0.00%	–	20.71%	(3.48%)

December 31, 2012	Valuation Technique	Unobservable Input	Range (Weighted Average)
Other real estate owned	Discounted appraised value	Selling cost	0.00%(1)	–	6.00%	(4.30%)
Other real estate owned	Discounted appraised value	Discount for lack of marketability and age of appraisal	0.00%	–	30.90%	(4.68%)

Fair Value, by Balance Sheet Grouping [Table Text Block]

	September 30, 2013
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total Estimated Fair Value
Financial Assets:
Cash and due from banks	$	13,806	$	13,806	$	---	$	---	$	13,806
Interest-bearing deposits		62,776		62,776		---		---		62,776
Securities		356,977		---		352,901		---		352,901
Restricted securities		1,414		---		1,414		---		1,414
Mortgage loans held for sale		617		---		617		---		617
Loans, net		582,574		---		---		590,117		590,117
Accrued interest receivable		6,044		6,044		---		---		6,044
Bank-owned life insurance		21,020		21,020		---		---		21,020
Financial Liabilities:
Deposits	$	923,498	$	674,924	$	---	$	250,304	$	925,228
Accrued interest payable		97		97		---		---		97

	December 31, 2012
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total Estimated Fair Value
Financial Assets:
Cash and due from banks	$	14,783	$	14,783	$	---	$	---	$	14,783
Interest-bearing deposits		96,597		96,597		---		---		96,597
Securities		350,354		---		360,661		---		360,661
Restricted securities		1,689		---		1,689		---		1,689
Mortgage loans held for sale		2,796		---		2,796		---		2,796
Loans, net		583,813		---		---		570,471		570,471
Accrued interest receivable		6,247		6,247		---		---		6,247
Bank-owned life insurance		20,523		20,523		---		---		20,523
Financial Liabilities:
Deposits	$	946,766	$	669,028	$	---	$	272,820	$	941,848
Accrued interest payable		139		139		---		---		139

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Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Net Income	$ 4,517	$ 4,293	$ 13,168	$ 13,062
Other Comprehensive Loss, Net of Tax
Unrealized holding losses on available for sale securities net of taxes of ($2,056) and ($351) for three-month periods ended September 30, 2013 and 2012, and ($7,126) and ($178) for nine-month periods ended September 30, 2013 and 2012, respectively	(3,818)	(653)	(13,234)	(331)
Reclassification adjustment, net of taxes of $31 and $6 for three-month periods ended September 30, 2013 and 2012, and $1 and ($7) for nine-month periods ended September 30, 3013 and 2012, respectively	57	12	3	(13)
Other comprehensive loss, net of taxes of ($2,025) and ($345) for three-month periods ended September 30, 2013 and 2012, and (7,125) and ($185) for nine-month periods ended September 30, 2013 and 2012, respectively	(3,761)	(641)	(13,231)	(344)
Total Comprehensive Income	$ 756	$ 3,652	$ (63)	$ 12,718

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Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (USD $) In Thousands	Common Stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Beginning Balances at Dec. 31, 2011	$ 8,675	$ 133,945	$ (1,321)	$ 141,299
Net income		13,062		13,062
Dividends		(3,678)		(3,678)
Stock options exercised	5	54		59
Other comprehensive income (loss), net of tax			(344)	(344)
Ending Balances at Sep. 30, 2012	8,680	143,383	(1,665)	150,398
Beginning Balances at Dec. 31, 2012	8,685	144,162	(2,738)	150,109
Net income		13,168		13,168
Dividends		(3,752)		(3,752)
Other comprehensive income (loss), net of tax			(13,231)	(13,231)
Ending Balances at Sep. 30, 2013	$ 8,685	$ 153,578	$ (15,969)	$ 146,294

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Note 1 - General

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1: General

The consolidated financial statements of National Bankshares, Inc. (“NBI”) and its wholly-owned subsidiaries, The National Bank of Blacksburg (“NBB”) and National Bankshares Financial Services, Inc. (“NBFS”) (collectively, the “Company”), conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. The accompanying interim period consolidated financial statements are unaudited; however, in the opinion of management, all adjustments consisting of normal recurring adjustments, which are necessary for a fair presentation of the consolidated financial statements, have been included.  The results of operations for the nine months ended September 30, 2013 are not necessarily indicative of results of operations for the full year or any other interim period.  The interim period consolidated financial statements and financial information included in this Form 10-Q should be read in conjunction with the notes to consolidated financial statements included in the Company’s 2012 Form 10-K/A.  The Company posts all reports required to be filed under the Securities and Exchange Act of 1934 on its web site at www.nationalbankshares.com.

Subsequent events have been considered through the date when the Form 10-Q was issued.

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Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Dividends per share			$ 0.54	$ 0.53
Other comprehensive income (loss), tax (in Dollars)	$ (2,025)	$ (345)	$ (7,125)	$ (185)

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Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) - Restructurings that Occurred during Previous Periods (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Financing Receivable, Modifications [Line Items]
Number of Contracts	2	2	6	10
Pre-Modification Outstanding Principal Balance	$ 273	$ 231	$ 4,401	$ 1,816
Post-Modification Outstanding Principal Balance	354	231	4,576	1,844
Consumer Real Estate [Member] | Residential closed end first liens [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	1	2	5
Pre-Modification Outstanding Principal Balance	241	38	453	383
Post-Modification Outstanding Principal Balance	309	38	525	402
Consumer Real Estate [Member] | Residential closed end junior liens [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts			1	1
Pre-Modification Outstanding Principal Balance			262	143
Post-Modification Outstanding Principal Balance			267	147
Commercial Real Estate Loans [Member] | Commercial real estate, owner occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts		1	1	3
Pre-Modification Outstanding Principal Balance		193	154	890
Post-Modification Outstanding Principal Balance		193	239	895
Commercial Non Real Estate [Member] | Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1		1	1
Pre-Modification Outstanding Principal Balance	32		32	400
Post-Modification Outstanding Principal Balance	$ 45		$ 45	$ 400

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Note 2 - Stock-Based Compensation (Details) - Stock Option Activity (Stock Option Plan 1999 [Member], USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Stock Option Plan 1999 [Member]
Note 2 - Stock-Based Compensation (Details) - Stock Option Activity [Line Items]
Outstanding at January 1, 2013	69,000
Outstanding at January 1, 2013 (in Dollars per share)	$ 23.75
Outstanding September 30, 2013	69,000
Outstanding September 30, 2013 (in Dollars per share)	$ 23.75
Outstanding September 30, 2013	1 year 40 days
Outstanding September 30, 2013 (in Dollars)	$ 838
Exercisable at September 30, 2013	69,000
Exercisable at September 30, 2013 (in Dollars per share)	$ 23.75
Exercisable at September 30, 2013	1 year 40 days
Exercisable at September 30, 2013 (in Dollars)	$ 838

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Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) - Summary of Ratios for Allowance for Loan Losses	9 Months Ended				12 Months Ended
	Sep. 30, 2013		Sep. 30, 2012		Dec. 31, 2012
Summary of Ratios for Allowance for Loan Losses [Abstract]
Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees	1.37%		1.40%		1.41%
Ratio of net charge-offs to average loans, net of unearned income and deferred fees(1)	0.36%	[1]	0.54%	[1]	0.49%	[1]

[1] Net charge-offs are on an annualized basis.

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Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) - Impaired Loans, Average Investment and Interest Income Recognized, Prior Year (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended				12 Months Ended
	Sep. 30, 2013		Sep. 30, 2013		Sep. 30, 2012		Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	$ 17,737	[1]	$ 17,357	[1],[2]	$ 13,831	[2]	$ 13,540	[2],[3]
Interest Income Recognized	57		159		292		9
Real Estate Construction [Member] | Construction residential [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	118	[1]	118	[1]			1,171	[3]
Real Estate Construction [Member] | Construction other [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	3,005	[1]	3,005	[1]			4,290	[3]
Interest Income Recognized							1
Consumer Real Estate [Member] | Equity Lines [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment		[1]		[1]			101	[3]
Consumer Real Estate [Member] | Residential closed end first liens [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	863	[1]	729	[1]			873	[3]
Interest Income Recognized	2		4				2
Consumer Real Estate [Member] | Residential closed end junior liens [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	410	[1]	238	[1]			234	[3]
Interest Income Recognized	2		2
Commercial Real Estate Loans [Member] | Multifamily real estate [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	4,133	[1]	4,189	[1]			1,466	[3]
Interest Income Recognized							5
Commercial Real Estate Loans [Member] | Commercial real estate, owner occupied [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	5,424	[1]	5,073	[1]			4,806	[3]
Interest Income Recognized	28		82				1
Commercial Real Estate Loans [Member] | Commercial real estate, other [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	3,489	[1]	3,492	[1]				[3]
Interest Income Recognized	22		65
Commercial Non Real Estate [Member] | Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	138	[1]	380	[1]			570	[3]
Interest Income Recognized	1		2
Public Sector and IDA [Member] | Public Sector and IDA [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment		[1]		[1]				[3]
Consumer Non Real Estate [Member] | Credit Card Receivable [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment		[1]		[1]				[3]
Consumer Non Real Estate [Member] | Automobile [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	26	[1]	33	[1]			4	[3]
Consumer Non Real Estate [Member] | Other Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment		[1]		[1]			$ 25	[3]

[1] Recorded investment includes the unpaid principal balance and any accrued interest and net deferred fees.

[2] Recorded investment includes principal, accrued interest and net deferred fees.

[3] Recorded investment includes the unpaid principal balance and any accrued interest and deferred fees.

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Note 9 - Components of Accumulated Other Comprehensive Loss (Details) - Components of Accumulated Other Comprehensive Loss (Parentheticals) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Accumulated Other Comprehensive Income (Loss) [Line Items]
Unrealized holding gains (losses) on available for sale securities, tax	$ (2,056)	$ (351)	$ (7,126)	$ (178)
Reclassification adjustment, tax	$ 31	$ 6	$ 1	$ (7)

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Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	$ 192,225	$ 189,815
US Treasury Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	2,012	2,073
US Treasury Securities [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	2,012	2,073
US Government Agencies [Member] | Fair Value, Inputs, Level 2 [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	152,143	129,564
US Government Agencies [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	152,143	129,564
States and Political Subdivisions [Member] | Fair Value, Inputs, Level 2 [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	24,404	36,779
States and Political Subdivisions [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	24,404	36,779
Mortgage-backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	3,153	4,569
Mortgage-backed Securities [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	3,153	4,569
Corporate Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	8,377	14,575
Corporate Securities [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	8,377	14,575
Other Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	2,136	2,255
Other Securities [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	2,136	2,255
Fair Value, Inputs, Level 2 [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities at Fair Value on Recurring Basis [Line Items]
Available-for-sale Securities	$ 192,225	$ 189,815

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Note 5 - Securities (Details) - Available for Sale Securities (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Available for Sale:
Amortized Costs	$ 209,433	$ 186,667
Gross Unrealized Gains	1,396	3,946
Gross Unrealized Losses	18,604	798
Fair Values	192,225	189,815
US Treasury Securities [Member]
Available for Sale:
Amortized Costs	2,001	2,005
Gross Unrealized Gains	11	68
Fair Values	2,012	2,073
US Government Agencies [Member]
Available for Sale:
Amortized Costs	169,815	128,805
Gross Unrealized Gains	253	1,381
Gross Unrealized Losses	17,925	622
Fair Values	152,143	129,564
Mortgage-backed Securities [Member]
Available for Sale:
Amortized Costs	2,919	4,202
Gross Unrealized Gains	234	367
Fair Values	3,153	4,569
States and Political Subdivisions [Member]
Available for Sale:
Amortized Costs	23,742	35,029
Gross Unrealized Gains	785	1,753
Gross Unrealized Losses	123	3
Fair Values	24,404	36,779
Corporate Securities [Member]
Available for Sale:
Amortized Costs	8,805	14,207
Gross Unrealized Gains	113	368
Gross Unrealized Losses	541
Fair Values	8,377	14,575
Other Securities [Member]
Available for Sale:
Amortized Costs	2,151	2,419
Gross Unrealized Gains		9
Gross Unrealized Losses	15	173
Fair Values	$ 2,136	$ 2,255

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Securities held to maturity (fair value at June 30, 2013 and at December 31, 2012) (in Dollars)	$ 160,676	$ 170,846
Preferred stock, par value (in Dollars per share)	$ 0	$ 0
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in Dollars per share)	$ 1.25	$ 1.25
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	6,947,974	6,947,974
Common Stock, shares outstanding	6,947,974	6,947,974

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Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans

9 Months Ended

Sep. 30, 2013

Disclosure Text Block Supplement [Abstract]

Allowance for Credit Losses [Text Block]

Note 4:    Allowance for Loan Losses, Nonperforming Assets and Impaired Loans

The allowance for loan losses methodology incorporates individual evaluation of impaired loans and collective evaluation of groups of non-impaired loans. The Company performs ongoing analysis of the loan portfolio to determine credit quality and to identify impaired loans. Credit quality is rated based on the loan’s payment history, the borrower’s current financial situation and value of the underlying collateral.

Impaired loans are those loans that have been modified in a troubled debt restructure (“TDR” or “restructure”) and larger, non-homogeneous loans that are in nonaccrual or exhibit payment history or financial status that indicate the probability that collection will not occur according to the loan’s terms. Generally, impaired loans are given risk ratings that indicate higher risk, such as “classified” or “other assets especially mentioned.” Impaired loans are individually evaluated to determine appropriate reserves and are measured at the lower of the invested amount or the fair market value. Impaired loans with an impairment loss are designated nonaccrual. Please refer to Note 2 of the Company’s 2012 Form 10-K/A, “Summary of Significant Accounting Policies” for additional information on evaluation of impaired loans and associated specific reserves, and policies regarding nonaccruals, past due status and charge-offs.

Troubled debt restructurings impact the estimation of the appropriate level of the allowance for loan losses. If the restructuring included forgiveness of a portion of principal or accrued interest, the charge-off is included in the historical charge-off rates applied to the collective evaluation methodology. Further, restructured loans are individually evaluated for impairment, with amounts below fair value accrued in the allowance for loan losses. TDRs that experience a payment default are examined to determine whether the default indicates collateral dependency or cash flows below those that were included in the fair value measurement. TDRs, as well as all impaired loans, that are determined to be collateral dependent are charged down to fair value. Deficiencies indicated by impairment measurements for TDRs that are not collateral dependent may be accrued in the allowance for loan losses or charged off if deemed uncollectible.

The Company evaluated characteristics in the loan portfolio and determined major segments and smaller classes within each segment. These characteristics include collateral type, repayment sources, and (if applicable) the borrower’s business model. The methodology for calculating reserves for collectively-evaluated loans is applied at the class level.

Portfolio Segments and Classes

Beginning January 1, 2013, the Company segregated certain loans that were included within the classes of the Residential Real Estate segment, including Equity lines, Residential closed-end first liens and Residential closed-end junior liens. The newly-segregated loans are secured by residential real estate collateral that is owned by investors and for which the primary repayment source is rental income. The new class in the Residential Real Estate segment allows the Company to address credit risks characteristic of investor-owned residential real estate. Segregating the investor-owned residential real estate did not have a significant impact on the calculation of the allowance for loan losses. Consistent with accounting guidance, prior periods have not been restated and are shown as originally published using the segments and classes in effect for the period.

The segments and classes used in determining the allowance for loan losses, beginning in 2013 are as follows.

Real Estate Construction		Commercial Non Real Estate
	Construction, residential		Commercial and Industrial
	Construction, other
		Public Sector and IDA
Consumer Real Estate			Public sector and IDA
	Equity lines
	Residential closed-end first liens	Consumer Non Real Estate
	Residential closed-end junior liens		Credit cards
	Investor-owned residential real estate		Automobile
			Other consumer loans
Commercial Real Estate
	Multifamily real estate
	Commercial real estate, owner-occupied
	Commercial real estate, other

Historical Loss Rates

The Company’s allowance methodology for collectively-evaluated loans applies historical loss rates by class to current class balances as part of the process of determining required reserves. Class loss rates are calculated as the net charge-offs for the class as a percentage of average class balance. The annualized current-year loss rate is averaged with that of prior periods to obtain the historical loss rate. Prior to the first quarter of 2013, one historical loss rate for each class was calculated and applied to current class balance to obtain the allocation for historical loss rates.

Beginning with the first quarter of 2013, two loss rates for each class are calculated: total net charge-offs for the class as a percentage of average class loan balance (“class loss rate”), and total net charge-offs for the class as a percentage of average classified loans in the class (“classified loss rate”). Classified loans are those with risk ratings of “substandard” or higher. Net charge-offs in both calculations include charge-offs and recoveries of classified and non-classified loans as well as those associated with impaired loans. Class historical loss rates are applied to non-classified loan balances at the reporting date, and classified historical loss rates are applied to classified balances at the reporting date.

The revised calculation and application of historical loss rates impacted the calculation of reserves for collectively-evaluated loans. Under the former methodology, the class historical loss rates were applied to all collectively-evaluated loans and would have resulted in a total allocation of $2,384. Under the revised methodology, class historical loss rates are applied to only non-classified loans, resulting in an allocation of $2,370. In addition, the classified historical loss rate resulted in an allocation of $452, for a total allocation based on historical loss rates of $2,822. Consistent with accounting guidance, prior periods have not been restated and are shown as originally published using the methodology in effect for the period.

Risk Factors

In addition to historical loss rates, risk factors pertinent to each class are analyzed to estimate reserves for collectively-evaluated loans. Factors include changes in national and local economic and business conditions, the nature and volume of classes within the portfolio, loan quality and loan officers’ experience. Prior to the first quarter of 2013, management also reviewed the Company’s lending policies and loan review system to determine whether changes had occurred during the quarter that affected credit risk. Until the first quarter of 2013, no changes were found to affect credit risk and no additional allocations were applied. During the first quarter of 2013, the Company incorporated to the allowance methodology a factor for changes in the Company’s lending policies and a factor for changes in the quality of the Company’s loan review, and set standard allocations for associated risk. The addition of the factors formalized and standardized a practice already in place and did not have a significant impact on the calculation of the allowance for loan losses.

The analysis of certain factors results in standard allocations to all segments and classes. These factors include loan officers’ average years of experience, the risk from changes in lending policies, and the risk from changes in loan review. Factors analyzed for each class, with resultant allocations based upon the level of risk assessed for each class, include levels of past due loans, nonaccrual loans, current class balance as a percentage of total loans, and the percentage of high risk loans within the class. Additionally, factors specific to each segment are analyzed and result in allocations to the segment.

Real estate construction loans are subject to general risks from changing commercial building and housing market trends and economic conditions that may impact demand for completed properties and the costs of completion. These risks are measured by market-area unemployment rates, bankruptcy rates, housing and commercial building market trends, and interest rates.

The credit quality of consumer real estate is subject to risks associated with the borrower’s repayment ability and collateral value, measured generally by analyzing local unemployment and bankruptcy trends, local housing market trends, and interest rates.

The commercial real estate segment includes loans secured by multifamily residential real estate, commercial real estate occupied by the owner/borrower, and commercial real estate leased to non-owners. Loans in the commercial real estate segment are impacted by economic risks from changing commercial real estate markets, rental markets for multi-family housing and commercial buildings, business bankruptcy rates, local unemployment and interest rate trends that would impact the businesses housed by the commercial real estate.

Commercial non real estate loans are secured by collateral other than real estate, or are unsecured. Credit risk for commercial non real estate loans is subject to economic conditions, generally monitored by local business bankruptcy trends, and interest rates. Public sector and IDA loans are extended to municipalities and related entities. Credit risk is based upon the entity’s ability to repay and interest rate trends.

Consumer non real estate includes credit cards, automobile and other consumer loans. Credit cards and certain other consumer loans are unsecured, while collateral is obtained for automobile loans and other consumer loans. Credit risk stems primarily from the borrower’s ability to repay, measured by average unemployment, average personal bankruptcy rates and interest rates.

Factor allocations applied to each class are increased for loans rated special mention and increased to a greater extent for loans rated classified. The Company allocates additional reserves for “high risk” loans, determined to be junior lien mortgages, high loan-to-value loans and interest-only loans.

A detailed analysis showing the allowance roll-forward by portfolio segment and related loan balance by segment follows.

	Activity in the Allowance for Loan Losses for the Three Months Ended September 30, 2013
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate		Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated			Total
Balance, June 30, 2013	$	1,032		$	1,670		$	3,029	$	1,481		$	111		$	513		$	116			7,952
Charge-offs		---			(120	)		---		(8	)		---			(68	)		---			(196	)
Recoveries		---			---			8		2			---			21			---			31
Provision for loan losses		(11	)		334			553		(472	)		(6	)		(59	)		(36	)		303
Balance, September 30, 2013	$	1,021		$	1,884		$	3,590	$	1,003		$	105		$	407		$	80		$	8,090

	Activity in the Allowance for Loan Losses for the Nine Months Ended September 30, 2013
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated		Total
Balance, December 31, 2012	$	1,070		$	2,263		$	3,442		$	959		$	142		$	424		$	49	$	8,349
Charge-offs		(184	)		(219	)		(35	)		(968	)		---			(274	)		---		(1,680	)
Recoveries		---			1			12			18			---			61			---		92
Provision for loan losses		135			(161	)		171			994			(37	)		196			31		1,329
Balance, September 30, 2013	$	1,021		$	1,884		$	3,590		$	1,003		$	105		$	407		$	80	$	8,090

	Activity in the Allowance for Loan Losses for the Three Months Ended September 30, 2012
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA		Consumer Non Real Estate			Unallocated			Total
Balance, June 30, 2012	$	1,396		$	1,910		$	3,257		$	909		$	111	$	422		$	163			8,168
Charge-offs		(51	)		(33	)		(592	)		---			---		(40	)		---			(716	)
Recoveries		---			---			---			1			---		23			---			24
Provision for loan losses		(158	)		95			872			(46	)		34		(5	)		(14	)		778
Balance, September 30, 2012	$	1,187		$	1,972		$	3,537		$	864		$	145	$	400		$	149		$	8,254

	Activity in the Allowance for Loan Losses for the Nine Months Ended September 30, 2012
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated		Total
Balance, December 31, 2011	$	1,079		$	1,245		$	3,515		$	1,473		$	232		$	403		$	121	$	8,068
Charge-offs		(640	)		(278	)		(1,329	)		(5	)		---			(192	)		---		(2,444	)
Recoveries		13			2			---			2			---			59			---		76
Provision for loan losses		735			1,003			1,351			(606	)		(87	)		130			28		2,554
Balance, September 30, 2012	$	1,187		$	1,972		$	3,537		$	864		$	145		$	400		$	149	$	8,254

	Allowance for Loan Losses as of September 30, 2013
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	---	$	11	$	617	$	3	$	---	$	---	$	---	$	631
Collectively evaluated for impairment		1,021		1,873		2,973		1,000		105		407		80		7,459
Total	$	1,021	$	1,884	$	3,590	$	1,003	$	105	$	407	$	80	$	8,090

	Allowance for Loan Losses as of December 31, 2012
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	---	$	43	$	273	$	231	$	---	$	7	$	---	$	554
Collectively evaluated for impairment		1,070		2,220		3,169		728		142		417		49		7,795
Total	$	1,070	$	2,263	$	3,442	$	959	$	142	$	424	$	49	$	8,349

	Loans as of September 30, 2013
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	2,992	$	1,199	$	12,719	$	112	$	---	$	24	$	---	$	17,046
Collectively evaluated for impairment		52,030		145,248		289,171		31,217		28,332		28,508		---		574,506
Total loans	$	55,022	$	146,447	$	301,890	$	31,329	$	28,332	$	28,532	$	---	$	591,552

	Loans as of December 31, 2012
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	6,643	$	864	$	10,329	$	574	$	---	$	46	$	---	$	18,456
Collectively evaluated for impairment		43,670		142,398		293,979		36,775		26,169		31,668		---		574,659
Total	$	50,313	$	143,262	$	304,308	$	37,349	$	26,169	$	31,714	$	---	$	593,115

A summary of ratios for the allowance for loan losses follows.

	Nine Months Ended September 30,				Year Ended December 31,
	2013		2012		2012
Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees		1.37 %		1.40 %		1.41 %
Ratio of net charge-offs to average loans, net of unearned income and deferred fees(1)		0.36 %		0.54 %		0.49 %

⁽¹⁾ Net charge-offs are on an annualized basis.

A summary of nonperforming assets follows.

	September 30,						December 31,
	2013			2012			2012
Nonperforming assets:
Nonaccrual loans	$	10,194		$	3,876		$	10,870
Restructured loans in nonaccrual		1,042			2,254			2,151
Total nonperforming loans		11,236			6,130			13,021
Other real estate owned, net		973			1,894			1,435
Total nonperforming assets	$	12,209		$	8,024		$	14,456
Ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned		2.06	%		1.35	%		2.44	%
Ratio of allowance for loan losses to nonperforming loans(1)		72.00	%		134.65	%		64.12	%

⁽¹⁾     The Company defines nonperforming loans as nonaccrual loans. Loans 90 days or more past due and still accruing and accruing restructured loans are excluded.

A summary of loans past due 90 days or more and impaired loans follows.

	September 30,						December 31,
	2013			2012			2012
Loans past due 90 days or more and still accruing	$	149		$	114		$	170
Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees		0.03	%		0.02	%		0.03	%
Accruing restructured loans	$	6,545		$	2,021		$	2,005
Impaired loans:
Impaired loans with no valuation allowance	$	14,874		$	11,063		$	16,974
Impaired loans with a valuation allowance		2,172			902			1,482
Total impaired loans	$	17,046		$	11,965		$	18,456
Valuation allowance		(631	)		(327	)		(554	)
Impaired loans, net of allowance	$	16,415		$	11,638		$	17,902
Average recorded investment in impaired loans(1)	$	17,357		$	13,831		$	13,540
Interest income recognized on impaired loans, after designation as impaired	$	159		$	292		$	9
Amount of income recognized on a cash basis	$	---		$	---		$	---

⁽¹⁾      Recorded investment includes principal, accrued interest and net deferred fees.

Nonaccrual loans that meet the Company’s balance threshold of $250 and TDRs are designated as impaired. No interest income was recognized on nonaccrual loans for the nine months ended September 30, 2013 or September 30, 2012 or for the year ended December 31, 2012.

A detailed analysis of investment in impaired loans, associated reserves and interest income recognized, segregated by loan class follows.     

	Impaired Loans as of September 30, 2013
	Principal Balance		(A) Total Recorded Investment(1)		Recorded Investment(1) in (A) for Which There is No Related Allowance		Recorded Investment(1) in (A) for Which There is a Related Allowance		Related Allowance
Real Estate Construction
Construction, residential	$	123	$	118	$	118	$	---	$	---
Construction, other		2,869		2,854		2,854		---		---
Consumer Real Estate
Equity lines		---		---		---		---		---
Residential closed-end first liens		760		762		214		548		4
Residential closed-end junior liens		310		312		48		264		7
Investor-owned residential real estate		129		131		131		---		---
Commercial Real Estate
Multifamily real estate		3,970		3,967		3,967		---		---
Commercial real estate, owner-occupied		5,271		5,274		3,713		1,561		617
Commercial real estate, other		3,478		3,478		3,478		---		---
Commercial Non Real Estate
Commercial and Industrial		112		112		4		108		3
Public Sector and IDA
Public sector and IDA		---		---		---		---		---
Consumer Non Real Estate
Credit cards		---		---		---		---		---
Automobile		24		24		24		---		---
Other consumer loans		---		---		---		---		---
Total	$	17,046	$	17,032	$	14,551	$	2,481	$	631

⁽¹⁾     Recorded investment includes the unpaid principal balance and any accrued interest and net deferred fees.

	Impaired Loans as of December 31, 2012
	Principal Balance		(A) Total Recorded Investment(1)		Recorded Investment(1) in (A) for Which There is No Related Allowance		Recorded Investment(1) in (A) for Which There is a Related Allowance		Related Allowance
Real Estate Construction
Construction, residential	$	123	$	118	$	118	$	---	$	---
Construction, other		6,520		6,487		6,487		---		---
Consumer Real Estate
Equity lines		---		---		---		---		---
Residential closed-end first liens		783		785		634		151		43
Residential closed-end junior liens		81		81		81		---		---
Commercial Real Estate
Multifamily real estate		5,284		5,288		5,288		---		---
Commercial real estate, owner-occupied		5,045		5,043		4,293		750		273
Commercial real estate, other		---		---		---		---		---
Commercial Non Real Estate
Commercial and Industrial		574		574		39		535		231
Public Sector and IDA
Public sector and IDA		---		---		---		---		---
Consumer Non Real Estate
Credit cards		---		---		---		---		---
Automobile		46		46		---		46		7
Other consumer loans		---		---		---		---		---
Total	$	18,456	$	18,422	$	16,940	$	1,482	$	554

⁽¹⁾     Recorded investment includes the unpaid principal balance, accrued interest and any accrued interest and deferred fees.

The following tables show the average investment and interest income recognized for impaired loans.

	Average Investment and Interest Income for Impaired Loans
	For the Three Months Ended September 30, 2013				For the Nine Months Ended September 30, 2013
	Average Recorded Investment(1)		Interest Income Recognized		Average Recorded Investment(1)		Interest Income Recognized
Real Estate Construction
Construction, residential	$	118	$	---	$	118	$	---
Construction, other		3,005		---		3,005		---
Consumer Real Estate
Equity lines		---		---		---		---
Residential closed-end first liens		863		2		729		4
Residential closed-end junior liens		410		2		238		2
Investor-owned residential real estate		131		2		100		4
Commercial Real Estate
Multifamily real estate		4,133		---		4,189		---
Commercial real estate, owner-occupied		5,424		28		5,073		82
Commercial real estate, other		3,489		22		3,492		65
Commercial Non Real Estate
Commercial and industrial		138		1		380		2
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		---		---		---		---
Automobile		26		---		33		---
Other consumer		---		---		---		---
Total	$	17,737	$	57	$	17,357	$	159

⁽¹⁾     Recorded investment includes the unpaid principal balance and any accrued interest and net deferred fees.

	Average Investment and Interest Income for Impaired Loans
	For the Year Ended December 31, 2012
	Average Recorded Investment(1)		Interest Income Recognized
Real Estate Construction
Construction, residential	$	1,171	$	---
Construction, other		4,290		1
Commercial Real Estate
Equity lines		101		---
Residential closed-end first liens		873		2
Residential closed-end junior liens		234		---
Commercial Real Estate
Multifamily real estate		1,466		5
Commercial real estate, owner-occupied		4,806		1
Commercial real estate, other		---		---
Commercial Non Real Estate
Commercial and Industrial		570		---
Public Sector and IDA
Public sector and IDA		---		---
Consumer Non Real Estate
Credit cards		---		---
Automobile		4		---
Other consumer		25		---
Total	$	13,540	$	9

⁽¹⁾ Recorded investment includes the unpaid principal balance and any accrued interest and deferred fees.

The Company reviews nonaccrual loans on an individual loan basis to determine whether future payments are reasonably assured. To satisfy this criteria, the Company’s evaluation must determine that the underlying cause of the original delinquency or weakness that indicated nonaccrual status has been resolved, such as receipt of new guarantees, increased cash flows that cover the debt service or other resolution. Nonaccrual loans that demonstrate reasonable assurance of future payments and that have made at least six consecutive payments in accordance with repayment terms and timeframes may be returned to accrual status.

A restructured loan for which impairment measurement does not indicate a loss and that maintains current status for at least six months may be returned to accrual status.

An analysis of past due and nonaccrual loans as of September 30, 2013 follows.

	30 – 89 Days Past Due		90 or More Days Past Due		90 or More Days Past Due and Still Accruing		Nonaccruals (Including Impaired Nonaccruals)
Real Estate Construction
Construction, residential	$	---	$	123	$	---	$	123
Construction, other		46		2,869		---		2,869
Consumer Real Estate
Equity lines		5		---		---		---
Residential closed-end first liens		1,045		338		146		447
Residential closed-end junior liens		54		77		---		78
Investor-owned residential real estate		170		53		---		52
Commercial Real Estate
Multifamily real estate		433		3,278		---		3,970
Commercial real estate, owner-occupied		573		3,540		---		3,540
Commercial real estate, other		35		---		---		---
Commercial Non Real Estate
Commercial and Industrial		182		43		---		133
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		20		2		2		---
Automobile		190		24		1		24
Other consumer loans		61		---		---		---
Total	$	2,814	$	10,347	$	149	$	11,236

An analysis of past due and nonaccrual loans follows.

December 31, 2012

	30 – 89 Days Past Due		90 or More Days Past Due		90 or More Days Past Due and Still Accruing		Nonaccruals (Including Impaired Nonaccruals)
Real Estate Construction
Construction, residential	$	---	$	123	$	---	$	123
Construction, other		31		89		---		3,109
Consumer Real Estate
Equity lines		22		30		30		98
Residential closed-end first liens		1,507		605		126		801
Residential closed-end junior liens		121		39		---		120
Commercial Real Estate
Multifamily real estate		671		261		---		4,624
Commercial real estate, owner-occupied		1,113		---		---		3,536
Commercial real estate, other		40		2,089		---		---
Commercial Non Real Estate
Commercial and Industrial		291		505		---		561
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		20		4		4		---
Automobile		142		10		10		49
Other consumer loans		132		---		---		---
Total	$	4,090	$	3,755	$	170	$	13,021

The estimate of credit risk for non-impaired loans is obtained by applying allocations for internal and external factors. The allocations are increased for loans that exhibit greater credit quality risk.

Credit quality indicators, which the Company terms risk grades, are assigned through the Company’s credit review function for larger loans and selective review of loans that fall below credit review thresholds. Loans that do not indicate heightened risk are graded as “pass.” Loans that appear to have elevated credit risk because of frequent or persistent past due status, which is less than 75 days, or that show weakness in the borrower’s financial condition are risk graded “special mention.” Loans with frequent or persistent delinquency exceeding 75 days or that have a higher level of weakness in the borrower’s financial condition are graded “classified.” Classified loans have regulatory risk ratings of “substandard” and “doubtful.” Allocations are increased by 50% and by 100% for loans with grades of “special mention” and “classified,” respectively.

Determination of risk grades was completed for the portfolio as of September 30, 2013 and 2012 and December 31, 2012.

The following displays collectively-evaluated loans by credit quality indicator.

September 30, 2013

	Pass		Special Mention		Classified (Excluding Impaired)
Real Estate Construction
Construction, 1-4 family residential	$	17,451	$	158	$	---
Construction, other		34,375		30		16
Consumer Real Estate
Equity lines		16,289		33		---
Closed-end first liens		81,171		1,446		1,605
Closed-end junior liens		4,856		166		35
Investor-owned residential real estate		39,550		---		97
Commercial Real Estate
Multifamily residential real estate		64,940		305		752
Commercial real estate owner-occupied		126,418		2,501		679
Commercial real estate, other		89,525		964		3,087
Commercial Non Real Estate
Commercial and Industrial		30,070		916		231
Public Sector and IDA
States and political subdivisions		28,332		---		---
Consumer Non Real Estate
Credit cards		7,054		---		---
Automobile		11,964		217		5
Other consumer		9,215		53		---
Total	$	561,210	$	6,789	$	6,507

The following displays collectively-evaluated loans by credit quality indicator.

December 31, 2012

	Pass		Special Mention		Classified (Excluding Impaired)
Real Estate Construction
Construction, 1-4 family residential	$	14,344	$	158	$	---
Construction, other		29,011		---		120
Consumer Real Estate
Equity lines		17,742		100		182
Closed-end first liens		113,893		652		2,413
Closed-end junior liens		6,713		119		138
Commercial Real Estate
Multifamily residential real estate		36,421		---		324
Commercial real estate owner-occupied		160,188		253		1,079
Commercial real estate, other		92,628		3,112		---
Commercial Non Real Estate
Commercial and Industrial		36,372		99		318
Public Sector and IDA
States and political subdivisions		26,170		---		---
Consumer Non Real Estate
Credit cards		6,690		---		---
Automobile		12,344		101		56
Other consumer		11,815		45		105
Total	$	564,331	$	4,639	$	4,735

Sales, Purchases and Reclassification of Loans

The Company finances mortgages under “best efforts” contracts with mortgage purchasers. The mortgages are designated as held for sale upon initiation. There have been no major reclassifications from portfolio loans to held for sale. Occasionally, the Company purchases or sells participations in loans. All participation loans purchased met the Company’s normal underwriting standards at the time the participation was entered. Participation loans are included in the appropriate portfolio balances to which the allowance methodology is applied.

Troubled Debt Restructurings

The Company modifies loans in troubled debt restructurings. Total troubled debt restructurings amounted to $7,587 at September 30, 2013, $4,246 at December 31, 2012, and $4,275 at September 30, 2012. The following tables present restructurings by class that occurred during three and nine month periods ended September 30, 2013, and the three and nine month periods ended September 30, 2012.

Note: Only classes with restructured loans are presented.

	Restructurings That Occurred During the Three Months Ended September 30, 2013
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post- Modification Outstanding Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		1	$	241	$	309	$	---
Commercial Non Real Estate
Commercial and industrial		1		32		45		1
Total		2	$	273	$	354	$	1

The loans restructured during the three months ended September 30, 2013 were designated and reported as troubled debt restructures in previous quarters. The loans received additional modifications during the third quarter of 2013, transitioning payments from interest-only to amortizing, and capitalizing accrued interest. The interest rate for the consumer real estate loan remained unchanged, while the interest rate for the commercial non real estate loan decreased.

	Restructurings That Occurred During the Nine Months Ended September 30, 2013
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		2	$	453	$	525	$	3
Residential closed-end junior liens		1		262		267		7
Commercial Real Estate
Commercial real estate, owner-occupied		1		154		239		---
Commercial real estate, other		1		3,500		3,500		---
Commercial Non Real Estate
Commercial and industrial		1		32		45		1
Total		6	$	4,401	$	4,576	$	11

The modifications that resulted in troubled debt restructurings between January 1, 2013 and September 30, 2013 provided payment relief to the borrowers without forgiveness of principal or accrued interest. The date of conversion from interest-only to amortizing payments for one commercial real estate loan was extended beyond the date specified by the contract, resulting in designation as a troubled debt restructuring. During the second quarter of 2013, the loan was converted to amortizing payments and moved from Real Estate Construction to Commercial Real Estate. The other commercial real estate loan was modified to extend the term, lower the interest rate and provide debt consolidation to allow the borrower increased debt service ability. The modifications of the consumer real estate loans capitalized accrued interest and for one loan reduced the interest rate, while the other loan transitioned from interest-only payments to amortizing payments. The term for one consumer real estate loan was shortened, resulting in a higher payment, while the term for the other consumer real estate loan was lengthened, resulting in a lower payment. The interest rate for the commercial non real estate loan decreased, the balance increased to capitalize accrued interest and the payment was changed from interest-only to amortizing.

	Restructurings That Occurred During the Three Months Ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance
Consumer Real Estate
Residential closed-end first liens		1	$	38	$	38
Commercial Real Estate
Commercial real estate, owner occupied		1		193		193
Total		2	$	231	$	231

	Restructurings That Occurred During the Nine Months Ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance
Consumer Real Estate
Residential closed-end first liens		5	$	383	$	402
Residential closed-end junior liens		1		143		147
Commercial Real Estate
Commercial real estate, owner occupied		3		890		895
Commercial Non Real Estate
Commercial and Industrial		1		400		400
Total		10	$	1,816	$	1,844

Loans modified in troubled debt restructurings during the three months ended September 30, 2012 received non-financial underwriting exceptions that reduced payments by changing maturities or amortization structures. The troubled debt restructurings for the nine months ended September 30, 2012 included partial charge offs of $109 for two consumer real estate loans; providing payment relief primarily by extending maturity dates or changing amortization structures without reducing interest rates or amounts owed; and adding a co-borrower to one consumer real estate loan. Restructured loans are designated impaired and measured for impairment. Collateral dependent restructured loans are measured using the fair value of collateral. Non-collateral dependent restructured loans are measured using the present value of cash flows. The impairment measurement resulted in no specific allocations for loans modified during the three months ended September 30, 2012 and $220 for loans modified during the nine months ended September 30, 2012.

The following tables present restructured loans that defaulted during the three and nine month periods ended September 30, 2013 and the three and nine month periods ended September 30, 2012, and that were modified within 12 months prior to default. The Company defines default as one or more payments that occur more than 90 days past the due date, or charge-offs after the date of restructuring.

	Restructured Loans That Defaulted And Were Modified Within 12 Months Prior to Default
	Default During the 3 Month Period Ended September 30, 2013						Default During the 9 Month Period Ended September 30, 2013
	Number of Contracts		Principal Balance		Impairment Accrued		Number of Contracts		Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		1	$	26	$	1		1	$	26	$	1
Residential closed-end junior liens		1		47		---		1		47		---
Commercial Real Estate
Commercial real estate owner-occupied		2		664		352		3		857		352
Commercial Non Real Estate
Commercial and industrial		1		137		---		1		137		---
Total		5	$	874	$	353		6	$	1,067	$	353

Restructured loans are individually evaluated for impairment. The fair value measurements for most of the restructured loans that defaulted during the three-month and nine-month periods ended September 30, 2013 were based upon the fair value of collateral and as such were not significantly affected by the default. One of the commercial real estate restructurings that defaulted during the three months ended September 31, 2013 was measured using the present value of cash flows, resulting in an impairment allocation of $352. In previous quarters, no allocation was recognized. One of the commercial real estate loans that defaulted in the first quarter of 2013 was placed into other real estate owned, and the commercial non real estate loan was partially paid off by the borrower, with the remainder of the principal charged against the allowance for loan losses. All of the restructurings that defaulted during the three-month and nine-month periods ended September 30, 2013 and that remain active loans are in nonaccrual status.

	Restructured Loans That Defaulted And Were Modified Within 12 Months Prior to Default
	Default During the 3 Month Period Ended September 30, 2012						Default During the 9 Month Period Ended September 30, 2012
	Number of Contracts		Principal Balance		Impairment Accrued		Number of Contracts		Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		1	$	96	$	---		1	$	96	$	---
Residential closed-end junior liens		1		84		---		1		84		---
Commercial Real Estate
Commercial real estate owner-occupied		2		861		21		2		861		21
Total		4	$	1,041	$	21		4	$	1,041	$	21

The fair value measurements for all of the restructured loans that defaulted during the three-month and nine-month periods ended September 30, 2012 were measured using the fair value of collateral and as such, were not significantly affected by the payment default. All were maintained on nonaccrual status as of September 30, 2012.

XML

Consolidated Statements of Income (Unaudited) (Parentheticals) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Reclassification	$ (88)	$ (18)	$ (4)	$ 20
Reclassification, income tax expense (benefit)	$ (31)	$ (6)	$ (1)	$ 7

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Consolidated Balance Sheets (Current Period Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Assets
Cash and due from banks	$ 13,806	$ 14,783
Interest-bearing deposits	62,776	96,597
Securities available for sale, at fair value	192,225	189,815
Securities held to maturity (fair value approximates $160,676 at September 30, 2013 and $170,846 at December 31, 2012)	164,752	160,539
Restricted stock, at cost	1,414	1,689
Mortgage loans held for sale	617	2,796
Loans, net of unearned income and deferred fees	590,664	592,162
Less allowance for loan losses	(8,090)	(8,349)
Loans, net	582,574	583,813
Premises and equipment, net	10,025	10,401
Accrued interest receivable	6,044	6,247
Other real estate owned, net	973	1,435
Intangible assets and goodwill	8,568	9,377
Bank-owned life insurance	21,020	20,523
Other assets	12,609	6,346
Total assets	1,077,403	1,104,361
Liabilities and Stockholders' Equity
Noninterest-bearing demand deposits	147,928	144,252
Interest-bearing demand deposits	453,044	455,713
Savings deposits	73,952	69,063
Time deposits	248,574	277,738
Total deposits	923,498	946,766
Accrued interest payable	97	139
Other liabilities	7,514	7,347
Total liabilities	931,109	954,252
Commitments and contingencies
Stockholders' Equity
Preferred stock, no par value, 5,000,000 shares authorized; none issued and outstanding	0	0
Common stock of $1.25 par value. Authorized 10,000,000 shares; issued and outstanding 6,947,974 shares at September 30, 2013 and December 31, 2012	8,685	8,685
Retained earnings	153,578	144,162
Accumulated other comprehensive loss, net	(15,969)	(2,738)
Total stockholders' equity	146,294	150,109
Total liabilities and stockholders' equity	$ 1,077,403	$ 1,104,361

XML

Note 8 - Fair Value Measurements (Details) - Impaired Loans and Other Real Estate Owned Measured at Fair Value on Nonrecurring Basis (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Note 8 - Fair Value Measurements (Details) - Impaired Loans and Other Real Estate Owned Measured at Fair Value on Nonrecurring Basis [Line Items]
Impaired Loans	$ 1,541	$ 928
Other Real Estate Owned	973	1,435
Fair Value, Inputs, Level 3 [Member]
Note 8 - Fair Value Measurements (Details) - Impaired Loans and Other Real Estate Owned Measured at Fair Value on Nonrecurring Basis [Line Items]
Impaired Loans	1,541	928
Other Real Estate Owned	$ 973	$ 1,435

XML

Note 3 - Loan Portfolio (Details) - Loan Portfolio, excluding Loans Held for Sale (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans Receivable, Gross	$ 591,552	$ 593,115
Less unearned income and deferred fees	(888)	(953)
Loans, net of unearned income and deferred fees	590,664	592,162
Real Estate Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans Receivable, Gross	55,022	50,313
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans Receivable, Gross	146,447	143,262
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans Receivable, Gross	301,890	304,308
Commercial Non Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans Receivable, Gross	31,329	37,349
Public Sector and IDA [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans Receivable, Gross	28,332	26,169
Consumer Non Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans Receivable, Gross	$ 28,532	$ 31,714

XML

Note 5 - Securities (Tables)

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Available-for-sale Securities [Table Text Block]

	September 30, 2013
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
Available for Sale:
U.S. Treasury	$	2,001	$	11	$	---	$	2,012
U.S. Government agencies		169,815		253		17,925		152,143
Mortgage-backed securities		2,919		234		---		3,153
States and political subdivisions		23,742		785		123		24,404
Corporate		8,805		113		541		8,377
Other securities		2,151		---		15		2,136
Total	$	209,433	$	1,396	$	18,604	$	192,225

	December 31, 2012
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
Available for Sale:
U.S. Treasury	$	2,005	$	68	$	---	$	2,073
U.S. Government agencies		128,805		1,381		622		129,564
Mortgage-backed securities		4,202		367		---		4,569
States and political subdivisions		35,029		1,753		3		36,779
Corporate		14,207		368		---		14,575
Other securities		2,419		9		173		2,255
Total	$	186,667	$	3,946	$	798	$	189,815

Held-to-maturity Securities [Table Text Block]

	September 30, 2013
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
Held to Maturity:
U.S. Government agencies	$	13,977	$	315	$	1,025	$	13,267
Mortgage-backed securities		547		55		---		602
States and political subdivisions		150,228		3,158		6,579		146,807
Total	$	164,752	$	3,528	$	7,604	$	160,676

	December 31, 2012
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
Held to Maturity:
U.S. Government agencies	$	7,988	$	563	$	---	$	8,551
Mortgage-backed securities		691		73		---		764
States and political subdivisions		151,209		9,880		216		160,873
Corporate		651		7		---		658
Total	$	160,539	$	10,523	$	216	$	170,846

Schedule of Temporary Impairment Losses, Investments [Table Text Block]

	September 30, 2013
	Less Than 12 Months				12 Months or More
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Temporarily Impaired Securities:
U.S. Government agencies	$	156,170	$	18,542	$	2,608	$	408
States and political subdivisions		57,677		6,593		850		109
Corporate		5,477		541		---		---
Other securities		---		---		174		15
Total	$	219,324	$	25,676	$	3,632	$	532

	December 31, 2012
	Less Than 12 Months				12 Months or More
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Temporarily Impaired Securities:
U.S. Government agencies	$	44,351	$	622	$	---	$	---
States and political subdivisions		9,358		216		482		3
Other securities		---		---		133		172
Total	$	53,709	$	838	$	615	$	175

XML

Note 5 - Securities (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Note 5 - Securities (Details) [Line Items]
Number of temporarily impaired securities	278
Available For Sale And Held To Maturity Securities Continuous Unrealized Loss Position Fair Value	$ 222,956
Unrealized Loss on Securities	26,208
Continuous Unrealized Loss Position Twelve Months Or Longer Fair Value	3,632	615
Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses	$ 532	$ 175
Continuous Loss Position - 12 Months or More [Member]
Note 5 - Securities (Details) [Line Items]
Number of temporarily impaired securities	5

XML

Note 9 - Components of Accumulated Other Comprehensive Loss (Details) - Components of Accumulated Other Comprehensive Loss (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 Accumulated Net Unrealized Investment Gain (Loss) [Member]	Sep. 30, 2012 Accumulated Net Unrealized Investment Gain (Loss) [Member]	Sep. 30, 2013 Accumulated Defined Benefit Plans Adjustment [Member]	Dec. 31, 2012 Accumulated Defined Benefit Plans Adjustment [Member]	Sep. 30, 2012 Accumulated Defined Benefit Plans Adjustment [Member]	Dec. 31, 2011 Accumulated Defined Benefit Plans Adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance			$ (2,738)	$ (1,321)	$ 2,047	$ 2,646	$ (4,785)	$ (4,785)	$ (3,967)	$ (3,967)
Unrealized Holding Gains (Losses)	(3,818)	(653)	(13,234)	(331)	(13,234)	(331)
Reclassification Adjustment	57	12	3	(13)	3	(13)
Ending Balance	$ (15,969)	$ (1,665)	$ (15,969)	$ (1,665)	$ (11,184)	$ 2,302	$ (4,785)	$ (4,785)	$ (3,967)	$ (3,967)

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Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) - Collectively-Evaluated Loans by Credit Quality Indicator (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	$ 574,506	$ 574,659
Real Estate Construction [Member] | Construction, 1-4 Family Residential [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	17,451	14,344
Real Estate Construction [Member] | Construction, 1-4 Family Residential [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	158	158
Real Estate Construction [Member] | Construction other [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	34,375	29,011
Real Estate Construction [Member] | Construction other [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	30
Real Estate Construction [Member] | Construction other [Member] | Classified Excluding Impaired [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	16	120
Consumer Real Estate [Member] | Equity Lines [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	16,289	17,742
Consumer Real Estate [Member] | Equity Lines [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	33	100
Consumer Real Estate [Member] | Equity Lines [Member] | Classified Excluding Impaired [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans		182
Consumer Real Estate [Member] | Residential closed end first liens [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	81,171	113,893
Consumer Real Estate [Member] | Residential closed end first liens [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	1,446	652
Consumer Real Estate [Member] | Residential closed end first liens [Member] | Classified Excluding Impaired [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	1,605	2,413
Consumer Real Estate [Member] | Residential closed end junior liens [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	4,856	6,713
Consumer Real Estate [Member] | Residential closed end junior liens [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	166	119
Consumer Real Estate [Member] | Residential closed end junior liens [Member] | Classified Excluding Impaired [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	35	138
Consumer Real Estate [Member] | Investor-owned residential real estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	39,550
Consumer Real Estate [Member] | Investor-owned residential real estate [Member] | Classified Excluding Impaired [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	97
Commercial Real Estate Loans [Member] | Multifamily Residential Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	64,940	36,421
Commercial Real Estate Loans [Member] | Multifamily Residential Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	305
Commercial Real Estate Loans [Member] | Multifamily Residential Real Estate [Member] | Classified Excluding Impaired [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	752	324
Commercial Real Estate Loans [Member] | Commercial real estate, owner occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	126,418	160,188
Commercial Real Estate Loans [Member] | Commercial real estate, owner occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	2,501	253
Commercial Real Estate Loans [Member] | Commercial real estate, owner occupied [Member] | Classified Excluding Impaired [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	679	1,079
Commercial Real Estate Loans [Member] | Commercial real estate, other [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	89,525	92,628
Commercial Real Estate Loans [Member] | Commercial real estate, other [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	964	3,112
Commercial Real Estate Loans [Member] | Commercial real estate, other [Member] | Classified Excluding Impaired [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	3,087
Commercial Non Real Estate [Member] | Commercial and Industrial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	30,070	36,372
Commercial Non Real Estate [Member] | Commercial and Industrial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	916	99
Commercial Non Real Estate [Member] | Commercial and Industrial [Member] | Classified Excluding Impaired [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	231	318
Public Sector and IDA [Member] | States & Political Subdivisions [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	28,332	26,170
Consumer Non Real Estate [Member] | Credit Card Receivable [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	7,054	6,690
Consumer Non Real Estate [Member] | Automobile [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	11,964	12,344
Consumer Non Real Estate [Member] | Automobile [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	217	101
Consumer Non Real Estate [Member] | Automobile [Member] | Classified Excluding Impaired [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	5	56
Consumer Non Real Estate [Member] | Other Consumer Loans [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	9,215	11,815
Consumer Non Real Estate [Member] | Other Consumer Loans [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	53	45
Consumer Non Real Estate [Member] | Other Consumer Loans [Member] | Classified Excluding Impaired [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans		105
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	561,210	564,331
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	6,789	4,639
Classified Excluding Impaired [Member]
Financing Receivable, Recorded Investment [Line Items]
Collectively Evaluated Loans	$ 6,507	$ 4,735

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Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) - Impaired Loans and Associated Reserves (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013		Dec. 31, 2012		Sep. 30, 2012
Financing Receivable, Impaired [Line Items]
Principal Balance	$ 17,046		$ 18,456		$ 11,965
(A) Total Recorded Investment(1)	17,032	[1]	18,422	[1]
Recorded Investment(1)in (A) for Which There is No Related Allowance	14,551		16,940
Recorded Investment(1)in (A) for Which There is a Related Allowance	2,481		1,482
Related Allowance	631		554		327
Real Estate Construction [Member] | Construction residential [Member]
Financing Receivable, Impaired [Line Items]
Principal Balance	123		123
(A) Total Recorded Investment(1)	118	[1]	118	[1]
Recorded Investment(1)in (A) for Which There is No Related Allowance	118		118
Real Estate Construction [Member] | Construction other [Member]
Financing Receivable, Impaired [Line Items]
Principal Balance	2,869		6,520
(A) Total Recorded Investment(1)	2,854	[1]	6,487	[1]
Recorded Investment(1)in (A) for Which There is No Related Allowance	2,854		6,487
Consumer Real Estate [Member] | Equity Lines [Member]
Financing Receivable, Impaired [Line Items]
(A) Total Recorded Investment(1)		[1]		[1]
Consumer Real Estate [Member] | Residential closed end first liens [Member]
Financing Receivable, Impaired [Line Items]
Principal Balance	760		783
(A) Total Recorded Investment(1)	762	[1]	785	[1]
Recorded Investment(1)in (A) for Which There is No Related Allowance	214		634
Recorded Investment(1)in (A) for Which There is a Related Allowance	548		151
Related Allowance	4		43
Consumer Real Estate [Member] | Residential closed end junior liens [Member]
Financing Receivable, Impaired [Line Items]
Principal Balance	310		81
(A) Total Recorded Investment(1)	312	[1]	81	[1]
Recorded Investment(1)in (A) for Which There is No Related Allowance	48		81
Recorded Investment(1)in (A) for Which There is a Related Allowance	264
Related Allowance	7
Consumer Real Estate [Member] | Investor-owned residential real estate [Member]
Financing Receivable, Impaired [Line Items]
Principal Balance	129
(A) Total Recorded Investment(1)	131	[1]
Recorded Investment(1)in (A) for Which There is No Related Allowance	131
Commercial Real Estate Loans [Member] | Multifamily real estate [Member]
Financing Receivable, Impaired [Line Items]
Principal Balance	3,970		5,284
(A) Total Recorded Investment(1)	3,967	[1]	5,288	[1]
Recorded Investment(1)in (A) for Which There is No Related Allowance	3,967		5,288
Commercial Real Estate Loans [Member] | Commercial real estate, owner occupied [Member]
Financing Receivable, Impaired [Line Items]
Principal Balance	5,271		5,045
(A) Total Recorded Investment(1)	5,274	[1]	5,043	[1]
Recorded Investment(1)in (A) for Which There is No Related Allowance	3,713		4,293
Recorded Investment(1)in (A) for Which There is a Related Allowance	1,561		750
Related Allowance	617		273
Commercial Real Estate Loans [Member] | Commercial real estate, other [Member]
Financing Receivable, Impaired [Line Items]
Principal Balance	3,478
(A) Total Recorded Investment(1)	3,478	[1]		[1]
Recorded Investment(1)in (A) for Which There is No Related Allowance	3,478
Commercial Non Real Estate [Member] | Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Principal Balance	112		574
(A) Total Recorded Investment(1)	112	[1]	574	[1]
Recorded Investment(1)in (A) for Which There is No Related Allowance	4		39
Recorded Investment(1)in (A) for Which There is a Related Allowance	108		535
Related Allowance	3		231
Public Sector and IDA [Member] | Public Sector and IDA [Member]
Financing Receivable, Impaired [Line Items]
(A) Total Recorded Investment(1)		[1]		[1]
Consumer Non Real Estate [Member] | Credit Card Receivable [Member]
Financing Receivable, Impaired [Line Items]
(A) Total Recorded Investment(1)		[1]		[1]
Consumer Non Real Estate [Member] | Automobile [Member]
Financing Receivable, Impaired [Line Items]
Principal Balance	24		46
(A) Total Recorded Investment(1)	24	[1]	46	[1]
Recorded Investment(1)in (A) for Which There is No Related Allowance	24
Recorded Investment(1)in (A) for Which There is a Related Allowance			46
Related Allowance			7
Consumer Non Real Estate [Member] | Other Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
(A) Total Recorded Investment(1)		[1]		[1]

[1] Recorded investment includes the unpaid principal balance and any accrued interest and net deferred fees.

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Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) - Impaired Loans, Average Investment and Interest Income Recognized, Current Year (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended				12 Months Ended
	Sep. 30, 2013		Sep. 30, 2013		Sep. 30, 2012		Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	$ 17,737	[1]	$ 17,357	[1],[2]	$ 13,831	[2]	$ 13,540	[2],[3]
Interest Income Recognized	57		159		292		9
Real Estate Construction [Member] | Construction residential [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	118	[1]	118	[1]			1,171	[3]
Real Estate Construction [Member] | Construction other [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	3,005	[1]	3,005	[1]			4,290	[3]
Interest Income Recognized							1
Consumer Real Estate [Member] | Equity Lines [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment		[1]		[1]			101	[3]
Consumer Real Estate [Member] | Residential closed end first liens [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	863	[1]	729	[1]			873	[3]
Interest Income Recognized	2		4				2
Consumer Real Estate [Member] | Residential closed end junior liens [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	410	[1]	238	[1]			234	[3]
Interest Income Recognized	2		2
Consumer Real Estate [Member] | Investor-owned residential real estate [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	131	[1]	100	[1]
Interest Income Recognized	2		4
Commercial Real Estate Loans [Member] | Multifamily real estate [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	4,133	[1]	4,189	[1]			1,466	[3]
Interest Income Recognized							5
Commercial Real Estate Loans [Member] | Commercial real estate, owner occupied [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	5,424	[1]	5,073	[1]			4,806	[3]
Interest Income Recognized	28		82				1
Commercial Real Estate Loans [Member] | Commercial real estate, other [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	3,489	[1]	3,492	[1]				[3]
Interest Income Recognized	22		65
Commercial Non Real Estate [Member] | Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	138	[1]	380	[1]			570	[3]
Interest Income Recognized	1		2
Public Sector and IDA [Member] | Public Sector and IDA [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment		[1]		[1]				[3]
Consumer Non Real Estate [Member] | Credit Card Receivable [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment		[1]		[1]				[3]
Consumer Non Real Estate [Member] | Automobile [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	26	[1]	33	[1]			4	[3]
Consumer Non Real Estate [Member] | Other Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment		[1]		[1]			$ 25	[3]

[1] Recorded investment includes the unpaid principal balance and any accrued interest and net deferred fees.

[2] Recorded investment includes principal, accrued interest and net deferred fees.

[3] Recorded investment includes the unpaid principal balance and any accrued interest and deferred fees.

XML

Note 3 - Loan Portfolio

9 Months Ended

Sep. 30, 2013

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 3:    Loan Portfolio

The loan portfolio, excluding loans held for sale, was comprised of the following.

	September 30, 2013			December 31, 2012
Real estate construction	$	55,022		$	50,313
Consumer real estate		146,447			143,262
Commercial real estate		301,890			304,308
Commercial non real estate		31,329			37,349
Public sector and IDA		28,332			26,169
Consumer non real estate		28,532			31,714
Gross loans		591,552			593,115
Less unearned income and deferred fees		(888	)		(953	)
Loans, net of unearned income and deferred fees	$	590,664		$	592,162

XML

Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) [Line Items]
Loans and Leases Receivable, Allowance	$ 8,090	$ 8,254	$ 8,090	$ 8,254	$ 7,952	$ 8,349	$ 8,168	$ 8,068
Nonaccrual Designation as Impaired Threshold			250
Threshold period for considering loans as special mention or classified			75 days
Financing Receivable, Modifications, Recorded Investment	7,587	4,275	7,587	4,275		4,246
Financing Receivable, Allowance for Credit Losses, Write-downs	(196)	(716)	(1,680)	(2,444)
Financing Receivable Modifications Impairment Accrued	1	0	11	220
Cost Method Investments, Fair Value Disclosure	352		352
Portion Based on Historical Loss Rates [Member]
Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) [Line Items]
Loans and Leases Receivable, Allowance	2,822		2,822
Portion Based on Historical Loss Rates Under Former Methodology [Member]
Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) [Line Items]
Loans and Leases Receivable, Allowance	2,384		2,384
Portion Based on Historical Loss Rates Applied to Non-classified Loans [Member]
Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) [Line Items]
Loans and Leases Receivable, Allowance	2,370		2,370
Portion Based on Historical Loss Rates Applied to Classified Loans [Member]
Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) [Line Items]
Loans and Leases Receivable, Allowance	452		452
Consumer Real Estate [Member]
Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) [Line Items]
Financing Receivable, Allowance for Credit Losses, Write-downs				$ 109
Special Mention [Member]
Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) [Line Items]
Increase in percentage of allocation			50.00%
Classified Loans [Member]
Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) [Line Items]
Increase in percentage of allocation			100.00%

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Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) - Restructured Loans that Defaulted during Reporting Period (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Financing Receivable, Modifications [Line Items]
Number of Contracts	5	4	6	4
Principal Balance	$ 874	$ 1,041	$ 1,067	$ 1,041
Impairment Accrued	353	21	353	21
Consumer Real Estate [Member] | Residential closed end first liens [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	1	1	1
Principal Balance	26	96	26	96
Impairment Accrued	1		1
Consumer Real Estate [Member] | Residential closed end junior liens [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	1	1	1
Principal Balance	47	84	47	84
Commercial Real Estate Loans [Member] | Commercial real estate, owner occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	2	2	3	2
Principal Balance	664	861	857	861
Impairment Accrued	352	21	352	21
Commercial Non Real Estate [Member] | Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1		1
Principal Balance	$ 137		$ 137

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Note 6 - Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2013

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

Note 6: Recent Accounting Pronouncements

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities.” This ASU requires entities to disclose both gross information and net information about both instruments and transactions eligible for offset in the balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements.

In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment.” The amendments in this ASU apply to all entities that have indefinite-lived intangible assets, other than goodwill, reported in their financial statements. The amendments in this ASU provide an entity with the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative impairment test. The amendments also enhance the consistency of impairment testing guidance among long-lived asset categories by permitting an entity to assess qualitative factors to determine whether it is necessary to calculate the asset’s fair value when testing an indefinite-lived intangible asset for impairment. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements.

In January 2013, the FASB issued ASU 2013-01, “Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” The amendments in this ASU clarify the scope for derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements and securities borrowing and securities lending transactions that are either offset or subject to netting arrangements. An entity is required to apply the amendments for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements.

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The amendments in this ASU require an entity to present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income. In addition, the amendments require a cross-reference to other disclosures currently required for other reclassification items to be reclassified directly to net income in their entirety in the same reporting period. Companies should apply these amendments for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. The Company has included the required disclosures from ASU 2013-02 in the consolidated financial statements.

In July 2013, the FASB issued ASU 2013-10, “Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.” The amendments in this ASU permit the Fed Funds Effective Swap Rate (also referred to as the Overnight Index Swap Rate) to be used as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, in addition to interest rates on direct Treasury obligations of the U.S. government and the London Interbank Offered Rate. The amendments also remove the restriction on using different benchmark rates for similar hedges. The amendments apply to all entities that elect to apply hedge accounting of the benchmark interest rate under Topic 815. The amendments are effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” The amendments in this Update provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements.

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Note 2 - Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 2: Stock-Based Compensation

The Company had a stock option plan, the 1999 Stock Option Plan, that was adopted in 1999 and that was terminated on March 9, 2009. Incentive stock options were granted annually to key employees of NBI and its subsidiaries from 1999 to 2005 and none have been granted since 2005. All of the stock options are vested.

Options	Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2013		69,000	$	23.75
Exercised		---		---
Forfeited or expired		---		---
Outstanding September 30, 2013		69,000	$	23.75		1.11	$	838
Exercisable at September 30, 2013		69,000	$	23.75		1.11	$	838

There were no shares exercised during the nine months ended September 30, 2013. There were 4,000 shares with an intrinsic value of $74 exercised during the nine months ended September 30, 2012. As of September 30, 2013, there was no unrecognized compensation expense related to stock options.

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Consolidated Statements of Comprehensive Income (Unaudited) (Parentheticals) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Unrealized holding gains (losses) on available for sale securities, taxes	$ (2,056)	$ (351)	$ (7,126)	$ (178)
Reclassification adjustment, taxes	31	6	1	(7)
Other comprehensive income (loss), taxes	$ (2,025)	$ (345)	$ (7,125)	$ (185)

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Note 8 - Fair Value Measurements (Details) - Level 3 Fair Value Measurements	9 Months Ended		12 Months Ended
	Sep. 30, 2013		Dec. 31, 2012
Discounted Appraised Value [Member] | Impaired loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value, valuation technique	Discounted appraised value		Discounted appraised value
Fair value, unobservable input		[1]
Fair value, valuation technique	Discounted appraised value		Discounted appraised value
Fair value, valuation technique	Discounted appraised value		Discounted appraised value
Discounted Appraised Value [Member] | Other Real Estate Owned [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value, valuation technique	Discounted appraised value		Discounted appraised value
Fair value, valuation technique	Discounted appraised value		Discounted appraised value
Fair value, valuation technique	Discounted appraised value		Discounted appraised value
Discounted Appraised Value [Member] | Minimum [Member] | Impaired loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value, unobservable input			0.00%	[1]
Fair value, unobservable input			0.00%	[1]
Discounted Appraised Value [Member] | Minimum [Member] | Other Real Estate Owned [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value, unobservable input		[1]		[1]
Fair value, unobservable input	0.00%	[1]	0.00%	[1]
Discounted Appraised Value [Member] | Maximum [Member] | Impaired loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value, unobservable input			10.00%
Fair value, unobservable input			60.00%
Discounted Appraised Value [Member] | Maximum [Member] | Other Real Estate Owned [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value, unobservable input	9.95%		6.00%
Fair value, unobservable input	20.71%		30.90%
Discounted Appraised Value [Member] | Weighted Average [Member] | Impaired loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value, unobservable input			(2.00%)
Fair value, unobservable input			(52.00%)
Discounted Appraised Value [Member] | Weighted Average [Member] | Other Real Estate Owned [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value, unobservable input			(4.30%)
Fair value, unobservable input	(3.48%)		(4.68%)
Present Value of Cash Flows [Member] | Impaired loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value, valuation technique	Present value of cash flows		Present value of cash flows
Fair value, valuation technique	Present value of cash flows		Present value of cash flows
Fair value, valuation technique	Present value of cash flows		Present value of cash flows
Present Value of Cash Flows [Member] | Minimum [Member] | Impaired loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value, unobservable input	6.25%	[1]	6.00%	[1]
Present Value of Cash Flows [Member] | Maximum [Member] | Impaired loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value, unobservable input	9.50%		7.50%
Present Value of Cash Flows [Member] | Weighted Average [Member] | Impaired loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value, unobservable input	(6.75%)		(6.28%)

[1] Of the Company's impaired loans with specific allocations based on Level 3 inputs, both loans valued using fair value of collateral utilized the same discount rate.

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Note 5 - Securities (Details) - Temporarily Impaired Securities (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Temporarily Impaired Securities:
Less Than 12 Months - Fair Value	$ 219,324	$ 53,709
Less Than 12 Months - Unrealized Loss	25,676	838
12 Months or More - Fair Value	3,632	615
12 Months or More - Unrealized Loss	532	175
US Government Agencies [Member]
Temporarily Impaired Securities:
Less Than 12 Months - Fair Value	156,170	44,351
Less Than 12 Months - Unrealized Loss	18,542	622
12 Months or More - Fair Value	2,608
12 Months or More - Unrealized Loss	408
States and Political Subdivisions [Member]
Temporarily Impaired Securities:
Less Than 12 Months - Fair Value	57,677	9,358
Less Than 12 Months - Unrealized Loss	6,593	216
12 Months or More - Fair Value	850	482
12 Months or More - Unrealized Loss	109	3
Corporate Securities [Member]
Temporarily Impaired Securities:
Less Than 12 Months - Fair Value	5,477
Less Than 12 Months - Unrealized Loss	541
Other Securities [Member]
Temporarily Impaired Securities:
12 Months or More - Fair Value	174	133
12 Months or More - Unrealized Loss	$ 15	$ 172

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Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Details) - Summary of Nonperforming Assets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013		Dec. 31, 2012		Sep. 30, 2012
Summary of Nonperforming Assets [Abstract]
Nonaccrual loans	$ 10,194		$ 10,870		$ 3,876
Restructured loans in nonaccrual	1,042		2,151		2,254
Total nonperforming loans	11,236		13,021		6,130
Other real estate owned, net	973		1,435		1,894
Total nonperforming assets	$ 12,209		$ 14,456		$ 8,024
Ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned	2.06%		2.44%		1.35%
Ratio of allowance for loan losses to nonperforming loans(1)	72.00%	[1]	64.12%	[1]	134.65%	[1]

[1] The Company defines nonperforming loans as nonaccrual loans. Loans 90 days or more past due and still accruing and accruing restructured loans are excluded.

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Note 9 - Components of Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

Comprehensive Income (Loss) Note [Text Block]

Note 9: Components of Accumulated Other Comprehensive Loss

	Net Unrealized Gain (Loss) on Securities			Adjustments Related to Pension Benefits			Accumulated Other Comprehensive (Loss)
Balance at December 31, 2011	$	2,646		$	(3,967	)	$	(1,321	)
Unrealized holding loss on available for sale securities net of tax of ($178)		(331	)		---			(331	)
Reclassification adjustment, net of tax of ($7)		(13	)		---			(13	)
Balance at September 30, 2012		2,302			(3,967	)		(1,665	)
Balance at December 31, 2012		2,047			(4,785	)		(2,738	)
Unrealized holding loss on available for sale securities net of tax of ($7,126)		(13,234	)		---			(13,234	)
Reclassification adjustment, net of tax of $1		3			---			3
Balance at September 30, 2013	$	(11,184	)	$	(4,785	)	$	(15,969	)

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Note 5 - Securities

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 5: Securities

The amortized costs, gross unrealized gains, gross unrealized losses and fair values for securities available for sale by major security type are as follows.

	September 30, 2013
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
Available for Sale:
U.S. Treasury	$	2,001	$	11	$	---	$	2,012
U.S. Government agencies		169,815		253		17,925		152,143
Mortgage-backed securities		2,919		234		---		3,153
States and political subdivisions		23,742		785		123		24,404
Corporate		8,805		113		541		8,377
Other securities		2,151		---		15		2,136
Total	$	209,433	$	1,396	$	18,604	$	192,225

	December 31, 2012
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
Available for Sale:
U.S. Treasury	$	2,005	$	68	$	---	$	2,073
U.S. Government agencies		128,805		1,381		622		129,564
Mortgage-backed securities		4,202		367		---		4,569
States and political subdivisions		35,029		1,753		3		36,779
Corporate		14,207		368		---		14,575
Other securities		2,419		9		173		2,255
Total	$	186,667	$	3,946	$	798	$	189,815

The amortized costs, gross unrealized gains, gross unrealized losses and fair values for securities held to maturity by major security type are as follows.

	September 30, 2013
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
Held to Maturity:
U.S. Government agencies	$	13,977	$	315	$	1,025	$	13,267
Mortgage-backed securities		547		55		---		602
States and political subdivisions		150,228		3,158		6,579		146,807
Total	$	164,752	$	3,528	$	7,604	$	160,676

	December 31, 2012
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
Held to Maturity:
U.S. Government agencies	$	7,988	$	563	$	---	$	8,551
Mortgage-backed securities		691		73		---		764
States and political subdivisions		151,209		9,880		216		160,873
Corporate		651		7		---		658
Total	$	160,539	$	10,523	$	216	$	170,846

Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows.

	September 30, 2013
	Less Than 12 Months				12 Months or More
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Temporarily Impaired Securities:
U.S. Government agencies	$	156,170	$	18,542	$	2,608	$	408
States and political subdivisions		57,677		6,593		850		109
Corporate		5,477		541		---		---
Other securities		---		---		174		15
Total	$	219,324	$	25,676	$	3,632	$	532

	December 31, 2012
	Less Than 12 Months				12 Months or More
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Temporarily Impaired Securities:
U.S. Government agencies	$	44,351	$	622	$	---	$	---
States and political subdivisions		9,358		216		482		3
Other securities		---		---		133		172
Total	$	53,709	$	838	$	615	$	175

The Company had 278 securities with a fair value of $222,956 which were temporarily impaired at September 30, 2013.  The total unrealized loss on these securities was $26,208. Of the temporarily impaired total, five securities with a fair value of $3,632 and an unrealized loss of $532 have been in a continuous loss position for twelve months or more. The Company has determined that these securities are temporarily impaired at September 30, 2013 for the reasons set out below.

U.S. Government agencies. The unrealized losses in this category of investments were caused by interest rate and market fluctuations. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. The Company is monitoring bond market trends and developing strategies to address unrealized losses. At this time the unrealized losses are not considered to be other-than-temporarily impaired.

States and political subdivisions. This category’s unrealized losses are primarily the result of interest rate and market fluctuations. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and it is not likely that the Company will be required to sell any of the investments before recovery of its amortized cost basis, which may be at maturity, the Company does not consider these investments to be other-than-temporarily impaired.

Corporate. The Company’s unrealized losses in corporate debt securities are related to interest rate and market fluctuations. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments before recovery of its amortized cost basis, which may be at maturity, the Company does not consider these investments to be other-than-temporarily impaired.

Other securities. The Company holds an investment in an LLC and a small amount of community bank stock. The value of these investments has been negatively affected by market conditions. Because the Company does not intend to sell these investments before recovery of amortized cost basis, the Company does not consider these investments to be other-than-temporarily impaired.

As a member of the Federal Reserve and the Federal Home Loan Bank (“FHLB”) of Atlanta, NBB is required to maintain certain minimum investments in the common stock of those entities. Required levels of investment are based upon NBB’s capital and a percentage of qualifying assets. In addition, NBB is eligible to borrow from the FHLB with borrowings collateralized by qualifying assets, primarily residential mortgage loans and NBB’s capital stock investment in the FHLB. Redemption of FHLB stock is subject to certain limitations and conditions. At its discretion, the FHLB may declare dividends on the stock. Management reviews for impairment based upon the ultimate recoverability of the cost basis of the FHLB stock, and at September 30, 2013, management did not consider there to be any impairment.

Management regularly monitors the credit quality of the investment portfolio. Changes in ratings are noted and follow-up research on the issuer is undertaken when warranted. Management intends to carefully follow any changes in bond quality.

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Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Tables)

9 Months Ended

Sep. 30, 2013

Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Tables) [Line Items]

Allowance for Credit Losses on Financing Receivables [Table Text Block]

	Activity in the Allowance for Loan Losses for the Three Months Ended September 30, 2013
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate		Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated			Total
Balance, June 30, 2013	$	1,032		$	1,670		$	3,029	$	1,481		$	111		$	513		$	116			7,952
Charge-offs		---			(120	)		---		(8	)		---			(68	)		---			(196	)
Recoveries		---			---			8		2			---			21			---			31
Provision for loan losses		(11	)		334			553		(472	)		(6	)		(59	)		(36	)		303
Balance, September 30, 2013	$	1,021		$	1,884		$	3,590	$	1,003		$	105		$	407		$	80		$	8,090

	Activity in the Allowance for Loan Losses for the Nine Months Ended September 30, 2013
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated		Total
Balance, December 31, 2012	$	1,070		$	2,263		$	3,442		$	959		$	142		$	424		$	49	$	8,349
Charge-offs		(184	)		(219	)		(35	)		(968	)		---			(274	)		---		(1,680	)
Recoveries		---			1			12			18			---			61			---		92
Provision for loan losses		135			(161	)		171			994			(37	)		196			31		1,329
Balance, September 30, 2013	$	1,021		$	1,884		$	3,590		$	1,003		$	105		$	407		$	80	$	8,090

	Activity in the Allowance for Loan Losses for the Three Months Ended September 30, 2012
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA		Consumer Non Real Estate			Unallocated			Total
Balance, June 30, 2012	$	1,396		$	1,910		$	3,257		$	909		$	111	$	422		$	163			8,168
Charge-offs		(51	)		(33	)		(592	)		---			---		(40	)		---			(716	)
Recoveries		---			---			---			1			---		23			---			24
Provision for loan losses		(158	)		95			872			(46	)		34		(5	)		(14	)		778
Balance, September 30, 2012	$	1,187		$	1,972		$	3,537		$	864		$	145	$	400		$	149		$	8,254

	Activity in the Allowance for Loan Losses for the Nine Months Ended September 30, 2012
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated		Total
Balance, December 31, 2011	$	1,079		$	1,245		$	3,515		$	1,473		$	232		$	403		$	121	$	8,068
Charge-offs		(640	)		(278	)		(1,329	)		(5	)		---			(192	)		---		(2,444	)
Recoveries		13			2			---			2			---			59			---		76
Provision for loan losses		735			1,003			1,351			(606	)		(87	)		130			28		2,554
Balance, September 30, 2012	$	1,187		$	1,972		$	3,537		$	864		$	145		$	400		$	149	$	8,254

	Allowance for Loan Losses as of September 30, 2013
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	---	$	11	$	617	$	3	$	---	$	---	$	---	$	631
Collectively evaluated for impairment		1,021		1,873		2,973		1,000		105		407		80		7,459
Total	$	1,021	$	1,884	$	3,590	$	1,003	$	105	$	407	$	80	$	8,090

	Allowance for Loan Losses as of December 31, 2012
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	---	$	43	$	273	$	231	$	---	$	7	$	---	$	554
Collectively evaluated for impairment		1,070		2,220		3,169		728		142		417		49		7,795
Total	$	1,070	$	2,263	$	3,442	$	959	$	142	$	424	$	49	$	8,349

	Loans as of September 30, 2013
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	2,992	$	1,199	$	12,719	$	112	$	---	$	24	$	---	$	17,046
Collectively evaluated for impairment		52,030		145,248		289,171		31,217		28,332		28,508		---		574,506
Total loans	$	55,022	$	146,447	$	301,890	$	31,329	$	28,332	$	28,532	$	---	$	591,552

	Loans as of December 31, 2012
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	6,643	$	864	$	10,329	$	574	$	---	$	46	$	---	$	18,456
Collectively evaluated for impairment		43,670		142,398		293,979		36,775		26,169		31,668		---		574,659
Total	$	50,313	$	143,262	$	304,308	$	37,349	$	26,169	$	31,714	$	---	$	593,115

	Nine Months Ended September 30,				Year Ended December 31,
	2013		2012		2012
Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees		1.37 %		1.40 %		1.41 %
Ratio of net charge-offs to average loans, net of unearned income and deferred fees(1)		0.36 %		0.54 %		0.49 %

	September 30,						December 31,
	2013			2012			2012
Nonperforming assets:
Nonaccrual loans	$	10,194		$	3,876		$	10,870
Restructured loans in nonaccrual		1,042			2,254			2,151
Total nonperforming loans		11,236			6,130			13,021
Other real estate owned, net		973			1,894			1,435
Total nonperforming assets	$	12,209		$	8,024		$	14,456
Ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned		2.06	%		1.35	%		2.44	%
Ratio of allowance for loan losses to nonperforming loans(1)		72.00	%		134.65	%		64.12	%

	September 30,						December 31,
	2013			2012			2012
Loans past due 90 days or more and still accruing	$	149		$	114		$	170
Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees		0.03	%		0.02	%		0.03	%
Accruing restructured loans	$	6,545		$	2,021		$	2,005
Impaired loans:
Impaired loans with no valuation allowance	$	14,874		$	11,063		$	16,974
Impaired loans with a valuation allowance		2,172			902			1,482
Total impaired loans	$	17,046		$	11,965		$	18,456
Valuation allowance		(631	)		(327	)		(554	)
Impaired loans, net of allowance	$	16,415		$	11,638		$	17,902
Average recorded investment in impaired loans(1)	$	17,357		$	13,831		$	13,540
Interest income recognized on impaired loans, after designation as impaired	$	159		$	292		$	9
Amount of income recognized on a cash basis	$	---		$	---		$	---

Impaired Financing Receivables [Table Text Block]

	Impaired Loans as of September 30, 2013
	Principal Balance		(A) Total Recorded Investment(1)		Recorded Investment(1) in (A) for Which There is No Related Allowance		Recorded Investment(1) in (A) for Which There is a Related Allowance		Related Allowance
Real Estate Construction
Construction, residential	$	123	$	118	$	118	$	---	$	---
Construction, other		2,869		2,854		2,854		---		---
Consumer Real Estate
Equity lines		---		---		---		---		---
Residential closed-end first liens		760		762		214		548		4
Residential closed-end junior liens		310		312		48		264		7
Investor-owned residential real estate		129		131		131		---		---
Commercial Real Estate
Multifamily real estate		3,970		3,967		3,967		---		---
Commercial real estate, owner-occupied		5,271		5,274		3,713		1,561		617
Commercial real estate, other		3,478		3,478		3,478		---		---
Commercial Non Real Estate
Commercial and Industrial		112		112		4		108		3
Public Sector and IDA
Public sector and IDA		---		---		---		---		---
Consumer Non Real Estate
Credit cards		---		---		---		---		---
Automobile		24		24		24		---		---
Other consumer loans		---		---		---		---		---
Total	$	17,046	$	17,032	$	14,551	$	2,481	$	631

	Impaired Loans as of December 31, 2012
	Principal Balance		(A) Total Recorded Investment(1)		Recorded Investment(1) in (A) for Which There is No Related Allowance		Recorded Investment(1) in (A) for Which There is a Related Allowance		Related Allowance
Real Estate Construction
Construction, residential	$	123	$	118	$	118	$	---	$	---
Construction, other		6,520		6,487		6,487		---		---
Consumer Real Estate
Equity lines		---		---		---		---		---
Residential closed-end first liens		783		785		634		151		43
Residential closed-end junior liens		81		81		81		---		---
Commercial Real Estate
Multifamily real estate		5,284		5,288		5,288		---		---
Commercial real estate, owner-occupied		5,045		5,043		4,293		750		273
Commercial real estate, other		---		---		---		---		---
Commercial Non Real Estate
Commercial and Industrial		574		574		39		535		231
Public Sector and IDA
Public sector and IDA		---		---		---		---		---
Consumer Non Real Estate
Credit cards		---		---		---		---		---
Automobile		46		46		---		46		7
Other consumer loans		---		---		---		---		---
Total	$	18,456	$	18,422	$	16,940	$	1,482	$	554

Past Due Financing Receivables [Table Text Block]

	30 – 89 Days Past Due		90 or More Days Past Due		90 or More Days Past Due and Still Accruing		Nonaccruals (Including Impaired Nonaccruals)
Real Estate Construction
Construction, residential	$	---	$	123	$	---	$	123
Construction, other		46		2,869		---		2,869
Consumer Real Estate
Equity lines		5		---		---		---
Residential closed-end first liens		1,045		338		146		447
Residential closed-end junior liens		54		77		---		78
Investor-owned residential real estate		170		53		---		52
Commercial Real Estate
Multifamily real estate		433		3,278		---		3,970
Commercial real estate, owner-occupied		573		3,540		---		3,540
Commercial real estate, other		35		---		---		---
Commercial Non Real Estate
Commercial and Industrial		182		43		---		133
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		20		2		2		---
Automobile		190		24		1		24
Other consumer loans		61		---		---		---
Total	$	2,814	$	10,347	$	149	$	11,236

	30 – 89 Days Past Due		90 or More Days Past Due		90 or More Days Past Due and Still Accruing		Nonaccruals (Including Impaired Nonaccruals)
Real Estate Construction
Construction, residential	$	---	$	123	$	---	$	123
Construction, other		31		89		---		3,109
Consumer Real Estate
Equity lines		22		30		30		98
Residential closed-end first liens		1,507		605		126		801
Residential closed-end junior liens		121		39		---		120
Commercial Real Estate
Multifamily real estate		671		261		---		4,624
Commercial real estate, owner-occupied		1,113		---		---		3,536
Commercial real estate, other		40		2,089		---		---
Commercial Non Real Estate
Commercial and Industrial		291		505		---		561
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		20		4		4		---
Automobile		142		10		10		49
Other consumer loans		132		---		---		---
Total	$	4,090	$	3,755	$	170	$	13,021

Financing Receivable Credit Quality Indicators [Table Text Block]

	Pass		Special Mention		Classified (Excluding Impaired)
Real Estate Construction
Construction, 1-4 family residential	$	17,451	$	158	$	---
Construction, other		34,375		30		16
Consumer Real Estate
Equity lines		16,289		33		---
Closed-end first liens		81,171		1,446		1,605
Closed-end junior liens		4,856		166		35
Investor-owned residential real estate		39,550		---		97
Commercial Real Estate
Multifamily residential real estate		64,940		305		752
Commercial real estate owner-occupied		126,418		2,501		679
Commercial real estate, other		89,525		964		3,087
Commercial Non Real Estate
Commercial and Industrial		30,070		916		231
Public Sector and IDA
States and political subdivisions		28,332		---		---
Consumer Non Real Estate
Credit cards		7,054		---		---
Automobile		11,964		217		5
Other consumer		9,215		53		---
Total	$	561,210	$	6,789	$	6,507

	Pass		Special Mention		Classified (Excluding Impaired)
Real Estate Construction
Construction, 1-4 family residential	$	14,344	$	158	$	---
Construction, other		29,011		---		120
Consumer Real Estate
Equity lines		17,742		100		182
Closed-end first liens		113,893		652		2,413
Closed-end junior liens		6,713		119		138
Commercial Real Estate
Multifamily residential real estate		36,421		---		324
Commercial real estate owner-occupied		160,188		253		1,079
Commercial real estate, other		92,628		3,112		---
Commercial Non Real Estate
Commercial and Industrial		36,372		99		318
Public Sector and IDA
States and political subdivisions		26,170		---		---
Consumer Non Real Estate
Credit cards		6,690		---		---
Automobile		12,344		101		56
Other consumer		11,815		45		105
Total	$	564,331	$	4,639	$	4,735

Average Recorded Investment and Interest Income Recognized [Member] | Current Period [Member]

Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Tables) [Line Items]

Impaired Financing Receivables [Table Text Block]

	Average Investment and Interest Income for Impaired Loans
	For the Three Months Ended September 30, 2013				For the Nine Months Ended September 30, 2013
	Average Recorded Investment(1)		Interest Income Recognized		Average Recorded Investment(1)		Interest Income Recognized
Real Estate Construction
Construction, residential	$	118	$	---	$	118	$	---
Construction, other		3,005		---		3,005		---
Consumer Real Estate
Equity lines		---		---		---		---
Residential closed-end first liens		863		2		729		4
Residential closed-end junior liens		410		2		238		2
Investor-owned residential real estate		131		2		100		4
Commercial Real Estate
Multifamily real estate		4,133		---		4,189		---
Commercial real estate, owner-occupied		5,424		28		5,073		82
Commercial real estate, other		3,489		22		3,492		65
Commercial Non Real Estate
Commercial and industrial		138		1		380		2
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		---		---		---		---
Automobile		26		---		33		---
Other consumer		---		---		---		---
Total	$	17,737	$	57	$	17,357	$	159

Average Recorded Investment and Interest Income Recognized [Member] | Previous Period [Member]

Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Tables) [Line Items]

Impaired Financing Receivables [Table Text Block]

	Average Investment and Interest Income for Impaired Loans
	For the Year Ended December 31, 2012
	Average Recorded Investment(1)		Interest Income Recognized
Real Estate Construction
Construction, residential	$	1,171	$	---
Construction, other		4,290		1
Commercial Real Estate
Equity lines		101		---
Residential closed-end first liens		873		2
Residential closed-end junior liens		234		---
Commercial Real Estate
Multifamily real estate		1,466		5
Commercial real estate, owner-occupied		4,806		1
Commercial real estate, other		---		---
Commercial Non Real Estate
Commercial and Industrial		570		---
Public Sector and IDA
Public sector and IDA		---		---
Consumer Non Real Estate
Credit cards		---		---
Automobile		4		---
Other consumer		25		---
Total	$	13,540	$	9

Including Impairment Accrued [Member]

Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Tables) [Line Items]

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Restructurings That Occurred During the Three Months Ended September 30, 2013
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post- Modification Outstanding Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		1	$	241	$	309	$	---
Commercial Non Real Estate
Commercial and industrial		1		32		45		1
Total		2	$	273	$	354	$	1

	Restructurings That Occurred During the Nine Months Ended September 30, 2013
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		2	$	453	$	525	$	3
Residential closed-end junior liens		1		262		267		7
Commercial Real Estate
Commercial real estate, owner-occupied		1		154		239		---
Commercial real estate, other		1		3,500		3,500		---
Commercial Non Real Estate
Commercial and industrial		1		32		45		1
Total		6	$	4,401	$	4,576	$	11

Not Including Impairment Accrued [Member]

Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Tables) [Line Items]

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Restructurings That Occurred During the Three Months Ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance
Consumer Real Estate
Residential closed-end first liens		1	$	38	$	38
Commercial Real Estate
Commercial real estate, owner occupied		1		193		193
Total		2	$	231	$	231

	Restructurings That Occurred During the Nine Months Ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance
Consumer Real Estate
Residential closed-end first liens		5	$	383	$	402
Residential closed-end junior liens		1		143		147
Commercial Real Estate
Commercial real estate, owner occupied		3		890		895
Commercial Non Real Estate
Commercial and Industrial		1		400		400
Total		10	$	1,816	$	1,844

Year 2013 [Member]

Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Tables) [Line Items]

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Restructured Loans That Defaulted And Were Modified Within 12 Months Prior to Default
	Default During the 3 Month Period Ended September 30, 2013						Default During the 9 Month Period Ended September 30, 2013
	Number of Contracts		Principal Balance		Impairment Accrued		Number of Contracts		Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		1	$	26	$	1		1	$	26	$	1
Residential closed-end junior liens		1		47		---		1		47		---
Commercial Real Estate
Commercial real estate owner-occupied		2		664		352		3		857		352
Commercial Non Real Estate
Commercial and industrial		1		137		---		1		137		---
Total		5	$	874	$	353		6	$	1,067	$	353

Year 2012 [Member]

Note 4 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans (Tables) [Line Items]

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Restructured Loans That Defaulted And Were Modified Within 12 Months Prior to Default
	Default During the 3 Month Period Ended September 30, 2012						Default During the 9 Month Period Ended September 30, 2012
	Number of Contracts		Principal Balance		Impairment Accrued		Number of Contracts		Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		1	$	96	$	---		1	$	96	$	---
Residential closed-end junior liens		1		84		---		1		84		---
Commercial Real Estate
Commercial real estate owner-occupied		2		861		21		2		861		21
Total		4	$	1,041	$	21		4	$	1,041	$	21

XML

Note 2 - Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

Options	Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2013		69,000	$	23.75
Exercised		---		---
Forfeited or expired		---		---
Outstanding September 30, 2013		69,000	$	23.75		1.11	$	838
Exercisable at September 30, 2013		69,000	$	23.75		1.11	$	838

XML

Document And Entity Information	9 Months Ended
	Sep. 30, 2013	Oct. 31, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	NATIONAL BANKSHARES INC
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		6,947,974
Amendment Flag	false
Entity Central Index Key	0000796534
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

XML

Note 3 - Loan Portfolio (Tables)

9 Months Ended

Sep. 30, 2013

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	September 30, 2013			December 31, 2012
Real estate construction	$	55,022		$	50,313
Consumer real estate		146,447			143,262
Commercial real estate		301,890			304,308
Commercial non real estate		31,329			37,349
Public sector and IDA		28,332			26,169
Consumer non real estate		28,532			31,714
Gross loans		591,552			593,115
Less unearned income and deferred fees		(888	)		(953	)
Loans, net of unearned income and deferred fees	$	590,664		$	592,162