10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 FORM 10-Q  

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2020

Or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 001-33033

LIMESTONE BANCORP, INC.

(Exact name of registrant as specified in its charter)

Kentucky	61-1142247
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2500 Eastpoint Parkway, Louisville, Kentucky	40223
(Address of principal executive offices)	(Zip Code)

(502) 499-4800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares	LMST	Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐

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

Large accelerated filer  ☐	Accelerated filer  ☒
Non-accelerated filer  ☐	Smaller reporting company  ☒
	Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

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

6,269,305 Common Shares and 1,220,000 Non-Voting Common Shares were outstanding at April 30, 2020.

1

INDEX

		Page
PART I –	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	45
ITEM 4.	CONTROLS AND PROCEDURES	45
PART II –	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	46
ITEM 1A.	RISK FACTORS	46
ITEM 2.	UNREGISTERED SALES ON EQUITY SECURITIES AND USE OF PROCEEDS	46
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	46
ITEM 4.	MINE SAFETY DISCLOSURES	46
ITEM 5.	OTHER INFORMATION	46
ITEM 6.	EXHIBITS	47

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

The following consolidated financial statements of Limestone Bancorp, Inc. and subsidiary, Limestone Bank, Inc. are submitted:

Unaudited Consolidated Balance Sheets for March 31, 2020 and December 31, 2019

Unaudited Consolidated Statements of Income for the three months ended March 31, 2020 and 2019

Unaudited Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019

Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2020 and 2019

Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019

Notes to Unaudited Consolidated Financial Statements

3

LIMESTONE BANCORP, INC.

Unaudited Consolidated Balance Sheets

(dollars in thousands except share data)

	March 31, 2020			December 31, 2019
Assets
Cash and due from banks	$	9,509		$	8,241
Interest bearing deposits in banks		23,639			21,962
Cash and cash equivalents		33,148			30,203
Securities available for sale		198,657			209,000
Loans, net of allowance of $9,150 and $8,376, respectively		952,411			917,895
Premises and equipment, net		19,282			19,658
Premises held for sale		1,185			900
Other real estate owned		3,225			3,225
Federal Home Loan Bank stock		6,837			6,237
Bank owned life insurance		16,128			16,037
Deferred taxes, net		28,208			27,765
Goodwill		6,252			6,252
Other intangible assets, net		2,436			2,500
Accrued interest receivable and other assets		6,441			6,107
Total assets	$	1,274,210		$	1,245,779
Liabilities and Stockholders’ Equity
Deposits
Non-interest bearing	$	185,658		$	187,551
Interest bearing		872,242			839,424
Total deposits		1,057,900			1,026,975
Federal Home Loan Bank advances		61,349			61,389
Accrued interest payable and other liabilities		7,450			8,665
Junior subordinated debentures		21,000			21,000
Subordinated capital note		17,000			17,000
Senior debt		5,000			5,000
Total liabilities		1,169,699			1,140,029
Commitments and contingent liabilities (Note 15)		—			—
Stockholders’ equity
Common stock, no par, 39,000,000 shares authorized, 6,269,305 and 6,251,975 voting, and 1,220,000 and 1,220,000 non-voting issued and outstanding, respectively		140,639			140,639
Additional paid-in capital		24,577			24,508
Retained deficit		(53,843	)		(55,683	)
Accumulated other comprehensive loss		(6,862	)		(3,714	)
Total stockholders' equity		104,511			105,750
Total liabilities and stockholders’ equity	$	1,274,210		$	1,245,779

See accompanying notes to unaudited consolidated financial statements.

4

LIMESTONE BANCORP, INC.

Unaudited Consolidated Statements of Income

(dollars in thousands, except per share data)

	Three Months Ended March 31,
	2020		2019
Interest income
Loans, including fees	$	11,611	$	10,254
Taxable securities		1,467		1,573
Tax exempt securities		70		93
Federal funds sold and other		119		266
		13,267		12,186
Interest expense
Deposits		2,772		2,587
Federal Home Loan Bank advances		220		281
Senior debt		56		96
Junior subordinated debentures		215		263
Subordinated capital note		242		—
		3,505		3,227
Net interest income		9,762		8,959
Provision for loan losses		1,050		—
Net interest income after provision for loan losses		8,712		8,959
Non-interest income
Service charges on deposit accounts		668		496
Bank card interchange fees		750		508
Income from bank owned life insurance		96		99
Other		210		181
		1,724		1,284
Non-interest expense
Salaries and employee benefits		4,538		3,915
Occupancy and equipment		999		898
Professional fees		208		165
Marketing expense		214		227
FDIC insurance		—		108
Data processing expense		359		313
State franchise and deposit tax		360		315
Deposit account related expense		451		281
Other real estate owned expense		16		166
Litigation and loan collection expense		65		46
Communications expense		218		190
Insurance expense		103		114
Postage and delivery		168		141
Other		536		402
		8,235		7,281
Income before income taxes		2,201		2,962
Income tax expense		361		123
Net income		1,840		2,839
Basic and diluted income per common share	$	0.25	$	0.38

See accompanying notes to unaudited consolidated financial statements.

5

LIMESTONE BANCORP, INC.

Unaudited Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

	Three Months Ended March 31,
	2020			2019
Net income	$	1,840		$	2,839
Other comprehensive income (loss):
Unrealized gain (loss) on securities:
Unrealized gain (loss) arising during the period		(4,126	)		1,995
Reclassification adjustment for gains (losses) included in net income		—			—
Net unrealized gain (loss) recognized in comprehensive income (loss)		(4,126	)		1,995
Tax effect		978			(418	)
Other comprehensive income (loss)		(3,148	)		1,577
Comprehensive income (loss)	$	(1,308	)	$	4,416

See accompanying notes to unaudited consolidated financial statements.

6

LIMESTONE BANCORP, INC.

Unaudited Consolidated Statements of Changes in Stockholders’ Equity

For Three Months Ended March 31, 2020 and 2019

(Dollar amounts in thousands except share and per share data)

	Shares						Amount
	Common						Common
	Common		Non-Voting Common		Total Common		Common and Non-Voting Common		Additional Paid-In Capital			Retained Deficit			Accumulated Other Comprehensive Loss			Total
Balances, January 1, 2020		6,251,975		1,220,000		7,471,975	$	140,639	$	24,508		$	(55,683	)	$	(3,714	)	$	105,750
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award		17,330		—		17,330		—		(37	)		—			—			(37	)
Forfeited unvested stock		—		—		—		—		—			—			—			—
Stock-based compensation expense		—		—		—		—		106			—			—			106
Net income		—		—		—		—		—			1,840			—			1,840
Net change in accumulated other comprehensive loss, net of taxes		—		—		—		—		—			—			(3,148	)		(3,148	)
Balances, March 31, 2020		6,269,305		1,220,000		7,489,305	$	140,639	$	24,577		$	(53,843	)	$	(6,862	)	$	104,511

	Shares								Amount
	Common								Common
	Common			Non-Voting Common		Total Common			Common and Non-Voting Common		Additional Paid-In Capital			Retained Deficit			Accumulated Other Comprehensive Loss			Total
Balances, January 1, 2019		6,242,720			1,220,000		7,462,720		$	140,639	$	24,287		$	(66,201	)	$	(6,628	)	$	92,097
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award		1,642			—		1,642			—		(276	)		—			—			(276	)
Forfeited unvested stock		(3,748	)		—		(3,748	)		—		—			—			—			—
Stock-based compensation expense		—			—		—			—		82			—			—			82
Net income		—			—		—			—		—			2,839			—			2,839
Net change in accumulated other comprehensive loss, net of taxes		—			—		—			—		—			—			1,577			1,577
Balances, March 31, 2019		6,240,614			1,220,000		7,460,614		$	140,639	$	24,093		$	(63,362	)	$	(5,051	)	$	96,319

See accompanying notes to unaudited consolidated financial statements.

7

LIMESTONE BANCORP, INC.

Unaudited Consolidated Statements of Cash Flows

For Three Months Ended March 31, 2020 and 2019

(dollars in thousands)

	2020			2019
Cash flows from operating activities
Net income	$	1,840		$	2,839
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization		479			679
Provision for loan losses		1,050			—
Net amortization on securities		146			189
Stock-based compensation expense		106			82
Deferred taxes, net		535			295
Net write-down of other real estate owned		—			150
Impairment of premises held for sale		25			—
Increase in cash surrender value of life insurance, net of premium expense		(91	)		(93	)
Amortization of operating lease right-of-use assets		187			62
Net change in accrued interest receivable and other assets		(334	)		(668	)
Net change in accrued interest payable and other liabilities		(1,215	)		(2,671	)
Net cash from operating activities		2,728			864
Cash flows from investing activities
Purchases of available for sale securities		(6,869	)		(8,096	)
Proceeds from sales and calls of available for sale securities		6,000			1,000
Proceeds from maturities and prepayments of available for sale securities		6,940			3,683
Purchases of Federal Home Loan Bank stock		(600	)		—
Proceeds from mandatory redemptions of Federal Home Loan Bank stock		—			420
Net changes in loans		(35,712	)		(22,002	)
Purchases of premises and equipment		(390	)		(37	)
Net cash from investing activities		(30,631	)		(25,032	)
Cash flows from financing activities
Net change in deposits		30,925			14,611
Repayment of Federal Home Loan Bank advances		(95,040	)		(30,038	)
Advances from Federal Home Loan Bank		95,000			35,000
Common shares withheld for taxes		(37	)		(276	)
Net cash from financing activities		30,848			19,297
Net change in cash and cash equivalents		2,945			(4,871	)
Beginning cash and cash equivalents		30,203			35,361
Ending cash and cash equivalents	$	33,148		$	30,490
Supplemental cash flow information:
Interest paid	$	3,919		$	3,193
Supplemental non-cash disclosure:
Transfer from loans to other real estate	$	—		$	—
Transfer from premises and equipment to premises held for sale		310			—
Initial recognition of right-of-use lease assets		—			507

See accompanying notes to unaudited consolidated financial statements.

8

LIMESTONE BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements

Note 1 – Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation – The consolidated financial statements include Limestone Bancorp, Inc. (Company) and its subsidiary, Limestone Bank, Inc. (Bank). The Company owns a 100% interest in the Bank. All significant inter-company transactions and accounts have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the entire year. A description of other significant accounting policies is presented in the notes to the Consolidated Financial Statements for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K.

Use of Estimates – To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ.

In March 2020, the World Health Organization declared novel coronavirus disease 2019 ("COVID-19") as a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities, including those in markets in which the Company is located or does business.

The extent to which the COVID-19 pandemic impacts the Company’s business, liquidity, asset valuations, results of operations, and financial condition, as well as its regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic. Moreover, the effects of the COVID-19 pandemic may have a material adverse effect on all or a combination of valuation impairments on the Company's intangible assets, investments, loans, or deferred tax assets.

Reclassifications – Some items in the prior year financial statements were reclassified to conform to the current presentation. The reclassifications did not impact net income or stockholders’ equity.

New Accounting Standards – In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The final standard will change estimates for credit losses related to financial assets measured at amortized cost such as loans, held-to-maturity debt securities, and certain other contracts. For estimating credit losses, the FASB is replacing the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (CECL) model. Under the CECL model, certain financial assets that are carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, are required to be presented at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the “incurred loss” model required under current GAAP, which delays recognition until it is probable a loss has been incurred. The change could materially affect how the allowance for loan losses is determined. The impact of CECL model implementation is being evaluated, but it is expected that a one-time cumulative-effect adjustment to the allowance for loan losses will be recognized in retained earnings on the consolidated balance sheet as of the beginning of the first reporting period in which the new standard is effective, as is consistent with regulatory expectations set forth in interagency guidance. In December 2018, the OCC, The Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to the credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from adoption of the new accounting standard. In October 2019, the FASB voted to delay implementation for smaller reporting companies, private companies, and not-for-profit entities. The Company currently qualifies as a smaller reporting company. Companies qualifying for the delay will be required to implement CECL for fiscal year and interim periods beginning after December 15, 2022.

9

Note 2 – Securities

Securities are classified as available for sale (AFS). AFS securities may be sold if needed for liquidity, asset liability management, or other reasons. AFS securities are reported at fair value, with unrealized gains or losses included as a separate component of equity, net of tax.

The amortized cost and fair value of securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
March 31, 2020
Available for sale
U.S. Government and federal agency	$	20,751	$	353	$	—		$	21,104
Agency mortgage-backed: residential		86,840		2,428		(167	)		89,101
Collateralized loan obligations		44,732		—		(3,978	)		40,754
State and municipal		28,301		346		(493	)		28,154
Corporate bonds		20,831		199		(1,486	)		19,544
Total available for sale	$	201,455	$	3,326	$	(6,124	)	$	198,657

December 31, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
U.S. Government and federal agency	$	22,281	$	196	$	(147	)	$	22,330
Agency mortgage-backed: residential		91,269		1,186		(255	)		92,200
Collateralized loan obligations		49,831		—		(412	)		49,419
State and municipal		27,819		550		(3	)		28,366
Corporate bonds		16,472		213		—			16,685
Total available for sale	$	207,672	$	2,145	$	(817	)	$	209,000

Sales and calls of securities were as follows:

	Three Months Ended March 31,
	2020		2019
	(in thousands)
Proceeds	$	6,000	$	1,000
Gross gains		—		—
Gross losses		—		—

The amortized cost and fair value of our debt securities are shown by contractual maturity. Expected maturities may differ from actual maturities when borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities not due at a single maturity date are shown separately.  

	March 31, 2020
	Amortized Cost		Fair Value
	(in thousands)
Maturity
Available for sale
Within one year	$	31,403	$	30,003
One to five years		40,037		40,515
Five to ten years		23,970		22,852
Beyond ten years		19,205		16,186
Agency mortgage-backed: residential		86,840		89,101
Total	$	201,455	$	198,657

Securities pledged at March 31, 2020 and December 31, 2019 had carrying values of approximately $80.9 million and $75.8 million, respectively, and were pledged to secure public deposits.

10

At March 31, 2020 and December 31, 2019, the Bank held securities issued by the Commonwealth of Kentucky or Kentucky municipalities having a book value of $17.0 million and $14.5 million, respectively. At March 31, 2020 and December 31, 2019, there were no other holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

The Bank owns Collateralized Loan Obligations (CLOs), which are debt securities secured by professionally managed portfolios of senior-secured loans to corporations. CLOs are typically managed by large non-bank financial institutions or banks and are typically $300 million to $1 billion in size, contain one hundred or more loans, have five to six credit tranches ranging from AAA, AA, A, BBB, BB, B and equity tranche. Interest and principal are paid first to the AAA tranche then to the next lower rated tranche. Losses are borne first by the equity tranche then by the subsequently higher rated tranche. CLOs may be less liquid than government securities from time to time and volatility in the CLO market may cause the value of these investments to decline.

The market value of CLOs may be affected by, among other things, changes in composition of the underlying loans, changes in the cash flows from the underlying loans, defaults and recoveries on the underlying loans, capital gains and losses on the underlying loans, prepayments on the underlying loans, and other conditions or economic factors.

At March 31, 2020, $25.7 million and $15.0 million of our CLOs were AA and A rated, respectively. There were no CLOs rated below A and none of the CLOs were subject to ratings downgrade in the three months ended March 31, 2020. All of our CLOs are floating rate, with rates set on a quarterly basis at three-month LIBOR plus a spread. Stress testing was completed on each security in the CLO portfolio as of March 31, 2020. Each security in the portfolio passed, without dollar loss, a stress scenario characterized as severe, which assumed a ten percent per annum constant prepayment rate, a twelve percent per annum constant default rate for four years followed by a four percent rate thereafter, and a forty-five percent recovery rate on a one-year lag.

The Company evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, underlying credit quality of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the sector or industry trends and cycles affecting the issuer, and the results of reviews of the issuer’s financial condition. As of March 31, 2020, management does not believe any securities in the portfolio with unrealized losses should be classified as other than temporarily impaired.

Securities with unrealized losses at March 31, 2020 and December 31, 2019, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, are as follows:

	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
March 31, 2020
Available for sale
U.S. Government and federal agency	$	—	$	—		$	—	$	—		$	—	$	—
Agency mortgage-backed: residential		10,843		(120	)		1,617		(47	)		12,460		(167	)
Collateralized loan obligations		10,702		(843	)		30,052		(3,135	)		40,754		(3,978	)
State and municipal		10,192		(493	)		—		—			10,192		(493	)
Corporate bonds		11,008		(1,486	)		—		—			11,008		(1,486	)
Total temporarily impaired	$	42,745	$	(2,942	)	$	31,669	$	(3,182	)	$	74,414	$	(6,124	)
December 31, 2019
Available for sale
U.S. Government and federal agency	$	12,567	$	(147	)	$	—	$	—		$	12,567	$	(147	)
Agency mortgage-backed: residential		18,457		(97	)		10,665		(158	)		29,122		(255	)
Collateralized loan obligations		9,539		(46	)		35,336		(366	)		44,875		(412	)
State and municipal		911		(3	)		—		—			911		(3	)
Corporate bonds		—		—			—		—			—		—
Total temporarily impaired	$	41,474	$	(293	)	$	46,001	$	(524	)	$	87,475	$	(817	)

11

Note 3 – Loans

Loans net of unearned income, deferred loan origination costs, and net premiums on acquired loans by class were as follows:

	March 31,			December 31,
	2020			2019
	(in thousands)
Commercial	$	169,176		$	145,551
Commercial Real Estate:
Construction		71,267			64,911
Farmland		80,579			79,118
Nonfarm nonresidential		261,807			255,459
Residential Real Estate:
Multi-family		75,525			70,950
1-4 Family		220,701			226,629
Consumer		44,814			47,790
Agriculture		36,977			35,064
Other		715			799
Subtotal		961,561			926,271
Less: Allowance for loan losses		(9,150	)		(8,376	)
Loans, net	$	952,411		$	917,895

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2020 and 2019:

	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Agriculture			Other			Total
	(in thousands)
March 31, 2020:
Beginning balance	$	1,710		$	4,080		$	1,743		$	485		$	355		$	3		$	8,376
Provision (negative provision)		339			141			220			265			87			(2	)		1,050
Loans charged off		(29	)		(29	)		(75	)		(161	)		(41	)		–			(335	)
Recoveries		5			20			21			4			8			1			59
Ending balance	$	2,025		$	4,212		$	1,909		$	593		$	409		$	2		$	9,150
March 31, 2019:
Beginning balance	$	1,299		$	4,676		$	2,452		$	130		$	321		$	2		$	8,880
Provision (negative provision)		143			(165	)		(204	)		193			33			–			–
Loans charged off		–			(15	)		(82	)		(180	)		(1	)		–			(278	)
Recoveries		5			2			61			16			–			–			84
Ending balance	$	1,447		$	4,498		$	2,227		$	159		$	353		$	2		$	8,686

12

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of March 31, 2020:

	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Agriculture		Other		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	–	$	19	$	1	$	–	$	–	$	–	$	20
Collectively evaluated for impairment		2,025		4,193		1,908		593		409		2		9,130
Total ending allowance balance	$	2,025	$	4,212	$	1,909	$	593	$	409	$	2	$	9,150
Loans:
Loans individually evaluated for impairment	$	158	$	922	$	921	$	143	$	–	$	–	$	2,144
Loans collectively evaluated for impairment		169,018		412,731		295,305		44,671		36,977		715		959,417
Total ending loans balance	$	169,176	$	413,653	$	296,226	$	44,814	$	36,977	$	715	$	961,561

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of December 31, 2019:

	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Agriculture		Other		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3	$	37	$	2	$	–	$	–	$	–	$	42
Collectively evaluated for impairment		1,707		4,043		1,741		485		355		3		8,334
Total ending allowance balance	$	1,710	$	4,080	$	1,743	$	485	$	355	$	3	$	8,376
Loans:
Loans individually evaluated for impairment	$	74	$	1,064	$	892	$	98	$	42	$	–	$	2,170
Loans collectively evaluated for impairment		145,477		398,424		296,687		47,692		35,022		799		924,101
Total ending loans balance	$	145,551	$	399,488	$	297,579	$	47,790	$	35,064	$	799	$	926,271

13

Impaired Loans

Impaired loans include restructured loans and loans on nonaccrual or classified as doubtful, whereby collection of the total amount is improbable, or loss, whereby all or a portion of the loan has been written off or a specific allowance for loss had been provided.

The following tables present information related to loans individually evaluated for impairment by class of loans as of March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020 and 2019:

	As of March 31, 2020						Three Months Ended March 31, 2020
	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	(in thousands)
With No Related Allowance Recorded:
Commercial	$	265	$	158	$	—	$	104	$	—	$	—
Commercial real estate:
Construction		—		—		—		—		—		—
Farmland		414		299		—		296		10		10
Nonfarm nonresidential		1,043		480		—		485		8		—
Residential real estate:
Multi-family		—		—		—		—		—		—
1-4 Family		1,862		846		—		795		3		3
Consumer		354		143		—		121		1		1
Agriculture		297		—		—		21		—		—
Other		—		—		—		—		—		—
Subtotal		4,235		1,926		—		1,822		22		14
With An Allowance Recorded:
Commercial		—		—		—		12		—		—
Commercial real estate:
Construction		—		—		—		—		—		—
Farmland		143		143		19		212		2		—
Nonfarm nonresidential		—		—		—		—		—		—
Residential real estate:
Multi-family		—		—		—		—		—		—
1-4 Family		75		75		1		111		2		—
Consumer		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Other		—		—		—		—		—		—
Subtotal		218		218		20		335		4		—
Total	$	4,453	$	2,144	$	20	$	2,157	$	26	$	14

14

	As of December 31, 2019						Three Months Ended March 31, 2019
	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	(in thousands)
With No Related Allowance Recorded:
Commercial	$	138	$	50	$	—	$	52	$	—	$	—
Commercial real estate:
Construction		—		—		—		—		—		—
Farmland		380		293		—		98		5		5
Nonfarm nonresidential		1,057		489		—		256		3		3
Residential real estate:
Multi-family		—		—		—		—		—		—
1-4 Family		1,679		745		—		1,544		22		22
Consumer		309		98		—		14		—		—
Agriculture		304		42		—		32		—		—
Other		—		—		—		—		—		—
Subtotal		3,867		1,717		—		1,996		30		30
With An Allowance Recorded:
Commercial		24		24		3		—		—		—
Commercial real estate:
Construction		—		—		—		—		—		—
Farmland		282		282		37		158		—		—
Nonfarm nonresidential		—		—		—		—		—		—
Residential real estate:
Multi-family		—		—		—		—		—		—
1-4 Family		183		147		2		719		11		—
Consumer		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Other		—		—		—		—		—		—
Subtotal		489		453		42		877		11		—
Total	$	4,356	$	2,170	$	42	$	2,873	$	41	$	30

15

Troubled Debt Restructuring

A troubled debt restructuring (TDR) occurs when the Bank has agreed to a loan modification in the form of a concession for a borrower who is experiencing financial difficulty. The Bank’s TDRs typically involve a reduction in interest rate, a deferral of principal for a stated period of time, or an interest only period. All TDRs are considered impaired and the Bank has allocated reserves for these loans to reflect the present value of the concessionary terms granted to the borrower.

The following table presents the types of TDR loan modifications by portfolio segment outstanding as of March 31, 2020 and December 31, 2019:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
March 31, 2020
Commercial Real Estate:
Nonfarm nonresidential	$	391	$	—	$	391
Residential Real Estate:
1-4 Family		75		—		75
Total TDRs	$	466	$	—	$	466

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
December 31, 2019
Commercial Real Estate:
Nonfarm nonresidential	$	400	$	—	$	400
Residential Real Estate:
1-4 Family		75		—		75
Total TDRs	$	475	$	—	$	475

At March 31, 2020 and December 31, 2019, 100% of the Company’s TDRs were performing according to their modified terms. The Company allocated $1,000 in reserves to borrowers whose loan terms have been modified in TDRs as of March 31, 2020 and December 31, 2019. The Company has committed to lend no additional amounts as of March 31, 2020 and December 31, 2019 to borrowers with outstanding loans classified as TDRs.

Management periodically reviews renewals and modifications of previously identified TDRs, for which there was no principal forgiveness, to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification did not contain a concessionary interest rate or other concessionary terms, management considers the potential removal of the TDR classification. If deemed appropriate based upon current underwriting, the TDR classification is removed as the borrower has complied with the terms of the loan at the date of renewal/modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan subsequent to the date of the renewal/modification. In this instance, the TDR was originally considered a restructuring in a prior year as a result of a modification with an interest rate that was not commensurate with the risk of the underlying loan. Additionally, TDR classification can be removed in circumstances in which the Company performs a non-concessionary re-modification of the loan at terms that were considered to be at market for loans with comparable risk. Management expects the borrower will continue to perform under the re-modified terms based on the borrower’s past history of performance.

No TDR loan modifications occurred during the three months ended March 31, 2020 or March 31, 2019. During the first three months of 2020 and 2019, no TDRs defaulted on their restructured loan within the 12-month period following the loan modification. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual.

16

Non-performing Loans

Non-performing loans include impaired loans and smaller balance homogeneous loans, such as residential mortgage and consumer loans, that are collectively evaluated for impairment. The following table presents the recorded investment in nonaccrual and loans past due 90 days and still on accrual by class of loan as of March 31, 2020, and December 31, 2019:

	Nonaccrual				Loans Past Due 90 Days And Over Still Accruing
	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
	(in thousands)
Commercial	$	158	$	50	$	—	$	—
Commercial Real Estate:
Construction		—		—		—		—
Farmland		298		431		—		—
Nonfarm nonresidential		89		90		—		—
Residential Real Estate:
Multi-family		—		—		—		—
1-4 Family		812		817		—		—
Consumer		143		98		—		—
Agriculture		—		42		—		—
Other		—		—		—		—
Total	$	1,500	$	1,528	$	—	$	—

The following table presents the aging of the recorded investment in past due loans as of March 31, 2020 and December 31, 2019:

	30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days And Over Past Due		Nonaccrual		Total Past Due And Nonaccrual
	(in thousands)
March 31, 2020
Commercial	$	—	$	1	$	—	$	158	$	159
Commercial Real Estate:
Construction		—		—		—		—		—
Farmland		81		—		—		298		379
Nonfarm nonresidential		19		41		—		89		149
Residential Real Estate:
Multi-family		—		—		—		—		—
1-4 Family		961		147		—		812		1,920
Consumer		97		56		—		143		296
Agriculture		—		3		—		—		3
Other		—		—		—		—		—
Total	$	1,158	$	248	$	—	$	1,500	$	2,906

17

	30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days And Over Past Due		Nonaccrual		Total Past Due And Nonaccrual
	(in thousands)
December 31, 2019
Commercial	$	14	$	3	$	—	$	50	$	67
Commercial Real Estate:
Construction		—		—		—		—		—
Farmland		274		—		—		431		705
Nonfarm nonresidential		206		—		—		90		296
Residential Real Estate:
Multi-family		—		—		—		—		—
1-4 Family		1,162		503		—		817		2,482
Consumer		91		164		—		98		353
Agriculture		—		—		—		42		42
Other		—		—		—		—		—
Total	$	1,747	$	670	$	—	$	1,528	$	3,945

Credit Quality Indicators 

Management categorizes all loans into risk categories at origination based upon original underwriting. Thereafter, management categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends. Loans are analyzed through internal and external loan review processes and are routinely analyzed through credit administration processes which classify the loans as to credit risk. The following definitions are used for risk ratings:

Watch – Loans classified as watch are those loans which have or may experience a potentially adverse development which necessitates increased monitoring.

Special Mention – Loans classified as special mention do not have all of the characteristics of substandard or doubtful loans. They have one or more deficiencies which warrant special attention and which corrective action, such as accelerated collection practices, may remedy.

Substandard – Loans classified as substandard are those loans with clear and defined weaknesses such as a highly leveraged position, unfavorable financial ratios, uncertain repayment sources or poor financial condition which may jeopardize the repayment of the debt as contractually agreed. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful are those loans which have characteristics similar to substandard loans but with an increased risk that collection or liquidation in full is highly questionable and improbable.

18

As of March 31, 2020, and December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
March 31, 2020
Commercial	$	146,310	$	20,903	$	—	$	1,963	$	—	$	169,176
Commercial Real Estate:
Construction		71,267		—		—		—		—		71,267
Farmland		73,202		6,568		—		809		—		80,579
Nonfarm nonresidential		252,982		7,152		—		1,673		—		261,807
Residential Real Estate:
Multi-family		75,525		—		—		—		—		75,525
1-4 Family		214,559		3,683		—		2,459		—		220,701
Consumer		44,640		3		—		171		—		44,814
Agriculture		36,785		155		—		37		—		36,977
Other		715		—		—		—		—		715
Total	$	915,985	$	38,464	$	—	$	7,112	$	—	$	961,561

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
December 31, 2019
Commercial	$	130,312	$	11,280	$	—	$	3,959	$	—	$	145,551
Commercial Real Estate:
Construction		64,911		—		—		—		—		64,911
Farmland		71,503		6,663		—		952		—		79,118
Nonfarm nonresidential		245,995		6,986		—		2,478		—		255,459
Residential Real Estate:
Multi-family		70,950		—		—		—		—		70,950
1-4 Family		221,727		2,420		—		2,482		—		226,629
Consumer		47,657		5		—		128		—		47,790
Agriculture		34,853		168		—		43		—		35,064
Other		799		—		—		—		—		799
Total	$	888,707	$	27,522	$	—	$	10,042	$	—	$	926,271

Note 4 – Leases

As of March 31, 2020, the Company leases real estate for six branch offices or offsite ATM machines under various operating lease agreements. The lease agreements have maturity dates ranging from 2021 to 2055, including all expected extension periods. The weighted average remaining life of the lease term for these leases was 22 years as of March 31, 2020.

In determining the present value of lease payments, the Bank uses the implicit lease rate when readily determinable. As most of the Bank’s leases do not provide an implicit rate, the incremental borrowing rate based on the information available at commencement date is used. The incremental borrowing rate is the rate of interest that the Bank estimates it would pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. This methodology will be continued for the commencement of any subsequent lease agreements. The weighted average discount rate for the leases was 5.47% as of March 31, 2020.

Total rental expense was $120,000 for the three months ended March 31, 2020 and $65,000 for the three months ended March 31, 2019. The right-of-use asset, included in premises and equipment, and lease liability, included in other liabilities, was $2.9 million as of March 31, 2020 and $445,000 as of March 31, 2019.

19

Total estimated rental commitments for the operating leases were as follows as of March 31, 2020 (in thousands):

	March 31, 2020
2020	$	383
2021		260
2022		242
2023		246
2024		246
Thereafter		3,720
Total minimum lease payments		5,097
Discount effect of cash flows		(2,214	)
Present value of lease liabilities	$	2,883

Note 5 – Other Real Estate Owned

Other real estate owned (OREO) is real estate acquired as a result of foreclosure or by deed in lieu of foreclosure. It is classified as real estate owned until such time as it is sold. When property is acquired as a result of foreclosure or by deed in lieu of foreclosure, it is recorded at its fair market value less estimated cost to sell. Any write-down of the property at the time of acquisition is charged to the allowance for loan losses.

The following table presents the major categories of OREO at the period-ends indicated:

	March 31, 2020		December 31, 2019
	(in thousands)
Commercial Real Estate:
Construction, land development, and other land	$	3,225	$	3,225
	$	3,225	$	3,225

Residential loans secured by 1-4 family residential properties in the process of foreclosure totaled $156,000 and $172,000 at March 31, 2020 and December 31, 2019, respectively.

Activity relating to OREO during the three months ended March 31, 2020 and 2019 is as follows:

	For the Three Months Ended March 31,
	2020		2019
	(in thousands)
OREO Activity
OREO as of January 1	$	3,225	$	3,485
Real estate acquired		—		—
Valuation adjustment write-downs		—		(150	)
Net gain (loss) on sales		—		—
Proceeds from sales of properties		—		—
OREO as of March 31	$	3,225	$	3,335

Expenses related to OREO include:

	For the Three Months Ended March 31,
	2020		2019
	(in thousands)
Net loss (gain) on sales	$	—	$	—
Valuation adjustment write-downs		—		150
Operating expense		16		16
Total	$	16	$	166

20

 Note 6 – Goodwill and Intangible Assets

The following table summarizes the Company’s acquired goodwill and intangible assets as of March 31, 2020 and December 31, 2019 (in thousands):

	March 31, 2020				December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Goodwill	$	6,252	$	—	$	6,252	$	—
Core deposit intangibles		2,500		64		2,500		—
Outstanding, ending	$	8,752	$	64	$	8,752	$	—

The Company has $6.3 million of goodwill related to a branch acquisition transaction from 2019. Goodwill represents the excess of the total purchase price paid over the fair value of the identifiable assets acquired, net of the fair value of the liabilities assumed. Goodwill is not amortized but is evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. Impairment exists when a reporting unit’s carrying amount exceeds its fair value. Based upon current economic conditions as a result of COVID-19, management assessed goodwill for impairment as of March 31, 2020 and concluded there was no impairment. Goodwill is the only intangible asset with an indefinite life on the balance sheet.

The Company also has a core deposit intangible asset, which is amortized over a weighted average estimated life of the related deposits and is not estimated to have a significant residual value. During the three months ended March 31, 2020, the Company recorded intangible amortization expense totaling $64,000.

Amortization expense related to the core deposit intangible for the remainder of 2020 and beyond is estimated as follows (in thousands):

	March 31, 2020
April 2020 – December 2020	$	192
2021		256
2022		256
2023		256
2024		256
Thereafter		1,220
	$	2,436

Note 7 – Deposits

The following table details deposits by category:

	March 31, 2020		December 31, 2019
	(in thousands)
Non-interest bearing	$	185,658	$	187,551
Interest checking		157,621		146,038
Money market		154,851		160,837
Savings		92,235		56,015
Certificates of deposit		467,535		476,534
Total	$	1,057,900	$	1,026,975

Time deposits of $250,000 or more were approximately $64.9 million and $51.2 million at March 31, 2020 and December 31, 2019, respectively.

21

Scheduled maturities of total time deposits at March 31, 2020 for each of the next five years are as follows (in thousands):

Year 1	$	383,049
Year 2		47,132
Year 3		10,719
Year 4		15,232
Year 5		10,854
Thereafter		549
	$	467,535

Note 8 – Advances from the Federal Home Loan Bank

Advances from the Federal Home Loan Bank were as follows: 

	March 31,		December 31,
	2020		2019
	(in thousands)
Short term advances (fixed rates 0.13% to 0.22%) maturing April 2020	$	40,000	$	60,000
Long term advances (fixed rates 0.00% to 5.24%) maturing April 2020 to August 2033		21,349		1,389
Total advances from the Federal Home Loan Bank	$	61,349	$	61,389

FHLB advances had a weighted-average rate of 0.39% at March 31, 2020 and 1.70% at December 31, 2019. Each advance is payable per terms on agreement, with a prepayment penalty. No prepayment penalties were incurred during 2020 or 2019. The advances were collateralized by approximately $158.5 million and $166.0 million of first mortgage loans, under a blanket lien arrangement at March 31, 2020 and December 31, 2019, respectively. At March 31, 2020, the Bank’s additional borrowing capacity with the FHLB was $53.6 million.

Scheduled principal payments on the above during the next five years and thereafter (in thousands):

	Advances
Year 1	$	41,090
Year 2		98
Year 3		99
Year 4		42
Year 5		16
Thereafter		20,004
	$	61,349

Note 9 – Borrowings

Junior Subordinated Debentures – The junior subordinated debentures are redeemable at par prior to maturity at the option of the Company as defined within the trust indenture. The Company has the option to defer interest payments on the junior subordinated debentures from time to time for a period not to exceed 20 consecutive quarters. A deferral period may begin at the Company’s discretion so long as interest payments are current. The Company is prohibited from paying dividends on preferred and common shares when interest payments are in deferral. At March 31, 2020, the Company is current on all interest payments.

Subordinated Capital Note – The Company’s $17.0 million subordinated note matures on July 31, 2029. The note carries interest at a fixed rate of 5.75% until July 30, 2024 and then converts to variable at three-month LIBOR plus 395 basis points until maturity. The subordinated capital note qualifies as Tier 2 regulatory capital.

Senior Debt - The Company’s $5.0 million senior secured loan matures on June 30, 2022. Interest is payable quarterly at a rate of three-month LIBOR plus 250 basis points through June 30, 2020, at which time quarterly principal payments of $250,000 plus interest will commence. The loan is secured by a first priority pledge of 100% of the issued and outstanding stock of the Bank. The Company may prepay any amount due under the promissory note at any time without premium or penalty.

The loan agreement contains customary representations, warranties, covenants and events of default, including the following financial covenants: (i) the Company must maintain minimum cash on hand of not less than $2,500,000, (ii) the Company must maintain a total risk based capital ratio at least equal to 10% of risk-weighted assets, (iii) the Bank must maintain a total risk based capital ratio at least equal to 11% of risk-weighted assets, and (iv) non-performing assets of the Bank may not exceed 2.5% of the Bank’s total assets. Both the Company and Bank were in compliance with the covenants as of March 31, 2020.

22

Note 10 – Fair Values Measurement

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Various valuation techniques are used to determine fair value, including market, income and cost approaches. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that an entity has the ability to access as of the measurement date, or observable inputs.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When that occurs, the fair value hierarchy is classified on the lowest level of input that is significant to the fair value measurement. The following methods and significant assumptions are used to estimate fair value.

Securities: The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges, if available. This valuation method is classified as Level 1 in the fair value hierarchy. For securities where quoted prices are not available, fair values are calculated on market prices of similar securities, or 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. Matrix pricing relies on the securities’ relationship to similarly traded securities, benchmark curves, and the benchmarking of like securities. Matrix pricing utilizes observable market inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. In instances where broker quotes are used, these quotes are obtained from market makers or broker-dealers recognized to be market participants. This valuation method is classified as Level 2 in the fair value hierarchy. For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators. This valuation method is classified as Level 3 in the fair value hierarchy. Discounted cash flows are calculated using spread to swap and LIBOR curves that are updated to incorporate loss severities, volatility, credit spread and optionality. During times when trading is more liquid, broker quotes are used (if available) to validate the model. Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.

Impaired Loans: An impaired loan is evaluated at the time the loan is identified as impaired and is recorded at fair value less costs to sell. Fair value is measured based on the value of the collateral securing the loan and is classified as Level 3 in the fair value hierarchy. Fair value is determined using several methods. Generally, the fair value of real estate is determined based on appraisals by qualified licensed appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. These routine adjustments are made to adjust the value of a specific property relative to comparable properties for variations in qualities such as location, size, and income production capacity relative to the subject property of the appraisal. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Management routinely applies internal discounts to the value of appraisals used in the fair value evaluation of our impaired loans. The deductions to the appraisal take into account changing business factors and market conditions, as well as potential value impairment in cases where our appraisal date predates a likely change in market conditions. These deductions range from 10% for routine real estate collateral to 25% for real estate that is determined to have a thin trading market or to be specialized collateral. This is in addition to estimated discounts for cost to sell of six to ten percent.

Management also applies discounts to the expected fair value of collateral for impaired loans where the likely resolution involves litigation or foreclosure. Resolution of this nature generally results in receiving lower values for real estate collateral in a more aggressive sales environment. Discounts ranging from 10% to 33% have been utilized in our impairment evaluations when applicable.

Impaired loans are evaluated quarterly for additional impairment. Management obtains updated appraisals on properties securing our loans when circumstances are warranted such as at the time of renewal or when market conditions have significantly changed. This determination is made on a property-by-property basis in light of circumstances in the broader economic climate and the assessment of deterioration of real estate values in the market in which the property is located.

23

Other Real Estate Owned (OREO): OREO is evaluated at the time of acquisition and recorded at fair value as determined by independent appraisal or internal evaluation less estimated cost to sell. Quarterly evaluations of OREO for impairment are driven by property type. For smaller dollar single family homes, management consults with staff from the Bank’s special assets group as well as external realtors and appraisers. Based on these consultations, management determines asking prices for OREO properties being marketed for sale. If the internally evaluated fair value or asking price is below the recorded investment in the property, appropriate write-downs are taken.

For larger dollar commercial real estate properties, management obtains a new appraisal of the subject property or has staff in the special assets group evaluate the latest in-file appraisal in connection with the transfer to OREO. Management generally obtains updated appraisals within five quarters of the anniversary date of ownership unless a sale is imminent. When an asking price is lowered below the most recent appraised value, appropriate write-downs are taken.

Financial assets measured at fair value on a recurring basis at March 31, 2020 and December 31, 2019 are summarized below:

			Fair Value Measurements at March 31, 2020 Using
			(in thousands)
			Quoted Prices In				Significant
			Active Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
Description	Value		(Level 1)		(Level 2)		(Level 3)
Available for sale securities
U.S. Government and federal agency	$	21,104	$	—	$	21,104	$	—
Agency mortgage-backed: residential		89,101		—		89,101		—
Collateralized loan obligations		40,754		—		40,754		—
State and municipal		28,154		—		28,154		—
Corporate bonds		19,544		—		19,544		—
Total	$	198,657	$	—	$	198,657	$	—

			Fair Value Measurements at December 31, 2019 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities
U.S. Government and federal agency	$	22,330	$	—	$	22,330	$	—
Agency mortgage-backed: residential		92,200		—		92,200		—
Collateralized loan obligations		49,419		—		49,419		—
State and municipal		28,366		—		28,366		—
Corporate bonds		16,685		—		16,685		—
Total	$	209,000	$	—	$	209,000	$	—

There were no transfers between Level 1 and Level 2 during 2020 or 2019.

Financial assets measured at fair value on a non-recurring basis are summarized below: 

			Fair Value Measurements at March 31, 2020 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial real estate:
Farmland	$	124	$	—	$	—	$	124
Residential real estate:
1-4 Family		74		—		—		74

24

			Fair Value Measurements at December 31, 2019 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	21	$	—	$	—	$	21
Commercial real estate:
Farmland		245		—		—		245
Residential real estate:
1-4 Family		145		—		—		145

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $218,000 at March 31, 2020 with a valuation allowance of $20,000, resulting in no additional provision for loan losses for the three months ended March 31, 2020. Impaired loans had a carrying amount of $873,000 with a valuation allowance of $193,000, resulting in no additional provision for loan losses for the three months ended March 31, 2019. At December 31, 2019, impaired loans had a carrying amount of $453,000, with a valuation allowance of $42,000.

Carrying amount and estimated fair values of financial instruments were as follows for the periods indicated:

			Fair Value Measurements at March 31, 2020 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	33,148	$	33,148	$	—	$	—	$	33,148
Securities available for sale		198,657		—		198,657		—		198,657
Federal Home Loan Bank stock		6,837		N/A		N/A		N/A		N/A
Loans, net		952,411		—		—		903,898		903,898
Accrued interest receivable		4,219		—		993		3,226		4,219
Financial liabilities
Deposits	$	1,057,900	$	185,658	$	874,347	$	—	$	1,060,005
Federal Home Loan Bank advances		61,349		—		61,357		—		61,357
Junior subordinated debentures		21,000		—		—		14,153		14,153
Subordinated capital note		17,000		—		—		16,095		16,095
Senior Debt		5,000		—		—		4,900		4,900
Accrued interest payable		715		—		509		206		715

			Fair Value Measurements at December 31, 2019 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	30,203	$	30,203	$	—	$	—	$	30,203
Securities available for sale		209,000		—		209,000		—		209,000
Federal Home Loan Bank stock		6,237		N/A		N/A		N/A		N/A
Loans, net		917,895		—		—		925,388		925,388
Accrued interest receivable		4,257		—		1,118		3,139		4,257
Financial liabilities
Deposits	$	1,026,975	$	187,551	$	839,882	$	—	$	1,027,433
Federal Home Loan Bank advances		61,389		—		61,395		—		61,395
Junior subordinated debentures		21,000		—		—		17,466		17,466
Subordinated capital note		17,000		—		—		17,003		17,003
Senior Debt		5,000		—		—		5,022		5,022
Accrued interest payable		1,129		—		647		482		1,129

In accordance with ASU 2016-01, the methods utilized to measure the fair value of financial instruments represent an approximation of exit price; however, an actual exit price may differ.

25

Note 11 – Income Taxes

Deferred tax assets and liabilities were due to the following as of:

	March 31,		December 31,
	2020		2019
	(in thousands)
Deferred tax assets:
Net operating loss carry-forward	$	22,403	$	22,915
Allowance for loan losses		2,283		2,090
OREO write-down		2,665		2,665
Alternative minimum tax credit carry-forward		—		173
Net assets from acquisitions		188		228
Net unrealized loss on securities		646		—
New market tax credit carry-forward		208		208
Nonaccrual loan interest		310		303
Accrued expenses		99		102
Lease liability		719		766
Other		295		309
		29,816		29,759
Deferred tax liabilities:
FHLB stock dividends		563		563
Fixed assets		49		57
Deferred loan costs		170		170
Net unrealized gain on securities		—		331
Lease right-of-use assets		719		766
Other		107		107
		1,608		1,994
Net deferred tax asset	$	28,208	$	27,765

At March 31, 2020, the Company had net federal operating loss carryforwards of $100.5 million, which will begin to expire in 2032, and state net operating loss carryforwards of $32.7 million, which begin to expire in 2025. As of March 31, 2020, a total of $173,000 in alternative minimum tax credit carryforward was reclassified to other assets as it is currently refundable for the 2019 tax year due to the enactment of the Coronavirus Aid Relief and Economic Security Act ("CARES Act").

The Company does not have any beginning and ending unrecognized tax benefits. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. There were no interest and penalties recorded in the income statement or accrued for the three months ended March 31, 2020 or March 31, 2019 related to unrecognized tax benefits.

Under Section 382 of the Internal Revenue Code, as amended (“Section 382”), the Company’s net operating loss carryforwards and other deferred tax assets can generally be used to offset future taxable income and therefore reduce federal income tax obligations. However, the Company's ability to use its NOLs would be limited if there was an “ownership change” as defined by Section 382. This would occur if shareholders owning (or deemed to own under the tax rules) 5% or more of the Company's voting and non-voting common shares increase their aggregate ownership of the Company by more than 50 percentage points over a defined period of time.

In 2015, the Company took two measures to preserve the value of its NOLs. First, the Company adopted a tax benefits preservation plan designed to reduce the likelihood of an “ownership change” occurring as a result of purchases and sales of the Company's common shares. Upon adoption of this plan, the Company declared a dividend of one preferred stock purchase right for each common share outstanding as of the close of business on July 10, 2015. Any shareholder or group that acquires beneficial ownership of 5% or more of the Company (an “acquiring person”) could be subject to significant dilution in its holdings if the Company's Board of Directors does not approve such acquisition. Existing shareholders holding 5% or more of the Company will not be considered acquiring persons unless they acquire additional shares, subject to certain exceptions described in the plan. In addition, the Board of Directors has the discretion to exempt certain transactions and certain persons whose acquisition of securities is determined by the Board not to jeopardize the Company's deferred tax assets. The rights plan was extended in May 2018 to expire upon the earlier of (i) June 30, 2021, (ii) the beginning of a taxable year with respect to which the Board of Directors determines that no tax benefits may be carried forward, (iii) the repeal or amendment of Section 382 or any successor statute, if the Board of Directors determines that the plan is no longer needed to preserve the tax benefits, and (iv) certain other events as described in the plan.

26

On September 23, 2015, the Company’s shareholders approved an amendment to its articles of incorporation to further help protect the long-term value of the Company’s NOLs. The amendment provides a means to block transfers of our common shares that could result in an ownership change under Section 382. The transfer restrictions were extended in May 2018 by shareholder vote and will expire on the earlier of (i) May 23, 2021, (ii) the beginning of a taxable year with respect to which the Board of Directors determines that no tax benefit may be carried forward, (iii) the repeal of Section 382 or any successor statute if our Board determines that the transfer restrictions are no longer needed to preserve the tax benefits of our NOLs, or (iv) such date as the Board otherwise determines that the transfer restrictions are no longer necessary.

The Company and its subsidiaries are subject to U.S. federal income tax and the Company is subject to income tax in the Commonwealth of Kentucky. The Company is no longer subject to examination by taxing authorities for years before 2016.

Note 12 – Stock Plans and Stock Based Compensation

Shares available for issuance under the 2018 Omnibus Equity Compensation Plan (“2018 Plan”) total 273,329. Shares issued to employees under the plan vest annually on the anniversary date of the grant over three years. Shares issued annually to non-employee directors have a fair market value of $25,000 and vest on December 31 in the year of grant.

The fair value of the 2020 unvested shares issued was $349,000, or $17.03 per weighted-average share. The Company recorded $106,000 and $82,000 of stock-based compensation to salaries and employee benefits for the three months ended March 31, 2020 and 2019, respectively. Management expects substantially all of the unvested shares outstanding at the end of the period to vest according to the vesting schedule. A deferred tax benefit of $22,000 and $17,000 was recognized related to this expense during the three months ended March 31, 2020 and 2019, respectively.

The following table summarizes unvested share activity as of and for the periods indicated for the Stock Incentive Plan:

	Three Months Ended					Twelve Months Ended
	March 31, 2020					December 31, 2019
				Weighted					Weighted
				Average					Average
				Grant					Grant
	Shares			Price		Shares			Price
Outstanding, beginning		57,774		$	13.35		116,909		$	8.69
Granted		20,507			17.03		34,501			14.81
Vested		(13,329	)		11.85		(89,388	)		7.83
Forfeited		—			—		(4,248	)		13.07
Outstanding, ending		64,952		$	14.82		57,774		$	13.35

Unrecognized stock-based compensation expense related to unvested shares for the remainder of 2020 and beyond is estimated as follows (in thousands):

April 2020 – December 2020	$	305
2021		311
2022		136
2023		14

27

Note 13 – Earnings per Share

The factors used in the basic and diluted earnings per share computations follow:

	Three Months Ended
	March 31,
	2020		2019
	(in thousands, except share and per share data)
Net income	$	1,840	$	2,839
Less:
Earnings allocated to unvested shares		15		36
Net income available to common shareholders, basic and diluted	$	1,825	$	2,803
Basic
Weighted average common shares including unvested common shares outstanding		7,481,884		7,469,912
Less:
Weighted average unvested common shares		61,363		94,909
Weighted average common shares outstanding		7,420,521		7,375,003
Basic income per common share	$	0.25	$	0.38
Diluted
Add: Dilutive effects of assumed exercises of common stock warrants		—		—
Weighted average common shares and potential common shares		7,420,521		7,375,003
Diluted income per common share	$	0.25	$	0.38

The Company had no outstanding stock options or warrants at March 31, 2020 or 2019.

Note 14 – Regulatory Capital Matters

Banks and bank holding companies are subject to regulatory capital requirements in accordance with Basel III, as administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory action.

The Basel III rules established a “capital conservation buffer” of 2.5% above the regulatory minimum risk-based capital ratios. The minimum ratios are a common equity Tier 1 risk-based capital ratio of 7.0%, a Tier 1 risk-based capital ratio of 8.5%, and a total risk-based capital ratio of 10.5%. An institution is subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if capital levels fall below minimum levels plus the buffer amounts. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions without prior regulatory approval.

As of March 31, 2020, Management believes the Company and Bank met all capital adequacy requirements to which they are subject. As of March 31, 2020, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since the notification that management believes have changed the institution’s category.

28

The following tables show the ratios (excluding capital conservation buffer) and amounts of common equity Tier 1, Tier 1 capital, and total capital to risk-adjusted assets and the leverage ratios for the Bank at the dates indicated (dollars in thousands):

	Actual				Minimum Requirement for Capital Adequacy Purposes				Minimum Requirement to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of March 31, 2020:
Total risk-based capital (to risk-weighted assets)	$	129,035		12.38	$	83,378		8.00	$	104,223		10.00	%
Total common equity Tier 1 risk-based capital (to risk-weighted assets)		119,885		11.50		46,900		4.50		67,745		6.50
Tier 1 capital (to risk-weighted assets)		119,885		11.50		62,534		6.00		83,378		8.00
Tier 1 capital (to average assets)		119,885		9.67		49,607		4.00		62,008		5.00

	Actual					Minimum Requirement for Capital Adequacy Purposes					Minimum Requirement to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2019:
Total risk-based capital (to risk- weighted assets)	$	121,335		12.08	%	$	80,341		8.00	%	$	100,426		10.00	%
Total common equity Tier 1 risk- based capital (to risk-weighted assets)		112,959		11.25			45,192		4.50			65,277		6.50
Tier 1 capital (to risk-weighted assets)		112,959		11.25			60,256		6.00			80,341		8.00
Tier 1 capital (to average assets)		112,959		9.99			45,208		4.00			56,510		5.00

Kentucky banking laws limit the amount of dividends that may be paid to a holding company by its subsidiary banks without prior approval. These laws limit the amount of dividends that may be paid in any calendar year to current year’s net income, as defined in the laws, combined with the retained net income of the preceding two years, less any dividends declared during those periods. In addition, a bank must have positive retained earnings.

Note 15 – Off Balance Sheet Risks, Commitments, and Contingent Liabilities

The Company, in the normal course of business, is party to financial instruments with off balance sheet risk. The financial instruments include commitments to extend credit and standby letters of credit. The contract or notional amounts of these instruments reflect the potential future obligations of the Company pursuant to those financial instruments. Creditworthiness for all instruments is evaluated on a case-by-case basis in accordance with the Company’s credit policies. Collateral from the client may be required based on the Company’s credit evaluation of the client and may include business assets of commercial clients, as well as personal property and real estate of individual clients or guarantors.

An approved but unfunded loan commitment represents a potential credit risk and a liquidity risk, since the Company’s client(s) may demand immediate cash that would require funding. In addition, unfunded loan commitments represent interest rate risk as market interest rates may rise above the rate committed to the Company’s client. Since a portion of these loan commitments normally expire unused, the total amount of outstanding commitments at any point in time may not require future funding. Commitments to make loans are generally made for periods of one year or less.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a client to a third party. The terms and risk of loss involved in issuing standby letters of credit are similar to those involved in issuing loan commitments and extending credit. In addition to credit risk, the Company also has liquidity risk associated with standby letters of credit because funding for these obligations could be required immediately. The Company does not deem this risk to be material. No liability is currently established for standby letters of credit.

29

The following table presents the contractual amounts of financial instruments with off-balance sheet risk for each period ended:

	March 31, 2020				December 31, 2019
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
	(in thousands)
Commitments to make loans	$	12,403	$	26,290	$	11,577	$	20,415
Unused lines of credit		8,684		96,982		7,916		111,230
Standby letters of credit		531		1,336		531		3,164

Commitments to make loans are generally made for periods of one year or less.

In connection with the purchase of loan participations, the Bank entered into risk participation agreements, which had notional amounts totaling $26.6 million at March 31, 2020 and December 31, 2019. The risk participation agreements are not designated against specific assets or liabilities under ASC 815, Derivatives and Hedging, and, therefore, do not qualify for hedge accounting. The derivatives are recorded in other liabilities on the balance sheet at fair value and changes in fair value of both the borrower and the offsetting swap agreements are recorded (and essentially offset) in non-interest income.

In the normal course of business, the Company and its subsidiaries have been named, from time to time, as defendants in various legal actions. Certain of the actual or threatened legal actions may include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages.

The Company contests liability and/or the amount of damages as appropriate in each pending matter. In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases where claimants seek substantial or indeterminate damages or where investigations and proceedings are in the early stages, the Company cannot predict with certainty the loss or range of loss, if any, related to such matters, how or if such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, or other relief, if any, might be. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that the outcome of such pending matters will not have a material adverse effect on the consolidated financial condition of the Company, although the outcome of such matters could be material to the Company’s operating results and cash flows for a particular future period, depending on, among other things, the level of the Company’s revenues or income for such period. The Company will accrue for a loss contingency if (1) it is probable that a future event will occur and confirm the loss and (2) the amount of the loss can be reasonably estimated. The Company is not currently involved in any material litigation.

Note 16 – Revenue from Contracts with Customers

All of the Company’s revenue from customers within the scope of ASC 606 is recognized as non-interest income. A description of the Company’s revenue streams accounted for under ASC 606 follows:

Service Charges on Deposit Accounts: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges are withdrawn from the customer’s account balance.

Bank Card Interchange Income: The Company earns interchange fees from bank cardholder transactions conducted through a third-party payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Prior to adopting ASC 606, the Company reported bank card interchange fees net of expenses. Under ASC 606, bank card interchange fees are reported gross.

Gains/Losses on Sales of OREO: The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. Gains and losses on sales of OREO are netted with OREO expense and reported in non-interest expense.

Other Non-interest Income: Other non-interest income includes revenue from several sources that are within the scope of ASC 606, including title insurance commissions, income from secondary market loan sales, and other transaction-based revenue that is individually immaterial. Other non-interest income included approximately $156,000 and $136,000 of revenue for three months ended March 31, 2020 and March 31, 2019, respectively, within the scope of ASC 606. The remaining other non-interest income for the three months is excluded from the scope of ASC 606.

30

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

This item analyzes the Company’s financial condition, change in financial condition and results of operations. It should be read in conjunction with the unaudited consolidated financial statements and accompanying notes presented in Part I, Item 1 of this report.

Preliminary Note Concerning Forward-Looking Statements

This report contains statements about the future expectations, activities and events that constitute forward-looking statements. Forward-looking statements express our beliefs, assumptions and expectations of our future financial and operating performance and growth plans, taking into account information currently available to us. These statements are not statements of historical fact. The words “believe,” “may,” “should,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “seek,” “plan,” “strive” or similar words, or the negatives of these words, identify forward-looking statements.

Forward-looking statements are not guarantees of performance or results. A forward-looking statement may include the assumptions or bases underlying the forward-looking statement. Management has made assumptions and bases in good faith and believe they are reasonable. However, that estimates based on such assumptions or bases frequently differ from actual results, and the differences can be material. The forward-looking statements included in this report speak only as of the date of the report. Management does not intend to update these statements unless required by applicable laws.

Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we expressed or implied in any forward-looking statements. These risks and uncertainties can be difficult to predict and may be out of management’s control. Factors that could contribute to differences in results include, but are not limited to the following:

● Changes in fiscal, monetary, regulatory and tax policies;

● Changes in political and economic conditions;

• The magnitude and frequency of changes to the Federal Funds Target Rate implemented by the Federal Open Market Committee of the Federal Reserve Bank;

• Long-term and short-term interest rate fluctuations as well as the overall steepness of the yield curve;

• Competitive product and pricing pressures;

• Equity and fixed income market fluctuations;

• Client bankruptcies and loan defaults;

• Inflation;

• Recession;

• Epidemics and pandemics

• Natural disasters impacting Company operations;

● Future acquisitions;

● Integrations and performance of acquired businesses;

● Changes in technology and regulations or the interpretation and enforcement thereof;

● Changes in accounting standards;

● Changes to the Company’s overall internal control environment;

● Success in gaining regulatory approvals when required;

● Information security breaches or cyber security attacks involving either the Company or one of the Company’s third-party service providers; and

● Other risks and uncertainties reported from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”), including Part II Item 1A “Risk Factors” of this report, as well as Part I Item 1A "Risk Factors” of the Company’s December 31, 2019 Annual Report on Form 10-K for the year ended December 31, 2019.

Forward-looking statements are not guarantees of performance or results. A forward-looking statement may include the assumptions or bases underlying the forward-looking statement. Management has made assumptions and bases in good faith and believe they are reasonable. However, estimates based on such assumptions or bases frequently differ from actual results, and the differences can be material. The forward-looking statements included in this report speak only as of the date of the report. Management does not intend to update these statements unless required by applicable laws.

Overview

The Company is a bank holding company headquartered in Louisville, Kentucky. The Company’s common stock is traded on Nasdaq’s Capital Market under the symbol LMST. The Company operates Limestone Bank (the Bank), its wholly owned subsidiary and the eighth largest bank domiciled in the Commonwealth of Kentucky based on total assets. The Bank operates banking offices in 14 counties in Kentucky. The Bank’s markets include metropolitan Louisville in Jefferson County and the surrounding counties of Bullitt and Henry. The Bank serves south central, southern, and western Kentucky from banking centers in Barren, Butler, Daviess, Edmonson, Green, Hardin, Hart, Ohio, and Warren counties. The Bank also has banking centers in Lexington, Kentucky, the second largest city in the state, and Frankfort, Kentucky, the state capital. The Bank is a traditional community bank with a wide range of personal and business banking products and services. As of March 31, 2020, the Company had total assets of $1.27 billion, total loans of $961.6 million, total deposits of $1.06 billion and stockholders’ equity of $104.5 million.

31

The coronavirus pandemic (“COVID-19”) currently impacting the nation has caused a setback to the country’s economy. Since early March, the Company and Bank have felt the impact alongside thousands of businesses across the nation. In response to the global pandemic, and the declarations of emergency at the state and national levels the pandemic has triggered, the Bank has implemented several temporary operational changes to serve customers during the COVID-19 health crisis. Lobby services have been amended to appointment only while drive thru, mobile, and online banking have become the Bank’s primary channels of serving customers. Customer facing employees have been divided into two teams working separate ‘ten day on’ and ‘ten day off’ shifts to ensure a healthy workforce remains available to serve customers. Additionally, operational and support staff have been assigned to work from home where circumstances permit.

The Company reported net income of $1.8 million for the three months ended March 31, 2020, compared with $2.8 million for the first quarter of 2019. Net income before taxes and income tax expense was $2.2 million and $361,000, respectively for the first quarter of 2020, compared with $3.0 million and $123,000, respectively for the first quarter of 2019. Income tax expense for the first quarter of 2019 benefitted $341,000 or $0.05 per basic and diluted common share, from the establishment of a net deferred tax asset related to a change in Kentucky tax law enacted during the first quarter of 2019. The new law eliminates the Kentucky bank franchise tax, which is assessed at a rate of 1.1% of average capital and implements a state income tax for the Bank at a statutory rate of 5%. The new Kentucky income tax will go into effect on January 1, 2021.

Significant items for the three months ended March 31, 2020 are as follows:

● Loan growth outpaced paydowns during the period. Average loans receivable increased approximately $182.7 million or 23.8% to $949.2 million for the quarter ended March 31, 2020, compared with $766.5 million for the first quarter of 2019. This resulted in an increase in interest revenue volume of approximately $2.3 million for the quarter ended March 31, 2020, compared with the first quarter of 2019. Average loans were positively impacted from the branch purchase acquisition, which included approximately $126.8 million in loans at the time of the purchase, as well as loan growth during 2019 and the first quarter of 2020.

● Net interest margin was 3.31% for the first three months of 2020 compared with 3.61% for the first three months of 2019. The yield on earning assets decreased to 4.50% in the first quarter of 2020 as compared to 4.90% in the first quarter of 2019. The decline in yield on earning assets was driven by the impact of falling interest rates on the Bank’s fed funds, certain floating rate investment securities, and loans with variable rate pricing features as the Federal Reserve lowered the federal funds target rate by 75 basis points in the latter half of 2019, 50 basis points on March 6, 2020, and 100 basis points on March 15, 2020. The cost of interest-bearing liabilities decreased from 1.57% in the first quarter of 2019 to 1.45% in the first quarter of 2020 as a result of decreases in short-term interest rates during 2019 and 2020.

● While the Company has experienced historically strong trends in asset quality over the last several quarters and management’s assessment of risk within the portfolio has been low, the Company recorded provision for loan losses expense of $1.1 million in the first quarter of 2020, compared to no provision for loan losses expense in the first quarter of 2019. The first quarter 2020 loan loss provision was attributable to the level of net loan charge-offs for the quarter, to the impact of the increase in loan volume within the portfolio over the quarter, and to changes in the economic and business environment attributable to COVID-19 and the resultant risk it poses for business disruptions for the Bank’s borrowers. Net loan charge-offs were $276,000 for the first quarter of 2020, compared to net loan charge-offs of $194,000 for the first quarter of 2019.

● Loans past due 30-59 days decreased from $1.7 million at December 31, 2019 to $1.2 million at March 31, 2020, and loans past due 60-89 days decreased from $670,000 at December 31, 2019 to $248,000 at March 31, 2020. Total loans past due and nonaccrual loans decreased to $2.9 million at March 31, 2020, from $3.9 million at December 31, 2019.

● In response to requests from borrowers who have been impacted by COVID-19 through business and cash flow interruption, the Bank made short-term loan modifications involving principal deferrals (interest only) and, in other cases, principal and interest deferrals. See the table under “COVID-19 Short-term Loan Concessions” section for detailed discussion.

● At March 31, 2020, foreclosed properties remained unchanged at $3.2 million compared to December 31, 2019, and declined from $3.3 million at March 31, 2019. Operating expenses totaled $16,000 in the first quarter of 2020 compared to operating expenses and fair value write-downs of $166,000 in the first quarter of 2019.

● The ratio of non-performing assets to total assets decreased to 0.41% at March 31, 2020, compared with 0.42% at December 31, 2019, and 0.57% at March 31, 2019.

● Deposits were $1.06 billion at March 31, 2020, compared with $1.03 billion at December 31, 2019. Certificate of deposit balances decreased $9.0 million during the first three months of 2020 to $467.5 million at March 31, 2020, from $476.5 million at December 31, 2019. Interest checking accounts increased $11.6 million, non-interest bearing accounts decreased $1.9 million, money market declined $6.0 million, and savings accounts increased $36.2 million during the quarter ended March 31, 2020.

Application of Critical Accounting Policies

Management continually reviews accounting policies and financial information disclosures. The Company’s more significant accounting policies that require the use of estimates and judgments in preparing the financial statements are summarized in “Application of Critical Accounting Policies” in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operation of our Annual Report on Form 10-K for the calendar year ended December 31, 2019. Management has discussed the development, selection, and application of our critical accounting policies with our Audit Committee. During the first three months of 2020, there were no material changes in the critical accounting policies and assumptions.

32

Results of Operations

The following table summarizes components of income and expense and the change in those components for the three months ended March 31, 2020, compared with the same period of 2019:

	For the Three Months				Change from
	Ended March 31,				Prior Period
	2020		2019		Amount			Percent
	(dollars in thousands)
Gross interest income	$	13,267	$	12,186	$	1,081			8.9	%
Gross interest expense		3,505		3,227		278			8.6
Net interest income		9,762		8,959		803			9.0
Provision for loan losses		1,050		—		1,050			100
Non-interest income		1,724		1,284		440			34.3
Non-interest expense		8,235		7,281		954			13.1
Net income before taxes		2,201		2,962		(761	)		(25.7	)
Income tax expense		361		123		238			193.5
Net income		1,840		2,839		(999	)		(35.2	)

Net income for the three months ended March 31, 2020 totaled $1.8 million, compared with $2.8 million for the comparable period of 2019. Net interest income increased $803,000 from the 2019 first quarter as a result of an increase in earning assets from the branch transaction as well as loan growth. Provision expense of $1.1 million was recorded in the first quarter of 2020 as compared to no provision expense the first quarter of 2019 primarily in response to the level of net loan charge-offs for the quarter, to the impact of the increase in loan volume within the portfolio over the quarter, and to changes in the economic and business environment attributable to COVID-19. Non-interest income increased $440,000 from $1.3 million in the first quarter of 2019 to $1.7 million for the first quarter of 2020 primarily related to service charges on deposit accounts and interchange fee volume increases. Non-interest expense increased $954,000 from $7.3 million in the first quarter of 2019 to $8.2 million in the first quarter of 2020 primarily due to an increase in salaries and benefits connected to the addition of sales talent and associates acquired in the branch transaction.

Net income before taxes and income tax expense was $2.2 million and $361,000, respectively for the first quarter of 2020, compared with $3.0 million and $123,000, respectively for the first quarter of 2019. Income tax expense for the first quarter of 2019 benefitted $341,000 from the establishment of a net deferred tax asset related to a change in Kentucky tax law enacted during the first quarter of 2019. The new law eliminates the Kentucky bank franchise tax, which is assessed at a rate of 1.1% of average capital and implements a state income tax for the Bank at a statutory rate of 5%. The new Kentucky income tax will go into effect on January 1, 2021.

Net Interest Income – Net interest income was $9.8 million for the three months ended March 31, 2020, an increase of $803,000, or 9.0%, compared with $9.0 million for the same period in 2019. Net interest spread and margin were 3.05% and 3.31%, respectively, for the first quarter of 2020, compared with 3.33% and 3.61%, respectively, for the first quarter of 2019.

The interest rate environment remained challenging in the first quarter of 2020 as the Federal Reserve, after lowering rates 75 basis points in the latter half of 2019, lowered the federal funds target rate by 50 basis points on March 6, 2020 and 100 basis points on March 15, 2020. In particular, the Federal Reserve’s actions served to lower rates on the short end of the yield curve impacting yields on fed funds, certain floating rate investment securities, and loans with variable rate pricing features.

The yield on earning assets decreased to 4.50% for the first quarter of 2020, as compared to 4.90% in the first quarter of 2019. Average interest-earning assets were $1.18 billion for the first quarter of 2020, compared with $1.01 billion for the first quarter of 2019, a 17.7% increase, primarily attributable to higher average loans. Average loans receivable increased approximately $182.7 million for the first quarter of 2020 compared with the first quarter of 2019. Average loans were positively impacted from the branch purchase transaction on November 15, 2019, which included approximately $126.8 million of loans at the time of purchase, as well as loan growth during 2019 and the first three months of 2020. The increase in average loans resulted in an increase in interest revenue volume of approximately $2.3 million for the quarter ended March 31, 2020, which was offset by a decrease in interest revenue to due declining rate of $933,000, as compared with the first quarter of 2019. Loan fee income can meaningfully impact net interest income, loan yields, and net interest income. The amount of loan fee income included in total interest income represents eight basis points and 22 basis points of yield on earning assets and net interest margin for the first quarter ended March 31, 2020 and 2019, respectively. Total interest income increased 8.9%, or $1.1 million, for the first quarter of 2020 compared to the first quarter of 2019.

The cost of interest-bearing liabilities decreased to 1.45% for the first quarter of 2020, as compared to 1.57% for the first quarter of 2019. Average interest-bearing liabilities increased by 16.4% to $971.6 million for the first quarter of 2020, as compared to $834.6 million for the first quarter of 2019 due to deposit growth and the completion of the branch acquisition on November 15, 2019, which included approximately $131.8 million in deposits at the time of purchase. Total interest expense increased by 8.6% to $3.5 million for the first quarter of 2020 as compared to the first quarter of 2019. The cost of interest-bearing liabilities for the first quarter of 2020 was also impacted by the subordinated debt issuance at a fixed rate of 5.75% in July 2019. As of March 31, 2020, time deposits comprise $467.5 million of the Company’s liabilities with $311.6 million, or 67%, set to mature in 2020.

33

Average Balance Sheets

The following table presents the average balance sheets for the three-month periods ended March 31, 2020 and 2019, along with the related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.

	Three Months Ended March 31,
	2020								2019
	Average Balance			Interest Earned/Paid		Average Yield/Cost			Average Balance			Interest Earned/Paid		Average Yield/Cost
	(dollars in thousands)
ASSETS
Interest-earning assets:
Loan receivables (1)(2)	$	949,204		$	11,611		4.92	%	$	766,505		$	10,254		5.43	%
Securities
Taxable		193,260			1,467		3.05			191,656			1,573		3.33
Tax-exempt (3)		9,989			70		3.57			13,512			93		3.53
FHLB stock		6,283			40		2.56			7,068			109		6.25
Federal funds sold and other		29,578			79		1.07			31,207			157		2.04
Total interest-earning assets		1,188,314			13,267		4.50	%		1,009,948			12,186		4.90	%
Less: Allowance for loan losses		(8,287	)							(8,855	)
Non-interest earning assets		93,140								74,460
Total assets	$	1,273,167							$	1,075,553
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Certificates of deposit and other time deposits	$	481,797		$	2,233		1.86	%	$	459,709		$	2,048		1.81	%
NOW and money market deposits		310,046			428		0.56			264,847			525		0.80
Savings accounts		74,304			111		0.60			33,557			14		0.17
FHLB advances		62,407			220		1.42			45,524			281		2.50
Junior subordinated debentures		21,000			215		4.12			21,000			263		5.08
Subordinated capital note		17,000			242		5.73			—			—		—
Senior debt		5,000			56		4.50			10,000			96		3.89
Total interest-bearing liabilities		971,554			3,505		1.45	%		834,637			3,227		1.57	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		186,797								142,716
Other liabilities		7,184								4,709
Total liabilities		1,165,535								982,062
Stockholders’ equity		107,632								93,491
Total liabilities and stockholders’ equity	$	1,273,167							$	1,075,553
Net interest income				$	9,762							$	8,959
Net interest spread							3.05	%							3.33	%
Net interest margin							3.31	%							3.61	%

(1) Includes loan fees in both interest income and the calculation of yield on loans.

(2) Calculations include non-accruing loans averaging $1.5 million and $2.1 million, respectively, in average loan amounts outstanding.

(3) Taxable equivalent yields are calculated assuming a federal income tax rate of 21%.

34

Rate/Volume Analysis

The table below sets forth certain information regarding changes in interest income and interest expense for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in rate (changes in rate multiplied by old volume); (2) changes in volume (changes in volume multiplied by old rate); and (3) changes in rate-volume (change in rate multiplied by change in volume). Changes in rate-volume are proportionately allocated between rate and volume variance.

	Three Months Ended March 31, 2020 vs. 2019
	Increase (decrease) due to change in						Net
	Rate			Volume			Change
	(in thousands)
Interest-earning assets:
Loan receivables	$	(933	)	$	2,290		$	1,357
Securities		(113	)		(16	)		(129	)
FHLB stock		(58	)		(11	)		(69	)
Federal funds sold and other		(70	)		(8	)		(78	)
Total increase (decrease) in interest income		(1,174	)		2,255			1,081
Interest-bearing liabilities:
Certificates of deposit and other time deposits		85			100			185
NOW and money market accounts		(177	)		80			(97	)
Savings accounts		66			31			97
FHLB advances		(145	)		84			(61	)
Junior subordinated debentures		(48	)		—			(48	)
Subordinated capital note		—			242			242
Senior debt		14			(54	)		(40	)
Total decrease in interest expense		(205	)		483			278
Increase (decrease) in net interest income	$	(969	)	$	1,772		$	803

Non-Interest Income – The following table presents the major categories of non-interest income for the three months ended March 31, 2020 and 2019:

	For the Three Months
	Ended March 31,
	2020		2019
	(in thousands)
Service charges on deposit accounts	$	668	$	496
Bank card interchange fees		750		508
Income from bank owned life insurance		96		99
Other		210		181
Total non-interest income	$	1,724	$	1,284

Non-interest income for the first quarter of 2020 increased by $440,000, or 34.3%, to $1.7 million compared with $1.3 million for the first quarter of 2019. The increase was primarily related to services charges on deposit accounts and bank card interchange fees. The service charges on deposit accounts and interchange fee volume increases are primarily attributable to the deposit accounts acquired in the branch acquisition transaction on November 15, 2019.

35

Non-interest Expense – The following table presents the major categories of non-interest expense for the three months ended March 31, 2020 and 2019:

	For the Three Months
	Ended March 31,
	2020		2019
	(in thousands)
Salary and employee benefits	$	4,538	$	3,915
Occupancy and equipment		999		898
Professional fees		208		165
Marketing expense		214		227
FDIC insurance		—		108
Data processing expense		359		313
State franchise and deposit tax		360		315
Deposit account related expenses		451		281
Other real estate owned expense		16		166
Litigation and loan collection expense		65		46
Communications expense		218		190
Insurance expense		103		114
Postage and delivery		168		141
Other		536		402
Total non-interest expense	$	8,235	$	7,281

Non-interest expense for the first quarter ended March 31, 2020 increased $954,000, or 13.1%, to $8.2 million compared with $7.3 million for the first quarter of 2019. The increase from the first quarter of 2019 was primarily due to an increase in salaries and employee benefits of $623,000, as the Bank added sales talent and customer facing associates during the latter half of 2019 and branch staff added in connection with the branch purchase transaction. Deposit account related expense increased $170,000, which correlated to the growth in interchange fees. OREO expense decreased $150,000 as the first quarter of 2020 had no valuation write-downs as compared to write-downs of $150,000 in the first quarter of 2019. No FDIC insurance premium expense was recorded in the first quarter of 2020 as the Bank utilized assessment credits. FDIC insurance expense is expected to return to normalized levels in the second quarter of 2020.

Income Tax Expense – Effective tax rates differ from the federal statutory rate of 21% applied to income before income taxes due to the following:

	For the Three Months
	Ended March 31,
	2020			2019
	(in thousands)
Federal statutory rate times financial statement income	$	462		$	622
Effect of:
Tax-exempt income		(14	)		(19	)
Establish state deferred tax asset		(72	)		(341	)
Non-taxable life insurance income		(20	)		(21	)
Restricted stock vesting		(1	)		(126	)
Other, net		6			8
Total	$	361		$	123

Net income before taxes and income tax expense was $2.2 million and $361,000, respectively for the first quarter of 2020, compared with $3.0 million and $123,000, respectively for the first quarter of 2019. Income tax expense for the first quarter of 2019 benefitted $341,000 from the establishment of a net deferred tax asset related to a change in Kentucky tax law enacted during the first quarter of 2019. The new law eliminates the Kentucky bank franchise tax, which is assessed at a rate of 1.1% of average capital and implements a state income tax for the Bank at a statutory rate of 5%. The new Kentucky income tax will go into effect on January 1, 2021.

Analysis of Financial Condition

Total assets increased $28.4 million, or 2.3%, to $1.27 billion at March 31, 2020, from $1.25 billion at December 31, 2019. This increase was primarily attributable to an increase in loans receivable of $35.3 million, partially offset by a decrease in securities available for sale of $10.3 million.

36

Loans Receivable – Loans receivable increased $35.3 million, or 3.8%, during the three months ended March 31, 2020 to $961.6 million as loan growth outpaced paydowns. Our commercial and commercial real estate portfolios increased by an aggregate of $37.8 million, or 6.9% during the first quarter of 2020 and comprised 60.6% of the loan portfolio at March 31, 2020. Residential real estate and consumer portfolios decreased by an aggregate of $4.3 million, or 1.3% during the first quarter of 2020 and comprised 35.5% of the loan portfolio at March 31, 2020.

Loan Portfolio Composition – The following table presents a summary of the loan portfolio at the dates indicated, net of deferred loan fees, by type. There are no foreign loans in our portfolio and other than the categories noted, there is no concentration of loans in any industry exceeding 10% of total loans.

	As of March 31,					As of December 31,
	2020					2019
	Amount		Percent			Amount		Percent
			(dollars in thousands)
Commercial	$	169,176		17.59	%	$	145,551		15.71	%
Commercial Real Estate
Construction		71,267		7.41			64,911		7.01
Farmland		80,579		8.38			79,118		8.54
Nonfarm nonresidential		261,807		27.23			255,459		27.58
Residential Real Estate
Multi-family		75,525		7.85			70,950		7.66
1-4 Family		220,701		22.95			226,629		24.47
Consumer		44,814		4.66			47,790		5.16
Agriculture		36,977		3.85			35,064		3.79
Other		715		0.08			799		0.08
Total loans	$	961,561		100.00	%	$	926,271		100.00	%

Loan Portfolio by Risk Category – The following table presents a summary of the loan portfolio at the dates indicated, by risk category.

	March 31, 2020					December 31, 2019
	Loans		% to Total			Loans		% to Total
	(dollars in thousands)
Pass	$	915,985		95.3	%	$	888,707		95.9	%
Watch		38,464		4.0			27,522		3.0
Special Mention		—		—			—		—
Substandard		7,112		0.7			10,042		1.1
Doubtful		—		—			—		—
Total	$	961,561		100.0	%	$	926,271		100.00	%

Loans receivable increased $35.3 million, or 3.8%, during the three months ended March 31, 2020. Since December 31, 2019, the pass category increased approximately $27.3 million, the watch category increased approximately $10.9 million, and the substandard category decreased approximately $2.9 million. The increase in watch category primarily related to $9.6 million in commercial loans migrating during the first quarter of 2020. The $2.9 million decrease in loans classified as substandard was primarily driven by $3.2 million in payments, $305,000 in charge-offs, and $27,000 in loans upgraded from substandard offset by $563,000 in loans moved to substandard during the quarter.

Loan Delinquency – The following table presents a summary of loan delinquencies at the dates indicated.

	March 31, 2020		December 31, 2019
	(in thousands)
Past Due Loans:
30-59 Days	$	1,158	$	1,747
60-89 Days		248		670
90 Days and Over		—		—
Total Loans Past Due 30-90+ Days		1,406		2,417
Nonaccrual Loans		1,500		1,528
Total Past Due and Nonaccrual Loans	$	2,906	$	3,945

37

During the three months ended March 31, 2020, nonaccrual loans decreased by $28,000 to $1.5 million. During the three months ended March 31, 2020, loans past due 30-59 days decreased from $1.7 million at December 31, 2019 to $1.2 million at March 31, 2020. Loans past due 60-89 days decreased from $670,000 at December 31, 2019 to $248,000 at March 31, 2020. This represents a $1.0 million decrease from December 31, 2019 to March 31, 2020, in loans past due 30-89 days. This trend in delinquency levels is considered during the evaluation of qualitative trends in the portfolio when establishing the general component of the allowance for loan losses.

Troubled Debt Restructuring - A troubled debt restructuring (TDR) occurs when the Bank has agreed to a loan modification in the form of a concession to a borrower who is experiencing financial difficulty. The Bank’s TDRs typically involve a reduction in interest rate, a deferral of principal for a stated period of time, or an interest only period. All TDRs are considered impaired, and the Bank has allocated reserves for these loans to reflect the present value of the concessionary terms granted to the borrower. If the loan is considered collateral dependent, it is reported net of allocated reserves, at the fair value of the collateral less cost to sell.

The Bank does not have a formal loan modification program. If a borrower is unable to make contractual payments, management reviews the particular circumstances of that borrower’s situation and determine whether or not to negotiate a revised payment stream. The goal when restructuring a credit is to afford the borrower a reasonable period of time to remedy the issue causing cash flow constraints so that the credit may return to performing status over time. If a borrower fails to perform under the modified terms, the loan(s) are placed on nonaccrual status and collection actions are initiated.

Management periodically reviews renewals and modifications of previously identified TDRs for which there was no principal forgiveness, to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification did not contain a concessionary interest rate or other concessionary terms, management considers the potential removal of the TDR classification. If deemed appropriate based upon current underwriting, the TDR classification is removed as the borrower has complied with the terms of the loan at the date of renewal/modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan after the date of the renewal/modification. Additionally, the TDR classification may be removed in circumstances in which the Company performs a non-concessionary re-modification of the loan at terms that were considered to be at market for loans with comparable risk. Management expects the borrower will continue to perform under the re-modified terms based on the borrower’s past performance.

If the borrower fails to perform, management places the loan on nonaccrual status and seeks to liquidate the underlying collateral. The nonaccrual policy for restructured loans is identical to the nonaccrual policy for all loans. The policy calls for a loan to be reported as nonaccrual if it is maintained on a cash basis because of deterioration in the financial condition of the borrower, payment in full of principal and interest is not expected, or principal or interest is past due 90 days or more unless the assets are both well secured and in the process of collection. Changes in value for impairment, including the amount attributed to the passage of time, are recorded entirely within the provision for loan losses. Upon determination that a loan is collateral dependent, the loan is charged down to the fair value of collateral less estimated costs to sell.

At March 31, 2020 and December 31, 2019, the Bank had three restructured loans totaling $466,000 and $475,000, respectively, with borrowers who experienced deterioration in financial condition. In general, these loans were granted interest rate reductions to provide cash flow relief to borrowers experiencing cash flow difficulties. The Bank had no restructured loans that had been granted principal payment deferrals until maturity at March 31, 2020 or December 31, 2019. There were no concessions made to forgive principal relative to these loans, although partial charge-offs have been recorded for certain restructured loans. In general, these loans are secured by first liens on 1-4 residential properties or commercial real estate properties. At March 31, 2020 and December 31, 2019, all TDRs were performing according to their modified terms.

There were no modifications granted during 2020 and two modifications granted during 2019 that resulted in loans being identified as TDRs. See “Note 3 – Loans,” to the financial statements for additional disclosure related to troubled debt restructuring.

38

COVID-19 Short-term Loan Concessions - In response to requests from borrowers who have been impacted by COVID-19 through business and cash flow interruption, the Bank made short-term loan modifications as defined under section 4013 of the Coronavirus Aid Relief and Economic Security Act ("CARES Act") involving principal deferrals (interest only) and, in other cases, principal and interest deferrals. The following table details those modifications by loan category and type as of March 31, 2020 and April 29, 2020:

	March 31, 2020				April 29, 2020
	Amount		Number		Amount		Number
	(dollars in thousands)
Commercial:
Interest only	$	103		4	$	392		7
Principal and interest deferral		413		6		10,578		25
Commercial Real Estate
Construction:
Interest only		—		—		—		—
Principal and interest deferral		—		—		7,052		4
Farmland:
Interest only		—		—		9		1
Principal and interest deferral		498		4		2,296		14
Nonfarm nonresidential:
Interest only		4,796		15		18,217		31
Principal and interest deferral		3,877		7		86,534		59
Residential Real Estate
Multi-family:
Interest only		—		—		1,740		2
Principal and interest deferral		188		1		619		2
1-4 Family:
Interest only		143		2		4,450		17
Principal and interest deferral		2,046		11		11,291		66
Consumer:
Interest only		50		5		74		8
Principal and interest deferral		7		2		41		5
Agriculture:
Interest only		—		—		—		—
Principal and interest deferral		—		—		—		—
Other:
Interest only		—		—		—		—
Principal and interest deferral		—		—		—		—
Total modified loans	$	12,121		57	$	143,293		241

Retail purpose commercial real estate operators, as well as hotel and restaurant operators, have been disproportionately impacted by COVID-19. As of March 31, 2020, the Bank had loans totaling $63.9 million secured by retail purpose commercial real estate, $50.4 million secured by hotel and lodging real estate, and $30.9 million secured by limited and full-service restaurant real estate, or 6.6%, 5.2%, and 3.2% of total loans, respectively. As of April 29, 2020, loans with outstanding principal balances of $22.9 million for retail purpose commercial real estate, $49.2 million for hotel and lodging real estate, and $21.9 million for limited and full-service restaurant real estate were granted principal and interest deferrals.

The Bank is also working with borrowers to secure SBA guaranteed financing for those who qualify through the SBA Paycheck Protection Program, which became available in early April through the CARES Act. As of April 29, 2020, the Bank had secured loan guarantees for 414 borrowers totaling approximately $40.5 million.

39

Non-Performing Assets – Non-performing assets consist of certain restructured loans for which interest rate or other terms have been renegotiated, loans past due 90 days or more still on accrual, loans on which interest is no longer accrued, real estate acquired through foreclosure and repossessed assets. The following table sets forth information with respect to non-performing assets as of March 31, 2020 and December 31, 2019.

	March 31, 2020			December 31, 2019
	(dollars in thousands)
Loans on nonaccrual status	$	1,500		$	1,528
Troubled debt restructurings on accrual		466			475
Past due 90 days or more still on accrual		—			—
Total non-performing loans		1,966			2,003
Real estate acquired through foreclosure		3,225			3,225
Other repossessed assets		—			—
Total non-performing assets	$	5,191		$	5,228
Non-performing loans to total loans		0.20	%		0.22	%
Non-performing assets to total assets		0.41	%		0.42	%
Allowance for non-performing loans	$	33		$	48
Allowance for non-performing loans to non-performing loans		1.68	%		2.40	%

Nonperforming loans at March 31, 2020, were $2.0 million, or 0.20% of total loans, compared with $2.0 million, or 0.22% of total loans at December 31, 2019, and $2.8 million, or 0.36% of total loans at March 31, 2019.

Provision and Allowance for Loan Losses – The Bank maintains an allowance for loan losses believed to be sufficient to absorb probable incurred losses existing in the loan portfolio. Management evaluates the adequacy of the allowance using, among other things, historical loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral and current economic conditions and trends. The allowance may be allocated for specific loans or loan categories, but the entire allowance is available for any loan. The allowance consists of specific and general components. The specific component relates to loans that are individually evaluated and measured for impairment. The general component is based on historical loss experience adjusted for qualitative environmental factors. Management develops allowance estimates based on actual loss experience adjusted for current economic conditions and trends. Allowance estimates are a prudent measurement of the risk in the loan portfolio applied to individual loans based on loan type. If the mix and amount of future charge-off percentages differ significantly from the assumptions used by management in making its determination, management may be required to materially increase its allowance for loan losses and provision for loan losses, which could adversely affect results.

While the Company has experienced historically strong trends in asset quality over the last several quarters and management’s assessment of risk in the loan portfolio has been low, a provision of $1.05 million was recorded in the first quarter of 2020 compared to no provision for loan losses in the first quarter of 2019. The first quarter 2020 loan loss provision was attributable to the level of net loan charge-offs for the quarter, the impact of the increase in loan volume within the portfolio over the quarter, and to changes in the economic and business environment attributable to COVID-19, the state and national emergencies that have been declared and the resultant risk the pandemic poses for business disruptions for the Bank’s borrowers.

While the Company expects the U.S. Government’s economic response to the COVID-19 pandemic through monetary policy and fiscal stimulus will provide meaningful support to the economy, management deemed it prudent to increase the allowance for loan losses through its qualitative environmental factors to account for the pandemic risk.

40

The following table sets forth an analysis of loan loss experience as of and for the periods indicated: 

	Three Months Ended March 31,						Year Ended December 31,
	2020			2019			2019
	(dollars in thousands)
Balances at beginning of period	$	8,376		$	8,880		$	8,880
Loans charged-off:
Real estate		104			97			322
Commercial		29			—			37
Consumer		161			180			663
Agriculture		41			1			266
Other		—			—			—
Total charge-offs		335			278			1,288
Recoveries:
Real estate		41			63			597
Commercial		5			5			106
Consumer		4			16			75
Agriculture		8			—			3
Other		1			—			3
Total recoveries		59			84			784
Net charge-offs (recoveries)		276			194			504
Provision (negative provision) for loan losses		1,050			—			—
Balance at end of period	$	9,150		$	8,686		$	8,376
Allowance for loan losses to period-end loans		0.95	%		1.10	%		0.90	%
Net charge-offs (recoveries) to average loans		0.12	%		0.10	%		0.06	%
Allowance for loan losses to non-performing loans		465.41	%		306.82	%		418.17	%

The allowance for loan losses to total loans was 0.95% at March 31, 2020, compared to 0.90% at December 31, 2019, and 1.10% at March 31, 2019. Loans acquired in the November 2019 branch transaction totaled $118.0 million at March 31, 2020 and $124.7 million at December 31, 2019. These loans were recorded at fair value as determined by an independent third party. The remaining discount associated with the fair value purchase accounting adjustments on the acquired loans was $427,000 at March 31, 2020, compared to $480,000 at December 31, 2019. Any subsequent deterioration of these acquired loans may require an adjustment through the allowance for loan loss. Excluding loans acquired in the November 2019 branch transaction, the allowance for loan losses to total loans was 1.08% and 1.04% at March 31, 2020 and December 31, 2019, respectively. Net loan charge-offs were $276,000 for the first quarter of 2020, compared to $194,000 for the first quarter of 2019. The allowance for loan losses to non-performing loans was 465.41% at March 31, 2020, compared with 418.17% at December 31, 2019, and 306.82% at March 31, 2019. Net charge-offs in the first three months of 2019 totaled $276,000 compared to net charge-offs of $194,000 in the first three months of 2019.

The majority of nonperforming loans are secured by real estate collateral, and the underlying collateral coverage for nonperforming loans supports the likelihood of collection of principal. Management has assessed these loans for collectability and considered, among other things, the borrower’s ability to repay, the value of the underlying collateral, and other market conditions to ensure the allowance for loan losses is adequate to absorb probable incurred losses. Based on prior charge-offs, the current recorded investment in loans individually evaluated for impairment in the commercial real estate and residential real estate segments of the portfolio are significantly below the unpaid principal balance for those loans. The recorded investment net of the allocated allowance was 56.44% and 47.50% of the unpaid principal balance in the commercial real estate and residential real estate segments of the portfolio, respectively, at March 31, 2020.

Investment Securities – The securities portfolio serves as a source of liquidity and earnings and contributes to the management of interest rate risk. Investments are made in various types of liquid assets, including U.S. Treasury obligations and securities of various federal agencies, obligations of states and political subdivisions, corporate bonds, and collateralized loan obligations. The investment portfolio decreased by $10.3 million, or 4.9%, to $198.7 million at March 31, 2020, compared with $209.0 million at December 31, 2019.

41

The following table sets forth the carrying value of our securities portfolio at the dates indicated:

	March 31, 2020									December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(dollars in thousands)
Securities available for sale
U.S. Government andfederal agencies	$	20,751	$	353	$	—		$	21,104	$	22,281	$	196	$	(147	)	$	22,330
Agency mortgage-backed residential		86,840		2,428		(167	)		89,101		91,269		1,186		(255	)		92,200
Collateralized loan obligations		44,732		—		(3,978	)		40,754		49,831		—		(412	)		49,419
State and municipal		28,301		346		(493	)		28,154		27,819		550		(3	)		28,366
Corporate bonds		20,831		199		(1,486	)		19,544		16,472		213		—			16,685
Total available for sale	$	201,455	$	3,326	$	(6,124	)	$	198,657	$	207,672	$	2,145	$	(817	)	$	209,000

The Bank owns Collateralized Loan Obligations (CLOs), which are debt securities secured by professionally managed portfolios of senior-secured loans to corporations. CLOs are typically managed large non-bank financial institutions or banks and are typically $300 million to $1 billion in size, contain one hundred or more loans and have five to six credit tranches ranging from AAA, AA, A, BBB, BB, B and equity tranche. Interest and principal are paid first to the AAA tranche then to the next lower rated tranche. Losses are borne first by the equity tranche then by the subsequently higher rated tranche. CLOs may be less liquid than government securities from time to time and volatility in the CLO market may cause the value of these investments to decline.

The market value of CLOs may be affected by, among other things, changes in composition of the underlying loans, changes in the cash flows from the underlying loans, defaults and recoveries on the underlying loans, capital gains and losses on the underlying loans, prepayments on the underlying loans, and other conditions or economic factors. The fair value of the Bank’s CLOs declined by approximately $3.6 million, or 8% of amortized cost, during the first quarter of 2020 as market liquidity within the CLO sector was disrupted by COVID-19.

Although the Bank attempts to mitigate the credit and liquidity risks associated with CLOs by purchasing CLOs with credit ratings of A or higher, completing pre-purchase due diligence, and through ongoing monitoring, no assurance can be given that these risk mitigation efforts will be successful. At March 31, 2020, $25.7 million and $15.0 million of our CLOs were AA and A rated, respectively. There were no CLOs rated below A and none of the CLOs were subject to ratings downgrade in 2019 or in the first quarter of 2020. Stress testing was completed on each security in the CLO portfolio as of quarter-end. Each security in the portfolio passed, without dollar loss, a stress scenario characterized as severe, which assumed a ten percent per annum constant prepayment rate, a twelve percent per annum constant default rate for four years followed by a four percent rate thereafter, and a forty-five percent recovery rate on a one-year lag. During the first quarter, one of the CLOs in the investment portfolio rated AA with a book value of $5.0 million was called and redeemed at par value or $5.0 million by the issuer. The Bank’s CLOs are all floating rate with rates set on a quarterly basis at three-month LIBOR plus a spread.

The fair value of the Bank’s corporate bond portfolio was also impacted by market disruption and declining rates, resulting in a fair value decline of approximately $1.5 million, or 7% of amortized cost, during the first quarter. The corporate bond portfolio consists of ten subordinated debt securities of U.S. banks and bank holding companies with maturities ranging from 2024 to 2037. The securities are either fixed for five years converting to floating at an index over LIBOR or floating at an index over LIBOR from inception. Management regularly monitors the financial condition of these corporate issuers by reviewing their regulatory and public filings.

The Bank has the intent and ability to hold its CLO and corporate debt securities to maturity and, at this juncture, has determined the value decline is temporary in nature.

Foreclosed Properties – Foreclosed properties at March 31, 2020 were $3.2 million compared with $3.3 million at March 31, 2019 and $3.2 million at December 31, 2019. See Note 5, “Other Real Estate Owned,” to the financial statements. Management values foreclosed properties at fair value less estimated costs to sell when acquired and expects to liquidate these properties to recover the investment in the due course of business.

OREO is recorded at fair market value less estimated cost to sell at time of acquisition. Any write-down of the property at the time of acquisition is charged to the allowance for loan losses. When foreclosed properties are acquired, management obtains a new appraisal or has staff from the Bank’s special assets group evaluate the latest in-file appraisal in connection with the transfer to OREO. Management typically obtains updated appraisals within five quarters of the anniversary date of ownership unless a sale is imminent. Subsequent reductions in fair value are recorded as non-interest expense when a new appraisal indicates a decline in value or in cases where a listing price is lowered below the appraisal amount.

42

Operating expenses for OREO totaled $16,000 for the three months ended March 31, 2020, compared to write-downs and operating expenses of $166,000 for the three months ended March 31, 2019. There were no fair value write-downs recorded during the three months ended March 31, 2020, compared with write-downs of $150,000 for the three months ended March 31, 2019.

Liabilities – Total liabilities at March 31, 2020 were $1.2 billion compared with $1.1 billion at December 31, 2019, an increase of $29.7 million, or 2.6%. This increase was primarily attributable to an increase in total deposits of $30.9 million.

Deposits are the primary source of funds. The following table sets forth the average daily balances and weighted average rates paid for deposits for the periods indicated:

	For the Three Months					For the Year
	Ended March 31,					Ended December 31,
	2020					2019
	Average		Average			Average		Average
	Balance		Rate			Balance		Rate
	(dollars in thousands)
Demand	$	186,797				$	151,299
Interest checking		153,965		0.36	%		104,077		0.30	%
Money market		156,081		0.74			161,610		1.06
Savings		74,304		0.60			36,035		0.19
Certificates of deposit		481,797		1.86			483,222		1.98
Total deposits	$	1,052,944		1.06	%	$	936,243		1.25	%

The following table shows at March 31, 2020 the amount of time deposits of $250,000 or more by time remaining until maturity (in thousands):

Maturity Period
(in thousands)
Three months or less	$	29,235
Three months through six months		13,076
Six months through twelve months		15,633
Over twelve months		6,956
Total	$	64,900

Liquidity

Liquidity risk arises from the possibility the Company may not be able to satisfy current or future financial commitments or may become unduly reliant on alternative funding sources. The objective of liquidity risk management is to ensure that the Company meets the cash flow requirements of depositors and borrowers, as well as operating cash needs, taking into account all on- and off-balance sheet funding demands. Liquidity risk management also involves ensuring that cash flow needs are met at a reasonable cost. Management maintains an investment and funds management policy, which identifies the primary sources of liquidity, establishes procedures for monitoring and measuring liquidity, and establishes minimum liquidity requirements in compliance with regulatory guidance. The Asset Liability Committee regularly monitors and reviews our liquidity position.

Funds are available to the Bank from a number of sources, including the sale of securities in the available for sale investment portfolio, principal pay-downs on loans and mortgage-backed securities, customer deposit inflows, and other wholesale funding.

43

The Bank also borrows from the FHLB to supplement funding requirements. At March 31, 2020, the Bank had an unused borrowing capacity with the FHLB of $53.6 million. Advances are collateralized by first mortgage residential loans and borrowing capacity is based on the underlying book value of eligible pledged loans.

The Bank also has available on an unsecured basis federal funds borrowing lines from a correspondent bank totaling $5.0 million. Management believes the sources of liquidity are adequate to meet expected cash needs for the foreseeable future. Historically, the Bank has also utilized brokered and wholesale deposits to supplement its funding strategy. At March 31, 2020, the Bank had no brokered deposits.

The Company uses cash on hand to service senior debt, the subordinated capital note, junior subordinated debentures, and to provide for operating cash flow needs. The Company also may issue common equity, preferred equity and debt to support cash flow needs and liquidity requirements. The senior debt loan agreement requires the Company to maintain a minimum of $2.5 million in cash on hand. At March 31, 2020, cash on hand totaled $3.8 million.

Capital

Stockholders’ equity decreased $1.2 million to $104.5 million at March 31, 2020, compared with $105.8 million at December 31, 2019 primarily due to the other comprehensive loss for the quarter of $3.1 million, offset by current year net income of $1.8 million.

The following table shows the ratios of Tier 1 capital, common equity Tier 1 capital, and total capital to risk-adjusted assets and the leverage ratios (excluding the capital conservation buffer) for the Bank at the dates indicated:

	Regulatory Minimums			Well-Capitalized Minimums			March 31, 2020			December 31, 2019
Tier 1 Capital		6.0	%		8.0	%		11.50	%		11.25	%
Common equity Tier 1 capital		4.5			6.5			11.50			11.25
Total risk-based capital		8.0			10.0			12.38			12.08
Tier 1 leverage ratio		4.0			5.0			9.67			9.99

Failure to meet minimum capital requirements could result in discretionary actions by regulators that, if taken, could have a materially adverse effect on our financial condition.

The Basel III rules also established a “capital conservation buffer” of 2.5% above the regulatory minimum risk-based capital ratios. The minimum ratios are a common equity Tier 1 risk-based capital ratio of 7.0%, a Tier 1 risk-based capital ratio of 8.5%, and a total risk-based capital ratio of 10.5%. An institution is subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if capital levels fall below minimum levels plus the buffer amounts. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

44

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Given an instantaneous 100 basis point increase in interest rates, the base net interest income would decrease by an estimated 1.6% at March 31, 2020, compared with a decrease of 2.3% at December 31, 2019. Given a 200 basis point increase in interest rates, base net interest income would decrease by an estimated 2.4% at March 31, 2020, compared with a decrease of 5.1% at December 31, 2019.

The following table indicates the estimated impact on net interest income under various interest rate scenarios for the twelve months following March 31, 2020, as calculated using the static shock model approach:

	Change in Future Net Interest Income
	Dollar Change			Percentage Change
	(dollars in thousands)
+ 200 basis points	$	(1,026	)		(2.44	)%
+ 100 basis points		(680	)		(1.62	)
- 100 basis points		100			0.24
- 200 basis points		(943	)		(2.24	)

Item 4. Controls and Procedures

As of the end of the quarterly period covered by this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)). Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were, to the best of their knowledge, effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms as of such date.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

45

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

In the normal course of business, the Company and its subsidiaries have been named, from time to time, as defendants in various legal actions. Certain of the actual or threatened legal actions may include claims for substantial compensatory and/or punitive damages or claims for indeterminate amount of damages. Litigation is subject to inherent uncertainties and unfavorable outcomes could occur.

The Company contests liability and/or the amount of damages as appropriate in each pending matter. In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases where claimants seek substantial or indeterminate damages or where investigations and proceedings are in the early stages, the Company cannot predict with certainty the loss or range of loss, if any, related to such matters, how or if such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, or other relief, if any, might be. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that the outcome of such pending matters will not have a material adverse effect on the consolidated financial condition of the Company, although the outcome of such matters could be material to the Company’s operating results and cash flows for a particular future period, depending on, among other things, the level of the Company’s revenues or income for such period. The Company will accrue for a loss contingency if (1) it is probable that a future event will occur and confirm the loss and (2) the amount of the loss can be reasonably estimated.

The Company is not currently involved in any material litigation.

Item 1A. Risk Factors

The following risk factor supplements the “Risk Factors” section in our 2019 Annual Report and Part I Item 1A of our 2019 Form 10-K.

The COVID-19 Pandemic Creates Significant Risks and Uncertainties for the Company’s Business.

In March 2020, the World Health Organization declared novel coronavirus disease 2019 ("COVID-19") as a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities, including those in markets in which the Company is located or does business.

As a result, the demand for the Company’s products and services has been, and will continue to be, significantly impacted. Furthermore, the pandemic could influence the recognition of credit losses in the Company’s loan portfolio and increase its allowance for loan losses as both businesses and consumers are negatively impacted by the economic downturn. In addition, governmental actions are meaningfully influencing the interest-rate environment, which could adversely affect the Company’s results of operations and financial condition. The business operations of the Bank may also be disrupted if significant portions of its workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic, travel restrictions, technology limitations and/or disruptions. Furthermore, the business operations of the Company and Bank have been, and may again in the future be, disrupted due to vendors and third-party service providers being unable to work or provide services effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic.

In response to the pandemic, the Bank has made certain accommodations to customers, which may negatively impact revenue and other results of operations of the Company in the near term and, if not effective in mitigating the effect of COVID-19 on the Company’s customers, may adversely affect the Company’s business and results of operations more substantially over a longer period of time.

The extent to which the COVID-19 pandemic impacts the Company’s business, liquidity, asset valuations such as goodwill, loan collections, results of operations, and financial condition, as well as its regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic. Moreover, the effects of the COVID-19 pandemic may heighten many of the other risks described in the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K.

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

The following chart depicts information regarding the shares of restricted stock that were withheld to satisfy required tax withholdings upon vesting of restricted stock awarded under the Company’s equity compensation plan.

Period	Total Shares Purchased (Withheld)	Average Price Paid (Credited) Per Share
February 2020	1,339	$17.04
March 2020	1,838	$7.50

The Company does not have a publicly announced share plan or program.

Item 3. Default Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable

46

Item 6. Exhibits

(a)           Exhibits

The following exhibits are filed or furnished as part of this report:

Exhibit Number	Description of Exhibit
3.1		Articles of Incorporation of the Company, restated to reflect amendments. Filed as Exhibit 3.1 to the Quarterly Report on Form 10-Q filed August 2, 2019 and incorporated by reference.
3.3		Amended and Restated Bylaws of Limestone Bancorp, Inc. dated June 18, 2018. Exhibit 3.2 to Form 8-K filed June 6, 2018 is hereby incorporated by reference.
4.1		Tax Benefits Preservation Plan, dated as of June 25, 2015, between the Company and American Stock Transfer Company, as Rights Agent. Exhibit 3.1 to Form 8-K filed June 29, 2015 is incorporated by reference.
4.2		Amendment No. 1 to the Tax Benefits Preservation Plan, dated August 4, 2015. Exhibit 4.2 to the Quarterly Report on Form 10-Q filed August 5, 2015 is incorporated by reference.
4.3		Amendment No. 2 to the Tax Benefits Preservation Plan dated May 23, 2018. Exhibit 4 to the Form 8-K filed May 23, 2018 is incorporated by reference.
4.4		Amendment No. 3 to the Limestone Bancorp, Inc. Tax Benefits Preservation Plan, dated November 25, 2019. Exhibit 4.4 to the Form 8-K filed November 27, 2019 is incorporated herein by reference.
31.1	Certification of Principal Executive Officer, pursuant to Rule 13a - 14(a).
31.2	Certification of Principal Financial Officer, pursuant to Rule 13a - 14(a).
32.1	Certification of Principal Executive Officer, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial Officer, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial statements from the Company’s Quarterly Report on Form 10Q for the quarter ended March 31, 2020, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statement of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements.

The Company has other long-term debt agreements that meet the exclusion set forth in Section 601 (b)(4)(iii)(A) of Regulation S-K. The Company hereby agrees to furnish a copy of such agreements to the Securities and Exchange Commission upon request.

47

SIGNATURES

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

	LIMESTONE BANCORP, INC.
	(Registrant)
May 1, 2020	By:	/s/ John T. Taylor
		John T. Taylor
		Chief Executive Officer
May 1, 2020	By:	/s/ Phillip W. Barnhouse
		Phillip W. Barnhouse
		Chief Financial Officer

48

EX-31.1

Exhibit 31.1

Limestone Bancorp, Inc.

Rule 13a-14(a) Certification

of Chief Executive Officer

I, John T. Taylor, Chief Executive Officer of Limestone Bancorp, Inc. (the “Company”), certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of the Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  May 1, 2020	/s/ John T. Taylor
	John T. Taylor
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Limestone Bancorp, Inc.

Rule 13a-14(a) Certification

of Chief Financial Officer

I, Phillip W. Barnhouse, Chief Financial Officer of Limestone Bancorp, Inc. (the “Company”), certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of the Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  May 1, 2020	/s/ Phillip W. Barnhouse
	Phillip W. Barnhouse
	Chief Financial Officer

EX-32.1

   Exhibit 32.1

SECTION 906 CERTIFICATION

In connection with the Quarterly Report on Form 10-Q of Limestone Bancorp, Inc. (the “Company”) for the quarterly period ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John T. Taylor, Chief Executive Officer of the Company, do hereby certify, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	LIMESTONE BANCORP, INC.
Dated:  May 1, 2020	By:	/s/ John T. Taylor
		John T. Taylor
		Chief Executive Officer

EX-32.2

Exhibit 32.2

SECTION 906 CERTIFICATION

In connection with the Quarterly Report on Form 10-Q of Limestone Bancorp, Inc. (the “Company”) for the quarterly period ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Phillip W. Barnhouse, Chief Financial Officer of the Company, do hereby certify, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	LIMESTONE BANCORP, INC.
Dated:  May 1, 2020	By:	/s/ Phillip W. Barnhouse
		Phillip W. Barnhouse
		Chief Financial Officer

XML

Note 13 - Earnings per Share

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

1

3

– Earnings per Share

The factors used in the basic and diluted earnings per share computations follow:

	Three Months Ended
	March 31 ,
	20 20		201 9
	(in thousands, except share and per share data)
Net income	$	1,840	$	2,839
Less:
Earnings allocated to unvested shares		15		36
Net income available to common shareholders, basic and diluted	$	1,825	$	2,803
Basic
Weighted average common shares including unvested common shares outstanding		7,481,884		7,469,912
Less:
Weighted average unvested common shares		61,363		94,909
Weighted average common shares outstanding		7,420,521		7,375,003
Basic income per common share	$	0.25	$	0.38
Diluted
Add: Dilutive effects of assumed exercises of common stock warrants		—		—
Weighted average common shares and potential common shares		7,420,521		7,375,003
Diluted income per common share	$	0.25	$	0.38

The Company had

no

outstanding stock options or warrants at

March 31, 2020

or

2019.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

– The consolidated financial statements include Limestone Bancorp, Inc. (Company) and its subsidiary, Limestone Bank, Inc. (Bank). The Company owns a

100%

interest in the Bank. All significant inter-company transactions and accounts have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form

10

-Q and Rule

10

-

01

of Regulation S-

X.

 Accordingly, the financial statements do

not

include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the

three

months ended

March 31, 2020

are

not

necessarily indicative of the results that

may

be expected for the entire year. A description of other significant accounting policies is presented in the notes to the Consolidated Financial Statements for the year ended

December 31, 2019

included in the Company’s Annual Report on Form

10

-K.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

– To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ.

In

March 2020,

the World Health Organization declared novel coronavirus disease

2019

("COVID-

19"

) as a global pandemic. The COVID-

19

pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities, including those in markets in which the Company is located or does business.

The extent to which the COVID-

19

pandemic impacts the Company’s business, liquidity, asset valuations, results of operations, and financial condition, as well as its regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain, including the scope and duration of the pandemic and actions taken by governmental authorities and other

third

parties in response to the pandemic. Moreover, the effects of the COVID-

19

pandemic

may

have a material adverse effect on all or a combination of valuation impairments on the Company's intangible assets, investments, loans, or deferred tax assets.

Reclassification, Comparability Adjustment [Policy Text Block]

Reclassifications

– Some items in the prior year financial statements were reclassified to conform to the current presentation. The reclassifications did

not

impact net income or stockholders’ equity.

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Standards

–

In

June 2016,

the FASB issued ASU

No.

2016

-

13,

Financial Instruments – Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments. The final standard will change estimates for credit losses related to financial assets measured at amortized cost such as loans, held-to-maturity debt securities, and certain other contracts. For estimating credit losses, the FASB is replacing the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (CECL) model. Under the CECL model, certain financial assets that are carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, are required to be presented at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is

first

added to the balance sheet and periodically thereafter. This differs significantly from the “incurred loss” model required under current GAAP, which delays recognition until it is probable a loss has been incurred. The change could materially affect how the allowance for loan losses is determined. The impact of CECL model implementation is being evaluated, but it is expected that a

one

-time cumulative-effect adjustment to the allowance for loan losses will be recognized in retained earnings on the consolidated balance sheet as of the beginning of the

first

reporting period in which the new standard is effective, as is consistent with regulatory expectations set forth in interagency guidance. In

December 2018,

the OCC, The Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to the credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a

three

-year period the day-

one

adverse effects on regulatory capital that

may

result from adoption of the new accounting standard. In

October 2019,

the FASB voted to delay implementation for smaller reporting companies, private companies, and

not

-for-profit entities. The Company currently qualifies as a smaller reporting company. Companies qualifying for the delay will be required to implement CECL for fiscal year and interim periods beginning after

December 15, 2022.

XML

Note 5 - Other Real Estate Owned (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Real Estate Properties [Table Text Block]

	March 31, 20 20		December 31, 201 9
	(in thousands)
Commercial Real Estate:
Construction, land development, and other land	$	3,225	$	3,225
	$	3,225	$	3,225

Schedule of Expenses Related to Foreclosed Real Estate [Table Text Block]

	For the Three Months Ended March 31,
	20 20		20 19
	(in thousands)
OREO Activity
OREO as of January 1	$	3,225	$	3,485
Real estate acquired		—		—
Valuation adjustment write-downs		—		(150	)
Net gain (loss) on sales		—		—
Proceeds from sales of properties		—		—
OREO as of March 31	$	3,225	$	3,335

Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]

	For the Three Months Ended March 31 ,
	20 20		201 9
	(in thousands)
Net loss (gain) on sales	$	—	$	—
Valuation adjustment write-downs		—		150
Operating expense		16		16
Total	$	16	$	166

XML

Note 3 - Loans - Types of Troubled Debt Restructuring Loan Modification by Portfolio Segment (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Troubled debt restructuring	$ 466	$ 475
Performing Financial Instruments [Member]
Troubled debt restructuring	466	475
Nonperforming Financial Instruments [Member]
Troubled debt restructuring
Commercial Real Estate Portfolio Segment [Member] | One- to Four-family Residential Properties [Member] | Performing Financial Instruments [Member]
Troubled debt restructuring	391	400
Commercial Real Estate Portfolio Segment [Member] | Nonfarm Nonresidential [Member]
Troubled debt restructuring	391	400
Commercial Real Estate Portfolio Segment [Member] | Nonfarm Nonresidential [Member] | Nonperforming Financial Instruments [Member]
Troubled debt restructuring
Residential Portfolio Segment [Member] | One- to Four-family Residential Properties [Member]
Troubled debt restructuring	75	75
Residential Portfolio Segment [Member] | One- to Four-family Residential Properties [Member] | Performing Financial Instruments [Member]
Troubled debt restructuring	75	75
Residential Portfolio Segment [Member] | One- to Four-family Residential Properties [Member] | Nonperforming Financial Instruments [Member]
Troubled debt restructuring

XML

Note 3 - Loans - Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Gross loans	$ 961,561	$ 926,271
Less: Allowance for loan losses	(9,150)	(8,376)
Loans, net	952,411	917,895
Commercial Portfolio Segment [Member]
Gross loans	169,176	145,551
Less: Allowance for loan losses	(2,025)	(1,710)
Commercial Real Estate Portfolio Segment [Member]
Gross loans	413,653	399,488
Less: Allowance for loan losses	(4,212)	(4,080)
Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Gross loans	71,267	64,911
Commercial Real Estate Portfolio Segment [Member] | Farmland Loans [Member]
Gross loans	80,579	79,118
Commercial Real Estate Portfolio Segment [Member] | Nonfarm Nonresidential [Member]
Gross loans	261,807	255,459
Residential Portfolio Segment [Member]
Gross loans	296,226	297,579
Less: Allowance for loan losses	(1,909)	(1,743)
Residential Portfolio Segment [Member] | Multifamily Loans [Member]
Gross loans	75,525	70,950
Residential Portfolio Segment [Member] | One- to Four-family Residential Properties [Member]
Gross loans	220,701	226,629
Consumer Portfolio Segment [Member]
Gross loans	44,814	47,790
Less: Allowance for loan losses	(593)	(485)
Agriculture Portfolio Segment [Member]
Gross loans	36,977	35,064
Less: Allowance for loan losses	(409)	(355)
Other Portfolio Segment [Member]
Gross loans	715	799
Less: Allowance for loan losses	$ (2)	$ (3)

XML

Note 2 - Securities - Sales and Calls of Securities (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Proceeds	$ 6	$ 1
Gross gains
Gross losses

XML

Note 2 - Securities

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note

2

– Securities

Securities are classified as available for sale (AFS). AFS securities

may

be sold if needed for liquidity, asset liability management, or other reasons. AFS securities are reported at fair value, with unrealized gains or losses included as a separate component of equity, net of tax.

The amortized cost and fair value of securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
March 31, 20 20
Available for sale
U.S. Government and federal agency	$	20,751	$	353	$	—		$	21,104
Agency mortgage-backed: residential		86,840		2,428		(167	)		89,101
Collateralized loan obligations		44,732		—		(3,978	)		40,754
State and municipal		28,301		346		(493	)		28,154
Corporate bonds		20,831		199		(1,486	)		19,544
Total available for sale	$	201,455	$	3,326	$	(6,124	)	$	198,657

December 31, 201 9	Amortized Cost		Gross Unre alized Gains		Gross Unre alized Losses			Fair Value
Available for sale
U.S. Government and federal agency	$	22,281	$	196	$	(147	)	$	22,330
Agency mortgage-backed: residential		91,269		1,186		(255	)		92,200
Collateralized loan obligations		49,831		—		(412	)		49,419
State and municipal		27,819		550		(3	)		28,366
Corporate bonds		16,472		213		—			16,685
Total available for sale	$	207,672	$	2,145	$	(817	)	$	209,000

Sales and calls of securities were as follows:

	Three Months Ended March 31,
	20 20		201 9
	(in thousands)
Proceeds	$	6,000	$	1,000
Gross gains		—		—
Gross losses		—		—

The amortized cost and fair value of our debt securities are shown by contractual maturity. Expected maturities

may

differ from actual maturities when borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities

not

due at a single maturity date are shown separately.  

	March 31 , 20 20
	Amortized Cost		Fair Value
	(in thousands)
Maturity
Available for sale
Within one year	$	31,403	$	30,003
One to five years		40,037		40,515
Five to ten years		23,970		22,852
Beyond ten years		19,205		16,186
Agency mortgage-backed: residential		86,840		89,101
Total	$	201,455	$	198,657

Securities pledged at

March 31, 2020

and

December 31, 2019

had carrying values of approximately

$80.9

million and

$75.8

million, respectively, and were pledged to secure public deposits.

At

March 31, 2020

and

December 31, 2019,

the Bank held securities issued by the Commonwealth of Kentucky or Kentucky municipalities having a book value of

$17.0

million and

$14.5

million, respectively. At

March 31, 2020

and

December 31, 2019,

there were

no

other holdings of securities of any

one

issuer, other than the U.S. Government and its agencies, in an amount greater than

10%

of stockholders’ equity.

The Bank owns Collateralized Loan Obligations (CLOs), which are debt securities secured by professionally managed portfolios of senior-secured loans to corporations. CLOs are typically managed by large non-bank financial institutions or banks and are typically

$300

million to

$1

billion in size, contain

one hundred

or more loans, have

five

to

six

credit tranches ranging from AAA, AA, A, BBB, BB, B and equity tranche. Interest and principal are paid

first

to the AAA tranche then to the next lower rated tranche. Losses are borne

first

by the equity tranche then by the subsequently higher rated tranche. CLOs

may

be less liquid than government securities from time to time and volatility in the CLO market

may

cause the value of these investments to decline.

The market value of CLOs

may

be affected by, among other things, changes in composition of the underlying loans, changes in the cash flows from the underlying loans, defaults and recoveries on the underlying loans, capital gains and losses on the underlying loans, prepayments on the underlying loans, and other conditions or economic factors.

At

March 31, 2020,

$25.7

million and

$15.0

million of our CLOs were AA and A rated, respectively. There were

no

CLOs rated below A and

none

of the CLOs were subject to ratings downgrade in the

three

months ended

March 31, 2020.

All of our CLOs are floating rate, with rates set on a quarterly basis at

three

-month LIBOR plus a spread. Stress testing was completed on each security in the CLO portfolio as of

March 31, 2020.

Each security in the portfolio passed, without dollar loss, a stress scenario characterized as severe, which assumed a

ten

percent per annum constant prepayment rate, a

twelve

percent per annum constant default rate for

four

years followed by a

four

percent rate thereafter, and a

forty-five

percent recovery rate on a

one

-year lag.

The Company evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, underlying credit quality of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company

may

consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the sector or industry trends and cycles affecting the issuer, and the results of reviews of the issuer’s financial condition. As of

March 

31,

2020,

management does

not

believe any securities in the portfolio with unrealized losses should be classified as other than temporarily impaired.

Securities with unrealized losses at

March 31, 2020

and

December 31, 2019,

aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, are as follows:

	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
March 31, 20 20
Available for sale
U.S. Government and federal agency	$	—	$	—		$	—	$	—		$	—	$	—
Agency mortgage-backed: residential		10,843		(120	)		1,617		(47	)		12,460		(167	)
Collateralized loan obligations		10,702		(843	)		30,052		(3,135	)		40,754		(3,978	)
State and municipal		10,192		(493	)		—		—			10,192		(493	)
Corporate bonds		11,008		(1,486	)		—		—			11,008		(1,486	)
Total temporarily impaired	$	42,745	$	(2,942	)	$	31,669	$	(3,182	)	$	74,414	$	(6,124	)
December 31, 201 9
Available for sale
U.S. Government and federal agency	$	12,567	$	(147	)	$	—	$	—		$	12,567	$	(147	)
Agency mortgage-backed: residential		18,457		(97	)		10,665		(158	)		29,122		(255	)
Collateralized loan obligations		9,539		(46	)		35,336		(366	)		44,875		(412	)
State and municipal		911		(3	)		—		—			911		(3	)
Corporate bonds		—		—			—		—			—		—
Total temporarily impaired	$	41,474	$	(293	)	$	46,001	$	(524	)	$	87,475	$	(817	)

XML

Unaudited Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Net income	$ 1,840	$ 2,839
Other comprehensive income (loss):
Unrealized gain (loss) arising during the period	(4,126)	1,995
Reclassification adjustment for gains (losses) included in net income
Net unrealized gain (loss) recognized in comprehensive income (loss)	(4,126)	1,995
Tax effect	978	(418)
Other comprehensive income (loss)	(3,148)	1,577
Comprehensive income (loss)	$ (1,308)	$ 4,416

XML

Note 7 - Deposits (Details Textual) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Time Deposits, at or Above FDIC Insurance Limit	$ 64.9	$ 51.2

XML

Note 8 - Advances from the Federal Home Loan Bank - Advances From the Federal Home Loan Bank (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Short term advances (fixed rates 0.13% to 0.22%) maturing April 2020	$ 40,000	$ 60,000
Long term advances (fixed rates 0.00% to 5.24%) maturing April 2020 to August 2033	21,349	1,389
Total advances from the Federal Home Loan Bank	$ 61,349	$ 61,389

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2020	Apr. 30, 2020
Document Information [Line Items]
Entity Registrant Name	LIMESTONE BANCORP, INC.
Entity Central Index Key	0001358356
Trading Symbol	lmst
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false
Title of 12(b) Security	Common shares
Nonvoting Common Stock [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding (in shares)		1,220,000
Common Stock [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding (in shares)		6,269,305

XML

Note 3 - Loans - Recorded Investment in Nonaccrual and Loans Past Due 90 Days and Still on Accrual by Class of Loan (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Nonaccrual	$ 1,500	$ 1,528
Loans Past Due 90 Days and Over Still Accruing	0	0
Commercial Portfolio Segment [Member]
Nonaccrual	158	50
Loans Past Due 90 Days and Over Still Accruing	0	0
Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Nonaccrual	0	0
Loans Past Due 90 Days and Over Still Accruing	0	0
Commercial Real Estate Portfolio Segment [Member] | Farmland Loans [Member]
Nonaccrual	298	431
Loans Past Due 90 Days and Over Still Accruing	0	0
Commercial Real Estate Portfolio Segment [Member] | Nonfarm Nonresidential [Member]
Nonaccrual	89	90
Loans Past Due 90 Days and Over Still Accruing	0	0
Residential Portfolio Segment [Member] | Multifamily Loans [Member]
Nonaccrual	0	0
Loans Past Due 90 Days and Over Still Accruing	0	0
Residential Portfolio Segment [Member] | One- to Four-family Residential Properties [Member]
Nonaccrual	812	817
Loans Past Due 90 Days and Over Still Accruing	0	0
Consumer Portfolio Segment [Member]
Nonaccrual	143	98
Loans Past Due 90 Days and Over Still Accruing	0	0
Agriculture Portfolio Segment [Member]
Nonaccrual		42
Loans Past Due 90 Days and Over Still Accruing	0	0
Other Portfolio Segment [Member]
Nonaccrual	0	0
Loans Past Due 90 Days and Over Still Accruing	$ 0	$ 0

XML

Note 4 - Leases - Future Minimum Lease Payments (Details) - USD ($)	Mar. 31, 2020	Mar. 31, 2019
2020	$ 383,000
2021	260,000
2022	242,000
2023	246,000
2024	246,000
Thereafter	3,720,000
Total minimum lease payments	5,097,000
Discount effect of cash flows	(2,214,000)
Other Liabilities [Member]
Operating Lease, Liability, Total	$ 2,883,000	$ 445,000

XML

Note 5 - Other Real Estate Owned - Expenses Related to Other Real Estate Owned (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Net loss (gain) on sales
Valuation adjustment write-downs		150
Operating expense	16	16
Total	$ 16	$ 166

XML

Note 12 - Stock Plans and Stock Based Compensation - Unrecognized Stock Based Compensation Expense Related to Unvested Shares (Details) $ in Thousands	Mar. 31, 2020 USD ($)
April 2020 – December 2020	$ 305
2021	311
2022	136
2023	$ 14

XML

Note 15 - Off Balance Sheet Risks, Commitments, and Contingent Liabilities - Contractual Amounts of Financial Instruments With Off Balance Sheet Risk (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Fixed Rate [Member] | Commitments to Make Loans [Member]
Financial Instrument off Balance Sheet Risk, Amount	$ 12,403	$ 11,577
Fixed Rate [Member] | Unused lines of Credit [Member]
Financial Instrument off Balance Sheet Risk, Amount	8,684	7,916
Fixed Rate [Member] | Standby Letters of Credit [Member]
Financial Instrument off Balance Sheet Risk, Amount	531	531
Variable Rate [Member] | Commitments to Make Loans [Member]
Financial Instrument off Balance Sheet Risk, Amount	26,290	20,415
Variable Rate [Member] | Unused lines of Credit [Member]
Financial Instrument off Balance Sheet Risk, Amount	96,982	111,230
Variable Rate [Member] | Standby Letters of Credit [Member]
Financial Instrument off Balance Sheet Risk, Amount	$ 1,336	$ 3,164

XML

Note 11 - Income Taxes (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Jul. 10, 2015
Deferred Tax Assets, Tax Credit Carryforwards, Alternative Minimum Tax			$ 173,000
Unrecognized Tax Benefits, Ending Balance	0
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense, Total	$ 0	$ 0
Common Stock Ownership Percentage by Individual	5.00%
Common Stock Ownership Percentage	50.00%
Dividend Declared Preferred Stock Purchase Right Per Each Share of Common Stock (in shares)				1
Domestic Tax Authority [Member]
Operating Loss Carryforwards, Total	$ 100,500,000
Domestic Tax Authority [Member] | Other Assets [Member]
Deferred Tax Assets, Tax Credit Carryforwards, Alternative Minimum Tax	173,000
State and Local Jurisdiction [Member]
Operating Loss Carryforwards, Total	$ 32,700,000

XML

Note 5 - Other Real Estate Owned

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Real Estate Owned [Text Block]

Note

5

– Other Real Estate Owned

Other real estate owned (OREO) is real estate acquired as a result of foreclosure or by deed in lieu of foreclosure. It is classified as real estate owned until such time as it is sold. When property is acquired as a result of foreclosure or by deed in lieu of foreclosure, it is recorded at its fair market value less estimated cost to sell. Any write-down of the property at the time of acquisition is charged to the allowance for loan losses.

The following table presents the major categories of OREO at the period-ends indicated:

	March 31, 20 20		December 31, 201 9
	(in thousands)
Commercial Real Estate:
Construction, land development, and other land	$	3,225	$	3,225
	$	3,225	$	3,225

Residential loans secured by

1

-

4

family residential properties in the process of foreclosure totaled

$156,000

and

$172,000

at

March 31, 2020

and

December 31, 2019,

respectively.

Activity relating to OREO during the

three

months ended

March 31, 2020

and

2019

is as follows:

	For the Three Months Ended March 31,
	20 20		20 19
	(in thousands)
OREO Activity
OREO as of January 1	$	3,225	$	3,485
Real estate acquired		—		—
Valuation adjustment write-downs		—		(150	)
Net gain (loss) on sales		—		—
Proceeds from sales of properties		—		—
OREO as of March 31	$	3,225	$	3,335

Expenses related to OREO include:

	For the Three Months Ended March 31 ,
	20 20		201 9
	(in thousands)
Net loss (gain) on sales	$	—	$	—
Valuation adjustment write-downs		—		150
Operating expense		16		16
Total	$	16	$	166

XML

Note 9 - Borrowings

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Long-term Debt [Text Block]

Note

9

–

Borrowings

Junior Subordinated Debentures

– The junior subordinated debentures are redeemable at par prior to maturity at the option of the Company as defined within the trust indenture. The Company has the option to defer interest payments on the junior subordinated debentures from time to time for a period

not

to exceed

20

consecutive quarters. A deferral period

may

begin at the Company’s discretion so long as interest payments are current. The Company is prohibited from paying dividends on preferred and common shares when interest payments are in deferral. At

March 31, 2020,

the Company is current on all interest payments.

Subordinated

Capital Note

– The Company’s

$17.0

million subordinated note matures on

July 31, 2029.

The note carries interest at a fixed rate of

5.75%

until

July 30, 2024

and then converts to variable at

three

-month LIBOR plus

395

basis points until maturity. The subordinated capital note qualifies as Tier

2

regulatory capital.

Senior Debt

- The Company’s

$5.0

million senior secured loan matures on

June 30, 2022.

Interest is payable quarterly at a rate of

three

-month LIBOR plus

250

basis points through

June 30, 2020,

at which time quarterly principal payments of

$250,000

plus interest will commence. The loan is secured by a

first

priority pledge of

100%

of the issued and outstanding stock of the Bank. The Company

may

prepay any amount due under the promissory note at any time without premium or penalty.

The loan agreement contains customary representations, warranties, covenants and events of default, including the following financial covenants: (i) the Company must maintain minimum cash on hand of

not

less than

$2,500,000,

(ii) the Company must maintain a total risk based capital ratio at least equal to

10%

of risk-weighted assets, (iii) the Bank must maintain a total risk based capital ratio at least equal to

11%

of risk-weighted assets, and (iv) non-performing assets of the Bank

may

not

exceed

2.5%

of the Bank’s total assets. Both the Company and Bank were in compliance with the covenants as of

March 31, 2020.

XML

Note 2 - Securities (Details Textual) $ in Thousands	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Security Owned and Pledged as Collateral, Fair Value, Total	$ 80,900	$ 75,800
Debt Securities, Available-for-sale, Total	$ 198,657	$ 209,000
Concentration Risk Number	0	0
Risk Level, AA Rated [Member]
Collateralized Agreements, Total	$ 25,700
Risk Level, A Rated [Member]
Collateralized Agreements, Total	15,000
Risk Level, Below A Rated [Member]
Collateralized Agreements, Total	0
Risk Level, Subject to Downgrade [Member]
Collateralized Agreements, Total	0
Kentucky Municipalities [Member]
Debt Securities, Available-for-sale, Total	17,000	$ 14,500
Collateralized Debt Obligations [Member]
Debt Securities, Available-for-sale, Total	$ 40,754	$ 49,419
Collateralized Debt Obligations [Member] | Measurement Input, Constant Prepayment Rate [Member]
Debt Securities, Available-for-sale, Measurement Input	0.1
Collateralized Debt Obligations [Member] | Measurement Input, Constant Default Rate for First Four Years [Member]
Debt Securities, Available-for-sale, Measurement Input	0.12
Collateralized Debt Obligations [Member] | Measurement Input, Constant Default Rate for After First Four Years [Member]
Debt Securities, Available-for-sale, Measurement Input	0.04
Collateralized Debt Obligations [Member] | Measurement Input, Recovery Rate Over One Year Lag [Member]
Debt Securities, Available-for-sale, Measurement Input	0.45

XML

Note 13 - Earnings per Share (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended
	March 31 ,
	20 20		201 9
	(in thousands, except share and per share data)
Net income	$	1,840	$	2,839
Less:
Earnings allocated to unvested shares		15		36
Net income available to common shareholders, basic and diluted	$	1,825	$	2,803
Basic
Weighted average common shares including unvested common shares outstanding		7,481,884		7,469,912
Less:
Weighted average unvested common shares		61,363		94,909
Weighted average common shares outstanding		7,420,521		7,375,003
Basic income per common share	$	0.25	$	0.38
Diluted
Add: Dilutive effects of assumed exercises of common stock warrants		—		—
Weighted average common shares and potential common shares		7,420,521		7,375,003
Diluted income per common share	$	0.25	$	0.38

XML

Note 8 - Advances from the Federal Home Loan Bank (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Federal Home Loan Bank, Advances, by Branch of FHLB Bank [Table Text Block]

	March 31,		December 31,
	20 20		201 9
	(in thousands)
Short term advances (fixed rates 0.13% to 0.22%) maturing April 2020	$	40,000	$	60,000
Long term advances (fixed rates 0.00% to 5.24%) maturing April 2020 to August 2033		21,349		1,389
Total advances from the Federal Home Loan Bank	$	61,349	$	61,389

Schedule of Maturities of Long-term Debt [Table Text Block]

	Advances
Year 1	$	41,090
Year 2		98
Year 3		99
Year 4		42
Year 5		16
Thereafter		20,004
	$	61,349

XML

Note 6 - Goodwill and Intangible Assets (Details Textual) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019	Nov. 15, 2019
Goodwill, Ending Balance	$ 6,252,000	$ 6,252,000
Goodwill, Impairment Loss	0	$ 0
Amortization of Intangible Assets, Total	$ 64,000
Branch Acquisition from Republic Bank and Trust [Member]
Goodwill, Ending Balance			$ 6,300,000

XML

Note 3 - Loans - Aging of Recorded Investment in Past Due Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Nonaccrual	$ 1,500	$ 1,528
Total past due and nonaccrual	2,906	3,945
Financial Asset, 30 to 59 Days Past Due [Member]
Past due	1,158	1,747
Financial Asset, 60 to 89 Days Past Due [Member]
Past due	248	670
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due	0	0
Commercial Portfolio Segment [Member]
Nonaccrual	158	50
Total past due and nonaccrual	159	67
Commercial Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due		14
Commercial Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due	1	3
Commercial Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due	0	0
Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Nonaccrual	0	0
Total past due and nonaccrual	0	0
Commercial Real Estate Portfolio Segment [Member] | Farmland Loans [Member]
Nonaccrual	298	431
Total past due and nonaccrual	379	705
Commercial Real Estate Portfolio Segment [Member] | Nonfarm Nonresidential [Member]
Nonaccrual	89	90
Total past due and nonaccrual	149	296
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Construction Loans [Member]
Past due	0	0
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Farmland Loans [Member]
Past due	81	274
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Nonfarm Nonresidential [Member]
Past due	19	206
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Construction Loans [Member]
Past due	0	0
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Farmland Loans [Member]
Past due	0
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Nonfarm Nonresidential [Member]
Past due	41
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Construction Loans [Member]
Past due	0	0
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Farmland Loans [Member]
Past due	0	0
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Nonfarm Nonresidential [Member]
Past due	0	0
Residential Portfolio Segment [Member] | Multifamily Loans [Member]
Nonaccrual	0	0
Total past due and nonaccrual	0	0
Residential Portfolio Segment [Member] | One- to Four-family Residential Properties [Member]
Nonaccrual	812	817
Total past due and nonaccrual	1,920	2,482
Residential Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Multifamily Loans [Member]
Past due	0	0
Residential Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | One- to Four-family Residential Properties [Member]
Past due	961	1,162
Residential Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Multifamily Loans [Member]
Past due	0	0
Residential Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | One- to Four-family Residential Properties [Member]
Past due	147	503
Residential Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Multifamily Loans [Member]
Past due	0	0
Residential Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | One- to Four-family Residential Properties [Member]
Past due	0	0
Consumer Portfolio Segment [Member]
Nonaccrual	143	98
Total past due and nonaccrual	296	353
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due	97	91
Consumer Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due	56	164
Consumer Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due	0	0
Agriculture Portfolio Segment [Member]
Nonaccrual		42
Total past due and nonaccrual	3	42
Agriculture Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due	0
Agriculture Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due	3	0
Agriculture Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due	0	0
Other Portfolio Segment [Member]
Nonaccrual	0	0
Total past due and nonaccrual	0	0
Other Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due	0	0
Other Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due	0	0
Other Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due	$ 0	$ 0

XML

Note 5 - Other Real Estate Owned (Details Textual) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
One- to Four-family Residential Properties [Member]
Mortgage Loans in Process of Foreclosure, Amount	$ 156,000	$ 172,000

XML

Note 12 - Stock Plans and Stock Based Compensation - Unvested Share Activity (Details) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Granted, weighted average grant price (in dollars per share)	$ 17.03
2018 Omnibus Equity Compensation Plan [Member]
Outstanding, beginning (in shares)	57,774	116,909
Outstanding, weighted average grant price (in dollars per share)	$ 13.35	$ 8.69
Granted (in shares)	20,507	34,501
Granted, weighted average grant price (in dollars per share)	$ 17.03	$ 14.81
Vested (in shares)	(13,329)	(89,388)
Vested, weighted average grant price (in dollars per share)	$ 11.85	$ 7.83
Forfeited (in shares)		(4,248)
Forfeited, weighted average grant price (in dollars per share)		$ 13.07
Outstanding, ending (in shares)	64,952	57,774
Outstanding, weighted average grant price (in dollars per share)	$ 14.82	$ 13.35

XML

Note 15 - Off Balance Sheet Risks, Commitments, and Contingent Liabilities (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Commitments Period (Year)	1 year
Risk Participation Agreement [Member]
Derivative, Notional Amount	$ 26,600	$ 26,600
Standby Letters of Credit [Member]
Long-term Line of Credit, Total	$ 0

XML

Note 10 - Fair Values Measurement - Carrying Amount and Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Securities available for sale	$ 198,657	$ 209,000
Reported Value Measurement [Member]
Cash and cash equivalents	33,148	30,203
Securities available for sale	198,657	209,000
Federal Home Loan Bank stock	6,837	6,237
Loans, net	952,411	917,895
Accrued interest receivable	4,219	4,257
Deposits	1,057,900	1,026,975
Federal Home Loan Bank advances	61,349	61,389
Junior subordinated debentures	21,000	21,000
Subordinated capital note	17,000	17,000
Senior Debt	5,000	5,000
Accrued interest payable	715	1,129
Estimate of Fair Value Measurement [Member]
Cash and cash equivalents	33,148	30,203
Securities available for sale	198,657	209,000
Federal Home Loan Bank stock
Loans, net	903,898	925,388
Accrued interest receivable	4,219	4,257
Deposits	1,060,005	1,027,433
Federal Home Loan Bank advances	61,357	61,395
Junior subordinated debentures	14,153	17,466
Subordinated capital note	16,095	17,003
Senior Debt	4,900	5,022
Accrued interest payable	715	1,129
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	33,148	30,203
Securities available for sale
Federal Home Loan Bank stock
Loans, net
Accrued interest receivable
Deposits	185,658	187,551
Federal Home Loan Bank advances
Junior subordinated debentures
Subordinated capital note
Senior Debt
Accrued interest payable
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Cash and cash equivalents
Securities available for sale	198,657	209,000
Federal Home Loan Bank stock
Loans, net
Accrued interest receivable	993	1,118
Deposits	874,347	839,882
Federal Home Loan Bank advances	61,357	61,395
Junior subordinated debentures
Subordinated capital note
Senior Debt
Accrued interest payable	509	647
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Cash and cash equivalents
Securities available for sale
Federal Home Loan Bank stock
Loans, net	903,898	925,388
Accrued interest receivable	3,226	3,139
Deposits
Federal Home Loan Bank advances
Junior subordinated debentures	14,153	17,466
Subordinated capital note	16,095	17,003
Senior Debt	4,900	5,022
Accrued interest payable	$ 206	$ 482

XML

Note 6 - Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

 Note

6

– Goodwill and Intangible Assets

The following table summarizes the Company’s acquired goodwill and intangible assets as of

March 31, 2020

and

December 31, 2019 (

in thousands):

	March 31 , 2020				December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Goodwill	$	6,252	$	—	$	6,252	$	—
Core deposit intangibles		2,500		64		2,500		—
Outstanding, ending	$	8,752	$	64	$	8,752	$	—

The Company has

$6.3

million of goodwill related to a branch acquisition transaction from

2019.

Goodwill represents the excess of the total purchase price paid over the fair value of the identifiable assets acquired, net of the fair value of the liabilities assumed. Goodwill is

not

amortized but is evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value

may

not

be recoverable. Impairment exists when a reporting unit’s carrying amount exceeds its fair value. Based upon current economic conditions as a result of COVID-

19,

management assessed goodwill for impairment as of

March 31, 2020

and concluded there was

no

impairment. Goodwill is the only intangible asset with an indefinite life on the balance sheet.

The Company also has a core deposit intangible asset, which is amortized over a weighted average estimated life of the related deposits and is

not

estimated to have a significant residual value. During the

three

months ended

March 31, 2020,

the Company recorded intangible amortization expense totaling

$64,000.

Amortization expense related to the core deposit intangible for the remainder of

2020

and beyond is estimated as follows (in thousands):

	March 31, 2020
April 2020 – December 2020	$	192
2021		256
2022		256
2023		256
2024		256
Thereafter		1,220
	$	2,436

XML

Note 10 - Fair Values Measurement

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

10

– Fair Values Measurement

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Various valuation techniques are used to determine fair value, including market, income and cost approaches. There are

three

levels of inputs that

may

be used to measure fair values:

Level

1:

Quoted prices (unadjusted) for identical assets or liabilities in active markets that an entity has the ability to access as of the measurement date, or observable inputs.

Level

2:

Significant other observable inputs other than Level

1

prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are

not

active, and other inputs that are observable or can be corroborated by observable market data.

Level

3:

Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

In certain cases, the inputs used to measure fair value

may

fall into different levels of the fair value hierarchy. When that occurs, the fair value hierarchy is classified on the lowest level of input that is significant to the fair value measurement. The following methods and significant assumptions are used to estimate fair value.

Securities:

The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges, if available. This valuation method is classified as Level

1

in the fair value hierarchy. For securities where quoted prices are

not

available, fair values are calculated on market prices of similar securities, or 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. Matrix pricing relies on the securities’ relationship to similarly traded securities, benchmark curves, and the benchmarking of like securities. Matrix pricing utilizes observable market inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads,

two

-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. In instances where broker quotes are used, these quotes are obtained from market makers or broker-dealers recognized to be market participants. This valuation method is classified as Level

2

in the fair value hierarchy. For securities where quoted prices or market prices of similar securities are

not

available, fair values are calculated using discounted cash flows or other market indicators. This valuation method is classified as Level

3

in the fair value hierarchy. Discounted cash flows are calculated using spread to swap and LIBOR curves that are updated to incorporate loss severities, volatility, credit spread and optionality. During times when trading is more liquid, broker quotes are used (if available) to validate the model. Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.

Impaired Loans:

An impaired loan is evaluated at the time the loan is identified as impaired and is recorded at fair value less costs to sell. Fair value is measured based on the value of the collateral securing the loan and is classified as Level

3

in the fair value hierarchy. Fair value is determined using several methods. Generally, the fair value of real estate is determined based on appraisals by qualified licensed appraisers. These appraisals

may

utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. These routine adjustments are made to adjust the value of a specific property relative to comparable properties for variations in qualities such as location, size, and income production capacity relative to the subject property of the appraisal. Such adjustments are typically significant and result in a Level

3

classification of the inputs for determining fair value.

Management routinely applies internal discounts to the value of appraisals used in the fair value evaluation of our impaired loans. The deductions to the appraisal take into account changing business factors and market conditions, as well as potential value impairment in cases where our appraisal date predates a likely change in market conditions. These deductions range from

10%

for routine real estate collateral to

25%

for real estate that is determined to have a thin trading market or to be specialized collateral. This is in addition to estimated discounts for cost to sell of

six

to

ten

percent.

Management also applies discounts to the expected fair value of collateral for impaired loans where the likely resolution involves litigation or foreclosure. Resolution of this nature generally results in receiving lower values for real estate collateral in a more aggressive sales environment. Discounts ranging from

10%

to

33%

have been utilized in our impairment evaluations when applicable.

Impaired loans are evaluated quarterly for additional impairment. Management obtains updated appraisals on properties securing our loans when circumstances are warranted such as at the time of renewal or when market conditions have significantly changed. This determination is made on a property-by-property basis in light of circumstances in the broader economic climate and the assessment of deterioration of real estate values in the market in which the property is located.

Other Real Estate Owned (OREO)

: OREO is evaluated at the time of acquisition and recorded at fair value as determined by independent appraisal or internal evaluation less estimated cost to sell. Quarterly evaluations of OREO for impairment are driven by property type. For smaller dollar single family homes, management consults with staff from the Bank’s special assets group as well as external realtors and appraisers. Based on these consultations, management determines asking prices for OREO properties being marketed for sale. If the internally evaluated fair value or asking price is below the recorded investment in the property, appropriate write-downs are taken.

For larger dollar commercial real estate properties, management obtains a new appraisal of the subject property or has staff in the special assets group evaluate the latest in-file appraisal in connection with the transfer to OREO. Management generally obtains updated appraisals within

five

quarters of the anniversary date of ownership unless a sale is imminent. When an asking price is lowered below the most recent appraised value, appropriate write-downs are taken.

Financial assets measured at fair value on a recurring basis at

March 31, 2020

and

December 31, 2019

are summarized below:

			Fair Value Measurements at March 31, 20 20 Using
			(in thousands)
			Quoted Prices In				Significant
			Active Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
Description	Value		(Level 1)		(Level 2)		(Level 3)
Available for sale securities
U.S. Government and federal agency	$	21,104	$	—	$	21,104	$	—
Agency mortgage-backed: residential		89,101		—		89,101		—
Collateralized loan obligations		40,754		—		40,754		—
State and municipal		28,154		—		28,154		—
Corporate bonds		19,544		—		19,544		—
Total	$	198,657	$	—	$	198,657	$	—

			Fair Value Measurements at December 31, 201 9 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities
U.S. Government and federal agency	$	22,330	$	—	$	22,330	$	—
Agency mortgage-backed: residential		92,200		—		92,200		—
Collateralized loan obligations		49,419		—		49,419		—
State and municipal		28,366		—		28,366		—
Corporate bonds		16,685		—		16,685		—
Total	$	209,000	$	—	$	209,000	$	—

There were

no

transfers between Level

1

and Level

2

during

2020

or

2019.

Financial assets measured at fair value on a non-recurring basis are summarized below: 

			Fair Value Measurements at March 31, 20 20 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial real estate:
Farmland	$	124	$	—	$	—	$	124
Residential real estate:
1-4 Family		74		—		—		74

			Fair Value Measurements at December 31, 201 9 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	21	$	—	$	—	$	21
Commercial real estate:
Farmland		245		—		—		245
Residential real estate:
1-4 Family		145		—		—		145

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of

$218,000

at

March 31, 2020

with a valuation allowance of

$20,000,

resulting in

no

additional provision for loan losses for the

three

months ended

March 31, 2020.

Impaired loans had a carrying amount of

$873,000

with a valuation allowance of

$193,000,

resulting in

no

additional provision for loan losses for the

three

months ended

March 31, 2019.

At

December 31, 2019,

impaired loans had a carrying amount of

$453,000,

with a valuation allowance of

$42,000.

Carrying amount and estimated fair values of financial instruments were as follows for the periods indicated:

			Fair Value Measurements at March 31, 20 20 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	33,148	$	33,148	$	—	$	—	$	33,148
Securities available for sale		198,657		—		198,657		—		198,657
Federal Home Loan Bank stock		6,837		N/A		N/A		N/A		N/A
Loans, net		952,411		—		—		903,898		903,898
Accrued interest receivable		4,219		—		993		3,226		4,219
Financial liabilities
Deposits	$	1,057,900	$	185,658	$	874,347	$	—	$	1,060,005
Federal Home Loan Bank advances		61,349		—		61,357		—		61,357
Junior subordinated debentures		21,000		—		—		14,153		14,153
Subordinated capital note		17,000		—		—		16,095		16,095
Senior Debt		5,000		—		—		4,900		4,900
Accrued interest payable		715		—		509		206		715

			Fair Value Measurements at December 31, 201 9 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	30,203	$	30,203	$	—	$	—	$	30,203
Securities available for sale		209,000		—		209,000		—		209,000
Federal Home Loan Bank stock		6,237		N/A		N/A		N/A		N/A
Loans, net		917,895		—		—		925,388		925,388
Accrued interest receivable		4,257		—		1,118		3,139		4,257
Financial liabilities
Deposits	$	1,026,975	$	187,551	$	839,882	$	—	$	1,027,433
Federal Home Loan Bank advances		61,389		—		61,395		—		61,395
Junior subordinated debentures		21,000		—		—		17,466		17,466
Subordinated capital note		17,000		—		—		17,003		17,003
Senior Debt		5,000		—		—		5,022		5,022
Accrued interest payable		1,129		—		647		482		1,129

In accordance with ASU

2016

-

01,

the methods utilized to measure the fair value of financial instruments represent an approximation of exit price; however, an actual exit price

may

differ.

XML

Note 12 - Stock Plans and Stock Based Compensation (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Nonvested Share Activity [Table Text Block]

	Three Months Ended					Twelve Months Ended
	March 31 , 20 20					December 31, 201 9
				Weighted					Weighted
				Average					Average
				Grant					Grant
	Shares			Price		Shares			Price
Outstanding, beginning		57,774		$	13.35		116,909		$	8.69
Granted		20,507			17.03		34,501			14.81
Vested		(13,329	)		11.85		(89,388	)		7.83
Forfeited		—			—		(4,248	)		13.07
Outstanding, ending		64,952		$	14.82		57,774		$	13.35

Share-based Payment Arrangement, Nonvested Award, Cost [Table Text Block]

April 2020 – December 2020	$	305
2021		311
2022		136
2023		14

XML

Note 7 - Deposits (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Deposits [Table Text Block]

	March 31 , 20 20		December 31, 201 9
	(in thousands)
Non-interest bearing	$	185,658	$	187,551
Interest checking		157,621		146,038
Money market		154,851		160,837
Savings		92,235		56,015
Certificates of deposit		467,535		476,534
Total	$	1,057,900	$	1,026,975

Schedule of Maturities of Time Deposits [Table Text Block]

Year 1	$	383,049
Year 2		47,132
Year 3		10,719
Year 4		15,232
Year 5		10,854
Thereafter		549
	$	467,535

XML

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (Details Textual)	Mar. 31, 2020
Limestone Bank [Member]
Noncontrolling Interest, Ownership Percentage by Parent	100.00%

XML

Note 6 - Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Intangible Assets and Goodwill [Table Text Block]

	March 31 , 2020				December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Goodwill	$	6,252	$	—	$	6,252	$	—
Core deposit intangibles		2,500		64		2,500		—
Outstanding, ending	$	8,752	$	64	$	8,752	$	—

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

	March 31, 2020
April 2020 – December 2020	$	192
2021		256
2022		256
2023		256
2024		256
Thereafter		1,220
	$	2,436

XML

Note 14 - Regulatory Capital Matters

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note

1

4

–

Regulatory Capital Matters

Banks and bank holding companies are subject to regulatory capital requirements in accordance with Basel III, as administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory action.

The Basel III rules established a “capital conservation buffer” of

2.5%

above the regulatory minimum risk-based capital ratios. The minimum ratios are a common equity Tier

1

risk-based capital ratio of

7.0%,

a Tier

1

risk-based capital ratio of

8.5%,

and a total risk-based capital ratio of

10.5%.

 An institution is subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if capital levels fall below minimum levels plus the buffer amounts. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions without prior regulatory approval.

As of

March 31, 2020,

Management believes the Company and Bank met all capital adequacy requirements to which they are subject. As of

March 31, 2020,

the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are

no

conditions or events since the notification that management believes have changed the institution’s category.

The following tables show the ratios (excluding capital conservation buffer) and amounts of common equity Tier

1,

Tier

1

capital, and total capital to risk-adjusted assets and the leverage ratios for the Bank at the dates indicated (dollars in thousands):

	Actual				Minimum Requirement for Capital Adequacy Purposes				Minimum Requirement to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of March 31, 20 20 :
Total risk-based capital (to risk-weighted assets)	$	129,035		12.38	$	83,378		8.00	$	104,223		10.00	%
Total common equity Tier 1 risk-based capital (to risk-weighted assets)		119,885		11.50		46,900		4.50		67,745		6.50
Tier 1 capital (to risk-weighted assets)		119,885		11.50		62,534		6.00		83,378		8.00
Tier 1 capital (to average assets)		119,885		9.67		49,607		4.00		62,008		5.00

	Actual					Minimum Requirement for Capital Adequacy Purposes					Minimum Requirement to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 201 9 :
Total risk-based capital (to risk- weighted assets)	$	121,335		12.08	%	$	80,341		8.00	%	$	100,426		10.00	%
Total common equity Tier 1 risk- based capital (to risk-weighted assets)		112,959		11.25			45,192		4.50			65,277		6.50
Tier 1 capital (to risk-weighted assets)		112,959		11.25			60,256		6.00			80,341		8.00
Tier 1 capital (to average assets)		112,959		9.99			45,208		4.00			56,510		5.00

Kentucky banking laws limit the amount of dividends that

may

be paid to a holding company by its subsidiary banks without prior approval. These laws limit the amount of dividends that

may

be paid in any calendar year to current year’s net income, as defined in the laws, combined with the retained net income of the preceding

two

years, less any dividends declared during those periods. In addition, a bank must have positive retained earnings.

XML

Note 2 - Securities (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Marketable Securities [Table Text Block]

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
March 31, 20 20
Available for sale
U.S. Government and federal agency	$	20,751	$	353	$	—		$	21,104
Agency mortgage-backed: residential		86,840		2,428		(167	)		89,101
Collateralized loan obligations		44,732		—		(3,978	)		40,754
State and municipal		28,301		346		(493	)		28,154
Corporate bonds		20,831		199		(1,486	)		19,544
Total available for sale	$	201,455	$	3,326	$	(6,124	)	$	198,657

December 31, 201 9	Amortized Cost		Gross Unre alized Gains		Gross Unre alized Losses			Fair Value
Available for sale
U.S. Government and federal agency	$	22,281	$	196	$	(147	)	$	22,330
Agency mortgage-backed: residential		91,269		1,186		(255	)		92,200
Collateralized loan obligations		49,831		—		(412	)		49,419
State and municipal		27,819		550		(3	)		28,366
Corporate bonds		16,472		213		—			16,685
Total available for sale	$	207,672	$	2,145	$	(817	)	$	209,000

Schedule of Realized Gain (Loss) [Table Text Block]

	Three Months Ended March 31,
	20 20		201 9
	(in thousands)
Proceeds	$	6,000	$	1,000
Gross gains		—		—
Gross losses		—		—

Investments Classified by Contractual Maturity Date [Table Text Block]

	March 31 , 20 20
	Amortized Cost		Fair Value
	(in thousands)
Maturity
Available for sale
Within one year	$	31,403	$	30,003
One to five years		40,037		40,515
Five to ten years		23,970		22,852
Beyond ten years		19,205		16,186
Agency mortgage-backed: residential		86,840		89,101
Total	$	201,455	$	198,657

Schedule of Unrealized Loss on Investments [Table Text Block]

	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
March 31, 20 20
Available for sale
U.S. Government and federal agency	$	—	$	—		$	—	$	—		$	—	$	—
Agency mortgage-backed: residential		10,843		(120	)		1,617		(47	)		12,460		(167	)
Collateralized loan obligations		10,702		(843	)		30,052		(3,135	)		40,754		(3,978	)
State and municipal		10,192		(493	)		—		—			10,192		(493	)
Corporate bonds		11,008		(1,486	)		—		—			11,008		(1,486	)
Total temporarily impaired	$	42,745	$	(2,942	)	$	31,669	$	(3,182	)	$	74,414	$	(6,124	)
December 31, 201 9
Available for sale
U.S. Government and federal agency	$	12,567	$	(147	)	$	—	$	—		$	12,567	$	(147	)
Agency mortgage-backed: residential		18,457		(97	)		10,665		(158	)		29,122		(255	)
Collateralized loan obligations		9,539		(46	)		35,336		(366	)		44,875		(412	)
State and municipal		911		(3	)		—		—			911		(3	)
Corporate bonds		—		—			—		—			—		—
Total temporarily impaired	$	41,474	$	(293	)	$	46,001	$	(524	)	$	87,475	$	(817	)

XML

Note 3 - Loans (Details Textual)	3 Months Ended
	Mar. 31, 2020 USD ($)	Mar. 31, 2019	Dec. 31, 2019 USD ($)
Financing Receivable Modifications Percentage of Performing TDRs to Total TDRs	100.00%		100.00%
Troubled Debt Restructuring Reserve	$ 1,000		$ 1,000
Financing Receivable, Modifications, Number of Contracts	$ 0		$ 0
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	0	0
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	0	0

XML

Note 2 - Securities - Amortized Cost, Gross Unrealized Gains or Losses, and Fair Value of Investment Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Available for sale securities, amortized cost	$ 201,455	$ 207,672
Available for sale securities, gross unrealized gains	3,326	2,145
Available for sale securities, gross unrealized losses	(6,124)	(817)
Securities available for sale	198,657	209,000
US Treasury and Government [Member]
Available for sale securities, amortized cost	20,751	22,281
Available for sale securities, gross unrealized gains	353	196
Available for sale securities, gross unrealized losses		(147)
Securities available for sale	21,104	22,330
Residential Mortgage Backed Securities [Member]
Available for sale securities, amortized cost	86,840	91,269
Available for sale securities, gross unrealized gains	2,428	1,186
Available for sale securities, gross unrealized losses	(167)	(255)
Securities available for sale	89,101	92,200
Collateralized Debt Obligations [Member]
Available for sale securities, amortized cost	44,732	49,831
Available for sale securities, gross unrealized gains
Available for sale securities, gross unrealized losses	(3,978)	(412)
Securities available for sale	40,754	49,419
US States and Political Subdivisions Debt Securities [Member]
Available for sale securities, amortized cost	28,301	27,819
Available for sale securities, gross unrealized gains	346	550
Available for sale securities, gross unrealized losses	(493)	(3)
Securities available for sale	28,154	28,366
Corporate Debt Securities [Member]
Available for sale securities, amortized cost	20,831	16,472
Available for sale securities, gross unrealized gains	199	213
Available for sale securities, gross unrealized losses	(1,486)
Securities available for sale	$ 19,544	$ 16,685

XML

Note 3 - Loans - Loans Individually Evaluated for Impairment by Class of Loans (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Unpaid principal balance, with no related allowance recorded	$ 4,235	$ 3,867
Recorded investment, with no related allowance recorded	1,926	1,717
Average recorded investment, with no related allowance recorded	1,822	1,996
Interest income recognized, with no related allowance recorded	22	30
Cash basis interest income recognized, with no related allowance recorded	14	30
Unpaid principal balance, with an allowance recorded	218	489
Recorded investment, with an allowance recorded	218	453
Allowance for loan losses allocated, with an allowance recorded	20	42
Average recorded investment, with an allowance recorded	335	877
Interest income recognized, with an allowance recorded	4	11
Cash basis interest income recognized, with an allowance recorded
Unpaid principal balance, total	4,453	4,356
Recorded investment, total	2,144	2,170
Average recorded investment, total	2,157	2,873
Interest income recognized, total	26	41
Cash basis interest income recognized	14	30
Commercial Portfolio Segment [Member]
Unpaid principal balance, with no related allowance recorded	265	138
Recorded investment, with no related allowance recorded	158	50
Average recorded investment, with no related allowance recorded	104	52
Interest income recognized, with no related allowance recorded
Cash basis interest income recognized, with no related allowance recorded
Unpaid principal balance, with an allowance recorded		24
Recorded investment, with an allowance recorded		24
Allowance for loan losses allocated, with an allowance recorded		3
Average recorded investment, with an allowance recorded	12
Interest income recognized, with an allowance recorded
Cash basis interest income recognized, with an allowance recorded
Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Unpaid principal balance, with no related allowance recorded
Recorded investment, with no related allowance recorded
Average recorded investment, with no related allowance recorded
Interest income recognized, with no related allowance recorded
Cash basis interest income recognized, with no related allowance recorded
Unpaid principal balance, with an allowance recorded	0	0
Recorded investment, with an allowance recorded	0	0
Allowance for loan losses allocated, with an allowance recorded	0	0
Average recorded investment, with an allowance recorded	0	0
Interest income recognized, with an allowance recorded	0	0
Cash basis interest income recognized, with an allowance recorded	0	0
Commercial Real Estate Portfolio Segment [Member] | Farmland Loans [Member]
Unpaid principal balance, with no related allowance recorded	414	380
Recorded investment, with no related allowance recorded	299	293
Average recorded investment, with no related allowance recorded	296	98
Interest income recognized, with no related allowance recorded	10	5
Cash basis interest income recognized, with no related allowance recorded	10	5
Unpaid principal balance, with an allowance recorded	143	282
Recorded investment, with an allowance recorded	143	282
Allowance for loan losses allocated, with an allowance recorded	19	37
Average recorded investment, with an allowance recorded	212	158
Interest income recognized, with an allowance recorded	2	0
Cash basis interest income recognized, with an allowance recorded
Commercial Real Estate Portfolio Segment [Member] | Nonfarm Nonresidential [Member]
Unpaid principal balance, with no related allowance recorded	1,043	1,057
Recorded investment, with no related allowance recorded	480	489
Average recorded investment, with no related allowance recorded	485	256
Interest income recognized, with no related allowance recorded	8	3
Cash basis interest income recognized, with no related allowance recorded		3
Unpaid principal balance, with an allowance recorded
Recorded investment, with an allowance recorded
Allowance for loan losses allocated, with an allowance recorded
Average recorded investment, with an allowance recorded
Interest income recognized, with an allowance recorded
Cash basis interest income recognized, with an allowance recorded
Residential Portfolio Segment [Member] | Multifamily Loans [Member]
Unpaid principal balance, with no related allowance recorded
Recorded investment, with no related allowance recorded
Average recorded investment, with no related allowance recorded
Interest income recognized, with no related allowance recorded
Cash basis interest income recognized, with no related allowance recorded
Unpaid principal balance, with an allowance recorded
Recorded investment, with an allowance recorded
Allowance for loan losses allocated, with an allowance recorded
Average recorded investment, with an allowance recorded
Interest income recognized, with an allowance recorded
Cash basis interest income recognized, with an allowance recorded
Residential Portfolio Segment [Member] | One- to Four-family Residential Properties [Member]
Unpaid principal balance, with no related allowance recorded	1,862	1,679
Recorded investment, with no related allowance recorded	846	745
Average recorded investment, with no related allowance recorded	795	1,544
Interest income recognized, with no related allowance recorded	3	22
Cash basis interest income recognized, with no related allowance recorded	3	22
Unpaid principal balance, with an allowance recorded	75	183
Recorded investment, with an allowance recorded	75	147
Allowance for loan losses allocated, with an allowance recorded	1	2
Average recorded investment, with an allowance recorded	111	719
Interest income recognized, with an allowance recorded	2	11
Cash basis interest income recognized, with an allowance recorded
Consumer Portfolio Segment [Member]
Unpaid principal balance, with no related allowance recorded	354	309
Recorded investment, with no related allowance recorded	143	98
Average recorded investment, with no related allowance recorded	121	14
Interest income recognized, with no related allowance recorded	1
Cash basis interest income recognized, with no related allowance recorded	1
Unpaid principal balance, with an allowance recorded	0	0
Recorded investment, with an allowance recorded	0	0
Allowance for loan losses allocated, with an allowance recorded	0	0
Average recorded investment, with an allowance recorded
Interest income recognized, with an allowance recorded	0	0
Cash basis interest income recognized, with an allowance recorded	0	0
Agriculture Portfolio Segment [Member]
Unpaid principal balance, with no related allowance recorded	297	304
Recorded investment, with no related allowance recorded		42
Average recorded investment, with no related allowance recorded	21	32
Interest income recognized, with no related allowance recorded
Cash basis interest income recognized, with no related allowance recorded
Unpaid principal balance, with an allowance recorded
Recorded investment, with an allowance recorded
Allowance for loan losses allocated, with an allowance recorded
Average recorded investment, with an allowance recorded
Interest income recognized, with an allowance recorded	0	0
Cash basis interest income recognized, with an allowance recorded
Other Portfolio Segment [Member]
Unpaid principal balance, with no related allowance recorded	0	0
Recorded investment, with no related allowance recorded	0	0
Average recorded investment, with no related allowance recorded
Interest income recognized, with no related allowance recorded
Cash basis interest income recognized, with no related allowance recorded
Unpaid principal balance, with an allowance recorded	0	0
Recorded investment, with an allowance recorded	0	0
Allowance for loan losses allocated, with an allowance recorded	0	0
Average recorded investment, with an allowance recorded	0	0
Interest income recognized, with an allowance recorded	0	0
Cash basis interest income recognized, with an allowance recorded	$ 0	$ 0

XML

Note 7 - Deposits - Deposit Balances by Category (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Non-interest bearing	$ 185,658	$ 187,551
Interest checking	157,621	146,038
Money market	154,851	160,837
Savings	92,235	56,015
Certificates of deposit	467,535	476,534
Total	$ 1,057,900	$ 1,026,975

XML

Unaudited Consolidated Statements of Income - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Interest income
Loans, including fees	$ 11,611,000	$ 10,254,000
Taxable securities	1,467,000	1,573,000
Tax exempt securities	70,000	93,000
Federal funds sold and other	119,000	266,000
Interest and Dividend Income, Operating, Total	13,267,000	12,186,000
Interest expense
Deposits	2,772,000	2,587,000
Federal Home Loan Bank advances	220,000	281,000
Senior debt	56,000	96,000
Junior subordinated debentures	215,000	263,000
Subordinated capital note	242,000
Interest Expense, Total	3,505,000	3,227,000
Net interest income	9,762,000	8,959,000
Provision for loan losses	1,050,000
Net interest income after provision for loan losses	8,712,000	8,959,000
Non-interest income
Non-interest income revenue	156,000	136,000
Income from bank owned life insurance	96,000	99,000
Other	210,000	181,000
Noninterest Income, Total	1,724,000	1,284,000
Non-interest expense
Salaries and employee benefits	4,538,000	3,915,000
Occupancy and equipment	999,000	898,000
Professional fees	208,000	165,000
Marketing expense	214,000	227,000
FDIC insurance		108,000
Data processing expense	359,000	313,000
State franchise and deposit tax	360,000	315,000
Deposit account related expense	451,000	281,000
Other real estate owned expense	16,000	166,000
Litigation and loan collection expense	65,000	46,000
Communications expense	218,000	190,000
Insurance expense	103,000	114,000
Postage and delivery	168,000	141,000
Other	536,000	402,000
Noninterest Expense, Total	8,235,000	7,281,000
Income before income taxes	2,201,000	2,962,000
Income tax expense	361,000	123,000
Net income	$ 1,840,000	$ 2,839,000
Basic and diluted income per common share (in dollars per share)	$ 0.25	$ 0.38
Deposit Account [Member]
Non-interest income
Non-interest income revenue	$ 668,000	$ 496,000
Debit Card [Member]
Non-interest income
Non-interest income revenue	$ 750,000	$ 508,000

XML

Note 8 - Advances from the Federal Home Loan Bank - Advances From the Federal Home Loan Bank (Details) (Parentheticals)	Mar. 31, 2020	Dec. 31, 2019
Minimum [Member]
Short-term advances from the FHLB, fixed rate	0.13%	0.13%
Long term advances from the FHLB, fixed rate	0.00%	0.00%
Maximum [Member]
Short-term advances from the FHLB, fixed rate	0.22%	0.22%
Long term advances from the FHLB, fixed rate	5.24%	5.24%

XML

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Basis of Presentation and Significant Accounting Policies [Text Block]

Note

1

– Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

– The consolidated financial statements include Limestone Bancorp, Inc. (Company) and its subsidiary, Limestone Bank, Inc. (Bank). The Company owns a

100%

interest in the Bank. All significant inter-company transactions and accounts have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form

10

-Q and Rule

10

-

01

of Regulation S-

X.

 Accordingly, the financial statements do

not

include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the

three

months ended

March 31, 2020

are

not

necessarily indicative of the results that

may

be expected for the entire year. A description of other significant accounting policies is presented in the notes to the Consolidated Financial Statements for the year ended

December 31, 2019

included in the Company’s Annual Report on Form

10

-K.

Use of Estimates

– To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ.

In

March 2020,

the World Health Organization declared novel coronavirus disease

2019

("COVID-

19"

) as a global pandemic. The COVID-

19

pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities, including those in markets in which the Company is located or does business.

The extent to which the COVID-

19

pandemic impacts the Company’s business, liquidity, asset valuations, results of operations, and financial condition, as well as its regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain, including the scope and duration of the pandemic and actions taken by governmental authorities and other

third

parties in response to the pandemic. Moreover, the effects of the COVID-

19

pandemic

may

have a material adverse effect on all or a combination of valuation impairments on the Company's intangible assets, investments, loans, or deferred tax assets.

Reclassifications

– Some items in the prior year financial statements were reclassified to conform to the current presentation. The reclassifications did

not

impact net income or stockholders’ equity.

New Accounting Standards

–

In

June 2016,

the FASB issued ASU

No.

2016

-

13,

Financial Instruments – Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments. The final standard will change estimates for credit losses related to financial assets measured at amortized cost such as loans, held-to-maturity debt securities, and certain other contracts. For estimating credit losses, the FASB is replacing the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (CECL) model. Under the CECL model, certain financial assets that are carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, are required to be presented at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is

first

added to the balance sheet and periodically thereafter. This differs significantly from the “incurred loss” model required under current GAAP, which delays recognition until it is probable a loss has been incurred. The change could materially affect how the allowance for loan losses is determined. The impact of CECL model implementation is being evaluated, but it is expected that a

one

-time cumulative-effect adjustment to the allowance for loan losses will be recognized in retained earnings on the consolidated balance sheet as of the beginning of the

first

reporting period in which the new standard is effective, as is consistent with regulatory expectations set forth in interagency guidance. In

December 2018,

the OCC, The Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to the credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a

three

-year period the day-

one

adverse effects on regulatory capital that

may

result from adoption of the new accounting standard. In

October 2019,

the FASB voted to delay implementation for smaller reporting companies, private companies, and

not

-for-profit entities. The Company currently qualifies as a smaller reporting company. Companies qualifying for the delay will be required to implement CECL for fiscal year and interim periods beginning after

December 15, 2022.

XML

Note 13 - Earnings per Share (Details Textual) - shares shares in Thousands	Mar. 31, 2020	Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance (in shares)	0	0

XML

Note 11 - Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Deferred tax assets:
Net operating loss carry-forward	$ 22,403	$ 22,915
Allowance for loan losses	2,283	2,090
OREO write-down	2,665	2,665
Alternative minimum tax credit carry-forward		173
Net assets from acquisitions	188	228
Net unrealized loss on securities	646
New market tax credit carry-forward	208	208
Nonaccrual loan interest	310	303
Accrued expenses	99	102
Lease liability	719	766
Other	295	309
Deferred Tax Assets, Gross, Total	29,816	29,759
Deferred tax liabilities:
FHLB stock dividends	563	563
Fixed assets	49	57
Deferred loan costs	170	170
Net unrealized gain on securities		331
Lease right-of-use assets	719	766
Other	107	107
Deferred Tax Liabilities, Gross, Total	1,608	1,994
Net deferred tax asset	$ 28,208	$ 27,765

XML

Note 16 - Revenue from Contracts With Customers (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenue from Contract with Customer, Including Assessed Tax	$ 156,000	$ 136,000

XML

Note 14 - Regulatory Capital Matters (Details Textual)	Mar. 31, 2020
Banking Regulation, Capital Conservation Buffer, Capital Conserved, Minimum	2.5
Banking Regulation, Capital Conservation Buffer, Common Equity Tier One Risk-Based Capital, Actual	7
Banking Regulation, Capital Conservation Buffer, Tier One Risk-Based Capital, Actual	8.5
Banking Regulation, Capital Conservation Buffer, Tier One Risk-Based Capital, Actual	10.5

XML

Note 10 - Fair Values Measurement (Details Textual)	3 Months Ended
	Mar. 31, 2020 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2019 USD ($)
Impaired Financing Receivable, with Related Allowance, Recorded Investment	$ 218,000		$ 453,000
Impaired Financing Receivable, Related Allowance	20,000		42,000
Impaired Loans [Member]
Impaired Financing Receivable, Related Allowance	20,000	$ 193,000	42,000
Impaired Financing Receivable Provision for Loan Losses	0	0
Measured for Impairment Using Fair Value of Collateral [Member] | Impaired Loans [Member]
Impaired Financing Receivable, with Related Allowance, Recorded Investment	$ 218,000	$ 873,000	$ 453,000
Measurement Input, Discount Rate [Member] | Minimum [Member]
Impaired Loans, Measurement Input	0.1
Measurement Input, Discount Rate [Member] | Maximum [Member]
Impaired Loans, Measurement Input	0.33
Measurement Input, Estimated Discount for Cost to Sell [Member] | Minimum [Member]
Impaired Loans, Measurement Input	0.06
Measurement Input, Estimated Discount for Cost to Sell [Member] | Maximum [Member]
Impaired Loans, Measurement Input	0.1
Routine Real Estate Collateral [Member] | Measurement Input, Discount Rate [Member]
Impaired Loans, Measurement Input	0.1
Thin Trading Market or Specialized Collateral [Member] | Measurement Input, Discount Rate [Member]
Impaired Loans, Measurement Input	0.25

XML

Note 4 - Leases (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Operating Lease, Weighted Average Remaining Lease Term (Year)	22 years
Operating Lease, Weighted Average Discount Rate, Percent	5.47%
Operating Leases, Rent Expense, Net, Total	$ 120,000	$ 65,000
Other Liabilities [Member]
Operating Lease, Liability, Total	2,883,000	445,000
Premises and Equipment [Member]
Operating Lease, Right-of-Use Asset	$ 2,900,000	$ 445,000

XML

Note 5 - Other Real Estate Owned - Activity Relating to Other Real Estate Owned (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
OREO	$ 3,225	$ 3,485
Real estate acquired
Valuation adjustment write-downs		(150)
Net loss (gain) on sales
Proceeds from sales of properties
OREO	$ 3,225	$ 3,335

XML

Note 14 - Regulatory Capital Matters (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

	Actual				Minimum Requirement for Capital Adequacy Purposes				Minimum Requirement to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of March 31, 20 20 :
Total risk-based capital (to risk-weighted assets)	$	129,035		12.38	$	83,378		8.00	$	104,223		10.00	%
Total common equity Tier 1 risk-based capital (to risk-weighted assets)		119,885		11.50		46,900		4.50		67,745		6.50
Tier 1 capital (to risk-weighted assets)		119,885		11.50		62,534		6.00		83,378		8.00
Tier 1 capital (to average assets)		119,885		9.67		49,607		4.00		62,008		5.00

	Actual					Minimum Requirement for Capital Adequacy Purposes					Minimum Requirement to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 201 9 :
Total risk-based capital (to risk- weighted assets)	$	121,335		12.08	%	$	80,341		8.00	%	$	100,426		10.00	%
Total common equity Tier 1 risk- based capital (to risk-weighted assets)		112,959		11.25			45,192		4.50			65,277		6.50
Tier 1 capital (to risk-weighted assets)		112,959		11.25			60,256		6.00			80,341		8.00
Tier 1 capital (to average assets)		112,959		9.99			45,208		4.00			56,510		5.00

XML

Note 10 - Fair Values Measurement (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Table Text Block]

			Fair Value Measurements at March 31, 20 20 Using
			(in thousands)
			Quoted Prices In				Significant
			Active Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
Description	Value		(Level 1)		(Level 2)		(Level 3)
Available for sale securities
U.S. Government and federal agency	$	21,104	$	—	$	21,104	$	—
Agency mortgage-backed: residential		89,101		—		89,101		—
Collateralized loan obligations		40,754		—		40,754		—
State and municipal		28,154		—		28,154		—
Corporate bonds		19,544		—		19,544		—
Total	$	198,657	$	—	$	198,657	$	—

			Fair Value Measurements at December 31, 201 9 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities
U.S. Government and federal agency	$	22,330	$	—	$	22,330	$	—
Agency mortgage-backed: residential		92,200		—		92,200		—
Collateralized loan obligations		49,419		—		49,419		—
State and municipal		28,366		—		28,366		—
Corporate bonds		16,685		—		16,685		—
Total	$	209,000	$	—	$	209,000	$	—

			Fair Value Measurements at March 31, 20 20 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial real estate:
Farmland	$	124	$	—	$	—	$	124
Residential real estate:
1-4 Family		74		—		—		74

			Fair Value Measurements at December 31, 201 9 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	21	$	—	$	—	$	21
Commercial real estate:
Farmland		245		—		—		245
Residential real estate:
1-4 Family		145		—		—		145

Fair Value, by Balance Sheet Grouping [Table Text Block]

			Fair Value Measurements at March 31, 20 20 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	33,148	$	33,148	$	—	$	—	$	33,148
Securities available for sale		198,657		—		198,657		—		198,657
Federal Home Loan Bank stock		6,837		N/A		N/A		N/A		N/A
Loans, net		952,411		—		—		903,898		903,898
Accrued interest receivable		4,219		—		993		3,226		4,219
Financial liabilities
Deposits	$	1,057,900	$	185,658	$	874,347	$	—	$	1,060,005
Federal Home Loan Bank advances		61,349		—		61,357		—		61,357
Junior subordinated debentures		21,000		—		—		14,153		14,153
Subordinated capital note		17,000		—		—		16,095		16,095
Senior Debt		5,000		—		—		4,900		4,900
Accrued interest payable		715		—		509		206		715

			Fair Value Measurements at December 31, 201 9 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	30,203	$	30,203	$	—	$	—	$	30,203
Securities available for sale		209,000		—		209,000		—		209,000
Federal Home Loan Bank stock		6,237		N/A		N/A		N/A		N/A
Loans, net		917,895		—		—		925,388		925,388
Accrued interest receivable		4,257		—		1,118		3,139		4,257
Financial liabilities
Deposits	$	1,026,975	$	187,551	$	839,882	$	—	$	1,027,433
Federal Home Loan Bank advances		61,389		—		61,395		—		61,395
Junior subordinated debentures		21,000		—		—		17,466		17,466
Subordinated capital note		17,000		—		—		17,003		17,003
Senior Debt		5,000		—		—		5,022		5,022
Accrued interest payable		1,129		—		647		482		1,129

XML

Note 4 - Leases

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

Note

4

– Leases

As of

March 31, 2020,

the Company leases real estate for

six

branch offices or offsite ATM machines under various operating lease agreements. The lease agreements have maturity dates ranging from

2021

to

2055,

including all expected extension periods. The weighted average remaining life of the lease term for these leases was

22

years as of

March 31, 2020.

In determining the present value of lease payments, the Bank uses the implicit lease rate when readily determinable. As most of the Bank’s leases do

not

provide an implicit rate, the incremental borrowing rate based on the information available at commencement date is used. The incremental borrowing rate is the rate of interest that the Bank estimates it would pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. This methodology will be continued for the commencement of any subsequent lease agreements. The weighted average discount rate for the leases was

5.47%

as of

March 31, 2020.

Total rental expense was

$120,000

for the

three

months ended

March 31, 2020

and

$65,000

for the

three

months ended

March 31, 2019.

The right-of-use asset, included in premises and equipment, and lease liability, included in other liabilities, was

$2.9

million as of

March 31, 2020

and

$445,000

as of

March 31, 2019.

Total estimated rental commitments for the operating leases were as follows as of

March 31, 2020 (

in thousands):

	March 31, 2020
2020	$	383
2021		260
2022		242
2023		246
2024		246
Thereafter		3,720
Total minimum lease payments		5,097
Discount effect of cash flows		(2,214	)
Present value of lease liabilities	$	2,883

XML

Note 8 - Advances from the Federal Home Loan Bank

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Federal Home Loan Bank Advances, Disclosure [Text Block]

Note

8

– Advance

s

from the Federal Home Loan Bank

Advances from the Federal Home Loan Bank were as follows: 

	March 31,		December 31,
	20 20		201 9
	(in thousands)
Short term advances (fixed rates 0.13% to 0.22%) maturing April 2020	$	40,000	$	60,000
Long term advances (fixed rates 0.00% to 5.24%) maturing April 2020 to August 2033		21,349		1,389
Total advances from the Federal Home Loan Bank	$	61,349	$	61,389

FHLB advances had a weighted-average rate of

0.39%

at

March 31, 2020

and

1.70%

at

December 31, 2019.

Each advance is payable per terms on agreement, with a prepayment penalty.

No

prepayment penalties were incurred during

2020

or

2019.

The advances were collateralized by approximately

$158.5

million and

$166.0

million of

first

mortgage loans, under a blanket lien arrangement at

March 31, 2020

and

December 31, 2019,

respectively. At

March 31, 2020,

the Bank’s additional borrowing capacity with the FHLB was

$53.6

million.

Scheduled principal payments on the above during the next

five

years and thereafter (in thousands):

	Advances
Year 1	$	41,090
Year 2		98
Year 3		99
Year 4		42
Year 5		16
Thereafter		20,004
	$	61,349

XML

Note 12 - Stock Plans and Stock Based Compensation

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note

1

2

– Stock Plans and Stock Based Compensation

Shares available for issuance under the

2018

Omnibus Equity Compensation Plan (

“2018

Plan”) total

273,329.

Shares issued to employees under the plan vest annually on the anniversary date of the grant over

three

years. Shares issued annually to non-employee directors have a fair market value of

$25,000

and vest on

December 31

in the year of grant.

The fair value of the

2020

unvested shares issued was

$349,000,

or

$17.03

per weighted-average share. The Company recorded

$106,000

and

$82,000

of stock-based compensation to salaries and employee benefits for the

three

months ended

March 31, 2020

and

2019,

respectively. Management expects substantially all of the unvested shares outstanding at the end of the period to vest according to the vesting schedule. A deferred tax benefit of

$22,000

and

$17,000

was recognized related to this expense during the

three

months ended

March 31, 2020

and

2019,

respectively.

The following table summarizes unvested share activity as of and for the periods indicated for the Stock Incentive Plan:

	Three Months Ended					Twelve Months Ended
	March 31 , 20 20					December 31, 201 9
				Weighted					Weighted
				Average					Average
				Grant					Grant
	Shares			Price		Shares			Price
Outstanding, beginning		57,774		$	13.35		116,909		$	8.69
Granted		20,507			17.03		34,501			14.81
Vested		(13,329	)		11.85		(89,388	)		7.83
Forfeited		—			—		(4,248	)		13.07
Outstanding, ending		64,952		$	14.82		57,774		$	13.35

Unrecognized stock-based compensation expense related to unvested shares for the remainder of

2020

and beyond is estimated as follows (in thousands):

April 2020 – December 2020	$	305
2021		311
2022		136
2023		14

XML

Note 16 - Revenue from Contracts With Customers

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

Note

1

6

–

Revenue from Contracts with Customers

All of the Company’s revenue from customers within the scope of ASC

606

is recognized as non-interest income. A description of the Company’s revenue streams accounted for under ASC

606

follows:

Service Charges on Deposit Accounts:

The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges are withdrawn from the customer’s account balance.

Bank Card Interchange Income:

The Company earns interchange fees from bank cardholder transactions conducted through a

third

-party payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Prior to adopting ASC

606,

the Company reported bank card interchange fees net of expenses. Under ASC

606,

bank card interchange fees are reported gross.

Gains/Losses on Sales of OREO:

The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. Gains and losses on sales of OREO are netted with OREO expense and reported in non-interest expense.

Other Non-interest I

ncome

: Other non-interest income includes revenue from several sources that are within the scope of ASC

606,

including title insurance commissions, income from secondary market loan sales, and other transaction-based revenue that is individually immaterial. Other non-interest income included approximately

$156,000

and

$136,000

of revenue for

three

months ended

March 31, 2020

and

March 31, 2019,

respectively, within the scope of ASC

606.

The remaining other non-interest income for the

three

months is excluded from the scope of ASC

606.

XML

Note 4 - Leases (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

	March 31, 2020
2020	$	383
2021		260
2022		242
2023		246
2024		246
Thereafter		3,720
Total minimum lease payments		5,097
Discount effect of cash flows		(2,214	)
Present value of lease liabilities	$	2,883

XML

Unaudited Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member] Voting Common Stock [Member]	Common Stock [Member] Nonvoting Common Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balances (in shares) at Dec. 31, 2018	6,242,720	1,220,000	7,462,720
Balances at Dec. 31, 2018			$ 140,639	$ 24,287	$ (66,201)	$ (6,628)	$ 92,097
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award (in shares)	1,642		1,642
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award				(276)			(276)
Forfeited unvested stock (in shares)	(3,748)		(3,748)
Forfeited unvested stock
Stock-based compensation expense				82			82
Net income					2,839		2,839
Net change in accumulated other comprehensive loss, net of taxes						1,577	1,577
Balances (in shares) at Mar. 31, 2019	6,240,614	1,220,000	7,460,614
Balances at Mar. 31, 2019			$ 140,639	24,093	(63,362)	(5,051)	96,319
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award (in shares)	1,642		1,642
Balances (in shares) at Dec. 31, 2019	6,251,975	1,220,000	7,471,975
Balances at Dec. 31, 2019			$ 140,639	24,508	(55,683)	(3,714)	105,750
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award (in shares)	17,330		17,330
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award				(37)			(37)
Forfeited unvested stock (in shares)
Forfeited unvested stock
Stock-based compensation expense				106			106
Net income					1,840		1,840
Net change in accumulated other comprehensive loss, net of taxes						(3,148)	(3,148)
Balances (in shares) at Mar. 31, 2020	6,269,305	1,220,000	7,489,305
Balances at Mar. 31, 2020			$ 140,639	$ 24,577	$ (53,843)	$ (6,862)	$ 104,511
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award (in shares)	17,330		17,330

XML

Note 6 - Goodwill and Intangible Assets - Expected Amortization Expense (Details) - Core Deposits [Member] $ in Thousands	Mar. 31, 2020 USD ($)
April 2020 – December 2020	$ 192
2021	256
2022	256
2023	256
2024	256
Thereafter	1,220
Finite-Lived Intangible Assets, Net, Ending Balance	$ 2,436

XML

Note 8 - Advances from the Federal Home Loan Bank (Details Textual) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Federal Home Loan Bank, Advances, Weighted Average Interest Rate	0.39%	1.70%
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Repayment and Penalties	$ 0	$ 0
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	158,500	$ 166,000
Federal Home Loan Bank, Advances, General Debt Obligations, Amount of Available, Unused Funds	$ 53,600

XML

Unaudited Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Assets
Cash and due from banks	$ 9,509	$ 8,241
Interest bearing deposits in banks	23,639	21,962
Cash and cash equivalents	33,148	30,203
Securities available for sale	198,657	209,000
Loans, net of allowance of $9,150 and $8,376, respectively	952,411	917,895
Premises and equipment, net	19,282	19,658
Premises held for sale	1,185	900
Other real estate owned	3,225	3,225
Federal Home Loan Bank stock	6,837	6,237
Bank owned life insurance	16,128	16,037
Deferred taxes, net	28,208	27,765
Goodwill	6,252	6,252
Other intangible assets, net	2,436	2,500
Accrued interest receivable and other assets	6,441	6,107
Total assets	1,274,210	1,245,779
Deposits
Non-interest bearing	185,658	187,551
Interest bearing	872,242	839,424
Total deposits	1,057,900	1,026,975
Federal Home Loan Bank advances	61,349	61,389
Accrued interest payable and other liabilities	7,450	8,665
Junior subordinated debentures	21,000	21,000
Subordinated capital note	17,000	17,000
Senior debt	5,000	5,000
Total liabilities	1,169,699	1,140,029
Commitments and contingent liabilities (Note 15)
Stockholders’ equity
Common stock, no par, 39,000,000 shares authorized, 6,269,305 and 6,251,975 voting, and 1,220,000 and 1,220,000 non-voting issued and outstanding, respectively	140,639	140,639
Additional paid-in capital	24,577	24,508
Retained deficit	(53,843)	(55,683)
Accumulated other comprehensive loss	(6,862)	(3,714)
Total stockholders' equity	104,511	105,750
Total liabilities and stockholders’ equity	$ 1,274,210	$ 1,245,779

XML

Note 9 - Borrowings (Details Textual) - USD ($)		3 Months Ended	48 Months Ended	60 Months Ended
	Jul. 23, 2019	Mar. 31, 2020	Jun. 30, 2022	Jul. 31, 2029
Senior Notes [Member]
Early Repayment of Senior Debt	$ 5,000,000
Debt Instrument, Periodic Payment, Principal		$ 250,000
First Priority Pledge, Percent of Issued and Outstanding Stock		100.00%
Senior Notes [Member] | Subsidiaries [Member]
Debt Instrument, Financial Covenants, Non-performing Assets to Total Assets, Percentage, Minimum		2.50%
Forecast [Member] | Senior Notes [Member]
Debt Instrument, Financial Convenants, Minimum Cash on Hand			$ 2,500,000
Debt Instrument, Financial Convenants, Minimum Risk Based Capital to Risk Weighted Assets			10.00%
Forecast [Member] | Senior Notes [Member] | Subsidiaries [Member]
Debt Instrument, Financial Convenants, Minimum Risk Based Capital to Risk Weighted Assets			11.00%
London Interbank Offered Rate (LIBOR) [Member] | Senior Notes [Member]
Debt Instrument, Basis Spread on Variable Rate		2.50%
Ten Year Subordinated Debt Note, Issued July 23, 2019 [Member]
Proceeds from Issuance of Subordinated Long-term Debt	$ 17,000,000
Debt Instrument, Fixed Rate for First Five Years	5.75%
Ten Year Subordinated Debt Note, Issued July 23, 2019 [Member] | London Interbank Offered Rate (LIBOR) [Member] | Forecast [Member]
Debt Instrument, Basis Spread on Variable Rate				3.95%

XML

Note 3 - Loans - Activity in Allowance for Loan Losses by Portfolio Segment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Balance	$ 8,376	$ 8,880
Provision for loan losses	1,050
Loans charged off	(335)	(278)
Recoveries	59	84
Balance	9,150	8,686
Commercial Portfolio Segment [Member]
Balance	1,710	1,299
Provision for loan losses	339	143
Loans charged off	(29)
Recoveries	5	5
Balance	2,025	1,447
Commercial Real Estate Portfolio Segment [Member]
Balance	4,080	4,676
Provision for loan losses	141	(165)
Loans charged off	(29)	(15)
Recoveries	20	2
Balance	4,212	4,498
Residential Portfolio Segment [Member]
Balance	1,743	2,452
Provision for loan losses	220	(204)
Loans charged off	(75)	(82)
Recoveries	21	61
Balance	1,909	2,227
Consumer Portfolio Segment [Member]
Balance	485	130
Provision for loan losses	265	193
Loans charged off	(161)	(180)
Recoveries	4	16
Balance	593	159
Agriculture Portfolio Segment [Member]
Balance	355	321
Provision for loan losses	87	33
Loans charged off	(41)	(1)
Recoveries	8
Balance	409	353
Other Portfolio Segment [Member]
Balance	3	2
Provision for loan losses	(2)
Loans charged off
Recoveries	1
Balance	$ 2	$ 2

XML

Note 2 - Securities - Amortized Cost and Fair Value of Debt Investment Securities Portfolio by Contractual Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Within one year, amortized cost	$ 31,403
Within one year, fair value	30,003
One to five years, amortized cost	40,037
One to five years, fair value	40,515
Five to ten years, amortized cost	23,970
Five to ten years, fair value	22,852
Beyond ten years, amortized cost	19,205
Beyond ten years, fair value	16,186
Agency mortgage-backed: residential, amortized cost	86,840
Agency mortgage-backed: residential, fair value	89,101
Total, amortized cost	201,455	$ 207,672
Total, fair value	$ 198,657	$ 209,000

XML

Note 15 - Off Balance Sheet Risks, Commitments, and Contingent Liabilities

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

1

5

–

Off Balance Sheet Risks, Commitments, and Contingent Liabilities

The Company, in the normal course of business, is party to financial instruments with off balance sheet risk. The financial instruments include commitments to extend credit and standby letters of credit. The contract or notional amounts of these instruments reflect the potential future obligations of the Company pursuant to those financial instruments. Creditworthiness for all instruments is evaluated on a case-by-case basis in accordance with the Company’s credit policies. Collateral from the client

may

be required based on the Company’s credit evaluation of the client and

may

include business assets of commercial clients, as well as personal property and real estate of individual clients or guarantors.

An approved but unfunded loan commitment represents a potential credit risk and a liquidity risk, since the Company’s client(s)

may

demand immediate cash that would require funding. In addition, unfunded loan commitments represent interest rate risk as market interest rates

may

rise above the rate committed to the Company’s client. Since a portion of these loan commitments normally expire unused, the total amount of outstanding commitments at any point in time

may

not

require future funding. Commitments to make loans are generally made for periods of

one

year or less.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a client to a

third

party. The terms and risk of loss involved in issuing standby letters of credit are similar to those involved in issuing loan commitments and extending credit. In addition to credit risk, the Company also has liquidity risk associated with standby letters of credit because funding for these obligations could be required immediately. The Company does

not

deem this risk to be material.

No

liability is currently established for standby letters of credit.

The following table presents the contractual amounts of financial instruments with off-balance sheet risk for each period ended:

	March 31, 20 20				December 31, 201 9
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
	(in thousands)
Commitments to make loans	$	12,403	$	26,290	$	11,577	$	20,415
Unused lines of credit		8,684		96,982		7,916		111,230
Standby letters of credit		531		1,336		531		3,164

Commitments to make loans are generally made for periods of

one

year or less.

In connection with the purchase of loan participations, the Bank entered into risk participation agreements, which had notional amounts totaling

$26.6

million at

March 31, 2020

and

December 31, 2019.

The risk participation agreements are

not

designated against specific assets or liabilities under ASC

815,

Derivatives and Hedging, and, therefore, do

not

qualify for hedge accounting. The derivatives are recorded in other liabilities on the balance sheet at fair value and changes in fair value of both the borrower and the offsetting swap agreements are recorded (and essentially offset) in non-interest income.

In the normal course of business, the Company and its subsidiaries have been named, from time to time, as defendants in various legal actions. Certain of the actual or threatened legal actions

may

include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages.

The Company contests liability and/or the amount of damages as appropriate in each pending matter. In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases where claimants seek substantial or indeterminate damages or where investigations and proceedings are in the early stages, the Company cannot predict with certainty the loss or range of loss, if any, related to such matters, how or if such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, or other relief, if any, might be. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that the outcome of such pending matters will

not

have a material adverse effect on the consolidated financial condition of the Company, although the outcome of such matters could be material to the Company’s operating results and cash flows for a particular future period, depending on, among other things, the level of the Company’s revenues or income for such period. The Company will accrue for a loss contingency if (

1

) it is probable that a future event will occur and confirm the loss and (

2

) the amount of the loss can be reasonably estimated. The Company is

not

currently involved in any material litigation.

XML

Note 3 - Loans (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	March 31,			December 31,
	20 20			201 9
	(in thousands)
Commercial	$	169,176		$	145,551
Commercial Real Estate:
Construction		71,267			64,911
Farmland		80,579			79,118
Nonfarm nonresidential		261,807			255,459
Residential Real Estate:
Multi-family		75,525			70,950
1-4 Family		220,701			226,629
Consumer		44,814			47,790
Agriculture		36,977			35,064
Other		715			799
Subtotal		961,561			926,271
Less: Allowance for loan losses		(9,150	)		(8,376	)
Loans, net	$	952,411		$	917,895

Financing Receivable, Allowance for Credit Loss [Table Text Block]

	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Agriculture			Other			Total
	(in thousands)
March 31, 20 20 :
Beginning balance	$	1,710		$	4,080		$	1,743		$	485		$	355		$	3		$	8,376
Provision (negative provision)		339			141			220			265			87			(2	)		1,050
Loans charged off		(29	)		(29	)		(75	)		(161	)		(41	)		–			(335	)
Recoveries		5			20			21			4			8			1			59
Ending balance	$	2,025		$	4,212		$	1,909		$	593		$	409		$	2		$	9,150
March 31, 201 9 :
Beginning balance	$	1,299		$	4,676		$	2,452		$	130		$	321		$	2		$	8,880
Provision (negative provision)		143			(165	)		(204	)		193			33			–			–
Loans charged off		–			(15	)		(82	)		(180	)		(1	)		–			(278	)
Recoveries		5			2			61			16			–			–			84
Ending balance	$	1,447		$	4,498		$	2,227		$	159		$	353		$	2		$	8,686

Impairment Evaluation of Financing Receivables [Table Text Block]

	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Agriculture		Other		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	–	$	19	$	1	$	–	$	–	$	–	$	20
Collectively evaluated for impairment		2,025		4,193		1,908		593		409		2		9,130
Total ending allowance balance	$	2,025	$	4,212	$	1,909	$	593	$	409	$	2	$	9,150
Loans:
Loans individually evaluated for impairment	$	158	$	922	$	921	$	143	$	–	$	–	$	2,144
Loans collectively evaluated for impairment		169,018		412,731		295,305		44,671		36,977		715		959,417
Total ending loans balance	$	169,176	$	413,653	$	296,226	$	44,814	$	36,977	$	715	$	961,561

	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Agriculture		Other		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3	$	37	$	2	$	–	$	–	$	–	$	42
Collectively evaluated for impairment		1,707		4,043		1,741		485		355		3		8,334
Total ending allowance balance	$	1,710	$	4,080	$	1,743	$	485	$	355	$	3	$	8,376
Loans:
Loans individually evaluated for impairment	$	74	$	1,064	$	892	$	98	$	42	$	–	$	2,170
Loans collectively evaluated for impairment		145,477		398,424		296,687		47,692		35,022		799		924,101
Total ending loans balance	$	145,551	$	399,488	$	297,579	$	47,790	$	35,064	$	799	$	926,271

Impaired Financing Receivables [Table Text Block]

	As of March 31, 20 20						T hree Months Ended March 31, 20 20
	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	(in thousands)
With No Related Allowance Recorded:
Commercial	$	265	$	158	$	—	$	104	$	—	$	—
Commercial real estate:
Construction		—		—		—		—		—		—
Farmland		414		299		—		296		10		10
Nonfarm nonresidential		1,043		480		—		485		8		—
Residential real estate:
Multi-family		—		—		—		—		—		—
1-4 Family		1,862		846		—		795		3		3
Consumer		354		143		—		121		1		1
Agriculture		297		—		—		21		—		—
Other		—		—		—		—		—		—
Subtotal		4,235		1,926		—		1,822		22		14
With An Allowance Recorded:
Commercial		—		—		—		12		—		—
Commercial real estate:
Construction		—		—		—		—		—		—
Farmland		143		143		19		212		2		—
Nonfarm nonresidential		—		—		—		—		—		—
Residential real estate:
Multi-family		—		—		—		—		—		—
1-4 Family		75		75		1		111		2		—
Consumer		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Other		—		—		—		—		—		—
Subtotal		218		218		20		335		4		—
Total	$	4,453	$	2,144	$	20	$	2,157	$	26	$	14

	As of December 31, 201 9						T hree Months Ended March 31, 201 9
	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	(in thousands)
With No Related Allowance Recorded:
Commercial	$	138	$	50	$	—	$	52	$	—	$	—
Commercial real estate:
Construction		—		—		—		—		—		—
Farmland		380		293		—		98		5		5
Nonfarm nonresidential		1,057		489		—		256		3		3
Residential real estate:
Multi-family		—		—		—		—		—		—
1-4 Family		1,679		745		—		1,544		22		22
Consumer		309		98		—		14		—		—
Agriculture		304		42		—		32		—		—
Other		—		—		—		—		—		—
Subtotal		3,867		1,717		—		1,996		30		30
With An Allowance Recorded:
Commercial		24		24		3		—		—		—
Commercial real estate:
Construction		—		—		—		—		—		—
Farmland		282		282		37		158		—		—
Nonfarm nonresidential		—		—		—		—		—		—
Residential real estate:
Multi-family		—		—		—		—		—		—
1-4 Family		183		147		2		719		11		—
Consumer		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Other		—		—		—		—		—		—
Subtotal		489		453		42		877		11		—
Total	$	4,356	$	2,170	$	42	$	2,873	$	41	$	30

Financing Receivable, Troubled Debt Restructuring [Table Text Block]

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
March 31, 20 20
Commercial Real Estate:
Nonfarm nonresidential	$	391	$	—	$	391
Residential Real Estate:
1-4 Family		75		—		75
Total TDRs	$	466	$	—	$	466

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
December 31, 201 9
Commercial Real Estate:
Nonfarm nonresidential	$	400	$	—	$	400
Residential Real Estate:
1-4 Family		75		—		75
Total TDRs	$	475	$	—	$	475

Financing Receivable, Nonaccrual [Table Text Block]

	Nonaccrual				Loans Past Due 90 Days And Over Still Accruing
	March 31 , 20 20		December 31, 201 9		March 31 , 20 20		December 31, 201 9
	(in thousands)
Commercial	$	158	$	50	$	—	$	—
Commercial Real Estate:
Construction		—		—		—		—
Farmland		298		431		—		—
Nonfarm nonresidential		89		90		—		—
Residential Real Estate:
Multi-family		—		—		—		—
1-4 Family		812		817		—		—
Consumer		143		98		—		—
Agriculture		—		42		—		—
Other		—		—		—		—
Total	$	1,500	$	1,528	$	—	$	—

Financing Receivable, Past Due [Table Text Block]

	30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days And Over Past Due		Nonaccrual		Total Past Due And Nonaccrual
	(in thousands)
March 31, 20 20
Commercial	$	—	$	1	$	—	$	158	$	159
Commercial Real Estate:
Construction		—		—		—		—		—
Farmland		81		—		—		298		379
Nonfarm nonresidential		19		41		—		89		149
Residential Real Estate:
Multi-family		—		—		—		—		—
1-4 Family		961		147		—		812		1,920
Consumer		97		56		—		143		296
Agriculture		—		3		—		—		3
Other		—		—		—		—		—
Total	$	1,158	$	248	$	—	$	1,500	$	2,906

	30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days And Over Past Due		Nonaccrual		Total Past Due And Nonaccrual
	(in thousands)
December 31, 201 9
Commercial	$	14	$	3	$	—	$	50	$	67
Commercial Real Estate:
Construction		—		—		—		—		—
Farmland		274		—		—		431		705
Nonfarm nonresidential		206		—		—		90		296
Residential Real Estate:
Multi-family		—		—		—		—		—
1-4 Family		1,162		503		—		817		2,482
Consumer		91		164		—		98		353
Agriculture		—		—		—		42		42
Other		—		—		—		—		—
Total	$	1,747	$	670	$	—	$	1,528	$	3,945

Financing Receivable Credit Quality Indicators [Table Text Block]

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
March 31, 20 20
Commercial	$	146,310	$	20,903	$	—	$	1,963	$	—	$	169,176
Commercial Real Estate:
Construction		71,267		—		—		—		—		71,267
Farmland		73,202		6,568		—		809		—		80,579
Nonfarm nonresidential		252,982		7,152		—		1,673		—		261,807
Residential Real Estate:
Multi-family		75,525		—		—		—		—		75,525
1-4 Family		214,559		3,683		—		2,459		—		220,701
Consumer		44,640		3		—		171		—		44,814
Agriculture		36,785		155		—		37		—		36,977
Other		715		—		—		—		—		715
Total	$	915,985	$	38,464	$	—	$	7,112	$	—	$	961,561

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
December 31, 201 9
Commercial	$	130,312	$	11,280	$	—	$	3,959	$	—	$	145,551
Commercial Real Estate:
Construction		64,911		—		—		—		—		64,911
Farmland		71,503		6,663		—		952		—		79,118
Nonfarm nonresidential		245,995		6,986		—		2,478		—		255,459
Residential Real Estate:
Multi-family		70,950		—		—		—		—		70,950
1-4 Family		221,727		2,420		—		2,482		—		226,629
Consumer		47,657		5		—		128		—		47,790
Agriculture		34,853		168		—		43		—		35,064
Other		799		—		—		—		—		799
Total	$	888,707	$	27,522	$	—	$	10,042	$	—	$	926,271

XML

Note 8 - Advances from the Federal Home Loan Bank - Principal Payments on Advances From the Federal Home Loan Bank (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Year 1	$ 41,090
Year 2	98
Year 3	99
Year 4	42
Year 5	16
Thereafter	20,004
Advances from Federal Home Loan Banks, Total	$ 61,349	$ 61,389

XML

Note 6 - Goodwill and Intangible Assets - Schedule of Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Goodwill, Gross	$ 6,252	$ 6,252
Accumulated Amortization	64
Total, Gross	8,752	8,752
Core Deposits [Member]
Core deposit intangibles, Gross	2,500	2,500
Accumulated Amortization	$ 64

XML

Unaudited Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities
Net income	$ 1,840	$ 2,839
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization	479	679
Provision for loan losses	1,050
Net amortization on securities	146	189
Stock-based compensation expense	106	82
Deferred taxes, net	535	295
Net write-down of other real estate owned		150
Impairment of premises held for sale	25
Increase in cash surrender value of life insurance, net of premium expense	(91)	(93)
Amortization of operating lease right-of-use assets	187	62
Net change in accrued interest receivable and other assets	(334)	(668)
Net change in accrued interest payable and other liabilities	(1,215)	(2,671)
Net cash from operating activities	2,728	864
Cash flows from investing activities
Purchases of available for sale securities	(6,869)	(8,096)
Proceeds from sales and calls of available for sale securities	6,000	1,000
Proceeds from maturities and prepayments of available for sale securities	6,940	3,683
Purchases of Federal Home Loan Bank stock	(600)
Proceeds from mandatory redemptions of Federal Home Loan Bank stock		420
Net changes in loans	(35,712)	(22,002)
Purchases of premises and equipment	(390)	(37)
Net cash from investing activities	(30,631)	(25,032)
Cash flows from financing activities
Net change in deposits	30,925	14,611
Repayment of Federal Home Loan Bank advances	(95,040)	(30,038)
Advances from Federal Home Loan Bank	95,000	35,000
Common shares withheld for taxes	(37)	(276)
Net cash from financing activities	30,848	19,297
Net change in cash and cash equivalents	2,945	(4,871)
Beginning cash and cash equivalents	30,203	35,361
Ending cash and cash equivalents	33,148	30,490
Supplemental cash flow information:
Interest paid	3,919	3,193
Supplemental non-cash disclosure:
Transfer from loans to other real estate
Transfer from premises and equipment to premises held for sale	310
Initial recognition of right-of-use lease assets		$ 507

XML

Unaudited Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ / shares in Thousands, $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Loans, allowance	$ 9,150	$ 8,376
Common stock, no par (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	39,000,000	39,000,000
Voting Common Stock [Member]
Common stock, shares issued (in shares)	6,269,305	6,251,975
Common stock, shares outstanding (in shares)	6,269,305	6,251,975
Nonvoting Common Stock [Member]
Common stock, shares issued (in shares)	1,220,000	1,220,000
Common stock, shares outstanding (in shares)	1,220,000	1,220,000

XML

Note 7 - Deposits - Maturities of Time Deposits (Details) $ in Thousands	Mar. 31, 2020 USD ($)
Year 1	$ 383,049
Year 2	47,132
Year 3	10,719
Year 4	15,232
Year 5	10,854
Thereafter	549
Time Deposits, Total	$ 467,535

XML

Note 3 - Loans - Balance in Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment and Bases on Impairment Method (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Individually evaluated for impairment	$ 20	$ 42
Collectively evaluated for impairment	9,130	8,334
Total ending allowance balance	9,150	8,376
Loans individually evaluated for impairment	2,144	2,170
Loans collectively evaluated for impairment	959,417	924,101
Total ending loans balance	961,561	926,271
Commercial Portfolio Segment [Member]
Individually evaluated for impairment		3
Collectively evaluated for impairment	2,025	1,707
Total ending allowance balance	2,025	1,710
Loans individually evaluated for impairment	158	74
Loans collectively evaluated for impairment	169,018	145,477
Total ending loans balance	169,176	145,551
Commercial Real Estate Portfolio Segment [Member]
Individually evaluated for impairment	19	37
Collectively evaluated for impairment	4,193	4,043
Total ending allowance balance	4,212	4,080
Loans individually evaluated for impairment	922	1,064
Loans collectively evaluated for impairment	412,731	398,424
Total ending loans balance	413,653	399,488
Residential Portfolio Segment [Member]
Individually evaluated for impairment	1	2
Collectively evaluated for impairment	1,908	1,741
Total ending allowance balance	1,909	1,743
Loans individually evaluated for impairment	921	892
Loans collectively evaluated for impairment	295,305	296,687
Total ending loans balance	296,226	297,579
Consumer Portfolio Segment [Member]
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	593	485
Total ending allowance balance	593	485
Loans individually evaluated for impairment	143	98
Loans collectively evaluated for impairment	44,671	47,692
Total ending loans balance	44,814	47,790
Agriculture Portfolio Segment [Member]
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	409	355
Total ending allowance balance	409	355
Loans individually evaluated for impairment		42
Loans collectively evaluated for impairment	36,977	35,022
Total ending loans balance	36,977	35,064
Other Portfolio Segment [Member]
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	2	3
Total ending allowance balance	2	3
Loans individually evaluated for impairment	0	0
Loans collectively evaluated for impairment	715	799
Total ending loans balance	$ 715	$ 799

XML

Note 2 - Securities - Securities With Unrealized Losses (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Available for sale, fair value, less than 12 months	$ 42,745	$ 41,474
Available for sale, unrealized loss, less than 12 months	(2,942)	(293)
Available for sale, fair value, 12 months or more	31,669	46,001
Available for sale, unrealized loss, 12 months or more	(3,182)	(524)
Available for sale, fair value	74,414	87,475
Available for sale, unrealized loss	(6,124)	(817)
US Treasury and Government [Member]
Available for sale, fair value, less than 12 months		12,567
Available for sale, unrealized loss, less than 12 months		(147)
Available for sale, fair value, 12 months or more
Available for sale, unrealized loss, 12 months or more
Available for sale, fair value		12,567
Available for sale, unrealized loss		(147)
Residential Mortgage Backed Securities [Member]
Available for sale, fair value, less than 12 months	10,843	18,457
Available for sale, unrealized loss, less than 12 months	(120)	(97)
Available for sale, fair value, 12 months or more	1,617	10,665
Available for sale, unrealized loss, 12 months or more	(47)	(158)
Available for sale, fair value	12,460	29,122
Available for sale, unrealized loss	(167)	(255)
Collateralized Loan Obligations [Member]
Available for sale, fair value, less than 12 months	10,702	9,539
Available for sale, unrealized loss, less than 12 months	(843)	(46)
Available for sale, fair value, 12 months or more	30,052	35,336
Available for sale, unrealized loss, 12 months or more	(3,135)	(366)
Available for sale, fair value	40,754	44,875
Available for sale, unrealized loss	(3,978)	(412)
US States and Political Subdivisions Debt Securities [Member]
Available for sale, fair value, less than 12 months	10,192	911
Available for sale, unrealized loss, less than 12 months	(493)	(3)
Available for sale, fair value, 12 months or more
Available for sale, unrealized loss, 12 months or more
Available for sale, fair value	10,192	911
Available for sale, unrealized loss	(493)	(3)
Corporate Debt Securities [Member]
Available for sale, fair value, less than 12 months	11,008
Available for sale, unrealized loss, less than 12 months	(1,486)
Available for sale, fair value, 12 months or more
Available for sale, unrealized loss, 12 months or more
Available for sale, fair value	11,008
Available for sale, unrealized loss	$ (1,486)

XML

Note 12 - Stock Plans and Stock Based Compensation (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other Than Options, Nonvested Intrinsic Value1	$ 349,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)	$ 17.03
Share-based Payment Arrangement, Expense	$ 106,000	$ 82,000
Share-based Payment Arrangement, Expense, Tax Benefit	$ 22,000	$ 17,000
2018 Omnibus Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)	273,329
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)	$ 17.03		$ 14.81
Non-Employee Directors Stock Incentive Plan 2006 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Annual Award to Non Employee Directors, Value	$ 25,000

XML

Note 14 - Regulatory Capital Matters - Ratios and Amounts of Common Equity, Capital, and Total Capital to Risk-adjusted Assets (Details) $ in Thousands	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Total risk-based capital to risk-weighted assets, actual amount	$ 129,035	$ 121,335
Total risk-based capital to risk-weighted assets, actual ratio	0.1238	0.1208
Total risk-based capital to risk-weighted assets, for capital adequacy purposes, amount	$ 83,378	$ 80,341
Total risk-based capital to risk-weighted assets, for capital adequacy purposes, ratio	0.08	0.08
Total risk-based capital to risk-weighted assets, for minimum requirements to be well capitalized, amount	$ 104,223	$ 100,426
Total risk-based capital to risk-weighted assets, for minimum requirements to be well capitalized, ratio	0.1	0.1
Total common equity Tier 1 risk-based capital (to risk-weighted assets), actual amount	$ 119,885	$ 112,959
Total common equity Tier 1 risk-based capital (to risk-weighted assets), actual ratio	0.115	0.1125
Total common equity Tier 1 risk-based capital (to risk-weighted assets), for capital adequacy purposes, amount	$ 46,900	$ 45,192
Total common equity Tier 1 risk-based capital (to risk-weighted assets), for capital adequacy purposes, ratio	0.045	0.045
Total common equity Tier 1 risk-based capital (to risk-weighted assets), for minimum requirements to be well capitalized, amount	$ 67,745	$ 65,277
Total common equity Tier 1 risk-based capital (to risk-weighted assets), for minimum requirements to be well capitalized, ratio	0.065	0.065
Tier I capital to risk-weighted assets, actual amount	$ 119,885	$ 112,959
Tier I capital to risk-weighted assets, actual ratio	0.115	0.1125
Tier I capital to risk-weighted assets, for capital adequacy purposes, amount	$ 62,534	$ 60,256
Tier I capital to risk-weighted assets, for capital adequacy purposes, ratio	0.06	0.06
Tier I capital to risk-weighted assets, for minimum requirements to be well capitalized, amount	$ 83,378	$ 80,341
Tier I capital to risk-weighted assets, for minimum requirements to be well capitalized, ratio	0.08	0.08
Tier 1 capital (to average assets), actual amount	$ 119,885	$ 112,959
Tier 1 capital (to average assets), actual ratio	0.0967	0.0999
Tier 1 capital (to average assets), for capital adequacy purposes, amount	$ 49,607	$ 45,208
Tier 1 capital (to average assets), for capital adequacy purposes, ratio	0.04	0.04
Tier 1 capital (to average assets), for minimum requirements to be well capitalized, amount	$ 62,008	$ 56,510
Tier 1 capital (to average assets), for minimum requirements to be well capitalized, ratio	0.05	0.05

XML

Note 10 - Fair Values Measurement - Financial Assets Measured at the Fair Value on Recurring and Non-recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Securities available for sale	$ 198,657	$ 209,000
Recorded investment, total	2,144	2,170
Fair Value, Recurring [Member]
Securities available for sale	198,657	209,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	198,657	209,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale
US Treasury and Government [Member]
Securities available for sale	21,104	22,330
US Treasury and Government [Member] | Fair Value, Recurring [Member]
Securities available for sale	21,104	22,330
US Treasury and Government [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale
US Treasury and Government [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	21,104	22,330
US Treasury and Government [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale
Impaired Loans [Member] | Fair Value, Nonrecurring [Member] | Commercial Portfolio Segment [Member]
Recorded investment, total		21
Impaired Loans [Member] | Fair Value, Nonrecurring [Member] | Commercial Portfolio Segment [Member] | Fair Value, Inputs, Level 1 [Member]
Recorded investment, total
Impaired Loans [Member] | Fair Value, Nonrecurring [Member] | Commercial Portfolio Segment [Member] | Fair Value, Inputs, Level 2 [Member]
Recorded investment, total
Impaired Loans [Member] | Fair Value, Nonrecurring [Member] | Commercial Portfolio Segment [Member] | Fair Value, Inputs, Level 3 [Member]
Recorded investment, total		21
Impaired Loans [Member] | Fair Value, Nonrecurring [Member] | Commercial Real Estate Portfolio Segment [Member] | Farmland Loans [Member]
Recorded investment, total	124	245
Impaired Loans [Member] | Fair Value, Nonrecurring [Member] | Commercial Real Estate Portfolio Segment [Member] | Fair Value, Inputs, Level 1 [Member] | Farmland Loans [Member]
Recorded investment, total
Impaired Loans [Member] | Fair Value, Nonrecurring [Member] | Commercial Real Estate Portfolio Segment [Member] | Fair Value, Inputs, Level 2 [Member] | Farmland Loans [Member]
Recorded investment, total
Impaired Loans [Member] | Fair Value, Nonrecurring [Member] | Commercial Real Estate Portfolio Segment [Member] | Fair Value, Inputs, Level 3 [Member] | Farmland Loans [Member]
Recorded investment, total	124	245
Impaired Loans [Member] | Fair Value, Nonrecurring [Member] | Residential Portfolio Segment [Member] | One- to Four-family Residential Properties [Member]
Recorded investment, total	74	145
Impaired Loans [Member] | Fair Value, Nonrecurring [Member] | Residential Portfolio Segment [Member] | Fair Value, Inputs, Level 1 [Member] | One- to Four-family Residential Properties [Member]
Recorded investment, total
Impaired Loans [Member] | Fair Value, Nonrecurring [Member] | Residential Portfolio Segment [Member] | Fair Value, Inputs, Level 2 [Member] | One- to Four-family Residential Properties [Member]
Recorded investment, total
Impaired Loans [Member] | Fair Value, Nonrecurring [Member] | Residential Portfolio Segment [Member] | Fair Value, Inputs, Level 3 [Member] | One- to Four-family Residential Properties [Member]
Recorded investment, total	74	145
Residential Mortgage Backed Securities [Member]
Securities available for sale	89,101	92,200
Residential Mortgage Backed Securities [Member] | Fair Value, Recurring [Member]
Securities available for sale	89,101	92,200
Residential Mortgage Backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale
Residential Mortgage Backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	89,101	92,200
Residential Mortgage Backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale
Collateralized Debt Obligations [Member]
Securities available for sale	40,754	49,419
Collateralized Debt Obligations [Member] | Fair Value, Recurring [Member]
Securities available for sale	40,754	49,419
Collateralized Debt Obligations [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale
Collateralized Debt Obligations [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	40,754	49,419
Collateralized Debt Obligations [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale
US States and Political Subdivisions Debt Securities [Member]
Securities available for sale	28,154	28,366
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member]
Securities available for sale	28,154	28,366
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	28,154	28,366
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale
Corporate Debt Securities [Member]
Securities available for sale	19,544	16,685
Corporate Debt Securities [Member] | Fair Value, Recurring [Member]
Securities available for sale	19,544	16,685
Corporate Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale
Corporate Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	19,544	16,685
Corporate Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale

XML

Note 13 - Earnings per Share - Basic and Diluted Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Net income	$ 1,840	$ 2,839
Earnings allocated to unvested shares	15	36
Net income available to common shareholders, basic and diluted	$ 1,825	$ 2,803
Weighted average common shares including unvested common shares outstanding (in shares)	7,481,884	7,469,912
Weighted average shares outstanding (in shares)	7,420,521	7,375,003
Basic income per common share (in dollars per share)	$ 0.25	$ 0.38
Add: Dilutive effects of assumed exercises of common stock warrants (in shares)
Weighted average common shares and potential common shares (in shares)	7,420,521	7,375,003
Diluted income per common share (in dollars per share)	$ 0.25	$ 0.38
Unvested Shares [Member]
Weighted average shares outstanding (in shares)	61,363	94,909

XML

Note 3 - Loans - Risk Category of Loans by Class of Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Gross loans	$ 961,561	$ 926,271
Pass [Member]
Gross loans	915,985	888,707
Watch [Member]
Gross loans	38,464	27,522
Special Mention [Member]
Gross loans	0
Substandard [Member]
Gross loans	7,112	10,042
Doubtful [Member]
Gross loans	0	0
Commercial Portfolio Segment [Member]
Gross loans	169,176	145,551
Commercial Portfolio Segment [Member] | Pass [Member]
Gross loans	146,310	130,312
Commercial Portfolio Segment [Member] | Watch [Member]
Gross loans	20,903	11,280
Commercial Portfolio Segment [Member] | Special Mention [Member]
Gross loans	0	0
Commercial Portfolio Segment [Member] | Substandard [Member]
Gross loans	1,963	3,959
Commercial Portfolio Segment [Member] | Doubtful [Member]
Gross loans	0	0
Commercial Real Estate Portfolio Segment [Member]
Gross loans	413,653	399,488
Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Gross loans	71,267	64,911
Commercial Real Estate Portfolio Segment [Member] | Farmland Loans [Member]
Gross loans	80,579	79,118
Commercial Real Estate Portfolio Segment [Member] | Nonfarm Nonresidential [Member]
Gross loans	261,807	255,459
Commercial Real Estate Portfolio Segment [Member] | Pass [Member] | Construction Loans [Member]
Gross loans	71,267	64,911
Commercial Real Estate Portfolio Segment [Member] | Pass [Member] | Farmland Loans [Member]
Gross loans	73,202	71,503
Commercial Real Estate Portfolio Segment [Member] | Pass [Member] | Nonfarm Nonresidential [Member]
Gross loans	252,982	245,995
Commercial Real Estate Portfolio Segment [Member] | Watch [Member] | Construction Loans [Member]
Gross loans	0	0
Commercial Real Estate Portfolio Segment [Member] | Watch [Member] | Farmland Loans [Member]
Gross loans	6,568	6,663
Commercial Real Estate Portfolio Segment [Member] | Watch [Member] | Nonfarm Nonresidential [Member]
Gross loans	7,152	6,986
Commercial Real Estate Portfolio Segment [Member] | Special Mention [Member] | Construction Loans [Member]
Gross loans	0	0
Commercial Real Estate Portfolio Segment [Member] | Special Mention [Member] | Farmland Loans [Member]
Gross loans	0	0
Commercial Real Estate Portfolio Segment [Member] | Special Mention [Member] | Nonfarm Nonresidential [Member]
Gross loans	0	0
Commercial Real Estate Portfolio Segment [Member] | Substandard [Member] | Construction Loans [Member]
Gross loans	0	0
Commercial Real Estate Portfolio Segment [Member] | Substandard [Member] | Farmland Loans [Member]
Gross loans	809	952
Commercial Real Estate Portfolio Segment [Member] | Substandard [Member] | Nonfarm Nonresidential [Member]
Gross loans	1,673	2,478
Commercial Real Estate Portfolio Segment [Member] | Doubtful [Member] | Construction Loans [Member]
Gross loans	0	0
Commercial Real Estate Portfolio Segment [Member] | Doubtful [Member] | Farmland Loans [Member]
Gross loans	0	0
Commercial Real Estate Portfolio Segment [Member] | Doubtful [Member] | Nonfarm Nonresidential [Member]
Gross loans	0	0
Residential Portfolio Segment [Member]
Gross loans	296,226	297,579
Residential Portfolio Segment [Member] | Multifamily Loans [Member]
Gross loans	75,525	70,950
Residential Portfolio Segment [Member] | One- to Four-family Residential Properties [Member]
Gross loans	220,701	226,629
Residential Portfolio Segment [Member] | Pass [Member] | Multifamily Loans [Member]
Gross loans	75,525	70,950
Residential Portfolio Segment [Member] | Pass [Member] | One- to Four-family Residential Properties [Member]
Gross loans	214,559	221,727
Residential Portfolio Segment [Member] | Watch [Member] | Multifamily Loans [Member]
Gross loans	0
Residential Portfolio Segment [Member] | Watch [Member] | One- to Four-family Residential Properties [Member]
Gross loans	3,683	2,420
Residential Portfolio Segment [Member] | Special Mention [Member] | Multifamily Loans [Member]
Gross loans	0	0
Residential Portfolio Segment [Member] | Special Mention [Member] | One- to Four-family Residential Properties [Member]
Gross loans	0
Residential Portfolio Segment [Member] | Substandard [Member] | Multifamily Loans [Member]
Gross loans	0	0
Residential Portfolio Segment [Member] | Substandard [Member] | One- to Four-family Residential Properties [Member]
Gross loans	2,459	2,482
Residential Portfolio Segment [Member] | Doubtful [Member] | Multifamily Loans [Member]
Gross loans	0	0
Residential Portfolio Segment [Member] | Doubtful [Member] | One- to Four-family Residential Properties [Member]
Gross loans	0	0
Consumer Portfolio Segment [Member]
Gross loans	44,814	47,790
Consumer Portfolio Segment [Member] | Pass [Member]
Gross loans	44,640	47,657
Consumer Portfolio Segment [Member] | Watch [Member]
Gross loans	3	5
Consumer Portfolio Segment [Member] | Special Mention [Member]
Gross loans	0	0
Consumer Portfolio Segment [Member] | Substandard [Member]
Gross loans	171	128
Consumer Portfolio Segment [Member] | Doubtful [Member]
Gross loans	0	0
Agriculture Portfolio Segment [Member]
Gross loans	36,977	35,064
Agriculture Portfolio Segment [Member] | Pass [Member]
Gross loans	36,785	34,853
Agriculture Portfolio Segment [Member] | Watch [Member]
Gross loans	155	168
Agriculture Portfolio Segment [Member] | Special Mention [Member]
Gross loans	0	0
Agriculture Portfolio Segment [Member] | Substandard [Member]
Gross loans	37	43
Agriculture Portfolio Segment [Member] | Doubtful [Member]
Gross loans	0	0
Other Portfolio Segment [Member]
Gross loans	715	799
Other Portfolio Segment [Member] | Pass [Member]
Gross loans	715	799
Other Portfolio Segment [Member] | Watch [Member]
Gross loans	0	0
Other Portfolio Segment [Member] | Special Mention [Member]
Gross loans	0	0
Other Portfolio Segment [Member] | Substandard [Member]
Gross loans	0	0
Other Portfolio Segment [Member] | Doubtful [Member]
Gross loans	$ 0	$ 0

XML

Note 5 - Other Real Estate Owned - Major Categories of OREO (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Other real estate owned, gross	$ 3,225	$ 3,225
Commercial Real Estate Portfolio Segment [Member] | Construction, Land Development, and Other Land Loans [Member]
Other real estate owned, gross	$ 3,225	$ 3,225

XML

Note 15 - Off Balance Sheet Risks, Commitments, and Contingent Liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Fair Value, Off-balance Sheet Risks [Table Text Block]

	March 31, 20 20				December 31, 201 9
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
	(in thousands)
Commitments to make loans	$	12,403	$	26,290	$	11,577	$	20,415
Unused lines of credit		8,684		96,982		7,916		111,230
Standby letters of credit		531		1,336		531		3,164

XML

Note 11 - Income Taxes (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	March 31,		December 31,
	20 20		201 9
	(in thousands)
Deferred tax assets:
Net operating loss carry-forward	$	22,403	$	22,915
Allowance for loan losses		2,283		2,090
OREO write-down		2,665		2,665
Alternative minimum tax credit carry-forward		—		173
Net assets from acquisitions		188		228
Net unrealized loss on securities		646		—
New market tax credit carry-forward		208		208
Nonaccrual loan interest		310		303
Accrued expenses		99		102
Lease liability		719		766
Other		295		309
		29,816		29,759
Deferred tax liabilities:
FHLB stock dividends		563		563
Fixed assets		49		57
Deferred loan costs		170		170
Net unrealized gain on securities		—		331
Lease right-of-use assets		719		766
Other		107		107
		1,608		1,994
Net deferred tax asset	$	28,208	$	27,765

XML

Note 11 - Income Taxes

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

11

– Income Taxes

Deferred tax assets and liabilities were due to the following as of:

	March 31,		December 31,
	20 20		201 9
	(in thousands)
Deferred tax assets:
Net operating loss carry-forward	$	22,403	$	22,915
Allowance for loan losses		2,283		2,090
OREO write-down		2,665		2,665
Alternative minimum tax credit carry-forward		—		173
Net assets from acquisitions		188		228
Net unrealized loss on securities		646		—
New market tax credit carry-forward		208		208
Nonaccrual loan interest		310		303
Accrued expenses		99		102
Lease liability		719		766
Other		295		309
		29,816		29,759
Deferred tax liabilities:
FHLB stock dividends		563		563
Fixed assets		49		57
Deferred loan costs		170		170
Net unrealized gain on securities		—		331
Lease right-of-use assets		719		766
Other		107		107
		1,608		1,994
Net deferred tax asset	$	28,208	$	27,765

At

March 31, 2020,

the Company had net federal operating loss carryforwards of

$100.5

million, which will begin to expire in

2032,

and state net operating loss carryforwards of

$32.7

million, which begin to expire in

2025.

As of

March 31, 2020,

a total of

$173,000

in alternative minimum tax credit carryforward was reclassified to other assets as it is currently refundable for the

2019

tax year due to the enactment of the Coronavirus Aid Relief and Economic Security Act ("CARES Act").

The Company does

not

have any beginning and ending unrecognized tax benefits. The Company does

not

expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next

twelve

months. There were

no

interest and penalties recorded in the income statement or accrued for the

three

months ended

March 31, 2020

or

March 31, 2019

related to unrecognized tax benefits.

Under Section

382

of the Internal Revenue Code, as amended (“Section

382”

), the Company’s net operating loss carryforwards and other deferred tax assets can generally be used to offset future taxable income and therefore reduce federal income tax obligations. However, the Company's ability to use its NOLs would be limited if there was an “ownership change” as defined by Section

382.

This would occur if shareholders owning (or deemed to own under the tax rules)

5%

or more of the Company's voting and non-voting common shares increase their aggregate ownership of the Company by more than

50

percentage points over a defined period of time.

In

2015,

the Company took

two

measures to preserve the value of its NOLs. First, the Company adopted a tax benefits preservation plan designed to reduce the likelihood of an “ownership change” occurring as a result of purchases and sales of the Company's common shares. Upon adoption of this plan, the Company declared a dividend of

one

preferred stock purchase right for each common share outstanding as of the close of business on

July 10, 2015.

Any shareholder or group that acquires beneficial ownership of

5%

or more of the Company (an “acquiring person”) could be subject to significant dilution in its holdings if the Company's Board of Directors does

not

approve such acquisition. Existing shareholders holding

5%

or more of the Company will

not

be considered acquiring persons unless they acquire additional shares, subject to certain exceptions described in the plan. In addition, the Board of Directors has the discretion to exempt certain transactions and certain persons whose acquisition of securities is determined by the Board

not

to jeopardize the Company's deferred tax assets. The rights plan was extended in

May 2018

to expire upon the earlier of (i)

June 30, 2021, (

ii) the beginning of a taxable year with respect to which the Board of Directors determines that

no

tax benefits

may

be carried forward, (iii) the repeal or amendment of Section

382

or any successor statute, if the Board of Directors determines that the plan is

no

longer needed to preserve the tax benefits, and (iv) certain other events as described in the plan.

On

September 23, 2015,

the Company’s shareholders approved an amendment to its articles of incorporation to further help protect the long-term value of the Company’s NOLs. The amendment provides a means to block transfers of our common shares that could result in an ownership change under Section

382.

The transfer restrictions were extended in

May 2018

by shareholder vote and will expire on the earlier of (i)

May 23, 2021, (

ii) the beginning of a taxable year with respect to which the Board of Directors determines that

no

tax benefit

may

be carried forward, (iii) the repeal of Section

382

or any successor statute if our Board determines that the transfer restrictions are

no

longer needed to preserve the tax benefits of our NOLs, or (iv) such date as the Board otherwise determines that the transfer restrictions are

no

longer necessary.

The Company and its subsidiaries are subject to U.S. federal income tax and the Company is subject to income tax in the Commonwealth of Kentucky. The Company is

no

longer subject to examination by taxing authorities for years before

2016.

XML

Note 3 - Loans

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note

3

– Loans

Loans net of unearned income, deferred loan origination costs, and net premiums on acquired loans by class were as follows:

	March 31,			December 31,
	20 20			201 9
	(in thousands)
Commercial	$	169,176		$	145,551
Commercial Real Estate:
Construction		71,267			64,911
Farmland		80,579			79,118
Nonfarm nonresidential		261,807			255,459
Residential Real Estate:
Multi-family		75,525			70,950
1-4 Family		220,701			226,629
Consumer		44,814			47,790
Agriculture		36,977			35,064
Other		715			799
Subtotal		961,561			926,271
Less: Allowance for loan losses		(9,150	)		(8,376	)
Loans, net	$	952,411		$	917,895

The following table presents the activity in the allowance for loan losses by portfolio segment for the

three

months ended

March 31, 2020

and

2019:

	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Agriculture			Other			Total
	(in thousands)
March 31, 20 20 :
Beginning balance	$	1,710		$	4,080		$	1,743		$	485		$	355		$	3		$	8,376
Provision (negative provision)		339			141			220			265			87			(2	)		1,050
Loans charged off		(29	)		(29	)		(75	)		(161	)		(41	)		–			(335	)
Recoveries		5			20			21			4			8			1			59
Ending balance	$	2,025		$	4,212		$	1,909		$	593		$	409		$	2		$	9,150
March 31, 201 9 :
Beginning balance	$	1,299		$	4,676		$	2,452		$	130		$	321		$	2		$	8,880
Provision (negative provision)		143			(165	)		(204	)		193			33			–			–
Loans charged off		–			(15	)		(82	)		(180	)		(1	)		–			(278	)
Recoveries		5			2			61			16			–			–			84
Ending balance	$	1,447		$	4,498		$	2,227		$	159		$	353		$	2		$	8,686

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of

March 31, 2020:

	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Agriculture		Other		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	–	$	19	$	1	$	–	$	–	$	–	$	20
Collectively evaluated for impairment		2,025		4,193		1,908		593		409		2		9,130
Total ending allowance balance	$	2,025	$	4,212	$	1,909	$	593	$	409	$	2	$	9,150
Loans:
Loans individually evaluated for impairment	$	158	$	922	$	921	$	143	$	–	$	–	$	2,144
Loans collectively evaluated for impairment		169,018		412,731		295,305		44,671		36,977		715		959,417
Total ending loans balance	$	169,176	$	413,653	$	296,226	$	44,814	$	36,977	$	715	$	961,561

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of

December 31, 2019:

	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Agriculture		Other		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3	$	37	$	2	$	–	$	–	$	–	$	42
Collectively evaluated for impairment		1,707		4,043		1,741		485		355		3		8,334
Total ending allowance balance	$	1,710	$	4,080	$	1,743	$	485	$	355	$	3	$	8,376
Loans:
Loans individually evaluated for impairment	$	74	$	1,064	$	892	$	98	$	42	$	–	$	2,170
Loans collectively evaluated for impairment		145,477		398,424		296,687		47,692		35,022		799		924,101
Total ending loans balance	$	145,551	$	399,488	$	297,579	$	47,790	$	35,064	$	799	$	926,271

Impaired Loans

Impaired loans include restructured loans and loans on nonaccrual or classified as doubtful, whereby collection of the total amount is improbable, or loss, whereby all or a portion of the loan has been written off or a specific allowance for loss had been provided.

The following tables present information related to loans individually evaluated for impairment by class of loans as of

March 31, 2020

and

December 31, 2019

and for the

three

months ended

March 31, 2020

and

2019:

	As of March 31, 20 20						T hree Months Ended March 31, 20 20
	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	(in thousands)
With No Related Allowance Recorded:
Commercial	$	265	$	158	$	—	$	104	$	—	$	—
Commercial real estate:
Construction		—		—		—		—		—		—
Farmland		414		299		—		296		10		10
Nonfarm nonresidential		1,043		480		—		485		8		—
Residential real estate:
Multi-family		—		—		—		—		—		—
1-4 Family		1,862		846		—		795		3		3
Consumer		354		143		—		121		1		1
Agriculture		297		—		—		21		—		—
Other		—		—		—		—		—		—
Subtotal		4,235		1,926		—		1,822		22		14
With An Allowance Recorded:
Commercial		—		—		—		12		—		—
Commercial real estate:
Construction		—		—		—		—		—		—
Farmland		143		143		19		212		2		—
Nonfarm nonresidential		—		—		—		—		—		—
Residential real estate:
Multi-family		—		—		—		—		—		—
1-4 Family		75		75		1		111		2		—
Consumer		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Other		—		—		—		—		—		—
Subtotal		218		218		20		335		4		—
Total	$	4,453	$	2,144	$	20	$	2,157	$	26	$	14

	As of December 31, 201 9						T hree Months Ended March 31, 201 9
	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	(in thousands)
With No Related Allowance Recorded:
Commercial	$	138	$	50	$	—	$	52	$	—	$	—
Commercial real estate:
Construction		—		—		—		—		—		—
Farmland		380		293		—		98		5		5
Nonfarm nonresidential		1,057		489		—		256		3		3
Residential real estate:
Multi-family		—		—		—		—		—		—
1-4 Family		1,679		745		—		1,544		22		22
Consumer		309		98		—		14		—		—
Agriculture		304		42		—		32		—		—
Other		—		—		—		—		—		—
Subtotal		3,867		1,717		—		1,996		30		30
With An Allowance Recorded:
Commercial		24		24		3		—		—		—
Commercial real estate:
Construction		—		—		—		—		—		—
Farmland		282		282		37		158		—		—
Nonfarm nonresidential		—		—		—		—		—		—
Residential real estate:
Multi-family		—		—		—		—		—		—
1-4 Family		183		147		2		719		11		—
Consumer		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Other		—		—		—		—		—		—
Subtotal		489		453		42		877		11		—
Total	$	4,356	$	2,170	$	42	$	2,873	$	41	$	30

Troubled Debt Restructuring

A troubled debt restructuring (TDR) occurs when the Bank has agreed to a loan modification in the form of a concession for a borrower who is experiencing financial difficulty. The Bank’s TDRs typically involve a reduction in interest rate, a deferral of principal for a stated period of time, or an interest only period. All TDRs are considered impaired and the Bank has allocated reserves for these loans to reflect the present value of the concessionary terms granted to the borrower.

The following table presents the types of TDR loan modifications by portfolio segment outstanding as of

March 31, 2020

and

December 31, 2019:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
March 31, 20 20
Commercial Real Estate:
Nonfarm nonresidential	$	391	$	—	$	391
Residential Real Estate:
1-4 Family		75		—		75
Total TDRs	$	466	$	—	$	466

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
December 31, 201 9
Commercial Real Estate:
Nonfarm nonresidential	$	400	$	—	$	400
Residential Real Estate:
1-4 Family		75		—		75
Total TDRs	$	475	$	—	$	475

At

March 31, 2020

and

December 31, 2019,

100%

of the Company’s TDRs were performing according to their modified terms. The Company allocated

$1,000

in reserves to borrowers whose loan terms have been modified in TDRs as of

March 31, 2020

and

December 31, 2019.

The Company has committed to lend

no

additional amounts as of

March 31, 2020

and

December 31, 2019

to borrowers with outstanding loans classified as TDRs.

Management periodically reviews renewals and modifications of previously identified TDRs, for which there was

no

principal forgiveness, to consider if it is appropriate to remove the TDR classification. If the borrower is

no

longer experiencing financial difficulty and the renewal/modification did

not

contain a concessionary interest rate or other concessionary terms, management considers the potential removal of the TDR classification. If deemed appropriate based upon current underwriting, the TDR classification is removed as the borrower has complied with the terms of the loan at the date of renewal/modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan subsequent to the date of the renewal/modification. In this instance, the TDR was originally considered a restructuring in a prior year as a result of a modification with an interest rate that was

not

commensurate with the risk of the underlying loan. Additionally, TDR classification can be removed in circumstances in which the Company performs a non-concessionary re-modification of the loan at terms that were considered to be at market for loans with comparable risk. Management expects the borrower will continue to perform under the re-modified terms based on the borrower’s past history of performance.

No

TDR loan modifications occurred during the

three

months ended

March 31, 2020

or

March 31, 2019.

During the

first

three

months of

2020

and

2019,

no

TDRs defaulted on their restructured loan within the

12

-month period following the loan modification. A default is considered to have occurred once the TDR is past due

90

days or more or it has been placed on nonaccrual.

Non

-

performing Loans

Non-performing loans include impaired loans and smaller balance homogeneous loans, such as residential mortgage and consumer loans, that are collectively evaluated for impairment. The following table presents the recorded investment in nonaccrual and loans past due

90

days and still on accrual by class of loan as of

March 31, 2020,

and

December 31, 2019:

	Nonaccrual				Loans Past Due 90 Days And Over Still Accruing
	March 31 , 20 20		December 31, 201 9		March 31 , 20 20		December 31, 201 9
	(in thousands)
Commercial	$	158	$	50	$	—	$	—
Commercial Real Estate:
Construction		—		—		—		—
Farmland		298		431		—		—
Nonfarm nonresidential		89		90		—		—
Residential Real Estate:
Multi-family		—		—		—		—
1-4 Family		812		817		—		—
Consumer		143		98		—		—
Agriculture		—		42		—		—
Other		—		—		—		—
Total	$	1,500	$	1,528	$	—	$	—

The following table presents the aging of the recorded investment in past due loans as of

March 31, 2020

and

December 31, 2019:

	30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days And Over Past Due		Nonaccrual		Total Past Due And Nonaccrual
	(in thousands)
March 31, 20 20
Commercial	$	—	$	1	$	—	$	158	$	159
Commercial Real Estate:
Construction		—		—		—		—		—
Farmland		81		—		—		298		379
Nonfarm nonresidential		19		41		—		89		149
Residential Real Estate:
Multi-family		—		—		—		—		—
1-4 Family		961		147		—		812		1,920
Consumer		97		56		—		143		296
Agriculture		—		3		—		—		3
Other		—		—		—		—		—
Total	$	1,158	$	248	$	—	$	1,500	$	2,906

	30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days And Over Past Due		Nonaccrual		Total Past Due And Nonaccrual
	(in thousands)
December 31, 201 9
Commercial	$	14	$	3	$	—	$	50	$	67
Commercial Real Estate:
Construction		—		—		—		—		—
Farmland		274		—		—		431		705
Nonfarm nonresidential		206		—		—		90		296
Residential Real Estate:
Multi-family		—		—		—		—		—
1-4 Family		1,162		503		—		817		2,482
Consumer		91		164		—		98		353
Agriculture		—		—		—		42		42
Other		—		—		—		—		—
Total	$	1,747	$	670	$	—	$	1,528	$	3,945

Credit Quality Indicators

 

Management categorizes all loans into risk categories at origination based upon original underwriting. Thereafter, management categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends. Loans are analyzed through internal and external loan review processes and are routinely analyzed through credit administration processes which classify the loans as to credit risk. The following definitions are used for risk ratings:

Watch –

Loansclassified as watch are those loans which have or

may

experience a potentially adverse development which necessitates increased monitoring.

Special Mention –

Loans classified as special mention do

not

have all of the characteristics of substandard or doubtful loans. They have

one

or more deficiencies which warrant special attention and which corrective action, such as accelerated collection practices,

may

remedy.

Substandard –

Loans classified as substandard are those loans with clear and defined weaknesses such as a highly leveraged position, unfavorable financial ratios, uncertain repayment sources or poor financial condition which

may

jeopardize the repayment of the debt as contractually agreed. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are

not

corrected.

Doubtful

– Loans classified as doubtful are those loans which have characteristics similar to substandard loans but with an increased risk that collection or liquidation in full is highly questionable and improbable.

As of

March 31, 2020,

and

December 31, 2019,

and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
March 31, 20 20
Commercial	$	146,310	$	20,903	$	—	$	1,963	$	—	$	169,176
Commercial Real Estate:
Construction		71,267		—		—		—		—		71,267
Farmland		73,202		6,568		—		809		—		80,579
Nonfarm nonresidential		252,982		7,152		—		1,673		—		261,807
Residential Real Estate:
Multi-family		75,525		—		—		—		—		75,525
1-4 Family		214,559		3,683		—		2,459		—		220,701
Consumer		44,640		3		—		171		—		44,814
Agriculture		36,785		155		—		37		—		36,977
Other		715		—		—		—		—		715
Total	$	915,985	$	38,464	$	—	$	7,112	$	—	$	961,561

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
December 31, 201 9
Commercial	$	130,312	$	11,280	$	—	$	3,959	$	—	$	145,551
Commercial Real Estate:
Construction		64,911		—		—		—		—		64,911
Farmland		71,503		6,663		—		952		—		79,118
Nonfarm nonresidential		245,995		6,986		—		2,478		—		255,459
Residential Real Estate:
Multi-family		70,950		—		—		—		—		70,950
1-4 Family		221,727		2,420		—		2,482		—		226,629
Consumer		47,657		5		—		128		—		47,790
Agriculture		34,853		168		—		43		—		35,064
Other		799		—		—		—		—		799
Total	$	888,707	$	27,522	$	—	$	10,042	$	—	$	926,271

XML

Note 7 - Deposits

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Deposit Liabilities Disclosures [Text Block]

Note

7

– Deposits

The following table details deposits by category:

	March 31 , 20 20		December 31, 201 9
	(in thousands)
Non-interest bearing	$	185,658	$	187,551
Interest checking		157,621		146,038
Money market		154,851		160,837
Savings		92,235		56,015
Certificates of deposit		467,535		476,534
Total	$	1,057,900	$	1,026,975

Time deposits of

$250,000

or more were approximately

$64.9

million and

$51.2

million at

March 31, 2020

and

December 31, 2019,

respectively.

Scheduled maturities of total time deposits at

March 31, 2020

for each of the next

five

years are as follows (in thousands):

Year 1	$	383,049
Year 2		47,132
Year 3		10,719
Year 4		15,232
Year 5		10,854
Thereafter		549
	$	467,535