10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2020

or

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

For the transition period from                       to                     

Commission file number 0-12820

AMERICAN NATIONAL BANKSHARES INC.

(Exact name of registrant as specified in its charter)

Virginia	54-1284688
(State of incorporation)	(I.R.S. Employer Identification No.)
628 Main Street, Danville, VA	24541
(Address of principal executive offices)	(Zip Code)

434-792-5111

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $1 par value	AMNB	Nasdaq Global Select Market

Securities registered pursuant to section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 

☐ Yes   ☑  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. 

☐ Yes   ☑  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑ Yes  ☐ No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

☑ Yes  ☐ No

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

Large accelerated filer ☐                        Accelerated filer  ☑ 

Non-accelerated filer  ☐                         Smaller reporting company ☑

Emerging growth company ☐

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

☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (12 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

☑

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

☐ Yes   ☑  No

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The aggregate market value of the voting stock held by non-affiliates of the registrant at June 30, 2020, based on the closing price, was $259,004,000.

The number of shares of the registrant's common stock outstanding on February 26, 2021 was 10,965,502.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement of the Registrant for the Annual Meeting of Shareholders to be held on May 18, 2021, are incorporated by reference into Part III of this report.

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CROSS REFERENCE INDEX
PART I		PAGE
ITEM 1	Business	4
ITEM 1A	Risk Factors	14
ITEM 1B	Unresolved Staff Comments	None
ITEM 2	Properties	23
ITEM 3	Legal Proceedings	23
ITEM 4	Mine Safety Disclosures	23
PART II
ITEM 5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
ITEM 6	Selected Financial Data	26
ITEM 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
ITEM 7A	Quantitative and Qualitative Disclosures About Market Risk	49
ITEM 8	Financial Statements and Supplementary Data	50
	Reports of Independent Registered Public Accounting Firm	52
	Consolidated Balance Sheets as of December 31, 2020 and 2019	55
	Consolidated Statements of Income for the years ended December 31, 2020, 2019, and 2018	56
	Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019, and 2018	57
	Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2020, 2019, and 2018	58
	Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019, and 2018	59
	Notes to Consolidated Financial Statements	60
ITEM 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	None
ITEM 9A	Controls and Procedures	102
ITEM 9B	Other Information	None
PART III
ITEM 10	Directors, Executive Officers and Corporate Governance	*
ITEM 11	Executive Compensation	*
ITEM 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	*
ITEM 13	Certain Relationships and Related Transactions, and Director Independence	*
ITEM 14	Principal Accountant Fees and Services	*
PART IV
ITEM 15	Exhibits, Financial Statement Schedules	103
ITEM 16	Form 10-K Summary	None

_______________________________

*Certain information required by Item 10 is incorporated herein by reference to the information that appears under the headings "Election of Directors," "Election of Directors – Board Members Serving on Other Publicly Traded Company Boards of Directors," "Election of Directors – Board of Directors and Committees," "Report of the Audit Committee," and "Code of Conduct" in the Registrant's Proxy Statement for the 2021 Annual Meeting of Shareholders. The information required by Item 401 of Regulation S-K on executive officers is disclosed herein.

The information required by Item 11 is incorporated herein by reference to the information that appears under the headings "Compensation Discussion and Analysis," "Compensation Committee Interlocks and Insider Participation," and "Compensation Committee Report" in the Registrant's Proxy Statement for the 2021 Annual Meeting of Shareholders.

The information required by Item 12 is incorporated herein by reference to the information that appears under the heading "Security Ownership" in the Registrant's Proxy Statement for the 2021 Annual Meeting of Shareholders. 

The information required by Item 13 is incorporated herein by reference to the information that appears under the headings "Related Party Transactions" and "Election of Directors – Board Independence" in the Registrant's Proxy Statement for the 2021 Annual Meeting of Shareholders.

The information required by Item 14 is incorporated herein by reference to the information that appears under the heading "Independent Registered Public Accounting Firm" in the Registrant's Proxy Statement for the 2021 Annual Meeting of Shareholders.

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PART I

Forward-Looking Statements

This report contains forward-looking statements with respect to the financial condition, results of operations and business of American National Bankshares Inc. (the "Company") and its wholly owned subsidiary, American National Bank and Trust Company (the "Bank"). These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management of the Company and on information available to management at the time these statements and disclosures were prepared. Forward-looking statements are subject to numerous assumptions, estimates, risks, and uncertainties that could cause actual conditions, events, or results to differ materially from those stated or implied by such forward-looking statements.

A variety of factors, some of which are discussed in more detail in Item 1A – Risk Factors, may affect the operations, performance, business strategy, and results of the Company. Those factors include but are not limited to the following:

• the impact of the ongoing COVID-19 pandemic and the associated efforts to limit the spread of the virus;

• financial market volatility including the level of interest rates, could affect the values of financial instruments and the amount of net interest income earned;

• the adequacy of the level of the Company's allowance for loan losses, the amount of loan loss provisions required in future periods, and the failure of assumptions underlying the allowance for loan losses;

• general economic or business conditions, either nationally or in the market areas in which the Company does business, may be less favorable than expected, resulting in deteriorating credit quality, reduced demand for credit, or a weakened ability to generate deposits;

• competition among financial institutions may increase, and competitors may have greater financial resources and develop products and technology that enable those competitors to compete more successfully than the Company;

• businesses that the Company is engaged in may be adversely affected by legislative or regulatory changes, including changes in accounting standards and tax laws;

• the ability to recruit and retain key personnel;

• cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain reliable and secure electronic systems; and

• risks associated with mergers, acquisitions, and other expansion activities.

ITEM 1 – BUSINESS

American National Bankshares Inc. is a one-bank holding company organized under the laws of the Commonwealth of Virginia in 1984. On September 1, 1984, the Company acquired all of the outstanding capital stock of American National Bank and Trust Company, a national banking association chartered in 1909 under the laws of the United States. American National Bank and Trust Company is the only banking subsidiary of the Company.

As of December 31, 2020, the operations of the Company are conducted at twenty-six banking offices and one loan production office in Roanoke, Virginia. Through these offices, the Company serves its primary market area of south central Virginia and north central North Carolina. The Bank provides a full array of financial products and services, including commercial, mortgage, and consumer banking; trust and investment services; and insurance. Services are also provided through thirty-seven Automated Teller Machines ("ATMs"), "Online Banking," and "Telephone Banking."

On April 1, 2019, the Company completed the acquisition of Roanoke-based HomeTown Bankshares Corporation ("HomeTown"). The acquisition of HomeTown deepened the Company's footprint in the Roanoke, Virginia metropolitan area and created a presence in the New River Valley with an office in Christiansburg, Virginia.

The Company has two reportable segments, (i) community banking and (ii) trust and investment services. For more financial data and other information about each of the Company's operating segments, refer to "Note 24 - Segment and Related Information" of the Consolidated Financial Statements contained in Item 8 of this Form 10-K.

Competition and Markets

Vigorous competition exists in the Company's service areas. The Company competes not only with national, regional, and community banks, but also with other types of financial institutions including finance companies, mutual and money market fund providers, financial technology companies, brokerage firms, wealth management firms, insurance companies, credit unions, and mortgage companies.

The Company's primary market area is south central Virginia and north central North Carolina. The Company also has a significant presence in Roanoke, Virginia that increased substantially in connection with the acquisition of HomeTown. The Company's Virginia banking offices are located in the cities of Danville, Lynchburg, Martinsville, Roanoke, and Salem and in the counties of Campbell, Franklin, Halifax, Henry, Montgomery, Pittsylvania and Roanoke. In North Carolina, the Company's banking offices are located in the cities of Burlington, Graham, Greensboro, Mebane, Raleigh, Winston-Salem, and Yanceyville, which are within the counties of Alamance, Caswell, Forsyth, Guilford, and Wake. 

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The Company has the largest deposit market share in the City of Danville, Virginia. The Company had a deposit market share in the Danville Micropolitan Statistical Area of 35.5% at June 30, 2020 based on Federal Deposit Insurance Corporation ("FDIC") data. The Company has the second largest deposit market share in Pittsylvania County, Virginia. The Company had a deposit market share in the County of 27.0% at June 30, 2020, based on FDIC data.

Unemployment levels in each Virginia market the Company serves have continued to improve from their COVID-19 related highs in early to mid 2020.  Service sectors, financials, medical, manufacturing, construction, timber management and production, and technology related businesses have remained strong while hospitality, restaurants, travel & tourism, meeting spaces, and fitness facilities continue to suffer from the COVID-19 restrictions.  Other important business industries include farming, tobacco processing and sales, and food processing.  New businesses continue to move into the Company's Virginia footprint, which has been positive for economic growth.

The Company's market area in North Carolina has strong competition in attracting deposits and making loans. Its most direct competition for deposits comes from commercial banks and credit unions located in the market area, including large financial institutions that have greater financial and marketing resources available to them. The Company had a deposit market share in Alamance County of 14.7% at June 30, 2020, based on FDIC data, which was the third largest of any FDIC-insured institution.

Supervision and Regulation

The Company and the Bank are extensively regulated under federal and state law. The following information describes certain aspects of that regulation applicable to the Company and the Bank and does not purport to be complete. Proposals to change the laws, regulations, and policies governing the banking industry are frequently raised in U.S. Congress, in state legislatures, and before the various bank regulatory agencies. The likelihood and timing of any changes and the impact such changes might have on the Company and the Bank are impossible to determine with any certainty. A change in applicable laws, regulations or policies, or a change in the way such laws, regulations or policies are interpreted by regulatory agencies or courts, may have a material impact on the business, operations, and earnings of the Company and the Bank.

American National Bankshares Inc.

American National Bankshares Inc. is qualified as a bank holding company ("BHC") within the meaning of the Bank Holding Company Act of 1956, as amended (the "BHC Act"), and is registered as such with the Board of Governors of the Federal Reserve System (the "FRB"). As a bank holding company, the Company is subject to supervision, regulation and examination by the FRB and is required to file various reports and additional information with the FRB. The Company is also registered under the bank holding company laws of Virginia and is subject to supervision, regulation and examination by the Bureau of Financial Institutions of the Virginia State Corporation Commission (the "SCC").

Under the Gramm-Leach-Bliley Act, a BHC may elect to become a financial holding company and thereby engage in a broader range of financial and other activities than are permissible for traditional BHC's. In order to qualify for the election, all of the depository institution subsidiaries of the BHC must be well capitalized, well managed, and have achieved a rating of "satisfactory" or better under the Community Reinvestment Act (the "CRA"). Financial holding companies are permitted to engage in activities that are "financial in nature" or incidental or complementary thereto as determined by the FRB. The Gramm-Leach-Bliley Act identifies several activities as "financial in nature," including insurance underwriting and sales, investment advisory services, merchant banking and underwriting, and dealing or making a market in securities. The Company has not elected to become a financial holding company, and has no plans to become a financial holding company.

American National Bank and Trust Company

American National Bank and Trust Company is a federally chartered national bank and is a member of the Federal Reserve System. As a national bank, the Bank is subject to supervision, regulation and examination by the Office of the Comptroller of the Currency (the "OCC") and is required to file various reports and additional information with the OCC. The OCC has primary supervisory and regulatory authority over the operations of the Bank. Because the Bank accepts insured deposits from the public, it is also subject to examination by the FDIC.

Depository institutions, including the Bank, are subject to extensive federal and state regulations that significantly affect their business and activities. Regulatory bodies have broad authority to implement standards and initiate proceedings designed to prohibit depository institutions from engaging in unsafe and unsound banking practices. The standards relate generally to operations and management, asset quality, interest rate exposure, and capital. The bank regulatory agencies are authorized to take action against institutions that fail to meet such standards.

As with other financial institutions, the earnings of the Bank are affected by general economic conditions and by the monetary policies of the FRB. The FRB exerts a substantial influence on interest rates and credit conditions, primarily through open market operations in U.S. Government securities, setting the reserve requirements of member banks, and establishing the discount rate on member bank borrowings. The policies of the FRB have a direct impact on loan and deposit growth and the interest rates charged and paid thereon. They also impact the source, cost of funds, and the rates of return on investments. Changes in the FRB's monetary policies have had a significant impact on the operating results of the Bank and other financial institutions and are expected to continue to do so in the future; however, the exact impact of such conditions and policies upon the future business and earnings cannot accurately be predicted.

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The Dodd-Frank Act

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). The Dodd-Frank Act significantly restructured the financial regulatory regime in the United States and has had a broad impact on the financial services industry as a result of the significant regulatory and compliance changes required under the act. A summary of certain provisions of the Dodd-Frank Act is set forth below:

Increased Capital Standards. The federal banking agencies are required to establish minimum leverage and risk-based capital requirements for banks and bank holding companies. See "Capital Requirements" below. Among other things, the Dodd-Frank Act provides for stronger capital standards.

Deposit Insurance. The Dodd-Frank Act made permanent the $250,000 deposit insurance limit for insured deposits. Amendments to the Federal Deposit Insurance Act ("FDIA") also revised the assessment base against which an insured depository institution's deposit insurance premiums paid to the Deposit Insurance Fund (the "DIF") are calculated. Under the amendments, the assessment base is the institution's average consolidated total assets less its average tangible equity during the assessment period. Additionally, the Dodd-Frank Act made changes to the minimum designated reserve ratio of the DIF, increasing the minimum from 1.15% to 1.35% of the estimated amount of total insured deposits and eliminating the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds. The Dodd-Frank Act also provides that depository institutions may pay interest on demand deposits.

The Consumer Financial Protection Bureau ("CFPB"). The Dodd-Frank Act created the CFPB. The CFPB is charged with establishing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services.

Compensation Practices. The Dodd-Frank Act provides that the appropriate federal regulators must establish standards prohibiting as an unsafe and unsound practice any compensation plan of a bank holding company or bank that provides an insider or other employee with "excessive compensation" or could lead to a material financial loss to such firm. In June 2010, prior to the Dodd-Frank Act, the federal bank regulatory agencies promulgated the Interagency Guidance on Sound Incentive Compensation Policies, which requires that financial institutions establish metrics for measuring the impact of activities to achieve incentive compensation with the related risk to the financial institution of such behavior. See "Incentive Compensation" below.

Recent Amendments to the Dodd-Frank Act. The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018, which was signed into law on May 24, 2018 (the "EGRRCPA"), amended the Dodd-Frank Act to provide regulatory relief for certain smaller and regional financial institutions. The EGRRCPA, among other things, provides financial institutions with less than $10 billion in assets with relief from certain capital requirements and exempts banks with less than $250 billion in total consolidated assets from the enhanced prudential standards and the company-run and supervisory stress tests required under the Dodd-Frank Act.

The Dodd-Frank Act has had, and may in the future have, a material impact on the Company's operations, particularly through increased compliance costs resulting from new and possible future consumer and fair lending regulations. The future changes resulting from the Dodd-Frank Act may affect the profitability of business activities, require changes to certain business practices, impose more stringent regulatory requirements or otherwise adversely affect the business and financial condition of the Company and the Bank. These changes may also require the Company to invest significant management attention and resources to evaluate and make necessary changes to comply with new statutory and regulatory requirements.

Deposit Insurance

The deposits of the Bank are insured up to applicable limits by the DIF and are subject to deposit insurance assessments to maintain the DIF. The deposit insurance assessment base of the Bank is based on its average total assets minus average tangible equity, pursuant to a rule issued by the FDIC as required by the Dodd-Frank Act. The FDIC uses a "financial ratios method" based on CAMELS composite ratings to determine assessment rates for small established institutions with less than $10 billion in assets, such as the Bank. The CAMELS rating system is a supervisory rating system designed to take into account and reflect all financial and operational risks that a bank may face, including capital adequacy, asset quality, management capability, earnings, liquidity and sensitivity to market risk ("CAMELS"). CAMELS composite ratings set a maximum assessment for CAMELS 1 and 2 rated banks, and set minimum assessments for lower rated institutions.

The FDIC's "reserve ratio" of the DIF to total industry deposits reached its 1.15% target effective June 30, 2016. On March 15, 2016, the FDIC implemented by final rule certain Dodd-Frank Act provisions by raising the DIF's minimum reserve ratio from 1.15% to 1.35%. The FDIC imposed a 4.5 basis point annual surcharge on insured depository institutions with total consolidated assets of $10 billion or more. The new rule granted credits to smaller banks for the portion of their regular assessments that contributed to increasing the reserve ratio from 1.15% to 1.35%, to be applied when the reserve ratio reached at least 1.38%. The 1.35% target was achieved in the third quarter of 2018, resulting in the termination of the surcharge. The reserve ratio reached 1.40% as of June 30, 2019, and the FDIC first applied small bank credits on the assessment for the second quarter of 2019, which was invoiced September 30, 2019. The FDIC continued to apply the balance of small bank credits as a reserve ratio of at least 1.35% was sustained, with the last of the Company's credits being applied to the assessment for the first quarter of 2020, which was invoiced June 30, 2020. In 2020 and 2019, the Company recorded expense of $639,000 and $119,000, respectively, for FDIC insurance premiums.

In addition, all FDIC insured institutions were required to pay assessments to the FDIC at an annual rate of approximately one basis point of insured deposits to fund interest payments on bonds issued by the Financing Corporation, an agency of the federal government established to recapitalize the predecessor to the Savings Association Insurance Fund. These assessments continued until the Financing Corporation bonds matured in 2019.

6

Capital Requirements 

The FRB, the OCC and the FDIC have issued substantially similar capital guidelines applicable to all banks and bank holding companies. In addition, those regulatory agencies may from time to time require that a banking organization maintain capital above the minimum levels because of its financial condition or actual or anticipated growth.

Effective January 1, 2015, the Company and the Bank became subject to rules implementing the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision (the "Basel Committee") and certain provisions of the Dodd-Frank Act (the "Basel III Capital Rules"). The Basel III Capital Rules require the Company and the Bank to comply with the following minimum capital ratios: (i) a ratio of common equity Tier 1 to risk-weighted assets ("CET1") of at least 4.5%, plus a 2.5% "capital conservation buffer" (effectively resulting in a minimum CET1 ratio of at least 7%), (ii) a ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.5%), and (iv) a leverage ratio of 4%, calculated as the ratio of Tier 1 capital to average assets. The phase-in of the capital conservation buffer requirement began on January 1, 2016, at 0.625% of risk-weighted assets, increasing by the same amount each year until it was fully implemented at 2.5% on January 1, 2019.

With respect to the Bank, the "prompt corrective action" regulations pursuant to Section 38 of the FDIA were also revised, effective as of January 1, 2015, to incorporate a CET1 ratio and to increase certain other capital ratios. To be well capitalized under the revised regulations, a bank must have the following minimum capital ratios: (i) a CET1 ratio of at least 6.5%; (ii) a Tier 1 capital to risk-weighted assets ratio of at least 8.0%; (iii) a total capital to risk-weighted assets ratio of at least 10.0%; and (iv) a leverage ratio of at least 5.0%. See "The Federal Deposit Insurance Corporation Improvement Act" below.

The Tier 1 and total capital to risk-weighted asset ratios of the Company were 13.78% and 15.18%, respectively, as of December 31, 2020, thus exceeding the minimum requirements. The CET 1 ratio of the Company was 12.36% and the Bank was 12.86% as of December 31, 2020. The Tier 1 and total capital to risk-weighted asset ratios of the Bank were 12.86% and 13.97%, respectively, as of December 31, 2020, also exceeding the minimum requirements.

The Basel III Capital Rules provide for a number of deductions from and adjustments to CET1. In July 2019, the federal banking agencies adopted final rules (the "Capital Simplification Rules") that, among other things, revised these deductions and adjustments. Following the adoption of the Capital Simplification Rules, certain deferred tax assets and significant investments in non-consolidated financial entities must be deducted from CET1 to the extent that any one such category exceeds 25% of CET1. Prior to the adoption of the Capital Simplification Rules, amounts were deducted from CET1 to the extent that any one such category exceeded 10% of CET1 or all such items, in the aggregate, exceeded 15% of CET1. The Capital Simplification Rules took effect for the Company as of January 1, 2020. These limitations did not impact regulatory capital during any of the reported periods.

The Basel III Capital Rules prescribe a standardized approach for risk weightings that expanded the risk-weighting categories from the general risk-based capital rules to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. government and agency securities, to 600% for certain equity exposures (and higher percentages for certain other types of interests), and resulting in higher risk weights for a variety of asset categories. In November 2019, the federal banking agencies adopted a rule revising the scope of commercial real estate mortgages subject to a 150% risk weight.

In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms (the standards are commonly referred to as "Basel IV"). Among other things, these standards revise the Basel Committee's standardized approach for credit risk (including by recalibrating risk weights and introducing new capital requirements for certain "unconditionally cancellable commitments," such as unused credit card lines of credit) and provide a new standardized approach for operational risk capital. Under the proposed framework, these standards will generally be effective on January 1, 2022, with an aggregate output floor phasing-in through January 1, 2027. Under the current capital rules, operational risk capital requirements and a capital floor apply only to advanced approaches institutions, and not to the Company. The impact of Basel IV on the Company and the Bank will depend on the manner in which it is implemented by the federal bank regulatory agencies.

On August 28, 2018, the FRB issued an interim final rule required by the EGRRCPA that expands the applicability of the FRB's small bank holding company policy statement (the "SBHC Policy Statement") to bank holding companies with total consolidated assets of less than $3 billion (up from the prior $1 billion threshold). Under the SBHC Policy Statement, qualifying bank holding companies have additional flexibility in the amount of debt they can issue and are also exempt from the Basel III Capital Rules (subsidiary depository institutions of qualifying bank holding companies are still subject to capital requirements). The Company currently had less than $3 billion in total consolidated assets at June 30, 2020 and would likely qualify under the revised SBHC Policy Statement. However, the Company does not currently intend to issue a material amount of debt or take any other action that would cause its capital ratios to fall below the minimum ratios required by the Basel III Capital Rules.

On September 17, 2019, the federal banking agencies jointly issued a final rule required by the EGRRCPA that permits qualifying banks and bank holding companies that have less than $10 billion in consolidated assets to elect to be subject to a 9% leverage ratio (commonly referred to as the community bank leverage ratio or "CBLR"). Under the final rule, banks and bank holding companies that opt into the CBLR framework and maintain a CBLR of greater than 9% are not subject to other risk-based and leverage capital requirements under the Basel III Capital Rules and are deemed to have met the well capitalized ratio requirements under the "prompt corrective action" framework. In addition, a community bank that falls out of compliance with the framework has a two-quarter grace period to come back into full compliance, provided its leverage ratio remains above 8%, and will be deemed well-capitalized during the grace period. The CBLR framework was first available for banking organizations to use in their March 31, 2020 regulatory reports. These CBLR rules were modified in response to the COVID-19 pandemic.  See "Coronavirus Aid, Relief, and Economic Security Act and Consolidated Appropriations Act, 2021" below. The Company and the Bank do not currently expect to opt into the CBLR framework.

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Dividends

The Company's principal source of cash flow, including cash flow to pay dividends to its shareholders, is dividends it receives from the Bank. Statutory and regulatory limitations apply to the Bank's payment of dividends to the Company. As a general rule, the amount of a dividend may not exceed, without prior regulatory approval, the sum of net income in the calendar year to date and the retained net earnings of the immediately preceding two calendar years. A depository institution may not pay any dividend if payment would cause the institution to become "undercapitalized" or if it already is "undercapitalized." The OCC may prevent the payment of a dividend if it determines that the payment would be an unsafe and unsound banking practice. The OCC also has advised that a national bank should generally pay dividends only out of current operating earnings.

Permitted Activities

As a bank holding company, the Company is limited to managing or controlling banks, furnishing services to or performing services for its subsidiaries, and engaging in other activities that the FRB determines by regulation or order to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In determining whether a particular activity is permissible, the FRB must consider whether the performance of such an activity reasonably can be expected to produce benefits to the public that outweigh possible adverse effects. Possible benefits include greater convenience, increased competition, and gains in efficiency. Possible adverse effects include undue concentration of resources, decreased or unfair competition, conflicts of interest, and unsound banking practices. Despite prior approval, the FRB may order a bank holding company or its subsidiaries to terminate any activity or to terminate ownership or control of any subsidiary when the FRB has reasonable cause to believe that a serious risk to the financial safety, soundness or stability of any bank subsidiary of that bank holding company may result from such an activity.

Banking Acquisitions; Changes in Control

The BHC Act requires, among other things, the prior approval of the FRB in any case where a bank holding company proposes to (i) acquire direct or indirect ownership or control of more than 5% of the outstanding voting stock of any bank or bank holding company (unless it already owns a majority of such voting shares), (ii) acquire all or substantially all of the assets of another bank or bank holding company, or (iii) merge or consolidate with any other bank holding company. In determining whether to approve a proposed bank acquisition, the FRB will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution's performance under the CRA and its compliance with fair housing and other consumer protection laws.

Subject to certain exceptions, the BHC Act and the Change in Bank Control Act, together with the applicable regulations, require FRB approval (or, depending on the circumstances, no notice of disapproval) prior to any person or company acquiring "control" of a bank or bank holding company. A conclusive presumption of control exists if an individual or company acquires the power, directly or indirectly, to direct the management or policies of an insured depository institution or to vote 25% or more of any class of voting securities of any insured depository institution. A rebuttable presumption of control exists if a person or company acquires 10% or more but less than 25% of any class of voting securities of an insured depository institution and either the institution has registered its securities with the Securities and Exchange Commission under Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act") or no other person will own a greater percentage of that class of voting securities immediately after the acquisition. The Company's common stock is registered under Section 12 of the Exchange Act.

In addition, Virginia law requires the prior approval of the SCC for (i) the acquisition of more than 5% of the voting shares of a Virginia bank or any holding company that controls a Virginia bank, or (ii) the acquisition by a Virginia bank holding company of a bank or its holding company domiciled outside Virginia.

Source of Strength

FRB policy has historically required bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. The Dodd-Frank Act codified this policy as a statutory requirement. Under this requirement, the Company is expected to commit resources to support the Bank, including at times when the Company may not be in a financial position to provide such resources. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other indebtedness of such subsidiary banks. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.

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Safety and Soundness

There are a number of obligations and restrictions imposed on bank holding companies and their subsidiary banks by law and regulatory policy that are designed to minimize potential loss to the depositors of such depository institutions and the FDIC insurance fund in the event of a depository institution default. For example, under the Federal Deposit Insurance Corporation Improvement Act of 1991, to avoid receivership of an insured depository institution subsidiary, a bank holding company is required to guarantee the compliance of any subsidiary bank that may become "undercapitalized" with the terms of any capital restoration plan filed by such subsidiary with its appropriate federal bank regulatory agency up to the lesser of (i) an amount equal to 5% of the institution's total assets at the time the institution became undercapitalized or (ii) the amount that is necessary (or would have been necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution fails to comply with such capital restoration plan.

Under the FDIA, the federal bank regulatory agencies have adopted guidelines prescribing safety and soundness standards. These guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risk and exposures specified in the guidelines.

The Federal Deposit Insurance Corporation Improvement Act

Under the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), the federal bank regulatory agencies possess broad powers to take prompt corrective action to resolve problems of insured depository institutions. The extent of these powers depends upon whether the institution is "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," or "critically undercapitalized," as defined by the law. 

Reflecting changes under the new Basel III capital requirements, the relevant capital measures that became effective on January 1, 2015 for prompt corrective action are the total capital ratio, the common equity Tier 1 capital ratio, the Tier 1 capital ratio and the leverage ratio. A bank will be (i) "well capitalized" if the institution has a total risk-based capital ratio of 10.0% or greater, a common equity Tier 1 capital ratio of 6.5% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, and a leverage ratio of 5.0% or greater, and is not subject to any capital directive order; (ii) "adequately capitalized" if the institution has a total risk-based capital ratio of 8.0% or greater, a common equity Tier 1 capital ratio of 4.5% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 4.0% or greater and is not "well capitalized"; (iii) "undercapitalized" if the institution has a total risk-based capital ratio that is less than 8.0%, a common equity Tier 1 capital ratio less than 4.5%, a Tier 1 risk-based capital ratio of less than 6.0% or a leverage ratio of less than 4.0%; (iv) "significantly undercapitalized" if the institution has a total risk-based capital ratio of less than 6.0%, a common equity Tier 1 capital ratio less than 3.0%, a Tier 1 risk-based capital ratio of less than 4.0% or a leverage ratio of less than 3.0%; and (v) "critically undercapitalized" if the institution's tangible equity is equal to or less than 2.0% of average quarterly tangible assets. An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. A bank's capital category is determined solely for the purpose of applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of the bank's overall financial condition or prospects for other purposes. Management believes, as of December 31, 2020 and 2019, the Bank met the requirements for being classified as "well capitalized."

As described above, on September 17, 2019, the federal banking agencies jointly issued a final rule required by the EGRRCPA that permits qualifying banks and bank holding companies that have less than $10 billion in consolidated assets to elect to opt into the CBLR framework. Banks opting into the CBLR framework and maintaining a CBLR of greater than 9% are deemed to have met the well capitalized ratio requirements under the "prompt corrective action" framework. In addition, a community bank that falls out of compliance with the framework has a two-quarter grace period to come back into full compliance, provided its leverage ratio remains above 8%, and will be deemed well-capitalized during the grace period. The CBLR framework was first available for banking organizations to use in their March 31, 2020 regulatory reports. These CBLR rules were modified in response to the COVID-19 pandemic.  See "Coronavirus Aid, Relief, and Economic Security Act and Consolidated Appropriations Act, 2021" below. The Company and the Bank do not currently expect to opt into the CBLR framework.

As required by FDICIA, the federal bank regulatory agencies also have adopted guidelines prescribing safety and soundness standards relating to, among other things, internal controls and information systems, internal audit systems, loan documentation, credit underwriting, and interest rate exposure. In general, the guidelines require appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. In addition, the agencies adopted regulations that authorize, but do not require, an institution which has been notified that it is not in compliance with safety and soundness standards to submit a compliance plan. If, after being so notified, an institution fails to submit an acceptable compliance plan, the agency must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types to which an undercapitalized institution is subject under the prompt corrective action provisions described above.

Branching

Pursuant to the Dodd-Frank Act, national and state-chartered banks may open an initial branch in a state other than its home state (e.g., a host state) by establishing a de novo branch at any location in such host state at which a bank chartered in such host state could establish a branch. Applications to establish such branches must still be filed with the appropriate primary federal bank regulatory agency and state bank regulatory authorities may require applications or notices.

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Transactions with Affiliates

Pursuant to Sections 23A and 23B of the Federal Reserve Act and Regulation W, the authority of the Bank to engage in transactions with related parties or "affiliates" or to make loans to insiders is limited. Loan transactions with an affiliate generally must be collateralized and certain transactions between the Bank and its affiliates, including the sale of assets, the payment of money, or the provision of services, must be on terms and conditions that are substantially the same, or at least as favorable to the Bank, as those prevailing for comparable nonaffiliated transactions. In addition, the Bank generally may not purchase securities issued or underwritten by affiliates.

Loans to executive officers, directors or to any person who directly or indirectly, or acting through or in concert with one or more persons, owns, controls or has the power to vote more than 10% of any class of voting securities of a bank (a "10% Shareholders"), are subject to Sections 22(g) and 22(h) of the Federal Reserve Act and their corresponding regulations (Regulation O) and Section 13(k) of the Exchange Act relating to the prohibition on personal loans to executives (which exempts financial institutions in compliance with the insider lending restrictions of Section 22(h) of the Federal Reserve Act). Among other things, these loans must be made on terms substantially the same as those prevailing on transactions made to unaffiliated individuals and certain extensions of credit to those persons must first be approved in advance by a disinterested majority of the entire board of directors. Section 22(h) of the Federal Reserve Act prohibits loans to any of those individuals where the aggregate amount exceeds an amount equal to 15% of an institution's unimpaired capital and surplus plus an additional 10% of unimpaired capital and surplus in the case of loans that are fully secured by readily marketable collateral, or when the aggregate amount on all of the extensions of credit outstanding to all of these persons would exceed the Bank's unimpaired capital and unimpaired surplus. Section 22(g) of the Federal Reserve Act identifies limited circumstances in which the Bank is permitted to extend credit to executive officers.

Consumer Financial Protection

The Company is subject to a number of federal and state consumer protection laws that extensively govern its relationship with its customers. These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service Members Civil Relief Act, laws governing flood insurance, federal and state laws prohibiting unfair and deceptive business practices, foreclosure laws, and various regulations that implement some or all of the foregoing. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, collecting loans and providing other services. If the Company fails to comply with these laws and regulations, it may be subject to various penalties. Failure to comply with consumer protection requirements may also result in failure to obtain any required bank regulatory approval for merger or acquisition transactions the Company may wish to pursue or being prohibited from engaging in such transactions even if approval is not required.

The Dodd-Frank Act centralized responsibility for consumer financial protection by creating a new agency, the CFPB, and giving it responsibility for implementing, examining, and enforcing compliance with federal consumer protection laws. The CFPB focuses on (i) risks to consumers and compliance with the federal consumer financial laws, (ii) the markets in which firms operate and risks to consumers posed by activities in those markets, (iii) depository institutions that offer a wide variety of consumer financial products and services, and (iv) non-depository companies that offer one or more consumer financial products or services. The CFPB has broad rule making authority for a wide range of consumer financial laws that apply to all banks, including, among other things, the authority to prohibit "unfair, deceptive or abusive" acts and practices. Abusive acts or practices are defined as those that materially interfere with a consumer's ability to understand a term or condition of a consumer financial product or service or take unreasonable advantage of a consumer's (i) lack of financial savvy, (ii) inability to protect himself in the selection or use of consumer financial products or services, or (iii) reasonable reliance on a covered entity to act in the consumer's interests. The CFPB can issue cease-and-desist orders against banks and other entities that violate consumer financial laws. The CFPB may also institute a civil action against an entity in violation of federal consumer financial law in order to impose a civil penalty or injunction.

Community Reinvestment Act

The CRA requires the appropriate federal banking agency, in connection with its examination of a bank, to assess the bank's record in meeting the credit needs of the communities served by the bank, including low and moderate income neighborhoods. Furthermore, such assessment is also required of banks that have applied, among other things, to merge or consolidate with or acquire the assets or assume the liabilities of an insured depository institution, or to open or relocate a branch. In the case of a BHC applying for approval to acquire a bank or BHC, the record of each subsidiary bank of the applicant BHC is subject to assessment in considering the application. Under the CRA, institutions are assigned a rating of "outstanding," "satisfactory," "needs to improve," or "substantial non-compliance." The Bank was rated "satisfactory" in its most recent CRA evaluation.

On June 5, 2020, the OCC published a final rule, effective October 1, 2020, to modernize the agency's regulations under the CRA. The rule (i) clarifies which activities qualify for CRA credit and (ii) requires banks to identify an additional assessment area based on where they receive a significant portion of their domestic retail products, thus creating two assessment areas: a deposit-based assessment area and a facility-based assessment area. Further, on November 24, 2020, the OCC issued a proposed rule to establish the agency's proposed approach to determine the CRA evaluation measure benchmarks, retail lending distribution test thresholds, and community development minimums under the general performance standards set forth in the June 2020 final rule.  The Company is evaluating what impact this new rule will have on its operations.

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Anti-Money Laundering Legislation

The Company is subject to several federal laws that are designed to combat money laundering, terrorist financing, and transactions with persons, companies or foreign governments designated by U.S. authorities ("AML laws"). This category of laws includes the Bank Secrecy Act of 1970, the Money Laundering Control Act of 1986, the USA PATRIOT Act of 2001, and the Anti-Money Laundering Act of 2020.

The AML laws and their implementing regulations require insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing. The AML laws and their regulations also provide for information sharing, subject to conditions, between federal law enforcement agencies and financial institutions, as well as among financial institutions, for counter-terrorism purposes. Federal banking regulators are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering activities of the applicants. To comply with these obligations, the Company has implemented appropriate internal practices, procedures, and controls.

Office of Foreign Assets Control

The U.S. Treasury Department's Office of Foreign Assets Control ("OFAC") is responsible for administering and enforcing economic and trade sanctions against specified foreign parties, including countries and regimes, foreign individuals and other foreign organizations and entities. OFAC publishes lists of prohibited parties that are regularly consulted by the Company in the conduct of its business in order to assure compliance. The Company is responsible for, among other things, blocking accounts of, and transactions with, prohibited parties identified by OFAC, avoiding unlicensed trade and financial transactions with such parties and reporting blocked transactions after their occurrence. Failure to comply with OFAC requirements could have serious legal, financial and reputational consequences for the Company.

Privacy Legislation

Several recent laws, including the Right to Financial Privacy Act, and related regulations issued by the federal bank regulatory agencies, also provide new protections against the transfer and use of customer information by financial institutions. A financial institution must provide to its customers information regarding its policies and procedures with respect to the handling of customers' personal information. Each institution must conduct an internal risk assessment of its ability to protect customer information. These privacy provisions generally prohibit a financial institution from providing a customer's personal financial information to unaffiliated parties without prior notice and approval from the customer.

Incentive Compensation

In June 2010, the federal bank regulatory agencies issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of financial institutions do not undermine the safety and soundness of such institutions by encouraging excessive risk-taking. The Interagency Guidance on Sound Incentive Compensation Policies, which covers all employees that have the ability to materially affect the risk profile of a financial institutions, either individually or as part of a group, is based upon the key principles that a financial institution's incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the institution's ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the financial institution's board of directors.

Section 956 of the Dodd-Frank Act requires the federal banking agencies and the Securities and Exchange Commission to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities that encourage inappropriate risk-taking by providing an executive officer, employee, director or principal shareholder with excessive compensation, fees, or benefits or that could lead to material financial loss to the entity. The federal banking agencies issued such proposed rules in March 2011 and issued a revised proposed rule in June 2016 implementing the requirements and prohibitions set forth in Section 956. The revised proposed rule would apply to all banks, among other institutions, with at least $1 billion in average total consolidated assets, like the Bank, for which it would go beyond the existing Interagency Guidance on Sound Incentive Compensation Policies to (i) prohibit certain types and features of incentive-based compensation arrangements for senior executive officers, (ii) require incentive-based compensation arrangements to adhere to certain basic principles to avoid a presumption of encouraging inappropriate risk, (iii) require appropriate board or committee oversight, (iv) establish minimum recordkeeping, and (v) mandate disclosures to the appropriate federal banking agency. The proposed rules have not yet been finalized.

The FRB will review, as part of the regular, risk-focused examination process, the incentive compensation arrangements of financial institutions, such as the Company, that are not "large, complex banking organizations." These reviews will be tailored to each financial institution based on the scope and complexity of the institution's activities and the prevalence of incentive compensation arrangements. The findings of the supervisory initiatives will be included in reports of examination. Deficiencies will be incorporated into the institution's supervisory ratings, which can affect the institution's ability to make acquisitions and take other actions. Enforcement actions may be taken against a financial institution if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the institution's safety and soundness and the financial institution is not taking prompt and effective measures to correct the deficiencies. At December 31, 2020, the Company had not been made aware of any instances of non-compliance with the final guidance.

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Ability-to-Repay and Qualified Mortgage Rule

Pursuant to the Dodd-Frank Act, the CFPB has issued a final rule amending Regulation Z as implemented by the Truth in Lending Act, requiring mortgage lenders to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms. Mortgage lenders are required to determine consumers' ability to repay in one of two ways. The first alternative requires the mortgage lender to consider the following eight underwriting factors when making the credit decision: (i) current or reasonably expected income or assets; (ii) current employment status; (iii) the monthly payment on the covered transaction; (iv) the monthly payment on any simultaneous loan; (v) the monthly payment for mortgage-related obligations; (vi) current debt obligations, alimony, and child support; (vii) the monthly debt-to-income ratio or residual income; and (viii) credit history. Alternatively, the mortgage lender can originate "qualified mortgages," which are entitled to a presumption that the creditor making the loan satisfied the ability-to-repay requirements. In general, a "qualified mortgage" is a mortgage loan without negative amortization, interest-only payments, balloon payments, or terms exceeding 30 years. In addition, to be a qualified mortgage the points and fees paid by a consumer cannot exceed 3% of the total loan amount. Qualified mortgages that are "higher-priced" (e.g. subprime loans) garner a rebuttable presumption of compliance with the ability-to-repay rules, while qualified mortgages that are not "higher-priced" (e.g. prime loans) are given a safe harbor of compliance. The Company is predominantly an originator of compliant qualified mortgages.

Cybersecurity

In March 2015, federal regulators issued two related statements regarding cybersecurity. One statement indicates that financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution. The other statement indicates that a financial institution's management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution's operations after a cyber-attack involving destructive malware. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack. If the Company fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.

In December 2020, the federal banking agencies issued a notice of proposed rulemaking that would require banking organizations to notify their primary regulator within 36 hours of becoming aware of a "computer-security incident" or a "notification incident." The proposed rule also would require specific and immediate notifications by bank service providers that become aware of similar incidents.

To date, the Company has not experienced a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, but its systems and those of its customers and third-party service providers are under constant threat and it is possible that the Company could experience a significant event in the future. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by the Company and its customers.

Coronavirus Aid, Relief, and Economic Security Act and Consolidated Appropriations Act, 2021

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law on March 27, 2020 and the Consolidated Appropriations Act, 2021 ("Appropriations Act") was signed into law on December 27, 2020.  Among other things, the CARES Act and Appropriations Act include the following provisions impacting financial institutions:

• Community Bank Leverage Ratio.  The CARES Act directed federal banking agencies to adopt interim final rules to lower the threshold under the CBLR from 9% to 8% and to provide a reasonable grace period for a community bank that falls below the threshold to regain compliance, in each case until the earlier of the termination date of the national emergency or December 31, 2020.  In April 2020, the federal bank regulatory agencies issued two interim final rules implementing this directive.  One interim final rule provides that, as of the second quarter 2020, banking organizations with leverage ratios of 8% or greater (and that meet the other existing qualifying criteria) may elect to use the CBLR framework.  It also establishes a two-quarter grace period for qualifying community banking organizations whose leverage ratios fall below the 8% CBLR requirement, so long as the banking organization maintains a leverage ratio of 7% or greater.  The second interim final rule provides a transition from the temporary 8% CBLR requirement to a 9% CBLR requirement.  It establishes a minimum CBLR of 8% for the second through fourth quarters of 2020, 8.5% for 2021, and 9% thereafter, and maintains a two-quarter grace period for qualifying community banking organizations whose leverage ratios fall no more than 100 basis points below the applicable CBLR requirement.

• Temporary Troubled Debt Restructurings Relief.  The CARES Act allowed banks to elect to suspend requirements under U.S. generally accepted accounting principles ("GAAP") for loan modifications related to the COVID-19 pandemic (for loans that were not more than 30 days past due as of December 31, 2019) that would otherwise be categorized as a troubled debt restructuring ("TDR"), including impairment for accounting purposes, until the earlier of 60 days after the termination date of the national emergency or December 31, 2020.  Federal banking agencies are required to defer to the determination of the banks making such suspension.  The Appropriations Act extended this temporary relief until the earlier of 60 days after the termination date of the national emergency or January 1, 2022.

• Small Business Administration Paycheck Protection Program.  The CARES Act created the Small Business Administration ("SBA") Paycheck Protection Program ("PPP") and it was extended by the Appropriations Act.  Under the PPP, money was authorized for small business loans to pay payroll and group health costs, salaries and commissions, mortgage and rent payments, utilities, and interest on other debt.  The loans are provided through participating financial institutions, such as the Bank, that process loan applications and service the loans.

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Future Legislation and Regulation

Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states. Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied. The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of the proposed legislation could impact the regulatory structure under which the Company and the Bank operate and may significantly increase costs, impede the efficiency of internal business processes, require an increase in regulatory capital, require modifications to business strategy, and limit the ability to pursue business opportunities in an efficient manner. A change in statutes, regulations or regulatory policies applicable to the Company or the Bank could have a material adverse effect on the business, financial condition and results of operations of the Company and the Bank.

Effect of Governmental Monetary Policies

The Company's operations are affected not only by general economic conditions, but also by the policies of various regulatory authorities. In particular, the FRB regulates money and credit conditions and interest rates to influence general economic conditions. These policies have a significant impact on overall growth and distribution of loans, investments and deposits; they affect interest rates charged on loans or paid for time and savings deposits. FRB monetary policies have had a significant effect on the operating results of commercial banks, including the Company, in the past and are expected to do so in the future. As a result, it is difficult for the Company to predict the potential effects of possible changes in monetary policies upon its future operating results.

Tax Reform

As a result of the enactment of the CARES Act in 2020, the Company recognized a tax benefit for the net operating loss ("NOL") five-year carryback provision for the NOL acquired in the HomeTown merger.

Employees

At December 31, 2020, the Company employed 342 full-time equivalent persons. In the opinion of the management of the Company, the relationship with employees of the Company and the Bank is good.

Internet Access to Company Documents

The Company provides access to its Securities and Exchange Commission (the "SEC") filings through a link on the Investor Relations page of the Company's website at www.amnb.com. Reports available at no cost include the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after the reports are filed electronically with the SEC. The information on the Company's website is not incorporated into this Annual Report on Form 10-K or any other filing the Company makes with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

Executive Officers of the Company

The following table lists, as of December 31, 2020, the executive officers of the Company, their ages, and their positions:

Name	Age	Position
Jeffrey V. Haley	60	President and Chief Executive Officer of the Company and the Bank since January 2013. President of the Company and Chief Executive Officer of the Bank since January 2012. Executive Vice President of the Company from June 2010 to December 2011. Senior Vice President of the Company from July 2008 to May 2010. President of the Bank since June 2010. Executive Vice President of the Bank, as well as President of Trust and Financial Services from July 2008 to May 2010. Executive Vice President and Chief Operating Officer of the Bank from November 2005 to June 2007.
Jeffrey W. Farrar	60	Executive Vice President, Chief Financial Officer, Treasurer and Secretary of the Company since October 2019. Executive Vice President and Chief Operating Officer for the Bank since August 2019. Senior Vice President/Finance and Chief Financial Officer of Old Point Financial Corporation from June 2017 to August 2019. Director of Wealth Management, Mortgage and Insurance for Union Bankshares Corporation (now Atlantic Union Bankshares Corporation) from January 2014 to June 2017. Chief Financial Officer of StellarOne Corporation and its predecessor companies from January 1996 to June 2017.
H. Gregg Strader	62	Executive Vice President and Chief Banking Officer of the Company since January 2015. Executive Vice President and Chief Banking Officer of the Bank since January 2014. Executive Vice President of the Bank from June 2013 until December 2013. Executive Vice President and Chief Credit Officer of IBERIABANK Corporation from 2009 to June 2013.
Edward C. Martin	47	Executive Vice President and Chief Administrative Officer of the Company and the Bank and President of Virginia Banking since August 2020. Executive Vice President and Chief Credit Officer of the Company from December 2019 until August 2020. Executive Vice President and Chief Credit Officer of the Bank from March 2017 until August 2020. Senior Credit Officer of the Bank from September 2016 until March 2017. Regional Credit Officer of Bank of North Carolina from July 2015 to September 2016. Chief Credit Officer of Valley Bank from June 2007 to June 2015.
John H. Settle, Jr.	62	Executive Vice President and President of Trust and Investment Services since October 2016. Senior Vice President and Senior Fiduciary Advisory Specialist with Wells Fargo Private Bank from March 2012 to October 2016. Prior thereto, Managing Director with SunTrust Private Wealth Management.

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COVID-19 Impact and Response

In March 2020, the outbreak of COVID-19 was recognized as a global pandemic. The spread of the virus has created a global health crisis that has resulted in unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally. Governmental responses have included orders closing businesses not deemed essential and directing individuals to restrict their movements, observe social distancing and shelter in place. These actions, together with responses to the pandemic by all parties, have resulted in rapid decreases in commercial and consumer activity, temporary closures of many businesses that have led to a loss of revenues and a rapid increase in unemployment, disrupted supply chains, market downturns and volatility, changes in consumer behavior, related emergency response legislation and an expectation that the FRB will maintain a low interest rate environment for the foreseeable future.

In response to the outbreak, the Company implemented a business continuity plan and protocols to continue to maintain a high level of care for its employees, customers and communities. The Company also transitioned to a majority of its non-branch employees working remotely and assisting customers by appointment only in branches or directing them to drive-thrus or ATMs. It cancelled all business travel, and it holds all Company meetings through virtual platforms.

In March 2020 (revised in April 2020), the federal banking agencies issued an "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus." This was in response to the COVID-19 pandemic affecting societies and economies around the world. This guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19. The guidance explains that, in consultation with the Financial Accounting Standards Board ("FASB") staff, the federal banking agencies have concluded that short-term modifications (e.g. six months) made on a good faith basis to borrowers who were current as of the implementation date of a relief program are not TDRs. The CARES Act was passed by the U.S. Congress on March 27, 2020. Section 4013 of the CARES Act also addressed COVID-19 related modifications and specified that COVID-19 related modifications on loans that were current as of December 31, 2019 were not TDRs. The Bank implemented a Disaster Assistance Program ("DAP") to provide relief to its borrowers under this guidance. The Bank provided assistance to customers with loan balances of $405.1 million during the year ended December 31, 2020. The balance of loans remaining in this program at December 31, 2020 was $30.0 million, or 1.5% of the total portfolio, with $18.2 million of the $30.0 million in total deferrals the result of second and third request interest deferrals. At February 28, 2021, the balance of loans remaining in this program was $25.2 million, or 1.2% of the total portfolio, with $16.7 million of the $25.2 million in total deferrals the result of second request interest deferrals. The majority of remaining modifications involved three-month deferments of interest. This interagency guidance has not had a material impact on the Company's financials and is not expected to have a material impact on ongoing operations; however, this impact cannot be quantified at this time.

The CARES Act included an initial first round allocation of $659.0 billion for loans to be issued by financial institutions through the SBA's PPP. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which was passed by Congress on December 21, 2020 and then signed into law on December 27, 2020 as part of the Appropriations Act, allocated an additional $284.4 billion. These loans carry a fixed rate of 1.00% and a term of two years for the majority of the initial loans and for five years on the second round, if not forgiven, in whole or in part. Payments were deferred for the first six months of the loan. The loans are 100% guaranteed by the SBA. The SBA paid the Bank a processing fee based on the size of the loan. The SBA has approved over 2,700 applications as of  February 28, 2021 totaling $340.9 million in loans. The Company had outstanding net PPP loans of $211.3 million at December 31, 2020 and $226.4 million at February 28, 2021. The Bank has received processing fees of $11.2 million on the PPP loans and incurred direct origination costs of $1.8 million. The Company had net unaccreted PPP loan origination fees of $4.4 million at December 31, 2020 and $5.0 at February 28, 2021. From a funding perspective, the Bank utilized core funding sources for these loans. At December 31, 2020 and February 28, 2021, respectively, the SBA had forgiven $56.4 million and $105.8 million of PPP loans.

ITEM 1A – RISK FACTORS

CREDIT RISK

The Company's credit standards and its on-going credit assessment processes might not protect it from significant credit losses.

The Company takes credit risk by virtue of making loans and extending loan commitments and letters of credit. The Company manages credit risk through a program of underwriting standards, the review of certain credit decisions and an on-going process of assessment of the quality of the credit already extended. The Company's exposure to credit risk is managed through the use of consistent underwriting standards that emphasize local lending while avoiding highly leveraged transactions as well as excessive industry and other concentrations. The Company's credit administration function employs risk management techniques to help ensure that problem loans are promptly identified. While these procedures are designed to provide the Company with the information needed to implement policy adjustments where necessary and to take appropriate corrective actions, and have proven to be reasonably effective to date, there can be no assurance that such measures will be effective in avoiding future undue credit risk.

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The Company's focus on lending to small to mid-sized community-based businesses may increase its credit risk.

Most of the Company's commercial business and commercial real estate loans are made to small business or middle market customers. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities and have a heightened vulnerability to economic conditions. Additionally, these loans may increase concentration risk as to industry or collateral securing the loans. If general economic conditions in the market areas in which the Company operates negatively impact this important customer sector, the Company's results of operations and financial condition may be adversely affected. Moreover, a portion of these loans have been made by the Company in recent years, and the borrowers may not have experienced a complete business or economic cycle. The deterioration of the borrowers' businesses may hinder their ability to repay their loans with the Company, which could have a material adverse effect on the Company's financial condition and results of operations.

The Company depends on the accuracy and completeness of information about clients and counterparties, and its financial condition could be adversely affected if it relies on misleading information.

In deciding whether to extend credit or to enter into other transactions with clients and counterparties, the Company may rely on information furnished to it by or on behalf of clients and counterparties, including financial statements and other financial information, which the Company does not independently verify. The Company also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to clients, the Company may assume that a customer's audited financial statements conform with GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. The Company's financial condition and results of operations could be negatively impacted to the extent it relies on financial statements that do not comply with GAAP or are materially misleading.

The allowance for loan losses may not be adequate to cover actual losses.

In accordance with GAAP, an allowance for loan losses is maintained by the Company to provide for loan losses. The allowance for loan losses may not be adequate to cover actual credit losses, and future provisions for credit losses could materially and adversely affect operating results. The allowance for loan losses is based on prior experience, as well as an evaluation of the risks in the current portfolio. The amount of future losses is susceptible to changes in economic, operating, and other outside forces and conditions, including changes in interest rates, all of which are beyond the Company's control; and these losses may exceed current estimates. Federal bank regulatory agencies, as a part of their examination process, review the Company's loans and allowance for loan losses. While management believes that the allowance for loan losses is adequate to cover current losses, it cannot make assurances that it will not further increase the allowance for loan losses or that regulators will not require it to increase this allowance. Either of these occurrences could adversely affect earnings.

In addition, the adoption of Accounting Standards Update ("ASU") 2016-13, as amended, could result in an increase in the allowance for loan losses as a result of changing from an "incurred loss" model, which encompasses allowances for current known and inherent losses within the portfolio, to an "expected loss" model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. As a smaller reporting company at the one-time evaluation date, the Company has elected to defer adoption of ASU 2016-13 until January 2023. Refer to Note 1 of the Consolidated Financial Statements contained in Item 8 of this Form 10-K for a discussion of recent accounting pronouncements.

Nonperforming assets take significant time to resolve and adversely affect the Company's results of operations and financial condition.

The Company's nonperforming assets adversely affect its net income in various ways. The Company does not record interest income on nonaccrual loans, which adversely affects its income and increases credit administration costs. When the Company receives collateral through foreclosures and similar proceedings, it is required to mark the related asset to the then fair market value of the collateral less estimated selling costs, which may, and often does, result in a loss. An increase in the level of nonperforming assets also increases the Company's risk profile and may impact the capital levels regulators believe are appropriate in light of such risks. The Company utilizes various techniques such as workouts, restructurings, and loan sales to manage problem assets. Increases in or negative adjustments in the value of these problem assets, the underlying collateral, or in the borrowers' performance or financial condition, could adversely affect the Company's business, results of operations and financial condition. In addition, the resolution of nonperforming assets requires significant commitments of time from management and staff, which can be detrimental to the performance of their other responsibilities, including generation of new loans. There can be no assurance that the Company will avoid increases in nonperforming loans in the future.

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A downturn in the local real estate market could materially and negatively affect the Company's business.

The Company offers a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, home equity lines of credit, consumer and other loans. Many of these loans are secured by real estate (both residential and commercial) located in the Company's market area. A downturn in the real estate market in the areas in which the Company conducts its operations could negatively affect the Company's business because significant portions of its loans are secured by real estate. At December 31, 2020, the Company had approximately $2.0 billion in loans, of which approximately $1.5 billion (75.2%) were secured by real estate. The ability to recover on defaulted loans by selling the real estate collateral could then be diminished and the Company would be more likely to suffer losses.

Substantially all of the Company's real property collateral is located in its market area. If there is a decline in real estate values, especially in the Company's market area, the collateral for loans would deteriorate and provide significantly less security.

The Company relies upon independent appraisals to determine the value of the real estate which secures a significant portion of its loans, and the values indicated by such appraisals may not be realizable if the Company is forced to foreclose upon such loans.

A significant portion of the Company's loan portfolio consists of loans secured by real estate. The Company relies upon independent appraisers to estimate the value of such real estate. Appraisals are only estimates of value and the independent appraisers may make mistakes of fact or judgment which adversely affect the reliability of their appraisals. In addition, events occurring after the initial appraisal may cause the value of the real estate to increase or decrease. As a result of any of these factors, the real estate securing some of the Company's loans may be more or less valuable than anticipated at the time the loans were made. If a default occurs on a loan secured by real estate that is less valuable than originally estimated, the Company may not be able to recover the outstanding balance of the loan and will suffer a loss.

MARKET RISK

The Company's business is subject to interest rate risk, and variations in interest rates and inadequate management of interest rate risk may negatively affect financial performance.

Changes in the interest rate environment may reduce the Company's profits. It is expected that the Company will continue to realize income from the spread between the interest earned on loans, securities, and other interest earning assets, and interest paid on deposits, borrowings and other interest bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest earning assets and interest bearing liabilities. In addition, loan volume and yields are affected by market interest rates on loans, and the current interest rate environment encourages extreme competition for new loan originations from qualified borrowers. Management cannot ensure that it can minimize the Company's interest rate risk.

If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, the Company's net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Any substantial, unexpected, or prolonged change in market interest rates could have a material adverse effect on the Company's financial condition and results of operations.
 

The Bank may be required to transition from the use of the London Interbank Offered Rate ("LIBOR") index in the future.

In November 2020, the administrator of LIBOR announced it will consult on its intention to extend the retirement date of certain offered rates whereby the publication of the one week and two month LIBOR offered rates will cease after December 31, 2021; but, the publication of the remaining LIBOR offered rates will continue until June 30, 2023. Given consumer protection, litigation, and reputation risks, federal bank regulators have indicated that entering into new contracts that use LIBOR as a reference rate after December 31, 2021, would create safety and soundness risks and that they will examine bank practices accordingly. Therefore, the agencies encouraged banks to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021.

Regulators, industry groups, and others have, among other things, published recommended replacement language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., the Secured Overnight Financing Rate), and proposed implementations of the recommended alternatives in floating rate instruments. There is not yet any consensus on what recommendations and proposals will be broadly accepted.

The Company has a significant number of loans, borrowings and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR. The transition from LIBOR could create considerable costs and additional risk. Since proposed alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR. The transition will change the Company's market risk profiles, requiring changes to risk and pricing models, valuation tools, product design and hedging strategies. Furthermore, failure to adequately manage this transition process with customers could adversely impact the Company's reputation. Although the Company is currently unable to assess what the ultimate impact of the transition from LIBOR will be, failure to adequately manage the transition could have a material adverse effect on the Company's business, financial condition and results of operations.

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LIQUIDITY RISK

The Company may need to raise additional capital in the future to continue to grow, but may be unable to obtain additional capital on favorable terms or at all.

Federal and state banking regulators and safe and sound banking practices require the Company to maintain adequate levels of capital to support its operations. The Company's business strategy calls for it to continue to grow in its existing banking markets (internally and through additional offices) and to expand into new markets as appropriate opportunities arise. Continued growth in the Company's earning assets, which may result from internal expansion and new branch offices, at rates in excess of the rate at which its capital is increased through retained earnings, will reduce the Company's capital ratios. If the Company's capital ratios fell below "well capitalized" levels, the FDIC deposit insurance assessment rate would increase until capital was restored and maintained at a "well capitalized" level. A higher assessment rate would cause an increase in the assessments the Company pays for federal deposit insurance, which would have an adverse effect on the Company's operating results.

Management of the Company believes that its current and projected capital position is sufficient to maintain capital ratios significantly in excess of regulatory requirements for the next several years and allow the Company flexibility in the timing of any possible future efforts to raise additional capital. However, if, in the future, the Company needs to increase its capital to fund additional growth or satisfy regulatory requirements, its ability to raise that additional capital will depend on conditions at that time in the capital markets, economic conditions, the Company's financial performance and condition, and other factors, many of which are outside its control. There is no assurance that the Company will be able to raise additional capital on terms favorable to it or at all. Any future inability to raise additional capital on terms acceptable to the Company may have a material adverse effect on its ability to expand operations, and on its financial condition, results of operations and future prospects.

TECHNOLOGY RISK

The Company's operations may be adversely affected by cybersecurity risks.

The Company relies heavily on communications and information systems to conduct business. Any failure, interruption, or breach in security of these systems could result in failures or disruptions in the Company's internet banking, deposit, loan, and other systems. While the Company has policies and procedures designed to prevent or limit the effect of such failure, interruption, or security breach of the Company's information systems, there can be no assurance that they will not occur or, if they do occur, that they will be adequately addressed. Further, to access the Company's products and services, its customers may use computers and mobile devices that are beyond the Company's security control systems. The occurrence of any failure, interruption or security breach of the Company's communications and information systems could damage the Company's reputation, result in a loss of customer business, subject the Company to additional regulatory scrutiny, or expose the Company to civil litigation and possible financial liability. Additionally, the Company outsources its data processing to a third party. If the Company's third party provider encounters difficulties or if the Company has difficulty in communicating with such third party, it will significantly affect the Company's ability to adequately process and account for customer transactions, which would significantly affect its business operations.

In the ordinary course of business, the Company collects and stores sensitive data, including proprietary business information and personally identifiable information of its customers and employees in systems and on networks. The secure processing, maintenance and use of this information is critical to operations and the Company's business strategy. The Company has invested in accepted technologies, and annually reviews processes and practices that are designed to protect its networks, computers and data from damage or unauthorized access. Despite these security measures, the Company's computer systems and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. A breach of any kind could compromise systems, and the information stored there could be accessed, damaged or disclosed. A breach in security could result in legal claims, regulatory penalties, disruption in operations, and damage to the Company's reputation, which could adversely affect the Company's business. Furthermore, as cyberattacks continue to evolve and increase, the Company may be required to expend significant additional resources to modify or enhance its protective measures, or to investigate and remediate any identified information security vulnerabilities.

Multiple major U.S. retailers, financial institutions, government agencies and departments have experienced data systems incursions reportedly resulting in the thefts of credit and debit card information, online account information, and other financial data of tens of millions of individuals and customers. Retailer incursions affect cards issued and deposit accounts maintained by many financial institutions, including the Bank. Although neither the Company's nor the Bank's systems are breached in government or retailer incursions, these events can cause the Bank to reissue a significant number of cards and take other costly steps to avoid significant theft loss to the Bank and its customers. In some cases, the Bank may be required to reimburse customers for the losses they incur. Other possible points of intrusion or disruption not within the Company's nor the Bank's control include internet service providers, electronic mail portal providers, social media portals, distant-server (so called "cloud") service providers, electronic data security providers, personal computers and mobile phones, telecommunications companies, and mobile phone manufacturers.

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Consumers may increasingly decide not to use the Bank to complete their financial transactions because of technological and other changes, which would have a material adverse impact on the Company's financial condition and operations.

Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks. In particular, the activity of fintech companies has grown significantly over recent years and is expected to continue to grow. Fintech companies have and may continue to offer bank or bank-like products and some fintech companies have applied for bank charters. In addition, other fintech companies have partnered with existing banks to allow them to offer deposit products to their customers. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds or general-purpose reloadable prepaid cards. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as "disintermediation," could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on the Company's financial condition and results of operations.

OPERATIONAL RISK

The Company is dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect the Company's operations and prospects.

The Company is a relationship-driven organization. A key aspect of the Company's business strategy is for its senior officers to have primary contact with current and potential customers. The Company's growth and development are in large part a result of these personalized relationships with the customer base. The success of the Company also often depends on its ability to hire and retain qualified banking officers.

The Company's senior officers have considerable experience in the banking industry and related financial services and are extremely valuable and would be difficult to replace. The loss of the services of these officers could have a material adverse effect upon future prospects. Although the Company has entered into employment contracts with certain of its senior executive officers, and purchased key man life insurance policies to mitigate the risk of an unforeseen departure or death of certain of the senior executive officers, it cannot offer any assurance that they and other key employees will remain employed by the Company. The unexpected loss of services of one or more of these key employees could have a material adverse effect on operations and possibly result in reduced revenues.

Failure to maintain effective systems of internal and disclosure control could have a material adverse effect on the Company's results of operation and financial condition.

Effective internal and disclosure controls are necessary for the Company to provide reliable financial reports and effectively prevent fraud and to operate successfully as a public company. If the Company cannot provide reliable financial reports or prevent fraud, its reputation and operating results would be harmed. As part of the Company's ongoing monitoring of internal control, it may discover material weaknesses or significant deficiencies in its internal control that require remediation. A "material weakness" is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis.

The Company has in the past discovered, and may in the future discover, areas of its internal controls that need improvement. Even so, the Company is continuing to work to improve its internal controls. The Company cannot be certain that these measures will ensure that it implements and maintains adequate controls over its financial processes and reporting in the future. Any failure to maintain effective controls or to timely effect any necessary improvement of the Company's internal and disclosure controls could, among other things, result in losses from fraud or error, harm the Company's reputation or cause investors to lose confidence in the Company's reported financial information, all of which could have a material adverse effect on the Company's results of operation and financial condition.

The carrying value of goodwill may be adversely impacted.

When the Company completes an acquisition, generally goodwill is recorded on the date of acquisition as an asset. Current accounting guidance requires for goodwill to be tested for impairment, which the Company performs an impairment analysis at least annually, rather than amortizing it over a period of time. A significant adverse change in expected future cash flows or sustained adverse change in the Company's common stock could require the asset to become impaired. If impaired, the Company would incur a non-cash charge to earnings that would have a significant impact on the results of operations. The carrying value of goodwill was approximately $85.0 million at December 31, 2020.

The Company relies on other companies to provide key components of the Company's business infrastructure.

Third parties provide key components of the Company's business operations such as data processing, recording and monitoring transactions, online banking interfaces and services, Internet connections and network access. While the Company has selected these third party vendors carefully, it does not control their actions. Any problem caused by these third parties, including those resulting from disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cybersecurity breaches, failure of a vendor to provide services for any reason or poor performance of services, could adversely affect the Company's ability to deliver products and services to its customers and otherwise conduct its business. Financial or operational difficulties of a third party vendor could also hurt the Company's operations if those difficulties interface with the vendor's ability to serve the Company. Replacing these third party vendors could also create significant delay and expense. Accordingly, use of such third parties creates an unavoidable inherent risk to the Company's business operations.

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LEGAL, REGULATORY AND COMPLIANCE RISK

The Company is subject to extensive regulation which could adversely affect its business.

The Company's operations as a publicly traded corporation, a bank holding company, and a parent company to an insured depository institution are subject to extensive regulation by federal, state, and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of the Company's operations. Because the Company's business is highly regulated, the laws, rules, and regulations applicable to it are subject to frequent and sometimes extensive change. Such changes could include higher capital requirements, increased insurance premiums, increased compliance costs, reductions of non-interest income and limitations on services that can be provided. Actions by regulatory agencies or significant litigation against the Company could cause it to devote significant time and resources to defend itself and may lead to liability or penalties that materially affect the Company and its shareholders. Any future changes in the laws, rules or regulations applicable to the Company may negatively affect the Company's business and results of operations.

Regulatory capital standards may have an adverse effect on the Company's profitability, lending, and ability to pay dividends on the Company's securities.

The Company is subject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types of capital that the Company and the Bank must maintain. From time to time, regulators implement changes to these regulatory capital adequacy guidelines. If the Company fails to meet these minimum capital guidelines and/or other regulatory requirements, its financial condition would be materially and adversely affected. The Basel III Capital Rules require bank holding companies and their subsidiaries to maintain significantly more capital as a result of higher required capital levels and more demanding regulatory capital risk weightings and calculations. While the Company is exempt from these capital requirements under the Federal Reserve's SBHC Policy Statement, the Bank is not exempt and must comply. The Bank must also comply with the capital requirements set forth in the "prompt corrective action" regulations pursuant to Section 38 of the FDIA. Satisfying capital requirements may require the Company to limit its banking operations, retain net income or reduce dividends to improve regulatory capital levels, which could negatively affect its business, financial condition and results of operations.

Regulations issued by the CFPB could adversely impact earnings due to, among other things, increased compliance costs or costs due to noncompliance.

The CFPB has broad rulemaking authority to administer and carry out the provisions of the Dodd-Frank Act with respect to financial institutions that offer covered financial products and services to consumers. The CFPB has also been directed to write rules identifying practices or acts that are unfair, deceptive or abusive in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. For example, the CFPB has issued a final rule requiring mortgage lenders to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms, or to originate "qualified mortgages" that meet specific requirements with respect to terms, pricing and fees. The rule also contains additional disclosure requirements at mortgage loan origination and in monthly statements. The requirements under the CFPB's regulations and policies could limit the Company's ability to make certain types of loans or loans to certain borrowers, or could make it more expensive and/or time consuming to make these loans, which could adversely impact the Company's profitability.

Changes in accounting standards could impact reported earnings.

From time to time, with increasing frequency, there are changes in the financial accounting and reporting standards that govern the preparation of the Company's financial statements. These changes can materially impact how the Company records and reports its financial condition and results of operations. In some instances, the Company could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements. Refer to Note 1 of the Consolidated Financial Statements contained in Item 8 of this Form 10-K for a discussion of recent accounting pronouncements.

Current and proposed regulation addressing consumer privacy and data use and security could increase the Company's costs and impact its reputation.

The Company is subject to a number of laws concerning consumer privacy and data use and security, including information safeguard rules under the Gramm-Leach-Bliley Act. These rules require that financial institutions develop, implement and maintain a written, comprehensive information security program containing safeguards that are appropriate to the financial institution's size and complexity, the nature and scope of the financial institution's activities, and the sensitivity of any customer information at issue. The United States has experienced a heightened legislative and regulatory focus on privacy and data security, including requiring consumer notification in the event of a data breach. In addition, most states have enacted security breach legislation requiring varying levels of consumer notification in the event of certain types of security breaches. New regulations in these areas may increase the Company's compliance costs, which could negatively impact earnings. In addition, failure to comply with the privacy and data use and security laws and regulations to which the Company is subject, including by reason of inadvertent disclosure of confidential information, could result in fines, sanctions, penalties or other adverse consequences and loss of consumer confidence, which could materially adversely affect the Company's results of operations, overall business, and reputation.

The Company is subject to claims and litigation pertaining to fiduciary responsibility.

From time to time, customers make claims and take legal action pertaining to the performance of the Company's fiduciary responsibilities. Whether customer claims and legal action related to the performance of the Company's fiduciary responsibilities are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to the Company, they may result in significant financial liability and/or adversely affect the market perception of the Company and its products and services, as well as impact customer demand for those products and services. Any financial liability or reputation damage could have a material adverse effect on the Company's business, which, in turn, could have a material adverse effect on the Company's financial condition and results of operations.

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STRATEGIC RISK

The Company faces strong competition from financial services companies and other companies that offer banking and other financial services, which could negatively affect the Company's business.

The Company encounters substantial competition from other financial institutions in its market area. Ultimately, the Company may not be able to compete successfully against current and future competitors. Many competitors offer the same banking services that the Company offers. These competitors include national, regional, and community banks. The Company also faces competition from many other types of financial institutions, including finance companies, mutual and money market fund providers, financial technology ("fintech") companies, brokerage firms, insurance companies, credit unions, financial subsidiaries of certain industrial corporations, and mortgage companies. In particular, competitors include several major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous banking locations and ATMs and conduct extensive promotional and advertising campaigns. Increased competition may result in reduced business for the Company.

Additionally, banks and other financial institutions with larger capitalization and financial intermediaries not subject to bank regulatory restrictions have larger lending limits and are thereby able to serve the credit needs of larger customers. These institutions also may have differing pricing and underwriting standards, which may adversely affect the Company through the loss of business or causing a misalignment in the Company's risk-return relationship. Areas of competition include interest rates for loans and deposits, efforts to obtain loans and deposits, and range and quality of products and services provided, including new technology-driven products and services. Technological innovation continues to contribute to greater competition in domestic financial services markets as technological advances enable more companies to provide financial services. If the Company is unable to attract and retain banking customers, it may be unable to continue to grow loan and deposit portfolios and its results of operations and financial condition may be adversely affected.

The inability of the Company to successfully manage its growth or implement its growth strategy may adversely affect the Company's results of operations and financial condition.

The Company may not be able to successfully implement its growth strategy if it is unable to identify attractive markets, locations or opportunities to expand in the future. In addition, the ability to manage growth successfully depends on whether the Company can maintain adequate capital levels, cost controls and asset quality, and successfully integrate any businesses acquired into the Company.

As the Company continues to implement its growth strategy by opening new branches or acquiring branches or banks, it expects to incur increased personnel, occupancy and other operating expenses. In the case of new branches, the Company must absorb those higher expenses while it begins to generate new deposits; there is also further time lag involved in redeploying new deposits into attractively priced loans and other higher yielding earning assets. The Company's plans to expand could depress earnings in the short run, even if it efficiently executes a growth strategy leading to long-term financial benefits.

Difficulties in combining the operations of acquired entities with the Company's own operations may prevent the Company from achieving the expected benefits from acquisitions.

The Company may not be able to achieve fully the strategic objectives and operating efficiencies expected in an acquisition. Inherent uncertainties exist in integrating the operations of an acquired entity. In addition, the markets and industries in which the Company and its potential acquisition targets operate are highly competitive. The Company may lose customers or the customers of acquired entities as a result of an acquisition; the Company may lose key personnel, either from the acquired entity or from itself; and the Company may not be able to control the incremental increase in noninterest expense arising from an acquisition in a manner that improves its overall operating efficiencies. These factors could contribute to the Company not achieving the expected benefits from its acquisitions within desired time frames, if at all. Future business acquisitions could be material to the Company and it may issue additional shares of common stock to pay for those acquisitions, which would dilute current shareholders' ownership interests. Acquisitions also could require the Company to use substantial cash or other liquid assets or to incur debt; the Company could therefore become more susceptible to economic downturns and competitive pressures.

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GENERAL RISK

The COVID-19 pandemic could adversely affect the Company and the adverse impacts on its business, financial position, and operations could be significant.  The ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted.

The COVID-19 pandemic has created global economic disruptions and disruptions to the lives of people around the world.  Governments, businesses, and the public are taking unprecedented actions to contain the spread of COVID-19 and to mitigate its effects, including quarantines, travel bans, shelter-in-place orders, closures of businesses and schools, fiscal stimulus, and legislation designed to deliver monetary aid and other relief.  While the scope, duration, and full effects are rapidly evolving and not fully known, the pandemic and related efforts to contain it have disrupted global economic activity, adversely affected the functioning of financial markets, impacted interest rates, increased economic and market uncertainty, and disrupted trade and supply chains.  If these effects continue for a prolonged time period or result in sustained economic stress or recession, such effects could have a material adverse impact on it in terms of credit quality, collateral values, ability of customers to repay loans, product demand, funding, operations, interest rate risk and human capital.

Measures enacted to contain the virus, including business shutdowns and shelter-in-place orders along with actions taken by individuals to ensure their safety, have resulted in significant changes to the corporate risk profile.  These actions have led to loss of revenues for the Company's business customers, extreme increases in national and state unemployment, disrupted global supply chains, market downturns and volatility, disruptions in consumer behavior and emergency response legislation, and an expectation that FRB policy will maintain a low interest rate environment for the foreseeable future.  These changes have a significant adverse effect on the markets in which the Company operates and the demand for its products and services.

The Company has taken comprehensive steps to protect the health of its employees and customers by implementing business continuity plan protocols.  For its customers, it has closed branch lobbies but remains open to meet with customers by appointment only and maintained banking hours at branches throughout its footprint.  It has continued to provide financial support to the communities it serves.  For its employees, the Company has cancelled all business travel, enabled approximately 65% of the workforce to work remotely and implemented safety protocols at each location for employees whose role requires they come into the office. These steps have not materially impacted the ability to serve its customers, conduct business or support its employees.  There is no guarantee these actions will be sufficient to successfully mitigate the risks presented by the COVID-19 pandemic and additional actions may be required.  Future actions deemed necessary by local, state or national leaders could hinder its ability to operate going forward.  Its business operations may be disrupted if key personnel or significant portions of the Company's employees are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic.  The Company's ability to serve its customers could be impacted if actions taken by vendors or business partners are unable to continue providing services the Company depends on.

COVID-19 continues to be a threat to the world.  The extent, severity and duration of the current and future actions are unprecedented and, until normal economic conditions resume, the Company is unable to accurately predict or measure the effects.  For this reason, the extent to which the COVID-19 pandemic affects its business, operations and financial conditions, as well as its regulatory capital and liquidity ratios is highly uncertain and unpredictable and depends on, among other things, new information that may emerge from the actions discussed above to combat the threats posed by the virus. If the pandemic is prolonged, the adverse impact on the markets served and on its business, operations and financial condition could deepen.

Changes in economic conditions could materially and negatively affect the Company's business.

The Company's business is directly impacted by economic, political, and market conditions, broad trends in industry and finance, legislative and regulatory changes, changes in government monetary and fiscal policies, and inflation, all of which are beyond the Company's control. A deterioration in economic conditions, whether caused by global, national or local events, especially within the Company's market area, could result in potentially negative material consequences such as the following, among others: loan delinquencies increasing; problem assets and foreclosures increasing; demand for products and services decreasing; low cost or noninterest bearing deposits decreasing; and collateral for loans, especially real estate, declining in value, in turn reducing customers' borrowing power, and reducing the value of assets and collateral associated with existing loans. Each of these consequences may have a material adverse effect on the Company's financial condition and results of operations.

Trust division income is a major source of non-interest income for the Company. Trust and brokerage fee revenue is largely dependent on the fair market value of assets under management and on trading volumes in the brokerage business. General economic conditions and their subsequent effect on the securities markets tend to act in correlation. When general economic conditions deteriorate, securities markets generally decline in value, and the Company's trust and brokerage fee revenue is negatively impacted as asset values and trading volumes decrease.

The Company's exposure to operational, technological and organizational risk may adversely affect the Company.

The Company is exposed to many types of operational risks, including reputation, legal, and compliance risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees or operational errors, clerical or record-keeping errors, and errors resulting from faulty or disabled computer or telecommunications systems.

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Negative public opinion can result from the actual or alleged conduct in any number of activities, including lending practices, corporate governance, and acquisitions, and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect the Company's ability to attract and retain customers and can expose it to litigation and regulatory action.

Certain errors may be repeated or compounded before they are discovered and successfully rectified. The Company's necessary dependence upon automated systems to record and process its transactions may further increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. The Company may also be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control (for example, computer viruses or electrical or telecommunications outages), which may give rise to disruption of service to customers and to financial loss or liability. The Company is further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as is the Company) and to the risk that the Company's (or its vendors') business continuity and data security systems prove to be inadequate.

The Company's risk-management framework may not be effective in mitigating risk and loss.

The Company maintains an enterprise risk management program that is designed to identify, quantify, monitor, report, and control the risks that it faces. These risks include, but are not limited to: strategic, interest-rate, credit, liquidity, operations, pricing, reputation, compliance, litigation and cybersecurity. While the Company assesses and improves this program on an ongoing basis, there can be no assurance that its approach and framework for risk management and related controls will effectively mitigate all risk and limit losses in its business. If conditions or circumstances arise that expose flaws or gaps in the Company's risk-management program, or if its controls break down, the Company's results of operations and financial condition may be adversely affected.

Negative perception of the Company through media may adversely affect the Company's reputation and business.

The Company's reputation is critical to the success of its business. The Company believes that its brand image has been well received by customers, reflecting the fact that the brand image, like the Company’s business, is based in part on trust and confidence. The Company’s reputation and brand image could be negatively affected by rapid and widespread distribution of publicity through social and traditional media channels. The Company’s reputation could also be affected by the Company’s association with clients affected negatively through social and traditional media distribution, or other third parties, or by circumstances outside of the Company’s control. Negative publicity, whether deserved or undeserved, could affect the Company’s ability to attract or retain customers, or cause the Company to incur additional liabilities or costs, or result in additional regulatory scrutiny.

Severe weather, natural disasters, acts of war or terrorism, public health issues, and other external events could significantly impact the Company's business.

Severe weather, natural disasters, acts of war or terrorism, public health issues, and other adverse external events could have a significant impact on the Company's ability to conduct business. In addition, such events could affect the stability of the Company's deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, and/or cause the Company to incur additional expenses. The occurrence of any such event in the future could have a material adverse effect on the Company's business, which, in turn, could have a material adverse effect on its financial condition and results of operations.

RISKS RELATING TO OUR SECURITIES

While the Company's common stock is currently traded on the Nasdaq Global Select Market, it has less liquidity than stocks for larger companies quoted on a national securities exchange.

The trading volume in the Company's common stock on the Nasdaq Global Select Market has been relatively low when compared with larger companies listed on the Nasdaq Global Select Market or other stock exchanges. There is no assurance that a more active and liquid trading market for the common stock will exist in the future. Consequently, shareholders may not be able to sell a substantial number of shares for the same price at which shareholders could sell a smaller number of shares. In addition, the Company cannot predict the effect, if any, that future sales of the Company's common stock in the market, or the availability of shares of common stock for sale in the market, will have on the market price of the common stock.

Economic and other conditions may cause volatility in the price of the Company's common stock.

In the current economic environment, the prices of publicly traded stocks in the financial services sector have been volatile. However, even in a more stable economic environment the price of the Company's common stock can be affected by a variety of factors such as expected or actual results of operations, changes in analysts' recommendations or projections, announcements of developments related to its businesses, operating and stock performance of other companies deemed to be peers, news or expectations based on the performance of others in the financial services industry, and expected impacts of a changing regulatory environment. These factors not only impact the price of the Company's common stock but could also affect the liquidity of the stock given the Company's size, geographical footprint, and industry. The price for shares of the Company's common stock may fluctuate significantly in the future, and these fluctuations may be unrelated to the Company's performance. General market price declines or market volatility in the future could adversely affect the price for shares of the Company's common stock, and the current market price of such shares may not be indicative of future market prices.

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Future issuances of the Company's common stock could adversely affect the market price of the common stock and could be dilutive.

The Company is not restricted from issuing additional shares of common stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, shares of common stock. Issuances of a substantial number of shares of common stock, or the expectation that such issuances might occur, including in connection with acquisitions by the Company, could materially adversely affect the market price of the shares of the common stock and could be dilutive to shareholders. Because the Company's decision to issue common stock in the future will depend on market conditions and other factors, it cannot predict or estimate the amount, timing or nature of possible future issuances of its common stock. Accordingly, the Company's shareholders bear the risk that future issuances will reduce the market price of the common stock and dilute their stock holdings in the Company.

The primary source of the Company's income from which it pays cash dividends is the receipt of dividends from its subsidiary bank.

The availability of dividends from the Company is limited by various statutes and regulations. It is possible, depending upon the financial condition of the Bank and other factors, that the OCC could assert that payment of dividends or other payments is an unsafe or unsound practice. In the event the Bank was unable to pay dividends to the Company, or be limited in the payment of such dividends, the Company would likely have to reduce or stop paying common stock dividends. The Company's reduction, limitation. or failure to pay such dividends on its common stock could have a material adverse effect on the market price of the common stock.

The Company's governing documents and Virginia law contain anti-takeover provisions that could negatively impact its shareholders.

The Company's Articles of Incorporation and Bylaws and the Virginia Stock Corporation Act contain certain provisions designed to enhance the ability of the Company's Board of Directors to deal with attempts to acquire control of the Company. These provisions and the ability to set the voting rights, preferences and other terms of any series of preferred stock that may be issued, may be deemed to have an anti-takeover effect and may discourage takeovers (which certain shareholders may deem to be in their best interest). To the extent that such takeover attempts are discouraged, temporary fluctuations in the market price of the Company's common stock resulting from actual or rumored takeover attempts may be inhibited. These provisions also could discourage or make more difficult a merger, tender offer, or proxy contest, even though such transactions may be favorable to the interests of shareholders, and could potentially adversely affect the market price of the Company's common stock.

ITEM 2 – PROPERTIES

As of December 31, 2020, the Company maintained twenty-six banking offices. The Company's Virginia banking offices are located in the cities of Danville, Lynchburg, Martinsville, Roanoke, and Salem and in the counties of Campbell, Franklin, Halifax, Henry, Montgomery, Pittsylvania and Roanoke. In North Carolina, the Company's banking offices are located in the cities of Burlington, Graham, Greensboro, Mebane, Raleigh, Winston-Salem, and Yanceyville, which are within the counties of Alamance, Caswell, Forsyth, Guilford, and Wake. The Company also operates one loan production office.

The principal executive offices of the Company are located at 628 Main Street in the business district of Danville, Virginia. This building, owned by the Company, has three floors totaling approximately 27,000 square feet.

The Company owns a building located at 103 Tower Drive in Danville, Virginia. This three-story facility serves as an operations center.

The Company has an office at 445 Mount Cross Road in Danville, Virginia, where it consolidated two banking offices in January 2009 and gained additional administrative space.

The Company leases certain space located at 202 S. Jefferson Street, Roanoke, Virginia as a result of the merger with HomeTown. This office serves as the Virginia banking headquarters and the center for its corporate credit function.

The Company leases an office at 703 Green Valley Road in Greensboro, North Carolina. This building serves as the head office for the Company's North Carolina banking headquarters.

The Company owns twenty other offices for a total of twenty-three owned buildings. There are no mortgages or liens against any of the properties owned by the Company. The Company operates thirty-seven ATMs on owned or leased facilities.  The Company leases five other offices for a total of seven leased office locations and leases one storage warehouse.

ITEM 3 – LEGAL PROCEEDINGS

In the ordinary course of operations, the Company and the Bank are parties to various legal proceedings. Based upon information currently available, management believes that such legal proceedings, in the aggregate, will not have a material adverse effect on the business, financial condition, or results of operations of the Company.

ITEM 4 – MINE SAFETY DISCLOSURES

None.

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PART II

ITEM 5 – MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market and Dividend Information

The Company's common stock is traded on the Nasdaq Global Select Market under the symbol "AMNB." At December 31, 2020, the Company had 3,857 shareholders of record. 

The Company paid quarterly cash dividends of $0.27 per share for each quarter of 2020. The Company's future dividend policy is subject to the discretion of the Boards of Directors of the Company and the Bank and will depend upon a number of factors, including future earnings, financial condition, cash requirements and general business conditions. The Company and the Bank are also subject to certain restrictions imposed by the reserve and capital requirements of federal and state statutes and regulations. See "Part I, Item 1. Business - Supervision and Regulation - Dividends," for information on regulatory restrictions on dividends.

Stock Compensation Plans

The Company's 2018 Stock Incentive Plan (the "2018 Plan") was adopted by the Board of Directors of the Company on February 20, 2018 and approved by shareholders on May 15, 2018 at the Company's 2018 Annual Meeting of Shareholders. The 2018 Plan replaced the Company's 2008 Stock Incentive Plan, the term of which expired in 2018. The plans and stock compensation in general are discussed in Note 16 of the Consolidated Financial Statements contained in Item 8 of this Form 10-K.

The following table summarizes information, as of December 31, 2020, relating to the Company's equity based compensation plans, pursuant to which grants of options to acquire shares of common stock have been and may be granted from time to time.

	December 31, 2020
	Number of Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted-Average Per Share Exercise Price of Outstanding Options, Warrants and Rights		Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans
Equity compensation plans approved by shareholders		10,541	$	16.63		571,460
Equity compensation plans not approved by shareholders		—		—		—
Total		10,541	$	16.63		571,460

Stock Repurchase Program

On December 19, 2019, the Company filed a Form 8-K with the SEC to announce the approval by its Board of Directors of a stock repurchase program that authorized the repurchase of up to 400,000 shares of the Company's common stock through December 31, 2020. The Company suspended the program in the second quarter of 2020 in an effort to conserve capital due to COVID-19. In 2020, the Company repurchased 140,526 shares at an average cost of $35.44 per share for a total cost of $4,981,000.

On January 12, 2021, the Company filed a Form 8-K with the SEC to announce the approval by its Board of Directors of a stock repurchase program that authorizes the repurchase of up to 350,000 shares of the Company's common stock through December 31, 2021.

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Comparative Stock Performance

The following graph compares the Company's cumulative total return to its shareholders with the returns of two indexes for the five-year period ended December 31, 2020. The cumulative total return was calculated taking into consideration changes in stock price, cash dividends, stock dividends, and stock splits since December 31, 2015. The indexes are the Nasdaq Composite Index and the SNL Bank $1 Billion - $5 Billion Index, which includes bank holding companies with assets of $1 billion to $5 billion and is published by SNL Financial, LC.

American National Bankshares Inc.

	Period Ending
Index	12/31/2015		12/31/2016		12/31/2017		12/31/2018		12/31/2019		12/31/2020
American National Bankshares Inc.	$	100.00	$	140.67	$	158.91	$	124.88	$	173.57	$	119.86
Nasdaq Composite		100.00		108.87		141.13		137.12		187.44		271.64
SNL Bank $1B-$5B		100.00		143.87		153.37		134.37		163.35		138.81

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ITEM 6 - SELECTED FINANCIAL DATA

The following table sets forth selected financial data for the Company for the last five years:

(Amounts in thousands, except share and per share information and ratios)
	December 31,
	2020			2019			2018			2017			2016
Results of Operations:
Interest income	$	95,840		$	92,855		$	68,768		$	63,038		$	56,170
Interest expense		12,020			15,728			9,674			7,291			6,316
Net interest income		83,820			77,127			59,094			55,747			49,854
Provision for (recovery of) loan losses		8,916			456			(103	)		1,016			250
Noninterest income		16,843			15,170			13,274			14,227			13,505
Noninterest expense		54,565			66,074			44,246			42,883			39,801
Income before income tax provision		37,182			25,767			28,225			26,075			23,308
Income tax provision		7,137			4,861			5,646			10,826			7,007
Net income	$	30,045		$	20,906		$	22,579		$	15,249		$	16,301
Financial Condition:
Assets	$	3,050,010		$	2,478,550		$	1,862,866		$	1,816,078		$	1,678,638
Loans, net of unearned income		2,015,056			1,830,815			1,357,476			1,336,125			1,164,821
Securities		474,806			387,825			339,730			327,447			352,726
Deposits		2,611,330			2,060,547			1,566,227			1,534,726			1,370,640
Shareholders' equity		337,894			320,258			222,542			208,717			201,380
Shareholders' equity, tangible (1)		246,755			228,528			177,744			163,654			155,789
Per Share Information:
Earnings per share, basic	$	2.74		$	1.99		$	2.60		$	1.76		$	1.89
Earnings per share, diluted		2.73			1.98			2.59			1.76			1.89
Cash dividends paid		1.08			1.04			1.00			0.97			0.96
Book value		30.77			28.93			25.52			24.13			23.37
Book value, tangible (1)		22.47			20.64			20.38			18.92			18.08
Average common shares outstanding - basic		10,981,623			10,531,572			8,698,014			8,641,717			8,611,507
Average common shares outstanding - diluted		10,985,790			10,541,337			8,708,462			8,660,628			8,621,241
Selected Ratios:
Return on average assets		1.08	%		0.91	%		1.24	%		0.87	%		1.02	%
Return on average common equity (2)		9.12	%		7.16	%		10.56	%		7.34	%		8.07	%
Return on average tangible common equity (1)(3)		13.19	%		10.43	%		13.49	%		9.59	%		10.85	%
Dividend payout ratio		39.41	%		52.45	%		38.54	%		54.98	%		50.71	%
Efficiency ratio (1)(4)		52.80	%		57.25	%		59.20	%		60.14	%		59.97	%
Net interest margin		3.30	%		3.68	%		3.49	%		3.50	%		3.52	%
Asset Quality Ratios:
Allowance for loan losses to period end loans		1.06	%		0.72	%		0.94	%		1.02	%		1.10	%
Allowance for loan losses to period end nonperforming loans		793.88	%		570.59	%		1,101.98	%		531.37	%		360.39	%
Nonperforming assets to total assets		0.12	%		0.15	%		0.11	%		0.21	%		0.29	%
Net charge-offs to average loans		0.03	%		0.01	%		0.05	%		0.02	%		0.00	%
Capital Ratios:
Total risk-based capital ratio		15.18	%		14.04	%		15.35	%		14.39	%		14.81	%
Common equity tier 1 capital ratio		12.36	%		11.56	%		12.55	%		11.50	%		11.77	%
Tier 1 capital ratio		13.78	%		12.98	%		14.46	%		13.42	%		13.83	%
Tier 1 leverage ratio		9.48	%		10.75	%		11.62	%		10.95	%		11.67	%
Tangible common equity to tangible assets ratio (1)(5)		8.34	%		9.57	%		9.78	%		9.24	%		9.54	%

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(1)	Non-GAAP financial measure. See the Non-GAAP Presentations section of Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-K for reconciliation.
(2)	Return on average common equity is calculated by dividing net income available to common shareholders by average common equity.
(3)	Return on average tangible common equity is calculated by dividing net income available to common shareholders plus amortization of intangibles tax effected by average common equity less average intangibles.
(4)	The efficiency ratio is calculated by dividing noninterest expense excluding (i) gains or losses on the sale of other real estate owned, (ii) core deposit intangible amortization, and (iii) merger related expenses by net interest income including tax equivalent income on nontaxable loans and securities and noninterest income excluding (x) gains or losses on securities and (y) gains or losses on sale or disposal of premises and equipment.
(5)	Tangible common equity to tangible assets ratio is calculated by dividing period-end common equity less period-end intangibles by period-end assets less period-end intangibles.

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this discussion is to focus on significant changes in the financial condition and results of operations of the Company during the past three years. The discussion and analysis are intended to supplement and highlight information contained in the accompanying Consolidated Financial Statements and the selected financial data presented elsewhere in this Annual Report on Form 10-K.

RECLASSIFICATION

In certain circumstances, reclassifications have been made to prior period information to conform to the 2020 presentation. There were no material reclassifications.

CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies followed by the Company conform with GAAP and to general practices within the banking industry. The Company's critical accounting policies, which are summarized below, relate to (1) the allowance for loan losses, (2) mergers and acquisitions, (3) acquired loans with specific credit-related deterioration, (4) goodwill and intangible assets, (5) deferred tax assets and liabilities, and (6) other-than-temporary impairment of securities. A summary of the Company's significant accounting policies is set forth in Note 1 to the Consolidated Financial Statements.

The financial information contained within the Company's financial 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. In addition, GAAP itself may change from one previously acceptable method to another method.

Allowance for Loan Losses

The purpose of the allowance for loan losses ("ALLL") is to provide for probable losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses and by recoveries of previously charged-off loans. Loan charge-offs decrease the allowance.

The goal of the Company is to maintain an appropriate, systematic, and consistently applied process to determine the amounts of the ALLL and the provision for loan loss expense.

The Company uses certain practices to manage its credit risk. These practices include (1) appropriate lending limits for loan officers, (2) a loan approval process, (3) careful underwriting of loan requests, including analysis of borrowers, cash flows, collateral, and market risks, (4) regular monitoring of the portfolio, including diversification by type and geography, (5) review of loans by the Loan Review department, which operates independently of loan production (the Loan Review function consists of a co-sourced arrangement using both internal personnel and external vendors to provide the Company with a more robust review function of the loan portfolio), (6) regular meetings of the Credit Committee to discuss portfolio and policy changes and make decisions on large or unusual loan requests, and (7) regular meetings of the Asset Quality Committee which reviews the status of individual loans.

Risk grades are assigned as part of the loan origination process. From time to time, risk grades may be modified as warranted by the facts and circumstances surrounding the credit.

Calculation and analysis of the ALLL is prepared quarterly by the Finance Department with input from the Credit Department. The Company's Credit Committee, Risk and Compliance Committee, Audit Committee, and the Board of Directors review the allowance for adequacy.

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The Company's ALLL has two basic components: the formula allowance and the specific allowance. Each of these components is determined based upon estimates and judgments.

The formula allowance uses historical loss experience as an indicator of future losses, along with various qualitative factors, including levels and trends in delinquencies, nonaccrual loans, charge-offs and recoveries, trends in volume and terms of loans, effects of changes in underwriting standards, experience of lending staff, economic conditions, portfolio concentrations, regulatory, legal, competition, quality of loan review system, and value of underlying collateral. In the formula allowance for commercial and commercial real estate loans, the historical loss rate is combined with the qualitative factors, resulting in an adjusted loss factor for each risk-grade category of loans. The period-end balances for each loan risk-grade category are multiplied by the adjusted loss factor. Allowance calculations for residential real estate and consumer loans are calculated based on historical losses for each product category without regard to risk grade. This loss rate is combined with qualitative factors resulting in an adjusted loss factor for each product category.

The specific allowance uses various techniques to arrive at an estimate of loss for specifically identified impaired loans. These include:

• The present value of expected future cash flows discounted at the loan's effective interest rate. The effective interest rate on a loan is the rate of return implicit in the loan (that is, the contractual interest rate adjusted for any net deferred loan fees or costs and any premium or discount existing at the origination or acquisition of the loan);

• The loan's observable market price; or

• The fair value of the collateral, net of estimated costs to dispose, if the loan is collateral dependent.

The use of these computed values is inherently subjective and actual losses could be greater or less than the estimates.

No single statistic, formula, or measurement determines the adequacy of the allowance. Management makes subjective and complex judgments about matters that are inherently uncertain, and different amounts would be reported under different conditions or using different assumptions. For analytical purposes, management allocates a portion of the allowance to specific loan categories and specific loans. However, the entire allowance is used to absorb credit losses inherent in the loan portfolio, including identified and unidentified losses.

The relationships and ratios used in calculating the allowance, including the qualitative factors, may change from period to period as facts and circumstances evolve. Furthermore, management cannot provide assurance that in any particular period the Bank will not have sizable credit losses in relation to the amount reserved. Management may find it necessary to significantly adjust the allowance, considering current factors at the time.

Mergers and Acquisitions

Business combinations are accounted for under the FASB Accounting Standards Codification ("ASC") 805, Business Combinations, using the acquisition method of accounting. The acquisition method of accounting requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date. To determine the fair values, the Company will rely on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analysis or other valuation techniques. Under the acquisition method of accounting, the Company will identify the acquirer and the closing date and apply applicable recognition principles and conditions.

Acquisition-related costs are costs the Company incurs to effect a business combination. Those costs include advisory, legal, accounting, valuation, and other professional or consulting fees. Some other examples of costs to the Company include systems conversions, integration planning, consultants, and advertising costs. The Company will account for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, with one exception. The costs to issue debt or equity securities will be recognized in accordance with other applicable GAAP. These acquisition-related costs have been and will be included within the consolidated statements of income classified within the noninterest expense caption.

Acquired Loans with Specific Credit-Related Deterioration

Acquired loans with specific credit deterioration are accounted for by the Company in accordance with FASB ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality. Certain acquired loans, those for which specific credit-related deterioration since origination is identified, are recorded at the amount paid, such that there is no carryover of the seller's allowance for loan losses. Income recognition on these loans is based on a reasonable expectation about the timing and amount of cash flows to be collected.

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Goodwill and Intangible Assets

The Company follows ASC 350, Goodwill and Other Intangible Assets, which prescribes the accounting for goodwill and intangible assets subsequent to initial recognition. Goodwill resulting from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill resulting from business combinations after January 1, 2009 is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed. The Company has selected June 30 as the date to perform the annual impairment test.  Due to the COVID-19 pandemic market conditions, the Company determined a triggering event occurred during the first quarter of 2020 and performed a qualitative assessment at March 31, 2020. As the pandemic continued, the Company performed qualitative assessments at June 30 and September 30 and a quantitative assessment at December 31, 2020. The assessments determined the fair value exceeded the carrying value and did not indicate impairment. The impact of COVID-19 on market conditions and other changes in the economic environment, operations, or other adverse events could result in future impairment charges which could have a material adverse impact on the Company's operating results. No indicators of impairment were identified during the year ended December 31, 2019.  Intangible assets with definite useful lives are amortizing over their estimated useful lives of 10 years. Goodwill is the only intangible asset with an indefinite life on the Company's consolidated balance sheets.

Deferred Tax Assets and Liabilities

The realization of deferred income tax assets is assessed and a valuation allowance is recorded if it is "more likely than not" that all or a portion of the deferred tax asset will not be realized. "More likely than not" is defined as greater than a 50% chance. Management considers all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is needed.

Other-than-temporary Impairment of Securities

Impairment of securities occurs when the fair value of a security is less than its amortized cost. For debt securities, impairment is considered other-than-temporary and recognized in its entirety in net income if either (1) the Company intends to sell the security or (2) it is more-likely-than-not that the Company will be required to sell the security before recovery of its amortized cost basis. If, however, the Company does not intend to sell the security and it is not more-likely-than-not that it will be required to sell the security before recovery, the Company must determine what portion of the impairment is attributable to a credit loss, which occurs when the amortized cost basis of the security exceeds the present value of the cash flows expected to be collected from the security. If there is no credit loss, there is no other-than-temporary impairment. If there is a credit loss, other-than-temporary impairment exists, and the credit loss must be recognized in net income and the remaining portion of impairment must be recognized in other comprehensive income.

RECENT ACQUISITION

On April 1, 2019, the Company completed its acquisition of HomeTown. The combination deepened the Company's footprint in the Roanoke, Virginia metropolitan area and created a presence in the New River Valley with an office in Christiansburg, Virginia. After the merger and with two office consolidations, the Company has eight offices in the combined Roanoke/New River Valley market area. As a result of the merger, the holders of shares of HomeTown common stock received 0.4150 shares of the Company's common stock for each share of HomeTown common stock held immediately prior to the effective date of the merger. Following completion of the merger, HomeTown's subsidiary bank, HomeTown Bank, was merged with and into the Bank.

NON-GAAP PRESENTATIONS

Non-GAAP presentations are provided because the Company believes these may be valuable to investors. These include (1) the calculation of the efficiency ratio, (2) the analysis of net interest income presented on a taxable equivalent basis to facilitate performance comparisons among various taxable and tax-exempt assets, (3) return on average tangible common equity, (4) tangible common equity to tangible assets ratio, and (5) tangible book value per share.

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The efficiency ratio is calculated by dividing noninterest expense excluding (1) gains or losses on the sale of other real estate owned ("OREO"), (2) core deposit intangible amortization and (3) merger related expense by net interest income including tax equivalent income on nontaxable loans and securities and noninterest income and excluding (x) gains or losses on securities and (y) gains or losses on sale or disposal of premises and equipment. The efficiency ratio for 2020, 2019, and 2018 was 52.80%, 57.25%, and 59.20%, respectively. The Company expects this ratio to increase in 2021 as the benefits of PPP related items decrease. The efficiency ratio is a non-GAAP financial measure that the Company believes provides investors with important information regarding operational efficiency. Such information is not prepared in accordance with GAAP and should not be construed as such. Management believes, however, such financial information is meaningful to the reader in understanding operating performance but cautions that such information not be viewed as a substitute for GAAP information. In addition, the Company's non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. The Company, in referring to its net income, is referring to income under GAAP. The components of the efficiency ratio calculation are summarized in the following table (dollars in thousands):

	Year Ended December 31,
	2020			2019			2018
Efficiency Ratio
Noninterest expense	$	54,565		$	66,074		$	44,246
Add/subtract: gain/loss on sale OREO, net of writedowns		4			52			(44	)
Subtract: core deposit intangible amortization		(1,637	)		(1,398	)		(265	)
Subtract: merger related expenses		—			(11,782	)		(872	)
	$	52,932		$	52,946		$	43,065
Net interest income	$	83,820		$	77,127		$	59,094
Tax equivalent adjustment		288			369			556
Noninterest income		16,843			15,170			13,274
Subtract: gain on securities		(814	)		(607	)		(123	)
Add/subtract: loss/gain on sale of fixed assets		110			427			(60	)
	$	100,247		$	92,486		$	72,741
Efficiency ratio		52.80	%		57.25	%		59.20	%

Net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets. Because a portion of interest income earned by the Company is nontaxable, the tax equivalent net interest income is considered in the calculation of this ratio. Tax equivalent net interest income is calculated by adding the tax benefit realized from interest income that is nontaxable to total interest income then subtracting total interest expense. The tax rate utilized in calculating the tax benefit is 21% for 2020, 2019, and 2018. The reconciliation of tax equivalent net interest income, which is not a measurement under GAAP, to net interest income, is reflected in the table below (in thousands):

	Year Ended December 31,
	2020			2019			2018
Reconciliation of Net Interest Income to Tax-Equivalent Net Interest Income
Non-GAAP measures:
Interest income - loans	$	87,881		$	82,869		$	60,159
Interest income - investments and other		8,247			10,355			9,165
Interest expense - deposits		(9,729	)		(13,143	)		(8,086	)
Interest expense - customer repurchase agreements		(259	)		(596	)		(164	)
Interest expense - other short-term borrowings		—			(54	)		(22	)
Interest expense - long-term borrowings		(2,032	)		(1,935	)		(1,402	)
Total net interest income	$	84,108		$	77,496		$	59,650
Less non-GAAP measures:
Tax benefit realized on nontaxable interest income - loans		(181	)		(185	)		(192	)
Tax benefit realized on nontaxable interest income - municipal securities		(107	)		(184	)		(364	)
GAAP measures net interest income	$	83,820		$	77,127		$	59,094

Return on average tangible common equity is calculated by dividing net income available to common shareholders by average common equity.

	Year Ended December 31,
	2020			2019			2018
Return on Average Tangible Common Equity
Return on average common equity (GAAP basis)		9.12	%		7.16	%		10.56	%
Impact of excluding average goodwill and other intangibles		4.07	%		3.27	%		2.93	%
Return on average tangible common equity (non-GAAP)		13.19	%		10.43	%		13.49	%

30

Tangible common equity to tangible assets ratio is calculated by dividing period-end common equity less period-end intangibles by period-end assets less period-end intangibles.

	As of December 31,
	2020			2019
Tangible Common Equity to Tangible Assets
Common equity to assets ratio (GAAP basis)		11.08	%		12.92	%
Impact of excluding goodwill and other intangibles		(2.74	)%		(3.35	)%
Tangible common equity to tangible assets ratio (non-GAAP)		8.34	%		9.57	%

The Company presents book value per share (period-end shareholders' equity divided by period-end common shares outstanding) and tangible book value per share. In calculating tangible book value, the Company excludes goodwill and other intangible assets.

	As of December 31,
	2020			2019
Tangible Book Value Per Share
Book value per share (GAAP basis)	$	30.77		$	28.93
Impact of excluding goodwill and other intangibles		(8.30	)		(8.29	)
Tangible book value per share (non-GAAP)	$	22.47		$	20.64

RESULTS OF OPERATIONS

Executive Overview

The Company's 2020 financial highlights include the following:

• Earnings produced a return on average tangible common equity of 13.19% for 2020, compared to 10.43% for 2019.*

• Average deposits grew 22.3% in 2020 over 2019.

• Net interest margin was 3.30% for 2020, down from 3.68% for 2019.*   

• Noninterest revenues increased $1.7 million, or 11.0%, when compared to the previous year.

• Noninterest expense decreased $11.5 million, or 17.4%, when compared to 2019, primarily due to $11.8 million in one-time merger expenses associated with the HomeTown acquisition in 2019.

• The 2020 provision for loan losses totaled $8.9 million, which compares to a provision of $456 thousand in the prior year. The allowance for loan losses as a percentage of loans held for investment increased to 1.06% at year-end 2020, compared to 0.72% at year-end 2019.

• Nonperforming assets as a percentage of total assets were 0.12% at December 31, 2020, down from 0.15% at December 31, 2019.

• Net charge-offs were 0.03% for 2020, up from 0.01% for 2019.

• As a result of the Company's participation in the SBA's PPP under the CARES Act, it had outstanding net PPP loans of $211.3 million at December 31, 2020. The Company had net unamortized PPP loan origination fees with a balance of $4.4 million at December 31, 2020.

*Refer to the Non-GAAP Financial Measures section within this section for further information on these non-GAAP financial measurements.

31

Net Income

Net income for 2020 was $30,045,000 compared to $20,906,000 for 2019, an increase of $9,139,000, or 43.7%. Basic earnings per share were $2.74 for 2020 compared to $1.99 for 2019. Diluted earnings per share were $2.73 for 2020 compared to $1.98 for 2019. This net income produced for 2020 a return on average assets of 1.08%, a return on average common equity of 9.12%, and a return on average tangible common equity of 13.19%.

The increase in earnings in 2020 was primarily related to the April 1, 2019 merger with HomeTown as the Company realized a full year of operations from the combined entities and 2019 earnings were impacted adversely by $11,782,000 in one-time merger expenses. 

Net income for 2019 was $20,906,000 compared to $22,579,000 for 2018, a decrease of $1,673,000, or 7.4%. Basic earnings per share were $1.99 for 2019 compared to $2.60 for 2018. Diluted earnings per share were $1.98 for 2019 compared to $2.59 for 2018. This net income produced for 2019 a return on average assets of 0.91%, a return on average common equity of 7.16%, and a return on average tangible common equity of 10.43%.

The decrease in earnings in 2019 was primarily related to the April 1, 2019 merger with HomeTown, as earnings were impacted adversely by $11,782,000 in one-time merger expenses. Partially offsetting this impact were increases in net interest income associated with higher loan yields and greater loan volume also associated with the HomeTown acquisition augmented by organic growth throughout the rest of the Company's franchise.

Net Interest Income

Net interest income is the difference between interest income on earning assets, primarily loans and securities, and interest expense on interest bearing liabilities, primarily deposits and borrowings. Fluctuations in interest rates as well as volume and mix changes in earning assets and interest bearing liabilities can materially impact net interest income. Mergers including the most recent 2019 acquisition of HomeTown impacted net interest income positively for 2020, 2019, and 2018 through increased earning assets.

The following discussion of net interest income is presented on a taxable equivalent basis to facilitate performance comparisons among various taxable and tax-exempt assets, such as certain state and municipal securities. A tax rate of 21% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis for 2020, 2019, and 2018. Net interest income divided by average earning assets is referred to as the net interest margin. The net interest spread represents the difference between the average rate earned on earning assets and the average rate paid on interest bearing liabilities. All references in this section relate to average yields and rates and average asset and liability balances during the periods discussed.

Net interest income on a taxable equivalent basis increased $6,612,000, or 8.5%, in 2020 from 2019, following a $17,846,000, or 29.9%, increase in 2019 from 2018. The increase in net interest income in 2020 was primarily due to increased volume of earning assets. Average loan balances for 2020 were up $310,962,000 or 18.2%, over 2019, primarily due to PPP lending. These loans had a net balance of $211,275,000 at December 31, 2020, earn 1% interest and generated fee income that is being accreted over the life of the loans. The fee accretion contributed to the yield on the PPP portfolio, but the much lower effective rate contributed to decreased loan yields for 2020. PPP yield may be positively impacted in future periods due to forgiveness and recognition of net fees. Net interest margin benefited from $6.1 million in interest earned on these loans, net of deferred fees and costs. Loan yields overall for 2020 were 50 basis points lower than 2019, reflecting a much lower rate environment during the period and the effect of PPP lending.

Yields on loans were 4.36% in 2020 compared to 4.86% in 2019. Cost of funds was 0.72% in 2020 compared to 1.08% in 2019. Between 2020 and 2019, deposit rates for demand accounts decreased to 0.09% from 0.12%, money market accounts decreased to 0.46% from 1.18%, and time deposits decreased to 1.52% from 1.58%. The net interest margin was 3.30% for 2020, compared to 3.68% for 2019. The decrease in net interest margin was driven by declining interest rates and the impact of the lower rate on the PPP lending.

In 2020, the FOMC, in response to the COVID-19 crisis, reduced the target federal funds rate by 0.50% on March 3 and by another 1.00% on March 15, taking the federal funds target rate down to 0.25% where it remained for the rest of the year.

Net interest income on a taxable equivalent basis increased $17,846,000, or 29.9%, in 2019 from 2018, following a $2,564,000, or 4.5%, increase in 2018 from 2017. The increase in net interest income in 2019 was primarily due to increased volumes of earning assets and higher loan yields related to the acquisition of HomeTown coupled with organic growth in the legacy bank.

The following presentation is an analysis of net interest income and related yields and rates, on a taxable equivalent basis, for the last three years. Nonaccrual loans are included in average balances. Interest income on nonaccrual loans, if recognized, is recorded on a cash basis or when the loan returns to accrual status.

32

Net Interest Income Analysis

(in thousands, except yields and rates)

	Average Balance						Interest Income/Expense(1)						Average Yield/Rate
	2020		2019		2018		2020		2019		2018		2020			2019			2018
Loans:
Commercial	$	475,068	$	306,065	$	264,241	$	17,768	$	14,125	$	10,579		3.74	%		4.62	%		4.00	%
Real estate		1,531,195		1,388,188		1,063,950		69,525		68,050		49,275		4.54			4.90			4.63
Consumer		8,998		10,046		4,676		588		694		305		6.53			6.91			6.52
Total loans(2)		2,015,261		1,704,299		1,332,867		87,881		82,869		60,159		4.36			4.86			4.51
Securities:
U.S. Treasury		9,010		—		—		51		—		—		0.57			—			—
Federal agencies and GSEs		72,112		132,916		121,923		1,423		3,191		2,708		1.97			2.40			2.22
Mortgage-backed and CMOs		200,612		134,458		109,048		4,060		3,350		2,467		2.02			2.49			2.26
State and municipal		45,836		58,293		85,061		1,175		1,650		2,399		2.56			2.83			2.82
Other securities		20,382		16,552		14,950		1,098		903		718		5.39			5.46			4.80
Total securities		347,952		342,219		330,982		7,807		9,094		8,292		2.24			2.66			2.51
Deposits in other banks		188,700		60,651		45,434		440		1,261		873		0.23			2.08			1.92
Total interest earning assets		2,551,913		2,107,169		1,709,283		96,128		93,224		69,324		3.77			4.42			4.06
Nonearning assets		221,094		196,455		118,375
Total assets	$	2,773,007	$	2,303,624	$	1,827,658
Deposits:
Demand	$	386,790	$	307,329	$	234,857		344		370		49		0.09			0.12			0.02
Money market		574,510		445,505		393,321		2,634		5,246		3,505		0.46			1.18			0.89
Savings		198,313		166,842		132,182		117		284		40		0.06			0.17			0.03
Time		436,081		457,746		374,152		6,634		7,243		4,492		1.52			1.58			1.20
Total deposits		1,595,694		1,377,422		1,134,512		9,729		13,143		8,086		0.61			0.95			0.71
Customer repurchase agreements		42,937		39,134		18,401		259		596		164		0.60			1.52			0.89
Other short-term borrowings		1		2,694		1,149		—		54		22		0.55			2.00			1.91
Long-term borrowings		35,586		33,644		27,874		2,032		1,935		1,402		5.71			5.75			5.03
Total interest bearing liabilities		1,674,218		1,452,894		1,181,936		12,020		15,728		9,674		0.72			1.08			0.82
Noninterest bearing demand deposits		746,659		537,775		421,527
Other liabilities		22,777		20,933		10,374
Shareholders' equity		329,353		292,022		213,821
Total liabilities and shareholders' equity	$	2,773,007	$	2,303,624	$	1,827,658
Interest rate spread														3.05	%		3.34	%		3.24	%
Net interest margin														3.30	%		3.68	%		3.49	%
Net interest income (taxable equivalent basis)								84,108		77,496		59,650
Less: Taxable equivalent adjustment(3)								288		369		556
Net interest income							$	83,820	$	77,127	$	59,094

______________________

(1) Interest income includes net accretion/amortization of acquired loan fair value adjustments and the net accretion/amortization of deferred loan fees/costs.

(2) Nonaccrual loans are included in the average balances.

(3) A tax rate of 21% in 2020, 2019, and 2018 was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis.

33

The following table presents the dollar amount of changes in interest income and interest expense, and distinguishes between changes resulting from fluctuations in average balances of interest earning assets and interest bearing liabilities (volume) and changes resulting from fluctuations in average interest rates on such assets and liabilities (rate). Changes attributable to both volume and rate have been allocated proportionately (dollars in thousands):

Changes in Net Interest Income (Rate / Volume Analysis)

	2020 vs. 2019									2019 vs. 2018
				Change									Change
	Increase			Attributable to						Increase			Attributable to
Interest income	(Decrease)			Rate			Volume			(Decrease)			Rate		Volume
Loans:
Commercial	$	3,643		$	(3,056	)	$	6,699		$	3,546		$	1,741	$	1,805
Real estate		1,475			(5,234	)		6,709			18,775			3,022		15,753
Consumer		(106	)		(36	)		(70	)		389			19		370
Total loans		5,012			(8,326	)		13,338			22,710			4,782		17,928
Securities:
U.S. Treasury		51			—			51			—			—		—
Federal agencies and GSEs		(1,768	)		(495	)		(1,273	)		483			228		255
Mortgage-backed and CMOs		710			(714	)		1,424			883			268		615
State and municipal		(475	)		(145	)		(330	)		(749	)		9		(758	)
Other securities		195			(11	)		206			185			103		82
Total securities		(1,287	)		(1,365	)		78			802			608		194
Deposits in other banks		(821	)		(1,819	)		998			388			76		312
Total interest income		2,904			(11,510	)		14,414			23,900			5,466		18,434
Interest expense
Deposits:
Demand		(26	)		(109	)		83			321			301		20
Money market		(2,612	)		(3,833	)		1,221			1,741			1,232		509
Savings		(167	)		(213	)		46			244			231		13
Time		(609	)		(273	)		(336	)		2,751			1,616		1,135
Total deposits		(3,414	)		(4,428	)		1,014			5,057			3,380		1,677
Customer repurchase agreements		(337	)		(390	)		53			432			166		266
Other short-term borrowings		(54	)		(27	)		(27	)		32			1		31
Long-term borrowings		97			(14	)		111			533			218		315
Total interest expense		(3,708	)		(4,859	)		1,151			6,054			3,765		2,289
Net interest income	$	6,612		$	(6,651	)	$	13,263		$	17,846		$	1,701	$	16,145

Fair Value Impact to Net Interest Margin

The Company's fully taxable equivalent net interest margin includes the impact of acquisition accounting fair value adjustments. The impact of net accretion for 2018, 2019, and 2020 and the remaining estimated net accretion are reflected in the following table (dollars in thousands):

	Loans Accretion		Deposit Accretion		Borrowings Amortization			Total
For the year ended December 31, 2018	$	1,390	$	—	$	(102	)	$	1,288
For the year ended December 31, 2019		3,101		375		(89	)		3,387
For the year ended December 31, 2020		4,516		181		(85	)		4,612
For the years ending (estimated):
2021		1,854		78		(102	)		1,830
2022		1,198		50		(102	)		1,146
2023		718		30		(102	)		646
2024		485		5		(102	)		388
2025		381		2		(102	)		281
Thereafter (estimated)		1,696		3		(743	)		956

34

Noninterest Income

For the year ended December 31, 2020, noninterest income increased $1,673,000, or 11.0%, compared to the year ended December 31, 2019.

	Year Ended December 31,
	(Dollars in thousands)
	2020			2019			$ Change			% Change
Noninterest income:
Trust fees	$	4,044		$	3,847		$	197			5.1	%
Service charges on deposit accounts		2,557			2,866			(309	)		(10.8	)
Other fees and commissions		3,925			3,693			232			6.3
Mortgage banking income		3,514			2,439			1,075			44.1
Securities gains, net		814			607			207			34.1
Brokerage fees		745			721			24			3.3
Income from Small Business Investment Companies		270			211			59			28.0
Losses on premises and equipment, net		(110	)		(427	)		317			74.2
Other		1,084			1,213			(129	)		(10.6	)
Total noninterest income	$	16,843		$	15,170		$	1,673			11.0	%

A substantial portion of trust fees are earned based on account fair values, so changes in the equity markets may have a large and potentially volatile impact on revenue. Trust fees increased $197,000 for 2020 compared to 2019. Other fees and commissions increased $232,000 in 2020 compared to 2019, while service charges decreased $309,000. Due to the actions taken to combat COVID-19, such as stay-at-home orders and restaurant and retail changes, debit card income decreased as consumers did not spend at the same levels in 2020 as 2019. The Company saw decreases in overdraft and related fees, another component of service charge income, caused by consumer spending decreases during the same period. Mortgage banking income increased $1,075,000 for 2020 compared to 2019. The increase in 2020 is a result of historically low rates in 2020 resulting in increased application volume for new purchases and refinancing of existing loans. Net securities gains increased $207,000 in 2020 compared to 2019, while income from Small Business Investment Companies ("SBICs") investments increased $59,000. The year ended December 31, 2020 benefitted from reduced losses on premises and equipment. Other noninterest income for 2020 was reduced by a loss on the sale of repossessed assets of $139,000.

	Year Ended December 31,
	(Dollars in thousands)
	2019			2018		$ Change			% Change
Noninterest income:
Trust fees	$	3,847		$	3,783	$	64			1.7	%
Service charges on deposit accounts		2,866			2,455		411			16.7
Other fees and commissions		3,693			2,637		1,056			40.0
Mortgage banking income		2,439			1,862		577			31.0
Securities gains, net		607			123		484			393.5
Brokerage fees		721			795		(74	)		(9.3	)
Income from Small Business Investment Companies		211			637		(426	)		(66.9	)
Gains (losses) on premises and equipment, net		(427	)		60		(487	)		(811.7	)
Other		1,213			922		291			31.6
Total noninterest income	$	15,170		$	13,274	$	1,896			14.3	%

Trust fees remained stable while service charges increased $411,000 for 2019 compared to 2018, primarily due to the HomeTown acquisition. Other fees and commissions increased $1,056,000 in 2019 compared to 2018, mostly as a result of the acquisition but also from the strength of increased debit card fee revenue. As a result of increased volume, mortgage banking income increased $577,000 in 2019 over 2018. Net securities gains were up $484,000, or 393.5%. Income from SBICs investments decreased $426,000 or 66.9% for 2019 compared to 2018. Net gains (losses) on premises and equipment were a loss of $427,000 for 2019 compared to a gain of $60,000 in 2018. The loss was primarily due to a write-down of carrying value on existing equipment in connection with an ATM replacement initiative.

35

Noninterest Expense

For the year ended December 31, 2020, noninterest expense decreased $11,509,000, or 17.4%, as compared to the year ended December 31, 2019.

	Year Ended December 31,
	(Dollars in thousands)
	2020		2019		$ Change			% Change
Noninterest expense:
Salaries and employee benefits	$	29,765	$	30,015	$	(250	)		(0.8	)%
Occupancy and equipment		5,586		5,417		169			3.1
FDIC assessment		639		119		520			437.0
Bank franchise tax		1,702		1,644		58			3.5
Core deposit intangible amortization		1,637		1,398		239			17.1
Data processing		3,017		2,567		450			17.5
Software		1,454		1,295		159			12.3
Other real estate owned, net		60		31		29			93.5
Merger related expenses		—		11,782		(11,782	)		(100.0	)
Other		10,705		11,806		(1,101	)		(9.3	)
Total noninterest expense	$	54,565	$	66,074	$	(11,509	)		(17.4	)%

Salaries and employee benefits decreased $250,000 in 2020 as compared to 2019. Total full-time equivalent employees ("FTEs") were 342 at end of 2020, down from 355 at the end of 2019; however, 2020 was impacted by pension and salary expenses resulting from voluntary early retirement package costs. Contributing to the decrease was a reduction in salary expenses of $1.7 million for the deferral of loan costs related to PPP originations. The FDIC assessment expense in 2020 and 2019 was positively impacted by the Small Bank Assessment Credit, which reduced insurance expense $75,000 in 2020 and $492,000 in 2019. Core deposit intangible amortization increased $239,000 in 2020 compared to 2019 due to the HomeTown acquisition. Merger related expenses, which are related to the HomeTown acquisition and are nonrecurring in nature, totaled $11,782,000 during 2019. The increased expense for data processing in 2020 compared to 2019 of $450,000 was attributable to the increased costs as a result of a larger customer base after the HomeTown merger. The decrease in other noninterest expense in 2020 compared to 2019 was primarily due to reduced travel due to the COVID-19 pandemic and increased synergies from the HomeTown acquisition.

	Year Ended December 31,
	(Dollars in thousands)
	2019		2018		$ Change			% Change
Noninterest expense:
Salaries and employee benefits	$	30,015	$	24,879	$	5,136			20.6	%
Occupancy and equipment		5,417		4,378		1,039			23.7
FDIC assessment		119		537		(418	)		(77.8	)
Bank franchise tax		1,644		1,054		590			56.0
Core deposit intangible amortization		1,398		265		1,133			427.5
Data processing		2,567		1,691		876			51.8
Software		1,295		1,279		16			1.3
Other real estate owned, net		31		122		(91	)		(74.6	)
Merger related expenses		11,782		872		10,910			1,251.1
Other		11,806		9,169		2,637			28.8
Total noninterest expense	$	66,074	$	44,246	$	21,828			49.3	%

Salaries and employee benefits increased $5,136,000, or 20.6%, in 2019 compared to 2018. Total FTEs were 355 at the end of 2019, up from 305 at the end of 2018, for an increase of 50 FTEs primarily associated with the HomeTown acquisition. Occupancy and equipment expense increased $1,039,000 in 2019 compared to 2018, primarily due to the acquisition. The FDIC assessment expense in 2019 was positively impacted by the Small Bank Assessment Credit, which reduced insurance expense $492,000. Core deposit intangible amortization increased $1,133,000 in 2019 compared to 2018, and data processing expense increased $876,000 in 2019 compared to 2018, again as a result of the merger. Merger related expenses, which are related to the HomeTown acquisition and are nonrecurring in nature, totaled $11,782,000 during 2019 compared to $872,000 in 2018.

36

Income Taxes

Income taxes on 2020 earnings amounted to $7,137,000, resulting in an effective tax rate of 19.2%, compared to 18.9% in 2019 and 20.0% in 2018. As a result of the enactment of the CARES Act, the Company recognized in the first quarter of 2020 a tax benefit for the net operating loss ("NOL") five-year carryback provision for the NOL acquired in the HomeTown merger. The rate increased as the Company recognized less tax exempt income in 2020. An income tax benefit was realized for the difference between the current corporate income tax rate of 21% and the higher federal corporate tax rate of 35% prior to 2018.

The effective tax rate is lowered by income that is not taxable for federal income tax purposes. The primary nontaxable income is from state and municipal securities and loans.

Impact of Inflation and Changing Prices

The majority of assets and liabilities of a financial institution are monetary in nature and therefore differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories. The most significant effect of inflation is on noninterest expenses that tend to rise during periods of inflation. Changes in interest rates have a greater impact on a financial institution's profitability than do the effects of higher costs for goods and services. Through its balance sheet management practices, the Company has the ability to react to those changes and measure and monitor its interest rate and liquidity risk.

Market Risk Management

Effectively managing market risk is essential to achieving the Company's financial objectives. Market risk reflects the risk of economic loss resulting from changes in interest rates and market prices. The Company is generally not subject to currency exchange risk or commodity price risk. The Company's primary market risk exposure is interest rate risk; however, market risk also includes liquidity risk. Both are discussed in the following sections.

Interest Rate Risk Management

Interest rate risk and its impact on net interest income is a primary market risk exposure. The Company manages its exposure to fluctuations in interest rates through policies approved by its Asset Liability Committee ("ALCO") and Board of Directors, both of which receive and review periodic reports of the Company's interest rate risk position.

The Company uses computer simulation analysis to measure the sensitivity of projected earnings to changes in interest rates. Simulation takes into account current balance sheet volumes and the scheduled repricing dates, instrument level optionality, and maturities of assets and liabilities. It incorporates numerous assumptions including growth, changes in the mix of assets and liabilities, prepayments, and average rates earned and paid. Based on this information, management uses the model to project net interest income under multiple interest rate scenarios.

A balance sheet is considered asset sensitive when its earning assets (loans and securities) reprice faster or to a greater extent than its liabilities (deposits and borrowings). An asset sensitive balance sheet will produce relatively more net interest income when interest rates rise and less net interest income when they decline. Based on the Company's simulation analysis, management believes the Company's interest sensitivity position at December 31, 2020 is asset sensitive. 

Earnings Simulation

The table below shows the estimated impact of changes in interest rates on net interest income as of December 31, 2020 (dollars in thousands), assuming instantaneous and parallel changes in interest rates, and consistent levels of assets and liabilities. Net interest income for the following twelve months is projected to increase when interest rates are higher than current rates.

Estimated Changes in Net Interest Income

	December 31, 2020
	Change in net interest income
Change in interest rates	Amount			Percent
Up 4.0%	$	10,976			13.8	%
Up 3.0%		8,247			10.4
Up 2.0%		5,446			6.8
Up 1.0%		2,676			3.4
Flat		—			—
Down 0.25%		(448	)		(0.6	)
Down 1.00% (1)		(1,133	)		(1.4	)

__________________________

(1) This scenario is deemed invalid at this time due to the current low interest rate environment.

37

Management cannot predict future interest rates or their exact effect on net interest income. Computations of future effects of hypothetical interest rate changes are based on numerous assumptions and should not be relied upon as indicative of actual results. Certain limitations are inherent in such computations. Assets and liabilities may react differently than projected to changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while rates on other types of assets and liabilities may lag changes in market interest rates. Interest rate shifts may not be parallel.

Changes in interest rates can cause substantial changes in the amount of prepayments of loans and mortgage-backed securities, which may in turn affect the Company's interest rate sensitivity position. Additionally, credit risk may rise if an interest rate increase adversely affects the ability of borrowers to service their debt.

Economic Value Simulation

Economic value simulation is used to calculate the estimated fair value of assets and liabilities over different interest rate environments. Economic values are calculated based on discounted cash flow analysis. The net economic value of equity is the economic value of all assets minus the economic value of all liabilities. The change in net economic value over different rate environments is an indication of the longer-term earnings capability of the balance sheet. The same assumptions are used in the economic value simulation as in the earnings simulation. The economic value simulation uses instantaneous rate shocks to the balance sheet.

The following table reflects the estimated change in net economic value over different rate environments using economic value simulation for the balances at the period ended December 31, 2020 (dollars in thousands):

Estimated Changes in Economic Value of Equity

	December 31, 2020
Change in interest rates	Amount		$ Change			% Change
Up 4.0%	$	414,016	$	192,052			86.5	%
Up 3.0%		379,029		157,065			70.8
Up 2.0%		337,336		115,372			52.0
Up 1.0%		284,837		62,873			28.3
Flat		221,964		—			—
Down 0.25%		198,836		(23,128	)		(10.4	)
Down 1.00% (1)		111,512		(110,452	)		(49.8	)

__________________________

(1) This scenario is deemed invalid at this time due to the current low interest rate environment.

Liquidity Risk Management

Liquidity is the ability of the Company in a timely manner to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management involves maintaining the Company's ability to meet the daily cash flow requirements of its customers, whether they are borrowers requiring funds or depositors desiring to withdraw funds. Additionally, the Company requires cash for various operating needs including dividends to shareholders, the servicing of debt, and the payment of general corporate expenses. The Company manages its exposure to fluctuations in interest rates and liquidity needs through policies approved by the ALCO and Board of Directors, both of which receive periodic reports of the Company's interest rate risk and liquidity position. The Company uses a computer simulation model to assist in the management of the future liquidity needs of the Company.

Liquidity sources include on balance sheet and off balance sheet sources.

Balance sheet liquidity sources include cash, amounts due from banks, loan repayments, bond maturities and calls, and increases in deposits. Further, the Company maintains a large, high quality, very liquid bond portfolio, which is generally 50% to 60% unpledged and would, accordingly, be available for sale if necessary.

Off balance sheet sources include lines of credit from the Federal Home Loan Bank of Atlanta ("FHLB"), federal funds lines of credit, and access to the Federal Reserve Bank of Richmond's discount window.

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The Company has a line of credit with the FHLB, equal to 30% of the Company's assets, subject to the amount of collateral pledged. Under the terms of its collateral agreement with the FHLB, the Company provides a blanket lien covering all of its residential first mortgage loans, home equity lines of credit, commercial real estate loans and commercial construction loans. In addition, the Company pledges as collateral its capital stock in and deposits with the FHLB. At December 31, 2020 and 2019, there were no principal advance obligations to the FHLB. The Company had outstanding $245,000,000 in FHLB letters of credit at December 31, 2020 compared to $170,000,000 in letters of credit at December 31, 2019. The letters of credit provide the Bank with additional collateral for securing public entity deposits above FDIC insurance levels, thereby providing less need for collateral pledging from the securities portfolio and accordingly increasing the Company's balance sheet liquidity.

Short-term borrowing is discussed in Note 11 and long-term borrowing is discussed in Note 12 of the Consolidated Financial Statements contained in Item 8 of this Form 10-K.

The Company has federal funds lines of credit established with correspondent banks in the amount of $60,000,000 and has access to the Federal Reserve Bank of Richmond's discount window. There were no amounts outstanding under these facilities at December 31, 2020. The Company, through its subsidiary bank, has a relationship with Promontory Network, the sponsoring entity for the Certificate of Deposit Account Registry Service® ("CDARS"). Through CDARS, the Company is able to provide deposit customers with access to aggregate FDIC insurance in amounts far exceeding $250,000. This gives the Company the ability, as and when needed, to attract and retain large deposits from insurance sensitive customers. Under the EGRRCPA signed into law on May 24, 2018, a well-capitalized bank with a CAMELS rating of 1 or 2 may hold reciprocal deposits up to the lesser of 20% of its total liabilities or $5 billion without those deposits being treated as brokered deposits. With CDARS, the Company has the option to keep deposits on balance sheet or sell them to other members of the network. Additionally, subject to certain limits, the Company can use CDARS to purchase cost-effective funding without collateralization and in lieu of generating funds through traditional brokered CDs or the FHLB. Thus, CDARS serves as a deposit-gathering tool and an additional liquidity management tool. Deposits through the CDARS program as of December 31, 2020 and 2019 were $4,342,000 and $14,864,000, respectively.

The Bank also participates with the Promontory Network using Insured Cash Sweep®, a product which provides the Bank the capability of providing additional deposit insurance to customers in the context of a money market account arrangement. The product is analogous to the CDARS product discussed above.

COVID-19 and the participation in the PPP and the DAP programs could significantly impact the Company's liquidity. Average deposits grew 22.3% in 2020 compared to 2019, partially due to customer deposits of loan proceeds from participation in the PPP program. Customers have continued to maintain higher cash balances throughout the second, third, and fourth quarters of 2020 as future liquidity needs remain uncertain. This buildup of cash reserves primarily accounts for the significant increase over the same period of 2019. Management believes that the resources available to the Company will provide sufficient and timely liquidity, both on and off the balance sheet to support the programs and operations.

BALANCE SHEET ANALYSIS

Securities

The securities portfolio generates income, plays a strategic role in the management of interest rate sensitivity, provides a source of liquidity, and is used to meet collateral requirements. The securities portfolio consists of high quality investments, mostly federal agency, mortgage-backed, and state and municipal securities.

The Company is cognizant of the continuing historically low and currently steady rate environment and has elected to execute an asset liability strategy of purchasing high quality taxable securities with relatively low optionality and short and overall balanced duration.

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The following table presents information on the amortized cost, maturities, and taxable equivalent yields of available for sale securities at the end of the last three years (dollars in thousands):

	As of December 31,
	2020					2019					2018
			Taxable					Taxable					Taxable
	Amortized		Equivalent			Amortized		Equivalent			Amortized		Equivalent
	Cost		Yield			Cost		Yield			Cost		Yield
U. S. Treasury
Within 1 year	$	34,997		0.08	%	$	14,992		1.52	%	$	—		—	%
1 to 5 years		—		—			—		—			—		—
5 to 10 years		—		—			—		—			—		—
Over 10 years		—		—			—		—			—		—
Total		34,997		0.08			14,992		1.52			—		—
Federal Agencies:
Within 1 year		86		2.68			24,987		1.52			—		—
1 to 5 years		65,553		0.62			24,920		2.28			68,786		2.27
5 to 10 years		24,742		1.99			46,946		2.71			55,797		2.66
Over 10 years		13,711		2.18			29,976		2.32			12,487		2.05
Total		104,092		1.15			126,829		2.30			137,070		2.40
Mortgage-backed:
Within 1 year		30		2.42			73		3.26			72		3.14
1 to 5 years		6,368		1.41			2,794		2.84			2,946		2.62
5 to 10 years		92,590		1.40			38,993		2.27			36,241		2.44
Over 10 years		147,782		1.61			140,872		2.46			74,624		2.54
Total		246,770		1.53			182,732		2.42			113,883		2.51
State and Municipal:
Within 1 year		2,998		2.47			1,255		3.85			6,872		2.25
1 to 5 years		30,852		2.13			25,619		2.72			46,287		2.93
5 to 10 years		15,371		2.02			9,086		2.82			20,199		2.82
Over 10 years		7,901		2.93			5,467		3.50			6,664		2.71
Total		57,122		2.23			41,427		2.88			80,022		2.82
Corporate Securities:
Within 1 year		—		—			—		—			—		—
1 to 5 years		500		2.42			500		2.42			500		2.42
5 to 10 years		12,511		5.11			505		5.28			—		—
Over 10 years		—		—			8,509		5.56			6,299		5.41
Total		13,011		5.01			9,514		5.38			6,799		4.70
Total portfolio	$	455,992		1.52	%	$	375,494		2.47	%	$	337,774		2.59	%

The Company adopted ASU 2016-01 effective January 1, 2018 and had no equity securities at December 31, 2020 and 2019. The Company recognized in income $333,000 of unrealized holding gains during 2019. During the year ended December 31, 2019, the Company sold $445,000 in equity securities at fair value.

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Loans

The loan portfolio consists primarily of commercial and residential real estate loans, commercial loans to small and medium-sized businesses, construction and land development loans, and home equity loans. At December 31, 2020, the commercial real estate portfolio included concentrations of $75,235,000, $44,738,000 and $190,840,000 in hotel, restaurants, and retail, respectively. The concentrations total 15.5% of total loans, excluding loans in process.

Average loans increased $310,962,000, or 18.2%, from 2019 to 2020, primarily related to PPP lending. Average loans increased $371,432,000, or 27.9%, from 2018 to 2019, mostly impacted by the HomeTown merger.

At December 31, 2020, total loans, net of deferred fees and costs, were $2,015,056,000, an increase of $184,241,000, or 10.1%, from the prior year. Excluding PPP loans of $211,275,000 at December 31, 2020, loans held for investment were slightly lower year over year.

Loans held for sale and associated with secondary mortgage activity totaled $15,591,000 at December 31, 2020 and $2,027,000 at December 31, 2019. Loan production volume was $165,755,000 and $102,708,000 for 2020 and 2019, respectively. These loans were approximately 40% purchase, 60% refinancing for the year ended December 31, 2020 compared to approximately 60% purchase, 40% refinancing for the year ended December 31, 2019.

Management of the loan portfolio is organized around portfolio segments. Each segment is comprised of various loan types that are reflective of operational and regulatory reporting requirements. The following table presents the Company's portfolio as of the dates indicated by segment (dollars in thousands): 

Loans

	As of December 31,
	2020		2019		2018		2017		2016
Real estate:
Construction and land development	$	140,071	$	137,920	$	97,240	$	123,147	$	114,258
Commercial real estate - owner occupied		373,680		360,991		255,863		234,922		224,364
Commercial real estate - non-owner occupied		627,569		538,208		399,937		402,779		286,596
Residential real estate		269,137		324,315		209,438		209,326		215,104
Home equity		104,881		119,423		103,933		109,857		110,751
Total real estate		1,515,338		1,480,857		1,066,411		1,080,031		951,073
Commercial and industrial		491,256		339,077		285,972		251,666		208,717
Consumer		8,462		10,881		5,093		4,428		5,031
Total loans, net of deferred fees and costs	$	2,015,056	$	1,830,815	$	1,357,476	$	1,336,125	$	1,164,821

The following table provides loan balance information by geographic regions. In some circumstances, loans may be originated in one region for borrowers located in other regions (dollars in thousands):

Loans by Geographic Region

	December 31, 2020					Percentage Change in Balance Since
			Percentage			December 31,
	Balance		of Portfolio			2019
Danville region	$	250,653		12.4	%		13.6	%
Central region		127,487		6.3			(7.5	)
Southside region		82,443		4.1			19.1
Eastern region		104,474		5.2			11.6
Franklin region		136,587		6.8			13.7
Roanoke region		429,553		21.3			1.3
New River Valley region		131,021		6.5			15.7
Alamance region		274,912		13.7			(3.9	)
Guilford region		312,736		15.5			13.4
Winston-Salem region		116,186		5.8			28.9
Triangle region		49,004		2.4			100.0
Total loans, net of deferred fees and costs	$	2,015,056		100.0	%		10.1	%

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The Danville region consists of offices in Danville, Virginia and Yanceyville, North Carolina. The Central region consists of offices in Lynchburg, and Campbell County, Virginia. The Southside region consists of offices in Martinsville and Henry County, Virginia. The Eastern region consists of offices in South Boston and the counties of Halifax and Pittsylvania, Virginia. The Franklin region consists of offices in Rocky Mount and Hardy, Virginia. The Roanoke region consists of offices in Roanoke, Salem, and Roanoke County, Virginia. The New River Valley region consists of an office in Christiansburg, Virginia. The Alamance region consists of offices in Burlington, Graham, and Mebane, North Carolina. The Guilford region consists of offices in Greensboro, North Carolina. The Winston-Salem region consists of an office in Winston-Salem, North Carolina. The Triangle region consists of an office in Raleigh, North Carolina.

The Company does not participate in or have any highly leveraged lending transactions, as defined by bank regulations. The Company has no foreign loans. There were no concentrations of loans to any individual, group of individuals, business, or industry that exceeded 10% of total loans at December 31, 2020 or 2019.

The following table presents the maturity schedule of selected loan types (dollars in thousands):

Maturities of Selected Loan Types

December 31, 2020

	Commercial		Construction
	and		and Land
	Industrial (1)		Development		Total
1 year or less	$	63,796	$	24,745	$	88,541
1 to 5 years (2)		353,258		102,974		456,232
After 5 years (2)		74,202		12,352		86,554
Total	$	491,256	$	140,071	$	631,327

__________________________

(1) Includes agricultural loans.

(2) Of the loans due after one year, $459,488 have predetermined interest rates and $83,298 have floating or adjustable interest rates.

Provision for Loan Losses

The Company had a provision for loan losses of $8,916,000 for the year ended December 31, 2020, compared to a provision for loan losses of $456,000 and a negative provision for loan losses of $103,000 for the years ended December 31, 2019 and 2018, respectively.

The larger provision for 2020 reflects an increase in allowance requirements in response to the declining and uncertain economic landscape caused by the COVID-19 pandemic during the period. The increase in 2020 can be attributed to a measurable increase in qualitative factors related to significant contractions in economic data for both national and local economies and a significant increase in unemployment rates. The provision for 2019 primarily related to a $156,000 increase in the impaired loan reserve and loan growth during the fourth quarter of 2019. The negative provision for 2018 related to favorable adjustments on the purchased credit impaired loan loss allowance. 

Allowance for Loan Losses

The purpose of the ALLL is to provide for probable losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses and by recoveries of previously charged-off loans. Loan charge-offs decrease the allowance.

The ALLL was $21,403,000, $13,152,000, and $12,805,000 at December 31, 2020, 2019, and 2018, respectively. The ALLL as a percentage of loans at each of those dates was 1.06%, 0.72%, and 0.94%, respectively. Excluding PPP loans, the allowance as a percentage of loans increased to 1.19% at December 31, 2020.

The increase in the allowance as a percentage of loans during 2020 as compared to 2019 was primarily due to the economic effects of the COVID-19 pandemic. The decrease in the allowance as a percentage of loans during 2019 as compared to 2018 was primarily due to the acquired loan portfolio of HomeTown recorded at fair value with no continuing allowance and the continued high asset quality, low charge-offs, and improvement in various qualitative factors, notably economic, used in the determination of the allowance.

In an effort to better evaluate the adequacy of its ALLL, the Company computes its ASC 450, Contingencies, loan balance by reducing total loans by acquired loans and loans that were evaluated for impairment individually or smaller balance nonaccrual loans evaluated for impairment in homogeneous pools. It also adjusts its ASC 450 loan loss reserve balance total by removing allowances associated with these other pools of loans.

The general allowance, ASC 450 (FAS 5) reserves to ASC 450 loans, was 1.16% at December 31, 2020, compared to 0.87% at December 31, 2019. On a dollar basis, the reserve was $20,534,000 at December 31, 2020, compared to $12,684,000 at December 31, 2019. The percentage of the reserve to total loans has increased due to economic uncertainty resulting from the COVID-19 pandemic. This segment of the allowance represents by far the largest portion of the loan portfolio and the largest aggregate risk.

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The specific allowance, ASC 310-40 (FAS 114) reserves to ASC 310-40 loans, was 1.06% at December 31, 2020, compared to 10.51% at December 31, 2019. On a dollar basis, the reserve was $30,000 at December 31, 2020, compared to $230,000 at December 31, 2019. There is ongoing turnover in the composition of the impaired loan population, which increased $660,000 from December 31, 2019. The decrease in the specific allowance from the prior year is primarily due to the write-off of the specific reserves on two loans for which we have received a commitment to purchase.

The specific allowance does not include reserves related to acquired loans with deteriorated credit quality. This reserve was $839,000 at December 31, 2020, compared to $238,000 at December 31, 2019. This is the only portion of the reserve related to acquired loans. Cash flow expectations for these loans are reviewed on a quarterly basis and unfavorable changes in those estimates relative to the initial estimates can result in the need for specific loan loss provisions.

The following table presents the Company's loan loss and recovery experience for the past five years (dollars in thousands):

Summary of Loan Loss Experience

	Year Ended December 31,
	2020		2019		2018			2017		2016
Balance at beginning of period	$	13,152	$	12,805	$	13,603		$	12,801	$	12,601
Charge-offs:
Construction and land development		—		—		—			35		—
Commercial real estate - owner occupied		17		6		11			55		—
Commercial real estate - non-owner occupied		165		—		—			3		10
Residential real estate		90		20		—			159		21
Home equity		27		50		86			13		66
Total real estate		299		76		97			265		97
Commercial and industrial		505		12		787			282		40
Consumer		202		245		136			143		189
Total charge-offs		1,006		333		1,020			690		326
Recoveries:
Construction and land development		2		—		4			43		11
Commercial real estate - owner occupied		12		9		6			3		3
Commercial real estate - non-owner occupied		50		—		—			14		18
Residential real estate		63		40		45			45		53
Home equity		22		18		104			40		15
Total real estate		149		67		159			145		100
Commercial and industrial		65		13		69			223		40
Consumer		127		144		97			108		136
Total recoveries		341		224		325			476		276
Net charge-offs		665		109		695			214		50
Provision for (recovery of) loan losses		8,916		456		(103	)		1,016		250
Balance at end of period	$	21,403	$	13,152	$	12,805		$	13,603	$	12,801

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The following table summarizes the allocation of the allowance for loan losses by major portfolio segments for the past five years (dollars in thousands):

Allocation of Allowance for Loan Losses

	Year Ended December 31,
	2020					2019					2018					2017					2016
	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
Commercial	$	3,373		24.4	%	$	2,657		18.5	%	$	2,537		21.0	%	$	2,413		18.8	%	$	2,095		17.9	%
Construction and land development		1,927		7.0			1,161		7.6			1,059		7.2			1,401		9.2			1,378		9.8
Commercial real estate - owner occupied		4,340		18.5			2,474		19.7			2,420		18.8			2,668		17.6			2,537		19.3
Commercial real estate - non-owner occupied		7,626		31.1			3,781		29.4			3,767		29.5			4,252		30.2			3,440		24.6
Residential real estate		4,067		18.6			3,023		24.2			2,977		23.1			2,825		23.9			3,303		28.0
Consumer		70		0.4			56		0.6			45		0.4			44		0.3			48		0.4
Total	$	21,403		100.0	%	$	13,152		100.0	%	$	12,805		100.0	%	$	13,603		100.0	%	$	12,801		100.0	%

__________________________

% - represents the percentage of loans in each category to total loans.

Asset Quality Indicators

The following table provides certain qualitative indicators relevant to the Company's loan portfolio for the past five years.

Asset Quality Ratios

	As of or for the Year Ended December 31,
	2020			2019			2018			2017			2016
Allowance to loans (1)		1.06	%		0.72	%		0.94	%		1.02	%		1.10	%
ASC 450/general allowance (2)		1.16			0.87			0.94			1.04			1.17
Net charge-offs to year-end allowance		3.11			0.83			5.43			1.57			0.39
Net charge-offs to average loans		0.03			0.01			0.05			0.02			0.00
Nonperforming assets to total assets		0.12			0.15			0.11			0.21			0.29
Nonperforming loans to loans		0.13			0.13			0.09			0.19			0.30
Provision to net charge-offs (recoveries)		1,340.75			418.35			(14.82	)		474.77			500.00
Provision to average loans		0.44			0.03			(0.01	)		0.08			0.02
Allowance to nonperforming loans		793.88			570.59			1,101.98			531.37			360.39

__________________________

(1) Excluding PPP loans, 1.19%

 (2) Excluding PPP loans, 1.32%

Nonperforming Assets (Loans and Other Real Estate Owned)

Nonperforming loans include loans on which interest is no longer accrued and accruing loans that are contractually past due 90 days or more. Nonperforming loans include loans originated and loans acquired exclusive of purchased credit impaired loans.

Nonperforming loans to total loans were 0.13% at both December 31, 2020 and December 31, 2019. The increase in nonperforming loans during 2020 was $391,000.

Nonperforming assets include nonperforming loans and foreclosed real estate. Nonperforming assets represented 0.12% at December 31, 2020 compared to 0.15% of total assets at December 31, 2019. The Company continues to monitor the significant impact to its borrowers caused by COVID-19 and anticipates increases in nonperforming assets as a result, but the total cannot be determined at this time.

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In most cases, it is the policy of the Company that any loan that becomes 90 days past due will automatically be placed on nonaccrual loan status, accrued interest reversed out of income, and further interest accrual ceased. Any payments received on such loans will be credited to principal. In some cases a loan in process of renewal may become 90 days past due. In these instances the loan may still be accruing because of a delayed renewal process in which the customer has not been billed. In accounting for acquired impaired loans, such loans are not classified as nonaccrual when they become 90 days past due. They are considered to be accruing because their interest income relates to the accretable yield and not to contractual interest payments.

Loans will only be restored to full accrual status after six consecutive months of payments that were each less than 30 days delinquent. The Company strictly adheres with this policy before restoring a loan to normal accrual status.

The following table presents the Company's nonperforming asset history, including acquired impaired loans as of the dates indicated (dollars in thousands):

Nonperforming Assets

	As of December 31,
	2020		2019		2018		2017		2016
Nonaccrual loans:
Real estate	$	2,328	$	1,083	$	1,007	$	2,111	$	2,928
Commercial		100		857		83		90		19
Consumer		6		4		—		—		18
Total nonaccrual loans		2,434		1,944		1,090		2,201		2,965
Loans past due 90 days and accruing interest:
Real estate		262		309		72		359		587
Commercial		—		52		—		—		—
Consumer		—		—		—		—		—
Total past due loans		262		361		72		359		587
Total nonperforming loans		2,696		2,305		1,162		2,560		3,552
Other real estate owned, net		958		1,308		869		1,225		1,328
Total nonperforming assets	$	3,654	$	3,613	$	2,031	$	3,785	$	4,880

Impaired Loans

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. The following table shows loans that were considered impaired, exclusive of purchased credit impaired loans, as of the dates indicated (dollars in thousands):

Impaired Loans

	As of December 31,
	2020		2019		2018		2017		2016
Accruing	$	758	$	969	$	848	$	1,016	$	2,059
On nonaccrual status		2,094		1,223		486		2,201		2,785
Total impaired loans	$	2,852	$	2,192	$	1,334	$	3,217	$	4,844

Troubled Debt Restructurings

TDRs exist whenever the Company makes a concession to a customer based on the customer's financial distress that would not have otherwise been made in the normal course of business.

There were $1,976,000 in TDRs at December 31, 2020 compared to $1,058,000 at December 31, 2019.

45

In March 2020 (revised in April 2020), the federal banking agencies issued an "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus." This was in response to the COVID-19 pandemic affecting societies and economies around the world. This guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19. The guidance explains that, in consultation with the FASB staff, the federal banking agencies have concluded that short-term modifications (e.g. six months) made on a good faith basis to borrowers who were current as of the implementation date of a relief program are not TDR. The CARES Act was passed by the U.S. Congress on March 27, 2020. Section 4013 of the CARES Act also addressed COVID-19 related modifications and specified that COVID-19 related modifications on loans that were current as of December 31, 2019 were not TDRs. The Bank implemented a DAP to provide relief to its borrowers under this guidance. The Bank provided assistance to customers with loan balances of $405.1 million during the year ended December 31, 2020. 

Other Real Estate Owned

OREO is carried on the consolidated balance sheets at $958,000 and $1,308,000 as of December 31, 2020 and 2019, respectively. Foreclosed assets are initially recorded at fair value, less estimated costs to sell, at the date of foreclosure. Loan losses resulting from foreclosure are charged against the ALLL at that time. Subsequent to foreclosure, valuations are periodically performed by management, and the assets are carried at the lower of the new cost basis or fair value, less estimated costs to sell, with any additional write-downs charged against earnings. For significant assets, these valuations are typically outside annual appraisals. 

The following table shows OREO as of the dates indicated (dollars in thousands):

	As of December 31,
	2020		2019		2018		2017		2016
Construction and land development	$	443	$	600	$	78	$	318	$	139
Commercial real estate - owner occupied		230		390		—		173		375
Commercial real estate - non-owner occupied		—		33		72		105		161
Residential real estate		237		285		719		629		250
Home equity		48		—		—		—		403
Total OREO	$	958	$	1,308	$	869	$	1,225	$	1,328

Deposits

The Company's deposits consist primarily of checking, money market, savings, and consumer and commercial time deposits. Average deposits increased $427,156,000, or 22.3%, in 2020, mostly a result of continued higher than average cash balances being maintained by customers as the uncertainty of the pandemic continues and is a trend that is consistent for all commercial banks. Average deposits increased $359,158,000, or 23.1%, from 2018 to 2019, mostly impacted by the HomeTown merger.

Period-end total deposits increased $550,783,000, or 26.7%, during 2020. Customers have continued to maintain higher cash balances as future liquidity needs remain uncertain. The Company has only a relatively small portion of its time deposits provided by wholesale sources. These include time deposits through the CDARS program, which at year end totaled $4,342,000 for 2020, $14,864,000 for 2019, and $22,431,000 for 2018. Management considers the CDARS deposits the functional equivalent of core deposits because they relate to balances derived from customers with long standing relationships with the Company.

Average deposits and rates for the years indicated (dollars in thousands):

Deposits

	Year Ended December 31,
	2020					2019					2018
	Average					Average					Average
	Balance		Rate			Balance		Rate			Balance		Rate
Noninterest bearing deposits	$	746,659		—	%	$	537,775		—	%	$	421,527		—	%
Interest bearing accounts:
NOW accounts	$	386,790		0.09	%	$	307,329		0.12	%	$	234,857		0.02	%
Money market		574,510		0.46			445,505		1.18			393,321		0.89
Savings		198,313		0.06			166,842		0.17			132,182		0.03
Time		436,081		1.52			457,746		1.58			374,152		1.20
Total interest bearing deposits	$	1,595,694		0.61	%	$	1,377,422		0.95	%	$	1,134,512		0.71	%
Average total deposits	$	2,342,353		0.42	%	$	1,915,197		0.68	%	$	1,556,039		0.52	%

46

Certificates of Deposit of $100,000 or More

Certificates of deposit at December 31, 2020 in amounts of $100,000 or more were classified by maturity as follows (dollars in thousands):

	December 31, 2020
3 months or less	$	94,282
Over 3 through 6 months		35,823
Over 6 through 12 months		67,352
Over 12 months		75,344
Total	$	272,801

Certificates of Deposit of $250,000 or More

Certificates of deposit at December 31, 2020 in amounts of $250,000 or more were classified by maturity as follows (dollars in thousands):

	December 31, 2020
3 months or less	$	68,319
Over 3 through 6 months		21,037
Over 6 through 12 months		47,859
Over 12 months		32,874
Total	$	170,089

Borrowed Funds

In addition to internal deposit generation, the Company also relies on borrowed funds as a supplemental source of funding. Borrowed funds consist of customer repurchase agreements, overnight borrowings from the FHLB and longer-term FHLB advances, subordinated debt acquired in the HomeTown merger, and trust preferred capital notes. Additionally, on August 21, 2019, the Company secured a $3,000,000 line of credit with a regional commercial bank at 0.25% under Prime that matured August 21, 2020. Customer repurchase agreements are borrowings collateralized by securities of the U.S. Government, its agencies, or Government Sponsored Enterprises ("GSEs") and generally mature daily. The Company considers these accounts to be a stable and low cost source of funds. The securities underlying these agreements remain under the Company's control. Refer to Notes 12, 13 and 14 of the Consolidated Financial Statements contained in Item 8 of this Form 10-K for a discussion of long-term debt.

The following table presents information pertaining to the Company's short-term borrowed funds as of the dates indicated (dollars in thousands):

Short-Term Borrowings

	As of December 31,
	2020			2019
Customer repurchase agreements	$	42,551		$	40,475
Weighted interest rate		0.13	%		1.40	%
Average for the year ended:
Outstanding	$	42,938		$	41,890
Interest rate		0.60	%		1.54	%
Maximum month-end outstanding	$	47,402		$	42,986

In the regular course of conducting its business, the Company takes deposits from political subdivisions of the states of Virginia and North Carolina. At December 31, 2020, the Bank's public deposits totaled $326,774,000. The Company is legally required to provide collateral to secure the deposits that exceed the insurance coverage provided by the FDIC. This collateral can be provided in the form of certain types of government agency bonds or letters of credit from the FHLB. At year-end 2020, the Company had $245,000,000 in letters of credit with the FHLB outstanding to supplement collateral for such deposits.

47

Shareholders' Equity

The Company's goal with capital management is to comply with all regulatory capital requirements and to support growth, while generating acceptable returns on equity and paying a high rate of dividends.

Shareholders' equity was $337,894,000 at December 31, 2020 and $320,258,000 at December 31, 2019.

The Company declared and paid quarterly dividends totaling $1.08 per share for 2020, $1.04 per share for 2019, and $1.00 per share for 2018. Cash dividends in 2020 totaled $11,842,000 and represented a 39.4% payout of 2020 net income, compared to a 52.4% payout in 2019, and a 38.5% payout in 2018.

Effective January 1, 2015, the Company and the Bank became subject to the Basel III Capital Rules. The Basel III Capital Rules require the Company and the Bank to comply with the following minimum capital ratios: (i) a ratio of common equity Tier 1 to risk-weighted assets of at least 4.5%, plus a 2.5% "capital conservation buffer" (effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7%), (ii) a ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.5%), and (iv) a leverage ratio of 4%, calculated as the ratio of Tier 1 capital to average assets. The phase-in of the capital conservation buffer requirement began on January 1, 2016, at 0.625% of risk-weighted assets, increasing by the same amount each year until it was fully implemented at 2.5% on January 1, 2019. In addition, to be well capitalized under the "prompt corrective action" regulations pursuant to Section 38 of the FDIA, the Bank must have the following minimum capital ratios: (i) a common equity Tier 1 capital ratio of at least 6.5%; (ii) a Tier 1 capital to risk-weighted assets ratio of at least 8.0%; (iii) a total capital to risk-weighted assets ratio of at least 10.0%; and (iv) a leverage ratio of at least 5.0%.

On August 28, 2018, the FRB issued an interim final rule required by the EGRRCPA that expands the applicability of the FRB's SBHC Policy Statement to bank holding companies with total consolidated assets of less than $3 billion (up from the prior $1 billion threshold). Under the SBHC Policy Statement, qualifying bank holding companies, such as the Company, have additional flexibility in the amount of debt they can issue and are also exempt from the Basel III Capital Rules. However, the Company does not currently intend to issue a material amount of debt or take any other action that would cause its capital ratios to fall below the minimum ratios required by the Basel III Capital Rules. The SBHC Policy Statement does not apply to the Bank, and the Bank must comply with the Basel III Capital Rules.

On September 17, 2019, the federal banking agencies jointly issued a final rule required by the EGRRCPA that will permit qualifying banks and bank holding companies that have less than $10 billion in consolidated assets to elect to opt into the CBLR framework. Under the final rule, banks and bank holding companies that opt into the CBLR framework and maintain a CBLR of greater than 9% would not be subject to other risk-based and leverage capital requirements under the Basel III Capital Rules and will be deemed to have met the well capitalized ratio requirements under the "prompt corrective action" framework. In addition, a community bank that falls out of compliance with the framework will have a two-quarter grace period to come back into full compliance, provided its leverage ratio remains above 8%, and will be deemed well-capitalized during the grace period. The CBLR framework was first available for banking organizations to use in their March 31, 2020 regulatory reports.

On April 6, 2020, the federal bank regulatory agencies announced the issuance of two interim final rules that make changes to the CBLR framework and implement Section 4012 of the CARES Act. One interim final rule provides that, as of the second quarter of 2020, a banking organization with a leverage ratio of 8% or greater (and that meets the other existing qualifying criteria) could elect to use the CBLR framework. This rule also establishes a two-quarter grace period for a qualifying community banking organization whose leverage ratio fell below 8% so long as the banking organization maintained a leverage ratio of 7% or greater. The second interim final rule provides a transition back to the leverage ratio requirement of 9%. Under this rule, the required leverage ratio was 8% beginning in the second quarter and for the remainder of calendar year 2020 and will be 8.5% for calendar year 2021 and 9% thereafter. This rule also maintains a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 1% below the applicable ratio. This transition will allow community banking organizations to focus on supporting lending to creditworthy households and businesses given the recent strains on the U.S. economy caused by COVID-19. The Company and the Bank do not currently expect to opt into the CBLR framework.

The following table represents the major regulatory capital ratios for the Company as of the dates indicated:

	As of December 31,
	2020			2019			2018			2017			2016
Risk-Based Capital Ratios:
Common equity tier 1 capital ratio		12.36	%		11.56	%		12.55	%		11.50	%		11.77	%
Tier 1 capital ratio		13.78	%		12.98	%		14.46	%		13.42	%		13.83	%
Total capital ratio		15.18	%		14.04	%		15.35	%		14.39	%		14.81	%
Leverage Capital Ratios:
Tier 1 leverage ratio		9.48	%		10.75	%		11.62	%		10.95	%		11.67	%

Management believes the Company is in compliance with all regulatory capital requirements applicable to it, and the Bank meets the requirements to be considered "well capitalized" under the prompt corrective action framework as of December 31, 2020 and 2019.

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Stock Repurchase Programs

On December 19, 2019, the Company filed a Form 8-K with the SEC to announce the approval by its Board of Directors of a stock repurchase program. The program authorized the repurchase of up to 400,000 shares of the Company's common stock through December 31, 2020. The program was suspended since in second quarter of 2020 in an effort to conserve capital due to COVID-19.

In 2020, the Company repurchased 140,526 shares at an average cost of $35.44 per share for a total cost of $4,981,000. In 2019, the Company repurchased 85,868 shares at an average cost of $36.64 per share, for a total cost of $3,146,000. The Company did not repurchase any shares in 2018.

On January 12, 2021, the Company filed a Form 8-K with the SEC to announce the approval by its Board of Directors of another stock repurchase program. The program authorizes the repurchase of up to 350,000 shares of the Company's common stock through December 31, 2021.

CONTRACTUAL OBLIGATIONS

The following items are contractual obligations of the Company as of December 31, 2020 (dollars in thousands):

	Payments Due By Period
	Total		Under 1 Year		1-3 Years		3-5 Years		More than 5 years
Time deposits	$	396,426	$	271,868	$	90,030	$	29,494	$	5,034
Repurchase agreements		42,551		42,551		—		—		—
Operating leases		5,575		1,048		1,989		989		1,549
Subordinated debt		7,500		—		—		7,500		—
Junior subordinated debt		28,130		—		—		—		28,130

OFF-BALANCE SHEET ACTIVITIES

The Company enters into certain financial transactions in the ordinary course of performing traditional banking services that result in off-balance sheet transactions. Other than AMNB Statutory Trust I, formed in 2006 to issue trust preferred securities, and MidCarolina Trust I and MidCarolina Trust II, the Company does not have any off-balance sheet subsidiaries. Refer to Note 14 of the Consolidated Financial Statements contained in Item 8 of this Form 10-K for a discussion of junior subordinated debt. Off-balance sheet transactions were as follows as of the dates indicated (dollars in thousands):

	December 31,
Off-Balance Sheet Commitments	2020		2019
Commitments to extend credit	$	503,272	$	557,364
Standby letters of credit		17,355		13,611
Mortgage loan rate-lock commitments		26,883		10,791

Commitments to extend credit to customers represent legally binding agreements with fixed expiration dates or other termination clauses. Since many of the commitments are expected to expire without being funded, the total commitment amounts do not necessarily represent future funding requirements. Standby letters of credit are conditional commitments issued by the Company guaranteeing the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements.

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This information is incorporated herein by reference from Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-K.

49

ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Quarterly Financial Results

(in thousands, except per share amounts)

	First		Second		Third		Fourth
2020	Quarter		Quarter		Quarter		Quarter		Total
Interest income	$	23,866	$	23,297	$	24,179	$	24,498	$	95,840
Interest expense		3,947		3,037		2,684		2,352		12,020
Net interest income		19,919		20,260		21,495		22,146		83,820
Provision for loan losses		953		4,759		2,619		585		8,916
Net interest income after provision for loan losses		18,966		15,501		18,876		21,561		74,904
Noninterest income		4,495		3,835		4,292		4,221		16,843
Noninterest expense		13,334		12,432		14,140		14,659		54,565
Income before income taxes		10,127		6,904		9,028		11,123		37,182
Income taxes		1,585		1,422		1,801		2,329		7,137
Net income	$	8,542	$	5,482	$	7,227	$	8,794	$	30,045
Per common share:
Net income - basic	$	0.77	$	0.50	$	0.66	$	0.80	$	2.74
Net income - diluted		0.77		0.50		0.66		0.80		2.73
Cash dividends		0.27		0.27		0.27		0.27		1.08

	First		Second			Third			Fourth
2019	Quarter		Quarter			Quarter			Quarter		Total
Interest income	$	18,096	$	25,211		$	24,958		$	24,590	$	92,855
Interest expense		3,028		4,222			4,336			4,142		15,728
Net interest income		15,068		20,989			20,622			20,448		77,127
Provision for (recovery of) loan losses		16		(10	)		(12	)		462		456
Net interest income after provision for (recovery of) loan losses		15,052		20,999			20,634			19,986		76,671
Noninterest income		3,451		3,682			4,171			3,866		15,170
Noninterest expense		10,929		26,316			13,792			15,037		66,074
Income before income taxes		7,574		(1,635	)		11,013			8,815		25,767
Income taxes		1,571		(405	)		2,321			1,374		4,861
Net income	$	6,003	$	(1,230	)	$	8,692		$	7,441	$	20,906
Per common share:
Net income - basic	$	0.69	$	(0.11	)	$	0.78		$	0.67	$	1.99
Net income - diluted		0.69		(0.11	)		0.78			0.67		1.98
Cash dividends		0.25		0.25			0.27			0.27		1.04

50

	First			Second			Third			Fourth
2018	Quarter			Quarter			Quarter			Quarter			Total
Interest income	$	16,668		$	16,992		$	17,217		$	17,891		$	68,768
Interest expense		2,125			2,204			2,466			2,879			9,674
Net interest income		14,543			14,788			14,751			15,012			59,094
Provision for (recovery of) loan losses		(44	)		(30	)		(23	)		(6	)		(103	)
Net interest income after provision for (recovery of) loan losses		14,587			14,818			14,774			15,018			59,197
Noninterest income		3,333			3,563			3,380			2,998			13,274
Noninterest expense		10,702			11,002			10,904			11,638			44,246
Income before income taxes		7,218			7,379			7,250			6,378			28,225
Income taxes		1,406			1,399			1,465			1,376			5,646
Net income	$	5,812		$	5,980		$	5,785		$	5,002		$	22,579
Per common share:
Net income - basic	$	0.67		$	0.69		$	0.66		$	0.57		$	2.60
Net income - diluted		0.67			0.69			0.66			0.57			2.59
Cash dividends		0.25			0.25			0.25			0.25			1.00

51

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

American National Bankshares Inc.

Danville, Virginia

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of American National Bankshares Inc. and Subsidiary (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 8, 2021 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Loan Losses – Loans Collectively Evaluated for Impairment – Qualitative Factors

Description of the Matter

As described in Note 1 (Summary of Significant Accounting Policies) and Note 6 (Allowance for Loan Losses and Reserve for Unfunded Lending Commitments) to the consolidated financial statements, the Company maintains an allowance for loan losses to provide for probable losses inherent in the loan portfolio.  The Company's allowance for loan losses has two basic components, the formula allowance and the specific allowance. At December 31, 2020, the formula allowance represented $20,534,000 of the total allowance for loan losses of $21,403,000. For loans that are not specifically identified for impairment, the formula allowance uses historical loss experience along with various qualitative factors to develop adjusted loss factors for each loan segment.  The qualitative adjustments to the historical loss experience are established by applying a loss percentage to the loan segments identified by management based on their assessment of shared risk characteristics within groups of similar loans. Qualitative factors are determined based on management's continuing evaluation of inputs and assumptions underlying the quality of the loan portfolio. Management evaluates qualitative factors, primarily considering national, regional and local economic trends and conditions; concentrations of credit; trends in delinquencies, nonaccrual loans, and loss rates; trends in volume and terms of loans; effects of changes in risk selection, underwriting standards, and lending policies; experience of lending officers, other lending staff and loan review; and legal, regulatory and collateral factors.

Management exercised significant judgment when assessing the qualitative factors in estimating the allowance for loan losses. We identified the assessment of the qualitative factors as a critical audit matter as auditing the qualitative factors involved especially complex and subjective auditor judgment in evaluating management's assessment of the inherently subjective estimates.

52

How We Addressed the Matter in Our Audit

The primary audit procedures we performed to address this critical audit matter included:

● Testing the effectiveness of controls over the evaluation of qualitative factors, including management's development and review of the data inputs used as the basis for the allocation factors and management's review and approval of the reasonableness of the assumptions used to develop the qualitative adjustments.

● Substantively testing management's process, including evaluating their judgments and assumptions for developing the qualitative factors, which included:

● Evaluating the completeness and accuracy of data inputs used as a basis for the qualitative factors.

● Evaluating the reasonableness of management's judgments related to the determination of qualitative factors.

● Evaluating the qualitative factors for directional consistency and for reasonableness.

● Testing the mathematical accuracy of the allowance calculation, including the application of the qualitative factors.

/s/ YOUNT, HYDE & BARBOUR, P.C.

We have served as the Company's auditor since 2002.

Winchester, Virginia

March 8, 2021

53

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

American National Bankshares Inc.

Danville, Virginia

Opinion on the Internal Control over Financial Reporting

We have audited American National Bankshares Inc. and Subsidiary's (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes to the consolidated financial statements of the Company and our report dated March 8, 2021 expressed an unqualified opinion.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ YOUNT, HYDE & BARBOUR, P.C.

Winchester, Virginia

March 8, 2021

54

American National Bankshares Inc.

Consolidated Balance Sheets

As of December 31, 2020 and 2019

(Dollars in thousands, except per share data)

	2020			2019
ASSETS
Cash and due from banks	$	30,767		$	32,505
Interest-bearing deposits in other banks		343,603			47,077
Securities available for sale, at fair value		466,091			379,195
Restricted stock, at cost		8,715			8,630
Loans held for sale		15,591			2,027
Loans, net of deferred fees and costs		2,015,056			1,830,815
Less allowance for loan losses		(21,403	)		(13,152	)
Net loans		1,993,653			1,817,663
Premises and equipment, net		39,723			39,848
Other real estate owned, net of valuation allowance		958			1,308
Goodwill		85,048			84,002
Core deposit intangibles, net		6,091			7,728
Bank owned life insurance		28,482			27,817
Other assets		31,288			30,750
Total assets	$	3,050,010		$	2,478,550
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits	$	830,094		$	578,606
Interest-bearing deposits		1,781,236			1,481,941
Total deposits		2,611,330			2,060,547
Customer repurchase agreements		42,551			40,475
Subordinated debt		7,500			7,517
Junior subordinated debt		28,130			28,029
Other liabilities		22,605			21,724
Total liabilities		2,712,116			2,158,292
Commitments and contingencies
Shareholders' equity:
Preferred stock, $5 par value, 2,000,000 shares authorized, none outstanding		—			—
Common stock, $1 par value, 20,000,000 shares authorized, 10,982,367 shares outstanding at December 31, 2020 and 11,071,540 shares outstanding at December 31, 2019		10,926			11,019
Capital in excess of par value		154,850			158,244
Retained earnings		169,681			151,478
Accumulated other comprehensive income (loss), net		2,437			(483	)
Total shareholders' equity		337,894			320,258
Total liabilities and shareholders' equity	$	3,050,010		$	2,478,550

The accompanying notes are an integral part of the consolidated financial statements.

55

American National Bankshares Inc.

Consolidated Statements of Income

For the Years Ended December 31, 2020, 2019, and 2018

(Dollars in thousands, except per share data)

	2020			2019			2018
Interest and Dividend Income:
Interest and fees on loans	$	87,700		$	82,684		$	59,966
Interest and dividends on securities:
Taxable		6,764			7,682			6,106
Tax-exempt		433			777			1,502
Dividends		503			451			321
Other interest income		440			1,261			873
Total interest and dividend income		95,840			92,855			68,768
Interest Expense:
Interest on deposits		9,729			13,143			8,086
Interest on short-term borrowings		259			650			186
Interest on subordinated debt		489			367			—
Interest on junior subordinated debt		1,543			1,554			1,402
Interest on long-term borrowings		—			14			—
Total interest expense		12,020			15,728			9,674
Net Interest Income		83,820			77,127			59,094
Provision for (recovery of) loan losses		8,916			456			(103	)
Net Interest Income after Provision for (Recovery of) Loan Losses		74,904			76,671			59,197
Noninterest Income:
Trust fees		4,044			3,847			3,783
Service charges on deposit accounts		2,557			2,866			2,455
Other fees and commissions		3,925			3,693			2,637
Mortgage banking income		3,514			2,439			1,862
Securities gains, net		814			607			123
Brokerage fees		745			721			795
Income from Small Business Investment Companies		270			211			637
Gains (losses) on premises and equipment, net		(110	)		(427	)		60
Other		1,084			1,213			922
Total noninterest income		16,843			15,170			13,274
Noninterest Expense:
Salaries and employee benefits		29,765			30,015			24,879
Occupancy and equipment		5,586			5,417			4,378
FDIC assessment		639			119			537
Bank franchise tax		1,702			1,644			1,054
Core deposit intangible amortization		1,637			1,398			265
Data processing		3,017			2,567			1,691
Software		1,454			1,295			1,279
Other real estate owned, net		60			31			122
Merger related expenses		—			11,782			872
Other		10,705			11,806			9,169
Total noninterest expense		54,565			66,074			44,246
Income Before Income Taxes		37,182			25,767			28,225
Income Taxes		7,137			4,861			5,646
Net Income	$	30,045		$	20,906		$	22,579
Net Income Per Common Share:
Basic	$	2.74		$	1.99		$	2.60
Diluted	$	2.73		$	1.98		$	2.59
Weighted Average Common Shares Outstanding:
Basic		10,981,623			10,531,572			8,698,014
Diluted		10,985,790			10,541,337			8,708,462

The accompanying notes are an integral part of the consolidated financial statements.

56

American National Bankshares Inc.

Consolidated Statements of Comprehensive Income

For the Years Ended December 31, 2020, 2019, and 2018

(Dollars in thousands)

	Year Ended December 31,
	2020			2019			2018
Net income	$	30,045		$	20,906		$	22,579
Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale		7,213			9,095			(3,209	)
Tax effect		(1,557	)		(2,005	)		745
Reclassification adjustment for gains on sale or call of securities		(814	)		(274	)		(81	)
Tax effect		176			59			18
Unrealized losses on cash flow hedges		(2,210	)		(1,854	)		(804	)
Tax effect		448			394			180
Change in unfunded pension liability		(413	)		(64	)		1,291
Tax effect		77			1			(249	)
Other comprehensive income (loss)		2,920			5,352			(2,109	)
Comprehensive income	$	32,965		$	26,258		$	20,470

The accompanying notes are an integral part of the consolidated financial statements.

57

American National Bankshares Inc.

Consolidated Statements of Changes in Shareholders' Equity

For the Years Ended December 31, 2020, 2019, and 2018

(Dollars in thousands, except per share data)

										Accumulated
				Capital in						Other			Total
	Common			Excess of			Retained			Comprehensive			Shareholders'
	Stock			Par Value			Earnings			Income (Loss)			Equity
Balance, December 31, 2017	$	8,604		$	76,179		$	127,010		$	(3,076	)	$	208,717
Net income		—			—			22,579			—			22,579
Other comprehensive loss		—			—			—			(2,109	)		(2,109	)
Reclassification for ASU 2016-01 adoption		—			—			650			(650	)		—
Stock options exercised (35,310 shares)		35			826			—			—			861
Vesting of restricted stock (12,712 shares)		13			(13	)		—			—			—
Equity based compensation (34,480 shares)		16			1,180			—			—			1,196
Cash dividends paid, $1.00 per share		—			—			(8,702	)		—			(8,702	)
Balance, December 31, 2018		8,668			78,172			141,537			(5,835	)		222,542
Net income		—			—			20,906			—			20,906
Other comprehensive income		—			—			—			5,352			5,352
Issuance of common stock for acquisition (2,361,686 shares)		2,362			80,108			—			—			82,470
Issuance of replacement options/restricted stock		—			870			—			—			870
Stock repurchased (85,868 shares)		(86	)		(3,060	)		—			—			(3,146	)
Stock options exercised (37,104 shares)		37			651			—			—			688
Vesting of restricted stock (21,747 shares)		22			(22	)		—			—			—
Equity based compensation (38,281 shares)		16			1,525			—			—			1,541
Cash dividends paid, $1.04 per share		—			—			(10,965	)		—			(10,965	)
Balance, December 31, 2019		11,019			158,244			151,478			(483	)		320,258
Net income		—			—			30,045			—			30,045
Other comprehensive income		—			—			—			2,920			2,920
Stock repurchased (140,526 shares)		(141	)		(4,840	)		—			—			(4,981	)
Stock options exercised (2,573 shares)		3			40			—			—			43
Vesting of restricted stock (18,487 shares)		18			(18	)		—			—			—
Equity based compensation (48,780 shares)		27			1,424			—			—			1,451
Cash dividends paid, $1.08 per share		—			—			(11,842	)		—			(11,842	)
Balance, December 31, 2020	$	10,926		$	154,850		$	169,681		$	2,437		$	337,894

The accompanying notes are an integral part of the consolidated financial statements.

58

American National Bankshares Inc.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2020, 2019, and 2018

(Dollars in thousands)

	2020			2019			2018
Cash Flows from Operating Activities:
Net income	$	30,045		$	20,906		$	22,579
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (recovery of) loan losses		8,916			456			(103	)
Depreciation		2,188			2,064			1,775
Net accretion of acquisition accounting adjustments		(3,812	)		(3,387	)		(1,288	)
Core deposit intangible amortization		1,637			1,398			265
Net amortization of securities		1,186			1,100			1,617
Net gain on sale or call of securities available for sale		(814	)		(274	)		(81	)
Net change in fair value of equity securities		—			(333	)		(42	)
Gain on sale of loans held for sale		(3,514	)		(2,439	)		(1,862	)
Proceeds from sales of loans held for sale		155,705			103,760			80,600
Originations of loans held for sale		(165,755	)		(102,708	)		(77,739	)
Net (gain) loss on other real estate owned		(4	)		(120	)		14
Valuation allowance on other real estate owned		—			68			30
Net (gain) loss on sale or disposal of premises and equipment		110			427			(60	)
Equity based compensation expense		1,451			1,541			1,196
Earnings on bank owned life insurance		(665	)		(630	)		(481	)
Deferred income tax expense		(640	)		1,068			556
Net change in other assets		29			11,137			(318	)
Net change in other liabilities		(2,387	)		(1,354	)		844
Net cash provided by operating activities		23,676			32,680			27,502
Cash Flows from Investing Activities:
Proceeds from sales of equity securities		—			445			431
Proceeds from sales of securities available for sale		5,811			29,878			57,607
Proceeds from maturities, calls and paydowns of securities available for sale		208,429			123,915			30,607
Purchases of securities available for sale		(295,109	)		(155,746	)		(106,575	)
Net change in restricted stock		(85	)		(795	)		863
Proceeds from sales of purchased credit impaired loans		4,939			—			—
Net increase in loans		(186,635	)		(26,257	)		(21,256	)
Proceeds from sale of premises and equipment		1			—			234
Purchases of premises and equipment		(2,694	)		(3,555	)		(2,723	)
Proceeds from sales of other real estate owned		195			1,289			911
Cash paid in bank acquisition		—			(27	)		—
Cash acquired in bank acquisition		—			26,283			—
Net cash used in investing activities		(265,148	)		(4,570	)		(39,901	)
Cash Flows from Financing Activities:
Net change in noninterest-bearing deposits		251,488			23,310			41,484
Net change in interest-bearing deposits		299,476			(12,241	)		(9,983	)
Net change in customer repurchase agreements		2,076			5,232			24,517
Net change in other short-term borrowings		—			(14,883	)		(24,000	)
Net change in long-term borrowings		—			(778	)		—
Common stock dividends paid		(11,842	)		(10,965	)		(8,702	)
Repurchase of common stock		(4,981	)		(3,146	)		—
Proceeds from exercise of stock options		43			688			861
Net cash provided by (used in) financing activities		536,260			(12,783	)		24,177
Net Increase in Cash and Cash Equivalents		294,788			15,327			11,778
Cash and Cash Equivalents at Beginning of Period		79,582			64,255			52,477
Cash and Cash Equivalents at End of Period	$	374,370		$	79,582		$	64,255

The accompanying notes are an integral part of the consolidated financial statements.

59

American National Bankshares Inc.

Notes to Consolidated Financial Statements

December 31, 2020, 2019, and 2018

Note 1 – Summary of Significant Accounting Policies

Nature of Operations and Consolidation

The consolidated financial statements include the accounts of American National Bankshares Inc. (the "Company") and its wholly owned subsidiary, American National Bank and Trust Company (the "Bank"). The Bank offers a wide variety of retail, commercial, secondary market mortgage lending, and trust and investment services which also include non-deposit products such as mutual funds and insurance policies.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, goodwill and intangible assets, other-than-temporary impairment of securities, accounting for merger and acquisition activity, accounting for acquired loans with specific credit-related deterioration, and the valuation of deferred tax assets and liabilities.

COVID-19 spread rapidly across the world in the first quarter of 2020 and was declared a pandemic by the World Health Organization. On March 13, 2020, the United States President declared a national emergency in the face of a growing public health and economic crisis due to the COVID-19 global pandemic. The government and private sector responses to contain its spread began to significantly affect the Company's operations beginning in March and will likely continue to adversely affect its operations through 2021, although such effects may vary significantly. The duration and extent of the effects over longer terms cannot be reasonably estimated at this time. The risks and uncertainties resulting from the pandemic will most likely affect future earnings, cash flows and overall financial condition of the Company. These uncertainties include the nature and duration of the financial effects felt by its customers impacting their ability to perform in accordance with their underlying loan agreements, the Company's ability to generate demand for non-loan related products and services, as well as potential declines in real estate values resulting from the market disruption which may impair the recorded values of collateral-dependent loans and other real estate owned. Further, these factors, in addition to those pervasive to the industry and overall U.S. economy, may necessitate an overall valuation of the Company's franchise in such a way an impairment charge to the carrying value of goodwill would be required. Accordingly, significant estimates used in the preparation of the Company's financial statements including those associated with the evaluation of the allowance for loan losses as well as other valuation-based estimates may be subject to significant adjustments in future periods. The greater the duration and severity of the pandemic, the more likely that estimates will be materially impacted by its effects.

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") included an initial first round allocation of $659.0 billion for loans to be issued by financial institutions through the Small Business Administration ("SBA"). This program is known as the Paycheck Protection Program ("PPP"). PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which was passed by Congress on December 21, 2020 and then signed into law on December 27, 2020 as part of the Consolidated Appropriations Act, 2021 ("Appropriations Act"), allocated an additional $284.4 billion. These loans carry a fixed rate of 1.00% and a term of two years for the majority of the initial loans and for five years on the second round, if not forgiven, in whole or in part. Payments were deferred for the first six months of the loan. The loans are 100% guaranteed by the SBA. The SBA paid the Bank a processing fee based on the size of the loan. The SBA has approved over 2,700 applications as of  February 28, 2021 totaling $340.9 million in loans. The Company had outstanding net PPP loans of $211.3 million at December 31, 2020 and $226.4 million at February 28, 2021. The Bank has received processing fees of $11.2 million on the PPP loans and incurred direct origination costs of $1.8 million. The Company had net unaccreted PPP loan origination fees of $4.4 million at December 31, 2020 and $5.0 at February 28, 2021. From a funding perspective, the Bank utilized core funding sources for these loans. At December 31, 2020 and February 28, 2021, respectively, the SBA had forgiven $56.4 million and $105.8 million of PPP loans.

In April 2006, AMNB Statutory Trust I, a Delaware statutory trust (the "AMNB Trust") and an unconsolidated wholly owned subsidiary of the Company, was formed for the purpose of issuing preferred securities (the "Trust Preferred Securities") in a private placement pursuant to an applicable exemption from registration. Proceeds from the securities were used to fund the acquisition of Community First Financial Corporation ("Community First") which occurred in April 2006.

In July 2011, and in connection with its acquisition of MidCarolina Financial Corporation ("MidCarolina"), the Company assumed liabilities of MidCarolina Trust I and MidCarolina Trust II, two separate unconsolidated Delaware statutory trusts (the "MidCarolina Trusts"), which were also formed for the purpose of issuing preferred securities. Refer to Note 14 for further details concerning these entities.

All significant inter-company transactions and accounts are eliminated in consolidation, with the exception of the AMNB Trust and the MidCarolina Trusts, as detailed in Note 14.

Cash and Cash Equivalents

Cash includes cash on hand, cash with correspondent banks, and cash on deposit at the Federal Reserve Bank of Richmond. Cash equivalents are short-term, highly liquid investments that are readily convertible to cash with original maturities of three months or less and are subject to an insignificant risk of change in value. Cash and cash equivalents are carried at cost.

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Interest-bearing Deposits in Other Banks

Interest-bearing deposits in other banks mature within one year and are carried at cost.

Securities

Certain debt securities that management has the positive intent and ability to hold to maturity are classified as "held to maturity" and recorded at amortized cost. Trading securities are recorded at fair value with changes in fair value included in earnings. Debt securities not classified as held to maturity or trading are classified as "available for sale" and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

The Company does not currently have any securities in held to maturity or trading and has no plans to add any to either category. Management evaluates securities for other-than-temporary impairment ("OTTI") on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement and, (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.

Equity securities with readily determinable fair values that are not held for trading are carried at fair value with the unrealized gains and losses included in noninterest income.

Due to the nature and restrictions placed on the Company's investment in common stock of the Federal Home Loan Bank of Atlanta ("FHLB") and the Federal Reserve Bank of Richmond, these securities have been classified as restricted equity securities and carried at cost.

Loans Held for Sale

Secondary market mortgage loans are designated as held for sale at the time of their origination. These loans are pre-sold with servicing released and the Company does not retain any interest after the loans are sold. These loans consist primarily of fixed-rate, single-family residential mortgage loans which meet the underwriting characteristics of certain government-sponsored enterprises (conforming loans). In addition, the Company requires a firm purchase commitment from a permanent investor before a loan can be committed, thus limiting interest rate risk. Loans held for sale are carried at fair value. Gains on sales of loans are recognized at the loan closing date and are included in noninterest income.

Derivative Loan Commitments

The Company enters into mortgage loan commitments whereby the interest rate on the loan is determined prior to funding (rate lock commitments). Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. Loan commitments that are derivatives are recognized at fair value on the consolidated balance sheets with net changes in their fair values recorded in other expenses. 

The period of time between issuance of a loan commitment and sale of the loan generally ranges from 30 to 60 days. The Company protects itself from changes in interest rates through the use of best efforts forward delivery contracts, by committing to sell a loan at the time the borrower commits to an interest rate with the intent that the buyer has assumed the interest rate risk on the loan. As a result, the Company is not generally exposed to significant losses nor will it realize significant gains related to its rate lock commitments due to changes in interest rates. The correlation between the rate lock commitments and the best efforts contracts is very high due to their similarity.

The fair value of rate lock commitments and best efforts contracts is not readily ascertainable with precision because rate lock commitments and best efforts contracts are not actively traded in stand-alone markets. The Company determines the fair value of rate lock commitments and best efforts contracts by measuring the change in the estimated value of the underlying assets while taking into consideration the probability that the loan will be funded.

Loans

The Company makes mortgage, commercial, and consumer loans. A substantial portion of the loan portfolio is secured by real estate. The ability of the Company's debtors to honor their contracts is dependent upon the real estate market and general economic conditions in the Company's market area.

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Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balance adjusted for the allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. The accrual of interest on loans is generally discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. Loans are typically charged off when the loan is 120 days past due, unless secured and in process of collection. Loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.

Interest accrued but not collected for loans that are placed on nonaccrual status or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash basis or cost recovery method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

A loan is considered past due when a payment of principal or interest or both is due but not paid. Management closely monitors past due loans in timeframes of 30-59 days, 60-89 days, and 90 or more days past due.

These policies apply to all loan portfolio classes and segments.

Substandard and doubtful risk graded commercial, commercial real estate, and construction loans are reviewed for impairment. All troubled debt restructurings ("TDRs"), regardless of dollar amount, are also evaluated for impairment. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment and establishing a specific allowance include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial, commercial real estate, and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Generally, large groups of smaller balance homogeneous loans (residential real estate and consumer loans) are collectively evaluated for impairment. The Company's policy for recognizing interest income on impaired loans is consistent with its nonaccrual policy.

The Company's loan portfolio is organized by major segment. These include: commercial, commercial real estate, residential real estate and consumer loans. Each segment has particular risk characteristics that are specific to the borrower and the generic category of credit. Commercial loan repayments are highly dependent on cash flows associated with the underlying business and its profitability. They can also be impacted by changes in collateral values. Commercial real estate loans share the same general risk characteristics as commercial loans but are often more dependent on the value of the underlying real estate collateral and, when construction is involved, the ultimate completion of and sale of the project. Residential real estate loans are generally dependent on the value of collateral and the credit worthiness of the underlying borrower. Consumer loans are very similar in risk characteristics to residential real estate.

In connection with mergers, certain loans were acquired which exhibited deteriorated credit quality since origination and for which the Company does not expect to collect all contractual payments. These purchased credit impaired loans are accounted for in accordance with Accounting Standards Codification ("ASC") 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality, and are recorded at the amount paid, such that there is no carryover of the seller's allowance for loan losses. After acquisition, losses are recognized by an increase in the allowance for loan losses.

Such purchased credit impaired loans are accounted for individually or aggregated into pools of loans based on common risk characteristics such as, credit score, loan type, and date of origination. The Company estimates the amount and timing of expected cash flows for each loan or pool, and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan or pool (accretable yield). The excess of the loan's or pool's contractual principal and interest over expected cash flows is not recorded (nonaccretable difference).

Over the life of the loan or pool, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded as a provision for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

Troubled Debt Restructurings

In situations where, for economic or legal reasons related to a borrower's financial condition, management may grant a concession to the borrower that it would not otherwise consider, the related loan is classified as a TDR. Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted above for impaired loans. The Company had $1,976,000 in loans classified as TDRs as of December 31, 2020 and $1,058,000 as of December 31, 2019.

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In March 2020 (revised in April 2020), the federal banking agencies issued an "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus." This was in response to the COVID-19 pandemic affecting societies and economies around the world. This guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19. The guidance explains that, in consultation with the Financial Accounting Standards Board ("FASB") staff, the federal banking agencies have concluded that short-term modifications (e.g. six months) made on a good faith basis to borrowers who were current as of the implementation date of a relief program are not TDRs. The CARES Act was passed by the U.S. Congress on March 27, 2020. Section 4013 of the CARES Act also addressed COVID-19 related modifications and specified that COVID-19 related modifications on loans that were current as of December 31, 2019 were not TDRs. The Bank implemented a Disaster Assistance Program ("DAP") to provide relief to its borrowers under this guidance. The Bank provided assistance to customers with loan balances of $405.1 million during the year ended December 31, 2020.  The balance of loans remaining in this program at December 31, 2020 was $30.0 million, or 1.5% of the total portfolio, with $18.2 million of the $30.0 million in total deferrals the result of second and third request interest deferrals. At February 28, 2021, the balance of loans remaining in this program was $25.2 million, or 1.2% of the total portfolio, with $16.7 million of the $25.2 million in total deferrals the result of second request interest deferrals. The majority of remaining modifications involved three-month deferments of interest. This interagency guidance has not had a material impact on the Company's financials and is not expected to have a material impact on ongoing operations; however, this impact cannot be quantified at this time.

Allowance for Loan Losses

The purpose of the allowance for loan losses ("ALLL") is to provide for probable losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses and by recoveries of previously charged-off loans. Loan charge-offs decrease the allowance.

The goal of the Company is to maintain an appropriate, systematic, and consistently applied process to determine the amounts of the ALLL and the provision for loan loss expense.

The Company uses certain practices to manage its credit risk. These practices include (1) appropriate lending limits for loan officers, (2) a loan approval process, (3) careful underwriting of loan requests, including analysis of borrowers, cash flows, collateral, and market risks, (4) regular monitoring of the portfolio, including diversification by type and geography, (5) review of loans by the Loan Review department, which operates independently of loan production (the Loan Review function consists of a co-sourced arrangement using both internal personnel and external vendors to provide the Company with a more robust review function of the loan portfolio), (6) regular meetings of the Credit Committees to discuss portfolio and policy changes and make decisions on large or unusual loan requests, and (7) regular meetings of the Asset Quality Committee which reviews the status of individual loans.

Risk grades are assigned as part of the loan origination process. From time to time risk grades may be modified as warranted by the facts and circumstances surrounding the credit.

Calculation and analysis of the allowance for loan losses is prepared quarterly by the Finance Department. The Company's Credit Committee, Risk and Compliance Committee, Audit Committee, and the Board of Directors review the allowance for adequacy.

The Company's allowance for loan losses has two basic components: the formula allowance and the specific allowance. Each of these components is determined based upon estimates and judgments.

The formula allowance uses historical loss experience as an indicator of future losses, along with various qualitative factors, including levels and trends in delinquencies, nonaccrual loans, charge-offs and recoveries, trends in volume and terms of loans, effects of changes in underwriting standards, experience of lending staff, economic conditions, and portfolio concentrations. In the formula allowance for commercial and commercial real estate loans, the historical loss rate is combined with the qualitative factors, resulting in an adjusted loss factor for each risk-grade category of loans. The period-end balances for each loan risk-grade category are multiplied by the adjusted loss factor. Allowance calculations for consumer loans are calculated based on historical losses for each product category without regard to risk grade. This loss rate is combined with qualitative factors resulting in an adjusted loss factor for each product category.

The specific allowance uses various techniques to arrive at an estimate of loss for specifically identified impaired loans. These include:

• The present value of expected future cash flows discounted at the loan's effective interest rate. The effective interest rate on a loan is the rate of return implicit in the loan (that is, the contractual interest rate adjusted for any net deferred loan fees or costs and any premium or discount existing at the origination or acquisition of the loan);

• The loan's observable market price, or

• The fair value of the collateral, net of estimated costs to dispose, if the loan is collateral dependent.

The use of these computed values is inherently subjective and actual losses could be greater or less than the estimates. No single statistic, formula, or measurement determines the adequacy of the allowance. Management makes subjective and complex judgments about matters that are inherently uncertain, and different amounts would be reported under different conditions or using different assumptions. For analytical purposes, management allocates a portion of the allowance to specific loan categories and specific loans. However, the entire allowance is used to absorb credit losses inherent in the loan portfolio, including identified and unidentified losses.

The relationships and ratios used in calculating the allowance, including the qualitative factors, may change from period to period as facts and circumstances evolve. Furthermore, management cannot provide assurance that in any particular period the Company will not have sizeable credit losses in relation to the amount reserved. Management may find it necessary to significantly adjust the allowance, considering current factors at the time.

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Premises and Equipment

Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation and amortization. Premises and equipment are depreciated over their estimated useful lives ranging from three years to thirty-nine years; leasehold improvements are amortized over the lives of the respective leases or the estimated useful lives of the improvements, whichever is less. Software is generally amortized over three years. Depreciation and amortization are recorded on the straight-line method.

Costs of maintenance and repairs are charged to expense as incurred. Costs of replacing structural parts of major units are considered individually and are expensed or capitalized as the facts dictate. Gains and losses on routine dispositions are reflected in current operations.

Goodwill and Intangible Assets

Goodwill is subject to at least an annual assessment for impairment. Additionally, acquired intangible assets (such as core deposit intangibles) are separately recognized if the benefit of the assets can be sold, transferred, licensed, rented, or exchanged, and amortized over their useful lives. The cost of purchased deposit relationships, based on independent valuation, are being amortized over their estimated lives of ten years.

The Company records as goodwill the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Impairment testing is performed annually, as well as when an event triggering impairment may have occurred. On January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2017-04, which simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the previous two-step impairment test. Under the new guidance, if a reporting unit's carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates the prior requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount. The Company performs its annual analysis as of June 30 each fiscal year. Due to the COVID-19 pandemic market conditions, the Company determined a triggering event occurred during the first quarter of 2020 and performed a qualitative assessment at March 31, 2020 and as the pandemic continued performed qualitative assessments at June 30 and September 30 and a quantitative assessment at December 31, 2020 and determined no impairment was indicated. The impact of COVID-19 on market conditions and other changes in the economic environment, operations, or other adverse events could result in future impairment charges which could have a material adverse impact on the Company's operating results. No indicators of impairment were identified during the years ended December 31, 2019 or 2018.

Trust Assets

Securities and other property held by the trust and investment services segment in a fiduciary or agency capacity are not assets of the Company and are not included in the accompanying consolidated financial statements.

Other Real Estate Owned ("OREO")

OREO represents real estate that has been acquired through loan foreclosures or deeds received in lieu of loan payments. Generally, such properties are appraised at the time acquired and are recorded at fair value less estimated selling costs. Subsequent to foreclosure, valuations are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expense.

Bank Owned Life Insurance

In connection with mergers, the Company has acquired bank owned life insurance ("BOLI"). The asset is reflected as the cash surrender value of the policies as provided by the insurer on a monthly basis.

Transfers of Financial Assets

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

Income Taxes

The Company uses the balance sheet method to account for deferred income tax assets and liabilities. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

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When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company had no liability for unrecognized tax benefits as of December 31, 2020 and 2019.

Stock-Based Compensation

Stock compensation accounting guidance ASC 718, Compensation - Stock Compensation, requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the grant date fair value of the equity or liability instruments issued. The stock compensation accounting guidance covers a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.

The stock compensation accounting guidance requires that compensation cost for all stock awards be calculated and recognized over the employees' service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. A Black-Scholes model is used to estimate the fair value of stock options, while the market price of the Company's common stock at the date of grant is used for restricted stock awards.

Earnings Per Common Share

Basic earnings per common share represent income available to common shareholders divided by the average number of common shares outstanding during the period. Diluted earnings per common share reflect the impact of additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company consist solely of outstanding stock options and are determined using the treasury method. Nonvested shares of restricted stock are included in the computation of basic earnings per share because the holder has voting rights and shares in non-forfeitable dividends during the vesting period.

Comprehensive Income

Comprehensive income is shown in a two statement approach; the first statement presents total net income and its components followed by a second statement that presents all the components of other comprehensive income which include unrealized gains and losses on available for sale securities, unrealized gains and losses on cash flow hedges, and changes in the funded status of the defined benefit postretirement plan.

Advertising and Marketing Costs

Advertising and marketing costs are expensed as incurred, and were $453,000, $473,000, and $365,000 in 2020, 2019, and 2018, respectively.

Mergers and Acquisitions

Business combinations are accounted for under ASC 805, Business Combinations, using the acquisition method of accounting. The acquisition method of accounting requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date. To determine the fair values, the Company relies on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques. Under the acquisition method of accounting, the Company identifies the acquirer and the closing date and applies applicable recognition principles and conditions. Acquisition-related costs are costs the Company incurs to effect a business combination. Those costs include advisory, legal, accounting, valuation, and other professional or consulting fees. Some other examples of costs to the Company include systems conversions, integration planning consultants and advertising costs. The Company accounts for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, with one exception. The costs to issue debt or equity securities is recognized in accordance with other applicable GAAP. These acquisition-related costs have been and will be included within the consolidated statements of income classified within the noninterest expense caption.

Derivative Financial Instruments

The Company uses derivatives primarily to manage risk associated with changing interest rates. The Company's derivative financial instruments consist of interest rate swaps that qualify as cash flow hedges of the Company's trust preferred capital notes. The Company recognizes derivative financial instruments at fair value as either an other asset or other liability in the consolidated balance sheets. The effective portion of the gain or loss on the Company's cash flow hedges is reported as a component of other comprehensive income, net of deferred income taxes, and is reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

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Reclassifications

Certain reclassifications have been made in prior years financial statements to conform to classifications used in the current year. There were no material reclassifications.

Recently Adopted Accounting Developments

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." ASU 2017-04 simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the previous two-step impairment test. Under the new guidance, if a reporting unit's carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates the prior requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount. ASU 2017-04 was effective for the Company on January 1, 2020. The adoption of ASU 2017-04 did not have a material effect on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." ASU 2018-13 modifies the disclosure requirements on fair value measurements by requiring that Level 3 fair value disclosures include the range and weighted average of significant unobservable inputs used to develop those fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. Certain disclosure requirements in Topic 820 were also removed or modified. ASU 2018-13 was effective for the Company on January 1, 2020. The adoption of ASU 2018-13 did not have a material effect on the Company's consolidated financial statements.

In March 2020 (revised in April 2020), various regulatory agencies, including the Board of Governors of the Federal Reserve System ("FRB") and the Federal Deposit Insurance Corporation, ("FDIC") issued an "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus."  The interagency statement was effective immediately and impacted accounting for loan modifications. Under ASC 310-40, "Receivables – Troubled Debt Restructurings by Creditors," a restructuring of debt constitutes a TDR if the creditor, for economic or legal reasons related to the debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. In August 2020, a joint statement on additional loan modifications was issued. Among other things, the Interagency Statement addresses accounting and regulatory reporting considerations for loan modifications, including those accounted for under Section 4013 of the CARES Act. The CARES Act  was signed into law on March 27, 2020 to help support individuals and businesses through loans, grants, tax changes and other types of relief. The most significant impacts of the CARES Act related to accounting for loan modifications and establishment of the PPP. On December 21, 2020, the Appropriations Act was passed. The Appropriations Act extends or modifies many of the relief programs first created by the CARES Act, including the PPP and treatment of certain loan modifications related to the COVID-19 pandemic. This interagency guidance is not expected to have a material impact on the Company's financial statements; however, this impact cannot be quantified at this time.

Recent Accounting Pronouncements and Other Authoritative Accounting Guidance 

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The FASB has issued multiple updates to ASU 2016-13 as codified in Topic 326, including ASU's 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, and 2020-03. These ASUs have provided for various minor technical corrections and improvements to the codification as well as other transition matters. Smaller reporting companies who file with the U.S. Securities and Exchange Commission ("SEC") and all other entities who do not file with the SEC are required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022. At the one-time evaluation date, the Company qualified as a smaller reporting company and elected to defer the adoption of the standard. The Company will continue to validate its models that will be used upon future adoption of the standard. The implementation of this ASU will likely result in increases to the Company's reserves when implemented. 

In August 2018, the FASB issued ASU 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans." The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Certain disclosure requirements have been deleted while the following disclosure requirements have been added: the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The amendments also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed: the projected benefit obligation ("PBO") and fair value of plan assets for plans with PBOs in excess of plan assets and the accumulated benefit obligation ("ABO") and fair value of plan assets for plans with ABOs in excess of plan assets. The amendments are effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company is currently assessing the impact that ASU 2018-14 will have on its consolidated financial statements.

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Effective  November 25, 2019, the SEC adopted Staff Accounting Bulletin ("SAB") 119. SAB 119 updated portions of SEC interpretative guidance to align with ASC 326, "Financial Instruments - Credit Losses." It covers topics including (1) measuring current expected credit losses; (2) development, governance, and documentation of a systematic methodology; (3) documenting the results of a systematic methodology; and (4) validating a systematic methodology.

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes." The ASU is expected to reduce cost and complexity related to the accounting for income taxes by removing specific exceptions to general principles in Topic 740 (eliminating the need for an organization to analyze whether certain exceptions apply in a given period) and improving financial statement preparers' application of certain income tax-related guidance. This ASU is part of the FASB's simplification initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact that ASU 2019-12 will have on its consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815." The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, such as the Company, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of ASU 2020-01 to have a material impact on its consolidated financial statements.

In  March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments in this ASU provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. Subsequently, in January 2021, the FASB issued ASU 2021-01 "Reference Rate Reform (Topic 848): Scope." This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. An entity may elect to apply ASU 2021-01 on contract modifications that change the interest rate used for margining, discounting, or contract price alignment retrospectively as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date within the interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued. An entity may elect to apply ASU 2021-01 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020, and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. The Company is assessing ASU 2020-04 and its impact on the Company's transition away from LIBOR for its loan and other financial instruments.

On  March 12, 2020, the SEC finalized amendments to the definitions of its "accelerated filer" and "large accelerated filer" definitions. The amendments increase the threshold criteria for meeting these filer classifications and were effective on April 27, 2020. Any changes in filer status are to be applied beginning with the filer's first annual report filed with the SEC subsequent to the effective date. The rule change revises the definition of "accelerated filers" to exclude entities with public float of less than $700 million and less than $100 million in annual revenues. If an entity's annual revenues exceed $100 million, its category will change back to "accelerated filer." A public company that is classified as an "accelerated filer" or "large accelerated filer" must obtain an auditor attestation concerning the effectiveness of internal control over financial reporting ("ICFR") and include the opinion on ICFR in its annual report on Form 10-K. Non-accelerated filers also have additional time to file quarterly and annual financial statements. All public companies are required to obtain and file annual financial statement audits, as well as provide management's assertion on effectiveness of ICFR, but the external auditor attestation of ICFR is not required for non-accelerated filers. The Company's annual revenues exceeded $100 million in the previous year, and the Company expects its annual revenues to exceed $100 million in future years and to remain an "accelerated filer." Therefore, this change is not expected to have a significant impact on the Company's annual reporting and audit requirements.

In August 2020, the FASB issued ASU 2020-06, "Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity." The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share calculation in certain areas. In addition, the amendment updates the disclosure requirements for convertible instruments to increase the information transparency. For public business entities, excluding smaller reporting companies, the amendments in the ASU are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.  For all other entities, the standard will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of ASU 2020-06 to have a material impact on its consolidated financial statements.

In October 2020, the FASB issued ASU 2020-08, "Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable fees and Other Costs." This ASU clarifies that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.  Early adoption is not permitted. All entities should apply ASU 2020-08 on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. The Company does not expect the adoption of ASU 2020-08 to have a material impact on its consolidated financial statements.

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Note 2 - Acquisitions

On April 1, 2019, the Company completed its acquisition of Roanoke-based HomeTown Bankshares Corporation ("HomeTown") and its wholly-owned subsidiary bank, HomeTown Bank. Pursuant and subject to the terms of the merger agreement, as a result of the merger, the holders of shares of HomeTown common stock received 0.4150 shares of the Company's common stock for each share of HomeTown common stock held immediately prior to the effective date of the merger.

The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition, in accordance with ASC 350, Intangibles-Goodwill and Other.

The following table provides detail of the consideration transferred, assets acquired, and liabilities assumed as of the date of the acquisition (dollars in thousands):

Consideration Paid:
Common shares issued (2,361,686)	$	82,470
Issuance of replacement stock options/restricted stock		753
Cash paid in lieu of fractional shares		27
Value of consideration		83,250
Assets acquired:
Cash and cash equivalents		26,283
Investment securities		34,876
Restricted stock		2,588
Loans		444,324
Premises and equipment		12,034
Deferred income taxes		2,960
Core deposit intangible		8,200
Other real estate owned		1,188
Banked owned life insurance		8,246
Other assets		14,244
Total assets		554,943
Liabilities assumed:
Deposits		483,626
Short-term FHLB advances		14,883
Long-term FHLB advances		778
Subordinated debt		7,530
Other liabilities		6,052
Total liabilities		512,869
Net assets acquired		42,074
Goodwill resulting from merger with HomeTown	$	41,176

The following table details the changes in fair value of net assets acquired and liabilities assumed from the amounts reported in the Form 10-K for the year ended December 31, 2019 (dollars in thousands):

Goodwill at December 31, 2019	$	40,130
Effect of adjustments to:
Premises and equipment		520
Other real estate owned		254
Other liabilities		272
Goodwill at December 31, 2020	$	41,176

The increase in goodwill made during the first quarter of 2020 was due to adjustments to the valuations of several acquired buildings and OREO obtained on the date of merger. Also in the first quarter of 2020, the goodwill adjustment for other liabilities related to a reassessment of the interest rate prevailing for supplemental early retirement plan obligations at the merger date.

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The acquired loans were recorded at fair value at the acquisition date without carryover of HomeTown's previously established allowance for loan losses. The fair value of the loans was determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected on the loans and leases and then applying a market-based discount rate to those cash flows. In this regard, the acquired loans were segregated into pools based on loan type and credit risk. Loan type was determined based on collateral type, purpose, and lien position. Credit risk characteristics included risk rating groups (pass rated loans and adversely classified loans), and past due status. For valuation purposes, these pools were further disaggregated by maturity, pricing characteristics (e.g., fixed-rate, adjustable-rate) and re-payment structure (e.g., interest only, fully amortizing, balloon). Fair values determined at the acquisition date were preliminary and subject to refinement during the one-year measurement period as additional information was obtained regarding facts and circumstances about expected cash flows that existed as of the acquisition date.

The acquired loans were divided into loans with evidence of credit quality deterioration, which are accounted for under ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality (purchased credit impaired), and loans that do not meet these criteria, which are accounted for under ASC 310-20, Receivables - Nonrefundable Fees and Other Costs (purchased performing).

The following table presents the purchased credit impaired loans receivable at the acquisition date (dollars in thousands):

Contractually required principal and interest at acquisition	$	45,551
Contractual cash flows not expected to be collected (nonaccretable difference)		8,296
Expected cash flows at acquisition		37,255
Interest component of expected cash flows (accretable yield)		4,410
Fair value of acquired loans accounted for under FASB ASC 310-30	$	32,845

Direct costs related to the HomeTown acquisition were expensed as incurred. There were no merger related expenses during 2020 compared to $11,782,000 during 2019 and $872,000 during 2018.

The following table presents unaudited pro forma information as if the acquisition of HomeTown had occurred on January  1, 2018 (dollars in thousands, except per share data). These results combine the historical results of HomeTown in the Company's consolidated statements of income and, while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on January 1, 2018. In particular, no adjustments have been made to eliminate the amount of HomeTown's provision for loan losses that would not have been necessary had the acquired loans been recorded at fair value as of January 1, 2018. Pro forma adjustments below include the net impact of accretion for 2018 and the elimination of merger-related costs for 2019 and 2018.

	Pro forma Year Ended December 31,
	2019		2018
Total revenues (1)	$	95,178	$	98,232
Net income	$	29,841	$	27,974
Earnings per share	$	2.70	$	2.52

__________________________

(1) Includes net interest income and noninterest income.

Note 3 – Restrictions on Cash

The Company is a member of the Federal Reserve System and is required to maintain certain levels of its cash and cash equivalents as reserves based on regulatory requirements. The gross reserve requirement with the Federal Reserve Bank of Richmond was zero and $14.4 million at December 31, 2020 and 2019, respectively. The required balance to be maintained with the Federal Reserve Bank of Richmond was zero and $2.6 million at December 31, 2020 and December 31, 2019, respectively.

The Company maintains cash accounts in other commercial banks. The amount on deposit with correspondent institutions at December 31, 2020 exceeded the insurance limits of the FDIC by $2,610,000.

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Note 4 - Securities

The amortized cost and estimated fair value of investments in securities at December 31, 2020 and 2019 were as follows (dollars in thousands):

	December 31, 2020
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Securities available for sale:
U.S. Treasury	$	34,997	$	1	$	—	$	34,998
Federal agencies and GSEs		104,092		1,976		45		106,023
Mortgage-backed and CMOs		246,770		6,117		105		252,782
State and municipal		57,122		1,979		2		59,099
Corporate		13,011		188		10		13,189
Total securities available for sale	$	455,992	$	10,261	$	162	$	466,091

The Company adopted ASU 2016-01 effective January 1, 2018 and had no equity securities at December 31, 2020 and December 31, 2019 and recognized in income $333,000 of unrealized holding gains during 2019. During the year ended December 31, 2019, the Company sold $445,000 in equity securities at fair value.

(Dollars in thousands)		December 31, 2019
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Securities available for sale:
U.S. Treasury	$	14,992	$	—	$	5	$	14,987
Federal agencies and GSEs		126,829		1,504		219		128,114
Mortgage-backed and CMOs		182,732		1,901		393		184,240
State and municipal		41,427		769		42		42,154
Corporate		9,514		186		—		9,700
Total securities available for sale	$	375,494	$	4,360	$	659	$	379,195

The amortized cost and estimated fair value of investments in debt securities at December 31, 2020, by contractual maturity, are shown in the following table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because mortgage-backed securities have both known principal repayment terms as well as unknown principal repayments due to potential borrower pre-payments, it is difficult to accurately predict the final maturity of these investments. Mortgage-backed securities are shown separately (dollars in thousands):

	Available for Sale
	Amortized
	Cost		Fair Value
Due in one year or less	$	38,081	$	38,120
Due after one year through five years		96,905		98,651
Due after five years through ten years		52,624		54,465
Due after ten years		21,612		22,073
Mortgage-backed and CMOs		246,770		252,782
	$	455,992	$	466,091

Gross realized gains and losses on, and the proceeds from the sale of, securities available for sale were as follows (dollars in thousands):

	For the Year Ended December 31,
	2020		2019			2018
Gross realized gains	$	814	$	328		$	342
Gross realized losses		—		(54	)		(261	)
Proceeds from sales of securities		5,811		29,878			57,607

Securities with a carrying value of approximately $189,791,000 and $179,852,000 at December 31, 2020 and 2019, respectively, were pledged to secure public deposits, repurchase agreements, and for other purposes as required by law. FHLB letters of credit were used as additional collateral in the amounts of $245,000,000 at December 31, 2020 and $170,000,000 at December 31, 2019.

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Temporarily Impaired Securities

The following table shows estimated fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2020. The reference point for determining when securities are in an unrealized loss position is month-end. Therefore, it is possible that a security's market value exceeded its amortized cost on other days during the past twelve-month period.

Available for sale securities that have been in a continuous unrealized loss position are as follows (dollars in thousands):

	Total				Less than 12 Months				12 Months or More
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
Federal agencies and GSEs	$	21,237	$	45	$	19,974	$	26	$	1,263	$	19
Mortgage-backed and CMOs		46,640		105		46,640		105		—		—
State and municipal		3,456		2		3,456		2		—		—
Corporate		5,990		10		5,990		10		—		—
Total	$	77,323	$	162	$	76,060	$	143	$	1,263	$	19

Federal agencies and GSEs: The unrealized losses on the Company's investment in 14 government sponsored entities ("GSEs") were caused by normal market fluctuations. Eleven of these securities were in an unrealized loss position for 12 months or more. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2020.

Mortgage-backed securities: The unrealized losses on the Company's investment in six GSE mortgage-backed securities were caused by normal market fluctuations. None of these securities were in an unrealized loss position for 12 months or more. The contractual cash flows of those investments are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company's investments. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2020.

Collateralized Mortgage Obligations: The unrealized losses associated with five private GSE collateralized mortgage obligations ("CMOs") were due to normal market fluctuations. None of these securities were in an unrealized loss position for 12 months or more. The contractual cash flows of these investments are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company's investments. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of its amortized cost bases, which may be maturity, the Company does not consider the investments to be other-than-temporarily impaired at December 31, 2020.

State and municipal securities:  The unrealized losses on two state and municipal securities were caused by normal market fluctuations. These securities are of high credit quality (rated A- or higher), and principal and interest payments have been made timely. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2020.

Corporate securities: The unrealized losses on two corporate securities were caused by normal market fluctuations and not credit deterioration. These securities remain investment grade, and the Company's analysis did not indicate the existence of credit loss. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2020.

Due to restrictions placed upon the Bank's common stock investment in the Federal Reserve Bank of Richmond and FHLB, these securities have been classified as restricted equity securities and carried at cost. These restricted securities are not subject to the investment security classification requirements and are included as a separate line item on the Company's consolidated balance sheet. The FHLB requires the Bank to maintain stock in an amount equal to 4.25% of outstanding borrowings and a specific percentage of the Bank's total assets. The Federal Reserve Bank of Richmond requires the Bank to maintain stock with a par value equal to 3.0% of its outstanding capital and an additional 3.0% is on call. Restricted equity securities consist of Federal Reserve Bank of Richmond stock in the amount of $6,458,000 and $6,415,000 as of  December 31, 2020 and 2019, respectively, and FHLB stock in the amount of $2,257,000 and $2,215,000 as of December 31, 2020 and 2019, respectively.

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The table below shows gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position, at December 31, 2019 (dollars in thousands):

	Total				Less than 12 Months				12 Months or More
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
U.S. Treasury	$	14,987	$	5	$	14,987	$	5	$	—	$	—
Federal agencies and GSEs		69,095		219		31,779		44		37,316		175
Mortgage-backed and CMOs		89,391		393		66,324		266		23,067		127
State and municipal		4,262		42		3,108		37		1,154		5
Total	$	177,735	$	659	$	116,198	$	352	$	61,537	$	307

Other-Than-Temporary-Impaired Securities

As of December 31, 2020 and 2019, there were no securities classified as other-than-temporary impaired.

Note 5 – Loans

Loans, excluding loans held for sale, at December 31, 2020 and 2019 were comprised of the following (dollars in thousands):

	December 31,
	2020		2019
Commercial	$	491,256	$	339,077
Commercial real estate:
Construction and land development		140,071		137,920
Commercial real estate - owner occupied		373,680		360,991
Commercial real estate - non-owner occupied		627,569		538,208
Residential real estate:
Residential		269,137		324,315
Home equity		104,881		119,423
Consumer		8,462		10,881
Total loans, net of deferred fees and costs	$	2,015,056	$	1,830,815

Net deferred loan (fees) costs included in the above loan categories are $(3,021,000) for 2020 and $1,197,000 for 2019. The balance at December 31, 2020 includes $(4,439,000) in unamortized net PPP fees.

Overdraft deposits were reclassified to consumer loans in the amount of $59,000 and $134,000 for 2020 and 2019, respectively.

Acquired Loans

The outstanding principal balance and the carrying amount of these loans, including ASC 310-30 loans, included in the consolidated balance sheets at December 31, 2020 and 2019 are as follows (dollars in thousands):

	2020		2019
Outstanding principal balance	$	251,730	$	393,618
Carrying amount		241,008		377,130

The outstanding principal balance and related carrying amount of purchased credit impaired loans, for which the Company applies ASC 310-30 to account for interest earned, at December 31, 2020 and 2019 are as follows (dollars in thousands):

	2020		2019
Outstanding principal balance	$	37,417	$	53,600
Carrying amount		30,201		43,028

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The following table presents changes in the accretable yield on purchased credit impaired loans, for which the Company applies ASC 310-30, for the years ended December 31, 2020, 2019, and 2018 (dollars in thousands):

	2020			2019			2018
Balance at January 1	$	7,893		$	4,633		$	4,890
Additions from merger with HomeTown		—			4,410			—
Accretion		(3,553	)		(3,304	)		(2,362	)
Reclassification from nonaccretable difference		2,233			736			956
Other changes, net (1)		(60	)		1,418			1,149
Balance at December 31	$	6,513		$	7,893		$	4,633

__________________________

(1)  This line item represents changes in the cash flows expected to be collected due to the impact of non-credit changes such as prepayment assumptions, changes in interest rates on variable rate acquired impaired loans, and discounted payoffs that occurred in the period.

Past Due Loans

The following table shows an analysis by portfolio segment of the Company's past due loans at December 31, 2020 (dollars in thousands):

					90 Days +
					Past Due		Non-		Total
	30- 59 Days		60-89 Days		and Still		Accrual		Past				Total
	Past Due		Past Due		Accruing		Loans		Due		Current		Loans
Commercial	$	153	$	9	$	—	$	100	$	262	$	490,994	$	491,256
Commercial real estate:
Construction and land development		168		—		—		5		173		139,898		140,071
Commercial real estate - owner occupied		62		—		209		304		575		373,105		373,680
Commercial real estate - non-owner occupied		—		—		—		1,158		1,158		626,411		627,569
Residential:
Residential		711		211		53		792		1,767		267,370		269,137
Home equity		—		—		—		69		69		104,812		104,881
Consumer		49		14		—		6		69		8,393		8,462
Total	$	1,143	$	234	$	262	$	2,434	$	4,073	$	2,010,983	$	2,015,056

The following table shows an analysis by portfolio segment of the Company's past due loans at December 31, 2019 (dollars in thousands):

					90 Days +
					Past Due		Non-		Total
	30- 59 Days		60-89 Days		and Still		Accrual		Past				Total
	Past Due		Past Due		Accruing		Loans		Due		Current		Loans
Commercial	$	325	$	163	$	52	$	857	$	1,397	$	337,680	$	339,077
Commercial real estate:
Construction and land development		58		—		—		11		69		137,851		137,920
Commercial real estate - owner occupied		217		434		—		274		925		360,066		360,991
Commercial real estate - non-owner occupied		—		—		—		—		—		538,208		538,208
Residential:
Residential		639		260		282		685		1,866		322,449		324,315
Home equity		49		90		27		113		279		119,144		119,423
Consumer		73		13		—		4		90		10,791		10,881
Total	$	1,361	$	960	$	361	$	1,944	$	4,626	$	1,826,189	$	1,830,815

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Impaired Loans

The following table presents the Company's impaired loan balances by portfolio segment, excluding acquired impaired loans, at December 31, 2020 (dollars in thousands):

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Commercial	$	18	$	18	$	—	$	23	$	6
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		286		283		—		357		27
Commercial real estate - non-owner occupied		1,148		1,147		—		766		75
Residential:
Residential		1,096		1,103		—		912		62
Home equity		6		6		—		31		3
Consumer		—		—		—		—		—
	$	2,554	$	2,557	$	—	$	2,089	$	173
With a related allowance recorded:
Commercial	$	39	$	33	$	29	$	382	$	15
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		—		—		—		—		—
Commercial real estate - non-owner occupied		122		122		—		180		15
Residential
Residential		137		137		1		256		9
Home equity		—		—		—		—		—
Consumer		—		—		—		—		—
	$	298	$	292	$	30	$	818	$	39
Total:
Commercial	$	57	$	51	$	29	$	405	$	21
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		286		283		—		357		27
Commercial real estate - non-owner occupied		1,270		1,269		—		946		90
Residential:
Residential		1,233		1,240		1		1,168		71
Home equity		6		6		—		31		3
Consumer		—		—		—		—		—
	$	2,852	$	2,849	$	30	$	2,907	$	212

In the table above, recorded investment may exceed unpaid principal balance due to acquired loans with a premium and loans with unearned costs that exceed unearned fees.

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The following table presents the Company's impaired loan balances by portfolio segment, excluding acquired impaired loans, at December 31, 2019 (dollars in thousands):

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Commercial	$	49	$	49	$	—	$	16	$	5
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		343		341		—		250		26
Commercial real estate - non-owner occupied		159		159		—		174		13
Residential:
Residential		611		612		—		652		38
Home equity		41		41		—		45		6
Consumer		—		—		—		—		—
	$	1,203	$	1,202	$	—	$	1,137	$	88
With a related allowance recorded:
Commercial	$	735	$	730	$	204	$	191	$	41
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		—		—		—		—		—
Commercial real estate - non-owner occupied		—		—		—		—		—
Residential:
Residential		254		254		26		225		16
Home equity		—		—		—		—		—
Consumer		—		—		—		—		—
	$	989	$	984	$	230	$	416	$	57
Total:
Commercial	$	784	$	779	$	204	$	207	$	46
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		343		341		—		250		26
Commercial real estate - non-owner occupied		159		159		—		174		13
Residential:
Residential		865		866		26		877		54
Home equity		41		41		—		45		6
Consumer		—		—		—		—		—
	$	2,192	$	2,186	$	230	$	1,553	$	145

In the table above, recorded investment may exceed unpaid principal balance due to acquired loans with a premium and loans with unearned costs that exceed unearned fees.

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The following table shows the detail of loans modified as TDRs during the year ended December 31, 2020, 2019, and 2018, included in the impaired loan balances (dollars in thousands):

	Loans Modified as TDRs for the Year Ended December 31, 2020
			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Contracts		Investment		Investment
Commercial		1	$	106	$	106
Commercial real estate - owner occupied		—		—		—
Commercial real estate - non-owner occupied		2		1,311		1,311
Residential real estate		1		82		82
Home equity		1		6		6
Consumer		—		—		—
Total		5	$	1,505	$	1,505

	Loans Modified as TDRs for the Year Ended December 31, 2019
			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Contracts		Investment		Investment
Commercial		—	$	—	$	—
Commercial real estate - owner occupied		—		—		—
Commercial real estate - non-owner occupied
Residential real estate		1		207		207
Home equity		—		—		—
Consumer		—		—		—
Total		1	$	207	$	207

	Loans Modified as TDRs for the Year Ended December 31, 2018
			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Contracts		Investment		Investment
Commercial		—	$	—	$	—
Commercial real estate - owner occupied		—		—		—
Commercial real estate - non-owner occupied		—		—		—
Residential real estate		1		11		11
Home equity		—		—		—
Consumer		—		—		—
Total		1	$	11	$	11

All loans modified as TDRs during the years ended December 31, 2020, 2019, and 2018 were structure modifications. The impact on the allowance for loan losses for the commercial loan modified as a TDR in 2020 was $88,000. The impact on the allowance for loan losses for one of the commercial real estate - non-owner occupied loans modified as a TDR in 2020 was $138,000; there was no impact on the allowance for loan losses for the other commercial real estate - non-owner occupied loan. There was no impact on the allowance for loan losses for the residential real estate loan and the home equity loan modified as TDRs in 2020. For the year ended December 31, 2020, the impact on the allowance was due to specific reserves that were charged-off prior to year end. The impact on the allowance for loan losses for the residential real estate loan modified as a TDR in 2019 was $24,000. There was no impact on the allowance for loan losses for the residential real estate loan modified as a TDR in 2018.

During the year ended December 31, 2020, the Company had one commercial real estate - non-owner occupied loan with a recorded investment of $1,052,000 that subsequently defaulted within 12 months of modification. During the years ended December 31, 2019 and 2018, the Company had no loans that subsequently defaulted within twelve months of modification. The Company defines default as one or more payments that occur more than 90 days past the due date, charge-off, or foreclosure subsequent to modification. Any charge-offs resulting in default were adjusted through the allowance for loan losses.

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In March 2020 (revised in April 2020), the federal banking agencies issued an "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus." This was in response to the COVID-19 pandemic affecting societies and economies around the world. This guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19. The guidance explains that, in consultation with the FASB staff, the federal banking agencies have concluded that short-term modifications (e.g. six months) made on a good faith basis to borrowers who were current as of the implementation date of a relief program are not TDRs. The CARES Act was passed by the U.S. Congress on March 27, 2020. Section 4013 of the CARES Act also addressed COVID-19 related modifications and specified that COVID-19 related modifications on loans that were current as of December 31, 2019 were not TDRs. The Bank implemented a DAP to provide relief to its borrowers under this guidance. The Bank provided assistance to customers with loan balances of $405.1 million during the year ended December 31, 2020.  The balance of loans remaining in this program at December 31, 2020 was $30.0 million, or 1.5% of the total portfolio, with $18.2 million of the $30.0 million in total deferrals the result of second and third request interest deferrals. At February 28, 2021, the balance of loans remaining in this program was $25.2 million, or 1.2% of the total portfolio, with $16.7 million of the $25.2 million in total deferrals the result of second request interest deferrals. The majority of remaining modifications involved three-month deferments of interest. This interagency guidance has not had a material impact on the Company's financials and is not expected to have a material impact on ongoing operations; however, this impact cannot be quantified at this time.

The CARES Act included an initial first round allocation of $659.0 billion for loans to be issued by financial institutions through the SBA's PPP. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which was passed by Congress on December 21, 2020 and then signed into law on December 27, 2020 as part of the Appropriations Act, allocated an additional $284.4 billion. These loans carry a fixed rate of 1.00% and a term of two years for the majority of the initial loans and for five years on the second round, if not forgiven, in whole or in part. Payments were deferred for the first six months of the loan. The loans are 100% guaranteed by the SBA. The SBA paid the Bank a processing fee based on the size of the loan. The SBA has approved over 2,700 applications as of  February 28, 2021 totaling $340.9 million in loans. The Company had outstanding net PPP loans of $211.3 million at December 31, 2020 and $226.4 million at February 28, 2021. The Bank has received processing fees of $11.2 million on the PPP loans and incurred direct origination costs of $1.8 million. The Company had net unaccreted PPP loan origination fees of $4.4 million at December 31, 2020 and $5.0 at February 28, 2021. From a funding perspective, the Bank utilized core funding sources for these loans. At December 31, 2020 and February 28, 2021, respectively, the SBA had forgiven $56.4 million and $105.8 million of PPP loans. These PPP loans are guaranteed by the SBA and, therefore, do not have a related allowance.

The loan portfolio consists primarily of commercial and residential real estate loans, commercial loans to small and medium-sized businesses, construction and land development loans, and home equity loans. At December 31, 2020, the commercial real estate portfolio included concentrations of $75,235,000, $44,738,000 and $190,840,000 in hotel, restaurants, and retail, respectively. The concentrations total 15.5% of total loans, excluding loans in process.

The Company had $387,000 and $161,000 in residential real estate loans in the process of foreclosure at December  31, 2020 and December  31, 2019, respectively, and had $285,000 in residential OREO at both December  31, 2020 and December  31, 2019.

Risk Ratings

The following tables show the Company's loan portfolio broken down by internal risk grading as of December 31, 2020 (dollars in thousands):

Commercial and Consumer Credit Exposure

Credit Risk Profile by Internally Assigned Grade

	Commercial		Construction and Land Development		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-owner Occupied		Residential Real Estate		Home Equity
Pass	$	479,416	$	131,770	$	350,376	$	612,688	$	262,677	$	104,608
Special Mention		10,956		2,505		14,621		9,196		3,665		—
Substandard		865		5,796		8,474		5,563		2,795		273
Doubtful		19		—		209		122		—		—
Total	$	491,256	$	140,071	$	373,680	$	627,569	$	269,137	$	104,881

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity

	Consumer
Performing	$	8,456
Nonperforming		6
Total	$	8,462

Loans classified in the Pass category typically are fundamentally sound, and risk factors are reasonable and acceptable.

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Loans classified in the Special Mention category typically have been criticized internally, by loan review or the loan officer, or by external regulators under the current credit policy regarding risk grades.

Loans classified in the Substandard category typically have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are typically characterized by the possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Loans classified in the Doubtful category typically have all the weaknesses inherent in loans classified as substandard, plus the added characteristic the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur that may salvage the debt.

Consumer loans are classified as performing or nonperforming. A loan is nonperforming when payments of interest and principal are past due 90 days or more.

The following tables show the Company's loan portfolio broken down by internal risk grading as of December 31, 2019 (dollars in thousands):

Commercial and Consumer Credit Exposure

Credit Risk Profile by Internally Assigned Grade

	Commercial		Construction and Land Development		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-owner Occupied		Residential Real Estate		Home Equity
Pass	$	328,488	$	130,694	$	340,696	$	519,919	$	316,454	$	118,960
Special Mention		8,710		4,133		13,094		9,023		4,370		—
Substandard		1,144		3,093		7,200		9,267		3,491		463
Doubtful		735		—		—		—		—		—
Total	$	339,077	$	137,920	$	360,990	$	538,209	$	324,315	$	119,423

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity

	Consumer
Performing	$	10,877
Nonperforming		4
Total	$	10,881

Note 6 – Allowance for Loan Losses and Reserve for Unfunded Lending Commitments

Changes in the allowance for loan losses and the reserve for unfunded lending commitments (included in other liabilities) for each of the years in the three-year period ended December 31, 2020, are presented below (dollars in thousands):

	Year Ended December 31,
	2020			2019			2018
Allowance for Loan Losses
Balance, beginning of year	$	13,152		$	12,805		$	13,603
Provision for (recovery of) loan losses		8,916			456			(103	)
Charge-offs		(1,006	)		(333	)		(1,020	)
Recoveries		341			224			325
Balance, end of year	$	21,403		$	13,152		$	12,805

	Year Ended December 31,
	2020			2019		2018
Reserve for Unfunded Lending Commitments
Balance, beginning of year	$	329		$	217	$	206
Provision for (recovery of) unfunded commitments		(25	)		112		11
Charge-offs		—			—		—
Balance, end of year	$	304		$	329	$	217

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The reserve for unfunded loan commitments is included in other liabilities, and the provision for unfunded commitments is included in noninterest expense. The following table presents the Company's allowance for loan losses by portfolio segment and the related loan balance total by segment for the year ended December 31, 2020 (dollars in thousands):

	Commercial (1)			Construction and Land Development		Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-owner Occupied			Residential Real Estate			Consumer			Total
Allowance for Loan Losses
Balance at December 31, 2019	$	2,657		$	1,161	$	2,474		$	3,781		$	3,023		$	56		$	13,152
Charge-offs		(505	)		—		(17	)		(165	)		(117	)		(202	)		(1,006	)
Recoveries		65			2		12			50			85			127			341
Provision		1,156			764		1,871			3,960			1,076			89			8,916
Balance at December 31, 2020	$	3,373		$	1,927	$	4,340		$	7,626		$	4,067		$	70		$	21,403
Balance at December 31, 2020:
Allowance for Loan Losses
Individually evaluated for impairment	$	29		$	—	$	—		$	—		$	1		$	—		$	30
Collectively evaluated for impairment		3,318			1,927		4,138			7,185			3,896			70			20,534
Purchased credit impaired loans		26			—		202			441			170			—			839
Total	$	3,373		$	1,927	$	4,340		$	7,626		$	4,067		$	70		$	21,403
Loans
Individually evaluated for impairment	$	57		$	—	$	286		$	1,270		$	1,239		$	—		$	2,852
Collectively evaluated for impairment		490,736			139,833		360,579			616,498			365,967			8,390			1,982,003
Purchased credit impaired loans		463			238		12,815			9,801			6,812			72			30,201
Total	$	491,256		$	140,071	$	373,680		$	627,569		$	374,018		$	8,462		$	2,015,056

__________________________

(1) Includes PPP loans, which are guaranteed by the SBA and have no related allowance.

The following table presents the Company's allowance for loan losses by portfolio segment and the related loan balance total by segment for the year ended December 31, 2019 (dollars in thousands):

	Commercial			Construction and Land Development		Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-owner Occupied		Residential Real Estate			Consumer			Total
Allowance for Loan Losses
Balance at December 31, 2018	$	2,537		$	1,059	$	2,420		$	3,767	$	2,977		$	45		$	12,805
Charge-offs		(12	)		—		(6	)		—		(70	)		(245	)		(333	)
Recoveries		13			—		9			—		58			144			224
Provision		119			102		51			14		58			112			456
Balance at December 31, 2019	$	2,657		$	1,161	$	2,474		$	3,781	$	3,023		$	56		$	13,152
Balance at December 31, 2019:
Allowance for Loan Losses
Individually evaluated for impairment	$	204		$	—	$	—		$	—	$	26		$	—		$	230
Collectively evaluated for impairment		2,448			1,161		2,444			3,781		2,794			56			12,684
Purchased credit impaired loans		5			—		30			—		203			—			238
Total	$	2,657		$	1,161	$	2,474		$	3,781	$	3,023		$	56		$	13,152
Loans
Individually evaluated for impairment	$	784		$	—	$	—		$	502	$	906		$	—		$	2,192
Collectively evaluated for impairment		337,312			137,522		346,233			520,541		433,121			10,866			1,785,595
Purchased credit impaired loans		981			398		14,758			17,165		9,711			15			43,028
Total	$	339,077		$	137,920	$	360,991		$	538,208	$	443,738		$	10,881		$	1,830,815

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The allowance for loan losses is allocated to loan segments based upon historical loss factors, risk grades on individual loans, portfolio analysis of smaller balance, homogenous loans, and qualitative factors. Qualitative factors include trends in delinquencies, nonaccrual loans, and loss rates; trends in volume and terms of loans, effects of changes in risk selection, underwriting standards, and lending policies; experience of lending officers, other lending staff and loan review; national, regional, and local economic trends and conditions; legal, regulatory and collateral factors; and concentrations of credit.

The provision for loan losses for the 2020 period reflects an increase in the allowance based on a qualitative assessment of the declining and uncertain economic landscape in the wake of the COVID-19 pandemic. Sharp declines in employment, gross national product, housing and auto sales, housing starts and business activity in general indicate a higher risk of probable losses in the Bank's portfolio. The Bank has been actively working with borrowers at risk who were impacted by the stay-at-home orders, utilizing its DAP to include short-term deferments of principal and interest and short-term acceptance of interest-only payments. Many of the Bank's customers have applied for and received PPP loans. Management will continue to evaluate the adequacy of the Company's allowance for loan losses as more economic data becomes available and as changes within the Company's portfolio are known. The effects of the pandemic may require further changes in the level of allowance.

Note 7 – Premises and Equipment

Major classifications of premises and equipment at December 31, 2020 and 2019 are summarized as follows (dollars in thousands):

	December 31,
	2020			2019
Land	$	10,267		$	10,421
Buildings		36,173			36,247
Leasehold improvements		1,160			1,469
Furniture and equipment		19,424			17,695
		67,024			65,832
Accumulated depreciation		(27,301	)		(25,984	)
Premises and equipment, net	$	39,723		$	39,848

Depreciation expense for the years ended December 31, 2020, 2019, and 2018 was $2,188,000, $2,064,000, and $1,775,000, respectively.

Note 8 – Goodwill and Other Intangible Assets

The Company records as goodwill the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Impairment testing is performed annually, as well as when an event triggering impairment may have occurred. On January 1, 2020, the Company adopted ASU 2017-04, which simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the previous two-step impairment test. Under the new guidance, if a reporting unit's carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates the prior requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount. The Company performs its annual analysis as of June 30 each fiscal year. Due to the COVID-19 pandemic market conditions, the Company determined a triggering event occurred during the first quarter of 2020 and performed a qualitative assessment at March 31, 2020 and as the pandemic continued performed qualitative assessments at June 30 and September 30 and a quantitative assessment at December 31, 2020 and determined no impairment was indicated. The impact of COVID-19 on market conditions and other changes in the economic environment, operations, or other adverse events could result in future impairment charges which could have a material adverse impact on the Company's operating results. No indicators of impairment were identified during the years ended December 31, 2019 or 2018.

Core deposit intangibles resulting from the MidCarolina acquisition in July 2011 were $6,556,000 and became fully amortized at June 30, 2020. Core deposit intangibles resulting from the MainStreet Bankshares, Inc. acquisition in January 2015 were $1,839,000 and are being amortized on an accelerated basis over 120 months. Core deposit intangibles resulting from the acquisition of HomeTown in April 2019 were $8,200,000 and are being amortized on an accelerated basis over 120 months.

The changes in the carrying amount of goodwill and intangibles for the twelve months ended December 31, 2020, are as follows (dollars in thousands):

	Goodwill		Intangibles
Balance at December 31, 2019	$	84,002	$	7,728
Measurement period adjustments		1,046		—
Amortization		—		(1,637	)
Balance at December 31, 2020	$	85,048	$	6,091

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Goodwill and intangible assets at December 31, 2020 and 2019 are as follows (dollars in thousands):

	Gross Carrying		Accumulated			Net Carrying
	Value		Amortization			Value
December 31, 2020
Core deposit intangibles	$	19,708	$	(13,617	)	$	6,091
Goodwill		85,048		—			85,048
December 31, 2019
Core deposit intangibles	$	19,708	$	(11,980	)	$	7,728
Goodwill		84,002		—			84,002

Amortization expense of core deposit intangibles for the years ended December 31, 2020, 2019, and 2018 was $1,637,000, $1,398,000, and $265,000, respectively.  As of December 31, 2020, the estimated future amortization expense of core deposit intangibles is as follows (dollars in thousands):

Year	Amount
2021	$	1,464
2022		1,260
2023		1,069
2024		800
2025		617
2026 and after		881
Total	$	6,091

Note 9 – Leases

On January 1, 2019, the Company adopted ASU No. 2016-02 "Leases (Topic 842)" and all subsequent ASUs that modified Topic 842. The Company elected the prospective application approach provided by ASU 2018-11 and did not adjust prior periods for ASC 842. The Company also elected certain practical expedients within the standard and, consistent with such elections, did not reassess whether any expired or existing contracts are or contain leases, did not reassess the lease classification for any expired or existing leases, and did not reassess any initial direct costs for existing leases. The implementation of the new standard resulted in recognition of a right-of-use asset and lease liability of $4.4 million at the date of adoption, which is related to the Company's lease of premises used in operations. In connection with the HomeTown merger in 2019, the Company added $1.8 million to the right-of-use asset and lease liability. The aggregate right-of-use asset and lease liability are included in other assets and other liabilities, respectively, in the Company's consolidated balance sheets.

Lease liabilities represent the Company's obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company's incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company's right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor.

The Company's long-term lease agreements are classified as operating leases. Certain of these leases offer the option to extend the lease term, and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

The following tables present information about the Company's leases as of and for the years ended December 31, 2020 and December 31, 2019 (dollars in thousands):

	December 31, 2020			December 31, 2019
Lease liabilities	$	4,940		$	5,369
Right-of-use assets	$	4,878		$	5,340
Weighted average remaining lease term (in years)		7.33			8.17
Weighted average discount rate		3.03	%		3.21	%

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	Year Ended December 31, 2020		Year Ended December 31, 2019
Lease cost
Operating lease cost	$	993	$	1,040
Short-term lease cost		3		3
Total lease cost	$	996	$	1,043
Cash paid for amounts included in the measurement of lease liabilities	$	959	$	1,013

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities is as follows (dollars in thousands):

Lease payments due	As of December 31, 2020
2021	$	1,048
2022		1,044
2023		945
2024		516
2025		473
2026 and after		1,549
Total undiscounted cash flows	$	5,575
Discount		(635	)
Lease liabilities	$	4,940

Lease expense, a component of occupancy and equipment expense, for the years ended December 31, 2020, 2019, and 2018 was $1,158,000, $1,187,000, and $919,000, respectively. The amounts recognized in lease expense include insurance, property taxes, and common area maintenance.

Note 10 - Deposits

The aggregate amount of time deposits in denominations of $250,000 or more at December 31, 2020 and 2019 was $170,089,000 and $200,712,000, respectively.

At December 31, 2020, the scheduled maturities and amounts of certificates of deposits (included in interest-bearing deposits on the consolidated balance sheets) were as follows (dollars in thousands):

Year	Amount
2021	$	271,868
2022		58,544
2023		31,486
2024		15,596
2025		13,898
2026 and after		5,034
Total	$	396,426

There were no brokered time deposits at December 31, 2020 or December 31, 2019. Time deposits through the Certificate of Deposit Account Registry Service ("CDARS") program totaled $4,342,000 at December 31, 2020 compared to $14,864,000 at  December 31, 2019. Deposits through the CDARS program are generated from major customers with substantial relationships with the Bank.

Note 11 – Short-term Borrowings

Short-term borrowings consist of customer repurchase agreements, overnight borrowings from the FHLB, and federal funds purchased. The Company has federal funds lines of credit established with correspondent banks in the amount of $60,000,000 and has access to the Federal Reserve Bank of Richmond's discount window. Customer repurchase agreements are collateralized by securities of the U.S. Government, its agencies or GSEs. They mature daily. The interest rates are generally fixed but may be changed at the discretion of the Company. The securities underlying these agreements remain under the Company's control. FHLB overnight borrowings contain floating interest rates that may change daily at the discretion of the FHLB. Short-term borrowings consisted solely of the following at December 31, 2020 and 2019 (dollars in thousands):

	December 31, 2020					December 31, 2019
	Amount		Weighted Average Rate			Amount		Weighted Average Rate
Customer repurchase agreements	$	42,551		0.13	%	$	40,475		1.40	%

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Note 12 – Long-term Borrowings

Under the terms of its collateral agreement with the FHLB, the Company provides a blanket lien covering all of its residential first mortgage loans, second mortgage loans, home equity lines of credit, and commercial real estate loans. In addition, the Company pledges as collateral its capital stock in the FHLB and deposits with the FHLB. The Company has a line of credit with the FHLB equal to 30% of the Company's assets, subject to the amount of collateral pledged. As of December 31, 2020, $897,979,000 in eligible collateral was pledged under the blanket floating lien agreement which covers both short-term and long-term borrowings.

There were no long-term borrowings as of December 31, 2020 or 2019.

In the regular course of conducting its business, the Company takes deposits from political subdivisions of the states of Virginia and North Carolina. At December 31, 2020, the Bank's public deposits totaled $326,774,000. The Company is required to provide collateral to secure the deposits that exceed the insurance coverage provided by the FDIC. This collateral can be provided in the form of certain types of government or agency bonds or letters of credit from the FHLB. At December 31, 2020, the Company had $245,000,000 in letters of credit with the FHLB outstanding as well as $136,213,000 in agency, state, and municipal securities to provide collateral for such deposits.

Note 13 – Subordinated Debt 

On April 1, 2019, in connection with the HomeTown merger, the Company assumed $7,500,000 in aggregate principal amount of fixed-to-floating rate subordinated notes issued to various institutional accredited investors. The notes have a maturity date of December 30, 2025 and had an annual fixed interest rate of 6.75% until December 30, 2020. Thereafter, the notes have a floating interest rate based on LIBOR. Interest was paid semi-annually, in arrears, on June 30 and December 30 of each year during the fixed interest rate period. Interest will be paid quarterly, in arrears, on March 30, June 30, September 30, and December 30 throughout the floating interest rate period or earlier redemption date.

The indebtedness evidenced by the notes, including principal and interest, is unsecured and subordinate and junior in right of the Company's payments to general and secured creditors and depositors of the Bank. The notes are redeemable, without penalty, on or after December 30, 2020 and were redeemable in certain limited circumstances prior to that date. The notes limit the Company from declaring or paying any dividend, or making any distribution on capital stock or other equity securities of any kind of the Company if the Company is not "well capitalized" for regulatory purposes, immediately prior to the declaration of such dividend or distribution, except for dividends payable solely in shares of common stock of the Company.

The carrying value of the subordinated debt included a fair value adjustment of $17,000 at December 31, 2019. The original fair value adjustment of $30,000 was recorded as a result of the acquisition of HomeTown on April 1, 2019, and was amortized into interest expense through December 30, 2020.

Note 14 – Junior Subordinated Debt

On April 7, 2006, AMNB Statutory Trust I, a Delaware statutory trust and a wholly owned subsidiary of the Company, issued $20,000,000 of preferred securities in a private placement pursuant to an applicable exemption from registration. The Trust Preferred Securities mature on June 30, 2036, but may be redeemed at the Company's option beginning on September 30, 2011. Initially, the securities required quarterly distributions by the trust to the holder of the Trust Preferred Securities at a fixed rate of 6.66%. Effective September 30, 2011, the rate resets quarterly at the three-month LIBOR plus 1.35%. Distributions are cumulative and accrue from the date of original issuance but may be deferred by the Company from time to time for up to 20 consecutive quarterly periods. The Company has guaranteed the payment of all required distributions on the Trust Preferred Securities. The proceeds of the Trust Preferred Securities received by the trust, along with proceeds of $619,000 received by the trust from the issuance of common securities by the trust to the Company, were used to purchase $20,619,000 of the Company's junior subordinated debt securities (the "Trust Preferred Capital Notes"), issued pursuant to a junior subordinated debenture entered into between the Company and Wilmington Trust Company, as trustee. The proceeds of the Trust Preferred Securities were used to fund the cash portion of the merger consideration to the former shareholders of Community First in connection with the Company's acquisition of that company, and for general corporate purposes.

On July 1, 2011, in connection with the MidCarolina merger, the Company assumed $8,764,000 in junior subordinated debentures to the MidCarolina Trusts, to fully and unconditionally guarantee the preferred securities issued by the MidCarolina Trusts. These long-term obligations, which currently qualify as Tier 1 capital, constitute a full and unconditional guarantee by the Company of the MidCarolina Trusts' obligations. The MidCarolina Trusts are not consolidated in the Company's financial statements.

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In accordance with ASC 810-10-15-14, Consolidation - Overall - Scope and Scope Exceptions, the Company did not eliminate through consolidation the Company's $619,000 equity investment in AMNB Statutory Trust I or the $264,000 equity investment in the MidCarolina Trusts. Instead, the Company reflected these equity investments in other assets in the Company's consolidated balance sheets. .

A description of the junior subordinated debt securities outstanding payable to the trusts is shown below (dollars in thousands):

				Principal Amount
				As of December 31,
Issuing Entity	Date Issued	Interest Rate	Maturity Date	2020		2019
AMNB Trust I	4/7/2006	Libor plus 1.35%	6/30/2036	$	20,619	$	20,619
MidCarolina Trust I	10/29/2002	Libor plus 3.45%	11/7/2032		4,489		4,433
MidCarolina Trust II	12/3/2003	Libor plus 2.95%	10/7/2033		3,022		2,977
				$	28,130	$	28,029

The principal amounts reflected above for the MidCarolina Trusts are net of fair value adjustments of $666,000 and $587,000 at December 31, 2020 and $722,000 and $632,000 at  December 31, 2019, respectively. The original fair value adjustments of $1,197,000 and $1,021,000 were recorded as a result of the acquisition of MidCarolina on July 1, 2011, and are being amortized into interest expense over the remaining lives of the respective borrowings.

Note 15 - Derivative Financial Instruments and Hedging Activities

The Company uses derivative financial instruments ("derivatives") primarily to manage risks associated with changing interest rates. The Company's derivatives are hedging instruments in a qualifying hedge accounting relationship (cash flow or fair value hedge).

The Company designates derivatives as cash flow hedges when they are used to manage exposure to variability in cash flows on variable rate borrowings such as the Company's Trust Preferred Capital Notes. The Company uses interest rate swap agreements as part of its hedging strategy by exchanging variable-rate interest payments on a notional amount equal to the principal amount of the borrowings for fixed-rate interest payments, with such interest rates set based on benchmarked interest rates.

All interest rate swaps were entered into with counterparties that met the Company's credit standards and the agreements contain collateral provisions protecting the at-risk party. The Company believes that the credit risk inherent in these derivative contracts is not significant.

Terms and conditions of the interest rate swaps vary and amounts receivable or payable are recognized as accrued under the terms of the agreements. The Company assesses the effectiveness of each hedging relationship on a periodic basis. In accordance with ASC 815, Derivatives and Hedging, the effective portions of the derivatives' unrealized gains or losses are recorded as a component of other comprehensive income. Based on the Company's assessment, its cash flow hedges are highly effective, but to the extent that any ineffectiveness exists in the hedge relationships, the amounts would be recorded in the Company's consolidated statements of income.

(Dollars in thousands)	December 31, 2020
	Notional Amount		Positions		Assets		Liabilities		Cash Collateral Pledged
Cash flow hedges:
Interest rate swaps:
Variable-rate to fixed-rate swaps with counterparty	$	28,500	$	3	$	—	$	4,868	$	5,750

(Dollars in thousands)	December 31, 2019
	Notional Amount		Positions		Assets		Liabilities		Cash Collateral Pledged
Cash flow hedges:
Interest rate swaps:
Variable-rate to fixed-rate swaps with counterparty	$	28,500	$	3	$	—	$	2,658	$	3,450

In addition, the Company has commitments to fund certain mortgage loans (interest rate lock commitments) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors which are considered derivatives. It is the Company's practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of change in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships.

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Note 16 – Stock-Based Compensation

The Company's 2018 Stock Incentive Plan (the "2018 Plan") was adopted by the Board of Directors of the Company on February 20, 2018 and approved by shareholders on May 15, 2018 at the Company's 2018 Annual Meeting of Shareholders. The 2018 Plan provides for the granting of restricted stock awards, incentive and non-statutory options, and other equity-based awards to employees and directors at the discretion of the Compensation Committee of the Board of Directors. The 2018 Plan authorizes the issuance of up to 675,000 shares of common stock. The 2018 Plan replaced the Company's stock incentive plan that was approved by the shareholders at the 2008 Annual Meeting that expired in February 2018.

Stock Options

Accounting guidance requires that compensation cost relating to share-based payment transactions be recognized in the financial statements with measurement based upon the fair value of the equity or liability instruments issued.

A summary of stock option transactions for the year ended December 31, 2020 is as follows:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	Option			Exercise		Contractual Term		Value
	Shares			Price		(In Years)		($000)
Outstanding at December 31, 2019		13,944		$	16.63
Granted		—			—
Exercised		(2,573	)		16.63
Forfeited		(830	)		16.63
Expired		—			—
Outstanding at December 31, 2020		10,541		$	16.63		3.97	$	101
Exercisable at December 31, 2020		10,541		$	16.63		3.97	$	101

The aggregate intrinsic value of stock options in the table above represents the total pre-tax intrinsic value (the amount by which the current fair value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on December 31, 2020. This amount changes based on changes in the fair value of the Company's common stock.

The total proceeds of the in-the-money options exercised during the years ended December 31, 2020, 2019, and 2018 were $43,000, $688,000, and $861,000, respectively. Total intrinsic value of options exercised during the years ended December 31, 2020, 2019, and 2018 was $42,000, $616,000, and $732,000, respectively.

In connection with the HomeTown acquisition, there was $147,000 in recognized stock compensation expense attributable to outstanding stock options in the year ended December 31, 2019. There was no recognized stock compensation expense attributable to outstanding stock options in 2020 and 2018. As of December 31, 2020, 2019, and 2018, there was no unrecognized compensation expense attributable to the outstanding stock options.

The following table summarizes information related to stock options outstanding on December 31, 2020:

Options Outstanding and Exercisable
			Weighted-Average
	Number of		Remaining
Range of	Outstanding		Contractual Life		Weighted-Average
Exercise Prices	Options		(In Years)		Exercise Price
$15.00 to $20.00		10,541		3.97	$	16.63

No stock options were granted in 2020, 2019 and 2018.

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Restricted Stock

The Company from time-to-time grants shares of restricted stock to key employees and non-employee directors. These awards help align the interests of these employees and directors with the interests of the shareholders of the Company by providing economic value directly related to increases in the value of the Company's common stock. The value of the stock awarded is established as the fair market value of the stock at the time of the grant. The Company recognizes expense, equal to the total value of such awards, ratably over the vesting period of the stock grants. Restricted stock granted in 2020 cliff vests at the end of a 36-month period beginning on the date of grant. Nonvested restricted stock activity for the year ended December 31, 2020 is summarized in the following table:

				Weighted
				Average Grant
	Shares			Date Value Per Share
Nonvested at December 31, 2019		57,271		$	34.84
Granted		26,010			34.42
Vested		(19,526	)		34.50
Forfeited		(5,216	)		34.29
Nonvested at December 31, 2020		58,539			34.81

As of December 31, 2020, 2019, and 2018, there was $797,000, $751,000, and $647,000, respectively, in unrecognized compensation cost related to nonvested restricted stock granted under the 2018 Plan. This cost is expected to be recognized over the next 12 to 36 months. The share based compensation expense for nonvested restricted stock was $672,000, $915,000, and $610,000 during 2020, 2019, and 2018, respectively. The expense for 2019 included $257,000 of accelerated compensation expense as a result of the HomeTown merger.

Starting in 2010, the Company began offering its outside directors alternatives with respect to director compensation. For 2020, the regular quarterly board retainer could be received in the form of shares of immediately vested but restricted stock with a market value of $10,000. Monthly meeting fees could be received as $800 per meeting in cash or $1,000 in immediately vested but restricted stock. For 2019, the regular monthly board retainer could be received quarterly in the form of immediately vested but restricted stock with a market value of $7,500. Monthly meeting fees could be received as $725 per meeting in cash or $900 in immediately vested but restricted stock. Only outside directors receive board fees. The Company issued 27,986, 17,373 and 15,471 shares and recognized share based compensation expense of $779,000, $626,000, and $586,000 during 2020, 2019 and 2018, respectively.

Note 17 – Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and the states of Virginia and North Carolina. With few exceptions, the Company is no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years prior to 2017.

The components of the Company's net deferred tax assets were as follows (dollars in thousands):

	December 31,
	2020		2019
Deferred tax assets:
Allowance for loan losses	$	4,636	$	2,841
Nonaccrual loan interest		507		490
Other real estate owned valuation allowance		124		120
Deferred compensation		159		1,184
Acquisition accounting adjustments		3,404		3,670
Lease liability, net of right of use asset		13		—
Accrued pension liability		447		50
NOL Carryforward		—		456
Net unrealized loss on cash flow hedges		1,022		573
Other		318		601
Total deferred tax assets		10,630		9,985
Deferred tax liabilities:
Depreciation		1,352		1,079
Core deposit intangibles		1,315		1,669
Accrued pension liability		213		—
Deferred loan origination costs, net		533		258
Net unrealized gain on securities available for sale		2,180		541
Other		32		574
Total deferred tax liabilities		5,625		4,121
Net deferred tax assets	$	5,005	$	5,864

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The provision for income taxes consists of the following (dollars in thousands):

	Year Ended December 31,
	2020			2019		2018
Current tax expense	$	7,777		$	3,793	$	5,090
Deferred tax expense		(640	)		1,068		556
Total income tax expense	$	7,137		$	4,861	$	5,646

A reconcilement of the "expected" federal income tax expense to reported income tax expense is as follows (dollars in thousands):

	Year Ended December 31,
	2020			2019			2018
Expected federal tax expense	$	7,808		$	5,411		$	5,927
Nondeductible interest expense		31			67			69
Tax-exempt interest		(259	)		(478	)		(504	)
State income taxes		207			149			337
Other, net		(650	)		(288	)		(183	)
Total income tax expense	$	7,137		$	4,861		$	5,646

Note 18 – Earnings Per Common Share

The following shows the weighted average number of shares used in computing earnings per common share and the effect on the weighted average number of shares of potentially dilutive common stock. Potentially dilutive common stock had no effect on income available to common shareholders. Nonvested restricted shares are included in the computation of basic earnings per share as the holder is entitled to full shareholder benefits during the vesting period including voting rights and sharing in nonforfeitable dividends.

	Year Ended December 31,
	2020					2019					2018
			Per Share					Per Share					Per Share
	Shares		Amount			Shares		Amount			Shares		Amount
Basic earnings per share		10,981,623	$	2.74			10,531,572	$	1.99			8,698,014	$	2.60
Effect of dilutive securities - stock options		4,167		(0.01	)		9,765		(0.01	)		10,448		(0.01	)
Diluted earnings per share		10,985,790	$	2.73			10,541,337	$	1.98			8,708,462	$	2.59

Outstanding stock options on common stock, which were not included in computing diluted earnings per share in 2020, 2019, and 2018 because their effects were anti-dilutive, were zero shares for 2020, 2019, and 2018.

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Note 19 – Off-Balance Sheet Activities

The Company is party to credit-related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if applicable, is based on management's credit evaluation of the customer.

The Company's exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments.

The following off-balance sheet financial instruments whose contract amounts represent credit risk were outstanding at December 31, 2020 and 2019 (dollars in thousands):

	December 31,
	2020		2019
Commitments to extend credit	$	503,272	$	557,364
Standby letters of credit		17,355		13,611
Mortgage loan rate lock commitments		26,883		10,791

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments generally consist of unused portions of lines of credit issued to customers. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

At December 31, 2020, the Company had locked-rate commitments to originate mortgage loans amounting to approximately $26,883,000 and loans held for sale of $15,591,000. Risks arise from the possible inability of counterparties to meet the terms of their contracts, though the Company has never experienced a failure of one of its counterparties to perform. If a loan becomes past due 90 days within 180 days of sale, the Company would be required to repurchase the loan.

Note 20 – Related Party Transactions

In the ordinary course of business, loans are granted to executive officers, directors, and their related entities. Management believes that all such loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans to similar, unrelated borrowers, and do not involve more than a normal risk of collectibility or present other unfavorable features. As of December 31, 2020 and 2019, none of these loans was restructured, past due, or on nonaccrual status.

An analysis of these loans for 2020 is as follows (dollars in thousands):

Balance at December 31, 2019	$	9,594
Additions		3,751
Repayments		(4,760	)
Reclassifications(1)		(63	)
Balance at December 31, 2020	$	8,522

__________________________

(1) Includes loans to persons no longer affiliated with the Company and therefore not considered related party loans as of period end.

Related party deposits totaled $16,436,000 at December 31, 2020 and $14,741,000 at December 31, 2019.

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Note 21 – Employee Benefit Plans

Defined Benefit Plan

The Company previously maintained a non-contributory defined benefit pension plan which covered substantially all employees who were 21 years of age or older and who had at least one year of service. The Company froze its pension plan to new participants and converted its pension plan to a cash balance plan effective December 31, 2009. Each year, existing participants will receive, with some adjustments, income based on the yield of the 10 year U.S. Treasury Note in December of the preceding year. Information pertaining to the activity in the plan is as follows (dollars in thousands):

	As of and for the Year Ended December 31,
	2020			2019			2018
Change in Benefit Obligation:
Projected benefit obligation at beginning of year	$	6,262		$	5,812		$	8,313
Service cost		—			—			—
Interest cost		152			209			235
Actuarial (gain) loss		814			489			(782	)
Settlement gain (loss)		44			(12	)		(120	)
Benefits paid		(1,451	)		(236	)		(1,834	)
Projected benefit obligation at end of year		5,821			6,262			5,812
Change in Plan Assets:
Fair value of plan assets at beginning of year		5,915			5,653			7,556
Actual return (loss) on plan assets		237			498			(69	)
Benefits paid		(1,451	)		(236	)		(1,834	)
Fair value of plan assets at end of year		4,701			5,915			5,653
Funded Status at End of Year	$	(1,120	)	$	(347	)	$	(159	)
Amounts Recognized in the Consolidated Balance Sheets
Other liabilities	$	(1,120	)	$	(347	)	$	(159	)
Amounts Recognized in Accumulated Other Comprehensive Loss
Net actuarial loss	$	2,071		$	1,658		$	1,594
Deferred income taxes		(435	)		(358	)		(357	)
Amount recognized	$	1,636		$	1,300		$	1,237

	As of and for the Year Ended December 31,
	2020			2019			2018
Components of Net Periodic Benefit Cost
Service cost	$	—		$	—		$	—
Interest cost		152			209			235
Expected return on plan assets		(285	)		(269	)		(353	)
Recognized net loss due to settlement		352			52			540
Recognized net actuarial loss		140			133			272
Net periodic benefit cost	$	359		$	125		$	694
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income) Loss
Net actuarial (gain) loss	$	413		$	64		$	(1,291	)
Amortization of prior service cost		—			—			—
Total recognized in other comprehensive (income) loss	$	413		$	64		$	(1,291	)
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive (Income) Loss	$	772		$	189		$	(597	)

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The accumulated benefit obligation as of December 31, 2020, 2019, and 2018 was $5,821,000, $6,262,000, and $5,812,000, respectively. The rate of compensation increase is no longer applicable since the defined benefit plan was frozen and converted to a cash balance plan.

The plan sponsor selected the expected long-term rate-of-return-on-assets assumption in consultation with their investment advisors and actuary. This rate was intended to reflect the average rate of earnings expected to be earned on the funds invested or to be invested to provide plan benefits. Historical performance is reviewed, especially with respect to real rates of return (net of inflation), for the major asset classes held or anticipated to be held by the trust, and for the trust itself. Undue weight is not given to recent experience that may not continue over the measurement period, with higher significance placed on current forecasts of future long-term economic conditions.

Because assets are held in a qualified trust, anticipated returns are not reduced for taxes. Further, solely for this purpose, the plan is assumed to continue in force and not terminate during the period in which assets are invested. However, consideration is given to the potential impact of current and future investment policy, cash flow into and out of the trust, and expenses (both investment and non-investment) typically paid from plan assets (to the extent such expenses are not explicitly estimated within periodic cost).

Below is a description of the plan's assets. The plan's weighted-average asset allocations by asset category are as follows as of December 31, 2020 and 2019:

Asset Category	December 31,
	2020			2019
Fixed Income		65.6	%		61.8	%
Equity		31.5	%		27.5	%
Cash and Accrued Income		2.9	%		10.7	%
Total		100.0	%		100.0	%

The investment policy and strategy for plan assets can best be described as a growth and income strategy. Diversification is accomplished by limiting the holding of any one equity issuer to no more than 5% of total equities. Exchange traded funds are used to provide diversified exposure to the small capitalization and international equity markets. All fixed income investments are rated as investment grade, with the majority of these assets invested in corporate issues. The assets are managed by the Company's Trust and Investment Services Division. No derivatives are used to manage the assets. Equity securities do not include holdings in the Company.

The fair value of the Company's pension plan assets at December 31, 2020 and 2019, by asset category are as follows (dollars in thousands):

			Fair Value Measurements at December 31, 2020 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Asset Category	2020		Level 1		Level 2		Level 3
Cash	$	138	$	138	$	—	$	—
Fixed income securities
Government sponsored entities		444		—		444		—
Municipal bonds and notes		2,147		—		2,147		—
Corporate bonds and notes		491		—		491		—
Equity securities
U.S. companies		1,259		1,259		—		—
Foreign companies		222		222		—		—
	$	4,701	$	1,619	$	3,082	$	—

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			Fair Value Measurements at December 31, 2019 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Asset Category	2019		Level 1		Level 2		Level 3
Cash	$	636	$	636	$	—	$	—
Fixed income securities
Government sponsored entities		1,648		—		1,648		—
Municipal bonds and notes		1,792		—		1,792		—
Corporate bonds and notes		212		—		212		—
Equity securities
U.S. companies		1,385		1,385		—		—
Foreign companies		242		242		—		—
	$	5,915	$	2,263	$	3,652	$	—

Projected benefit payments for the years 2021 to 2030 are as follows (dollars in thousands):

Year	Amount
2021	$	629
2022		381
2023		910
2024		252
2025		1,204
2026 - 2030		2,390

401(k) Plan

The Company maintains a 401(k) plan that covers substantially all full-time employees of the Company. The Company matches a portion of the contribution made by employee participants after at least one year of service. The Company contributed $1,038,000, $932,000, and $778,000 to the 401(k) plan in 2020, 2019, and 2018, respectively. These amounts are included in employee benefits expense for the respective years.

Deferred Compensation Arrangements

Prior to 2015, the Company maintained deferred compensation agreements with former employees providing for annual payments to each ranging from $25,000 to $50,000 per year for ten years upon their retirement. The liabilities under these agreements are being accrued over the officers' remaining periods of employment so that, on the date of their retirement, the then-present value of the annual payments would have been accrued. As of December 31, 2020, the Company only had one remaining agreement under which payments are being made to a former officer. The liabilities were $200,000 and $250,000 at December 31, 2020 and 2019, respectively. There was no expense for these agreements for the years ended December 31, 2020, 2019, and 2018. As a result of acquisitions, the Company has various agreements with current and former employees and executives with balances of $5,585,000 and $5,235,000 at December 31, 2020 and 2019, respectively that accrue through eligibility and are payable upon retirement.

Beginning in 2015, certain named executive officers became eligible to participate in a voluntary, nonqualified deferred compensation plan pursuant to which the officers may defer any portion of their annual cash incentive payments. In addition, the Company may make discretionary cash bonus contributions to the deferred compensation plan. Such contributions, if any, are made on an annual basis after the Committee assesses the performance of each of the named executive officers and the Company during the most recently completed fiscal year. The contributions charged to salary expense were $0, $158,000 and $141,000 for the years ended December 31, 2020, 2019 and 2018, respectively.

Incentive Arrangements

The Company maintains a cash incentive compensation plan for officers based on the Company's performance and individual officer goals. The total amount charged to salary expense for this plan was $1,214,000, $1,217,000 and $1,643,000 for the years ended December 31, 2020, 2019, and 2018, respectively.

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Note 22 – Fair Value Measurements

Determination of Fair Value

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the fair value measurements and disclosures topic of FASB ASC 825, Financial Instruments, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The fair value guidance provides a consistent definition of fair value, which focuses on exit price in the principal or most advantageous market for the asset or liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

Fair Value Hierarchy

In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

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 financial 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).

Loans held for sale: Loans held for sale are carried at fair value. These loans currently consist of 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). Gains and losses on the sale of loans are recorded in current period earnings as a component of mortgage banking income on the Company's consolidated statements of income.

Derivative asset (liability) - cash flow hedges: Cash flow hedges are recorded at fair value on a recurring basis. Cash flow hedges are valued by a third party using significant assumptions that are observable in the market and can be corroborated by market data. All of the Company's cash flow hedges are classified as Level 2.

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The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis during the period (dollars in thousands):

			Fair Value Measurements at December 31, 2020 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2020		Level 1		Level 2		Level 3
Assets:
Securities available for sale:
U.S. Treasury	$	34,998	$	—	$	34,998	$	—
Federal agencies and GSEs		106,023		—		106,023		—
Mortgage-backed and CMOs		252,782		—		252,782		—
State and municipal		59,099		—		59,099		—
Corporate		13,189		—		13,189		—
Total securities available for sale	$	466,091	$	—	$	466,091	$	—
Loans held for sale	$	15,591	$	—	$	15,591	$	—
Liabilities:
Derivative - cash flow hedges	$	4,868	$	—	$	4,868	$	—

			Fair Value Measurements at December 31, 2019 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2019		Level 1		Level 2		Level 3
Assets:
Securities available for sale:
U.S. Treasury	$	14,987	$	—	$	14,987	$	—
Federal agencies and GSEs		128,114		—		128,114		—
Mortgage-backed and CMOs		184,240		—		184,240		—
State and municipal		42,154		—		42,154		—
Corporate		9,700		—		9,700		—
Total securities available for sale	$	379,195	$	—	$	379,195	$	—
Loans held for sale	$	2,027	$	—	$	2,027	$	—
Liabilities:
Derivative - cash flow hedges	$	2,658	$	—	$	2,658	$	—

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:

Impaired loans: Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreements will not be collected when due. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan 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 Company's collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal, of one year or less, conducted by an independent, licensed appraiser using observable market data (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of the property is more than one year old and not solely based on observable market comparables or management determines the fair value of the collateral is further impaired below the appraised value, then a Level 3 valuation is considered to measure the fair value. The value of business equipment is based upon an outside appraisal, of one year or less, if deemed significant, or the net book value on the applicable business's financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). 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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Other real estate owned:  Measurement for fair values for other real estate owned are the same as impaired loans. Any fair value adjustments are recorded in the period incurred as a valuation allowance against OREO with the associated expense included in OREO expense, net on the consolidated statements of income.

The following table summarizes the Company's assets that were measured at fair value on a nonrecurring basis during the period (dollars in thousands):

			Fair Value Measurements at December 31, 2020 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2020		Level 1		Level 2		Level 3
Assets:
Impaired loans, net of valuation allowance	$	268	$	—	$	—	$	268
Other real estate owned, net		958		—		—		958

			Fair Value Measurements at December 31, 2019 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2019		Level 1		Level 2		Level 3
Assets:
Impaired loans, net of valuation allowance	$	759	$	—	$	—	$	759
Other real estate owned, net		1,308		—		—		1,308

Quantitative Information About Level 3 Fair Value Measurements as of  December 31, 2020 and 2019:

Assets	Valuation Technique	Unobservable Input	Range; Weighted Average (1)
Impaired loans	Discounted appraised value	Selling cost	8.00%
	Discounted cash flow analysis	Market rate for borrower (discount rate)	4.13% - 7.20%; 5.19%
Other real estate owned	Discounted appraised value	Selling cost	8.00%

__________________________

(1) Unobservable inputs were weighted by the relative fair value of the impaired loans.

FASB ASC 825, Financial Instruments, requires disclosure about fair value of financial instruments, including those financial assets and financial liabilities that are not required to be measured and reported at fair value on a recurring or nonrecurring basis. ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. Additionally, in accordance with ASU 2016-01, which the Company adopted January 1, 2018 on a prospective basis, the Company uses the exit price notion, rather than the entry price notion, in calculating the fair values of financial instruments not measured at fair value on a recurring basis.

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The carrying values and estimated fair values of the Company's financial instruments at December 31, 2020 are as follows (dollars in thousands):

	Fair Value Measurements at December 31, 2020 Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Balance
Financial Assets:
Cash and cash equivalents	$	374,370	$	374,370	$	—	$	—	$	374,370
Securities available for sale		466,091		—		466,091		—		466,091
Restricted stock		8,715		—		8,715		—		8,715
Loans held for sale		15,591		—		15,591		—		15,591
Loans, net of allowance		1,993,653		—		—		1,992,326		1,992,326
Bank owned life insurance		28,482		—		28,482		—		28,482
Accrued interest receivable		7,193		—		7,193		—		7,193
Financial Liabilities:
Deposits	$	2,611,330	$	—	$	2,615,157	$	—	$	2,615,157
Repurchase agreements		42,551		—		42,551		—		42,551
Subordinated debt		7,500		—		7,522		—		7,522
Junior subordinated debt		28,130		—		—		21,696		21,696
Accrued interest payable		778		—		778		—		778
Derivative - cash flow hedges		4,868		—		4,868		—		4,868

The carrying values and estimated fair values of the Company's financial instruments at December 31, 2019 are as follows (dollars in thousands):

	Fair Value Measurements at December 31, 2019 Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Balance
Financial Assets:
Cash and cash equivalents	$	79,582	$	79,582	$	—	$	—	$	79,582
Securities available for sale		379,195		—		379,195		—		379,195
Restricted stock		8,630		—		8,630		—		8,630
Loans held for sale		2,027		—		2,027		—		2,027
Loans, net of allowance		1,817,663		—		—		1,818,655		1,818,655
Bank owned life insurance		27,817		—		27,817		—		27,817
Accrued interest receivable		6,625		—		6,625		—		6,625
Financial Liabilities:
Deposits	$	2,060,547	$	—	$	2,062,823	$	—	$	2,062,823
Repurchase agreements		40,475		—		40,475		—		40,475
Subordinated debt		7,517		—		8,525		—		8,525
Junior subordinated debt		28,029		—		—		22,697		22,697
Accrued interest payable		1,213		—		1,213		—		1,213
Derivative - cash flow hedges		2,658		—		2,658		—		2,658

95

Note 23 – Dividend Restrictions and Regulatory Capital

The approval of the Office of the Comptroller of the Currency is required if the total of all dividends declared by a national bank in any calendar year exceeds the bank's retained net income, as defined, for that year combined with its retained net income for the preceding two calendar years. Under this formula, the Bank can distribute as dividends to the Company, without the approval of the Office of the Comptroller of the Currency, up to $18,628,000 as of December 31, 2020. Dividends paid by the Bank to the Company are the only significant source of funding for dividends paid by the Company to its shareholders.

Federal bank regulators have issued substantially similar guidelines requiring banks and bank holding companies to maintain capital at certain levels. In addition, regulators may from time to time require that a banking organization maintain capital above the minimum levels because of its financial condition or actual or anticipated growth. Failure to meet minimum capital requirements can trigger certain mandatory and discretionary actions by regulators that could have a direct material effect on the Company's financial condition and results of operations.

The FRB and Office of the Comptroller of the Currency have adopted rules to implement the Basel III capital framework as outlined by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Basel III Capital Rules"). The Basel III Capital Rules require banks and bank holding companies to comply with certain minimum capital ratios, plus a "capital conservation buffer," as set forth in the table below. The capital conservation buffer requirement was phased in beginning on January 1, 2016, at 0.625% of risk-weighted assets, and increased by the same amount each year until it was fully implemented at 2.5% on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress and is applicable to all ratios except the leverage capital ratio.

The Company meets the eligibility criteria of a small bank holding company in accordance with the FRB's Small Bank Holding Company Policy Statement (the "SBHC Policy Statement"). Under the SBHC Policy Statement, qualifying bank holding companies, such as the Company, have additional flexibility in the amount of debt they can issue and are also exempt from the Basel III Capital Rules. However, the Company does not currently intend to issue a material amount of debt or take any other action that would cause its capital ratios to fall below the minimum ratios required by the Basel III Capital Rules. The SBHC Policy Statement does not apply to the Bank, and the Bank must comply with the Basel III Capital Rules. The Bank must also comply with the capital requirements set forth in the "prompt corrective action" regulations pursuant to Section 38 of the Federal Deposit Insurance Act. The minimum capital ratios for the Bank to be considered "well capitalized" are set forth in the table below.

Management believes that as of December 31, 2020, the Company and Bank meet all capital adequacy requirements to which they are subject. At year-end 2020 and 2019, the most recent regulatory notifications categorized the Bank as "well capitalized" under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank's category.

On September 17, 2019, the federal banking agencies jointly issued a final rule required by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 that permits qualifying banks and bank holding companies that have less than $10 billion in consolidated assets to elect to be subject to a 9% leverage ratio (commonly referred to as the community bank leverage ratio or "CBLR"). Under the final rule, banks and bank holding companies that opt into the CBLR framework and maintain a CBLR of greater than 9% are not subject to other risk-based and leverage capital requirements under the Basel III Capital Rules and are deemed to have met the well capitalized ratio requirements under the "prompt corrective action" framework. In addition, a community bank that falls out of compliance with the framework has a two-quarter grace period to come back into full compliance, provided its leverage ratio remains above 8%, and will be deemed well-capitalized during the grace period. The CBLR framework was first available for banking organizations to use in their March 31, 2020 regulatory reports. 

On April 6, 2020, the federal bank regulatory agencies announced the issuance of two interim final rules that make changes to the CBLR framework and implement Section 4012 of the CARES Act. One interim final rule provides that, as of the second quarter of 2020, a banking organization with a leverage ratio of 8% or greater (and that meets the other existing qualifying criteria) could elect to use the CBLR framework. This rule also establishes a two-quarter grace period for a qualifying community banking organization whose leverage ratio fell below 8% so long as the banking organization maintained a leverage ratio of 7% or greater. The second interim final rule provides a transition back to the leverage ratio requirement of 9%. Under this rule, the required leverage ratio was 8% beginning in the second quarter and for the remainder of calendar year 2020 and will be 8.5% for calendar year 2021 and 9% thereafter. This rule also maintains a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 1% below the applicable ratio. This transition will allow community banking organizations to focus on supporting lending to creditworthy households and businesses given the recent strains on the U.S. economy caused by COVID-19. The Company and the Bank do not currently expect to opt into the CBLR framework.

96

 

Actual and required capital amounts (in thousands) and ratios are presented below at year-end:

										To Be Well
										Capitalized Under
										Prompt Corrective
	Actual					Required for Capital Adequacy Purposes				Action Provisions
	Amount		Ratio			Amount		Ratio		Amount		Ratio
December 31, 2020
Common Equity Tier 1
Company	$	244,318		12.36	%	$	88,967		>4.50%		N/A		N/A
Bank		252,748		12.86			137,530		>7.00	$	127,706		>6.50%
Tier 1 Capital
Company		272,448		13.78			118,623		>6.00		N/A		N/A
Bank		252,748		12.86			167,001		>8.50		157,177		>8.00
Total Capital
Company		300,155		15.18			158,164		>8.00		N/A		N/A
Bank		274,455		13.97			206,295		>10.50		196,471		>10.00
Leverage Capital
Company		272,448		9.48			114,902		>4.00		N/A		N/A
Bank		252,748		8.85			114,247		>4.00		142,809		>5.00
December 31, 2019
Common Equity Tier 1
Company	$	228,554		11.56	%	$	88,968		>4.50%		N/A		N/A
Bank		243,449		12.38			137,698		>7.00	$	127,862		>6.50%
Tier 1 Capital
Company		256,583		12.98			118,624		>6.00		N/A		N/A
Bank		243,449		12.38			167,205		>8.50		157,369		>8.00
Total Capital
Company		277,581		14.04			158,166		>8.00		N/A		N/A
Bank		256,930		13.06			206,547		>10.50		196,712		>10.00
Leverage Capital
Company		256,583		10.75			95,514		>4.00		N/A		N/A
Bank		243,449		10.25			94,972		>4.00		118,715		>5.00

Note 24 – Segment and Related Information

The Company has two reportable segments, community banking and trust and investment services.

Community banking involves making loans to and generating deposits from individuals and businesses. All assets and liabilities of the Company are allocated to community banking. Investment income from securities is also allocated to the community banking segment. Loan fee income, service charges from deposit accounts, and non-deposit fees such as automated teller machine fees and insurance commissions generate additional income for the community banking segment.

Trust and investment services include estate planning, trust account administration, investment management, and retail brokerage. Investment management services include purchasing equity, fixed income, and mutual fund investments for customer accounts. The trust and investment services segment receives fees for investment and administrative services.

97

 

Segment information as of and for the years ended December 31, 2020, 2019, and 2018, is shown in the following table (dollars in thousands):

	2020
	Community Banking		Trust and Investment Services		Total
Interest income	$	95,840	$	—	$	95,840
Interest expense		12,020		—		12,020
Noninterest income		12,054		4,789		16,843
Noninterest expense		52,245		2,320		54,565
Incomebefore income taxes		34,714		2,468		37,182
Net income		28,052		1,993		30,045
Depreciation and amortization		3,815		10		3,825
Total assets		3,049,779		231		3,050,010
Goodwill		85,048		—		85,048
Capital expenditures		2,690		4		2,694

	2019
	Community Banking		Trust and Investment Services		Total
Interest income	$	92,855	$	—	$	92,855
Interest expense		15,728		—		15,728
Noninterest income		10,602		4,568		15,170
Noninterest expense		63,794		2,280		66,074
Incomebefore income taxes		23,479		2,288		25,767
Net income		19,050		1,856		20,906
Depreciation and amortization		3,454		8		3,462
Total assets		2,478,478		72		2,478,550
Goodwill		84,002		—		84,002
Capital expenditures		3,534		21		3,555

	2018
	Community Banking		Trust and Investment Services		Total
Interest income	$	68,768	$	—	$	68,768
Interest expense		9,674		—		9,674
Noninterest income		8,695		4,579		13,274
Noninterest expense		41,832		2,414		44,246
Incomebefore income taxes		26,060		2,165		28,225
Net income		20,848		1,731		22,579
Depreciation and amortization		2,030		10		2,040
Total assets		1,862,849		17		1,862,866
Goodwill		43,872		—		43,872
Capital expenditures		2,723		—		2,723

98

Note 25 – Parent Company Financial Information

Condensed Parent Company financial information is as follows (dollars in thousands):

	December 31,
Condensed Balance Sheets	2020		2019
Cash	$	17,759	$	11,127
Securities available for sale, at fair value		8,534		8,683
Investment in subsidiaries		351,033		337,983
Due from subsidiaries		143		134
Other assets		1,062		674
Total Assets	$	378,531	$	358,601
Subordinated debt	$	7,500	$	7,517
Junior subordinated debt		28,130		28,029
Other liabilities		5,007		2,797
Shareholders' equity		337,894		320,258
Total Liabilities and Shareholders' Equity	$	378,531	$	358,601

	Year Ended December 31,
Condensed Statements of Income	2020			2019			2018
Dividends from subsidiary	$	25,500		$	25,000		$	11,000
Other income		512			823			456
Expenses		3,369			4,232			2,396
Income tax benefit		(600	)		(601	)		(407	)
Income before equity in undistributed earnings of subsidiary		23,243			22,192			9,467
Equity in undistributed (distributed) earnings of subsidiary		6,802			(1,286	)		13,112
Net Income	$	30,045		$	20,906		$	22,579

	Year Ended December 31,
Condensed Statements of Cash Flows	2020			2019			2018
Cash Flows from Operating Activities:
Net income	$	30,045		$	20,906		$	22,579
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in (undistributed) distributions of subsidiary		(6,802	)		1,286			(13,112	)
Net change in other assets		84			(382	)		(194	)
Net change in other liabilities		85			(35	)		136
Net cash provided by operating activities		23,412			21,775			9,409
Cash Flows from Investing Activities:
Purchases of securities available for sale		—			(2,220	)		—
Sales of equity securities		—			445			431
Cash paid in bank acquisition		—			(27	)		—
Cash acquired in bank acquisition		—			981			—
Net cash provided by (used in) investing activities		—			(821	)		431
Cash Flows from Financing Activities:
Common stock dividends paid		(11,842	)		(10,965	)		(8,702	)
Repurchase of common stock		(4,981	)		(3,146	)		—
Proceeds from exercise of stock options		43			688			861
Net cash used in financing activities		(16,780	)		(13,423	)		(7,841	)
Net increase in cash and cash equivalents		6,632			7,531			1,999
Cash and cash equivalents at beginning of period		11,127			3,596			1,597
Cash and cash equivalents at end of period	$	17,759		$	11,127		$	3,596

99

 

Note 26 – Concentrations of Credit Risk

Substantially all of the Company's loans are made within its market area, which includes Southern and Central Virginia and the northern portion of Central North Carolina. The ultimate collectibility of the Company's loan portfolio and the ability to realize the value of any underlying collateral, if necessary, are impacted by the economic conditions and real estate values of the market area.

Loans secured by real estate were $1,515,338,000, or 75.2% of the loan portfolio at December 31, 2020, and $1,480,857,000, or 80.9% of the loan portfolio at December 31, 2019. Loans secured by commercial real estate represented the largest portion of loans at $1,001,249,000 at December 31, 2020 and $899,199,000 at December 31, 2019, 49.7% and 49.1%, respectively, of total loans. There were no concentrations of loans to any individual, group of individuals, business, or industry that exceeded 10% of total loans at December 31, 2020 or 2019.

Note 27 – Supplemental Cash Flow Information

(dollars in thousands)	As of or for the Year Ended December 31,
	2020			2019			2018
Supplemental Schedule of Cash and Cash Equivalents:
Cash and due from banks	$	30,767		$	32,505		$	29,587
Interest-bearing deposits in other banks		343,603			47,077			34,668
	$	374,370		$	79,582		$	64,255
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest on deposits and borrowed funds	$	12,455		$	15,310		$	9,553
Income taxes		7,609			4,698			5,056
Noncash investing and financing activities:
Transfer of loans to other real estate owned		95			234			599
Transfer of loans to repossessions		411			—			—
Transfer from premises and equipment to other assets		—			445			—
Increase in operating lease right-of-use asset		371			4,453			—
Increase in operating lease liability		371			4,453			—
Unrealized gains (losses) on securities available for sale		6,399			8,821			(3,290	)
Unrealized losses on cash flow hedges		(2,210	)		(1,854	)		(804	)
Change in unfunded pension liability		(413	)		(64	)		1,291
Non-cash transactions related to acquisitions:
Assets acquired:
Investment securities		—			34,876			—
Restricted stock		—			2,588			—
Loans		—			444,324			—
Premises and equipment		—			12,554			—
Deferred income taxes		—			2,960			—
Core deposit intangible		—			8,200			—
Other real estate owned		—			1,442			—
Bank owned life insurance		—			8,246			—
Other assets		—			14,244			—
Liabilities assumed:
Deposits		—			483,626			—
Short-term FHLB advances		—			14,883			—
Long-term FHLB advances		—			778			—
Subordinated debt		—			7,530			—
Other liabilities		—			5,780			—
Consideration:
Issuance of common stock		—			82,470			—
Fair value of replacement stock options/restricted stock		—			753			—

100

Note 28 – Accumulated Other Comprehensive Income (Loss)

Changes in each component of accumulated other comprehensive income (loss) were as follows (dollars in thousands):

				Unrealized			Adjustments			Accumulated
	Net Unrealized			Losses on			Related to			Other
	Gains (Losses)			Cash Flow			Pension			Comprehensive
	on Securities			Hedges			Benefits			Income (Loss)
Balance at Balance at December 31, 2017	$	(796	)	$	—		$	(2,280	)	$	(3,076	)
Net unrealized losses on securities available for sale, net of tax, $(745)		(2,464	)		—			—			(2,464	)
Reclassification adjustment for realized gains on securities, net of tax, $(18)		(63	)		—			—			(63	)
Net unrealized losses on cash flow hedges, net of tax, $(180)		—			(624	)		—			(624	)
Change in unfunded pension liability, net of tax, $249		—			—			1,042			1,042
Reclassification for ASU 2016-01 adoption		(650	)		—			—			(650	)
Balance at December 31, 2018		(3,973	)		(624	)		(1,238	)		(5,835	)
Net unrealized gains on securities available for sale, net of tax, $2,005		7,090			—			—			7,090
Reclassification adjustment for realized gains on securities, net of tax, $(59)		(215	)		—			—			(215	)
Net unrealized losses on cash flow hedges, net of tax, $(394)		—			(1,460	)		—			(1,460	)
Change in unfunded pension liability, net of tax, $(1)		—			—			(63	)		(63	)
Balance at December 31, 2019		2,902			(2,084	)		(1,301	)		(483	)
Net unrealized gains on securities available for sale, net of tax, $1,557		5,656			—			—			5,656
Reclassification adjustment for realized gains on securities, net of tax, $(176)		(638	)		—			—			(638	)
Net unrealized losses on cash flow hedges, net of tax, $(448)		—			(1,762	)		—			(1,762	)
Change in unfunded pension liability, net of tax, $(77)		—			—			(336	)		(336	)
Balance at December 31, 2020		7,920			(3,846	)		(1,637	)	$	2,437

The following table provides information regarding reclassifications out of accumulated other comprehensive income (loss) (dollars in thousands):

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

For the Three Years Ending December 31, 2020

Details about AOCI Components	Amount Reclassified from AOCI									Affected Line Item in the Statement of Where Net Income is Presented
	Year Ended December 31,
	2020			2019			2018
Available for sale securities:
Realized gain on sale of securities	$	814		$	274		$	81		Securities gains, net
		(176	)		(59	)		(18	)	Income taxes
	$	638		$	215		$	63		Net of tax
Reclassification for ASU-2016-01 adoption		—			—			650		(1)
Total reclassifications	$	638		$	215		$	713

______________________

(1) Reclassification from AOCI to retained earnings for unrealized holding gains on equity securities due to adoption of ASU 2016-01.

101

 

ITEM 9A – CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company's management, including the Chief Executive Officer and Chief Financial Officer, evaluated the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), as of December 31, 2020. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. There were no significant changes in the Company's internal controls over financial reporting that occurred during the quarter ended December 31, 2020 that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.

Management's Annual Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Management regularly monitors its internal control over financial reporting, and actions are taken to correct deficiencies as they are identified.

Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting. This assessment was based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this evaluation under the framework in Internal Control – Integrated Framework, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2020, as such term is defined in Exchange Act Rule 13a-15(f).

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Further, because of changes in conditions, internal control effectiveness may vary over time.

The Company's independent registered public accounting firm, Yount, Hyde and Barbour, P.C., has audited the Company's internal control over financial reporting as of December 31, 2020, as stated in their report included herein. Yount, Hyde and Barbour, P.C. also audited the Company's consolidated financial statements as of and for the year ended December 31, 2020.

/s/ Jeffrey V. Haley

Jeffrey V. Haley

President and Chief Executive Officer

/s/ Jeffrey W. Farrar

Jeffrey W. Farrar

Executive Vice President,

Chief Operating Officer and Chief Financial Officer

March 8, 2021

102

PART IV

ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1)	Financial Statements.  See Item 8 for reference.
(a)(2)	Financial Statement Schedules.  All applicable financial statement schedules required under Regulation S-X have been included in the Notes to the Consolidated Financial Statements.
(a)(3)	Exhibits.  The exhibits required by Item 601 of Regulation S-K are listed below.

	EXHIBIT INDEX
Exhibit No.	Description	Location
2.1	Agreement and Plan of Reorganization, dated October 1, 2018, between American National Bankshares Inc. and HomeTown Bankshares Corporation	Exhibit 2.1 on Form 8-K filed October 5, 2018
3.1	Articles of Incorporation, as amended	Exhibit 3.1 on Form 8-K filed July 5, 2011
3.2	Bylaws, as amended	Exhibit 3.2 on Form 8-K filed May 21, 2020
4.1	Description of American National Bankshares Inc.’s Securities	Filed herewith
10.1	Deferred Compensation Agreement between American National Bank and Trust Company, and Charles H. Majors dated December 31, 2008	Exhibit 10.1 on Form 10-K filed March 16, 2009
10.2	Employment Agreement between American National Bankshares Inc. and Jeffrey V. Haley dated March 2, 2015	Exhibit 10.1 on Form 8-K filed March 4, 2015
10.3	Employment Agreement between American National Bankshares Inc. and Jeffrey W. Farrar dated August 5, 2019	Exhibit 10.1 on Form 8-K filed August 5, 2019
10.4	Employment Agreement between American National Bankshares Inc. and H. Gregg Strader dated March 2, 2015	Exhibit 10.3 on Form 10-Q filed May 11, 2015
10.5	Amendment to Employment Agreement between American National Bankshares Inc. and H. Gregg Strader, dated January 21, 2021	Exhibit 10.1 on Form 8-K filed January 26, 2021
10.6	Employment Agreement between American National Bank and Trust Company, and Charles T. Canaday, Jr., dated March 27, 2014	Filed herewith
10.7	Executive Severance Agreement between American National Bankshares Inc., American National Bank and Trust Company, and Charles T. Canaday, Jr. dated December 15, 2010, as amended March 27, 2014	Filed herewith
10.8	Employment Agreement between American National Bank and Trust Company and Edward C. Martin dated September 21, 2016	Exhibit 10.1 on Form 8-K filed December 29, 2016
10.9	Employment Agreement between American National Bank and Trust Company and John H. Settle, Jr. dated February 8, 2017	Exhibit 10.8 on Form 10-K filed March 8, 2019

103

	EXHIBIT INDEX
Exhibit No.	Description	Location
10.10	Employment Agreement between American National Bank and Trust Company and Susan K. Still dated February 5, 2019	Exhibit 10.1 on Pre-Effective Amendment No. 1 to Form S-4 filed February 6, 2019
10.11	American National Bankshares Inc. 2008 Stock Incentive Plan	Appendix A of the Proxy Statement for the Annual Meeting of Shareholders held on April 22, 2008, filed on March 14, 2008
10.12	American National Bankshares Inc. 2018 Equity Compensation Plan	Appendix A of the Proxy Statement for the Annual Meeting of Shareholders held on May 15, 2018, filed on April 12, 2018
10.13	HomeTown Bank 2005 Stock Option Plan	Exhibit 4.0 on Post-Effective Amendment No. 1 on Form S-8 to Form S-4 filed April 1, 2019
10.14	Adoption Agreement for Virginia Bankers Association Non-Qualified Deferred Compensation Plan for Executives of American National Bank and Trust Company	Exhibit 10.11 on Form 10-K filed March 15, 2016
21.1	Subsidiaries of the registrant	Filed herewith
23.1	Consent of Yount, Hyde & Barbour, P.C.	Filed herewith
31.1	Section 302 Certification of Jeffrey V. Haley, President and Chief Executive Officer	Filed herewith
31.2	Section 302 Certification of Jeffrey W. Farrar, Executive Vice President, Chief Operating Officer and Chief Financial Officer	Filed herewith
32.1	Section 906 Certification of Jeffrey V. Haley, President and Chief Executive Officer	Filed herewith
32.2	Section 906 Certification of Jeffrey W. Farrar, Executive Vice President, Chief Operating Officer and Chief Financial Officer	Filed herewith
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	The cover page from the Company's Annual Report on Form 10-K for the year ended December 31,  2020, formatted in Inline eXtensible Business Reporting Language (included with Exhibit 101).

ITEM 16 – FORM 10-K SUMMARY

The registrant has not selected the option to provide the summary information of the Form 10-K.

104

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: March 8, 2021		AMERICAN NATIONAL BANKSHARES INC.
	By:	/s/  Jeffrey V. Haley
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 8, 2021.

/s/  Jeffrey V. Haley	Director, President and
Jeffrey V. Haley	Chief Executive Officer (principal executive officer)
/s/  Charles H. Majors	Director and Chairman
Charles H. Majors
/s/  Nancy H. Agee	Director	/s/  John H. Love	Director
Nancy H. Agee		John H. Love
/s/  Kenneth S. Bowling	Director	/s/  Ronda M. Penn	Director
Kenneth S. Bowling		Ronda M. Penn
/s/  Tammy M. Finley	Director	/s/  Dan M. Pleasant	Director
Tammy M. Finley		Dan M. Pleasant
/s/  Michael P. Haley	Director	/s/  Joel R. Shepherd	Director
Michael P. Haley		Joel R. Shepherd
/s/  Charles S. Harris	Director	/s/  Susan K. Still	Director
Charles S. Harris		Susan K. Still
/s/  F. D. Hornaday, III	Director
F. D. Hornaday, III
/s/ Cathy W. Liles	Senior Vice President and	/s/ Jeffrey W. Farrar	Executive Vice President,
Cathy W. Liles	Chief Accounting Officer (principal accounting officer)	Jeffrey W. Farrar	Chief Operating Officer and Chief Financial Officer (principal financial officer)

105

EX-4.1

Exhibit 4.1

DESCRIPTION OF AMERICAN NATIONAL BANKSHARES INC.’S SECURITIES

As of December 31, 2020, the common stock of American National Bankshares Inc. (“American National”) was the only class of its securities registered under Section 12 of the Securities Exchange Act of 1934. The following summary description of the material features of the common stock of American National does not purport to be complete and is subject to, and qualified in its entirety by reference to, American National’s articles of incorporation and bylaws, each as amended. For more information, refer to American National’s articles of incorporation and bylaws and any applicable provisions of relevant law, including the Virginia Stock Corporation Act (the “Virginia SCA”) and federal laws governing banks and bank holding companies.

General

American National is authorized to issue 20,000,000 shares of common stock, par value $1.00 per share. Each share of American National’s common stock has the same relative rights as, and is identical in all respects to, each other share of American National’s common stock. American National’s common stock is traded on the Nasdaq Global Select Market under the symbol “AMNB.” The transfer agent for American National’s common stock is Computershare, Inc., 250 Royall Street, Canton, Massachusetts 02021.

Dividends

American National’s shareholders are entitled to receive dividends or distributions that its board of directors may declare out of funds legally available for those payments. The payment of distributions by American National is subject to the restrictions of Virginia law applicable to the declaration of distributions by a corporation. A Virginia corporation generally may not authorize and make distributions if, after giving effect to the distribution, it would be unable to meet its debts as they become due in the usual course of business or if the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if it were dissolved at that time, to satisfy the preferential rights of shareholders whose rights are superior to the rights of those receiving the distribution. In addition, the payment of distributions to shareholders is subject to any prior rights of outstanding preferred stock.

As a bank holding company, American National’s ability to pay dividends is affected by the ability of American National Bank and Trust Company (“American National Bank”), American National’s bank subsidiary, to pay dividends to American National. The ability of American National Bank to pay dividends is influenced by bank regulatory requirements and capital guidelines.

Liquidation Rights

In the event of any liquidation, dissolution or winding up of American National, the holders of shares of its common stock will be entitled to receive, after payment of all debts and liabilities of American National and after satisfaction of all liquidation preferences applicable to any preferred stock, all remaining assets of American National available for distribution in cash or in kind.

Voting Rights

The holders of American National’s common stock are entitled to one vote per share and, in general, a majority of votes cast with respect to a matter is sufficient to authorize action upon routine matters. Directors are elected by a plurality of the votes cast, and shareholders do not have the right to accumulate their votes in the election of directors.

Classes of Directors

American National’s board of directors is divided into three classes, apportioned as evenly as possible, with directors serving staggered three-year terms.

No Preemptive Rights; Redemption and Assessment

Holders of shares of American National’s common stock will not be entitled to preemptive rights with respect to any shares that may be issued. American National’s common stock is not subject to redemption or any sinking fund and the outstanding shares are fully paid and nonassessable.

Preferred Stock

American National’s board of directors is empowered to authorize the issuance, in one or more series, of shares of preferred stock at such times, for such purposes and for such consideration as it may deem advisable without shareholder approval. American National’s board is also authorized to fix the designations, voting, conversion, preference and other relative rights, qualifications and limitations of any such series of preferred stock. American National’s board, without shareholder approval, may authorize the issuance of one or more series of preferred stock with voting and conversion rights which could adversely affect the voting power of the holders of American National’s common stock. The creation and issuance of any series of preferred stock, and the relative rights, designations and preferences of such series, if and when established, will depend upon, among other things, the future capital needs of American National, then existing market conditions and other factors that, in the judgment of American National’s board, might warrant the issuance of preferred stock.

Anti-takeover Provisions

Certain provisions of American National’s articles of incorporation and bylaws may discourage attempts to acquire control of American National. These provisions also may render the removal of one or all directors more difficult or deter or delay corporate changes of control that American National’s board of directors did not approve. These provisions include the following:

Classified Board of Directors. American National’s articles of incorporation provide for classification of American National’s board of directors into three separate classes, which may have certain anti-takeover effects. For example, at least two annual meetings of shareholders may be required for the shareholders to replace a majority of the directors serving on American National’s board of directors.

Authorized Preferred Stock. American National’s board of directors may, subject to application of Virginia law, authorize the issuance of preferred stock at such times, for such purposes and for such consideration as the board may deem advisable without further shareholder approval. The issuance of preferred stock under certain circumstances may have the effect of discouraging an attempt by a third party to acquire control of American National by, for example, authorizing the issuance of a series of preferred stock with rights and preferences designed to impede the proposed transaction.

Supermajority Voting Provisions. American National’s articles of incorporation state that certain business combination transactions must be approved by at least 80% of all votes entitled to be cast on such transactions by each voting group entitled to vote on the transaction when the other party to the transaction owns more than 25% of American National’s voting stock, unless certain conditions are met.

If the transaction does not involve a holder of more than 25% of the outstanding voting stock, the Virginia SCA applies and the affirmative vote of more than two-thirds of the votes entitled to be cast is required to approve the transaction.

No amendment to American National’s articles of incorporation may change, repeal or make inoperative any of the provisions relating to cumulative voting, directors or certain business combinations unless such amendment is approved by at least 80% of the outstanding shares of its common stock; provided, however, that if such amendment has been unanimously recommended to shareholders by American National’s board of directors (i) at a time when no other entity beneficially owns, or, to the knowledge of any director, proposes to acquire, 25% or more of American National’s voting stock, or (ii) if all such directors are “continuing directors” as defined in American National’s articles, such amendment need only be approved by a majority of the votes entitled to be cast by each voting group entitled to vote on the matter.

Directors of American National may be removed with or without cause, but only by the affirmative vote of the holders of at least 80% of the outstanding shares of its common stock.

No Cumulative Voting. American National’s articles of incorporation do not provide for cumulative voting for any purpose. The absence of cumulative voting may afford anti-takeover protection by making it more difficult for American National’s shareholders to elect nominees opposed by the board of directors.

Shareholder Proposals. American National’s bylaws require a shareholder who intends to raise new business at a shareholder meeting to deliver written notice to the Secretary of American National at least 60 days prior to the first anniversary of the date of American National’s proxy statement for the preceding year’s annual meeting. American National’s bylaws also require shareholders who desire to raise new business to provide certain information to American National concerning the nature of the new business, the shareholder and the shareholder’s interest in the business matter. These requirements may discourage American National’s shareholders from submitting proposals.

EX-10.6

Exhibit 10.6

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the "Agreement"), effective as of March 27, 2014 (the "Effective Date"), by and between AMERICAN NATIONAL BANK AND TRUST COMPANY (the "Company"), a national banking association with its principal office at 628 Main Street, Danville, VA 24543-0191 and CHARLES T. CANADAY, JR., ("Executive").

WHEREAS, the Company and Executive entered into an Employment Agreement dated as of December 15, 2010 (the “Prior Agreement”); and

WHEREAS, the Company and Executive desire to amend and extend the Prior Agreement with this Agreement for the purpose of clearly, correctly and completely stating the terms of Executive’s employment by the Company;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the Company and Executive agree as follows:

1.     Employment. The Company hereby employs Executive and Executive hereby accepts such employment on the terms and conditions hereinafter set forth.

2.     Term. This Agreement shall commence on the Effective Date and will expire on the earlier of (i) the date the Executive attains age sixty-five (65) and (ii) December 31, 2016; provided that on December 31, 2014 and on each December 31^st thereafter (each such December 31^st is referred to as the “Renewal Date”), this Agreement will be automatically extended for an additional calendar year so as to terminate three years from such Renewal Date. This Agreement will not, however, be extended if either the Company or the Executive gives written notice to the other (“Nonrenewal Notice”) of such non-renewal at least ninety (90) days before the Renewal Date (the initial and any extended term of this Agreement is referred to as the “Term of Employment”).

3.     Duties. Executive shall serve as Executive Vice President and President of North Carolina Banking and Market President - Alamance Region. Executive shall be generally responsible for retail and commercial banking activities (other than branch administration) in the Alamance Region. Executive shall also render such additional services and duties consistent with the position as may be assigned to Executive form time to time by the Company’s President and Chief Executive Officer or Commercial Banking Officer. During the Term of Employment, Executive shall devote full time, attention and efforts to the business of the Company and shall use best efforts to promote the interests of the Company at all times. This shall not be construed to prevent Executive from personally, and for Executive’s own account and benefit, trading in stocks, bonds, securities (including securities of publicly traded financial institutions so long as, in the case of entities that are not affiliates of the Company, Executive's holdings represent less than one percent of any such entity's issued and outstanding securities), real estate, commodities or other forms of investment so long as such activities do not interfere with Executive's duties as an Executive of the Company.

4.     Compensation and Benefits.

(a)     The Company agrees to pay Executive, for services rendered hereunder in his capacity as Executive Vice President and President of North Carolina Banking and Market President - Alamance Region, a salary at the annual base salary (exclusive of any profit sharing, bonus stock award, or incentive payments) of Two Hundred Thousand dollars ($200,000.00) during the first year of this Agreement. Such amount shall be payable in bi-weekly installments, less any sums which may be required to be deducted or withheld under applicable law.

(b)     Executive’s base salary shall not decrease during the Employment Term, but Executive shall be eligible for consideration for an increase in base salary each calendar year. The amount of the increase in base salary, if any, shall be determined by the Human Resources & Compensation Committee of the Company's board of directors.

(c)     Executive shall be eligible to participate in the Company's profit sharing plan, incentive compensation program, or other compensation programs that may be implemented for officers, on the same basis as other officers of the Company. Profit sharing and incentive compensation plans are subject to the approval of the Company's board of directors each calendar year. Although subject to change, profit sharing and incentive compensation are currently paid following the end of the calendar year. Any profit sharing or incentive compensation benefits earned by Executive shall be paid no later than March 15 following the year in which such benefits arc earned.

 (d)     The Company agrees to provide benefits to Executive which are the same as those currently provided to other officers of the Company holding positions commensurate with the office of Executive, and such other benefits as the Company may from time to time, in is discretion provide to Executive.

 (e)     The Company shall reimburse Executive for all reasonable expenses incurred in connection with the performance of Executive’s duties for the Company, within such limits and standards as may from time to time be set by the Company. Expenses that are reimbursable by the Company shall be paid to Executive no later than March 15 following the year in which such expense was incurred.

 (f)      Executive shall be entitled to four weeks of vacation each calendar year (in addition to the established public or statutory holidays). Upon termination of Executive's employment, Executive shall be entitled to accrued vacation pay (to the extent such vacation time has not been used) for any vacation days not taken during the year of termination. Vacation days not taken in any twelve-month period nor carried forward in accordance with the Company's vacation policy shall be forfeited and not carried forward.

5. Covenants of the Executive.

(a)     Noncompetition. Executive agrees that (1) during the Term of Employment, (2) for the duration of any period for which the Company makes termination payments or payments pursuant to a Nonrenewal Notice, and (3) for an eighteen-month period following termination of Executive’s employment during the Term of Employment by the Executive, or by the Company for disability or good cause (the “Noncompete Period”), Executive will not directly or indirectly, as a principal, agent, employee, employer, investor, co-partner or in any other individual or representative capacity whatsoever, engage in a Competitive Business anywhere in the Market Area (as such terms are defined below) in any capacity that includes any of the significant responsibilities held or significant activities engaged in by Executive while employed with the Company or any of its Affiliates. Notwithstanding the foregoing, Executive may purchase or otherwise acquire up to (but not more than) 1% of any class of securities of any business enterprise (but without otherwise participating in the activities of such enterprise) that engages in a Competitive Business in the Market Area and whose securities are listed on any national or regional securities exchange or have been registered under Section 12 of the Securities Exchange Act of 1934, as amended.

(b)     Nonsolicitation. Executive further agrees that during the Noncompete Period Executive will not directly or indirectly: (i) solicit, or assist any other person in soliciting, any depositors or customers of the Company or its Affiliates to make deposits in, borrow money from, or become customers of any other company conducting a Competitive Business in the Market Area; (ii) induce any customers of the Company or its Affiliates to terminate their relationship with the Company or its Affiliates; or (iii) contact, solicit or assist in the solicitation of any employee to terminate his or her employment with the Company or any of its Affiliates.

(c)     Definitions. As used in this Agreement, the term “Competitive Business” means the financial services business, which includes one or more of the following businesses: consumer and commercial banking, trust and asset management, residential and commercial mortgage lending, and any other business in which the Company or any of its Affiliates are engaged and in which Executive is significantly engaged at the time of termination of his employment; the term “Market Area” means (i) Alamance and Guilford Counties, any county contiguous with Alamance or Guilford County, and any other county in North Carolina in which the Company has established and is continuing to operate a full-service banking office at the time of termination of Executive’s employment, and (ii) the area within a 30-mile radius of any full-service banking office of the Company in North Carolina at the time of termination of Executive’s employment; the term “Affiliate” means a Person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company; the term “Person” means any person, partnership, corporation, company, group or other entity; and the term “Confidential Information” shall include, but not be limited to, all financial and personnel data, computer software and all data base technologies, capital plans, customer lists and requirements, market studies, know-how, processes, trade secrets, and any other information concerning the non-public business and affairs of the Company and its Affiliates.

(d)     Confidentiality. During the Term of Employment and thereafter, and except as required by any court, supervisory authority or administrative agency or as may be otherwise required by applicable law, Executive shall not, without the written consent of a person duly authorized by the Company, disclose to any person (other than Executive’s personal attorney, or an employee of the Company or an Affiliate, or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of Executive’s duties as an employee of the Company) or utilize in conducting a business any Confidential Information obtained by Executive while in the employ of the Company, unless such information has become a matter of public knowledge at the time of such disclosure. On termination of employment, Executive will deliver to the Company all Confidential Information and all records, reports, data, memoranda and notes of any nature that are in Executive’s possession or under Executive’s control and that are prepared or acquired in the course of his employment relationship with the Company (whether in paper or electronic form), and will not knowingly retain or remove from Company premises any of the foregoing or any reproduction thereof or any Confidential Information.

(e)     Acknowledgment. The covenants contained in this Section 5 shall be construed and interpreted in any proceeding to permit their enforcement to the maximum extent permitted by law. Executive agrees that the restrictions imposed herein are necessary for the reasonable and proper protection of the Company and its Affiliates, and that each and every one of the restrictions is reasonable in respect to length of time, geographic area and scope of prohibited activities, and that the restrictions are neither overly restrictive on Executive’s post-employment activity nor overly burdensome for Executive to abide by. Executive covenants that Executive will not make any contention contrary to any of the foregoing representations in the future and agrees that Executive will be estopped to deny or contradict the truth or accuracy of these representations. If, however, the time, geographic and/or scope of activity restrictions set forth in Section 5 are found by an arbitrator or court to exceed the standards deemed enforceable, the arbitrator or court, as applicable, is empowered and directed to modify the restriction(s) to the extent necessary to make them enforceable. Notwithstanding anything to the contrary herein, nothing in this Agreement shall be construed to prohibit any activity that cannot reasonably be construed to further in any meaningful way any actual or potential competition against the Company or an Affiliate.

(f)     Enforcement. Executive acknowledges that damages at law would not be a measurable or adequate remedy for breach of the covenants contained in this Section 5 and, accordingly, Executive agrees to submit to the equitable jurisdiction of any court of competent jurisdiction in connection with any action to enjoin Executive from violating any such covenants. In any legal, equitable, or arbitration action in connection with the enforcement of the covenants included in this Section 5, each party shall be responsible for its own costs, including reasonable attorneys’ fees. In the event legal action is commenced with respect to the provisions of this Section 5 and Executive has not strictly observed the restrictions set forth in this Section 5, then the restricted periods described in Paragraphs (a) and (b) shall begin to run anew from the date of any Final Determination of such legal action. “Final Determination” shall mean the expiration of time to file any possible appeal from a final judgment in such legal action or, if an appeal be taken, the final determination of the final appellate proceeding. Except as may be otherwise provided herein, all the provisions of this Section 5 will survive termination and expiration of this Agreement.     

6.     Termination. Notwithstanding the provisions of Section 2, and in addition to the expiration of the then-existing term of this Agreement following receipt by either party of a Nonrenewal Notice, Executive's employment may be terminated by the Company or by the Executive at any time or for any reason.

Executive may terminate employment by written notice to the Company effective thirty days after receipt of such notice by the Company, and upon such termination, Executive shall have no right to render services or receive compensation or other benefits under this Agreement for any period after such termination.

The Company may terminate Executive’s employment without “good cause” at any time upon written notice to Executive, which termination shall be effective immediately or on such later date as specified in the written notice. If the Company terminates Executive’s employment and such termination is not on account of death or disability of Executive or for "good cause," the Company shall pay Executive a "termination payment" as described below, provided Executive signs a release and waiver of claims in favor of the Company, its Affiliates and their respective officers and directors in a form provided by the Company and such release has become effective. In the event of a termination for death, disability or good cause, other than amounts payable with respect to services actually rendered, the Company shall owe Executive no further salary, benefits or other compensation of any kind after the Company provides notice to Executive of termination. The obligations of Executive under Paragraph 5 shall survive such termination, whether made by the Company or by Executive.

Disability shall mean Executive is unable to perform the customary duties of Executive’s position for a consecutive period of six months due to a physical or mental illness. In the event a dispute arises between Executive and the Company concerning Executive's physical or mental ability to continue or return to the performance of Executive’s duties, Executive shall submit to examination by a competent physician mutually agreeable to the parties, and the physician’s opinion as to Executive's capability to so perform will be final and binding.

The Company shall be deemed to have "good cause" to terminate Executive's employment if the Company determines that Executive

(a)     has materially violated Section 3 or 5, provided that Executive has received written notice from the Company of such material violation and such violation remains uncured thirty days after the delivery of such notice;

(b)     has materially refused or failed to perform the duties of his position or other duties which have been assigned to him, provided that Executive has received written notice from the Company of such material refusal or failure and such refusal or failure remains uncured thirty days after the delivery of such notice;

(c)     is guilty of personal dishonesty, gross incompetence, willful misconduct, a breach of a fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses), unethical business practices in connection with the Company's business, misappropriation of the Company's or any affiliate's assets (determined on a reasonable basis) or is subject to a final cease-and-desist order, or has been convicted of a felony or a misdemeanor involving moral turpitude; or

(d)     is guilty of a material breach of any other provision of this Agreement, provided that Executive has received written notice from the Company of such material breach and such breach remains uncured thirty days after the delivery of such notice.

"Termination payment" means the continuation of Executive's base salary (as in effect on the date that Executive’s employment terminates) during the period beginning on the date of Executive's termination of employment and ending on the earlier of (i) the date that Executive attains age sixty-five (65) and (ii) the end of the Term of Employment. The termination payments shall be paid in accordance with the Company's regular payroll procedure commencing with Executive's "separation from service" (as defined in Treas. Reg. § 1.409A-1(h)); provided, however, that if Executive is a "specified employee" (as defined in Treas. Reg. § 1.409A-1(i)), the amount of termination payments paid before the first day of the seventh month beginning after Executive's "separation from service" (as defined above) shall not exceed the lesser of (i) two times Executive's annualized compensation from the Company for the calendar year preceding the year in which the "separation from service" (as defined above) occurs and (ii) two times the maximum amount of compensation that may be taken into account under Section 401(a)(17) of the Code as in effect for the year in which the "separation from service" (as defined above) occurs. If the termination payments are reduced to comply with the preceding limitation, the total reductions shall be paid with the first termination payment due on or after the first day of the seventh month beginning after Executive's "separation from service” (as defined above).

To the extent Executive is entitled to a series of installment payments under the provisions of this Agreement, such series of installment payments shall be treated as a series of separate payments for purposes of Code Section 409A and underlying Treasury Regulations.

If the Company gives Executive notice of its election not to renew the term of this Agreement as provided in Section 2, Company has the option to pay Executive’s base salary, subject to customary deductions, in lieu of allowing Executive to work for the remainder of then-current Term of Employment, subject to the payment provisions applicable to termination payments as set forth above.

7.     Binding Effect; Survival. This Agreement shall be binding on and inure to the benefit of the parties and their respective successors, heirs and assigns, provided that no part of this Agreement is assignable by Executive. No assignment by the Company hereunder shall release the Company from its obligations pursuant to Paragraph 4 hereof in the event the Company's successor fails to satisfy such obligations. Except as otherwise expressly provided herein, upon termination or expiration of this Agreement the respective rights and obligations of the parties hereto shall survive such termination or expiration to the extent necessary to carry out the intention of the parties embodied in this Agreement.

8.     Change in Control. Provided the Executive Severance Agreement entered into as of December 15, 2010 between Executive, the Company and American National Bankshares Inc., a Virginia corporation (“AMNB”) continues to remain in effect at that time, this Agreement will terminate and be of no further force and effect in the event there is a change in control of AMNB or the Company (as such term is defined in the Executive Severance Agreement), other than (i) Section 5(d) relating to Confidential Information, which shall survive such termination, or (ii) as may otherwise be provided in the Executive Severance Agreement, and any termination benefits will be determined and paid solely pursuant to the Executive Severance Agreement. For the avoidance of doubt, the Company and Executive acknowledge and agree that this Section 8 shall have no effect on the Restated Salary Continuation Agreement, dated as of May 27, 2008, between Executive and MidCarolina Bank and assumed by the Company pursuant to the Consent to Assumption of Restated Salary Continuation Agreement dated as of December 15, 2010.

9.       Severability. The failure of any court to enforce any clause, paragraph or provision of this Agreement shall not adversely affect the validity or enforceability of any other clause or provision.

10.    Entire Agreement. This Agreement sets forth the entire agreement of the parties with respect to the employment contemplated hereby and supersedes all prior agreements, arrangements and understandings with respect thereto between the Company and Executive. No modification, amendment, addition to or termination of this Agreement, nor waiver of any of its provisions shall be valid or enforceable unless in writing and signed by both parties.

11.     Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which constitute one instrument.

12.     Headings. The underlined headings herein are for convenience only and shall not affect the interpretation of this Agreement.

13.     Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia.

14.     Notice. Any notice to be delivered under this Agreement shall be given in writing and delivered personally or by leaving the same at or by sending the same first-class mail, postage prepaid:

   (a)     in the case of the Company:

American National Bank And Trust Company

P. O. Box 191

Danville, Virginia 24543-0191

Attention: Jeffrey V. Haley

President & Chief Executive Officer

(b)     in the case of Executive, a the most recent address as shown in the Company's records;

(c)     in the case of either party, such other address as shall have been notified in writing to the other of them for the purposes of service hereunder.

Executive agrees to notify the Company, in writing, of any change in address after this Agreement is executed.

WITNESS the following signatures as of the indicated dates.

AMERICAN NATIONAL BANK AND TRUST COMPANY

March 27, 2014                                                             By:      /s/ Jeffrey V. Haley               

Jeffrey V. Haley

President & Chief Executive Officer

March 27, 2014                                                                   /s/ Charles T. Canaday, Jr.          

CHARLES T. CANADAY, JR.

EX-10.7

Exhibit 10.7

EXECUTIVE SEVERANCE AGREEMENT

THIS EXECUTIVE SEVERANCE AGREEMENT, dated as of December 15, 2010 (the “Agreement”), is among AMERICAN NATIONAL BANKSHARES INC., a Virginia corporation (the “Parent”), AMERICAN NATIONAL BANK AND TRUST COMPANY, a national banking association (the “Company”), and CHARLES T. CANADAY, JR. (“Executive”).

WHEREAS, the Parent and MidCarolina Financial Corporation, a North Carolina corporation (“MCFI”), have entered into an Agreement and Plan of Reorganization, dated as of December 15, 2010, pursuant to which MCFI will affiliate with the Parent through the merger of MCFI with and into a direct wholly-owned subsidiary of the Parent organized to facilitate the affiliation (the “Merger”);

WHEREAS, the Company and Executive have agreed that upon consummation of the Merger, the Executive shall become an employee of the Company on the terms and subject to the conditions set forth in the Employment Agreement, dated as of December 15, 2010, between the Company and the Executive (the “Employment Agreement”);

WHEREAS, the Company recognizes that there is a possibility of a Change in Control of the Parent, the Company or both;

WHEREAS, the Parent and the Company recognize that the mere possibility of a Change in Control of the Parent or the Company may create uncertainty on the part of senior management or a distraction of senior management from its day-to-day operating responsibilities;

WHEREAS, the Parent and the Company recognize that outstanding management is essential to advancing the interests of the Parent and the Company and their shareholders and that the Parent and the Company can better recruit and retain outstanding management by providing certain assurances in the event of a Change in Control;

WHEREAS, in the event of a Change in Control of the Parent, the Company or both, the best interests of the Parent and the Company and their shareholders require a continuity of the Parent’s and the Company’s business with a minimum of disruption; and

WHEREAS, the Employment Agreement will terminate upon a Change in Control of the Parent, the Company or both and the terms and conditions of the Executive’s employment following a Change in Control will be governed by this Agreement.

NOW THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the Parent, the Company and the Executive agree as follows:

1.     Effective Date. Conditional upon consummation of the Merger and the Executive continuing in the employment of MCFI and MidCarolina Bank on the effective date of the Merger (the “Merger Date”), and effective at the Merger Date, this Agreement shall become effective on the Merger Date.

2.      Employment after a Change in Control. If a Change in Control of the Parent or the Company occurs and the Executive is employed by the Company on the Control Change Date, the Employment Agreement will terminate and the Company will continue to employ the Executive in accordance with the terms and conditions of this Agreement.

3.     Term of Agreement. The Term of this Agreement shall begin on a Control Change Date and end on the earlier of (i) the day before the third anniversary of the Control Change Date or (ii) the date that the Executive attains age sixty-five (65).

4.     Minimum Cash Compensation. During the Term of this Agreement, the total amount payable to the Executive by the Parent and the Company as base salary, “profit sharing” bonus and “incentive compensation” bonus, on an annualized basis, shall not be less than the amounts prescribed below:

(a)     The Executive’s total annual base salary from the Parent and the Company shall not be less than the annualized rate of total base salary payable to the Executive immediately before the Control Change Date.

(b)     The total annualized “profit sharing” bonus from the Parent and the Company, expressed as a percentage of the Executive’s then total base salary, shall not be less than the “profit sharing” bonus, expressed as a percentage of the Executive’s then total base salary, payable to the Executive for the four quarters immediately preceding the Control Change Date.

(c)     The total annualized “incentive compensation” bonus from the Parent and the Company, expressed as a percentage of the Executive’s then total base salary, shall not be less than the “incentive compensation” bonus, expressed as a percentage of the Executive’s then total base salary, payable to the Executive for the calendar year ending immediately preceding the Control Change Date.

5.     Termination Without Cause. This paragraph 5 describes the amounts payable to the Executive if the Parent and the Company terminate the Executive’s employment without Cause during the Term of this Agreement.

(a)     If such termination is effective before the first anniversary of the Control Change Date, the Executive shall be entitled to receive the Termination Benefits during the period beginning with the Executive’s termination of employment and ending on the second anniversary of the Control Change Date or the last day of the Term of this Agreement, whichever occurs first.

(b)     If such termination is effective on or after the first anniversary of the Control Change Date, the Executive shall be entitled to receive the Termination Benefits during the period beginning with the Executive’s termination of employment and ending on the last day of the twelfth (12th) month thereafter or the last day of the Term of this Agreement, whichever occurs first.

6.     Executive’s Resignation. This paragraph 6 describes the amounts payable to the Executive upon his resignation from the employ of the Parent and the Company during the Term of this Agreement.

(a)     During the period beginning on the Control Change Date and ending on the last day of the third month ending after the Control Change Date, the Executive may resign from the employ of both the Parent and the Company if (i) the Parent or the Company breaches the obligation set forth in paragraph 4 or (ii) the Parent or the Company notifies the Executive that he will be required to relocate his office more than thirty (30) miles from the location at which the Executive performed his duties immediately prior to the Change in Control. If the Executive resigns in accordance with the preceding sentence, he shall be entitled to receive the Termination Benefits for the period beginning on the date of the Executive’s termination of employment and ending on the last day of the twelfth (12th) month thereafter or the last day of the Term of this Agreement, whichever occurs first.

(b)     During the period beginning on the first day of the fourth month beginning after the Control Change Date and ending on the first anniversary of the Control Change Date, the Executive may resign from the employ of both the Parent and the Company, for any reason or no reason. If the Executive resigns in accordance with the preceding sentence, he shall be entitled to receive the Termination Benefits for the period beginning on the date of the Executive’s termination of employment and ending on the last day of the twelfth (12th) month thereafter or the last day of the Term of this Agreement, whichever occurs first.

(c)     During the period beginning on the day after the first anniversary of the Control Change Date and ending on the last day of the Term of this Agreement, the Executive may resign from the employ of both the Parent and the Company if (i) the Parent or the Company breaches the obligation set forth in paragraph 4, (ii) the Parent or the Company notifies the Executive that he will be required to relocate his office more than thirty (30) miles from the location at which the Executive performed his duties immediately prior to the Change in Control or (iii) the Executive’s duties, title or responsibilities with respect to the Parent or the Company are reduced from the duties, title or responsibilities assigned to the Executive as of the first anniversary of the Control Change Date. If the Executive resigns in accordance with the preceding sentence, he shall be entitled to receive the Termination Benefits for the period beginning on the date of the Executive’s termination of employment and ending on the last day of the twelfth (12th) month thereafter or the last day of the Term of this Agreement, whichever occurs first.

7.     Maximum Benefit. No amounts will be payable and no benefits will be provided under this Agreement to the extent that such payments or benefits, together with other payments or benefits under other plans, agreements or arrangements, would make the Executive liable for the payment of an excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended, or any successor provision. The amounts otherwise payable and the benefits otherwise to be provided under this Agreement shall be reduced to the extent necessary to avoid the imposition of such excise tax liability; provided, however, that the Executive shall have the right to direct which payments or benefits under this Agreement shall be reduced in order to avoid any such excise tax liability.

8.     Cause. The Parent and the Company shall be deemed to have “Cause” to terminate the Executive’s employment under this Agreement if the Parent or the Company determines that the Executive (i) has failed or refused to perform a material duty of his position, provided that Executive has received written notice from the Parent or Company of such failure or refusal and such failure or refusal remains uncured thirty days after the delivery of such notice, (ii) is guilty of personal dishonesty, gross incompetence, willful misconduct, a breach of fiduciary duty involving personal profit, willful violation of any law, rule or regulation (other than traffic violations or similar offenses), unethical business practices in connection with the Parent’s or the Company’s business, misappropriation of the Parent’s or the Company’s assets (determined on a reasonable basis), or is subject to a final cease-and-desist order, or has been convicted of a felony or a misdemeanor involving moral turpitude or (iii) is guilty of a material breach of any employment agreement between the Parent and the Executive or the Company and the Executive, provided that Executive has received written notice from the Parent or Company of such material breach and such breach remains uncured thirty days after the delivery of such notice.

9.     Change in Control. A “Change in Control” of the Parent or the Company occurs if:

(a)     Any person, including a “group” (as such term is used in section 13(d)(3) of the Securities Exchange Act of 1934, as amended, as in effect on the Effective Date (the “Exchange Act”)) is or becomes, directly or indirectly, the owner or beneficial owner of Parent or Company securities (other than as a result of an issuance of securities initiated by the Parent or the Company, or a tender offer initiated by the Parent or the Company or open market purchases approved by the Parent’s or the Company’s Board of Director’s (the “Board”), as long as the majority of the Parent’s or the Company’s Board approving the purchases are directors at the time the purchases are made), having more than fifty percent (50%) of the combined voting power of the then outstanding Parent or Company securities that may be cast for the election of the Parent’s or the Company’s directors; or

(b)     During any period of twenty-four (24) consecutive months, individuals who at the beginning of such period constitute the Parent’s or the Company’s Board and any new director (other than a director designated by a person who has entered into an agreement with the Parent or the Company to effect a transaction described in subparagraphs 9(a), 9(c) or 9(d) or any such individual whose initial assumption of office occurs as a result of either an actual or threatened contested solicitation (as such terms are used in Rule 14a-2 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents) whose election by the Parent’s or the Company’s Board or nomination for election by the Parent’s or the Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Parent’s or the Company’s Board; or

(c)     There is consummated a reorganization, merger, or consolidation involving the Parent or the Company that requires the approval of the Parent’s or the Company’s shareholders, other than a reorganization, merger or consolidation with respect to which all or substantially all of the individuals and entities who were beneficial owners, immediately prior to such reorganization, merger or consolidation, of the combined voting power of the Parent’s or the Company’s then outstanding securities beneficially own, directly or indirectly, immediately after such reorganization, merger or consolidation, more than fifty percent (50%) of the combined voting power of the securities of the corporation resulting from such reorganization, merger or consolidation in substantially the same proportions as their respective ownership, immediately prior to such reorganization, merger or consolidation, of the combined voting power of the Parent’s or the Company’s securities; or

(d)     The Parent’s or the Company’s shareholders approve (i) the sale or disposition by the Parent or the Company (other than to a subsidiary of the Parent or the Company) of more than fifty percent (50%) of the assets of the Parent or the Company (including a sale or disposition that is effected through condemnation proceedings) or (ii) a complete liquidation or dissolution of the Parent or the Company.

10.     Control Change Date. A “Control Change Date” is the date on which a Change in Control of the Parent or the Company occurs. If a Change in Control of the Parent or the Company occurs as the result of a series of transactions or events, the Control Change Date is the date of the last of the transactions or events in the series.

11.     Separation from Service/Installment Payments. For purposes of this Agreement, the term "termination of employment" means a “Separation from Service” which has the same meaning as set forth in Treas. Reg. § 1.409A-1(h).To the extent Executive is entitled to a series of installment payments under the provisions of this Agreement, such series of installment payments shall be treated as a series of separate payments for purposes of Code Section 409A and underlying Treasury Regulations.

12.     Specified Employee. For purposes of this Agreement, the term “Specified Employee” has the same meaning as set forth in Treas. Reg. § 1.409A-1(i).

13.     Termination Benefits. The “Termination Benefits” payable in accordance with paragraphs 5 and 6 are the following payments and benefits:

(a)     Continued payment of the Executive’s base salary for the applicable period specified in paragraph 5 or 6 at the rate in effect on the date of the Executive’s termination of employment (but not less than the rate of base salary required under paragraph 4). The benefit payable under this paragraph 13(a) shall be paid in accordance with the Company’s regular payroll procedure commencing with the Executive’s Separation from Service; provided, however, that if the Executive is a Specified Employee, the first payment under this paragraph 13(a) shall be paid on the first day of the seventh month beginning after the Executive’s Separation from Service and the first payment shall include the payments of base salary that would have been payable (had the Executive continued employment) in accordance with the Company’s regular payroll procedure from the date of the Executive’s termination of employment until the date of the first payment. The remaining payments under this paragraph 13(a) shall be paid in accordance with the Company’s regular payroll procedure.

(b)     Payment each month during the applicable period specified in paragraph 5 or 6 of a pro rata amount of the annualized “profit sharing” bonus in the amount required under paragraph 4. The first payment shall be made in the month following the Executive’s Separation from Service and shall include the pro rata amount of annualized “profit sharing” bonus for the months following the Executive’s termination of employment until the date of the first payment. The preceding sentence to the contrary notwithstanding, if the Executive is a Specified Employee, the first payment under this paragraph 13(b) shall be paid on the first day of the seventh month beginning after the Executive’s Separation from Service and the first payment shall include the pro rata amount of annualized “profit sharing” bonus for the months following the Executive’s termination of employment until the date of the first payment.

(c)     Payment each month during the applicable period specified in paragraph 5 or 6 of a pro rata amount of the annualized “incentive compensation” bonus in the amount required under paragraph 4. The first payment shall be made in the month following the Executive’s Separation from Service and shall include the pro rata amount of annualized “incentive compensation” bonus for the months following the Executive’s termination of employment until the date of the first payment. The preceding sentence to the contrary notwithstanding, if the Executive is a Specified Employee, the first payment under this paragraph 13(c) shall be paid on the first day of the seventh month beginning after the Executive’s Separation from Service and the first payment shall include the pro rata amount of annualized “incentive compensation” bonus for the months following the Executive’s termination of employment until the date of the first payment.

(d)     A single sum payment equal to the sum of the amounts described in (i), (ii) and (iii) below:

(i)     The product of (x) the lesser of eighteen or the number of months during the applicable period specified in paragraph 5 or 6 times (y) the excess of the premium for continued health, dental and vision coverage under Section 4980B of the Code for the Executive and the Executive’s “qualified beneficiaries” (as defined in Section 4980B of the Code) (the “COBRA Premium”) over the amount that the Executive paid for such coverage immediately before his termination of employment.

(ii)     The product of (x) the COBRA Premium and (y) the number of months during the applicable period specified in paragraph 5 or 6 in excess of eighteen months.

(iii)     The product of (x) the monthly premium that the Executive would pay for long-term disability and life insurance coverage upon conversion to individual policies upon termination of employment times (y) the number of months during the applicable period specified in paragraph 5 or 6.

The benefit payable under this paragraph 13(d) shall be paid on the first day of the third month beginning after the Executive’s Separation from Service; provided, however, that if the Executive is a Specified Employee, the payment shall be made on the first day of the seventh month beginning after the Executive’s Separation from Service.

(e)     A single sum payment equal to the difference between (i) the present value of the benefits that the Executive would have accrued under the Parent’s or the Company’s defined benefit pension plan based on his actual service and assuming continued service during the applicable period specified in paragraph 5 or 6 and (ii) the present value of the benefit payable to the Executive under the Parent’s or the Company’s defined benefit pension plan. The amount of the payment required under the preceding sentence shall be calculated by the actuary of the Parent’s or the Company’s defined benefit pension plan using the actuarial assumptions and methods in effect for purposes of determining the funded status of such plan and shall assume that amounts payable under this Agreement are recognized as compensation for purposes of such plan. The benefit payable under this paragraph 13(e) shall be paid on the first day of the third month beginning after the Executive’s Separation from Service; provided, however, that if the Executive is a Specified Employee, the payment shall be made on the first day of the seventh month beginning after the Executive’s Separation from Service.

14.     Successors. This Agreement shall inure to the benefit of, and be enforceable by, the Executive’s legal representatives and heirs. This Agreement shall inure to the benefit of, and be binding upon, the Parent and the Company and their successors and assigns. The Parent and the Company shall require any successor to the Parent or the Company (whether direct or indirect, by merger, purchase, consolidation or otherwise) to all or substantially all of the business or assets of the Parent or the Company to assume expressly and agree to perform the Parent’s and the Company’s obligations under this Agreement. References in this Agreement to the “Parent” and to the “Company” include the Parent and the Company as defined above and any successor to their business or assets that is obligated to perform this Agreement by operation or law or otherwise.

15.     Entire Agreement. This Agreement sets forth the entire agreement of the parties with respect to the termination of the Executive’s employment on or after a Control Change Date and supersedes all prior agreements, arrangements and understandings with respect thereto between the Parent, the Company and the Executive. No modification, amendment or termination of this Agreement, nor any waiver of its provisions, shall be valid or enforceable unless in writing and signed by both parties.

16.     Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original and all of which constitute on instrument.

17.     Headings. The headings herein are for convenience only and will not affect the interpretation of this Agreement.

18.     Governing Law. This Agreement will be governed by, and construed in accordance with, the laws of the Commonwealth of Virginia (other than its choice of law provisions to the extent that they would require the application of the laws of another State).

19.     No Employment Contract. Nothing in this Agreement will be construed as creating an employment contract between the Executive and the Parent or the Company prior to a Control Change Date.

[Signatures appear on the following page]

WITNESS¸ the following signatures as of the date first indicated above.

AMERICAN NATIONAL BANKSHARES INC.

By:      /s/ Charles H. Majors                    

Charles H. Majors

President and Chief Executive Officer

AMERICAN NATIONAL BANK AND TRUST

COMPANY

By:      /s/ Charles H. Majors                    

Charles H. Majors

Chief Executive Officer

     /s/ Charles T. Canaday, Jr.                    

Charles T. Canaday, Jr.

AMENDMENT TO EXECUTIVE SEVERANCE AGREEMENT

THIS AMENDMENT TO EXECUTIVE SEVERANCE AGREEMENT (the “Amendment”) is made as of March 27, 2014, by and between AMERICAN NATIO NAL BANKSHARES INC., a Virginia corporation (“AMNB”), AMERICAN NATIONAL BANK AND TRUST COMPANY, a national banking association (the “Company”), and CHARLES T. CANADAY, JR. (“Executive”).

WHEREAS, AMNB, the Company and Executive entered into an Executive Severance Agreement dated as of December 15, 2010 (the “Agreement”);

WHEREAS, the Company and Executive entered into an Employment Agreement dated as of December 15, 2010;

WHEREAS, the Company and Executive are amending and extending the Employment Agreement effective as of March 27, 2014; and

WHEREAS, AMNB, the Company and Executive desire to amend the Agreement to give Executive the ability to reinstate the Employment Agreement at his election in certain circumstances following a Change in Control;

NOW THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, AMNB, the Company and Executive agree as follows:

1.     Defined Terms. Terms not otherwise defined herein shall be defined as provided in the Agreement.

2.     Executive’s Resignation. Paragraph 6(b) of the Agreement is hereby amended to provide as follows:

(b) During the period beginning on the first day of the fourth month beginning after the Control Change Date and ending on the first anniversary of the Control Change Date, the Executive may (i) resign from the employ of the Company, for any reason or no reason, or (ii) elect, by written notice to the Company, to reinstate the Employment Agreement, effective as of the notice date. If the Executive resigns in accordance with the preceding sentence, he shall be entitled to receive the Termination Benefits for the period beginning on the date of the Executive’s termination of employment and ending on the last day of the twelfth (12th) month thereafter or the last day of the term of this Agreement, whichever occurs first. If the Executive elects to reinstate the Employment Agreement, the terms of Executive’s employment will thereafter be governed by the Employment Agreement, and this Agreement will be of no further force or effect.

[Signatures appear on the following page]

WITNESS, the following signatures as of the date first indicated above.

AMERICAN NATIONAL BANKSHARES INC.

By:      /s/ Jeffrey V. Haley               

Jeffrey V. Haley

President & Chief Executive Officer

AMERICAN NATIONAL BANK AND

TRUST COMPANY

By:      /s/ Jeffrey V. Haley                

Jeffrey V. Haley

President & Chief Executive Officer

     /s/ Charles T. Canaday, Jr.          

Charles T. Canaday, Jr.

EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

Registrant: American National Bankshares Inc.

Incorporated under the laws of the Commonwealth of Virginia

Subsidiaries of American National Bankshares Inc.:

American National Bank and Trust Company

Chartered under the laws of the United States

AMNB Statutory Trust I, A Delaware Statutory Trust

MidCarolina Trust I, A Delaware Statutory Trust

MidCarolina Trust II, A Delaware Statutory Trust

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statements on Form S-3 (No. 333-222759, 333-164977 and 333-200584), Form S-3D (No. 333-174473 and 333-34013), and Form S-8 (No. 333-228810, 333-227481, 333-151277 and 333-35783) of American National Bankshares Inc. of our reports dated March 8, 2021 relating to the consolidated financial statements and the effectiveness of internal control over financial reporting of American National Bankshares Inc., appearing in this Annual Report on Form 10-K of American National Bankshares Inc. for the year ended December 31, 2020.

/s/ YOUNT, HYDE & BARBOUR, P.C.

Winchester, Virginia

March 8, 2021

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Jeffrey V. Haley, certify that:

1.     I have reviewed this annual report on Form 10-K of American 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)     all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)     any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 8, 2021

/s/ Jeffrey V. Haley

Jeffrey V. Haley

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Jeffrey W. Farrar, certify that:

1.     I have reviewed this annual report on Form 10-K of American 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)     all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)     any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 8, 2021

/s/ Jeffrey W. Farrar

Jeffrey W. Farrar

Executive Vice President,

Chief Operating Officer and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of American National Bankshares Inc. (the "Company") for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey V. Haley, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report 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 the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jeffrey V. Haley

Jeffrey V. Haley

President and Chief Executive Officer

March 8, 2021

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of American National Bankshares Inc. (the "Company") for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey W. Farrar, Executive Vice President, Chief Operating Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report 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 the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jeffrey W. Farrar

Jeffrey W. Farrar

Executive Vice President,

Chief Operating Officer and Chief Financial Officer

March 8, 2021

XML

Document And Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2020	Feb. 26, 2021	Jun. 30, 2020
Document Information [Line Items]
Entity Central Index Key	0000741516
Entity Registrant Name	AMERICAN NATIONAL BANKSHARES INC.
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2020
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2020
Document Transition Report	false
Entity File Number	0-12820
Entity Incorporation, State or Country Code	VA
Entity Tax Identification Number	54-1284688
Entity Address, Address Line One	628 Main Street
Entity Address, City or Town	Danville
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	24541
City Area Code	434
Local Phone Number	792-5111
Title of 12(b) Security	Common Stock, $1 par value
Trading Symbol	AMNB
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 259,004,000
Entity Common Stock, Shares Outstanding		10,965,502

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
ASSETS
Cash and due from banks	$ 30,767	$ 32,505
Interest-bearing deposits in other banks	343,603	47,077
Securities available for sale, at fair value	466,091	379,195
Restricted stock, at cost	8,715	8,630
Loans held for sale	15,591	2,027
Loans, net of deferred fees and costs	2,015,056	1,830,815
Less allowance for loan losses	(21,403)	(13,152)
Net loans	1,993,653	1,817,663
Premises and equipment, net	39,723	39,848
Other real estate owned, net of valuation allowance	958	1,308
Goodwill	85,048	84,002
Core deposit intangibles, net	6,091	7,728
Bank owned life insurance	28,482	27,817
Other assets	31,288	30,750
Total assets	3,050,010	2,478,550
Liabilities:
Noninterest-bearing deposits	830,094	578,606
Interest-bearing deposits	1,781,236	1,481,941
Total deposits	2,611,330	2,060,547
Customer repurchase agreements	42,551	40,475
Subordinated debt	7,500	7,517
Junior subordinated debt	28,130	28,029
Other liabilities	22,605	21,724
Total liabilities	2,712,116	2,158,292
Commitments and contingencies
Shareholders' equity:
Preferred stock, $5 par value, 2,000,000 shares authorized, none outstanding	0	0
Common stock, $1 par value, 20,000,000 shares authorized, 10,982,367 shares outstanding at December 31, 2020 and 11,071,540 shares outstanding at December 31, 2019	10,926	11,019
Capital in excess of par value	154,850	158,244
Retained earnings	169,681	151,478
Accumulated other comprehensive income (loss), net	2,437	(483)
Total shareholders' equity	337,894	320,258
Total liabilities and shareholders' equity	$ 3,050,010	$ 2,478,550

XML

Consolidated Balance Sheets (Parentheticals) - $ / shares	Dec. 31, 2020	Dec. 31, 2019
Preferred stock, par value (in dollars per share)	$ 5	$ 5
Preferred stock, shares authorized (in shares)	2,000,000	2,000,000
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares outstanding (in shares)	10,982,367	11,071,540

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Consolidated Statements of Income - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Interest and Dividend Income:
Interest and fees on loans	$ 87,700,000	$ 82,684,000	$ 59,966,000
Interest and dividends on securities:
Taxable	6,764,000	7,682,000	6,106,000
Tax-exempt	433,000	777,000	1,502,000
Dividends	503,000	451,000	321,000
Other interest income	440,000	1,261,000	873,000
Total interest and dividend income	95,840,000	92,855,000	68,768,000
Interest Expense:
Interest on deposits	9,729,000	13,143,000	8,086,000
Interest on short-term borrowings	259,000	650,000	186,000
Interest on subordinated debt	489,000	367,000	0
Interest on junior subordinated debt	1,543,000	1,554,000	1,402,000
Interest on long-term borrowings	0	14,000	0
Total interest expense	12,020,000	15,728,000	9,674,000
Net Interest Income	83,820,000	77,127,000	59,094,000
Provision for (recovery of) loan losses	8,916,000	456,000	(103,000)
Net Interest Income after Provision for (Recovery of) Loan Losses	74,904,000	76,671,000	59,197,000
Noninterest Income:
Securities gains, net	814,000	607,000	123,000
Brokerage fees	745,000	721,000	795,000
Income from Small Business Investment Companies	270,000	211,000	637,000
Gains (losses) on premises and equipment, net	(110,000)	(427,000)	60,000
Other	1,084,000	1,213,000	922,000
Total noninterest income	16,843,000	15,170,000	13,274,000
Noninterest Expense:
Salaries and employee benefits	29,765,000	30,015,000	24,879,000
Occupancy and equipment	5,586,000	5,417,000	4,378,000
FDIC assessment	639,000	119,000	537,000
Bank franchise tax	1,702,000	1,644,000	1,054,000
Core deposit intangible amortization	1,637,000	1,398,000	265,000
Data processing	3,017,000	2,567,000	1,691,000
Software	1,454,000	1,295,000	1,279,000
Other real estate owned, net	60,000	31,000	122,000
Merger related expenses	0	11,782,000	872,000
Other	10,705,000	11,806,000	9,169,000
Total noninterest expense	54,565,000	66,074,000	44,246,000
Income Before Income Taxes	37,182,000	25,767,000	28,225,000
Income Taxes	7,137,000	4,861,000	5,646,000
Net Income	$ 30,045,000	$ 20,906,000	$ 22,579,000
Net Income Per Common Share:
Basic (in dollars per share)	$ 2.74	$ 1.99	$ 2.60
Diluted (in dollars per share)	$ 2.73	$ 1.98	$ 2.59
Weighted Average Common Shares Outstanding:
Basic (in shares)	10,981,623	10,531,572	8,698,014
Diluted (in shares)	10,985,790	10,541,337	8,708,462
Fiduciary and Trust [Member]
Noninterest Income:
Noninterest Income	$ 4,044,000	$ 3,847,000	$ 3,783,000
Deposit Account [Member]
Noninterest Income:
Noninterest Income	2,557,000	2,866,000	2,455,000
Financial Service, Other [Member]
Noninterest Income:
Noninterest Income	3,925,000	3,693,000	2,637,000
Mortgage Banking [Member]
Noninterest Income:
Noninterest Income	$ 3,514,000	$ 2,439,000	$ 1,862,000

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Net income	$ 30,045	$ 20,906	$ 22,579
Unrealized gains (losses) on securities available for sale	7,213	9,095	(3,209)
Tax effect	(1,557)	(2,005)	745
Reclassification adjustment for gains on sale or call of securities	(814)	(274)	(81)
Tax effect	176	59	18
Unrealized losses on cash flow hedges	(2,210)	(1,854)	(804)
Tax effect	448	394	180
Change in unfunded pension liability	(413)	(64)	1,291
Change in unfunded pension liability, tax	77	1	(249)
Other comprehensive income (loss)	2,920	5,352	(2,109)
Comprehensive income	$ 32,965	$ 26,258	$ 20,470

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Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Cumulative Effect, Period of Adoption, Adjusted Balance [Member] Common Stock [Member]	Cumulative Effect, Period of Adoption, Adjusted Balance [Member] Additional Paid-in Capital [Member]	Cumulative Effect, Period of Adoption, Adjusted Balance [Member] Retained Earnings [Member]	Cumulative Effect, Period of Adoption, Adjusted Balance [Member] AOCI Attributable to Parent [Member]	Cumulative Effect, Period of Adoption, Adjusted Balance [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance at Dec. 31, 2017	$ 0	$ 0	$ 650	$ (650)	$ 0	$ 8,604	$ 76,179	$ 127,010	$ (3,076)	$ 208,717
Net income						0	0	22,579	0	22,579
Other comprehensive income (loss)						0	0	0	(2,109)	(2,109)
Stock options exercised						35	826	0	0	861
Vesting of restricted stock						13	(13)	0	0	0
Equity based compensation						16	1,180	0	0	1,196
Cash dividends paid						0	0	(8,702)	0	(8,702)
Balance at Dec. 31, 2018						8,668	78,172	141,537	(5,835)	222,542
Net income						0	0	20,906	0	20,906
Other comprehensive income (loss)						0	0	0	5,352	5,352
Stock options exercised						37	651	0	0	688
Vesting of restricted stock						22	(22)	0	0	0
Equity based compensation						16	1,525	0	0	1,541
Cash dividends paid						0	0	(10,965)	0	(10,965)
Issuance of common stock for acquisition (2,361,686 shares)						2,362	80,108	0	0	82,470
Issuance of replacement options/restricted stock						0	870	0	0	870
Stock repurchased						(86)	(3,060)	0	0	(3,146)
Balance at Dec. 31, 2019						11,019	158,244	151,478	(483)	320,258
Net income						0	0	30,045	0	30,045
Other comprehensive income (loss)						0	0	0	2,920	2,920
Stock options exercised						3	40	0	0	43
Vesting of restricted stock						18	(18)	0	0	0
Equity based compensation						27	1,424	0	0	1,451
Cash dividends paid						0	0	(11,842)	0	(11,842)
Stock repurchased						(141)	(4,840)	0	0	(4,981)
Balance at Dec. 31, 2020						$ 10,926	$ 154,850	$ 169,681	$ 2,437	$ 337,894

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Consolidated Statements of Changes in Shareholders' Equity (Parentheticals) - $ / shares	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Stock options exercised, shares (in shares)	2,573	37,104	35,310
Vesting of restricted stock, shares (in shares)	18,487	21,747	12,712
Equity based compensation, shares (in shares)	48,780	38,281	34,480
Cash dividends paid, per share (in dollars per share)	$ 1.08	$ 1.04	$ 1.00
Issuance of common stock for acquisition, shares (in shares)		2,361,686
Stock repurchased, shares (in shares)	140,526	85,868

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Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Cash Flows from Operating Activities:
Net income	$ 30,045,000	$ 20,906,000	$ 22,579,000
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (recovery of) loan losses	8,916,000	456,000	(103,000)
Depreciation	2,188,000	2,064,000	1,775,000
Net accretion of acquisition accounting adjustments	(3,812,000)	(3,387,000)	(1,288,000)
Core deposit intangible amortization	1,637,000	1,398,000	265,000
Net amortization of securities	1,186,000	1,100,000	1,617,000
Net gain on sale or call of securities available for sale	(814,000)	(274,000)	(81,000)
Net change in fair value of equity securities	0	(333,000)	(42,000)
Gain on sale of loans held for sale	(3,514,000)	(2,439,000)	(1,862,000)
Proceeds from sales of loans held for sale	155,705,000	103,760,000	80,600,000
Originations of loans held for sale	(165,755,000)	(102,708,000)	(77,739,000)
Net (gain) loss on other real estate owned	(4,000)	(120,000)	14,000
Valuation allowance on other real estate owned	0	68,000	30,000
Net (gain) loss on sale or disposal of premises and equipment	110,000	427,000	(60,000)
Equity based compensation expense	1,451,000	1,541,000	1,196,000
Earnings on bank owned life insurance	(665,000)	(630,000)	(481,000)
Deferred income tax expense	(640,000)	1,068,000	556,000
Net change in other assets	29,000	11,137,000	(318,000)
Net change in other liabilities	(2,387,000)	(1,354,000)	844,000
Net cash provided by operating activities	23,676,000	32,680,000	27,502,000
Cash Flows from Investing Activities:
Proceeds from sales of equity securities	0	445,000	431,000
Proceeds from sales of securities available for sale	5,811,000	29,878,000	57,607,000
Proceeds from maturities, calls and paydowns of securities available for sale	208,429,000	123,915,000	30,607,000
Purchases of securities available for sale	(295,109,000)	(155,746,000)	(106,575,000)
Net change in restricted stock	(85,000)	(795,000)	863,000
Proceeds from sales of purchased credit impaired loans	4,939,000	0	0
Net increase in loans	(186,635,000)	(26,257,000)	(21,256,000)
Proceeds from sale of premises and equipment	1,000	0	234,000
Purchases of premises and equipment	(2,694,000)	(3,555,000)	(2,723,000)
Proceeds from sales of other real estate owned	195,000	1,289,000	911,000
Cash paid in bank acquisition	0	(27,000)	0
Cash acquired in bank acquisition	0	26,283,000	0
Net cash used in investing activities	(265,148,000)	(4,570,000)	(39,901,000)
Cash Flows from Financing Activities:
Net change in noninterest-bearing deposits	251,488,000	23,310,000	41,484,000
Net change in interest-bearing deposits	299,476,000	(12,241,000)	(9,983,000)
Net change in customer repurchase agreements	2,076,000	5,232,000	24,517,000
Net change in other short-term borrowings	0	(14,883,000)	(24,000,000)
Net change in long-term borrowings	0	(778,000)	0
Common stock dividends paid	(11,842,000)	(10,965,000)	(8,702,000)
Repurchase of common stock	(4,981,000)	(3,146,000)	0
Proceeds from exercise of stock options	43,000	688,000	861,000
Net cash provided by (used in) financing activities	536,260,000	(12,783,000)	24,177,000
Net Increase in Cash and Cash Equivalents	294,788,000	15,327,000	11,778,000
Cash and Cash Equivalents at Beginning of Period	79,582,000	64,255,000	52,477,000
Cash and Cash Equivalents at End of Period	$ 374,370,000	$ 79,582,000	$ 64,255,000

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Note 1 - Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Significant Accounting Policies [Text Block]

Note 1 – Summary of Significant Accounting Policies

Nature of Operations and Consolidation

The consolidated financial statements include the accounts of American National Bankshares Inc. (the "Company") and its wholly owned subsidiary, American National Bank and Trust Company (the "Bank"). The Bank offers a wide variety of retail, commercial, secondary market mortgage lending, and trust and investment services which also include non-deposit products such as mutual funds and insurance policies.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, goodwill and intangible assets, other-than-temporary impairment of securities, accounting for merger and acquisition activity, accounting for acquired loans with specific credit-related deterioration, and the valuation of deferred tax assets and liabilities.

COVID-19 spread rapidly across the world in the first quarter of 2020 and was declared a pandemic by the World Health Organization. On March 13, 2020, the United States President declared a national emergency in the face of a growing public health and economic crisis due to the COVID-19 global pandemic. The government and private sector responses to contain its spread began to significantly affect the Company's operations beginning in March and will likely continue to adversely affect its operations through 2021, although such effects may vary significantly. The duration and extent of the effects over longer terms cannot be reasonably estimated at this time. The risks and uncertainties resulting from the pandemic will most likely affect future earnings, cash flows and overall financial condition of the Company. These uncertainties include the nature and duration of the financial effects felt by its customers impacting their ability to perform in accordance with their underlying loan agreements, the Company's ability to generate demand for non-loan related products and services, as well as potential declines in real estate values resulting from the market disruption which may impair the recorded values of collateral-dependent loans and other real estate owned. Further, these factors, in addition to those pervasive to the industry and overall U.S. economy, may necessitate an overall valuation of the Company's franchise in such a way an impairment charge to the carrying value of goodwill would be required. Accordingly, significant estimates used in the preparation of the Company's financial statements including those associated with the evaluation of the allowance for loan losses as well as other valuation-based estimates may be subject to significant adjustments in future periods. The greater the duration and severity of the pandemic, the more likely that estimates will be materially impacted by its effects.

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") included an initial first round allocation of $659.0 billion for loans to be issued by financial institutions through the Small Business Administration ("SBA"). This program is known as the Paycheck Protection Program ("PPP"). PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which was passed by Congress on December 21, 2020 and then signed into law on December 27, 2020 as part of the Consolidated Appropriations Act, 2021 ("Appropriations Act"), allocated an additional $284.4 billion. These loans carry a fixed rate of 1.00% and a term of two years for the majority of the initial loans and for five years on the second round, if not forgiven, in whole or in part. Payments were deferred for the first six months of the loan. The loans are 100% guaranteed by the SBA. The SBA paid the Bank a processing fee based on the size of the loan. The SBA has approved over 2,700 applications as of  February 28, 2021 totaling $340.9 million in loans. The Company had outstanding net PPP loans of $211.3 million at December 31, 2020 and $226.4 million at February 28, 2021. The Bank has received processing fees of $11.2 million on the PPP loans and incurred direct origination costs of $1.8 million. The Company had net unaccreted PPP loan origination fees of $4.4 million at December 31, 2020 and $5.0 at February 28, 2021. From a funding perspective, the Bank utilized core funding sources for these loans. At December 31, 2020 and February 28, 2021, respectively, the SBA had forgiven $56.4 million and $105.8 million of PPP loans.

In April 2006, AMNB Statutory Trust I, a Delaware statutory trust (the "AMNB Trust") and an unconsolidated wholly owned subsidiary of the Company, was formed for the purpose of issuing preferred securities (the "Trust Preferred Securities") in a private placement pursuant to an applicable exemption from registration. Proceeds from the securities were used to fund the acquisition of Community First Financial Corporation ("Community First") which occurred in April 2006.

In July 2011, and in connection with its acquisition of MidCarolina Financial Corporation ("MidCarolina"), the Company assumed liabilities of MidCarolina Trust I and MidCarolina Trust II, two separate unconsolidated Delaware statutory trusts (the "MidCarolina Trusts"), which were also formed for the purpose of issuing preferred securities. Refer to Note 14 for further details concerning these entities.

All significant inter-company transactions and accounts are eliminated in consolidation, with the exception of the AMNB Trust and the MidCarolina Trusts, as detailed in Note 14.

Cash and Cash Equivalents

Cash includes cash on hand, cash with correspondent banks, and cash on deposit at the Federal Reserve Bank of Richmond. Cash equivalents are short-term, highly liquid investments that are readily convertible to cash with original maturities of three months or less and are subject to an insignificant risk of change in value. Cash and cash equivalents are carried at cost.

Interest-bearing Deposits in Other Banks

Interest-bearing deposits in other banks mature within one year and are carried at cost.

Securities

Certain debt securities that management has the positive intent and ability to hold to maturity are classified as "held to maturity" and recorded at amortized cost. Trading securities are recorded at fair value with changes in fair value included in earnings. Debt securities not classified as held to maturity or trading are classified as "available for sale" and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

The Company does not currently have any securities in held to maturity or trading and has no plans to add any to either category. Management evaluates securities for other-than-temporary impairment ("OTTI") on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement and, (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.

Equity securities with readily determinable fair values that are not held for trading are carried at fair value with the unrealized gains and losses included in noninterest income.

Due to the nature and restrictions placed on the Company's investment in common stock of the Federal Home Loan Bank of Atlanta ("FHLB") and the Federal Reserve Bank of Richmond, these securities have been classified as restricted equity securities and carried at cost.

Loans Held for Sale

Secondary market mortgage loans are designated as held for sale at the time of their origination. These loans are pre-sold with servicing released and the Company does not retain any interest after the loans are sold. These loans consist primarily of fixed-rate, single-family residential mortgage loans which meet the underwriting characteristics of certain government-sponsored enterprises (conforming loans). In addition, the Company requires a firm purchase commitment from a permanent investor before a loan can be committed, thus limiting interest rate risk. Loans held for sale are carried at fair value. Gains on sales of loans are recognized at the loan closing date and are included in noninterest income.

Derivative Loan Commitments

The Company enters into mortgage loan commitments whereby the interest rate on the loan is determined prior to funding (rate lock commitments). Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. Loan commitments that are derivatives are recognized at fair value on the consolidated balance sheets with net changes in their fair values recorded in other expenses. 

The period of time between issuance of a loan commitment and sale of the loan generally ranges from 30 to 60 days. The Company protects itself from changes in interest rates through the use of best efforts forward delivery contracts, by committing to sell a loan at the time the borrower commits to an interest rate with the intent that the buyer has assumed the interest rate risk on the loan. As a result, the Company is not generally exposed to significant losses nor will it realize significant gains related to its rate lock commitments due to changes in interest rates. The correlation between the rate lock commitments and the best efforts contracts is very high due to their similarity.

The fair value of rate lock commitments and best efforts contracts is not readily ascertainable with precision because rate lock commitments and best efforts contracts are not actively traded in stand-alone markets. The Company determines the fair value of rate lock commitments and best efforts contracts by measuring the change in the estimated value of the underlying assets while taking into consideration the probability that the loan will be funded.

Loans

The Company makes mortgage, commercial, and consumer loans. A substantial portion of the loan portfolio is secured by real estate. The ability of the Company's debtors to honor their contracts is dependent upon the real estate market and general economic conditions in the Company's market area.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balance adjusted for the allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. The accrual of interest on loans is generally discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. Loans are typically charged off when the loan is 120 days past due, unless secured and in process of collection. Loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.

Interest accrued but not collected for loans that are placed on nonaccrual status or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash basis or cost recovery method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

A loan is considered past due when a payment of principal or interest or both is due but not paid. Management closely monitors past due loans in timeframes of 30-59 days, 60-89 days, and 90 or more days past due.

These policies apply to all loan portfolio classes and segments.

Substandard and doubtful risk graded commercial, commercial real estate, and construction loans are reviewed for impairment. All troubled debt restructurings ("TDRs"), regardless of dollar amount, are also evaluated for impairment. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment and establishing a specific allowance include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial, commercial real estate, and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Generally, large groups of smaller balance homogeneous loans (residential real estate and consumer loans) are collectively evaluated for impairment. The Company's policy for recognizing interest income on impaired loans is consistent with its nonaccrual policy.

The Company's loan portfolio is organized by major segment. These include: commercial, commercial real estate, residential real estate and consumer loans. Each segment has particular risk characteristics that are specific to the borrower and the generic category of credit. Commercial loan repayments are highly dependent on cash flows associated with the underlying business and its profitability. They can also be impacted by changes in collateral values. Commercial real estate loans share the same general risk characteristics as commercial loans but are often more dependent on the value of the underlying real estate collateral and, when construction is involved, the ultimate completion of and sale of the project. Residential real estate loans are generally dependent on the value of collateral and the credit worthiness of the underlying borrower. Consumer loans are very similar in risk characteristics to residential real estate.

In connection with mergers, certain loans were acquired which exhibited deteriorated credit quality since origination and for which the Company does not expect to collect all contractual payments. These purchased credit impaired loans are accounted for in accordance with Accounting Standards Codification ("ASC") 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality, and are recorded at the amount paid, such that there is no carryover of the seller's allowance for loan losses. After acquisition, losses are recognized by an increase in the allowance for loan losses.

Such purchased credit impaired loans are accounted for individually or aggregated into pools of loans based on common risk characteristics such as, credit score, loan type, and date of origination. The Company estimates the amount and timing of expected cash flows for each loan or pool, and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan or pool (accretable yield). The excess of the loan's or pool's contractual principal and interest over expected cash flows is not recorded (nonaccretable difference).

Over the life of the loan or pool, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded as a provision for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

Troubled Debt Restructurings

In situations where, for economic or legal reasons related to a borrower's financial condition, management may grant a concession to the borrower that it would not otherwise consider, the related loan is classified as a TDR. Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted above for impaired loans. The Company had $1,976,000 in loans classified as TDRs as of December 31, 2020 and $1,058,000 as of December 31, 2019.

In March 2020 (revised in April 2020), the federal banking agencies issued an "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus." This was in response to the COVID-19 pandemic affecting societies and economies around the world. This guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19. The guidance explains that, in consultation with the Financial Accounting Standards Board ("FASB") staff, the federal banking agencies have concluded that short-term modifications (e.g. six months) made on a good faith basis to borrowers who were current as of the implementation date of a relief program are not TDRs. The CARES Act was passed by the U.S. Congress on March 27, 2020. Section 4013 of the CARES Act also addressed COVID-19 related modifications and specified that COVID-19 related modifications on loans that were current as of December 31, 2019 were not TDRs. The Bank implemented a Disaster Assistance Program ("DAP") to provide relief to its borrowers under this guidance. The Bank provided assistance to customers with loan balances of $405.1 million during the year ended December 31, 2020.  The balance of loans remaining in this program at December 31, 2020 was $30.0 million, or 1.5% of the total portfolio, with $18.2 million of the $30.0 million in total deferrals the result of second and third request interest deferrals. At February 28, 2021, the balance of loans remaining in this program was $25.2 million, or 1.2% of the total portfolio, with $16.7 million of the $25.2 million in total deferrals the result of second request interest deferrals. The majority of remaining modifications involved three-month deferments of interest. This interagency guidance has not had a material impact on the Company's financials and is not expected to have a material impact on ongoing operations; however, this impact cannot be quantified at this time.

Allowance for Loan Losses

The purpose of the allowance for loan losses ("ALLL") is to provide for probable losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses and by recoveries of previously charged-off loans. Loan charge-offs decrease the allowance.

The goal of the Company is to maintain an appropriate, systematic, and consistently applied process to determine the amounts of the ALLL and the provision for loan loss expense.

The Company uses certain practices to manage its credit risk. These practices include (1) appropriate lending limits for loan officers, (2) a loan approval process, (3) careful underwriting of loan requests, including analysis of borrowers, cash flows, collateral, and market risks, (4) regular monitoring of the portfolio, including diversification by type and geography, (5) review of loans by the Loan Review department, which operates independently of loan production (the Loan Review function consists of a co-sourced arrangement using both internal personnel and external vendors to provide the Company with a more robust review function of the loan portfolio), (6) regular meetings of the Credit Committees to discuss portfolio and policy changes and make decisions on large or unusual loan requests, and (7) regular meetings of the Asset Quality Committee which reviews the status of individual loans.

Risk grades are assigned as part of the loan origination process. From time to time risk grades may be modified as warranted by the facts and circumstances surrounding the credit.

Calculation and analysis of the allowance for loan losses is prepared quarterly by the Finance Department. The Company's Credit Committee, Risk and Compliance Committee, Audit Committee, and the Board of Directors review the allowance for adequacy.

The Company's allowance for loan losses has two basic components: the formula allowance and the specific allowance. Each of these components is determined based upon estimates and judgments.

The formula allowance uses historical loss experience as an indicator of future losses, along with various qualitative factors, including levels and trends in delinquencies, nonaccrual loans, charge-offs and recoveries, trends in volume and terms of loans, effects of changes in underwriting standards, experience of lending staff, economic conditions, and portfolio concentrations. In the formula allowance for commercial and commercial real estate loans, the historical loss rate is combined with the qualitative factors, resulting in an adjusted loss factor for each risk-grade category of loans. The period-end balances for each loan risk-grade category are multiplied by the adjusted loss factor. Allowance calculations for consumer loans are calculated based on historical losses for each product category without regard to risk grade. This loss rate is combined with qualitative factors resulting in an adjusted loss factor for each product category.

The specific allowance uses various techniques to arrive at an estimate of loss for specifically identified impaired loans. These include:

• The present value of expected future cash flows discounted at the loan's effective interest rate. The effective interest rate on a loan is the rate of return implicit in the loan (that is, the contractual interest rate adjusted for any net deferred loan fees or costs and any premium or discount existing at the origination or acquisition of the loan);

• The loan's observable market price, or

• The fair value of the collateral, net of estimated costs to dispose, if the loan is collateral dependent.

The use of these computed values is inherently subjective and actual losses could be greater or less than the estimates. No single statistic, formula, or measurement determines the adequacy of the allowance. Management makes subjective and complex judgments about matters that are inherently uncertain, and different amounts would be reported under different conditions or using different assumptions. For analytical purposes, management allocates a portion of the allowance to specific loan categories and specific loans. However, the entire allowance is used to absorb credit losses inherent in the loan portfolio, including identified and unidentified losses.

The relationships and ratios used in calculating the allowance, including the qualitative factors, may change from period to period as facts and circumstances evolve. Furthermore, management cannot provide assurance that in any particular period the Company will not have sizeable credit losses in relation to the amount reserved. Management may find it necessary to significantly adjust the allowance, considering current factors at the time.

Premises and Equipment

Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation and amortization. Premises and equipment are depreciated over their estimated useful lives ranging from three years to thirty-nine years; leasehold improvements are amortized over the lives of the respective leases or the estimated useful lives of the improvements, whichever is less. Software is generally amortized over three years. Depreciation and amortization are recorded on the straight-line method.

Costs of maintenance and repairs are charged to expense as incurred. Costs of replacing structural parts of major units are considered individually and are expensed or capitalized as the facts dictate. Gains and losses on routine dispositions are reflected in current operations.

Goodwill and Intangible Assets

Goodwill is subject to at least an annual assessment for impairment. Additionally, acquired intangible assets (such as core deposit intangibles) are separately recognized if the benefit of the assets can be sold, transferred, licensed, rented, or exchanged, and amortized over their useful lives. The cost of purchased deposit relationships, based on independent valuation, are being amortized over their estimated lives of ten years.

The Company records as goodwill the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Impairment testing is performed annually, as well as when an event triggering impairment may have occurred. On January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2017-04, which simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the previous two-step impairment test. Under the new guidance, if a reporting unit's carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates the prior requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount. The Company performs its annual analysis as of June 30 each fiscal year. Due to the COVID-19 pandemic market conditions, the Company determined a triggering event occurred during the first quarter of 2020 and performed a qualitative assessment at March 31, 2020 and as the pandemic continued performed qualitative assessments at June 30 and September 30 and a quantitative assessment at December 31, 2020 and determined no impairment was indicated. The impact of COVID-19 on market conditions and other changes in the economic environment, operations, or other adverse events could result in future impairment charges which could have a material adverse impact on the Company's operating results. No indicators of impairment were identified during the years ended December 31, 2019 or 2018.

Trust Assets

Securities and other property held by the trust and investment services segment in a fiduciary or agency capacity are not assets of the Company and are not included in the accompanying consolidated financial statements.

Other Real Estate Owned ("OREO")

OREO represents real estate that has been acquired through loan foreclosures or deeds received in lieu of loan payments. Generally, such properties are appraised at the time acquired and are recorded at fair value less estimated selling costs. Subsequent to foreclosure, valuations are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expense.

Bank Owned Life Insurance

In connection with mergers, the Company has acquired bank owned life insurance ("BOLI"). The asset is reflected as the cash surrender value of the policies as provided by the insurer on a monthly basis.

Transfers of Financial Assets

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

Income Taxes

The Company uses the balance sheet method to account for deferred income tax assets and liabilities. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company had no liability for unrecognized tax benefits as of December 31, 2020 and 2019.

Stock-Based Compensation

Stock compensation accounting guidance ASC 718, Compensation - Stock Compensation, requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the grant date fair value of the equity or liability instruments issued. The stock compensation accounting guidance covers a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.

The stock compensation accounting guidance requires that compensation cost for all stock awards be calculated and recognized over the employees' service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. A Black-Scholes model is used to estimate the fair value of stock options, while the market price of the Company's common stock at the date of grant is used for restricted stock awards.

Earnings Per Common Share

Basic earnings per common share represent income available to common shareholders divided by the average number of common shares outstanding during the period. Diluted earnings per common share reflect the impact of additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company consist solely of outstanding stock options and are determined using the treasury method. Nonvested shares of restricted stock are included in the computation of basic earnings per share because the holder has voting rights and shares in non-forfeitable dividends during the vesting period.

Comprehensive Income

Comprehensive income is shown in a two statement approach; the first statement presents total net income and its components followed by a second statement that presents all the components of other comprehensive income which include unrealized gains and losses on available for sale securities, unrealized gains and losses on cash flow hedges, and changes in the funded status of the defined benefit postretirement plan.

Advertising and Marketing Costs

Advertising and marketing costs are expensed as incurred, and were $453,000, $473,000, and $365,000 in 2020, 2019, and 2018, respectively.

Mergers and Acquisitions

Business combinations are accounted for under ASC 805, Business Combinations, using the acquisition method of accounting. The acquisition method of accounting requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date. To determine the fair values, the Company relies on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques. Under the acquisition method of accounting, the Company identifies the acquirer and the closing date and applies applicable recognition principles and conditions. Acquisition-related costs are costs the Company incurs to effect a business combination. Those costs include advisory, legal, accounting, valuation, and other professional or consulting fees. Some other examples of costs to the Company include systems conversions, integration planning consultants and advertising costs. The Company accounts for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, with one exception. The costs to issue debt or equity securities is recognized in accordance with other applicable GAAP. These acquisition-related costs have been and will be included within the consolidated statements of income classified within the noninterest expense caption.

Derivative Financial Instruments

The Company uses derivatives primarily to manage risk associated with changing interest rates. The Company's derivative financial instruments consist of interest rate swaps that qualify as cash flow hedges of the Company's trust preferred capital notes. The Company recognizes derivative financial instruments at fair value as either an other asset or other liability in the consolidated balance sheets. The effective portion of the gain or loss on the Company's cash flow hedges is reported as a component of other comprehensive income, net of deferred income taxes, and is reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

Reclassifications

Certain reclassifications have been made in prior years financial statements to conform to classifications used in the current year. There were no material reclassifications.

Recently Adopted Accounting Developments

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." ASU 2017-04 simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the previous two-step impairment test. Under the new guidance, if a reporting unit's carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates the prior requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount. ASU 2017-04 was effective for the Company on January 1, 2020. The adoption of ASU 2017-04 did not have a material effect on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." ASU 2018-13 modifies the disclosure requirements on fair value measurements by requiring that Level 3 fair value disclosures include the range and weighted average of significant unobservable inputs used to develop those fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. Certain disclosure requirements in Topic 820 were also removed or modified. ASU 2018-13 was effective for the Company on January 1, 2020. The adoption of ASU 2018-13 did not have a material effect on the Company's consolidated financial statements.

In March 2020 (revised in April 2020), various regulatory agencies, including the Board of Governors of the Federal Reserve System ("FRB") and the Federal Deposit Insurance Corporation, ("FDIC") issued an "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus."  The interagency statement was effective immediately and impacted accounting for loan modifications. Under ASC 310-40, "Receivables – Troubled Debt Restructurings by Creditors," a restructuring of debt constitutes a TDR if the creditor, for economic or legal reasons related to the debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. In August 2020, a joint statement on additional loan modifications was issued. Among other things, the Interagency Statement addresses accounting and regulatory reporting considerations for loan modifications, including those accounted for under Section 4013 of the CARES Act. The CARES Act  was signed into law on March 27, 2020 to help support individuals and businesses through loans, grants, tax changes and other types of relief. The most significant impacts of the CARES Act related to accounting for loan modifications and establishment of the PPP. On December 21, 2020, the Appropriations Act was passed. The Appropriations Act extends or modifies many of the relief programs first created by the CARES Act, including the PPP and treatment of certain loan modifications related to the COVID-19 pandemic. This interagency guidance is not expected to have a material impact on the Company's financial statements; however, this impact cannot be quantified at this time.

Recent Accounting Pronouncements and Other Authoritative Accounting Guidance 

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The FASB has issued multiple updates to ASU 2016-13 as codified in Topic 326, including ASU's 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, and 2020-03. These ASUs have provided for various minor technical corrections and improvements to the codification as well as other transition matters. Smaller reporting companies who file with the U.S. Securities and Exchange Commission ("SEC") and all other entities who do not file with the SEC are required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022. At the one-time evaluation date, the Company qualified as a smaller reporting company and elected to defer the adoption of the standard. The Company will continue to validate its models that will be used upon future adoption of the standard. The implementation of this ASU will likely result in increases to the Company's reserves when implemented. 

In August 2018, the FASB issued ASU 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans." The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Certain disclosure requirements have been deleted while the following disclosure requirements have been added: the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The amendments also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed: the projected benefit obligation ("PBO") and fair value of plan assets for plans with PBOs in excess of plan assets and the accumulated benefit obligation ("ABO") and fair value of plan assets for plans with ABOs in excess of plan assets. The amendments are effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company is currently assessing the impact that ASU 2018-14 will have on its consolidated financial statements.

Effective  November 25, 2019, the SEC adopted Staff Accounting Bulletin ("SAB") 119. SAB 119 updated portions of SEC interpretative guidance to align with ASC 326, "Financial Instruments - Credit Losses." It covers topics including (1) measuring current expected credit losses; (2) development, governance, and documentation of a systematic methodology; (3) documenting the results of a systematic methodology; and (4) validating a systematic methodology.

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes." The ASU is expected to reduce cost and complexity related to the accounting for income taxes by removing specific exceptions to general principles in Topic 740 (eliminating the need for an organization to analyze whether certain exceptions apply in a given period) and improving financial statement preparers' application of certain income tax-related guidance. This ASU is part of the FASB's simplification initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact that ASU 2019-12 will have on its consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815." The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, such as the Company, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of ASU 2020-01 to have a material impact on its consolidated financial statements.

In  March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments in this ASU provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. Subsequently, in January 2021, the FASB issued ASU 2021-01 "Reference Rate Reform (Topic 848): Scope." This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. An entity may elect to apply ASU 2021-01 on contract modifications that change the interest rate used for margining, discounting, or contract price alignment retrospectively as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date within the interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued. An entity may elect to apply ASU 2021-01 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020, and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. The Company is assessing ASU 2020-04 and its impact on the Company's transition away from LIBOR for its loan and other financial instruments.

On  March 12, 2020, the SEC finalized amendments to the definitions of its "accelerated filer" and "large accelerated filer" definitions. The amendments increase the threshold criteria for meeting these filer classifications and were effective on April 27, 2020. Any changes in filer status are to be applied beginning with the filer's first annual report filed with the SEC subsequent to the effective date. The rule change revises the definition of "accelerated filers" to exclude entities with public float of less than $700 million and less than $100 million in annual revenues. If an entity's annual revenues exceed $100 million, its category will change back to "accelerated filer." A public company that is classified as an "accelerated filer" or "large accelerated filer" must obtain an auditor attestation concerning the effectiveness of internal control over financial reporting ("ICFR") and include the opinion on ICFR in its annual report on Form 10-K. Non-accelerated filers also have additional time to file quarterly and annual financial statements. All public companies are required to obtain and file annual financial statement audits, as well as provide management's assertion on effectiveness of ICFR, but the external auditor attestation of ICFR is not required for non-accelerated filers. The Company's annual revenues exceeded $100 million in the previous year, and the Company expects its annual revenues to exceed $100 million in future years and to remain an "accelerated filer." Therefore, this change is not expected to have a significant impact on the Company's annual reporting and audit requirements.

In August 2020, the FASB issued ASU 2020-06, "Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity." The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share calculation in certain areas. In addition, the amendment updates the disclosure requirements for convertible instruments to increase the information transparency. For public business entities, excluding smaller reporting companies, the amendments in the ASU are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.  For all other entities, the standard will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of ASU 2020-06 to have a material impact on its consolidated financial statements.

In October 2020, the FASB issued ASU 2020-08, "Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable fees and Other Costs." This ASU clarifies that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.  Early adoption is not permitted. All entities should apply ASU 2020-08 on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. The Company does not expect the adoption of ASU 2020-08 to have a material impact on its consolidated financial statements.

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Note 2 - Acquisitions

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note 2 - Acquisitions

On April 1, 2019, the Company completed its acquisition of Roanoke-based HomeTown Bankshares Corporation ("HomeTown") and its wholly-owned subsidiary bank, HomeTown Bank. Pursuant and subject to the terms of the merger agreement, as a result of the merger, the holders of shares of HomeTown common stock received 0.4150 shares of the Company's common stock for each share of HomeTown common stock held immediately prior to the effective date of the merger.

The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition, in accordance with ASC 350, Intangibles-Goodwill and Other.

The following table provides detail of the consideration transferred, assets acquired, and liabilities assumed as of the date of the acquisition (dollars in thousands):

Consideration Paid:
Common shares issued (2,361,686)	$	82,470
Issuance of replacement stock options/restricted stock		753
Cash paid in lieu of fractional shares		27
Value of consideration		83,250
Assets acquired:
Cash and cash equivalents		26,283
Investment securities		34,876
Restricted stock		2,588
Loans		444,324
Premises and equipment		12,034
Deferred income taxes		2,960
Core deposit intangible		8,200
Other real estate owned		1,188
Banked owned life insurance		8,246
Other assets		14,244
Total assets		554,943
Liabilities assumed:
Deposits		483,626
Short-term FHLB advances		14,883
Long-term FHLB advances		778
Subordinated debt		7,530
Other liabilities		6,052
Total liabilities		512,869
Net assets acquired		42,074
Goodwill resulting from merger with HomeTown	$	41,176

The following table details the changes in fair value of net assets acquired and liabilities assumed from the amounts reported in the Form 10-K for the year ended December 31, 2019 (dollars in thousands):

Goodwill at December 31, 2019	$	40,130
Effect of adjustments to:
Premises and equipment		520
Other real estate owned		254
Other liabilities		272
Goodwill at December 31, 2020	$	41,176

The increase in goodwill made during the first quarter of 2020 was due to adjustments to the valuations of several acquired buildings and OREO obtained on the date of merger. Also in the first quarter of 2020, the goodwill adjustment for other liabilities related to a reassessment of the interest rate prevailing for supplemental early retirement plan obligations at the merger date.

The acquired loans were recorded at fair value at the acquisition date without carryover of HomeTown's previously established allowance for loan losses. The fair value of the loans was determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected on the loans and leases and then applying a market-based discount rate to those cash flows. In this regard, the acquired loans were segregated into pools based on loan type and credit risk. Loan type was determined based on collateral type, purpose, and lien position. Credit risk characteristics included risk rating groups (pass rated loans and adversely classified loans), and past due status. For valuation purposes, these pools were further disaggregated by maturity, pricing characteristics (e.g., fixed-rate, adjustable-rate) and re-payment structure (e.g., interest only, fully amortizing, balloon). Fair values determined at the acquisition date were preliminary and subject to refinement during the one-year measurement period as additional information was obtained regarding facts and circumstances about expected cash flows that existed as of the acquisition date.

The acquired loans were divided into loans with evidence of credit quality deterioration, which are accounted for under ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality (purchased credit impaired), and loans that do not meet these criteria, which are accounted for under ASC 310-20, Receivables - Nonrefundable Fees and Other Costs (purchased performing).

The following table presents the purchased credit impaired loans receivable at the acquisition date (dollars in thousands):

Contractually required principal and interest at acquisition	$	45,551
Contractual cash flows not expected to be collected (nonaccretable difference)		8,296
Expected cash flows at acquisition		37,255
Interest component of expected cash flows (accretable yield)		4,410
Fair value of acquired loans accounted for under FASB ASC 310-30	$	32,845

Direct costs related to the HomeTown acquisition were expensed as incurred. There were no merger related expenses during 2020 compared to $11,782,000 during 2019 and $872,000 during 2018.

The following table presents unaudited pro forma information as if the acquisition of HomeTown had occurred on January  1, 2018 (dollars in thousands, except per share data). These results combine the historical results of HomeTown in the Company's consolidated statements of income and, while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on January 1, 2018. In particular, no adjustments have been made to eliminate the amount of HomeTown's provision for loan losses that would not have been necessary had the acquired loans been recorded at fair value as of January 1, 2018. Pro forma adjustments below include the net impact of accretion for 2018 and the elimination of merger-related costs for 2019 and 2018.

	Pro forma Year Ended December 31,
	2019		2018
Total revenues (1)	$	95,178	$	98,232
Net income	$	29,841	$	27,974
Earnings per share	$	2.70	$	2.52

__________________________

(1) Includes net interest income and noninterest income.

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Note 3 - Restrictions on Cash

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Cash and Cash Equivalents Disclosure [Text Block]

Note 3 – Restrictions on Cash

The Company is a member of the Federal Reserve System and is required to maintain certain levels of its cash and cash equivalents as reserves based on regulatory requirements. The gross reserve requirement with the Federal Reserve Bank of Richmond was zero and $14.4 million at December 31, 2020 and 2019, respectively. The required balance to be maintained with the Federal Reserve Bank of Richmond was zero and $2.6 million at December 31, 2020 and December 31, 2019, respectively.

The Company maintains cash accounts in other commercial banks. The amount on deposit with correspondent institutions at December 31, 2020 exceeded the insurance limits of the FDIC by $2,610,000.

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Note 4 - Securities

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

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

Note 4 - Securities

The amortized cost and estimated fair value of investments in securities at December 31, 2020 and 2019 were as follows (dollars in thousands):

	December 31, 2020
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Securities available for sale:
U.S. Treasury	$	34,997	$	1	$	—	$	34,998
Federal agencies and GSEs		104,092		1,976		45		106,023
Mortgage-backed and CMOs		246,770		6,117		105		252,782
State and municipal		57,122		1,979		2		59,099
Corporate		13,011		188		10		13,189
Total securities available for sale	$	455,992	$	10,261	$	162	$	466,091

The Company adopted ASU 2016-01 effective January 1, 2018 and had no equity securities at December 31, 2020 and December 31, 2019 and recognized in income $333,000 of unrealized holding gains during 2019. During the year ended December 31, 2019, the Company sold $445,000 in equity securities at fair value.

(Dollars in thousands)		December 31, 2019
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Securities available for sale:
U.S. Treasury	$	14,992	$	—	$	5	$	14,987
Federal agencies and GSEs		126,829		1,504		219		128,114
Mortgage-backed and CMOs		182,732		1,901		393		184,240
State and municipal		41,427		769		42		42,154
Corporate		9,514		186		—		9,700
Total securities available for sale	$	375,494	$	4,360	$	659	$	379,195

The amortized cost and estimated fair value of investments in debt securities at December 31, 2020, by contractual maturity, are shown in the following table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because mortgage-backed securities have both known principal repayment terms as well as unknown principal repayments due to potential borrower pre-payments, it is difficult to accurately predict the final maturity of these investments. Mortgage-backed securities are shown separately (dollars in thousands):

	Available for Sale
	Amortized
	Cost		Fair Value
Due in one year or less	$	38,081	$	38,120
Due after one year through five years		96,905		98,651
Due after five years through ten years		52,624		54,465
Due after ten years		21,612		22,073
Mortgage-backed and CMOs		246,770		252,782
	$	455,992	$	466,091

Gross realized gains and losses on, and the proceeds from the sale of, securities available for sale were as follows (dollars in thousands):

	For the Year Ended December 31,
	2020		2019			2018
Gross realized gains	$	814	$	328		$	342
Gross realized losses		—		(54	)		(261	)
Proceeds from sales of securities		5,811		29,878			57,607

Securities with a carrying value of approximately $189,791,000 and $179,852,000 at December 31, 2020 and 2019, respectively, were pledged to secure public deposits, repurchase agreements, and for other purposes as required by law. FHLB letters of credit were used as additional collateral in the amounts of $245,000,000 at December 31, 2020 and $170,000,000 at December 31, 2019.

Temporarily Impaired Securities

The following table shows estimated fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2020. The reference point for determining when securities are in an unrealized loss position is month-end. Therefore, it is possible that a security's market value exceeded its amortized cost on other days during the past twelve-month period.

Available for sale securities that have been in a continuous unrealized loss position are as follows (dollars in thousands):

	Total				Less than 12 Months				12 Months or More
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
Federal agencies and GSEs	$	21,237	$	45	$	19,974	$	26	$	1,263	$	19
Mortgage-backed and CMOs		46,640		105		46,640		105		—		—
State and municipal		3,456		2		3,456		2		—		—
Corporate		5,990		10		5,990		10		—		—
Total	$	77,323	$	162	$	76,060	$	143	$	1,263	$	19

Federal agencies and GSEs: The unrealized losses on the Company's investment in 14 government sponsored entities ("GSEs") were caused by normal market fluctuations. Eleven of these securities were in an unrealized loss position for 12 months or more. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2020.

Mortgage-backed securities: The unrealized losses on the Company's investment in six GSE mortgage-backed securities were caused by normal market fluctuations. None of these securities were in an unrealized loss position for 12 months or more. The contractual cash flows of those investments are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company's investments. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2020.

Collateralized Mortgage Obligations: The unrealized losses associated with five private GSE collateralized mortgage obligations ("CMOs") were due to normal market fluctuations. None of these securities were in an unrealized loss position for 12 months or more. The contractual cash flows of these investments are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company's investments. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of its amortized cost bases, which may be maturity, the Company does not consider the investments to be other-than-temporarily impaired at December 31, 2020.

State and municipal securities:  The unrealized losses on two state and municipal securities were caused by normal market fluctuations. These securities are of high credit quality (rated A- or higher), and principal and interest payments have been made timely. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2020.

Corporate securities: The unrealized losses on two corporate securities were caused by normal market fluctuations and not credit deterioration. These securities remain investment grade, and the Company's analysis did not indicate the existence of credit loss. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2020.

Due to restrictions placed upon the Bank's common stock investment in the Federal Reserve Bank of Richmond and FHLB, these securities have been classified as restricted equity securities and carried at cost. These restricted securities are not subject to the investment security classification requirements and are included as a separate line item on the Company's consolidated balance sheet. The FHLB requires the Bank to maintain stock in an amount equal to 4.25% of outstanding borrowings and a specific percentage of the Bank's total assets. The Federal Reserve Bank of Richmond requires the Bank to maintain stock with a par value equal to 3.0% of its outstanding capital and an additional 3.0% is on call. Restricted equity securities consist of Federal Reserve Bank of Richmond stock in the amount of $6,458,000 and $6,415,000 as of  December 31, 2020 and 2019, respectively, and FHLB stock in the amount of $2,257,000 and $2,215,000 as of December 31, 2020 and 2019, respectively.

The table below shows gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position, at December 31, 2019 (dollars in thousands):

	Total				Less than 12 Months				12 Months or More
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
U.S. Treasury	$	14,987	$	5	$	14,987	$	5	$	—	$	—
Federal agencies and GSEs		69,095		219		31,779		44		37,316		175
Mortgage-backed and CMOs		89,391		393		66,324		266		23,067		127
State and municipal		4,262		42		3,108		37		1,154		5
Total	$	177,735	$	659	$	116,198	$	352	$	61,537	$	307

Other-Than-Temporary-Impaired Securities

As of December 31, 2020 and 2019, there were no securities classified as other-than-temporary impaired.

XML

Note 5 - Loans

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

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

Note 5 – Loans

Loans, excluding loans held for sale, at December 31, 2020 and 2019 were comprised of the following (dollars in thousands):

	December 31,
	2020		2019
Commercial	$	491,256	$	339,077
Commercial real estate:
Construction and land development		140,071		137,920
Commercial real estate - owner occupied		373,680		360,991
Commercial real estate - non-owner occupied		627,569		538,208
Residential real estate:
Residential		269,137		324,315
Home equity		104,881		119,423
Consumer		8,462		10,881
Total loans, net of deferred fees and costs	$	2,015,056	$	1,830,815

Net deferred loan (fees) costs included in the above loan categories are $(3,021,000) for 2020 and $1,197,000 for 2019. The balance at December 31, 2020 includes $(4,439,000) in unamortized net PPP fees.

Overdraft deposits were reclassified to consumer loans in the amount of $59,000 and $134,000 for 2020 and 2019, respectively.

Acquired Loans

The outstanding principal balance and the carrying amount of these loans, including ASC 310-30 loans, included in the consolidated balance sheets at December 31, 2020 and 2019 are as follows (dollars in thousands):

	2020		2019
Outstanding principal balance	$	251,730	$	393,618
Carrying amount		241,008		377,130

The outstanding principal balance and related carrying amount of purchased credit impaired loans, for which the Company applies ASC 310-30 to account for interest earned, at December 31, 2020 and 2019 are as follows (dollars in thousands):

	2020		2019
Outstanding principal balance	$	37,417	$	53,600
Carrying amount		30,201		43,028

The following table presents changes in the accretable yield on purchased credit impaired loans, for which the Company applies ASC 310-30, for the years ended December 31, 2020, 2019, and 2018 (dollars in thousands):

	2020			2019			2018
Balance at January 1	$	7,893		$	4,633		$	4,890
Additions from merger with HomeTown		—			4,410			—
Accretion		(3,553	)		(3,304	)		(2,362	)
Reclassification from nonaccretable difference		2,233			736			956
Other changes, net (1)		(60	)		1,418			1,149
Balance at December 31	$	6,513		$	7,893		$	4,633

__________________________

(1)  This line item represents changes in the cash flows expected to be collected due to the impact of non-credit changes such as prepayment assumptions, changes in interest rates on variable rate acquired impaired loans, and discounted payoffs that occurred in the period.

Past Due Loans

The following table shows an analysis by portfolio segment of the Company's past due loans at December 31, 2020 (dollars in thousands):

					90 Days +
					Past Due		Non-		Total
	30- 59 Days		60-89 Days		and Still		Accrual		Past				Total
	Past Due		Past Due		Accruing		Loans		Due		Current		Loans
Commercial	$	153	$	9	$	—	$	100	$	262	$	490,994	$	491,256
Commercial real estate:
Construction and land development		168		—		—		5		173		139,898		140,071
Commercial real estate - owner occupied		62		—		209		304		575		373,105		373,680
Commercial real estate - non-owner occupied		—		—		—		1,158		1,158		626,411		627,569
Residential:
Residential		711		211		53		792		1,767		267,370		269,137
Home equity		—		—		—		69		69		104,812		104,881
Consumer		49		14		—		6		69		8,393		8,462
Total	$	1,143	$	234	$	262	$	2,434	$	4,073	$	2,010,983	$	2,015,056

The following table shows an analysis by portfolio segment of the Company's past due loans at December 31, 2019 (dollars in thousands):

					90 Days +
					Past Due		Non-		Total
	30- 59 Days		60-89 Days		and Still		Accrual		Past				Total
	Past Due		Past Due		Accruing		Loans		Due		Current		Loans
Commercial	$	325	$	163	$	52	$	857	$	1,397	$	337,680	$	339,077
Commercial real estate:
Construction and land development		58		—		—		11		69		137,851		137,920
Commercial real estate - owner occupied		217		434		—		274		925		360,066		360,991
Commercial real estate - non-owner occupied		—		—		—		—		—		538,208		538,208
Residential:
Residential		639		260		282		685		1,866		322,449		324,315
Home equity		49		90		27		113		279		119,144		119,423
Consumer		73		13		—		4		90		10,791		10,881
Total	$	1,361	$	960	$	361	$	1,944	$	4,626	$	1,826,189	$	1,830,815

Impaired Loans

The following table presents the Company's impaired loan balances by portfolio segment, excluding acquired impaired loans, at December 31, 2020 (dollars in thousands):

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Commercial	$	18	$	18	$	—	$	23	$	6
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		286		283		—		357		27
Commercial real estate - non-owner occupied		1,148		1,147		—		766		75
Residential:
Residential		1,096		1,103		—		912		62
Home equity		6		6		—		31		3
Consumer		—		—		—		—		—
	$	2,554	$	2,557	$	—	$	2,089	$	173
With a related allowance recorded:
Commercial	$	39	$	33	$	29	$	382	$	15
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		—		—		—		—		—
Commercial real estate - non-owner occupied		122		122		—		180		15
Residential
Residential		137		137		1		256		9
Home equity		—		—		—		—		—
Consumer		—		—		—		—		—
	$	298	$	292	$	30	$	818	$	39
Total:
Commercial	$	57	$	51	$	29	$	405	$	21
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		286		283		—		357		27
Commercial real estate - non-owner occupied		1,270		1,269		—		946		90
Residential:
Residential		1,233		1,240		1		1,168		71
Home equity		6		6		—		31		3
Consumer		—		—		—		—		—
	$	2,852	$	2,849	$	30	$	2,907	$	212

In the table above, recorded investment may exceed unpaid principal balance due to acquired loans with a premium and loans with unearned costs that exceed unearned fees.

The following table presents the Company's impaired loan balances by portfolio segment, excluding acquired impaired loans, at December 31, 2019 (dollars in thousands):

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Commercial	$	49	$	49	$	—	$	16	$	5
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		343		341		—		250		26
Commercial real estate - non-owner occupied		159		159		—		174		13
Residential:
Residential		611		612		—		652		38
Home equity		41		41		—		45		6
Consumer		—		—		—		—		—
	$	1,203	$	1,202	$	—	$	1,137	$	88
With a related allowance recorded:
Commercial	$	735	$	730	$	204	$	191	$	41
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		—		—		—		—		—
Commercial real estate - non-owner occupied		—		—		—		—		—
Residential:
Residential		254		254		26		225		16
Home equity		—		—		—		—		—
Consumer		—		—		—		—		—
	$	989	$	984	$	230	$	416	$	57
Total:
Commercial	$	784	$	779	$	204	$	207	$	46
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		343		341		—		250		26
Commercial real estate - non-owner occupied		159		159		—		174		13
Residential:
Residential		865		866		26		877		54
Home equity		41		41		—		45		6
Consumer		—		—		—		—		—
	$	2,192	$	2,186	$	230	$	1,553	$	145

In the table above, recorded investment may exceed unpaid principal balance due to acquired loans with a premium and loans with unearned costs that exceed unearned fees.

The following table shows the detail of loans modified as TDRs during the year ended December 31, 2020, 2019, and 2018, included in the impaired loan balances (dollars in thousands):

	Loans Modified as TDRs for the Year Ended December 31, 2020
			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Contracts		Investment		Investment
Commercial		1	$	106	$	106
Commercial real estate - owner occupied		—		—		—
Commercial real estate - non-owner occupied		2		1,311		1,311
Residential real estate		1		82		82
Home equity		1		6		6
Consumer		—		—		—
Total		5	$	1,505	$	1,505

	Loans Modified as TDRs for the Year Ended December 31, 2019
			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Contracts		Investment		Investment
Commercial		—	$	—	$	—
Commercial real estate - owner occupied		—		—		—
Commercial real estate - non-owner occupied
Residential real estate		1		207		207
Home equity		—		—		—
Consumer		—		—		—
Total		1	$	207	$	207

	Loans Modified as TDRs for the Year Ended December 31, 2018
			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Contracts		Investment		Investment
Commercial		—	$	—	$	—
Commercial real estate - owner occupied		—		—		—
Commercial real estate - non-owner occupied		—		—		—
Residential real estate		1		11		11
Home equity		—		—		—
Consumer		—		—		—
Total		1	$	11	$	11

All loans modified as TDRs during the years ended December 31, 2020, 2019, and 2018 were structure modifications. The impact on the allowance for loan losses for the commercial loan modified as a TDR in 2020 was $88,000. The impact on the allowance for loan losses for one of the commercial real estate - non-owner occupied loans modified as a TDR in 2020 was $138,000; there was no impact on the allowance for loan losses for the other commercial real estate - non-owner occupied loan. There was no impact on the allowance for loan losses for the residential real estate loan and the home equity loan modified as TDRs in 2020. For the year ended December 31, 2020, the impact on the allowance was due to specific reserves that were charged-off prior to year end. The impact on the allowance for loan losses for the residential real estate loan modified as a TDR in 2019 was $24,000. There was no impact on the allowance for loan losses for the residential real estate loan modified as a TDR in 2018.

During the year ended December 31, 2020, the Company had one commercial real estate - non-owner occupied loan with a recorded investment of $1,052,000 that subsequently defaulted within 12 months of modification. During the years ended December 31, 2019 and 2018, the Company had no loans that subsequently defaulted within twelve months of modification. The Company defines default as one or more payments that occur more than 90 days past the due date, charge-off, or foreclosure subsequent to modification. Any charge-offs resulting in default were adjusted through the allowance for loan losses.

In March 2020 (revised in April 2020), the federal banking agencies issued an "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus." This was in response to the COVID-19 pandemic affecting societies and economies around the world. This guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19. The guidance explains that, in consultation with the FASB staff, the federal banking agencies have concluded that short-term modifications (e.g. six months) made on a good faith basis to borrowers who were current as of the implementation date of a relief program are not TDRs. The CARES Act was passed by the U.S. Congress on March 27, 2020. Section 4013 of the CARES Act also addressed COVID-19 related modifications and specified that COVID-19 related modifications on loans that were current as of December 31, 2019 were not TDRs. The Bank implemented a DAP to provide relief to its borrowers under this guidance. The Bank provided assistance to customers with loan balances of $405.1 million during the year ended December 31, 2020.  The balance of loans remaining in this program at December 31, 2020 was $30.0 million, or 1.5% of the total portfolio, with $18.2 million of the $30.0 million in total deferrals the result of second and third request interest deferrals. At February 28, 2021, the balance of loans remaining in this program was $25.2 million, or 1.2% of the total portfolio, with $16.7 million of the $25.2 million in total deferrals the result of second request interest deferrals. The majority of remaining modifications involved three-month deferments of interest. This interagency guidance has not had a material impact on the Company's financials and is not expected to have a material impact on ongoing operations; however, this impact cannot be quantified at this time.

The CARES Act included an initial first round allocation of $659.0 billion for loans to be issued by financial institutions through the SBA's PPP. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which was passed by Congress on December 21, 2020 and then signed into law on December 27, 2020 as part of the Appropriations Act, allocated an additional $284.4 billion. These loans carry a fixed rate of 1.00% and a term of two years for the majority of the initial loans and for five years on the second round, if not forgiven, in whole or in part. Payments were deferred for the first six months of the loan. The loans are 100% guaranteed by the SBA. The SBA paid the Bank a processing fee based on the size of the loan. The SBA has approved over 2,700 applications as of  February 28, 2021 totaling $340.9 million in loans. The Company had outstanding net PPP loans of $211.3 million at December 31, 2020 and $226.4 million at February 28, 2021. The Bank has received processing fees of $11.2 million on the PPP loans and incurred direct origination costs of $1.8 million. The Company had net unaccreted PPP loan origination fees of $4.4 million at December 31, 2020 and $5.0 at February 28, 2021. From a funding perspective, the Bank utilized core funding sources for these loans. At December 31, 2020 and February 28, 2021, respectively, the SBA had forgiven $56.4 million and $105.8 million of PPP loans. These PPP loans are guaranteed by the SBA and, therefore, do not have a related allowance.

The loan portfolio consists primarily of commercial and residential real estate loans, commercial loans to small and medium-sized businesses, construction and land development loans, and home equity loans. At December 31, 2020, the commercial real estate portfolio included concentrations of $75,235,000, $44,738,000 and $190,840,000 in hotel, restaurants, and retail, respectively. The concentrations total 15.5% of total loans, excluding loans in process.

The Company had $387,000 and $161,000 in residential real estate loans in the process of foreclosure at December  31, 2020 and December  31, 2019, respectively, and had $285,000 in residential OREO at both December  31, 2020 and December  31, 2019.

Risk Ratings

The following tables show the Company's loan portfolio broken down by internal risk grading as of December 31, 2020 (dollars in thousands):

Commercial and Consumer Credit Exposure

Credit Risk Profile by Internally Assigned Grade

	Commercial		Construction and Land Development		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-owner Occupied		Residential Real Estate		Home Equity
Pass	$	479,416	$	131,770	$	350,376	$	612,688	$	262,677	$	104,608
Special Mention		10,956		2,505		14,621		9,196		3,665		—
Substandard		865		5,796		8,474		5,563		2,795		273
Doubtful		19		—		209		122		—		—
Total	$	491,256	$	140,071	$	373,680	$	627,569	$	269,137	$	104,881

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity

	Consumer
Performing	$	8,456
Nonperforming		6
Total	$	8,462

Loans classified in the Pass category typically are fundamentally sound, and risk factors are reasonable and acceptable.

Loans classified in the Special Mention category typically have been criticized internally, by loan review or the loan officer, or by external regulators under the current credit policy regarding risk grades.

Loans classified in the Substandard category typically have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are typically characterized by the possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Loans classified in the Doubtful category typically have all the weaknesses inherent in loans classified as substandard, plus the added characteristic the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur that may salvage the debt.

Consumer loans are classified as performing or nonperforming. A loan is nonperforming when payments of interest and principal are past due 90 days or more.

The following tables show the Company's loan portfolio broken down by internal risk grading as of December 31, 2019 (dollars in thousands):

Commercial and Consumer Credit Exposure

Credit Risk Profile by Internally Assigned Grade

	Commercial		Construction and Land Development		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-owner Occupied		Residential Real Estate		Home Equity
Pass	$	328,488	$	130,694	$	340,696	$	519,919	$	316,454	$	118,960
Special Mention		8,710		4,133		13,094		9,023		4,370		—
Substandard		1,144		3,093		7,200		9,267		3,491		463
Doubtful		735		—		—		—		—		—
Total	$	339,077	$	137,920	$	360,990	$	538,209	$	324,315	$	119,423

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity

	Consumer
Performing	$	10,877
Nonperforming		4
Total	$	10,881

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Note 6 - Allowance for Loan Losses and Reserve for Unfunded Lending Commitments

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Allowance for Credit Losses [Text Block]

Note 6 – Allowance for Loan Losses and Reserve for Unfunded Lending Commitments

Changes in the allowance for loan losses and the reserve for unfunded lending commitments (included in other liabilities) for each of the years in the three-year period ended December 31, 2020, are presented below (dollars in thousands):

	Year Ended December 31,
	2020			2019			2018
Allowance for Loan Losses
Balance, beginning of year	$	13,152		$	12,805		$	13,603
Provision for (recovery of) loan losses		8,916			456			(103	)
Charge-offs		(1,006	)		(333	)		(1,020	)
Recoveries		341			224			325
Balance, end of year	$	21,403		$	13,152		$	12,805

	Year Ended December 31,
	2020			2019		2018
Reserve for Unfunded Lending Commitments
Balance, beginning of year	$	329		$	217	$	206
Provision for (recovery of) unfunded commitments		(25	)		112		11
Charge-offs		—			—		—
Balance, end of year	$	304		$	329	$	217

The reserve for unfunded loan commitments is included in other liabilities, and the provision for unfunded commitments is included in noninterest expense. The following table presents the Company's allowance for loan losses by portfolio segment and the related loan balance total by segment for the year ended December 31, 2020 (dollars in thousands):

	Commercial (1)			Construction and Land Development		Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-owner Occupied			Residential Real Estate			Consumer			Total
Allowance for Loan Losses
Balance at December 31, 2019	$	2,657		$	1,161	$	2,474		$	3,781		$	3,023		$	56		$	13,152
Charge-offs		(505	)		—		(17	)		(165	)		(117	)		(202	)		(1,006	)
Recoveries		65			2		12			50			85			127			341
Provision		1,156			764		1,871			3,960			1,076			89			8,916
Balance at December 31, 2020	$	3,373		$	1,927	$	4,340		$	7,626		$	4,067		$	70		$	21,403
Balance at December 31, 2020:
Allowance for Loan Losses
Individually evaluated for impairment	$	29		$	—	$	—		$	—		$	1		$	—		$	30
Collectively evaluated for impairment		3,318			1,927		4,138			7,185			3,896			70			20,534
Purchased credit impaired loans		26			—		202			441			170			—			839
Total	$	3,373		$	1,927	$	4,340		$	7,626		$	4,067		$	70		$	21,403
Loans
Individually evaluated for impairment	$	57		$	—	$	286		$	1,270		$	1,239		$	—		$	2,852
Collectively evaluated for impairment		490,736			139,833		360,579			616,498			365,967			8,390			1,982,003
Purchased credit impaired loans		463			238		12,815			9,801			6,812			72			30,201
Total	$	491,256		$	140,071	$	373,680		$	627,569		$	374,018		$	8,462		$	2,015,056

__________________________

(1) Includes PPP loans, which are guaranteed by the SBA and have no related allowance.

The following table presents the Company's allowance for loan losses by portfolio segment and the related loan balance total by segment for the year ended December 31, 2019 (dollars in thousands):

	Commercial			Construction and Land Development		Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-owner Occupied		Residential Real Estate			Consumer			Total
Allowance for Loan Losses
Balance at December 31, 2018	$	2,537		$	1,059	$	2,420		$	3,767	$	2,977		$	45		$	12,805
Charge-offs		(12	)		—		(6	)		—		(70	)		(245	)		(333	)
Recoveries		13			—		9			—		58			144			224
Provision		119			102		51			14		58			112			456
Balance at December 31, 2019	$	2,657		$	1,161	$	2,474		$	3,781	$	3,023		$	56		$	13,152
Balance at December 31, 2019:
Allowance for Loan Losses
Individually evaluated for impairment	$	204		$	—	$	—		$	—	$	26		$	—		$	230
Collectively evaluated for impairment		2,448			1,161		2,444			3,781		2,794			56			12,684
Purchased credit impaired loans		5			—		30			—		203			—			238
Total	$	2,657		$	1,161	$	2,474		$	3,781	$	3,023		$	56		$	13,152
Loans
Individually evaluated for impairment	$	784		$	—	$	—		$	502	$	906		$	—		$	2,192
Collectively evaluated for impairment		337,312			137,522		346,233			520,541		433,121			10,866			1,785,595
Purchased credit impaired loans		981			398		14,758			17,165		9,711			15			43,028
Total	$	339,077		$	137,920	$	360,991		$	538,208	$	443,738		$	10,881		$	1,830,815

The allowance for loan losses is allocated to loan segments based upon historical loss factors, risk grades on individual loans, portfolio analysis of smaller balance, homogenous loans, and qualitative factors. Qualitative factors include trends in delinquencies, nonaccrual loans, and loss rates; trends in volume and terms of loans, effects of changes in risk selection, underwriting standards, and lending policies; experience of lending officers, other lending staff and loan review; national, regional, and local economic trends and conditions; legal, regulatory and collateral factors; and concentrations of credit.

The provision for loan losses for the 2020 period reflects an increase in the allowance based on a qualitative assessment of the declining and uncertain economic landscape in the wake of the COVID-19 pandemic. Sharp declines in employment, gross national product, housing and auto sales, housing starts and business activity in general indicate a higher risk of probable losses in the Bank's portfolio. The Bank has been actively working with borrowers at risk who were impacted by the stay-at-home orders, utilizing its DAP to include short-term deferments of principal and interest and short-term acceptance of interest-only payments. Many of the Bank's customers have applied for and received PPP loans. Management will continue to evaluate the adequacy of the Company's allowance for loan losses as more economic data becomes available and as changes within the Company's portfolio are known. The effects of the pandemic may require further changes in the level of allowance.

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Note 7 - Premises and Equipment

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

Note 7 – Premises and Equipment

Major classifications of premises and equipment at December 31, 2020 and 2019 are summarized as follows (dollars in thousands):

	December 31,
	2020			2019
Land	$	10,267		$	10,421
Buildings		36,173			36,247
Leasehold improvements		1,160			1,469
Furniture and equipment		19,424			17,695
		67,024			65,832
Accumulated depreciation		(27,301	)		(25,984	)
Premises and equipment, net	$	39,723		$	39,848

Depreciation expense for the years ended December 31, 2020, 2019, and 2018 was $2,188,000, $2,064,000, and $1,775,000, respectively.

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Note 8 - Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Note 8 – Goodwill and Other Intangible Assets

The Company records as goodwill the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Impairment testing is performed annually, as well as when an event triggering impairment may have occurred. On January 1, 2020, the Company adopted ASU 2017-04, which simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the previous two-step impairment test. Under the new guidance, if a reporting unit's carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates the prior requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount. The Company performs its annual analysis as of June 30 each fiscal year. Due to the COVID-19 pandemic market conditions, the Company determined a triggering event occurred during the first quarter of 2020 and performed a qualitative assessment at March 31, 2020 and as the pandemic continued performed qualitative assessments at June 30 and September 30 and a quantitative assessment at December 31, 2020 and determined no impairment was indicated. The impact of COVID-19 on market conditions and other changes in the economic environment, operations, or other adverse events could result in future impairment charges which could have a material adverse impact on the Company's operating results. No indicators of impairment were identified during the years ended December 31, 2019 or 2018.

Core deposit intangibles resulting from the MidCarolina acquisition in July 2011 were $6,556,000 and became fully amortized at June 30, 2020. Core deposit intangibles resulting from the MainStreet Bankshares, Inc. acquisition in January 2015 were $1,839,000 and are being amortized on an accelerated basis over 120 months. Core deposit intangibles resulting from the acquisition of HomeTown in April 2019 were $8,200,000 and are being amortized on an accelerated basis over 120 months.

The changes in the carrying amount of goodwill and intangibles for the twelve months ended December 31, 2020, are as follows (dollars in thousands):

	Goodwill		Intangibles
Balance at December 31, 2019	$	84,002	$	7,728
Measurement period adjustments		1,046		—
Amortization		—		(1,637	)
Balance at December 31, 2020	$	85,048	$	6,091

Goodwill and intangible assets at December 31, 2020 and 2019 are as follows (dollars in thousands):

	Gross Carrying		Accumulated			Net Carrying
	Value		Amortization			Value
December 31, 2020
Core deposit intangibles	$	19,708	$	(13,617	)	$	6,091
Goodwill		85,048		—			85,048
December 31, 2019
Core deposit intangibles	$	19,708	$	(11,980	)	$	7,728
Goodwill		84,002		—			84,002

Amortization expense of core deposit intangibles for the years ended December 31, 2020, 2019, and 2018 was $1,637,000, $1,398,000, and $265,000, respectively.  As of December 31, 2020, the estimated future amortization expense of core deposit intangibles is as follows (dollars in thousands):

Year	Amount
2021	$	1,464
2022		1,260
2023		1,069
2024		800
2025		617
2026 and after		881
Total	$	6,091

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Note 9 - Leases

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

Note 9 – Leases

On January 1, 2019, the Company adopted ASU No. 2016-02 "Leases (Topic 842)" and all subsequent ASUs that modified Topic 842. The Company elected the prospective application approach provided by ASU 2018-11 and did not adjust prior periods for ASC 842. The Company also elected certain practical expedients within the standard and, consistent with such elections, did not reassess whether any expired or existing contracts are or contain leases, did not reassess the lease classification for any expired or existing leases, and did not reassess any initial direct costs for existing leases. The implementation of the new standard resulted in recognition of a right-of-use asset and lease liability of $4.4 million at the date of adoption, which is related to the Company's lease of premises used in operations. In connection with the HomeTown merger in 2019, the Company added $1.8 million to the right-of-use asset and lease liability. The aggregate right-of-use asset and lease liability are included in other assets and other liabilities, respectively, in the Company's consolidated balance sheets.

Lease liabilities represent the Company's obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company's incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company's right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor.

The Company's long-term lease agreements are classified as operating leases. Certain of these leases offer the option to extend the lease term, and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

The following tables present information about the Company's leases as of and for the years ended December 31, 2020 and December 31, 2019 (dollars in thousands):

	December 31, 2020			December 31, 2019
Lease liabilities	$	4,940		$	5,369
Right-of-use assets	$	4,878		$	5,340
Weighted average remaining lease term (in years)		7.33			8.17
Weighted average discount rate		3.03	%		3.21	%

	Year Ended December 31, 2020		Year Ended December 31, 2019
Lease cost
Operating lease cost	$	993	$	1,040
Short-term lease cost		3		3
Total lease cost	$	996	$	1,043
Cash paid for amounts included in the measurement of lease liabilities	$	959	$	1,013

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities is as follows (dollars in thousands):

Lease payments due	As of December 31, 2020
2021	$	1,048
2022		1,044
2023		945
2024		516
2025		473
2026 and after		1,549
Total undiscounted cash flows	$	5,575
Discount		(635	)
Lease liabilities	$	4,940

Lease expense, a component of occupancy and equipment expense, for the years ended December 31, 2020, 2019, and 2018 was $1,158,000, $1,187,000, and $919,000, respectively. The amounts recognized in lease expense include insurance, property taxes, and common area maintenance.

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Note 10 - Deposits

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Deposit Liabilities Disclosures [Text Block]

Note 10 - Deposits

The aggregate amount of time deposits in denominations of $250,000 or more at December 31, 2020 and 2019 was $170,089,000 and $200,712,000, respectively.

At December 31, 2020, the scheduled maturities and amounts of certificates of deposits (included in interest-bearing deposits on the consolidated balance sheets) were as follows (dollars in thousands):

Year	Amount
2021	$	271,868
2022		58,544
2023		31,486
2024		15,596
2025		13,898
2026 and after		5,034
Total	$	396,426

There were no brokered time deposits at December 31, 2020 or December 31, 2019. Time deposits through the Certificate of Deposit Account Registry Service ("CDARS") program totaled $4,342,000 at December 31, 2020 compared to $14,864,000 at  December 31, 2019. Deposits through the CDARS program are generated from major customers with substantial relationships with the Bank.

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Note 11 - Short-term Borrowings

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Short-term Debt [Text Block]

Note 11 – Short-term Borrowings

Short-term borrowings consist of customer repurchase agreements, overnight borrowings from the FHLB, and federal funds purchased. The Company has federal funds lines of credit established with correspondent banks in the amount of $60,000,000 and has access to the Federal Reserve Bank of Richmond's discount window. Customer repurchase agreements are collateralized by securities of the U.S. Government, its agencies or GSEs. They mature daily. The interest rates are generally fixed but may be changed at the discretion of the Company. The securities underlying these agreements remain under the Company's control. FHLB overnight borrowings contain floating interest rates that may change daily at the discretion of the FHLB. Short-term borrowings consisted solely of the following at December 31, 2020 and 2019 (dollars in thousands):

	December 31, 2020					December 31, 2019
	Amount		Weighted Average Rate			Amount		Weighted Average Rate
Customer repurchase agreements	$	42,551		0.13	%	$	40,475		1.40	%

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Note 12 - Long-term Borrowings

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Long-term Debt [Text Block]

Note 12 – Long-term Borrowings

Under the terms of its collateral agreement with the FHLB, the Company provides a blanket lien covering all of its residential first mortgage loans, second mortgage loans, home equity lines of credit, and commercial real estate loans. In addition, the Company pledges as collateral its capital stock in the FHLB and deposits with the FHLB. The Company has a line of credit with the FHLB equal to 30% of the Company's assets, subject to the amount of collateral pledged. As of December 31, 2020, $897,979,000 in eligible collateral was pledged under the blanket floating lien agreement which covers both short-term and long-term borrowings.

There were no long-term borrowings as of December 31, 2020 or 2019.

In the regular course of conducting its business, the Company takes deposits from political subdivisions of the states of Virginia and North Carolina. At December 31, 2020, the Bank's public deposits totaled $326,774,000. The Company is required to provide collateral to secure the deposits that exceed the insurance coverage provided by the FDIC. This collateral can be provided in the form of certain types of government or agency bonds or letters of credit from the FHLB. At December 31, 2020, the Company had $245,000,000 in letters of credit with the FHLB outstanding as well as $136,213,000 in agency, state, and municipal securities to provide collateral for such deposits.

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Note 13 - Subordinated Debt

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Subordinated Borrowings Disclosure [Text Block]

Note 13 – Subordinated Debt 

On April 1, 2019, in connection with the HomeTown merger, the Company assumed $7,500,000 in aggregate principal amount of fixed-to-floating rate subordinated notes issued to various institutional accredited investors. The notes have a maturity date of December 30, 2025 and had an annual fixed interest rate of 6.75% until December 30, 2020. Thereafter, the notes have a floating interest rate based on LIBOR. Interest was paid semi-annually, in arrears, on June 30 and December 30 of each year during the fixed interest rate period. Interest will be paid quarterly, in arrears, on March 30, June 30, September 30, and December 30 throughout the floating interest rate period or earlier redemption date.

The indebtedness evidenced by the notes, including principal and interest, is unsecured and subordinate and junior in right of the Company's payments to general and secured creditors and depositors of the Bank. The notes are redeemable, without penalty, on or after December 30, 2020 and were redeemable in certain limited circumstances prior to that date. The notes limit the Company from declaring or paying any dividend, or making any distribution on capital stock or other equity securities of any kind of the Company if the Company is not "well capitalized" for regulatory purposes, immediately prior to the declaration of such dividend or distribution, except for dividends payable solely in shares of common stock of the Company.

The carrying value of the subordinated debt included a fair value adjustment of $17,000 at December 31, 2019. The original fair value adjustment of $30,000 was recorded as a result of the acquisition of HomeTown on April 1, 2019, and was amortized into interest expense through December 30, 2020.

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Note 14 - Junior Subordinated Debt

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Trust Preferred Capital Notes [Text Block]

Note 14 – Junior Subordinated Debt

On April 7, 2006, AMNB Statutory Trust I, a Delaware statutory trust and a wholly owned subsidiary of the Company, issued $20,000,000 of preferred securities in a private placement pursuant to an applicable exemption from registration. The Trust Preferred Securities mature on June 30, 2036, but may be redeemed at the Company's option beginning on September 30, 2011. Initially, the securities required quarterly distributions by the trust to the holder of the Trust Preferred Securities at a fixed rate of 6.66%. Effective September 30, 2011, the rate resets quarterly at the three-month LIBOR plus 1.35%. Distributions are cumulative and accrue from the date of original issuance but may be deferred by the Company from time to time for up to 20 consecutive quarterly periods. The Company has guaranteed the payment of all required distributions on the Trust Preferred Securities. The proceeds of the Trust Preferred Securities received by the trust, along with proceeds of $619,000 received by the trust from the issuance of common securities by the trust to the Company, were used to purchase $20,619,000 of the Company's junior subordinated debt securities (the "Trust Preferred Capital Notes"), issued pursuant to a junior subordinated debenture entered into between the Company and Wilmington Trust Company, as trustee. The proceeds of the Trust Preferred Securities were used to fund the cash portion of the merger consideration to the former shareholders of Community First in connection with the Company's acquisition of that company, and for general corporate purposes.

On July 1, 2011, in connection with the MidCarolina merger, the Company assumed $8,764,000 in junior subordinated debentures to the MidCarolina Trusts, to fully and unconditionally guarantee the preferred securities issued by the MidCarolina Trusts. These long-term obligations, which currently qualify as Tier 1 capital, constitute a full and unconditional guarantee by the Company of the MidCarolina Trusts' obligations. The MidCarolina Trusts are not consolidated in the Company's financial statements.

In accordance with ASC 810-10-15-14, Consolidation - Overall - Scope and Scope Exceptions, the Company did not eliminate through consolidation the Company's $619,000 equity investment in AMNB Statutory Trust I or the $264,000 equity investment in the MidCarolina Trusts. Instead, the Company reflected these equity investments in other assets in the Company's consolidated balance sheets. .

A description of the junior subordinated debt securities outstanding payable to the trusts is shown below (dollars in thousands):

				Principal Amount
				As of December 31,
Issuing Entity	Date Issued	Interest Rate	Maturity Date	2020		2019
AMNB Trust I	4/7/2006	Libor plus 1.35%	6/30/2036	$	20,619	$	20,619
MidCarolina Trust I	10/29/2002	Libor plus 3.45%	11/7/2032		4,489		4,433
MidCarolina Trust II	12/3/2003	Libor plus 2.95%	10/7/2033		3,022		2,977
				$	28,130	$	28,029

The principal amounts reflected above for the MidCarolina Trusts are net of fair value adjustments of $666,000 and $587,000 at December 31, 2020 and $722,000 and $632,000 at  December 31, 2019, respectively. The original fair value adjustments of $1,197,000 and $1,021,000 were recorded as a result of the acquisition of MidCarolina on July 1, 2011, and are being amortized into interest expense over the remaining lives of the respective borrowings.

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Note 15 - Derivative Financial Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 15 - Derivative Financial Instruments and Hedging Activities

The Company uses derivative financial instruments ("derivatives") primarily to manage risks associated with changing interest rates. The Company's derivatives are hedging instruments in a qualifying hedge accounting relationship (cash flow or fair value hedge).

The Company designates derivatives as cash flow hedges when they are used to manage exposure to variability in cash flows on variable rate borrowings such as the Company's Trust Preferred Capital Notes. The Company uses interest rate swap agreements as part of its hedging strategy by exchanging variable-rate interest payments on a notional amount equal to the principal amount of the borrowings for fixed-rate interest payments, with such interest rates set based on benchmarked interest rates.

All interest rate swaps were entered into with counterparties that met the Company's credit standards and the agreements contain collateral provisions protecting the at-risk party. The Company believes that the credit risk inherent in these derivative contracts is not significant.

Terms and conditions of the interest rate swaps vary and amounts receivable or payable are recognized as accrued under the terms of the agreements. The Company assesses the effectiveness of each hedging relationship on a periodic basis. In accordance with ASC 815, Derivatives and Hedging, the effective portions of the derivatives' unrealized gains or losses are recorded as a component of other comprehensive income. Based on the Company's assessment, its cash flow hedges are highly effective, but to the extent that any ineffectiveness exists in the hedge relationships, the amounts would be recorded in the Company's consolidated statements of income.

(Dollars in thousands)	December 31, 2020
	Notional Amount		Positions		Assets		Liabilities		Cash Collateral Pledged
Cash flow hedges:
Interest rate swaps:
Variable-rate to fixed-rate swaps with counterparty	$	28,500	$	3	$	—	$	4,868	$	5,750

(Dollars in thousands)	December 31, 2019
	Notional Amount		Positions		Assets		Liabilities		Cash Collateral Pledged
Cash flow hedges:
Interest rate swaps:
Variable-rate to fixed-rate swaps with counterparty	$	28,500	$	3	$	—	$	2,658	$	3,450

In addition, the Company has commitments to fund certain mortgage loans (interest rate lock commitments) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors which are considered derivatives. It is the Company's practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of change in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships.

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Note 16 - Stock-based Compensation

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note 16 – Stock-Based Compensation

The Company's 2018 Stock Incentive Plan (the "2018 Plan") was adopted by the Board of Directors of the Company on February 20, 2018 and approved by shareholders on May 15, 2018 at the Company's 2018 Annual Meeting of Shareholders. The 2018 Plan provides for the granting of restricted stock awards, incentive and non-statutory options, and other equity-based awards to employees and directors at the discretion of the Compensation Committee of the Board of Directors. The 2018 Plan authorizes the issuance of up to 675,000 shares of common stock. The 2018 Plan replaced the Company's stock incentive plan that was approved by the shareholders at the 2008 Annual Meeting that expired in February 2018.

Stock Options

Accounting guidance requires that compensation cost relating to share-based payment transactions be recognized in the financial statements with measurement based upon the fair value of the equity or liability instruments issued.

A summary of stock option transactions for the year ended December 31, 2020 is as follows:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	Option			Exercise		Contractual Term		Value
	Shares			Price		(In Years)		($000)
Outstanding at December 31, 2019		13,944		$	16.63
Granted		—			—
Exercised		(2,573	)		16.63
Forfeited		(830	)		16.63
Expired		—			—
Outstanding at December 31, 2020		10,541		$	16.63		3.97	$	101
Exercisable at December 31, 2020		10,541		$	16.63		3.97	$	101

The aggregate intrinsic value of stock options in the table above represents the total pre-tax intrinsic value (the amount by which the current fair value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on December 31, 2020. This amount changes based on changes in the fair value of the Company's common stock.

The total proceeds of the in-the-money options exercised during the years ended December 31, 2020, 2019, and 2018 were $43,000, $688,000, and $861,000, respectively. Total intrinsic value of options exercised during the years ended December 31, 2020, 2019, and 2018 was $42,000, $616,000, and $732,000, respectively.

In connection with the HomeTown acquisition, there was $147,000 in recognized stock compensation expense attributable to outstanding stock options in the year ended December 31, 2019. There was no recognized stock compensation expense attributable to outstanding stock options in 2020 and 2018. As of December 31, 2020, 2019, and 2018, there was no unrecognized compensation expense attributable to the outstanding stock options.

The following table summarizes information related to stock options outstanding on December 31, 2020:

Options Outstanding and Exercisable
			Weighted-Average
	Number of		Remaining
Range of	Outstanding		Contractual Life		Weighted-Average
Exercise Prices	Options		(In Years)		Exercise Price
$15.00 to $20.00		10,541		3.97	$	16.63

No stock options were granted in 2020, 2019 and 2018.

Restricted Stock

The Company from time-to-time grants shares of restricted stock to key employees and non-employee directors. These awards help align the interests of these employees and directors with the interests of the shareholders of the Company by providing economic value directly related to increases in the value of the Company's common stock. The value of the stock awarded is established as the fair market value of the stock at the time of the grant. The Company recognizes expense, equal to the total value of such awards, ratably over the vesting period of the stock grants. Restricted stock granted in 2020 cliff vests at the end of a 36-month period beginning on the date of grant. Nonvested restricted stock activity for the year ended December 31, 2020 is summarized in the following table:

				Weighted
				Average Grant
	Shares			Date Value Per Share
Nonvested at December 31, 2019		57,271		$	34.84
Granted		26,010			34.42
Vested		(19,526	)		34.50
Forfeited		(5,216	)		34.29
Nonvested at December 31, 2020		58,539			34.81

As of December 31, 2020, 2019, and 2018, there was $797,000, $751,000, and $647,000, respectively, in unrecognized compensation cost related to nonvested restricted stock granted under the 2018 Plan. This cost is expected to be recognized over the next 12 to 36 months. The share based compensation expense for nonvested restricted stock was $672,000, $915,000, and $610,000 during 2020, 2019, and 2018, respectively. The expense for 2019 included $257,000 of accelerated compensation expense as a result of the HomeTown merger.

Starting in 2010, the Company began offering its outside directors alternatives with respect to director compensation. For 2020, the regular quarterly board retainer could be received in the form of shares of immediately vested but restricted stock with a market value of $10,000. Monthly meeting fees could be received as $800 per meeting in cash or $1,000 in immediately vested but restricted stock. For 2019, the regular monthly board retainer could be received quarterly in the form of immediately vested but restricted stock with a market value of $7,500. Monthly meeting fees could be received as $725 per meeting in cash or $900 in immediately vested but restricted stock. Only outside directors receive board fees. The Company issued 27,986, 17,373 and 15,471 shares and recognized share based compensation expense of $779,000, $626,000, and $586,000 during 2020, 2019 and 2018, respectively.

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Note 17 - Income Taxes

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 17 – Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and the states of Virginia and North Carolina. With few exceptions, the Company is no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years prior to 2017.

The components of the Company's net deferred tax assets were as follows (dollars in thousands):

	December 31,
	2020		2019
Deferred tax assets:
Allowance for loan losses	$	4,636	$	2,841
Nonaccrual loan interest		507		490
Other real estate owned valuation allowance		124		120
Deferred compensation		159		1,184
Acquisition accounting adjustments		3,404		3,670
Lease liability, net of right of use asset		13		—
Accrued pension liability		447		50
NOL Carryforward		—		456
Net unrealized loss on cash flow hedges		1,022		573
Other		318		601
Total deferred tax assets		10,630		9,985
Deferred tax liabilities:
Depreciation		1,352		1,079
Core deposit intangibles		1,315		1,669
Accrued pension liability		213		—
Deferred loan origination costs, net		533		258
Net unrealized gain on securities available for sale		2,180		541
Other		32		574
Total deferred tax liabilities		5,625		4,121
Net deferred tax assets	$	5,005	$	5,864

The provision for income taxes consists of the following (dollars in thousands):

	Year Ended December 31,
	2020			2019		2018
Current tax expense	$	7,777		$	3,793	$	5,090
Deferred tax expense		(640	)		1,068		556
Total income tax expense	$	7,137		$	4,861	$	5,646

A reconcilement of the "expected" federal income tax expense to reported income tax expense is as follows (dollars in thousands):

	Year Ended December 31,
	2020			2019			2018
Expected federal tax expense	$	7,808		$	5,411		$	5,927
Nondeductible interest expense		31			67			69
Tax-exempt interest		(259	)		(478	)		(504	)
State income taxes		207			149			337
Other, net		(650	)		(288	)		(183	)
Total income tax expense	$	7,137		$	4,861		$	5,646

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Note 18 - Earnings Per Common Share

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Earnings Per Share [Text Block]

Note 18 – Earnings Per Common Share

The following shows the weighted average number of shares used in computing earnings per common share and the effect on the weighted average number of shares of potentially dilutive common stock. Potentially dilutive common stock had no effect on income available to common shareholders. Nonvested restricted shares are included in the computation of basic earnings per share as the holder is entitled to full shareholder benefits during the vesting period including voting rights and sharing in nonforfeitable dividends.

	Year Ended December 31,
	2020					2019					2018
			Per Share					Per Share					Per Share
	Shares		Amount			Shares		Amount			Shares		Amount
Basic earnings per share		10,981,623	$	2.74			10,531,572	$	1.99			8,698,014	$	2.60
Effect of dilutive securities - stock options		4,167		(0.01	)		9,765		(0.01	)		10,448		(0.01	)
Diluted earnings per share		10,985,790	$	2.73			10,541,337	$	1.98			8,708,462	$	2.59

Outstanding stock options on common stock, which were not included in computing diluted earnings per share in 2020, 2019, and 2018 because their effects were anti-dilutive, were zero shares for 2020, 2019, and 2018.

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Note 19 - Off-balance Sheet Activities

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Off-balance Sheet Activities [Text Block]

Note 19 – Off-Balance Sheet Activities

The Company is party to credit-related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if applicable, is based on management's credit evaluation of the customer.

The Company's exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments.

The following off-balance sheet financial instruments whose contract amounts represent credit risk were outstanding at December 31, 2020 and 2019 (dollars in thousands):

	December 31,
	2020		2019
Commitments to extend credit	$	503,272	$	557,364
Standby letters of credit		17,355		13,611
Mortgage loan rate lock commitments		26,883		10,791

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments generally consist of unused portions of lines of credit issued to customers. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

At December 31, 2020, the Company had locked-rate commitments to originate mortgage loans amounting to approximately $26,883,000 and loans held for sale of $15,591,000. Risks arise from the possible inability of counterparties to meet the terms of their contracts, though the Company has never experienced a failure of one of its counterparties to perform. If a loan becomes past due 90 days within 180 days of sale, the Company would be required to repurchase the loan.

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Note 20 - Related Party Transactions

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note 20 – Related Party Transactions

In the ordinary course of business, loans are granted to executive officers, directors, and their related entities. Management believes that all such loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans to similar, unrelated borrowers, and do not involve more than a normal risk of collectibility or present other unfavorable features. As of December 31, 2020 and 2019, none of these loans was restructured, past due, or on nonaccrual status.

An analysis of these loans for 2020 is as follows (dollars in thousands):

Balance at December 31, 2019	$	9,594
Additions		3,751
Repayments		(4,760	)
Reclassifications(1)		(63	)
Balance at December 31, 2020	$	8,522

__________________________

(1) Includes loans to persons no longer affiliated with the Company and therefore not considered related party loans as of period end.

Related party deposits totaled $16,436,000 at December 31, 2020 and $14,741,000 at December 31, 2019.

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Note 21 - Employee Benefit Plans

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Retirement Benefits [Text Block]

Note 21 – Employee Benefit Plans

Defined Benefit Plan

The Company previously maintained a non-contributory defined benefit pension plan which covered substantially all employees who were 21 years of age or older and who had at least one year of service. The Company froze its pension plan to new participants and converted its pension plan to a cash balance plan effective December 31, 2009. Each year, existing participants will receive, with some adjustments, income based on the yield of the 10 year U.S. Treasury Note in December of the preceding year. Information pertaining to the activity in the plan is as follows (dollars in thousands):

	As of and for the Year Ended December 31,
	2020			2019			2018
Change in Benefit Obligation:
Projected benefit obligation at beginning of year	$	6,262		$	5,812		$	8,313
Service cost		—			—			—
Interest cost		152			209			235
Actuarial (gain) loss		814			489			(782	)
Settlement gain (loss)		44			(12	)		(120	)
Benefits paid		(1,451	)		(236	)		(1,834	)
Projected benefit obligation at end of year		5,821			6,262			5,812
Change in Plan Assets:
Fair value of plan assets at beginning of year		5,915			5,653			7,556
Actual return (loss) on plan assets		237			498			(69	)
Benefits paid		(1,451	)		(236	)		(1,834	)
Fair value of plan assets at end of year		4,701			5,915			5,653
Funded Status at End of Year	$	(1,120	)	$	(347	)	$	(159	)
Amounts Recognized in the Consolidated Balance Sheets
Other liabilities	$	(1,120	)	$	(347	)	$	(159	)
Amounts Recognized in Accumulated Other Comprehensive Loss
Net actuarial loss	$	2,071		$	1,658		$	1,594
Deferred income taxes		(435	)		(358	)		(357	)
Amount recognized	$	1,636		$	1,300		$	1,237

	As of and for the Year Ended December 31,
	2020			2019			2018
Components of Net Periodic Benefit Cost
Service cost	$	—		$	—		$	—
Interest cost		152			209			235
Expected return on plan assets		(285	)		(269	)		(353	)
Recognized net loss due to settlement		352			52			540
Recognized net actuarial loss		140			133			272
Net periodic benefit cost	$	359		$	125		$	694
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income) Loss
Net actuarial (gain) loss	$	413		$	64		$	(1,291	)
Amortization of prior service cost		—			—			—
Total recognized in other comprehensive (income) loss	$	413		$	64		$	(1,291	)
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive (Income) Loss	$	772		$	189		$	(597	)

The accumulated benefit obligation as of December 31, 2020, 2019, and 2018 was $5,821,000, $6,262,000, and $5,812,000, respectively. The rate of compensation increase is no longer applicable since the defined benefit plan was frozen and converted to a cash balance plan.

The plan sponsor selected the expected long-term rate-of-return-on-assets assumption in consultation with their investment advisors and actuary. This rate was intended to reflect the average rate of earnings expected to be earned on the funds invested or to be invested to provide plan benefits. Historical performance is reviewed, especially with respect to real rates of return (net of inflation), for the major asset classes held or anticipated to be held by the trust, and for the trust itself. Undue weight is not given to recent experience that may not continue over the measurement period, with higher significance placed on current forecasts of future long-term economic conditions.

Because assets are held in a qualified trust, anticipated returns are not reduced for taxes. Further, solely for this purpose, the plan is assumed to continue in force and not terminate during the period in which assets are invested. However, consideration is given to the potential impact of current and future investment policy, cash flow into and out of the trust, and expenses (both investment and non-investment) typically paid from plan assets (to the extent such expenses are not explicitly estimated within periodic cost).

Below is a description of the plan's assets. The plan's weighted-average asset allocations by asset category are as follows as of December 31, 2020 and 2019:

Asset Category	December 31,
	2020			2019
Fixed Income		65.6	%		61.8	%
Equity		31.5	%		27.5	%
Cash and Accrued Income		2.9	%		10.7	%
Total		100.0	%		100.0	%

The investment policy and strategy for plan assets can best be described as a growth and income strategy. Diversification is accomplished by limiting the holding of any one equity issuer to no more than 5% of total equities. Exchange traded funds are used to provide diversified exposure to the small capitalization and international equity markets. All fixed income investments are rated as investment grade, with the majority of these assets invested in corporate issues. The assets are managed by the Company's Trust and Investment Services Division. No derivatives are used to manage the assets. Equity securities do not include holdings in the Company.

The fair value of the Company's pension plan assets at December 31, 2020 and 2019, by asset category are as follows (dollars in thousands):

			Fair Value Measurements at December 31, 2020 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Asset Category	2020		Level 1		Level 2		Level 3
Cash	$	138	$	138	$	—	$	—
Fixed income securities
Government sponsored entities		444		—		444		—
Municipal bonds and notes		2,147		—		2,147		—
Corporate bonds and notes		491		—		491		—
Equity securities
U.S. companies		1,259		1,259		—		—
Foreign companies		222		222		—		—
	$	4,701	$	1,619	$	3,082	$	—

			Fair Value Measurements at December 31, 2019 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Asset Category	2019		Level 1		Level 2		Level 3
Cash	$	636	$	636	$	—	$	—
Fixed income securities
Government sponsored entities		1,648		—		1,648		—
Municipal bonds and notes		1,792		—		1,792		—
Corporate bonds and notes		212		—		212		—
Equity securities
U.S. companies		1,385		1,385		—		—
Foreign companies		242		242		—		—
	$	5,915	$	2,263	$	3,652	$	—

Projected benefit payments for the years 2021 to 2030 are as follows (dollars in thousands):

Year	Amount
2021	$	629
2022		381
2023		910
2024		252
2025		1,204
2026 - 2030		2,390

401(k) Plan

The Company maintains a 401(k) plan that covers substantially all full-time employees of the Company. The Company matches a portion of the contribution made by employee participants after at least one year of service. The Company contributed $1,038,000, $932,000, and $778,000 to the 401(k) plan in 2020, 2019, and 2018, respectively. These amounts are included in employee benefits expense for the respective years.

Deferred Compensation Arrangements

Prior to 2015, the Company maintained deferred compensation agreements with former employees providing for annual payments to each ranging from $25,000 to $50,000 per year for ten years upon their retirement. The liabilities under these agreements are being accrued over the officers' remaining periods of employment so that, on the date of their retirement, the then-present value of the annual payments would have been accrued. As of December 31, 2020, the Company only had one remaining agreement under which payments are being made to a former officer. The liabilities were $200,000 and $250,000 at December 31, 2020 and 2019, respectively. There was no expense for these agreements for the years ended December 31, 2020, 2019, and 2018. As a result of acquisitions, the Company has various agreements with current and former employees and executives with balances of $5,585,000 and $5,235,000 at December 31, 2020 and 2019, respectively that accrue through eligibility and are payable upon retirement.

Beginning in 2015, certain named executive officers became eligible to participate in a voluntary, nonqualified deferred compensation plan pursuant to which the officers may defer any portion of their annual cash incentive payments. In addition, the Company may make discretionary cash bonus contributions to the deferred compensation plan. Such contributions, if any, are made on an annual basis after the Committee assesses the performance of each of the named executive officers and the Company during the most recently completed fiscal year. The contributions charged to salary expense were $0, $158,000 and $141,000 for the years ended December 31, 2020, 2019 and 2018, respectively.

Incentive Arrangements

The Company maintains a cash incentive compensation plan for officers based on the Company's performance and individual officer goals. The total amount charged to salary expense for this plan was $1,214,000, $1,217,000 and $1,643,000 for the years ended December 31, 2020, 2019, and 2018, respectively.

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Note 22 - Fair Value Measurements

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note 22 – Fair Value Measurements

Determination of Fair Value

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the fair value measurements and disclosures topic of FASB ASC 825, Financial Instruments, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The fair value guidance provides a consistent definition of fair value, which focuses on exit price in the principal or most advantageous market for the asset or liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

Fair Value Hierarchy

In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

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 financial 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).

Loans held for sale: Loans held for sale are carried at fair value. These loans currently consist of 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). Gains and losses on the sale of loans are recorded in current period earnings as a component of mortgage banking income on the Company's consolidated statements of income.

Derivative asset (liability) - cash flow hedges: Cash flow hedges are recorded at fair value on a recurring basis. Cash flow hedges are valued by a third party using significant assumptions that are observable in the market and can be corroborated by market data. All of the Company's cash flow hedges are classified as Level 2.

The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis during the period (dollars in thousands):

			Fair Value Measurements at December 31, 2020 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2020		Level 1		Level 2		Level 3
Assets:
Securities available for sale:
U.S. Treasury	$	34,998	$	—	$	34,998	$	—
Federal agencies and GSEs		106,023		—		106,023		—
Mortgage-backed and CMOs		252,782		—		252,782		—
State and municipal		59,099		—		59,099		—
Corporate		13,189		—		13,189		—
Total securities available for sale	$	466,091	$	—	$	466,091	$	—
Loans held for sale	$	15,591	$	—	$	15,591	$	—
Liabilities:
Derivative - cash flow hedges	$	4,868	$	—	$	4,868	$	—

			Fair Value Measurements at December 31, 2019 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2019		Level 1		Level 2		Level 3
Assets:
Securities available for sale:
U.S. Treasury	$	14,987	$	—	$	14,987	$	—
Federal agencies and GSEs		128,114		—		128,114		—
Mortgage-backed and CMOs		184,240		—		184,240		—
State and municipal		42,154		—		42,154		—
Corporate		9,700		—		9,700		—
Total securities available for sale	$	379,195	$	—	$	379,195	$	—
Loans held for sale	$	2,027	$	—	$	2,027	$	—
Liabilities:
Derivative - cash flow hedges	$	2,658	$	—	$	2,658	$	—

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:

Impaired loans: Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreements will not be collected when due. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan 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 Company's collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal, of one year or less, conducted by an independent, licensed appraiser using observable market data (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of the property is more than one year old and not solely based on observable market comparables or management determines the fair value of the collateral is further impaired below the appraised value, then a Level 3 valuation is considered to measure the fair value. The value of business equipment is based upon an outside appraisal, of one year or less, if deemed significant, or the net book value on the applicable business's financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). 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.

Other real estate owned:  Measurement for fair values for other real estate owned are the same as impaired loans. Any fair value adjustments are recorded in the period incurred as a valuation allowance against OREO with the associated expense included in OREO expense, net on the consolidated statements of income.

The following table summarizes the Company's assets that were measured at fair value on a nonrecurring basis during the period (dollars in thousands):

			Fair Value Measurements at December 31, 2020 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2020		Level 1		Level 2		Level 3
Assets:
Impaired loans, net of valuation allowance	$	268	$	—	$	—	$	268
Other real estate owned, net		958		—		—		958

			Fair Value Measurements at December 31, 2019 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2019		Level 1		Level 2		Level 3
Assets:
Impaired loans, net of valuation allowance	$	759	$	—	$	—	$	759
Other real estate owned, net		1,308		—		—		1,308

Quantitative Information About Level 3 Fair Value Measurements as of  December 31, 2020 and 2019:

Assets	Valuation Technique	Unobservable Input	Range; Weighted Average (1)
Impaired loans	Discounted appraised value	Selling cost	8.00%
	Discounted cash flow analysis	Market rate for borrower (discount rate)	4.13% - 7.20%; 5.19%
Other real estate owned	Discounted appraised value	Selling cost	8.00%

__________________________

(1) Unobservable inputs were weighted by the relative fair value of the impaired loans.

FASB ASC 825, Financial Instruments, requires disclosure about fair value of financial instruments, including those financial assets and financial liabilities that are not required to be measured and reported at fair value on a recurring or nonrecurring basis. ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. Additionally, in accordance with ASU 2016-01, which the Company adopted January 1, 2018 on a prospective basis, the Company uses the exit price notion, rather than the entry price notion, in calculating the fair values of financial instruments not measured at fair value on a recurring basis.

The carrying values and estimated fair values of the Company's financial instruments at December 31, 2020 are as follows (dollars in thousands):

	Fair Value Measurements at December 31, 2020 Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Balance
Financial Assets:
Cash and cash equivalents	$	374,370	$	374,370	$	—	$	—	$	374,370
Securities available for sale		466,091		—		466,091		—		466,091
Restricted stock		8,715		—		8,715		—		8,715
Loans held for sale		15,591		—		15,591		—		15,591
Loans, net of allowance		1,993,653		—		—		1,992,326		1,992,326
Bank owned life insurance		28,482		—		28,482		—		28,482
Accrued interest receivable		7,193		—		7,193		—		7,193
Financial Liabilities:
Deposits	$	2,611,330	$	—	$	2,615,157	$	—	$	2,615,157
Repurchase agreements		42,551		—		42,551		—		42,551
Subordinated debt		7,500		—		7,522		—		7,522
Junior subordinated debt		28,130		—		—		21,696		21,696
Accrued interest payable		778		—		778		—		778
Derivative - cash flow hedges		4,868		—		4,868		—		4,868

The carrying values and estimated fair values of the Company's financial instruments at December 31, 2019 are as follows (dollars in thousands):

	Fair Value Measurements at December 31, 2019 Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Balance
Financial Assets:
Cash and cash equivalents	$	79,582	$	79,582	$	—	$	—	$	79,582
Securities available for sale		379,195		—		379,195		—		379,195
Restricted stock		8,630		—		8,630		—		8,630
Loans held for sale		2,027		—		2,027		—		2,027
Loans, net of allowance		1,817,663		—		—		1,818,655		1,818,655
Bank owned life insurance		27,817		—		27,817		—		27,817
Accrued interest receivable		6,625		—		6,625		—		6,625
Financial Liabilities:
Deposits	$	2,060,547	$	—	$	2,062,823	$	—	$	2,062,823
Repurchase agreements		40,475		—		40,475		—		40,475
Subordinated debt		7,517		—		8,525		—		8,525
Junior subordinated debt		28,029		—		—		22,697		22,697
Accrued interest payable		1,213		—		1,213		—		1,213
Derivative - cash flow hedges		2,658		—		2,658		—		2,658

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Note 23 - Dividend Restrictions and Regulatory Capital

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Restrictions on Dividends, Loans and Advances [Text Block]

Note 23 – Dividend Restrictions and Regulatory Capital

The approval of the Office of the Comptroller of the Currency is required if the total of all dividends declared by a national bank in any calendar year exceeds the bank's retained net income, as defined, for that year combined with its retained net income for the preceding two calendar years. Under this formula, the Bank can distribute as dividends to the Company, without the approval of the Office of the Comptroller of the Currency, up to $18,628,000 as of December 31, 2020. Dividends paid by the Bank to the Company are the only significant source of funding for dividends paid by the Company to its shareholders.

Federal bank regulators have issued substantially similar guidelines requiring banks and bank holding companies to maintain capital at certain levels. In addition, regulators may from time to time require that a banking organization maintain capital above the minimum levels because of its financial condition or actual or anticipated growth. Failure to meet minimum capital requirements can trigger certain mandatory and discretionary actions by regulators that could have a direct material effect on the Company's financial condition and results of operations.

The FRB and Office of the Comptroller of the Currency have adopted rules to implement the Basel III capital framework as outlined by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Basel III Capital Rules"). The Basel III Capital Rules require banks and bank holding companies to comply with certain minimum capital ratios, plus a "capital conservation buffer," as set forth in the table below. The capital conservation buffer requirement was phased in beginning on January 1, 2016, at 0.625% of risk-weighted assets, and increased by the same amount each year until it was fully implemented at 2.5% on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress and is applicable to all ratios except the leverage capital ratio.

The Company meets the eligibility criteria of a small bank holding company in accordance with the FRB's Small Bank Holding Company Policy Statement (the "SBHC Policy Statement"). Under the SBHC Policy Statement, qualifying bank holding companies, such as the Company, have additional flexibility in the amount of debt they can issue and are also exempt from the Basel III Capital Rules. However, the Company does not currently intend to issue a material amount of debt or take any other action that would cause its capital ratios to fall below the minimum ratios required by the Basel III Capital Rules. The SBHC Policy Statement does not apply to the Bank, and the Bank must comply with the Basel III Capital Rules. The Bank must also comply with the capital requirements set forth in the "prompt corrective action" regulations pursuant to Section 38 of the Federal Deposit Insurance Act. The minimum capital ratios for the Bank to be considered "well capitalized" are set forth in the table below.

Management believes that as of December 31, 2020, the Company and Bank meet all capital adequacy requirements to which they are subject. At year-end 2020 and 2019, the most recent regulatory notifications categorized the Bank as "well capitalized" under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank's category.

On September 17, 2019, the federal banking agencies jointly issued a final rule required by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 that permits qualifying banks and bank holding companies that have less than $10 billion in consolidated assets to elect to be subject to a 9% leverage ratio (commonly referred to as the community bank leverage ratio or "CBLR"). Under the final rule, banks and bank holding companies that opt into the CBLR framework and maintain a CBLR of greater than 9% are not subject to other risk-based and leverage capital requirements under the Basel III Capital Rules and are deemed to have met the well capitalized ratio requirements under the "prompt corrective action" framework. In addition, a community bank that falls out of compliance with the framework has a two-quarter grace period to come back into full compliance, provided its leverage ratio remains above 8%, and will be deemed well-capitalized during the grace period. The CBLR framework was first available for banking organizations to use in their March 31, 2020 regulatory reports. 

On April 6, 2020, the federal bank regulatory agencies announced the issuance of two interim final rules that make changes to the CBLR framework and implement Section 4012 of the CARES Act. One interim final rule provides that, as of the second quarter of 2020, a banking organization with a leverage ratio of 8% or greater (and that meets the other existing qualifying criteria) could elect to use the CBLR framework. This rule also establishes a two-quarter grace period for a qualifying community banking organization whose leverage ratio fell below 8% so long as the banking organization maintained a leverage ratio of 7% or greater. The second interim final rule provides a transition back to the leverage ratio requirement of 9%. Under this rule, the required leverage ratio was 8% beginning in the second quarter and for the remainder of calendar year 2020 and will be 8.5% for calendar year 2021 and 9% thereafter. This rule also maintains a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 1% below the applicable ratio. This transition will allow community banking organizations to focus on supporting lending to creditworthy households and businesses given the recent strains on the U.S. economy caused by COVID-19. The Company and the Bank do not currently expect to opt into the CBLR framework.

Actual and required capital amounts (in thousands) and ratios are presented below at year-end:

										To Be Well
										Capitalized Under
										Prompt Corrective
	Actual					Required for Capital Adequacy Purposes				Action Provisions
	Amount		Ratio			Amount		Ratio		Amount		Ratio
December 31, 2020
Common Equity Tier 1
Company	$	244,318		12.36	%	$	88,967		>4.50%		N/A		N/A
Bank		252,748		12.86			137,530		>7.00	$	127,706		>6.50%
Tier 1 Capital
Company		272,448		13.78			118,623		>6.00		N/A		N/A
Bank		252,748		12.86			167,001		>8.50		157,177		>8.00
Total Capital
Company		300,155		15.18			158,164		>8.00		N/A		N/A
Bank		274,455		13.97			206,295		>10.50		196,471		>10.00
Leverage Capital
Company		272,448		9.48			114,902		>4.00		N/A		N/A
Bank		252,748		8.85			114,247		>4.00		142,809		>5.00
December 31, 2019
Common Equity Tier 1
Company	$	228,554		11.56	%	$	88,968		>4.50%		N/A		N/A
Bank		243,449		12.38			137,698		>7.00	$	127,862		>6.50%
Tier 1 Capital
Company		256,583		12.98			118,624		>6.00		N/A		N/A
Bank		243,449		12.38			167,205		>8.50		157,369		>8.00
Total Capital
Company		277,581		14.04			158,166		>8.00		N/A		N/A
Bank		256,930		13.06			206,547		>10.50		196,712		>10.00
Leverage Capital
Company		256,583		10.75			95,514		>4.00		N/A		N/A
Bank		243,449		10.25			94,972		>4.00		118,715		>5.00

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Note 24 - Segment and Related Information

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note 24 – Segment and Related Information

The Company has two reportable segments, community banking and trust and investment services.

Community banking involves making loans to and generating deposits from individuals and businesses. All assets and liabilities of the Company are allocated to community banking. Investment income from securities is also allocated to the community banking segment. Loan fee income, service charges from deposit accounts, and non-deposit fees such as automated teller machine fees and insurance commissions generate additional income for the community banking segment.

Trust and investment services include estate planning, trust account administration, investment management, and retail brokerage. Investment management services include purchasing equity, fixed income, and mutual fund investments for customer accounts. The trust and investment services segment receives fees for investment and administrative services.

Segment information as of and for the years ended December 31, 2020, 2019, and 2018, is shown in the following table (dollars in thousands):

	2020
	Community Banking		Trust and Investment Services		Total
Interest income	$	95,840	$	—	$	95,840
Interest expense		12,020		—		12,020
Noninterest income		12,054		4,789		16,843
Noninterest expense		52,245		2,320		54,565
Incomebefore income taxes		34,714		2,468		37,182
Net income		28,052		1,993		30,045
Depreciation and amortization		3,815		10		3,825
Total assets		3,049,779		231		3,050,010
Goodwill		85,048		—		85,048
Capital expenditures		2,690		4		2,694

	2019
	Community Banking		Trust and Investment Services		Total
Interest income	$	92,855	$	—	$	92,855
Interest expense		15,728		—		15,728
Noninterest income		10,602		4,568		15,170
Noninterest expense		63,794		2,280		66,074
Incomebefore income taxes		23,479		2,288		25,767
Net income		19,050		1,856		20,906
Depreciation and amortization		3,454		8		3,462
Total assets		2,478,478		72		2,478,550
Goodwill		84,002		—		84,002
Capital expenditures		3,534		21		3,555

	2018
	Community Banking		Trust and Investment Services		Total
Interest income	$	68,768	$	—	$	68,768
Interest expense		9,674		—		9,674
Noninterest income		8,695		4,579		13,274
Noninterest expense		41,832		2,414		44,246
Incomebefore income taxes		26,060		2,165		28,225
Net income		20,848		1,731		22,579
Depreciation and amortization		2,030		10		2,040
Total assets		1,862,849		17		1,862,866
Goodwill		43,872		—		43,872
Capital expenditures		2,723		—		2,723

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Note 25 - Parent Company Financial Information

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Condensed Financial Information of Parent Company Only Disclosure [Text Block]

Note 25 – Parent Company Financial Information

Condensed Parent Company financial information is as follows (dollars in thousands):

	December 31,
Condensed Balance Sheets	2020		2019
Cash	$	17,759	$	11,127
Securities available for sale, at fair value		8,534		8,683
Investment in subsidiaries		351,033		337,983
Due from subsidiaries		143		134
Other assets		1,062		674
Total Assets	$	378,531	$	358,601
Subordinated debt	$	7,500	$	7,517
Junior subordinated debt		28,130		28,029
Other liabilities		5,007		2,797
Shareholders' equity		337,894		320,258
Total Liabilities and Shareholders' Equity	$	378,531	$	358,601

	Year Ended December 31,
Condensed Statements of Income	2020			2019			2018
Dividends from subsidiary	$	25,500		$	25,000		$	11,000
Other income		512			823			456
Expenses		3,369			4,232			2,396
Income tax benefit		(600	)		(601	)		(407	)
Income before equity in undistributed earnings of subsidiary		23,243			22,192			9,467
Equity in undistributed (distributed) earnings of subsidiary		6,802			(1,286	)		13,112
Net Income	$	30,045		$	20,906		$	22,579

	Year Ended December 31,
Condensed Statements of Cash Flows	2020			2019			2018
Cash Flows from Operating Activities:
Net income	$	30,045		$	20,906		$	22,579
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in (undistributed) distributions of subsidiary		(6,802	)		1,286			(13,112	)
Net change in other assets		84			(382	)		(194	)
Net change in other liabilities		85			(35	)		136
Net cash provided by operating activities		23,412			21,775			9,409
Cash Flows from Investing Activities:
Purchases of securities available for sale		—			(2,220	)		—
Sales of equity securities		—			445			431
Cash paid in bank acquisition		—			(27	)		—
Cash acquired in bank acquisition		—			981			—
Net cash provided by (used in) investing activities		—			(821	)		431
Cash Flows from Financing Activities:
Common stock dividends paid		(11,842	)		(10,965	)		(8,702	)
Repurchase of common stock		(4,981	)		(3,146	)		—
Proceeds from exercise of stock options		43			688			861
Net cash used in financing activities		(16,780	)		(13,423	)		(7,841	)
Net increase in cash and cash equivalents		6,632			7,531			1,999
Cash and cash equivalents at beginning of period		11,127			3,596			1,597
Cash and cash equivalents at end of period	$	17,759		$	11,127		$	3,596

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Note 26 - Concentrations of Credit Risk

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

Note 26 – Concentrations of Credit Risk

Substantially all of the Company's loans are made within its market area, which includes Southern and Central Virginia and the northern portion of Central North Carolina. The ultimate collectibility of the Company's loan portfolio and the ability to realize the value of any underlying collateral, if necessary, are impacted by the economic conditions and real estate values of the market area.

Loans secured by real estate were $1,515,338,000, or 75.2% of the loan portfolio at December 31, 2020, and $1,480,857,000, or 80.9% of the loan portfolio at December 31, 2019. Loans secured by commercial real estate represented the largest portion of loans at $1,001,249,000 at December 31, 2020 and $899,199,000 at December 31, 2019, 49.7% and 49.1%, respectively, of total loans. There were no concentrations of loans to any individual, group of individuals, business, or industry that exceeded 10% of total loans at December 31, 2020 or 2019.

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Note 27 - Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

Note 27 – Supplemental Cash Flow Information

(dollars in thousands)	As of or for the Year Ended December 31,
	2020			2019			2018
Supplemental Schedule of Cash and Cash Equivalents:
Cash and due from banks	$	30,767		$	32,505		$	29,587
Interest-bearing deposits in other banks		343,603			47,077			34,668
	$	374,370		$	79,582		$	64,255
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest on deposits and borrowed funds	$	12,455		$	15,310		$	9,553
Income taxes		7,609			4,698			5,056
Noncash investing and financing activities:
Transfer of loans to other real estate owned		95			234			599
Transfer of loans to repossessions		411			—			—
Transfer from premises and equipment to other assets		—			445			—
Increase in operating lease right-of-use asset		371			4,453			—
Increase in operating lease liability		371			4,453			—
Unrealized gains (losses) on securities available for sale		6,399			8,821			(3,290	)
Unrealized losses on cash flow hedges		(2,210	)		(1,854	)		(804	)
Change in unfunded pension liability		(413	)		(64	)		1,291
Non-cash transactions related to acquisitions:
Assets acquired:
Investment securities		—			34,876			—
Restricted stock		—			2,588			—
Loans		—			444,324			—
Premises and equipment		—			12,554			—
Deferred income taxes		—			2,960			—
Core deposit intangible		—			8,200			—
Other real estate owned		—			1,442			—
Bank owned life insurance		—			8,246			—
Other assets		—			14,244			—
Liabilities assumed:
Deposits		—			483,626			—
Short-term FHLB advances		—			14,883			—
Long-term FHLB advances		—			778			—
Subordinated debt		—			7,530			—
Other liabilities		—			5,780			—
Consideration:
Issuance of common stock		—			82,470			—
Fair value of replacement stock options/restricted stock		—			753			—

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Note 28 - Accumulated Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

Note 28 – Accumulated Other Comprehensive Income (Loss)

Changes in each component of accumulated other comprehensive income (loss) were as follows (dollars in thousands):

				Unrealized			Adjustments			Accumulated
	Net Unrealized			Losses on			Related to			Other
	Gains (Losses)			Cash Flow			Pension			Comprehensive
	on Securities			Hedges			Benefits			Income (Loss)
Balance at Balance at December 31, 2017	$	(796	)	$	—		$	(2,280	)	$	(3,076	)
Net unrealized losses on securities available for sale, net of tax, $(745)		(2,464	)		—			—			(2,464	)
Reclassification adjustment for realized gains on securities, net of tax, $(18)		(63	)		—			—			(63	)
Net unrealized losses on cash flow hedges, net of tax, $(180)		—			(624	)		—			(624	)
Change in unfunded pension liability, net of tax, $249		—			—			1,042			1,042
Reclassification for ASU 2016-01 adoption		(650	)		—			—			(650	)
Balance at December 31, 2018		(3,973	)		(624	)		(1,238	)		(5,835	)
Net unrealized gains on securities available for sale, net of tax, $2,005		7,090			—			—			7,090
Reclassification adjustment for realized gains on securities, net of tax, $(59)		(215	)		—			—			(215	)
Net unrealized losses on cash flow hedges, net of tax, $(394)		—			(1,460	)		—			(1,460	)
Change in unfunded pension liability, net of tax, $(1)		—			—			(63	)		(63	)
Balance at December 31, 2019		2,902			(2,084	)		(1,301	)		(483	)
Net unrealized gains on securities available for sale, net of tax, $1,557		5,656			—			—			5,656
Reclassification adjustment for realized gains on securities, net of tax, $(176)		(638	)		—			—			(638	)
Net unrealized losses on cash flow hedges, net of tax, $(448)		—			(1,762	)		—			(1,762	)
Change in unfunded pension liability, net of tax, $(77)		—			—			(336	)		(336	)
Balance at December 31, 2020		7,920			(3,846	)		(1,637	)	$	2,437

The following table provides information regarding reclassifications out of accumulated other comprehensive income (loss) (dollars in thousands):

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

For the Three Years Ending December 31, 2020

Details about AOCI Components	Amount Reclassified from AOCI									Affected Line Item in the Statement of Where Net Income is Presented
	Year Ended December 31,
	2020			2019			2018
Available for sale securities:
Realized gain on sale of securities	$	814		$	274		$	81		Securities gains, net
		(176	)		(59	)		(18	)	Income taxes
	$	638		$	215		$	63		Net of tax
Reclassification for ASU-2016-01 adoption		—			—			650		(1)
Total reclassifications	$	638		$	215		$	713

______________________

(1) Reclassification from AOCI to retained earnings for unrealized holding gains on equity securities due to adoption of ASU 2016-01.

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Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Nature of Operations and Consolidation [Policy Text Block]

Nature of Operations and Consolidation

The consolidated financial statements include the accounts of American National Bankshares Inc. (the "Company") and its wholly owned subsidiary, American National Bank and Trust Company (the "Bank"). The Bank offers a wide variety of retail, commercial, secondary market mortgage lending, and trust and investment services which also include non-deposit products such as mutual funds and insurance policies.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, goodwill and intangible assets, other-than-temporary impairment of securities, accounting for merger and acquisition activity, accounting for acquired loans with specific credit-related deterioration, and the valuation of deferred tax assets and liabilities.

COVID-19 spread rapidly across the world in the first quarter of 2020 and was declared a pandemic by the World Health Organization. On March 13, 2020, the United States President declared a national emergency in the face of a growing public health and economic crisis due to the COVID-19 global pandemic. The government and private sector responses to contain its spread began to significantly affect the Company's operations beginning in March and will likely continue to adversely affect its operations through 2021, although such effects may vary significantly. The duration and extent of the effects over longer terms cannot be reasonably estimated at this time. The risks and uncertainties resulting from the pandemic will most likely affect future earnings, cash flows and overall financial condition of the Company. These uncertainties include the nature and duration of the financial effects felt by its customers impacting their ability to perform in accordance with their underlying loan agreements, the Company's ability to generate demand for non-loan related products and services, as well as potential declines in real estate values resulting from the market disruption which may impair the recorded values of collateral-dependent loans and other real estate owned. Further, these factors, in addition to those pervasive to the industry and overall U.S. economy, may necessitate an overall valuation of the Company's franchise in such a way an impairment charge to the carrying value of goodwill would be required. Accordingly, significant estimates used in the preparation of the Company's financial statements including those associated with the evaluation of the allowance for loan losses as well as other valuation-based estimates may be subject to significant adjustments in future periods. The greater the duration and severity of the pandemic, the more likely that estimates will be materially impacted by its effects.

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") included an initial first round allocation of $659.0 billion for loans to be issued by financial institutions through the Small Business Administration ("SBA"). This program is known as the Paycheck Protection Program ("PPP"). PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which was passed by Congress on December 21, 2020 and then signed into law on December 27, 2020 as part of the Consolidated Appropriations Act, 2021 ("Appropriations Act"), allocated an additional $284.4 billion. These loans carry a fixed rate of 1.00% and a term of two years for the majority of the initial loans and for five years on the second round, if not forgiven, in whole or in part. Payments were deferred for the first six months of the loan. The loans are 100% guaranteed by the SBA. The SBA paid the Bank a processing fee based on the size of the loan. The SBA has approved over 2,700 applications as of  February 28, 2021 totaling $340.9 million in loans. The Company had outstanding net PPP loans of $211.3 million at December 31, 2020 and $226.4 million at February 28, 2021. The Bank has received processing fees of $11.2 million on the PPP loans and incurred direct origination costs of $1.8 million. The Company had net unaccreted PPP loan origination fees of $4.4 million at December 31, 2020 and $5.0 at February 28, 2021. From a funding perspective, the Bank utilized core funding sources for these loans. At December 31, 2020 and February 28, 2021, respectively, the SBA had forgiven $56.4 million and $105.8 million of PPP loans.

In April 2006, AMNB Statutory Trust I, a Delaware statutory trust (the "AMNB Trust") and an unconsolidated wholly owned subsidiary of the Company, was formed for the purpose of issuing preferred securities (the "Trust Preferred Securities") in a private placement pursuant to an applicable exemption from registration. Proceeds from the securities were used to fund the acquisition of Community First Financial Corporation ("Community First") which occurred in April 2006.

In July 2011, and in connection with its acquisition of MidCarolina Financial Corporation ("MidCarolina"), the Company assumed liabilities of MidCarolina Trust I and MidCarolina Trust II, two separate unconsolidated Delaware statutory trusts (the "MidCarolina Trusts"), which were also formed for the purpose of issuing preferred securities. Refer to Note 14 for further details concerning these entities.

All significant inter-company transactions and accounts are eliminated in consolidation, with the exception of the AMNB Trust and the MidCarolina Trusts, as detailed in Note 14.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

Cash includes cash on hand, cash with correspondent banks, and cash on deposit at the Federal Reserve Bank of Richmond. Cash equivalents are short-term, highly liquid investments that are readily convertible to cash with original maturities of three months or less and are subject to an insignificant risk of change in value. Cash and cash equivalents are carried at cost.

Interest-bearing Deposits in Other Banks [Policy Text Block]

Interest-bearing Deposits in Other Banks

Interest-bearing deposits in other banks mature within one year and are carried at cost.

Marketable Securities, Policy [Policy Text Block]

Securities

Certain debt securities that management has the positive intent and ability to hold to maturity are classified as "held to maturity" and recorded at amortized cost. Trading securities are recorded at fair value with changes in fair value included in earnings. Debt securities not classified as held to maturity or trading are classified as "available for sale" and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

The Company does not currently have any securities in held to maturity or trading and has no plans to add any to either category. Management evaluates securities for other-than-temporary impairment ("OTTI") on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement and, (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.

Equity securities with readily determinable fair values that are not held for trading are carried at fair value with the unrealized gains and losses included in noninterest income.

Due to the nature and restrictions placed on the Company's investment in common stock of the Federal Home Loan Bank of Atlanta ("FHLB") and the Federal Reserve Bank of Richmond, these securities have been classified as restricted equity securities and carried at cost.

Financing Receivable, Held-for-sale [Policy Text Block]

Loans Held for Sale

Secondary market mortgage loans are designated as held for sale at the time of their origination. These loans are pre-sold with servicing released and the Company does not retain any interest after the loans are sold. These loans consist primarily of fixed-rate, single-family residential mortgage loans which meet the underwriting characteristics of certain government-sponsored enterprises (conforming loans). In addition, the Company requires a firm purchase commitment from a permanent investor before a loan can be committed, thus limiting interest rate risk. Loans held for sale are carried at fair value. Gains on sales of loans are recognized at the loan closing date and are included in noninterest income.

Loan Commitments, Policy [Policy Text Block]

Derivative Loan Commitments

The Company enters into mortgage loan commitments whereby the interest rate on the loan is determined prior to funding (rate lock commitments). Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. Loan commitments that are derivatives are recognized at fair value on the consolidated balance sheets with net changes in their fair values recorded in other expenses. 

The period of time between issuance of a loan commitment and sale of the loan generally ranges from 30 to 60 days. The Company protects itself from changes in interest rates through the use of best efforts forward delivery contracts, by committing to sell a loan at the time the borrower commits to an interest rate with the intent that the buyer has assumed the interest rate risk on the loan. As a result, the Company is not generally exposed to significant losses nor will it realize significant gains related to its rate lock commitments due to changes in interest rates. The correlation between the rate lock commitments and the best efforts contracts is very high due to their similarity.

The fair value of rate lock commitments and best efforts contracts is not readily ascertainable with precision because rate lock commitments and best efforts contracts are not actively traded in stand-alone markets. The Company determines the fair value of rate lock commitments and best efforts contracts by measuring the change in the estimated value of the underlying assets while taking into consideration the probability that the loan will be funded.

Receivable [Policy Text Block]

Loans

The Company makes mortgage, commercial, and consumer loans. A substantial portion of the loan portfolio is secured by real estate. The ability of the Company's debtors to honor their contracts is dependent upon the real estate market and general economic conditions in the Company's market area.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balance adjusted for the allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. The accrual of interest on loans is generally discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. Loans are typically charged off when the loan is 120 days past due, unless secured and in process of collection. Loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.

Interest accrued but not collected for loans that are placed on nonaccrual status or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash basis or cost recovery method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

A loan is considered past due when a payment of principal or interest or both is due but not paid. Management closely monitors past due loans in timeframes of 30-59 days, 60-89 days, and 90 or more days past due.

These policies apply to all loan portfolio classes and segments.

Substandard and doubtful risk graded commercial, commercial real estate, and construction loans are reviewed for impairment. All troubled debt restructurings ("TDRs"), regardless of dollar amount, are also evaluated for impairment. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment and establishing a specific allowance include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial, commercial real estate, and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Generally, large groups of smaller balance homogeneous loans (residential real estate and consumer loans) are collectively evaluated for impairment. The Company's policy for recognizing interest income on impaired loans is consistent with its nonaccrual policy.

The Company's loan portfolio is organized by major segment. These include: commercial, commercial real estate, residential real estate and consumer loans. Each segment has particular risk characteristics that are specific to the borrower and the generic category of credit. Commercial loan repayments are highly dependent on cash flows associated with the underlying business and its profitability. They can also be impacted by changes in collateral values. Commercial real estate loans share the same general risk characteristics as commercial loans but are often more dependent on the value of the underlying real estate collateral and, when construction is involved, the ultimate completion of and sale of the project. Residential real estate loans are generally dependent on the value of collateral and the credit worthiness of the underlying borrower. Consumer loans are very similar in risk characteristics to residential real estate.

In connection with mergers, certain loans were acquired which exhibited deteriorated credit quality since origination and for which the Company does not expect to collect all contractual payments. These purchased credit impaired loans are accounted for in accordance with Accounting Standards Codification ("ASC") 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality, and are recorded at the amount paid, such that there is no carryover of the seller's allowance for loan losses. After acquisition, losses are recognized by an increase in the allowance for loan losses.

Such purchased credit impaired loans are accounted for individually or aggregated into pools of loans based on common risk characteristics such as, credit score, loan type, and date of origination. The Company estimates the amount and timing of expected cash flows for each loan or pool, and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan or pool (accretable yield). The excess of the loan's or pool's contractual principal and interest over expected cash flows is not recorded (nonaccretable difference).

Over the life of the loan or pool, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded as a provision for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

Troubled Debt Restructuring [Policy Text Block]

Troubled Debt Restructurings

In situations where, for economic or legal reasons related to a borrower's financial condition, management may grant a concession to the borrower that it would not otherwise consider, the related loan is classified as a TDR. Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted above for impaired loans. The Company had $1,976,000 in loans classified as TDRs as of December 31, 2020 and $1,058,000 as of December 31, 2019.

In March 2020 (revised in April 2020), the federal banking agencies issued an "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus." This was in response to the COVID-19 pandemic affecting societies and economies around the world. This guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19. The guidance explains that, in consultation with the Financial Accounting Standards Board ("FASB") staff, the federal banking agencies have concluded that short-term modifications (e.g. six months) made on a good faith basis to borrowers who were current as of the implementation date of a relief program are not TDRs. The CARES Act was passed by the U.S. Congress on March 27, 2020. Section 4013 of the CARES Act also addressed COVID-19 related modifications and specified that COVID-19 related modifications on loans that were current as of December 31, 2019 were not TDRs. The Bank implemented a Disaster Assistance Program ("DAP") to provide relief to its borrowers under this guidance. The Bank provided assistance to customers with loan balances of $405.1 million during the year ended December 31, 2020.  The balance of loans remaining in this program at December 31, 2020 was $30.0 million, or 1.5% of the total portfolio, with $18.2 million of the $30.0 million in total deferrals the result of second and third request interest deferrals. At February 28, 2021, the balance of loans remaining in this program was $25.2 million, or 1.2% of the total portfolio, with $16.7 million of the $25.2 million in total deferrals the result of second request interest deferrals. The majority of remaining modifications involved three-month deferments of interest. This interagency guidance has not had a material impact on the Company's financials and is not expected to have a material impact on ongoing operations; however, this impact cannot be quantified at this time.

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

Allowance for Loan Losses

The purpose of the allowance for loan losses ("ALLL") is to provide for probable losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses and by recoveries of previously charged-off loans. Loan charge-offs decrease the allowance.

The goal of the Company is to maintain an appropriate, systematic, and consistently applied process to determine the amounts of the ALLL and the provision for loan loss expense.

The Company uses certain practices to manage its credit risk. These practices include (1) appropriate lending limits for loan officers, (2) a loan approval process, (3) careful underwriting of loan requests, including analysis of borrowers, cash flows, collateral, and market risks, (4) regular monitoring of the portfolio, including diversification by type and geography, (5) review of loans by the Loan Review department, which operates independently of loan production (the Loan Review function consists of a co-sourced arrangement using both internal personnel and external vendors to provide the Company with a more robust review function of the loan portfolio), (6) regular meetings of the Credit Committees to discuss portfolio and policy changes and make decisions on large or unusual loan requests, and (7) regular meetings of the Asset Quality Committee which reviews the status of individual loans.

Risk grades are assigned as part of the loan origination process. From time to time risk grades may be modified as warranted by the facts and circumstances surrounding the credit.

Calculation and analysis of the allowance for loan losses is prepared quarterly by the Finance Department. The Company's Credit Committee, Risk and Compliance Committee, Audit Committee, and the Board of Directors review the allowance for adequacy.

The Company's allowance for loan losses has two basic components: the formula allowance and the specific allowance. Each of these components is determined based upon estimates and judgments.

The formula allowance uses historical loss experience as an indicator of future losses, along with various qualitative factors, including levels and trends in delinquencies, nonaccrual loans, charge-offs and recoveries, trends in volume and terms of loans, effects of changes in underwriting standards, experience of lending staff, economic conditions, and portfolio concentrations. In the formula allowance for commercial and commercial real estate loans, the historical loss rate is combined with the qualitative factors, resulting in an adjusted loss factor for each risk-grade category of loans. The period-end balances for each loan risk-grade category are multiplied by the adjusted loss factor. Allowance calculations for consumer loans are calculated based on historical losses for each product category without regard to risk grade. This loss rate is combined with qualitative factors resulting in an adjusted loss factor for each product category.

The specific allowance uses various techniques to arrive at an estimate of loss for specifically identified impaired loans. These include:

• The present value of expected future cash flows discounted at the loan's effective interest rate. The effective interest rate on a loan is the rate of return implicit in the loan (that is, the contractual interest rate adjusted for any net deferred loan fees or costs and any premium or discount existing at the origination or acquisition of the loan);

• The loan's observable market price, or

• The fair value of the collateral, net of estimated costs to dispose, if the loan is collateral dependent.

The use of these computed values is inherently subjective and actual losses could be greater or less than the estimates. No single statistic, formula, or measurement determines the adequacy of the allowance. Management makes subjective and complex judgments about matters that are inherently uncertain, and different amounts would be reported under different conditions or using different assumptions. For analytical purposes, management allocates a portion of the allowance to specific loan categories and specific loans. However, the entire allowance is used to absorb credit losses inherent in the loan portfolio, including identified and unidentified losses.

The relationships and ratios used in calculating the allowance, including the qualitative factors, may change from period to period as facts and circumstances evolve. Furthermore, management cannot provide assurance that in any particular period the Company will not have sizeable credit losses in relation to the amount reserved. Management may find it necessary to significantly adjust the allowance, considering current factors at the time.

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

Premises and Equipment

Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation and amortization. Premises and equipment are depreciated over their estimated useful lives ranging from three years to thirty-nine years; leasehold improvements are amortized over the lives of the respective leases or the estimated useful lives of the improvements, whichever is less. Software is generally amortized over three years. Depreciation and amortization are recorded on the straight-line method.

Costs of maintenance and repairs are charged to expense as incurred. Costs of replacing structural parts of major units are considered individually and are expensed or capitalized as the facts dictate. Gains and losses on routine dispositions are reflected in current operations.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Intangible Assets

Goodwill is subject to at least an annual assessment for impairment. Additionally, acquired intangible assets (such as core deposit intangibles) are separately recognized if the benefit of the assets can be sold, transferred, licensed, rented, or exchanged, and amortized over their useful lives. The cost of purchased deposit relationships, based on independent valuation, are being amortized over their estimated lives of ten years.

The Company records as goodwill the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Impairment testing is performed annually, as well as when an event triggering impairment may have occurred. On January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2017-04, which simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the previous two-step impairment test. Under the new guidance, if a reporting unit's carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates the prior requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount. The Company performs its annual analysis as of June 30 each fiscal year. Due to the COVID-19 pandemic market conditions, the Company determined a triggering event occurred during the first quarter of 2020 and performed a qualitative assessment at March 31, 2020 and as the pandemic continued performed qualitative assessments at June 30 and September 30 and a quantitative assessment at December 31, 2020 and determined no impairment was indicated. The impact of COVID-19 on market conditions and other changes in the economic environment, operations, or other adverse events could result in future impairment charges which could have a material adverse impact on the Company's operating results. No indicators of impairment were identified during the years ended December 31, 2019 or 2018.

Trust Assets [Policy Text Block]

Trust Assets

Securities and other property held by the trust and investment services segment in a fiduciary or agency capacity are not assets of the Company and are not included in the accompanying consolidated financial statements.

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

Other Real Estate Owned ("OREO")

OREO represents real estate that has been acquired through loan foreclosures or deeds received in lieu of loan payments. Generally, such properties are appraised at the time acquired and are recorded at fair value less estimated selling costs. Subsequent to foreclosure, valuations are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expense.

Life Insurance, Bank Owned [Policy Text Block]

Bank Owned Life Insurance

In connection with mergers, the Company has acquired bank owned life insurance ("BOLI"). The asset is reflected as the cash surrender value of the policies as provided by the insurer on a monthly basis.

Transfers and Servicing of Financial Assets, Transfers of Financial Assets, Policy [Policy Text Block]

Transfers of Financial Assets

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

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company uses the balance sheet method to account for deferred income tax assets and liabilities. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company had no liability for unrecognized tax benefits as of December 31, 2020 and 2019.

Compensation Related Costs, Policy [Policy Text Block]

Stock-Based Compensation

Stock compensation accounting guidance ASC 718, Compensation - Stock Compensation, requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the grant date fair value of the equity or liability instruments issued. The stock compensation accounting guidance covers a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.

The stock compensation accounting guidance requires that compensation cost for all stock awards be calculated and recognized over the employees' service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. A Black-Scholes model is used to estimate the fair value of stock options, while the market price of the Company's common stock at the date of grant is used for restricted stock awards.

Earnings Per Share, Policy [Policy Text Block]

Earnings Per Common Share

Basic earnings per common share represent income available to common shareholders divided by the average number of common shares outstanding during the period. Diluted earnings per common share reflect the impact of additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company consist solely of outstanding stock options and are determined using the treasury method. Nonvested shares of restricted stock are included in the computation of basic earnings per share because the holder has voting rights and shares in non-forfeitable dividends during the vesting period.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income

Comprehensive income is shown in a two statement approach; the first statement presents total net income and its components followed by a second statement that presents all the components of other comprehensive income which include unrealized gains and losses on available for sale securities, unrealized gains and losses on cash flow hedges, and changes in the funded status of the defined benefit postretirement plan.

Advertising Cost [Policy Text Block]

Advertising and Marketing Costs

Advertising and marketing costs are expensed as incurred, and were $453,000, $473,000, and $365,000 in 2020, 2019, and 2018, respectively.

Business Combinations Policy [Policy Text Block]

Mergers and Acquisitions

Business combinations are accounted for under ASC 805, Business Combinations, using the acquisition method of accounting. The acquisition method of accounting requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date. To determine the fair values, the Company relies on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques. Under the acquisition method of accounting, the Company identifies the acquirer and the closing date and applies applicable recognition principles and conditions. Acquisition-related costs are costs the Company incurs to effect a business combination. Those costs include advisory, legal, accounting, valuation, and other professional or consulting fees. Some other examples of costs to the Company include systems conversions, integration planning consultants and advertising costs. The Company accounts for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, with one exception. The costs to issue debt or equity securities is recognized in accordance with other applicable GAAP. These acquisition-related costs have been and will be included within the consolidated statements of income classified within the noninterest expense caption.

Derivatives, Policy [Policy Text Block]

Derivative Financial Instruments

The Company uses derivatives primarily to manage risk associated with changing interest rates. The Company's derivative financial instruments consist of interest rate swaps that qualify as cash flow hedges of the Company's trust preferred capital notes. The Company recognizes derivative financial instruments at fair value as either an other asset or other liability in the consolidated balance sheets. The effective portion of the gain or loss on the Company's cash flow hedges is reported as a component of other comprehensive income, net of deferred income taxes, and is reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

Reclassification, Comparability Adjustment [Policy Text Block]

Reclassifications

Certain reclassifications have been made in prior years financial statements to conform to classifications used in the current year. There were no material reclassifications.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Developments

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." ASU 2017-04 simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the previous two-step impairment test. Under the new guidance, if a reporting unit's carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates the prior requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount. ASU 2017-04 was effective for the Company on January 1, 2020. The adoption of ASU 2017-04 did not have a material effect on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." ASU 2018-13 modifies the disclosure requirements on fair value measurements by requiring that Level 3 fair value disclosures include the range and weighted average of significant unobservable inputs used to develop those fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. Certain disclosure requirements in Topic 820 were also removed or modified. ASU 2018-13 was effective for the Company on January 1, 2020. The adoption of ASU 2018-13 did not have a material effect on the Company's consolidated financial statements.

In March 2020 (revised in April 2020), various regulatory agencies, including the Board of Governors of the Federal Reserve System ("FRB") and the Federal Deposit Insurance Corporation, ("FDIC") issued an "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus."  The interagency statement was effective immediately and impacted accounting for loan modifications. Under ASC 310-40, "Receivables – Troubled Debt Restructurings by Creditors," a restructuring of debt constitutes a TDR if the creditor, for economic or legal reasons related to the debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. In August 2020, a joint statement on additional loan modifications was issued. Among other things, the Interagency Statement addresses accounting and regulatory reporting considerations for loan modifications, including those accounted for under Section 4013 of the CARES Act. The CARES Act  was signed into law on March 27, 2020 to help support individuals and businesses through loans, grants, tax changes and other types of relief. The most significant impacts of the CARES Act related to accounting for loan modifications and establishment of the PPP. On December 21, 2020, the Appropriations Act was passed. The Appropriations Act extends or modifies many of the relief programs first created by the CARES Act, including the PPP and treatment of certain loan modifications related to the COVID-19 pandemic. This interagency guidance is not expected to have a material impact on the Company's financial statements; however, this impact cannot be quantified at this time.

Recent Accounting Pronouncements and Other Authoritative Accounting Guidance 

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The FASB has issued multiple updates to ASU 2016-13 as codified in Topic 326, including ASU's 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, and 2020-03. These ASUs have provided for various minor technical corrections and improvements to the codification as well as other transition matters. Smaller reporting companies who file with the U.S. Securities and Exchange Commission ("SEC") and all other entities who do not file with the SEC are required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022. At the one-time evaluation date, the Company qualified as a smaller reporting company and elected to defer the adoption of the standard. The Company will continue to validate its models that will be used upon future adoption of the standard. The implementation of this ASU will likely result in increases to the Company's reserves when implemented. 

In August 2018, the FASB issued ASU 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans." The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Certain disclosure requirements have been deleted while the following disclosure requirements have been added: the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The amendments also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed: the projected benefit obligation ("PBO") and fair value of plan assets for plans with PBOs in excess of plan assets and the accumulated benefit obligation ("ABO") and fair value of plan assets for plans with ABOs in excess of plan assets. The amendments are effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company is currently assessing the impact that ASU 2018-14 will have on its consolidated financial statements.

Effective  November 25, 2019, the SEC adopted Staff Accounting Bulletin ("SAB") 119. SAB 119 updated portions of SEC interpretative guidance to align with ASC 326, "Financial Instruments - Credit Losses." It covers topics including (1) measuring current expected credit losses; (2) development, governance, and documentation of a systematic methodology; (3) documenting the results of a systematic methodology; and (4) validating a systematic methodology.

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes." The ASU is expected to reduce cost and complexity related to the accounting for income taxes by removing specific exceptions to general principles in Topic 740 (eliminating the need for an organization to analyze whether certain exceptions apply in a given period) and improving financial statement preparers' application of certain income tax-related guidance. This ASU is part of the FASB's simplification initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact that ASU 2019-12 will have on its consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815." The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, such as the Company, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of ASU 2020-01 to have a material impact on its consolidated financial statements.

In  March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments in this ASU provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. Subsequently, in January 2021, the FASB issued ASU 2021-01 "Reference Rate Reform (Topic 848): Scope." This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. An entity may elect to apply ASU 2021-01 on contract modifications that change the interest rate used for margining, discounting, or contract price alignment retrospectively as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date within the interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued. An entity may elect to apply ASU 2021-01 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020, and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. The Company is assessing ASU 2020-04 and its impact on the Company's transition away from LIBOR for its loan and other financial instruments.

On  March 12, 2020, the SEC finalized amendments to the definitions of its "accelerated filer" and "large accelerated filer" definitions. The amendments increase the threshold criteria for meeting these filer classifications and were effective on April 27, 2020. Any changes in filer status are to be applied beginning with the filer's first annual report filed with the SEC subsequent to the effective date. The rule change revises the definition of "accelerated filers" to exclude entities with public float of less than $700 million and less than $100 million in annual revenues. If an entity's annual revenues exceed $100 million, its category will change back to "accelerated filer." A public company that is classified as an "accelerated filer" or "large accelerated filer" must obtain an auditor attestation concerning the effectiveness of internal control over financial reporting ("ICFR") and include the opinion on ICFR in its annual report on Form 10-K. Non-accelerated filers also have additional time to file quarterly and annual financial statements. All public companies are required to obtain and file annual financial statement audits, as well as provide management's assertion on effectiveness of ICFR, but the external auditor attestation of ICFR is not required for non-accelerated filers. The Company's annual revenues exceeded $100 million in the previous year, and the Company expects its annual revenues to exceed $100 million in future years and to remain an "accelerated filer." Therefore, this change is not expected to have a significant impact on the Company's annual reporting and audit requirements.

In August 2020, the FASB issued ASU 2020-06, "Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity." The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share calculation in certain areas. In addition, the amendment updates the disclosure requirements for convertible instruments to increase the information transparency. For public business entities, excluding smaller reporting companies, the amendments in the ASU are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.  For all other entities, the standard will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of ASU 2020-06 to have a material impact on its consolidated financial statements.

In October 2020, the FASB issued ASU 2020-08, "Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable fees and Other Costs." This ASU clarifies that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.  Early adoption is not permitted. All entities should apply ASU 2020-08 on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. The Company does not expect the adoption of ASU 2020-08 to have a material impact on its consolidated financial statements.

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Note 2 - Acquisitions (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

Consideration Paid:
Common shares issued (2,361,686)	$	82,470
Issuance of replacement stock options/restricted stock		753
Cash paid in lieu of fractional shares		27
Value of consideration		83,250
Assets acquired:
Cash and cash equivalents		26,283
Investment securities		34,876
Restricted stock		2,588
Loans		444,324
Premises and equipment		12,034
Deferred income taxes		2,960
Core deposit intangible		8,200
Other real estate owned		1,188
Banked owned life insurance		8,246
Other assets		14,244
Total assets		554,943
Liabilities assumed:
Deposits		483,626
Short-term FHLB advances		14,883
Long-term FHLB advances		778
Subordinated debt		7,530
Other liabilities		6,052
Total liabilities		512,869
Net assets acquired		42,074
Goodwill resulting from merger with HomeTown	$	41,176

Schedule of Goodwill [Table Text Block]

Goodwill at December 31, 2019	$	40,130
Effect of adjustments to:
Premises and equipment		520
Other real estate owned		254
Other liabilities		272
Goodwill at December 31, 2020	$	41,176

Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Table Text Block]

Contractually required principal and interest at acquisition	$	45,551
Contractual cash flows not expected to be collected (nonaccretable difference)		8,296
Expected cash flows at acquisition		37,255
Interest component of expected cash flows (accretable yield)		4,410
Fair value of acquired loans accounted for under FASB ASC 310-30	$	32,845

Business Acquisition, Pro Forma Information [Table Text Block]

	Pro forma Year Ended December 31,
	2019		2018
Total revenues (1)	$	95,178	$	98,232
Net income	$	29,841	$	27,974
Earnings per share	$	2.70	$	2.52

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Note 4 - Securities (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Marketable Securities [Table Text Block]

	December 31, 2020
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Securities available for sale:
U.S. Treasury	$	34,997	$	1	$	—	$	34,998
Federal agencies and GSEs		104,092		1,976		45		106,023
Mortgage-backed and CMOs		246,770		6,117		105		252,782
State and municipal		57,122		1,979		2		59,099
Corporate		13,011		188		10		13,189
Total securities available for sale	$	455,992	$	10,261	$	162	$	466,091

(Dollars in thousands)		December 31, 2019
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Securities available for sale:
U.S. Treasury	$	14,992	$	—	$	5	$	14,987
Federal agencies and GSEs		126,829		1,504		219		128,114
Mortgage-backed and CMOs		182,732		1,901		393		184,240
State and municipal		41,427		769		42		42,154
Corporate		9,514		186		—		9,700
Total securities available for sale	$	375,494	$	4,360	$	659	$	379,195

Investments Classified by Contractual Maturity Date [Table Text Block]

	Available for Sale
	Amortized
	Cost		Fair Value
Due in one year or less	$	38,081	$	38,120
Due after one year through five years		96,905		98,651
Due after five years through ten years		52,624		54,465
Due after ten years		21,612		22,073
Mortgage-backed and CMOs		246,770		252,782
	$	455,992	$	466,091

Realized Gain (Loss) on Investments [Table Text Block]

	For the Year Ended December 31,
	2020		2019			2018
Gross realized gains	$	814	$	328		$	342
Gross realized losses		—		(54	)		(261	)
Proceeds from sales of securities		5,811		29,878			57,607

Debt Securities, Available-for-sale, Unrealized Loss Position, Fair Value [Table Text Block]

	Total				Less than 12 Months				12 Months or More
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
Federal agencies and GSEs	$	21,237	$	45	$	19,974	$	26	$	1,263	$	19
Mortgage-backed and CMOs		46,640		105		46,640		105		—		—
State and municipal		3,456		2		3,456		2		—		—
Corporate		5,990		10		5,990		10		—		—
Total	$	77,323	$	162	$	76,060	$	143	$	1,263	$	19

	Total				Less than 12 Months				12 Months or More
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
U.S. Treasury	$	14,987	$	5	$	14,987	$	5	$	—	$	—
Federal agencies and GSEs		69,095		219		31,779		44		37,316		175
Mortgage-backed and CMOs		89,391		393		66,324		266		23,067		127
State and municipal		4,262		42		3,108		37		1,154		5
Total	$	177,735	$	659	$	116,198	$	352	$	61,537	$	307

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Note 5 - Loans (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

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

	December 31,
	2020		2019
Commercial	$	491,256	$	339,077
Commercial real estate:
Construction and land development		140,071		137,920
Commercial real estate - owner occupied		373,680		360,991
Commercial real estate - non-owner occupied		627,569		538,208
Residential real estate:
Residential		269,137		324,315
Home equity		104,881		119,423
Consumer		8,462		10,881
Total loans, net of deferred fees and costs	$	2,015,056	$	1,830,815

Schedule of Outstanding and Carrying Amount of Certain Loans Acquired in Transfer [Table Text Block]

	2020		2019
Outstanding principal balance	$	251,730	$	393,618
Carrying amount		241,008		377,130

	2020		2019
Outstanding principal balance	$	37,417	$	53,600
Carrying amount		30,201		43,028

Schedule of Changes in Accretable Yield on Acquired Loans [Table Text Block]

	2020			2019			2018
Balance at January 1	$	7,893		$	4,633		$	4,890
Additions from merger with HomeTown		—			4,410			—
Accretion		(3,553	)		(3,304	)		(2,362	)
Reclassification from nonaccretable difference		2,233			736			956
Other changes, net (1)		(60	)		1,418			1,149
Balance at December 31	$	6,513		$	7,893		$	4,633

Financing Receivable, Past Due [Table Text Block]

					90 Days +
					Past Due		Non-		Total
	30- 59 Days		60-89 Days		and Still		Accrual		Past				Total
	Past Due		Past Due		Accruing		Loans		Due		Current		Loans
Commercial	$	153	$	9	$	—	$	100	$	262	$	490,994	$	491,256
Commercial real estate:
Construction and land development		168		—		—		5		173		139,898		140,071
Commercial real estate - owner occupied		62		—		209		304		575		373,105		373,680
Commercial real estate - non-owner occupied		—		—		—		1,158		1,158		626,411		627,569
Residential:
Residential		711		211		53		792		1,767		267,370		269,137
Home equity		—		—		—		69		69		104,812		104,881
Consumer		49		14		—		6		69		8,393		8,462
Total	$	1,143	$	234	$	262	$	2,434	$	4,073	$	2,010,983	$	2,015,056

					90 Days +
					Past Due		Non-		Total
	30- 59 Days		60-89 Days		and Still		Accrual		Past				Total
	Past Due		Past Due		Accruing		Loans		Due		Current		Loans
Commercial	$	325	$	163	$	52	$	857	$	1,397	$	337,680	$	339,077
Commercial real estate:
Construction and land development		58		—		—		11		69		137,851		137,920
Commercial real estate - owner occupied		217		434		—		274		925		360,066		360,991
Commercial real estate - non-owner occupied		—		—		—		—		—		538,208		538,208
Residential:
Residential		639		260		282		685		1,866		322,449		324,315
Home equity		49		90		27		113		279		119,144		119,423
Consumer		73		13		—		4		90		10,791		10,881
Total	$	1,361	$	960	$	361	$	1,944	$	4,626	$	1,826,189	$	1,830,815

Impaired Financing Receivables [Table Text Block]

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Commercial	$	18	$	18	$	—	$	23	$	6
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		286		283		—		357		27
Commercial real estate - non-owner occupied		1,148		1,147		—		766		75
Residential:
Residential		1,096		1,103		—		912		62
Home equity		6		6		—		31		3
Consumer		—		—		—		—		—
	$	2,554	$	2,557	$	—	$	2,089	$	173
With a related allowance recorded:
Commercial	$	39	$	33	$	29	$	382	$	15
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		—		—		—		—		—
Commercial real estate - non-owner occupied		122		122		—		180		15
Residential
Residential		137		137		1		256		9
Home equity		—		—		—		—		—
Consumer		—		—		—		—		—
	$	298	$	292	$	30	$	818	$	39
Total:
Commercial	$	57	$	51	$	29	$	405	$	21
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		286		283		—		357		27
Commercial real estate - non-owner occupied		1,270		1,269		—		946		90
Residential:
Residential		1,233		1,240		1		1,168		71
Home equity		6		6		—		31		3
Consumer		—		—		—		—		—
	$	2,852	$	2,849	$	30	$	2,907	$	212

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Commercial	$	49	$	49	$	—	$	16	$	5
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		343		341		—		250		26
Commercial real estate - non-owner occupied		159		159		—		174		13
Residential:
Residential		611		612		—		652		38
Home equity		41		41		—		45		6
Consumer		—		—		—		—		—
	$	1,203	$	1,202	$	—	$	1,137	$	88
With a related allowance recorded:
Commercial	$	735	$	730	$	204	$	191	$	41
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		—		—		—		—		—
Commercial real estate - non-owner occupied		—		—		—		—		—
Residential:
Residential		254		254		26		225		16
Home equity		—		—		—		—		—
Consumer		—		—		—		—		—
	$	989	$	984	$	230	$	416	$	57
Total:
Commercial	$	784	$	779	$	204	$	207	$	46
Commercial real estate:
Construction and land development		—		—		—		—		—
Commercial real estate - owner occupied		343		341		—		250		26
Commercial real estate - non-owner occupied		159		159		—		174		13
Residential:
Residential		865		866		26		877		54
Home equity		41		41		—		45		6
Consumer		—		—		—		—		—
	$	2,192	$	2,186	$	230	$	1,553	$	145

Financing Receivable, Troubled Debt Restructuring [Table Text Block]

	Loans Modified as TDRs for the Year Ended December 31, 2020
			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Contracts		Investment		Investment
Commercial		1	$	106	$	106
Commercial real estate - owner occupied		—		—		—
Commercial real estate - non-owner occupied		2		1,311		1,311
Residential real estate		1		82		82
Home equity		1		6		6
Consumer		—		—		—
Total		5	$	1,505	$	1,505

	Loans Modified as TDRs for the Year Ended December 31, 2019
			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Contracts		Investment		Investment
Commercial		—	$	—	$	—
Commercial real estate - owner occupied		—		—		—
Commercial real estate - non-owner occupied
Residential real estate		1		207		207
Home equity		—		—		—
Consumer		—		—		—
Total		1	$	207	$	207

	Loans Modified as TDRs for the Year Ended December 31, 2018
			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Contracts		Investment		Investment
Commercial		—	$	—	$	—
Commercial real estate - owner occupied		—		—		—
Commercial real estate - non-owner occupied		—		—		—
Residential real estate		1		11		11
Home equity		—		—		—
Consumer		—		—		—
Total		1	$	11	$	11

Financing Receivable Credit Quality Indicators [Table Text Block]

	Commercial		Construction and Land Development		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-owner Occupied		Residential Real Estate		Home Equity
Pass	$	479,416	$	131,770	$	350,376	$	612,688	$	262,677	$	104,608
Special Mention		10,956		2,505		14,621		9,196		3,665		—
Substandard		865		5,796		8,474		5,563		2,795		273
Doubtful		19		—		209		122		—		—
Total	$	491,256	$	140,071	$	373,680	$	627,569	$	269,137	$	104,881

	Consumer
Performing	$	8,456
Nonperforming		6
Total	$	8,462

	Commercial		Construction and Land Development		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-owner Occupied		Residential Real Estate		Home Equity
Pass	$	328,488	$	130,694	$	340,696	$	519,919	$	316,454	$	118,960
Special Mention		8,710		4,133		13,094		9,023		4,370		—
Substandard		1,144		3,093		7,200		9,267		3,491		463
Doubtful		735		—		—		—		—		—
Total	$	339,077	$	137,920	$	360,990	$	538,209	$	324,315	$	119,423

	Consumer
Performing	$	10,877
Nonperforming		4
Total	$	10,881

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Note 6 - Allowance for Loan Losses and Reserve for Unfunded Lending Commitments (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Financing Receivable, Allowance for Credit Loss [Table Text Block]

	Year Ended December 31,
	2020			2019			2018
Allowance for Loan Losses
Balance, beginning of year	$	13,152		$	12,805		$	13,603
Provision for (recovery of) loan losses		8,916			456			(103	)
Charge-offs		(1,006	)		(333	)		(1,020	)
Recoveries		341			224			325
Balance, end of year	$	21,403		$	13,152		$	12,805

	Year Ended December 31,
	2020			2019		2018
Reserve for Unfunded Lending Commitments
Balance, beginning of year	$	329		$	217	$	206
Provision for (recovery of) unfunded commitments		(25	)		112		11
Charge-offs		—			—		—
Balance, end of year	$	304		$	329	$	217

	Commercial (1)			Construction and Land Development		Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-owner Occupied			Residential Real Estate			Consumer			Total
Allowance for Loan Losses
Balance at December 31, 2019	$	2,657		$	1,161	$	2,474		$	3,781		$	3,023		$	56		$	13,152
Charge-offs		(505	)		—		(17	)		(165	)		(117	)		(202	)		(1,006	)
Recoveries		65			2		12			50			85			127			341
Provision		1,156			764		1,871			3,960			1,076			89			8,916
Balance at December 31, 2020	$	3,373		$	1,927	$	4,340		$	7,626		$	4,067		$	70		$	21,403
Balance at December 31, 2020:
Allowance for Loan Losses
Individually evaluated for impairment	$	29		$	—	$	—		$	—		$	1		$	—		$	30
Collectively evaluated for impairment		3,318			1,927		4,138			7,185			3,896			70			20,534
Purchased credit impaired loans		26			—		202			441			170			—			839
Total	$	3,373		$	1,927	$	4,340		$	7,626		$	4,067		$	70		$	21,403
Loans
Individually evaluated for impairment	$	57		$	—	$	286		$	1,270		$	1,239		$	—		$	2,852
Collectively evaluated for impairment		490,736			139,833		360,579			616,498			365,967			8,390			1,982,003
Purchased credit impaired loans		463			238		12,815			9,801			6,812			72			30,201
Total	$	491,256		$	140,071	$	373,680		$	627,569		$	374,018		$	8,462		$	2,015,056

	Commercial			Construction and Land Development		Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-owner Occupied		Residential Real Estate			Consumer			Total
Allowance for Loan Losses
Balance at December 31, 2018	$	2,537		$	1,059	$	2,420		$	3,767	$	2,977		$	45		$	12,805
Charge-offs		(12	)		—		(6	)		—		(70	)		(245	)		(333	)
Recoveries		13			—		9			—		58			144			224
Provision		119			102		51			14		58			112			456
Balance at December 31, 2019	$	2,657		$	1,161	$	2,474		$	3,781	$	3,023		$	56		$	13,152
Balance at December 31, 2019:
Allowance for Loan Losses
Individually evaluated for impairment	$	204		$	—	$	—		$	—	$	26		$	—		$	230
Collectively evaluated for impairment		2,448			1,161		2,444			3,781		2,794			56			12,684
Purchased credit impaired loans		5			—		30			—		203			—			238
Total	$	2,657		$	1,161	$	2,474		$	3,781	$	3,023		$	56		$	13,152
Loans
Individually evaluated for impairment	$	784		$	—	$	—		$	502	$	906		$	—		$	2,192
Collectively evaluated for impairment		337,312			137,522		346,233			520,541		433,121			10,866			1,785,595
Purchased credit impaired loans		981			398		14,758			17,165		9,711			15			43,028
Total	$	339,077		$	137,920	$	360,991		$	538,208	$	443,738		$	10,881		$	1,830,815

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Note 7 - Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Property, Plant and Equipment [Table Text Block]

	December 31,
	2020			2019
Land	$	10,267		$	10,421
Buildings		36,173			36,247
Leasehold improvements		1,160			1,469
Furniture and equipment		19,424			17,695
		67,024			65,832
Accumulated depreciation		(27,301	)		(25,984	)
Premises and equipment, net	$	39,723		$	39,848

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Note 8 - Goodwill and Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Intangible Assets and Goodwill [Table Text Block]

	Goodwill		Intangibles
Balance at December 31, 2019	$	84,002	$	7,728
Measurement period adjustments		1,046		—
Amortization		—		(1,637	)
Balance at December 31, 2020	$	85,048	$	6,091

	Gross Carrying		Accumulated			Net Carrying
	Value		Amortization			Value
December 31, 2020
Core deposit intangibles	$	19,708	$	(13,617	)	$	6,091
Goodwill		85,048		—			85,048
December 31, 2019
Core deposit intangibles	$	19,708	$	(11,980	)	$	7,728
Goodwill		84,002		—			84,002

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Year	Amount
2021	$	1,464
2022		1,260
2023		1,069
2024		800
2025		617
2026 and after		881
Total	$	6,091

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Note 9 - Leases (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Lease, Cost [Table Text Block]

	December 31, 2020			December 31, 2019
Lease liabilities	$	4,940		$	5,369
Right-of-use assets	$	4,878		$	5,340
Weighted average remaining lease term (in years)		7.33			8.17
Weighted average discount rate		3.03	%		3.21	%

	Year Ended December 31, 2020		Year Ended December 31, 2019
Lease cost
Operating lease cost	$	993	$	1,040
Short-term lease cost		3		3
Total lease cost	$	996	$	1,043
Cash paid for amounts included in the measurement of lease liabilities	$	959	$	1,013

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

Lease payments due	As of December 31, 2020
2021	$	1,048
2022		1,044
2023		945
2024		516
2025		473
2026 and after		1,549
Total undiscounted cash flows	$	5,575
Discount		(635	)
Lease liabilities	$	4,940

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Note 10 - Deposits (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Time Deposit Maturities [Table Text Block]

Year	Amount
2021	$	271,868
2022		58,544
2023		31,486
2024		15,596
2025		13,898
2026 and after		5,034
Total	$	396,426

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Note 11 - Short-term Borrowings (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Short-term Debt [Table Text Block]

	December 31, 2020					December 31, 2019
	Amount		Weighted Average Rate			Amount		Weighted Average Rate
Customer repurchase agreements	$	42,551		0.13	%	$	40,475		1.40	%

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Note 14 - Junior Subordinated Debt (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Long-term Debt Instruments [Table Text Block]

				Principal Amount
				As of December 31,
Issuing Entity	Date Issued	Interest Rate	Maturity Date	2020		2019
AMNB Trust I	4/7/2006	Libor plus 1.35%	6/30/2036	$	20,619	$	20,619
MidCarolina Trust I	10/29/2002	Libor plus 3.45%	11/7/2032		4,489		4,433
MidCarolina Trust II	12/3/2003	Libor plus 2.95%	10/7/2033		3,022		2,977
				$	28,130	$	28,029

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Note 15 - Derivative Financial Instruments and Hedging Activities (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Interest Rate Derivatives [Table Text Block]

(Dollars in thousands)	December 31, 2020
	Notional Amount		Positions		Assets		Liabilities		Cash Collateral Pledged
Cash flow hedges:
Interest rate swaps:
Variable-rate to fixed-rate swaps with counterparty	$	28,500	$	3	$	—	$	4,868	$	5,750

(Dollars in thousands)	December 31, 2019
	Notional Amount		Positions		Assets		Liabilities		Cash Collateral Pledged
Cash flow hedges:
Interest rate swaps:
Variable-rate to fixed-rate swaps with counterparty	$	28,500	$	3	$	—	$	2,658	$	3,450

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Note 16 - Stock-based Compensation (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Stock Options Roll Forward [Table Text Block]

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	Option			Exercise		Contractual Term		Value
	Shares			Price		(In Years)		($000)
Outstanding at December 31, 2019		13,944		$	16.63
Granted		—			—
Exercised		(2,573	)		16.63
Forfeited		(830	)		16.63
Expired		—			—
Outstanding at December 31, 2020		10,541		$	16.63		3.97	$	101
Exercisable at December 31, 2020		10,541		$	16.63		3.97	$	101

Share-based Payment Arrangement, Option, Exercise Price Range [Table Text Block]

Options Outstanding and Exercisable
			Weighted-Average
	Number of		Remaining
Range of	Outstanding		Contractual Life		Weighted-Average
Exercise Prices	Options		(In Years)		Exercise Price
$15.00 to $20.00		10,541		3.97	$	16.63

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

				Weighted
				Average Grant
	Shares			Date Value Per Share
Nonvested at December 31, 2019		57,271		$	34.84
Granted		26,010			34.42
Vested		(19,526	)		34.50
Forfeited		(5,216	)		34.29
Nonvested at December 31, 2020		58,539			34.81

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Note 17 - Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	December 31,
	2020		2019
Deferred tax assets:
Allowance for loan losses	$	4,636	$	2,841
Nonaccrual loan interest		507		490
Other real estate owned valuation allowance		124		120
Deferred compensation		159		1,184
Acquisition accounting adjustments		3,404		3,670
Lease liability, net of right of use asset		13		—
Accrued pension liability		447		50
NOL Carryforward		—		456
Net unrealized loss on cash flow hedges		1,022		573
Other		318		601
Total deferred tax assets		10,630		9,985
Deferred tax liabilities:
Depreciation		1,352		1,079
Core deposit intangibles		1,315		1,669
Accrued pension liability		213		—
Deferred loan origination costs, net		533		258
Net unrealized gain on securities available for sale		2,180		541
Other		32		574
Total deferred tax liabilities		5,625		4,121
Net deferred tax assets	$	5,005	$	5,864

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	Year Ended December 31,
	2020			2019		2018
Current tax expense	$	7,777		$	3,793	$	5,090
Deferred tax expense		(640	)		1,068		556
Total income tax expense	$	7,137		$	4,861	$	5,646

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Year Ended December 31,
	2020			2019			2018
Expected federal tax expense	$	7,808		$	5,411		$	5,927
Nondeductible interest expense		31			67			69
Tax-exempt interest		(259	)		(478	)		(504	)
State income taxes		207			149			337
Other, net		(650	)		(288	)		(183	)
Total income tax expense	$	7,137		$	4,861		$	5,646

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Note 18 - Earnings Per Common Share (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Year Ended December 31,
	2020					2019					2018
			Per Share					Per Share					Per Share
	Shares		Amount			Shares		Amount			Shares		Amount
Basic earnings per share		10,981,623	$	2.74			10,531,572	$	1.99			8,698,014	$	2.60
Effect of dilutive securities - stock options		4,167		(0.01	)		9,765		(0.01	)		10,448		(0.01	)
Diluted earnings per share		10,985,790	$	2.73			10,541,337	$	1.98			8,708,462	$	2.59

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Note 19 - Off-balance Sheet Activities (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Fair Value, Off-balance Sheet Risks [Table Text Block]

	December 31,
	2020		2019
Commitments to extend credit	$	503,272	$	557,364
Standby letters of credit		17,355		13,611
Mortgage loan rate lock commitments		26,883		10,791

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Note 20 - Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Related Party Transactions [Table Text Block]

Balance at December 31, 2019	$	9,594
Additions		3,751
Repayments		(4,760	)
Reclassifications(1)		(63	)
Balance at December 31, 2020	$	8,522

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Note 21 - Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Defined Benefit Plans Disclosures [Table Text Block]

	As of and for the Year Ended December 31,
	2020			2019			2018
Change in Benefit Obligation:
Projected benefit obligation at beginning of year	$	6,262		$	5,812		$	8,313
Service cost		—			—			—
Interest cost		152			209			235
Actuarial (gain) loss		814			489			(782	)
Settlement gain (loss)		44			(12	)		(120	)
Benefits paid		(1,451	)		(236	)		(1,834	)
Projected benefit obligation at end of year		5,821			6,262			5,812
Change in Plan Assets:
Fair value of plan assets at beginning of year		5,915			5,653			7,556
Actual return (loss) on plan assets		237			498			(69	)
Benefits paid		(1,451	)		(236	)		(1,834	)
Fair value of plan assets at end of year		4,701			5,915			5,653
Funded Status at End of Year	$	(1,120	)	$	(347	)	$	(159	)
Amounts Recognized in the Consolidated Balance Sheets
Other liabilities	$	(1,120	)	$	(347	)	$	(159	)
Amounts Recognized in Accumulated Other Comprehensive Loss
Net actuarial loss	$	2,071		$	1,658		$	1,594
Deferred income taxes		(435	)		(358	)		(357	)
Amount recognized	$	1,636		$	1,300		$	1,237

	As of and for the Year Ended December 31,
	2020			2019			2018
Components of Net Periodic Benefit Cost
Service cost	$	—		$	—		$	—
Interest cost		152			209			235
Expected return on plan assets		(285	)		(269	)		(353	)
Recognized net loss due to settlement		352			52			540
Recognized net actuarial loss		140			133			272
Net periodic benefit cost	$	359		$	125		$	694
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income) Loss
Net actuarial (gain) loss	$	413		$	64		$	(1,291	)
Amortization of prior service cost		—			—			—
Total recognized in other comprehensive (income) loss	$	413		$	64		$	(1,291	)
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive (Income) Loss	$	772		$	189		$	(597	)

Schedule of Allocation of Plan Assets [Table Text Block]

Asset Category	December 31,
	2020			2019
Fixed Income		65.6	%		61.8	%
Equity		31.5	%		27.5	%
Cash and Accrued Income		2.9	%		10.7	%
Total		100.0	%		100.0	%

Schedule of Changes in Fair Value of Plan Assets [Table Text Block]

			Fair Value Measurements at December 31, 2020 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Asset Category	2020		Level 1		Level 2		Level 3
Cash	$	138	$	138	$	—	$	—
Fixed income securities
Government sponsored entities		444		—		444		—
Municipal bonds and notes		2,147		—		2,147		—
Corporate bonds and notes		491		—		491		—
Equity securities
U.S. companies		1,259		1,259		—		—
Foreign companies		222		222		—		—
	$	4,701	$	1,619	$	3,082	$	—

			Fair Value Measurements at December 31, 2019 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Asset Category	2019		Level 1		Level 2		Level 3
Cash	$	636	$	636	$	—	$	—
Fixed income securities
Government sponsored entities		1,648		—		1,648		—
Municipal bonds and notes		1,792		—		1,792		—
Corporate bonds and notes		212		—		212		—
Equity securities
U.S. companies		1,385		1,385		—		—
Foreign companies		242		242		—		—
	$	5,915	$	2,263	$	3,652	$	—

Schedule of Expected Benefit Payments [Table Text Block]

Year	Amount
2021	$	629
2022		381
2023		910
2024		252
2025		1,204
2026 - 2030		2,390

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Note 22 - Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

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

			Fair Value Measurements at December 31, 2020 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2020		Level 1		Level 2		Level 3
Assets:
Securities available for sale:
U.S. Treasury	$	34,998	$	—	$	34,998	$	—
Federal agencies and GSEs		106,023		—		106,023		—
Mortgage-backed and CMOs		252,782		—		252,782		—
State and municipal		59,099		—		59,099		—
Corporate		13,189		—		13,189		—
Total securities available for sale	$	466,091	$	—	$	466,091	$	—
Loans held for sale	$	15,591	$	—	$	15,591	$	—
Liabilities:
Derivative - cash flow hedges	$	4,868	$	—	$	4,868	$	—

			Fair Value Measurements at December 31, 2019 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2019		Level 1		Level 2		Level 3
Assets:
Securities available for sale:
U.S. Treasury	$	14,987	$	—	$	14,987	$	—
Federal agencies and GSEs		128,114		—		128,114		—
Mortgage-backed and CMOs		184,240		—		184,240		—
State and municipal		42,154		—		42,154		—
Corporate		9,700		—		9,700		—
Total securities available for sale	$	379,195	$	—	$	379,195	$	—
Loans held for sale	$	2,027	$	—	$	2,027	$	—
Liabilities:
Derivative - cash flow hedges	$	2,658	$	—	$	2,658	$	—

Fair Value Measurements, Nonrecurring [Table Text Block]

			Fair Value Measurements at December 31, 2020 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2020		Level 1		Level 2		Level 3
Assets:
Impaired loans, net of valuation allowance	$	268	$	—	$	—	$	268
Other real estate owned, net		958		—		—		958

			Fair Value Measurements at December 31, 2019 Using
			Quoted Prices		Significant
			in Active		Other		Significant
	Balance as of		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2019		Level 1		Level 2		Level 3
Assets:
Impaired loans, net of valuation allowance	$	759	$	—	$	—	$	759
Other real estate owned, net		1,308		—		—		1,308

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques [Table Text Block]

Assets	Valuation Technique	Unobservable Input	Range; Weighted Average (1)
Impaired loans	Discounted appraised value	Selling cost	8.00%
	Discounted cash flow analysis	Market rate for borrower (discount rate)	4.13% - 7.20%; 5.19%
Other real estate owned	Discounted appraised value	Selling cost	8.00%

__________________________

(1) Unobservable inputs were weighted by the relative fair value of the impaired loans.

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

	Fair Value Measurements at December 31, 2020 Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Balance
Financial Assets:
Cash and cash equivalents	$	374,370	$	374,370	$	—	$	—	$	374,370
Securities available for sale		466,091		—		466,091		—		466,091
Restricted stock		8,715		—		8,715		—		8,715
Loans held for sale		15,591		—		15,591		—		15,591
Loans, net of allowance		1,993,653		—		—		1,992,326		1,992,326
Bank owned life insurance		28,482		—		28,482		—		28,482
Accrued interest receivable		7,193		—		7,193		—		7,193
Financial Liabilities:
Deposits	$	2,611,330	$	—	$	2,615,157	$	—	$	2,615,157
Repurchase agreements		42,551		—		42,551		—		42,551
Subordinated debt		7,500		—		7,522		—		7,522
Junior subordinated debt		28,130		—		—		21,696		21,696
Accrued interest payable		778		—		778		—		778
Derivative - cash flow hedges		4,868		—		4,868		—		4,868

	Fair Value Measurements at December 31, 2019 Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Balance
Financial Assets:
Cash and cash equivalents	$	79,582	$	79,582	$	—	$	—	$	79,582
Securities available for sale		379,195		—		379,195		—		379,195
Restricted stock		8,630		—		8,630		—		8,630
Loans held for sale		2,027		—		2,027		—		2,027
Loans, net of allowance		1,817,663		—		—		1,818,655		1,818,655
Bank owned life insurance		27,817		—		27,817		—		27,817
Accrued interest receivable		6,625		—		6,625		—		6,625
Financial Liabilities:
Deposits	$	2,060,547	$	—	$	2,062,823	$	—	$	2,062,823
Repurchase agreements		40,475		—		40,475		—		40,475
Subordinated debt		7,517		—		8,525		—		8,525
Junior subordinated debt		28,029		—		—		22,697		22,697
Accrued interest payable		1,213		—		1,213		—		1,213
Derivative - cash flow hedges		2,658		—		2,658		—		2,658

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Note 23 - Dividend Restrictions and Regulatory Capital (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

										To Be Well
										Capitalized Under
										Prompt Corrective
	Actual					Required for Capital Adequacy Purposes				Action Provisions
	Amount		Ratio			Amount		Ratio		Amount		Ratio
December 31, 2020
Common Equity Tier 1
Company	$	244,318		12.36	%	$	88,967		>4.50%		N/A		N/A
Bank		252,748		12.86			137,530		>7.00	$	127,706		>6.50%
Tier 1 Capital
Company		272,448		13.78			118,623		>6.00		N/A		N/A
Bank		252,748		12.86			167,001		>8.50		157,177		>8.00
Total Capital
Company		300,155		15.18			158,164		>8.00		N/A		N/A
Bank		274,455		13.97			206,295		>10.50		196,471		>10.00
Leverage Capital
Company		272,448		9.48			114,902		>4.00		N/A		N/A
Bank		252,748		8.85			114,247		>4.00		142,809		>5.00
December 31, 2019
Common Equity Tier 1
Company	$	228,554		11.56	%	$	88,968		>4.50%		N/A		N/A
Bank		243,449		12.38			137,698		>7.00	$	127,862		>6.50%
Tier 1 Capital
Company		256,583		12.98			118,624		>6.00		N/A		N/A
Bank		243,449		12.38			167,205		>8.50		157,369		>8.00
Total Capital
Company		277,581		14.04			158,166		>8.00		N/A		N/A
Bank		256,930		13.06			206,547		>10.50		196,712		>10.00
Leverage Capital
Company		256,583		10.75			95,514		>4.00		N/A		N/A
Bank		243,449		10.25			94,972		>4.00		118,715		>5.00

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Note 24 - Segment and Related Information (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	2020
	Community Banking		Trust and Investment Services		Total
Interest income	$	95,840	$	—	$	95,840
Interest expense		12,020		—		12,020
Noninterest income		12,054		4,789		16,843
Noninterest expense		52,245		2,320		54,565
Incomebefore income taxes		34,714		2,468		37,182
Net income		28,052		1,993		30,045
Depreciation and amortization		3,815		10		3,825
Total assets		3,049,779		231		3,050,010
Goodwill		85,048		—		85,048
Capital expenditures		2,690		4		2,694

	2019
	Community Banking		Trust and Investment Services		Total
Interest income	$	92,855	$	—	$	92,855
Interest expense		15,728		—		15,728
Noninterest income		10,602		4,568		15,170
Noninterest expense		63,794		2,280		66,074
Incomebefore income taxes		23,479		2,288		25,767
Net income		19,050		1,856		20,906
Depreciation and amortization		3,454		8		3,462
Total assets		2,478,478		72		2,478,550
Goodwill		84,002		—		84,002
Capital expenditures		3,534		21		3,555

	2018
	Community Banking		Trust and Investment Services		Total
Interest income	$	68,768	$	—	$	68,768
Interest expense		9,674		—		9,674
Noninterest income		8,695		4,579		13,274
Noninterest expense		41,832		2,414		44,246
Incomebefore income taxes		26,060		2,165		28,225
Net income		20,848		1,731		22,579
Depreciation and amortization		2,030		10		2,040
Total assets		1,862,849		17		1,862,866
Goodwill		43,872		—		43,872
Capital expenditures		2,723		—		2,723

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Note 25 - Parent Company Financial Information (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Condensed Balance Sheet [Table Text Block]

	December 31,
Condensed Balance Sheets	2020		2019
Cash	$	17,759	$	11,127
Securities available for sale, at fair value		8,534		8,683
Investment in subsidiaries		351,033		337,983
Due from subsidiaries		143		134
Other assets		1,062		674
Total Assets	$	378,531	$	358,601
Subordinated debt	$	7,500	$	7,517
Junior subordinated debt		28,130		28,029
Other liabilities		5,007		2,797
Shareholders' equity		337,894		320,258
Total Liabilities and Shareholders' Equity	$	378,531	$	358,601

Condensed Income Statement [Table Text Block]

	Year Ended December 31,
Condensed Statements of Income	2020			2019			2018
Dividends from subsidiary	$	25,500		$	25,000		$	11,000
Other income		512			823			456
Expenses		3,369			4,232			2,396
Income tax benefit		(600	)		(601	)		(407	)
Income before equity in undistributed earnings of subsidiary		23,243			22,192			9,467
Equity in undistributed (distributed) earnings of subsidiary		6,802			(1,286	)		13,112
Net Income	$	30,045		$	20,906		$	22,579

Condensed Cash Flow Statement [Table Text Block]

	Year Ended December 31,
Condensed Statements of Cash Flows	2020			2019			2018
Cash Flows from Operating Activities:
Net income	$	30,045		$	20,906		$	22,579
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in (undistributed) distributions of subsidiary		(6,802	)		1,286			(13,112	)
Net change in other assets		84			(382	)		(194	)
Net change in other liabilities		85			(35	)		136
Net cash provided by operating activities		23,412			21,775			9,409
Cash Flows from Investing Activities:
Purchases of securities available for sale		—			(2,220	)		—
Sales of equity securities		—			445			431
Cash paid in bank acquisition		—			(27	)		—
Cash acquired in bank acquisition		—			981			—
Net cash provided by (used in) investing activities		—			(821	)		431
Cash Flows from Financing Activities:
Common stock dividends paid		(11,842	)		(10,965	)		(8,702	)
Repurchase of common stock		(4,981	)		(3,146	)		—
Proceeds from exercise of stock options		43			688			861
Net cash used in financing activities		(16,780	)		(13,423	)		(7,841	)
Net increase in cash and cash equivalents		6,632			7,531			1,999
Cash and cash equivalents at beginning of period		11,127			3,596			1,597
Cash and cash equivalents at end of period	$	17,759		$	11,127		$	3,596

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Note 27 - Supplemental Cash Flow Information (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

(dollars in thousands)	As of or for the Year Ended December 31,
	2020			2019			2018
Supplemental Schedule of Cash and Cash Equivalents:
Cash and due from banks	$	30,767		$	32,505		$	29,587
Interest-bearing deposits in other banks		343,603			47,077			34,668
	$	374,370		$	79,582		$	64,255
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest on deposits and borrowed funds	$	12,455		$	15,310		$	9,553
Income taxes		7,609			4,698			5,056
Noncash investing and financing activities:
Transfer of loans to other real estate owned		95			234			599
Transfer of loans to repossessions		411			—			—
Transfer from premises and equipment to other assets		—			445			—
Increase in operating lease right-of-use asset		371			4,453			—
Increase in operating lease liability		371			4,453			—
Unrealized gains (losses) on securities available for sale		6,399			8,821			(3,290	)
Unrealized losses on cash flow hedges		(2,210	)		(1,854	)		(804	)
Change in unfunded pension liability		(413	)		(64	)		1,291
Non-cash transactions related to acquisitions:
Assets acquired:
Investment securities		—			34,876			—
Restricted stock		—			2,588			—
Loans		—			444,324			—
Premises and equipment		—			12,554			—
Deferred income taxes		—			2,960			—
Core deposit intangible		—			8,200			—
Other real estate owned		—			1,442			—
Bank owned life insurance		—			8,246			—
Other assets		—			14,244			—
Liabilities assumed:
Deposits		—			483,626			—
Short-term FHLB advances		—			14,883			—
Long-term FHLB advances		—			778			—
Subordinated debt		—			7,530			—
Other liabilities		—			5,780			—
Consideration:
Issuance of common stock		—			82,470			—
Fair value of replacement stock options/restricted stock		—			753			—

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Note 28 - Accumulated Other Comprehensive Income (Loss) (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

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

				Unrealized			Adjustments			Accumulated
	Net Unrealized			Losses on			Related to			Other
	Gains (Losses)			Cash Flow			Pension			Comprehensive
	on Securities			Hedges			Benefits			Income (Loss)
Balance at Balance at December 31, 2017	$	(796	)	$	—		$	(2,280	)	$	(3,076	)
Net unrealized losses on securities available for sale, net of tax, $(745)		(2,464	)		—			—			(2,464	)
Reclassification adjustment for realized gains on securities, net of tax, $(18)		(63	)		—			—			(63	)
Net unrealized losses on cash flow hedges, net of tax, $(180)		—			(624	)		—			(624	)
Change in unfunded pension liability, net of tax, $249		—			—			1,042			1,042
Reclassification for ASU 2016-01 adoption		(650	)		—			—			(650	)
Balance at December 31, 2018		(3,973	)		(624	)		(1,238	)		(5,835	)
Net unrealized gains on securities available for sale, net of tax, $2,005		7,090			—			—			7,090
Reclassification adjustment for realized gains on securities, net of tax, $(59)		(215	)		—			—			(215	)
Net unrealized losses on cash flow hedges, net of tax, $(394)		—			(1,460	)		—			(1,460	)
Change in unfunded pension liability, net of tax, $(1)		—			—			(63	)		(63	)
Balance at December 31, 2019		2,902			(2,084	)		(1,301	)		(483	)
Net unrealized gains on securities available for sale, net of tax, $1,557		5,656			—			—			5,656
Reclassification adjustment for realized gains on securities, net of tax, $(176)		(638	)		—			—			(638	)
Net unrealized losses on cash flow hedges, net of tax, $(448)		—			(1,762	)		—			(1,762	)
Change in unfunded pension liability, net of tax, $(77)		—			—			(336	)		(336	)
Balance at December 31, 2020		7,920			(3,846	)		(1,637	)	$	2,437

Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]

Details about AOCI Components	Amount Reclassified from AOCI									Affected Line Item in the Statement of Where Net Income is Presented
	Year Ended December 31,
	2020			2019			2018
Available for sale securities:
Realized gain on sale of securities	$	814		$	274		$	81		Securities gains, net
		(176	)		(59	)		(18	)	Income taxes
	$	638		$	215		$	63		Net of tax
Reclassification for ASU-2016-01 adoption		—			—			650		(1)
Total reclassifications	$	638		$	215		$	713

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Note 1 - Summary of Significant Accounting Policies (Details Textual)		2 Months Ended	12 Months Ended
	Feb. 28, 2021 USD ($)	Feb. 28, 2021 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Financing Receivable, Paycheck Protection Program Loans Originated Through the CARES Act			$ 211,300,000
Financing Receivable, Paycheck Protection Program Loans Originated Through the CARES Act, Processing Fees			11,200,000
Financing Receivable, Paycheck Protection Program Loans Originated Through the CARES Act, Direct Origination Cost			1,800,000
Financing Receivable, Paycheck Protection Program Loans Originated Through the CARES Act, Net Unaccreted Loan Origination Fees			$ 4,400,000
Maturity Period of Interest-bearing Deposits in Other Banks (Year)			1 year
Debt Securities, Held-to-maturity, Total			$ 0
Minimum Period of Time Between Issuance and Sale of Loan Commitment (Day)			30 days
Maximum Period of Time Between Issuance and Sale of Loan Commitment (Day)			60 days
Period to Discontinued Interest Accrual on Delinquent Loans (Day)			90 days
Past Due Period when Loans are Charged Off (Day)			120 days
Financing Receivable, Troubled Debt Restructuring			$ 1,976,000	$ 1,058,000
Financing Receivable, Disaster Assistance Program			405,100,000
Financing Receivable, Deferred Payments			$ 30,000,000.0
Financing Receivable, Deferred Payments, Percentage of Portfolio			1.50%
Financing Receivable, Second Deferrals			$ 18,200,000
Goodwill and Intangible Asset Impairment, Total			0
Unrecognized Tax Benefits, Ending Balance			0	0
Marketing and Advertising Expense, Total			$ 453,000	$ 473,000	$ 365,000
Software Development [Member]
Property, Plant and Equipment, Useful Life (Year)			3 years
Minimum [Member]
Property, Plant and Equipment, Useful Life (Year)			3 years
Maximum [Member]
Property, Plant and Equipment, Useful Life (Year)			39 years
Subsequent Event [Member]
Financing Receivable, Paycheck Protection Program Loans Originated Through the CARES Act	$ 226,400,000	$ 226,400,000
Financing Receivable, Paycheck Protection Program Loans Originated Through the CARES Act, Net Unaccreted Loan Origination Fees	5,000,000.0	5,000,000.0
Financing Receivable, Deferred Payments	$ 25,200,000	$ 25,200,000
Financing Receivable, Deferred Payments, Percentage of Portfolio	1.20%	1.20%
Financing Receivable, Second Deferrals	$ 16,700,000	$ 16,700,000
SBA CARES Act Paycheck Protection Program [Member]
Financing Receivable, Deferred Payments, Forgiven Amount			$ 56,400,000
SBA CARES Act Paycheck Protection Program [Member] | Subsequent Event [Member]
Financing Receivable, Applications Approved	2,700	2,700
Financing Receivable, Applications Approved, Amount	$ 340,900,000	$ 340,900,000
Financing Receivable, Deferred Payments, Forgiven Amount	$ 105,800,000	$ 105,800,000

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Note 2 - Acquisitions (Details Textual) - USD ($)		12 Months Ended
	Apr. 01, 2019	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Business Combination, Acquisition Related Costs		$ 0	$ 11,782,000	$ 872,000
HomeTown Bankshares Corporation [Member]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares Issued Per Share Of Common Stock (in dollars per share)	$ 0.4150
Business Combination, Acquisition Related Costs		$ 0	$ 11,782,000	$ 872,000

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Note 2 - Acquisitions - Preliminary Assessment of Consideration Transferred, Assets Acquired, and Liabilities Assumed (Details) - USD ($) $ in Thousands		12 Months Ended
	Apr. 01, 2019	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Cash paid in lieu of fractional shares		$ (0)	$ 27	$ (0)
Goodwill resulting from merger with HomeTown		85,048	84,002	$ 43,872
HomeTown Bankshares Corporation [Member]
Cash paid in lieu of fractional shares	$ 27
Value of consideration	83,250
Cash and cash equivalents	26,283
Investment securities	34,876
Restricted stock	2,588
Loans	444,324
Premises and equipment	12,034
Deferred income taxes	2,960
Core deposit intangible	8,200
Other real estate owned	1,188
Banked owned life insurance	8,246
Other assets	14,244
Total assets	554,943
Deposits	483,626
Short-term FHLB advances	14,883
Long-term FHLB advances	778
Subordinated debt	7,530
Other liabilities	6,052
Total liabilities	512,869
Net assets acquired	42,074
Goodwill resulting from merger with HomeTown	41,176	$ 41,176	$ 40,130
HomeTown Bankshares Corporation [Member] | Stock Options and Restricted Stock [Member]
Common shares issued (2,361,686)	753
HomeTown Bankshares Corporation [Member] | Common Stock [Member]
Common shares issued (2,361,686)	$ 82,470

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Note 2 - Acquisitions - Preliminary Assessment of Consideration Transferred, Assets Acquired, and Liabilities Assumed (Details) (Parentheticals)	12 Months Ended
	Dec. 31, 2019 shares
Common shares issued, shares (in shares)	2,361,686

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Note 2 - Acquisitions - Changes in Fair Value of Net Assets Acquired and Liabilities (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2020 USD ($)
Goodwill at December 31, 2019	$ 84,002
Goodwill at December 31, 2020	85,048
HomeTown Bankshares Corporation [Member]
Goodwill at December 31, 2019	40,130
Premises and equipment	520
Other real estate owned	254
Other liabilities	272
Goodwill at December 31, 2020	$ 41,176

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Note 2 - Acquisitions - Acquired Impaired Loans Receivable (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Apr. 01, 2019	Dec. 31, 2018	Dec. 31, 2017
Interest component of expected cash flows (accretable yield)	$ 6,513	$ 7,893		$ 4,633	$ 4,890
HomeTown Bankshares Corporation [Member]
Contractually required principal and interest at acquisition			$ 45,551
Contractual cash flows not expected to be collected (nonaccretable difference)			8,296
Expected cash flows at acquisition			37,255
Interest component of expected cash flows (accretable yield)			4,410
Fair value of acquired loans accounted for under FASB ASC 310-30			$ 32,845

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Note 2 - Acquisitions - Pro Forma Amounts (Details) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018
Total revenues (1)	[1]	$ 95,178	$ 98,232
Net income		$ 29,841	$ 27,974
Earnings per share (in dollars per share)		$ 2.70	$ 2.52

[1] Includes net interest income and noninterest income.

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Note 3 - Restrictions on Cash (Details Textual) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Restricted Cash and Cash Equivalents, Total	$ 0	$ 14,400,000
Cash Reserve Deposit Required and Made	0	$ 2,600,000
Cash, Uninsured Amount	$ 2,610,000

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Note 4 - Securities (Details Textual)	12 Months Ended
	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Equity Securities, FV-NI	$ 0	$ 0
Equity Securities, FV-NI, Unrealized Gain	(0)	333,000	$ 42,000
Proceeds from the Sale of Equity Securities	0	445,000	$ 431,000
Debt Securities, Available-for-sale, Restricted	189,791,000	179,852,000
Federal Home Loan Bank Letters of Credit Used as Additional Collateral Amount	$ 245,000,000	170,000,000
Par Value of Restricted Stock Out of Outstanding Borrowings Required by FHLB	4.25%
Par Value of Restricted Stock Out of Outstanding Capital Required by FRB	3.00%
Percentage of Par Value of Federal Reserve Banks Restricted Stock Outstanding Capital Subject to Call	3.00%
Federal Reserve Bank Stock	$ 6,458,000	6,415,000
Federal Home Loan Bank Stock	2,257,000	$ 2,215,000
Other than Temporary Impairment Losses, Investments, Total	$ 0
US Government-sponsored Enterprises Debt Securities [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	14
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	6
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Total	$ 0
Collateralized Mortgage Backed Securities [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	5
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Total	$ 0
US States and Political Subdivisions Debt Securities [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	2
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Total	$ 0
Corporate Debt Securities [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	2
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Total	$ 0

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Note 4 - Securities - Amortized Cost and Fair Value of Investments in Debt Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Debt Securities, Available-for-sale, Amortized Cost	$ 455,992	$ 375,494
Securities available for sale, unrealized gains	10,261	4,360
Securities available for sale, unrealized losses	162	659
Securities available for sale, fair value	466,091	379,195
US Treasury Securities [Member]
Debt Securities, Available-for-sale, Amortized Cost	34,997	14,992
Securities available for sale, unrealized gains	1	0
Securities available for sale, unrealized losses	0	5
Securities available for sale, fair value	34,998	14,987
US Government-sponsored Enterprises Debt Securities [Member]
Debt Securities, Available-for-sale, Amortized Cost	104,092	126,829
Securities available for sale, unrealized gains	1,976	1,504
Securities available for sale, unrealized losses	45	219
Securities available for sale, fair value	106,023	128,114
Collateralized Mortgage Backed Securities [Member]
Debt Securities, Available-for-sale, Amortized Cost	246,770	182,732
Securities available for sale, unrealized gains	6,117	1,901
Securities available for sale, unrealized losses	105	393
Securities available for sale, fair value	252,782	184,240
US States and Political Subdivisions Debt Securities [Member]
Debt Securities, Available-for-sale, Amortized Cost	57,122	41,427
Securities available for sale, unrealized gains	1,979	769
Securities available for sale, unrealized losses	2	42
Securities available for sale, fair value	59,099	42,154
Corporate Debt Securities [Member]
Debt Securities, Available-for-sale, Amortized Cost	13,011	9,514
Securities available for sale, unrealized gains	188	186
Securities available for sale, unrealized losses	10	0
Securities available for sale, fair value	$ 13,189	$ 9,700

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Note 4 - Securities - Amortized Cost and Estimated Fair Value by Maturity (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Due in one year or less, Amortized cost	$ 38,081
Due in one year or less, Fair value	38,120
Due after one year through five years, Amortized cost	96,905
Due after one year through five years, Fair value	98,651
Due after five years through ten years, Amortized cost	52,624
Due after five years through ten years, Fair value	54,465
Due after ten years, Amortized cost	21,612
Due after ten years, Fair value	22,073
Debt Securities, Available-for-sale, Amortized Cost	455,992	$ 375,494
Securities available for sale, at fair value	466,091	$ 379,195
Mortgage-backed and CMOs [Member]
Mortgage-backed and CMOs, Amortized cost	246,770
Mortgage-backed and CMOs, Fair value	$ 252,782

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Note 4 - Securities - Realized Gain (Loss) on Investments (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Gross realized gains	$ 814	$ 328	$ 342
Gross realized losses	0	(54)	(261)
Proceeds from sales of securities available for sale	$ 5,811	$ 29,878	$ 57,607

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Note 4 - Securities - Available for Sale Securities in a Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Total, fair value	$ 77,323	$ 177,735
Total, unrealized loss	162	659
Less than 12 months, fair value	76,060	116,198
Less than 12 months, unrealized loss	143	352
12 months or more, fair value	1,263	61,537
12 months or more, unrealized loss	19	307
US Government-sponsored Enterprises Debt Securities [Member]
Total, fair value	21,237	69,095
Total, unrealized loss	45	219
Less than 12 months, fair value	19,974	31,779
Less than 12 months, unrealized loss	26	44
12 months or more, fair value	1,263	37,316
12 months or more, unrealized loss	19	175
US Treasury Securities [Member]
Total, fair value		14,987
Total, unrealized loss		5
Less than 12 months, fair value		14,987
Less than 12 months, unrealized loss		5
12 months or more, fair value		0
12 months or more, unrealized loss		0
Collateralized Mortgage Backed Securities [Member]
Total, fair value	46,640	89,391
Total, unrealized loss	105	393
Less than 12 months, fair value	46,640	66,324
Less than 12 months, unrealized loss	105	266
12 months or more, fair value	0	23,067
12 months or more, unrealized loss	0	127
US States and Political Subdivisions Debt Securities [Member]
Total, fair value	3,456	4,262
Total, unrealized loss	2	42
Less than 12 months, fair value	3,456	3,108
Less than 12 months, unrealized loss	2	37
12 months or more, fair value	0	1,154
12 months or more, unrealized loss	0	$ 5
Corporate Debt Securities [Member]
Total, fair value	5,990
Total, unrealized loss	10
Less than 12 months, fair value	5,990
Less than 12 months, unrealized loss	10
12 months or more, fair value	0
12 months or more, unrealized loss	$ 0

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Note 5 - Loans (Details Textual)		2 Months Ended	12 Months Ended
	Feb. 28, 2021 USD ($)	Feb. 28, 2021 USD ($)	Dec. 31, 2020 USD ($)		Dec. 31, 2019 USD ($)	Dec. 31, 2018
Unamortized Loan Commitment and Origination Fees and Unamortized Discounts or Premiums, Total			$ 3,021,000		$ 1,197,000
Overdraft Deposits			59,000		$ 134,000
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts					0	0
Financing Receivable, Assistance to Customers, Amount			405,100,000
Financing Receivable, Deferred Payments			$ 30,000,000.0
Financing Receivable, Deferred Payments, Percentage of Portfolio			1.50%
Financing Receivable, Second Deferrals			$ 18,200,000
Financing Receivable, Paycheck Protection Program Loans Originated Through the CARES Act			211,300,000
Financing Receivable, Paycheck Protection Program Loans Originated Through the CARES Act, Processing Fees			11,200,000
Financing Receivable, Paycheck Protection Program Loans Originated Through the CARES Act, Direct Origination Cost			1,800,000
Financing Receivable, Paycheck Protection Program Loans Originated Through the CARES Act, Net Unaccreted Loan Origination Fees			4,400,000
Loans and Leases Receivable, Net of Deferred Income, Total			2,015,056,000		$ 1,830,815,000
Mortgage Loans in Process of Foreclosure, Amount			387,000		161,000
Real Estate Acquired Through Foreclosure			285,000		285,000
Subsequent Event [Member]
Financing Receivable, Deferred Payments	$ 25,200,000	$ 25,200,000
Financing Receivable, Deferred Payments, Percentage of Portfolio	1.20%	1.20%
Financing Receivable, Second Deferrals	$ 16,700,000	$ 16,700,000
Financing Receivable, Paycheck Protection Program Loans Originated Through the CARES Act	226,400,000	226,400,000
Financing Receivable, Paycheck Protection Program Loans Originated Through the CARES Act, Net Unaccreted Loan Origination Fees	5,000,000.0	5,000,000.0
Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Loss, Period Increase (Decrease), Total			88,000
Loans and Leases Receivable, Net of Deferred Income, Total			$ 491,256,000	[1]	339,077,000
Financing Receivable, Percent of Portfolio			15.50%
Commercial Portfolio Segment [Member] | Hotel Loans [Member]
Loans and Leases Receivable, Net of Deferred Income, Total			$ 75,235,000
Commercial Portfolio Segment [Member] | Restaurant Loans [Member]
Loans and Leases Receivable, Net of Deferred Income, Total			44,738,000
Commercial Portfolio Segment [Member] | Retail Loans [Member]
Loans and Leases Receivable, Net of Deferred Income, Total			190,840,000
Residential Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Loss, Period Increase (Decrease), Total					24,000
Loans and Leases Receivable, Net of Deferred Income, Total			374,018,000		443,738,000
Residential Portfolio Segment [Member] | Non-owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total			627,569,000		538,209,000
Commercial Real Estate Portfolio Segment [Member] | Non-owner Occupied Commercial Real Estate [Member]
Financing Receivable, Troubled Debt Restructuring, Subsequent Default			1,052,000
Loans and Leases Receivable, Net of Deferred Income, Total			627,569,000		538,208,000
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Loss, Period Increase (Decrease), Total			138,000
Loans and Leases Receivable, Net of Deferred Income, Total			373,680,000		$ 360,991,000
SBA CARES Act Paycheck Protection Program [Member]
Unamortized Loan Commitment and Origination Fees and Unamortized Discounts or Premiums, Total			4,439,000
Financing Receivable, Deferred Payments, Forgiven Amount			$ 56,400,000
SBA CARES Act Paycheck Protection Program [Member] | Subsequent Event [Member]
Financing Receivable, Deferred Payments, Forgiven Amount	$ 105,800,000	$ 105,800,000

[1] Includes PPP loans, which are guaranteed by the SBA and have no related allowance.

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Note 5 - Loans - Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2020		Dec. 31, 2019
Loans and Leases Receivable, Net of Deferred Income, Total	$ 2,015,056		$ 1,830,815
Commercial Portfolio Segment [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	491,256	[1]	339,077
Commercial Real Estate Portfolio Segment [Member] | Construction and Land Development [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	140,071		137,920
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	373,680		360,991
Commercial Real Estate Portfolio Segment [Member] | Non-owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	627,569		538,208
Residential Portfolio Segment [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	374,018		443,738
Residential Portfolio Segment [Member] | Non-owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	627,569		538,209
Residential Portfolio Segment [Member] | Residential [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	269,137		324,315
Residential Portfolio Segment [Member] | Home Equity Line of Credit [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	104,881		119,423
Consumer Portfolio Segment [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	$ 8,462		$ 10,881

[1] Includes PPP loans, which are guaranteed by the SBA and have no related allowance.

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Note 5 - Loans - Acquired Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Outstanding principal balance	$ 251,730	$ 393,618
Carrying amount	241,008	377,130
Outstanding principal balance	37,417	53,600
Carrying amount	$ 30,201	$ 43,028

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Note 5 - Loans - Accretable Yield on Acquired Impaired Loans (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Balance		$ 7,893	$ 4,633	$ 4,890
Additions from merger with HomeTown		0	4,410	0
Accretion		(3,553)	(3,304)	(2,362)
Reclassification from nonaccretable difference		2,233	736	956
Other changes, net (1)	[1]	(60)	1,418	1,149
Balance		$ 6,513	$ 7,893	$ 4,633

[1] This line item represents changes in the cash flows expected to be collected due to the impact of non-credit changes such as prepayment assumptions, changes in interest rates on variable rate acquired impaired loans, and discounted payoffs that occurred in the period.

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Note 5 - Loans - Past Due Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2020		Dec. 31, 2019
Past due	$ 4,073		$ 4,626
90 days past due and still accruing	262		361
Nonaccrual loans	2,434		1,944
Loans and Leases Receivable, Net of Deferred Income, Total	2,015,056		1,830,815
Current	2,010,983		1,826,189
Loans, net of deferred fees and costs	2,015,056		1,830,815
Financial Asset, 30 to 59 Days Past Due [Member]
Past due	1,143		1,361
Financial Asset, 60 to 89 Days Past Due [Member]
Past due	234		960
Commercial Portfolio Segment [Member]
Past due	262		1,397
90 days past due and still accruing	0		52
Nonaccrual loans	100		857
Loans and Leases Receivable, Net of Deferred Income, Total	491,256	[1]	339,077
Current			337,680
Loans, net of deferred fees and costs	491,256	[1]	339,077
Commercial Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due	153		325
Commercial Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due	9		163
Commercial Real Estate Portfolio Segment [Member] | Construction and Land Development [Member]
Past due	173		69
90 days past due and still accruing	0		0
Nonaccrual loans	5		11
Loans and Leases Receivable, Net of Deferred Income, Total	140,071		137,920
Current	139,898		137,851
Loans, net of deferred fees and costs	140,071		137,920
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Commercial Real Estate [Member]
Past due	575		925
90 days past due and still accruing	209		0
Nonaccrual loans	304		274
Loans and Leases Receivable, Net of Deferred Income, Total	373,680		360,991
Current	373,105		360,066
Loans, net of deferred fees and costs	373,680		360,991
Commercial Real Estate Portfolio Segment [Member] | Non-owner Occupied Commercial Real Estate [Member]
Past due	1,158		0
90 days past due and still accruing	0		0
Nonaccrual loans	1,158		0
Loans and Leases Receivable, Net of Deferred Income, Total	627,569		538,208
Current	626,411		538,208
Loans, net of deferred fees and costs	627,569		538,208
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Construction and Land Development [Member]
Past due	168		58
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Owner Occupied Commercial Real Estate [Member]
Past due	62		217
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Non-owner Occupied Commercial Real Estate [Member]
Past due	0		0
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Construction and Land Development [Member]
Past due	0		0
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Owner Occupied Commercial Real Estate [Member]
Past due	0		434
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Non-owner Occupied Commercial Real Estate [Member]
Past due	0		0
Residential Portfolio Segment [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	374,018		443,738
Loans, net of deferred fees and costs	374,018		443,738
Residential Portfolio Segment [Member] | Non-owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	627,569		538,209
Loans, net of deferred fees and costs	627,569		538,209
Residential Portfolio Segment [Member] | Residential [Member]
Past due	1,767		1,866
90 days past due and still accruing	53		282
Nonaccrual loans	792		685
Loans and Leases Receivable, Net of Deferred Income, Total	269,137		324,315
Current	267,370		322,449
Loans, net of deferred fees and costs	269,137		324,315
Residential Portfolio Segment [Member] | Home Equity Line of Credit [Member]
Past due	69		279
90 days past due and still accruing	0		27
Nonaccrual loans	69		113
Loans and Leases Receivable, Net of Deferred Income, Total	104,881		119,423
Current	104,812		119,144
Loans, net of deferred fees and costs	104,881		119,423
Residential Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Residential [Member]
Past due	711		639
Residential Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Home Equity Line of Credit [Member]
Past due	0		49
Residential Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Residential [Member]
Past due	211		260
Residential Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Home Equity Line of Credit [Member]
Past due	0		90
Consumer Portfolio Segment [Member]
Past due	69		90
90 days past due and still accruing	0		0
Nonaccrual loans	6		4
Loans and Leases Receivable, Net of Deferred Income, Total	8,462		10,881
Current	8,393		10,791
Loans, net of deferred fees and costs	8,462		10,881
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due	49		73
Consumer Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due	$ 14		$ 13

[1] Includes PPP loans, which are guaranteed by the SBA and have no related allowance.

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Note 5 - Loans - Impaired Loan Balances by Portfolio Segment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Recorded investment, with no related allowance recorded	$ 2,554	$ 1,203
Unpaid principal balance, with no related allowance recorded	2,557	1,202
Average recorded investment, with no related allowance recorded	2,089	1,137
Interest income recognized, with no related allowance recorded	173	88
Recorded investment, with a related allowance recorded	298	989
Unpaid principal balance, with a related allowance recorded	292	984
Related allowance	30	230
Average recorded investment, with a related allowance recorded	818	416
Interest income recognized, with a related allowance recorded	39	57
Recorded investment	2,852	2,192
Unpaid principal balance	2,849	2,186
Average recorded investment	2,907	1,553
Interest income recognized	212	145
Commercial Portfolio Segment [Member]
Recorded investment, with no related allowance recorded	18	49
Unpaid principal balance, with no related allowance recorded	18	49
Average recorded investment, with no related allowance recorded	23	16
Interest income recognized, with no related allowance recorded	6	5
Recorded investment, with a related allowance recorded	39	735
Unpaid principal balance, with a related allowance recorded	33	730
Related allowance	29	204
Average recorded investment, with a related allowance recorded	382	191
Interest income recognized, with a related allowance recorded	15	41
Recorded investment	57	784
Unpaid principal balance	51	779
Average recorded investment	405	207
Interest income recognized	21	46
Commercial Real Estate Portfolio Segment [Member] | Construction and Land Development [Member]
Recorded investment, with no related allowance recorded	0	0
Unpaid principal balance, with no related allowance recorded	0	0
Average recorded investment, with no related allowance recorded	0	0
Interest income recognized, with no related allowance recorded	0	0
Recorded investment, with a related allowance recorded	0	0
Unpaid principal balance, with a related allowance recorded	0	0
Related allowance	0	0
Average recorded investment, with a related allowance recorded	0	0
Interest income recognized, with a related allowance recorded	0	0
Recorded investment	0	0
Unpaid principal balance	0	0
Average recorded investment	0	0
Interest income recognized	0	0
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Commercial Real Estate [Member]
Recorded investment, with no related allowance recorded	286	343
Unpaid principal balance, with no related allowance recorded	283	341
Average recorded investment, with no related allowance recorded	357	250
Interest income recognized, with no related allowance recorded	27	26
Recorded investment, with a related allowance recorded	0	0
Unpaid principal balance, with a related allowance recorded	0	0
Related allowance	0	0
Average recorded investment, with a related allowance recorded	0	0
Interest income recognized, with a related allowance recorded	0	0
Recorded investment	286	0
Unpaid principal balance	283	0
Average recorded investment	357	0
Interest income recognized	27	0
Commercial Real Estate Portfolio Segment [Member] | Non-owner Occupied Commercial Real Estate [Member]
Recorded investment, with no related allowance recorded	1,148	159
Unpaid principal balance, with no related allowance recorded	1,147	159
Average recorded investment, with no related allowance recorded	766	174
Interest income recognized, with no related allowance recorded	75	13
Recorded investment, with a related allowance recorded	122
Unpaid principal balance, with a related allowance recorded	122
Related allowance	0	0
Average recorded investment, with a related allowance recorded	180
Interest income recognized, with a related allowance recorded	15
Recorded investment	1,270	343
Unpaid principal balance	1,269	341
Average recorded investment	946	250
Interest income recognized	90	26
Residential Portfolio Segment [Member] | Residential [Member]
Recorded investment, with no related allowance recorded	1,096	611
Unpaid principal balance, with no related allowance recorded	1,103	612
Average recorded investment, with no related allowance recorded	912	652
Interest income recognized, with no related allowance recorded	62	38
Recorded investment, with a related allowance recorded	137	254
Unpaid principal balance, with a related allowance recorded	137	254
Related allowance	1	26
Average recorded investment, with a related allowance recorded	256	225
Interest income recognized, with a related allowance recorded	9	16
Recorded investment	1,233	865
Unpaid principal balance	1,240	866
Average recorded investment	1,168	877
Interest income recognized	71	54
Residential Portfolio Segment [Member] | Home Equity Line of Credit [Member]
Recorded investment, with no related allowance recorded	6	41
Unpaid principal balance, with no related allowance recorded	6	41
Average recorded investment, with no related allowance recorded	31	45
Interest income recognized, with no related allowance recorded	3	6
Recorded investment, with a related allowance recorded	0	0
Unpaid principal balance, with a related allowance recorded	0	0
Related allowance	0	0
Average recorded investment, with a related allowance recorded	0	0
Interest income recognized, with a related allowance recorded	0	0
Recorded investment	6	41
Unpaid principal balance	6	41
Average recorded investment	31	45
Interest income recognized	3	6
Consumer Portfolio Segment [Member]
Recorded investment, with no related allowance recorded	0	0
Unpaid principal balance, with no related allowance recorded	0	0
Average recorded investment, with no related allowance recorded	0	0
Interest income recognized, with no related allowance recorded	0	0
Recorded investment, with a related allowance recorded	0	0
Unpaid principal balance, with a related allowance recorded	0	0
Related allowance	0	0
Average recorded investment, with a related allowance recorded	0	0
Interest income recognized, with a related allowance recorded	0	0
Recorded investment	0	0
Unpaid principal balance	0	0
Average recorded investment	0	0
Interest income recognized	$ 0	$ 0

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Note 5 - Loans - Loans Modified as TDRs (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Number of Contracts	5	1	1
Pre-Modification Outstanding Recorded Investment	$ 1,505	$ 207	$ 11
Post-Modification Outstanding Recorded Investment	$ 1,505	$ 207	$ 11
Commercial Portfolio Segment [Member]
Number of Contracts	1	0	0
Pre-Modification Outstanding Recorded Investment	$ 106	$ 0	$ 0
Post-Modification Outstanding Recorded Investment	$ 106	$ 0	$ 0
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Commercial Real Estate [Member]
Number of Contracts	0	0	0
Pre-Modification Outstanding Recorded Investment	$ 0	$ 0	$ 0
Post-Modification Outstanding Recorded Investment	$ 0	$ 0	$ 0
Commercial Real Estate Portfolio Segment [Member] | Non-owner Occupied Commercial Real Estate [Member]
Number of Contracts	2		0
Pre-Modification Outstanding Recorded Investment	$ 1,311		$ 0
Post-Modification Outstanding Recorded Investment	$ 1,311		$ 0
Residential Portfolio Segment [Member] | Residential [Member]
Number of Contracts	1	1	1
Pre-Modification Outstanding Recorded Investment	$ 82	$ 207	$ 11
Post-Modification Outstanding Recorded Investment	$ 82	$ 207	$ 11
Residential Portfolio Segment [Member] | Home Equity Line of Credit [Member]
Number of Contracts	1	0	0
Pre-Modification Outstanding Recorded Investment	$ 6	$ 0	$ 0
Post-Modification Outstanding Recorded Investment	$ 6	$ 0	$ 0
Consumer Portfolio Segment [Member]
Number of Contracts	0	0	0
Pre-Modification Outstanding Recorded Investment	$ 0	$ 0	$ 0
Post-Modification Outstanding Recorded Investment	$ 0	$ 0	$ 0

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Note 5 - Loans - Credit Risk Profile (Details) - USD ($) $ in Thousands	Dec. 31, 2020		Dec. 31, 2019
Loans and Leases Receivable, Net of Deferred Income, Total	$ 2,015,056		$ 1,830,815
Consumer Portfolio Segment [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	8,462		10,881
Consumer Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	8,456		10,877
Consumer Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	6		4
Commercial Portfolio Segment [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	491,256	[1]	339,077
Commercial Portfolio Segment [Member] | Pass [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	479,416		328,488
Commercial Portfolio Segment [Member] | Special Mention [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	10,956		8,710
Commercial Portfolio Segment [Member] | Substandard [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	865		1,144
Commercial Portfolio Segment [Member] | Doubtful [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	19		735
Commercial Real Estate Portfolio Segment [Member] | Construction and Land Development [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	140,071		137,920
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	373,680		360,991
Commercial Real Estate Portfolio Segment [Member] | Non-owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	627,569		538,208
Commercial Real Estate Portfolio Segment [Member] | Pass [Member] | Construction and Land Development [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	131,770		130,694
Commercial Real Estate Portfolio Segment [Member] | Pass [Member] | Owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	350,376		340,696
Commercial Real Estate Portfolio Segment [Member] | Special Mention [Member] | Construction and Land Development [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	2,505		4,133
Commercial Real Estate Portfolio Segment [Member] | Special Mention [Member] | Owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	14,621		13,094
Commercial Real Estate Portfolio Segment [Member] | Substandard [Member] | Construction and Land Development [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	5,796		3,093
Commercial Real Estate Portfolio Segment [Member] | Substandard [Member] | Owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	8,474		7,200
Commercial Real Estate Portfolio Segment [Member] | Doubtful [Member] | Construction and Land Development [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	0		0
Commercial Real Estate Portfolio Segment [Member] | Doubtful [Member] | Owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	209		0
Residential Portfolio Segment [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	374,018		443,738
Residential Portfolio Segment [Member] | Non-owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	627,569		538,209
Residential Portfolio Segment [Member] | Residential [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	269,137		324,315
Residential Portfolio Segment [Member] | Home Equity Line of Credit [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	104,881		119,423
Residential Portfolio Segment [Member] | Pass [Member] | Non-owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	612,688		519,919
Residential Portfolio Segment [Member] | Pass [Member] | Residential [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	262,677		316,454
Residential Portfolio Segment [Member] | Pass [Member] | Home Equity Line of Credit [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	104,608		118,960
Residential Portfolio Segment [Member] | Special Mention [Member] | Non-owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	9,196		9,023
Residential Portfolio Segment [Member] | Special Mention [Member] | Residential [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	3,665		4,370
Residential Portfolio Segment [Member] | Special Mention [Member] | Home Equity Line of Credit [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	0		0
Residential Portfolio Segment [Member] | Substandard [Member] | Non-owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	5,563		9,267
Residential Portfolio Segment [Member] | Substandard [Member] | Residential [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	2,795		3,491
Residential Portfolio Segment [Member] | Substandard [Member] | Home Equity Line of Credit [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	273		463
Residential Portfolio Segment [Member] | Doubtful [Member] | Non-owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	122		0
Residential Portfolio Segment [Member] | Doubtful [Member] | Residential [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	0		0
Residential Portfolio Segment [Member] | Doubtful [Member] | Home Equity Line of Credit [Member]
Loans and Leases Receivable, Net of Deferred Income, Total	$ 0		$ 0

[1] Includes PPP loans, which are guaranteed by the SBA and have no related allowance.

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Note 6 - Allowance for Loan Losses and Reserve for Unfunded Lending Commitments (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Loans and Leases Receivable, Allowance, Ending Balance	$ 21,403	$ 13,152	$ 12,805	$ 13,603
SBA CARES Act Paycheck Protection Program [Member]
Loans and Leases Receivable, Allowance, Ending Balance	$ 0

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Note 6 - Allowance for Loan Losses and Reserve for Unfunded Lending Commitments - Changes in Allowance for Loan Losses and Reserve for Unfunded Lending Commitments (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020		Dec. 31, 2019		Dec. 31, 2018	Dec. 31, 2020		Dec. 31, 2019
Balance, beginning of year	$ 13,152		$ 12,805		$ 13,603
Provision for (recovery of) loan losses	8,916		456		(103)
Charge-offs	(1,006)		(333)		(1,020)
Recoveries	341		224		325
Balance, end of year	21,403		13,152		12,805
Provision for (recovery of) loan losses	8,916		456		(103)
Individually evaluated for impairment						$ 30		$ 230
Collectively evaluated for impairment						20,534		12,684
Loans and Leases Receivable, Allowance, Ending Balance	13,152		12,805		13,603	21,403		13,152
Individually evaluated for impairment						2,852		2,192
Collectively evaluated for impairment						1,982,003		1,785,595
Loans and Leases Receivable, Net of Deferred Income, Total						2,015,056		1,830,815
Financial Asset Acquired with Credit Deterioration [Member]
Balance, beginning of year	238
Balance, end of year	839		238
Loans and Leases Receivable, Allowance, Ending Balance	238		238			839		238
Loans and Leases Receivable, Net of Deferred Income, Total						30,201		43,028
Unfunded Loan Commitment [Member]
Balance, beginning of year	329		217		206
Provision for (recovery of) unfunded commitments	(25)		112		11
Charge-offs	0		0		0
Balance, end of year	304		329		217
Commercial Portfolio Segment [Member]
Balance, beginning of year	2,657	[1]	2,537
Provision for (recovery of) loan losses	1,156	[1]	119
Charge-offs	(505)	[1]	(12)
Recoveries	65	[1]	13
Balance, end of year	3,373	[1]	2,657	[1]	2,537
Provision for (recovery of) loan losses	1,156	[1]	119
Individually evaluated for impairment						29	[1]	204
Collectively evaluated for impairment						3,318	[1]	2,448
Loans and Leases Receivable, Allowance, Ending Balance	3,373	[1]	2,537		2,537	3,373	[1]	2,657	[1]
Individually evaluated for impairment						57	[1]	784
Collectively evaluated for impairment						490,736	[1]	337,312
Loans and Leases Receivable, Net of Deferred Income, Total						491,256	[1]	339,077
Commercial Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Balance, beginning of year	5
Balance, end of year	26	[1]	5
Loans and Leases Receivable, Allowance, Ending Balance	5		5			26	[1]	5
Loans and Leases Receivable, Net of Deferred Income, Total						463	[1]	981
Construction and Land Development [Member]
Balance, beginning of year	1,161		1,059
Provision for (recovery of) loan losses	764		102
Charge-offs	0		0
Recoveries	2		0
Balance, end of year	1,927		1,161		1,059
Provision for (recovery of) loan losses	764		102
Individually evaluated for impairment						0		0
Collectively evaluated for impairment						1,927		1,161
Loans and Leases Receivable, Allowance, Ending Balance	1,927		1,059		1,059	1,927		1,161
Individually evaluated for impairment						0		0
Collectively evaluated for impairment						139,833		137,522
Loans and Leases Receivable, Net of Deferred Income, Total						140,071		137,920
Construction and Land Development [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Balance, beginning of year	0
Balance, end of year	0		0
Loans and Leases Receivable, Allowance, Ending Balance	0		0			0		0
Loans and Leases Receivable, Net of Deferred Income, Total						238		398
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Commercial Real Estate [Member]
Balance, beginning of year	2,474		2,420
Provision for (recovery of) loan losses	1,871		51
Charge-offs	(17)		(6)
Recoveries	12		9
Balance, end of year	4,340		2,474		2,420
Provision for (recovery of) loan losses	1,871		51
Individually evaluated for impairment						0		0
Collectively evaluated for impairment						4,138		2,444
Loans and Leases Receivable, Allowance, Ending Balance	4,340		2,420		2,420	4,340		2,474
Individually evaluated for impairment						286		0
Collectively evaluated for impairment						360,579		346,233
Loans and Leases Receivable, Net of Deferred Income, Total						373,680		360,991
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Commercial Real Estate [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Balance, beginning of year	30
Balance, end of year	202		30
Loans and Leases Receivable, Allowance, Ending Balance	30		30			202		30
Loans and Leases Receivable, Net of Deferred Income, Total						12,815		14,758
Commercial Real Estate Portfolio Segment [Member] | Non-owner Occupied Commercial Real Estate [Member]
Balance, beginning of year	3,781		3,767
Provision for (recovery of) loan losses	3,960		14
Charge-offs	(165)		0
Recoveries	50		0
Balance, end of year	7,626		3,781		3,767
Provision for (recovery of) loan losses	3,960		14
Individually evaluated for impairment						0		0
Collectively evaluated for impairment						7,185		3,781
Loans and Leases Receivable, Allowance, Ending Balance	7,626		3,767		3,767	7,626		3,781
Individually evaluated for impairment						1,270		502
Collectively evaluated for impairment						616,498		520,541
Loans and Leases Receivable, Net of Deferred Income, Total						627,569		538,208
Commercial Real Estate Portfolio Segment [Member] | Non-owner Occupied Commercial Real Estate [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Balance, beginning of year	0
Balance, end of year	441		0
Loans and Leases Receivable, Allowance, Ending Balance	0		0			441		0
Loans and Leases Receivable, Net of Deferred Income, Total						9,801		17,165
Residential Portfolio Segment [Member]
Balance, beginning of year	3,023		2,977
Provision for (recovery of) loan losses	1,076		58
Charge-offs	(117)		(70)
Recoveries	85		58
Balance, end of year	4,067		3,023		2,977
Provision for (recovery of) loan losses	1,076		58
Individually evaluated for impairment						1		26
Collectively evaluated for impairment						3,896		2,794
Loans and Leases Receivable, Allowance, Ending Balance	4,067		2,977		2,977	4,067		3,023
Individually evaluated for impairment						1,239		906
Collectively evaluated for impairment						365,967		433,121
Loans and Leases Receivable, Net of Deferred Income, Total						374,018		443,738
Residential Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Balance, beginning of year	203
Balance, end of year	170		203
Loans and Leases Receivable, Allowance, Ending Balance	203		203			170		203
Loans and Leases Receivable, Net of Deferred Income, Total						6,812		9,711
Residential Portfolio Segment [Member] | Non-owner Occupied Commercial Real Estate [Member]
Loans and Leases Receivable, Net of Deferred Income, Total						627,569		538,209
Consumer Portfolio Segment [Member]
Balance, beginning of year	56		45
Provision for (recovery of) loan losses	89		112
Charge-offs	(202)		(245)
Recoveries	127		144
Balance, end of year	70		56		45
Provision for (recovery of) loan losses	89		112
Individually evaluated for impairment						0		0
Collectively evaluated for impairment						70		56
Loans and Leases Receivable, Allowance, Ending Balance	70		45		$ 45	70		56
Individually evaluated for impairment						0		0
Collectively evaluated for impairment						8,390		10,866
Loans and Leases Receivable, Net of Deferred Income, Total						8,462		10,881
Consumer Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Balance, beginning of year	0
Balance, end of year	0		0
Loans and Leases Receivable, Allowance, Ending Balance	$ 0		$ 0			0		0
Loans and Leases Receivable, Net of Deferred Income, Total						$ 72		$ 15

[1] Includes PPP loans, which are guaranteed by the SBA and have no related allowance.

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Note 7 - Premises and Equipment (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Depreciation, Total	$ 2,188,000	$ 2,064,000	$ 1,775,000

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Note 7 - Premises and Equipment - Premises and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Premises and equipment, gross	$ 67,024	$ 65,832
Accumulated depreciation	(27,301)	(25,984)
Premises and equipment, net	39,723	39,848
Land [Member]
Premises and equipment, gross	10,267	10,421
Building [Member]
Premises and equipment, gross	36,173	36,247
Leasehold Improvements [Member]
Premises and equipment, gross	1,160	1,469
Furniture and Equipment [Member]
Premises and equipment, gross	$ 19,424	$ 17,695

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Note 8 - Goodwill and Other Intangible Assets (Details Textual) - USD ($)	1 Months Ended		12 Months Ended
	Apr. 30, 2019	Jan. 31, 2015	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Jul. 31, 2011
Amortization of Intangible Assets, Total			$ 1,637,000	$ 1,398,000	$ 265,000
MidCarolina Financial Corporation [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles						$ 6,556,000
MainStreet Bankshares, Inc. [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles		$ 1,839,000
Finite-Lived Intangible Asset, Useful Life (Month)		120 months
HomeTown Bankshares Corporation [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles	$ 8,200,000
Finite-Lived Intangible Asset, Useful Life (Month)	120 months

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Note 8 - Goodwill and Other Intangible Assets - Goodwill and Intangible Assets (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2020	Dec. 31, 2019
Goodwill at December 31, 2019	$ 84,002,000	$ 43,872,000
Balance, intangibles	7,728,000
Measurement period adjustments, goodwill	1,046,000
Measurement period adjustments, intangibles	0
Amortization, intangibles	(1,637,000)	(1,398,000)	$ (265,000)
Goodwill at December 31, 2020	85,048,000	84,002,000	43,872,000
Balance, intangibles	6,091,000	7,728,000
Core deposit intangibles, net	6,091,000	7,728,000		$ 6,091,000	$ 7,728,000
Goodwill, gross				85,048,000	84,002,000
Goodwill resulting from merger with HomeTown	84,002,000	43,872,000	$ 43,872,000	85,048,000	84,002,000
Core Deposits [Member]
Balance, intangibles	7,728,000
Balance, intangibles	6,091,000	7,728,000
Core deposit intangibles, gross				19,708,000	19,708,000
Core deposit intangibles, accumulated amortization				(13,617,000)	(11,980,000)
Core deposit intangibles, net	$ 7,728,000	$ 7,728,000		$ 6,091,000	$ 7,728,000

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Note 8 - Goodwill and Other Intangible Assets - Estimated Future Amortization Expense of Intangibles (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Total	$ 6,091	$ 7,728
Core Deposits [Member]
2021	1,464
2022	1,260
2023	1,069
2024	800
2025	617
2026 and after	881
Total	$ 6,091	$ 7,728

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Note 9 - Leases (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Apr. 01, 2019	Jan. 01, 2019
Operating Lease, Right-of-Use Asset	$ 4,878,000	$ 5,340,000
Operating Lease, Expense	$ 1,158,000	$ 1,187,000	$ 919,000
HomeTown Bankshares Corporation [Member]
Operating Lease, Right-of-Use Asset				$ 1,800,000
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset					$ 4,400,000
Operating Lease, Liability, Total					$ 4,400,000

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Note 9 - Leases - Lease Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Right-of-use assets	$ 4,878	$ 5,340
Weighted average remaining lease term (in years) (Year)	7 years 3 months 29 days	8 years 2 months 1 day
Weighted average discount rate	3.03%	3.21%
Operating lease cost	$ 993	$ 1,040
Short-term lease cost	3	3
Total lease cost	996	1,043
Cash paid for amounts included in the measurement of lease liabilities	959	1,013
Other Liabilities [Member]
Lease liabilities	$ 4,940	$ 5,369

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Note 9 - Leases - Maturity of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
2021	$ 1,048
2022	1,044
2023	945
2024	516
2025	473
2026 and after	1,549
Total undiscounted cash flows	5,575
Discount	(635)
Other Liabilities [Member]
Lease liabilities	$ 4,940	$ 5,369

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Note 10 - Deposits (Details Textual) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Time Deposits, at or Above FDIC Insurance Limit	$ 170,089,000	$ 200,712,000
Interest-bearing Domestic Deposit, Brokered	0	0
Interest-bearing Domestic Deposit, Certificates of Deposits	$ 4,342,000	$ 14,864,000

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Note 10 - Deposits - Scheduled Maturities and Amounts of Certificates of Deposits (Details) $ in Thousands	Dec. 31, 2020 USD ($)
2021	$ 271,868
2022	58,544
2023	31,486
2024	15,596
2025	13,898
2026 and after	5,034
Total	$ 396,426

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Note 11 - Short-term Borrowings (Details Textual)	Dec. 31, 2020 USD ($)
Federal Funds [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 60,000,000

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Note 11 - Short-term Borrowings - Short-term Borrowings (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Customer repurchase agreements	$ 42,551	$ 40,475
Weighted Average Rate	0.13%	1.40%

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Note 12 - Long-term Borrowings (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	$ 897,979
Long-term Federal Home Loan Bank Advances, Total	0	$ 0
Public Deposit Accounts	326,774
US States and Political Subdivisions Debt Securities [Member]
Deposit Liabilities, Collateral Issued, Financial Instruments	$ 136,213
FHLB Line of Credit [Member]
Debt Instrument, Percentage of Assets	30.00%
Letters of Credit Outstanding, Amount	$ 245,000

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Note 13 - Subordinated Debt (Details Textual) - USD ($)		12 Months Ended
	Apr. 01, 2019	Dec. 31, 2019	Dec. 31, 2020
Subordinated Debt, Ending Balance		$ 7,517,000	$ 7,500,000
Subordinated Borrowing, Interest Rate	6.75%
Subordinated Debt [Member]
Liabilities, Fair Value Adjustment		$ 17,000
HomeTown Bankshares Corporation [Member]
Subordinated Debt, Ending Balance	$ 7,500,000
HomeTown Bankshares Corporation [Member] | Subordinated Debt [Member]
Liabilities, Fair Value Adjustment	$ 30,000

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Note 14 - Junior Subordinated Debt (Details Textual) - USD ($)	Sep. 30, 2011	Apr. 07, 2006	Dec. 31, 2020	Dec. 31, 2019	Jul. 01, 2011
Proceeds from Issuance of Long-term Debt, Total		$ 20,000,000
Number of Consecutive Quarterly Periods for Deferral of Distributions on Trust Preferred Securities, Maximum		20
Proceeds from Issuance of Common Stock		$ 619,000
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust, Total		$ 20,619,000	$ 28,130,000	$ 28,029,000
MidCarolina Trusts [Member]
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust, Total					$ 8,764,000
Equity Method Investments			264,000
AMNB Statutory Trust I [Member]
Equity Method Investments			619,000
MidCarolina Trust I [Member]
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust, Fair Value Adjustment			666,000	722,000	1,197,000
MidCarolina Trust II [Member]
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust, Fair Value Adjustment			$ 587,000	$ 632,000	$ 1,021,000
Securities Subject to Mandatory Redemption [Member]
Debt Instrument, Interest Rate, Stated Percentage		6.66%
Securities Subject to Mandatory Redemption [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	1.35%

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Note 14 - Junior Subordinated Debt - Outstanding Payables (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Apr. 07, 2006
Principal amount	$ 28,130,000	$ 28,029,000	$ 20,619,000
Junior Subordinated Debt [Member] | AMNB Statutory Trust I [Member]
Principal amount	$ 20,619,000	20,619,000
Junior Subordinated Debt [Member] | AMNB Statutory Trust I [Member] | London Interbank Offered Rate (LIBOR) [Member]
Interest rate	1.35%
Junior Subordinated Debt [Member] | MidCarolina Trust I [Member]
Principal amount	$ 4,489,000	4,433,000
Junior Subordinated Debt [Member] | MidCarolina Trust I [Member] | London Interbank Offered Rate (LIBOR) [Member]
Interest rate	3.45%
Junior Subordinated Debt [Member] | MidCarolina Trust II [Member]
Principal amount	$ 3,022,000	$ 2,977,000
Junior Subordinated Debt [Member] | MidCarolina Trust II [Member] | London Interbank Offered Rate (LIBOR) [Member]
Interest rate	2.95%

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Note 15 - Derivative Financial Instruments and Hedging Activities - Derivative Financial Instruments (Details) - Cash Flow Hedging [Member] - Interest Rate Swap [Member] $ in Thousands	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Notional amount	$ 28,500	$ 28,500
Positions	3	3
Assets	$ 0	$ 0
Liabilities	4,868	2,658
Cash collateral pledged	$ 5,750	$ 3,450

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Note 16 - Stock-based Compensation (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Feb. 20, 2018
Proceeds from Stock Options Exercised	$ 43,000	$ 688,000	$ 861,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value	$ 42,000	$ 616,000	$ 732,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)	0	0	0
Regular Quarterly Retainer of Vested Restricted Stock	$ 10,000	$ 7,500
Monthly Meeting Fees Director Could Receive in Cash	800	725
Monthly Meeting Fees Director Could Receive in Vested Restricted Stock	1,000	900
Restricted Stock [Member]
Share-based Payment Arrangement, Nonvested Award, Excluding Option, Cost Not yet Recognized, Amount	797,000	751,000	$ 647,000
Share-based Payment Arrangement, Expense	672,000	915,000	610,000
Restricted Stock [Member] | Director [Member]
Share-based Payment Arrangement, Expense	$ 779,000	$ 626,000	$ 586,000
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period (in shares)	27,986	17,373	15,471
Restricted Stock [Member] | Minimum [Member]
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Month)	12 months
Restricted Stock [Member] | Maximum [Member]
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Month)	36 months
Restricted Stock [Member] | Cliff Vested [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Month)	36 months
HomeTown Bankshares Corporation [Member]
Stock or Unit Option Plan Expense		$ 147,000
HomeTown Bankshares Corporation [Member] | Restricted Stock [Member]
Share-based Payment Arrangement, Expense		$ 257,000
The 2018 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)				675,000

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Note 16 - Stock-based Compensation - Stock Option Transactions (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Outstanding, option shares (in shares)	13,944
Outstanding, weighted average exercise price (in dollars per share)	$ 16.63
Granted, option shares (in shares)	0	0	0
Granted, weighted average exercise price (in dollars per share)	$ 0
Exercised, option shares (in shares)	(2,573)	(37,104)	(35,310)
Exercised, weighted average exercise price (in dollars per share)	$ 16.63
Forfeited, option shares (in shares)	(830)
Forfeited, weighted average exercise price (in dollars per share)	$ 16.63
Expired, option shares (in shares)	0
Expired, weighted average exercise price (in dollars per share)	$ 0
Outstanding, option shares (in shares)	10,541	13,944
Outstanding, weighted average exercise price (in dollars per share)	$ 16.63	$ 16.63
Outstanding, Weighted Average Remaining Contractual Term (Year)	3 years 11 months 19 days
Outstanding, Aggregate Intrinsic Value	$ 101
Exercisable, option shares (in shares)	10,541
Exercisable, weighted average exercise price (in dollars per share)	$ 16.63
Exercisable, Weighted Average Remaining Contractual Term (Year)	3 years 11 months 19 days
Exercisable, Aggregate Intrinsic Value	$ 101

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Note 16 - Stock-based Compensation - Schedule of Exercise Price Range (Details)	12 Months Ended
	Dec. 31, 2020 $ / shares shares
Exercise price range, minimum (in dollars per share)	$ 15.00
Number of Outstanding Options (in shares) | shares	10,541
Exercise price range, maximum (in dollars per share)	$ 20.00
Weighted-Average Remaining Contractual Life (Year)	3 years 11 months 19 days
Weighted-Average Exercise Price (in dollars per share)	$ 16.63

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Note 16 - Stock Based Compensation - Nonvested Restricted Stock Activity (Details) - Restricted Stock [Member]	12 Months Ended
	Dec. 31, 2020 $ / shares shares
Nonvested, shares (in shares) | shares	57,271
Nonvested, weighted average grant date value per share (in dollars per share) | $ / shares	$ 34.84
Granted, shares (in shares) | shares	26,010
Granted, weighted average grant date value per share (in dollars per share) | $ / shares	$ 34.42
Vested, shares (in shares) | shares	(19,526)
Vested, weighted average grant date value per share (in dollars per share) | $ / shares	$ 34.50
Forfeited, shares (in shares) | shares	(5,216)
Forfeited, weighted average grant date value per share (in dollars per share) | $ / shares	$ 34.29
Nonvested, shares (in shares) | shares	58,539
Nonvested, weighted average grant date value per share (in dollars per share) | $ / shares	$ 34.81

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Note 17 - Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Deferred tax assets:
Allowance for loan losses	$ 4,636	$ 2,841
Nonaccrual loan interest	507	490
Other real estate owned valuation allowance	124	120
Deferred compensation	159	1,184
Acquisition accounting adjustments	3,404	3,670
Lease liability, net of right of use asset	13	0
Accrued pension liability	447	50
NOL Carryforward	0	456
Net unrealized loss on cash flow hedges	1,022	573
Other	318	601
Total deferred tax assets	10,630	9,985
Deferred tax liabilities:
Depreciation	1,352	1,079
Core deposit intangibles	1,315	1,669
Accrued pension liability	213	0
Deferred loan origination costs, net	533	258
Net unrealized gain on securities available for sale	2,180	541
Other	32	574
Total deferred tax liabilities	5,625	4,121
Net deferred tax assets	$ 5,005	$ 5,864

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Note 17 - Income Taxes - Provision for Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Current tax expense	$ 7,777	$ 3,793	$ 5,090
Deferred tax expense	(640)	1,068	556
Total income tax expense	$ 7,137	$ 4,861	$ 5,646

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Note 17 - Income Taxes - Summary of Income Tax Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Expected federal tax expense	$ 7,808	$ 5,411	$ 5,927
Nondeductible interest expense	31	67	69
Tax-exempt interest	(259)	(478)	(504)
State income taxes	207	149	337
Other, net	(650)	(288)	(183)
Total income tax expense	$ 7,137	$ 4,861	$ 5,646

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Note 18 - Earnings Per Common Share (Details Textual) - shares shares in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Share-based Payment Arrangement, Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)	0	0	0

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Note 18 - Earnings Per Common Share - Earnings Per Common Share (Details) - $ / shares	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Basic earnings per share (in shares)	10,981,623	10,531,572	8,698,014
Basic earnings per share (in dollars per share)	$ 2.74	$ 1.99	$ 2.60
Effect of dilutive securities - stock options (in shares)	4,167	9,765	10,448
Effect of dilutive securities - stock options (in dollars per share)	$ (0.01)	$ (0.01)	$ (0.01)
Diluted earnings per share (in shares)	10,985,790	10,541,337	8,708,462
Diluted earnings per share (in dollars per share)	$ 2.73	$ 1.98	$ 2.59

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Note 19 - Off-balance Sheet Activities (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Fair Value Disclosure, Off-balance Sheet Risks, Loan Repurchase Requirement Number of Days Past Due (Day)	90 days
Fair Value Disclosure, Off-balance Sheet Risks, Loan Repurchase Requirement, Number of Days Following Sale (Day)	180 days
Mortgage Loan Rate Lock Commitments [Member]
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	$ 26,883,000	$ 10,791,000
Loans Held for Sale [Member]
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	$ 15,591,000

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Note 19 - Off-balance Sheet Activities - Off-balance Sheet Financial Instruments Whose Contractual Amounts Represents Credit Risk (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Commitments to Extend Credit [Member]
Off-balance sheet financial instruments outstanding	$ 503,272,000	$ 557,364,000
Standby Letters of Credit [Member]
Off-balance sheet financial instruments outstanding	17,355,000	13,611,000
Mortgage Loan Rate Lock Commitments [Member]
Off-balance sheet financial instruments outstanding	$ 26,883,000	$ 10,791,000

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Note 20 - Related Party Transactions (Details Textual) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Related Party Deposit Liabilities	$ 16,436,000	$ 14,741,000

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Note 20 - Related Party Transactions - Analysis of Related Party Loans (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2020 USD ($)
Balance at December 31, 2019	$ 9,594
Additions	3,751
Repayments	(4,760)
Reclassifications(1)	(63)	[1]
Balance at December 31, 2020	$ 8,522

[1] Includes loans to persons no longer affiliated with the Company and therefore not considered related party loans as of period end.

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Note 21 - Employee Benefit Plans (Details Textual)	12 Months Ended
	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Defined Benefit Plan, Requisite Age	21
Defined Benefit Plan, Requisite Service Period (Year)	1 year
Defined Benefit Plan, Accumulated Benefit Obligation	$ 5,821,000	$ 6,262,000	$ 5,812,000
Defined Benefit Plan, Maximum Percentage of Limiting Equities	5.00%
Defined Contribution Plan, Employer Matching Contribution, Service Requirement (Year)	1 year
Defined Contribution Plan, Cost	$ 1,038,000	932,000	778,000
Deferred Compensation Arrangement with Individual, Maximum Contractual Term (Year)	10 years
Deferred Compensation Arrangement with Individual, Recorded Liability	$ 200,000	250,000
Deferred Compensation Arrangement with Individual, Compensation Expense	0	0	0
Profit Sharing and Deferred Compensation Arrangements Expense	0	158,000	141,000
Profit Sharing and Incentive Arrangements Expense	1,214,000	1,217,000	$ 1,643,000
HomeTown Bankshares Corporation [Member]
Deferred Compensation Arrangement with Individual, Recorded Liability	5,585,000	$ 5,235,000
Minimum [Member]
Deferred Compensation Arrangement with Individual, Contributions by Employer	25,000
Maximum [Member]
Deferred Compensation Arrangement with Individual, Contributions by Employer	$ 50,000

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Note 21 - Employee Benefit Plans - Information Pertaining to Activity in the Plan (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Projected benefit obligation at beginning of year	$ 6,262	$ 5,812	$ 8,313
Service cost	0	0	0
Interest cost	152	209	235
Actuarial (gain) loss	814	489	(782)
Settlement gain (loss)	44	(12)	(120)
Benefits paid	(1,451)	(236)	(1,834)
Projected benefit obligation at end of year	5,821	6,262	5,812
Fair value of plan assets at beginning of year	5,915	5,653	7,556
Actual return (loss) on plan assets	237	498	(69)
Benefits paid	(1,451)	(236)	(1,834)
Fair value of plan assets at end of year	4,701	5,915	5,653
Funded Status at End of Year	(1,120)	(347)	(159)
Other liabilities	(1,120)	(347)	(159)
Net actuarial loss	2,071	1,658	1,594
Deferred income taxes	(435)	(358)	(357)
Amount recognized	1,636	1,300	1,237
Service cost	0	0	0
Interest cost	152	209	235
Expected return on plan assets	(285)	(269)	(353)
Recognized net loss due to settlement	352	52	540
Recognized net actuarial loss	140	133	272
Net periodic benefit cost	359	125	694
Net actuarial (gain) loss	(413)	(64)	1,291
Amortization of prior service cost	(0)	(0)	(0)
Total recognized in other comprehensive (income) loss	413	64	(1,291)
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive (Income) Loss	$ 772	$ 189	$ (597)

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Note 21 - Employee Benefit Plans - Weighted Average Asset Allocation by Asset Category (Details)	Dec. 31, 2020	Dec. 31, 2019
Asset allocations	100.00%	100.00%
Fixed Income Securities [Member]
Asset allocations	65.60%	61.80%
Defined Benefit Plan, Equity Securities [Member]
Asset allocations	31.50%	27.50%
Defined Benefit Plan, Cash and Accrued Income [Member]
Asset allocations	2.90%	10.70%

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Note 21 - Employee Benefit Plans - Fair Value of Pension Plan Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Fair value of plan assets	$ 4,701	$ 5,915	$ 5,653	$ 7,556
Fair Value, Inputs, Level 1 [Member]
Fair value of plan assets	1,619	2,263
Fair Value, Inputs, Level 2 [Member]
Fair value of plan assets	3,082	3,652
Fair Value, Inputs, Level 3 [Member]
Fair value of plan assets	0	0
Defined Benefit Plan, Cash [Member]
Fair value of plan assets	138	636
Defined Benefit Plan, Cash [Member] | Fair Value, Inputs, Level 1 [Member]
Fair value of plan assets	138	636
Defined Benefit Plan, Cash [Member] | Fair Value, Inputs, Level 2 [Member]
Fair value of plan assets	0	0
Defined Benefit Plan, Cash [Member] | Fair Value, Inputs, Level 3 [Member]
Fair value of plan assets	0	0
Fixed Income Securities, Government Sponsored Entities [Member]
Fair value of plan assets	444	1,648
Fixed Income Securities, Government Sponsored Entities [Member] | Fair Value, Inputs, Level 1 [Member]
Fair value of plan assets	0	0
Fixed Income Securities, Government Sponsored Entities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair value of plan assets	444	1,648
Fixed Income Securities, Government Sponsored Entities [Member] | Fair Value, Inputs, Level 3 [Member]
Fair value of plan assets	0	0
Fixed Income Securities, Municipal Bonds and Notes [Member]
Fair value of plan assets	2,147	1,792
Fixed Income Securities, Municipal Bonds and Notes [Member] | Fair Value, Inputs, Level 1 [Member]
Fair value of plan assets	0	0
Fixed Income Securities, Municipal Bonds and Notes [Member] | Fair Value, Inputs, Level 2 [Member]
Fair value of plan assets	2,147	1,792
Fixed Income Securities, Municipal Bonds and Notes [Member] | Fair Value, Inputs, Level 3 [Member]
Fair value of plan assets	0	0
Fixed Income Securities, Corporate Bonds and Notes [Member]
Fair value of plan assets	491	212
Fixed Income Securities, Corporate Bonds and Notes [Member] | Fair Value, Inputs, Level 1 [Member]
Fair value of plan assets	0	0
Fixed Income Securities, Corporate Bonds and Notes [Member] | Fair Value, Inputs, Level 2 [Member]
Fair value of plan assets	491	212
Fixed Income Securities, Corporate Bonds and Notes [Member] | Fair Value, Inputs, Level 3 [Member]
Fair value of plan assets	0	0
Defined Benefit Plan, Equity Securities, US Companies [Member]
Fair value of plan assets	1,259	1,385
Defined Benefit Plan, Equity Securities, US Companies [Member] | Fair Value, Inputs, Level 1 [Member]
Fair value of plan assets	1,259	1,385
Defined Benefit Plan, Equity Securities, US Companies [Member] | Fair Value, Inputs, Level 2 [Member]
Fair value of plan assets	0	0
Defined Benefit Plan, Equity Securities, US Companies [Member] | Fair Value, Inputs, Level 3 [Member]
Fair value of plan assets	0	0
Defined Benefit Plan, Equity Securities, Foreign Companies [Member]
Fair value of plan assets	222	242
Defined Benefit Plan, Equity Securities, Foreign Companies [Member] | Fair Value, Inputs, Level 1 [Member]
Fair value of plan assets	222	242
Defined Benefit Plan, Equity Securities, Foreign Companies [Member] | Fair Value, Inputs, Level 2 [Member]
Fair value of plan assets	0	0
Defined Benefit Plan, Equity Securities, Foreign Companies [Member] | Fair Value, Inputs, Level 3 [Member]
Fair value of plan assets	$ 0	$ 0

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Note 21 - Employee Benefit Plans - Projected Benefit Payments (Details) $ in Thousands	Dec. 31, 2020 USD ($)
2021	$ 629
2022	381
2023	910
2024	252
2025	1,204
2026-2030	$ 2,390

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Note 22 - Fair Value Measurements - Financial Assets and Liabilities Measured on a Recurring Basis (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Securities available for sale	$ 466,091	$ 379,195
US Treasury Securities [Member]
Securities available for sale	34,998	14,987
US Government-sponsored Enterprises Debt Securities [Member]
Securities available for sale	106,023	128,114
US States and Political Subdivisions Debt Securities [Member]
Securities available for sale	59,099	42,154
Corporate Debt Securities [Member]
Securities available for sale	13,189	9,700
Fair Value, Recurring [Member]
Securities available for sale	466,091	379,195
Loans held for sale	15,591	2,027
Fair Value, Recurring [Member] | Cash Flow Hedging [Member]
Derivative - cash flow hedges	4,868	2,658
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale	0	0
Loans held for sale	0	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Cash Flow Hedging [Member]
Derivative - cash flow hedges	0	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	466,091	379,195
Loans held for sale	15,591	2,027
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Cash Flow Hedging [Member]
Derivative - cash flow hedges	4,868	2,658
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale	0	0
Loans held for sale	0	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Cash Flow Hedging [Member]
Derivative - cash flow hedges	0	0
Fair Value, Recurring [Member] | US Treasury Securities [Member]
Securities available for sale	34,998	14,987
Fair Value, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale	0	0
Fair Value, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	34,998	14,987
Fair Value, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale	0	0
Fair Value, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member]
Securities available for sale	106,023	128,114
Fair Value, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale	0	0
Fair Value, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	106,023	128,114
Fair Value, Recurring [Member] | US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale	0	0
Fair Value, Recurring [Member] | Collateralized Mortgage Obligations [Member]
Securities available for sale	252,782	184,240
Fair Value, Recurring [Member] | Collateralized Mortgage Obligations [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale	0	0
Fair Value, Recurring [Member] | Collateralized Mortgage Obligations [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	252,782	184,240
Fair Value, Recurring [Member] | Collateralized Mortgage Obligations [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale	0	0
Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]
Securities available for sale	59,099	42,154
Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale	0	0
Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	59,099	42,154
Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale	0	0
Fair Value, Recurring [Member] | Corporate Debt Securities [Member]
Securities available for sale	13,189	9,700
Fair Value, Recurring [Member] | Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale	0	0
Fair Value, Recurring [Member] | Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	13,189	9,700
Fair Value, Recurring [Member] | Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale	$ 0	$ 0

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Note 22 - Fair Value Measurements - Assets Measured on a Nonrecurring Basis (Details) - Fair Value, Nonrecurring [Member] - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Impaired loans, net of valuation allowance	$ 268	$ 759
Other real estate owned, net	958	1,308
Fair Value, Inputs, Level 1 [Member]
Impaired loans, net of valuation allowance	0	0
Other real estate owned, net	0	0
Fair Value, Inputs, Level 2 [Member]
Impaired loans, net of valuation allowance	0	0
Other real estate owned, net	0	0
Fair Value, Inputs, Level 3 [Member]
Impaired loans, net of valuation allowance	268	759
Other real estate owned, net	$ 958	$ 1,308

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Note 22 - Fair Value Measurements - Quantitative Information About Level 3 Fair Value Measurements (Details) - Fair Value, Inputs, Level 3 [Member]	Dec. 31, 2020	[1]
Valuation Technique, Discounted Appraisal Value [Member] | Measurement Input, Cost to Sell [Member]
Impaired loans	0.0800
Other real estate owned	0.0800
Valuation Technique, Discounted Cash Flow [Member] | Measurement Input, Discount Rate [Member]
Impaired loans	0.0519
Valuation Technique, Discounted Cash Flow [Member] | Measurement Input, Discount Rate [Member] | Minimum [Member]
Impaired loans	0.0413
Valuation Technique, Discounted Cash Flow [Member] | Measurement Input, Discount Rate [Member] | Maximum [Member]
Impaired loans	0.072

[1] Unobservable inputs were weighted by the relative fair value of the impaired loans.

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Note 22 - Fair Value Measurements - Carrying and Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Securities available for sale	$ 466,091	$ 379,195
Reported Value Measurement [Member]
Cash and cash equivalents	374,370	79,582
Securities available for sale	466,091	379,195
Restricted stock	8,715	8,630
Loans held for sale	15,591	2,027
Loans, net of allowance	1,993,653	1,817,663
Bank owned life insurance	28,482	27,817
Accrued interest receivable	7,193	6,625
Deposits	2,611,330	2,060,547
Repurchase agreements	42,551	40,475
Subordinated debt		7,517
Accrued interest payable	778	1,213
Derivative - cash flow hedges	4,868	2,658
Reported Value Measurement [Member] | Junior Subordinated Debt [Member]
Subordinated debt	28,130	28,029
Reported Value Measurement [Member] | Subordinated Debt [Member]
Subordinated debt	7,500
Estimate of Fair Value Measurement [Member]
Cash and cash equivalents	374,370	79,582
Securities available for sale	466,091	379,195
Restricted stock	8,715	8,630
Loans held for sale	15,591	2,027
Loans, net of allowance	1,992,326	1,818,655
Bank owned life insurance	28,482	27,817
Accrued interest receivable	7,193	6,625
Deposits	2,615,157	2,062,823
Repurchase agreements	42,551	40,475
Subordinated debt		8,525
Accrued interest payable	778	1,213
Derivative - cash flow hedges	4,868	2,658
Estimate of Fair Value Measurement [Member] | Junior Subordinated Debt [Member]
Subordinated debt	21,696	22,697
Estimate of Fair Value Measurement [Member] | Subordinated Debt [Member]
Subordinated debt	7,522
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	374,370	79,582
Securities available for sale	0	0
Restricted stock	0	0
Loans held for sale	0	0
Loans, net of allowance	0	0
Bank owned life insurance	0	0
Accrued interest receivable	0	0
Deposits	0	0
Repurchase agreements	0	0
Subordinated debt		0
Accrued interest payable	0	0
Derivative - cash flow hedges	0	0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member] | Junior Subordinated Debt [Member]
Subordinated debt	0	0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member] | Subordinated Debt [Member]
Subordinated debt	0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Cash and cash equivalents	0	0
Securities available for sale	466,091	379,195
Restricted stock	8,715	8,630
Loans held for sale	15,591	2,027
Loans, net of allowance	0	0
Bank owned life insurance	28,482	27,817
Accrued interest receivable	7,193	6,625
Deposits	2,615,157	2,062,823
Repurchase agreements	42,551	40,475
Subordinated debt		8,525
Accrued interest payable	778	1,213
Derivative - cash flow hedges	4,868	2,658
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Junior Subordinated Debt [Member]
Subordinated debt	0	0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Subordinated Debt [Member]
Subordinated debt	7,522
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Cash and cash equivalents	0	0
Securities available for sale	0	0
Restricted stock	0	0
Loans held for sale	0	0
Loans, net of allowance	1,992,326	1,818,655
Bank owned life insurance	0	0
Accrued interest receivable	0	0
Deposits	0	0
Repurchase agreements	0	0
Subordinated debt		0
Accrued interest payable	0	0
Derivative - cash flow hedges	0	0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member] | Junior Subordinated Debt [Member]
Subordinated debt	21,696	$ 22,697
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member] | Subordinated Debt [Member]
Subordinated debt	$ 0

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Note 23 - Dividend Restrictions and Regulatory Capital (Details Textual)	Dec. 31, 2020 USD ($)
Statutory Accounting Practices, Statutory Amount Available for Dividend Payments without Regulatory Approval	$ 18,628,000

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Note 23 - Dividend Restrictions and Regulatory Capital - Actual and Required Capital Amounts (Details) $ in Thousands	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Company [Member]
Common equity tier 1, actual amount	$ 244,318	$ 228,554
Common equity tier 1, actual ratio	0.1236	0.1156
Common equity tier 1, required for capital adequacy purposes, amount	$ 88,967	$ 88,968
Common equity tier 1, required for capital adequacy purposes, ratio	0.0450	0.0450
Tier 1 capital, actual amount	$ 272,448	$ 256,583
Tier 1 capital, actual ratio	0.1378	0.1298
Tier 1 capital, required for capital adequacy purposes, amount	$ 118,623	$ 118,624
Tier 1 capital, required for capital adequacy purposes, ratio	0.0600	0.0600
Total capital, actual amount	$ 300,155	$ 277,581
Total capital, actual ratio	0.1518	0.1404
Total capital, required for capital adequacy purposes, amount	$ 158,164	$ 158,166
Total capital, required for capital adequacy purposes, ratio	0.0800	0.0800
Leverage capital, actual amount	$ 272,448	$ 256,583
Leverage capital, actual ratio	0.0948	0.1075
Leverage capital, required for capital adequacy purposes, amount	$ 114,902	$ 95,514
Leverage capital, required for capital adequacy purposes, ratio	0.0400	0.0400
Bank [Member]
Common equity tier 1, actual amount	$ 252,748	$ 243,449
Common equity tier 1, actual ratio	0.1286	0.1238
Common equity tier 1, required for capital adequacy purposes, amount	$ 137,530	$ 137,698
Common equity tier 1, required for capital adequacy purposes, ratio	0.0700	0.0700
Common equity tier 1, to be well capitalized under prompt corrective action provisions, amount	$ 127,706	$ 127,862
Common equity tier 1, to be well capitalized under prompt corrective action provisions, ratio	0.0650	0.0650
Tier 1 capital, actual amount	$ 252,748	$ 243,449
Tier 1 capital, actual ratio	0.1286	0.1238
Tier 1 capital, required for capital adequacy purposes, amount	$ 167,001	$ 167,205
Tier 1 capital, required for capital adequacy purposes, ratio	0.0850	0.0850
Tier 1 capital, to be well capitalized under prompt corrective action provisions, amount	$ 157,177	$ 157,369
Tier 1 capital, to be well capitalized under prompt corrective action provisions, ratio	0.0800	0.0800
Total capital, actual amount	$ 274,455	$ 256,930
Total capital, actual ratio	0.1397	0.1306
Total capital, required for capital adequacy purposes, amount	$ 206,295	$ 206,547
Total capital, required for capital adequacy purposes, ratio	0.1050	0.1050
Total capital, to be well capitalized under prompt corrective action provisions, amount	$ 196,471	$ 196,712
Total capital, to be well capitalized under prompt corrective action provisions, ratio	0.1000	0.1000
Leverage capital, actual amount	$ 252,748	$ 243,449
Leverage capital, actual ratio	0.0885	0.1025
Leverage capital, required for capital adequacy purposes, amount	$ 114,247	$ 94,972
Leverage capital, required for capital adequacy purposes, ratio	0.0400	0.0400
Leverage capital, to be well capitalized under prompt corrective action provisions, amount	$ 142,809	$ 118,715
Leverage capital, to be well capitalized under prompt corrective action provisions, ratio	0.0500	0.0500

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Note 24 - Segment and Related Information (Details Textual)	12 Months Ended
	Dec. 31, 2020
Number of Reportable Segments	2

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Note 24 - Segment and Related Information - Segment Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Interest income	$ 95,840	$ 92,855	$ 68,768
Interest expense	12,020	15,728	9,674
Noninterest income	16,843	15,170	13,274
Noninterest expense	54,565	66,074	44,246
Incomebefore income taxes	37,182	25,767	28,225
Net income	30,045	20,906	22,579
Depreciation and amortization	3,825	3,462	2,040
Total assets	3,050,010	2,478,550	1,862,866
Goodwill	85,048	84,002	43,872
Capital expenditures	2,694	3,555	2,723
Community Banking [Member] | Operating Segments [Member]
Interest income	95,840	92,855	68,768
Interest expense	12,020	15,728	9,674
Noninterest income	12,054	10,602	8,695
Noninterest expense	52,245	63,794	41,832
Incomebefore income taxes	34,714	23,479	26,060
Net income	28,052	19,050	20,848
Depreciation and amortization	3,815	3,454	2,030
Total assets	3,049,779	2,478,478	1,862,849
Goodwill	85,048	84,002	43,872
Capital expenditures	2,690	3,534	2,723
Trust and Investment Services [Member] | Operating Segments [Member]
Interest income	0	0	0
Interest expense	0	0	0
Noninterest income	4,789	4,568	4,579
Noninterest expense	2,320	2,280	2,414
Incomebefore income taxes	2,468	2,288	2,165
Net income	1,993	1,856	1,731
Depreciation and amortization	10	8	10
Total assets	231	72	17
Goodwill	0	0	0
Capital expenditures	$ 4	$ 21	$ 0

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Note 25 - Parent Company Financial Information - Condensed Balance Sheets (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Securities available for sale, at fair value	$ 466,091	$ 379,195
Other assets	31,288	30,750
Total assets	3,050,010	2,478,550	$ 1,862,866
Subordinated debt	7,500	7,517
Junior subordinated debt	28,130	28,029
Other liabilities	22,605	21,724
Shareholders' equity	337,894	320,258	$ 222,542	$ 208,717
Total Liabilities and Shareholders' Equity	3,050,010	2,478,550
Parent Company [Member]
Cash	17,759	11,127
Securities available for sale, at fair value	8,534	8,683
Investment in subsidiaries	351,033	337,983
Due from subsidiaries	143	134
Other assets	1,062	674
Total assets	378,531	358,601
Subordinated debt	7,500	7,517
Junior subordinated debt	28,130	28,029
Other liabilities	5,007	2,797
Shareholders' equity	337,894	320,258
Total Liabilities and Shareholders' Equity	$ 378,531	$ 358,601

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Note 25 - Parent Company Financial Information - Condensed Statements of Income (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Dividends	$ 503	$ 451	$ 321
Income Taxes	7,137	4,861	5,646
Net income	30,045	20,906	22,579
Parent Company [Member]
Dividends	25,500	25,000	11,000
Other income	512	823	456
Expenses	3,369	4,232	2,396
Income Taxes	(600)	(601)	(407)
Income before equity in undistributed earnings of subsidiary	23,243	22,192	9,467
Equity in undistributed (distributed) earnings of subsidiary	6,802	(1,286)	13,112
Net income	$ 30,045	$ 20,906	$ 22,579

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Note 25 - Parent Company Financial Information - Condensed Statements of Cash Flows (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Net income	$ 30,045,000	$ 20,906,000	$ 22,579,000
Net change in other assets	29,000	11,137,000	(318,000)
Net change in other liabilities	(2,387,000)	(1,354,000)	844,000
Net cash provided by operating activities	23,676,000	32,680,000	27,502,000
Purchases of securities available for sale	(295,109,000)	(155,746,000)	(106,575,000)
Sales of equity securities	0	445,000	431,000
Cash paid in bank acquisition	0	(27,000)	0
Cash acquired in bank acquisition	0	26,283,000	0
Net cash provided by (used in) investing activities	(265,148,000)	(4,570,000)	(39,901,000)
Common stock dividends paid	(11,842,000)	(10,965,000)	(8,702,000)
Repurchase of common stock	(4,981,000)	(3,146,000)	0
Proceeds from exercise of stock options	43,000	688,000	861,000
Net cash used in financing activities	536,260,000	(12,783,000)	24,177,000
Net increase in cash and cash equivalents	294,788,000	15,327,000	11,778,000
Cash and Cash Equivalents at Beginning of Period	79,582,000	64,255,000	52,477,000
Cash and Cash Equivalents at End of Period	374,370,000	79,582,000	64,255,000
Parent Company [Member]
Net income	30,045,000	20,906,000	22,579,000
Equity in (undistributed) distributions of subsidiary	(6,802,000)	1,286,000	(13,112,000)
Net change in other assets	84,000	(382,000)	(194,000)
Net change in other liabilities	85,000	(35,000)	136,000
Net cash provided by operating activities	23,412,000	21,775,000	9,409,000
Purchases of securities available for sale	0	(2,220,000)	0
Sales of equity securities	0	445,000	431,000
Cash paid in bank acquisition	0	(27,000)	0
Cash acquired in bank acquisition	0	981,000	0
Net cash provided by (used in) investing activities	0	(821,000)	431,000
Common stock dividends paid	(11,842,000)	(10,965,000)	(8,702,000)
Repurchase of common stock	(4,981,000)	(3,146,000)	0
Proceeds from exercise of stock options	43,000	688,000	861,000
Net cash used in financing activities	(16,780,000)	(13,423,000)	(7,841,000)
Net increase in cash and cash equivalents	6,632,000	7,531,000	1,999,000
Cash and Cash Equivalents at Beginning of Period	11,127,000	3,596,000	1,597,000
Cash and Cash Equivalents at End of Period	$ 17,759,000	$ 11,127,000	$ 3,596,000

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Note 26 - Concentrations of Credit Risk (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Loans and Leases Receivable, Net Amount, Total	$ 1,993,653,000	$ 1,817,663,000
Credit Concentration Risk [Member] | Loans Receivable [Member] | Real Estate Loan [Member]
Loans and Leases Receivable, Net Amount, Total	$ 1,515,338,000	$ 1,480,857,000
Concentration Risk, Percentage	75.20%	80.90%
Credit Concentration Risk [Member] | Loans Receivable [Member] | Commercial Real Estate [Member]
Loans and Leases Receivable, Net Amount, Total	$ 1,001,249,000	$ 899,199,000
Concentration Risk, Percentage	49.70%	49.10%

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Note 27 - Supplemental Cash Flow Information - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Cash and due from banks	$ 30,767	$ 32,505	$ 29,587
Interest-bearing deposits in other banks	343,603	47,077	34,668
Cash and Cash Equivalents, at Carrying Value, Ending Balance	374,370	79,582	64,255
Interest on deposits and borrowed funds	12,455	15,310	9,553
Income taxes	7,609	4,698	5,056
Transfer of loans to other real estate owned	95	234	599
Transfer of loans to repossessions	411	0	0
Transfer from premises and equipment to other assets	0	445	0
Increase in operating lease right-of-use asset	371	4,453	0
Increase in operating lease liability	371	4,453	0
Unrealized gains (losses) on securities available for sale	6,399	8,821	(3,290)
Unrealized losses on cash flow hedges	(2,210)	(1,854)	(804)
Change in unfunded pension liability	(413)	(64)	1,291
Assets acquired:
Investment securities	0	34,876	0
Restricted stock	0	2,588	0
Loans	0	444,324	0
Premises and equipment	0	12,554	0
Deferred income taxes	0	2,960	0
Core deposit intangible	0	8,200	0
Other real estate owned	0	1,442	0
Bank owned life insurance	0	8,246	0
Other assets	0	14,244	0
Liabilities assumed:
Deposits	0	483,626	0
Short-term FHLB advances	0	14,883	0
Long-term FHLB advances	0	778	0
Subordinated debt	0	7,530	0
Other liabilities	0	5,780	0
Consideration:
Issuance of common stock	0	82,470	0
Fair value of replacement stock options/restricted stock	$ 0	$ 753	$ 0

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Note 28 - Accumulated Other Comprehensive Income (Loss) - Changes in AOCI (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Balance	$ 320,258	$ 222,542	$ 208,717
Balance	337,894	320,258	222,542
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Balance	2,902	(3,973)	(796)
Net unrealized gains (losses) on securities available for sale, net of tax	5,656	7,090	(2,464)
Reclassification adjustment for realized gains on securities, net of tax	(638)	(215)	(63)
Net unrealized gains (losses) on cash flow hedges, net of tax	0	0	0
Change in unfunded pension liability, net of tax	0	0	0
Balance	7,920	2,902	(3,973)
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member] | Accounting Standards Update 2016-01 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Balance			(650)
Accumulated Gain (Loss), Net, Cash Flow Hedge, Parent [Member]
Balance	(2,084)	(624)	0
Net unrealized gains (losses) on securities available for sale, net of tax	0	0	0
Reclassification adjustment for realized gains on securities, net of tax	0	0	0
Net unrealized gains (losses) on cash flow hedges, net of tax	(1,762)	(1,460)	(624)
Change in unfunded pension liability, net of tax	0	0	0
Balance	(3,846)	(2,084)	(624)
Accumulated Gain (Loss), Net, Cash Flow Hedge, Parent [Member] | Accounting Standards Update 2016-01 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Balance			0
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance	(1,301)	(1,238)	(2,280)
Net unrealized gains (losses) on securities available for sale, net of tax	0	0	0
Reclassification adjustment for realized gains on securities, net of tax	0	0	0
Net unrealized gains (losses) on cash flow hedges, net of tax	0	0	0
Change in unfunded pension liability, net of tax	(336)	(63)	1,042
Balance	(1,637)	(1,301)	(1,238)
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member] | Accounting Standards Update 2016-01 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Balance			0
AOCI Attributable to Parent [Member]
Balance	(483)	(5,835)	(3,076)
Net unrealized gains (losses) on securities available for sale, net of tax	5,656	7,090	(2,464)
Reclassification adjustment for realized gains on securities, net of tax	(638)	(215)	(63)
Net unrealized gains (losses) on cash flow hedges, net of tax	(1,762)	(1,460)	(624)
Change in unfunded pension liability, net of tax	(336)	(63)	1,042
Balance	$ 2,437	$ (483)	(5,835)
AOCI Attributable to Parent [Member] | Accounting Standards Update 2016-01 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Balance			$ (650)

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Note 28 - Accumulated Other Comprehensive Income (Loss) - Changes in AOCI (Details) (Parentheticals) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Reclassification adjustment for realized gains on securities, tax	$ (176)	$ (59)	$ (18)
Change in unfunded pension liability, tax	$ 77	$ 1	$ (249)

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Note 28 - Accumulated Other Comprehensive Income (Loss) - Reclassifications Out of AOCI (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Realized gain on sale of securities		$ 814	$ 607	$ 123
Income taxes		7,137	4,861	5,646
Total reclassifications		30,045	20,906	22,579
Reclassification out of Accumulated Other Comprehensive Income [Member]
Total reclassifications		638	215	713
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accounting Standards Update 2016-01 [Member]
Total reclassifications	[1]	0	0	650
Reclassification out of Accumulated Other Comprehensive Income [Member] | AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Realized gain on sale of securities		814	274	81
Income taxes		(176)	(59)	(18)
Total reclassifications		$ 638	$ 215	$ 63

[1] Reclassification from AOCI to retained earnings for unrealized holding gains on equity securities due to adoption of ASU 2016-01