Peoples Bancorp of North Carolina (PEBK) 10-K 15 Mar 18 2017 FY Annual report Financial data

Document and Entity Information

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2017	Feb. 28, 2018	Jun. 30, 2017
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, 2017
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			$ 132,203,074
Entity Common Stock, Shares Outstanding		5,995,256
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2,017

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Assets
Cash and due from banks, including reserve requirements of $7,472 at 12/31/17 and $6,075 at 12/31/16	$ 53,186	$ 53,613
Interest-bearing deposits	4,118	16,481
Cash and cash equivalents	57,304	70,094
Investment securities available for sale	229,321	249,946
Other investments	1,830	2,635
Total securities	231,151	252,581
Mortgage loans held for sale	857	5,709
Loans	759,764	723,811
Less allowance for loan losses	(6,366)	(7,550)
Net loans	753,398	716,261
Premises and equipment, net	19,911	16,452
Cash surrender value of life insurance	15,552	14,952
Other real estate	118	283
Accrued interest receivable and other assets	13,875	11,659
Total assets	1,092,166	1,087,991
Deposits:
Non-interest bearing demand	285,406	271,851
NOW, MMDA & savings	498,445	477,054
Time, $250,000 or more	18,756	26,771
Other time	104,345	117,242
Total deposits	906,952	892,918
Securities sold under agreements to repurchase	37,757	36,434
FHLB borrowings	0	20,000
Junior subordinated debentures	20,619	20,619
Accrued interest payable and other liabilities	10,863	10,592
Total liabilities	976,191	980,563
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 5,995,256 shares at December 31, 2017 and 5,417,800 shares at December 31, 2016	62,096	44,187
Retained earnings	50,286	60,254
Accumulated other comprehensive income	3,593	2,987
Total shareholders' equity	115,975	107,428
Total liabilities and shareholders' equity	$ 1,092,166	$ 1,087,991

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Assets
Cash and due from banks, reserve requirements	$ 7,472	$ 6,075
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)	5,995,256	5,417,800
Common stock, shares outstanding (in shares)	5,995,256	5,417,800

Consolidated Statements of Earn

Consolidated Statements of Earnings - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Interest income:
Interest and fees on loans	$ 34,888	$ 32,452	$ 31,098
Interest on due from banks	219	123	26
Interest on investment securities:
U.S. Government sponsored enterprises	2,404	2,531	2,616
States and political subdivisions	4,236	4,454	4,600
Other	202	249	326
Total interest income	41,949	39,809	38,666
Interest expense:
NOW, MMDA & savings deposits	598	495	432
Time deposits	466	586	870
FHLB borrowings	662	1,661	1,735
Junior subordinated debentures	590	485	402
Other	61	44	45
Total interest expense	2,377	3,271	3,484
Net interest income	39,572	36,538	35,182
(Reduction of) provision for loan losses	(507)	(1,206)	(17)
Net interest income after provision for loan losses	40,079	37,744	35,199
Non-interest income:
Service charges	4,453	4,497	4,647
Other service charges and fees	593	890	931
Gain on sale of securities	0	729	0
Mortgage banking income	1,190	1,428	1,130
Insurance and brokerage commissions	761	632	714
Gain (loss) on sales and write-downs of other real estate	(239)	64	245
Miscellaneous	6,080	5,736	5,645
Total non-interest income	12,838	13,976	13,312
Non-interest expense:
Salaries and employee benefits	20,058	19,264	18,285
Occupancy	6,701	6,765	6,288
Professional fees	1,236	2,439	1,468
Advertising	1,195	1,136	784
Debit card expense	1,248	1,141	988
FDIC insurance	347	494	681
Other	7,917	8,743	7,284
Total non-interest expense	38,702	39,982	35,778
Earnings before income taxes	14,215	11,738	12,733
Income tax expense	3,947	2,561	3,100
Net earnings	$ 10,268	$ 9,177	$ 9,633
Basic net earnings per share	$ 1.71	$ 1.53	$ 1.57
Diluted net earnings per share	1.69	1.50	1.56
Cash dividends declared per share	$ 0.44	$ 0.35	$ 0.25

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Consolidated Statements Of Comprehensive Income
Net earnings	$ 10,268	$ 9,177	$ 9,633
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available for sale	(355)	(3,274)	93
Reclassification adjustment for gains on securities available for sale included in net earnings	0	(729)	0
Total other comprehensive income (loss), before income taxes	(355)	(4,003)	93
Income tax (benefit) expense related to other comprehensive (loss) income:
Unrealized holding gains (losses) on securities available for sale	(354)	(1,196)	36
Reclassification adjustment for gains on securities available for sale included in net earnings	0	(284)	0
Total income tax expense (benefit) related to other comprehensive income (loss)	(354)	(1,480)	36
Total other comprehensive income (loss), net of tax	(1)	(2,523)	57
Total comprehensive income	$ 10,267	$ 6,654	$ 9,690

Consolidated Statements of Chan

Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Common Stock	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total
Beginning Balance, Shares at Dec. 31, 2014	5,612,588
Beginning Balance, Amount at Dec. 31, 2014	$ 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)
10% stock dividend, Amount				0
Restricted stock units exercised, Amount				0
Net earnings		9,633		9,633
Change in accumulated other comprehensive income, net of tax			57	57
Ending Balance, Shares at Dec. 31, 2015	5,510,538
Ending Balance, Amount at Dec. 31, 2015	$ 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)
10% stock dividend, Amount				0
Restricted stock units exercised, Amount				0
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
Cash dividends declared on common stock		(2,629)		(2,629)
10% stock dividend, Shares	544,844
10% stock dividend, Amount	$ 16,994	(17,000)		(6)
Restricted stock units exercised, Shares	32,612
Restricted stock units exercised, Amount	$ 915			915
Net earnings		10,268		10,268
Change in accumulated other comprehensive income due to Tax Cuts and Jobs Act		(607)	607
Change in accumulated other comprehensive income, net of tax			(1)	(1)
Ending Balance, Shares at Dec. 31, 2017	5,995,256
Ending Balance, Amount at Dec. 31, 2017	$ 62,096	$ 50,286	$ 3,593	$ 115,975

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities:
Net earnings	$ 10,268	$ 9,177	$ 9,633
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation, amortization and accretion	5,018	5,423	6,053
Reduction of provision for loan losses	(507)	(1,206)	(17)
Deferred income taxes	(2,120)	1,097	673
Gain on sale of investment securities	0	(729)	0
Gain on sale of other real estate	0	(81)	(363)
Write-down of other real estate	239	17	118
Restricted stock expense	592	932	487
Proceeds from sales of loans held for sale	59,193	67,764	50,770
Origination of loans held for sale	(54,341)	(69,324)	(53,544)
Change in:
Cash surrender value of life insurance	(600)	(406)	(421)
Other assets	258	(636)	(408)
Other liabilities	594	211	882
Net cash provided by operating activities	18,594	12,239	13,863
Cash flows from investing activities:
Purchases of investment securities available for sale	(10,014)	(12,707)	(19,220)
Proceeds from sales, calls and maturities of investment securities available for sale	10,162	4,053	5,475
Proceeds from paydowns of investment securities available for sale	17,202	20,675	22,732
Purchases of other investments	(45)	(255)	(6)
FHLB stock redemption	850	1,256	401
Net change in loans	(36,748)	(36,116)	(43,441)
Purchases of premises and equipment	(5,557)	(1,610)	(2,354)
Proceeds from sale of other real estate and repossessions	44	1,083	6,287
Net cash used by investing activities	(24,106)	(23,621)	(30,126)
Cash flows from financing activities:
Net change in deposits	14,034	60,743	17,475
Net change in securities sold under agreement to repurchase	1,323	8,560	(20,556)
Proceeds from FHLB borrowings	1	6,000	20,001
Repayments of FHLB borrowings	(20,001)	(29,500)	(26,501)
Proceeds from FRB borrowings	1	1	1
Repayments of FRB borrowings	(1)	(1)	(1)
Proceeds from Fed Funds Purchased	187	9,112	5,192
Repayments of Fed Funds Purchased	(187)	(9,112)	(5,192)
Common stock repurchased	0	(1,984)	(1,917)
Cash dividends paid in lieu of fractional shares	(6)	0	0
Cash dividends paid on common stock	(2,629)	(2,106)	(1,574)
Net cash (used) provided by financing activities	(7,278)	41,713	(13,072)
Net change in cash and cash equivalents	(12,790)	30,331	(29,335)
Cash and cash equivalents at beginning of period	70,094	39,763	69,098
Cash and cash equivalents at end of period	57,304	70,094	39,763
Cash paid during the year for:
Interest	2,526	3,415	3,518
Income taxes	2,408	2,028	2,278
Noncash investing and financing activities:
Change in unrealized (loss) gain on investment securities available for sale, net	(1)	(2,523)	57
Transfer of loans to other real estate and repossessions	118	563	4,825
Issuance of accrued restricted stock units	(915)	0	0
Financed portion of sale of other real estate	$ 0	$ 0	$ 60

1. Summary of Significant Accou

1. Summary of Significant Accounting Policies	12 Months Ended
	Dec. 31, 2017
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 and Durham 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. 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 three banking offices focused on the Latino population that were formerly operated as a division of the Bank under the name Banco de la Gente (“Banco”). These offices are now branded as Bank branches and considered a separate market territory of the Bank as they offer 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. 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, 2017 and 2016, 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, 2017 as compared to the year ended December 31, 2016. 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 offices 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 $1.0 million, $1.4 million and $1.6 million at December 31, 2017, 2016 and 2015, 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 284,658 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 32,465 restricted stock units under the Plan at a grant date fair value of $7.18 per share during the first quarter of 2012, of which 5,891 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 5,891 restricted stock units at a grant date fair value of $7.50 per share. The Company granted 29,475 restricted stock units under the Plan at a grant date fair value of $10.82 per share during the second quarter of 2013. The Company granted 23,162 restricted stock units under the Plan at a grant date fair value of $14.27 per share during the first quarter of 2014. The Company granted 16,583 restricted stock units under the Plan at a grant date fair value of $16.34 per share during the first quarter of 2015. The Company granted 5,544 restricted stock units under the Plan at a grant date fair value of $16.91 per share during the first quarter of 2016. The Company granted 4,114 restricted stock units under the Plan at a grant date fair value of $25.00 per share during the first quarter of 2017. The number of restricted stock units granted and grant date fair values have been restated to reflect the 10% stock dividend during the fourth quarter of 2017. 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, 2016 and 2017 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, 2017, the total unrecognized compensation expense related to the restricted stock unit grants under the Plan was $319,000. The Company recognized compensation expense for restricted stock units granted under the Plan of $592,000, $932,000 and $487,000 for the years ended December 31, 2017, 2016 and 2015, 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, 2017, 2016 and 2015 are as follows: For the year ended December 31, 2017 Net Earnings (Dollars in thousands) Weighted Average Number of Shares Per Share Amount Basic earnings per share $ 10,268 5,988,183 $ 1.71 Effect of dilutive securities: Restricted stock units - 74,667 Diluted earnings per share $ 10,268 6,062,850 $ 1.69 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 6,024,970 $ 1.53 Effect of dilutive securities: Restricted stock units - 77,807 Diluted earnings per share $ 9,177 6,102,777 $ 1.50 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 6,115,159 $ 1.57 Effect of dilutive securities: Restricted stock units - 52,749 Diluted earnings per share $ 9,633 6,167,908 $ 1.56 In November 2017, the Board of Directors of the Company declared a cash dividend in the amount of $0.12 per share and a 10% stock dividend. The cash dividend was paid based on the number of shares held by shareholders on the record date of December 4, 2017. As a result of the stock dividend, each shareholder received one new share of stock for every ten shares of stock they held as of the record date of December 4, 2017. The payable date for the cash dividend and stock dividend was December 15, 2017. All previously reported per share amounts have been restated to reflect this stock dividend. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, (Topic 606): Revenue from Contracts with Customers The Company will apply ASU No. 2014-09 using a modified retrospective approach. The Company’s revenue is comprised of net interest income and noninterest income. The scope of ASU No. 2014-09 explicitly excludes net interest income as well as many other revenues for financial assets and liabilities including loans, leases, securities, and derivatives. Accordingly, the majority of the Company’s revenues will not be affected. The Company is currently assessing its revenue contracts related to revenue streams that are within the scope of ASU No. 2014-09. The Company’s accounting policies will not change materially since the principles of revenue recognition from ASU No. 2014-09 are largely consistent with existing guidance and the Company’s current practices. The Company has not identified material changes to the timing or amount of revenue recognition. However, the Company does anticipate that it will make changes to its revenue-related disclosures. The Company will provide qualitative disclosures of its performance obligations related to its revenue recognition and will continue to evaluate disaggregation for significant categories of revenue within the scope of ASU No. 2014-09. In February 2016, FASB issued ASU No. 2016-02, (Topic 842): Leases The Company expects to adopt ASU No. 2016-02 using the modified retrospective method and practical expedients for transition. The practical expedients allow the Company to largely account for its existing leases consistent with current guidance except for the incremental balance sheet recognition for lessees. The Company has started an initial evaluation of its leasing contracts and activities and has started developing its methodology to estimate the right-of use assets and lease liabilities, which is based on the present value of lease payments (the December 31, 2017 future minimum lease payments were $4.8 million). While the Company does not expect there to be a material change in the timing of expense recognition, it is too early in the evaluation process to determine if there will be a material change to the timing of expense recognition. The Company is evaluating its existing disclosures and may need to provide additional information as a result of adoption of ASU No. 2016-02. In June 2016, FASB issued ASU No. 2016-13, (Topic 326): Measurement of Credit Losses on Financial Instruments The Company will apply the amendments to ASU No. 2016-13 through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. While early adoption is permitted beginning in the first quarter of 2019, the Company does not expect to elect that option. The Company is evaluating the impact of ASU No. 2016-13 on its consolidated financial statements. The Company anticipates that ASU No. 2016-13 will have no material impact on the recorded allowance for loan losses given the change to estimated losses over the contractual life of the loans adjusted for expected prepayments. In addition to the Company’s allowance for loan losses, it will also record an allowance for credit losses on debt securities instead of applying the impairment model currently utilized. The amount of the adjustments will be impacted by each portfolio’s composition and credit quality at the adoption date as well as economic conditions and forecasts at that time. In January 2017, FASB issued ASU No. 2017-01, (Topic 805): Clarifying the Definition of a Business. In January 2017, FASB issued ASU No. 2017-04, (Topic 350): Simplifying the Test for Goodwill Impairment In February 2017, FASB issued ASU No. 2017-05, (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets Revenue from Contracts with Customers In March 2017, FASB issued ASU No. 2017-07, (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs In March 2017, FASB issued ASU No. 2017-08, (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. In May 2017, FASB issued ASU No. 2017-09, (Topic 718): Scope of Modification Accounting In September 2017, FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic In November 2017, FASB issued ASU No. 2017-14, Income Statement—Rep

2. Investment Securities

2. Investment Securities	12 Months Ended
	Dec. 31, 2017
Investments, Debt and Equity Securities [Abstract]
Investment Securities	Investment securities available for sale at December 31, 2017 and 2016 are as follows: (Dollars in thousands) December 31, 2017 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Mortgage-backed securities $ 53,124 814 329 53,609 U.S. Government sponsored enterprises 40,504 140 264 40,380 State and political subdivisions 129,276 4,310 16 133,570 Corporate bonds 1,500 12 - 1,512 Trust preferred securities 250 - - 250 Total $ 224,654 5,276 609 229,321 (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 The current fair value and associated unrealized losses on investments in debt securities with unrealized losses at December 31, 2017 and 2016 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, 2017 Less than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Mortgage-backed securities $ 8,701 75 11,259 254 19,960 329 U.S. Government sponsored enterprises 12,661 98 10,067 166 22,728 264 State and political subdivisions 798 2 1,501 14 2,299 16 Total $ 22,160 175 22,827 434 44,987 609 (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 At December 31, 2017, unrealized losses in the investment securities portfolio relating to debt securities totaled $609,000. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the December 31, 2017 tables above, four out of 159 securities issued by state and political subdivisions contained unrealized losses and 27 out of 78 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 2017, 2016 or 2015. The amortized cost and estimated fair value of investment securities available for sale at December 31, 2017, 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, 2017 (Dollars in thousands) Amortized Cost Estimated Fair Value Due within one year $ 17,584 17,682 Due from one to five years 96,639 99,547 Due from five to ten years 48,542 49,578 Due after ten years 8,765 8,905 Mortgage-backed securities 53,124 53,609 Equity securities - - Total $ 224,654 229,321 No securities available for sale were sold during the year ended December 31, 2017. 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. Securities with a fair value of approximately $105.6 million and $95.6 million at December 31, 2017 and 2016, 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, 2017 and 2016. (Dollars in thousands) December 31, 2017 Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage-backed securities $ 53,609 - 53,609 - U.S. Government sponsored enterprises $ 40,380 - 40,380 - State and political subdivisions $ 133,570 - 133,570 - Corporate bonds $ 1,512 - 1,512 - Trust preferred securities $ 250 - - 250 (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 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, 2017. (Dollars in thousands) Investment Securities Available for Sale Level 3 Valuation Balance, beginning of period $ 750 Change in book value - Change in gain/(loss) realized and unrealized - Purchases/(sales and calls) (500 ) Transfers in and/or (out) of Level 3 - Balance, end of period $ 250 Change in unrealized gain/(loss) for assets still held in Level 3 $ -

3. Loans

3. Loans	12 Months Ended
	Dec. 31, 2017
Receivables [Abstract]
Loans	Major classifications of loans at December 31, 2017 and 2016 are summarized as follows: (Dollars in thousands) December 31, 2017 December 31, 2016 Real estate loans: Construction and land development $ 84,987 61,749 Single-family residential 246,703 240,700 Single-family residential - Banco de la Gente stated income 37,249 40,189 Commercial 248,637 247,521 Multifamily and farmland 28,937 21,047 Total real estate loans 646,513 611,206 Loans not secured by real estate: Commercial loans 89,022 87,596 Farm loans 1,204 - Consumer loans 9,888 9,832 All other loans 13,137 15,177 Total loans 759,764 723,811 Less allowance for loan losses 6,366 7,550 Total net loans $ 753,398 716,261 The above table includes deferred costs, net of deferred fees, totaling $1.6 million and $1.4 million at December 31, 2017 and 2016, 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 and Durham 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, 2017, construction and land development loans comprised approximately 11% 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, 2017, single-family residential loans comprised approximately 37% of the Bank’s total loan portfolio, including Banco single-family residential stated income loans which were approximately 5% 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, 2017, commercial real estate loans comprised approximately 33% 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, 2017, 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, 2017 and 2016: December 31, 2017 (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 Real estate loans: Construction and land development $ 277 - 277 84,710 84,987 - Single-family residential 3,241 193 3,434 243,269 246,703 - Single-family residential - Banco de la Gente stated income 4,078 465 4,543 32,706 37,249 - Commercial 588 - 588 248,049 248,637 - Multifamily and farmland - 12 12 28,925 28,937 - Total real estate loans 8,184 670 8,854 637,659 646,513 - Loans not secured by real estate: Commercial loans 53 100 153 88,869 89,022 - Farm loans - - - 1,204 1,204 - Consumer loans 113 5 118 9,770 9,888 - All other loans - - - 13,137 13,137 - Total loans $ 8,350 775 9,125 750,639 759,764 - 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 - The following table presents the Bank’s non-accrual loans as of December 31, 2017 and 2016: (Dollars in thousands) December 31, 2017 December 31, 2016 Real estate loans: Construction and land development $ 14 22 Single-family residential 1,634 1,662 Single-family residential - Banco de la Gente stated income 1,543 1,340 Commercial 396 669 Multifamily and farmland 12 78 Total real estate loans 3,599 3,771 Loans not secured by real estate: Commercial loans 100 21 Consumer loans 12 33 Total $ 3,711 3,825 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 $4.9 million and $5.9 million at December 31, 2017 and 2016, respectively. Accruing impaired loans were $24.6 million and $23.5 million at December 31, 2017 and December 31, 2016, respectively. Interest income recognized on accruing impaired loans was $1.4 million and $1.2 million for the years ended December 31, 2017 and 2016, 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, 2017, 2016 and 2015: December 31, 2017 (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 - 277 277 6 253 17 Single-family residential 5,226 1,135 3,686 4,821 41 5,113 265 Single-family residential - Banco de la Gente stated income 17,360 - 16,805 16,805 1,149 16,867 920 Commercial 2,761 807 1,661 2,468 1 3,411 148 Multifamily and farmland 78 - 12 12 - 28 - Total impaired real estate loans 25,707 1,942 22,441 24,383 1,197 25,672 1,350 Loans not secured by real estate: Commercial loans 264 100 4 104 - 149 3 Consumer loans 158 - 154 154 2 194 9 Total impaired loans $ 26,129 2,042 22,599 24,641 1,199 26,015 1,362 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 The fair value measurements for mortgage loans held for sale, impaired loans and other real estate on a non-recurring basis at December 31, 2017 and 2016 are presented below. The Company’s valuation methodology is discussed in Note 15. (Dollars in thousands) Fair Value Measurements December 31, 2017 Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage loans held for sale $ 857 - - 857 Impaired loans $ 23,442 - - 23,442 Other real estate $ 118 - - 118 (Dollars in thousands) Fair Value Measurements December 31, 2016 Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage loans held for sale $ 5,709 - - 5,709 Impaired loans $ 25,772 - - 25,772 Other real estate $ 283 - - 283 (Dollars in thousands) Fair Value December 31, 2017 Fair Value December 31, 2016 Valuation Technique Significant Unobservable Inputs General Range of Significant Unobservable Input Values Mortgage loans held for sale $ 857 5,709 Rate lock commitment N/A N/A Impaired loans $ 23,442 25,772 Appraised value and discounted cash flows Discounts to reflect current market conditions and ultimate collectability 0 - 25% Other real estate $ 118 283 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, 2017 were as follows: (Dollars in thousands) Real Estate Loans Construction and Land Development Single- Family Residential Single- Family Residential - la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer and All Other Unallocated Total Allowance for loan losses: Beginning balance $ 1,152 2,126 1,377 1,593 52 675 - 204 371 7,550 Charge-offs - (249 ) - - (66 ) (194 ) - (473 ) - (982 ) Recoveries 14 85 - 21 - 31 - 154 - 305 Provision (362 ) (150 ) (97 ) (421 ) 86 62 - 270 105 (507 ) Ending balance $ 804 1,812 1,280 1,193 72 574 - 155 476 6,366 Ending balance: individually evaluated for impairment $ - - 1,093 37 - - - - - 1,130 Ending balance: collectively evaluated for impairment 804 1,812 187 1,156 72 574 - 155 476 5,236 Ending balance $ 804 1,812 1,280 1,193 72 574 - 155 476 6,366 Loans: Ending balance $ 84,987 246,703 37,249 248,637 28,937 89,022 1,204 23,025 - 759,764 Ending balance: individually evaluated for impairment $ 98 1,855 15,460 2,251 - 100 - - - 19,764 Ending balance: collectively evaluated for impairment $ 84,889 244,848 21,789 246,386 28,937 88,922 1,204 23,025 - 740,000 Changes in the allowance for loan losses for the year ended December 31, 2016 were as follows: (Dollars in thousands) Real Estate Loans Construction and Land Development Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer and All Other 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 and Land Development Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer and All Other 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 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, 2017 and 2016. December 31, 2017 (Dollars in thousands) Real Estate Loans Construction and Land Development 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 $ 152 8,590 - - - 446 - 791 - 9,979 2- High Quality 20,593 120,331 - 34,360 561 17,559 - 3,475 2,410 199,289 3- Good Quality 53,586 89,120 14,955 196,439 25,306 65,626 1,085 5,012 9,925 461,054 4- Management Attention 4,313 20,648 15,113 13,727 1,912 5,051 119 562 802 62,247 5- Watch 6,060 4,796 3,357 3,671 1,146 223 - 23 - 19,276 6- Substandard 283 3,218 3,824 440 12 117 - 25 - 7,919 7- Doubtful - - - - - - - - - - 8- Loss - - - - - - - - - - Total $ 84,987 246,703 37,249 248,637 28,937 89,022 1,204 9,888 13,137 759,764 December 31, 2016 (Dollars in thousands) Real Estate Loans Construction and Land Development 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 TDR loans modified in 2017, past due TDR loans and non-accrual TDR loans totaled $4.5 million and $5.9 million at December 31, 2017 and December 31, 2016, 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 $21,000 and $81,000 in performing loans classified as TDR loans at December 31, 2017 and December 31, 2016, respectively. The following table presents an analysis of loan modifications during the year ended December 31, 2017: Year ended December 31, 2017 (Dollars in thousands) Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Real estate loans: Single-family residential 2 $ 22 22 Total TDR loans 2 $ 22 22 During the year ended December 31, 2017, two 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, 2016: Year ended December 31, 2016 (Dollars in thousands) Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment 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. 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, 2017 and 2016. 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, 2017
Property, Plant and Equipment [Abstract]
Premises and Equipment	Major classifications of premises and equipment at December 31, 2017 and 2016 are summarized as follows: (Dollars in thousands) 2017 2016 Land $ 3,700 3,670 Buildings and improvements 19,312 16,398 Furniture and equipment 21,115 19,996 Construction in process 847 - Total premises and equipment 44,974 40,064 Less accumulated depreciation 25,063 23,612 Total net premises and equipment $ 19,911 16,452 The Company recognized approximately $2.1 million in depreciation expense for the year ended December 31, 2017. Depreciation expense was approximately $2.1 million and $2.4 million for the years ended December 31, 2016 and 2015, respectively.

5. Time Deposits

5. Time Deposits	12 Months Ended
	Dec. 31, 2017
Banking and Thrift [Abstract]
Time Deposits	At December 31, 2017, the scheduled maturities of time deposits are as follows: (Dollars in thousands) 2018 $ 81,684 2019 21,064 2020 13,343 2021 3,903 2022 and thereafter 3,107 Total $ 123,101 At December 31, 2017 and 2016, the Bank had approximately $5.2 million and $7.2 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 $5.2 million and $7.2 million as of December 31, 2017 and 2016, respectively. The weighted average rate of brokered deposits as of December 31, 2017 and 2016 was 0.07% and 0.05%, respectively.

6. Federal Home Loan Bank and F

6. Federal Home Loan Bank and Federal Reserve Bank Borrowings	12 Months Ended
	Dec. 31, 2017
Banking and Thrift [Abstract]
Federal Home Loan Bank and Federal Reserve Bank Borrowings	The Bank had no borrowing from the FHLB at December 31, 2017. The Bank had borrowings from the FHLB totaling $20 million at December 31, 2016. 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, 2017, the carrying value of loans pledged as collateral totaled approximately $137.5 million. The remaining availability under the line of credit with the FHLB was $87.2 million at December 31, 2017. Borrowings from the FHLB outstanding at December 31, 2016 consisted 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 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 $978,000 and $1.8 million of FHLB stock, included in other investments, at December 31, 2017 and 2016, respectively. The Bank prepaid FHLB borrowings totaling $20.0 million in 2017 with prepayment penalties totaling $508,000. The Bank prepaid FHLB borrowings totaling $23.5 million in 2016 with prepayment penalties totaling $1.3 million. As of December 31, 2017 and 2016, 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, 2017, the carrying value of loans pledged as collateral totaled approximately $408.5 million. Availability under the line of credit with the FRB was $315.2 million at December 31, 2017.

7. Junior Subordinated Debentur

7. Junior Subordinated Debentures	12 Months Ended
	Dec. 31, 2017
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, 2017
Income Tax Disclosure [Abstract]
Income Taxes	On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“TCJA”). The TCJA includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 34 percent to 21 percent for tax years beginning after December 31, 2017. The Company recognized the income tax effects of the TCJA in its 2017 financial statements in accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of Accounting Standards Codification ("ASC") Topic 740, Income Taxes The provision for income taxes is summarized as follows: (Dollars in thousands) 2017 2016 2015 Current expense $ 1,827 1,464 2,427 Deferred income tax expense 2,120 1,097 673 Total income tax $ 3,947 2,561 3,100 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) 2017 2016 2015 Tax expense at statutory rate (34%) $ 4,833 3,991 4,329 State income tax, net of federal income tax effect 307 339 494 Tax-exempt interest income (1,594 ) (1,681 ) (1,682 ) Increase in cash surrender value of life insurance (136 ) (138 ) (143 ) Nondeductible interest and other expense 46 78 103 Impact of Tax Cuts and Jobs Act 588 - - Other (97 ) (28 ) (1 ) Total $ 3,947 2,561 3,100 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, 2017 and 2016. (Dollars in thousands) 2017 2016 Deferred tax assets: Allowance for loan losses $ 1,463 2,717 Accrued retirement expense 1,073 1,616 Other real estate - - Federal credit carryforward 88 326 State credit carryforward - 14 Restricted stock 243 745 Accrued bonuses 171 216 Interest income on nonaccrual loans 5 27 Other than temporary impairment 9 14 Other - 23 Total gross deferred tax assets 3,052 5,698 Deferred tax liabilities: Deferred loan fees 365 797 Accumulated depreciation 498 532 Prepaid expenses 14 78 Other 28 23 Unrealized gain on available for sale securities 1,072 1,807 Total gross deferred tax liabilities 1,977 3,237 Net deferred tax asset $ 1,075 2,461 The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Company’s deferred tax assets and liabilities were remeasured to reflect the reduction in the U.S. corporate income tax rate from 34 percent to 21 percent, resulting in a $588,000 increase in income tax expense for the year ended December 31, 2017 and a corresponding $588,000 decrease in net deferred tax assets as of December 31, 2017. 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 income tax filings for years 2014 through 2017 were at year end 2017 open to audit under statutes of limitations by the Internal Revenue Service and the North Carolina Department of Revenue.

9. Related Party Transactions

9. Related Party Transactions	12 Months Ended
	Dec. 31, 2017
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 2017 and 2016: (Dollars in thousands) 2017 2016 Beginning balance $ 4,503 5,674 New loans 5,879 6,048 Repayments (6,703 ) (7,219 ) Ending balance $ 3,679 4,503 At December 31, 2017 and 2016, the Company had deposit relationships with related parties of approximately $26.6 million and $27.8 million, respectively. A director of the Company is an officer and partial owner of the construction company that renovated the Bank’s Corporate Center located at 518 West C Street, Newton, North Carolina during 2017. During 2017 the Company paid a total of approximately $2.6 million to this construction company for such renovation work. During 2016 the Company paid a total of approximately $209,000 to this construction company for such renovation work.

10. Commitments and Contingenci

10. Commitments and Contingencies	12 Months Ended
	Dec. 31, 2017
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, 2017 are as follows: (Dollars in thousands) Year ending December 31, 2018 $ 716 2019 697 2020 678 2021 663 2022 369 Thereafter 1,739 Total minimum obligation $ 4,862 Total rent expense was approximately $756,000, $752,000 and $702,000 for the years ended December 31, 2017, 2016 and 2015, 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 2017 2016 Financial instruments whose contract amount represent credit risk: Commitments to extend credit $ 233,972 195,528 Standby letters of credit and financial guarantees written $ 3,325 3,728 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 $237.3 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 $79.5 million available for the purchase of overnight federal funds from six correspondent financial institutions as of December 31, 2017. At December 31, 2017, the Bank has a commitment to invest $3.0 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 has funded $603,000 of this commitment at December 31, 2017.

11. Employee and Director Benef

11. Employee and Director Benefit Programs	12 Months Ended
	Dec. 31, 2017
Retirement Benefits [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 2015, 2016 and 2017. The Company’s contribution pursuant to this formula was approximately $622,000, $565,000 and $539,000 for the years 2017, 2016 and 2015, 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. 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 $411,000, $428,000 and $413,000 for the years 2017, 2016 and 2015, respectively. The Company is currently paying medical benefits for certain retired employees. The Company did not incur any postretirement medical benefits expense in 2017, 2016 and 2015 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) 2017 2016 Benefit obligation at beginning of period $ 4,174 3,993 Service cost 348 346 Interest cost 68 67 Benefits paid (229 ) (232 ) Benefit obligation at end of period $ 4,361 4,174 The amounts recognized in the Company’s Consolidated Balance Sheet as of December 31, 2017 and 2016 are shown in the following two tables: (Dollars in thousands) 2017 2016 Benefit obligation $ 4,361 4,174 Fair value of plan assets - - (Dollars in thousands) 2017 2016 Funded status $ (4,361 ) (4,174 ) Unrecognized prior service cost/benefit - - Unrecognized net actuarial loss - - Net amount recognized $ (4,361 ) (4,174 ) Unfunded accrued liability $ (4,361 ) (4,174 ) Intangible assets - - Net amount recognized $ (4,361 ) (4,174 ) Net periodic benefit cost of the Company’s postretirement benefit plans for the years ended December 31, 2017, 2016 and 2015 consisted of the following: (Dollars in thousands) 2017 2016 2015 Service cost $ 348 346 334 Interest cost 68 67 65 Net periodic cost $ 416 413 399 Weighted average discount rate assumption used to determine benefit obligation 5.49 % 5.47 % 5.47 % The Company paid benefits under the two postretirement plans totaling $229,000 and $232,000 during the years ended December 31, 2017 and 2016, 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, 2018 $ 227 2019 $ 304 2020 $ 357 2021 $ 357 2022 $ 346 Thereafter $ 9,005

12. Regulatory Matters

12. Regulatory Matters	12 Months Ended
	Dec. 31, 2017
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, 2017, that the Company and the Bank meet all capital adequacy requirements to which they are subject. As of December 31, 2017, 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 are being 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 was added to the minimum requirements for capital adequacy purposes beginning on January 1, 2016 at 0.625% and is being 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, 2017: Total Capital (to Risk-Weighted Assets) Consolidated $ 138,492 16.06 % 79,758 9.25 % N/A N/A Bank $ 136,299 15.83 % 79,627 9.25 % 86,084 10.00 % Tier 1 Capital (to Risk-Weighted Assets) Consolidated $ 132,126 15.32 % 62,513 7.25 % N/A N/A Bank $ 129,933 15.09 % 62,411 7.25 % 68,867 8.00 % Tier 1 Capital (to Average Assets) Consolidated $ 132,126 11.94 % 44,255 4.00 % N/A N/A Bank $ 129,933 11.69 % 44,475 4.00 % 55,594 5.00 % Common Equity Tier 1 (to Risk-Weighted Assets) Consolidated $ 112,126 13.00 % 49,579 5.75 % N/A N/A Bank $ 129,933 15.09 % 49,498 5.75 % 55,954 6.50 % (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 % 70,666 8.63 % N/A N/A Bank $ 129,035 15.78 % 70,578 8.63 % 81,782 10.00 % Tier 1 Capital (to Risk-Weighted Assets) Consolidated $ 124,441 15.20 % 54,289 6.63 % N/A N/A Bank $ 121,485 14.85 % 54,222 6.63 % 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 % 42,007 5.13 % N/A N/A Bank $ 121,485 14.85 % 41,954 5.13 % 53,158 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 required 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. During the third quarter of 2017 the Bank received notice that the Order was terminated effective August 30, 2017.

13. Shareholders' Equity

13. Shareholders' Equity	12 Months Ended
	Dec. 31, 2017
Equity [Abstract]
Shareholders' Equity	Shareholders’ equity was $116.0 million, or 10.62% of total assets, as of December 31, 2017, compared to $107.4 million, or 9.87% of total assets, as of December 31, 2016. The increase in shareholders’ equity is primarily due to an increase in retained earnings due to net income. Annualized return on average equity for the year ended December 31, 2017 was 8.78% compared to 8.11% for the year ended December 31, 2016. Total cash dividends paid on common stock were $2.6 million and $2.1 million for the years ended December 31, 2017 and 2016, 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 2016, the Company’s Board of Directors authorized a stock repurchase program, pursuant to which up to $2 million was allocated to repurchase the Company’s common stock. Any purchases under the Company’s 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 were determined by the Company’s management, based on its evaluation of market conditions and other factors. The Company has repurchased approximately $2.0 million, or 92,738 shares of its common stock, under this program as of December 31, 2017 .

14. Other Operating Income and

14. Other Operating Income and Expense	12 Months Ended
	Dec. 31, 2017
Other Income and Expenses [Abstract]
Other Operating Income and Expense	Miscellaneous non-interest income for the years ended December 31, 2017, 2016 and 2015 included the following items that exceeded one percent of total revenues at some point during the following three-year period: (Dollars in thousands) 2017 2016 2015 Visa debit card income $ 3,757 3,589 3,452 Net appraisal management fee income $ 780 886 635 Insurance and brokerage commissions $ 761 632 714 Other non-interest expense for the years ended December 31, 2017, 2016 and 2015 included the following items that exceeded one percent of total revenues at some point during the following three-year period: (Dollars in thousands) 2017 2016 2015 Advertising $ 1,195 1,136 784 FDIC insurance $ 347 494 681 Visa debit card expense $ 1,248 1,140 988 Telephone $ 855 754 588 Foreclosure/OREO expense $ 46 120 398 Internet banking expense $ 720 710 671 FHLB advance prepayment penalty $ 508 1,260 504 Consulting $ 785 2,257 904

15. Fair Value of Financial Ins

15. Fair Value of Financial Instruments	12 Months Ended
	Dec. 31, 2017
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, 2017 and 2016. The fair value presentation for non-recurring assets is presented in Note 3. There were no non-recurring liabilities at December 31, 2017 and 2016. The carrying amount and estimated fair value of the Company’s financial instruments at December 31, 2017 and 2016 are as follows: (Dollars in thousands) Fair Value Measurements at December 31, 2017 Carrying Amount Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 53,186 53,186 - - 53,186 Investment securities available for sale $ 229,321 - 229,071 250 229,321 Other investments $ 1,830 - - 1,830 1,830 Mortgage loans held for sale $ 857 - - 857 857 Loans, net $ 753,398 - - 735,837 735,837 Cash surrender value of life insurance $ 15,552 - 15,552 - 15,552 Liabilities: Deposits $ 906,952 - - 894,932 894,932 Securities sold under agreements to repurchase $ 37,757 - 37,757 - 37,757 Junior subordinated debentures $ 20,619 - 20,619 - 20,619 (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

16. Peoples Bancorp of North Ca

16. Peoples Bancorp of North Carolina, Inc. (Parent Company Only) Condensed Financial Statements	12 Months Ended
	Dec. 31, 2017
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, 2017 and 2016 (Dollars in thousands) Assets 2017 2016 Cash $ 428 957 Interest-bearing time deposit 1,000 1,000 Investment in subsidiaries 133,781 124,471 Investment in PEBK Capital Trust II 619 619 Investment securities available for sale 250 750 Other assets 546 275 Total assets $ 136,624 128,072 Liabilities and Shareholders' Equity Junior subordinated debentures $ 20,619 20,619 Liabilities 30 25 Shareholders' equity 115,975 107,428 Total liabilities and shareholders' equity $ 136,624 128,072 Statements of Earnings For the Years Ended December 31, 2017, 2016 and 2015 (Dollars in thousands) Revenues: 2017 2016 2015 Interest and dividend income $ 1,839 4,569 3,979 Gain on sale of securities - 405 - Total revenues 1,839 4,974 3,979 Expenses: Interest 590 485 403 Other operating expenses 725 513 538 Total expenses 1,315 998 941 Income before income tax benefit and equity in undistributed earnings of subsidiaries 524 3,976 3,038 Income tax benefit 434 178 262 Income before equity in undistributed earnings of subsidiaries 958 4,154 3,300 Equity in undistributed earnings of subsidiaries 9,310 5,023 6,333 Net earnings $ 10,268 9,177 9,633 Statements of Cash Flows For the Years Ended December 31, 2017, 2016 and 2015 (Dollars in thousands) 2017 2016 2015 Cash flows from operating activities: Net earnings $ 10,268 9,177 9,633 Adjustments to reconcile net earnings to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries (9,310 ) (5,023 ) (6,333 ) Gain on sale of investment securities - (405 ) - Change in: Other assets (272 ) 61 (4 ) Accrued income - - - Accrued expense 5 5 3 Other liabilities - - - Net cash provided by operating activities 691 3,815 3,299 Cash flows from investing activities: Proceeds from calls and maturities of investment securities available for sale 500 669 In kind transfer from parent to Bank - 10 - Net cash provided by investing activities 500 679 - Cash flows from financing activities: Cash dividends paid on common stock (2,629 ) (2,106 ) (1,574 ) Cash in lieu stock dividend (6 ) - - Stock repurchase - (1,984 ) (1,917 ) Proceeds from exercise of restricted stock units 915 - - Net cash used by financing activities (1,720 ) (4,090 ) (3,491 ) Net change in cash (529 ) 404 (192 ) Cash at beginning of year 957 553 745 Cash at end of year $ 428 957 553 Noncash investing and financing activities: Change in unrealized gain on investment securities available for sale, net $ (1 ) (2,523 ) 57

17. Quarterly Data

17. Quarterly Data	12 Months Ended
	Dec. 31, 2017
Quarterly Financial Information Disclosure [Abstract]
Quarterly Data	2017 2016 (Dollars in thousands, except per share amounts) First Second Third Fourth First Second Third Fourth Total interest income $ 10,064 10,461 10,698 10,726 $ 9,905 9,815 9,982 10,107 Total interest expense 598 622 650 507 809 813 828 821 Net interest income 9,466 9,839 10,048 10,219 9,096 9,002 9,154 9,286 (Reduction of) provision for loan losses (236 ) 49 (218 ) (102 ) (216 ) (531 ) (360 ) (99 ) Other income 2,876 3,281 3,504 3,177 3,324 3,572 3,414 3,666 Other expense 9,795 9,335 9,351 10,169 9,492 9,109 9,598 11,783 Income before income taxes 2,783 3,736 4,419 3,329 3,144 3,996 3,330 1,268 Income taxes (benefit) 578 925 1,177 1,319 691 1,032 872 (34 ) Net earnings 2,205 2,811 3,242 2,010 2,453 2,964 2,458 1,302 Basic net earni ngs per share $ 0.36 0.47 0.54 0.34 $ 0.41 0.49 0.41 0.22 Diluted net earnings per share $ 0.36 0.46 0.53 0.34 $ 0.40 0.48 0.40 0.22

1. Summary of Significant Acc25

1. Summary of Significant Accounting Policies (Policies)	12 Months Ended
	Dec. 31, 2017
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 and Durham 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. 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 three banking offices focused on the Latino population that were formerly operated as a division of the Bank under the name Banco de la Gente (“Banco”). These offices are now branded as Bank branches and considered a separate market territory of the Bank as they offer 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.
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, 2017 and 2016, 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, 2017 as compared to the year ended December 31, 2016. 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 offices 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 $1.0 million, $1.4 million and $1.6 million at December 31, 2017, 2016 and 2015, 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 284,658 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 32,465 restricted stock units under the Plan at a grant date fair value of $7.18 per share during the first quarter of 2012, of which 5,891 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 5,891 restricted stock units at a grant date fair value of $7.50 per share. The Company granted 29,475 restricted stock units under the Plan at a grant date fair value of $10.82 per share during the second quarter of 2013. The Company granted 23,162 restricted stock units under the Plan at a grant date fair value of $14.27 per share during the first quarter of 2014. The Company granted 16,583 restricted stock units under the Plan at a grant date fair value of $16.34 per share during the first quarter of 2015. The Company granted 5,544 restricted stock units under the Plan at a grant date fair value of $16.91 per share during the first quarter of 2016. The Company granted 4,114 restricted stock units under the Plan at a grant date fair value of $25.00 per share during the first quarter of 2017. The number of restricted stock units granted and grant date fair values have been restated to reflect the 10% stock dividend during the fourth quarter of 2017. 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, 2016 and 2017 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, 2017, the total unrecognized compensation expense related to the restricted stock unit grants under the Plan was $319,000. The Company recognized compensation expense for restricted stock units granted under the Plan of $592,000, $932,000 and $487,000 for the years ended December 31, 2017, 2016 and 2015, 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, 2017, 2016 and 2015 are as follows: For the year ended December 31, 2017 Net Earnings (Dollars in thousands) Weighted Average Number of Shares Per Share Amount Basic earnings per share $ 10,268 5,988,183 $ 1.71 Effect of dilutive securities: Restricted stock units - 74,667 Diluted earnings per share $ 10,268 6,062,850 $ 1.69 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 6,024,970 $ 1.53 Effect of dilutive securities: Restricted stock units - 77,807 Diluted earnings per share $ 9,177 6,102,777 $ 1.50 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 6,115,159 $ 1.57 Effect of dilutive securities: Restricted stock units - 52,749 Diluted earnings per share $ 9,633 6,167,908 $ 1.56 In November 2017, the Board of Directors of the Company declared a cash dividend in the amount of $0.12 per share and a 10% stock dividend. The cash dividend was paid based on the number of shares held by shareholders on the record date of December 4, 2017. As a result of the stock dividend, each shareholder received one new share of stock for every ten shares of stock they held as of the record date of December 4, 2017. The payable date for the cash dividend and stock dividend was December 15, 2017. All previously reported per share amounts have been restated to reflect this stock dividend.
Recent Accounting Pronouncements	In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, (Topic 606): Revenue from Contracts with Customers The Company will apply ASU No. 2014-09 using a modified retrospective approach. The Company’s revenue is comprised of net interest income and noninterest income. The scope of ASU No. 2014-09 explicitly excludes net interest income as well as many other revenues for financial assets and liabilities including loans, leases, securities, and derivatives. Accordingly, the majority of the Company’s revenues will not be affected. The Company is currently assessing its revenue contracts related to revenue streams that are within the scope of ASU No. 2014-09. The Company’s accounting policies will not change materially since the principles of revenue recognition from ASU No. 2014-09 are largely consistent with existing guidance and the Company’s current practices. The Company has not identified material changes to the timing or amount of revenue recognition. However, the Company does anticipate that it will make changes to its revenue-related disclosures. The Company will provide qualitative disclosures of its performance obligations related to its revenue recognition and will continue to evaluate disaggregation for significant categories of revenue within the scope of ASU No. 2014-09. In February 2016, FASB issued ASU No. 2016-02, (Topic 842): Leases The Company expects to adopt ASU No. 2016-02 using the modified retrospective method and practical expedients for transition. The practical expedients allow the Company to largely account for its existing leases consistent with current guidance except for the incremental balance sheet recognition for lessees. The Company has started an initial evaluation of its leasing contracts and activities and has started developing its methodology to estimate the right-of use assets and lease liabilities, which is based on the present value of lease payments (the December 31, 2017 future minimum lease payments were $4.8 million). While the Company does not expect there to be a material change in the timing of expense recognition, it is too early in the evaluation process to determine if there will be a material change to the timing of expense recognition. The Company is evaluating its existing disclosures and may need to provide additional information as a result of adoption of ASU No. 2016-02. In June 2016, FASB issued ASU No. 2016-13, (Topic 326): Measurement of Credit Losses on Financial Instruments The Company will apply the amendments to ASU No. 2016-13 through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. While early adoption is permitted beginning in the first quarter of 2019, the Company does not expect to elect that option. The Company is evaluating the impact of ASU No. 2016-13 on its consolidated financial statements. The Company anticipates that ASU No. 2016-13 will have no material impact on the recorded allowance for loan losses given the change to estimated losses over the contractual life of the loans adjusted for expected prepayments. In addition to the Company’s allowance for loan losses, it will also record an allowance for credit losses on debt securities instead of applying the impairment model currently utilized. The amount of the adjustments will be impacted by each portfolio’s composition and credit quality at the adoption date as well as economic conditions and forecasts at that time. In January 2017, FASB issued ASU No. 2017-01, (Topic 805): Clarifying the Definition of a Business. In January 2017, FASB issued ASU No. 2017-04, (Topic 350): Simplifying the Test for Goodwill Impairment In February 2017, FASB issued ASU No. 2017-05, (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets Revenue from Contracts with Customers In March 2017, FASB issued ASU No. 2017-07, (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs In March 2017, FASB issued ASU No. 2017-08, (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. In May 2017, FASB issued ASU No. 2017-09, (Topic 718): Scope of Modification Accounting In September 2017, FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic In November 2017, FASB issued ASU No. 2017-14, Income Statement—Reporting Comprehensive, Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606) In February 2018, FASB issued ASU 2018-02, Income Statement (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income 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 2015 and 2016 consolidated financial statements have been reclassified to conform to the 2017 presentation.

1. Summary of Significant Acc26

1. Summary of Significant Accounting Policies (Tables)	12 Months Ended
	Dec. 31, 2017
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, 2017 Net Earnings (Dollars in thousands) Weighted Average Number of Shares Per Share Amount Basic earnings per share $ 10,268 5,988,183 $ 1.71 Effect of dilutive securities: Restricted stock units - 74,667 Diluted earnings per share $ 10,268 6,062,850 $ 1.69 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 6,024,970 $ 1.53 Effect of dilutive securities: Restricted stock units - 77,807 Diluted earnings per share $ 9,177 6,102,777 $ 1.50 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 6,115,159 $ 1.57 Effect of dilutive securities: Restricted stock units - 52,749 Diluted earnings per share $ 9,633 6,167,908 $ 1.56

2. Investment Securities (Table

2. Investment Securities (Tables)	12 Months Ended
	Dec. 31, 2017
Investment Securities Tables
Investment securities available for sale	(Dollars in thousands) December 31, 2017 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Mortgage-backed securities $ 53,124 814 329 53,609 U.S. Government sponsored enterprises 40,504 140 264 40,380 State and political subdivisions 129,276 4,310 16 133,570 Corporate bonds 1,500 12 - 1,512 Trust preferred securities 250 - - 250 Total $ 224,654 5,276 609 229,321 (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
Current fair value and associated unrealized losses on investments in debt securities with unrealized losses	(Dollars in thousands) December 31, 2017 Less than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Mortgage-backed securities $ 8,701 75 11,259 254 19,960 329 U.S. Government sponsored enterprises 12,661 98 10,067 166 22,728 264 State and political subdivisions 798 2 1,501 14 2,299 16 Total $ 22,160 175 22,827 434 44,987 609 (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
Amortized cost and estimated fair value of investment securities available for sale by contractual maturity	December 31, 2017 (Dollars in thousands) Amortized Cost Estimated Fair Value Due within one year $ 17,584 17,682 Due from one to five years 96,639 99,547 Due from five to ten years 48,542 49,578 Due after ten years 8,765 8,905 Mortgage-backed securities 53,124 53,609 Equity securities - - Total $ 224,654 229,321
Available for sale securities measured at fair value on a recurring basis	(Dollars in thousands) December 31, 2017 Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage-backed securities $ 53,609 - 53,609 - U.S. Government sponsored enterprises $ 40,380 - 40,380 - State and political subdivisions $ 133,570 - 133,570 - Corporate bonds $ 1,512 - 1,512 - Trust preferred securities $ 250 - - 250 (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
Fair value measurements of investment securities available for sale using Level 3 significant unobservable inputs	(Dollars in thousands) Investment Securities Available for Sale Level 3 Valuation Balance, beginning of period $ 750 Change in book value - Change in gain/(loss) realized and unrealized - Purchases/(sales and calls) (500 ) Transfers in and/or (out) of Level 3 - Balance, end of period $ 250 Change in unrealized gain/(loss) for assets still held in Level 3 $ -

3. Loans (Tables)

3. Loans (Tables)	12 Months Ended
	Dec. 31, 2017
Loans Tables
Major classifications of loans	(Dollars in thousands) December 31, 2017 December 31, 2016 Real estate loans: Construction and land development $ 84,987 61,749 Single-family residential 246,703 240,700 Single-family residential - Banco de la Gente stated income 37,249 40,189 Commercial 248,637 247,521 Multifamily and farmland 28,937 21,047 Total real estate loans 646,513 611,206 Loans not secured by real estate: Commercial loans 89,022 87,596 Farm loans 1,204 - Consumer loans 9,888 9,832 All other loans 13,137 15,177 Total loans 759,764 723,811 Less allowance for loan losses 6,366 7,550 Total net loans $ 753,398 716,261
Age analysis of past due loans, by loan type	December 31, 2017 (Dollars in thousands) Loans 30- Days Past Due Loans 90 or More Days Past Due Total Past Due Loans Total Current Loans Total Loans Accruing Real estate loans: Construction and land development $ 277 - 277 84,710 84,987 - Single-family residential 3,241 193 3,434 243,269 246,703 - Single-family residential - Banco de la Gente stated income 4,078 465 4,543 32,706 37,249 - Commercial 588 - 588 248,049 248,637 - Multifamily and farmland - 12 12 28,925 28,937 - Total real estate loans 8,184 670 8,854 637,659 646,513 - Loans not secured by real estate: Commercial loans 53 100 153 88,869 89,022 - Farm loans - - - 1,204 1,204 - Consumer loans 113 5 118 9,770 9,888 - All other loans - - - 13,137 13,137 - Total loans $ 8,350 775 9,125 750,639 759,764 - December 31, 2016 (Dollars in thousands) Loans 30- Days Past Loans 90 or More Days Past Due Total Past Due Loans Total Current Loans Total Loans Accruing Loans 90 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 -
Non-accrual loans	(Dollars in thousands) December 31, 2017 December 31, 2016 Real estate loans: Construction and land development $ 14 22 Single-family residential 1,634 1,662 Single-family residential - Banco de la Gente stated income 1,543 1,340 Commercial 396 669 Multifamily and farmland 12 78 Total real estate loans 3,599 3,771 Loans not secured by real estate: Commercial loans 100 21 Consumer loans 12 33 Total $ 3,711 3,825
Impaired loans	December 31, 2017 (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 - 277 277 6 253 17 Single-family residential 5,226 1,135 3,686 4,821 41 5,113 265 Single-family residential - Banco de la Gente stated income 17,360 - 16,805 16,805 1,149 16,867 920 Commercial 2,761 807 1,661 2,468 1 3,411 148 Multifamily and farmland 78 - 12 12 - 28 - Total impaired real estate loans 25,707 1,942 22,441 24,383 1,197 25,672 1,350 Loans not secured by real estate: Commercial loans 264 100 4 104 - 149 3 Consumer loans 158 - 154 154 2 194 9 Total impaired loans $ 26,129 2,042 22,599 24,641 1,199 26,015 1,362 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
Fair value measurements for mortgage loans held for sale, impaired loans and other real estate on a non-recurring basis	(Dollars in thousands) Fair Value Measurements December 31, 2017 Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage loans held for sale $ 857 - - 857 Impaired loans $ 23,442 - - 23,442 Other real estate $ 118 - - 118 (Dollars in thousands) Fair Value Measurements December 31, 2016 Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage loans held for sale $ 5,709 - - 5,709 Impaired loans $ 25,772 - - 25,772 Other real estate $ 283 - - 283 (Dollars in thousands) Fair Value December 31, 2017 Fair Value December 31, 2016 Valuation Technique Significant Unobservable Inputs General Range of Significant Unobservable Input Values Mortgage loans held for sale $ 857 5,709 Rate lock commitment N/A N/A Impaired loans $ 23,442 25,772 Appraised value and discounted cash flows Discounts to reflect current market conditions and ultimate collectability 0 - 25% Other real estate $ 118 283 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, 2017 were as follows: (Dollars in thousands) Real Estate Loans Construction and Land Development Single- Family Residential Single- Family Residential - la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer and All Other Unallocated Total Allowance for loan losses: Beginning balance $ 1,152 2,126 1,377 1,593 52 675 - 204 371 7,550 Charge-offs - (249 ) - - (66 ) (194 ) - (473 ) - (982 ) Recoveries 14 85 - 21 - 31 - 154 - 305 Provision (362 ) (150 ) (97 ) (421 ) 86 62 - 270 105 (507 ) Ending balance $ 804 1,812 1,280 1,193 72 574 - 155 476 6,366 Ending balance: individually evaluated for impairment $ - - 1,093 37 - - - - - 1,130 Ending balance: collectively evaluated for impairment 804 1,812 187 1,156 72 574 - 155 476 5,236 Ending balance $ 804 1,812 1,280 1,193 72 574 - 155 476 6,366 Loans: Ending balance $ 84,987 246,703 37,249 248,637 28,937 89,022 1,204 23,025 - 759,764 Ending balance: individually evaluated for impairment $ 98 1,855 15,460 2,251 - 100 - - - 19,764 Ending balance: collectively evaluated for impairment $ 84,889 244,848 21,789 246,386 28,937 88,922 1,204 23,025 - 740,000 Changes in the allowance for loan losses for the year ended December 31, 2016 were as follows: (Dollars in thousands) Real Estate Loans Construction and Land Development Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer and All Other 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 and Land Development Single- Family Residential Single- Family Residential - Banco de la Gente Stated Income Commercial Multifamily and Farmland Commercial Farm Consumer and All Other 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
Credit risk profile of each loan type based on internally assigned risk grade	December 31, 2017 (Dollars in thousands) Real Estate Loans Construction and Land Development 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 $ 152 8,590 - - - 446 - 791 - 9,979 2- High Quality 20,593 120,331 - 34,360 561 17,559 - 3,475 2,410 199,289 3- Good Quality 53,586 89,120 14,955 196,439 25,306 65,626 1,085 5,012 9,925 461,054 4- Management Attention 4,313 20,648 15,113 13,727 1,912 5,051 119 562 802 62,247 5- Watch 6,060 4,796 3,357 3,671 1,146 223 - 23 - 19,276 6- Substandard 283 3,218 3,824 440 12 117 - 25 - 7,919 7- Doubtful - - - - - - - - - - 8- Loss - - - - - - - - - - Total $ 84,987 246,703 37,249 248,637 28,937 89,022 1,204 9,888 13,137 759,764 December 31, 2016 (Dollars in thousands) Real Estate Loans Construction and Land Development 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
Analysis of TDR loans by loan type	Year ended December 31, 2017 (Dollars in thousands) Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Real estate loans: Single-family residential 2 $ 22 22 Total TDR loans 2 $ 22 22 Year ended December 31, 2016 (Dollars in thousands) Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Real estate loans: Single-family residential 3 $ 124 121 Total TDR loans 3 $ 124 121

4. Premises and Equipment (Tabl

4. Premises and Equipment (Tables)	12 Months Ended
	Dec. 31, 2017
Property, Plant and Equipment [Abstract]
Summary of premises and equipment	(Dollars in thousands) 2017 2016 Land $ 3,700 3,670 Buildings and improvements 19,312 16,398 Furniture and equipment 21,115 19,996 Construction in process 847 - Total premises and equipment 44,974 40,064 Less accumulated depreciation 25,063 23,612 Total net premises and equipment $ 19,911 16,452

5. Time Deposits (Tables)

5. Time Deposits (Tables)	12 Months Ended
	Dec. 31, 2017
Banking and Thrift [Abstract]
Scheduled maturities of time deposits	(Dollars in thousands) 2018 $ 81,684 2019 21,064 2020 13,343 2021 3,903 2022 and thereafter 3,107 Total $ 123,101

6. Federal Home Loan Bank and31

6. Federal Home Loan Bank and Federal Reserve Bank Borrowings (Tables)	12 Months Ended
	Dec. 31, 2017
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

8. Income Taxes (Tables)

8. Income Taxes (Tables)	12 Months Ended
	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Components of Income Tax Expense (Benefit)	(Dollars in thousands) 2017 2016 2015 Current expense $ 1,827 1,464 2,427 Deferred income tax expense 2,120 1,097 673 Total income tax $ 3,947 2,561 3,100
Schedule of Effective Income Tax Rate Reconciliation	(Dollars in thousands) 2017 2016 2015 Tax expense at statutory rate (34%) $ 4,833 3,991 4,329 State income tax, net of federal income tax effect 307 339 494 Tax-exempt interest income (1,594 ) (1,681 ) (1,682 ) Increase in cash surrender value of life insurance (136 ) (138 ) (143 ) Nondeductible interest and other expense 46 78 103 Impact of Tax Cuts and Jobs Act 588 - - Other (97 ) (28 ) (1 ) Total $ 3,947 2,561 3,100
Schedule of Deferred Tax Assets and Liabilities	(Dollars in thousands) 2017 2016 Deferred tax assets: Allowance for loan losses $ 1,463 2,717 Accrued retirement expense 1,073 1,616 Other real estate - - Federal credit carryforward 88 326 State credit carryforward - 14 Restricted stock 243 745 Accrued bonuses 171 216 Interest income on nonaccrual loans 5 27 Other than temporary impairment 9 14 Other - 23 Total gross deferred tax assets 3,052 5,698 Deferred tax liabilities: Deferred loan fees 365 797 Accumulated depreciation 498 532 Prepaid expenses 14 78 Other 28 23 Unrealized gain on available for sale securities 1,072 1,807 Total gross deferred tax liabilities 1,977 3,237 Net deferred tax asset $ 1,075 2,461

9. Related Party Transactions (

9. Related Party Transactions (Tables)	12 Months Ended
	Dec. 31, 2017
Related Party Transactions [Abstract]
Summary of activity for related party loans	(Dollars in thousands) 2017 2016 Beginning balance $ 4,503 5,674 New loans 5,879 6,048 Repayments (6,703 ) (7,219 ) Ending balance $ 3,679 4,503

10. Commitments and Contingen34

10. Commitments and Contingencies (Tables)	12 Months Ended
	Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
Future Minimum Rental Payments for Operating Leases	(Dollars in thousands) Year ending December 31, 2018 $ 716 2019 697 2020 678 2021 663 2022 369 Thereafter 1,739 Total minimum obligation $ 4,862
Financial instruments with credit risk	(Dollars in thousands) Contractual Amount 2017 2016 Financial instruments whose contract amount represent credit risk: Commitments to extend credit $ 233,972 195,528 Standby letters of credit and financial guarantees written $ 3,325 3,728

11. Employee and Director Ben35

11. Employee and Director Benefit Programs (Tables)	12 Months Ended
	Dec. 31, 2017
Retirement Benefits [Abstract]
Change in accumulated benefit obligation	(Dollars in thousands) 2017 2016 Benefit obligation at beginning of period $ 4,174 3,993 Service cost 348 346 Interest cost 68 67 Benefits paid (229 ) (232 ) Benefit obligation at end of period $ 4,361 4,174
Amounts recognized in the Consolidated Balance Sheet	(Dollars in thousands) 2017 2016 Benefit obligation $ 4,361 4,174 Fair value of plan assets - - (Dollars in thousands) 2017 2016 Funded status $ (4,361 ) (4,174 ) Unrecognized prior service cost/benefit - - Unrecognized net actuarial loss - - Net amount recognized $ (4,361 ) (4,174 ) Unfunded accrued liability $ (4,361 ) (4,174 ) Intangible assets - - Net amount recognized $ (4,361 ) (4,174 )
Schedule of Net Benefit Costs	(Dollars in thousands) 2017 2016 2015 Service cost $ 348 346 334 Interest cost 68 67 65 Net periodic cost $ 416 413 399 Weighted average discount rate assumption used to determine benefit obligation 5.49 % 5.47 % 5.47 %
Schedule of Expected Benefit Payments	(Dollars in thousands) Year ending December 31, 2018 $ 227 2019 $ 304 2020 $ 357 2021 $ 357 2022 $ 346 Thereafter $ 9,005

12. Regulatory Matters (Tables)

12. Regulatory Matters (Tables)	12 Months Ended
	Dec. 31, 2017
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, 2017: Total Capital (to Risk-Weighted Assets) Consolidated $ 138,492 16.06 % 79,758 9.25 % N/A N/A Bank $ 136,299 15.83 % 79,627 9.25 % 86,084 10.00 % Tier 1 Capital (to Risk-Weighted Assets) Consolidated $ 132,126 15.32 % 62,513 7.25 % N/A N/A Bank $ 129,933 15.09 % 62,411 7.25 % 68,867 8.00 % Tier 1 Capital (to Average Assets) Consolidated $ 132,126 11.94 % 44,255 4.00 % N/A N/A Bank $ 129,933 11.69 % 44,475 4.00 % 55,594 5.00 % Common Equity Tier 1 (to Risk-Weighted Assets) Consolidated $ 112,126 13.00 % 49,579 5.75 % N/A N/A Bank $ 129,933 15.09 % 49,498 5.75 % 55,954 6.50 % (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 % 70,666 8.63 % N/A N/A Bank $ 129,035 15.78 % 70,578 8.63 % 81,782 10.00 % Tier 1 Capital (to Risk-Weighted Assets) Consolidated $ 124,441 15.20 % 54,289 6.63 % N/A N/A Bank $ 121,485 14.85 % 54,222 6.63 % 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 % 42,007 5.13 % N/A N/A Bank $ 121,485 14.85 % 41,954 5.13 % 53,158 6.50 %

14. Other Operating Income an37

14. Other Operating Income and Expense (Tables)	12 Months Ended
	Dec. 31, 2017
Other Income and Expenses [Abstract]
Other operating income and expense	(Dollars in thousands) 2017 2016 2015 Visa debit card income $ 3,757 3,589 3,452 Net appraisal management fee income $ 780 886 635 Insurance and brokerage commissions $ 761 632 714 (Dollars in thousands) 2017 2016 2015 Advertising $ 1,195 1,136 784 FDIC insurance $ 347 494 681 Visa debit card expense $ 1,248 1,140 988 Telephone $ 855 754 588 Foreclosure/OREO expense $ 46 120 398 Internet banking expense $ 720 710 671 FHLB advance prepayment penalty $ 508 1,260 504 Consulting $ 785 2,257 904

15. Fair Value of Financial I38

15. Fair Value of Financial Instruments (Tables)	12 Months Ended
	Dec. 31, 2017
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, 2017 Carrying Amount Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 53,186 53,186 - - 53,186 Investment securities available for sale $ 229,321 - 229,071 250 229,321 Other investments $ 1,830 - - 1,830 1,830 Mortgage loans held for sale $ 857 - - 857 857 Loans, net $ 753,398 - - 735,837 735,837 Cash surrender value of life insurance $ 15,552 - 15,552 - 15,552 Liabilities: Deposits $ 906,952 - - 894,932 894,932 Securities sold under agreements to repurchase $ 37,757 - 37,757 - 37,757 Junior subordinated debentures $ 20,619 - 20,619 - 20,619 (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

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, 2017
Condensed Financial Information of Parent Company Only Disclosure [Abstract]
Balance Sheets	Balance Sheets December 31, 2017 and 2016 (Dollars in thousands) Assets 2017 2016 Cash $ 428 957 Interest-bearing time deposit 1,000 1,000 Investment in subsidiaries 133,781 124,471 Investment in PEBK Capital Trust II 619 619 Investment securities available for sale 250 750 Other assets 546 275 Total assets $ 136,624 128,072 Liabilities and Shareholders' Equity Junior subordinated debentures $ 20,619 20,619 Liabilities 30 25 Shareholders' equity 115,975 107,428 Total liabilities and shareholders' equity $ 136,624 128,072
Statements of Earnings	Statements of Earnings For the Years Ended December 31, 2017, 2016 and 2015 (Dollars in thousands) Revenues: 2017 2016 2015 Interest and dividend income $ 1,839 4,569 3,979 Gain on sale of securities - 405 - Total revenues 1,839 4,974 3,979 Expenses: Interest 590 485 403 Other operating expenses 725 513 538 Total expenses 1,315 998 941 Income before income tax benefit and equity in undistributed earnings of subsidiaries 524 3,976 3,038 Income tax benefit 434 178 262 Income before equity in undistributed earnings of subsidiaries 958 4,154 3,300 Equity in undistributed earnings of subsidiaries 9,310 5,023 6,333 Net earnings $ 10,268 9,177 9,633
Statements of Cash Flows	Statements of Cash Flows For the Years Ended December 31, 2017, 2016 and 2015 (Dollars in thousands) 2017 2016 2015 Cash flows from operating activities: Net earnings $ 10,268 9,177 9,633 Adjustments to reconcile net earnings to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries (9,310 ) (5,023 ) (6,333 ) Gain on sale of investment securities - (405 ) - Change in: Other assets (272 ) 61 (4 ) Accrued income - - - Accrued expense 5 5 3 Other liabilities - - - Net cash provided by operating activities 691 3,815 3,299 Cash flows from investing activities: Proceeds from calls and maturities of investment securities available for sale 500 669 In kind transfer from parent to Bank - 10 - Net cash provided by investing activities 500 679 - Cash flows from financing activities: Cash dividends paid on common stock (2,629 ) (2,106 ) (1,574 ) Cash in lieu stock dividend (6 ) - - Stock repurchase - (1,984 ) (1,917 ) Proceeds from exercise of restricted stock units 915 - - Net cash used by financing activities (1,720 ) (4,090 ) (3,491 ) Net change in cash (529 ) 404 (192 ) Cash at beginning of year 957 553 745 Cash at end of year $ 428 957 553 Noncash investing and financing activities: Change in unrealized gain on investment securities available for sale, net $ (1 ) (2,523 ) 57

17. Quarterly Data (Tables)

17. Quarterly Data (Tables)	12 Months Ended
	Dec. 31, 2017
Quarterly Financial Information Disclosure [Abstract]
Schedule of Quarterly Financial Information	2017 2016 (Dollars in thousands, except per share amounts) First Second Third Fourth First Second Third Fourth Total interest income $ 10,064 10,461 10,698 10,726 $ 9,905 9,815 9,982 10,107 Total interest expense 598 622 650 507 809 813 828 821 Net interest income 9,466 9,839 10,048 10,219 9,096 9,002 9,154 9,286 (Reduction of) provision for loan losses (236 ) 49 (218 ) (102 ) (216 ) (531 ) (360 ) (99 ) Other income 2,876 3,281 3,504 3,177 3,324 3,572 3,414 3,666 Other expense 9,795 9,335 9,351 10,169 9,492 9,109 9,598 11,783 Income before income taxes 2,783 3,736 4,419 3,329 3,144 3,996 3,330 1,268 Income taxes (benefit) 578 925 1,177 1,319 691 1,032 872 (34 ) Net earnings 2,205 2,811 3,242 2,010 2,453 2,964 2,458 1,302 Basic net earni ngs per share $ 0.36 0.47 0.54 0.34 $ 0.41 0.49 0.41 0.22 Diluted net earnings per share $ 0.36 0.46 0.53 0.34 $ 0.40 0.48 0.40 0.22

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, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Net Earnings Available to Common Shareholders
Basic earnings per common share									$ 10,268	$ 9,177	$ 9,633
Effect of dilutive securities: Restricted stock units									0	0	0
Diluted earnings per common share									$ 10,268	$ 9,177	$ 9,633
Common Shares
Basic earnings per common share (in shares)									5,988,183	6,024,970	6,115,159
Effect of dilutive securities: Restricted stock units (in shares)									74,667	77,807	52,749
Diluted earnings per common share (in shares)									6,062,850	6,102,777	6,167,908
Per Share Amount
Basic earnings per common share (in dollars per share)	$ 0.34	$ 0.54	$ 0.47	$ 0.36	$ 0.22	$ 0.41	$ 0.49	$ 0.41	$ 1.71	$ 1.53	$ 1.57
Diluted earnings per common share (in dollars per share)	$ .34	$ .53	$ .46	$ .36	$ .22	$ .40	$ .48	$ .40	$ 1.69	$ 1.50	$ 1.56

1. Summary of Significant Acc42

1. Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Summary Of Significant Accounting Policies Details Narrative
Unpaid principal balances of mortgage loans serviced for others	$ 1,000	$ 1,400	$ 1,600
Compensation expense for restricted stock units	592	$ 932	$ 487
Unrecognized compensation expense	$ 319

2. Investment Securities (Detai

2. Investment Securities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Investment securities available for sale
Amortized Cost	$ 224,654	$ 244,924
Estimated Fair Value	229,321	249,946
Mortgage-backed securities
Investment securities available for sale
Amortized Cost	53,124	66,654
Gross Unrealized Gains	814	1,221
Gross Unrealized Losses	329	290
Estimated Fair Value	53,609	67,585
U.S. Government sponsored enterprises
Investment securities available for sale
Amortized Cost	40,504	38,188
Gross Unrealized Gains	140	308
Gross Unrealized Losses	264	274
Estimated Fair Value	40,380	38,222
State and political subdivisions
Investment securities available for sale
Amortized Cost	129,276	137,832
Gross Unrealized Gains	4,310	4,176
Gross Unrealized Losses	16	152
Estimated Fair Value	133,570	141,856
Corporate bonds
Investment securities available for sale
Amortized Cost	1,500	1,500
Gross Unrealized Gains	12	33
Gross Unrealized Losses	0	0
Estimated Fair Value	1,512	1,533
Trust preferred securities
Investment securities available for sale
Amortized Cost	250	750
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	250	750
Total
Investment securities available for sale
Amortized Cost	224,654	244,924
Gross Unrealized Gains	5,276	5,738
Gross Unrealized Losses	609	716
Estimated Fair Value	$ 229,321	$ 249,946

2. Investment securities, Conti

2. Investment securities, Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Investment securities with continuous unrealized loss position
Less than 12 Months, Fair Value	$ 22,160	$ 36,155
Less than 12 Months, Unrealized Losses	175	507
12 Months or More, Fair Value	22,827	10,123
12 Months or More, Unrealized Losses	434	209
Total, Fair Value	44,987	46,278
Total, Unrealized Losses	609	716
Mortgage-backed securities
Investment securities with continuous unrealized loss position
Less than 12 Months, Fair Value	8,701	15,594
Less than 12 Months, Unrealized Losses	75	290
12 Months or More, Fair Value	11,259	0
12 Months or More, Unrealized Losses	254	0
Total, Fair Value	19,960	15,594
Total, Unrealized Losses	329	290
U.S. Government sponsored enterprises
Investment securities with continuous unrealized loss position
Less than 12 Months, Fair Value	12,661	10,120
Less than 12 Months, Unrealized Losses	98	94
12 Months or More, Fair Value	10,067	9,562
12 Months or More, Unrealized Losses	166	180
Total, Fair Value	22,728	19,682
Total, Unrealized Losses	264	274
State and political subdivisions
Investment securities with continuous unrealized loss position
Less than 12 Months, Fair Value	798	10,441
Less than 12 Months, Unrealized Losses	2	123
12 Months or More, Fair Value	1,501	561
12 Months or More, Unrealized Losses	14	29
Total, Fair Value	2,299	11,002
Total, Unrealized Losses	$ 16	$ 152

2. Investment securities, Contr

2. Investment securities, Contractual Maturity (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Amortized Cost
Due within one year	$ 17,584
Due from one to five years	96,639
Due from five to ten years	48,542
Due after ten years	8,765
Mortgage-backed securities	53,124
Equity securities	0
Total	224,654	$ 244,924
Estimated Fair Value
Due within one year	17,682
Due from one to five years	99,547
Due from five to ten years	49,578
Due after ten years	8,905
Mortgage-backed securities	53,609
Equity securities	0
Total	$ 229,321

2. Investment securities, Fair

2. Investment securities, Fair Value Measurements (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Estimated Fair Value	$ 229,321	$ 249,946
Mortgage-backed securities
Estimated Fair Value	53,609	67,585
Level 1 valuation	0	0
Level 2 valuation	53,609	67,585
Level 3 valuation	0	0
U.S. Government sponsored enterprises
Estimated Fair Value	40,380	38,222
Level 1 valuation	0	0
Level 2 valuation	40,380	38,222
Level 3 valuation	0	0
State and political subdivisions
Estimated Fair Value	133,570	141,856
Level 1 valuation	0	0
Level 2 valuation	133,570	141,856
Level 3 valuation	0	0
Corporate bonds
Estimated Fair Value	1,512	1,533
Level 1 valuation	0	0
Level 2 valuation	1,512	1,533
Level 3 valuation	0	0
Trust preferred securities
Estimated Fair Value	250	750
Level 1 valuation	0	0
Level 2 valuation	0	0
Level 3 valuation	$ 250	$ 750

2. Investment securities, Fai47

2. Investment securities, Fair Value Level 3 Valuation (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017USD ($)
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)	(500)
Transfers in and/or (out) of Level 3	0
Balance, end of period	250
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, 2017	Dec. 31, 2016	Dec. 31, 2015
Investment Securities Details Narrative
Unrealized losses in the investment securites portfolio relating to debt securities	$ 609
Proceeds from sales of investment securities available for sale	0	$ 1,500	$ 0
Gains on sales of available for sale securities		729
Securities pledged to secure public deposits	$ 105,600	$ 95,600

3. Loans (Details)

3. Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Major classifications
Total Loans	$ 759,764	$ 723,811	$ 689,091
Less allowance for loan losses	6,366	7,550	9,589	$ 11,082
Net loans	753,398	716,261
Construction and land development
Major classifications
Total Loans	84,987	61,749	65,791
Less allowance for loan losses	804	1,152	2,185	2,785
Single-family residential
Major classifications
Total Loans	246,703	240,700	220,690
Less allowance for loan losses	1,812	2,126	2,534	2,566
Single-family residential - Banco de la Gente stated income
Major classifications
Total Loans	37,249	40,189	43,733
Less allowance for loan losses	1,280	1,377	1,460	1,610
Commercial
Major classifications
Total Loans	248,637	247,521	228,526
Less allowance for loan losses	1,193	1,593	1,917	1,902
Multifamily and Farmland
Major classifications
Total Loans	28,937	21,047	18,080
Less allowance for loan losses	72	52	0	7
Total real estate loans
Major classifications
Total Loans	646,513	611,206
Commercial loans (not secured by real estate)
Major classifications
Total Loans	89,022	87,596	91,010
Less allowance for loan losses	574	675	842	1,098
Farm loans (not secured by real estate)
Major classifications
Total Loans	1,204	0	3
Less allowance for loan losses	0	0	$ 0	$ 0
Consumer loans (not secured by real estate)
Major classifications
Total Loans	9,888	9,832
All other loans (not secured by real estate)
Major classifications
Total Loans	$ 13,137	$ 15,177

3. Loans, Past Due (Details)

3. Loans, Past Due (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Past due loans
Loans 30-89 Days Past Due	$ 8,350	$ 11,297
Loans 90 or More Days Past Due	775	471
Total Past Due Loans	9,125	11,768
Total Current Loans	750,639	712,043
Total loans	759,764	723,811	$ 689,091
Accruing Loans 90 or More Days Past Due	0	0
Construction and land development
Past due loans
Loans 30-89 Days Past Due	277	0
Loans 90 or More Days Past Due	0	10
Total Past Due Loans	277	10
Total Current Loans	84,710	61,739
Total loans	84,987	61,749
Accruing Loans 90 or More Days Past Due	0	0
Single-family residential
Past due loans
Loans 30-89 Days Past Due	3,241	4,890
Loans 90 or More Days Past Due	193	80
Total Past Due Loans	3,434	4,970
Total Current Loans	243,269	235,730
Total loans	246,703	240,700
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	4,078	5,250
Loans 90 or More Days Past Due	465	249
Total Past Due Loans	4,543	5,499
Total Current Loans	32,706	34,690
Total loans	37,249	40,189
Accruing Loans 90 or More Days Past Due	0	0
Commercial
Past due loans
Loans 30-89 Days Past Due	588	342
Loans 90 or More Days Past Due	0	126
Total Past Due Loans	588	468
Total Current Loans	248,049	247,053
Total loans	248,637	247,521
Accruing Loans 90 or More Days Past Due	0	0
Multifamily and Farmland
Past due loans
Loans 30-89 Days Past Due	0	471
Loans 90 or More Days Past Due	12	0
Total Past Due Loans	12	471
Total Current Loans	28,925	20,576
Total loans	28,937	21,047
Accruing Loans 90 or More Days Past Due	0	0
Total real estate loans
Past due loans
Loans 30-89 Days Past Due	8,184	10,953
Loans 90 or More Days Past Due	670	465
Total Past Due Loans	8,854	11,418
Total Current Loans	637,659	599,788
Total loans	646,513	611,206
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	53	273
Loans 90 or More Days Past Due	100	0
Total Past Due Loans	153	273
Total Current Loans	88,869	87,323
Total loans	89,022	87,596
Accruing Loans 90 or More Days Past Due	0	0
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	1,204	0
Total loans	1,204	0
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	113	68
Loans 90 or More Days Past Due	5	6
Total Past Due Loans	118	74
Total Current Loans	9,770	9,758
Total loans	9,888	9,832
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	0	3
Loans 90 or More Days Past Due	0	0
Total Past Due Loans	0	3
Total Current Loans	13,137	15,174
Total loans	13,137	15,177
Accruing Loans 90 or More Days Past Due	$ 0	$ 0

3. Loans, Nonaccrual (Details)

3. Loans, Nonaccrual (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Non-accrual loans
Non-accrual loans	$ 3,711	$ 3,825
Construction and land development
Non-accrual loans
Non-accrual loans	14	22
Single-family residential
Non-accrual loans
Non-accrual loans	1,634	1,662
Single-family residential - Banco de la Gente stated income
Non-accrual loans
Non-accrual loans	1,543	1,340
Commercial
Non-accrual loans
Non-accrual loans	396	669
Multifamily and Farmland
Non-accrual loans
Non-accrual loans	12	78
Total real estate loans
Non-accrual loans
Non-accrual loans	3,599	3,771
Commercial loans (not secured by real estate)
Non-accrual loans
Non-accrual loans	100	21
Consumer loans (not secured by real estate)
Non-accrual loans
Non-accrual loans	$ 12	$ 33

3. Loans, Impaired (Details)

3. Loans, Impaired (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Impaired loans
Unpaid Contractual Principal Balance	$ 26,129	$ 28,313	$ 34,964
Recorded Investment With No Allowance	2,042	2,002	1,705
Recorded Investment With Allowance	22,599	25,179	31,643
Recorded Investment in Impaired Loans	24,641	27,181	33,348
Related Allowance	1,199	1,409	1,530
Average Outstanding Impaired Loans	26,015	30,302	35,976
Year-To-Date Interest Income Recognized	1,362	1,198	1,274
Construction and land development
Impaired loans
Unpaid Contractual Principal Balance	282	282	643
Recorded Investment With No Allowance	0	0	216
Recorded Investment With Allowance	277	278	226
Recorded Investment in Impaired Loans	277	278	442
Related Allowance	6	11	12
Average Outstanding Impaired Loans	253	330	705
Year-To-Date Interest Income Recognized	17	13	18
Single-family residential
Impaired loans
Unpaid Contractual Principal Balance	5,226	5,354	8,828
Recorded Investment With No Allowance	1,135	703	1,489
Recorded Investment With Allowance	3,686	4,323	6,805
Recorded Investment in Impaired Loans	4,821	5,026	8,294
Related Allowance	41	47	189
Average Outstanding Impaired Loans	5,113	7,247	10,852
Year-To-Date Interest Income Recognized	265	164	224
Single-family residential - Banco de la Gente stated income
Impaired loans
Unpaid Contractual Principal Balance	17,360	18,611	20,375
Recorded Investment With No Allowance	0	0	0
Recorded Investment With Allowance	16,805	18,074	19,215
Recorded Investment in Impaired Loans	16,805	18,074	19,215
Related Allowance	1,149	1,182	1,143
Average Outstanding Impaired Loans	16,867	17,673	18,414
Year-To-Date Interest Income Recognized	920	861	921
Commercial
Impaired loans
Unpaid Contractual Principal Balance	2,761	3,750	4,556
Recorded Investment With No Allowance	807	1,299	0
Recorded Investment With Allowance	1,661	2,197	4,893
Recorded Investment in Impaired Loans	2,468	3,496	4,893
Related Allowance	1	166	179
Average Outstanding Impaired Loans	3,411	4,657	5,497
Year-To-Date Interest Income Recognized	148	152	89
Multifamily and Farmland
Impaired loans
Unpaid Contractual Principal Balance	78	78	96
Recorded Investment With No Allowance	0	0	0
Recorded Investment With Allowance	12	78	83
Recorded Investment in Impaired Loans	12	78	83
Related Allowance	0	0	0
Average Outstanding Impaired Loans	28	78	93
Year-To-Date Interest Income Recognized	0	0	6
Total real estate loans
Impaired loans
Unpaid Contractual Principal Balance	25,707	28,075	34,498
Recorded Investment With No Allowance	1,942	2,002	1,705
Recorded Investment With Allowance	22,441	24,950	31,222
Recorded Investment in Impaired Loans	24,383	26,952	32,927
Related Allowance	1,197	1,406	1,523
Average Outstanding Impaired Loans	25,672	29,985	35,561
Year-To-Date Interest Income Recognized	1,350	1,190	1,258
Commercial loans (not secured by real estate)
Impaired loans
Unpaid Contractual Principal Balance	264	27	180
Recorded Investment With No Allowance	100	0	0
Recorded Investment With Allowance	4	27	161
Recorded Investment in Impaired Loans	104	27	161
Related Allowance	0	0	3
Average Outstanding Impaired Loans	149	95	132
Year-To-Date Interest Income Recognized	3	0	5
Consumer loans (not secured by real estate)
Impaired loans
Unpaid Contractual Principal Balance	158	211	286
Recorded Investment With No Allowance	0	0	0
Recorded Investment With Allowance	154	202	260
Recorded Investment in Impaired Loans	154	202	260
Related Allowance	2	3	4
Average Outstanding Impaired Loans	194	222	283
Year-To-Date Interest Income Recognized	$ 9	$ 8	$ 11

3. Loans Impaired, Fair Value M

3. Loans Impaired, Fair Value Measurements (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Mortgage loans held for sale	$ 857	$ 5,709
Impaired loans	23,442	25,772
Other real estate	118	283
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	857	5,709
Impaired loans	23,442	25,772
Other real estate	$ 118	$ 283

3. Loans, Allowance for Loan Lo

3. Loans, Allowance for Loan Losses (Details) (USD $) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Allowance for loan losses
Beginning balance	$ 7,550	$ 9,589	$ 11,082
Charge-offs	(982)	(1,238)	(1,844)
Recoveries	305	405	368
Provision	(507)	(1,206)	(17)
Ending balance	6,366	7,550	9,589
Ending balance: individually evaluated for impairments	1,130	1,319	1,382
Ending balance: collectively evaluated for impairments	5,236	6,231	8,207
Ending balance	6,366	7,550	9,589
Loans
Ending balance	759,764	723,811	689,091
Ending balance: individually evaluated for impairment	19,764	21,301	24,914
Ending balance: collectively evaluated for impairment	740,000	702,510	664,177
Construction and land development
Allowance for loan losses
Beginning balance	1,152	2,185	2,785
Charge-offs	0	(7)	(198)
Recoveries	14	10	45
Provision	(362)	(1,036)	(447)
Ending balance	804	1,152	2,185
Ending balance: individually evaluated for impairments	0	0	0
Ending balance: collectively evaluated for impairments	804	1,152	2,185
Ending balance	804	1,152	2,185
Loans
Ending balance	84,987	61,749	65,791
Ending balance: individually evaluated for impairment	98	0	216
Ending balance: collectively evaluated for impairment	84,889	61,749	65,575
Single-family residential
Allowance for loan losses
Beginning balance	2,126	2,534	2,566
Charge-offs	(249)	(275)	(618)
Recoveries	85	55	34
Provision	(150)	(188)	552
Ending balance	1,812	2,126	2,534
Ending balance: individually evaluated for impairments	0	0	96
Ending balance: collectively evaluated for impairments	1,812	2,126	2,438
Ending balance	1,812	2,126	2,534
Loans
Ending balance	246,703	240,700	220,690
Ending balance: individually evaluated for impairment	1,855	935	2,636
Ending balance: collectively evaluated for impairment	244,848	239,765	218,054
Single-family residential - Banco de la Gente stated income
Allowance for loan losses
Beginning balance	1,377	1,460	1,610
Charge-offs	0	0	(117)
Recoveries	0	0	22
Provision	(97)	(83)	(55)
Ending balance	1,280	1,377	1,460
Ending balance: individually evaluated for impairments	1,093	1,160	1,115
Ending balance: collectively evaluated for impairments	187	217	345
Ending balance	1,280	1,377	1,460
Loans
Ending balance	37,249	40,189	43,733
Ending balance: individually evaluated for impairment	15,460	16,718	17,850
Ending balance: collectively evaluated for impairment	21,789	23,471	25,883
Commercial
Allowance for loan losses
Beginning balance	1,593	1,917	1,902
Charge-offs	0	(318)	(329)
Recoveries	21	19	21
Provision	(421)	(25)	323
Ending balance	1,193	1,593	1,917
Ending balance: individually evaluated for impairments	37	159	171
Ending balance: collectively evaluated for impairments	1,156	1,434	1,746
Ending balance	1,193	1,593	1,917
Loans
Ending balance	248,637	247,521	228,526
Ending balance: individually evaluated for impairment	2,251	3,648	4,212
Ending balance: collectively evaluated for impairment	246,386	243,873	224,314
Multifamily and Farmland
Allowance for loan losses
Beginning balance	52	0	7
Charge-offs	(66)	0	0
Recoveries	0	0	0
Provision	86	52	(7)
Ending balance	72	52	0
Ending balance: individually evaluated for impairments	0	0	0
Ending balance: collectively evaluated for impairments	72	52	0
Ending balance	72	52	0
Loans
Ending balance	28,937	21,047	18,080
Ending balance: individually evaluated for impairment	0	0	0
Ending balance: collectively evaluated for impairment	28,937	21,047	18,080
Commercial loans (not secured by real estate)
Allowance for loan losses
Beginning balance	675	842	1,098
Charge-offs	(194)	(146)	(37)
Recoveries	31	170	101
Provision	62	(191)	(320)
Ending balance	574	675	842
Ending balance: individually evaluated for impairments	0	0	0
Ending balance: collectively evaluated for impairments	574	675	842
Ending balance	574	675	842
Loans
Ending balance	89,022	87,596	91,010
Ending balance: individually evaluated for impairment	100	0	0
Ending balance: collectively evaluated for impairment	88,922	87,596	91,010
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	1,204	0	3
Ending balance: individually evaluated for impairment	0	0	0
Ending balance: collectively evaluated for impairment	1,204	0	3
Consumer And All Other Loans
Allowance for loan losses
Beginning balance	204	172	233
Charge-offs	(473)	(492)	(545)
Recoveries	154	151	145
Provision	270	373	339
Ending balance	155	204	172
Ending balance: individually evaluated for impairments	0	0	0
Ending balance: collectively evaluated for impairments	155	204	172
Ending balance	155	204	172
Loans
Ending balance	23,025	25,009	21,258
Ending balance: individually evaluated for impairment	0	0	0
Ending balance: collectively evaluated for impairment	23,025	25,009	21,258
Unallocated
Allowance for loan losses
Beginning balance	371	479	881
Charge-offs	0	0	0
Recoveries	0	0	0
Provision	105	(108)	(402)
Ending balance	476	371	479
Ending balance: individually evaluated for impairments	0	0	0
Ending balance: collectively evaluated for impairments	476	371	479
Ending balance	476	371	479
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, 2017	Dec. 31, 2016	Dec. 31, 2015
Credit risk profile
Total Loans	$ 759,764	$ 723,811	$ 689,091
Excellent Quality
Credit risk profile
Total Loans	9,979	16,496
High Quality
Credit risk profile
Total Loans	199,289	194,094
Good Quality
Credit risk profile
Total Loans	461,054	394,039
Management Attention
Credit risk profile
Total Loans	62,247	86,753
Watch
Credit risk profile
Total Loans	19,276	22,238
Substandard
Credit risk profile
Total Loans	7,919	10,187
Doubtful
Credit risk profile
Total Loans	0	0
Loss
Credit risk profile
Total Loans	0	4
Construction and land development
Credit risk profile
Total Loans	84,987	61,749
Single-family residential
Credit risk profile
Total Loans	246,703	240,700
Single-family residential - Banco de la Gente stated income
Credit risk profile
Total Loans	37,249	40,189
Commercial
Credit risk profile
Total Loans	248,637	247,521
Multifamily and Farmland
Credit risk profile
Total Loans	28,937	21,047
Commercial loans (not secured by real estate)
Credit risk profile
Total Loans	89,022	87,596
Farm loans (not secured by real estate)
Credit risk profile
Total Loans	1,204	0
Consumer loans (not secured by real estate)
Credit risk profile
Total Loans	9,888	9,832
All other loans (not secured by real estate)
Credit risk profile
Total Loans	13,137	15,177
Construction and land development
Credit risk profile
Total Loans	84,987	61,749	65,791
Construction and land development | Excellent Quality
Credit risk profile
Total Loans	152	0
Construction and land development | High Quality
Credit risk profile
Total Loans	20,593	9,784
Construction and land development | Good Quality
Credit risk profile
Total Loans	53,586	33,633
Construction and land development | Management Attention
Credit risk profile
Total Loans	4,313	10,892
Construction and land development | Watch
Credit risk profile
Total Loans	6,060	7,229
Construction and land development | Substandard
Credit risk profile
Total Loans	283	211
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	246,703	240,700	220,690
Single-family residential | Excellent Quality
Credit risk profile
Total Loans	8,590	14,996
Single-family residential | High Quality
Credit risk profile
Total Loans	120,331	109,809
Single-family residential | Good Quality
Credit risk profile
Total Loans	89,120	82,147
Single-family residential | Management Attention
Credit risk profile
Total Loans	20,648	25,219
Single-family residential | Watch
Credit risk profile
Total Loans	4,796	4,682
Single-family residential | Substandard
Credit risk profile
Total Loans	3,218	3,847
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	37,249	40,189	43,733
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	14,955	16,703
Single-family residential - Banco de la Gente stated income | Management Attention
Credit risk profile
Total Loans	15,113	15,580
Single-family residential - Banco de la Gente stated income | Watch
Credit risk profile
Total Loans	3,357	3,943
Single-family residential - Banco de la Gente stated income | Substandard
Credit risk profile
Total Loans	3,824	3,963
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	248,637	247,521	228,526
Commercial | Excellent Quality
Credit risk profile
Total Loans	0	0
Commercial | High Quality
Credit risk profile
Total Loans	34,360	39,769
Commercial | Good Quality
Credit risk profile
Total Loans	196,439	176,109
Commercial | Management Attention
Credit risk profile
Total Loans	13,727	24,753
Commercial | Watch
Credit risk profile
Total Loans	3,671	4,906
Commercial | Substandard
Credit risk profile
Total Loans	440	1,984
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	28,937	21,047	18,080
Multifamily and Farmland | Excellent Quality
Credit risk profile
Total Loans	0	0
Multifamily and Farmland | High Quality
Credit risk profile
Total Loans	561	2,884
Multifamily and Farmland | Good Quality
Credit risk profile
Total Loans	25,306	14,529
Multifamily and Farmland | Management Attention
Credit risk profile
Total Loans	1,912	2,355
Multifamily and Farmland | Watch
Credit risk profile
Total Loans	1,146	1,201
Multifamily and Farmland | Substandard
Credit risk profile
Total Loans	12	78
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	89,022	87,596	91,010
Commercial loans (not secured by real estate) | Excellent Quality
Credit risk profile
Total Loans	446	541
Commercial loans (not secured by real estate) | High Quality
Credit risk profile
Total Loans	17,559	26,006
Commercial loans (not secured by real estate) | Good Quality
Credit risk profile
Total Loans	65,626	55,155
Commercial loans (not secured by real estate) | Management Attention
Credit risk profile
Total Loans	5,051	5,586
Commercial loans (not secured by real estate) | Watch
Credit risk profile
Total Loans	223	246
Commercial loans (not secured by real estate) | Substandard
Credit risk profile
Total Loans	117	62
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	1,204	0	$ 3
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	1,085	0
Farm loans (not secured by real estate) | Management Attention
Credit risk profile
Total Loans	119	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	9,888	9,832
Consumer loans (not secured by real estate) | Excellent Quality
Credit risk profile
Total Loans	791	959
Consumer loans (not secured by real estate) | High Quality
Credit risk profile
Total Loans	3,475	3,335
Consumer loans (not secured by real estate) | Good Quality
Credit risk profile
Total Loans	5,012	4,842
Consumer loans (not secured by real estate) | Management Attention
Credit risk profile
Total Loans	562	619
Consumer loans (not secured by real estate) | Watch
Credit risk profile
Total Loans	23	31
Consumer loans (not secured by real estate) | Substandard
Credit risk profile
Total Loans	25	42
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	0	4
All other loans (not secured by real estate)
Credit risk profile
Total Loans	13,137	15,177
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	2,410	2,507
All other loans (not secured by real estate) | Good Quality
Credit risk profile
Total Loans	9,925	10,921
All other loans (not secured by real estate) | Management Attention
Credit risk profile
Total Loans	802	1,749
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, 2017USD ($)Integer	Dec. 31, 2016USD ($)Integer
TDR Loans
Post-Modification Outstanding Recorded Investment	$ 4,900	$ 5,900
Single-family residential
TDR Loans
Number of Contracts | Integer	2	3
Pre-Modification Outstanding Recorded Investment	$ 22	$ 124
Post-Modification Outstanding Recorded Investment	$ 22	$ 121
Total TDR Loans
TDR Loans
Number of Contracts | Integer	2	3
Pre-Modification Outstanding Recorded Investment	$ 22	$ 124
Post-Modification Outstanding Recorded Investment	$ 22	$ 121

3. Loans (Details Narrative)

3. Loans (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Loans Details Narrative
Percentage of construction and land development loans in Bank's loan portfolio	11.00%	9.00%
Percentage of single-family residential loans in Bank's loan portfolio	37.00%	39.00%
Percentage of Single-family residential - Banco de la Gente stated income loans in Bank's loan portfolio	5.00%	6.00%
Percentage of commercial real estate loans in Bank's loan portfolio	33.00%	34.00%
Percentage of commercial loans in Bank's loan portfolio	12.00%	12.00%
Accruing impaired loans	$ 24,600	$ 23,500
Interest income recognized on accruing impaired loans	1,400	1,200
TDR loan amounts	4,900	5,900
Amount of performing TDR loans included	$ 21	$ 81

4. Premises and Equipment (Deta

4. Premises and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Premises And Equipment Details
Land	$ 3,700	$ 3,670
Buildings and improvements	19,312	16,398
Furniture and equipment	21,115	19,996
Construction in process	847	0
Total premises and equipment	44,974	40,064
Less accumulated depreciation	25,063	23,612
Total net premises and equipment	$ 19,911	$ 16,452

4. Premises and Equipment (De59

4. Premises and Equipment (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Premises And Equipment Details Narrative
Depreciation expense	$ 2,100	$ 2,100	$ 2,400

5. Time Deposits (Details)

5. Time Deposits (Details) $ in Thousands	Dec. 31, 2017USD ($)
Time Deposits Details
2,018	$ 81,864
2,019	21,064
2,020	13,343
2,021	3,903
2022 and thereafter	3,107
Total	$ 123,101

5. Time Deposits (Details Narra

5. Time Deposits (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
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	$ 5,200	$ 7,200
CDARS balances	$ 5,200	$ 7,200
Weighted average rate of brokered deposits	0.07%	0.05%

6. Federal Home Loan Bank and62

6. Federal Home Loan Bank and Federal Reserve Bank Borrowings (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Federal Home Loan Bank And Federal Reserve Bank Borrowings Details Narrative
Loans pledged as collateral to the FHLB	$ 137,500
FHLB stock owned	978	$ 1,800
Carrying value of loans pledged as collateral to the FHLB	408,500
Availability under the line of credit with the FRB	$ 315,200

8. Income Taxes (Details)

8. Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Taxes Details
Current expense									$ 1,827	$ 1,464	$ 2,427
Deferred income tax expense									2,120	1,097	673
Total income tax	$ 1,319	$ 1,177	$ 925	$ 578	$ (34)	$ 872	$ 1,032	$ 691	$ 3,947	$ 2,561	$ 3,100

8. Income Taxes (Details 1)

8. Income Taxes (Details 1) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Taxes Details 1
Tax expense at statutory rate (34%)									$ 4,833	$ 3,991	$ 4,329
Differences:
State income tax, net of federal income tax effect									307	339	494
Tax exempt interest income									(1,594)	(1,681)	(1,682)
Increase in cash surrender value of life insurance									(136)	(138)	(143)
Nondeductible interest and other expense									46	78	103
Impact of Tax Cuts and Jobs Act									588	0	0
Other									(97)	(28)	(1)
Total income tax	$ 1,319	$ 1,177	$ 925	$ 578	$ (34)	$ 872	$ 1,032	$ 691	$ 3,947	$ 2,561	$ 3,100

8. Income Taxes (Details 2)

8. Income Taxes (Details 2) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Deferred tax assets:
Allowance for loan losses	$ 1,463	$ 2,717
Accrued retirement expense	1,073	1,616
Other real estate	0	0
Federal credit carryforward	88	326
State credit carryforward	0	14
Restricted stock	243	745
Accrued bonuses	171	216
Interest income on nonaccrual loans	5	27
Other than temporary impairment	9	14
Other	0	23
Total gross deferred tax assets	3,052	5,698
Deferred tax liabilities:
Deferred loan fees	365	797
Accumulated depreciation	498	532
Prepaid expenses	14	78
Other	28	23
Unrealized gain on available for sale securities	1,072	1,807
Total gross deferred tax liabilities	1,977	3,237
Net deferred tax asset	$ 1,075	$ 2,461

9. Related Party Transactions66

9. Related Party Transactions (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Related Party Transactions Details
Beginning balance	$ 4,503	$ 5,674
New loans	5,879	6,048
Repayments	(6,703)	(7,219)
Ending balance	$ 3,679	$ 4,503

9. Related Party Transactions67

9. Related Party Transactions (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Related Party Transactions Details Narrative
Related party deposits	$ 26,600	$ 27,800

10. Commitments and Contingen68

10. Commitments and Contingencies (Details) $ in Thousands	Dec. 31, 2017USD ($)
Commitments And Contingencies Details
2,018	$ 716
2,019	697
2,020	678
2,021	663
2,022	369
Thereafter	1,739
Total minimum obligation	$ 4,862

10. Commitments and Contingen69

10. Commitments and Contingencies (Details 1) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Commitments and contingencies
Commitments to extend credit
Commitments and contingencies	233,972	195,528
Standby letters of credit and financial guarantees written
Commitments and contingencies	$ 3,325	$ 3,728

10. Commitments and Contingen70

10. Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Commitments And Contingencies Details Narrative
Rent expense	$ 756	$ 752	$ 702
Overnight federal funds	$ 79,500

11. Employee and Director Ben71

11. Employee and Director Benefit Programs (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Employee And Director Benefit Programs Details
Benefit obligation at beginning of period	$ 4,174	$ 3,993
Service cost	348	346	$ 334
Interest cost	68	67	65
Benefits paid	(229)	(232)
Benefit obligation at end of period	$ 4,361	$ 4,174	$ 3,993

11. Employee and Director Ben72

11. Employee and Director Benefit Programs (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Employee And Director Benefit Programs Details 1
Benefit obligation	$ 4,361	$ 4,174	$ 3,993
Fair value of plan assets	0	0
Funded status	(4,361)	(4,174)
Unrecognized prior service cost/benefit	0	0
Unrecognized net actuarial loss	0	0
Net amount recognized	(4,361)	(4,174)
Unfunded accrued liability	(4,361)	(4,174)
Intangible assets	0	0
Net amounts recognized	$ (4,361)	$ (4,174)

11. Employee and Director Ben73

11. Employee and Director Benefit Programs (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Employee And Director Benefit Programs Details 2
Service cost	$ 348	$ 346	$ 334
Interest cost	68	67	65
Net periodic cost	$ 416	$ 413	$ 399
Weighted average discount rate assumption used to determine benefit obligation	5.49%	5.47%	5.47%

11. Employee and Director Ben74

11. Employee and Director Benefit Programs (Details 3) $ in Thousands	Dec. 31, 2017USD ($)
Employee And Director Benefit Programs Details 3
2,018	$ 227
2,019	304
2,020	357
2,021	357
2,022	346
Thereafter	$ 9,005

11. Employee and Director Ben75

11. Employee and Director Benefit Programs (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Employee And Director Benefit Programs Details Narrative
Matching of employee contributions, percentage	4.00%	4.00%	4.00%
Defined Benefit Plan, Contributions by Employer	$ 622	$ 565	$ 539
Expenses incurred for benefits relating to the postretirement benefit plan	$ 411	$ 428	$ 413

12. Regulatory Matters (Details

12. Regulatory Matters (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Total capital (to Risk-Weighted Assets) | Consolidated
Actual, amount	$ 138,492	$ 131,991
Actual, ratio	16.06%	16.12%
For Capital Adequacy Purposes, amount	$ 79,758	$ 70,666
For Capital Adequacy Purposes, ratio	9.25%	8.63%
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	$ 136,299	$ 129,035
Actual, ratio	15.83%	15.78%
For Capital Adequacy Purposes, amount	$ 79,627	$ 70,578
For Capital Adequacy Purposes, ratio	9.25%	8.63%
To Be Well Capitalized Under Prompt Corrective Action Provisions, amount	$ 86,084	$ 81,782
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio	10.00%	10.00%
Tier 1 Capital (to Risk- Weighted Assets) | Consolidated
Actual, amount	$ 132,126	$ 124,441
Actual, ratio	15.32%	15.20%
For Capital Adequacy Purposes, amount	$ 62,513	$ 54,289
For Capital Adequacy Purposes, ratio	7.25%	6.63%
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	$ 129,933	$ 121,485
Actual, ratio	15.09%	14.85%
For Capital Adequacy Purposes, amount	$ 62,411	$ 54,222
For Capital Adequacy Purposes, ratio	7.25%	6.63%
To Be Well Capitalized Under Prompt Corrective Action Provisions, amount	$ 68,867	$ 65,426
To Be Well Capitalized Under Prompt Corrective Action Provisions, ratio	8.00%	8.00%
Tier 1 Capital (Average Assets) | Consolidated
Actual, amount	$ 132,126	$ 124,441
Actual, ratio	11.94%	11.19%
For Capital Adequacy Purposes, amount	$ 44,255	$ 44,488
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	$ 129,933	$ 121,485
Actual, ratio	11.69%	10.88%
For Capital Adequacy Purposes, amount	$ 44,475	$ 44,677
For Capital Adequacy Purposes, ratio	4.00%	4.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, amount	$ 55,594	$ 55,846
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	$ 112,126	$ 104,441
Actual, ratio	13.00%	12.75%
For Capital Adequacy Purposes, amount	$ 49,579	$ 42,007
For Capital Adequacy Purposes, ratio	5.75%	5.13%
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	$ 129,933	$ 121,485
Actual, ratio	15.09%	14.85%
For Capital Adequacy Purposes, amount	$ 49,498	$ 41,954
For Capital Adequacy Purposes, ratio	5.75%	5.13%
To Be Well Capitalized Under Prompt Corrective Action Provisions, amount	$ 55,954	$ 53,158
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, 2017	Dec. 31, 2016	Dec. 31, 2015
Other Operating Income And Expense Details
Visa debit card income	$ 3,757	$ 3,589	$ 3,452
Net appraisal management fee income	780	886	635
Insurance and brokerage commissions	761	632	714
Advertising	1,195	1,136	784
FDIC insurance	347	494	681
Visa debit card expense	1,248	1,140	988
Telephone	855	754	588
Foreclosure/OREO expense	46	120	398
Internet banking expense	720	710	671
FHLB advance prepayment penalty	508	1,260	504
Consulting	$ 785	$ 2,257	$ 904

15. Fair Value of Financial I78

15. Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Assets:
Investment securities available for sale	$ 229,321	$ 249,946
Mortgage loans held for sale	857	5,709
Carrying Amount
Assets:
Cash and cash equivalents	53,186	70,094
Investment securities available for sale	229,321	249,946
Other investments	1,830	2,635
Mortgage loans held for sale	857	5,709
Loans, net	753,398	716,261
Cash surrender value of life insurance	15,552	14,952
Liabilities:
Deposits	906,952	892,918
Securities sold under agreements to repurchase	37,757	36,434
FHLB borrowings		20,000
Junior subordinated debentures	20,619	20,619
Level 1
Assets:
Cash and cash equivalents	53,186	70,094
Investment securities available for sale	0	0
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
Junior subordinated debentures	0	0
Level 2
Assets:
Cash and cash equivalents	0	0
Investment securities available for sale	229,071	249,196
Other investments	0	0
Mortgage loans held for sale	0	0
Loans, net	0	0
Cash surrender value of life insurance	15,552	14,952
Liabilities:
Deposits	0	0
Securities sold under agreements to repurchase	37,757	36,434
FHLB borrowings		18,864
Junior subordinated debentures	20,619	20,619
Level 3
Assets:
Cash and cash equivalents	0	0
Investment securities available for sale	250	750
Other investments	1,830	2,635
Mortgage loans held for sale	857	5,709
Loans, net	735,837	720,675
Cash surrender value of life insurance	0	0
Liabilities:
Deposits	894,932	884,510
Securities sold under agreements to repurchase	0	0
FHLB borrowings		0
Junior subordinated debentures	0	0
Estimated Fair Value
Assets:
Cash and cash equivalents	53,186	70,094
Investment securities available for sale	229,321	249,946
Other investments	1,830	2,635
Mortgage loans held for sale	857	5,709
Loans, net	735,837	720,675
Cash surrender value of life insurance	15,552	14,952
Liabilities:
Deposits	894,932	884,510
Securities sold under agreements to repurchase	37,757	36,434
FHLB borrowings		18,864
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, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2017	Dec. 31, 2016
Assets
Interest-bearing time deposit												$ 4,118	$ 16,481
Investment securities available for sale												229,321	249,946
Total assets												1,092,166	1,087,991
Liabilities and Shareholders' Equity
Junior subordinated debentures												20,619	20,619
Liabilities												976,191	980,563
Shareholders' equity												115,975	107,428
Total liabilities and shareholders' equity												1,092,166	1,087,991
Revenues:
Interest and dividend income	$ 10,726	$ 10,698	$ 10,461	$ 10,064	$ 10,107	$ 9,982	$ 9,815	$ 9,905	$ 41,949	$ 39,809	$ 38,666
Gain on sale of securities									0	729	0
Expenses:
Interest	507	650	622	598	821	828	813	809	2,377	3,271	3,484
Income before income tax benefit and equity in undistributed earnings of subsidiaries	3,329	4,419	3,736	2,783	1,268	3,330	3,996	3,144	14,215	11,738	12,733
Income tax benefit	1,319	1,177	925	578	(34)	872	1,032	691	3,947	2,561	3,100
Net earnings	2,010	3,242	2,811	2,205	1,302	2,458	2,964	2,453	10,268	9,177	9,633
Cash flows from operating activities:
Net earnings	2,010	$ 3,242	$ 2,811	2,205	1,302	$ 2,458	$ 2,964	2,453	10,268	9,177	9,633
Adjustments to reconcile net earnings to net cash provided by operating activities:
Gain on sale of investment securities									0	(729)	0
Change in:
Other assets									258	(636)	(408)
Net cash provided by operating activities									18,594	12,239	13,863
Cash flows from investing activities:
Purchases of investment securities available for sale									(10,014)	(12,707)	(19,220)
Proceeds from calls and maturities of investment securities available for sale									10,162	4,053	5,475
Net cash provided (used) by investing activities									(24,106)	(23,621)	(30,126)
Cash flows from financing activities:
Cash in lieu stock dividend									(6)	0	0
Net cash used by financing activities									(7,278)	41,713	(13,072)
Net change in cash									(12,790)	30,331	(29,335)
Noncash investing and financing activities:
Change in unrealized gain on investment securities available for sale, net									(1)	(2,523)	57
Parent Company
Assets
Cash	428			957	957			553	957	957	553	428	957
Interest-bearing time deposit												1,000	1,000
Investment in subsidiaries												133,781	124,471
Investment in PEBK Capital Trust II												619	619
Investment securities available for sale												250	750
Other assets												546	275
Total assets												136,624	128,072
Liabilities and Shareholders' Equity
Junior subordinated debentures												20,619	20,619
Liabilities												30	25
Shareholders' equity												115,975	107,428
Total liabilities and shareholders' equity												$ 136,624	$ 128,072
Revenues:
Interest and dividend income									1,839	4,569	3,979
Gain on sale of securities									0	405	0
Total revenues									1,839	4,974	3,979
Expenses:
Interest									590	485	403
Other operating expenses									725	513	538
Total expenses									1,315	998	941
Income before income tax benefit and equity in undistributed earnings of subsidiaries									524	3,976	3,038
Income tax benefit									434	178	262
Income before equity in undistributed earnings of subsidiaries									958	4,154	3,300
Equity in undistributed earnings of subsidiaries									9,310	5,023	6,333
Net earnings									10,268	9,177	9,633
Cash flows from operating activities:
Net earnings									10,268	9,177	9,633
Adjustments to reconcile net earnings to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries									(9,310)	(5,023)	(6,333)
Gain on sale of investment securities									0	(405)	0
Change in:
Other assets									(272)	61	(4)
Accrued income									0	0	0
Accrued expense									5	5	3
Other liabilities									0	0	0
Net cash provided by operating activities									691	3,815	3,299
Cash flows from investing activities:
Proceeds from calls and maturities of investment securities available for sale									500	669	0
In kind transfer from parent to Bank									0	10	0
Net cash provided (used) by investing activities									500	679	0
Cash flows from financing activities:
Cash dividends paid on common stock									(2,629)	(2,106)	(1,574)
Cash in lieu stock dividend									(6)	0	0
Stock repurchase									0	(1,984)	(1,917)
Proceeds from exercise of restricted stock units									915	0	0
Net cash used by financing activities									(1,720)	(4,090)	(3,491)
Net change in cash									(529)	404	(192)
Cash at beginning of year				$ 957				$ 553	957	553	745
Cash at end of year	$ 428				$ 957				428	957	553
Noncash investing and financing activities:
Change in unrealized gain on investment securities available for sale, net									$ (1)	$ (2,523)	$ 57

17. Quarterly Data (Details)

17. Quarterly Data (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Quarterly Financial Information Disclosure [Abstract]
Total interest income	$ 10,726	$ 10,698	$ 10,461	$ 10,064	$ 10,107	$ 9,982	$ 9,815	$ 9,905	$ 41,949	$ 39,809	$ 38,666
Total interest expense	507	650	622	598	821	828	813	809	2,377	3,271	3,484
Net interest income	10,219	10,048	9,839	9,466	9,286	9,154	9,002	9,096	39,572	36,538	35,182
(Reduction of) provision for loan losses	(102)	(218)	49	(236)	(99)	(360)	(531)	(216)	(507)	(1,206)	(17)
Other income	3,177	3,504	3,281	2,876	3,666	3,414	3,572	3,324	12,838	13,976	13,312
Other expense	10,169	9,351	9,335	9,795	11,783	9,598	9,109	9,492	38,702	39,982	35,778
Income before income taxes	3,329	4,419	3,736	2,783	1,268	3,330	3,996	3,144	14,215	11,738	12,733
Income tax benefit	1,319	1,177	925	578	(34)	872	1,032	691	3,947	2,561	3,100
Net earnings	$ 2,010	$ 3,242	$ 2,811	$ 2,205	$ 1,302	$ 2,458	$ 2,964	$ 2,453	$ 10,268	$ 9,177	$ 9,633
Basic net earnings per share	$ 0.34	$ 0.54	$ 0.47	$ 0.36	$ 0.22	$ 0.41	$ 0.49	$ 0.41	$ 1.71	$ 1.53	$ 1.57
Diluted net earnings per share	$ .34	$ .53	$ .46	$ .36	$ .22	$ .40	$ .48	$ .40	$ 1.69	$ 1.50	$ 1.56