Peoples Bancorp of North Carolina (PEBK) 10-K 16 Mar 17 2016 FY Annual report Financial data

Document and Entity Information

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2016	Feb. 28, 2017	Jun. 30, 2016
Document And Entity Information
Entity Registrant Name	PEOPLES BANCORP OF NORTH CAROLINA INC
Entity Central Index Key	1,093,672
Document Type	10-K
Document Period End Date	Dec. 31, 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	Accelerated Filer
Entity Public Float			$ 83,741,340
Entity Common Stock, Shares Outstanding		5,426,188
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2,016

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Assets
Cash and due from banks, including reserve requirements of $16,576 at 12/31/16 and $14,587 at 12/31/15	$ 53,613	$ 29,194
Interest-bearing deposits	16,481	10,569
Cash and cash equivalents	70,094	39,763
Investment securities available for sale	249,946	268,530
Other investments	2,635	3,636
Total securities	252,581	272,166
Mortgage loans held for sale	5,709	4,149
Loans	723,811	689,091
Less allowance for loan losses	(7,550)	(9,589)
Net loans	716,261	679,502
Premises and equipment, net	16,452	16,976
Cash surrender value of life insurance	14,952	14,546
Other real estate	283	739
Accrued interest receivable and other assets	11,659	10,640
Total assets	1,087,991	1,038,481
Deposits:
Non-interest bearing demand	271,851	244,231
NOW, MMDA & savings	477,054	431,052
Time, $250,000 or more	26,771	26,891
Other time	117,242	130,001
Total deposits	892,918	832,175
Securities sold under agreements to repurchase	36,434	27,874
FHLB borrowings	20,000	43,500
Junior subordinated debentures	20,619	20,619
Accrued interest payable and other liabilities	10,592	9,449
Total liabilities	980,563	933,617
Commitments (Note 10)
Shareholders' equity:
Series A preferred stock, $1,000 stated value; authorized 5,000,000 shares; no shares issued and outstanding	0	0
Common stock, no par value; authorized 20,000,000 shares; issued and outstanding 5,417,800 shares at December 31, 2016 and 5,510,538 shares at December 31, 2015	44,187	46,171
Retained earnings	60,254	53,183
Accumulated other comprehensive income	2,987	5,510
Total shareholders' equity	107,428	104,864
Total liabilities and shareholders' equity	$ 1,087,991	$ 1,038,481

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Assets
Cash and due from banks, reserve requirements	$ 16,576	$ 14,587
Shareholders' equity:
Series A preferred stock, stated value (in dollars per share)	$ 1,000	$ 1,000
Series A preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Series A preferred stock, shares issued (in shares)	0	0
Series A preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	5,417,800	5,510,538
Common stock, shares outstanding (in shares)	5,417,800	5,510,538

Consolidated Statements of Earn

Consolidated Statements of Earnings - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Interest income:
Interest and fees on loans	$ 32,452	$ 31,098	$ 30,305
Interest on due from banks	123	26	65
Interest on investment securities:
U.S. Government sponsored enterprises	2,531	2,616	2,995
States and political subdivisions	4,454	4,600	4,677
Other	249	326	378
Total interest income	39,809	38,666	38,420
Interest expense:
NOW, MMDA & savings deposits	495	432	499
Time deposits	586	870	1,188
FHLB borrowings	1,661	1,735	2,166
Junior subordinated debentures	485	402	389
Other	44	45	45
Total interest expense	3,271	3,484	4,287
Net interest income	36,538	35,182	34,133
(Reduction of) provision for loan losses	(1,206)	(17)	(699)
Net interest income after provision for loan losses	37,744	35,199	34,832
Non-interest income:
Service charges	4,497	4,647	4,961
Other service charges and fees	890	931	1,080
Gain on sale of securities	729	0	266
Mortgage banking income	1,428	1,130	804
Insurance and brokerage commissions	632	714	701
Gain/(loss) on sales and write-downs of other real estate	64	245	(622)
Miscellaneous	5,736	5,645	4,974
Total non-interest income	13,976	13,312	12,164
Non-interest expense:
Salaries and employee benefits	19,264	18,285	17,530
Occupancy	6,765	6,288	6,251
Professional fees	2,439	1,468	1,401
Advertising	1,136	784	804
Debit card expense	1,141	988	905
FDIC insurance	494	681	739
Other	8,743	7,284	8,041
Total non-interest expense	39,982	35,778	35,671
Earnings before income taxes	11,738	12,733	11,325
Income tax expense	2,561	3,100	1,937
Net earnings	9,177	9,633	9,388
Net earnings available to common shareholders	$ 9,177	$ 9,633	$ 9,388
Basic net earnings per common share	$ 1.68	$ 1.73	$ 1.67
Diluted net earnings per common share	1.65	1.72	1.66
Cash dividends declared per common share	$ 0.38	$ 0.28	$ 0.18

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Consolidated Statements Of Comprehensive Income
Net earnings	$ 9,177	$ 9,633	$ 9,388
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available for sale	(3,274)	93	11,117
Reclassification adjustment for gains on securities available for sale included in net earnings	(729)	0	(266)
Total other comprehensive income (loss), before income taxes	(4,003)	93	10,851
Income tax (benefit) expense related to other comprehensive (loss) income:
Unrealized holding gains (losses) on securities available for sale	(1,196)	36	4,330
Reclassification adjustment for gains on securities available for sale included in net earnings	(284)	0	(104)
Total income tax expense (benefit) related to other comprehensive income (loss)	(1,480)	36	4,226
Total other comprehensive income (loss), net of tax	(2,523)	57	6,625
Total comprehensive income	$ 6,654	$ 9,690	$ 16,013

Consolidated Statements of Chan

Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Preferred Stock	Common Stock	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total
Beginning Balance, Shares at Dec. 31, 2013	0	5,613,495
Beginning Balance, Amount at Dec. 31, 2013	$ 0	$ 48,133	$ 36,758	$ (1,172)	$ 83,719
Common stock repurchase, Shares		(4,537)
Common stock repurchase, Amount		$ (82)			(82)
Cash dividends declared on common stock			(1,022)		(1,022)
Stock options exercised, Shares		3,630
Stock options exercised, Amount		$ 37			37
Net earnings			9,388		9,388
Change in accumulated other comprehensive income, net of tax				6,625	6,625
Ending Balance, Shares at Dec. 31, 2014	0	5,612,588
Ending Balance, Amount at Dec. 31, 2014	$ 0	$ 48,088	45,124	5,453	98,665
Common stock repurchase, Shares		(102,050)
Common stock repurchase, Amount		$ (1,917)			(1,917)
Cash dividends declared on common stock			(1,574)		(1,574)
Net earnings			9,633		9,633
Change in accumulated other comprehensive income, net of tax				57	57
Ending Balance, Shares at Dec. 31, 2015	0	5,510,538
Ending Balance, Amount at Dec. 31, 2015	$ 0	$ 46,171	53,183	5,510	104,864
Common stock repurchase, Shares		(92,738)
Common stock repurchase, Amount		$ (1,984)			(1,984)
Cash dividends declared on common stock			(2,106)		(2,106)
Net earnings			9,177		9,177
Change in accumulated other comprehensive income, net of tax				(2,523)	(2,523)
Ending Balance, Shares at Dec. 31, 2016		5,417,800
Ending Balance, Amount at Dec. 31, 2016		$ 44,187	$ 60,254	$ 2,987	$ 107,428

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash flows from operating activities:
Net earnings	$ 9,177	$ 9,633	$ 9,388
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation, amortization and accretion	5,423	6,053	6,889
Reduction of provision for loan losses	(1,206)	(17)	(699)
Deferred income taxes	(547)	673	178
Gain on sale of investment securities	1,097	0	(266)
Gain on sale of other real estate	(81)	(363)	(5)
Write-down of other real estate	17	118	627
Restricted stock expense	932	487	389
Proceeds from sales of loans held for sale	67,764	50,770	40,898
Origination of loans held for sale	(69,324)	(53,544)	(40,020)
Change in:
Cash surrender value of life insurance	(406)	(421)	(419)
Other assets	(818)	(408)	(2,534)
Other liabilities	211	882	(12,509)
Net cash provided by operating activities	12,239	13,863	1,917
Cash flows from investing activities:
Purchases of investment securities available for sale	(12,707)	(19,220)	(32,851)
Proceeds from sales, calls and maturities of investment securities available for sale	4,053	5,475	36,148
Proceeds from paydowns of investment securities available for sale	20,675	22,732	20,202
Purchases of other investments	(255)	(6)	0
FHLB stock redemption	1,256	401	959
Net change in loans	(36,116)	(43,441)	(36,692)
Purchases of premises and equipment	(1,610)	(2,354)	(3,120)
Proceeds from sale of other real estate and repossessions	1,083	6,287	3,456
Net cash used by investing activities	(23,621)	(30,126)	(11,898)
Cash flows from financing activities:
Net change in deposits	60,743	17,475	15,339
Net change in securities sold under agreement to repurchase	8,560	(20,556)	3,034
Proceeds from FHLB borrowings	6,000	20,001	0
Repayments of FHLB borrowings	(29,500)	(26,501)	(15,000)
Proceeds from FRB borrowings	1	1	1
Repayments of FRB borrowings	(1)	(1)	(1)
Proceeds from Fed Funds Purchased	9,112	5,192	2,602
Repayments of Fed Funds Purchased	(9,112)	(5,192)	(2,602)
Stock options exercised	0	0	37
Common stock repurchased	(1,984)	(1,917)	(82)
Cash dividends paid on common stock	(2,106)	(1,574)	(1,022)
Net cash (used) provided by financing activities	41,713	(13,072)	2,306
Net change in cash and cash equivalents	30,331	(29,335)	(7,675)
Cash and cash equivalents at beginning of period	39,763	69,098	76,773
Cash and cash equivalents at end of period	70,094	39,763	69,098
Cash paid during the year for:
Interest	3,415	3,518	4,388
Income taxes	2,028	2,278	1,939
Noncash investing and financing activities:
Change in unrealized (loss) gain on investment securities available for sale, net	(2,523)	57	6,625
Transfer of loans to other real estate and repossessions	563	4,825	4,415
Financed portion of sale of other real estate	0	60	374
Accrued redemption of Series A Preferred Stock	$ 0	$ 0	$ (12,524)

1. Summary of Significant Accou

1. Summary of Significant Accounting Policies	12 Months Ended
	Dec. 31, 2016
Accounting Policies [Abstract]
1. Summary of Significant Accounting Policies	Organization Peoples Bancorp of North Carolina, Inc. ("Bancorp") received regulatory approval to operate as a bank holding company on July 22, 1999, and became effective August 31, 1999. Bancorp is primarily regulated by the Board of Governors of the Federal Reserve System, and serves as the one-bank holding company for Peoples Bank (the "Bank"). The Bank commenced business in 1912 upon receipt of its banking charter from the North Carolina Commissioner of Banks (the "Commissioner"). The Bank is primarily regulated by the Commissioner and the Federal Deposit Insurance Corporation (the "FDIC") and undergoes periodic examinations by these regulatory agencies. The Bank, whose main office is in Newton, North Carolina, provides a full range of commercial and consumer banking services primarily in Catawba, Alexander, Lincoln, Mecklenburg, Iredell, Union, Wake, Durham and Forsyth counties in North Carolina. Peoples Investment Services, Inc. is a wholly owned subsidiary of the Bank and began operations in 1996 to provide investment and trust services through agreements with an outside party. Real Estate Advisory Services, Inc. ("REAS") is a wholly owned subsidiary of the Bank and began operations in 1997 to provide real estate appraisal and property management services to individuals and commercial customers of the Bank. Community Bank Real Estate Solutions, LLC ("CBRES") is a wholly owned subsidiary of the Bank and began operations in 2009 as a "clearing house" for appraisal services for community banks. Other banks are able to contract with CBRES to find and engage appropriate appraisal companies in the area where the property is located. CBRES was moved from a wholly owned subsidiary of Peoples Bancorp of North Carolina, Inc. to a wholly owned subsidiary of the Bank effective August 31, 2016. PB Real Estate Holdings, LLC ("PBREH") is a wholly owned subsidiary of the Bank and began operation in 2015. PBREH acquires, manages and disposes of real property, other collateral and other assets obtained in the ordinary course of collecting debts previously contracted. The Bank operates four offices focused on the Latino population under the name Banco de la Gente. These offices are operated as a division of the Bank. Banco de la Gente offers normal and customary banking services as are offered in the Bank's other branches such as the taking of deposits and the making of loans and therefore is not considered a reportable segment of the Company (as defined below). Principles of Consolidation The consolidated financial statements include the financial statements of Bancorp and its wholly owned subsidiary, the Bank, along with the Bank's wholly owned subsidiaries, Peoples Investment Services, Inc., REAS, CBRES and PBREH (collectively called the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation. Basis of Presentation The accounting principles followed by the Company, and the methods of applying these principles, conform with accounting principles generally accepted in the United States of America ("GAAP") and with general practices in the banking industry. In preparing the financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ significantly from these estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses and valuation of real estate acquired in connection with or in lieu of foreclosure on loans. Cash and Cash Equivalents Cash, due from banks and interest-bearing deposits are considered cash and cash equivalents for cash flow reporting purposes. Investment Securities There are three classifications the Company is able to classify its investment securities: trading, available for sale, or held to maturity. Trading securities are bought and held principally for sale in the near term. Held to maturity securities are those securities for which the Company has the ability and intent to hold until maturity. All other securities not included in trading or held to maturity are classified as available for sale. At December 31, 2016 and 2015, the Company classified all of its investment securities as available for sale. Available for sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of shareholders' equity until realized. Management evaluates investment securities for other-than-temporary impairment on an annual basis. A decline in the market value of any investment below cost that is deemed other-than-temporary is charged to earnings for the decline in value deemed to be credit related and a new cost basis in the security is established. The decline in value attributed to non-credit related factors is recognized in comprehensive income. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to the yield. Realized gains and losses for securities classified as available for sale are included in earnings and are derived using the specific identification method for determining the cost of securities sold. Other Investments Other investments include equity securities with no readily determinable fair value. These investments are carried at cost. Mortgage Loans Held for Sale Mortgage loans held for sale are carried at lower of aggregate cost or market value. The cost of mortgage loans held for sale approximates the market value. Loans Loans that management has the intent and ability to hold for the foreseeable future or until maturity are reported at the principal amount outstanding, net of the allowance for loan losses. Interest on loans is calculated by using the simple interest method on daily balances of the principal amount outstanding. The recognition of certain loan origination fee income and certain loan origination costs is deferred when such loans are originated and amortized over the life of the loan. A loan is impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan will not be collected. Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan's effective interest rate, or at the loan's observable market price, or the fair value of the collateral if the loan is collateral dependent. Accrual of interest is discontinued on a loan when management believes, after considering economic conditions and collection efforts, that the borrower's financial condition is such that collection of interest is doubtful. Interest previously accrued but not collected is reversed against current period earnings. Allowance for Loan Losses The allowance for loan losses reflects management's assessment and estimate of the risks associated with extending credit and its evaluation of the quality of the loan portfolio. The Bank periodically analyzes the loan portfolio in an effort to review asset quality and to establish an allowance for loan losses that management believes will be adequate in light of anticipated risks and loan losses. In assessing the adequacy of the allowance, size, quality and risk of loans in the portfolio are reviewed. Other factors considered are: · the Bank's loan loss experience; · the amount of past due and non-performing loans; · specific known risks; · the status and amount of other past due and non-performing assets; · underlying estimated values of collateral securing loans; · current and anticipated economic conditions; and · other factors which management believes affect the allowance for potential credit losses. Management uses several measures to assess and monitor the credit risks in the loan portfolio, including a loan grading system that begins upon loan origination and continues until the loan is collected or collectability becomes doubtful. Upon loan origination, the Bank's originating loan officer evaluates the quality of the loan and assigns one of eight risk grades. The loan officer monitors the loan's performance and credit quality and makes changes to the credit grade as conditions warrant. When originated or renewed, all loans over a certain dollar amount receive in-depth reviews and risk assessments by the Bank's Credit Administration. Before making any changes in these risk grades, management considers assessments as determined by the third party credit review firm (as described below), regulatory examiners and the Bank's Credit Administration. Any issues regarding the risk assessments are addressed by the Bank's senior credit administrators and factored into management's decision to originate or renew the loan. The Bank's Board of Directors reviews, on a monthly basis, an analysis of the Bank's reserves relative to the range of reserves estimated by the Bank's Credit Administration. As an additional measure, the Bank engages an independent third party to review the underwriting, documentation and risk grading analyses. This independent third party reviews and evaluates loan relationships greater than $1.0 million, excluding loans in default, and loans in process of litigation or liquidation. The third party's evaluation and report is shared with management and the Bank's Board of Directors. Management considers certain commercial loans with weak credit risk grades to be individually impaired and measures such impairment based upon available cash flows and the value of the collateral. Allowance or reserve levels are estimated for all other graded loans in the portfolio based on their assigned credit risk grade, type of loan and other matters related to credit risk. Management uses the information developed from the procedures described above in evaluating and grading the loan portfolio. This continual grading process is used to monitor the credit quality of the loan portfolio and to assist management in estimating the allowance for loan losses. The provision for loan losses charged or credited to earnings is based upon management's judgment of the amount necessary to maintain the allowance at a level appropriate to absorb probable incurred losses in the loan portfolio at the balance sheet date. The amount each quarter is dependent upon many factors, including growth and changes in the composition of the loan portfolio, net charge-offs, delinquencies, management's assessment of loan portfolio quality, the value of collateral, and other macro-economic factors and trends. The evaluation of these factors is performed quarterly by management through an analysis of the appropriateness of the allowance for loan losses. The allowance for loan losses is comprised of three components: specific reserves, general reserves and unallocated reserves. After a loan has been identified as impaired, management measures impairment. When the measure of the impaired loan is less than the recorded investment in the loan, the amount of the impairment is recorded as a specific reserve. These specific reserves are determined on an individual loan basis based on management's current evaluation of the Bank's loss exposure for each credit, given the appraised value of any underlying collateral. Loans for which specific reserves are provided are excluded from the general allowance calculations as described below. The general allowance reflects reserves established under GAAP for collective loan impairment. These reserves are based upon historical net charge-offs using the greater of the last two, three, four or five years' loss experience. This charge-off experience may be adjusted to reflect the effects of current conditions. The Bank considers information derived from its loan risk ratings and external data related to industry and general economic trends in establishing reserves. The unallocated allowance is determined through management's assessment of probable losses that are in the portfolio but are not adequately captured by the other two components of the allowance, including consideration of current economic and business conditions and regulatory requirements. The unallocated allowance also reflects management's acknowledgement of the imprecision and subjectivity that underlie the modeling of credit risk. Due to the subjectivity involved in determining the overall allowance, including the unallocated portion, the unallocated portion may fluctuate from period to period based on management's evaluation of the factors affecting the assumptions used in calculating the allowance. There were no significant changes in the estimation methods or fundamental assumptions used in the evaluation of the allowance for loan losses for the year ended December 31, 2016 as compared to the year ended December 31, 2015. Revisions, estimates and assumptions may be made in any period in which the supporting factors indicate that loss levels may vary from the previous estimates. Effective December 31, 2012, stated income mortgage loans from the Banco de la Gente division of the Bank were analyzed separately from other single family residential loans in the Bank's loan portfolio. These loans are first mortgage loans made to the Latino market, primarily in Mecklenburg and surrounding counties. These loans are non-traditional mortgages in that the customer normally did not have a credit history, so all credit information was accumulated by the loan officers. These loans were made as stated income loans rather than full documentation loans because the customer may not have had complete documentation on the income supporting the loan. Various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses. Such agencies may require adjustments to the allowance based on their judgments of information available to them at the time of their examinations. Management believes it has established the allowance for credit losses pursuant to GAAP, and has taken into account the views of its regulators and the current economic environment. Management considers the allowance for loan losses adequate to cover the estimated losses inherent in the Bank's loan portfolio as of the date of the financial statements. Although management uses the best information available to make evaluations, significant future additions to the allowance may be necessary based on changes in economic and other conditions, thus adversely affecting the operating results of the Company. Mortgage Banking Activities Mortgage banking income represents net gains from the sale of mortgage loans and fees received from borrowers and loan investors related to the Bank's origination of single-family residential mortgage loans. Mortgage loans serviced for others are not included in the accompanying balance sheets. The unpaid principal balances of mortgage loans serviced for others was approximately $1.4 million, $1.6 million and $2.1 million at December 31, 2016, 2015 and 2014, respectively. The Bank originates certain fixed rate mortgage loans and commits these loans for sale. The commitments to originate fixed rate mortgage loans and the commitments to sell these loans to a third party are both derivative contracts. The fair value of these derivative contracts is immaterial and has no effect on the recorded amounts in the financial statements. Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the assets. When assets are retired or otherwise disposed, the cost and related accumulated depreciation are removed from the accounts, and any gain or loss is reflected in earnings for that period. The cost of maintenance and repairs that do not improve or extend the useful life of the respective asset is charged to earnings as incurred, whereas significant renewals and improvements are capitalized. The range of estimated useful lives for premises and equipment are generally as follows: Buildings and improvements 10 - 50 years Furniture and equipment 3 - 10 years Other Real Estate Foreclosed assets include all assets received in full or partial satisfaction of a loan. Foreclosed assets are reported at fair value less estimated selling costs. Any write-downs at the time of foreclosure are charged to the allowance for loan losses. Subsequent to foreclosure, valuations are periodically performed by management, and a valuation allowance is established if fair value less estimated selling costs declines below carrying value. Costs relating to the development and improvement of the property are capitalized. Revenues and expenses from operations are included in other expenses. Changes in the valuation allowance are included in loss on sale and write-down of other real estate. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Additionally, the recognition of future tax benefits, such as net operating loss carryforwards, is required to the extent that the realization of such benefits is more likely than not to occur. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date. In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company's assets and liabilities results in a deferred tax asset, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some portion or all of the deferred tax asset will not be realized. In assessing the realizability of a deferred tax asset, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. Tax effects from an uncertain tax position can be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Previously recognized tax positions that no longer meet the more likely than not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. The Company assessed the impact of this guidance and determined that it did not have a material impact on the Company's financial position, results of operations or disclosures. Derivative Financial Instruments and Hedging Activities In the normal course of business, the Company enters into derivative contracts to manage interest rate risk by modifying the characteristics of the related balance sheet instruments in order to reduce the adverse effect of changes in interest rates. All material derivative financial instruments are recorded at fair value in the financial statements. The fair value of derivative contracts related to the origination of fixed rate mortgage loans and the commitments to sell these loans to a third party is immaterial and has no effect on the recorded amounts in the financial statements. The disclosure requirements for derivatives and hedging activities have the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. The disclosure requirements include qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about the fair value of, and gains and losses on, derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. On the date a derivative contract is entered into, the Company designates the derivative as a fair value hedge, a cash flow hedge, or a trading instrument. Changes in the fair value of instruments used as fair value hedges are accounted for in the earnings of the period simultaneous with accounting for the fair value change of the item being hedged. Changes in the fair value of the effective portion of cash flow hedges are accounted for in other comprehensive income rather than earnings. Changes in fair value of instruments that are not intended as a hedge are accounted for in the earnings of the period of the change. If a derivative instrument designated as a fair value hedge is terminated or the hedge designation removed, the difference between a hedged item's then carrying amount and its face amount is recognized into income over the original hedge period. Likewise, if a derivative instrument designated as a cash flow hedge is terminated or the hedge designation removed, related amounts accumulated in other accumulated comprehensive income are reclassified into earnings over the original hedge period during which the hedged item affects income. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company formally documents all hedging relationships, including an assessment that the derivative instruments are expected to be highly effective in offsetting the changes in fair values or cash flows of the hedged items. Advertising Costs Advertising costs are expensed as incurred. Stock-Based Compensation The Company has an Omnibus Stock Ownership and Long Term Incentive Plan that was approved by shareholders on May 7, 2009 (the "Plan") whereby certain stock-based rights, such as stock options, restricted stock, restricted stock units, performance units, stock appreciation rights or book value shares, may be granted to eligible directors and employees. A total of 262,520 shares are currently reserved for possible issuance under the Plan. All stock-based rights under the Plan must be granted or awarded by May 7, 2019 (i.e. ten years from the Plan effective date). The Company granted 29,514 restricted stock units under the Plan at a grant date fair value of $7.90 per share during the first quarter of 2012, of which 5,355 restricted stock units were forfeited by the executive officers of the Company as required by the agreement with the U.S. Department of the Treasury ("UST") in conjunction with the Company's participation in the Capital Purchase Program ("CPP") under the Troubled Asset Relief Program ("TARP"). In July 2012, the Company granted 5,355 restricted stock units at a grant date fair value of $8.25 per share. The Company granted 26,795 restricted stock units under the Plan at a grant date fair value of $11.90 per share during the second quarter of 2013. The Company granted 21,056 restricted stock units under the Plan at a grant date fair value of $15.70 per share during the first quarter of 2014. The Company granted 15,075 restricted stock units under the Plan at a grant date fair value of $17.97 per share during the first quarter of 2015. The Company granted 5,040 restricted stock units under the Plan at a grant date fair value of $18.60 per share during the first quarter of 2016. The Company recognizes compensation expense on the restricted stock units over the period of time the restrictions are in place (five years from the grant date for the 2012 grants, four years from the grant date for the 2013, 2015 and 2016 grants and three years from the grant date for the 2014 grants). The amount of expense recorded each period reflects the changes in the Company's stock price during such period. As of December 31, 2016, the total unrecognized compensation expense related to the restricted stock unit grants under the Plan was $396,000. The Company recognized compensation expense for restricted stock units granted under the Plan of $932,000, $487,000 and $389,000 for the years ended December 31, 2016, 2015 and 2014, respectively. Net Earnings Per Share Net earnings per common share is based on the weighted average number of common shares outstanding during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per common share. The average market price during the year is used to compute equivalent shares. The reconciliations of the amounts used in the computation of both "basic earnings per common share" and "diluted earnings per common share" for the years ended December 31, 2016, 2015 and 2014 are as follows: For the year ended December 31, 2016 Net Earnings (Dollars in thousands) Weighted Average Number of Shares Per Share Amount Basic earnings per share $ 9,177 5,477,245 $ 1.68 Effect of dilutive securities: Restricted stock units - 70,734 Diluted earnings per share $ 9,177 5,547,979 $ 1.65 For the year ended December 31, 2015 Net Earnings (Dollars in thousands) Weighted Average Number of Shares Per Share Amount Basic earnings per share $ 9,633 5,559,235 $ 1.73 Effect of dilutive securities: Restricted stock units - 47,954 Diluted earnings per share $ 9,633 5,607,189 $ 1.72 For the year ended December 31, 2014 Net Earnings (Dollars in thousands) Weighted Average Number of Shares Per Share Amount Basic earnings per share $ 9,388 5,615,666 $ 1.67 Effect of dilutive securities: Restricted stock units - 26,326 Diluted earnings per share $ 9,388 5,641,992 $ 1.66 Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, (Topic 842): Leases In June 2016, FASB issued ASU No. 2016-13, (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 provides guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. ASU No. 2016-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. The Company is currently evaluating the effect that implementation of the new standard will have on its results of operations, financial position and disclosures. In October 2016, FASB issued ASU No. 2016-16, (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory In October 2016, FASB issued ASU No. 2016-17, (Topic 810): Interests Held through Related Parties That Are under Common Control In November 2016, FASB issued ASU No. 2016-18, (Topic 230): Restricted Cash In December 2016, FASB issued ASU No. 2016-20, (Topic 606): Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers Other accounting standards that have been issued or proposed by FASB or other standards-setting bodies are not expected to have a material impact on the Company's results of operations, financial position or disclosures. Reclassification Certain amounts in the 2014 and 2015 consolidated financial statements have been reclassified to conform to the 2016 presentation.

2. Investment Securities

2. Investment Securities	12 Months Ended
	Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]
Investment Securities	Investment securities available for sale at December 31, 2016 and 2015 are as follows: (Dollars in thousands) December 31, 2016 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Mortgage-backed securities $ 66,654 1,221 290 67,585 U.S. Government sponsored enterprises 38,188 308 274 38,222 State and political subdivisions 137,832 4,176 152 141,856 Corporate bonds 1,500 33 - 1,533 Trust preferred securities 750 - - 750 Total $ 244,924 5,738 716 249,946 (Dollars in thousands) December 31, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Mortgage-backed securities $ 76,406 1,526 45 77,887 U.S. Government sponsored enterprises 38,173 399 155 38,417 State and political subdivisions 141,500 6,817 72 148,245 Corporate bonds 1,928 - 22 1,906 Trust preferred securities 750 - - 750 Equity securities 748 577 - 1,325 Total $ 259,505 9,319 294 268,530 The current fair value and associated unrealized losses on investments in debt securities with unrealized losses at December 31, 2016 and 2015 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position. (Dollars in thousands) December 31, 2016 Less than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Mortgage-backed securities $ 15,594 290 - - 15,594 290 U.S. Government sponsored enterprises 10,120 94 9,562 180 19,682 274 State and political subdivisions 10,441 123 561 29 11,002 152 Total $ 36,155 507 10,123 209 46,278 716 (Dollars in thousands) December 31, 2015 Less than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Mortgage-backed securities $ 7,891 45 - - 7,891 45 U.S. Government sponsored enterprises 3,074 13 10,828 142 13,902 155 State and political subdivisions 2,198 4 3,930 68 6,128 72 Corporate bonds 1,500 22 - - 1,500 22 Total $ 14,663 84 14,758 210 29,421 294 At December 31, 2016, unrealized losses in the investment securities portfolio relating to debt securities totaled $716,000. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the December 31, 2016 tables above, one out of 168 securities issued by state and political subdivisions contained unrealized losses and five out of 80 securities issued by U.S. Government sponsored enterprises, including mortgage-backed securities, contained unrealized losses. These unrealized losses are considered temporary because of acceptable financial condition and results of operations on each security and the repayment sources of principal and interest on U.S. Government sponsored enterprises, including mortgage-backed securities, are government backed. The Company periodically evaluates its investments for any impairment which would be deemed other-than-temporary. No investment impairments were deemed other-than-temporary in 2016, 2015 or 2014. The amortized cost and estimated fair value of investment securities available for sale at December 31, 2016, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties. December 31, 2016 (Dollars in thousands) Amortized Cost Estimated Fair Value Due within one year $ 7,304 7,341 Due from one to five years 81,366 84,100 Due from five to ten years 77,498 78,751 Due after ten years 12,102 12,169 Mortgage-backed securities 66,654 67,585 Equity securities - - Total $ 244,924 249,946 During 2016, proceeds from sales of securities available for sale were $1.5 million and resulted in gross gains of $729,000. No securities available for sale were sold during the year ended December 31, 2015. During 2014, proceeds from sales of securities available for sale were $20.2 million and resulted in gross gains of $291,000 and gross losses of $25,000. Securities with a fair value of approximately $95.6 million and $91.0 million at December 31, 2016 and 2015, respectively, were pledged to secure public deposits, Federal Home Loan Bank of Atlanta ("FHLB") borrowings and for other purposes as required by law. GAAP establishes a framework for measuring fair value and expands disclosures about fair value measurements. There is a three-level fair value hierarchy for fair value measurements. Level 1 inputs are quoted prices in active markets for identical assets or liabilities that a company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The table below presents the balance of securities available for sale, which are measured at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2016 and 2015. (Dollars in thousands) December 31, 2016 Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage-backed securities $ 67,585 - 67,585 - U.S. Government sponsored enterprises $ 38,222 - 38,222 - State and political subdivisions $ 141,856 - 141,856 - Corporate bonds $ 1,533 - 1,533 - Trust preferred securities $ 750 - - 750 (Dollars in thousands) December 31, 2015 Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage-backed securities $ 77,887 - 77,887 - U.S. Government sponsored enterprises $ 38,417 - 38,417 - State and political subdivisions $ 148,245 - 148,245 - Corporate bonds $ 1,906 - 1,906 - Trust preferred securities $ 750 - - 750 Equity securities $ 1,325 1,325 - - Fair values of investment securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges when available. If quoted prices are not available, fair value is determined using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities. The following is an analysis of fair value measurements of investment securities available for sale using Level 3, significant unobservable inputs, for the year ended December 31, 2016. (Dollars in thousands) Investment Securities Level 3 Valuation Balance, beginning of period $ 750 Change in book value - Change in gain/(loss) realized and unrealized - Purchases/(sales and calls) - Transfers in and/or (out) of Level 3 - Balance, end of period $ 750 Change in unrealized gain/(loss) for assets still held in Level 3 $ -

3. Loans

3. Loans	12 Months Ended
	Dec. 31, 2016
Receivables [Abstract]
Loans	Major classifications of loans at December 31, 2016 and 2015 are summarized as follows: (Dollars in thousands) December 31, 2016 December 31, 2015 Real estate loans: Construction and land development $ 61,749 65,791 Single-family residential 240,700 220,690 Single-family residential - Banco de la Gente stated income 40,189 43,733 Commercial 247,521 228,526 Multifamily and farmland 21,047 18,080 Total real estate loans 611,206 576,820 Loans not secured by real estate: Commercial loans 87,596 91,010 Farm loans - 3 Consumer loans 9,832 10,027 All other loans 15,177 11,231 Total loans 723,811 689,091 Less allowance for loan losses 7,550 9,589 Total net loans $ 716,261 679,502 The above table includes deferred costs, net of deferred fees, totaling $1.4 million and $488,000 at December 31, 2016 and 2015, respectively. The Bank grants loans and extensions of credit primarily within the Catawba Valley region of North Carolina, which encompasses Catawba, Alexander, Iredell and Lincoln counties and also in Mecklenburg, Union, Wake, Durham and Forsyth counties of North Carolina. Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate, the value of which is dependent upon the real estate market. Risk characteristics of the major components of the Bank's loan portfolio are discussed below: · Construction and land development loans – The risk of loss is largely dependent on the initial estimate of whether the property's value at completion equals or exceeds the cost of property construction and the availability of take-out financing. During the construction phase, a number of factors can result in delays or cost overruns. If the estimate is inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan, sale of the property, or by seizure of collateral. As of December 31, 2016, construction and land development loans comprised approximately 9% of the Bank's total loan portfolio. · Single-family residential loans – Declining home sales volumes, decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans. As of December 31, 2016, single-family residential loans comprised approximately 39% of the Bank's total loan portfolio, including Banco de la Gente single-family residential stated income loans which were approximately 6% of the Bank's total loan portfolio. · Commercial real estate loans – Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service. These loans also involve greater risk because they are generally not fully amortizing over a loan period, but rather have a balloon payment due at maturity. A borrower's ability to make a balloon payment typically will depend on being able to either refinance the loan or timely sell the underlying property. As of December 31, 2016, commercial real estate loans comprised approximately 34% of the Bank's total loan portfolio. · Commercial loans – Repayment is generally dependent upon the successful operation of the borrower's business. In addition, the collateral securing the loans may depreciate over time, be difficult to appraise, be illiquid, or fluctuate in value based on the success of the business. As of December 31, 2016, commercial loans comprised approximately 12% of the Bank's total loan portfolio. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on non-accrual status when, in management's opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The following tables present an age analysis of past due loans, by loan type, as of December 31, 2016 and 2015: December 31, 2016 (Dollars in thousands) Loans 30-89 Days Past Due Loans 90 or More Days Past Due Total Past Due Loans Total Current Loans Total Loans Accruing Loans 90 or More Days Past Due Real estate loans: Construction and land development $ - 10 10 61,739 61,749 - Single-family residential 4,890 80 4,970 235,730 240,700 - Single-family residential - Banco de la Gente stated income 5,250 249 5,499 34,690 40,189 - Commercial 342 126 468 247,053 247,521 - Multifamily and farmland 471 - 471 20,576 21,047 - Total real estate loans 10,953 465 11,418 599,788 611,206 - Loans not secured by real estate: Commercial loans 273 - 273 87,323 87,596 - Farm loans - - - - - - Consumer loans 68 6 74 9,758 9,832 - All other loans 3 - 3 15,174 15,177 - Total loans $ 11,297 471 11,768 712,043 723,811 - December 31, 2015 (Dollars in thousands) Loans 30-89 Days Past Due Loans 90 or More Days Past Due Total Past Due Loans Total Current Loans Total Loans Accruing Loans 90 or More Days Past Due Real estate loans: Construction and land development $ 330 17 347 65,444 65,791 - Single-family residential 2,822 1,385 4,207 216,483 220,690 - Single-family residential - Banco de la Gente stated income 7,021 114 7,135 36,598 43,733 - Commercial 2,619 157 2,776 225,750 228,526 - Multifamily and farmland - - - 18,080 18,080 - Total real estate loans 12,792 1,673 14,465 562,355 576,820 - Loans not secured by real estate: Commercial loans 185 40 225 90,785 91,010 17 Farm loans - - - 3 3 - Consumer loans 136 8 144 9,883 10,027 - All other loans - - - 11,231 11,231 - Total loans $ 13,113 1,721 14,834 674,257 689,091 17 The following table presents the Bank's non-accrual loans as of December 31, 2016 and 2015: (Dollars in thousands) December 31, 2016 December 31, 2015 Real estate loans: Construction and land development $ 22 146 Single-family residential 1,662 4,023 Single-family residential - Banco de la Gente stated income 1,340 1,106 Commercial 669 2,992 Multifamily and farmland 78 - Total real estate loans 3,771 8,267 Loans not secured by real estate: Commercial loans 21 113 Consumer loans 33 52 Total $ 3,825 8,432 At each reporting period, the Bank determines which loans are impaired. Accordingly, the Bank's impaired loans are reported at their estimated fair value on a non-recurring basis. An allowance for each impaired loan that is collateral-dependent is calculated based on the fair value of its collateral. The fair value of the collateral is based on appraisals performed by REAS, a subsidiary of the Bank. REAS is staffed by certified appraisers that also perform appraisals for other companies. Factors, including the assumptions and techniques utilized by the appraiser, are considered by management. If the recorded investment in the impaired loan exceeds the measure of fair value of the collateral, a valuation allowance is recorded as a component of the allowance for loan losses. An allowance for each impaired loan that is not collateral dependent is calculated based on the present value of projected cash flows. If the recorded investment in the impaired loan exceeds the present value of projected cash flows, a valuation allowance is recorded as a component of the allowance for loan losses. Impaired loans under $250,000 are not individually evaluated for impairment with the exception of the Bank's troubled debt restructured ("TDR") loans in the residential mortgage loan portfolio, which are individually evaluated for impairment. Impaired loans collectively evaluated for impairment totaled $5.9 million and $8.4 million at December 31, 2016 and 2015, respectively. Accruing impaired loans were $23.5 million and $25.0 million at December 31, 2016 and December 31, 2015, respectively. Interest income recognized on accruing impaired loans was $1.2 million and $1.3 million for the years ended December 31, 2016 and 2015, respectively. No interest income is recognized on non-accrual impaired loans subsequent to their classification as non-accrual. The following tables present the Bank's impaired loans as of December 31, 2016, 2015 and 2014: December 31, 2016 (Dollars in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Recorded Investment in Impaired Loans Related Allowance Average Outstanding Impaired Loans YTD Interest Income Recognized Real estate loans: Construction and land development $ 282 - 278 278 11 330 13 Single-family residential 5,354 703 4,323 5,026 47 7,247 164 Single-family residential - Banco de la Gente stated income 18,611 - 18,074 18,074 1,182 17,673 861 Commercial 3,750 1,299 2,197 3,496 166 4,657 152 Multifamily and farmland 78 - 78 78 - 78 - Total impaired real estate loans 28,075 2,002 24,950 26,952 1,406 29,985 1,190 Loans not secured by real estate: Commercial loans 27 - 27 27 - 95 - Consumer loans 211 - 202 202 3 222 8 Total impaired loans $ 28,313 2,002 25,179 27,181 1,409 30,302 1,198 December 31, 2015 (Dollars in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Recorded Investment in Impaired Loans Related Allowance Average Outstanding Impaired Loans YTD Interest Income Recognized Real estate loans: Construction and land development $ 643 216 226 442 12 705 18 Single-family residential 8,828 1,489 6,805 8,294 189 10,852 224 Single-family residential - Banco de la Gente stated income 20,375 - 19,215 19,215 1,143 18,414 921 Commercial 4,556 - 4,893 4,893 179 5,497 89 Multifamily and farmland 96 - 83 83 - 93 6 Total impaired real estate loans 34,498 1,705 31,222 32,927 1,523 35,561 1,258 Loans not secured by real estate: Commercial loans 180 - 161 161 3 132 5 Consumer loans 286 - 260 260 4 283 11 Total impaired loans $ 34,964 1,705 31,643 33,348 1,530 35,976 1,274 December 31, 2014 (Dollars in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Recorded Investment in Impaired Loans Related Allowance Average Outstanding Impaired Loans YTD Interest Income Recognized Real estate loans: Construction and land development $ 5,481 3,639 555 4,194 31 5,248 20 Single-family residential 6,717 933 5,540 6,473 154 7,430 214 Single-family residential - Banco de la Gente stated income 21,243 - 20,649 20,649 1,191 19,964 952 Commercial 4,752 1,485 2,866 4,351 272 4,399 76 Multifamily and farmland 111 - 110 110 1 154 - Total impaired real estate loans 38,304 6,057 29,720 35,777 1,649 37,195 1,262 Loans not secured by real estate: Commercial loans 218 - 201 201 4 641 2 Farm loans (non RE) - Consumer loans 318 - 313 313 5 309 12 Total impaired loans $ 38,840 6,057 30,234 36,291 1,658 38,145 1,276 The fair value measurements for mortgage loans held for sale, impaired loans and other real estate on a non-recurring basis at December 31, 2016 and 2015 are presented below. The Company's valuation methodology is discussed in Note 15. (Dollars in thousands) Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage loans held for sale $ 5,709 - - 5,709 Impaired loans $ 25,931 - - 25,931 Other real estate $ 283 - - 283 (Dollars in thousands) Fair Value Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage loans held for sale $ 4,149 - - 4,149 Impaired loans $ 31,818 - - 31,818 Other real estate $ 739 - - 739 (Dollars in thousands) Fair Value December 31, 2016 Fair Value December 31, 2015 Valuation Technique Significant Unobservable Inputs General Range of Significant Input Values Mortgage loans held for sale $ 5,709 4,149 Rate lock commitment N/A N/A Impaired loans $ 25,931 31,818 Appraised value and discounted cash flows Discounts to reflect current market conditions and ultimate collectability 0 - 25% Other real estate $ 283 739 Appraised value Discounts to reflect current market conditions and estimated costs to sell 0 - 25% Changes in the allowance for loan losses for the year ended December 31, 2016 were as follows: (Dollars in thousands) Real Estate Loans Construction Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer Unallocated Total Allowance for loan losses: Beginning balance $ 2,185 2,534 1,460 1,917 - 842 - 172 479 9,589 Charge-offs (7 ) (275 ) - (318 ) - (146 ) - (492 ) - (1,238 ) Recoveries 10 55 - 19 - 170 - 151 - 405 Provision (1,036 ) (188 ) (83 ) (25 ) 52 (191 ) - 373 (108 ) (1,206 ) Ending balance $ 1,152 2,126 1,377 1,593 52 675 - 204 371 7,550 Ending balance: individually evaluated for impairment $ - - 1,160 159 - - - - - 1,319 Ending balance: collectively evaluated for impairment 1,152 2,126 217 1,434 52 675 - 204 371 6,231 Ending balance $ 1,152 2,126 1,377 1,593 52 675 - 204 371 7,550 Loans: Ending balance $ 61,749 240,700 40,189 247,521 21,047 87,596 - 25,009 - 723,811 Ending balance: individually evaluated for impairment $ - 935 16,718 3,648 - - - - - 21,301 Ending balance: collectively evaluated for impairment $ 61,749 239,765 23,471 243,873 21,047 87,596 - 25,009 - 702,510 Changes in the allowance for loan losses for the year ended December 31, 2015 were as follows: (Dollars in thousands) Real Estate Loans Construction Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer Unallocated Total Allowance for loan losses: Beginning balance $ 2,785 2,566 1,610 1,902 7 1,098 - 233 881 11,082 Charge-offs (198 ) (618 ) (117 ) (329 ) - (37 ) - (545 ) - (1,844 ) Recoveries 45 34 22 21 - 101 - 145 - 368 Provision (447 ) 552 (55 ) 323 (7 ) (320 ) - 339 (402 ) (17 ) Ending balance $ 2,185 2,534 1,460 1,917 - 842 - 172 479 9,589 Ending balance: individually evaluated for impairment $ - 96 1,115 171 - - - - - 1,382 Ending balance: collectively evaluated for impairment 2,185 2,438 345 1,746 - 842 - 172 479 8,207 Ending balance $ 2,185 2,534 1,460 1,917 - 842 - 172 479 9,589 Loans: Ending balance $ 65,791 220,690 43,733 228,526 18,080 91,010 3 21,258 - 689,091 Ending balance: individually evaluated for impairment $ 216 2,636 17,850 4,212 - - - - - 24,914 Ending balance: collectively evaluated for impairment $ 65,575 218,054 25,883 224,314 18,080 91,010 3 21,258 - 664,177 Changes in the allowance for loan losses for the year ended December 31, 2014 were as follows: (Dollars in thousands) Real Estate Loans Construction Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer Unallocated Total Allowance for loan losses: Beginning balance $ 3,218 3,123 1,863 2,219 37 1,069 - 245 1,727 13,501 Charge-offs (884 ) (309 ) (190 ) (290 ) - (430 ) - (534 ) - (2,637 ) Recoveries 428 72 16 171 - 54 - 176 - 917 Provision 23 (320 ) (79 ) (198 ) (30 ) 405 - 346 (846 ) (699 ) Ending balance $ 2,785 2,566 1,610 1,902 7 1,098 - 233 881 11,082 Ending balance: individually evaluated for impairment $ - 82 1,155 260 - - - - - 1,497 Ending balance: collectively evaluated for impairment 2,785 2,484 455 1,642 7 1,098 - 233 881 9,585 Ending balance $ 2,785 2,566 1,610 1,902 7 1,098 - 233 881 11,082 Loans: Ending balance $ 57,617 206,417 47,015 228,558 12,400 76,262 7 23,615 - 651,891 Ending balance: individually evaluated for impairment $ 3,639 2,298 18,884 3,345 - - - - - 28,166 Ending balance: collectively evaluated for impairment $ 53,978 204,119 28,131 225,213 12,400 76,262 7 23,615 - 623,725 The Bank utilizes an internal risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 8. These risk grades are evaluated on an ongoing basis. A description of the general characteristics of the eight risk grades is as follows: · Risk Grade 1 – Excellent Quality: Loans are well above average quality and a minimal amount of credit risk exists. CD or cash secured loans or properly margined actively traded stock or bond secured loans would fall in this grade. · Risk Grade 2 – High Quality: Loans are of good quality with risk levels well within the Company's range of acceptability. The organization or individual is established with a history of successful performance though somewhat susceptible to economic changes. · Risk Grade 3 – Good Quality: Loans of average quality with risk levels within the Company's range of acceptability but higher than normal. This may be a new organization or an existing organization in a transitional phase (e.g. expansion, acquisition, market change). · Risk Grade 4 – Management Attention: These loans have higher risk and servicing needs but still are acceptable. Evidence of marginal performance or deteriorating trends is observed. These are not problem credits presently, but may be in the future if the borrower is unable to change its present course. · Risk Grade 5 – Watch: These loans are currently performing satisfactorily, but there has been some recent past due history on repayment and there are potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Company's position at some future date. · Risk Grade 6 – Substandard: A Substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged (if there is any). There is a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. · Risk Grade 7 – Doubtful: Loans classified as Doubtful have all the weaknesses inherent in loans classified 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. Doubtful is a temporary grade where a loss is expected but is presently not quantified with any degree of accuracy. Once the loss position is determined, the amount is charged off. · Risk Grade 8 – Loss: Loans classified as Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be realized in the future. Loss is a temporary grade until the appropriate authority is obtained to charge the loan off. The following tables present the credit risk profile of each loan type based on internally assigned risk grades as of December 31, 2016 and 2015. December 31, 2016 (Dollars in thousands) Real Estate Loans Construction Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer All Other Total 1- Excellent Quality $ - 14,996 - - - 541 - 959 - 16,496 2- High Quality 9,784 109,809 - 39,769 2,884 26,006 - 3,335 2,507 194,094 3- Good Quality 33,633 82,147 16,703 176,109 14,529 55,155 - 4,842 10,921 394,039 4- Management Attention 10,892 25,219 15,580 24,753 2,355 5,586 - 619 1,749 86,753 5- Watch 7,229 4,682 3,943 4,906 1,201 246 - 31 - 22,238 6- Substandard 211 3,847 3,963 1,984 78 62 - 42 - 10,187 7- Doubtful - - - - - - - - - - 8- Loss - - - - - - - 4 - 4 Total $ 61,749 240,700 40,189 247,521 21,047 87,596 - 9,832 15,177 723,811 December 31, 2015 (Dollars in thousands) Real Estate Loans Construction Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer All Other Total 1- Excellent Quality $ - 15,189 - - - 700 - 1,091 - 16,980 2- High Quality 10,144 86,061 - 38,647 2,998 24,955 - 3,647 1,665 168,117 3- Good Quality 35,535 78,843 19,223 148,805 12,058 58,936 3 4,571 7,828 365,802 4- Management Attention 12,544 30,259 15,029 31,824 335 5,905 - 620 1,738 98,254 5- Watch 7,265 4,322 3,308 4,561 2,689 332 - 43 - 22,520 6- Substandard 303 6,016 6,173 4,689 - 182 - 55 - 17,418 7- Doubtful - - - - - - - - - - 8- Loss - - - - - - - - - - Total $ 65,791 220,690 43,733 228,526 18,080 91,010 3 10,027 11,231 689,091 TDR loans modified in 2016, past due TDR loans and non-accrual TDR loans totaled $5.9 million and $8.8 million at December 31, 2016 and December 31, 2015, respectively. The terms of these loans have been renegotiated to provide a concession to original terms, including a reduction in principal or interest as a result of the deteriorating financial position of the borrower. There were $81,000 and $354,000 in performing loans classified as TDR loans at December 31, 2016 and December 31, 2015, respectively. The following table presents an analysis of loan modifications during the year ended December 31, 2016: Year ended December 31, 2016 (Dollars in thousands) Number of Contracts Pre-Modification Post-Modification Real estate loans: Single-family residential 3 $ 124 121 Total TDR loans 3 $ 124 121 During the year ended December 31, 2016, three loans were modified that were considered to be new TDR loans. The interest rate was modified on these TDR loans. The following table presents an analysis of loan modifications during the year ended December 31, 2015: Year ended December 31, 2015 (Dollars in thousands) Number of Contracts Pre-Modification Post-Modification Real estate loans: Construction and land development 1 $ 216 216 Single-family residential 3 288 271 Total TDR loans 4 $ 504 487 During the year ended December 31, 2015, four loans were modified that were considered to be new TDR loans. The interest rate was modified on these TDR loans. There were no TDR loans with a payment default occurring within 12 months of the restructure date, and the payment default occurring during the years ended December 31, 2016 and 2015. TDR loans are deemed to be in default if they become past due by 90 days or more.

4. Premises and Equipment

4. Premises and Equipment	12 Months Ended
	Dec. 31, 2016
Property, Plant and Equipment [Abstract]
Premises and Equipment	Major classifications of premises and equipment at December 31, 2016 and 2015 are summarized as follows: (Dollars in thousands) 2016 2015 Land $ 3,670 3,669 Buildings and improvements 16,398 15,889 Furniture and equipment 19,996 19,462 Total premises and equipment 40,064 39,020 Less accumulated depreciation 23,612 22,044 Total net premises and equipment $ 16,452 16,976 The Company recognized approximately $2.1 million in depreciation expense for the year ended December 31, 2016. Depreciation expense was approximately $2.4 million and $2.5 million for the years ended December 31, 2015 and 2014, respectively.

5. Time Deposits

5. Time Deposits	12 Months Ended
	Dec. 31, 2016
Banking and Thrift [Abstract]
Time Deposits	At December 31, 2016, the scheduled maturities of time deposits are as follows: (Dollars in thousands) 2017 $ 86,817 2018 33,184 2019 15,207 2020 5,287 2021 and thereafter 3,518 Total $ 144,013 At December 31, 2016 and 2015, the Bank had approximately $7.2 million and $4.3 million, respectively, in time deposits purchased through third party brokers, including certificates of deposit participated through the Certificate of Deposit Account Registry Service ("CDARS") on behalf of local customers. CDARS balances totaled $7.2 million and $4.1 million as of December 31, 2016 and 2015, respectively. The weighted average rate of brokered deposits as of December 31, 2016 and 2015 was 0.05% and 0.10%, respectively.

6. Federal Home Loan Bank and F

6. Federal Home Loan Bank and Federal Reserve Bank Borrowings	12 Months Ended
	Dec. 31, 2016
Banking and Thrift [Abstract]
Federal Home Loan Bank and Federal Reserve Bank Borrowings	The Bank has borrowings from the FHLB with monthly or quarterly interest payments at December 31, 2016. The FHLB borrowings are collateralized by a blanket assignment on all residential first mortgage loans, home equity lines of credit and loans secured by multi-family real estate that the Bank owns. At December 31, 2016, the carrying value of loans pledged as collateral totaled approximately $128.3 million. The remaining availability under the line of credit with the FHLB was $66.8 million at December 31, 2016. Borrowings from the FHLB outstanding at December 31, 2016 and 2015 consist of the following: December 31, 2016 (Dollars in thousands) Maturity Date Call Date Rate Rate Type Amount October 17, 2018 N/A 4.050% Adjustable Rate Hybrid $ 5,000 October 17, 2018 N/A 4.065% Adjustable Rate Hybrid 5,000 October 17, 2018 N/A 4.120% Adjustable Rate Hybrid 5,000 May 8, 2018 N/A 2.683% Adjustable Rate Hybrid 5,000 $ 20,000 December 31, 2015 (Dollars in thousands) Maturity Date Call Date Rate Rate Type Amount October 17, 2018 N/A 3.485% Adjustable Rate Hybrid $ 5,000 October 17, 2018 N/A 3.725% Adjustable Rate Hybrid 15,000 October 17, 2018 N/A 3.500% Adjustable Rate Hybrid 5,000 October 17, 2018 N/A 3.555% Adjustable Rate Hybrid 5,000 May 8, 2018 N/A 2.144% Adjustable Rate Hybrid 5,000 May 8, 2018 N/A 3.734% Floating to Fixed 8,500 $ 43,500 The Bank is required to purchase and hold certain amounts of FHLB stock in order to obtain FHLB borrowings. No ready market exists for the FHLB stock, and it has no quoted market value. The stock is redeemable at $100 per share subject to certain limitations set by the FHLB. The Bank owned $1.8 million and $2.8 million of FHLB stock, included in other investments, at December 31, 2016 and 2015, respectively. The Bank prepaid FHLB borrowings totaling $23.5 million in 2016 with prepayment penalties totaling $1.3 million. The Bank prepaid FHLB borrowings totaling $6.5 million in 2015 with prepayment penalties totaling $504,000. As of December 31, 2016 and 2015, the Bank had no borrowings from the Federal Reserve Bank ("FRB"). FRB borrowings are collateralized by a blanket assignment on all qualifying loans that the Bank owns which are not pledged to the FHLB. At December 31, 2016, the carrying value of loans pledged as collateral totaled approximately $374.5 million. Availability under the line of credit with the FRB was $289.7 million at December 31, 2016.

7. Junior Subordinated Debentur

7. Junior Subordinated Debentures	12 Months Ended
	Dec. 31, 2016
Brokers and Dealers [Abstract]
Junior Subordinated Debentures	In June 2006, the Company formed a second wholly owned Delaware statutory trust, PEBK Capital Trust II ("PEBK Trust II"), which issued $20.0 million of guaranteed preferred beneficial interests in the Company's junior subordinated deferrable interest debentures. All of the common securities of PEBK Trust II are owned by the Company. The proceeds from the issuance of the common securities and the trust preferred securities were used by PEBK Trust II to purchase $20.6 million of junior subordinated debentures of the Company. The proceeds received by the Company from the sale of the junior subordinated debentures were used to repay in December 2006 the trust preferred securities issued in December 2001 by PEBK Capital Trust, a wholly owned Delaware statutory trust of the Company, and for general purposes. The debentures represent the sole assets of PEBK Trust II. PEBK Trust II is not included in the consolidated financial statements. The trust preferred securities issued by PEBK Trust II accrue and pay interest quarterly at a floating rate of three-month LIBOR plus 163 basis points. The Company has guaranteed distributions and other payments due on the trust preferred securities to the extent PEBK Trust II does not have funds with which to make the distributions and other payments. The net combined effect of all the documents entered into in connection with the trust preferred securities is that the Company is liable to make the distributions and other payments required on the trust preferred securities. These trust preferred securities are mandatorily redeemable upon maturity of the debentures on June 28, 2036, or upon earlier redemption as provided in the indenture. The Company has the right to redeem the debentures purchased by PEBK Trust II, in whole or in part, which became effective on June 28, 2011. As specified in the indenture, if the debentures are redeemed prior to maturity, the redemption price will be the principal amount plus any accrued but unpaid interest.

8. Income Taxes

8. Income Taxes	12 Months Ended
	Dec. 31, 2016
Income Tax Disclosure [Abstract]
Income Taxes	The provision for income taxes is summarized as follows: (Dollars in thousands) 2016 2015 2014 Current expense $ 1,464 2,427 1,759 Deferred income tax expense 1,097 673 178 Total income tax $ 2,561 3,100 1,937 The differences between the provision for income taxes and the amount computed by applying the statutory federal income tax rate to earnings before income taxes are as follows: (Dollars in thousands) 2016 2015 2014 Tax expense at statutory rate (34%) $ 3,991 4,329 3,851 State income tax, net of federal income tax effect 339 494 (283 ) Tax-exempt interest income (1,681 ) (1,682 ) (1,630 ) Increase in cash surrender value of life insurance (138 ) (143 ) (143 ) Nondeductible interest and other expense 78 103 119 Other (28 ) (1 ) 23 Total $ 2,561 3,100 1,937 The following summarizes the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities. The net deferred tax asset is included as a component of other assets at December 31, 2016 and 2015. (Dollars in thousands) 2016 2015 Deferred tax assets: Allowance for loan losses $ 2,717 3,513 Accrued retirement expense 1,616 1,574 Other real estate - 33 Federal credit carryforward 326 - State credit carryforward 14 - Restricted stock 745 417 Accrued bonuses 216 238 Interest income on nonaccrual loans 27 88 Other than temporary impairment 14 374 Other 23 16 Total gross deferred tax assets 5,698 6,253 Deferred tax liabilities: Deferred loan fees 797 588 Accumulated depreciation 532 172 Prepaid expenses 78 59 Other 23 70 Unrealized gain on available for sale securities 1,807 3,308 Total gross deferred tax liabilities 3,237 4,197 Net deferred tax asset $ 2,461 2,056 The Company has analyzed the tax positions taken or expected to be taken in its tax returns and has concluded that it has no liability related to uncertain tax positions. The Company's tax filings for years 2013 through 2016 were at year end 2016 open to audit under statutes of limitations by the Internal Revenue Service and State taxing authorities.

9. Related Party Transactions

9. Related Party Transactions	12 Months Ended
	Dec. 31, 2016
Related Party Transactions [Abstract]
Related Party Transactions	The Company conducts transactions with its directors and executive officers, including companies in which they have beneficial interests, in the normal course of business. It is the policy of the Company that loan transactions with directors and officers are made on substantially the same terms as those prevailing at the time made for comparable loans to other persons. The following is a summary of activity for related party loans for 2016 and 2015: (Dollars in thousands) 2016 2015 Beginning balance $ 5,674 6,055 New loans 6,048 7,857 Repayments (7,219 ) (8,238 ) Ending balance $ 4,503 5,674 At December 31, 2016 and 2015, the Company had deposit relationships with related parties of approximately $27.8 million and $22.1 million, respectively. A Director of the Company is an officer and partial owner of the construction company engaged to renovate the Bank's Corporate Center located at 518 West C Street, Newton, North Carolina. During 2016 the Company paid a total of approximately $209,000 to this construction company for such renovation work. At December 31, 2016, the remaining commitment to this construction company for renovation work not yet completed was approximately $2.2 million.

10. Commitments and Contingenci

10. Commitments and Contingencies	12 Months Ended
	Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	The Company leases various office spaces for banking and operational facilities and equipment under operating lease arrangements. Future minimum lease payments required for all operating leases having a remaining term in excess of one year at December 31, 2016 are as follows: (Dollars in thousands) Year ending December 31, 2017 $ 632 2018 611 2019 601 2020 602 2021 591 Thereafter 1,611 Total minimum obligation $ 4,648 Total rent expense was approximately $752,000, $702,000 and $691,000 for the years ended December 31, 2016, 2015 and 2014, respectively. The Bank is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments. The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit and financial guarantees written is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. In most cases, the Bank requires collateral or other security to support financial instruments with credit risk. (Dollars in thousands) Contractual Amount 2016 2015 Financial instruments whose contract amount represent credit risk: Commitments to extend credit $ 195,528 189,351 Standby letters of credit and financial guarantees written $ 3,728 3,872 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates and because they may expire without being drawn upon, the total commitment amount of $199.3 million does not necessarily represent future cash requirements. Standby letters of credit and financial guarantees written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to businesses in the Bank's delineated market area. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds real estate, equipment, automobiles and customer deposits as collateral supporting those commitments for which collateral is deemed necessary. In the normal course of business, the Company is a party (both as plaintiff and defendant) to a number of lawsuits. In the opinion of management and counsel, none of these cases should have a material adverse effect on the financial position of the Company. Bancorp and the Bank have employment agreements with certain key employees. The agreements, among other things, include salary, bonus, incentive compensation, and change in control provisions. The Company has $59.5 million available for the purchase of overnight federal funds from five correspondent financial institutions as of December 31, 2016. At December 31, 2016, the Bank has a commitment to invest $3 million in an income tax credit partnership owning and developing two multifamily housing developments in Charlotte, North Carolina, with $1.5 million allocated to each property. The Bank funded $136,000 of this commitment in 2016.

11. Employee and Director Benef

11. Employee and Director Benefit Programs	12 Months Ended
	Dec. 31, 2016
Compensation and Retirement Disclosure [Abstract]
Employee and Director Benefit Programs	The Company has a profit sharing and 401(k) plan for the benefit of substantially all employees subject to certain minimum age and service requirements. Under the 401(k) plan, the Company matched employee contributions to a maximum of 4.00% of annual compensation in 2014, 2015 and 2016. The Company's contribution pursuant to this formula was approximately $565,000, $539,000 and $439,000 for the years 2016, 2015 and 2014, respectively. Investments of the 401(k) plan are determined by a committee comprised of senior management. No investments in Company stock have been made by the 401(k) plan. Prior to January 1, 2015, the vesting schedule for the 401(k) plan began at 20 percent after two years of employment and graduated 20 percent each year until reaching 100 percent after six years of employment. Effective January 1, 2015, contributions to the 401(k) plan are vested immediately. In December 2001, the Company initiated a postretirement benefit plan to provide retirement benefits to key officers and its Board of Directors and to provide death benefits for their designated beneficiaries. Under the postretirement benefit plan, the Company purchased life insurance contracts on the lives of the key officers and each director. The increase in cash surrender value of the contracts constitutes the Company's contribution to the postretirement benefit plan each year. Postretirement benefit plan participants are to be paid annual benefits for a specified number of years commencing upon retirement. Expenses incurred for benefits relating to the postretirement benefit plan were approximately $428,000, $413,000 and $422,000 for the years 2016, 2015 and 2014, respectively. The Company is currently paying medical benefits for certain retired employees. The Company did not incur any postretirement medical benefits expense in 2016, 2015 and 2014 due to an excess accrual balance. The following table sets forth the change in the accumulated benefit obligation for the Company's two postretirement benefit plans described above: (Dollars in thousands) 2016 2015 Benefit obligation at beginning of period $ 3,993 3,812 Service cost 346 334 Interest cost 67 65 Benefits paid (232 ) (218 ) Benefit obligation at end of period $ 4,174 3,993 The amounts recognized in the Company's Consolidated Balance Sheet as of December 31, 2016 and 2015 are shown in the following two tables: (Dollars in thousands) 2016 2015 Benefit obligation $ 4,174 3,993 Fair value of plan assets - - (Dollars in thousands) 2016 2015 Funded status $ (4,174 ) (3,993 ) Unrecognized prior service cost/benefit - - Unrecognized net actuarial loss - - Net amount recognized $ (4,174 ) (3,993 ) Unfunded accrued liability $ (4,174 ) (3,993 ) Intangible assets - - Net amount recognized $ (4,174 ) (3,993 ) Net periodic benefit cost of the Company's postretirement benefit plans for the years ended December 31, 2016, 2015 and 2014 consisted of the following: (Dollars in thousands) 2016 2015 2014 Service cost $ 346 334 348 Interest cost 67 65 67 Net periodic cost $ 413 399 415 Weighted average discount rate assumption used to determine benefit obligation 5.47% 5.47% 5.47% The Company paid benefits under the two postretirement plans totaling $232,000 and $218,000 during the years ended December 31, 2016 and 2015, respectively. Information about the expected benefit payments for the Company's two postretirement benefit plans is as follows: (Dollars in thousands) Year ending December 31, 2017 $ 263 2018 $ 275 2019 $ 310 2020 $ 363 2021 $ 364 Thereafter $ 9,077

12. Regulatory Matters

12. Regulatory Matters	12 Months Ended
	Dec. 31, 2016
Banking and Thrift [Abstract]
Regulatory Matters	The Company is subject to various regulatory capital requirements administered by the 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 Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the 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 Company to maintain minimum amounts and ratios of capital in relation to both on- and off-balance sheet items at various risk weights. Total capital consists of two tiers of capital. Tier 1 Capital includes common shareholders' equity and trust preferred securities less adjustments for intangible assets. Tier 2 Capital consists of the allowance for loan losses, up to 1.25% of risk-weighted assets and other adjustments. Management believes, as of December 31, 2016, that the Company and the Bank meet all capital adequacy requirements to which they are subject. As of December 31, 2016, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. There have been no conditions or events since that notification that management believes have changed the Bank's category. In 2013, the Federal Reserve Board approved its final rule on the Basel III capital standards, which implement changes to the regulatory capital framework for banking organizations. The Basel III capital standards, which became effective January 1, 2015, include new risk-based capital and leverage ratios, which will be phased in from 2015 to 2019. The new minimum capital level requirements applicable to the Company and the Bank under the final rules are as follows: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total risk based capital ratio of 8% (unchanged from previous rules); and (iv) a Tier 1 leverage ratio of 4% (unchanged from previous rules). An additional capital conservation buffer will be added to the minimum requirements for capital adequacy purposes beginning on January 1, 2016 at 0.625% and will be phased in through 2019 (increasing by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019). This will result in the following minimum ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. Under the final rules, institutions would be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained earnings that could be utilized for such actions. The Company's and the Bank's actual capital amounts and ratios are presented below: (Dollars in thousands) Actual For Capital Adequacy Purposes To Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio As of December 31, 2016: Total Capital (to Risk-Weighted Assets) Consolidated $ 131,991 16.12% 65,508 8.00% N/A N/A Bank $ 129,035 15.78% 65,426 8.00% 81,782 10.00% Tier 1 Capital (to Risk-Weighted Assets) Consolidated $ 124,441 15.20% 49,131 6.00% N/A N/A Bank $ 121,485 14.85% 49,069 6.00% 65,426 8.00% Tier 1 Capital (to Average Assets) Consolidated $ 124,441 11.19% 44,488 4.00% N/A N/A Bank $ 121,485 10.88% 44,677 4.00% 55,846 5.00% Common Equity Tier 1 (to Risk-Weighted Assets) Consolidated $ 104,441 12.75% 36,848 4.50% N/A N/A Bank $ 121,485 14.85% 36,802 4.50% 53,158 6.50% As of December 31, 2015: Total Capital (to Risk-Weighted Assets) Consolidated $ 129,203 16.63% 62,137 8.00% N/A N/A Bank $ 124,910 16.11% 62,026 8.00% 77,532 10.00% Tier 1 Capital (to Risk-Weighted Assets) Consolidated $ 119,354 15.37% 46,603 6.00% N/A N/A Bank $ 115,160 14.85% 46,519 6.00% 62,026 8.00% Tier 1 Capital (to Average Assets) Consolidated $ 119,354 11.44% 41,743 4.00% N/A N/A Bank $ 115,160 11.03% 41,776 4.00% 52,220 5.00% Common Equity Tier 1 (to Risk-Weighted Assets) Consolidated $ 99,354 12.79% 34,952 4.50% N/A N/A Bank $ 115,160 14.85% 34,890 4.50% 50,396 6.50% On August 31, 2015, the FDIC and the Commissioner issued a Consent Order (the "Order") in connection with compliance by the Bank with the Bank Secrecy Act and its implementing regulations (collectively, the "BSA"). The Order was issued pursuant to the consent of the Bank. In consenting to the issuance of the Order, the Bank did not admit or deny any unsafe or unsound banking practices or violations of law or regulation. The Order requires the Bank to take certain affirmative actions to comply with its obligations under the BSA, including, without limitation, strengthening its Board of Directors' oversight of BSA activities; reviewing, enhancing, adopting and implementing a revised BSA compliance program; completing a BSA risk assessment; developing a revised system of internal controls designed to ensure full compliance with the BSA; reviewing and revising customer due diligence and risk assessment processes, policies and procedures; developing, adopting and implementing effective BSA training programs; assessing BSA staffing needs and resources and appointing a qualified BSA officer; establishing an independent BSA testing program; ensuring that all reports required by the BSA are accurately and properly filed and engaging an independent firm to review past account activity to determine whether suspicious activity was properly identified and reported. Prior to implementation, certain of the actions described above are subject to review by and approval or non-objection from the FDIC and the Commissioner. The Order will remain in effect and be enforceable until it is modified, terminated, suspended or set aside by the FDIC and the Commissioner. The Bank continues to make progress in addressing the issues identified in the Order and expects that it will be able to undertake and implement all required actions within the time period specified in the Order. The Bank has incurred and will continue to incur additional non-interest expenses associated with the implementation of corrective actions; however, these expenses are not expected to have a significant impact on the results of operations or financial position of the Company. Operating under the Order will limit the Company's ability to participate in acquisitions, to open new branches, and to allocate funds to its stock repurchase plan until such time as the Order has been modified, terminated, suspended or set aside by the FDIC and the Commissioner.

13. Shareholders' Equity

13. Shareholders' Equity	12 Months Ended
	Dec. 31, 2016
Equity [Abstract]
Shareholders' Equity	Shareholders' equity was $107.4 million, or 9.9% of total assets, as of December 31, 2016, compared to $104.9 million, or 10.1% of total assets, as of December 31, 2015. The increase in shareholders' equity is primarily due to an increase in retained earnings due to net income, which was partially offset by a decrease in accumulated other comprehensive income resulting from a decrease in the unrealized gain on investment securities and a $2.0 million decrease in common stock due to 92,738 shares of common stock being repurchased under the Company's stock repurchase program implemented during the second quarter of 2016. Annualized return on average equity for the year ended December 31, 2016 was 8.11% compared to 9.03% for the year ended December 31, 2015. Total cash dividends paid on common stock were $2.1 million and $1.6 million for the years ended December 31, 2016 and 2015, respectively. The Board of Directors, at its discretion, can issue shares of preferred stock up to a maximum of 5,000,000 shares. The Board is authorized to determine the number of shares, voting powers, designations, preferences, limitations and relative rights. The Board of Directors does not currently anticipate issuing any additional series of preferred stock. In 2014, the Company's Board of Directors authorized a stock repurchase program ("the 2014 Stock Repurchase Program"), pursuant to which up to $2 million was allocated to repurchase the Company's common stock. All purchases under the 2014 Stock Repurchase Program were made periodically as permitted by securities laws and other legal requirements in the open market or in privately negotiated transactions. The timing and amount of the repurchase of shares was determined by the Company's management, based on its evaluation of market conditions and other factors. The Company had repurchased approximately $2.0 million, or 106,587 shares of its common stock, under the 2014 Stock Repurchase Program as of December 31, 2015. In the second quarter of 2016, the Company's Board of Directors authorized another stock repurchase program ("the 2016 Stock Repurchase Program"), pursuant to which up to $2 million was allocated to repurchase the Company's common stock. All purchases under the 2016 Stock Repurchase Program were made periodically as permitted by securities laws and other legal requirements in the open market or in privately negotiated transactions. The timing and amount of any repurchase of shares was determined by the Company's management, based on its evaluation of market conditions and other factors. The Company repurchased approximately $2.0 million, or 92,738 shares of its common stock, under the 2016 Stock Repurchase Program during 2016.

14. Other Operating Income and

14. Other Operating Income and Expense	12 Months Ended
	Dec. 31, 2016
Other Income and Expenses [Abstract]
Other Operating Income and Expense	Miscellaneous non-interest income for the years ended December 31, 2016, 2015 and 2014 included the following items that exceeded one percent of total revenues at some point during the following three-year period: (Dollars in thousands) 2016 2015 2014 Visa debit card income $ 3,589 3,452 3,170 Net appraisal management fee income $ 886 635 525 Insurance and brokerage commissions $ 631 713 701 Other non-interest expense for the years ended December 31, 2016, 2015 and 2014 included the following items that exceeded one percent of total revenues at some point during the following three-year period: (Dollars in thousands) 2016 2015 2014 Advertising $ 1,136 784 804 FDIC insurance $ 494 681 739 Visa debit card expense $ 1,140 988 905 Telephone $ 754 588 574 Foreclosure/OREO expense $ 120 398 317 Internet banking expense $ 710 671 644 FHLB advance prepayment penalty $ 1,260 504 869 Consulting $ 2,257 904 609 NC Tax Credit Amortization $ - - 870

15. Fair Value of Financial Ins

15. Fair Value of Financial Instruments	12 Months Ended
	Dec. 31, 2016
Fair Value Disclosures [Abstract]
Fair Value of Financial Instruments	The Company is required to disclose fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions used in the estimation of the fair value of the Company's financial instruments are detailed below. Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather a good faith estimate of the increase or decrease in the value of financial instruments held by the Company since purchase, origination, or issuance. The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are: · Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets. · Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. · Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. Cash and Cash Equivalents For cash, due from banks and interest-bearing deposits, the carrying amount is a reasonable estimate of fair value. Cash and cash equivalents are reported in the Level 1 fair value category. Investment Securities Available for Sale Fair values of investment securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges when available. If quoted prices are not available, fair value is determined using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities. Fair values for investment securities with quoted market prices are reported in the Level 1 fair value category. Fair value measurements obtained from independent pricing services are reported in the Level 2 fair value category. All other fair value measurements are reported in the Level 3 fair value category. Other Investments For other investments, the carrying value is a reasonable estimate of fair value. Other investments are reported in the Level 3 fair value category. Mortgage Loans Held for Sale Mortgage loans held for sale are carried at lower of aggregate cost or market value. The cost of mortgage loans held for sale approximates the market value. Mortgage loans held for sale are reported in the Level 3 fair value category. Loans The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For variable rate loans, the carrying amount is a reasonable estimate of fair value. Loans are reported in the Level 3 fair value category, as the pricing of loans is more subjective than the pricing of other financial instruments. Cash Surrender Value of Life Insurance For cash surrender value of life insurance, the carrying value is a reasonable estimate of fair value. Cash surrender value of life insurance is reported in the Level 2 fair value category. Other Real Estate The fair value of other real estate is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral. Other real estate is reported in the Level 3 fair value category. Deposits The fair value of demand deposits, interest-bearing demand deposits and savings is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities. Deposits are reported in the Level 2 fair value category. Securities Sold Under Agreements to Repurchase For securities sold under agreements to repurchase, the carrying value is a reasonable estimate of fair value. Securities sold under agreements to repurchase are reported in the Level 2 fair value category. FHLB Borrowings The fair value of FHLB borrowings is estimated based upon discounted future cash flows using a discount rate comparable to the current market rate for such borrowings. FHLB borrowings are reported in the Level 2 fair value category. Junior Subordinated Debentures Because the Company's junior subordinated debentures were issued at a floating rate, the carrying amount is a reasonable estimate of fair value. Junior subordinated debentures are reported in the Level 2 fair value category. Commitments to Extend Credit and Standby Letters of Credit Commitments to extend credit and standby letters of credit are generally short-term and at variable interest rates. Therefore, both the carrying value and estimated fair value associated with these instruments are immaterial. Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. The fair value presentation for recurring assets is presented in Note 2. There were no recurring liabilities at December 31, 2016 and 2015. The fair value presentation for non-recurring assets is presented in Note 3. There were no non-recurring liabilities at December 31, 2016 and 2015. The carrying amount and estimated fair value of the Company's financial instruments at December 31, 2016 and 2015 are as follows: (Dollars in thousands) Fair Value Measurements at December 31, 2016 Carrying Amount Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 70,094 70,094 - - 70,094 Investment securities available for sale $ 249,946 - 249,196 750 249,946 Other investments $ 2,635 - - 2,635 2,635 Mortgage loans held for sale $ 5,709 - - 5,709 5,709 Loans, net $ 716,261 - - 720,675 720,675 Cash surrender value of life insurance $ 14,952 - 14,952 - 14,952 Liabilities: Deposits $ 892,918 - - 884,510 884,510 Securities sold under agreements to repurchase $ 36,434 - 36,434 - 36,434 FHLB borrowings $ 20,000 - 18,864 - 18,864 Junior subordinated debentures $ 20,619 - 20,619 - 20,619 (Dollars in thousands) Fair Value Measurements at December 31, 2015 Carrying Amount Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 39,763 39,763 - - 39,763 Investment securities available for sale $ 268,530 1,325 266,455 750 268,530 Other investments $ 3,636 - - 3,636 3,636 Mortgage loans held for sale $ 4,149 - - 4,149 4,149 Loans, net $ 679,502 - - 683,540 683,540 Cash surrender value of life insurance $ 14,546 - 14,546 - 14,546 Liabilities: Deposits $ 832,175 - - 827,874 827,874 Securities sold under agreements to repurchase $ 27,874 - 27,874 - 27,874 FHLB borrowings $ 43,500 - 43,144 - 43,144 Junior subordinated debentures $ 20,619 - 20,619 - 20,619

16. Peoples Bancorp of North Ca

16. Peoples Bancorp of North Carolina, Inc. (Parent Company Only) Condensed Financial Statements	12 Months Ended
	Dec. 31, 2016
Condensed Financial Information of Parent Company Only Disclosure [Abstract]
Peoples Bancorp of North Carolina, Inc. (Parent Company Only) Condensed Financial Statements	Balance Sheets December 31, 2016 and 2015 (Dollars in thousands) Assets 2016 2015 Cash $ 957 553 Interest-bearing time deposit 1,000 1,000 Investment in subsidiaries 124,471 121,848 Investment in PEBK Capital Trust II 619 619 Investment securities available for sale 750 1,234 Other assets 275 249 Total assets $ 128,072 125,503 Liabilities and Shareholders' Equity Junior subordinated debentures $ 20,619 20,619 Liabilities 25 20 Shareholders' equity 107,428 104,864 Total liabilities and shareholders' equity $ 128,072 125,503 Statements of Earnings For the Years Ended December 31, 2016, 2015 and 2014 (Dollars in thousands) Revenues: 2016 2015 2014 Interest and dividend income $ 4,569 3,979 2,718 Gain on sale of securities 405 - - Total revenues 4,974 3,979 2,718 Expenses: Interest 485 403 389 Other operating expenses 513 538 527 Total expenses 998 941 916 Income before income tax benefit and equity in undistributed earnings of subsidiaries 3,976 3,038 1,802 Income tax benefit 178 262 239 Income before equity in undistributed earnings of subsidiaries 4,154 3,300 2,041 Equity in undistributed earnings of subsidiaries 5,023 6,333 7,347 Net earnings $ 9,177 9,633 9,388 Statements of Cash Flows For the Years Ended December 31, 2016, 2015 and 2014 (Dollars in thousands) 2016 2015 2014 Cash flows from operating activities: Net earnings $ 9,177 9,633 9,388 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Equity in undistributed earnings of subsidiaries (5,023 ) (6,333 ) (7,347 ) Gain on sale of investment securities (405 ) - - Change in: Other assets 61 (4 ) 28 Accrued income - - (5 ) Accrued expense 5 3 1 Other liabilities - - (12,632 ) Net cash provided by operating activities 3,815 3,299 (10,567 ) Cash flows from investing activities: Proceeds from maturities of investment securities available for sale 669 - 500 In kind transfer from parent to Bank 10 - - Net change in interest-bearing time deposit - - (1,000 ) Net cash provided (used) by investing activities 679 - (500 ) Cash flows from financing activities: Cash dividends paid on common stock (2,106 ) (1,574 ) (1,022 ) Stock repurchase (1,984 ) (1,917 ) (82 ) Proceeds from exercise of stock options - - 37 Net cash used by financing activities (4,090 ) (3,491 ) (1,067 ) Net change in cash 404 (192 ) (12,134 ) Cash at beginning of year 553 745 12,879 Cash at end of year $ 957 553 745 Noncash investing and financing activities: Change in unrealized gain on investment securities available for sale, net $ (2,523 ) 57 6,625 Accrued redemption of Series A Preferred Stock - - (12,524 )

17. Quarterly Data

17. Quarterly Data	12 Months Ended
	Dec. 31, 2016
Quarterly Financial Information Disclosure [Abstract]
17. Quarterly Data	2016 2015 (Dollars in thousands, except per share amounts) First Second Third Fourth First Second Third Fourth Total interest income $ 9,905 9,815 9,982 10,107 $ 9,567 9,191 9,947 9,961 Total interest expense 809 813 828 821 884 875 874 851 Net interest income 9,096 9,002 9,154 9,286 8,683 8,316 9,073 9,110 (Reduction of) provision for loan losses (216 ) (531 ) (360 ) (99 ) 173 (214 ) 235 (211 ) Other income 3,324 3,572 3,414 3,666 3,245 3,297 3,266 3,504 Other expense 9,492 9,109 9,598 11,783 8,748 8,337 8,669 10,024 Income before income taxes 3,144 3,996 3,330 1,268 3,007 3,490 3,435 2,801 Income taxes (benefit) 691 1,032 872 (34 ) 679 866 942 613 Net earnings 2,453 2,964 2,458 1,302 2,328 2,624 2,493 2,188 Basic net earnings per share 0.45 0.54 0.45 0.24 $ 0.41 0.47 0.45 0.40 Diluted net earnings per share $ 0.44 0.53 0.44 0.24 $ 0.41 0.47 0.45 0.39

1. Summary of Significant Acc25

1. Summary of Significant Accounting Policies (Policies)	12 Months Ended
	Dec. 31, 2016
Accounting Policies [Abstract]
Organization	Peoples Bancorp of North Carolina, Inc. ("Bancorp") received regulatory approval to operate as a bank holding company on July 22, 1999, and became effective August 31, 1999. Bancorp is primarily regulated by the Board of Governors of the Federal Reserve System, and serves as the one-bank holding company for Peoples Bank (the "Bank"). The Bank commenced business in 1912 upon receipt of its banking charter from the North Carolina Commissioner of Banks (the "Commissioner"). The Bank is primarily regulated by the Commissioner and the Federal Deposit Insurance Corporation (the "FDIC") and undergoes periodic examinations by these regulatory agencies. The Bank, whose main office is in Newton, North Carolina, provides a full range of commercial and consumer banking services primarily in Catawba, Alexander, Lincoln, Mecklenburg, Iredell, Union, Wake, Durham and Forsyth counties in North Carolina. Peoples Investment Services, Inc. is a wholly owned subsidiary of the Bank and began operations in 1996 to provide investment and trust services through agreements with an outside party. Real Estate Advisory Services, Inc. ("REAS") is a wholly owned subsidiary of the Bank and began operations in 1997 to provide real estate appraisal and property management services to individuals and commercial customers of the Bank. Community Bank Real Estate Solutions, LLC ("CBRES") is a wholly owned subsidiary of the Bank and began operations in 2009 as a "clearing house" for appraisal services for community banks. Other banks are able to contract with CBRES to find and engage appropriate appraisal companies in the area where the property is located. CBRES was moved from a wholly owned subsidiary of Peoples Bancorp of North Carolina, Inc. to a wholly owned subsidiary of the Bank effective August 31, 2016. PB Real Estate Holdings, LLC ("PBREH") is a wholly owned subsidiary of the Bank and began operation in 2015. PBREH acquires, manages and disposes of real property, other collateral and other assets obtained in the ordinary course of collecting debts previously contracted. The Bank operates four offices focused on the Latino population under the name Banco de la Gente. These offices are operated as a division of the Bank. Banco de la Gente offers normal and customary banking services as are offered in the Bank's other branches such as the taking of deposits and the making of loans and therefore is not considered a reportable segment of the Company (as defined below).
Principles of Consolidation	The consolidated financial statements include the financial statements of Bancorp and its wholly owned subsidiary, the Bank, along with the Bank's wholly owned subsidiaries, Peoples Investment Services, Inc., REAS, CBRES and PBREH (collectively called the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation.
Basis of Presentation	The accounting principles followed by the Company, and the methods of applying these principles, conform with accounting principles generally accepted in the United States of America ("GAAP") and with general practices in the banking industry. In preparing the financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ significantly from these estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses and valuation of real estate acquired in connection with or in lieu of foreclosure on loans.
Cash and Cash Equivalents	Cash, due from banks and interest-bearing deposits are considered cash and cash equivalents for cash flow reporting purposes.
Investment Securities	There are three classifications the Company is able to classify its investment securities: trading, available for sale, or held to maturity. Trading securities are bought and held principally for sale in the near term. Held to maturity securities are those securities for which the Company has the ability and intent to hold until maturity. All other securities not included in trading or held to maturity are classified as available for sale. At December 31, 2016 and 2015, the Company classified all of its investment securities as available for sale. Available for sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of shareholders' equity until realized. Management evaluates investment securities for other-than-temporary impairment on an annual basis. A decline in the market value of any investment below cost that is deemed other-than-temporary is charged to earnings for the decline in value deemed to be credit related and a new cost basis in the security is established. The decline in value attributed to non-credit related factors is recognized in comprehensive income. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to the yield. Realized gains and losses for securities classified as available for sale are included in earnings and are derived using the specific identification method for determining the cost of securities sold.
Other Investments	Other investments include equity securities with no readily determinable fair value. These investments are carried at cost.
Mortgage Loans Held for Sale	Mortgage loans held for sale are carried at lower of aggregate cost or market value. The cost of mortgage loans held for sale approximates the market value.
Loans	Loans that management has the intent and ability to hold for the foreseeable future or until maturity are reported at the principal amount outstanding, net of the allowance for loan losses. Interest on loans is calculated by using the simple interest method on daily balances of the principal amount outstanding. The recognition of certain loan origination fee income and certain loan origination costs is deferred when such loans are originated and amortized over the life of the loan. A loan is impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan will not be collected. Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan's effective interest rate, or at the loan's observable market price, or the fair value of the collateral if the loan is collateral dependent. Accrual of interest is discontinued on a loan when management believes, after considering economic conditions and collection efforts, that the borrower's financial condition is such that collection of interest is doubtful. Interest previously accrued but not collected is reversed against current period earnings.
Allowance for Loan Losses	The allowance for loan losses reflects management's assessment and estimate of the risks associated with extending credit and its evaluation of the quality of the loan portfolio. The Bank periodically analyzes the loan portfolio in an effort to review asset quality and to establish an allowance for loan losses that management believes will be adequate in light of anticipated risks and loan losses. In assessing the adequacy of the allowance, size, quality and risk of loans in the portfolio are reviewed. Other factors considered are: · the Bank's loan loss experience; · the amount of past due and non-performing loans; · specific known risks; · the status and amount of other past due and non-performing assets; · underlying estimated values of collateral securing loans; · current and anticipated economic conditions; and · other factors which management believes affect the allowance for potential credit losses. Management uses several measures to assess and monitor the credit risks in the loan portfolio, including a loan grading system that begins upon loan origination and continues until the loan is collected or collectability becomes doubtful. Upon loan origination, the Bank's originating loan officer evaluates the quality of the loan and assigns one of eight risk grades. The loan officer monitors the loan's performance and credit quality and makes changes to the credit grade as conditions warrant. When originated or renewed, all loans over a certain dollar amount receive in-depth reviews and risk assessments by the Bank's Credit Administration. Before making any changes in these risk grades, management considers assessments as determined by the third party credit review firm (as described below), regulatory examiners and the Bank's Credit Administration. Any issues regarding the risk assessments are addressed by the Bank's senior credit administrators and factored into management's decision to originate or renew the loan. The Bank's Board of Directors reviews, on a monthly basis, an analysis of the Bank's reserves relative to the range of reserves estimated by the Bank's Credit Administration. As an additional measure, the Bank engages an independent third party to review the underwriting, documentation and risk grading analyses. This independent third party reviews and evaluates loan relationships greater than $1.0 million, excluding loans in default, and loans in process of litigation or liquidation. The third party's evaluation and report is shared with management and the Bank's Board of Directors. Management considers certain commercial loans with weak credit risk grades to be individually impaired and measures such impairment based upon available cash flows and the value of the collateral. Allowance or reserve levels are estimated for all other graded loans in the portfolio based on their assigned credit risk grade, type of loan and other matters related to credit risk. Management uses the information developed from the procedures described above in evaluating and grading the loan portfolio. This continual grading process is used to monitor the credit quality of the loan portfolio and to assist management in estimating the allowance for loan losses. The provision for loan losses charged or credited to earnings is based upon management's judgment of the amount necessary to maintain the allowance at a level appropriate to absorb probable incurred losses in the loan portfolio at the balance sheet date. The amount each quarter is dependent upon many factors, including growth and changes in the composition of the loan portfolio, net charge-offs, delinquencies, management's assessment of loan portfolio quality, the value of collateral, and other macro-economic factors and trends. The evaluation of these factors is performed quarterly by management through an analysis of the appropriateness of the allowance for loan losses. The allowance for loan losses is comprised of three components: specific reserves, general reserves and unallocated reserves. After a loan has been identified as impaired, management measures impairment. When the measure of the impaired loan is less than the recorded investment in the loan, the amount of the impairment is recorded as a specific reserve. These specific reserves are determined on an individual loan basis based on management's current evaluation of the Bank's loss exposure for each credit, given the appraised value of any underlying collateral. Loans for which specific reserves are provided are excluded from the general allowance calculations as described below. The general allowance reflects reserves established under GAAP for collective loan impairment. These reserves are based upon historical net charge-offs using the greater of the last two, three, four or five years' loss experience. This charge-off experience may be adjusted to reflect the effects of current conditions. The Bank considers information derived from its loan risk ratings and external data related to industry and general economic trends in establishing reserves. The unallocated allowance is determined through management's assessment of probable losses that are in the portfolio but are not adequately captured by the other two components of the allowance, including consideration of current economic and business conditions and regulatory requirements. The unallocated allowance also reflects management's acknowledgement of the imprecision and subjectivity that underlie the modeling of credit risk. Due to the subjectivity involved in determining the overall allowance, including the unallocated portion, the unallocated portion may fluctuate from period to period based on management's evaluation of the factors affecting the assumptions used in calculating the allowance. There were no significant changes in the estimation methods or fundamental assumptions used in the evaluation of the allowance for loan losses for the year ended December 31, 2016 as compared to the year ended December 31, 2015. Revisions, estimates and assumptions may be made in any period in which the supporting factors indicate that loss levels may vary from the previous estimates. Effective December 31, 2012, stated income mortgage loans from the Banco de la Gente division of the Bank were analyzed separately from other single family residential loans in the Bank's loan portfolio. These loans are first mortgage loans made to the Latino market, primarily in Mecklenburg and surrounding counties. These loans are non-traditional mortgages in that the customer normally did not have a credit history, so all credit information was accumulated by the loan officers. These loans were made as stated income loans rather than full documentation loans because the customer may not have had complete documentation on the income supporting the loan. Various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses. Such agencies may require adjustments to the allowance based on their judgments of information available to them at the time of their examinations. Management believes it has established the allowance for credit losses pursuant to GAAP, and has taken into account the views of its regulators and the current economic environment. Management considers the allowance for loan losses adequate to cover the estimated losses inherent in the Bank's loan portfolio as of the date of the financial statements. Although management uses the best information available to make evaluations, significant future additions to the allowance may be necessary based on changes in economic and other conditions, thus adversely affecting the operating results of the Company.
Mortgage Banking Activities	Mortgage banking income represents net gains from the sale of mortgage loans and fees received from borrowers and loan investors related to the Bank's origination of single-family residential mortgage loans. Mortgage loans serviced for others are not included in the accompanying balance sheets. The unpaid principal balances of mortgage loans serviced for others was approximately $1.4 million, $1.6 million and $2.1 million at December 31, 2016, 2015 and 2014, respectively. The Bank originates certain fixed rate mortgage loans and commits these loans for sale. The commitments to originate fixed rate mortgage loans and the commitments to sell these loans to a third party are both derivative contracts. The fair value of these derivative contracts is immaterial and has no effect on the recorded amounts in the financial statements.
Premises and Equipment	Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the assets. When assets are retired or otherwise disposed, the cost and related accumulated depreciation are removed from the accounts, and any gain or loss is reflected in earnings for that period. The cost of maintenance and repairs that do not improve or extend the useful life of the respective asset is charged to earnings as incurred, whereas significant renewals and improvements are capitalized. The range of estimated useful lives for premises and equipment are generally as follows: Buildings and improvements 10 - 50 years Furniture and equipment 3 - 10 years
Other Real Estate	Foreclosed assets include all assets received in full or partial satisfaction of a loan. Foreclosed assets are reported at fair value less estimated selling costs. Any write-downs at the time of foreclosure are charged to the allowance for loan losses. Subsequent to foreclosure, valuations are periodically performed by management, and a valuation allowance is established if fair value less estimated selling costs declines below carrying value. Costs relating to the development and improvement of the property are capitalized. Revenues and expenses from operations are included in other expenses. Changes in the valuation allowance are included in loss on sale and write-down of other real estate.
Income Taxes	Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Additionally, the recognition of future tax benefits, such as net operating loss carryforwards, is required to the extent that the realization of such benefits is more likely than not to occur. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date. In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company's assets and liabilities results in a deferred tax asset, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some portion or all of the deferred tax asset will not be realized. In assessing the realizability of a deferred tax asset, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. Tax effects from an uncertain tax position can be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Previously recognized tax positions that no longer meet the more likely than not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. The Company assessed the impact of this guidance and determined that it did not have a material impact on the Company's financial position, results of operations or disclosures.
Derivative Financial Instruments and Hedging Activities	In the normal course of business, the Company enters into derivative contracts to manage interest rate risk by modifying the characteristics of the related balance sheet instruments in order to reduce the adverse effect of changes in interest rates. All material derivative financial instruments are recorded at fair value in the financial statements. The fair value of derivative contracts related to the origination of fixed rate mortgage loans and the commitments to sell these loans to a third party is immaterial and has no effect on the recorded amounts in the financial statements. The disclosure requirements for derivatives and hedging activities have the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. The disclosure requirements include qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about the fair value of, and gains and losses on, derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. On the date a derivative contract is entered into, the Company designates the derivative as a fair value hedge, a cash flow hedge, or a trading instrument. Changes in the fair value of instruments used as fair value hedges are accounted for in the earnings of the period simultaneous with accounting for the fair value change of the item being hedged. Changes in the fair value of the effective portion of cash flow hedges are accounted for in other comprehensive income rather than earnings. Changes in fair value of instruments that are not intended as a hedge are accounted for in the earnings of the period of the change. If a derivative instrument designated as a fair value hedge is terminated or the hedge designation removed, the difference between a hedged item's then carrying amount and its face amount is recognized into income over the original hedge period. Likewise, if a derivative instrument designated as a cash flow hedge is terminated or the hedge designation removed, related amounts accumulated in other accumulated comprehensive income are reclassified into earnings over the original hedge period during which the hedged item affects income. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company formally documents all hedging relationships, including an assessment that the derivative instruments are expected to be highly effective in offsetting the changes in fair values or cash flows of the hedged items.
Advertising Costs	Advertising costs are expensed as incurred.
Stock-Based Compensation	The Company has an Omnibus Stock Ownership and Long Term Incentive Plan that was approved by shareholders on May 7, 2009 (the "Plan") whereby certain stock-based rights, such as stock options, restricted stock, restricted stock units, performance units, stock appreciation rights or book value shares, may be granted to eligible directors and employees. A total of 262,520 shares are currently reserved for possible issuance under the Plan. All stock-based rights under the Plan must be granted or awarded by May 7, 2019 (i.e. ten years from the Plan effective date). The Company granted 29,514 restricted stock units under the Plan at a grant date fair value of $7.90 per share during the first quarter of 2012, of which 5,355 restricted stock units were forfeited by the executive officers of the Company as required by the agreement with the U.S. Department of the Treasury ("UST") in conjunction with the Company's participation in the Capital Purchase Program ("CPP") under the Troubled Asset Relief Program ("TARP"). In July 2012, the Company granted 5,355 restricted stock units at a grant date fair value of $8.25 per share. The Company granted 26,795 restricted stock units under the Plan at a grant date fair value of $11.90 per share during the second quarter of 2013. The Company granted 21,056 restricted stock units under the Plan at a grant date fair value of $15.70 per share during the first quarter of 2014. The Company granted 15,075 restricted stock units under the Plan at a grant date fair value of $17.97 per share during the first quarter of 2015. The Company granted 5,040 restricted stock units under the Plan at a grant date fair value of $18.60 per share during the first quarter of 2016. The Company recognizes compensation expense on the restricted stock units over the period of time the restrictions are in place (five years from the grant date for the 2012 grants, four years from the grant date for the 2013, 2015 and 2016 grants and three years from the grant date for the 2014 grants). The amount of expense recorded each period reflects the changes in the Company's stock price during such period. As of December 31, 2016, the total unrecognized compensation expense related to the restricted stock unit grants under the Plan was $396,000. The Company recognized compensation expense for restricted stock units granted under the Plan of $932,000, $487,000 and $389,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
Net Earnings Per Share	Net earnings per common share is based on the weighted average number of common shares outstanding during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per common share. The average market price during the year is used to compute equivalent shares. The reconciliations of the amounts used in the computation of both "basic earnings per common share" and "diluted earnings per common share" for the years ended December 31, 2016, 2015 and 2014 are as follows: For the year ended December 31, 2016 Net Earnings Weighted Per Share Basic earnings per share $ 9,177 5,477,245 $ 1.68 Effect of dilutive securities: Restricted stock units - 70,734 Diluted earnings per share $ 9,177 5,547,979 $ 1.65 For the year ended December 31, 2015 Net Earnings Weighted Per Share Basic earnings per share $ 9,633 5,559,235 $ 1.73 Effect of dilutive securities: Restricted stock units - 47,954 Diluted earnings per share $ 9,633 5,607,189 $ 1.72 For the year ended December 31, 2014 Net Earnings Weighted Per Share Basic earnings per share $ 9,388 5,615,666 $ 1.67 Effect of dilutive securities: Restricted stock units - 26,326 Diluted earnings per share $ 9,388 5,641,992 $ 1.66
Recent Accounting Pronouncements	In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, (Topic 842): Leases In June 2016, FASB issued ASU No. 2016-13, (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 provides guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. ASU No. 2016-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. The Company is currently evaluating the effect that implementation of the new standard will have on its results of operations, financial position and disclosures. In October 2016, FASB issued ASU No. 2016-16, (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory In October 2016, FASB issued ASU No. 2016-17, (Topic 810): Interests Held through Related Parties That Are under Common Control In November 2016, FASB issued ASU No. 2016-18, (Topic 230): Restricted Cash In December 2016, FASB issued ASU No. 2016-20, (Topic 606): Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers Other accounting standards that have been issued or proposed by FASB or other standards-setting bodies are not expected to have a material impact on the Company's results of operations, financial position or disclosures.
Reclassification	Certain amounts in the 2014 and 2015 consolidated financial statements have been reclassified to conform to the 2016 presentation.

1. Summary of Significant Acc26

1. Summary of Significant Accounting Policies (Tables)	12 Months Ended
	Dec. 31, 2016
Summary Of Significant Accounting Policies Tables
Reconciliations of the amounts used in the computation of both basic earnings per common share and diluted earnings per common share	For the year ended December 31, 2016 Net Earnings Weighted Per Share Basic earnings per share $ 9,177 5,477,245 $ 1.68 Effect of dilutive securities: Restricted stock units - 70,734 Diluted earnings per share $ 9,177 5,547,979 $ 1.65 For the year ended December 31, 2015 Net Earnings Weighted Per Share Basic earnings per share $ 9,633 5,559,235 $ 1.73 Effect of dilutive securities: Restricted stock units - 47,954 Diluted earnings per share $ 9,633 5,607,189 $ 1.72 For the year ended December 31, 2014 Net Earnings Weighted Per Share Basic earnings per share $ 9,388 5,615,666 $ 1.67 Effect of dilutive securities: Restricted stock units - 26,326 Diluted earnings per share $ 9,388 5,641,992 $ 1.66

2. Investment Securities (Table

2. Investment Securities (Tables)	12 Months Ended
	Dec. 31, 2016
Investment Securities Tables
Investment securities available for sale	(Dollars in thousands) December 31, 2016 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Mortgage-backed securities $ 66,654 1,221 290 67,585 U.S. Government sponsored enterprises 38,188 308 274 38,222 State and political subdivisions 137,832 4,176 152 141,856 Corporate bonds 1,500 33 - 1,533 Trust preferred securities 750 - - 750 Total $ 244,924 5,738 716 249,946 (Dollars in thousands) December 31, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Mortgage-backed securities $ 76,406 1,526 45 77,887 U.S. Government sponsored enterprises 38,173 399 155 38,417 State and political subdivisions 141,500 6,817 72 148,245 Corporate bonds 1,928 - 22 1,906 Trust preferred securities 750 - - 750 Equity securities 748 577 - 1,325 Total $ 259,505 9,319 294 268,530
Current fair value and associated unrealized losses on investments in debt securities with unrealized losses	(Dollars in thousands) December 31, 2016 Less than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Mortgage-backed securities $ 15,594 290 - - 15,594 290 U.S. Government sponsored enterprises 10,120 94 9,562 180 19,682 274 State and political subdivisions 10,441 123 561 29 11,002 152 Total $ 36,155 507 10,123 209 46,278 716 (Dollars in thousands) December 31, 2015 Less than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Mortgage-backed securities $ 7,891 45 - - 7,891 45 U.S. Government sponsored enterprises 3,074 13 10,828 142 13,902 155 State and political subdivisions 2,198 4 3,930 68 6,128 72 Corporate bonds 1,500 22 - - 1,500 22 Total $ 14,663 84 14,758 210 29,421 294
Amortized cost and estimated fair value of investment securities available for sale by contractual maturity	December 31, 2016 (Dollars in thousands) Amortized Cost Estimated Fair Value Due within one year $ 7,304 7,341 Due from one to five years 81,366 84,100 Due from five to ten years 77,498 78,751 Due after ten years 12,102 12,169 Mortgage-backed securities 66,654 67,585 Equity securities - - Total $ 244,924 249,946
Available for sale securities measured at fair value on a recurring basis	(Dollars in thousands) December 31, 2016 Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage-backed securities $ 67,585 - 67,585 - U.S. Government sponsored enterprises $ 38,222 - 38,222 - State and political subdivisions $ 141,856 - 141,856 - Corporate bonds $ 1,533 - 1,533 - Trust preferred securities $ 750 - - 750 (Dollars in thousands) December 31, 2015 Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage-backed securities $ 77,887 - 77,887 - U.S. Government sponsored enterprises $ 38,417 - 38,417 - State and political subdivisions $ 148,245 - 148,245 - Corporate bonds $ 1,906 - 1,906 - Trust preferred securities $ 750 - - 750 Equity securities $ 1,325 1,325 - -
Fair value measurements of investment securities available for sale using Level 3 significant unobservable inputs	(Dollars in thousands) Investment Securities Level 3 Valuation Balance, beginning of period $ 750 Change in book value - Change in gain/(loss) realized and unrealized - Purchases/(sales and calls) - Transfers in and/or (out) of Level 3 - Balance, end of period $ 750 Change in unrealized gain/(loss) for assets still held in Level 3 $ -

3. Loans (Tables)

3. Loans (Tables)	12 Months Ended
	Dec. 31, 2016
Loans Tables
Major classifications of loans	(Dollars in thousands) December 31, 2016 December 31, 2015 Real estate loans: Construction and land development $ 61,749 65,791 Single-family residential 240,700 220,690 Single-family residential - Banco de la Gente stated income 40,189 43,733 Commercial 247,521 228,526 Multifamily and farmland 21,047 18,080 Total real estate loans 611,206 576,820 Loans not secured by real estate: Commercial loans 87,596 91,010 Farm loans - 3 Consumer loans 9,832 10,027 All other loans 15,177 11,231 Total loans 723,811 689,091 Less allowance for loan losses 7,550 9,589 Total net loans $ 716,261 679,502
Age analysis of past due loans, by loan type	December 31, 2016 (Dollars in thousands) Loans 30-89 Days Past Due Loans 90 or More Days Past Due Total Past Due Loans Total Current Loans Total Loans Accruing Loans 90 or More Days Past Due Real estate loans: Construction and land development $ - 10 10 61,739 61,749 - Single-family residential 4,890 80 4,970 235,730 240,700 - Single-family residential - Banco de la Gente stated income 5,250 249 5,499 34,690 40,189 - Commercial 342 126 468 247,053 247,521 - Multifamily and farmland 471 - 471 20,576 21,047 - Total real estate loans 10,953 465 11,418 599,788 611,206 - Loans not secured by real estate: Commercial loans 273 - 273 87,323 87,596 - Farm loans - - - - - - Consumer loans 68 6 74 9,758 9,832 - All other loans 3 - 3 15,174 15,177 - Total loans $ 11,297 471 11,768 712,043 723,811 - December 31, 2015 (Dollars in thousands) Loans 30-89 Days Past Due Loans 90 or More Days Past Due Total Past Due Loans Total Current Loans Total Loans Accruing Loans 90 or More Days Past Due Real estate loans: Construction and land development $ 330 17 347 65,444 65,791 - Single-family residential 2,822 1,385 4,207 216,483 220,690 - Single-family residential - Banco de la Gente stated income 7,021 114 7,135 36,598 43,733 - Commercial 2,619 157 2,776 225,750 228,526 - Multifamily and farmland - - - 18,080 18,080 - Total real estate loans 12,792 1,673 14,465 562,355 576,820 - Loans not secured by real estate: Commercial loans 185 40 225 90,785 91,010 17 Farm loans - - - 3 3 - Consumer loans 136 8 144 9,883 10,027 - All other loans - - - 11,231 11,231 - Total loans $ 13,113 1,721 14,834 674,257 689,091 17
Non-accrual loans	(Dollars in thousands) December 31, 2016 December 31, 2015 Real estate loans: Construction and land development $ 22 146 Single-family residential 1,662 4,023 Single-family residential - Banco de la Gente stated income 1,340 1,106 Commercial 669 2,992 Multifamily and farmland 78 - Total real estate loans 3,771 8,267 Loans not secured by real estate: Commercial loans 21 113 Consumer loans 33 52 Total $ 3,825 8,432
Impaired loans	December 31, 2016 (Dollars in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Recorded Investment in Impaired Loans Related Allowance Average Outstanding Impaired Loans YTD Interest Income Recognized Real estate loans: Construction and land development $ 282 - 278 278 11 330 13 Single-family residential 5,354 703 4,323 5,026 47 7,247 164 Single-family residential - Banco de la Gente stated income 18,611 - 18,074 18,074 1,182 17,673 861 Commercial 3,750 1,299 2,197 3,496 166 4,657 152 Multifamily and farmland 78 - 78 78 - 78 - Total impaired real estate loans 28,075 2,002 24,950 26,952 1,406 29,985 1,190 Loans not secured by real estate: Commercial loans 27 - 27 27 - 95 - Consumer loans 211 - 202 202 3 222 8 Total impaired loans $ 28,313 2,002 25,179 27,181 1,409 30,302 1,198 December 31, 2015 (Dollars in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Recorded Investment in Impaired Loans Related Allowance Average Outstanding Impaired Loans YTD Interest Income Recognized Real estate loans: Construction and land development $ 643 216 226 442 12 705 18 Single-family residential 8,828 1,489 6,805 8,294 189 10,852 224 Single-family residential - Banco de la Gente stated income 20,375 - 19,215 19,215 1,143 18,414 921 Commercial 4,556 - 4,893 4,893 179 5,497 89 Multifamily and farmland 96 - 83 83 - 93 6 Total impaired real estate loans 34,498 1,705 31,222 32,927 1,523 35,561 1,258 Loans not secured by real estate: Commercial loans 180 - 161 161 3 132 5 Consumer loans 286 - 260 260 4 283 11 Total impaired loans $ 34,964 1,705 31,643 33,348 1,530 35,976 1,274 December 31, 2014 (Dollars in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Recorded Investment in Impaired Loans Related Allowance Average Outstanding Impaired Loans YTD Interest Income Recognized Real estate loans: Construction and land development $ 5,481 3,639 555 4,194 31 5,248 20 Single-family residential 6,717 933 5,540 6,473 154 7,430 214 Single-family residential - Banco de la Gente stated income 21,243 - 20,649 20,649 1,191 19,964 952 Commercial 4,752 1,485 2,866 4,351 272 4,399 76 Multifamily and farmland 111 - 110 110 1 154 - Total impaired real estate loans 38,304 6,057 29,720 35,777 1,649 37,195 1,262 Loans not secured by real estate: Commercial loans 218 - 201 201 4 641 2 Farm loans (non RE) - Consumer loans 318 - 313 313 5 309 12 Total impaired loans $ 38,840 6,057 30,234 36,291 1,658 38,145 1,276
Fair value measurements for impaired loans and other real estate on a non-recurring basis	(Dollars in thousands) Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage loans held for sale $ 5,709 - - 5,709 Impaired loans $ 25,931 - - 25,931 Other real estate $ 283 - - 283 (Dollars in thousands) Fair Value Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage loans held for sale $ 4,149 - - 4,149 Impaired loans $ 31,818 - - 31,818 Other real estate $ 739 - - 739 (Dollars in thousands) Fair Value December 31, 2016 Fair Value December 31, 2015 Valuation Technique Significant Unobservable Inputs General Range of Significant Input Values Mortgage loans held for sale $ 5,709 4,149 Rate lock commitment N/A N/A Impaired loans $ 25,931 31,818 Appraised value and discounted cash flows Discounts to reflect current market conditions and ultimate collectability 0 - 25% Other real estate $ 283 739 Appraised value Discounts to reflect current market conditions and estimated costs to sell 0 - 25%
Changes in the allowance for loan losses	Changes in the allowance for loan losses for the year ended December 31, 2016 were as follows: (Dollars in thousands) Real Estate Loans Construction Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer Unallocated Total Allowance for loan losses: Beginning balance $ 2,185 2,534 1,460 1,917 - 842 - 172 479 9,589 Charge-offs (7 ) (275 ) - (318 ) - (146 ) - (492 ) - (1,238 ) Recoveries 10 55 - 19 - 170 - 151 - 405 Provision (1,036 ) (188 ) (83 ) (25 ) 52 (191 ) - 373 (108 ) (1,206 ) Ending balance $ 1,152 2,126 1,377 1,593 52 675 - 204 371 7,550 Ending balance: individually evaluated for impairment $ - - 1,160 159 - - - - - 1,319 Ending balance: collectively evaluated for impairment 1,152 2,126 217 1,434 52 675 - 204 371 6,231 Ending balance $ 1,152 2,126 1,377 1,593 52 675 - 204 371 7,550 Loans: Ending balance $ 61,749 240,700 40,189 247,521 21,047 87,596 - 25,009 - 723,811 Ending balance: individually evaluated for impairment $ - 935 16,718 3,648 - - - - - 21,301 Ending balance: collectively evaluated for impairment $ 61,749 239,765 23,471 243,873 21,047 87,596 - 25,009 - 702,510 Changes in the allowance for loan losses for the year ended December 31, 2015 were as follows: (Dollars in thousands) Real Estate Loans Construction Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer Unallocated Total Allowance for loan losses: Beginning balance $ 2,785 2,566 1,610 1,902 7 1,098 - 233 881 11,082 Charge-offs (198 ) (618 ) (117 ) (329 ) - (37 ) - (545 ) - (1,844 ) Recoveries 45 34 22 21 - 101 - 145 - 368 Provision (447 ) 552 (55 ) 323 (7 ) (320 ) - 339 (402 ) (17 ) Ending balance $ 2,185 2,534 1,460 1,917 - 842 - 172 479 9,589 Ending balance: individually evaluated for impairment $ - 96 1,115 171 - - - - - 1,382 Ending balance: collectively evaluated for impairment 2,185 2,438 345 1,746 - 842 - 172 479 8,207 Ending balance $ 2,185 2,534 1,460 1,917 - 842 - 172 479 9,589 Loans: Ending balance $ 65,791 220,690 43,733 228,526 18,080 91,010 3 21,258 - 689,091 Ending balance: individually evaluated for impairment $ 216 2,636 17,850 4,212 - - - - - 24,914 Ending balance: collectively evaluated for impairment $ 65,575 218,054 25,883 224,314 18,080 91,010 3 21,258 - 664,177 Changes in the allowance for loan losses for the year ended December 31, 2014 were as follows: (Dollars in thousands) Real Estate Loans Construction Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer Unallocated Total Allowance for loan losses: Beginning balance $ 3,218 3,123 1,863 2,219 37 1,069 - 245 1,727 13,501 Charge-offs (884 ) (309 ) (190 ) (290 ) - (430 ) - (534 ) - (2,637 ) Recoveries 428 72 16 171 - 54 - 176 - 917 Provision 23 (320 ) (79 ) (198 ) (30 ) 405 - 346 (846 ) (699 ) Ending balance $ 2,785 2,566 1,610 1,902 7 1,098 - 233 881 11,082 Ending balance: individually evaluated for impairment $ - 82 1,155 260 - - - - - 1,497 Ending balance: collectively evaluated for impairment 2,785 2,484 455 1,642 7 1,098 - 233 881 9,585 Ending balance $ 2,785 2,566 1,610 1,902 7 1,098 - 233 881 11,082 Loans: Ending balance $ 57,617 206,417 47,015 228,558 12,400 76,262 7 23,615 - 651,891 Ending balance: individually evaluated for impairment $ 3,639 2,298 18,884 3,345 - - - - - 28,166 Ending balance: collectively evaluated for impairment $ 53,978 204,119 28,131 225,213 12,400 76,262 7 23,615 - 623,725
Credit risk profile of each loan type based on internally assigned risk grade	December 31, 2016 (Dollars in thousands) Real Estate Loans Construction Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer All Other Total 1- Excellent Quality $ - 14,996 - - - 541 - 959 - 16,496 2- High Quality 9,784 109,809 - 39,769 2,884 26,006 - 3,335 2,507 194,094 3- Good Quality 33,633 82,147 16,703 176,109 14,529 55,155 - 4,842 10,921 394,039 4- Management Attention 10,892 25,219 15,580 24,753 2,355 5,586 - 619 1,749 86,753 5- Watch 7,229 4,682 3,943 4,906 1,201 246 - 31 - 22,238 6- Substandard 211 3,847 3,963 1,984 78 62 - 42 - 10,187 7- Doubtful - - - - - - - - - - 8- Loss - - - - - - - 4 - 4 Total $ 61,749 240,700 40,189 247,521 21,047 87,596 - 9,832 15,177 723,811 December 31, 2015 (Dollars in thousands) Real Estate Loans Construction Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer All Other Total 1- Excellent Quality $ - 15,189 - - - 700 - 1,091 - 16,980 2- High Quality 10,144 86,061 - 38,647 2,998 24,955 - 3,647 1,665 168,117 3- Good Quality 35,535 78,843 19,223 148,805 12,058 58,936 3 4,571 7,828 365,802 4- Management Attention 12,544 30,259 15,029 31,824 335 5,905 - 620 1,738 98,254 5- Watch 7,265 4,322 3,308 4,561 2,689 332 - 43 - 22,520 6- Substandard 303 6,016 6,173 4,689 - 182 - 55 - 17,418 7- Doubtful - - - - - - - - - - 8- Loss - - - - - - - - - - Total $ 65,791 220,690 43,733 228,526 18,080 91,010 3 10,027 11,231 689,091
Analysis of TDR loans by loan type	Year ended December 31, 2016 (Dollars in thousands) Number of Contracts Pre-Modification Post-Modification Real estate loans: Single-family residential 3 $ 124 121 Total TDR loans 3 $ 124 121 During the year ended December 31, 2016, three loans were modified that were considered to be new TDR loans. The interest rate was modified on these TDR loans. The following table presents an analysis of loan modifications during the year ended December 31, 2015: Year ended December 31, 2015 (Dollars in thousands) Number of Contracts Pre-Modification Post-Modification Real estate loans: Construction and land development 1 $ 216 216 Single-family residential 3 288 271 Total TDR loans 4 $ 504 487

4. Premises and Equipment (Tabl

4. Premises and Equipment (Tables)	12 Months Ended
	Dec. 31, 2016
Property, Plant and Equipment [Abstract]
Summary of premises and equipment	(Dollars in thousands) 2016 2015 Land $ 3,670 3,669 Buildings and improvements 16,398 15,889 Furniture and equipment 19,996 19,462 Total premises and equipment 40,064 39,020 Less accumulated depreciation 23,612 22,044 Total net premises and equipment $ 16,452 16,976

5. Time Deposits (Tables)

5. Time Deposits (Tables)	12 Months Ended
	Dec. 31, 2016
Banking and Thrift [Abstract]
Scheduled maturities of time deposits	(Dollars in thousands) 2017 $ 86,817 2018 33,184 2019 15,207 2020 5,287 2021 and thereafter 3,518 Total $ 144,013

6. Federal Home Loan Bank and31

6. Federal Home Loan Bank and Federal Reserve Bank Borrowings (Tables)	12 Months Ended
	Dec. 31, 2016
Banking and Thrift [Abstract]
Borrowings from the FHLB outstanding	December 31, 2016 (Dollars in thousands) Maturity Date Call Date Rate Rate Type Amount October 17, 2018 N/A 4.050% Adjustable Rate Hybrid $ 5,000 October 17, 2018 N/A 4.065% Adjustable Rate Hybrid 5,000 October 17, 2018 N/A 4.120% Adjustable Rate Hybrid 5,000 May 8, 2018 N/A 2.683% Adjustable Rate Hybrid 5,000 $ 20,000 December 31, 2015 (Dollars in thousands) Maturity Date Call Date Rate Rate Type Amount October 17, 2018 N/A 3.485% Adjustable Rate Hybrid $ 5,000 October 17, 2018 N/A 3.725% Adjustable Rate Hybrid 15,000 October 17, 2018 N/A 3.500% Adjustable Rate Hybrid 5,000 October 17, 2018 N/A 3.555% Adjustable Rate Hybrid 5,000 May 8, 2018 N/A 2.144% Adjustable Rate Hybrid 5,000 May 8, 2018 N/A 3.734% Floating to Fixed 8,500 $ 43,500

8. Income Taxes (Tables)

8. Income Taxes (Tables)	12 Months Ended
	Dec. 31, 2016
Income Tax Disclosure [Abstract]
Components of Income Tax Expense (Benefit)	(Dollars in thousands) 2016 2015 2014 Current expense $ 1,464 2,427 1,759 Deferred income tax expense 1,097 673 178 Total income tax $ 2,561 3,100 1,937
Schedule of Effective Income Tax Rate Reconciliation	(Dollars in thousands) 2016 2015 2014 Tax expense at statutory rate (34%) $ 3,991 4,329 3,851 State income tax, net of federal income tax effect 339 494 (283 ) Tax-exempt interest income (1,681 ) (1,682 ) (1,630 ) Increase in cash surrender value of life insurance (138 ) (143 ) (143 ) Nondeductible interest and other expense 78 103 119 Other (28 ) (1 ) 23 Total $ 2,561 3,100 1,937
Schedule of Deferred Tax Assets and Liabilities	(Dollars in thousands) 2016 2015 Deferred tax assets: Allowance for loan losses $ 2,717 3,513 Accrued retirement expense 1,616 1,574 Other real estate - 33 Federal credit carryforward 326 - State credit carryforward 14 - Restricted stock 745 417 Accrued bonuses 216 238 Interest income on nonaccrual loans 27 88 Other than temporary impairment 14 374 Other 23 16 Total gross deferred tax assets 5,698 6,253 Deferred tax liabilities: Deferred loan fees 797 588 Accumulated depreciation 532 172 Prepaid expenses 78 59 Other 23 70 Unrealized gain on available for sale securities 1,807 3,308 Total gross deferred tax liabilities 3,237 4,197 Net deferred tax asset $ 2,461 2,056

9. Related Party Transactions (

9. Related Party Transactions (Tables)	12 Months Ended
	Dec. 31, 2016
Related Party Transactions [Abstract]
Summary of activity for related party loans	(Dollars in thousands) 2016 2015 Beginning balance $ 5,674 6,055 New loans 6,048 7,857 Repayments (7,219 ) (8,238 ) Ending balance $ 4,503 5,674

10. Commitments and Contingen34

10. Commitments and Contingencies (Tables)	12 Months Ended
	Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
Future Minimum Rental Payments for Operating Leases	(Dollars in thousands) Year ending December 31, 2017 $ 632 2018 611 2019 601 2020 602 2021 591 Thereafter 1,611 Total minimum obligation $ 4,648
Financial instruments with credit risk	(Dollars in thousands) Contractual Amount 2016 2015 Financial instruments whose contract amount represent credit risk: Commitments to extend credit $ 195,528 189,351 Standby letters of credit and financial guarantees written $ 3,728 3,872

11. Employee and Director Ben35

11. Employee and Director Benefit Programs (Tables)	12 Months Ended
	Dec. 31, 2016
Compensation and Retirement Disclosure [Abstract]
Change in accumulated benefit obligation	(Dollars in thousands) 2016 2015 Benefit obligation at beginning of period $ 3,993 3,812 Service cost 346 334 Interest cost 67 65 Benefits paid (232 ) (218 ) Benefit obligation at end of period $ 4,174 3,993
Amounts recognized in the Consolidated Balance Sheet	(Dollars in thousands) 2016 2015 Benefit obligation $ 4,174 3,993 Fair value of plan assets - - (Dollars in thousands) 2016 2015 Funded status $ (4,174 ) (3,993 ) Unrecognized prior service cost/benefit - - Unrecognized net actuarial loss - - Net amount recognized $ (4,174 ) (3,993 ) Unfunded accrued liability $ (4,174 ) (3,993 ) Intangible assets - - Net amount recognized $ (4,174 ) (3,993 )
Schedule of Net Benefit Costs	(Dollars in thousands) 2016 2015 2014 Service cost $ 346 334 348 Interest cost 67 65 67 Net periodic cost $ 413 399 415 Weighted average discount rate assumption used to determine benefit obligation 5.47% 5.47% 5.47%
Schedule of Expected Benefit Payments	(Dollars in thousands) Year ending December 31, 2017 $ 263 2018 $ 275 2019 $ 310 2020 $ 363 2021 $ 364 Thereafter $ 9,077

12. Regulatory Matters (Tables)

12. Regulatory Matters (Tables)	12 Months Ended
	Dec. 31, 2016
Banking and Thrift [Abstract]
Bank's actual capital amounts and ratios	(Dollars in thousands) Actual For Capital Adequacy Purposes To Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio As of December 31, 2016: Total Capital (to Risk-Weighted Assets) Consolidated $ 131,991 16.12% 65,508 8.00% N/A N/A Bank $ 129,035 15.78% 65,426 8.00% 81,782 10.00% Tier 1 Capital (to Risk-Weighted Assets) Consolidated $ 124,441 15.20% 49,131 6.00% N/A N/A Bank $ 121,485 14.85% 49,069 6.00% 65,426 8.00% Tier 1 Capital (to Average Assets) Consolidated $ 124,441 11.19% 44,488 4.00% N/A N/A Bank $ 121,485 10.88% 44,677 4.00% 55,846 5.00% Common Equity Tier 1 (to Risk-Weighted Assets) Consolidated $ 104,441 12.75% 36,848 4.50% N/A N/A Bank $ 121,485 14.85% 36,802 4.50% 53,158 6.50% As of December 31, 2015: Total Capital (to Risk-Weighted Assets) Consolidated $ 129,203 16.63% 62,137 8.00% N/A N/A Bank $ 124,910 16.11% 62,026 8.00% 77,532 10.00% Tier 1 Capital (to Risk-Weighted Assets) Consolidated $ 119,354 15.37% 46,603 6.00% N/A N/A Bank $ 115,160 14.85% 46,519 6.00% 62,026 8.00% Tier 1 Capital (to Average Assets) Consolidated $ 119,354 11.44% 41,743 4.00% N/A N/A Bank $ 115,160 11.03% 41,776 4.00% 52,220 5.00% Common Equity Tier 1 (to Risk-Weighted Assets) Consolidated $ 99,354 12.79% 34,952 4.50% N/A N/A Bank $ 115,160 14.85% 34,890 4.50% 50,396 6.50%

14. Other Operating Income an37

14. Other Operating Income and Expense (Tables)	12 Months Ended
	Dec. 31, 2016
Other Income and Expenses [Abstract]
Other operating income and expense	(Dollars in thousands) 2016 2015 2014 Visa debit card income $ 3,589 3,452 3,170 Net appraisal management fee income $ 886 635 525 Insurance and brokerage commissions $ 631 713 701 (Dollars in thousands) 2016 2015 2014 Advertising $ 1,136 784 804 FDIC insurance $ 494 681 739 Visa debit card expense $ 1,140 988 905 Telephone $ 754 588 574 Foreclosure/OREO expense $ 120 398 317 Internet banking expense $ 710 671 644 FHLB advance prepayment penalty $ 1,260 504 869 Consulting $ 2,257 904 609 NC Tax Credit Amortization $ - - 870

15. Fair Value of Financial I38

15. Fair Value of Financial Instruments (Tables)	12 Months Ended
	Dec. 31, 2016
Fair Value Disclosures [Abstract]
Carrying amount and estimated fair value of the Company's financial instruments	(Dollars in thousands) Fair Value Measurements at December 31, 2016 Carrying Amount Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 70,094 70,094 - - 70,094 Investment securities available for sale $ 249,946 - 249,196 750 249,946 Other investments $ 2,635 - - 2,635 2,635 Mortgage loans held for sale $ 5,709 - - 5,709 5,709 Loans, net $ 716,261 - - 720,675 720,675 Cash surrender value of life insurance $ 14,952 - 14,952 - 14,952 Liabilities: Deposits $ 892,918 - - 884,510 884,510 Securities sold under agreements to repurchase $ 36,434 - 36,434 - 36,434 FHLB borrowings $ 20,000 - 18,864 - 18,864 Junior subordinated debentures $ 20,619 - 20,619 - 20,619 (Dollars in thousands) Fair Value Measurements at December 31, 2015 Carrying Amount Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 39,763 39,763 - - 39,763 Investment securities available for sale $ 268,530 1,325 266,455 750 268,530 Other investments $ 3,636 - - 3,636 3,636 Mortgage loans held for sale $ 4,149 - - 4,149 4,149 Loans, net $ 679,502 - - 683,540 683,540 Cash surrender value of life insurance $ 14,546 - 14,546 - 14,546 Liabilities: Deposits $ 832,175 - - 827,874 827,874 Securities sold under agreements to repurchase $ 27,874 - 27,874 - 27,874 FHLB borrowings $ 43,500 - 43,144 - 43,144 Junior subordinated debentures $ 20,619 - 20,619 - 20,619

16. Peoples Bancorp of North 39

16. Peoples Bancorp of North Carolina, Inc. (Parent Company Only) Condensed Financial Statements (Tables)	12 Months Ended
	Dec. 31, 2016
Condensed Financial Information of Parent Company Only Disclosure [Abstract]
Balance Sheets	Balance Sheets December 31, 2016 and 2015 (Dollars in thousands) Assets 2016 2015 Cash $ 957 553 Interest-bearing time deposit 1,000 1,000 Investment in subsidiaries 124,471 121,848 Investment in PEBK Capital Trust II 619 619 Investment securities available for sale 750 1,234 Other assets 275 249 Total assets $ 128,072 125,503 Liabilities and Shareholders' Equity Junior subordinated debentures $ 20,619 20,619 Liabilities 25 20 Shareholders' equity 107,428 104,864 Total liabilities and shareholders' equity $ 128,072 125,503
Statements of Earnings	Statements of Earnings For the Years Ended December 31, 2016, 2015 and 2014 (Dollars in thousands) Revenues: 2016 2015 2014 Interest and dividend income $ 4,569 3,979 2,718 Gain on sale of securities 405 - - Total revenues 4,974 3,979 2,718 Expenses: Interest 485 403 389 Other operating expenses 513 538 527 Total expenses 998 941 916 Income before income tax benefit and equity in undistributed earnings of subsidiaries 3,976 3,038 1,802 Income tax benefit 178 262 239 Income before equity in undistributed earnings of subsidiaries 4,154 3,300 2,041 Equity in undistributed earnings of subsidiaries 5,023 6,333 7,347 Net earnings $ 9,177 9,633 9,388
Statements of Cash Flows	Statements of Cash Flows For the Years Ended December 31, 2016, 2015 and 2014 (Dollars in thousands) 2016 2015 2014 Cash flows from operating activities: Net earnings $ 9,177 9,633 9,388 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Equity in undistributed earnings of subsidiaries (5,023 ) (6,333 ) (7,347 ) Gain on sale of investment securities (405 ) - - Change in: Other assets 61 (4 ) 28 Accrued income - - (5 ) Accrued expense 5 3 1 Other liabilities - - (12,632 ) Net cash provided by operating activities 3,815 3,299 (10,567 ) Cash flows from investing activities: Proceeds from maturities of investment securities available for sale 669 - 500 In kind transfer from parent to Bank 10 - - Net change in interest-bearing time deposit - - (1,000 ) Net cash provided (used) by investing activities 679 - (500 ) Cash flows from financing activities: Cash dividends paid on common stock (2,106 ) (1,574 ) (1,022 ) Stock repurchase (1,984 ) (1,917 ) (82 ) Proceeds from exercise of stock options - - 37 Net cash used by financing activities (4,090 ) (3,491 ) (1,067 ) Net change in cash 404 (192 ) (12,134 ) Cash at beginning of year 553 745 12,879 Cash at end of year $ 957 553 745 Noncash investing and financing activities: Change in unrealized gain on investment securities available for sale, net $ (2,523 ) 57 6,625 Accrued redemption of Series A Preferred Stock - - (12,524 )

17. Quarterly Data (Tables)

17. Quarterly Data (Tables)	12 Months Ended
	Dec. 31, 2016
Quarterly Financial Information Disclosure [Abstract]
Schedule of Quarterly Financial Information	2016 2015 (Dollars in thousands, except per share amounts) First Second Third Fourth First Second Third Fourth Total interest income $ 9,905 9,815 9,982 10,107 $ 9,567 9,191 9,947 9,961 Total interest expense 809 813 828 821 884 875 874 851 Net interest income 9,096 9,002 9,154 9,286 8,683 8,316 9,073 9,110 (Reduction of) provision for loan losses (216 ) (531 ) (360 ) (99 ) 173 (214 ) 235 (211 ) Other income 3,324 3,572 3,414 3,666 3,245 3,297 3,266 3,504 Other expense 9,492 9,109 9,598 11,783 8,748 8,337 8,669 10,024 Income before income taxes 3,144 3,996 3,330 1,268 3,007 3,490 3,435 2,801 Income taxes (benefit) 691 1,032 872 (34 ) 679 866 942 613 Net earnings 2,453 2,964 2,458 1,302 2,328 2,624 2,493 2,188 Basic net earnings per share 0.45 0.54 0.45 0.24 $ 0.41 0.47 0.45 0.40 Diluted net earnings per share $ 0.44 0.53 0.44 0.24 $ 0.41 0.47 0.45 0.39

1. Summary of Significant Acc41

1. Summary of Significant Accounting Policies (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Net Earnings Available to Common Shareholders
Basic earnings per common share									$ 9,177	$ 9,633	$ 9,388
Effect of dilutive securities: Restricted stock units and stock options									0	0	0
Diluted earnings per common share									$ 9,177	$ 9,633	$ 9,388
Common Shares
Basic earnings per common share (in shares)									5,477,245	5,559,235	5,615,666
Effect of dilutive securities: Restricted stock units (in shares)									70,734	47,954	26,326
Diluted earnings per common share (in shares)									5,547,979	5,607,189	5,641,992
Per Share Amount
Basic earnings per common share (in dollars per share)	$ 0.24	$ 0.45	$ 0.54	$ 0.45	$ 0.40	$ 0.45	$ 0.47	$ 0.41	$ 1.68	$ 1.73	$ 1.67
Diluted earnings per common share (in dollars per share)	$ 0.24	$ 0.44	$ 0.53	$ 0.44	$ 0.39	$ 0.45	$ 0.47	$ 0.41	$ 1.65	$ 1.72	$ 1.66

1. Summary of Significant Acc42

1. Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Summary Of Significant Accounting Policies Details Narrative
Unpaid principal balances of mortgage loans serviced for others	$ 1,400	$ 1,600	$ 2,100
Compensation expense for restricted stock units	932	$ 487	$ 389
Unrecognized compensation expense	$ 396

2. Investment Securities (Detai

2. Investment Securities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Investment securities available for sale
Amortized Cost	$ 244,924
Estimated Fair Value	249,946	$ 268,530
Mortgage-backed securities
Investment securities available for sale
Amortized Cost	66,654	76,406
Gross Unrealized Gains	1,221	1,526
Gross Unrealized Losses	290	45
Estimated Fair Value	67,585	77,887
U.S. Government sponsored enterprises
Investment securities available for sale
Amortized Cost	38,188	38,173
Gross Unrealized Gains	308	399
Gross Unrealized Losses	274	155
Estimated Fair Value	38,222	38,417
State and political subdivisions
Investment securities available for sale
Amortized Cost	137,832	141,500
Gross Unrealized Gains	4,176	6,817
Gross Unrealized Losses	152	72
Estimated Fair Value	141,856	148,245
Corporate bonds
Investment securities available for sale
Amortized Cost	1,500	1,928
Gross Unrealized Gains	33	0
Gross Unrealized Losses	0	22
Estimated Fair Value	1,533	1,906
Trust preferred securities
Investment securities available for sale
Amortized Cost	750	750
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	750	750
Equity securities
Investment securities available for sale
Amortized Cost		748
Gross Unrealized Gains		577
Gross Unrealized Losses		0
Estimated Fair Value		1,325
Total
Investment securities available for sale
Amortized Cost	244,924	259,505
Gross Unrealized Gains	5,738	9,319
Gross Unrealized Losses	716	294
Estimated Fair Value	$ 249,946	$ 268,530

2. Investment securities, Conti

2. Investment securities, Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Investment securities with continuous unrealized loss position
Less than 12 Months, Fair Value	$ 36,155	$ 14,663
Less than 12 Months, Unrealized Losses	507	84
12 Months or More, Fair Value	10,123	14,758
12 Months or More, Unrealized Losses	209	210
Total, Fair Value	46,278	29,421
Total, Unrealized Losses	716	294
Mortgage-backed securities
Investment securities with continuous unrealized loss position
Less than 12 Months, Fair Value	15,594	7,891
Less than 12 Months, Unrealized Losses	290	45
12 Months or More, Fair Value	0	0
12 Months or More, Unrealized Losses	0	0
Total, Fair Value	15,594	7,891
Total, Unrealized Losses	290	45
U.S. Government sponsored enterprises
Investment securities with continuous unrealized loss position
Less than 12 Months, Fair Value	10,120	3,074
Less than 12 Months, Unrealized Losses	94	13
12 Months or More, Fair Value	9,562	10,828
12 Months or More, Unrealized Losses	180	142
Total, Fair Value	19,682	13,902
Total, Unrealized Losses	274	155
State and political subdivisions
Investment securities with continuous unrealized loss position
Less than 12 Months, Fair Value	10,441	2,198
Less than 12 Months, Unrealized Losses	123	4
12 Months or More, Fair Value	561	3,930
12 Months or More, Unrealized Losses	29	68
Total, Fair Value	11,002	6,128
Total, Unrealized Losses	$ 152	72
Corporate bonds
Investment securities with continuous unrealized loss position
Less than 12 Months, Fair Value		1,500
Less than 12 Months, Unrealized Losses		22
12 Months or More, Fair Value		0
12 Months or More, Unrealized Losses		0
Total, Fair Value		1,500
Total, Unrealized Losses		$ 22

2. Investment securities, Contr

2. Investment securities, Contractual Maturity (Details) $ in Thousands	Dec. 31, 2016USD ($)
Amortized Cost
Due within one year	$ 7,304
Due from one to five years	81,366
Due from five to ten years	77,498
Due after ten years	12,102
Mortgage-backed securities	66,654
Equity securities	0
Total	244,924
Estimated Fair Value
Due within one year	7,341
Due from one to five years	84,100
Due from five to ten years	78,751
Due after ten years	12,169
Mortgage-backed securities	67,585
Equity securities	0
Total	$ 249,946

2. Investment securities, Fair

2. Investment securities, Fair Value Measurements (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Estimated Fair Value	$ 249,946	$ 268,530
Mortgage-backed securities
Estimated Fair Value	67,585	77,887
Level 1 valuation	0	0
Level 2 valuation	67,585	77,887
Level 3 valuation	0	0
U.S. Government sponsored enterprises
Estimated Fair Value	38,222	38,417
Level 1 valuation	0	0
Level 2 valuation	38,222	38,417
Level 3 valuation	0	0
State and political subdivisions
Estimated Fair Value	141,856	148,245
Level 1 valuation	0	0
Level 2 valuation	141,856	148,245
Level 3 valuation	0	0
Corporate bonds
Estimated Fair Value	1,533	1,906
Level 1 valuation	0	0
Level 2 valuation	1,533	1,906
Level 3 valuation	0	0
Trust preferred securities
Estimated Fair Value	750	750
Level 1 valuation	0	0
Level 2 valuation	0	0
Level 3 valuation	$ 750	750
Equity securities
Estimated Fair Value		1,325
Level 1 valuation		1,325
Level 2 valuation		0
Level 3 valuation		$ 0

2. Investment securities, Fai47

2. Investment securities, Fair Value Level 3 Valuation (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016USD ($)
Investment Securities Available for Sale Level 3 Valuation
Balance, beginning of period	$ 750
Change in book value	0
Change in gain/(loss) realized and unrealized	0
Purchases/(sales and calls)	0
Transfers in and/or (out) of Level 3	0
Balance, end of period	750
Change in unrealized gain/(loss) for assets still held in Level 3	$ 0

2. Investment Securities (Det48

2. Investment Securities (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Investment Securities Details Narrative
Unrealized losses in the investment securites portfolio relating to debt securities	$ 716
Proceeds from sales of investment securities available for sale	1,500	$ 0	$ 20,202
Gains on sales of available for sale securities	729		291
Loss on sales of available for sale securities			$ 25
Securities pledged to secure public deposits	$ 95,600	$ 91,000

3. Loans (Details)

3. Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Major classifications
Total Loans	$ 723,811	$ 689,091	$ 651,891	$ 620,960
Less allowance for loan losses	7,550	9,589	11,082	13,501
Net loans	716,261	679,502
Construction and land development
Major classifications
Total Loans	61,749	65,791	57,617
Less allowance for loan losses	1,152	2,185	2,785	3,218
Single-family residential
Major classifications
Total Loans	240,700	220,690	206,417
Less allowance for loan losses	2,126	2,534	2,566	3,123
Single-family residential - Banco de la Gente stated income
Major classifications
Total Loans	40,189	43,733	47,015
Less allowance for loan losses	1,377	1,460	1,610	1,863
Commercial
Major classifications
Total Loans	247,521	228,526	228,558
Less allowance for loan losses	1,593	1,917	1,902	2,219
Multifamily and Farmland
Major classifications
Total Loans	21,047	18,080	12,400
Less allowance for loan losses	52	0	7	37
Total real estate loans
Major classifications
Total Loans	611,206	576,820
Commercial loans (not secured by real estate)
Major classifications
Total Loans	87,596	91,010	76,262
Less allowance for loan losses	675	842	1,098	1,069
Farm loans (not secured by real estate)
Major classifications
Total Loans	0	3	7
Less allowance for loan losses	0	0	$ 0	$ 0
Consumer loans (not secured by real estate)
Major classifications
Total Loans	9,832	10,027
All other loans (not secured by real estate)
Major classifications
Total Loans	$ 15,177	$ 11,231

3. Loans, Past Due (Details)

3. Loans, Past Due (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Past due loans
Loans 30-89 Days Past Due	$ 11,297	$ 13,113
Loans 90 or More Days Past Due	471	1,721
Total Past Due Loans	11,768	14,834
Total Current Loans	712,043	674,257
Total loans	723,811	689,091	$ 651,891	$ 620,960
Accruing Loans 90 or More Days Past Due	0	17
Construction and land development
Past due loans
Loans 30-89 Days Past Due	0	330
Loans 90 or More Days Past Due	10	17
Total Past Due Loans	10	347
Total Current Loans	61,739	65,444
Total loans	61,749	65,791
Accruing Loans 90 or More Days Past Due	0	0
Single-family residential
Past due loans
Loans 30-89 Days Past Due	4,890	2,822
Loans 90 or More Days Past Due	80	1,385
Total Past Due Loans	4,970	4,207
Total Current Loans	235,730	216,483
Total loans	240,700	220,690
Accruing Loans 90 or More Days Past Due	0	0
Single-family residential - Banco de la Gente stated income
Past due loans
Loans 30-89 Days Past Due	5,250	7,021
Loans 90 or More Days Past Due	249	114
Total Past Due Loans	5,499	7,135
Total Current Loans	34,690	36,598
Total loans	40,189	43,733
Accruing Loans 90 or More Days Past Due	0	0
Commercial
Past due loans
Loans 30-89 Days Past Due	342	2,619
Loans 90 or More Days Past Due	126	157
Total Past Due Loans	468	2,776
Total Current Loans	247,053	225,750
Total loans	247,521	228,526
Accruing Loans 90 or More Days Past Due	0	0
Multifamily and Farmland
Past due loans
Loans 30-89 Days Past Due	471	0
Loans 90 or More Days Past Due	0	0
Total Past Due Loans	471	0
Total Current Loans	20,576	18,080
Total loans	21,047	18,080
Accruing Loans 90 or More Days Past Due	0	0
Total real estate loans
Past due loans
Loans 30-89 Days Past Due	10,953	12,792
Loans 90 or More Days Past Due	465	1,673
Total Past Due Loans	11,418	14,465
Total Current Loans	599,788	562,355
Total loans	611,206	576,820
Accruing Loans 90 or More Days Past Due	0	0
Commercial loans (not secured by real estate)
Past due loans
Loans 30-89 Days Past Due	273	185
Loans 90 or More Days Past Due	0	40
Total Past Due Loans	273	225
Total Current Loans	87,323	90,785
Total loans	87,596	91,010
Accruing Loans 90 or More Days Past Due	0	17
Farm loans (not secured by real estate)
Past due loans
Loans 30-89 Days Past Due	0	0
Loans 90 or More Days Past Due	0	0
Total Past Due Loans	0	0
Total Current Loans	0	3
Total loans	0	3
Accruing Loans 90 or More Days Past Due	0	0
Consumer loans (not secured by real estate)
Past due loans
Loans 30-89 Days Past Due	68	136
Loans 90 or More Days Past Due	6	8
Total Past Due Loans	74	144
Total Current Loans	9,758	9,883
Total loans	9,832	10,027
Accruing Loans 90 or More Days Past Due	0	0
All other loans (not secured by real estate)
Past due loans
Loans 30-89 Days Past Due	3	0
Loans 90 or More Days Past Due	0	0
Total Past Due Loans	3	0
Total Current Loans	15,174	11,231
Total loans	15,177	11,231
Accruing Loans 90 or More Days Past Due	$ 0	$ 0

3. Loans, Nonaccrual (Details)

3. Loans, Nonaccrual (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Non-accrual loans
Non-accrual loans	$ 3,825	$ 8,432
Construction and land development
Non-accrual loans
Non-accrual loans	22	146
Single-family residential
Non-accrual loans
Non-accrual loans	1,662	4,023
Single-family residential - Banco de la Gente stated income
Non-accrual loans
Non-accrual loans	1,340	1,106
Commercial
Non-accrual loans
Non-accrual loans	669	2,992
Multifamily and Farmland
Non-accrual loans
Non-accrual loans	78	0
Total real estate loans
Non-accrual loans
Non-accrual loans	3,771	8,267
Commercial loans (not secured by real estate)
Non-accrual loans
Non-accrual loans	21	113
Consumer loans (not secured by real estate)
Non-accrual loans
Non-accrual loans	$ 33	$ 52

3. Loans, Impaired (Details)

3. Loans, Impaired (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Impaired loans
Unpaid Contractual Principal Balance	$ 28,313	$ 34,964	$ 38,840
Recorded Investment With No Allowance	2,002	1,705	6,057
Recorded Investment With Allowance	25,179	31,643	30,234
Recorded Investment in Impaired Loans	27,181	33,348	36,291
Related Allowance	1,409	1,530	1,658
Average Outstanding Impaired Loans	30,302	35,976	38,145
Year-To-Date Interest Income Recognized	1,198	1,274	1,276
Construction and land development
Impaired loans
Unpaid Contractual Principal Balance	282	643	5,481
Recorded Investment With No Allowance		216	3,639
Recorded Investment With Allowance	278	226	555
Recorded Investment in Impaired Loans	278	442	4,194
Related Allowance	11	12	31
Average Outstanding Impaired Loans	330	705	5,248
Year-To-Date Interest Income Recognized	13	18	20
Single-family residential
Impaired loans
Unpaid Contractual Principal Balance	5,354	8,828	6,717
Recorded Investment With No Allowance	703	1,489	933
Recorded Investment With Allowance	4,323	6,805	5,540
Recorded Investment in Impaired Loans	5,026	8,294	6,473
Related Allowance	47	189	154
Average Outstanding Impaired Loans	7,247	10,852	7,430
Year-To-Date Interest Income Recognized	164	224	214
Single-family residential - Banco de la Gente stated income
Impaired loans
Unpaid Contractual Principal Balance	18,611	20,375	21,243
Recorded Investment With No Allowance	0	0	0
Recorded Investment With Allowance	18,074	19,215	20,649
Recorded Investment in Impaired Loans	18,074	19,215	20,649
Related Allowance	1,182	1,143	1,191
Average Outstanding Impaired Loans	17,673	18,414	19,964
Year-To-Date Interest Income Recognized	861	921	952
Commercial
Impaired loans
Unpaid Contractual Principal Balance	3,750	4,556	4,752
Recorded Investment With No Allowance	1,299	0	1,485
Recorded Investment With Allowance	2,197	4,893	2,866
Recorded Investment in Impaired Loans	3,496	4,893	4,351
Related Allowance	166	179	272
Average Outstanding Impaired Loans	4,657	5,497	4,399
Year-To-Date Interest Income Recognized	152	89	76
Multifamily and Farmland
Impaired loans
Unpaid Contractual Principal Balance	78	96	111
Recorded Investment With No Allowance	0	0	0
Recorded Investment With Allowance	78	83	110
Recorded Investment in Impaired Loans	78	83	110
Related Allowance	0	0	1
Average Outstanding Impaired Loans	78	93	154
Year-To-Date Interest Income Recognized	0	6	0
Total real estate loans
Impaired loans
Unpaid Contractual Principal Balance	28,075	34,498	38,304
Recorded Investment With No Allowance	2,002	1,705	6,057
Recorded Investment With Allowance	24,950	31,222	29,720
Recorded Investment in Impaired Loans	26,952	32,927	35,777
Related Allowance	1,406	1,523	1,649
Average Outstanding Impaired Loans	29,985	35,561	37,195
Year-To-Date Interest Income Recognized	1,190	1,258	1,262
Commercial loans (not secured by real estate)
Impaired loans
Unpaid Contractual Principal Balance	27	180	218
Recorded Investment With No Allowance	0	0	0
Recorded Investment With Allowance	27	161	201
Recorded Investment in Impaired Loans	27	161	201
Related Allowance	0	3	4
Average Outstanding Impaired Loans	95	132	641
Year-To-Date Interest Income Recognized	0	5	2
Consumer loans (not secured by real estate)
Impaired loans
Unpaid Contractual Principal Balance	211	286	318
Recorded Investment With No Allowance	0	0	0
Recorded Investment With Allowance	202	260	313
Recorded Investment in Impaired Loans	202	260	313
Related Allowance	3	4	5
Average Outstanding Impaired Loans	222	283	309
Year-To-Date Interest Income Recognized	$ 8	$ 11	$ 12

3. Loans Impaired, Fair Value M

3. Loans Impaired, Fair Value Measurements (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Mortgage loans held for sale	$ 5,709	$ 4,149
Impaired loans	25,931	31,818
Other real estate	283	739
Level 1
Mortgage loans held for sale	0	0
Impaired loans	0	0
Other real estate	0	0
Level 2
Mortgage loans held for sale	0	0
Impaired loans	0	0
Other real estate	0	0
Level 3
Mortgage loans held for sale	5,709	4,149
Impaired loans	25,931	31,818
Other real estate	$ 283	$ 739

3. Loans, Allowance for Loan Lo

3. Loans, Allowance for Loan Losses (Details) (USD $) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Allowance for loan losses
Beginning balance	$ 9,589	$ 11,082	$ 13,501
Charge-offs	(1,238)	(1,844)	(2,637)
Recoveries	405	368	917
Provision	(1,206)	(17)	(699)
Ending balance	7,550	9,589	11,082
Ending balance: individually evaluated for impairments	1,319	1,382	1,497
Ending balance: collectively evaluated for impairments	6,231	8,207	9,585
Ending balance	7,550	9,589	11,082
Loans
Ending balance	723,811	689,091	651,891
Ending balance: individually evaluated for impairment	21,301	24,914	28,166
Ending balance: collectively evaluated for impairment	702,510	664,177	623,725
Construction and land development
Allowance for loan losses
Beginning balance	2,185	2,785	3,218
Charge-offs	(7)	(198)	(884)
Recoveries	10	45	428
Provision	(1,036)	(447)	23
Ending balance	1,152	2,185	2,785
Ending balance: individually evaluated for impairments	0	0	0
Ending balance: collectively evaluated for impairments	1,152	2,185	2,785
Ending balance	1,152	2,185	2,785
Loans
Ending balance	61,749	65,791	57,617
Ending balance: individually evaluated for impairment	0	216	3,639
Ending balance: collectively evaluated for impairment	61,749	65,575	53,978
Single-family residential
Allowance for loan losses
Beginning balance	2,534	2,566	3,123
Charge-offs	(275)	(618)	(309)
Recoveries	55	34	72
Provision	(188)	552	(320)
Ending balance	2,126	2,534	2,566
Ending balance: individually evaluated for impairments	0	96	82
Ending balance: collectively evaluated for impairments	2,126	2,438	2,484
Ending balance	2,126	2,534	2,566
Loans
Ending balance	240,700	220,690	206,417
Ending balance: individually evaluated for impairment	935	2,636	2,298
Ending balance: collectively evaluated for impairment	239,765	218,054	204,119
Single-family residential - Banco de la Gente stated income
Allowance for loan losses
Beginning balance	1,460	1,610	1,863
Charge-offs	0	(117)	(190)
Recoveries	0	22	16
Provision	(83)	(55)	(79)
Ending balance	1,377	1,460	1,610
Ending balance: individually evaluated for impairments	1,160	1,115	1,155
Ending balance: collectively evaluated for impairments	217	345	455
Ending balance	1,377	1,460	1,610
Loans
Ending balance	40,189	43,733	47,015
Ending balance: individually evaluated for impairment	16,718	17,850	18,884
Ending balance: collectively evaluated for impairment	23,471	25,883	28,131
Commercial
Allowance for loan losses
Beginning balance	1,917	1,902	2,219
Charge-offs	(318)	(329)	(290)
Recoveries	19	21	171
Provision	(25)	323	(198)
Ending balance	1,593	1,917	1,902
Ending balance: individually evaluated for impairments	159	171	260
Ending balance: collectively evaluated for impairments	1,434	1,746	1,642
Ending balance	1,593	1,917	1,902
Loans
Ending balance	247,521	228,526	228,558
Ending balance: individually evaluated for impairment	3,648	4,212	3,345
Ending balance: collectively evaluated for impairment	243,873	224,314	225,213
Multifamily and Farmland
Allowance for loan losses
Beginning balance	0	7	37
Charge-offs	0	0	0
Recoveries	0	0	0
Provision	52	(7)	(30)
Ending balance	52	0	7
Ending balance: individually evaluated for impairments	0	0	0
Ending balance: collectively evaluated for impairments	52	0	7
Ending balance	52	0	7
Loans
Ending balance	21,047	18,080	12,400
Ending balance: individually evaluated for impairment	0	0	0
Ending balance: collectively evaluated for impairment	21,047	18,080	12,400
Commercial loans (not secured by real estate)
Allowance for loan losses
Beginning balance	842	1,098	1,069
Charge-offs	(146)	(37)	(430)
Recoveries	170	101	54
Provision	(191)	(320)	405
Ending balance	675	842	1,098
Ending balance: individually evaluated for impairments	0	0	0
Ending balance: collectively evaluated for impairments	675	842	1,098
Ending balance	675	842	1,098
Loans
Ending balance	87,596	91,010	76,262
Ending balance: individually evaluated for impairment	0	0	0
Ending balance: collectively evaluated for impairment	87,596	91,010	76,262
Farm loans (not secured by real estate)
Allowance for loan losses
Beginning balance	0	0	0
Charge-offs	0	0	0
Recoveries	0	0	0
Provision	0	0	0
Ending balance	0	0	0
Ending balance: individually evaluated for impairments	0	0	0
Ending balance: collectively evaluated for impairments	0	0	0
Ending balance	0	0	0
Loans
Ending balance	0	3	7
Ending balance: individually evaluated for impairment	0	0	0
Ending balance: collectively evaluated for impairment	0	3	7
Consumer And All Other Loans
Allowance for loan losses
Beginning balance	172	233	245
Charge-offs	(492)	(545)	(534)
Recoveries	151	145	176
Provision	373	339	346
Ending balance	204	172	233
Ending balance: individually evaluated for impairments	0	0	0
Ending balance: collectively evaluated for impairments	204	172	233
Ending balance	204	172	233
Loans
Ending balance	25,009	21,258	23,615
Ending balance: individually evaluated for impairment	0	0	0
Ending balance: collectively evaluated for impairment	25,009	21,258	23,615
Unallocated
Allowance for loan losses
Beginning balance	479	881	1,727
Charge-offs	0	0	0
Recoveries	0	0	0
Provision	(108)	(402)	(846)
Ending balance	371	479	881
Ending balance: individually evaluated for impairments	0	0	0
Ending balance: collectively evaluated for impairments	371	479	881
Ending balance	371	479	881
Loans
Ending balance	0	0	0
Ending balance: individually evaluated for impairment	0	0	0
Ending balance: collectively evaluated for impairment	$ 0	$ 0	$ 0

3. Loans, Credit Risk (Details)

3. Loans, Credit Risk (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Credit risk profile
Total Loans	$ 723,811	$ 689,091	$ 651,891	$ 620,960
Excellent Quality
Credit risk profile
Total Loans	16,496	16,980
High Quality
Credit risk profile
Total Loans	194,094	168,117
Good Quality
Credit risk profile
Total Loans	394,039	365,802
Management Attention
Credit risk profile
Total Loans	86,753	98,254
Watch
Credit risk profile
Total Loans	22,238	22,520
Substandard
Credit risk profile
Total Loans	10,187	17,418
Doubtful
Credit risk profile
Total Loans	0	0
Loss
Credit risk profile
Total Loans	4	0
Construction and land development
Credit risk profile
Total Loans	61,749	65,791
Single-family residential
Credit risk profile
Total Loans	240,700	220,690
Single-family residential - Banco de la Gente stated income
Credit risk profile
Total Loans	40,189	43,733
Commercial
Credit risk profile
Total Loans	247,521	228,526
Multifamily and Farmland
Credit risk profile
Total Loans	21,047	18,080
Commercial loans (not secured by real estate)
Credit risk profile
Total Loans	87,596	91,010
Farm loans (not secured by real estate)
Credit risk profile
Total Loans	0	3
Consumer loans (not secured by real estate)
Credit risk profile
Total Loans	9,832	10,027
All other loans (not secured by real estate)
Credit risk profile
Total Loans	15,177	11,231
Construction and land development
Credit risk profile
Total Loans	61,749	65,791	57,617
Construction and land development | Excellent Quality
Credit risk profile
Total Loans	0	0
Construction and land development | High Quality
Credit risk profile
Total Loans	9,784	10,144
Construction and land development | Good Quality
Credit risk profile
Total Loans	33,633	35,535
Construction and land development | Management Attention
Credit risk profile
Total Loans	10,892	12,544
Construction and land development | Watch
Credit risk profile
Total Loans	7,229	7,265
Construction and land development | Substandard
Credit risk profile
Total Loans	211	303
Construction and land development | Doubtful
Credit risk profile
Total Loans	0	0
Construction and land development | Loss
Credit risk profile
Total Loans	0	0
Single-family residential
Credit risk profile
Total Loans	240,700	220,690	206,417
Single-family residential | Excellent Quality
Credit risk profile
Total Loans	14,996	15,189
Single-family residential | High Quality
Credit risk profile
Total Loans	109,809	86,061
Single-family residential | Good Quality
Credit risk profile
Total Loans	82,147	78,843
Single-family residential | Management Attention
Credit risk profile
Total Loans	25,219	30,259
Single-family residential | Watch
Credit risk profile
Total Loans	4,682	4,322
Single-family residential | Substandard
Credit risk profile
Total Loans	3,847	6,016
Single-family residential | Doubtful
Credit risk profile
Total Loans	0	0
Single-family residential | Loss
Credit risk profile
Total Loans	0	0
Single-family residential - Banco de la Gente stated income
Credit risk profile
Total Loans	40,189	43,733	47,015
Single-family residential - Banco de la Gente stated income | Excellent Quality
Credit risk profile
Total Loans	0	0
Single-family residential - Banco de la Gente stated income | High Quality
Credit risk profile
Total Loans	0	0
Single-family residential - Banco de la Gente stated income | Good Quality
Credit risk profile
Total Loans	16,703	19,223
Single-family residential - Banco de la Gente stated income | Management Attention
Credit risk profile
Total Loans	15,580	15,029
Single-family residential - Banco de la Gente stated income | Watch
Credit risk profile
Total Loans	3,943	3,308
Single-family residential - Banco de la Gente stated income | Substandard
Credit risk profile
Total Loans	3,963	6,173
Single-family residential - Banco de la Gente stated income | Doubtful
Credit risk profile
Total Loans	0	0
Single-family residential - Banco de la Gente stated income | Loss
Credit risk profile
Total Loans	0	0
Commercial
Credit risk profile
Total Loans	247,521	228,526	228,558
Commercial | Excellent Quality
Credit risk profile
Total Loans	0	0
Commercial | High Quality
Credit risk profile
Total Loans	39,769	38,647
Commercial | Good Quality
Credit risk profile
Total Loans	176,109	148,805
Commercial | Management Attention
Credit risk profile
Total Loans	24,753	31,824
Commercial | Watch
Credit risk profile
Total Loans	4,906	4,561
Commercial | Substandard
Credit risk profile
Total Loans	1,984	4,689
Commercial | Doubtful
Credit risk profile
Total Loans	0	0
Commercial | Loss
Credit risk profile
Total Loans	0	0
Multifamily and Farmland
Credit risk profile
Total Loans	21,047	18,080	12,400
Multifamily and Farmland | Excellent Quality
Credit risk profile
Total Loans	0	0
Multifamily and Farmland | High Quality
Credit risk profile
Total Loans	2,884	2,998
Multifamily and Farmland | Good Quality
Credit risk profile
Total Loans	14,529	12,058
Multifamily and Farmland | Management Attention
Credit risk profile
Total Loans	2,355	335
Multifamily and Farmland | Watch
Credit risk profile
Total Loans	1,201	2,689
Multifamily and Farmland | Substandard
Credit risk profile
Total Loans	78	0
Multifamily and Farmland | Doubtful
Credit risk profile
Total Loans	0	0
Multifamily and Farmland | Loss
Credit risk profile
Total Loans	0	0
Commercial loans (not secured by real estate)
Credit risk profile
Total Loans	87,596	91,010	76,262
Commercial loans (not secured by real estate) | Excellent Quality
Credit risk profile
Total Loans	541	700
Commercial loans (not secured by real estate) | High Quality
Credit risk profile
Total Loans	26,006	24,955
Commercial loans (not secured by real estate) | Good Quality
Credit risk profile
Total Loans	55,155	58,936
Commercial loans (not secured by real estate) | Management Attention
Credit risk profile
Total Loans	5,586	5,905
Commercial loans (not secured by real estate) | Watch
Credit risk profile
Total Loans	246	332
Commercial loans (not secured by real estate) | Substandard
Credit risk profile
Total Loans	62	182
Commercial loans (not secured by real estate) | Doubtful
Credit risk profile
Total Loans	0	0
Commercial loans (not secured by real estate) | Loss
Credit risk profile
Total Loans	0	0
Farm loans (not secured by real estate)
Credit risk profile
Total Loans	0	3	$ 7
Farm loans (not secured by real estate) | Excellent Quality
Credit risk profile
Total Loans	0	0
Farm loans (not secured by real estate) | High Quality
Credit risk profile
Total Loans	0	0
Farm loans (not secured by real estate) | Good Quality
Credit risk profile
Total Loans	0	3
Farm loans (not secured by real estate) | Management Attention
Credit risk profile
Total Loans	0	0
Farm loans (not secured by real estate) | Watch
Credit risk profile
Total Loans	0	0
Farm loans (not secured by real estate) | Substandard
Credit risk profile
Total Loans	0	0
Farm loans (not secured by real estate) | Doubtful
Credit risk profile
Total Loans	0	0
Farm loans (not secured by real estate) | Loss
Credit risk profile
Total Loans	0	0
Consumer loans (not secured by real estate)
Credit risk profile
Total Loans	9,832	10,027
Consumer loans (not secured by real estate) | Excellent Quality
Credit risk profile
Total Loans	959	1,091
Consumer loans (not secured by real estate) | High Quality
Credit risk profile
Total Loans	3,335	3,647
Consumer loans (not secured by real estate) | Good Quality
Credit risk profile
Total Loans	4,842	4,571
Consumer loans (not secured by real estate) | Management Attention
Credit risk profile
Total Loans	619	620
Consumer loans (not secured by real estate) | Watch
Credit risk profile
Total Loans	31	43
Consumer loans (not secured by real estate) | Substandard
Credit risk profile
Total Loans	42	55
Consumer loans (not secured by real estate) | Doubtful
Credit risk profile
Total Loans	0	0
Consumer loans (not secured by real estate) | Loss
Credit risk profile
Total Loans	4	0
All other loans (not secured by real estate)
Credit risk profile
Total Loans	15,177	11,231
All other loans (not secured by real estate) | Excellent Quality
Credit risk profile
Total Loans	0	0
All other loans (not secured by real estate) | High Quality
Credit risk profile
Total Loans	2,507	1,665
All other loans (not secured by real estate) | Good Quality
Credit risk profile
Total Loans	10,921	7,828
All other loans (not secured by real estate) | Management Attention
Credit risk profile
Total Loans	1,749	1,738
All other loans (not secured by real estate) | Watch
Credit risk profile
Total Loans	0	0
All other loans (not secured by real estate) | Substandard
Credit risk profile
Total Loans	0	0
All other loans (not secured by real estate) | Doubtful
Credit risk profile
Total Loans	0	0
All other loans (not secured by real estate) | Loss
Credit risk profile
Total Loans	$ 0	$ 0

3. Loans, TDR Loan Modification

3. Loans, TDR Loan Modifications (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016USD ($)Integer	Dec. 31, 2015USD ($)Integer
TDR Loans
Post-Modification Outstanding Recorded Investment	$ 5,900	$ 8,800
Construction and land development
TDR Loans
Number of Contracts | Integer		1
Pre-Modification Outstanding Recorded Investment		$ 216
Post-Modification Outstanding Recorded Investment		$ 216
Single-family residential
TDR Loans
Number of Contracts | Integer	3	3
Pre-Modification Outstanding Recorded Investment	$ 124	$ 288
Post-Modification Outstanding Recorded Investment	$ 121	$ 271
Total TDR Loans
TDR Loans
Number of Contracts | Integer	3	4
Pre-Modification Outstanding Recorded Investment	$ 124	$ 504
Post-Modification Outstanding Recorded Investment	$ 121	$ 487

3. Loans (Details Narrative)

3. Loans (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Loans Details Narrative
Percentage of construction and land development loans in Bank's loan portfolio	9.00%	10.00%
Percentage of single-family residential loans in Bank's loan portfolio	39.00%	38.00%
Percentage of Single-family residential - Banco de la Gente stated income loans in Bank's loan portfolio	6.00%	6.00%
Percentage of commercial real estate loans in Bank's loan portfolio	34.00%	33.00%
Percentage of commercial loans in Bank's loan portfolio	12.00%	13.00%
Accruing impaired loans	$ 23,500	$ 25,000
Interest income recognized on accruing impaired loans	1,200	1,300
TDR loan amounts	5,900	8,800
Amount of performing TDR loans included	$ 81	$ 354

4. Premises and Equipment (Deta

4. Premises and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Premises And Equipment Details
Land	$ 3,670	$ 3,669
Buildings and improvements	16,398	15,889
Furniture and equipment	19,996	19,462
Total premises and equipment	40,064	39,020
Less accumulated depreciation	23,612	22,044
Total net premises and equipment	$ 16,452	$ 16,976

4. Premises and Equipment (De59

4. Premises and Equipment (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Premises And Equipment Details Narrative
Depreciation expense	$ 2,100	$ 2,400	$ 2,500

5. Time Deposits (Details)

5. Time Deposits (Details) $ in Thousands	Dec. 31, 2016USD ($)
Time Deposits Details
2,017	$ 86,817
2,018	33,184
2,019	15,207
2,020	5,287
2021 and thereafter	3,518
Total	$ 144,013

5. Time Deposits (Details Narra

5. Time Deposits (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Time Deposits Details Narrative
Time deposits purchased through third party brokers, including certificates of deposit participated through the Certificate of Deposit Account Registry Service ("CDARS") on behalf of local customers	$ 7,200	$ 4,300
CDARS balances	$ 7,200	$ 4,100
Weighted average rate of brokered deposits	0.05%	0.10%

6. Federal Home Loan Bank and62

6. Federal Home Loan Bank and Federal Reserve Bank Borrowings (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Federal Home Loan Bank And Federal Reserve Bank Borrowings Details Narrative
Loans pledged as collateral to the FHLB	$ 128,300
FHLB stock owned	1,800	$ 2,800
Carrying value of loans pledged as collateral to the FHLB	128,300
Carrying value of loans pledged as collateral to the FRB	$ 374,500

8. Income Taxes (Details)

8. Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Taxes Details
Current expense									$ 1,464	$ 2,427	$ 1,759
Deferred income tax expense									1,097	673	178
Total income tax	$ (36)	$ 872	$ 1,032	$ 691	$ 613	$ 942	$ 866	$ 679	$ 2,561	$ 3,100	$ 1,937

8. Income Taxes (Details 1)

8. Income Taxes (Details 1) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Taxes Details 1
Tax expense at statutory rate (34%)									$ 3,991	$ 4,329	$ 3,851
Differences:
State income tax, net of federal income tax effect									339	494	(283)
Tax exempt interest income									(1,681)	(1,682)	(1,630)
Increase in cash surrender value of life insurance									(138)	(143)	(143)
Nondeductible interest and other expense									78	103	119
Other, net									(28)	(1)	23
Total income tax	$ (36)	$ 872	$ 1,032	$ 691	$ 613	$ 942	$ 866	$ 679	$ 2,561	$ 3,100	$ 1,937

8. Income Taxes (Details 2)

8. Income Taxes (Details 2) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Deferred tax assets:
Allowance for loan losses	$ 2,717	$ 3,513
Accrued retirement expense	1,616	1,574
Other real estate	0	33
Federal credit carryforward	326	0
State credit carryforward	14	0
Restricted stock	745	417
Accrued bonuses	216	238
Interest income on nonaccrual loans	27	88
Other than temporary impairment	14	374
Other	23	16
Total gross deferred tax assets	5,698	6,253
Deferred tax liabilities:
Deferred loan fees	797	588
Accumulated depreciation	532	172
Prepaid expenses	78	59
Other	23	70
Unrealized gain on available for sale securities	1,807	3,308
Total gross deferred tax liabilities	3,237	4,197
Net deferred tax asset	$ 2,461	$ 2,056

9. Related Party Transactions66

9. Related Party Transactions (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Related Party Transactions Details
Beginning balance	$ 5,674	$ 6,055
New loans	6,048	7,857
Repayments	(7,219)	(8,238)
Ending balance	$ 4,503	$ 5,674

9. Related Party Transactions67

9. Related Party Transactions (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Related Party Transactions Details Narrative
Related party deposits	$ 27,800	$ 22,100

10. Commitments and Contingen68

10. Commitments and Contingencies (Details) $ in Thousands	Dec. 31, 2016USD ($)
Commitments And Contingencies Details
2,017	$ 632
2,018	611
2,019	601
2,020	602
2,021	591
Thereafter	1,611
Total minimum obligation	$ 4,648

10. Commitments and Contingen69

10. Commitments and Contingencies (Details 1) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Commitments and contingencies
Commitments to extend credit
Commitments and contingencies	195,528	189,351
Standby letters of credit and financial guarantees written
Commitments and contingencies	$ 3,728	$ 3,872

10. Commitments and Contingen70

10. Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Commitments And Contingencies Details Narrative
Rent expense	$ 752	$ 702	$ 691
Overnight federal funds	$ 59,500

11. Employee and Director Ben71

11. Employee and Director Benefit Programs (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Employee And Director Benefit Programs Details
Benefit obligation at beginning of period	$ 3,993	$ 3,812
Service cost	346	334	$ 348
Interest cost	67	65	67
Benefits paid	(232)	(218)
Benefit obligation at end of period	$ 4,174	$ 3,993	$ 3,812

11. Employee and Director Ben72

11. Employee and Director Benefit Programs (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Employee And Director Benefit Programs Details 1
Benefit obligation	$ 4,174	$ 3,993	$ 3,812
Fair value of plan assets	0	0
Funded status	(4,174)	(3,993)
Unrecognized prior service cost/benefit	0	0
Unrecognized net actuarial loss	0	0
Net amount recognized	(4,174)	(3,993)
Unfunded accrued liability	(4,174)	(3,993)
Intangible assets	0	0
Net amounts recognized	$ (4,174)	$ (3,993)

11. Employee and Director Ben73

11. Employee and Director Benefit Programs (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Employee And Director Benefit Programs Details 2
Service cost	$ 346	$ 334	$ 348
Interest cost	67	65	67
Net periodic cost	$ 413	$ 399	$ 415
Weighted average discount rate assumption used to determine benefit obligation	5.47%	5.47%	5.47%

11. Employee and Director Ben74

11. Employee and Director Benefit Programs (Details 3) $ in Thousands	Dec. 31, 2016USD ($)
Employee And Director Benefit Programs Details 3
2,017	$ 263
2,018	275
2,019	310
2,020	363
2,021	364
Thereafter	$ 9,077

11. Employee and Director Ben75

11. Employee and Director Benefit Programs (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Employee And Director Benefit Programs Details Narrative
Matching of employee contributions, percentage	4.00%	4.00%	4.00%
Defined Benefit Plan, Contributions by Employer	$ 565	$ 539	$ 439
Expenses incurred for benefits relating to the postretirement benefit plan	428	413	422
Postretirement Benefits paid	$ 232	$ 218	$ 184

12. Regulatory Matters (Details

12. Regulatory Matters (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Total capital (to Risk-Weighted Assets) | Consolidated
Actual, amount	$ 131,991	$ 129,203
Actual, ratio	16.12%	16.63%
For Capital Adequacy Purposes, amount	$ 65,508	$ 62,137
For Capital Adequacy Purposes, ratio	8.00%	8.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, amount	$ 0	$ 0
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio	0.00%	0.00%
Total capital (to Risk-Weighted Assets) | Bank
Actual, amount	$ 129,035	$ 124,910
Actual, ratio	15.78%	16.11%
For Capital Adequacy Purposes, amount	$ 65,426	$ 62,026
For Capital Adequacy Purposes, ratio	8.00%	8.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, amount	$ 81,782	$ 77,532
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio	10.00%	10.00%
Tier 1 Capital (to Risk- Weighted Assets) | Consolidated
Actual, amount	$ 124,441	$ 119,354
Actual, ratio	15.20%	15.37%
For Capital Adequacy Purposes, amount	$ 49,131	$ 46,603
For Capital Adequacy Purposes, ratio	6.00%	6.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, amount	$ 0	$ 0
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio	0.00%	0.00%
Tier 1 Capital (to Risk- Weighted Assets) | Bank
Actual, amount	$ 121,485	$ 115,160
Actual, ratio	14.85%	14.85%
For Capital Adequacy Purposes, amount	$ 49,069	$ 46,519
For Capital Adequacy Purposes, ratio	6.00%	6.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, amount	$ 65,426	$ 62,026
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio	8.00%	8.00%
Tier 1 Capital (Average Assets) | Consolidated
Actual, amount	$ 124,441	$ 119,354
Actual, ratio	11.19%	11.44%
For Capital Adequacy Purposes, amount	$ 44,488	$ 41,743
For Capital Adequacy Purposes, ratio	4.00%	4.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, amount	$ 0	$ 0
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio	0.00%	0.00%
Tier 1 Capital (Average Assets) | Bank
Actual, amount	$ 121,485	$ 115,160
Actual, ratio	10.88%	11.03%
For Capital Adequacy Purposes, amount	$ 44,677	$ 41,776
For Capital Adequacy Purposes, ratio	4.00%	4.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, amount	$ 55,846	$ 52,220
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio	5.00%	5.00%
Common Equity Tier 1 (to Risk-Weighted Assets) | Consolidated
Actual, amount	$ 104,441	$ 99,354
Actual, ratio	12.75%	12.79%
For Capital Adequacy Purposes, amount	$ 36,848	$ 34,952
For Capital Adequacy Purposes, ratio	4.50%	4.50%
To Be Well Capitalized Under Prompt Corrective Action Provisions, amount	$ 0	$ 0
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio	0.00%	0.00%
Common Equity Tier 1 (to Risk-Weighted Assets) | Bank
Actual, amount	$ 121,485	$ 115,160
Actual, ratio	14.85%	14.85%
For Capital Adequacy Purposes, amount	$ 36,802	$ 34,890
For Capital Adequacy Purposes, ratio	4.50%	4.50%
To Be Well Capitalized Under Prompt Corrective Action Provisions, amount	$ 53,158	$ 50,396
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio	6.50%	6.50%

14. Other Operating Income an77

14. Other Operating Income and Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Other Operating Income And Expense Details
Visa debit card income	$ 3,589	$ 3,452	$ 3,170
Net appraisal management fee income	886	635	525
Insurance and brokerage commissions	632	714	701
Advertising	1,136	784	804
FDIC insurance	494	681	739
Visa debit card expense	1,140	988	905
Telephone	754	588	574
Foreclosure/OREO expense	120	398	317
Internet banking expense	710	671	644
FHLB advance prepayment penalty	1,260	504	869
Consulting	2,257	904	609
NC Tax Credit Amortization	$ 0	$ 0	$ 870

15. Fair Value of Financial I78

15. Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Assets:
Investment securities available for sale	$ 249,946	$ 268,530
Mortgage loans held for sale	5,709	4,149
Carrying Amount
Assets:
Cash and cash equivalents	70,094	39,763
Investment securities available for sale	249,946	268,530
Other investments	2,635	3,636
Mortgage loans held for sale	5,709	4,149
Loans, net	716,261	679,502
Cash surrender value of life insurance	14,952	14,546
Liabilities:
Deposits	892,918	832,175
Securities sold under agreements to repurchase	36,434	27,874
FHLB borrowings	20,000	43,500
Junior subordinated debentures	20,619	20,619
Level 1
Assets:
Cash and cash equivalents	70,094	39,763
Investment securities available for sale	0	1,325
Other investments	0	0
Mortgage loans held for sale	0	0
Loans, net	0	0
Cash surrender value of life insurance	0	0
Liabilities:
Deposits	0	0
Securities sold under agreements to repurchase	0	0
FHLB borrowings	0	0
Junior subordinated debentures	0	0
Level 2
Assets:
Cash and cash equivalents	0	0
Investment securities available for sale	249,196	266,455
Other investments	0	0
Mortgage loans held for sale	0	0
Loans, net	0	0
Cash surrender value of life insurance	14,952	14,546
Liabilities:
Deposits	0	0
Securities sold under agreements to repurchase	36,434	27,874
FHLB borrowings	18,864	43,144
Junior subordinated debentures	20,619	20,619
Level 3
Assets:
Cash and cash equivalents	0	0
Investment securities available for sale	750	750
Other investments	2,635	3,636
Mortgage loans held for sale	5,709	4,149
Loans, net	720,675	683,540
Cash surrender value of life insurance	0	0
Liabilities:
Deposits	884,510	827,874
Securities sold under agreements to repurchase	0	0
FHLB borrowings	0	0
Junior subordinated debentures	0	0
Estimated Fair Value
Assets:
Cash and cash equivalents	70,094	39,763
Investment securities available for sale	249,946	268,530
Other investments	2,635	3,636
Mortgage loans held for sale	5,709	4,149
Loans, net	720,675	683,540
Cash surrender value of life insurance	14,952	14,546
Liabilities:
Deposits	884,510	827,874
Securities sold under agreements to repurchase	36,434	27,874
FHLB borrowings	18,864	43,144
Junior subordinated debentures	$ 20,619	$ 20,619

16. Peoples Bancorp of North 79

16. Peoples Bancorp of North Carolina, Inc. (Parent Company Only) Condensed Financial Statements (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2016	Dec. 31, 2015
Assets
Interest-bearing time deposit												$ 16,481	$ 10,569
Investment securities available for sale												249,946	268,530
Total assets												1,087,991	1,038,481
Liabilities and Shareholders' Equity
Junior subordinated debentures												20,619	20,619
Liabilities												980,563	933,617
Shareholders' equity												107,428	104,864
Total liabilities and shareholders' equity												1,087,991	1,038,481
Revenues:
Interest and dividend income	$ 10,106	$ 9,982	$ 9,815	$ 9,905	$ 9,960	$ 9,947	$ 9,191	$ 9,567	$ 39,809	$ 38,666	$ 38,420
Gain on sale of securities									729	0	266
Expenses:
Interest	820	828	813	809	850	874	875	884	3,271	3,484	4,287
Income before income tax benefit and equity in undistributed earnings of subsidiaries	1,266	3,330	3,996	3,144	2,801	3,435	3,490	3,007	11,738	12,733	11,325
Income tax (benefit)	(36)	872	1,032	691	613	942	866	679	2,561	3,100	1,937
Net earnings	1,302	2,458	2,964	2,453	2,188	2,493	2,624	2,328	9,177	9,633	9,388
Cash flows from operating activities:
Net earnings	1,302	$ 2,458	$ 2,964	2,453	2,188	$ 2,493	$ 2,624	2,328	9,177	9,633	9,388
Adjustments to reconcile net earnings to net cash provided by operating activities:
Gain on sale of investment securities									1,097	0	(266)
Change in:
Other assets									(818)	(408)	(2,534)
Net cash provided by operating activities									12,239	13,863	1,917
Cash flows from investing activities:
Purchases of investment securities available for sale									(12,707)	(19,220)	(32,851)
Proceeds from maturities of investment securities available for sale									4,053	5,475	36,148
Net cash provided (used) by investing activities									(23,621)	(30,126)	(11,898)
Cash flows from financing activities:
Proceeds from exercise of stock options									0	0	37
Net cash used by financing activities									41,713	(13,072)	2,306
Net change in cash and cash equivalents									30,331	(29,335)	(7,675)
Noncash investing and financing activities:
Change in unrealized gain on investment securities available for sale, net									(2,523)	57	6,625
Accrued redemption of Series A Preferred Stock									0	0	(12,524)
Parent Company
Assets
Cash	957			553	553			745	553	553	745	957	553
Interest-bearing time deposit												1,000	1,000
Investment in subsidiaries												124,471	121,848
Investment in PEBK Capital Trust II												619	619
Investment securities available for sale												750	1,234
Other assets												275	249
Total assets												128,072	125,503
Liabilities and Shareholders' Equity
Junior subordinated debentures												20,619	20,619
Liabilities												25	20
Shareholders' equity												107,428	104,864
Total liabilities and shareholders' equity												$ 128,072	$ 125,503
Revenues:
Interest and dividend income									4,569	3,979	2,718
Gain on sale of securities									405	0	0
Total revenues									4,974	3,979	2,718
Expenses:
Interest									485	403	389
Other operating expenses									513	538	527
Total expenses									998	941	916
Income before income tax benefit and equity in undistributed earnings of subsidiaries									3,976	3,038	1,802
Income tax (benefit)									178	262	239
Income before equity in undistributed earnings of subsidiaries									4,154	3,300	2,041
Equity in undistributed earnings of subsidiaries									5,023	6,333	7,347
Net earnings									9,177	9,633	9,388
Cash flows from operating activities:
Net earnings									9,177	9,633	9,388
Adjustments to reconcile net earnings to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries									(5,023)	(6,333)	(7,347)
Gain on sale of investment securities									(405)	0	0
Change in:
Other assets									61	(4)	28
Accrued income									0	0	(5)
Accrued expense									5	3	1
Other liabilities									0	0	(12,632)
Net cash provided by operating activities									3,815	3,299	(10,567)
Cash flows from investing activities:
Proceeds from maturities of investment securities available for sale									669	0	500
In kind transfer from parent to Bank									10	0	0
Net change in interest-bearing time deposit									0	0	(1,000)
Net cash provided (used) by investing activities									679	0	(500)
Cash flows from financing activities:
Cash dividends paid on common stock									(2,106)	(1,574)	(1,022)
Stock repurchase									(1,984)	(1,917)	(82)
Proceeds from exercise of stock options									0	0	37
Net cash used by financing activities									(4,090)	(3,491)	(1,067)
Net change in cash and cash equivalents									404	(192)	(12,134)
Cash at beginning of year				$ 553				$ 745	553	745	12,879
Cash at end of year	$ 957				$ 553				957	553	745
Noncash investing and financing activities:
Change in unrealized gain on investment securities available for sale, net									(2,523)	57	6,625
Accrued redemption of Series A Preferred Stock									$ 0	$ 0	$ (12,524)

17. Quarterly Data (Details)

17. Quarterly Data (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Quarterly Financial Information Disclosure [Abstract]
Total interest income	$ 10,106	$ 9,982	$ 9,815	$ 9,905	$ 9,960	$ 9,947	$ 9,191	$ 9,567	$ 39,809	$ 38,666	$ 38,420
Total interest expense	820	828	813	809	850	874	875	884	3,271	3,484	4,287
Net interest income	9,286	9,154	9,002	9,096	9,110	9,073	8,316	8,683	36,538	35,182	34,133
(Reduction of) provision for loan losses	(99)	(360)	(531)	(216)	(211)	235	(214)	173	(1,206)	(17)	(699)
Other income	3,666	3,414	3,572	3,324	3,504	3,266	3,297	3,245	13,976	13,312	12,164
Other expense	11,783	9,598	9,109	9,492	10,024	8,669	8,337	8,748	39,982	35,778	35,671
Income before income taxes	1,266	3,330	3,996	3,144	2,801	3,435	3,490	3,007	11,738	12,733	11,325
Income tax (benefit)	(36)	872	1,032	691	613	942	866	679	2,561	3,100	1,937
Net earnings	$ 1,302	$ 2,458	$ 2,964	$ 2,453	$ 2,188	$ 2,493	$ 2,624	$ 2,328	$ 9,177	$ 9,633	$ 9,388
Basic net earnings per share	$ 0.24	$ 0.45	$ 0.54	$ 0.45	$ 0.40	$ 0.45	$ 0.47	$ 0.41	$ 1.68	$ 1.73	$ 1.67
Diluted net earnings per share	$ 0.24	$ 0.44	$ 0.53	$ 0.44	$ 0.39	$ 0.45	$ 0.47	$ 0.41	$ 1.65	$ 1.72	$ 1.66