Note 15 - Concentrations of Credit Risk

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

Note

1

5

: Concentrations of Credit Risk

The Company does a general banking business, serving the commercial and personal banking needs of its customers. NBB’s primary service area is defined as the counties of Montgomery, Giles, Carroll, Grayson, Pulaski, Tazewell, Smyth, Wythe, Roanoke and Washington and the cities of Galax, Radford and Roanoke in southwest Virginia, and Mercer and McDowell counties in West Virginia. For loan purposes, our trade area also includes the Virginia cities of Salem and Bristol and counties of Botetourt and Craig, the southernmost tip of West Virginia adjacent to the counties of Giles, Buchanan, Russell and Bland, the North Carolina counties of Surry and Alleghany, and the Tennessee city of Bristol and counties of Washington and Sullivan. Substantially all of NBB’s loans are made in its primary service area. Additionally, the Company occasionally participates in loans in nearby higher growth metropolitan areas. Loans outside of the primary service area are a small percentage of the loan portfolio, are appropriately underwritten and are

not

considered out of trade area exceptions. The ultimate collectability of the bank’s loan portfolio and the ability to realize the value of any underlying collateral, if needed, is influenced by the economic conditions of the market area. The Company’s operating results are therefore closely correlated with the economic trends within this area.

Commercial real estate as of

December 31, 2017

and

2016

represented approximately

51%

and

52%

of the loan portfolio, at

$340,414

and

$336,457,

respectively. Included in commercial real estate are loans for college housing and professional office buildings that comprised

$247,198

and

$236,552

as of

December 31, 2017

and

2016

respectively, corresponding to approximately

37%

of the loan portfolio at

December 31, 2017

and

36%

of the loan portfolio at

December 31, 2016.

Loans secured by residential real estate were

$166,965,

or approximately

25%

of the portfolio, and

$157,718,

or

24%

of the portfolio at

December 31, 2017

and

2016,

respectively.

The Company has established operating policies relating to the credit process and collateral in loan originations. Loans to purchase real and personal property are generally collateralized by the related property and with loan amounts established based on certain percentage limitations of the property’s total stated or appraised value. Credit approval is primarily a function of collateral and the evaluation of the creditworthiness of the individual borrower or project based on available financial information. Management considers the concentration of credit risk to be minimal.