10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2016

[ ] 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: 000-33411

NEW PEOPLES BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

Virginia (State or other jurisdiction of incorporation or organization)	31-1804543 (I.R.S. Employer Identification No.)
67 Commerce Drive Honaker, Virginia (Address of principal executive offices)	24260 (Zip Code)

(Registrant’s telephone number, including area code) (276) 873-7000

n/a

(Former name, former address and former fiscal year, if changed since last report)

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 [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [ ]

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

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

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

Yes [ ] No [X]

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

Class	Outstanding at November 11, 2016
Common Stock, $2.00 par value	23,354,257

NEW PEOPLES BANKSHARES, INC.

	INDEX
		Page
PART I	FINANCIAL INFORMATION	2
Item 1.	Financial Statements	2
	Consolidated Statements of Income – Nine Months
	Ended September 30, 2016 and 2015 (Unaudited)	2
	Consolidated Statements of Income – Three Months
	Ended September 30, 2016 and 2015 (Unaudited)	4
	Consolidated Statements of Comprehensive Income – Three and Nine Months
	Ended September 30, 2016 and 2015 (Unaudited)	6
	Consolidated Balance Sheets – September 30, 2016 (Unaudited) and December 31, 2015	7
	Consolidated Statements of Changes in Stockholders’ Equity -
	Nine Months Ended September 30, 2016 and 2015 (Unaudited)	9
	Consolidated Statements of Cash Flows – Nine Months
	Ended September 30, 2016 and 2015 (Unaudited)	10
	Notes to Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 4.	Controls and Procedures	41
PART II	OTHER INFORMATION	41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	41
SIGNATURES		42

Part I Financial Information

Item 1 Financial Statements

NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

INTEREST AND DIVIDEND INCOME	2016			2015
Loans including fees	$	16,910		$	17,595
Federal funds sold		—			2
Interest-earning deposits with banks		67			73
Investments		1,161			1,306
Dividends on equity securities (restricted)		99			98
Total Interest and Dividend Income		18,237			19,074
INTEREST EXPENSE
Deposits
Demand		37			28
Savings		122			129
Time deposits below $100,000		808			1,062
Time deposits above $100,000		480			735
FHLB advances		109			113
Federal funds purchased		2			—
Trust preferred securities		373			328
Total Interest Expense		1,931			2,395
NET INTEREST INCOME		16,306			16,679
PROVISION FOR LOAN LOSSES		(500	)		(1,200	)
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		16,806			17,879
NONINTEREST INCOME
Service charges		1,926			1,667
Fees, commissions and other income		2,694			2,333
Insurance and investment fees		404			411
Net realized gains on sale of investment securities		240			35
Life insurance investment income		118			316
Total Noninterest Income		5,382			4,762
NONINTEREST EXPENSES
Salaries and employee benefits		9,954			8,816
Occupancy and equipment expense		3,042			2,767
Advertising and public relations		332			240
Data processing and telecommunications		1,726			1,552
FDIC insurance premiums		407			652
Other real estate owned and repossessed vehicles, net		599			1,398
Other operating expenses		4,208			3,822
Total Noninterest Expenses		20,268			19,247

Table Of Contents  2

INCOME BEFORE INCOME TAXES		1,920			3,394
INCOME TAX EXPENSE (BENEFIT)		(6	)		17
NET INCOME	$	1,926		$	3,377
Income Per Share
Basic	$	0.08		$	0.15
Fully Diluted	$	0.08		$	0.15
Average Weighted Shares of Common Stock
Basic		23,354,092			22,878,654
Fully Diluted		23,354,092			22,878,654

The accompanying notes are an integral part of this statement.

Table Of Contents  3

NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

INTEREST AND DIVIDEND INCOME	2016		2015
Loans including fees	$	5,732	$	5,889
Federal funds sold		—		—
Interest-earning deposits with banks		23		18
Investments		334		457
Dividends on equity securities (restricted)		35		32
Total Interest and Dividend Income		6,124		6,396
INTEREST EXPENSE
Deposits
Demand		13		10
Savings		44		44
Time deposits below $100,000		273		315
Time deposits above $100,000		168		213
FHLB Advances		45		35
Federal funds purchased		—		—
Trust Preferred Securities		128		111
Total Interest Expense		671		728
NET INTEREST INCOME		5,453		5,668
PROVISION FOR LOAN LOSSES		—		(1,200	)
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		5,453		6,868
NONINTEREST INCOME
Service charges		854		579
Fees, commissions and other income		1,031		796
Insurance and investment fees		103		155
Net realized gains on sale of investment securities		—		—
Life insurance investment income		55		247
Total Noninterest Income		2,043		1,777
NONINTEREST EXPENSES
Salaries and employee benefits		3,405		2,992
Occupancy and equipment expense		1,121		905
Advertising and public relations		99		111
Data processing and telecommunications		569		550
FDIC insurance premiums		137		213
Other real estate owned and repossessed vehicles, net		347		332
Other operating expenses		1,477		1,235
Total Noninterest Expenses		7,155		6,338

Table Of Contents  4

INCOME BEFORE INCOME TAXES		341			2,307
INCOME TAX EXPENSE (BENEFIT)		(5	)		14
NET INCOME	$	346		$	2,293
Income Per Share
Basic	$	0.01		$	0.10
Fully Diluted	$	0.01		$	0.10
Weighted Average Shares of Common Stock
Basic		23,354,111			22,878,654
Fully Diluted		23,354,111			22,878,654

The accompanying notes are an integral part of this statement.

Table Of Contents  5

NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(IN THOUSANDS)

(UNAUDITED)

	For the three months ended September 30,						For the nine months ended September 30,
	2016			2015			2016			2015
NET INCOME	$	346		$	2,293		$	1,926		$	3,377
Other comprehensive income (loss):
Investment Securities Activity
Unrealized gains (losses) arising during the period		(70	)		576			1,409			309
Tax related to unrealized gains (losses)		24			(196	)		(479	)		(105	)
Reclassification of realized gains during the period		—			—			(240	)		(35	)
Tax related to realized gains		—			—			82			12
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)		(46	)		380			772			181
TOTAL COMPREHENSIVE INCOME	$	300		$	2,673		$	2,698		$	3,558

The accompanying notes are an integral part of this statement.

Table Of Contents  6

NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS EXCEPT PER SHARE AND SHARE DATA)

ASSETS	September 30,			December 31,
	2016			2015
	(Unaudited)			(Audited)
Cash and due from banks	$	16,625		$	15,087
Interest-bearing deposits with banks		15,776			11,251
Federal funds sold		36			—
Total Cash and Cash Equivalents		32,437			26,338
Investment securities available-for-sale		74,561			101,642
Loans receivable		464,721			441,169
Allowance for loan losses		(6,358	)		(7,493	)
Net Loans		458,363			433,676
Bank premises and equipment, net		30,259			28,148
Equity securities (restricted)		2,613			2,441
Other real estate owned		13,194			12,398
Accrued interest receivable		1,924			1,816
Life insurance investments		12,223			12,105
Deferred taxes, net		4,819			5,121
Other assets		3,474			2,213
Total Assets	$	633,867		$	625,898
LIABILITIES
Deposits:
Demand deposits:
Noninterest bearing	$	152,930		$	149,714
Interest-bearing		40,623			30,251
Savings deposits		115,007			121,076
Time deposits		247,956			256,978
Total Deposits		556,516			558,019
Federal Home Loan Bank advances		9,058			2,958
Accrued interest payable		294			288
Accrued expenses and other liabilities		2,718			2,050
Trust preferred securities		16,496			16,496
Total Liabilities		585,082			579,811
Commitments and contingencies		—			—

Table Of Contents  7

STOCKHOLDERS’ EQUITY
Common stock - $2.00 par value; 50,000,000 shares authorized;		46,708			46,708
23,354,257 and 23,354,082 shares issued and outstanding at
September 30, 2016 and December 31, 2015, respectively
Common stock warrants		764			764
Additional paid-in-capital		13,965			13,965
Retained deficit		(13,097	)		(15,023	)
Accumulated other comprehensive income (loss)		445			(327	)
Total Stockholders’ Equity		48,785			46,087
Total Liabilities and Stockholders’ Equity	$	633,867		$	625,898

The accompanying notes are an integral part of this statement.

Table Of Contents  8

NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(IN THOUSANDS INCLUDING SHARE DATA)

(UNAUDITED)

	Shares of Common Stock		Common Stock		Common Stock Warrants		Additional Paid-in- Capital		Retained  Deficit			Accum-ulated Other Compre-hensive Income (Loss)			Total Stockholders’ Equity
Balance, December 31, 2014		22,878	$	45,757	$	1,176	$	13,672	$	(17,685	)	$	(69	)	$	42,851
Net income		—		—		—		—		3,377			—			3,377
Other comprehensive loss, net of tax		—		—		—		—		—			181			181
Balance, September 30, 2015		22,878	$	45,757	$	1,176	$	13,672	$	(14,308	)	$	112		$	46,409
Balance, December 31, 2015		23,354	$	46,708	$	764	$	13,965	$	(15,023	)	$	(327	)	$	46,087
Net income		—		—		—		—		1,926			—			1,926
Other comprehensive income, net of tax		—		—		—		—		—			772			772
Balance, September 30, 2016*		23,354	$	46,708	$	764	$	13,965	$	(13,097	)	$	445		$	48,785

*During the third quarter of 2016, 175 shares of common stock were issued in connection with common stock warrants being exercised.

Table Of Contents  9

NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(IN THOUSANDS)

(UNAUDITED)

	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,926		$	3,377
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation		1,815			1,571
Provision for loan losses		(500	)		(1,200	)
Income on life insurance		(118	)		(316	)
Gain on sale of securities available-for-sale		(240	)		(35	)
Gain on sale of premises and equipment		(67	)		(67	)
Gain on sale of foreclosed assets		(290	)		(10	)
Net write-down of carrying value of foreclosed real estate		165			784
Accretion of bond premiums/discounts		711			867
Deferred tax benefit		(95	)		—
Net change in:
Interest receivable		(108	)		140
Other assets		(1,261	)		110
Accrued interest payable		6			35
Accrued expenses and other liabilities		668			550
Net Cash Provided by Operating Activities		2,612			5,806
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in loans		(27,362	)		15,686
Purchase of securities available-for-sale		(9,708	)		(25,202	)
Proceeds from sales and maturities of securities available-for-sale		37,487			22,330
Net Purchase of equity securities (restricted)		(172	)		(72	)
Payments for the purchase of premises and equipment		(4,469	)		(1,325	)
Payments for the purchase of other real estate owned		—			(5	)
Payments for premiums on life insurance investments		—			(65	)
Proceeds from life insurance investment		—			1,793
Proceeds from sales of premises and equipment		735			181
Proceeds from insurance on other real estate owned		—			57
Proceeds from sales of other real estate owned		2,379			1,084
Net Cash Provided by (Used in) Investing Activities		(1,110	)		14,462
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in Federal Home Loan Bank advances		6,100			(900	)
Net change in:
Demand deposits		13,588			2,064
Savings deposits		(6,069	)		11,129
Time deposits		(9,022	)		(33,762	)
Net Cash Provided by (Used in) Financing Activities		4,597			(21,469	)

Table Of Contents  10

Net increase (decrease) in cash and cash equivalents		6,099		(1,201	)
Cash and Cash Equivalents, Beginning of Period		26,338		35,560
Cash and Cash Equivalents, End of Period	$	32,437	$	34,359
Supplemental Disclosure of Cash Paid During the Period for:
Interest	$	1,925	$	2,360
Taxes	$	95	$	—
Supplemental Disclosure of Non Cash Transactions:
Other real estate acquired in settlement of foreclosed loans	$	3,851	$	2,249
Loans made to finance sale of foreclosed real estate	$	676	$	193
Transfer of other real estate to premises and equipment	$	125	$	—
Change in unrealized gains on securities available-for-sale	$	1,169	$	274

The accompanying notes are an integral part of this statement.

Table Of Contents  11

NEW PEOPLES BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 NATURE OF OPERATIONS:

New Peoples Bankshares, Inc. (“The Company”) is a financial holding company whose principal activity is the ownership and management of a community bank. New Peoples Bank, Inc. (“Bank”) was organized and incorporated under the laws of the Commonwealth of Virginia on December 9, 1997. The Bank commenced operations on October 28, 1998, after receiving regulatory approval. As a state-chartered member bank, the Bank is subject to regulation by the Virginia Bureau of Financial Institutions, the Federal Deposit Insurance Corporation and the Federal Reserve Bank. The Bank provides general banking services to individuals, small and medium size businesses and the professional community of southwestern Virginia, southern West Virginia, and eastern Tennessee. On June 9, 2003, the Company formed two wholly-owned subsidiaries; NPB Financial Services, Inc. and NPB Web Services, Inc. On July 7, 2004 the Company established NPB Capital Trust I for the purpose of issuing trust preferred securities. On September 27, 2006, the Company established NPB Capital Trust 2 for the purpose of issuing additional trust preferred securities. NPB Financial Services, Inc. was a subsidiary of the Company until January 1, 2009 when it became a subsidiary of the Bank. In June 2012 the name of NPB Financial Services, Inc. was changed to NPB Insurance Services, Inc. which operates solely as an insurance agency. On March 4, 2016 the Federal Reserve Bank of Richmond approved the Company’s election to become a financial holding company. In July 2016, the Bank and its wholly-owned subsidiary NPB Insurance Services, Inc. announced by press release it is teaming up with The Hilb Group of Virginia dba CSE Insurance Services, a division of the Hilb Group, LLC (“CSE”), located in Abingdon, Virginia, to provide insurance services for its current and future customers. Effective July 1, 2016, NPB Insurance Services, Inc. sold its existing book of business to CSE. These customers will be serviced by CSE and the Bank will refer future insurance needs of its bank customers to CSE.

NOTE 2 ACCOUNTING PRINCIPLES:

These consolidated financial statements conform to U. S. generally accepted accounting principles and to general industry practices. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position at September 30, 2016 and December 31, 2015, and the results of operations for the three and nine month periods ended September 30, 2016 and 2015. The notes included herein should be read in conjunction with the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results of operations for the three and nine month periods ended September 30, 2016 and 2015 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. The determination of the adequacy of the allowance for loan losses and the determination of the deferred tax asset and related valuation allowance are based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions.

NOTE 3 FORMAL WRITTEN AGREEMENT:

The Company and the Bank had previously entered into the Written Agreement with the Federal Reserve Bank of Richmond and the Virginia State Corporation Commission Bureau of Financial Institutions under which the Company and the Bank were required to take certain actions and implement certain plans. On February 2, 2016, the Company and the Bank announced that they had successfully complied with all of the requirements of the Written Agreement and accordingly, effective January 20, 2016, the agreement had been terminated.

Table Of Contents  12

NOTE 4 CAPITAL:

Capital Requirements and Ratios

The Bank is subject to various capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and, possibly, additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined) to risk-weighted assets (as defined), Tier 1 capital (as defined) to average assets (as defined), and Common Equity Tier 1 capital (as defined) to risk-weighted assets (as defined). As of September 30, 2016, the Bank meets all capital adequacy requirements to which it is subject.

The Company meets eligibility criteria of a small bank holding company in accordance with the Federal Reserve Board’s Small Bank Holding Company Policy Statement issued in February 2015, and is no longer obligated to report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies. The Bank’s actual capital amounts and ratios are presented in the following table as of September 30, 2016 and December 31, 2015, respectively. These ratios comply with Federal Reserve rules to align with the Basel III Capital requirements effective January 1, 2015.

	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars are in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2016:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		68,259		16.98	%	$	32,168		8.0	%		40,209		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,216		15.72	%		24,126		6.0	%		32,168		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		63,216		10.00	%		25,287		4.0	%		31,609		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,216		15.72	%		18,094		4.5	%		26,136		6.5	%
December 31, 2015:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		65,713		17.55	%	$	29,954		8.0	%		37,443		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		60,998		16.29	%		22,466		6.0	%		29,954		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		60,998		9.67	%		25,239		4.0	%		31,549		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		60,998		16.29	%		16,849		4.5	%		24,338		6.5	%

Table Of Contents  13

As of September 30, 2016, the Bank was well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage, and Common Equity Tier 1 ratios as set forth in the above tables. There are no conditions or events since the notification that management believes have changed the Bank’s category.

Beginning January 1, 2016, a capital conservation buffer of 0.625% became effective. The capital conservation buffer will be gradually increased through January 1, 2019 to 2.5%. Banks will be required to maintain levels that meet the required minimum plus the capital conservation buffer in order to make distributions, such as dividends, or discretionary bonus payments.

NOTE 5 INVESTMENT SECURITIES:

The amortized cost and estimated fair value of securities (all available-for-sale (“AFS”)) are as follows:

				Gross		Gross		Approximate
		Amortized		Unrealized		Unrealized		Fair
(Dollars are in thousands)		Cost		Gains		Losses		Value
September 30, 2016
U.S. Government Agencies	$	26,995	$	314	$	51	$	27,258
Taxable municipals		2,401	73		-		2,474
Corporate bonds		3,100	186		-		3,286
Mortgage backed securities		41,392	239		88		41,543
Total Securities AFS	$	73,888	$	812	$	139	$	74,561
December 31, 2015
U.S. Government Agencies	$	41,488	$	244	$	209	$	41,523
Taxable municipals		3,337	5		61		3,281
Corporate bonds		1,944	15		20		1,939
Mortgage backed securities		55,369	41		511		54,899
Total Securities AFS	$	102,138	$	305	$	801	$	101,642

The following table details unrealized losses and related fair values in the available-for-sale portfolio. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2016 and December 31, 2015.

	Less than 12 Months				12 Months or More				Total
(Dollars are in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2016
U.S. Government Agencies	$	3,724	$	42	$	1,794	$	9	$	5,518	$	51
Mtg. backed securities		7,915		45		4,938		43		12,853		88
Total Securities AFS	$	11,639	$	87	$	6,732	$	52	$	18,371	$	139
December 31, 2015
U.S. Government Agencies	$	14,995	$	81	$	7,708	$	128	$	22,073	$	209
Taxable municipals		2,136		57		278		4		2,414		61
Corporate bonds		923		20		—		—		923		20
Mtg. backed securities		38,945		354		8,719		157		47,664		511
Total Securities AFS	$	56,999	$	512	$	16,705	$	289	$	73,074	$	801

Table Of Contents  14

At September 30, 2016, the available-for-sale portfolio included forty two investments for which the fair market value was less than amortized cost. At December 31, 2015, the available-for-sale portfolio included one hundred and thirty four investments for which the fair market value was less than amortized cost. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, or more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial conditions and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Based on the Company’s analysis, the Company concluded that no securities had an other-than-temporary impairment.

Investment securities with a carrying value of $11.8 million and $15.4 million at September 30, 2016 and December 31, 2015, respectively, were pledged as collateral to secure public deposits and for other purposes required by law.

Gross proceeds on the sale of investment securities were $24.8 million and $7.1 million, respectively, for the nine months ended September 30, 2016 and 2015. Gross realized gains and losses pertaining to the sale of investment securities available for sale are detailed as follows:

	For the three months ended September 30,				For the nine months ended September 30,
(Dollars are in thousands)	2016		2015		2016			2015
Gross gains realized	$	—	$	—	$	275		$	62
Gross losses realized		—		—		(35	)		(27	)
Net realized gains	$	—	$	—	$	240		$	35

The amortized cost and fair value of investment securities at September 30, 2016, by contractual maturity, are shown in the following schedule. 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.

						Weighted
(Dollars are in thousands)		Amortized		Fair		Average
Securities Available-for-Sale		Cost		Value		Yield
Due in one year or less	$	1,221	$	1,225		0.91%
Due after one year through five years	656		657		1.84%
Due after five years through ten years		12,836		13,107		2.50%
Due after ten years		59,175		59,572		1.80%
Total	$	73,888	$	74,561		1.91%

The Bank, as a member of the Federal Reserve Bank and the Federal Home Loan Bank, is required to hold stock in each. The Bank also owns stock in CBB Financial Corp., which is a correspondent of the Bank. These equity securities are restricted from trading and are recorded at a cost of $2.6 million and $2.4 million as of September 30, 2016 and December 31, 2015, respectively.

NOTE 6 LOANS:

Loans receivable outstanding are summarized as follows:

Table Of Contents  15

(Dollars are in thousands)	September 30, 2016		December 31, 2015
Real estate secured:
Commercial	$	102,997	$	98,569
Construction and land development		22,749		14,672
Residential 1-4 family		248,042		242,916
Multifamily		13,205		12,954
Farmland		23,828		22,174
Total real estate loans		410,821		391,285
Commercial		26,246		21,469
Agriculture		4,459		3,793
Consumer installment loans		23,177		24,568
All other loans		18		54
Total loans	$	464,721	$	441,169

Loans receivable on nonaccrual status are summarized as follows:

(Dollars are in thousands)	September 30, 2016		December 31, 2015
Real estate secured:
Commercial	$	3,671	$	4,358
Construction and land development		354		436
Residential 1-4 family		8,145		8,338
Multifamily		169		430
Farmland		930		1,170
Total real estate loans		13,269		14,732
Commercial		3		65
Agriculture		83		9
Consumer installment loans		93		41
All other loans		—		—
Total loans receivable on nonaccrual status	$	13,448	$	14,847

Total interest income not recognized on nonaccrual loans for the nine months ended September 30, 2016 and 2015 was $397 thousand and $486 thousand, respectively.

The following table presents information concerning the Company’s investment in loans considered impaired as of September 30, 2016 and December 31, 2015:

Table Of Contents  16

As of September 30, 2016 (Dollars are in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial		3,533	$	3,959	$	—
Construction and land development		7		7		—
Residential 1-4 family		3,590		3,888		—
Multifamily		305		346		—
Farmland		4,358		5,050		—
Commercial		—		—		—
Agriculture		19		19		—
Consumer installment loans		—		—		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		1,589		1,680		172
Construction and land development		253		477		119
Residential 1-4 family		644		652		88
Multifamily		—		—		—
Farmland		502		512		293
Commercial		67		67		19
Agriculture		8		8		8
Consumer installment loans		53		53		20
All other loans		—		—		—
Total		14,928	$	16,718	$	719
As of December 31, 2015 (Dollars are in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial		4,212	$	5,173	$	—
Construction and land development		10		10		—
Residential 1-4 family		3,037		3,150		—
Multifamily		430		471		—
Farmland		3,983		4,620		—
Commercial		—		—		—
Agriculture		36		36		—
Consumer installment loans		11		11		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		2,503		2,849		288
Construction and land development		289		499		155
Residential 1-4 family		1,920		2,121		168
Multifamily		—		—		—
Farmland		761		778		328
Commercial		69		69		24
Agriculture		18		18		18
Consumer installment loans		45		45		2
All other loans		—		—		—
Total		17,324	$	19,850	$	983

Table Of Contents  17

The following table presents information concerning the Company’s average impaired loans and interest recognized on those impaired loans, for the periods indicated:

	Nine Months Ended
	September 30, 2016				September 30, 2015
(Dollars are in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	4,222	$	77	$	4,615	$	102
Construction and land development		89		—		13		1
Residential 1-4 family		3,716		140		3,623		140
Multifamily		288		14		543		5
Farmland		4,211		163		5,346		94
Commercial		—		—		333		—
Agriculture		29		2		44		3
Consumer installment loans		24		—		36		4
All other loans		—		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		1,539		6		3,043		58
Construction and land development		271		—		394		—
Residential 1-4 family		939		18		2,294		84
Multifamily		100		—		28		—
Farmland		572		18		942		28
Commercial		71		2		83		3
Agriculture		107		1		26		1
Consumer installment loans		30		1		13		—
All other loans		—		—		—		—
Total	$	16,208	$	442	$	21,376	$	523

Table Of Contents  18

	Three Months Ended
	September 30, 2016					September 30, 2015
(Dollars are in thousands)	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	3,965	$	4		$	4,916	$	43
Construction and land development		7		—			12		1
Residential 1-4 family		3,833		37			3,674		47
Multifamily		307		3			434		3
Farmland		4,274		61			4,963		42
Commercial		—		—			105		(2	)
Agriculture		23		—			36		—
Consumer installment loans		22		(2	)		59		1
All other loans		—		—			—		—
With an allowance recorded:
Real estate secured:
Commercial		1,309		6			2,411		18
Construction and land development		259		—			407		—
Residential 1-4 family		606		7			2,162		31
Multifamily		83		(4	)		—		—
Farmland		504		6			781		9
Commercial		68		—			82		1
Agriculture		97		3			23		—
Consumer installment loans		32		1			—		—
All other loans		—		—			—		—
Total	$	15,389	$	122		$	20,065	$	194

An age analysis of past due loans receivable was as follows:

As of September 30, 2016 (Dollars are in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
Real estate secured:
Commercial	$	747	$	305	$	1,819	$	2,871	$	100,126	$	102,997	$	—
Construction and land development		100		—		64		164		22,585		22,749		—
Residential 1-4 family		4,099		1,312		1,669		7,080		240,962		248,042		—
Multifamily		1,720		—		67		1,787		11,418		13,205		—
Farmland		82		—		—		82		23,746		23,828		—
Total real estate loans		6,748		1,617		3,619		11,984		398,837		410,821		—
Commercial		—		—		—		—		26,246		26,246		—
Agriculture		15		—		79		94		4,365		4,459		—
Consumer installment Loans		91		—		68		159		23,018		23,177		—
All other loans		—		—		—		—		18		18		—
Total loans	$	6,854	$	1,617	$	3,766	$	12,237	$	452,484	$	464,721	$	—

Table Of Contents  19

As of December 31, 2015 (Dollars are in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
Real estate secured:
Commercial	$	311	$	105	$	2,534	$	2,950	$	95,619	$	98,569	$	—
Construction and land development		144		—		17		161		14,511		14,672		—
Residential 1-4 family		4,694		1,487		2,891		9,072		233,844		242,916		—
Multifamily		47		—		320		367		12,587		12,954		—
Farmland		363		—		251		614		21,560		22,174		—
Total real estate loans		5,559		1,592		6,013		13,164		378,121		391,285		—
Commercial		18		1		64		83		21,386		21,469		—
Agriculture		—		—		—		—		3,793		3,793		—
Consumer installment Loans		113		1		27		141		24,427		24,568		—
All other loans		6		—		—		6		48		54		—
Total loans	$	5,696	$	1,594	$	6,104	$	13,394	$	427,775	$	441,169	$	—

The Company categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans receivable as to credit risk. The Company uses the following definitions for risk ratings:

Pass - Loans in this category are considered to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt and other factors.

Special Mention - Loans in this category are currently protected but are potentially weak, including adverse trends in borrower’s operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances.  Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s credit position at some future date.

Substandard - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified Doubtful have all the weaknesses inherent in loans classified as Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.

Table Of Contents  20

Based on the most recent analysis performed, the risk category of loans receivable was as follows:

As of September 30, 2016 (Dollars are in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real estate secured:
Commercial	$	91,708	$	7,165	$	4,124	$	—	$	102,997
Construction and land development		20,885		1,539		325		—		22,749
Residential 1-4 family		237,338		2,054		8,650		—		248,042
Multifamily		12,831		—		374		—		13,205
Farmland		17,847		3,531		2,450		—		23,828
Total real estate loans		380,609		14,289		15,923		—		410,821
Commercial		25,483		696		67		—		26,246
Agriculture		4,368		—		91		—		4,459
Consumer installment loans		23,016		—		161		—		23,177
All other loans		18		—		—		—		18
Total	$	433,494	$	14,985	$	16,242	$	—	$	464,721
As of December 31, 2015 (Dollars are in thousands)		Pass		Special Mention		Substandard		Doubtful		Total
Real estate secured:
Commercial	$	85,255	$	7,543	$	5,771	$	—	$	98,569
Construction and land development		12,262		1,974		436		—		14,672
Residential 1-4 family		229,182		3,572		10,162		—		242,916
Multifamily		12,264		187		503		—		12,954
Farmland		16,663		2,923		2,588		—		22,174
Total real estate loans		355,626		16,199		19,460		—		391,285
Commercial		20,641		724		104		—		21,469
Agriculture		3,767		—		26		—		3,793
Consumer installment loans		24,478		—		90		—		24,568
All other loans		54		—		—		—		54
Total	$	404,566	$	16,923		19,680	$	—	$	441,169

NOTE 7 ALLOWANCE FOR LOAN LOSSES:

The following table details activity in the allowance for loan losses by portfolio segment for the period ended September 30, 2016. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

As of September 30, 2016 (Dollars are in thousands)	Beginning Balance		Charge Offs			Recoveries		Advances		Provisions			Ending Balance
Real estate secured:
Commercial	$	2,384	$	(417	)	$	217	$	—	$	(238	)	$	1,946
Construction and land development		332		(5	)		24		—		(5	)		346
Residential 1-4 family		2,437		(601	)		78		—		329			2,243
Multifamily		232		(18	)		—		—		19			233
Farmland		675		(2	)		102		—		(144	)		631
Total real estate loans		6,060		(1,043	)		421		—		(39	)		5,399
Commercial		266		(65	)		52		—		(46	)		207
Agriculture		124		—			6		—		(87	)		43
Consumer installment loans		128		(22	)		16		—		9			131
All other loans		1		—			—		—		(1	)		—
Unallocated		914		—			—		—		(336	)		578
Total	$	7,493	$	(1,130	)	$	495	$	—	$	(500	)	$	6,358

Table Of Contents  21

		Allowance for Loan Losses						Recorded Investment in Loans
As of September 30, 2016 (Dollars are in thousands)		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Real estate secured:
Commercial	$	172	$	1,774	$	1,946	$	5,122	$	97,875	$	102,997
Construction and land development		119		227		346		260		22,489		22,749
Residential 1-4 family		88		2,155		2,243		4,234		243,808		248,042
Multifamily		-		233		233		305		12,900		13,205
Farmland		293		338		631		4,860		18,968		23,828
Total real estate loans		672		4,727		5,399		14,781		396,040		410,821
Commercial		19		188		207		67		26,179		26,246
Agriculture		8		35		43		27		4,432		4,459
Consumer installment loans		20		111		131		53		23,124		23,177
All other loans		-		-		-		-		18		18
Unallocated		-		578		578		-		-		-
Total	$	719	$	5,639	$	6,358	$	14,928	$	449,793	$	464,721

The following table details activity in the allowance for loan losses by portfolio segment for the period ended December 31, 2015. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

As of December 31, 2015 (Dollars are in thousands)	Beginning Balance		Charge Offs			Recoveries		Advances		Provisions			Ending Balance
Real estate secured:
Commercial	$	4,418	$	(724	)	$	147	$	—	$	(1,457	)	$	2,384
Construction and land development		199		(226	)		215		—		144			332
Residential 1-4 family		2,572		(743	)		93		—		515			2,437
Multifamily		154		(384	)		6		—		456			232
Farmland		913		(90	)		214		—		(362	)		675
Total real estate loans		8,256		(2,167	)		675		—		(704	)		6,060
Commercial		457		(92	)		1,412		—		(1,511	)		266
Agriculture		125		—			3		—		(4	)		124
Consumer installment loans		171		(101	)		41		—		17			128
All other loans		1		—			—		—		—			1
Unallocated		912		—			—		—		2			914
Total	$	9,922	$	(2,360	)	$	2,131	$	—	$	(2,200	)	$	7,493

Table Of Contents  22

		Allowance for Loan Losses						Recorded Investment in Loans
As of December 31, 2015 (Dollars are in thousands)		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Real estate secured:
Commercial	$	288	$	2,096	$	2,384	$	6,715	$	91,854	$	98,569
Construction and land development		155		177		332		299		14,373		14,672
Residential 1-4 family		168		2,269		2,437		4,957		237,959		242,916
Multifamily		-		232		232		430		12,524		12,954
Farmland		328		347		675		4,744		17,430		22,174
Total real estate loans		939		5,121		6,060		17,145		374,140		391,285
Commercial		24		242		266		69		21,400		21,469
Agriculture		18		106		124		54		3,739		3,793
Consumer installment loans		2		126		128		56		24,512		24,568
All other loans		-		1		1		-		54		54
Unallocated		-		914		914		-		-		-
Total	$	983	$	6,510		7,493	$	17,324	$	423,845	$	441,169

In determining the amount of our allowance, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions, as well as the requirements of the written agreement and other regulatory input. If our assumptions prove to be incorrect, our current allowance may not be sufficient to cover future loan losses and we may experience significant increases to our provision.

NOTE 8 TROUBLED DEBT RESTRUCTURINGS:

At September 30, 2016 there were $9.4 million in loans that are classified as troubled debt restructurings compared to $9.5 million at December 31, 2015. The following table presents information related to loans modified as troubled debt restructurings during the nine and three months ended September 30, 2016 and 2015.

Table Of Contents  23

	For the nine months ended September 30, 2016						For the nine months ended September 30, 2015
Troubled Debt Restructurings (Dollars are in thousands)	# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment
Real estate secured:
Commercial		1	$	341	$	341		—	$	—	$	—
Construction and land Development		—		—		—		1		551		302
Residential 1-4 family		—		—		—		2		225		224
Multifamily		—		—		—		—		—		—
Farmland		1		291		280		—		—		—
Total real estate loans		2		632		621		3		776		526
Commercial		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Consumer installment loans		—		—		—		—		—		—
All other loans		—		—		—		—		—		—
Total		2	$	632	$	621		3	$	776	$	526
		For the three months ended September 30, 2016						For the three months ended September 30, 2015
Troubled Debt Restructurings (Dollars are in thousands)		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment
Real estate secured:
Commercial		—	$	—	$	—		—	$	—	$	—
Construction and land Development		—		—		—		—		—		—
Residential 1-4 family		—		—		—		2		225		224
Multifamily		—		—		—		—		—		—
Farmland		—		—		—		—		—		—
Total real estate loans		—		—		—		2		225		224
Commercial		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Consumer installment loans		—		—		—		—		—		—
All other loans		—		—		—		—		—		—
Total		—	$	—	$	—		2	$	225	$	224

During the nine months ended September 30, 2016, the Company modified the terms of two loans for which the modification was considered to be a troubled debt restructuring. On one loan the interest rate and maturity date were not modified; however, the payment terms were changed. On one loan the interest rate was lowered and the payment terms and maturity date were changed. During the nine months ended September 30, 2015, the Company modified the terms of three loans for which the modification was considered to be a troubled debt restructuring. On two of the loans we modified the terms and lowered the interest rate. On one loan the interest rate was not modified; however, the maturity date was extended.

Table Of Contents  24

During the three months ended September 30, 2016, the Company modified no loans that were considered to be a troubled debt restructuring. During the three months ended September 30, 2015, the Company modified the terms of two loans for which the modification was considered to be a troubled debt restructuring. On the two loans we modified the terms and lowered the interest rate.

One commercial real estate loan with a recorded investment of $302 thousand that had been modified as a troubled debt restructuring defaulted during the nine months ended September 30, 2016, which was within twelve months of the loan’s modification date. No loans modified as troubled debt restructurings defaulted during the nine months ended September 30, 2015. No loans modified as troubled debt restructurings defaulted during the three months ended September 30, 2016 and 2015, which were within twelve months of their modification date. Generally, a troubled debt restructuring is considered to be in default once it becomes 90 days or more past due following a modification.

In determination of the allowance for loan losses, management considers troubled debt restructurings and subsequent defaults in these restructurings in its estimate. The Company evaluates all troubled debt restructurings for possible further impairment. As a result, the allowance may be increased, adjustments may be made in the allocation of the allowance, or charge-offs may be taken to further writedown the carrying value of the loan.

NOTE 9 OTHER REAL ESTATE OWNED:

The following table summarizes the activity in other real estate owned for the nine months ended September 30, 2016 and the year ended December 31, 2015:

(Dollars are in thousands)	September 30, 2016			December 31, 2015
Balance, beginning of period	$	12,398		$	15,049
Additions		3,851			3,277
Purchases of other real estate owned		—			12
Transfers of other real estate owned		(125	)		—
Donation of other real estate owned		—			(33	)
Proceeds from sales		(2,379	)		(1,831	)
Loans made to finance sales		(676	)		(878	)
Proceeds from insurance claims		—			(101	)
Adjustment of carrying value		(165	)		(3,246	)
Deferred gain from sales		—			50
Gain from sales		290			99
Balance, end of period	$	13,194		$	12,398

NOTE 10 EARNINGS PER SHARE:

Basic earnings per share computations are based on the weighted average number of shares outstanding during each period. Dilutive earnings per share reflect the additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued relate to outstanding options and common stock warrants are determined by the Treasury method. For the three and nine months ended September 30, 2016 and 2015, potential common shares of 882,178 and 1,539,877, respectively, were anti-dilutive and were not included in the calculation. Basic and diluted net income per common share calculations follows:

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(Amounts in Thousands, Except Share and Per Share Data)	For the three months ended September 30,				For the nine months ended September 30,
	2016		2015		2016		2015
Net income	$	346	$	2,293	$	1,926	$	3,377
Weighted average shares outstanding		23,354,111		22,878,654		23,354,092		22,878,654
Dilutive shares for stock options and warrants		—		—		—		—
Weighted average dilutive shares outstanding		23,354,111		22,878,654		23,354,092		22,878,654
Basic income per share	$	0.01	$	0.10	$	0.08	$	0.15
Diluted income per share	$	0.01	$	0.10	$	0.08	$	0.15

NOTE 11 TRUST PREFERRED SECURITIES AND DEFERRAL OF INTEREST PAYMENTS:

On July 7, 2004, the Company completed the issuance of $11.3 million in floating rate trust preferred securities offered by its wholly owned subsidiary, NPB Capital Trust I. The proceeds of the funds were used for general corporate purposes which included capital management for affiliates, retirement of indebtedness and other investments. The securities have a floating rate of 3 month LIBOR plus 260 basis points, which resets quarterly, with a current rate at September 30, 2016 of 3.28%.

On September 27, 2006, the Company completed the issuance of $5.2 million in floating rate trust preferred securities offered by its wholly owned subsidiary, NPB Capital Trust 2. The proceeds of the funds were used for general corporate purposes, which include capital management for affiliates and the acquisition of two branch banks. The securities have a floating rate of 3 month LIBOR plus 177 basis points, which resets quarterly, with a current rate at September 30, 2016 of 2.45%.

Under the terms of the subordinated debt transactions, the securities mature in 30 years from the date of issuance and are redeemable, in whole or in part, without penalty, at the option of the Company after five years. Due to the ability to defer interest and principal payments for 60 months without being considered in default, the regulatory agencies consider the trust preferred securities as Tier 1 capital up to certain limits.

In October 2009, a restriction to pay dividends from the Bank to the Company was issued by the Federal Reserve Bank of Richmond. In July 2010, the Company and the Bank entered into the Written Agreement discussed in Note 3. The Written Agreement prohibited the payment of interest on the trust preferred securities without prior regulatory approval. As a result, interest on trust preferred securities was deferred. This deferral was for a period of 60 months, and was set to expire on January 7, 2015. In the fourth quarter of 2014, the Company requested and received regulatory approval to pay the cumulative deferred interest on the trust preferred securities due on January 7, 2015 totaling $2.5 million, which the Company paid on December 10, 2014. As a result of this payment there has been no interest in arrears on the trust preferred securities since that date.

The Company is currently not deferring the quarterly interest payments on the trust preferred securities. However, as discussed above, regulatory approval was needed to pay the interest while the Company was under the formal Written Agreement. In March 2015 the Company requested and received regulatory approval to pay the $107 thousand in interest on the trust preferred securities due on April 7, 2015, which the Company paid on April 3, 2015. In June 2015 the Company requested and received regulatory approval to pay the $109 thousand in interest on the trust preferred securities due on July 7, 2015, which the Company paid on July 2, 2015. In September 2015 the Company requested and received regulatory approval to pay the $111 thousand in interest on the trust preferred securities due on October 7, 2015, which the Company paid on October 5, 2015. In December 2015 the Company requested and received regulatory approval to pay the $112 thousand in interest on the trust preferred securities due on January 7, 2016, which the Company paid on January 5, 2016.

The restriction requiring regulatory approval before the payment of interest on the trust preferred securities was lifted when the Written Agreement was terminated effective January 20, 2016. On April 4, 2016, the Company paid $124 thousand in interest on the trust preferred securities, which was due on April 7, 2016. On July 6, 2016 the Company paid $124 thousand in interest on the trust preferred securities, which was due on July 7, 2016. On October 4, 2016 the Company paid $127 thousand in interest on the trust preferred securities, which was due on October 7, 2016.

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NOTE 12 FAIR VALUES:

The financial reporting standard, “Fair Value Measurements and Disclosures” provides a framework for measuring fair value under generally accepted accounting principles and requires disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis (for example, available-for-sale investment securities) or on a nonrecurring basis (for example, impaired loans and other real estate acquired through foreclosure).

Fair value is the exchange price that would be received for 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 on the measurement date. Fair Value Measurements and Disclosures also establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an exchange market, as well as U. S. Treasury, other U. S. Government and agency mortgage-backed debt securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain derivative contracts and impaired loans.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. For example, this category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, and highly structured or long-term derivative contracts.

Investment Securities Available-for-Sale – Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. The Company’s available-for-sale securities, totaling $74.6 million and $101.6 million at September 30, 2016 and December 31, 2015, respectively, are the only assets whose fair values are measured on a recurring basis using Level 2 inputs from an independent pricing service.

Loans - The Company does not record loans at fair value on a recurring basis. Real estate serves as collateral on a substantial majority of the Company’s loans. When a loan is considered impaired a specific reserve may be established. Loans which are deemed to be impaired and require a reserve are primarily valued on a non-recurring basis at the fair values of the underlying real estate collateral. Such fair values are obtained using independent appraisals, which management evaluates and determines whether or not the fair value of the collateral is further impaired below the appraised value and there is no observable market price, or whether or not an appraised value does not include estimated costs of disposition. The Company records impaired loans as nonrecurring Level 3 assets. The aggregate carrying amounts of impaired loans carried at fair value were $14.2 million and $16.3 million at September 30, 2016 and December 31, 2015, respectively.

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Foreclosed Assets – Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets.  Foreclosed assets are carried at the lower of the carrying value or fair value.  Fair value is based upon independent observable market prices or appraised values of the collateral with a third party less an estimate of disposition costs, which the Company considers to be level 2 inputs. When the appraised value is not available, management determines the fair value of the collateral if further impaired below the appraised value and there is no observable market price, or an appraised value does not include estimated costs of disposition and management must make an estimate, the Company records the foreclosed asset as nonrecurring Level 3. The aggregate carrying amounts of foreclosed assets were $13.2 million and $12.4 million at September 30, 2016 and December 31, 2015, respectively.

Assets and liabilities measured at fair value are as follows as of September 30, 2016 (for purpose of this table the impaired loans are shown net of the related allowance):

(Dollars are in thousands)	Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis) Available-for-sale investments
U.S. Government Agencies	$	—	$	27,258	$	—
Taxable municipals		—		2,474		—
Corporate bonds		—		3,286		—
Mortgage backed securities		—		41,543		—
(On a non-recurring basis) Other real estate owned		—		—		13,194
Impaired loans:
Real estate secured:
Commercial		—		—		4,950
Construction and land development		—		—		141
Residential 1-4 family		—		—		4,146
Multifamily		—		—		305
Farmland		—		—		4,567
Commercial		—		—		48
Agriculture		—		—		19
Consumer installment loans		—		—		33
All other loans		—		—		—
Total	$	—	$	74,561	$	27,403

Assets and liabilities measured at fair value are as follows as of December 31, 2015 (for purpose of this table the impaired loans are shown net of the related allowance):

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(Dollars are in thousands)	Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis) Available-for-sale investments
U.S. Government Agencies	$	—	$	41,523	$	—
Taxable municipals		—		3,281		—
Corporate bonds		—		1,939		—
Mortgage backed securities		—		54,899		—
(On a non-recurring basis) Other real estate owned		—		—		12,398
Impaired loans:
Real estate secured:
Commercial		—		—		6,427
Construction and land development		—		—		144
Residential 1-4 family		—		—		4,789
Multifamily		—		—		430
Farmland		—		—		4,416
Commercial		—		—		45
Agriculture		—		—		36
Consumer installment loans		—		—		54
All other loans		—		—		—
Total	$	—	$	101,642	$	28,739

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

(Dollars in thousands)		Fair Value at September 30, 2016	Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired Loans	$	14,209	Appraised Value/Discounted Cash Flows/Market Value of Note	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0 – 18%
Other Real Estate Owned	$	13,194	Appraised Value/Comparable Sales/Other Estimates from Independent Sources	Discounts to reflect current market conditions and estimated costs to sell	0 – 18%

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Fair Value of Financial Instruments

Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another financial instrument.

The following summary presents the methodologies and assumptions used to estimate the fair value of the Company’s financial instruments presented below. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of September 30, 2016 and December 31, 2015. This table excludes financial instruments for which the carrying amount approximates fair value. The carrying value of cash and due from banks, federal funds sold, interest-bearing deposits, deposits with no stated maturities, trust preferred securities and accrued interest approximates fair value. The remaining financial instruments were valued based on the present value of estimated future cash flows, discounted at various rates in effect for similar instruments as of September 30, 2016 and December 31, 2015.

					Fair Value Measurements
(Dollars are in thousands)	Carrying Amount		Fair Value		Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
September 30, 2016
Financial Instruments – Assets
Net Loans	$	458,363	$	461,025	$	—	$	446,816	$	14,209
Financial Instruments – Liabilities
Time Deposits		247,956		247,529		—		247,529		—
FHLB Advances		9,058		9,110		—		9,110		—
December 31, 2015
Financial Instruments – Assets
Net Loans	$	433,676	$	438,589	$	—	$	422,248	$	16,341
Financial Instruments – Liabilities
Time Deposits		256,978		256,797		—		256,797		—
FHLB Advances		2,958		2,958		—		2,958		—

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NOTE 13 RECENT ACCOUNTING DEVELOPMENTS:

The following is a summary of recent authoritative announcements:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2015, the FASB issued guidance to eliminate from U.S. GAAP the concept of an extraordinary item, which is an event or transaction that is both (1) unusual in nature and (2) infrequently occurring. Under the new guidance, an entity will no longer (1) segregate an extraordinary item from the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income from continuing operations; or (3) disclose income taxes and earnings-per-share data applicable to an extraordinary item. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company applied the guidance prospectively. Adoption of these amendments did not have a material effect on the Company’s financial statements.

In February 2015, the FASB issued guidance which amends the consolidation requirements and significantly changes the consolidation analysis required under U.S. GAAP. Although the amendments are expected to result in the deconsolidation of many entities, the Company will need to reevaluate all its previous consolidation conclusions. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted (including during an interim period), provided that the guidance is applied as of the beginning of the annual period containing the adoption date. Adoption of these amendments did not have a material effect on the Company’s financial statements.

In June 2015, the FASB issued amendments to clarify the Accounting Standards Codification (“ASC”), correct unintended application of guidance, and make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant cost to most entities. The amendments were effective upon issuance (June 12, 2015) for amendments that do not have transition guidance. Amendments that are subject to transition guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. Adoption of these amendments did not have a material effect on the Company’s financial statements.

In August 2015, the FASB deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers. As a result of the deferral the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In August 2015, the FASB issued amendments to the Interest topic of the ASC to clarify the SEC staff’s position on presenting and measuring debt issuance costs incurred in connection with line-of-credit arrangements. The amendments were effective upon issuance. Adoption of these amendments did not have a material effect on the Company’s financial statements.

In January 2016, the FASB amended the Financial Instruments topic of the ASC to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect these amendments to have a material effect on its financial statements.

In February 2016, the FASB amended the Leases topic of the ASC to revise certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.

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In March 2016, the FASB amended the Revenue from Contracts with Customers topic of the ASC to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. Additionally, the guidance simplifies two areas specific to entities other than public business entities allowing them to apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics and also allowing them to make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value. The amendments will be effective for the Company for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The Company does not expect these amendments to have a material effect on its financial statements.

In April 2016, the FASB amended the Revenue from Contracts with Customers topic of the ASC to clarify guidance related to identifying performance obligations and accounting for licenses of intellectual property. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In May 2016, the FASB amended the Revenue from Contracts with Customers topic of the ASC to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In June 2016, the FASB issued guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. The amendments will be effective for the Company for reporting periods beginning after December 15, 2019. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.

In August 2016, the FASB amended the Statement of Cash Flows topic of the ASC to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

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

Caution About Forward Looking Statements

We make forward looking statements in this quarterly report that are subject to risks and uncertainties. These forward looking statements include statements regarding our profitability, liquidity, allowance for loan losses, interest rate sensitivity, market risk, business strategy, and financial and other goals. The words “believes,” “expects,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward looking statements.

Certain information contained in this discussion may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements contain the Company’s expectations, plans, future financial performance, and other statements that are not historical facts. These forward-looking statements are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar importance. Such forward-looking statements involve known and unknown risks including, but not limited to, changes in general economic and business conditions, interest rate fluctuations, competition within and from outside the banking industry, new products and services in the banking industry, risk inherent in making loans such as repayment risks and fluctuating collateral values, problems with technology utilized by the Company, changing trends in customer profiles and changes in laws and regulations applicable to the Company. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

Because of these uncertainties, our actual future results may be materially different from the results indicated by these forward looking statements. In addition, our past results of operations do not necessarily indicate our future results.

Written Agreement

The Company and the Bank had previously entered into the Written Agreement with the Federal Reserve Bank of Richmond and the Virginia State Corporation Commission Bureau of Financial Institutions under which the Company and the Bank were required to take certain actions and implement certain plans.. On February 2, 2016, the Company and the Bank announced that they had successfully complied with all of the requirements of the Written Agreement and accordingly, effective January 20, 2016, the agreement had been terminated.

Critical Accounting Policies

For discussion of our significant accounting policies see our Annual Report on Form 10-K for the year ended December 31, 2015. Certain critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements. Our most critical accounting policies relate to our provision for loan losses and the calculation of our deferred tax asset and related valuation allowance.

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The provision for loan losses reflects the estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our borrowers were to further deteriorate, resulting in an impairment of their ability to make payments, our estimates would be updated, and additional provisions could be required.

Our deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. 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. If all or a portion of the net deferred tax asset is determined to be unlikely to be realized in the foreseeable future, a valuation allowance is established to reduce the net deferred tax asset to the amount that is more likely than not to be realized. For further discussion of the deferred tax asset and valuation allowance, we refer you to the section on “Deferred Tax Asset and Income Taxes” below.

Overview

The Company had net income for the quarter ended September 30, 2016 of $346 thousand, or basic net income per share of $0.01, as compared to a net income of $2.3 million, or basic net income per share of $0.10, for the quarter ended September 30, 2015. This is a decrease of $1.9 million, or 84.91%. The decrease was mainly driven by a negative provision for loan losses of $1.2 million during the third quarter 2015 compared to no provision for loans losses during the third quarter 2016. Also we had a $415 thousand decrease in net interest income and an $817 thousand increase in noninterest expenses during the quarter, which was offset somewhat by a $266 increase in noninterest income. The Company had net income for the nine months ended September 30, 2016 of $1.9 million, or basic net income per share of $0.08, as compared to the nine months ending September 30, 2015 whereby the Company had net income of $3.4 million, or $0.15 basic net income per share. This is a decrease $1.5 million, or $0.07 per share.

Quarter-to-Date Results

Highlights from the third quarter of 2016 include:

· Strong net interest margin of 3.92%;

· $5.1 million, or 1.11%, increase in loans;

· A reduction in other real estate owned of $940 thousand, or 6.65%;

· A $3.4 million, or 21.78%, decrease in delinquencies;

· The Bank is considered well-capitalized under regulatory standards;

· The Bank opened a loan production office in Jonesborough, Tennessee; and,

· Book value per share of $2.09 as of September 30, 2016.

In the third quarter of 2016, our net interest margin was 3.92%, as compared to 3.99% for the same period in 2015, a decrease of 7 basis points. The Company’s primary source of income, net interest income, decreased $215 thousand, or 3.79%, to $5.5 million for the third quarter of 2016 from $5.7 million for the same period in 2015. Loan interest income decreased $157 thousand, or 2.67%, from $5.9 million for the third quarter of 2015 to $5.7 million for the third quarter of 2016. While we have been successful in our strategy to conservatively grow the loan portfolio, renewed loans are repricing at lower rates and new loans are being booked at lower interest rates due to competitive pressures. Investment interest income decreased $123 thousand to $334 thousand for the third quarter of 2016 as compared to $457 thousand for the third quarter of 2015 due to liquidation of the investment portfolio used to fund loan growth. Interest expense decreased $57 thousand, or 7.83%, from $728 thousand for the quarter ended September 30, 2015 to $671 thousand for the same quarter of 2016 as a result of time deposits re-pricing at lower interest rates at maturity, as well as a favorable shift in the deposit mix whereby our higher-cost time deposits were replaced with lower-cost deposit products.

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No provision for loan losses was recorded in the third quarter of 2016 as we continue to see improved loan quality. A negative provision of $1.2 million was recorded during the third quarter of 2015. See “Asset Quality” below for further discussion of $1.2 million negative provision for third quarter 2015.

Noninterest income for the third quarter of 2016 was $2.0 million, which is an increase of $266 thousand when compared to the $1.8 million for the same period in 2015. In June 2016, we began offering the Optional Overdraft Protection Service and Optional Overdraft Protection Service Plus products to our deposit customers. As a result our nonsufficient funds income and overdraft income increased by $287 thousand during the quarter when compared to the same quarter in 2015. We expect nonsufficient funds income and overdraft income to increase in the future as customers utilize these new services.

Noninterest expense increased $817 thousand, or 12.89%, to $7.2 million for the third quarter 2016 as compared to $6.3 million for the third quarter of 2015. Salaries and employee benefits increased $413 thousand, or 13.80% in the quarter-to-quarter comparison from $3.0 million at September 30, 2015 to $3.4 million for the same period in 2016. This increase was primarily the result of seasoned commercial bankers hired during the fourth quarter of 2015 and first nine months of 2016 as a part of our strategy to grow the loan portfolio, the opening of a loan production office in Jonesborough, Tennessee, as well as staff added to operate the newly implemented Interactive Teller Machines (“ITMs”). Occupancy and equipment expenses increased $216 thousand from $905 thousand for the third quarter of 2015 to $1.1 million for the third quarter of 2016. The increase in occupancy and equipment expenses was mainly due to the rollout of the ITMs during the first nine months quarter of 2016. The ITMs, a new, state-of-the-art technology which replaced the Bank’s ATMs, will help provide additional convenience by providing teller services from 7 AM to 7 PM Monday thru Saturday. The anticipate the addition of the ITMs will create efficiencies in the future. Other real estate owned and repossessed asset expenses increased $15 thousand, or 4.52%, to $347 thousand for the third quarter of 2016 as compared to $332 thousand for the same period in 2015.

Year-to-Date Results

Highlights from the first nine months of 2016 include:

· Strong net interest margin of 3.94%;

· A reduction in nonaccrual loans of $1.4 million, or 9.42%;

· Nonperforming assets to total assets lowered to 4.20% during the first nine months of 2016, as compared to 5.22% for the first nine months of 2015;

· $23.5 million, or 5.37%, increase in loans; and,

· $9.0 million, or 3.51%, decrease in higher-costing time deposits.

Net interest income year-to-date for September 30, 2016 was $16.3 million, which was a decline of $373 thousand, or 2.24%, when compared to the same period in 2015. Loan interest income for the first nine months of 2016 decreased $685 thousand, or 3.89%, from $17.6 million as of September 30, 2015 to $16.9 million as of September 30, 2016.

This decrease is primarily related to continued high level of nonaccrual loans, and new and renewal loans being booked at lower interest rates. Mostly offsetting the decline in interest income from loans was the decline in interest paid on deposits. Interest expense on deposits declined $507 thousand, for the nine-months ended September 30, 2016, when comparing it to the same period in 2015. The main driver in the decline in interest expense on deposits is the 6.86%, or $18.2 million, decline in time deposits when comparing the balances at September 30, 2016 and 2015, respectively. Also aiding in the decline in deposit expense is the favorable shift in the deposit mix of higher-costing time deposits to lower-costing non-time deposits.

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A negative provision of $500 thousand was recorded in the first nine months of 2016 as compared to a $1.2 million negative provision for the same period in 2015. The $500 thousand negative provision was made as a result of improved loan quality. See “Asset Quality” below for further discussion.

Year-to-date September 30, 2016, noninterest income increased to $5.4 million from $4.8 million in 2015, an increase of $620 thousand or 13.02%. This increase was primarily due to the $240 thousand gain on the sale of investment securities during the first nine months, compared to the $35 thousand gain on the sale of investment securities for the same period in 2015. In addition our nonsufficient funds / overdraft income increased by $308 thousand during the first nine months of 2016 as a result of the new optional overdraft protection services we began offering to our deposit customers in June 2016.

Noninterest expense increased $1.1 million, or 5.30%, for the first nine months of 2016 from $19.2 million as of September 30, 2015 to $20.3 million as of September 30, 2016. For the nine months ended September 30, 2016, salaries and employee benefits increased $1.2 million, or 12.91%, to $10.0 million as compared to $8.8 million for the same period in 2015. This increase was primarily the result of seasoned commercial bankers hired during the fourth quarter of 2015 and first nine months of 2016 as a part of our strategy to grow the loan portfolio, expand our market presence in the Tri-Cities, Tennessee area, as well as staff added to operate the ITMs. Total full time equivalent employees have increased to 258 at September 30, 2016 from 247 at September 30, 2015, an increase of 11, or 4.45%. Other real estate owned and repossessed asset expenses decreased $799 thousand, or 57.15%, to $599 thousand for the first nine months of 2016 as compared to $1.4 million for the same period in 2015. During the first nine months of 2016, we had net gains on the sale of other real estate owned of $290 thousand as compared to a net gain on the sale of other real estate owned of $10 thousand for the same period in 2015. Net writedowns on other real estate owned were $165 thousand for the first nine months of 2016 as compared to net writedowns of $784 thousand for the same period in 2015.

Balance Sheet

Total assets increased $8.0 million, or 1.27%, to $633.9 million at September 30, 2016 from $625.9 million at December 31, 2015. Loans showed an increase of $23.5 million as a result of our efforts to conservatively grow the loan portfolio, which was funded by selling investment securities during the first nine months of 2016.

Total investments decreased $27.0 million, or 26.64%, to $74.6 million at September 30, 2016 from $101.6 million at December 31, 2015. We sold $24.8 million in investment securities during the first nine months of 2016. These sales resulted in net realized gains of $240 thousand. These sales were executed to provide liquidity to fund loan growth and to take advantage of gains in the investment portfolio as deemed appropriate. Interest bearing deposits with banks increased $4.5 million, or 4.02%, in the first nine months of 2016 to $15.8 million from $11.3 million at December 31, 2015.

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Total loans increased $23.5 million, or 5.34%, to $464.7 million at September 30, 2016 as compared to $441.2 million at December 31, 2015. Our strategy is to conservatively grow assets, namely the loan portfolio. To assist in these efforts, we have added several commercial lenders, during the latter part of 2015 and first nine months of 2016, mostly focused in the Tri-Cities market of Bristol, VA and TN, Kingsport, TN, and Johnson City, TN. We expect the trend in total loan growth we have experienced in the first nine months of 2016 to continue at least in the near term, subject to economic conditions, customer demand, and competition in our markets. During the third quarter of 2016, we introduced new lending products that we anticipate will help us further service our customers, generate loan growth and enhance earnings. These include secondary market mortgage loans, Small Business Administration loans and credit cards.

Total deposits decreased $1.5 million from $558.0 million at December 31, 2015 to $556.5 million at September 30, 2016. Noninterest bearing deposits increased 2.15%, or $3.2 million, from $149.7 million at December 31, 2015 to $152.9 million at September 30, 2016. We experienced an increase of $10.3 million, or 34.29%, in interest-bearing demand deposits during the first nine months of 2016. We have experienced a $6.1 million, or 5.01%, decrease in non-maturity deposits. Time deposits decreased by $9.0 million, or 3.51%, from $257.0 million at December 31, 2015 to $248.0 million at September 30, 2016. Overall, we continue to maintain core deposits through attractive consumer and commercial deposit products and strong ties with our customer base and communities. The shift from higher-costing time deposits to lower-costing deposit products represents a favorable repositioning of the Company’s deposit mix. We have recently increased our interest rates on time deposits in an effort to stop shrinking the bank, to help provide funds for loan growth, and to increase deposit market share. Existing higher cost deposits should continue to reprice at lower interest rates, but the level of these higher yielding deposits is decreasing; thus, the opportunity to continue decreasing interest expense will diminish.

Total borrowings increased to $9.1 million at September 30, 2016, an increase of $6.1 million from the $3.0 million outstanding balance at December 31, 2015. Borrowings decreased $900 thousand during the first nine months of 2016 due to regularly scheduled principal payments on the $3.0 million outstanding at December 31, 2015. In June 2016, we borrowed $7.0 million in advances from the Federal Home Loan Bank to take advantage of lower interest rates to also help fund our loan growth as we work to grow our deposits and loans.

Total equity at September 30, 2016 was $48.8 million. That represents an increase of $2.7 million, or 5.85%, when compared to the December 31, 2015 balance of $46.1 million. Net income of $1.9 million and the $772 thousand increase in other comprehensive income resulting from an increase in net unrealized gains in the investment portfolio during the nine months ended September 30, 2016 were the drivers of the increase in equity.

Asset Quality

We continue to make progress in reducing the levels of non-performing assets. However, as asset quality improves, the level of nonperforming assets remains elevated as a result of the prolonged deteriorated residential and commercial real estate markets, as well as the sluggish economy. Loans rated substandard decreased $3.5 million, or 17.47%, to $16.2 million at September 30, 2016 from $19.7 million at December 31, 2015.

The ratio of nonperforming assets to total assets lowered to 4.20% at September 30, 2016 as compared to 4.35% at December 31, 2015. Nonperforming assets, which include nonaccrual loans, other real estate owned and past due loans greater than 90 days still accruing interest, decreased to $26.6 million at September 30, 2016 from $27.2 million at December 31, 2015, a reduction of $603 thousand, or 2.21%. We continue undertaking extensive and more aggressive measures to work out problem credits and liquidate foreclosed properties in an effort to accelerate a reduction of nonperforming assets. Our goal is to reduce the nonperforming assets being mindful of the impact to earnings and capital; however, we may recognize some losses and reductions in the allowance for loan loss as we expedite the resolution of these problem assets. Delinquencies decreased in the first nine months of 2016 as total past due loans decreased to $12.2 million at September 30, 2016 from $13.4 million at December 31, 2015, a decrease of $1.2 million, or 8.64%.

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Other real estate owned (“OREO”) increased $796 thousand to $13.2 million at September 30, 2016 from $12.4 million at December 31, 2015. All properties are available for sale by commercial and residential realtors under the direction of our Special Assets division. During the first nine months of 2016, OREO increased by $3.9 million as a result of settlement of foreclosed loans, which was offset by sales of $3.1 million of our properties with gains of $290 thousand realized as a result of the sales. Future sales of these properties are contingent upon an economic recovery; consequently, it is difficult to estimate the duration of our ownership of these assets. We do have lease agreements on certain other real estate owned properties which are generating rental income at market rates. Rental income on OREO properties was $182 thousand for the first nine months of 2016 and 2015. We anticipate liquidating properties that we have had for a long period in the fourth quarter of 2016, which could result in losses but reduce future carrying costs.

Our allowance for loan losses at September 30, 2016 was $6.4 million, or 1.37% of total loans as compared to $7.5 million, or 1.70% of total loans at December 31, 2015. Impaired loans decreased $2.4 million, or 13.83%, to $14.9 million with an estimated related allowance of $719 thousand for potential losses at September 30, 2016 as compared to $17.3 million in impaired loans with an estimated related allowance of $983 thousand at the end of 2015. No provision for loan losses was recorded during first nine months of 2016, while a negative provision of $500 thousand was recorded in the second quarter of 2016. In the first nine months of 2016, net charge offs were $635 thousand, or 0.19% of average loans, as compared to $50 thousand, or 0.01% of average loans, in the same period of 2015. Included in the net charge offs in 2015 is a recovery of $1.2 million, which was due to the receipt in August 2015 of death benefits on a life insurance policy on which the Bank was the beneficiary. The policy was acquired in 2010 as part of a settlement with a former borrower on several defaulted loans. As a result of this $1.2 million recovery a negative provision for loan losses of $1.2 million was made in the third quarter of 2015. The allowance for loan losses is being maintained at a level that management deems appropriate to absorb any potential future losses and known impairments within the loan portfolio whether or not the losses are actually ever realized. We continue to adjust the allowance for loan loss model to best reflect the risks in the portfolio and the improvements made in our internal policies and procedures; however, future provisions may be deemed necessary.

Capital Ratios

The Company meets eligibility criteria of a small bank holding company in accordance with the Federal Reserve Board’s Small Bank Holding Company Policy Statement issued in February 2015, and is no longer obligated to report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies.

At September 30, 2016, the Bank remains well capitalized under the regulatory framework for prompt corrective action. The following ratios existed at September 30, 2016 for the Bank: Tier 1 leverage ratio of 10.00%, Tier 1 risk based capital ratio of 15.72%, Total risk based capital ratio of 16.98%, and Common Equity Tier 1 ratio of 15.72%. The ratios were as follows at December 31, 2015: Tier 1 leverage ratio of 9.67%, Tier 1 risk based capital ratio of 16.29%, Total risk based capital ratio of 17.55%, and Common Equity Tier 1 ratio of 16.29%.

The ratios mentioned above for the Bank comply with the Federal Reserve rules to align with the Basel III Capital requirements effective January 1, 2015. As a result of these new rules the Bank is now subject to a Common Equity Tier 1 ratio set out above.

Deferred Tax Asset and Income Taxes

Due to timing differences between book and tax treatment of several income and expense items, a net deferred tax asset of $4.8 million existed at September 30, 2016 as compared to a net deferred tax asset of $5.1 million at December 31, 2015. At September 30, 2016 we had a valuation allowance of $5.1 million as compared to a valuation allowance of $5.7 million at December 31, 2015. During the first nine months of 2016 we reversed $561 thousand of our deferred tax valuation allowance. As of September 30, 2016, the Company had $16.3 million of net operating loss carryforwards which will expire in 2031 thru 2035. Management expects to utilize all of these carryforwards prior to expiration. Direct charge-offs contributed to a reduction of the tax asset and are permitted as tax deductions. In addition, writedowns on other real estate owned property are expensed for book purposes but are not deductible for tax purposes until disposition of the property. Goodwill expense also was realized for book purposes in 2011 but continues to only be tax deductible based on the statutory requirements; thus, creating a deferred tax asset. When, and if, taxable income increases in the future and during the net operating loss carryforward period, this valuation allowance may be reversed and used to decrease tax obligations in the future. Our income tax expense was computed at the normal corporate income tax rate of 34% of taxable income included in net income. We do not have significant nontaxable income or nondeductible expenses.

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Capital Resources

Our total capital at the end of the third quarter 2016 was $48.8 million compared to $46.1 million at December 31, 2015. The increase was $2.7 million, or 5.85%. New Peoples equity as a percentage of total assets was 7.70% at September 30, 2016 compared to 7.36% at December 31, 2015. The tangible book value per common share was $2.09 at September 30, 2016 compared to $1.97 at December 31, 2015.

Total assets increased during the first nine months of 2016 and we anticipate asset levels to increase in the future due to an emphasis on growing the loan portfolio and the core deposit base of the Bank. Our primary source of capital comes from earnings. Under current economic conditions, we believe it is prudent to continue to increase capital to support planned asset growth while being able to absorb potential losses that may occur if asset quality deteriorates further. Based upon projections, we believe retained earnings will be sufficient to support the Bank’s planned asset growth. As part of our initiative to maintain well capitalized status as defined by regulatory guidelines, we are working to further replace our nonperforming assets with high-quality interest-earning assets. We are also focused on improving earnings by maintaining a strong net interest margin and decreasing overhead expenses. However, these efforts alone may not provide us adequate capital if further losses related to OREO or loans are realized.

No cash dividends have been paid historically and we do not anticipate paying a cash dividend in the foreseeable future as the Company continues to have a retained deficit. Earnings will continue to be retained to build capital and position the Company to pay a dividend to its shareholders as soon as practicable.

Liquidity

We closely monitor our liquidity and our liquid assets which consist of cash, due from banks, federal funds sold, and unpledged available for sale investments. Collectively, those balances were $95.2 million at September 30, 2016, down from $112.6 million at December 31, 2015. A surplus of short-term assets are maintained at levels management deems adequate to meet potential liquidity needs.

At September 30, 2016, all of our investments are classified as available-for-sale. These investments provide an additional source of liquidity in the amount of $62.8 million, which is net of the $11.8 million of securities pledged as collateral. Investment securities available for sale serve as a source of liquidity while yielding a higher return versus other short term investment options, such as federal funds sold and overnight deposits with the Federal Reserve Bank. Due to maturities, paydowns, and sales of securities to fund loan growth our investment portfolio has declined from $101.6 million at December 31, 2015 to $74.6 million at September 30, 2016. A $1.2 million increase in the fair market value of the investment portfolio during the first nine months of 2016 resulted in a net unrealized gain of $673 thousand at September 30, 2016 compared to the net unrealized loss of $496 thousand at December 31, 2015.

Available third-party sources of liquidity at September 30, 2016 include the following: a line of credit with the Federal Home Loan Bank of Atlanta, access to brokered certificates of deposit markets and internet certificates of deposit, and the discount window at the Federal Reserve Bank of Richmond. In May 2015, we received notification that a $3.0 million unsecured federal funds line of credit facility with a correspondent bank had been reinstated. In February 2016, we received notification that this facility had been increased to $5.0 million. In March 2016, we received notification that another correspondent bank had reinstated an unsecured federal funds line of credit facility in the amount of $5.0 million. As a result we had the ability to borrow $10.0 million in unsecured federal funds as of September 30, 2016, which gives us an additional source of liquidity.

At September 30, 2016, we had borrowings from the Federal Home Loan Bank (“FHLB”) totaling $9.1 million as compared to $3.0 million at December 31, 2015. None of the FHLB advances are overnight borrowings and therefore none of the advances are subject to daily interest rate changes. $2.1 million of the borrowings have a maturity date in the year 2018, but are amortizing monthly or quarterly. These borrowings decreased $900 thousand during the first nine months of 2016 due to regularly scheduled principal payments. In June 2016 the Bank borrowed an additional $2.0 million with a maturity date in the year 2019 and an additional $5.0 million borrowing with a maturity date in the year 2021. These borrowings were done to take advantage of lower interest rates to also help fund our loan growth as we work to grow our deposits and loans. We also used our line of credit with the Federal Home Loan Bank to issue letters of credit for $7.0 million in 2013 and $5.0 million in 2015 to the Treasury Board of Virginia for collateral on public funds. An additional $123.8 million was available on September 30, 2016 on the $144.8 million line of credit, which is secured by a blanket lien on our residential real estate loans.

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We have access to the brokered deposits market. Currently we have $2.7 million in 10-year term time deposits comprised of $3 thousand incremental deposits which yield an interest rate of 4.10%. With the exception of Certificate of Deposit Registry Service (“CDARS”) time deposits, we have no other brokered deposits. Though this has not been a strategy in the past, we may utilize this source in the future as a lower cost source of funds. In February 2016, our ability to participate in CDARS one way buys was reinstated. As of September 30, 2016 we had $1.6 million in CDARS one way buys outstanding.

We are a member of an internet certificate of deposit network whereby we may purchase funds from other financial institutions at auction. We may invest funds through this network as well. Currently, we only intend to use this source of liquidity in a liquidity crisis event.

The Bank has access to additional liquidity through the Federal Reserve Bank discount window for overnight funding needs. We may collateralize this line with investment securities and loans at our discretion; however, we do not anticipate using this funding source except as a last resort.

Additional liquidity is expected to be provided by loan repayments and core deposit growth that will result from an increase in market share in our targeted trade area. During the first nine months of 2016, interest rates paid on time deposits were increased in an effort to slow down the trend of declining time deposit balances.

With the increased asset liquidity and other external sources of funding, we believe we have adequate liquidity and capital resources to meet our requirements and needs for the foreseeable future. However, liquidity can be further affected by a number of factors such as counterparty willingness or ability to extend credit, regulatory actions and customer preferences, etc.

The bank holding company has $967 thousand in cash on deposit at the Bank as of September 30, 2016. These funds will be used to pay operating expenses, trust preferred interest payments, and provide additional capital injections to the Bank, if needed.

The Company is making quarterly interest payments on the trust preferred securities. The restriction requiring regulatory approval before the payment of interest on the trust preferred securities was lifted when the Written Agreement was terminated effective January 20, 2016.

During the capital raise in 2012, common stock warrants were issued to investors. The warrants are immediately exercisable through December 2017 at a price of $1.75 per share. 175 warrants were exercised during the first nine months of 2016 and the number of warrants outstanding at September 30, 2016 was 882,178. If these warrants are exercised, additional funds may be received by the Company, which provides potentially up to $1.5 million in additional liquidity and capital to the holding company. Additional contingent funding sources will be explored as available.

Off Balance Sheet Items and Contractual Obligations

There have been no material changes during the quarter ended September 30, 2016 to the off-balance sheet items and the contractual obligations disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2015.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

Item 4. Controls and Procedures

We have carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer (our “CEO”) and our Senior Vice President and Chief Financial Officer (our “CFO”), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were operating effectively in providing reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (b) such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2016 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Part II Other Information

Item 1. Legal Proceedings

On June 24, 2015 New Peoples Bank filed an Amended Complaint in the Circuit Court of Russell County Virginia against Arthur Wayne Bostic, Michael W. Bostic, Sr. and Jeffrey C. Bostic to enforce guarantees of loans made to Bostic Ford Sales, Inc. and seeking judgment against the guarantors for $1,427,709.76 with interest and legal fees. On July 24, 2015 Arthur Bostic filed a counterclaim against New Peoples Bank. On March 8, 2016 Michael Bostic, Sr. and Jeffrey Bostic filed their counterclaims against the Bank. The counterclaims assert lender liability theories of recovery and arise from the refusal of the Bank to continue to extend credit to Bostic Ford Sales, Inc. in 2008-2009. The defendants seek a judgment against the Bank of at least $3 million.

Item 1A. Risk Factors

Not Applicable.

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

Not Applicable

Item 3. Defaults Upon Senior Securities

Not Applicable

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

Not Applicable

Item 6. Exhibits

See Index of Exhibits.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Ay 10, 2013

NEW PEOPLES BANKSHARES, INC.

(Registrant)

By: /s/ C. TODD ASBURY  

C. Todd Asbury

President and Chief Executive Officer

Date:       November 14, 2016

By: /s/ JOSEPH D. PENNINGTON            

Joseph D. Pennington

Senior Vice President and Chief Financial Officer

Date:  November 14, 2016

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Index of Exhibits

No.	Description
2.1	Agreement and Plan of Share Exchange dated August 15, 2011 (incorporated by reference to Exhibit 2 to Form 8-K filed December 17, 2011).
3.1	Amended Articles of Incorporation of New Peoples Bankshares, Inc. (incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarterly period ended June 30, 2008 filed on August 11, 2008).
3.2	Bylaws of New Peoples Bankshares, Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K filed on April 15, 2004).
4.1	Specimen Common Stock Certificate of New Peoples Bankshares, Inc. (incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarterly period ended June 30, 2012 filed on August 14, 2012).
4.2	Form of Warrant to Purchase Shares of Common Stock (incorporated by reference to Exhibit 4.2 to Form 10-Q for the quarterly period ended June 30, 2012 filed on August 14, 2012).
4.3	Form of Rights Certificate (incorporated by reference to Exhibit 4.3 to Form 10-Q for the quarterly period ended June 30, 2012 filed on August 14, 2012).
10.1*	New Peoples Bank, Inc. 2001 Stock Option Plan (incorporated by reference to Exhibit 10.1 to Annual Report on Form 10-KSB for the fiscal year ended December 31, 2001).
10.2*	Form of Non-Employee Director Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to Form 8-K filed November 30, 2004).
10.3*	Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.3 to Form 8-K filed November 30, 2004).
10.4*	Salary Continuation Agreement dated December 18, 2002 between New Peoples Bank, Inc. and Frank Sexton, Jr. (incorporated by reference to Exhibit 10.6 to Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
10.5*	First Amendment dated June 30, 2003 to Salary Continuation Agreement between New Peoples Bank, Inc. and Frank Sexton, Jr. (incorporated by reference to Exhibit 10.7 to Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
10.6*	Letter Agreement, dated as of June 29, 2009, between the Company and Kenneth D. Hart (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2009).
10.7	Written Agreement, effective August 4, 2010, by and among New Peoples Bankshares, Inc., New Peoples Bank, Inc., the Federal Reserve Bank of Richmond and the State Corporation Commission Bureau of Financial Institutions (incorporated by reference to Exhibit 10.1 to Form 8-K filed August 6, 2010).
10.8	Engagement Letters of Scott & Stringfellow, LLC (incorporated by reference to Exhibit 10.8 to Form 10-Q for the quarterly period ended June 30, 2012 filed on August 14, 2012).
10.9	Convertible Note Payable, B. Scott White, dated June 27, 2012 (incorporated by reference to Exhibit 10.1 to Form 8-K filed June 29, 2012).
10.10	Convertible Note Payable, Harold Lynn Keene, dated June 27, 2012 (incorporated by reference to Exhibit 10.2 to Form 8-K filed June 29, 2012).
31.1	Certification by Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
31.2	Certification by Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
32	Certification by Chief Executive Officer and Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials for the Company’s 10-Q Report for the quarterly period ended September 30, 2016, formatted in XBRL:  (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements, tagged as blocks of text.

___________________

* Denotes management contract.

Table Of Contents  43

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, C. Todd Asbury, certify that:

1.       I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2016 of New Peoples 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: November 14, 2016

/s/ C. TODD ASBURY

C. Todd Asbury

President & Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Joseph D. Pennington, certify that:

1.       I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2016 of New Peoples 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: November 14, 2016

/s/ JOSEPH D. PENNINGTON

Joseph D. Pennington

Senior Vice President & Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

The undersigned, as the Chief Executive Officer and Chief Financial Officer, respectively, of New Peoples Bankshares, Inc., certify that, to the best of their knowledge and belief, the Quarterly Report on Form 10-Q for the period ended September 30, 2016 which accompanies this certification fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of New Peoples Bankshares, Inc. at the dates and for the periods indicated. The foregoing certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) and shall not be relied upon for any other purpose. The undersigned expressly disclaim any obligation to update the foregoing certification except as required by law.

Date: November 14, 2016

/s/ C. TODD ASBURY

C. Todd Asbury

President & Chief Executive Officer

Date: November 14, 2016

/s/ JOSEPH D. PENNINGTON

Joseph D. Pennington

Senior Vice President & Chief Financial Officer

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 11, 2016
Document And Entity Information
Entity Registrant Name	NEW PEOPLES BANKSHARES INC
Entity Central Index Key	0001163389
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		23,354,257
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2016

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Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
INTEREST AND DIVIDEND INCOME
Loans including fees	$ 5,732	$ 5,889	$ 16,910	$ 17,595
Federal funds sold				2
Interest-earning deposits with banks	23	18	67	73
Investments	334	457	1,161	1,306
Dividends on equity securities (restricted)	35	32	99	98
Total Interest and Dividend Income	6,124	6,396	18,237	19,074
Deposits
Demand	13	10	37	28
Savings	44	44	122	129
Time deposits below $100,000	273	315	808	1,062
Time deposits above $100,000	168	213	480	735
FHLB advances	45	35	109	113
Federal funds purchased			2
Trust Preferred Securities	128	111	373	328
Total Interest Expense	671	728	1,931	2,395
NET INTEREST INCOME	5,453	5,668	16,306	16,679
PROVISION FOR LOAN LOSSES		(1,200)	(500)	(1,200)
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	5,453	6,868	16,806	17,879
NONINTEREST INCOME
Service charges	854	579	1,926	1,667
Fees, commission and other income	1,031	796	2,694	2,333
Insurance and investment fees	103	155	404	411
Net realized gains on sale of investment securities			240	35
Life insurance investment income	55	247	118	316
Total Noninterest Income	2,043	1,777	5,382	4,762
NONINTEREST EXPENSES
Salaries and employee benefits	3,405	2,992	9,954	8,816
Occupancy and equipment expenses	1,121	905	3,042	2,767
Advertising and public relations	99	111	332	240
Data processing and telecommunications	569	550	1,726	1,552
FDIC insurance premiums	137	213	407	652
Other real estate owned and repossessed assets, net	347	332	599	1,398
Other operating expenses	1,477	1,235	4,208	3,822
Total Noninterest Expenses	7,155	6,338	20,268	19,247
INCOME BEFORE INCOME TAXES	341	2,307	1,920	3,394
INCOME TAX EXPENSE (BENEFIT)	(5)	14	(6)	17
NET INCOME	$ 346	$ 2,293	$ 1,926	$ 3,377
Income Per Share
Basic	$ 0.01	$ 0.1	$ 0.08	$ 0.15
Fully Diluted	$ 0.01	$ 0.1	$ 0.08	$ 0.15
Average Weighted Shares of Common Stock
Basic	23,354,111	22,878,654	23,354,092	22,878,654
Fully Diluted	23,354,111	22,878,654	23,354,092	22,878,654

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Consolidated Statements Of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Consolidated Statements Of Comprehensive Income Loss
NET INCOME	$ 346	$ 2,293	$ 1,926	$ 3,377
Investment securities activity
Unrealized gains (losses) arising during the year	(70)	576	1,409	309
Tax related to unrealized gains (losses)	24	(196)	(479)	(105)
Reclassification of realized gains during the period			(240)	(35)
Tax related to realized gains			82	12
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	(46)	380	772	181
TOTAL COMPREHENSIVE INCOME (LOSS)	$ 300	$ 2,673	$ 2,698	$ 3,558

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Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
ASSETS
Cash and due from banks	$ 16,625	$ 15,087
Interest-bearing deposits with banks	15,776	11,251
Federal funds sold	36
Total Cash and Cash Equivalents	32,437	26,338
Investment securities available-for-sale	74,561	101,642
Loans receivable	464,721	441,169
Allowance for loan losses	(6,358)	(7,493)
Net Loans	458,363	433,676
Bank premises and equipment, net	30,259	28,148
Equity securities (restricted)	2,613	2,441
Other real estate owned	13,194	12,398
Accrued interest receivable	1,924	1,816
Life insurance investments	12,223	12,105
Deferred taxes, net	4,819	5,121
Other assets	3,474	2,213
Total Assets	633,867	625,898
Demand deposits:
Noninterest bearing	152,930	149,714
Interest-bearing	40,623	30,251
Savings deposits	115,007	121,076
Time deposits	247,956	256,978
Total Deposits	556,516	558,019
Federal Home Loan Bank advances	9,058	2,958
Accrued interest payable	294	288
Accrued expenses and other liabilities	2,718	2,050
Trust preferred securities	16,496	16,496
Total Liabilities	585,082	579,811
STOCKHOLDERS' EQUITY
Common stock - $2.00 par value; 50,000,000 shares authorized; 23,354,257 and 23,354,082 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively	46,708	46,708
Common stock warrants	764	764
Additional paid-in capital	13,965	13,965
Retained deficit	(13,097)	(15,023)
Accumulated other comprehensive income (loss)	445	(327)
Total Liabilities and Stockholders' Equity	$ 633,867	$ 625,898

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Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Common stock, par value	$ 2.00	$ 2.00
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	23,354,257	23,354,082
Common stock, shares outstanding	48,785	46,087

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Shareholders Equity - USD ($) $ in Thousands	Common Stock	Common Stock Warrants	Additional Paid-In Capital	Retained Deficit	Accumulated Other Comprehensive Income (Loss)	Total
Balance at Dec. 31, 2014	$ 22,878
Balance, Shares at Dec. 31, 2014	45,757	1,176	13,672	(17,685)	(69)	42,851
Net income				$ 3,377		$ 3,377
Other comprehensive income, net of tax					$ 181	$ 181
Balance at Sep. 30, 2015	$ 22,878
Balance, Shares at Sep. 30, 2015	45,757	1,176	13,672	(14,308)	112	46,409
Balance at Dec. 31, 2015	$ 23,354
Balance, Shares at Dec. 31, 2015	46,708	764	13,965	(15,023)	(327)	46,087
Net income				$ 1,926		$ 1,926
Other comprehensive income, net of tax					$ 772	$ 772
Balance at Sep. 30, 2016	$ 23,354
Balance, Shares at Sep. 30, 2016	46,708	764	13,965	(13,097)	445	48,785

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Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 1,926	$ 3,377
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	1,815	1,571
Provision for loan losses	(500)	(1,200)
Income on life insurance	(118)	(316)
Gain on sale of securities available-for-sale	(240)	(35)
Gain on sale of premises and equipment	(67)	(67)
Gain on sale of foreclosed assets	(290)	(10)
Net write-down of carrying value of foreclosed real estate	165	784
Accretion of bond premiums/discounts	711	867
Deferred tax benefit	(95)
Net change in:
Interest receivable	(108)	140
Other assets	(1,261)	110
Accrued interest payable	6	35
Accrued expenses and other liabilities	668	550
Net Cash Provided by Operating Activities	2,612	5,806
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in loans	(27,362)	15,686
Purchase of securities available-for-sale	(9,708)	(25,202)
Proceeds from sale and maturities of securities available-for-sale	37,487	22,330
Net Purchase of equity securities (restricted)	(172)	(72)
Payments for the purchase of premises and equipment	(4,469)	(1,325)
Payments for the purchase of other real estate owned		(5)
Payments for premiums on life insurance investments		(65)
Proceeds from life insurance investment		1,793
Proceeds from sales of premises and equipment	735	181
Proceeds from insurance on other real estate owned		57
Proceeds from sales of other real estate owned	2,379	1,084
Net Cash Provided by (Used in) Investing Activities	(1,110)	14,462
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in Federal Home Loan Bank advances	6,100	(900)
Net change in:
Demand deposits	13,588	2,064
Savings deposits	(6,069)	11,129
Time deposits	(9,022)	(33,762)
Net Cash Provided by (Used in) Financing Activities	4,597	(21,469)
Net increase (decrease) in cash and cash equivalents	6,099	(1,201)
Cash and Cash Equivalents, Beginning of the Year	26,338	35,560
Cash and Cash Equivalents, End of the Year	32,437	34,359
Supplemental Disclosure of Cash Paid During the Year for:
Interest	1,925	2,360
Taxes	95
Supplemental Disclosure of Non Cash Transactions:
Other real estate acquired in settlement of foreclosed loans	3,851	2,249
Loans made to finance sale of foreclosed real estate	676	193
Transfer of other real estate to premises and equipment	125
Change in unrealized gains (losses) on securities available-for-sale	$ 1,169	$ 274

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1. NATURE OF OPERATIONS

9 Months Ended

Sep. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

1. NATURE OF OPERATIONS

NOTE 1 NATURE OF OPERATIONS:

New Peoples Bankshares, Inc. (“The Company”) is a financial holding company whose principal activity is the ownership and management of a community bank. New Peoples Bank, Inc. (“Bank”) was organized and incorporated under the laws of the Commonwealth of Virginia on December 9, 1997. The Bank commenced operations on October 28, 1998, after receiving regulatory approval. As a state-chartered member bank, the Bank is subject to regulation by the Virginia Bureau of Financial Institutions, the Federal Deposit Insurance Corporation and the Federal Reserve Bank. The Bank provides general banking services to individuals, small and medium size businesses and the professional community of southwestern Virginia, southern West Virginia, and eastern Tennessee. On June 9, 2003, the Company formed two wholly-owned subsidiaries; NPB Financial Services, Inc. and NPB Web Services, Inc. On July 7, 2004 the Company established NPB Capital Trust I for the purpose of issuing trust preferred securities. On September 27, 2006, the Company established NPB Capital Trust 2 for the purpose of issuing additional trust preferred securities. NPB Financial Services, Inc. was a subsidiary of the Company until January 1, 2009 when it became a subsidiary of the Bank. In June 2012 the name of NPB Financial Services, Inc. was changed to NPB Insurance Services, Inc. which operates solely as an insurance agency. On March 4, 2016 the Federal Reserve Bank of Richmond approved the Company’s election to become a financial holding company. In July 2016, the Bank and its wholly-owned subsidiary NPB Insurance Services, Inc. announced by press release it is teaming up with The Hilb Group of Virginia dba CSE Insurance Services, a division of the Hilb Group, LLC (“CSE”), located in Abingdon, Virginia, to provide insurance services for its current and future customers. Effective July 1, 2016, NPB Insurance Services, Inc. sold its existing book of business to CSE. These customers will be serviced by CSE and the Bank will refer future insurance needs of its bank customers to CSE.

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2. ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 ACCOUNTING PRINCIPLES:

These consolidated financial statements conform to U. S. generally accepted accounting principles and to general industry practices. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position at September 30, 2016 and December 31, 2015, and the results of operations for the three and nine month periods ended September 30, 2016 and 2015. The notes included herein should be read in conjunction with the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results of operations for the three and nine month periods ended September 30, 2016 and 2015 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. The determination of the adequacy of the allowance for loan losses and the determination of the deferred tax asset and related valuation allowance are based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions.

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3. FORMAL WRITTEN AGREEMENT

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

3. FORMAL WRITTEN AGREEMENT

NOTE 3 FORMAL WRITTEN AGREEMENT:

The Company and the Bank had previously entered into the Written Agreement with the Federal Reserve Bank of Richmond and the Virginia State Corporation Commission Bureau of Financial Institutions under which the Company and the Bank were required to take certain actions and implement certain plans. On February 2, 2016, the Company and the Bank announced that they had successfully complied with all of the requirements of the Written Agreement and accordingly, effective January 20, 2016, the agreement had been terminated.

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4. CAPITAL

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

4. CAPITAL

NOTE 4 CAPITAL:

Capital Requirements and Ratios

The Bank is subject to various capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and, possibly, additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined) to risk-weighted assets (as defined), Tier 1 capital (as defined) to average assets (as defined), and Common Equity Tier 1 capital (as defined) to risk-weighted assets (as defined). As of September 30, 2016, the Bank meets all capital adequacy requirements to which it is subject.

The Company meets eligibility criteria of a small bank holding company in accordance with the Federal Reserve Board’s Small Bank Holding Company Policy Statement issued in February 2015, and is no longer obligated to report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies. The Bank’s actual capital amounts and ratios are presented in the following table as of September 30, 2016 and December 31, 2015, respectively. These ratios comply with Federal Reserve rules to align with the Basel III Capital requirements effective January 1, 2015.

	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars are in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2016:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		68,259		16.98	%	$	32,168		8.0	%		40,209		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,216		15.72	%		24,126		6.0	%		32,168		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		63,216		10.00	%		25,287		4.0	%		31,609		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,216		15.72	%		18,094		4.5	%		26,136		6.5	%
December 31, 2015:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		65,713		17.55	%	$	29,954		8.0	%		37,443		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		60,998		16.29	%		22,466		6.0	%		29,954		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		60,998		9.67	%		25,239		4.0	%		31,549		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		60,998		16.29	%		16,849		4.5	%		24,338		6.5	%

As of September 30, 2016, the Bank was well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage, and Common Equity Tier 1 ratios as set forth in the above tables. There are no conditions or events since the notification that management believes have changed the Bank’s category.

Beginning January 1, 2016, a capital conservation buffer of 0.625% became effective. The capital conservation buffer will be gradually increased through January 1, 2019 to 2.5%. Banks will be required to maintain levels that meet the required minimum plus the capital conservation buffer in order to make distributions, such as dividends, or discretionary bonus payments.

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5. INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2016

Investment securities activity

5. INVESTMENT SECURITIES

NOTE 5 INVESTMENT SECURITIES:

The amortized cost and estimated fair value of securities (all available-for-sale (“AFS”)) are as follows:

				Gross		Gross		Approximate
		Amortized		Unrealized		Unrealized		Fair
(Dollars are in thousands)		Cost		Gains		Losses		Value
September 30, 2016
U.S. Government Agencies	$	26,995	$	314	$	51	$	27,258
Taxable municipals		2,401	73		-		2,474
Corporate bonds		3,100	186		-		3,286
Mortgage backed securities		41,392	239		88		41,543
Total Securities AFS	$	73,888	$	812	$	139	$	74,561
December 31, 2015
U.S. Government Agencies	$	41,488	$	244	$	209	$	41,523
Taxable municipals		3,337	5		61		3,281
Corporate bonds		1,944	15		20		1,939
Mortgage backed securities		55,369	41		511		54,899
Total Securities AFS	$	102,138	$	305	$	801	$	101,642

The following table details unrealized losses and related fair values in the available-for-sale portfolio. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2016 and December 31, 2015.

	Less than 12 Months				12 Months or More				Total
(Dollars are in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2016
U.S. Government Agencies	$	3,724	$	42	$	1,794	$	9	$	5,518	$	51
Mtg. backed securities		7,915		45		4,938		43		12,853		88
Total Securities AFS	$	11,639	$	87	$	6,732	$	52	$	18,371	$	139
December 31, 2015
U.S. Government Agencies	$	14,995	$	81	$	7,708	$	128	$	22,073	$	209
Taxable municipals		2,136		57		278		4		2,414		61
Corporate bonds		923		20		—		—		923		20
Mtg. backed securities		38,945		354		8,719		157		47,664		511
Total Securities AFS	$	56,999	$	512	$	16,705	$	289	$	73,074	$	801

At September 30, 2016, the available-for-sale portfolio included forty two investments for which the fair market value was less than amortized cost. At December 31, 2015, the available-for-sale portfolio included one hundred and thirty four investments for which the fair market value was less than amortized cost. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, or more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial conditions and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Based on the Company’s analysis, the Company concluded that no securities had an other-than-temporary impairment.

Investment securities with a carrying value of $11.8 million and $15.4 million at September 30, 2016 and December 31, 2015, respectively, were pledged as collateral to secure public deposits and for other purposes required by law.

Gross proceeds on the sale of investment securities were $24.8 million and $7.1 million, respectively, for the nine months ended September 30, 2016 and 2015. Gross realized gains and losses pertaining to the sale of investment securities available for sale are detailed as follows:

	For the three months ended September 30,				For the nine months ended September 30,
(Dollars are in thousands)	2016		2015		2016			2015
Gross gains realized	$	—	$	—	$	275		$	62
Gross losses realized		—		—		(35	)		(27	)
Net realized gains	$	—	$	—	$	240		$	35

The amortized cost and fair value of investment securities at September 30, 2016, by contractual maturity, are shown in the following schedule. 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.

						Weighted
(Dollars are in thousands)		Amortized		Fair		Average
Securities Available-for-Sale		Cost		Value		Yield
Due in one year or less	$	1,221	$	1,225		0.91%
Due after one year through five years	656		657		1.84%
Due after five years through ten years		12,836		13,107		2.50%
Due after ten years		59,175		59,572		1.80%
Total	$	73,888	$	74,561		1.91%

The Bank, as a member of the Federal Reserve Bank and the Federal Home Loan Bank, is required to hold stock in each. The Bank also owns stock in CBB Financial Corp., which is a correspondent of the Bank. These equity securities are restricted from trading and are recorded at a cost of $2.6 million and $2.4 million as of September 30, 2016 and December 31, 2015, respectively.

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6. LOANS

9 Months Ended

Sep. 30, 2016

Receivables [Abstract]

6. LOANS

NOTE 6 LOANS:

Loans receivable outstanding are summarized as follows:

(Dollars are in thousands)	September 30, 2016		December 31, 2015
Real estate secured:
Commercial	$	102,997	$	98,569
Construction and land development		22,749		14,672
Residential 1-4 family		248,042		242,916
Multifamily		13,205		12,954
Farmland		23,828		22,174
Total real estate loans		410,821		391,285
Commercial		26,246		21,469
Agriculture		4,459		3,793
Consumer installment loans		23,177		24,568
All other loans		18		54
Total loans	$	464,721	$	441,169

Loans receivable on nonaccrual status are summarized as follows:

(Dollars are in thousands)	September 30, 2016		December 31, 2015
Real estate secured:
Commercial	$	3,671	$	4,358
Construction and land development		354		436
Residential 1-4 family		8,145		8,338
Multifamily		169		430
Farmland		930		1,170
Total real estate loans		13,269		14,732
Commercial		3		65
Agriculture		83		9
Consumer installment loans		93		41
All other loans		—		—
Total loans receivable on nonaccrual status	$	13,448	$	14,847

Total interest income not recognized on nonaccrual loans for the nine months ended September 30, 2016 and 2015 was $397 thousand and $486 thousand, respectively.

The following table presents information concerning the Company’s investment in loans considered impaired as of September 30, 2016 and December 31, 2015:

As of September 30, 2016 (Dollars are in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial		3,533	$	3,959	$	—
Construction and land development		7		7		—
Residential 1-4 family		3,590		3,888		—
Multifamily		305		346		—
Farmland		4,358		5,050		—
Commercial		—		—		—
Agriculture		19		19		—
Consumer installment loans		—		—		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		1,589		1,680		172
Construction and land development		253		477		119
Residential 1-4 family		644		652		88
Multifamily		—		—		—
Farmland		502		512		293
Commercial		67		67		19
Agriculture		8		8		8
Consumer installment loans		53		53		20
All other loans		—		—		—
Total		14,928	$	16,718	$	719
As of December 31, 2015 (Dollars are in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial		4,212	$	5,173	$	—
Construction and land development		10		10		—
Residential 1-4 family		3,037		3,150		—
Multifamily		430		471		—
Farmland		3,983		4,620		—
Commercial		—		—		—
Agriculture		36		36		—
Consumer installment loans		11		11		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		2,503		2,849		288
Construction and land development		289		499		155
Residential 1-4 family		1,920		2,121		168
Multifamily		—		—		—
Farmland		761		778		328
Commercial		69		69		24
Agriculture		18		18		18
Consumer installment loans		45		45		2
All other loans		—		—		—
Total		17,324	$	19,850	$	983

The following table presents information concerning the Company’s average impaired loans and interest recognized on those impaired loans, for the periods indicated:

	Nine Months Ended
	September 30, 2016				September 30, 2015
(Dollars are in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	4,222	$	77	$	4,615	$	102
Construction and land development		89		—		13		1
Residential 1-4 family		3,716		140		3,623		140
Multifamily		288		14		543		5
Farmland		4,211		163		5,346		94
Commercial		—		—		333		—
Agriculture		29		2		44		3
Consumer installment loans		24		—		36		4
All other loans		—		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		1,539		6		3,043		58
Construction and land development		271		—		394		—
Residential 1-4 family		939		18		2,294		84
Multifamily		100		—		28		—
Farmland		572		18		942		28
Commercial		71		2		83		3
Agriculture		107		1		26		1
Consumer installment loans		30		1		13		—
All other loans		—		—		—		—
Total	$	16,208	$	442	$	21,376	$	523

	Three Months Ended
	September 30, 2016					September 30, 2015
(Dollars are in thousands)	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	3,965	$	4		$	4,916	$	43
Construction and land development		7		—			12		1
Residential 1-4 family		3,833		37			3,674		47
Multifamily		307		3			434		3
Farmland		4,274		61			4,963		42
Commercial		—		—			105		(2	)
Agriculture		23		—			36		—
Consumer installment loans		22		(2	)		59		1
All other loans		—		—			—		—
With an allowance recorded:
Real estate secured:
Commercial		1,309		6			2,411		18
Construction and land development		259		—			407		—
Residential 1-4 family		606		7			2,162		31
Multifamily		83		(4	)		—		—
Farmland		504		6			781		9
Commercial		68		—			82		1
Agriculture		97		3			23		—
Consumer installment loans		32		1			—		—
All other loans		—		—			—		—
Total	$	15,389	$	122		$	20,065	$	194

An age analysis of past due loans receivable was as follows:

As of September 30, 2016 (Dollars are in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
Real estate secured:
Commercial	$	747	$	305	$	1,819	$	2,871	$	100,126	$	102,997	$	—
Construction and land development		100		—		64		164		22,585		22,749		—
Residential 1-4 family		4,099		1,312		1,669		7,080		240,962		248,042		—
Multifamily		1,720		—		67		1,787		11,418		13,205		—
Farmland		82		—		—		82		23,746		23,828		—
Total real estate loans		6,748		1,617		3,619		11,984		398,837		410,821		—
Commercial		—		—		—		—		26,246		26,246		—
Agriculture		15		—		79		94		4,365		4,459		—
Consumer installment Loans		91		—		68		159		23,018		23,177		—
All other loans		—		—		—		—		18		18		—
Total loans	$	6,854	$	1,617	$	3,766	$	12,237	$	452,484	$	464,721	$	—

As of December 31, 2015 (Dollars are in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
Real estate secured:
Commercial	$	311	$	105	$	2,534	$	2,950	$	95,619	$	98,569	$	—
Construction and land development		144		—		17		161		14,511		14,672		—
Residential 1-4 family		4,694		1,487		2,891		9,072		233,844		242,916		—
Multifamily		47		—		320		367		12,587		12,954		—
Farmland		363		—		251		614		21,560		22,174		—
Total real estate loans		5,559		1,592		6,013		13,164		378,121		391,285		—
Commercial		18		1		64		83		21,386		21,469		—
Agriculture		—		—		—		—		3,793		3,793		—
Consumer installment Loans		113		1		27		141		24,427		24,568		—
All other loans		6		—		—		6		48		54		—
Total loans	$	5,696	$	1,594	$	6,104	$	13,394	$	427,775	$	441,169	$	—

The Company categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans receivable as to credit risk. The Company uses the following definitions for risk ratings:

Pass - Loans in this category are considered to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt and other factors.

Special Mention - Loans in this category are currently protected but are potentially weak, including adverse trends in borrower’s operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances.  Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s credit position at some future date.

Substandard - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified Doubtful have all the weaknesses inherent in loans classified as Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.

Based on the most recent analysis performed, the risk category of loans receivable was as follows:

As of September 30, 2016 (Dollars are in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real estate secured:
Commercial	$	91,708	$	7,165	$	4,124	$	—	$	102,997
Construction and land development		20,885		1,539		325		—		22,749
Residential 1-4 family		237,338		2,054		8,650		—		248,042
Multifamily		12,831		—		374		—		13,205
Farmland		17,847		3,531		2,450		—		23,828
Total real estate loans		380,609		14,289		15,923		—		410,821
Commercial		25,483		696		67		—		26,246
Agriculture		4,368		—		91		—		4,459
Consumer installment loans		23,016		—		161		—		23,177
All other loans		18		—		—		—		18
Total	$	433,494	$	14,985	$	16,242	$	—	$	464,721
As of December 31, 2015 (Dollars are in thousands)		Pass		Special Mention		Substandard		Doubtful		Total
Real estate secured:
Commercial	$	85,255	$	7,543	$	5,771	$	—	$	98,569
Construction and land development		12,262		1,974		436		—		14,672
Residential 1-4 family		229,182		3,572		10,162		—		242,916
Multifamily		12,264		187		503		—		12,954
Farmland		16,663		2,923		2,588		—		22,174
Total real estate loans		355,626		16,199		19,460		—		391,285
Commercial		20,641		724		104		—		21,469
Agriculture		3,767		—		26		—		3,793
Consumer installment loans		24,478		—		90		—		24,568
All other loans		54		—		—		—		54
Total	$	404,566	$	16,923		19,680	$	—	$	441,169

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7. ALLOWANCE FOR LOAN LOSSES

9 Months Ended

Sep. 30, 2016

Receivables [Abstract]

7. ALLOWANCE FOR LOAN LOSSES

NOTE 7 ALLOWANCE FOR LOAN LOSSES:

The following table details activity in the allowance for loan losses by portfolio segment for the period ended September 30, 2016. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

As of September 30, 2016 (Dollars are in thousands)	Beginning Balance		Charge Offs			Recoveries		Advances		Provisions			Ending Balance
Real estate secured:
Commercial	$	2,384	$	(417	)	$	217	$	—	$	(238	)	$	1,946
Construction and land development		332		(5	)		24		—		(5	)		346
Residential 1-4 family		2,437		(601	)		78		—		329			2,243
Multifamily		232		(18	)		—		—		19			233
Farmland		675		(2	)		102		—		(144	)		631
Total real estate loans		6,060		(1,043	)		421		—		(39	)		5,399
Commercial		266		(65	)		52		—		(46	)		207
Agriculture		124		—			6		—		(87	)		43
Consumer installment loans		128		(22	)		16		—		9			131
All other loans		1		—			—		—		(1	)		—
Unallocated		914		—			—		—		(336	)		578
Total	$	7,493	$	(1,130	)	$	495	$	—	$	(500	)	$	6,358

		Allowance for Loan Losses						Recorded Investment in Loans
As of September 30, 2016 (Dollars are in thousands)		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Real estate secured:
Commercial	$	172	$	1,774	$	1,946	$	5,122	$	97,875	$	102,997
Construction and land development		119		227		346		260		22,489		22,749
Residential 1-4 family		88		2,155		2,243		4,234		243,808		248,042
Multifamily		-		233		233		305		12,900		13,205
Farmland		293		338		631		4,860		18,968		23,828
Total real estate loans		672		4,727		5,399		14,781		396,040		410,821
Commercial		19		188		207		67		26,179		26,246
Agriculture		8		35		43		27		4,432		4,459
Consumer installment loans		20		111		131		53		23,124		23,177
All other loans		-		-		-		-		18		18
Unallocated		-		578		578		-		-		-
Total	$	719	$	5,639	$	6,358	$	14,928	$	449,793	$	464,721

The following table details activity in the allowance for loan losses by portfolio segment for the period ended December 31, 2015. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

As of December 31, 2015 (Dollars are in thousands)	Beginning Balance		Charge Offs			Recoveries		Advances		Provisions			Ending Balance
Real estate secured:
Commercial	$	4,418	$	(724	)	$	147	$	—	$	(1,457	)	$	2,384
Construction and land development		199		(226	)		215		—		144			332
Residential 1-4 family		2,572		(743	)		93		—		515			2,437
Multifamily		154		(384	)		6		—		456			232
Farmland		913		(90	)		214		—		(362	)		675
Total real estate loans		8,256		(2,167	)		675		—		(704	)		6,060
Commercial		457		(92	)		1,412		—		(1,511	)		266
Agriculture		125		—			3		—		(4	)		124
Consumer installment loans		171		(101	)		41		—		17			128
All other loans		1		—			—		—		—			1
Unallocated		912		—			—		—		2			914
Total	$	9,922	$	(2,360	)	$	2,131	$	—	$	(2,200	)	$	7,493

		Allowance for Loan Losses						Recorded Investment in Loans
As of December 31, 2015 (Dollars are in thousands)		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Real estate secured:
Commercial	$	288	$	2,096	$	2,384	$	6,715	$	91,854	$	98,569
Construction and land development		155		177		332		299		14,373		14,672
Residential 1-4 family		168		2,269		2,437		4,957		237,959		242,916
Multifamily		-		232		232		430		12,524		12,954
Farmland		328		347		675		4,744		17,430		22,174
Total real estate loans		939		5,121		6,060		17,145		374,140		391,285
Commercial		24		242		266		69		21,400		21,469
Agriculture		18		106		124		54		3,739		3,793
Consumer installment loans		2		126		128		56		24,512		24,568
All other loans		-		1		1		-		54		54
Unallocated		-		914		914		-		-		-
Total	$	983	$	6,510		7,493	$	17,324	$	423,845	$	441,169

In determining the amount of our allowance, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions, as well as the requirements of the written agreement and other regulatory input. If our assumptions prove to be incorrect, our current allowance may not be sufficient to cover future loan losses and we may experience significant increases to our provision.

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8. TROUBLED DEBT RESTRUCTURINGS

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

8. TROUBLED DEBT RESTRUCTURINGS

NOTE 8 TROUBLED DEBT RESTRUCTURINGS:

At September 30, 2016 there were $9.4 million in loans that are classified as troubled debt restructurings compared to $9.5 million at December 31, 2015. The following table presents information related to loans modified as troubled debt restructurings during the nine and three months ended September 30, 2016 and 2015.

	For the nine months ended September 30, 2016						For the nine months ended September 30, 2015
Troubled Debt Restructurings (Dollars are in thousands)	# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment
Real estate secured:
Commercial		1	$	341	$	341		—	$	—	$	—
Construction and land Development		—		—		—		1		551		302
Residential 1-4 family		—		—		—		2		225		224
Multifamily		—		—		—		—		—		—
Farmland		1		291		280		—		—		—
Total real estate loans		2		632		621		3		776		526
Commercial		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Consumer installment loans		—		—		—		—		—		—
All other loans		—		—		—		—		—		—
Total		2	$	632	$	621		3	$	776	$	526
		For the three months ended September 30, 2016						For the three months ended September 30, 2015
Troubled Debt Restructurings (Dollars are in thousands)		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment
Real estate secured:
Commercial		—	$	—	$	—		—	$	—	$	—
Construction and land Development		—		—		—		—		—		—
Residential 1-4 family		—		—		—		2		225		224
Multifamily		—		—		—		—		—		—
Farmland		—		—		—		—		—		—
Total real estate loans		—		—		—		2		225		224
Commercial		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Consumer installment loans		—		—		—		—		—		—
All other loans		—		—		—		—		—		—
Total		—	$	—	$	—		2	$	225	$	224

During the nine months ended September 30, 2016, the Company modified the terms of two loans for which the modification was considered to be a troubled debt restructuring. On one loan the interest rate and maturity date were not modified; however, the payment terms were changed. On one loan the interest rate was lowered and the payment terms and maturity date were changed. During the nine months ended September 30, 2015, the Company modified the terms of three loans for which the modification was considered to be a troubled debt restructuring. On two of the loans we modified the terms and lowered the interest rate. On one loan the interest rate was not modified; however, the maturity date was extended.

During the three months ended September 30, 2016, the Company modified no loans that were considered to be a troubled debt restructuring. During the three months ended September 30, 2015, the Company modified the terms of two loans for which the modification was considered to be a troubled debt restructuring. On the two loans we modified the terms and lowered the interest rate.

One commercial real estate loan with a recorded investment of $302 thousand that had been modified as a troubled debt restructuring defaulted during the nine months ended September 30, 2016, which was within twelve months of the loan’s modification date. No loans modified as troubled debt restructurings defaulted during the nine months ended September 30, 2015. No loans modified as troubled debt restructurings defaulted during the three months ended September 30, 2016 and 2015, which were within twelve months of their modification date. Generally, a troubled debt restructuring is considered to be in default once it becomes 90 days or more past due following a modification.

In determination of the allowance for loan losses, management considers troubled debt restructurings and subsequent defaults in these restructurings in its estimate. The Company evaluates all troubled debt restructurings for possible further impairment. As a result, the allowance may be increased, adjustments may be made in the allocation of the allowance, or charge-offs may be taken to further writedown the carrying value of the loan.

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9. OTHER REAL ESTATE OWNED

9 Months Ended

Sep. 30, 2016

Property, Plant and Equipment [Abstract]

9. OTHER REAL ESTATE OWNED

NOTE 9 OTHER REAL ESTATE OWNED:

The following table summarizes the activity in other real estate owned for the nine months ended September 30, 2016 and the year ended December 31, 2015:

(Dollars are in thousands)	September 30, 2016			December 31, 2015
Balance, beginning of period	$	12,398		$	15,049
Additions		3,851			3,277
Purchases of other real estate owned		—			12
Transfers of other real estate owned		(125	)		—
Donation of other real estate owned		—			(33	)
Proceeds from sales		(2,379	)		(1,831	)
Loans made to finance sales		(676	)		(878	)
Proceeds from insurance claims		—			(101	)
Adjustment of carrying value		(165	)		(3,246	)
Deferred gain from sales		—			50
Gain from sales		290			99
Balance, end of period	$	13,194		$	12,398

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10. EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2016

Income Per Share

10. EARNINGS PER SHARE

NOTE 10 EARNINGS PER SHARE:

Basic earnings per share computations are based on the weighted average number of shares outstanding during each period. Dilutive earnings per share reflect the additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued relate to outstanding options and common stock warrants are determined by the Treasury method. For the three and nine months ended September 30, 2016 and 2015, potential common shares of 882,178 and 1,539,877, respectively, were anti-dilutive and were not included in the calculation. Basic and diluted net income per common share calculations follows:

(Amounts in Thousands, Except Share and Per Share Data)	For the three months ended September 30,				For the nine months ended September 30,
	2016		2015		2016		2015
Net income	$	346	$	2,293	$	1,926	$	3,377
Weighted average shares outstanding		23,354,111		22,878,654		23,354,092		22,878,654
Dilutive shares for stock options and warrants		—		—		—		—
Weighted average dilutive shares outstanding		23,354,111		22,878,654		23,354,092		22,878,654
Basic income per share	$	0.01	$	0.10	$	0.08	$	0.15
Diluted income per share	$	0.01	$	0.10	$	0.08	$	0.15

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11. TRUST PREFERRED SECURITIES AND DEFERRAL OF INTEREST PAYMENTS

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

11. TRUST PREFERRED SECURITIES AND DEFERRAL OF INTEREST PAYMENTS

NOTE 11 TRUST PREFERRED SECURITIES AND DEFERRAL OF INTEREST PAYMENTS:

On July 7, 2004, the Company completed the issuance of $11.3 million in floating rate trust preferred securities offered by its wholly owned subsidiary, NPB Capital Trust I. The proceeds of the funds were used for general corporate purposes which included capital management for affiliates, retirement of indebtedness and other investments. The securities have a floating rate of 3 month LIBOR plus 260 basis points, which resets quarterly, with a current rate at September 30, 2016 of 3.28%.

On September 27, 2006, the Company completed the issuance of $5.2 million in floating rate trust preferred securities offered by its wholly owned subsidiary, NPB Capital Trust 2. The proceeds of the funds were used for general corporate purposes, which include capital management for affiliates and the acquisition of two branch banks. The securities have a floating rate of 3 month LIBOR plus 177 basis points, which resets quarterly, with a current rate at September 30, 2016 of 2.45%.

Under the terms of the subordinated debt transactions, the securities mature in 30 years from the date of issuance and are redeemable, in whole or in part, without penalty, at the option of the Company after five years. Due to the ability to defer interest and principal payments for 60 months without being considered in default, the regulatory agencies consider the trust preferred securities as Tier 1 capital up to certain limits.

In October 2009, a restriction to pay dividends from the Bank to the Company was issued by the Federal Reserve Bank of Richmond. In July 2010, the Company and the Bank entered into the Written Agreement discussed in Note 3. The Written Agreement prohibited the payment of interest on the trust preferred securities without prior regulatory approval. As a result, interest on trust preferred securities was deferred. This deferral was for a period of 60 months, and was set to expire on January 7, 2015. In the fourth quarter of 2014, the Company requested and received regulatory approval to pay the cumulative deferred interest on the trust preferred securities due on January 7, 2015 totaling $2.5 million, which the Company paid on December 10, 2014. As a result of this payment there has been no interest in arrears on the trust preferred securities since that date.

The Company is currently not deferring the quarterly interest payments on the trust preferred securities. However, as discussed above, regulatory approval was needed to pay the interest while the Company was under the formal Written Agreement. In March 2015 the Company requested and received regulatory approval to pay the $107 thousand in interest on the trust preferred securities due on April 7, 2015, which the Company paid on April 3, 2015. In June 2015 the Company requested and received regulatory approval to pay the $109 thousand in interest on the trust preferred securities due on July 7, 2015, which the Company paid on July 2, 2015. In September 2015 the Company requested and received regulatory approval to pay the $111 thousand in interest on the trust preferred securities due on October 7, 2015, which the Company paid on October 5, 2015. In December 2015 the Company requested and received regulatory approval to pay the $112 thousand in interest on the trust preferred securities due on January 7, 2016, which the Company paid on January 5, 2016.

The restriction requiring regulatory approval before the payment of interest on the trust preferred securities was lifted when the Written Agreement was terminated effective January 20, 2016. On April 4, 2016, the Company paid $124 thousand in interest on the trust preferred securities, which was due on April 7, 2016. On July 6, 2016 the Company paid $124 thousand in interest on the trust preferred securities, which was due on July 7, 2016. On October 4, 2016 the Company paid $127 thousand in interest on the trust preferred securities, which was due on October 7, 2016.

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12. FAIR VALUES

9 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

12. FAIR VALUES

NOTE 12 FAIR VALUES:

The financial reporting standard, “Fair Value Measurements and Disclosures” provides a framework for measuring fair value under generally accepted accounting principles and requires disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis (for example, available-for-sale investment securities) or on a nonrecurring basis (for example, impaired loans and other real estate acquired through foreclosure).

Fair value is the exchange price that would be received for 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 on the measurement date. Fair Value Measurements and Disclosures also establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an exchange market, as well as U. S. Treasury, other U. S. Government and agency mortgage-backed debt securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain derivative contracts and impaired loans.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. For example, this category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, and highly structured or long-term derivative contracts.

Investment Securities Available-for-Sale – Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. The Company’s available-for-sale securities, totaling $74.6 million and $101.6 million at September 30, 2016 and December 31, 2015, respectively, are the only assets whose fair values are measured on a recurring basis using Level 2 inputs from an independent pricing service.

Loans - The Company does not record loans at fair value on a recurring basis. Real estate serves as collateral on a substantial majority of the Company’s loans. When a loan is considered impaired a specific reserve may be established. Loans which are deemed to be impaired and require a reserve are primarily valued on a non-recurring basis at the fair values of the underlying real estate collateral. Such fair values are obtained using independent appraisals, which management evaluates and determines whether or not the fair value of the collateral is further impaired below the appraised value and there is no observable market price, or whether or not an appraised value does not include estimated costs of disposition. The Company records impaired loans as nonrecurring Level 3 assets. The aggregate carrying amounts of impaired loans carried at fair value were $14.2 million and $16.3 million at September 30, 2016 and December 31, 2015, respectively.

Foreclosed Assets – Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets.  Foreclosed assets are carried at the lower of the carrying value or fair value.  Fair value is based upon independent observable market prices or appraised values of the collateral with a third party less an estimate of disposition costs, which the Company considers to be level 2 inputs. When the appraised value is not available, management determines the fair value of the collateral if further impaired below the appraised value and there is no observable market price, or an appraised value does not include estimated costs of disposition and management must make an estimate, the Company records the foreclosed asset as nonrecurring Level 3. The aggregate carrying amounts of foreclosed assets were $13.2 million and $12.4 million at September 30, 2016 and December 31, 2015, respectively.

Assets and liabilities measured at fair value are as follows as of September 30, 2016 (for purpose of this table the impaired loans are shown net of the related allowance):

(Dollars are in thousands)	Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis) Available-for-sale investments
U.S. Government Agencies	$	—	$	27,258	$	—
Taxable municipals		—		2,474		—
Corporate bonds		—		3,286		—
Mortgage backed securities		—		41,543		—
(On a non-recurring basis) Other real estate owned		—		—		13,194
Impaired loans:
Real estate secured:
Commercial		—		—		4,950
Construction and land development		—		—		141
Residential 1-4 family		—		—		4,146
Multifamily		—		—		305
Farmland		—		—		4,567
Commercial		—		—		48
Agriculture		—		—		19
Consumer installment loans		—		—		33
All other loans		—		—		—
Total	$	—	$	74,561	$	27,403

Assets and liabilities measured at fair value are as follows as of December 31, 2015 (for purpose of this table the impaired loans are shown net of the related allowance):

(Dollars are in thousands)	Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis) Available-for-sale investments
U.S. Government Agencies	$	—	$	41,523	$	—
Taxable municipals		—		3,281		—
Corporate bonds		—		1,939		—
Mortgage backed securities		—		54,899		—
(On a non-recurring basis) Other real estate owned		—		—		12,398
Impaired loans:
Real estate secured:
Commercial		—		—		6,427
Construction and land development		—		—		144
Residential 1-4 family		—		—		4,789
Multifamily		—		—		430
Farmland		—		—		4,416
Commercial		—		—		45
Agriculture		—		—		36
Consumer installment loans		—		—		54
All other loans		—		—		—
Total	$	—	$	101,642	$	28,739

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

(Dollars in thousands)		Fair Value at September 30, 2016	Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired Loans	$	14,209	Appraised Value/Discounted Cash Flows/Market Value of Note	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0 – 18%
Other Real Estate Owned	$	13,194	Appraised Value/Comparable Sales/Other Estimates from Independent Sources	Discounts to reflect current market conditions and estimated costs to sell	0 – 18%

Fair Value of Financial Instruments

Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another financial instrument.

The following summary presents the methodologies and assumptions used to estimate the fair value of the Company’s financial instruments presented below. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of September 30, 2016 and December 31, 2015. This table excludes financial instruments for which the carrying amount approximates fair value. The carrying value of cash and due from banks, federal funds sold, interest-bearing deposits, deposits with no stated maturities, trust preferred securities and accrued interest approximates fair value. The remaining financial instruments were valued based on the present value of estimated future cash flows, discounted at various rates in effect for similar instruments as of September 30, 2016 and December 31, 2015.

					Fair Value Measurements
(Dollars are in thousands)	Carrying Amount		Fair Value		Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
September 30, 2016
Financial Instruments – Assets
Net Loans	$	458,363	$	461,025	$	—	$	446,816	$	14,209
Financial Instruments – Liabilities
Time Deposits		247,956		247,529		—		247,529		—
FHLB Advances		9,058		9,110		—		9,110		—
December 31, 2015
Financial Instruments – Assets
Net Loans	$	433,676	$	438,589	$	—	$	422,248	$	16,341
Financial Instruments – Liabilities
Time Deposits		256,978		256,797		—		256,797		—
FHLB Advances		2,958		2,958		—		2,958		—

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13. RECENT ACCOUNTING DEVELOPMENTS

9 Months Ended

Sep. 30, 2016

Accounting Changes and Error Corrections [Abstract]

13. RECENT ACCOUNTING DEVELOPMENTS

NOTE 13 RECENT ACCOUNTING DEVELOPMENTS:

The following is a summary of recent authoritative announcements:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2015, the FASB issued guidance to eliminate from U.S. GAAP the concept of an extraordinary item, which is an event or transaction that is both (1) unusual in nature and (2) infrequently occurring. Under the new guidance, an entity will no longer (1) segregate an extraordinary item from the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income from continuing operations; or (3) disclose income taxes and earnings-per-share data applicable to an extraordinary item. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company applied the guidance prospectively. Adoption of these amendments did not have a material effect on the Company’s financial statements.

In February 2015, the FASB issued guidance which amends the consolidation requirements and significantly changes the consolidation analysis required under U.S. GAAP. Although the amendments are expected to result in the deconsolidation of many entities, the Company will need to reevaluate all its previous consolidation conclusions. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted (including during an interim period), provided that the guidance is applied as of the beginning of the annual period containing the adoption date. Adoption of these amendments did not have a material effect on the Company’s financial statements.

In June 2015, the FASB issued amendments to clarify the Accounting Standards Codification (“ASC”), correct unintended application of guidance, and make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant cost to most entities. The amendments were effective upon issuance (June 12, 2015) for amendments that do not have transition guidance. Amendments that are subject to transition guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. Adoption of these amendments did not have a material effect on the Company’s financial statements.

In August 2015, the FASB deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers. As a result of the deferral the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In August 2015, the FASB issued amendments to the Interest topic of the ASC to clarify the SEC staff’s position on presenting and measuring debt issuance costs incurred in connection with line-of-credit arrangements. The amendments were effective upon issuance. Adoption of these amendments did not have a material effect on the Company’s financial statements.

In January 2016, the FASB amended the Financial Instruments topic of the ASC to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect these amendments to have a material effect on its financial statements.

In February 2016, the FASB amended the Leases topic of the ASC to revise certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.

In March 2016, the FASB amended the Revenue from Contracts with Customers topic of the ASC to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. Additionally, the guidance simplifies two areas specific to entities other than public business entities allowing them to apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics and also allowing them to make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value. The amendments will be effective for the Company for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The Company does not expect these amendments to have a material effect on its financial statements.

In April 2016, the FASB amended the Revenue from Contracts with Customers topic of the ASC to clarify guidance related to identifying performance obligations and accounting for licenses of intellectual property. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In May 2016, the FASB amended the Revenue from Contracts with Customers topic of the ASC to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In June 2016, the FASB issued guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. The amendments will be effective for the Company for reporting periods beginning after December 15, 2019. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.

In August 2016, the FASB amended the Statement of Cash Flows topic of the ASC to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

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2. ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Basis of Presentation

NOTE 2 ACCOUNTING PRINCIPLES:

These consolidated financial statements conform to U. S. generally accepted accounting principles and to general industry practices. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position at September 30, 2016 and December 31, 2015, and the results of operations for the three and nine month periods ended September 30, 2016 and 2015. The notes included herein should be read in conjunction with the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results of operations for the three and nine month periods ended September 30, 2016 and 2015 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. The determination of the adequacy of the allowance for loan losses and the determination of the deferred tax asset and related valuation allowance are based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions.

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4. CAPITAL (Tables)

9 Months Ended

Sep. 30, 2016

Regulatory Capital Requirements [Abstract]

Schedule Of Capital Requirements

	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars are in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2016:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		68,259		16.98	%	$	32,168		8.0	%		40,209		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,216		15.72	%		24,126		6.0	%		32,168		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		63,216		10.00	%		25,287		4.0	%		31,609		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,216		15.72	%		18,094		4.5	%		26,136		6.5	%
December 31, 2015:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		65,713		17.55	%	$	29,954		8.0	%		37,443		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		60,998		16.29	%		22,466		6.0	%		29,954		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		60,998		9.67	%		25,239		4.0	%		31,549		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		60,998		16.29	%		16,849		4.5	%		24,338		6.5	%

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5. INVESTMENT SECURITIES (Tables)

9 Months Ended

Sep. 30, 2016

Investment securities activity

Schedule Of Securities' Amortized Cost And Estimated Fair Value

				Gross		Gross		Approximate
		Amortized		Unrealized		Unrealized		Fair
(Dollars are in thousands)		Cost		Gains		Losses		Value
September 30, 2016
U.S. Government Agencies	$	26,995	$	314	$	51	$	27,258
Taxable municipals		2,401	73		-		2,474
Corporate bonds		3,100	186		-		3,286
Mortgage backed securities		41,392	239		88		41,543
Total Securities AFS	$	73,888	$	812	$	139	$	74,561
December 31, 2015
U.S. Government Agencies	$	41,488	$	244	$	209	$	41,523
Taxable municipals		3,337	5		61		3,281
Corporate bonds		1,944	15		20		1,939
Mortgage backed securities		55,369	41		511		54,899
Total Securities AFS	$	102,138	$	305	$	801	$	101,642

Schedule Of Fair Value And Gross Unrealized Losses On Investment Securities In A Continuous Unrealized Loss Position

	Less than 12 Months				12 Months or More				Total
(Dollars are in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2016
U.S. Government Agencies	$	3,724	$	42	$	1,794	$	9	$	5,518	$	51
Mtg. backed securities		7,915		45		4,938		43		12,853		88
Total Securities AFS	$	11,639	$	87	$	6,732	$	52	$	18,371	$	139
December 31, 2015
U.S. Government Agencies	$	14,995	$	81	$	7,708	$	128	$	22,073	$	209
Taxable municipals		2,136		57		278		4		2,414		61
Corporate bonds		923		20		—		—		923		20
Mtg. backed securities		38,945		354		8,719		157		47,664		511
Total Securities AFS	$	56,999	$	512	$	16,705	$	289	$	73,074	$	801

Schedule of realized gains and losses pertaining to the sale of investment securities available for sale

	For the three months ended September 30,				For the nine months ended September 30,
(Dollars are in thousands)	2016		2015		2016			2015
Gross gains realized	$	—	$	—	$	275		$	62
Gross losses realized		—		—		(35	)		(27	)
Net realized gains	$	—	$	—	$	240		$	35

The Amortized Cost And Fair Value Of Investment Securities' Contractual Maturity

						Weighted
(Dollars are in thousands)		Amortized		Fair		Average
Securities Available-for-Sale		Cost		Value		Yield
Due in one year or less	$	1,221	$	1,225		0.91%
Due after one year through five years	656		657		1.84%
Due after five years through ten years		12,836		13,107		2.50%
Due after ten years		59,175		59,572		1.80%
Total	$	73,888	$	74,561		1.91%

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6. LOANS (Tables)

9 Months Ended

Sep. 30, 2016

Loans and Leases Receivable Disclosure [Abstract]

Summary Of Loans Receivable Outstanding

(Dollars are in thousands)	September 30, 2016		December 31, 2015
Real estate secured:
Commercial	$	102,997	$	98,569
Construction and land development		22,749		14,672
Residential 1-4 family		248,042		242,916
Multifamily		13,205		12,954
Farmland		23,828		22,174
Total real estate loans		410,821		391,285
Commercial		26,246		21,469
Agriculture		4,459		3,793
Consumer installment loans		23,177		24,568
All other loans		18		54
Total loans	$	464,721	$	441,169

Summary Of Loans Receivable On Nonaccrual Status

(Dollars are in thousands)	September 30, 2016		December 31, 2015
Real estate secured:
Commercial	$	3,671	$	4,358
Construction and land development		354		436
Residential 1-4 family		8,145		8,338
Multifamily		169		430
Farmland		930		1,170
Total real estate loans		13,269		14,732
Commercial		3		65
Agriculture		83		9
Consumer installment loans		93		41
All other loans		—		—
Total loans receivable on nonaccrual status	$	13,448	$	14,847

Summary Of Impaired Loans

As of September 30, 2016 (Dollars are in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial		3,533	$	3,959	$	—
Construction and land development		7		7		—
Residential 1-4 family		3,590		3,888		—
Multifamily		305		346		—
Farmland		4,358		5,050		—
Commercial		—		—		—
Agriculture		19		19		—
Consumer installment loans		—		—		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		1,589		1,680		172
Construction and land development		253		477		119
Residential 1-4 family		644		652		88
Multifamily		—		—		—
Farmland		502		512		293
Commercial		67		67		19
Agriculture		8		8		8
Consumer installment loans		53		53		20
All other loans		—		—		—
Total		14,928	$	16,718	$	719
As of December 31, 2015 (Dollars are in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial		4,212	$	5,173	$	—
Construction and land development		10		10		—
Residential 1-4 family		3,037		3,150		—
Multifamily		430		471		—
Farmland		3,983		4,620		—
Commercial		—		—		—
Agriculture		36		36		—
Consumer installment loans		11		11		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		2,503		2,849		288
Construction and land development		289		499		155
Residential 1-4 family		1,920		2,121		168
Multifamily		—		—		—
Farmland		761		778		328
Commercial		69		69		24
Agriculture		18		18		18
Consumer installment loans		45		45		2
All other loans		—		—		—
Total		17,324	$	19,850	$	983

Summary of average impaired loans

	Nine Months Ended
	September 30, 2016				September 30, 2015
(Dollars are in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	4,222	$	77	$	4,615	$	102
Construction and land development		89		—		13		1
Residential 1-4 family		3,716		140		3,623		140
Multifamily		288		14		543		5
Farmland		4,211		163		5,346		94
Commercial		—		—		333		—
Agriculture		29		2		44		3
Consumer installment loans		24		—		36		4
All other loans		—		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		1,539		6		3,043		58
Construction and land development		271		—		394		—
Residential 1-4 family		939		18		2,294		84
Multifamily		100		—		28		—
Farmland		572		18		942		28
Commercial		71		2		83		3
Agriculture		107		1		26		1
Consumer installment loans		30		1		13		—
All other loans		—		—		—		—
Total	$	16,208	$	442	$	21,376	$	523

	Three Months Ended
	September 30, 2016					September 30, 2015
(Dollars are in thousands)	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	3,965	$	4		$	4,916	$	43
Construction and land development		7		—			12		1
Residential 1-4 family		3,833		37			3,674		47
Multifamily		307		3			434		3
Farmland		4,274		61			4,963		42
Commercial		—		—			105		(2	)
Agriculture		23		—			36		—
Consumer installment loans		22		(2	)		59		1
All other loans		—		—			—		—
With an allowance recorded:
Real estate secured:
Commercial		1,309		6			2,411		18
Construction and land development		259		—			407		—
Residential 1-4 family		606		7			2,162		31
Multifamily		83		(4	)		—		—
Farmland		504		6			781		9
Commercial		68		—			82		1
Agriculture		97		3			23		—
Consumer installment loans		32		1			—		—
All other loans		—		—			—		—
Total	$	15,389	$	122		$	20,065	$	194

Summary Of Age Analysis Of Past Due Loans Receivable

As of September 30, 2016 (Dollars are in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
Real estate secured:
Commercial	$	747	$	305	$	1,819	$	2,871	$	100,126	$	102,997	$	—
Construction and land development		100		—		64		164		22,585		22,749		—
Residential 1-4 family		4,099		1,312		1,669		7,080		240,962		248,042		—
Multifamily		1,720		—		67		1,787		11,418		13,205		—
Farmland		82		—		—		82		23,746		23,828		—
Total real estate loans		6,748		1,617		3,619		11,984		398,837		410,821		—
Commercial		—		—		—		—		26,246		26,246		—
Agriculture		15		—		79		94		4,365		4,459		—
Consumer installment Loans		91		—		68		159		23,018		23,177		—
All other loans		—		—		—		—		18		18		—
Total loans	$	6,854	$	1,617	$	3,766	$	12,237	$	452,484	$	464,721	$	—

As of December 31, 2015 (Dollars are in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
Real estate secured:
Commercial	$	311	$	105	$	2,534	$	2,950	$	95,619	$	98,569	$	—
Construction and land development		144		—		17		161		14,511		14,672		—
Residential 1-4 family		4,694		1,487		2,891		9,072		233,844		242,916		—
Multifamily		47		—		320		367		12,587		12,954		—
Farmland		363		—		251		614		21,560		22,174		—
Total real estate loans		5,559		1,592		6,013		13,164		378,121		391,285		—
Commercial		18		1		64		83		21,386		21,469		—
Agriculture		—		—		—		—		3,793		3,793		—
Consumer installment Loans		113		1		27		141		24,427		24,568		—
All other loans		6		—		—		6		48		54		—
Total loans	$	5,696	$	1,594	$	6,104	$	13,394	$	427,775	$	441,169	$	—

Summary Of Risk Category Of Loans Receivable

As of September 30, 2016 (Dollars are in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real estate secured:
Commercial	$	91,708	$	7,165	$	4,124	$	—	$	102,997
Construction and land development		20,885		1,539		325		—		22,749
Residential 1-4 family		237,338		2,054		8,650		—		248,042
Multifamily		12,831		—		374		—		13,205
Farmland		17,847		3,531		2,450		—		23,828
Total real estate loans		380,609		14,289		15,923		—		410,821
Commercial		25,483		696		67		—		26,246
Agriculture		4,368		—		91		—		4,459
Consumer installment loans		23,016		—		161		—		23,177
All other loans		18		—		—		—		18
Total	$	433,494	$	14,985	$	16,242	$	—	$	464,721
As of December 31, 2015 (Dollars are in thousands)		Pass		Special Mention		Substandard		Doubtful		Total
Real estate secured:
Commercial	$	85,255	$	7,543	$	5,771	$	—	$	98,569
Construction and land development		12,262		1,974		436		—		14,672
Residential 1-4 family		229,182		3,572		10,162		—		242,916
Multifamily		12,264		187		503		—		12,954
Farmland		16,663		2,923		2,588		—		22,174
Total real estate loans		355,626		16,199		19,460		—		391,285
Commercial		20,641		724		104		—		21,469
Agriculture		3,767		—		26		—		3,793
Consumer installment loans		24,478		—		90		—		24,568
All other loans		54		—		—		—		54
Total	$	404,566	$	16,923		19,680	$	—	$	441,169

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7. ALLOWANCE FOR LOAN LOSSES (Tables)

9 Months Ended

Sep. 30, 2016

Loans and Leases Receivable, Allowance [Abstract]

Summary Of Activity In The Allowance For Loan Losses By Portfolio Segment

As of September 30, 2016 (Dollars are in thousands)	Beginning Balance		Charge Offs			Recoveries		Advances		Provisions			Ending Balance
Real estate secured:
Commercial	$	2,384	$	(417	)	$	217	$	—	$	(238	)	$	1,946
Construction and land development		332		(5	)		24		—		(5	)		346
Residential 1-4 family		2,437		(601	)		78		—		329			2,243
Multifamily		232		(18	)		—		—		19			233
Farmland		675		(2	)		102		—		(144	)		631
Total real estate loans		6,060		(1,043	)		421		—		(39	)		5,399
Commercial		266		(65	)		52		—		(46	)		207
Agriculture		124		—			6		—		(87	)		43
Consumer installment loans		128		(22	)		16		—		9			131
All other loans		1		—			—		—		(1	)		—
Unallocated		914		—			—		—		(336	)		578
Total	$	7,493	$	(1,130	)	$	495	$	—	$	(500	)	$	6,358

		Allowance for Loan Losses						Recorded Investment in Loans
As of September 30, 2016 (Dollars are in thousands)		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Real estate secured:
Commercial	$	172	$	1,774	$	1,946	$	5,122	$	97,875	$	102,997
Construction and land development		119		227		346		260		22,489		22,749
Residential 1-4 family		88		2,155		2,243		4,234		243,808		248,042
Multifamily		-		233		233		305		12,900		13,205
Farmland		293		338		631		4,860		18,968		23,828
Total real estate loans		672		4,727		5,399		14,781		396,040		410,821
Commercial		19		188		207		67		26,179		26,246
Agriculture		8		35		43		27		4,432		4,459
Consumer installment loans		20		111		131		53		23,124		23,177
All other loans		-		-		-		-		18		18
Unallocated		-		578		578		-		-		-
Total	$	719	$	5,639	$	6,358	$	14,928	$	449,793	$	464,721

Schedule Of Allocation Of Portion Of Allowance

As of December 31, 2015 (Dollars are in thousands)	Beginning Balance		Charge Offs			Recoveries		Advances		Provisions			Ending Balance
Real estate secured:
Commercial	$	4,418	$	(724	)	$	147	$	—	$	(1,457	)	$	2,384
Construction and land development		199		(226	)		215		—		144			332
Residential 1-4 family		2,572		(743	)		93		—		515			2,437
Multifamily		154		(384	)		6		—		456			232
Farmland		913		(90	)		214		—		(362	)		675
Total real estate loans		8,256		(2,167	)		675		—		(704	)		6,060
Commercial		457		(92	)		1,412		—		(1,511	)		266
Agriculture		125		—			3		—		(4	)		124
Consumer installment loans		171		(101	)		41		—		17			128
All other loans		1		—			—		—		—			1
Unallocated		912		—			—		—		2			914
Total	$	9,922	$	(2,360	)	$	2,131	$	—	$	(2,200	)	$	7,493

		Allowance for Loan Losses						Recorded Investment in Loans
As of December 31, 2015 (Dollars are in thousands)		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Real estate secured:
Commercial	$	288	$	2,096	$	2,384	$	6,715	$	91,854	$	98,569
Construction and land development		155		177		332		299		14,373		14,672
Residential 1-4 family		168		2,269		2,437		4,957		237,959		242,916
Multifamily		-		232		232		430		12,524		12,954
Farmland		328		347		675		4,744		17,430		22,174
Total real estate loans		939		5,121		6,060		17,145		374,140		391,285
Commercial		24		242		266		69		21,400		21,469
Agriculture		18		106		124		54		3,739		3,793
Consumer installment loans		2		126		128		56		24,512		24,568
All other loans		-		1		1		-		54		54
Unallocated		-		914		914		-		-		-
Total	$	983	$	6,510		7,493	$	17,324	$	423,845	$	441,169

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8. TROUBLED DEBT RESTRUCTURING (Tables)

9 Months Ended

Sep. 30, 2016

Troubled Debt Restructuring, Debtor, Current Period [Abstract]

Schedule Of Loans Modified As Troubled Debt Restructurings

	For the nine months ended September 30, 2016						For the nine months ended September 30, 2015
Troubled Debt Restructurings (Dollars are in thousands)	# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment
Real estate secured:
Commercial		1	$	341	$	341		—	$	—	$	—
Construction and land Development		—		—		—		1		551		302
Residential 1-4 family		—		—		—		2		225		224
Multifamily		—		—		—		—		—		—
Farmland		1		291		280		—		—		—
Total real estate loans		2		632		621		3		776		526
Commercial		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Consumer installment loans		—		—		—		—		—		—
All other loans		—		—		—		—		—		—
Total		2	$	632	$	621		3	$	776	$	526
		For the three months ended September 30, 2016						For the three months ended September 30, 2015
Troubled Debt Restructurings (Dollars are in thousands)		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment		# of Loans		Pre-Mod. Recorded Investment		Post-Mod. Recorded Investment
Real estate secured:
Commercial		—	$	—	$	—		—	$	—	$	—
Construction and land Development		—		—		—		—		—		—
Residential 1-4 family		—		—		—		2		225		224
Multifamily		—		—		—		—		—		—
Farmland		—		—		—		—		—		—
Total real estate loans		—		—		—		2		225		224
Commercial		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Consumer installment loans		—		—		—		—		—		—
All other loans		—		—		—		—		—		—
Total		—	$	—	$	—		2	$	225	$	224

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9. OTHER REAL ESTATE OWNED (Tables)

9 Months Ended

Sep. 30, 2016

Other Real Estate Owned Tables

Other Real Estate

(Dollars are in thousands)	September 30, 2016			December 31, 2015
Balance, beginning of period	$	12,398		$	15,049
Additions		3,851			3,277
Purchases of other real estate owned		—			12
Transfers of other real estate owned		(125	)		—
Donation of other real estate owned		—			(33	)
Proceeds from sales		(2,379	)		(1,831	)
Loans made to finance sales		(676	)		(878	)
Proceeds from insurance claims		—			(101	)
Adjustment of carrying value		(165	)		(3,246	)
Deferred gain from sales		—			50
Gain from sales		290			99
Balance, end of period	$	13,194		$	12,398

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10. EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2016

Income Per Share

Schedule Of Anti-Dilutive Income Per Common Share

(Amounts in Thousands, Except Share and Per Share Data)	For the three months ended September 30,				For the nine months ended September 30,
	2016		2015		2016		2015
Net income	$	346	$	2,293	$	1,926	$	3,377
Weighted average shares outstanding		23,354,111		22,878,654		23,354,092		22,878,654
Dilutive shares for stock options and warrants		—		—		—		—
Weighted average dilutive shares outstanding		23,354,111		22,878,654		23,354,092		22,878,654
Basic income per share	$	0.01	$	0.10	$	0.08	$	0.15
Diluted income per share	$	0.01	$	0.10	$	0.08	$	0.15

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12. FAIR VALUES (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

Summary Of Assets And Liabilities Measured At Fair Value

(Dollars are in thousands)	Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis) Available-for-sale investments
U.S. Government Agencies	$	—	$	27,258	$	—
Taxable municipals		—		2,474		—
Corporate bonds		—		3,286		—
Mortgage backed securities		—		41,543		—
(On a non-recurring basis) Other real estate owned		—		—		13,194
Impaired loans:
Real estate secured:
Commercial		—		—		4,950
Construction and land development		—		—		141
Residential 1-4 family		—		—		4,146
Multifamily		—		—		305
Farmland		—		—		4,567
Commercial		—		—		48
Agriculture		—		—		19
Consumer installment loans		—		—		33
All other loans		—		—		—
Total	$	—	$	74,561	$	27,403

Assets and liabilities measured at fair value are as follows as of December 31, 2015 (for purpose of this table the impaired loans are shown net of the related allowance):

(Dollars are in thousands)	Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis) Available-for-sale investments
U.S. Government Agencies	$	—	$	41,523	$	—
Taxable municipals		—		3,281		—
Corporate bonds		—		1,939		—
Mortgage backed securities		—		54,899		—
(On a non-recurring basis) Other real estate owned		—		—		12,398
Impaired loans:
Real estate secured:
Commercial		—		—		6,427
Construction and land development		—		—		144
Residential 1-4 family		—		—		4,789
Multifamily		—		—		430
Farmland		—		—		4,416
Commercial		—		—		45
Agriculture		—		—		36
Consumer installment loans		—		—		54
All other loans		—		—		—
Total	$	—	$	101,642	$	28,739

Schedule Of Significant Unobservable Inputs In Level 3 Assets

(Dollars in thousands)		Fair Value at September 30, 2016	Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired Loans	$	14,209	Appraised Value/Discounted Cash Flows/Market Value of Note	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0 – 18%
Other Real Estate Owned	$	13,194	Appraised Value/Comparable Sales/Other Estimates from Independent Sources	Discounts to reflect current market conditions and estimated costs to sell	0 – 18%

Estimated Fair Value Of Financial Instruments

					Fair Value Measurements
(Dollars are in thousands)	Carrying Amount		Fair Value		Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
September 30, 2016
Financial Instruments – Assets
Net Loans	$	458,363	$	461,025	$	—	$	446,816	$	14,209
Financial Instruments – Liabilities
Time Deposits		247,956		247,529		—		247,529		—
FHLB Advances		9,058		9,110		—		9,110		—
December 31, 2015
Financial Instruments – Assets
Net Loans	$	433,676	$	438,589	$	—	$	422,248	$	16,341
Financial Instruments – Liabilities
Time Deposits		256,978		256,797		—		256,797		—
FHLB Advances		2,958		2,958		—		2,958		—

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4. CAPITAL - Schedule of Capital Requirements (Details) - Bank - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Total Capital to Risk Weighted Assets, Actual, Amount	$ 68,259	$ 65,713
Total Capital to Risk Weighted Assets, Actual, Ratio	16.98%	17.55%
Total Capital to Risk Weighted Assets, Minimum Capital Requirement, Amount	$ 32,168	$ 29,954
Total Capital to Risk Weighted Assets, Minimum Capital Requirement, Ratio	8.00%	8.00%
Total Capital to Risk Weighted Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 40,209	$ 37,443
Total Capital to Risk Weighted Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	10.00%	10.00%
Tier 1 Capital Risk Weighted Assets, Actual, Amount	$ 63,216	$ 60,998
Tier 1 Capital Risk Weighted Assets, Actual, Ratio	15.72%	16.29%
Tier 1 Capital Risk Weighted Assets, Minimum Capital Requirement, Amount	$ 24,126	$ 22,466
Tier 1 Capital Risk Weighted Assets, Minimum Capital Requirement, Ratio	6.00%	6.00%
Tier 1 Capital Risk Weighted Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 32,168	$ 29,954
Tier 1 Capital Risk Weighted Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	8.00%	8.00%
Tier 1 Capital to Average Assets, Actual, Amount	$ 63,216	$ 60,998
Tier 1 Capital to Average Assets, Actual, Ratio	10.00%	9.67%
Tier 1 Capital to Average Assets, Minimum Capital Requirement, Amount	$ 63,216	$ 25,239
Tier 1 Capital to Average Assets, Minimum Capital Requirement, Ratio	4.00%	4.00%
Tier 1 Capital to Average Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 31,609	$ 31,549
Tier 1 Capital to Average Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	5.00%	5.00%
Common Equity Tier 1 Capital to Risk Weighted Assets, Actual, Amount	$ 63,216	$ 60,998
Common Equity Tier 1 Capital to Risk Weighted Assets, Actual, Ratio	15.72%	16.29%
Common Equity Tier 1 Capital to Risk Weighted Assets, Minimum Capital Requirement, Amount	$ 18,094	$ 16,849
Common Equity Tier 1 Capital to Risk Weighted Assets, Minimum Capital Requirement, Ratio	4.50%	4.50%
Common Equity Tier 1 Capital to Risk Weighted Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 26,136	$ 24,338
Common Equity Tier 1 Capital to Risk Weighted Assets, Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	6.50%	6.50%

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5. INVESTMENT SECURITIES - Schedule of Securities Amortized Cost and Estimated Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Amortized Cost	$ 73,888
Gross Unrealized Gains	812	$ 305
Gross Unrealized Losses	139	801
Approximate Fair Value	74,561	101,642
US Government Agencies
Amortized Cost	26,995	41,488
Gross Unrealized Gains	314	244
Gross Unrealized Losses	51	209
Approximate Fair Value	27,258	41,523
Taxable Municipals
Amortized Cost	2,401	3,337
Gross Unrealized Gains	73	5
Gross Unrealized Losses		61
Approximate Fair Value	2,474	3,281
Corporate Bonds
Amortized Cost	3,100	1,944
Gross Unrealized Gains	186	15
Gross Unrealized Losses		20
Approximate Fair Value	3,286	1,939
Mortgage Backed Securities
Amortized Cost	41,392	55,369
Gross Unrealized Gains	239	41
Gross Unrealized Losses	88	511
Approximate Fair Value	$ 41,543	$ 54,899

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5. INVESTMENT SECURITIES - Schedule of Fair Value and Gross Unrealized Losses on Investment Securities In A Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Fair Value, Less than 12 Months	$ 11,639	$ 56,999
Unrealized Losses, Less than 12 Months	87	512
Fair Value, 12 Months or More	6,732	16,705
Unrealized Losses, 12 Months or More	52	289
Fair Value, Total	18,371	73,074
Unrealized Losses, Total	139	801
US Government Agencies
Fair Value, Less than 12 Months	3,724	14,995
Unrealized Losses, Less than 12 Months	42	81
Fair Value, 12 Months or More	1,794	7,708
Unrealized Losses, 12 Months or More	9	128
Fair Value, Total	5,518	22,073
Unrealized Losses, Total	51	209
Mortgage Backed Securities
Fair Value, Less than 12 Months	7,915	38,945
Unrealized Losses, Less than 12 Months	45	354
Fair Value, 12 Months or More	4,938	8,719
Unrealized Losses, 12 Months or More	43	157
Fair Value, Total	12,853	47,664
Unrealized Losses, Total	$ 88	511
Taxable Municipals
Fair Value, Less than 12 Months		2,136
Unrealized Losses, Less than 12 Months		57
Fair Value, 12 Months or More		278
Unrealized Losses, 12 Months or More		4
Fair Value, Total		2,414
Unrealized Losses, Total		61
Corporate Bonds
Fair Value, Less than 12 Months		923
Unrealized Losses, Less than 12 Months		20
Fair Value, Total		923
Unrealized Losses, Total		$ 20

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5. INVESTMENT SECURITIES - Amortized Cost and Fair Value Of Investment Securities Contractual Maturity (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Investment securities activity
Due in one year or less, Amortized Cost	$ 1,221
Due after one year through five years, Amortized Cost	656
Due after five years through ten years, Amortized Cost	12,836
Due after ten years, Amortized Cost	59,175
Amortized Cost, Total	73,888
Due in one year or less, Fair Value	1,225
Due after one year through five years, Fair Value	657
Due after five years through ten years, Fair Value	13,107
Due after ten years, Fair Value	59,572
Approximate Fair Value	$ 74,561	$ 101,642
Due in one year or less, Weighted Average Yield	0.91%
Due after one year through five years, Weighted Average Yield	0.179%
Due after five years through ten years, Weighted Average Yield	2.50%
Due after ten years, Weighted Average Yield	1.80%
Weighted Average Yield, Total	1.91%

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6. LOANS - Summary of Loans Receivable Outstanding (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Total loans and leases	$ 464,721	$ 441,169
Real Estate [Member]
Total loans and leases	410,821	391,285
Commercial
Total loans and leases	26,246	21,469
Commercial | Real Estate [Member]
Total loans and leases	26,246	98,569
Construction and Land Development | Real Estate [Member]
Total loans and leases	247,956	14,672
Residential 1-4 Family | Real Estate [Member]
Total loans and leases	248,042	242,916
Multifamily | Real Estate [Member]
Total loans and leases	13,205	12,954
Farmland | Real Estate [Member]
Total loans and leases	23,828	22,174
Agriculture
Total loans and leases	4,459	3,793
Consumer Installment Loans
Total loans and leases	23,177	$ 24,568
Other Loans
Total loans and leases	18
Unallocated
Total loans and leases

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6. LOANS - Summary of Loans Receivable on Nonaccrual Status (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Total loans receivable on nonaccrual status	$ 13,448	$ 14,847
Real Estate [Member]
Total loans receivable on nonaccrual status	13,269	14,732
Commercial
Total loans receivable on nonaccrual status	3	65
Commercial | Real Estate [Member]
Total loans receivable on nonaccrual status	3,671	4,358
Construction and Land Development | Real Estate [Member]
Total loans receivable on nonaccrual status	354	436
Residential 1-4 Family | Real Estate [Member]
Total loans receivable on nonaccrual status	8,145	8,338
Multifamily | Real Estate [Member]
Total loans receivable on nonaccrual status	169	430
Farmland | Real Estate [Member]
Total loans receivable on nonaccrual status	930	1,170
Agriculture
Total loans receivable on nonaccrual status	83	9
Consumer Installment Loans
Total loans receivable on nonaccrual status	93	$ 41
Other Loans
Total loans receivable on nonaccrual status

XML

6. LOANS - Summary of Impaired Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Recorded Investment	$ 14,928	$ 17,324
Unpaid Principal Balance	16,718	19,850
Related Allowance	719	983
Consumer Installment Loans | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment		11
Unpaid Principal Balance		11
Related Allowance
Consumer Installment Loans | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment	53	45
Unpaid Principal Balance	53	45
Related Allowance	20	2
Agriculture | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment	19	36
Unpaid Principal Balance	19	36
Related Allowance
Agriculture | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment	8	18
Unpaid Principal Balance	8	18
Related Allowance	8	18
Commercial Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment
Unpaid Principal Balance
Related Allowance
Commercial Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment	67	69
Unpaid Principal Balance	67	69
Related Allowance	19	24
Commercial Real Estate [Member] | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment	3,533	4,212
Unpaid Principal Balance	3,959	5,173
Related Allowance
Commercial Real Estate [Member] | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment	1,589	2,503
Unpaid Principal Balance	1,680	2,849
Related Allowance	172	288
Construction and Land Development | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment	7	10
Unpaid Principal Balance	3,959	10
Related Allowance
Construction and Land Development | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment	253	289
Unpaid Principal Balance	477	499
Related Allowance	119	155
Residential 1-4 Family | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment	3,590	3,037
Unpaid Principal Balance	3,888	3,150
Related Allowance
Residential 1-4 Family | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment	644	1,920
Unpaid Principal Balance	652	2,121
Related Allowance	119	168
Multifamily | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment	305	430
Unpaid Principal Balance	3,888	471
Related Allowance
Multifamily | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment
Unpaid Principal Balance
Related Allowance
Farmland | Real Estate [Member] | Impaired Financing Receivables With No Related Allowance [Member]
Recorded Investment	4,358	3,983
Unpaid Principal Balance	5,050	4,620
Related Allowance
Farmland | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Recorded Investment	502	761
Unpaid Principal Balance	512	778
Related Allowance	$ 293	$ 328

XML

6. LOANS - Summary of Age Analysis of Past Due Loans Receivable (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Loans 30-59 Days Past Due	$ 7,892	$ 5,696
Loans 60-89 Days Past Due	3,604	1,594
Loans 90 or More Days Past Due	4,148	6,104
Total Past Due Loans	15,644	13,394
Current Loans	443,969	427,775
Total loans and leases	464,721	441,169
Accruing Loans 90 or More Days Past Due
Real Estate [Member]
Loans 30-59 Days Past Due	7,644	5,559
Loans 60-89 Days Past Due	3,540	1,592
Loans 90 or More Days Past Due	3,863	6,013
Total Past Due Loans	15,047	13,164
Current Loans	390,604	378,121
Total loans and leases	410,821	391,285
Accruing Loans 90 or More Days Past Due
Real Estate [Member]
Total loans and leases	464
Multifamily | Real Estate [Member]
Total loans and leases	13,205	12,954
Multifamily | Real Estate [Member]
Total loans and leases	13,205
Multifamily | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Loans 30-59 Days Past Due	446	47
Loans 60-89 Days Past Due	67
Loans 90 or More Days Past Due	165	320
Total Past Due Loans	678	367
Current Loans	12,595	12,587
Total loans and leases	13,273	12,954
Accruing Loans 90 or More Days Past Due
Farmland | Real Estate [Member]
Total loans and leases	23,828	22,174
Farmland | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Loans 30-59 Days Past Due	365	363
Loans 60-89 Days Past Due	164
Loans 90 or More Days Past Due		251
Total Past Due Loans	529	614
Current Loans	22,945	21,560
Total loans and leases	23,474	22,174
Accruing Loans 90 or More Days Past Due
Commercial
Loans 30-59 Days Past Due	36	18
Loans 60-89 Days Past Due	15	1
Loans 90 or More Days Past Due	75	64
Total Past Due Loans	126	83
Current Loans	24,737	21,386
Total loans and leases	26,246	21,469
Accruing Loans 90 or More Days Past Due
Commercial | Real Estate [Member]
Total loans and leases	26,246	98,569
Agriculture
Loans 30-59 Days Past Due	29
Loans 60-89 Days Past Due
Loans 90 or More Days Past Due	173
Total Past Due Loans	202
Current Loans	4,144	3,793
Total loans and leases	4,459	3,793
Accruing Loans 90 or More Days Past Due
Consumer Installment Loans
Loans 30-59 Days Past Due	161	113
Loans 60-89 Days Past Due	49	1
Loans 90 or More Days Past Due	37	27
Total Past Due Loans	247	141
Current Loans	24,477	24,427
Total loans and leases	23,177	24,568
Accruing Loans 90 or More Days Past Due
Other Loans
Loans 30-59 Days Past Due	22	6
Loans 60-89 Days Past Due
Loans 90 or More Days Past Due
Total Past Due Loans	22	6
Current Loans	7	48
Total loans and leases	18
Accruing Loans 90 or More Days Past Due
Residential 1-4 Family | Real Estate [Member]
Total loans and leases	248,042	242,916
Residential 1-4 Family | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Loans 30-59 Days Past Due	6,199	4,694
Loans 60-89 Days Past Due	2,054	1,487
Loans 90 or More Days Past Due	2,075	2,891
Total Past Due Loans	10,328	9,072
Current Loans	235,756	233,844
Total loans and leases	246,084	242,916
Accruing Loans 90 or More Days Past Due
Construction and Land Development | Real Estate [Member]
Total loans and leases	247,956	14,672
Construction and Land Development | Real Estate [Member]
Total loans and leases	22,749
Construction and Land Development | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Loans 30-59 Days Past Due	100	144
Loans 60-89 Days Past Due
Loans 90 or More Days Past Due	71	17
Total Past Due Loans	171	161
Current Loans	19,118	14,511
Total loans and leases	19,289	14,672
Accruing Loans 90 or More Days Past Due
Commercial Real Estate [Member] | Real Estate [Member] | Impaired Financing Receivables With Related Allowance [Member]
Loans 30-59 Days Past Due	534	311
Loans 60-89 Days Past Due	1,255	105
Loans 90 or More Days Past Due	1,552	2,534
Total Past Due Loans	3,341	2,950
Current Loans	100,190	95,619
Total loans and leases	103,531	98,569
Accruing Loans 90 or More Days Past Due
Unallocated
Total loans and leases

XML

6. LOANS - Summary of Risk Category of Loans Receivable (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Total	$ 464,721	$ 441,169
Real Estate [Member]
Total	410,821	391,285
Pass
Total	427,801	404,566
Substandard
Total	16,814	19,680
Special Mention
Total	14,998	16,923
Real Estate [Member]
Total	464
Real Estate [Member] | Pass
Total	374,971	355,626
Real Estate [Member] | Substandard
Total	16,388	19,460
Real Estate [Member] | Special Mention
Total	14,292	16,199
Consumer Installment Loans
Total	23,177	24,568
Consumer Installment Loans | Pass
Total	24,574	24,478
Consumer Installment Loans | Substandard
Total	150	90
Consumer Installment Loans | Special Mention
Total
Commercial
Total	26,246	21,469
Commercial | Real Estate [Member]
Total	26,246	98,569
Agriculture
Total	4,459	3,793
Agriculture | Pass
Total	4,157	3,767
Agriculture | Substandard
Total	189	26
Agriculture | Special Mention
Total
Other Loans
Total	18
Other Loans | Pass
Total	29	54
Other Loans | Substandard
Total
Other Loans | Special Mention
Total
Unallocated
Total
Construction and Land Development | Real Estate [Member]
Total	247,956	14,672
Construction and Land Development | Real Estate [Member]
Total	22,749
Construction and Land Development | Real Estate [Member] | Pass
Total	17,267	12,262
Construction and Land Development | Real Estate [Member] | Substandard
Total	424	436
Construction and Land Development | Real Estate [Member] | Special Mention
Total	1,598	1,974
Residential 1-4 Family | Real Estate [Member]
Total	248,042	242,916
Residential 1-4 Family | Real Estate [Member] | Pass
Total	235,604	229,182
Residential 1-4 Family | Real Estate [Member] | Substandard
Total	8,637	10,162
Residential 1-4 Family | Real Estate [Member] | Special Mention
Total	1,843	3,572
Multifamily | Real Estate [Member]
Total	13,205	12,954
Multifamily | Real Estate [Member]
Total	13,205
Multifamily | Real Estate [Member] | Pass
Total	12,730	12,264
Multifamily | Real Estate [Member] | Substandard
Total	543	503
Multifamily | Real Estate [Member] | Special Mention
Total		187
Commercial Portfolio Segment [Member] | Pass
Total	24,070	20,641
Commercial Portfolio Segment [Member] | Substandard
Total	87	104
Commercial Portfolio Segment [Member] | Special Mention
Total	706	724
Commercial Portfolio Segment [Member] | Real Estate [Member] | Pass
Total	91,667	85,255
Commercial Portfolio Segment [Member] | Real Estate [Member] | Substandard
Total	4,486	5,771
Commercial Portfolio Segment [Member] | Real Estate [Member] | Special Mention
Total	7,378	7,543
Farmland | Real Estate [Member]
Total	23,828	22,174
Farmland | Real Estate [Member] | Pass
Total	17,703	16,663
Farmland | Real Estate [Member] | Substandard
Total	2,298	2,588
Farmland | Real Estate [Member] | Special Mention
Total	$ 3,473	$ 2,923

XML

7. ALLOWANCE FOR LOAN LOSSES - Summary of Activity in the Allowance for Loan Losses (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Balance, beginning of year	$ 7,493
Charge Offs	(1,130)	$ (2,360)
Recoveries	495	2,131
Advances
Provision for loan losses	(500)	(2,200)
Balance, End of period	6,358	7,493
Real Estate [Member]
Balance, beginning of year	6,060	8,256
Charge Offs	(1,043)	(2,167)
Recoveries	421	675
Advances
Provision for loan losses	(39)	(704)
Balance, End of period	6,358	6,060
Commercial Real Estate [Member]
Balance, beginning of year	266	457
Charge Offs	(65)	(92)
Recoveries	52	1,412
Advances
Provision for loan losses	(46)	(1,511)
Balance, End of period		266
Commercial Real Estate [Member] | Real Estate [Member]
Balance, beginning of year	2,384	4,418
Charge Offs	(417)	(724)
Recoveries	217	147
Advances
Provision for loan losses	(238)	(1,457)
Balance, End of period		2,384
Construction and Land Development | Real Estate [Member]
Balance, beginning of year	332	199
Charge Offs	(5)	(226)
Recoveries	24	215
Advances
Provision for loan losses	(5)	144
Balance, End of period	346	332
Residential 1-4 Family | Real Estate [Member]
Balance, beginning of year	2,437	2,572
Charge Offs	(601)	(743)
Recoveries	78	93
Advances
Provision for loan losses	329	515
Balance, End of period		2,437
Multifamily | Real Estate [Member]
Balance, beginning of year	232	154
Charge Offs	(18)	(384)
Recoveries		6
Advances
Provision for loan losses	19	456
Balance, End of period	233	232
Farmland | Real Estate [Member]
Balance, beginning of year	675	913
Charge Offs	(2)	(90)
Recoveries	102	214
Advances
Provision for loan losses	(144)	(362)
Balance, End of period		675
Agriculture
Balance, beginning of year	124	125
Charge Offs
Recoveries	6	3
Advances
Provision for loan losses	(87)	(4)
Balance, End of period	43	124
Consumer Installment Loans
Balance, beginning of year	128	171
Charge Offs	(22)	(101)
Recoveries	16	41
Advances
Provision for loan losses	9	17
Balance, End of period	131	128
Other Loans
Balance, beginning of year		1
Charge Offs
Recoveries
Advances
Provision for loan losses	(1)
Balance, End of period
Unallocated
Balance, beginning of year		912
Charge Offs
Recoveries
Advances
Provision for loan losses	(336)	2
Balance, End of period	578
Commercial
Balance, beginning of year	266
Balance, End of period	$ 207	$ 266

XML

7. ALLOWANCE FOR LOAN LOSSES - Schedule of Allocation of Portion of Allowance (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015	Dec. 31, 2014
Allowance for Loan Losses, Individually Evaluated for Impairment		$ 983
Allowance for Loan Losses, Collectively Evaluated for Impairment		6,510
Allowance for Loan Losses, Total	$ 6,358	7,493
Recorded Investment in Loans, Individually Evaluated for Impairment		17,324
Recorded Investment in Loans, Collectively Evaluated for Impairment		423,845
Recorded Investment in Loans, Total	464,721	441,169
Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment	672	939
Allowance for Loan Losses, Collectively Evaluated for Impairment	4,727	5,121
Allowance for Loan Losses, Total	5,399	6,060
Recorded Investment in Loans, Individually Evaluated for Impairment	14,781	17,145
Recorded Investment in Loans, Collectively Evaluated for Impairment	396,040	374,140
Recorded Investment in Loans, Total	410,821	391,285
Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment	719
Allowance for Loan Losses, Collectively Evaluated for Impairment	5,639
Allowance for Loan Losses, Total	6,358	6,060	$ 8,256
Recorded Investment in Loans, Individually Evaluated for Impairment	14,928
Recorded Investment in Loans, Collectively Evaluated for Impairment	449,793
Recorded Investment in Loans, Total	464
Commercial
Allowance for Loan Losses, Individually Evaluated for Impairment	19	24
Allowance for Loan Losses, Collectively Evaluated for Impairment	188	242
Allowance for Loan Losses, Total	207	266
Recorded Investment in Loans, Individually Evaluated for Impairment	67	69
Recorded Investment in Loans, Collectively Evaluated for Impairment	26,179	21,400
Recorded Investment in Loans, Total	26,246	21,469
Commercial | Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment	172	288
Allowance for Loan Losses, Collectively Evaluated for Impairment	1,774	2,096
Allowance for Loan Losses, Total	1,946	2,384
Recorded Investment in Loans, Individually Evaluated for Impairment	5,122	6,715
Recorded Investment in Loans, Collectively Evaluated for Impairment	97,875	91,854
Recorded Investment in Loans, Total	26,246	98,569
Construction and Land Development | Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment		155
Allowance for Loan Losses, Collectively Evaluated for Impairment		177
Allowance for Loan Losses, Total		332
Recorded Investment in Loans, Individually Evaluated for Impairment		299
Recorded Investment in Loans, Collectively Evaluated for Impairment		14,373
Recorded Investment in Loans, Total	247,956	14,672
Construction and Land Development | Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment	119
Allowance for Loan Losses, Collectively Evaluated for Impairment	227
Allowance for Loan Losses, Total	346	332	199
Recorded Investment in Loans, Individually Evaluated for Impairment	260
Recorded Investment in Loans, Collectively Evaluated for Impairment	22,489
Recorded Investment in Loans, Total	22,749
Residential 1-4 Family | Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment	88	168
Allowance for Loan Losses, Collectively Evaluated for Impairment	2,155	2,269
Allowance for Loan Losses, Total	2,243	2,437
Recorded Investment in Loans, Individually Evaluated for Impairment	4,234	4,957
Recorded Investment in Loans, Collectively Evaluated for Impairment	243,808	237,959
Recorded Investment in Loans, Total	248,042	242,916
Residential 1-4 Family | Real Estate [Member]
Allowance for Loan Losses, Total		2,437	2,572
Multifamily | Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment
Allowance for Loan Losses, Collectively Evaluated for Impairment		232
Allowance for Loan Losses, Total		232
Recorded Investment in Loans, Individually Evaluated for Impairment		430
Recorded Investment in Loans, Collectively Evaluated for Impairment		12,524
Recorded Investment in Loans, Total	13,205	12,954
Multifamily | Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment
Allowance for Loan Losses, Collectively Evaluated for Impairment	233
Allowance for Loan Losses, Total	233	232	154
Recorded Investment in Loans, Individually Evaluated for Impairment	305
Recorded Investment in Loans, Collectively Evaluated for Impairment	12,900
Recorded Investment in Loans, Total	13,205
Farmland | Real Estate [Member]
Allowance for Loan Losses, Individually Evaluated for Impairment	293	328
Allowance for Loan Losses, Collectively Evaluated for Impairment	338	347
Allowance for Loan Losses, Total	631	675
Recorded Investment in Loans, Individually Evaluated for Impairment	4,860	4,744
Recorded Investment in Loans, Collectively Evaluated for Impairment	18,968	17,430
Recorded Investment in Loans, Total	23,828	22,174
Farmland | Real Estate [Member]
Allowance for Loan Losses, Total		675	913
Agriculture
Allowance for Loan Losses, Individually Evaluated for Impairment	8	18
Allowance for Loan Losses, Collectively Evaluated for Impairment	35	106
Allowance for Loan Losses, Total	43	124	125
Recorded Investment in Loans, Individually Evaluated for Impairment	27	54
Recorded Investment in Loans, Collectively Evaluated for Impairment	4,432	3,739
Recorded Investment in Loans, Total	4,459	3,793
Consumer Installment Loans
Allowance for Loan Losses, Individually Evaluated for Impairment	20	2
Allowance for Loan Losses, Collectively Evaluated for Impairment	111	126
Allowance for Loan Losses, Total	131	128	171
Recorded Investment in Loans, Individually Evaluated for Impairment	53	56
Recorded Investment in Loans, Collectively Evaluated for Impairment	23,124	24,512
Recorded Investment in Loans, Total	23,177	24,568
Other Loans
Allowance for Loan Losses, Individually Evaluated for Impairment
Allowance for Loan Losses, Collectively Evaluated for Impairment
Allowance for Loan Losses, Total			1
Recorded Investment in Loans, Individually Evaluated for Impairment
Recorded Investment in Loans, Collectively Evaluated for Impairment	18
Recorded Investment in Loans, Total	18
Unallocated
Allowance for Loan Losses, Individually Evaluated for Impairment
Allowance for Loan Losses, Collectively Evaluated for Impairment	578
Allowance for Loan Losses, Total	578		912
Recorded Investment in Loans, Individually Evaluated for Impairment
Recorded Investment in Loans, Collectively Evaluated for Impairment
Recorded Investment in Loans, Total
Commercial Real Estate [Member]
Allowance for Loan Losses, Total		266	457
Commercial Real Estate [Member] | Real Estate [Member]
Allowance for Loan Losses, Total		$ 2,384	$ 4,418

XML

8. TROUBLED DEBT RESTRUCTURINGS - Schedule Of Loans Modified As Troubled Debt Restructurings (Details) - Real Estate [Member] $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2016 USD ($) loans	Sep. 30, 2015 USD ($) loans	Dec. 31, 2015 USD ($) loans
# of Loans | loans	1	1
Pre-Mod. Recorded Investment	$ 632	$ 551
Post-Mod. Recorded Investment	$ 630	$ 314
Farmland
# of Loans | loans	1
Pre-Mod. Recorded Investment	$ 291
Post-Mod. Recorded Investment	$ 291
Commercial Real Estate [Member]
# of Loans | loans	1
Pre-Mod. Recorded Investment	$ 341
Post-Mod. Recorded Investment	$ 339
Construction and Land Development
# of Loans | loans			1
Pre-Mod. Recorded Investment			$ 551
Post-Mod. Recorded Investment			$ 314

XML

8. TROUBLED DEBT RESTRUCTURINGS (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Sep. 30, 2016
Notes to Financial Statements
Total TDRs	$ 9,500	$ 9,400
Period loan is considered to be in default, days	90 days

XML

9. OTHER REAL ESTATE OWNED - Other Real Estate (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Real Estate [Abstract]
Balance, beginning of year	$ 12,398	$ 15,049
Additions	3,851	3,277
Purchases of other real estate owned		12
Transfers of other real estate owned	(125)
Donation of other real estate owned		33
Proceeds from sales	(2,379)	(1,831)
Loans made to finance sales	(676)	(878)
Proceeds from insurance claims		(101)
Adjustment of carrying value	(165)	(3,246)
Deferred gain from sales		50
Gain (loss) from sales	290	99
Balance, end of year	$ 13,194	$ 12,398

XML

10. EARNINGS PER SHARE (Schedule Of Anti-Dilutive Income Per Common Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Income Per Share
Net income	$ 346	$ 2,293	$ 1,926	$ 3,377
Weighted average shares outstanding	23,354,111	22,878,654	23,354,092	22,878,654
Dilutive shares for stock options and warrants
Weighted average dilutive shares outstanding	23,354,111	22,878,654	23,354,092	22,878,654
Basic income per share	$ 0.01	$ 0.1	$ 0.08	$ 0.15
Diluted income per share	$ 0.01	$ 0.1	$ 0.08	$ 0.15

XML

12. FAIR VALUES - Summary of Assets And Liabilities Measured at Fair Value (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Fair Value, Inputs, Level 3 [Member]
Other real estate owned	$ 14,134	$ 12,398
Impaired Loans	29,078	28,739
Fair Value, Inputs, Level 2 [Member]
Available for sale investments	76,626
Impaired Loans		101,642
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage Backed Securities
Available for sale investments	42,486	54,899
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate Bond Securities [Member]
Available for sale investments	3,232	1,939
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | TaxableMunicipalsMember
Available for sale investments	2,483	3,281
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US Government Agencies
Available for sale investments	28,425	41,523
Other Loans | Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member]
Impaired Loans
Agriculture | Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member]
Impaired Loans	26	36
Farmland | Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member] | Real Estate [Member]
Impaired Loans	4,398	4,416
Multifamily | Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member] | Real Estate [Member]
Impaired Loans	443	430
Commercial Real Estate [Member] | Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member]
Impaired Loans		45
Commercial Real Estate [Member] | Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member] | Real Estate [Member]
Impaired Loans	5,267	6,427
Residential 1-4 Family | Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member] | Real Estate [Member]
Impaired Loans	4,574	4,789
Construction and Land Development | Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member] | Real Estate [Member]
Impaired Loans	141	144
Consumer Installment Loans | Nonrecurring Basis | Fair Value, Inputs, Level 3 [Member]
Impaired Loans	$ 50	$ 54

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12. FAIR VALUES - Schedule of Significant Unobservable Inputs In Level 3 Assets (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2016 USD ($)
Other Real Estate Owned
Fair Value at June 30, 2016	$ 13,194
Valuation Technique	Appraised Value/Comparable Sales/Other Estimates from Independent Sources
Significant Unobservable Inputs	Discounts to reflect current market conditions and estimated costs to sell
Other Real Estate Owned | Minimum [Member]
Significant Unobservable Input Value	0.00%
Other Real Estate Owned | Maximum [Member]
Significant Unobservable Input Value	18.00%
Impaired Loans
Fair Value at June 30, 2016	$ 14,209
Valuation Technique	Appraised Value/Discounted Cash Flows/Market Value of Note
Significant Unobservable Inputs	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell
Impaired Loans | Minimum [Member]
Significant Unobservable Input Value	0.00%
Impaired Loans | Maximum [Member]
Significant Unobservable Input Value	18.00%

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12. FAIR VALUES - Estimated Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Net Loans	$ 458,363	$ 433,676
Time deposits	247,956	256,978
FHLB advances	9,058
Fair Value, Measurements, Recurring [Member]
Net Loans	461,025	438,589
Time deposits	247,529	256,797
FHLB advances	9,110	2,958
Fair Value, Inputs, Level 1 [Member]
Net Loans
Time deposits
FHLB advances
Fair Value, Inputs, Level 2 [Member]
Net Loans	446,816	422,248
Time deposits	247,529	256,797
FHLB advances	9,110	2,958
Fair Value, Inputs, Level 3 [Member]
Net Loans	14,209	16,341
Time deposits
FHLB advances
Fair Value, Estimate Not Practicable, Carrying (Reported) Amount [Member]
Net Loans		433,676
Time deposits		256,978
FHLB advances		$ 2,958