Concentrations of Credit Risk

12 Months Ended

Dec. 31, 2012

Concentrations of Credit Risk [Abstract]

Concentration of Credit Risk

Note 16: Concentrations of Credit Risk

The Company does a general banking business, serving the commercial and personal banking needs of its customers. NBB's market area in southwest Virginia is made up of the counties of Montgomery, Giles, Pulaski, Tazewell, Wythe, Smyth and Washington. It also includes the independent cities of Radford and Galax, and the portions of Carroll and Grayson Counties that are adjacent to Galax. In addition, it serves those portions of Mercer County and McDowell County, West Virginia that are contiguous with Tazewell County. Substantially all of NBB's loans are made in its market area. The ultimate collectability of the bank's loan portfolio and the ability to realize the value of any underlying collateral, if needed, is influenced by the economic conditions of the market area. The Company's operating results are therefore closely correlated with the economic trends within this area.

Commercial real estate as of December 31, 2012 and 2011 represented approximately 51% of the loan portfolio, at $304,308 and $303,192, respectively. Included in commercial real estate are loans for college housing and professional office buildings that comprised $171,186 and $166,710 as of December 31, 2012 and 2011 respectively, corresponding to approximately 29% of the loan portfolio at December 31, 2012 and 28% of the loan portfolio at December 31, 2011. Loans secured by residential real estate were approximately $143,262, or 24% of the portfolio, and $150,224, or 26% of the portfolio at December 31, 2012 and 2011, respectively. Loans secured by automobiles represented 2% of the portfolio for both dates, at $11,764 and $13,089 at December 31, 2012 and 2011, respectively.

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