Parkway Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
Note 1. Organization and Summary of Significant Accounting Policies, continued
Use of Estimates, continued
Substantially all of the Banks loan portfolio consists of loans in its market area. Accordingly, the
ultimate collectability of a substantial portion of the Banks loan portfolio and the recovery of a substantial portion of the carrying amount of foreclosed real estate are susceptible to changes in local market conditions. The regional economy
is diverse, but influenced to an extent by the manufacturing and agricultural segments.
While management uses available information to recognize loan and
foreclosed real estate losses, future additions to the allowances may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as a part of their routine examination process, periodically review the Banks
allowances for loan and foreclosed real estate losses. Such agencies may require the Bank to recognize additions to the allowances based on their judgments about information available to them at the time of their examinations. Because of these
factors, it is reasonably possible that the allowances for loan and foreclosed real estate losses may change materially in the near term.
The Company
seeks strategies that minimize the tax effect of implementing their business strategies. As such, judgments are made regarding the ultimate consequence of long-term tax planning strategies, including the likelihood of future recognition of deferred
tax benefits. The Companys tax returns are subject to examination by both Federal and State authorities. Such examinations may result in the assessment of additional taxes, interest and penalties. As a result, the ultimate outcome, and the
corresponding financial statement impact, can be difficult to predict with accuracy.
Accounting for pension benefits, costs and related liabilities are
developed using actuarial valuations. These valuations include key assumptions determined by management, including the discount rate and expected long-term rate of return on plan assets. Material changes in pension costs may occur in the future due
to changes in these assumptions.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents includes cash and amounts due from banks (including cash items in process of collection),
interest-bearing deposits with banks and federal funds sold.
Trading Securities
The Company does not hold securities for short-term resale and therefore does not maintain a trading securities portfolio.
Securities Held to Maturity
Bonds, notes, and
debentures for which the Company has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity. The
Company does not currently hold any securities classified as held to maturity.
Securities Available for Sale
Available for sale securities are reported at fair value and consist of bonds, notes, debentures, and certain equity securities not classified as trading
securities or as held to maturity securities.
Unrealized holding gains and losses, net of tax, on available for sale securities are reported as a net
amount in a separate component of accumulated other comprehensive income. Realized gains and losses on the sale of available for sale securities are determined using the specific-identification method. Premiums and discounts are recognized in
interest income using the interest method over the period to maturity.
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