10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2017

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: 0-14549

First US Bancshares, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	63-0843362
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

131 West Front Street Post Office Box 249 Thomasville, AL	36784
(Address of Principal Executive Offices)	(Zip Code)

(334) 636-5424

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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 such 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 and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes    ☒  No    ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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	☐  (Do not check if a smaller reporting company)	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.

Class	Outstanding at May 5, 2017
Common Stock, $0.01 par value	6,055,293 shares

1

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

		PAGE
	PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS
Interim Condensed Consolidated Balance Sheets at March 31, 2017 (Unaudited) and December 31, 2016		4
Interim Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2017 and 2016 (Unaudited)		5
Interim Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and 2016 (Unaudited)		6
Interim Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016 (Unaudited)		7
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)		8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	36
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	49
ITEM 4.	CONTROLS AND PROCEDURES	50
	PART II. OTHER INFORMATION	51
ITEM 1.	LEGAL PROCEEDINGS	51
ITEM 1A.	RISK FACTORS	51
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	51
ITEM 6.	EXHIBITS	51
Signature Page		52

2

FORWARD-LOOKING STATEMENTS

Statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). In addition, First US Bancshares, Inc. (“Bancshares”) and, together with its subsidiaries, (the “Company”), through its senior management, from time to time makes forward-looking statements concerning its expected future operations and performance and other developments. The words “estimate,” “project,” “intend,” “anticipate,” “expect,” “believe,” “continues” and similar expressions are indicative of forward-looking statements. Such forward-looking statements are necessarily estimates reflecting the Company’s best judgment based on current information and involve a number of risks and uncertainties, and various factors could cause results to differ materially from those contemplated by such forward-looking statements. Such factors could include those identified from time to time in the Company's Securities and Exchange Commission (“SEC”) filings and other public announcements, including the risk factors described in Part I, Item 1A of the Company's Annual Report on Form 10-K as of and for the year ended December 31, 2016. Specifically, with respect to statements relating to loan demand, growth and earnings potential, geographic expansion and the adequacy of the allowance for loan losses for the Company, these factors include, but are not limited to, the rate of growth (or lack thereof) in the economy generally and in the Company’s service areas, the availability of quality loans in the Company’s service areas, the relative strength and weakness in the consumer and commercial credit sectors and in the real estate markets and collateral values. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to revise forward-looking statements to reflect circumstances or events that occur after the dates on which the forward-looking statements are made, except as required by law.

3

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Share and Per Share Data)

	March 31,			December 31,
	2017			2016
	(Unaudited)
ASSETS
Cash and due from banks	$	5,701		$	7,018
Interest-bearing deposits in banks		27,204			16,512
Total cash and cash equivalents		32,905			23,530
Investment securities available-for-sale, at fair value		183,858			181,910
Investment securities held-to-maturity, at amortized cost		29,639			25,904
Federal Home Loan Bank stock, at cost		1,609			1,581
Loans, net of allowance for loan losses of $4,879 and $4,856, respectively		317,677			322,772
Premises and equipment, net		22,192			18,340
Cash surrender value of bank-owned life insurance		14,683			14,603
Accrued interest receivable		1,924			1,987
Other real estate owned		4,587			4,858
Other assets		10,753			11,407
Total assets	$	619,827		$	606,892
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	$	509,078		$	497,556
Accrued interest expense		229			241
Other liabilities		7,473			7,735
Short-term borrowings		10,750			10,119
Long-term debt		15,000			15,000
Total liabilities		542,530			530,651
Commitments and contingencies
Shareholders’ equity:
Common stock, par value $0.01 per share, 10,000,000 shares authorized; 7,341,061 and 7,329,060 shares issued, respectively; 6,055,103 and 6,043,102 shares outstanding, respectively		73			73
Surplus		10,826			10,786
Accumulated other comprehensive loss, net of tax		(543	)		(1,277	)
Retained earnings		87,717			87,434
Less treasury stock: 1,285,958 shares at cost		(20,764	)		(20,764	)
Noncontrolling interest		(12	)		(11	)
Total shareholders’ equity		77,297			76,241
Total liabilities and shareholders’ equity	$	619,827		$	606,892

The accompanying notes are an integral part of these Interim Condensed Consolidated Statements.

4

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)

	Three Months Ended
	March 31,
	2017		2016
	(Unaudited)
Interest income:
Interest and fees on loans	$	6,496	$	6,053
Interest on investment securities		1,014		1,143
Total interest income		7,510		7,196
Interest expense:
Interest on deposits		528		523
Interest on borrowings		63		12
Total interest expense		591		535
Net interest income		6,919		6,661
Provision for loan losses		515		167
Net interest income after provision for loan losses		6,404		6,494
Non-interest income:
Service and other charges on deposit accounts		464		417
Credit insurance income		256		152
Net gain on sales and prepayments of investment securities		49		2
Other income, net		398		418
Total non-interest income		1,167		989
Non-interest expense:
Salaries and employee benefits		4,398		4,164
Net occupancy and equipment		777		769
Other real estate/foreclosure expense, net		84		117
Other expense		1,778		2,016
Total non-interest expense		7,037		7,066
Income before income taxes		534		417
Provision for income taxes		130		100
Net income	$	404	$	317
Basic net income per share	$	0.07	$	0.05
Diluted net income per share	$	0.06	$	0.05
Dividends per share	$	0.02	$	0.02

The accompanying notes are an integral part of these Interim Condensed Consolidated Statements.

5

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Thousands)

	Three Months Ended
	March 31,
	2017			2016
	(Unaudited)
Net income	$	404		$	317
Other comprehensive income:
Unrealized holding gains on securities available-for-sale arising during period, net of tax expense of $424 and $238, respectively		757			410
Reclassification adjustment for net gains on securities available-for-sale realized in net income, net of tax of $18 and $0, respectively		(31	)		—
Unrealized holding gains arising during the period on effective cash flow hedge derivatives, net of tax expense of $4 and $0, respectively		8			—
Other comprehensive income		734			410
Total comprehensive income	$	1,138		$	727

The accompanying notes are an integral part of these Interim Condensed Consolidated Statements.

6

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	Three Months Ended
	March 31,
	2017			2016
	(Unaudited)
Cash flows from operating activities:
Net income	$	404		$	317
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		242			232
Provision for loan losses		515			167
Deferred income tax provision		128			97
Net gain on sale and prepayment of investment securities		(49	)		(2	)
Stock-based compensation expense		79			91
Net amortization of securities		313			412
Net loss on premises and equipment and other real estate		80			125
Changes in assets and liabilities:
Decrease in accrued interest receivable		63			77
Decrease (increase) in other assets		(28	)		67
Decrease in accrued interest expense		(12	)		(1	)
Decrease in other liabilities		(262	)		(267	)
Net cash provided by operating activities		1,473			1,315
Cash flows from investing activities:
Net increase in federal funds sold		—			(3,000	)
Purchases of investment securities, available-for-sale		(15,254	)		(11,912	)
Purchases of investment securities, held-to-maturity		(4,696	)		(2,751	)
Proceeds from maturities and prepayments of investment securities, available-for-sale		14,228			11,546
Proceeds from maturities and prepayments of investment securities, held-to-maturity		925			3,091
Net decrease (increase) in Federal Home Loan Bank stock		(28	)		295
Proceeds from the sale of premises and equipment and other real estate		424			810
Net change in loan portfolio		4,397			(9,001	)
Purchases of premises and equipment		(4,087	)		(3,229	)
Net cash used in investing activities		(4,091	)		(14,151	)
Cash flows from financing activities:
Net increase in customer deposits		11,522			6,279
Increase in short-term borrowings		631			92
Repayment of long-term Federal Home Loan Bank advances		—			(7,000	)
Net share-based compensation transactions		(39	)		—
Dividends paid		(121	)		(121	)
Net cash provided by (used in) financing activities		11,993			(750	)
Net increase (decrease) in cash and cash equivalents		9,375			(13,586	)
Cash and cash equivalents, beginning of period		23,530			44,072
Cash and cash equivalents, end of period	$	32,905		$	30,486
Supplemental disclosures:
Cash paid for:
Interest	$	603		$	536
Non-cash transactions:
Assets acquired in settlement of loans	$	183		$	291

The accompanying notes are an integral part of these Interim Condensed Consolidated Statements.

7

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. GENERAL

The accompanying unaudited interim condensed consolidated financial statements include the accounts of First US Bancshares, Inc. (“Bancshares”) and its subsidiaries (collectively, the “Company”). Bancshares is the parent holding company of First US Bank (the “Bank”). The Bank operates a finance company subsidiary, Acceptance Loan Company, Inc. (“ALC”). Management has determined that the Bank and ALC comprise Bancshares' two reportable operating segments. All significant intercompany transactions and accounts have been eliminated.

The unaudited interim condensed consolidated financial statements, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company's consolidated financial position, results of operations and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. The results of operations for any interim period are not necessarily indicative of results expected for the fiscal year ending December 31, 2017. While certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), management believes that the disclosures herein are adequate to make the information presented not misleading. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2016.

2. BASIS OF PRESENTATION

Summary of Significant Accounting Policies

Certain significant accounting policies followed by the Company are set forth in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2016.

Net Income Per Share and Comprehensive Income

Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding. Included in basic shares are certain shares that have been accrued as of the balance sheet date as deferred compensation for members of Bancshares’ Board of Directors. Diluted net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding, adjusted for the effect of potentially dilutive stock awards outstanding during the period. The dilutive shares consist of nonqualified stock option grants issued to employees and members of Bancshares’ Board of Directors pursuant to Bancshares’ 2013 Incentive Plan (the “2013 Incentive Plan”) previously approved by Bancshares’ shareholders. The following table reflects weighted average shares used to calculate basic and diluted net income per share for the periods presented.

	Three Months Ended
	March 31,
	2017		2016
Basic shares		6,158,399		6,143,267
Dilutive shares		320,500		272,550
Diluted shares		6,478,899		6,415,817

	Three Months Ended
	March 31,
	2017		2016
	(Dollars in Thousands, Except Per Share Data)
Net income	$	404	$	317
Basic net income per share	$	0.07	$	0.05
Diluted net income per share	$	0.06	$	0.05

Comprehensive income consists of net income, as well as unrealized gains and losses that arise during the period associated with the Company’s available-for-sale securities portfolio and the effective portion of cash flow hedge derivatives. In the calculation of comprehensive income, reclassification adjustments are made for gains or losses realized in the statement of operations associated with the sale of available-for-sale securities or changes in the fair value of cash flow derivatives.

8

Accounting Policies Recently Adopted and Pending Accounting Pronouncements

Accounting Standards Update (“ASU”) 2016-13, "Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments.” Issued in June 2016, ASU 2016-13 removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current U.S. GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all current recognition thresholds and will require companies to recognize an allowance for lifetime expected credit losses. Credit losses will be immediately recognized through net income; the amount recognized will be based on the current estimate of contractual cash flows not expected to be collected over the financial asset’s contractual term. ASU 2016-13 also amends the credit loss measurement guidance for available-for-sale debt securities. For public business entities, ASU 2016-13 is effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after December 15, 2019. Institutions will be required to apply the changes through a cumulative-effect adjustment to their retained earnings as of the beginning of the first reporting period in which the guidance is effective. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.

ASU 2016-09, “Compensation-Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting.”  Issued in March 2016, ASU 2016-09 seeks to reduce complexity in accounting standards by simplifying several aspects of the accounting for share-based payment transactions, including (1) accounting for income taxes; (2) classification of excess tax benefits on the statement of cash flows; (3) forfeitures; (4) minimum statutory tax withholding requirements; (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax withholding purposes; (6) the practical expedient for estimating the expected term; and (7) intrinsic value.  ASU 2016-09 became effective for the Company on January 1, 2017.  The adoption of ASU 2016-09 did not have a material impact on the Company’s consolidated financial statements.

ASU 2016-05, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.” Issued in March 2016, ASU 2016-05 clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815 does not, in and of itself, require de-designation of that hedging relationship, provided that all other hedge accounting criteria continue to be met.  ASU 2016-05 became effective for the Company on January 1, 2017.  The adoption of ASU 2016-05 did not have a material impact on the Company’s consolidated financial statements.

ASU 2016-02, “Leases (Topic 842).” Issued in February 2016, ASU 2016-02 was issued by the FASB to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and by disclosing key information about leasing arrangements. ASU 2016-02 will require organizations that lease assets (lessees) to recognize on the balance sheet the assets and liabilities for the rights and obligations created by the lease for all operating leases under current U.S. GAAP with a term of more than 12 months. The recognition, measurement and presentation of expenses and cash flows arising from a lease are not significantly changed under ASU 2016-02, and there will continue to be differentiation between finance leases and operating leases. The accounting applied by the lessor in a lease transaction remains largely unchanged from previous U.S. GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.

ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (An Amendment of FASB ASC 825).” Issued in January 2016, ASU 2016-01 is intended to enhance the reporting model for financial instruments to provide users of financial statements with improved decision-making information. The amendments of ASU 2016-01 include: (i) requiring equity investments, except those accounted for under the equity method of accounting or those that result in the consolidation of an investee, to be measured at fair value, with changes in fair value recognized in net income; (ii) requiring a qualitative assessment to identify impairment of equity investments without readily determinable fair values; and (iii) clarifying that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments of ASU 2016-01 are effective for interim and annual periods beginning after December 15, 2017. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.

ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” Issued in May 2014, ASU 2014-09 will add FASB ASC Topic 606, Revenue from Contracts with Customers, and will supersede revenue recognition requirements in FASB ASC Topic 605, Revenue Recognition and certain cost guidance in FASB ASC Topic 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts. ASU 2014-09 requires an entity to recognize revenue when (or as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue should be recognized either over time, in a manner that depicts the entity’s performance, or at a point in time, when control of the goods or services is transferred to the customer. ASU 2015-14, “Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date,” issued in August 2015, defers the effective date of ASU 2014-09 by one year. ASU 2015-14 provides that the amendments of ASU 2014-09 become effective for interim and annual periods beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements, as well as the most appropriate method of application. However, because this guidance does not significantly impact the treatment of revenue associated with financial instruments, including loans and securities accounted for under other U.S. GAAP, the adoption of ASU 2014-09 is not expected to have a material impact on the Company’s consolidated financial statements.

9

3. INVESTMENT SECURITIES

Details of investment securities available-for-sale and held-to-maturity as of March 31, 2017 and December 31, 2016 were as follows:

	Available-for-Sale
	March 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	97,003	$	434	$	(938	)	$	96,499
Commercial		77,606		51		(1,156	)		76,501
Obligations of states and political subdivisions		7,637		395		(8	)		8,024
Obligations of U.S. government-sponsored agencies		2,000		4		—			2,004
Corporate notes		750		—		—			750
U.S. Treasury securities		80		—		—			80
Total	$	185,076	$	884	$	(2,102	)	$	183,858

	Held-to-Maturity
	March 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	17,880	$	7	$	(132	)	$	17,755
Obligations of U.S. government-sponsored agencies		9,715		12		(152	)		9,575
Obligations of states and political subdivisions		2,044		6		(22	)		2,028
Total	$	29,639	$	25	$	(306	)	$	29,358

	Available-for-Sale
	December 31, 2016
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	99,922	$	490	$	(2,003	)	$	98,409
Commercial		71,761		56		(1,287	)		70,530
Obligations of states and political subdivisions		9,759		390		(7	)		10,142
Obligations of U.S. government-sponsored agencies		2,000		—		(7	)		1,993
Corporate notes		756		—		—			756
U.S. Treasury securities		80		—		—			80
Total	$	184,278	$	936	$	(3,304	)	$	181,910

	Held-to-Maturity
	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	14,684	$	5	$	(148	)	$	14,541
Obligations of U.S. government-sponsored agencies		9,129		13		(222	)		8,920
Obligations of states and political subdivisions		2,091		2		(46	)		2,047
Total	$	25,904	$	20	$	(416	)	$	25,508

10

The scheduled maturities of investment securities available-for-sale and held-to-maturity as of March 31, 2017 are presented in the following table:

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Maturing within one year	$	1,089	$	1,093	$	—	$	—
Maturing after one to five years		6,172		6,245		2,289		2,303
Maturing after five to ten years		82,184		81,875		2,913		2,876
Maturing after ten years		95,631		94,645		24,437		24,179
Total	$	185,076	$	183,858	$	29,639	$	29,358

For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on the weighted-average contractual maturities of underlying collateral. The mortgage-backed securities generally mature earlier than their weighted-average contractual maturities because of principal prepayments.

11

The following table reflects gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of March 31, 2017 and December 31, 2016.

	Available-for-Sale
	March 31, 2017
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	75,284	$	(917	)	$	1,729	$	(21	)
Commercial		48,106		(807	)		18,066		(349	)
Obligations of states and political subdivisions		847		(8	)		—		—
U.S. Treasury securities		80		—			—		—
Total	$	124,317	$	(1,732	)	$	19,795	$	(370	)

	Held-to-Maturity
	March 31, 2017
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	13,030	$	(132	)	$	—	$	—
Obligations of U.S. government-sponsored agencies		8,618		(152	)		—		—
Obligations of states and political subdivisions		1,056		(15	)		549		(7	)
Total	$	22,704	$	(299	)	$	549	$	(7	)

	Available-for-Sale
	December 31, 2016
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	85,741	$	(1,976	)	$	1,904	$	(27	)
Commercial		54,475		(946	)		10,721		(341	)
Obligations of U.S. government-sponsored agencies		1,993		(7	)		—		—
Obligations of states and political subdivisions		434		(7	)		—		—
U.S. Treasury securities		80		—			—		—
Total	$	142,723	$	(2,936	)	$	12,625	$	(368	)

	Held-to-Maturity
	December 31, 2016
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	12,776	$	(148	)	$	—	$	—
Obligations of U.S. government-sponsored agencies		7,957		(222	)		—		—
Obligations of states and political subdivisions		1,628		(46	)		—		—
Total	$	22,361	$	(416	)	$	—	$	—

Management evaluates securities for other-than-temporary impairment no less frequently than quarterly and more frequently when economic or market concerns warrant such evaluation. Consideration is given to: (i) the length of time and the extent to which fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, (iii) whether the Company intends to sell securities, and (iv) whether it is more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases.

12

As of March 31, 2017, 18 debt securities had been in a loss position for more than 12 months, and 126 debt securities had been in a loss position for less than 12 months. As of December 31, 2016, 13 debt securities had been in a loss position for more than 12 months, and 130 debt securities had been in a loss position for less than 12 months. As of both March 31, 2017 and December 31, 2016, the losses for all securities were considered to be a direct result of the effect that the prevailing interest rate environment had on the value of debt securities and were not related to the creditworthiness of the issuers. Further, the Company has the current intent and ability to retain its investments in the issuers for a period of time that management believes to be sufficient to allow for any anticipated recovery in fair value. Therefore, the Company did not recognize any other-than-temporary impairments as of March 31, 2017 and December 31, 2016.

Investment securities available-for-sale with a carrying value of $95.2 million and $87.7 million as of March 31, 2017 and December 31, 2016, respectively, were pledged to secure public deposits and for other purposes.

No investment securities were sold during the three months ended March 31, 2017; however, certain securities were paid prior to contractual maturity, and the Company realized gains on the prepayment of the securities. Gains realized on prepayments of investment securities were approximately $50 thousand for the three months ended March 31, 2017. Gains realized on sales of securities available-for-sale and  prepayments of investment securities were approximately $0.6 million for the year ended December 31, 2016. There were no losses on sales of securities during the three months ended March 31, 2017 or the year ended December 31, 2016.

4. LOANS AND ALLOWANCE FOR LOAN LOSSES

Portfolio Segments

The Company has divided the loan portfolio into eight portfolio segments, each with different risk characteristics described as follows:

Construction, land development and other land loans – Commercial construction, land and land development loans include the development of residential housing projects, loans for the development of commercial and industrial use property and loans for the purchase and improvement of raw land. These loans are secured in whole or in part by the underlying real estate collateral and are generally guaranteed by the principals of the borrowing entity.

Secured by 1-4 family residential properties – These loans include conventional mortgage loans on one-to-four family residential properties. These properties may serve as the borrower’s primary residence, vacation home or investment property. Also included in this portfolio are home equity loans and lines of credit. This type of lending, which is secured by a first or second mortgage on the borrower’s residence, allows customers to borrow against the equity in their home.

Secured by multi-family residential properties – This portfolio segment includes mortgage loans secured by apartment buildings.

Secured by non-farm, non-residential properties – This portfolio segment includes real estate loans secured by commercial and industrial properties, office or mixed-use facilities, strip shopping centers or other commercial property. These loans are generally guaranteed by the principals of the borrowing entity.

Other real estate loans – Other real estate loans are loans primarily for agricultural production, secured by mortgages on farm land.

Commercial and industrial loans – This portfolio segment includes loans to commercial customers for use in the normal course of business. These credits may be loans and lines of credit to financially strong borrowers, secured by inventories, equipment or receivables, and are generally guaranteed by the principals of the borrowing entity.

Consumer loans – This portfolio segment includes a variety of secured and unsecured personal loans, including automobile loans, loans for household and personal purposes and all other direct consumer installment loans.

Indirect Sales – This portfolio segment includes loans secured by collateral that is purchased by consumers at retail stores with whom ALC has an established relationship to provide financing for the retail products sold if applicable underwriting standards are met.

13

As of March 31, 2017 and December 31, 2016, the composition of the loan portfolio by reporting segment and portfolio segment was as follows:

	March 31, 2017
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	25,853	$	—	$	25,853
Secured by 1-4 family residential properties		32,535		12,993		45,528
Secured by multi-family residential properties		16,464		—		16,464
Secured by non-farm, non-residential properties		97,294		—		97,294
Other		230		—		230
Commercial and industrial loans		57,253		—		57,253
Consumer loans:
Consumer		6,057		32,892		38,949
Indirect sales		—		47,196		47,196
Total loans		235,686		93,081		328,767
Less: Unearned interest, fees and deferred cost		249		5,962		6,211
Allowance for loan losses		2,521		2,358		4,879
Net loans	$	232,916	$	84,761	$	317,677

	December 31, 2016
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	23,772	$	—	$	23,772
Secured by 1-4 family residential properties		32,955		13,724		46,679
Secured by multi-family residential properties		16,627		—		16,627
Secured by non-farm, non-residential properties		102,112		—		102,112
Other		234		—		234
Commercial and industrial loans		57,963		—		57,963
Consumer loans:
Consumer		6,206		36,413		42,619
Indirect sales		—		44,775		44,775
Total loans		239,869		94,912		334,781
Less: Unearned interest, fees and deferred cost		218		6,935		7,153
Allowance for loan losses		2,409		2,447		4,856
Net loans	$	237,242	$	85,530	$	322,772

The Company makes commercial, real estate and installment loans to its customers. Although the Company has a diversified loan portfolio, 56.4% and 56.6% of the portfolio was concentrated in loans secured by real estate located primarily within a single geographic region of the United States as of March 31, 2017 and December 31, 2016, respectively.  

Related Party Loans

In the ordinary course of business, the Bank makes loans to certain officers and directors of the Company, including companies with which they are associated. These loans are made on the same terms as those prevailing for comparable transactions with non-related parties. Management believes that such loans do not represent more than a normal risk of collectability, nor do they present other unfavorable features. The aggregate balances of such related party loans and commitments as of both March 31, 2017 and December 31, 2016 were $2.7 million. During the three months ended March 31, 2017, there were no new loans to these parties, and repayments by active related parties were $35 thousand. During the year ended December 31, 2016, there was one new loan to these related parties, and repayments by active related parties was $0.1 million.

14

Allowance for Loan Losses

The following tables present changes in the allowance for loan losses and the related loan balances by loan portfolio segment and loan type as of March 31, 2017 and December 31, 2016:

	Bank
	Three Months Ended March 31, 2017
	Construction, Land		1-4 Family			Real Estate Multi- Family			Non-Farm Non-Residential			Other		Commercial	Consumer			Indirect Sales		Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	535	$	304		$	88	$	903		$	2	$	527	$	50		$	—	$	2,409
Charge-offs		—		—			—		—			—		—		(2	)		—		(2	)
Recoveries		—		31			—		66			—		4		13			—		114
Provision		71		(52	)		27		(186	)		—		157		(17	)		—		—
Ending balance	$	606	$	283		$	115	$	783		$	2	$	688	$	44		$	—	$	2,521
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	422	$	5		$	—	$	102		$	—	$	45	$	—		$	—	$	574
Collectively evaluated for impairment		184		278			115		681			2		643		44			—		1,947
Total allowance for loan losses	$	606	$	283		$	115	$	783		$	2	$	688	$	44		$	—	$	2,521
Ending balance of loans receivable:
Individually evaluated for impairment	$	1,361	$	191		$	—	$	542		$	—	$	70	$	—		$	—	$	2,164
Collectively evaluated for impairment		24,492		32,344			16,464		96,752			230		57,183		6,057			—		233,522
Total loans receivable	$	25,853	$	32,535		$	16,464	$	97,294		$	230	$	57,253	$	6,057		$	—	$	235,686

	ALC
	Three Months Ended March 31, 2017
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential		Other		Commercial		Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447
Charge-offs		—		(13	)		—		—		—		—		(658	)		(135	)		(806	)
Recoveries		—		15			—		—		—		—		137			50			202
Provision		—		(33	)		—		—		—		—		470			78			515
Ending balance	$	—	$	76		$	—	$	—	$	—	$	—	$	1,666		$	616		$	2,358
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		76			—		—		—		—		1,666			616			2,358
Total allowance for loan losses	$	—	$	76		$	—	$	—	$	—	$	—	$	1,666		$	616		$	2,358
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		12,993			—		—		—		—		32,892			47,196			93,081
Total loans receivable	$	—	$	12,993		$	—	$	—	$	—	$	—	$	32,892		$	47,196		$	93,081

15

	Bank and ALC
	Three Months Ended March 31, 2017
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential			Other		Commercial		Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	535	$	411		$	88	$	903		$	2	$	527	$	1,767		$	623		$	4,856
Charge-offs		—		(13	)		—		—			—		—		(660	)		(135	)		(808	)
Recoveries		—		46			—		66			—		4		150			50			316
Provision		71		(85	)		27		(186	)		—		157		453			78			515
Ending balance	$	606	$	359		$	115	$	783		$	2	$	688	$	1,710		$	616		$	4,879
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	422	$	5		$	—	$	102		$	—	$	45	$	—		$	—		$	574
Collectively evaluated for impairment		184		354			115		681			2		643		1,710			616			4,305
Total allowance for loan losses	$	606	$	359		$	115	$	783		$	2	$	688	$	1,710		$	616		$	4,879
Ending balance of loans receivable:
Individually evaluated for impairment	$	1,361	$	191		$	—	$	542		$	—	$	70	$	—		$	—		$	2,164
Collectively evaluated for impairment		24,492		45,337			16,464		96,752			230		57,183		38,949			47,196			326,603
Total loans receivable	$	25,853	$	45,528		$	16,464	$	97,294		$	230	$	57,253	$	38,949		$	47,196		$	328,767

	Bank
	Year Ended December 31, 2016
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential			Other		Commercial			Consumer			Indirect Sales		Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	110	$	138		$	29	$	351		$	1	$	659		$	41		$	—	$	1,329
Charge-offs		—		(66	)		—		(40	)		—		(2	)		(43	)		—		(151	)
Recoveries		200		23			—		—			—		73			50			—		346
Provision		225		209			59		592			1		(203	)		2			—		885
Ending balance	$	535	$	304		$	88	$	903		$	2	$	527		$	50		$	—	$	2,409
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	423	$	5		$	—	$	107		$	—	$	—		$	—		$	—	$	535
Collectively evaluated for impairment		112		299			88		796			2		527			50			—		1,874
Total allowance for loan losses	$	535	$	304		$	88	$	903		$	2	$	527		$	50		$	—	$	2,409
Loan receivables:
Individually evaluated for impairment	$	1,361	$	193		$	—	$	549		$	—	$	—		$	—		$	—	$	2,103
Collectively evaluated for impairment		22,411		32,762			16,627		101,563			234		57,963			6,206			—		237,766
Total loans receivable	$	23,772	$	32,955		$	16,627	$	102,112		$	234	$	57,963		$	6,206		$	—	$	239,869

16

	ALC
	Year Ended December 31, 2016
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential		Other		Commercial		Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	—	$	250		$	—	$	—	$	—	$	—	$	1,584		$	618		$	2,452
Charge-offs		—		(56	)		—		—		—		—		(2,218	)		(752	)		(3,026	)
Recoveries		—		39			—		—		—		—		451			220			710
Provision		—		(126	)		—		—		—		—		1,900			537			2,311
Ending balance	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		107			—		—		—		—		1,717			623			2,447
Total allowance for loan losses	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		13,724			—		—		—		—		36,413			44,775			94,912
Total loans receivable	$	—	$	13,724		$	—	$	—	$	—	$	—	$	36,413		$	44,775		$	94,912

	Bank and ALC
	Year Ended December 31, 2016
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential			Other		Commercial			Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	110	$	388		$	29	$	351		$	1	$	659		$	1,625		$	618		$	3,781
Charge-offs		—		(122	)		—		(40	)		—		(2	)		(2,261	)		(752	)		(3,177	)
Recoveries		200		62			—		—			—		73			501			220			1,056
Provision		225		83			59		592			1		(203	)		1,902			537			3,196
Ending balance	$	535	$	411		$	88	$	903		$	2	$	527		$	1,767		$	623		$	4,856
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	423	$	5		$	—	$	107		$	—	$	—		$	—		$	—		$	535
Collectively evaluated for impairment		112		406			88		796			2		527			1,767			623			4,321
Total allowance for loan losses	$	535	$	411		$	88	$	903		$	2	$	527		$	1,767		$	623		$	4,856
Loan receivables:
Individually evaluated for impairment	$	1,361	$	193		$	—	$	549		$	—	$	—		$	—		$	—		$	2,103
Collectively evaluated for impairment		22,411		46,486			16,627		101,563			234		57,963			42,619			44,775			332,678
Total loans receivable	$	23,772	$	46,679		$	16,627	$	102,112		$	234	$	57,963		$	42,619		$	44,775		$	334,781

Credit Quality Indicators

The Bank utilizes a credit grading system that provides a uniform framework for establishing and monitoring credit risk in the loan portfolio. Under this system, each loan is graded, based on pre-determined risk metrics, and categorized into one of nine risk grades. These risk grades can be summarized into categories described as pass, special mention, substandard, doubtful and loss, as described in further detail below.

● Pass (Risk Grades 1-5): Loans in this category include obligations in which the probability of default is considered low.

● Special Mention (Risk Grade 6): Loans in this category exhibit potential credit weaknesses or downward trends deserving Bank management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. Although a special mention asset has a higher probability of default than pass-rated categories, its default is not imminent.

17

● Substandard (Risk Grade 7): Loans in this category have defined weaknesses that jeopardize the orderly liquidation of debt. A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. There is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.

● Doubtful (Risk Grade 8): Loans classified as doubtful have all of the weaknesses found in substandard loans, with the added characteristic that the weaknesses make collection of debt in full, based on currently existing facts, conditions and values, highly questionable or improbable. Serious problems exist such that partial loss of principal is likely; however, because of certain important, reasonably specific pending factors that may work to strengthen the assets, the loans’ classification as estimated losses is deferred until a more exact status may be determined. Such pending factors may include proposed merger, acquisition or liquidation procedures, capital injection, perfection of liens on additional collateral and refinancing plans. Loans classified as doubtful may include loans to borrowers that have demonstrated a history of failing to live up to agreements.

● Loss (Risk Grade 9): Loans are classified in this category when borrowers are deemed incapable of repayment of unsecured debt. Loans to such borrowers are considered uncollectable and of such little value that continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not prudent to defer writing off these worthless assets, even though partial recovery may be affected in the future.

At ALC, because the loan portfolio is more uniform in nature, each loan is categorized into one of two risk grades, depending on whether the loan is considered to be performing or nonperforming. Performing loans are loans that are paying principal and interest in accordance with a contractual agreement. Nonperforming loans are loans that have demonstrated characteristics that indicate a probability of loss.

The tables below illustrate the carrying amount of loans by credit quality indicator as of March 31, 2017.

	Bank
	Pass 1-5		Special Mention 6		Substandard 7		Doubtful 8		Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	24,323	$	—	$	1,530	$	—	$	25,853
Secured by 1-4 family residential properties		31,552		207		776		—		32,535
Secured by multi-family residential properties		16,464		—		—		—		16,464
Secured by non-farm, non-residential properties		94,324		2,281		689		—		97,294
Other		230		—		—		—		230
Commercial and industrial loans		54,816		2,187		250		—		57,253
Consumer loans		6,057		—		—		—		6,057
Other loans		—		—		—		—		—
Total	$	227,766	$	4,675	$	3,245	$	—	$	235,686

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	12,744	$	249	$	12,993
Consumer loans:
Consumer		31,994		898		32,892
Indirect sales		46,701		495		47,196
Total	$	91,439	$	1,642	$	93,081

18

The tables below illustrate the carrying amount of loans by credit quality indicator as of December 31, 2016.

	Bank
	Pass 1-5		Special Mention 6		Substandard 7		Doubtful 8		Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	22,240	$	—	$	1,532	$	—	$	23,772
Secured by 1-4 family residential properties		31,995		213		747		—		32,955
Secured by multi-family residential properties		16,627		—		—		—		16,627
Secured by non-farm, non-residential properties		99,082		2,315		715		—		102,112
Other		234		—		—		—		234
Commercial and industrial loans		55,481		2,227		255		—		57,963
Consumer loans		6,126		—		80		—		6,206
Total	$	231,785	$	4,755	$	3,329	$	—	$	239,869

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	13,507	$	217	$	13,724
Consumer loans:
Consumer		35,278		1,135		36,413
Indirect sales		44,228		547		44,775
Total	$	93,013	$	1,899	$	94,912

The following tables provide an aging analysis of past due loans by class as of March 31, 2017.

	Bank
	As of March 31, 2017
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	86	$	86	$	25,767	$	25,853	$	—
Secured by 1-4 family residential properties		197		—		191		388		32,147		32,535		—
Secured by multi-family residential properties		—		—		—		—		16,464		16,464		—
Secured by non-farm, non-residential properties		—		—		—		—		97,294		97,294		—
Other		—		—		—		—		230		230		—
Commercial and industrial loans		—		6		15		21		57,232		57,253		—
Consumer loans		61		26		—		87		5,970		6,057		—
Total	$	258	$	32	$	292	$	582	$	235,104	$	235,686	$	—

19

	ALC
	As of March 31, 2017
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Secured by 1-4 family residential properties		47		1		242		290		12,703		12,993		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans:
Consumer		434		336		889		1,659		31,233		32,892		—
Indirect sales		136		146		459		741		46,455		47,196		—
Total	$	617	$	483	$	1,590	$	2,690	$	90,391	$	93,081	$	—

The following tables provide an aging analysis of past due loans by class as of December 31, 2016.

	Bank
	As of December 31, 2016
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	86	$	86	$	23,686	$	23,772	$	—
Secured by 1-4 family residential properties		164		69		145		378		32,577		32,955		—
Secured by multi-family residential properties		—		—		—		—		16,627		16,627		—
Secured by non-farm, non-residential properties		762		—		—		762		101,350		102,112		—
Other		—		—		—		—		234		234		—
Commercial and industrial loans		—		—		14		14		57,949		57,963		—
Consumer loans		—		28		—		28		6,178		6,206		—
Total	$	926	$	97	$	245	$	1,268	$	238,601	$	239,869	$	—

20

	ALC
	As of December 31, 2016
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Secured by 1-4 family residential properties		61		29		213		303		13,421		13,724		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans:
Consumer		441		413		1,104		1,958		34,455		36,413		—
Indirect sales		191		139		489		819		43,956		44,775		—
Total	$	693	$	581	$	1,806	$	3,080	$	91,832	$	94,912	$	—

The following table provides an analysis of non-accruing loans by class as of March 31, 2017 and December 31, 2016.

	Loans on Non-Accrual Status
	March 31, 2017		December 31, 2016
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	86	$	86
Secured by 1-4 family residential properties		623		570
Secured by multi-family residential properties		—		—
Secured by non-farm, non-residential properties		39		53
Commercial and industrial loans		31		32
Consumer loans		1,426		1,676
Total loans	$	2,205	$	2,417

Impaired Loans

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the related loan agreement. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the liquidation of the collateral at the Bank. At management's discretion, additional loans may be impaired based on homogeneous factors such as changes in the nature and volume of the portfolio, portfolio quality, adequacy of the underlying collateral value, loan concentrations, historical charge-off trends, and economic conditions that may affect the borrower's ability to pay. At ALC, all real estate loans of $0.1 million or more are identified for impairment analysis. There are currently no loans at ALC that meet that criteria. All loans of $0.5 million or more that have a credit quality risk grade of seven or above are identified for impairment analysis. Impaired loans, or portions thereof, are charged off when deemed uncollectable.

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As of March 31, 2017, the carrying amount of impaired loans consisted of the following:

	March 31, 2017
Impaired loans with no related allowance recorded	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		—		—		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		—		—		—
Total loans with no related allowance recorded	$	—	$	—	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	422
Secured by 1-4 family residential properties		191		191		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		542		542		102
Commercial and industrial		70		70		45
Total loans with an allowance recorded	$	2,164	$	2,164	$	574
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	422
Secured by 1-4 family residential properties		191		191		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		542		542		102
Commercial and industrial		70		70		45
Total impaired loans	$	2,164	$	2,164	$	574

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As of December 31, 2016, the carrying amount of impaired loans consisted of the following:  

	December 31, 2016
Impaired loans with no related allowance recorded	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		—		—		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		—		—		—
Total loans with no related allowance recorded	$	—	$	—	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	423
Secured by 1-4 family residential properties		193		193		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		549		549		107
Commercial and industrial		—		—		—
Total loans with an allowance recorded	$	2,103	$	2,103	$	535
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	423
Secured by 1-4 family residential properties		193		193		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		549		549		107
Commercial and industrial		—		—		—
Total impaired loans	$	2,103	$	2,103	$	535

The average net investment in impaired loans and interest income recognized and received on impaired loans as of the three months ended March 31, 2017 and the year ended December 31, 2016 were as follows:

	March 31, 2017
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	10	$	10
Secured by 1-4 family residential properties		193		4		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		542		8		5
Commercial and industrial		23		3		2
Total	$	2,119	$	25	$	22

23

	December 31, 2016
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	1,381	$	41	$	39
Secured by 1-4 family residential properties		232		14		14
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		557		33		31
Commercial and industrial		—		—		—
Total	$	2,170	$	88	$	84

Loans on which the accrual of interest has been discontinued amounted to $2.2 million and $2.4 million as of March 31, 2017 and December 31, 2016, respectively. If interest on those loans had been accrued, there would have been $9 thousand and $35 thousand of interest accrued for the periods ended March 31, 2017 and December 31, 2016, respectively. Interest income related to these loans as of March 31, 2017 and December 31, 2016 was $1 thousand and $4 thousand, respectively.

Troubled Debt Restructurings

Troubled debt restructurings include loans with respect to which concessions have been granted to borrowers that generally would not have otherwise been considered had the borrowers not been experiencing financial difficulty. The concessions granted may include payment schedule modifications, interest rate reductions, maturity date extensions, modifications of note structure, principal balance reductions or some combination of these concessions. There were no loans modified with concessions granted during the three-month period ended March 31, 2017. Restructured loans may involve loans remaining on non-accrual, moving to non-accrual or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Non-accrual restructured loans are included with all other non-accrual loans. In addition, all accruing restructured loans are reported as troubled debt restructurings. Generally, restructured loans remain on non-accrual until the customer has attained a sustained period of repayment performance under the modified loan terms (generally a minimum of six months). However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and whether the loan should be returned to or maintained on non-accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, then the loan remains on non-accrual. As of March 31, 2017 and December 31, 2016, respectively, the Company had $0.2 million and $0.1 million of non-accruing loans that were previously restructured and that remained on non-accrual status. For the three months ended March 31, 2017, the Company had no loans that were restored to accrual status based on a sustained period of repayment performance. For the year ended December 31, 2016, the Company had $0.3 million in restructured loans that were restored to accrual status based on a sustained period of repayment performance.

The following table provides the number of loans remaining in each loan category, as of March 31, 2017 and December 31, 2016 that the Bank had previously modified in a troubled debt restructuring, as well as the pre- and post-modification principal balance as of each date.

	March 31, 2017						December 31, 2016
	Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance		Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans		2	$	1,960	$	1,363		2	$	1,960	$	1,286
Secured by 1-4 family residential properties		3		318		246		3		318		249
Secured by non-farm, non-residential properties		1		53		40		1		53		41
Commercial loans		2		116		87		2		116		88
Total		8	$	2,447	$	1,736		8	$	2,447	$	1,664

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As of March 31, 2017 and December 31, 2016, no loans that previously had been modified in a troubled debt restructuring had defaulted subsequent to modification.

Restructured loan modifications primarily included maturity date extensions and payment schedule modifications. There were no modifications to principal balances of the loans that were restructured. Accordingly, there was no impact on the Company’s allowance for loan losses resulting from the modifications.

All loans with a principal balance of $0.5 million or more that have been modified in a troubled debt restructuring are considered impaired and evaluated individually for impairment. The nature and extent of impairment of restructured loans, including those that have experienced a subsequent payment default, are considered in the determination of an appropriate level of allowance for loan losses. This evaluation resulted in an allowance for loan losses attributable to such restructured loans of $9 thousand as of March 31, 2017 and $15 thousand as of December 31, 2016, respectively.

5. OTHER REAL ESTATE OWNED

Other real estate and certain other assets acquired in foreclosure are reported at the lower of the investment in the loan or the fair value of the property, less estimated costs to sell. The following table summarizes foreclosed property activity as of the three months ended March 31, 2017 and 2016:

	March 31, 2017
	Bank			ALC			Total
	(Dollars in Thousands)
Beginning balance	$	4,353		$	505		$	4,858
Transfers from loans		—			20			20
Sales proceeds		(204	)		(84	)		(288	)
Gross gains		13			—			13
Gross losses		(1	)		(15	)		(16	)
Net gains (losses)		12			(15	)		(3	)
Impairment		—			—			—
Ending balance	$	4,161		$	426		$	4,587

	March 31, 2016
	Bank			ALC			Total
	(Dollars in Thousands)
Beginning balance	$	5,327		$	711		$	6,038
Transfers from loans		—			18			18
Sales proceeds		(609	)		(77	)		(686	)
Gross gains		—			25			25
Gross losses		(16	)		—			(16	)
Net gains (losses)		(16	)		25			9
Impairment		—			(23	)		(23	)
Ending balance	$	4,702		$	654		$	5,356

Valuation adjustments are recorded in other non-interest expense and are primarily post-foreclosure write-downs that are a result of continued declining property values based on updated appraisals or other indications of value, such as offers to purchase. Fair value less estimated cost to sell of foreclosed residential real estate held by the Company was $0.8 million and $1.2 million as of March 31, 2017 and 2016, respectively. In addition, the Company held $0.1 million and $0.3 million in consumer mortgage loans collateralized by residential real estate that were in the process of foreclosure as of March 31, 2017 and 2016, respectively.

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6. INVESTMENT IN LIMITED PARTNERSHIP

The Bank holds an investment in an affordable housing project for which it provides funding as a limited partner and has received tax credits related to its investment in the project based on its partnership share. The net assets of the partnership consist primarily of apartment complexes, and the primary liabilities consist of those associated with the operation of the partnership. The Company has determined that this investment requires consolidation as a variable interest entity under ASC Topic 810, Consolidation. The Company holds a 99.9% interest in the limited partnership. Assets recorded by the Company as a result of the consolidation were less than $0.1 million as of both March 31, 2017 and December 31, 2016.

7. SHORT-TERM BORROWINGS

Short-term borrowings consist of federal funds purchased, securities sold under repurchase agreements, and short-term Federal Home Loan Bank (“FHLB”) advances with original maturities of one year or less. Short-term borrowings totaled $10.8 million and $10.1 million as of March 31, 2017 and December 31, 2016, respectively.

Federal funds purchased, which represent unsecured lines of credit that generally mature within one to four days, are available to the Bank through arrangements with correspondent banks and the Federal Reserve. As of both March 31, 2017 and December 31, 2016, there were no federal funds purchased outstanding, and the Bank had $18.8 million in available unused lines of credit with correspondent banks and the Federal Reserve.

Securities sold under repurchase agreements, which are secured borrowings, generally are reflected at the amount of cash received in connection with the transaction. The Bank may be required to provide additional collateral based on the fair value of the underlying securities. The Bank monitors the fair value of the underlying securities on a daily basis. Securities sold under repurchase agreements as of March 31, 2017 and December 31, 2016 totaled $0.8 million and $0.1 million, respectively.

Short-term FHLB advances are secured borrowings available to the Bank as an alternative funding source. As of both March 31, 2017 and December 31, 2016, the Bank had $10.0 million in outstanding FHLB advances with original  maturities of less than one year. 

8. LONG-TERM DEBT

The Company uses FHLB advances as an alternative to funding sources with similar maturities, such as certificates of deposit or other deposit programs. These advances generally offer more attractive rates than other mid-term financing options. They are also flexible, allowing the Company to quickly obtain the necessary maturities and rates that best suit its overall asset/liability strategy. FHLB advances with an original maturity of more than one year are classified as long-term. The Company had long-term FHLB advances outstanding of $15.0 million as of both March 31, 2017 and December 31, 2016.

Assets pledged associated with FHLB advances totaled $26.1 million and $28.0 million as of March 31, 2017 and December 31, 2016, respectively. As of March 31, 2017 and December 31, 2016, the Bank had $157.0 million and $155.0 million, respectively, in remaining credit from the FHLB (subject to available collateral).

9. INCOME TAXES

The provision for income taxes was $0.1 million for both of the three-month periods ended March 31, 2017 and 2016. The Company’s effective tax rate was 24.3% and 24.0% for the same periods. The effective tax rate is impacted by recurring permanent differences, such as those associated with bank-owned life insurance and tax-exempt investment and loan income.

The Company had a net deferred tax asset of $8.2 million and $8.7 million as of March 31, 2017 and December 31, 2016, respectively. The reduction in the net deferred tax asset resulted primarily from the impact of changes in the fair value of securities available-for-sale.

26

10. DEFERRED COMPENSATION PLANS

The Bank has entered into supplemental retirement compensation benefits agreements with certain directors and executive officers.  The measurement of the liability under these agreements includes estimates involving life expectancy, length of time before retirement and the expected returns on the bank-owned life insurance policies used to fund those agreements. Should these estimates prove materially wrong, the cost of these agreements could change accordingly. The related deferred compensation obligation to these directors and executive officers included in other liabilities was $3.5 million as of both March 31, 2017 and December 31, 2016.

Non-employee directors may elect to defer payment of all or any portion of their Bancshares and Bank director fees under Bancshares’ Non-Employee Directors’ Deferred Compensation Plan (the “Deferral Plan”). The Deferral Plan, which was ratified by shareholders at the annual meeting held on May 11, 2004, permits non-employee directors to invest their directors’ fees and to receive the adjusted value of the deferred amounts in cash and/or shares of Bancshares’ common stock. Neither Bancshares nor the Bank makes any contribution to participants’ accounts under the Deferral Plan.

11. STOCK AWARDS

In accordance with the Company’s 2013 Incentive Plan, stock awards, including stock options and restricted stock, have been granted to certain employees and non-employee directors. Shares of common stock available for distribution to satisfy the grants may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. Stock-based compensation expense related to stock awards totaled $0.1 million for both of the three-month periods ended March 31, 2017 and 2016.

Stock Options

The stock option awards were granted with an exercise price equal to the market price of the Company’s common stock on the date of the grant and have vesting periods ranging from one to three years, with 10-year contractual terms. 

The Company recognizes the cost of services received in exchange for stock option awards based on the grant date fair value of the award, with compensation expense recognized on a straight-line basis over the award’s vesting period. The fair value of outstanding awards was determined using the Black-Scholes option pricing model based on the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Company’s common stock.

	2017			2016
Risk-free interest rate		2.23	%		1.58	%
Expected term	7.5 years			7.5 years
Expected stock price volatility		25.36	%		25.25	%
Dividend yield		1.50	%		1.50	%

The following table summarizes the Company's stock option activity for the periods presented.

	Three Months Ended
	March 31, 2017				March 31, 2016
	Number of Shares		Average Exercise Price		Number of Shares		Average Exercise Price
Options:
Outstanding, beginning of period		272,550	$	8.21		175,550	$	8.17
Granted		64,600		14.11		97,000		8.30
Exercised		16,650		8.15		—		—
Expired		—		—		—		—
Forfeited		—		—		—		—
Options outstanding, end of period		320,500	$	9.41		272,550	$	8.21
Options exercisable, end of period		210,633	$	8.20		175,550	$	8.17

The aggregate intrinsic value of stock options outstanding (calculated as the amount by which the market value of underlying stock exceeds the exercise price of the option) was approximately $0.7 million and $0.1 million as of March 31, 2017 and 2016, respectively.

Restricted Stock

During the first three months of 2017, 7,533 shares of restricted stock were granted with vesting periods of either one or three years. No shares of restricted stock were granted during the first three months of 2016. The Company recognizes the cost of services received in exchange for restricted stock awards based on the grant date closing price of the stock, with compensation expense recognized on a straight-line basis over the award’s vesting period.

27

12. DERIVATIVE FINANCIAL INSTRUMENTS

Derivatives Designated as Hedging Instruments

On April 1, 2016, the Bank entered into a forward interest rate swap contract on a variable rate FHLB advance (indexed to three-month LIBOR) with a total notional amount of $10.0 million. The interest rate swap contract was designated as a derivative instrument in a cash flow hedge under ASC Topic 815, Derivatives and Hedging, with the objective of protecting the quarterly interest rate payments on the FHLB advance from the risk of variability of those payments resulting from changes in the three-month LIBOR interest rate throughout the seven-year period beginning on April 5, 2016 and ending on April 5, 2023. Under the swap arrangement, which became effective on April 5, 2016, the Bank will pay a fixed interest rate of 1.46% and receive a variable interest rate based on three-month LIBOR on the total notional amount of $10.0 million, with quarterly net settlements.

No ineffectiveness related to the interest rate swap designated as a cash flow hedge was recognized in the consolidated statements of operations for the three months ended March 31, 2017. The accumulated net after-tax gain related to the effective cash flow hedge included in accumulated other comprehensive income totaled $0.2 million as of both March 31, 2017 and December 31, 2016.

Derivatives Not Designated as Hedging Instruments

In 2014, the Bank entered into three separate interest rate cap agreements to mitigate risks associated with increases in interest rates on an aggregate notional amount of $40 million. The interest rate caps qualify as derivatives but were not designated as hedging instruments. Accordingly, changes in the fair value of the instruments are included in results of operations. Under the three agreements, the Company paid an up-front premium totaling approximately $0.1 million, in return for the ability to receive cash flows if interest rates rise above a strike rate indexed to three-month LIBOR. The agreements have contractual terms that mature at various dates in 2017. As of March 31, 2017, the strike rate had not been achieved on any of the three agreements, and accordingly, the Company has received no cash flows associated with the agreements. Since the inception of the agreements, on a quarterly basis, the Company has recorded the current fair value of the derivatives within other assets on the Company’s consolidated balance sheet, with changes in the fair value included in interest expense on the Company’s consolidated statements of operations. As of both March 31, 2017 and December 31, 2016, the fair value of each of the three derivative agreements was zero.

13. SEGMENT REPORTING

Under ASC Topic 280, Segment Reporting, certain information is disclosed for the two reportable operating segments of Bancshares: the Bank and ALC. The reportable segments were determined using the internal management reporting system. These segments comprise Bancshares’ and the Bank’s significant subsidiaries. The accounting policies for each segment are the same as those described in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2016. The segment results include certain overhead allocations and intercompany transactions that were recorded at current market prices. All intercompany transactions have been eliminated to determine the consolidated balances. The results for the two reportable segments of the Company are included in the tables below.

					All
	Bank		ALC		Other			Eliminations			Consolidated
	(Dollars in Thousands)
For the three months ended March 31, 2017:
Net interest income	$	3,911	$	3,005	$	3		$	—		$	6,919
Provision for loan losses		—		515		—			—			515
Total non-interest income		836		244		850			(763	)		1,167
Total non-interest expense		4,401		2,377		429			(170	)		7,037
Income before income taxes		346		357		424			(593	)		534
Provision for income taxes		98		130		(98	)		—			130
Net income	$	248	$	227	$	522		$	(593	)	$	404
Other significant items:
Total assets	$	622,528	$	88,233	$	82,667		$	(173,601	)	$	619,827
Total investment securities		213,417		—		80			—			213,497
Total loans, net		309,425		84,761		—			(76,509	)		317,677
Investment in subsidiaries		5		—		76,976			(76,976	)		5
Fixed asset additions		4,025		62		—			—			4,087
Depreciation and amortization expense		201		41		—			—			242
Total interest income from external customers		3,392		4,118		—			—			7,510
Total interest income from affiliates		1,114		—		3			(1,117	)		—

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						All
	Bank			ALC		Other			Eliminations			Consolidated
	(Dollars in Thousands)
For the three months ended March 31, 2016:
Net interest income	$	3,598		$	3,060	$	3		$	—		$	6,661
Provision (reduction in reserve) for loan losses		(280	)		447		—			—			167
Total non-interest income		721			252		675			(659	)		989
Total non-interest expense		4,334			2,427		440			(135	)		7,066
Income before income taxes		265			438		238			(524	)		417
Provision for income taxes		48			158		(106	)		—			100
Net income	$	217		$	280	$	344		$	(524	)	$	317
Other significant items:
Total assets	$	577,945		$	84,353	$	83,129		$	(169,845	)	$	575,582
Total investment securities		231,386			—		80			—			231,466
Total loans, net		256,037			80,480		—			(72,542	)		263,975
Investment in subsidiaries		5			—		77,716			(77,716	)		5
Fixed asset addition		3,224			5		—			—			3,229
Depreciation and amortization expense		180			52		—			—			232
Total interest income from external customers		3,124			4,072		—			—			7,196
Total interest income from affiliates		1,012			—		3			(1,015	)		—

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14. GUARANTEES, COMMITMENTS AND CONTINGENCIES

The Bank’s exposure to credit loss in the event of nonperformance by the other party for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making these commitments as it does for on-balance sheet instruments. For interest rate swap transactions and commitments to purchase or sell securities for forward delivery, the contract or notional amounts do not represent exposure to credit loss. The Bank controls the credit risk of these derivative instruments through credit approvals, limits and monitoring procedures. Certain derivative contracts have credit risk for the carrying value plus the amount to replace such contracts in the event of counterparty default. All of the Bank’s financial instruments are held for risk management and not for trading purposes. During the three-month periods ended March 31, 2017 and 2016, there were no credit losses associated with derivative contracts.

In the normal course of business, there are outstanding commitments and contingent liabilities, such as commitments to extend credit, letters of credit and others that are not included in the consolidated financial statements. The financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the financial statements. A summary of these commitments and contingent liabilities is presented below:

	March 31, 2017		December 31, 2016
	(Dollars in Thousands)
Standby letters of credit	$	183	$	183
Commitments to extend credit	$	43,806	$	41,267

Standby letters of credit are contingent commitments issued by the Bank generally to guarantee the performance of a customer to a third-party. The Bank has recourse against the customer for any amount that it is required to pay to a third-party under a standby letter of credit. Revenues are recognized over the lives of the standby letters of credit. As of March 31, 2017 and December 31, 2016, the potential amount of future payments that the Bank could be required to make under its standby letters of credit, which represent the Bank’s total credit risk in this category, is included in the table above.

A commitment to extend credit is an agreement to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon the extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.

Commitments to purchase securities for delayed delivery require the Bank to purchase a specified security at a specified price for delivery on a specified date. Similarly, commitments to sell securities for delayed delivery require the Bank to sell a specified security at a specified price for delivery on a specified date. Market risk arises from potential movements in security values and interest rates between the commitment and delivery dates. As of both March 31, 2017 and December 31, 2016, there were no outstanding commitments to purchase securities for delayed delivery and no outstanding commitments to sell securities for delayed delivery.

The Company is self-insured for a significant portion of employee health benefits. However, we maintain stop-loss coverage with third party insurers to limit our individual claim and total exposure related to self-insurance. We estimate our accrued liability for the ultimate costs to close known claims, as well as claims incurred but not yet reported, as of the balance sheet date. Our recorded estimated liability for self-insurance is based on the insurance companies’ incurred loss estimates and management’s judgment, including assumptions and factors related to the frequency and severity of claims, our claims development history and our claims settlement practices. The assessment of loss contingencies and self-insurance reserves is a highly subjective process that requires judgments about future events. Contingencies are reviewed at least quarterly to determine the adequacy of self-insurance accruals. The ultimate settlement of loss contingencies and self-insurance reserves may differ significantly from amounts we have accrued in our consolidated financial statements.

In 2016, the Bank entered into an agreement with a general contractor to manage construction of an office complex on a parcel of land located in the Birmingham, Alabama area that was purchased by the Bank in 2016. The office complex, which will be approximately 40,000 square feet in size, will house a retail branch of the Bank, as well as the Bank’s commercial lending team in the Birmingham area and certain other officers of the Bank. Approximately 25% of the square footage of the office complex will be utilized by the Bank, with the remainder to be leased to commercial tenants. Construction began on the office complex during the third quarter of 2016 and is expected to be completed during 2017. As of March 31, 2017, approximately $8.2 million in cost had been incurred by the Bank associated with the construction project. Remaining contractual commitments with the general contractor totaled $3.5 million. In addition to current commitments to the general contractor, the Bank estimates additional expenditures of approximately $1.7 million will be incurred for office finishes, tenant improvements, furniture and fixtures, architectural fees and certain other development costs. Additional expenses could be incurred under the agreement based on changes to building specifications at the discretion of the Bank and the occurrence of certain events specified in the contract. As costs associated with the construction are incurred, they are recorded in premises and equipment as construction in process. Upon completion of construction and placement of the office complex into service, depreciation expense associated with the office complex is currently estimated to be approximately $0.5 million annually.

Litigation

The Company is party to certain ordinary course litigation, and the Company intends to vigorously defend itself in all such litigation. In the opinion of the Company, based on review and consultation with legal counsel, the outcome of such ordinary course litigation should not have a material adverse effect on the Company’s consolidated financial statements or results of operations.

15. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company follows the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The assumptions used in the estimation of the fair value of the Company’s financial instruments are detailed below. The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather represent a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance.

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Fair Value Hierarchy

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. In determining fair value, the Company uses various methods, including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

● Level 1 — Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange or Nasdaq. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

● Level 2 — Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

● Level 3 — Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

The Company rarely transfers assets and liabilities measured at fair value between Level 1 and Level 2 measurements. Trading account assets and securities available-for-sale may be periodically transferred to or from Level 3 valuation based on management’s conclusion regarding the best method of pricing for an individual security. Such transfers are accounted for as if they occurred at the beginning of a reporting period. There were no such transfers during the three months ended March 31, 2017 or the year ended December 31, 2016.

Fair Value Measurements on a Recurring Basis

Securities Available-for-Sale

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include exchange-traded equities. Level 2 securities include U.S. Treasury and agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset-backed and other securities. Level 2 fair values are obtained from quoted prices of securities with similar characteristics. In certain cases, where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Interest Rate Derivative Agreements

Interest rate derivative agreements are used by the Company to mitigate risk associated with changes in interest rates. The fair value of these agreements is based on information obtained from third-party financial institutions. This information is periodically evaluated by the Company and, as necessary, corroborated against other third-party valuations. The Company classifies these derivative assets within Level 2 of the valuation hierarchy.

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The following table presents assets measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016. There were no liabilities measured at fair value on a recurring basis for either period presented.

	Fair Value Measurements as of March 31, 2017 Using
	Totals At March 31, 2017		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	96,499	$	—	$	96,499	$	—
Commercial		76,501		—		76,501		—
Obligations of states and political subdivisions		8,024		—		8,024		—
Obligations of U.S. government-sponsored agencies		2,004		—		2,004		—
Corporate notes		750		—		750		—
U.S. Treasury securities		80		—		80		—
Other assets - derivatives		358		—		358		—

	Fair Value Measurements as of December 31, 2016 Using
	Totals At December 31, 2016		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	98,409	$	—	$	98,409	$	—
Commercial		70,530		—		70,530		—
Obligations of states and political subdivisions		10,142		—		10,142		—
Obligations of U.S. government-sponsored agencies		1,993		—		1,993		—
Corporate notes		756		—		756		—
U.S. Treasury securities		80		—		80		—
Other assets - derivatives		346		—		346		—

Fair Value Measurements on a Non-recurring Basis

Impaired Loans

Loans that are considered impaired are loans for which, based on current information and events, it is probable that the Company will be unable to collect all principal and interest payments due under the contractual terms of the loan agreement. Impaired loans can be measured based on the present value of expected payments using the loan’s original effective rate as the discount rate, the loan’s observable market price, or the fair value of the collateral less estimated selling cost if the loan is collateral-dependent. For the Company, the fair value of impaired loans is primarily measured based on the value of the collateral securing the loans (typically real estate). The Company determines the fair value of the collateral based on independent appraisals performed by qualified licensed appraisers. The appraisals may include a single valuation approach or a combination of approaches, including comparable sales and income approaches. Appraised values are discounted for estimated costs to sell and may be discounted further based on management’s knowledge of the collateral, changes in market conditions since the most recent appraisal and/or management’s knowledge of the borrower and the borrower’s business. Such discounts by management are subjective and are typically significant unobservable inputs for determining fair value. Impaired loans are evaluated by management for additional impairment at least quarterly and are adjusted accordingly.

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OREO

OREO consists of properties obtained through foreclosure or in satisfaction of loans and is recorded at the lower of the loan’s carrying amount or the fair value of the property, less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically significant unobservable inputs for determining fair value.

Other Assets

Included within other assets are certain assets that were formerly included as premises and equipment, but have been removed from service, and as of the balance sheet date, were designated as assets to be disposed of by sale. These include assets associated with branches of the Bank that have been closed. When an asset is designated as held for sale, the Company ceases depreciation of the asset, and the asset is recorded at the lower of its carrying amount or fair value less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically unobservable inputs for determining fair value.

The following table presents the balances of impaired loans, OREO and other assets measured at fair value on a non-recurring basis as of March 31, 2017 and December 31, 2016.

	Fair Value Measurements as of March 31, 2017 Using
	Totals At March 31, 2017		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	1,590	$	—	$	—	$	1,590
OREO		4,587		—		—		4,587
Other assets		280		—		—		280

	Fair Value Measurements as of December 31, 2016 Using
	Totals At December 31, 2016		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	1,568	$	—	$	—	$	1,568
OREO		4,858		—		—		4,858
Other assets		280		—		—		280

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Non-recurring Fair Value Measurements Using Significant Unobservable Inputs

The following table presents information regarding assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of March 31, 2017. The table includes the valuation techniques and the significant unobservable inputs utilized. The range of each unobservable input and the weighted average within the range utilized as of March 31, 2017 are both included. Following the table is a description of the valuation technique and the sensitivity of the technique to changes in the significant unobservable input.

	Level 3 Significant Unobservable Input Assumptions
	Fair Value March 31, 2017		Valuation Technique	Unobservable Input	Quantitative Range of Unobservable Inputs (Weighted Average)
	(Dollars in Thousands)
Non-recurring fair value measurements:
Impaired loans	$	1,590	Multiple data points, including discount to appraised value of collateral based on recent market activity	Appraisal comparability adjustment (discount)	9%	-	10%	(9.5%)
OREO	$	4,587	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	9%	-	10%	(9.5%)
Other assets	$	280	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	9%	-	10%	(9.5%)

Impaired Loans

Impaired loans are valued based on multiple data points indicating the fair value for each loan. The primary data point is the appraisal value of the underlying collateral, to which a discount is applied. Management establishes this discount or comparability adjustment based on recent sales of similar property types. As liquidity in the market increases or decreases, the comparability adjustment and the resulting asset valuation are impacted.

OREO

OREO under a binding contract for sale is valued based on contract price. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet.

Other Assets

Assets designated as held for sale that are under a binding contract are valued based on the contract price. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet.

Fair Value of Financial Instruments

ASC Topic 825, Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

Cash, due from banks and federal funds sold: The carrying amount of cash, due from banks and federal funds sold approximates fair value.

Federal Home Loan Bank stock: Based on the redemption provision of the FHLB, the stock has no quoted market value and is carried at cost.

Investment securities: Fair values of investment securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on market prices of comparable instruments.

Derivative instruments: The fair value of derivative instruments is based on information obtained from a third-party financial institution. This information is periodically evaluated by the Company and, as necessary, corroborated against other third-party information.

Accrued interest receivable and payable: The carrying amount of accrued interest approximates fair value.

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Loans, net: For variable-rate loans, fair values are based on carrying values. Fixed-rate commercial loans, other installment loans and certain real estate mortgage loans are valued using discounted cash flows. The discount rate used to determine the present value of these loans is based on interest rates charged by the Company on comparable loans as to credit risk and term at the determination date.

Demand and savings deposits: The fair values of demand deposits are equal to the carrying value of such deposits. Demand deposits include non-interest-bearing demand deposits, savings accounts, NOW accounts and money market demand accounts.

Time deposits: The fair values of relatively short-term time deposits are equal to their carrying values. Discounted cash flows are used to value long-term time deposits. The discount rate used is based on interest rates currently offered by the Company on comparable deposits as to amount and term.

Short-term borrowings: These borrowings may consist of federal funds purchased, securities sold under agreements to repurchase and the floating rate borrowings from the FHLB account. Due to the short-term nature of these borrowings, fair values approximate carrying values.

Long-term debt: The fair value of this debt is estimated using discounted cash flows based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements as of March 31, 2017 and December 31, 2016.

Off-balance sheet instruments: The carrying amount of commitments to extend credit and standby letters of credit approximates fair value. The carrying amount of the off-balance sheet financial instruments is based on fees currently charged to enter into such agreements.

The estimated fair value and related carrying or notional amounts, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of March 31, 2017 and December 31, 2016, were as follows:

	March 31, 2017
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	32,905	$	32,905	$	32,905	$	—	$	—
Investment securities available-for-sale		183,858		183,858		—		183,858		—
Investment securities held-to-maturity		29,639		29,357		—		29,357		—
Federal Home Loan Bank stock		1,609		1,609		—		—		1,609
Loans, net of allowance for loan losses		317,677		313,079		—		—		313,079
Other assets – derivatives		358		358		—		358		—
Liabilities:
Deposits		509,078		508,634		—		508,634		—
Short-term borrowings		10,750		10,750		—		10,750		—
Long-term debt		15,000		15,001		—		15,001		—

	December 31, 2016
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	23,530	$	23,530	$	23,530	$	—	$	—
Investment securities available-for-sale		181,910		181,910		—		181,910		—
Investment securities held-to-maturity		25,904		25,508		—		25,508		—
Federal Home Loan Bank stock		1,581		1,581		—		—		1,581
Loans, net of allowance for loan losses		322,772		319,881		—		—		319,881
Other assets – derivatives		346		346		—		346		—
Liabilities:
Deposits		497,556		497,037		—		497,037		—
Short-term borrowings		10,119		10,119		—		10,119		—
Long-term debt		15,000		14,998		—		14,998		—

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DESCRIPTION OF THE BUSINESS

First US Bancshares, Inc., (“Bancshares”) a Delaware corporation, is a bank holding company with its principal offices in Thomasville, Alabama. Bancshares operates one commercial banking subsidiary, First US Bank (the “Bank”). As of March 31, 2017, the Bank operated and served its customers through fifteen banking offices located in Bucksville, Butler, Calera, Centreville, Columbiana, Gilbertown, Grove Hill, Harpersville, Jackson, Thomasville, Tuscaloosa and Woodstock, Alabama, in addition to a loan production office in Jefferson County, Alabama, that opened in April 2016.

The Bank owns all of the stock of Acceptance Loan Company, Inc., an Alabama corporation (“ALC”). ALC is a finance company organized for the purpose of making and purchasing consumer loans. ALC’s principal office is located in Mobile, Alabama. The Bank is the funding source for ALC. As of March 31, 2017, in addition to its principal office, ALC operated twenty-one offices located in Alabama and southeast Mississippi.

The Bank provides a wide range of commercial banking services to small- and medium-sized businesses, property managers, business executives, professionals and other individuals, while ALC’s business is focused on consumer lending.

FUSB Reinsurance, Inc., an Arizona corporation and a wholly owned subsidiary of the Bank (“FUSB Reinsurance”), reinsures or “underwrites” credit life and credit accident and health insurance policies sold to the Bank’s and ALC’s consumer loan customers. FUSB Reinsurance is responsible for the first level of risk on these policies up to a specified maximum amount, and a primary third-party insurer retains the remaining risk. The third-party insurer is also responsible for performing most of the administrative functions of FUSB Reinsurance on a contract basis.

Delivery of the best possible financial services to customers remains an overall operational focus of Bancshares and its subsidiaries (collectively, the “Company”). We recognize that attention to detail and responsiveness to customers’ desires are critical to customer satisfaction. The Company continues to upgrade technology, both in its financial services and in the training of its 252 full-time equivalent employees, to ensure customer satisfaction and convenience.

The preparation of the Company’s consolidated financial statements requires management to make subjective judgments associated with estimates. These estimates are necessary to comply with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and general banking practices. These estimates include accounting for the allowance for loan losses, other real estate owned, valuation of deferred tax assets and fair value measurements. A description of these estimates, which significantly affect the determination of the Company’s consolidated financial position, results of operations and cash flows, is set forth in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Bancshares’ Annual Report on Form 10-K as of and for the year ended December 31, 2016.

The emphasis of this discussion is a comparison of assets, liabilities and shareholders’ equity as of March 31, 2017 to December 31, 2016, while comparing income and expense for the three-month periods ended March 31, 2017 and 2016.

All yields and ratios presented and discussed herein are recorded and presented on the accrual basis and not on the tax-equivalent basis, unless otherwise indicated.

This information should be read in conjunction with the Company’s unaudited consolidated financial statements and related notes appearing elsewhere in this report and Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in Bancshares’ Annual Report on Form 10-K as of and for the year ended December 31, 2016.

EXECUTIVE OVERVIEW

The Company earned net income of $0.4 million, or $0.06 per diluted common share, during the three months ended March 31, 2017, compared to $0.3 million, or $0.05 per diluted common share, during the corresponding three-month period of 2016. Pre-provision net interest income totaled $6.9 million for the first quarter of 2017, compared to $6.7 million in the first quarter of 2016. Non-interest income totaled $1.2 million for the first quarter of 2017, compared to $1.0 million in the first quarter of 2016. The increases in net interest income and non-interest income were partially offset by an increase in the provision for loan losses of $0.3 million during the three months ended March 31, 2017, compared to the corresponding period of 2016. Non-interest expense was relatively flat comparing the two three-month periods.

Additional discussion of financial results for the first quarter of 2017 compared to the first quarter of 2016 is included below.

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● The increased earnings in the first quarter of 2017 compared to the first quarter of 2016 were driven by revenue growth, including both interest income and non-interest income, which increased on a combined basis by $0.5 million, or 6.0%, compared to the first quarter of 2016. The increase in interest income resulted from loan growth that occurred in 2016 primarily at the Bank. Average loans at the Bank and ALC increased by $60.6 million and $4.3 million, respectively, comparing the first quarter of 2017 to the first quarter of 2016. The increase in non-interest income resulted from increases in credit insurance income at ALC, as well as increases in service charges on deposit accounts at the Bank. 

● Net yield on interest-earning assets was 5.05% for the first quarter of 2017, compared to 5.10% during the first quarter of 2016. Yields declined at both the Bank and ALC as a result of continued efforts by management at both the Bank and ALC to adhere to practices designed to improve the credit quality of both the commercial and consumer portions of the Company’s loan portfolio. The Bank’s yield on loans totaled 4.06% during the first quarter of 2017, compared to 4.47% during the first quarter of 2016, while ALC’s yield totaled 19.11% and 19.60% during the first quarter of 2017 and 2016, respectively. The yield reduction at ALC was underscored by a continued mix-shift away from traditional consumer loans to point-of-sale retail lending, which provides higher credit quality, but at reduced yields. Average cost of funds on deposits and other borrowings was 0.54% during the first quarter of 2017, compared to 0.52% during the first quarter of 2016. 

● The Company’s provision for loan losses increased $0.3 million, comparing the first quarter of 2017 to the first quarter of 2016. This increase partially offset the impact of the revenue increases comparing the two quarters. The increase to the provision resulted from a negative provision of $0.3 million at the Bank during the first quarter of 2016 that was not repeated during the first quarter of 2017. Total provision expense, including both the Bank and ALC, was $0.5 million for the first quarter of 2017, compared to $0.2 million for the first quarter of 2016.   

● Non-interest expense decreased by 0.4%, comparing the three months ended March 31, 2017 to the corresponding period of 2016. Increases in salaries and employee benefits were offset by reductions in insurance and assessments, postage, stationery and supplies, and other real estate/foreclosure expense. 

● The Company’s allowance for loan losses totaled $4.9 million as of both March 31, 2017 and December 31, 2016, compared to $3.4 million as of March 31, 2016. Increases to the allowance over the twelve-month period were driven by significant loan growth experienced by the Bank during 2016. As a result of this growth, management concluded that it was appropriate to maintain the Bank’s loan loss reserves at higher levels to address inherent uncertainty related to portfolio growth. The Bank’s allowance for loan losses as a percentage of loans totaled 1.07% as of March 31, 2017, compared to 1.01% as of December 31, 2016 and 0.58% as of March 31, 2016. At ALC, the allowance for loan losses as a percentage of loans totaled 2.71% as of March 31, 2017, compared to 2.78% as of December 31, 2016 and 2.79% as of March 31, 2016.  

● Net loans decreased $5.1 million, or 1.6%, comparing the balance as of March 31, 2017 to the balance as of December 31, 2016. Reduction in net loans in the first quarter of 2017 totaled $4.3 million and $0.8 million at the Bank and ALC, respectively. Reductions at ALC are generally expected during the first quarter due to the seasonal nature of ALC’s traditional consumer lending portfolio. Increases or decreases in the Bank’s portfolio are generally more variable in nature and result from the timing of maturities and pay downs of loans, as well as the Bank’s ability to generate new commercial loan volume in a competitive lending environment. Despite the modest decrease in loan volume during the first quarter, management remains optimistic about loan growth prospects during the remainder of 2017.  

● The Company continued to experience improvement in asset quality metrics during the first quarter of 2017. Non-performing assets, including loans in non-accrual status and OREO, decreased to 1.10% of total assets as of March 31, 2017, compared to 1.20% as of December 31, 2016, and 1.50% as of March 31, 2016.  

● Premises and equipment increased by $3.9 million during the first quarter of 2017 due primarily to capital expenditures associated with the Bank’s construction of an office complex along Highway 280 in Birmingham, Alabama. The office complex will house a branch of the Bank, as well as offices of the Bank’s Birmingham-based commercial lending team and certain executive officers. Management believes the branch and office complex, which are expected to be operational during the third quarter of 2017, will enhance the Bank’s ability to gather deposits and make commercial loans of sufficient credit quality over time. 

● Deposits increased to $509.1 million as of March 31, 2017, compared to $497.6 million as of December 31, 2016 and $485.5 million as of March 31, 2016. Short- and long-term borrowings totaled $25.0 million as of both March 31, 2017 and December 31, 2016, compared to $10.0 million as of March 31, 2016. 

● Due to reductions in loan volume and growth in deposits during the first quarter, a portion of earning assets was redeployed in the investment securities portfolio. The investment securities portfolio (including both available-for-sale and held-to-maturity securities) increased to $213.5 million as of March 31, 2017, compared to $207.8 million as of December 31, 2016. Management has structured the investment portfolio to provide cash flows through interest earned and the maturity or payoff of securities in the portfolio on a monthly basis. In the current environment, we expect that cash flows from the investment securities portfolio will continue to serve as a significant source of liquidity available for the funding of future loan growth. 

The Company continues to maintain excess funding capacity to provide adequate liquidity for loan growth, capital expenditures and ongoing operations. The Company benefits from a strong deposit base, a liquid investment securities portfolio and access to funding from a variety of sources, including federal funds lines, Federal Home Loan Bank (FHLB) advances and brokered deposits. Management believes that continued success in loan growth efforts at both the Bank and ALC, combined with continued adherence to established credit underwriting standards, will strengthen both the diversity and credit quality of the Company’s loan portfolio, while improving interest and fee income on loans.

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RESULTS OF OPERATIONS

	Three Months Ended
	March 31,		March 31,
	2017		2016
	(Dollars in Thousands)
Interest income	$	7,510	$	7,196
Interest expense		591		535
Net interest income		6,919		6,661
Provision for loan losses		515		167
Net interest income after provision for loan losses		6,404		6,494
Non-interest income		1,167		989
Non-interest expense		7,037		7,066
Income before income taxes		534		417
Provision for income taxes		130		100
Net income	$	404	$	317

Net Interest Income

Net interest income is calculated as the difference between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest-bearing liabilities, can materially impact net interest income. The Company’s earning assets are comprised of loans at both the Bank and ALC, as well as taxable and nontaxable investments and federal funds sold by the Bank. Interest-bearing liabilities are comprised of interest-bearing demand deposits and savings and time deposits, as well as short-term borrowings and long-term debt. Net interest income for the Company increased $0.3 million, or 3.9%, for the three months ended March 31, 2017 compared to the three months ended March 31, 2016.

38

The following table shows the average balances of each principal category of assets, liabilities and shareholders’ equity for the three months ended March 31, 2017 and 2016. Additionally, the table provides an analysis of interest revenue or expense associated with each category, along with the accompanying yield or rate percentage. Net yield is calculated for each period presented as net interest income divided by average total interest-earning assets.

	Three Months Ended							Three Months Ended
	March 31, 2017							March 31, 2016
	Average Balance		Interest		Annualized Yield/ Rate %			Average Balance		Interest		Annualized Yield/ Rate %
	(Dollars in Thousands)
ASSETS
Interest-earning assets:
Loans – Bank (Note A)	$	237,706	$	2,377		4.06	%	$	177,090	$	1,981		4.47	%
Loans – ALC (Note A)		87,408		4,119		19.11	%		83,098		4,072		19.60	%
Taxable investment securities		200,772		884		1.79	%		218,343		963		1.76	%
Non-taxable investment securities		10,094		90		3.62	%		16,931		145		3.43	%
Federal funds sold		—		—		—	%		2,923		4		0.55	%
Interest-bearing deposits in banks		19,735		40		0.82	%		24,374		31		0.51	%
Total interest-earning assets		555,715		7,510		5.48	%		522,759		7,196		5.51	%
Non-interest-earning assets:
Other assets		53,668							47,933
Total	$	609,383						$	570,692
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Demand deposits	$	160,030	$	145		0.37	%	$	147,389	$	138		0.37	%
Savings deposits		77,379		36		0.19	%		75,529		35		0.18	%
Time deposits		184,359		347		0.76	%		180,690		350		0.78	%
Borrowings		25,599		63		1.00	%		9,445		12		0.51	%
Total interest-bearing liabilities		447,367		591		0.54	%		413,053		535		0.52	%
Non-interest-bearing liabilities:
Demand deposits		77,159							71,964
Other liabilities		7,676							8,493
Shareholders’ equity		77,181							77,182
Total	$	609,383						$	570,692
Net interest income (Note B)			$	6,919						$	6,661
Net yield on interest-earning assets						5.05	%						5.10	%

Note A	—	For the purpose of these computations, non-accruing loans are included in the average loan amounts outstanding. At the Bank, these loans averaged $0.6 million and $1.5 million for the three months ended March 31, 2017 and 2016, respectively. At ALC, these loans averaged $1.6 million and $1.8 million for the three months ended March 31, 2017 and 2016, respectively.
Note B	—	Loan fees are included in the interest amounts presented. At the Bank, loan fees totaled $0.1 million for both of the three months ended March 31, 2017 and 2016. At ALC, loan fees totaled $0.5 million and $0.7 million for the three months ended March 31, 2017 and 2016, respectively.

Interest income for the Company increased $0.3 million comparing the three months ended March 31, 2017 to the three months ended March 31, 2016. The increase resulted from increases in average loan balances at both the Bank and ALC. The Bank’s average loan balance increased $60.6 million comparing the three months ended March 31, 2017 to March 31, 2016, while ALC’s average loan balances increased $4.3 million.  These volume increases were partially offset by decreases in the average balances of taxable and non-taxable investments, federal funds sold, and interest-bearing deposits in banks. The shift in the mix of earning assets is consistent with management’s ongoing strategy to utilize cash flows from the maturity and pay down of investment securities to fund loan growth as opportunities permit.  The investment portfolio has been structured to provide monthly cash flows through the maturity and pay down of securities in a manner that management believes can continue to fund a substantial portion of loan growth over time.

At both the Bank and ALC, the increases in interest income that resulted from growth in average loans for the three months ended March 31, 2017 were partially offset by reductions in yield.  The yield reductions resulted from management’s strategic efforts to focus on problem asset resolution and the improvement of the credit quality of the loan portfolio through the tightening of credit standards at both entities.  These activities have been ongoing for the past several years and have resulted in significant improvement in the credit quality of the loan portfolio, with a corresponding decrease in yield commensurate with reduced risk. 

Comparing the three months ended March 31, 2017 and 2016, interest expense increased modestly due primarily to increased volume of interest-bearing deposits and borrowings. Average interest-bearing deposits and borrowings increased $18.2 million and $16.2 million, respectively, comparing the three months ended March 31, 2017 to the three months ended March 31, 2016.     

39

We expect that continued growth in net loan volume at both the Bank and ALC with loans of sufficient credit quality will enhance net interest income, particularly as resources are shifted from lower-earning investment securities to higher-earning loan balances. However, the competitive environment is significant relative to the generation of loans of high credit quality. At both the Bank and ALC, management is continuing to focus efforts on new loan origination within the parameters of established credit policy, while also maintaining vigilance in the deployment of strategies to effectively manage risks associated with interest rate fluctuations. Net interest income could experience downward pressure as a result of increased competition for quality loan opportunities, lower reinvestment yields, and fewer opportunities to reduce future funding costs.

Provision (Reduction in Reserve) for Loan Losses

The provision for loan losses is an expense used to establish the allowance for loan losses. Actual loan losses, net of recoveries, are charged directly to the allowance for loan losses. The expense recorded for each reporting period is a reflection of actual net losses experienced during the period and management’s judgment as to the adequacy of the allowance to absorb losses inherent in the portfolio as of the balance sheet date. The Company’s provision for loan losses was $0.5 million for the quarter ended March 31, 2017 compared to $0.2 million for the quarter ended March 31, 2016.

The following table presents the provision (reduction in reserve) for loan losses for the Bank and ALC for the three months ended March 31, 2017 and 2016.

	Three Months Ended
	March 31,		March 31,
	2017		2016
Bank	$	—	$	(280	)
ALC		515		447
Total	$	515	$	167

At the Bank, no provision for loan losses was recorded during the three months ended March 31, 2017, compared to a reduction in the reserve of $0.3 million during the three months ended March 31, 2016. The Bank experienced net recoveries of $0.1 million and $0.02 million during the three months ended March 31, 2017 and 2016, respectively. The reduction in reserve that was experienced during the first quarter of 2016 resulted from improvement in the overall credit quality of the Bank’s loan portfolio, including declining historical loss rates used in the calculation of the allowance for loan losses. During the first quarter of 2017, the Bank’s historical loss rates remained low; however, given the significant loan growth experienced by the Bank during 2016, management determined it was appropriate to maintain loan loss reserves at higher levels to address inherent uncertainty related to portfolio growth. The Bank’s allowance for loan losses as a percentage of loans totaled 1.07% as of March 31, 2017, compared to 1.01% as of December 31, 2016 and 0.58% as of March 31, 2016.

At ALC, the provision for loan losses increased to $0.5 million from $0.4 million comparing the three months ended March 31, 2017 to the three months ended March 31, 2016. The increase resulted primarily from growth in ALC’s loan balances. ALC experienced net charge-offs of $0.6 million during both of the three-month periods ended March 31, 2017 and 2016. ALC’s allowance for loan losses as a percentage of loans totaled 2.71% as of March 31, 2017, compared to 2.78% as of December 31, 2016 and 2.79% as of March 31, 2016.

Based on our evaluation of the portfolio, we believe that the allowance for loan losses at both the Bank and ALC is adequate to absorb losses inherent in the loan portfolio as of March 31, 2017. While we believe that the methodologies and calculations that have been used in the determination of the allowance are adequate, our conclusions are based on estimates and judgments and are, therefore, approximate and imprecise. Factors beyond our control, such as changes in economic conditions impacting the national economy or the local service areas in which the Bank and ALC operate, may negatively and materially affect asset quality and the adequacy of the allowance for loan losses, as well as the resulting provision for loan losses.

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Non-Interest Income

Non-interest income represents fees and income derived from sources other than interest-earning assets. The following table presents the major components of non-interest income. Expanded discussion of certain significant non-interest income items and fluctuations is provided below the table.

	Three Months Ended March 31,
	2017		2016		$ Change			% Change
	(Dollars in Thousands)
Service charges and other fees on deposit accounts	$	464	$	417	$	47			11.3	%
Credit insurance commissions and fees		256		152		104			68.4	%
Bank-owned life insurance		106		105		1			1.0	%
Net gain on sale and prepayment of investment securities		49		2		47			NM
Other income		292		313		(21	)		(6.7	)%
Total non-interest income	$	1,167	$	989	$	178			18.0	%

NM: Not meaningful

Service Charges and Other Fees on Deposit Accounts

Service charges and other fees are generated on deposit accounts held at the Bank. The increase in this category of non-interest income during the three months ended March 31, 2017 compared to the three months ended March 31, 2016 resulted primarily from increased fees generated from service charges on deposit accounts.  In general, income from these sources has declined in recent years due to regulatory requirements and changes in customer behaviors.  Periodically, management evaluates the fee structure on the Bank’s deposit accounts in order to ensure that fees charged are competitive in the current environment and compliant with regulatory guidance. In addition, management continues to evaluate opportunities for deposit growth through further penetration in existing service territories.  Although we expect that income from these sources will grow over time as deposit levels grow, given the competitive landscape, we do not anticipate significant growth in income from these sources in the foreseeable future.

Credit Insurance Commissions and Fees

Credit insurance commissions and fees are generated from credit life and credit accident and health insurance policies offered primarily at ALC to consumer loan customers through FUSB Reinsurance. The increase in non-interest income in this category during the three months ended March 31, 2017 compared to the corresponding period of 2016 resulted primarily from a focus by ALC management on product lines that facilitate the generation of these types of sales.  Although revenues in this category increased during the three months ended March 31, 2017 compared to the three months ended March 31, 2016, such revenues are generally dependent on the mix of product lines offered at ALC and the specific needs of borowers. Management continues to seek opportunities to grow revenues in this category when opportunities arise based on customer needs and in accordance with regulatory guidelines; however, we cannot predict with certainty the level of revenues that will be derived from this category in the future. 

Bank-owned Life Insurance

The Bank utilizes bank-owned life insurance as a tool to offset the cost of certain retirement benefit programs. The income derived from bank-owned life insurance represents the increase in the cash surrender value of the policies (which is generally non-taxable) over the periods presented. The cash surrender value of the policies totaled $14.7 million and $14.6 million as of March 31, 2017 and December 31, 2016, respectively. The insurance policies are adjustable-rate assets with minimum guaranteed rates of interest between 2% and 4%. Accordingly, management does not expect significant fluctuation in the income derived from these assets.

Net Gain on Sale and Prepayment of Investment Securities

The investment securities portfolio is used by management to provide liquidity, to generate interest income, and for use as collateral for public deposits and wholesale funding. Management reviews the securities in the investment portfolio periodically and, from time to time, may determine that it is appropriate to sell securities that are designated as securities available-for-sale. When this occurs, a gain or loss is recorded as the difference between the fair value of the security on the date of sale and the security’s carrying value. In addition, a gain may be recognized for prepayment penalties earned by the Company when a security is called by the debtor prior to its maturity date. During both the three months ended March 31, 2017 and 2016, no securities were sold from the investment securities portfolio. The non-interest income recognized in this category during both periods presented resulted from gains and prepayment penalties associated with the early redemption of securities in the portfolio. Because determinations of whether to sell investment securities are made by management based on specific facts and circumstances at a given point in time, no assessment can be made as to the level of gains or losses that could be incurred related to sales of investment securities or prepayment penalties in the future.

Other Income

Other non-interest income includes fee income generated by the Bank for ancillary services, such as letters of credit, ATMs, debit and credit cards, wire transfers and real estate rental. In addition, other non-interest income is generated at ALC for ancillary services, including ALC’s auto club membership program, which provides members with emergency roadside assistance, lock and key services and reimbursement for emergency travel expenses. The decrease in other non-interest income during the three months ended March 31, 2017 compared to the corresponding period of 2016 resulted primarily from reductions in ATM surcharge fees at the Bank. Given the nature of the types of revenues categorized as other income, there is uncertainty as to the level of revenue that will be derived from these sources in the future.

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Non-Interest Expense

Non-interest expense represents expenses incurred from sources other than interest-bearing liabilities. The following table presents the major components of non-interest expense for the periods indicated. Expanded discussion of certain significant non-interest expense items and fluctuations is provided below the table.

	Three Months Ended March 31,
	2017		2016		$ Change			% Change
	(Dollars in Thousands)
Salaries and employee benefits	$	4,398	$	4,164	$	234			5.6	%
Net occupancy and equipment expense		777		769		8			1.0	%
Computer services		387		339		48			14.2	%
Insurance expense and assessments		161		269		(108	)		(40.1)	%
Fees for professional services		233		222		11			5.0	%
Postage, stationery and supplies		154		191		(37	)		(19.4)	%
Telephone/data communication		221		174		47			27.0	%
Other real estate/foreclosure expense:
Write-downs, net of gain or loss on sale		2		14		(12	)		(85.7)	%
Carrying costs		82		103		(21	)		(20.4)	%
Total other real estate/foreclosure expense		84		117		(33	)		(28.2)	%
Other		622		821		(199	)		(24.2)	%
Total non-interest expense	$	7,037	$	7,066	$	(29	)		(0.4)	%

Salaries and Employee Benefits

Salaries and employee benefits expense, the largest category of non-interest expense, totaled $2.9 million at the Bank and $1.5 million at ALC for the first quarter of 2017, compared to $2.7 million at the Bank and $1.5 million at ALC during the first quarter of 2016. The expense amounts for the Bank are inclusive of salaries and benefits paid to certain members of management and employees for work performed on behalf of Bancshares, as well as current and deferred fees paid to members of the Bank’s and Bancshares’ Boards of Directors. The increase in this category of expense for the first quarter of 2017 compared to the first quarter of 2016 resulted primarily from the addition of reserves for self-insurance, as well as increases in estimated management incentive payments. Effective during the first quarter of 2017, the Company converted to a self-insured healthcare benefits plan for employees of both the Bank and ALC. Over time, we estimate that the self-insured plan will provide cost savings to the Company; however, charges were incurred at the conversion of the plan to establish an accrued liability for the estimated costs to close known claims, as well as claims incurred but not yet reported, as of the balance sheet date. Management remains committed to providing salaries and benefits packages to employees at competitive levels in order to ensure that we continue to provide quality service to our customers. Accordingly, we expect salaries and employee benefits expense to generally increase commensurate with the employment market over time.

Net Occupancy and Equipment Expense

This category of non-interest expense includes expenses associated with depreciation of buildings, equipment and furniture and fixtures, rent of office space, utilities expense and maintenance and repair costs. The majority of the Bank’s office space is owned, while the majority of ALC’s office space is leased. The modest increase in this category for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 resulted primarily from increases in depreciation and rent. Occupancy and equipment expense is expected to increase over time as the Company depreciates expenditures associated with capital improvements. During the three months ended March 31, 2017, the Company recorded $4.1 million in additions to premises and equipment. The majority of these expenditures was associated with the purchase of land and construction in process related to an office complex being built for the Bank in the Birmingham, Alabama metropolitan area.  The office complex, for which construction is expected to be completed in 2017, will house a retail branch of the Bank, as well as the Bank's commercial lending team in Birmingham and certain other officers of the Bank. Approximately 25% of the square footage of the office complex will be utilized by the Bank, with the remainder to be leased to commercial tenants.  Based on management's current estimates, it is expected that placement of the office complex into service will result in approximately $0.5 million in additional depreciation expense annually. Upon full lease-up of the office complex, management expects that the majority of depreciation expense, as well as additional operating costs associated with the complex, will be recovered through lease revenue; however, no assurance can be given regarding the office complex being fully leased by third-party tenants or the timing of such third-party leases.

Computer Services

Computer services expenses were primarily associated with core processing at the Bank and ALC. Due to the differing nature of their businesses, the Bank and ALC utilize different core processors. The increase in expense in this category comparing March 31, 2017 to March 31, 2016 was associated with additional information technology services provided by the Bank’s core processor that significantly enhanced the Bank’s technology platform, including increased protections against data security risk and enhanced disaster recovery planning. Given the rapid pace of technological change, increases in this category of expense are generally expected to occur at a more rapid pace than in other expense categories.

Insurance Expense and Assessments

This category of non-interest expense includes the cost of corporate insurance maintained by the Company, as well as FDIC insurance and state banking assessments.  The Bank pays assessments to the FDIC based on a prescribed regulatory calculation that factors in average total assets and the Company’s supervisory ratings, as determined by regulatory examinations. The decrease in this expense category comparing the three months ended March 31, 2017 to the three months ended March 31, 2016 resulted primarily from reductions in FDIC assessments. In the near term, based on current regulatory guidelines, this category of expense is expected to decline. However, over a longer-term time horizon, management expects this category of expenses to increase based on growth in the Company’s balance sheet and expansion of the Company’s activities.

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Fees for Professional Services

Fees for professional services include fees associated with legal, accounting and auditing, compliance and other consulting services. The increase in these expenses for the three months ended March 31, 2017 compared to the same period in 2016 resulted primarily from inflationary increases, as well as the timing of work performed in the current year. Although we do not anticipate significant increases in this category of expense, we do expect continued inflationary increases over time, as well as increases associated with increased regulatory guidelines commensurate with the Company’s growth and development.

Postage, Stationery and Supplies

The decrease in expense in this category comparing the three months ended March 31, 2017 to the three months ended March 31, 2016 resulted from continued efforts by management at the Bank and ALC to manage controllable expenses. We will continue efforts to control these expenses in a prudent manner; however, expense in this category is generally expected to increase over time due to inflationary growth, as well as expanded penetration by the Bank into metropolitan service territories.

Telephone / Data Communications

The increase in this expense category in the three months ended March 31, 2017 compared to the three months ended March 31, 2016 was primarily associated with management’s efforts to enhance network and telephone capabilities. During 2016, the Company began efforts to upgrade its computer and telephone network systems. These efforts are expected to create long-term benefits in improved efficiency and technical capabilities that will benefit both the Bank and ALC. In the short-term, however, we expect increases in this category of expenses as the Company continues upgrades.

Other Real Estate / Foreclosure Expense

Other real estate / foreclosure expense includes both the cost of carrying OREO and write-downs of OREO. Cost of carrying OREO includes property taxes, attorneys’ fees, maintenance costs, security costs and the cost of obtaining independent property appraisals. Write-downs include impairments recorded on existing OREO properties in order to carry the property at the lower of cost or fair value, less estimated cost to sell.

Both OREO write-downs and carrying costs decreased during the three months ended March 31, 2017 compared to the three months ended March 31, 2016 as a result of continued reduction in the level of OREO at both the Bank and ALC.  OREO totaled $4.2 million and $0.4 million at the Bank and ALC, respectively, as of March 31, 2017, compared to $4.7 million and $0.7 million, respectively, as of March 31, 2016, a decrease of $0.8 million for the Company on a consolidated basis.

Although management continued to reduce OREO levels during the three months ended March 31, 2017, there continues to be uncertainty with respect to economic conditions and real estate values in certain of the service areas in which both the Bank and ALC operate. In addition, as the level of OREO is reduced, it becomes more difficult to work out remaining OREO at the same pace as previously experienced. Accordingly, continued reduction of carrying costs cannot be expected with any level of certainty. Furthermore, if the national or local economy weakens, or if real estate values decline further in the Company’s primary service areas, additional write-downs of existing OREO could be required. Additionally, the pace of migration of properties into OREO could increase, resulting in the potential for increased levels of both write-downs and carrying costs.

43

Other

This category is comprised of a variety of expenses, including advertising and marketing fees, security services, sales and other taxes, employee training, expenses associated with fixed asset write-downs, and other miscellaneous expenses. Comparing the three months ended March 31, 2017 to the three months ended March 31, 2016, expenses in this category decreased due to reductions in a number of expenses, including training and development, marketing, and losses associated with fixed asset sales. Certain of these reductions are expected to be offset in future quarters; however, management continues to maintain vigilance in efforts to reduce these costs where opportunities to do so exist.

Provision for Income Taxes

The provision for income taxes was $0.1 million for both the three months ended March 31, 2017 and 2016. The Company’s effective tax rate was 24.3% for the first quarter of 2017, compared to 24.0% for the first quarter of 2016. The effective tax rate is expected to fluctuate based on recurring items, such as changes in tax-exempt interest income earned from bank-qualified municipal bonds and loans and the cash surrender value of bank-owned life insurance. Management makes decisions about whether to invest in tax-exempt instruments on a case-by-case basis after considering a number of factors, including investment return, credit quality and the consistency of such investments with the Company’s overall strategy. The Company’s effective tax rate is expected to fluctuate commensurate with the level of these investments as compared to total pre-tax income.

BALANCE SHEET ANALYSIS

Investment Securities

The investment securities portfolio is used by management to provide liquidity, to generate interest income and for use as collateral for public deposits and wholesale funding. Risk and return can be adjusted by altering the duration, composition and/or balance of the portfolio. The expected average life of securities in the investment portfolio was 3.0 years and 3.1 years as of March 31, 2017 and December 31, 2016, respectively.

Available-for-sale securities are recorded at estimated fair value, with unrealized gains or losses recognized, net of taxes, in accumulated other comprehensive income, a separate component of shareholders’ equity. As of March 31, 2017, available-for-sale securities totaled $183.9 million, or 86.1% of the total investment portfolio, compared to $181.9 million, or 87.5% of the total investment portfolio, as of December 31, 2016. Available-for-sale securities consisted of residential and commercial mortgage-backed securities, U.S. Treasury securities, obligations of U.S. government-sponsored agencies, obligations of state and political subdivisions and corporate notes.

Held-to-maturity securities are recorded at amortized cost and represent securities that the Company both intends and has the ability to hold to maturity. As of March 31, 2017 held-to-maturity securities totaled $29.6 million, or 13.9% of  the total investment portfolio, compared to $25.9 million, or 12.5% of the total investment portfolio, as of December 31, 2016. Held-to-maturity securities consisted of commercial mortgage-backed securities, obligations of U.S. government-sponsored agencies and obligations of state and political subdivisions.

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Loans and Allowance for Loan Losses

The tables below summarize loan balances by portfolio category for both the Bank and ALC at the end of each of the most recent five quarters as of March 31, 2017.

	Bank
	2017		2016
	March 31,		December 31,		September 30,		June 30,		March 31,
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	25,853	$	23,772	$	24,610	$	24,306	$	18,023
Secured by 1-4 family residential properties		32,535		32,955		32,559		33,326		30,623
Secured by multi-family residential properties		16,464		16,627		16,801		5,972		11,580
Secured by non-farm, non-residential properties		97,294		102,112		97,859		105,541		82,754
Other		230		234		185		190		168
Commercial and industrial loans		57,253		57,963		54,459		38,160		34,568
Consumer loans		6,057		6,206		6,335		6,730		7,021
Total loans	$	235,686	$	239,869	$	232,808	$	214,225	$	184,737
Less unearned interest, fees and deferred cost		249		218		191		192		174
Allowance for loan losses		2,521		2,409		1,216		1,138		1,068
Net loans	$	232,916	$	237,242	$	231,401	$	212,895	$	183,495

	ALC
	2017		2016
	March 31,		December 31,		September 30,		June 30,		March 31,
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	—	$	—	$	—	$	—	$	—
Secured by 1-4 family residential properties		12,993		13,724		14,462		15,430		16,265
Secured by multi-family residential properties		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—
Other		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—
Consumer loans:
Consumer		32,892		36,413		35,533		35,879		34,827
Indirect sales		47,196		44,775		45,382		45,007		39,842
Total loans	$	93,081	$	94,912	$	95,377	$	96,316	$	90,934
Less unearned interest, fees and deferred cost		5,962		6,935		7,205		7,857		8,147
Allowance for loan losses		2,358		2,447		2,452		2,453		2,307
Net loans	$	84,761	$	85,530	$	85,720	$	86,006	$	80,480

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The tables below summarize changes in the allowance for loan losses and certain asset quality ratios at the end of each of the most recent five quarters as of March 31, 2017, at both the Bank and ALC.

	Bank
	2017			2016
	First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
	(Dollars in Thousands)
Balance at beginning of period	$	2,409		$	1,216		$	1,138		$	1,068		$	1,329
Charge-offs:
Real estate loans:
Construction, land development and other land loans		—			—			—			—			—
Secured by 1-4 family residential properties		—			(56	)		(3	)		(7	)		—
Secured by multi-family residential properties		—			—			—			—			—
Secured by non-farm, non-residential properties		—			—			—			—			—
Other		—			—			—			—			—
Commercial and industrial		—			(1	)		(41	)		—			—
Consumer loans		(2	)		(13	)		(3	)		(6	)		(21	)
Other loans		—			—			—			—			—
Total charge-offs		(2	)		(70	)		(47	)		(13	)		(21	)
Recoveries		114			28			25			253			40
Net recoveries (charge-offs)		112			(42	)		(22	)		240			19
Provision (reduction in reserve) for loan losses		—			1,235			100			(170	)		(280	)
Ending balance	$	2,521		$	2,409		$	1,216		$	1,138		$	1,068
as a % of loans		1.07	%		1.01	%		0.52	%		0.53	%		0.58	%

	ALC
	2017			2016
	First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
	(Dollars in Thousands)
Balance at beginning of period	$	2,447		$	2,452		$	2,453		$	2,307		$	2,452
Charge-offs:
Real estate loans:
Construction, land development and other land loans		—			—			—			—			—
Secured by 1-4 family residential properties		(13	)		(7	)		(28	)		(16	)		(5	)
Secured by multi-family residential properties		—			—			—			—			—
Secured by non-farm, non-residential properties		—			—			—			—			—
Other		—			—			—			—			—
Commercial and industrial		—			—			—			—			—
Consumer loans:
Consumer		(658	)		(398	)		(596	)		(595	)		(629	)
Indirect sales		(135	)		(354	)		(111	)		(151	)		(136	)
Other loans		—			—			—			—			—
Total charge-offs		(806	)		(759	)		(735	)		(762	)		(770	)
Recoveries		202			176			154			202			178
Net recoveries (charge-offs)		(604	)		(583	)		(581	)		(560	)		(592	)
Provision (reduction in reserve) for loan losses		515			578			580			706			447
Ending balance	$	2,358		$	2,447		$	2,452		$	2,453		$	2,307
as a % of loans		2.71	%		2.78	%		2.78	%		2.77	%		2.79	%

46

Nonperforming Assets

Nonperforming assets at the end of the five most recent quarters as of March 31, 2017 were as follows:

	Consolidated
	2017			2016
	March 31,			December 31,			September 30,			June 30,			March 31,
	(Dollars in Thousands)
Non-accrual loans	$	2,205		$	2,417		$	2,266		$	2,619		$	3,277
Other real estate owned		4,587			4,858			5,391			5,405			5,356
Total	$	6,792		$	7,275		$	7,657		$	8,024		$	8,633
Nonperforming assets as a percentage of loans and other real estate		2.08	%		2.19	%		2.37	%		2.61	%		3.17	%
Nonperforming assets as a percentage of total assets		1.10	%		1.20	%		1.28	%		1.33	%		1.50	%

	Bank
	2017			2016
	March 31,			December 31,			September 30,			June 30,			March 31,
	(Dollars in Thousands)
Non-accrual loans	$	609		$	603		$	766		$	1,086		$	1,463
Other real estate owned		4,161			4,353			4,887			4,944			4,702
Total	$	4,770		$	4,956		$	5,653		$	6,030		$	6,165
Nonperforming assets as a percentage of loans and other real estate		1.99	%		2.03	%		2.38	%		2.75	%		3.26	%
Nonperforming assets as a percentage of total assets		0.77	%		0.81	%		0.94	%		1.00	%		1.07	%

	ALC
	2017			2016
	March 31,			December 31,			September 30,			June 30,			March 31,
	(Dollars in Thousands)
Non-accrual loans	$	1,596		$	1,814		$	1,500		$	1,533		$	1,814
Other real estate owned		426			505			504			461			654
Total	$	2,022		$	2,319		$	2,004		$	1,994		$	2,468
Nonperforming assets as a percentage of loans and other real estate		2.31	%		2.62	%		2.26	%		2.24	%		2.96	%
Nonperforming assets as a percentage of total assets		2.29	%		2.59	%		2.24	%		2.22	%		2.93	%

47

Deposits

Total deposits increased by 2.3% to $509.1 million as of March 31, 2017, from $497.6 million as of December 31, 2016. Core deposits, which exclude time deposits of $0.25 million or more, provide for a relatively stable funding source that supports earning assets. Core deposits totaled $473.3 million, or 93.0% of total deposits, as of March 31, 2017, compared to $461.8 million, or 92.8% of total deposits, as of December 31, 2016.

Deposits, in particular core deposits, have historically been the Company’s primary source of funding and have enabled the Company to successfully meet both short-term and long-term liquidity needs. Management anticipates that such deposits will continue to be one of the Company’s primary sources of funding in the future, and we will continue to monitor deposit levels closely to help ensure an adequate level of funding for the Company’s activities. However, various economic and competitive factors could affect this funding source in the future, including increased competition from other financial institutions in deposit gathering, national and local economic conditions, and interest rate policies adopted by the Federal Reserve and other central banks.

Other Interest-Bearing Liabilities

Other interest-bearing liabilities consist of federal funds purchased, securities sold under agreements to repurchase, and FHLB advances. This category continues to be utilized as an alternative source of funds. During the first quarter of 2017, these borrowings represented 5.7% of average interest-bearing liabilities, compared to 2.3% in the first quarter of 2016.

Shareholders’ Equity

The Company has historically placed great emphasis on maintaining its strong capital base. As of March 31, 2017, shareholders’ equity totaled $77.3 million, or 12.5% of total assets, compared to $76.2 million, or 12.6% of total assets, as of December 31, 2016. Management believes that this level of equity is an indicator of the financial soundness of the Company and the Company’s ability to sustain future growth and profitability. The increase in shareholders’ equity during the period ended March 31, 2017 resulted from growth in retained earnings and increases in accumulated other comprehensive income related to changes in the fair value of investment securities available-for-sale. The fair value of the available-for-sale portfolio fluctuates based primarily on changes in interest rates. Accordingly, the net unrealized gains during the first quarter of 2017 are not necessarily indicative of future performance of the portfolio.

The Company’s Board of Directors evaluates dividend payments based on the Company’s level of earnings and our desire to maintain a strong capital base, as well as regulatory requirements relating to the payment of dividends. During each of the three-month periods ended March 31, 2017 and 2016, the Company declared dividends of $0.02 per common share, or approximately $0.1 million in aggregate amount.

As of both March 31, 2017 and December 31, 2016, the Company retained approximately $20.8 million in treasury stock. The Company initiated a share repurchase program in January 2006, under which the Company was authorized to repurchase up to 642,785 shares of common stock before December 31, 2007. In December 2007, and in each year since, the Board of Directors has extended the expiration date of the share repurchase program for an additional year. Currently, the share repurchase program is set to expire on December 31, 2017. There are 242,303 shares available for repurchase under this program, at management’s discretion. No shares were purchased under this program to date in 2017 or in 2016.

As of March 31, 2017 and December 31, 2016, a total of 117,548 and 114,547 shares of stock, respectively, were deferred in connection with the Company’s Non-Employee Directors’ Deferred Compensation Plan. The plan permits non-employee directors to invest their directors’ fees and to receive the adjusted value of the deferred amounts in cash or shares of common stock. All deferred fees, whether in the form of cash or shares of stock, are reflected as compensation expense in the period earned. The Company classifies all deferred directors’ fees allocated to be paid in shares of stock as equity surplus. The Company uses shares of treasury stock to satisfy these obligations when due.

LIQUIDITY AND CAPITAL RESOURCES

The asset portion of the balance sheet provides liquidity primarily from two sources: (1) principal payments and maturities of loans and (2) maturities and principal payments from the investment portfolio. Other short-term investments, such as federal funds sold, may also provide additional sources of liquidity. Loans maturing or repricing in one year or less amounted to $123.2 million as of March 31, 2017 and $127.3 million as of December 31, 2016. Investment securities forecasted to mature or reprice in one year or less are estimated to be $12.3 million of the investment portfolio as of March 31, 2017.

Although the majority of the securities portfolio has legal final maturities exceeding 10 years, a substantial percentage of the portfolio provides monthly principal and interest payments and consists of securities that are readily marketable and easily convertible into cash on short notice. As of March 31, 2017, the investment securities portfolio had an estimated average life of 3.0 years, and approximately 82.1% of the portfolio (including both available-for-sale and held-to-maturity investments) was expected to be repaid within five years. However, management does not rely solely upon the investment portfolio to generate cash flows to fund loans, capital expenditures, dividends, debt repayment and other cash requirements. These activities are also funded by cash flows from loan payments, as well as increases in deposits and short-term borrowings.

48

The liability portion of the balance sheet provides liquidity through interest-bearing and non-interest-bearing deposit accounts, which represent the Company’s primary sources of funds. In addition, federal funds purchased, FHLB advances, securities sold under agreements to repurchase and short-term and long-term borrowings are additional sources of available liquidity. Liquidity management involves the continual monitoring of the sources and uses of funds to maintain an acceptable cash position. Long-term liquidity management focuses on considerations related to the total balance sheet structure. The Bank manages the pricing of its deposits to maintain a desired deposit balance. In addition, the Bank invests in short-term interest-earning assets, which provide liquidity to meet lending requirements.

As of both March 31, 2017 and December 31, 2016, the Company had $25.0 million in outstanding borrowings under FHLB advances. The Company had up to $157.0 million and $155.0 million in remaining unused credit from the FHLB (subject to available collateral) as of March 31, 2017 and December 31, 2016, respectively. In addition, the Company had $18.8 million in unused established federal funds lines as of both March 31, 2017 and December 31, 2016.

Management believes that the Company has adequate sources of liquidity to more than cover its contractual obligations and commitments over the next twelve months. Management is not aware of any condition that currently exists that would have an adverse effect on the liquidity, capital resources or operation of the Company. However, the Company is a defendant in certain claims and legal actions arising in the ordinary course of business. See Note 14, “Guarantees, Commitments and Contingencies,” in the Notes to the Interim Condensed Consolidated Financial Statements for further discussion.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary purpose of managing interest rate risk is to invest capital effectively and preserve the value created by our core banking business. This is accomplished through the development and implementation of lending, funding, pricing and hedging strategies designed to maximize net interest income performance under varying interest rate environments, subject to liquidity and interest rate risk guidelines. Effective interest rate sensitivity management ensures that both assets and liabilities respond to changes in interest rates within an acceptable time frame, thereby minimizing the effect of such interest rate movements on short- and long-term net interest margin and net interest income.

Financial simulation models are the primary tools used by the Asset/Liability Committee to measure interest rate exposure. Using a wide range of scenarios, management is provided with extensive information on the potential impact on net interest income caused by changes in interest rates. In these simulations, assumptions are made about the direction and volatility of interest rates, the slope of the yield curve and the changing composition of the Company’s balance sheet resulting from both strategic plans and customer behavior. Simulation models also incorporate management’s assumptions regarding such factors as loan and deposit growth, pricing, prepayment speeds and spreads between interest rates.

49

Measuring Interest Rate Sensitivity

Interest rate sensitivity is a function of the repricing characteristics of all of the Company’s portfolio of assets and liabilities. These repricing characteristics are the timeframes during which the interest-bearing assets and liabilities are subject to fluctuation based on changes in interest rates, either at replacement or maturity, during the life of the instruments. Measuring interest rate sensitivity is a function of the differences in the volume of assets and the volume of liabilities that are subject to repricing in future time periods. These differences are known as interest sensitivity gaps and are usually calculated for segments of time and on a cumulative basis.

The Company measures changes in net interest income and net interest margin on a monthly basis through income simulation over various interest rate shock scenarios, including plus or minus 1%, 2%, 3% and 4% scenarios. Each month, management evaluates how changes in short- and long-term interest rates may impact future profitability, as reflected in the Company’s net interest margin.

Also on a monthly basis, management calculates how changes in interest rates would impact the market value of the Company’s assets and liabilities, as well as its long-term profitability. The process is similar to assessing short-term risk but emphasizes and is measured over a five-year time period, which allows for a more comprehensive assessment of longer-term repricing and cash flow imbalances that may not be captured by short-term net interest margin simulations. The results of these calculations are representative of long-term interest rate risk, both in terms of changes in the present value of the Company’s assets and liabilities and long-term changes in core profitability.

See Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of Bancshares' Annual Report on Form 10-K as of and for the year ended December 31, 2016 for additional disclosures related to market risk. Management’s evaluation as of March 31, 2017 did not indicate any significant increase in the Company’s exposure to market risk from those disclosed as of December 31, 2016.

ITEM 4. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Bancshares maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in Bancshares’ Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to Bancshares’ management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Bancshares’ management carried out an evaluation, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Bancshares’ disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of March 31, 2017, pursuant to the evaluation of these controls and procedures required by Rule 13a-15 of the Exchange Act. Based on that evaluation, Bancshares’ management concluded, as of March 31, 2017, that Bancshares’ disclosure controls and procedures are effective to ensure that the information required to be disclosed in Bancshares’ periodic filings with the SEC is recorded, processed, summarized and reported within the time periods specified.

Changes in Internal Control Over Financial Reporting

There were no changes in Bancshares’ internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

50

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 14 to Item 1, “Guarantees, Commitments and Contingencies,” for information regarding certain litigation matters relating to the Company.

The Company is a party to certain ordinary course litigation, and the Company intends to vigorously defend itself in all such litigation. In the opinion of the Company, based on review and consultation with legal counsel, the outcome of such ordinary course litigation should not have a material adverse effect on the Company’s consolidated financial statements or results of operations.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors,” in Bancshares’ Annual Report on Form 10-K as of and for the year ended December 31, 2016 that could materially affect the Company’s business, financial condition or future results. The risks described in Bancshares’ Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth purchases made by or on behalf of Bancshares or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act, of shares of Bancshares’ common stock during the first quarter of 2017.

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased (2)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs (1)		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Programs (1)
January 1 – January 31		—	$	—		—		242,303
February 1 – February 28		—	$	—		—		242,303
March 1 – March 31		—	$	—		—		242,303
Total		—	$	—		—		242,303

(1) On December 16, 2016, the Board of Directors extended the share repurchase program previously approved by the Board on January 19, 2006. Under the repurchase program, Bancshares is authorized to repurchase up to 642,785 shares of common stock. The expiration date of the extended repurchase program is December 31, 2017. As of March 31, 2017, there were 242,303 shares still available for purchase under the program.

(2) No shares were purchased in open-market transactions by an independent trustee for Bancshares’ 401(k) Plan during the first quarter of 2017.

ITEM 6. EXHIBITS

The exhibits listed in the Index to Exhibits below are filed herewith and are incorporated herein by reference.

51

SIGNATURES

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

FIRST US BANCSHARES, INC.

DATE: May 5, 2017

BY:	/s/ Thomas S. Elley
	Thomas S. Elley
	Its Vice President, Treasurer and Assistant Secretary, Chief Financial Officer and Principal Accounting Officer
	(Duly Authorized Officer and Principal Financial Officer)

52

INDEX TO EXHIBITS

Exhibit No.	Description
3.1	Certificate of Incorporation of United Security Bancshares, Inc. (incorporated herein by reference to Exhibit 3 (i) to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (File No. 000-14549), filed on November 12, 1999).
3.1A	Certificate of Amendment to the Certificate of Incorporation of United Security Bancshares, Inc., effective as of October 11, 2016 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 000-14549), filed on October 11, 2016).
3.2	Bylaws of First US Bancshares, Inc., effective as of October 11, 2016 (incorporated herein by reference to Exhibit 3.2 to the Current Report on Form 8-K (File No. 000-14549), filed on October 11, 2016).
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Interactive Data Files for the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017.

EX-31.1

 

Exhibit 31.1

CERTIFICATION

I, James F. House, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First US Bancshares, Inc.;

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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 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 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.

Date: May 5, 2017

By:	/s/ James F. House
	James F. House
	President and Chief Executive Officer

EX-31.2

 

Exhibit 31.2

CERTIFICATION

I, Thomas S. Elley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First US Bancshares, Inc.;

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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 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 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.

Date: May 5, 2017

By:	/s/ Thomas S. Elley
	Thomas S. Elley
	Vice President, Treasurer and Assistant
	Secretary, Chief Financial Officer and
	Principal Accounting Officer

EX-32

Exhibit 32

CERTIFICATION

PURSUANT TO 18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, James F. House, President and Chief Executive Officer of First US Bancshares, Inc., and Thomas S. Elley, Vice President, Treasurer and Assistant Secretary, Chief Financial Officer and Principal Accounting Officer of First US Bancshares, Inc., certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of First US Bancshares, Inc. for the fiscal quarter ended March 31, 2017, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of United Security Bancshares, Inc.

BY:	/s/ James F. House
	James F. House
	President and Chief Executive Officer
	May 5, 2017
BY:	/s/ Thomas S. Elley
	Thomas S. Elley
	Vice President, Treasurer and Assistant
	Secretary, Chief Financial Officer and Principal
	Accounting Officer
	May 5, 2017

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2017	May 05, 2017
Document Information [Line Items]
Entity Registrant Name	FIRST US BANCSHARES INC
Entity Central Index Key	0000717806
Trading Symbol	fusb
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		6,055,293
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Interim Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
ASSETS
Cash and due from banks	$ 5,701	$ 7,018
Interest-bearing deposits in banks	27,204	16,512
Total cash and cash equivalents	32,905	23,530
Investment securities available-for-sale, at fair value	183,858	181,910
Investment securities held-to-maturity, at amortized cost	29,639	25,904
Federal Home Loan Bank stock, at cost	1,609	1,581
Loans, net of allowance for loan losses of $4,879 and $4,856, respectively	317,677	322,772
Premises and equipment, net	22,192	18,340
Cash surrender value of bank-owned life insurance	14,683	14,603
Accrued interest receivable	1,924	1,987
Other real estate owned	4,587	4,858
Other assets	10,753	11,407
Total assets	619,827	606,892
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	509,078	497,556
Accrued interest expense	229	241
Other liabilities	7,473	7,735
Short-term borrowings	10,750	10,119
Long-term debt	15,000	15,000
Total liabilities	542,530	530,651
Commitments and contingencies
Common stock, par value $0.01 per share, 10,000,000 shares authorized; 7,341,061 and 7,329,060 shares issued, respectively; 6,055,103 and 6,043,102 shares outstanding	73	73
Surplus	10,826	10,786
Accumulated other comprehensive loss, net of tax	(543)	(1,277)
Retained earnings	87,717	87,434
Less treasury stock: 1,285,958 shares at cost	(20,764)	(20,764)
Noncontrolling interest	(12)	(11)
Total shareholders’ equity	77,297	76,241
Total liabilities and shareholders’ equity	$ 619,827	$ 606,892

XML

Interim Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Loans, allowance for loan losses	$ 4,879	$ 4,856
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	10,000,000	10,000,000
Common stock, shares issued (in shares)	7,341,061	7,329,060
Common stock, shares outstanding (in shares)	6,055,103	6,043,102
Treasury stock, shares (in shares)	1,285,958	1,285,958

XML

Interim Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Interest income:
Interest and fees on loans	$ 6,496	$ 6,053
Interest on investment securities	1,014	1,143
Total interest income	7,510	7,196
Interest expense:
Interest on deposits	528	523
Interest on borrowings	63	12
Total interest expense	591	535
Net interest income	6,919	6,661
Provision for loan losses	515	167
Net interest income after provision for loan losses	6,404	6,494
Non-interest income:
Service and other charges on deposit accounts	464	417
Credit insurance income	256	152
Net gain on sales and prepayments of investment securities	49	2
Other income, net	398	418
Total non-interest income	1,167	989
Non-interest expense:
Salaries and employee benefits	4,398	4,164
Net occupancy and equipment	777	769
Other real estate/foreclosure expense, net	84	117
Other expense	1,778	2,016
Total non-interest expense	7,037	7,066
Income before income taxes	534	417
Provision for income taxes	130	100
Net income	$ 404	$ 317
Basic net income per share (in dollars per share)	$ 0.07	$ 0.05
Diluted net income per share (in dollars per share)	0.06	0.05
Dividends per share (in dollars per share)	$ 0.02	$ 0.02

XML

Interim Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Net income	$ 404	$ 317
Other comprehensive income:
Unrealized holding gains on securities available-for-sale arising during period, net of tax expense of $424 and $238, respectively	757	410
Reclassification adjustment for net gains on securities available-for-sale realized in net income, net of tax of $18 and $0, respectively	(31)
Unrealized holding gains arising during the period on effective cash flow hedge derivatives, net of tax expense of $4 and $0, respectively	8
Other comprehensive income	734	410
Total comprehensive income	$ 1,138	$ 727

XML

Interim Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Unrealized holding (loss) gain on available for sale securities arising during the period on securities held at end of period, tax	$ 424	$ 238
Tax on reclassification adjustment for net gains on securities available-for-sale realized in net income	18	0
Unrealized holding gains arising during the period on effective cash flow hedge derivatives, tax	$ 4	$ 0

XML

Interim Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net income	$ 404	$ 317
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	242	232
Provision for loan losses	515	167
Deferred income tax provision	128	97
Net gain on sale and prepayment of investment securities	(49)	(2)
Stock-based compensation expense	79	91
Net amortization of securities	(313)	(412)
Net loss on premises and equipment and other real estate	80	125
Changes in assets and liabilities:
Decrease in accrued interest receivable	63	77
Decrease (increase) in other assets	(28)	67
Decrease in accrued interest expense	(12)	(1)
Decrease in other liabilities	(262)	(267)
Net cash provided by operating activities	1,473	1,315
Cash flows from investing activities:
Net increase in federal funds sold		(3,000)
Purchases of investment securities, available-for-sale	(15,254)	(11,912)
Purchases of investment securities, held-to-maturity	(4,696)	(2,751)
Proceeds from maturities and prepayments of investment securities, available-for-sale	14,228	11,546
Proceeds from maturities and prepayments of investment securities, held-to-maturity	925	3,091
Net decrease (increase) in Federal Home Loan Bank stock	(28)	295
Proceeds from the sale of premises and equipment and other real estate	424	810
Net change in loan portfolio	4,397	(9,001)
Purchases of premises and equipment	(4,087)	(3,229)
Net cash used in investing activities	(4,091)	(14,151)
Cash flows from financing activities:
Net increase in customer deposits	11,522	6,279
Increase in short-term borrowings	631	92
Repayment of long-term Federal Home Loan Bank advances		(7,000)
Net share-based compensation transactions	(39)
Dividends paid	(121)	(121)
Net cash provided by (used in) financing activities	11,993	(750)
Net increase (decrease) in cash and cash equivalents	9,375	(13,586)
Cash and cash equivalents, beginning of period	23,530	44,072
Cash and cash equivalents, end of period	32,905	30,486
Cash paid for:
Interest	603	536
Non-cash transactions:
Assets acquired in settlement of loans	$ 183	$ 291

XML

Note 1 - General

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Nature of Operations [Text Block]

1. GENERAL

The accompanying unaudited interim condensed consolidated financial statements include the accounts of First US Bancshares, Inc. (“Bancshares”) and its subsidiaries (collectively, the “Company”). Bancshares is the parent holding company of First US Bank (the “Bank”). The Bank operates a finance company subsidiary, Acceptance Loan Company, Inc. (“ALC”). Management has determined that the Bank and ALC comprise Bancshares'

two

reportable operating segments. All significant intercompany transactions and accounts have been eliminated.

The unaudited interim condensed consolidated financial statements, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company's consolidated financial position, results of operations and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. The results of operations for any interim period are not necessarily indicative of results expected for the fiscal year ending

December

31,

2017

. While certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), management believes that the disclosures herein are adequate to make the information presented not misleading. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form

10

-K as of and for the year ended

December

31,

2016.

XML

Note 2 - Basis of Presentation

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Significant Accounting Policies [Text Block]

2. BASIS OF PRESENTATION

Summary of Significant Accounting Policies

Certain significant accounting policies followed by the Company are set forth in Note

2,

“Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form

10

-K as of and for the year ended

December

31,

2016.

Net Income Per Share and Comprehensive Income

Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding. Included in basic shares are certain shares that have

been accrued as of the balance sheet date as deferred compensation for members of Bancshares’ Board of Directors. Diluted net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding, adjusted for the effect of potentially dilutive stock awards outstanding during the period. The dilutive shares consist of nonqualified stock option grants issued to employees and members of Bancshares’ Board of Directors pursuant to Bancshares’

2013

Incentive Plan (the

“2013

Incentive Plan”) previously approved by Bancshares’ shareholders. The following table reflects weighted average shares used to calculate basic and diluted net income per share for the periods presented.

	Three Months Ended
	March 31,
	2017		2016
Basic shares		6,158,399		6,143,267
Dilutive shares		320,500		272,550
Diluted shares		6,478,899		6,415,817

	Three Months Ended
	March 31,
	2017		2016
	(Dollars in Thousands, Except Per Share Data)
Net income	$	404	$	317
Basic net income per share	$	0.07	$	0.05
Diluted net income per share	$	0.06	$	0.05

Comprehensive income consists of net income, as well as unrealized gains and losses that arise during the period associated with the Company’

s available-for-sale securities portfolio and the effective portion of cash flow hedge derivatives. In the calculation of comprehensive income, reclassification adjustments are made for gains or losses realized in the statement of operations associated with the sale of available-for-sale securities or changes in the fair value of cash flow derivatives.

Accounting Policies Recently Adopted and Pending Accounting Pronouncements

Accounting Standards Update (“

ASU”)

2016

-

13,

"Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments

.” Issued in

June

2016,

ASU

2016

-

13

removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current U.S. GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all current recognition thresholds and will require companies to recognize an allowance for lifetime expected credit losses. Credit losses will be immediately recognized through net income; the amount recognized will be based on the current estimate of contractual cash flows not expected to be collected over the financial asset’s contractual term. ASU

2016

-

13

also amends the credit loss measurement guidance for available-for-sale debt securities. For public business entities, ASU

2016

-

13

is effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after

December

15,

2019.

Institutions will be required to apply the changes through a cumulative-effect adjustment to their retained earnings as of the beginning of the

first

reporting period in which the guidance is effective. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.

ASU

2016

-

09,

“

Compensation-Stock Compensation (Topic

718)

- Improvements to Employee Share-Based Payment Accounting.”  

Issued in

March

2016,

ASU

2016

-

09

seeks to reduce complexity in accounting standards by simplifying several aspects of the accounting for share-based payment transactions, including

(1)

accounting for income taxes;

(2)

classification of excess tax benefits on the statement of cash flows;

(3)

forfeitures;

(4)

minimum statutory tax withholding requirements;

(5)

classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax withholding purposes;

(6)

the practical expedient for estimating the expected term; and

(7)

intrinsic value.  ASU

2016

-

09

became effective for the Company on

January

1,

2017.

  The adoption of ASU

2016

-

09

 did not have a material impact on the Company’s consolidated financial statements.

ASU

2016

-

05,

“

Derivatives and Hedging (Topic

815):

Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.”

Issued in

March

2016,

ASU 

2016

-

05

clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic

815

does not, in and of itself, require de-designation of that hedging relationship, provided that all other hedge accounting criteria continue to be met.  ASU

2016

-

05

became effective for the Company on

January

1,

2017.

  The adoption of ASU

2016

-

05

did not have a material impact on the Company’s consolidated financial statements.

ASU

2016

-

02,

“

Leases (Topic

842).”

Issued in

February

2016,

ASU

2016

-

02

was issued by the FASB to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and by disclosing key information about leasing arrangements. ASU

2016

-

02

will require organizations that lease assets (lessees) to recognize on the balance sheet the assets and liabilities for the rights and obligations created by the lease for all operating leases under current U.S. GAAP with a term of more than

12

months. The recognition, measurement and presentation of expenses and cash flows arising from a lease are not significantly changed under ASU

2016

-

02,

and there will continue to be differentiation between finance leases and operating leases. The accounting applied by the lessor in a lease transaction remains largely unchanged from previous U.S. GAAP. ASU

2016

-

02

is effective for fiscal years beginning after

December

15,

2018.

Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.

ASU

2016

-

01,

“

Financial Instruments - Overall (Subtopic

825

-

10):

Recognition and Measurement of Financial Assets and Financial Liabilities (An Amendment of FASB ASC

825).”

Issued in

January

2016,

ASU

2016

-

01

is intended to enhance the reporting model for financial instruments to provide users of financial statements with improved decision-making information. The amendments of ASU

2016

-

01

include: (i) requiring equity investments, except those accounted for under the equity method of accounting or those that result in the consolidation of an investee, to be measured at fair value, with changes in fair value recognized in net income; (ii) requiring a qualitative assessment to identify impairment of equity investments without readily determinable fair values; and (iii) clarifying that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments of ASU

2016

-

01

are effective for interim and annual periods beginning after

December

15,

2017.

Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.

ASU

2014

-

09,

“

Revenue from Contracts with Customers (Topic

606

).” Issued in

May

2014,

ASU

2014

-

09

will add

FASB ASC Topic

606,

Revenue from Contracts with Customers,

and will supersede revenue recognition requirements in

FASB ASC Topic

605,

Revenue Recognition

and certain cost guidance in

FASB ASC Topic

605

-

35,

Revenue Recognition – Construction-Type and Production-Type Contracts.

ASU

2014

-

09

requires an entity to recognize revenue when (or as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue should be recognized either over time, in a manner that depicts the entity’s performance, or at a point in time, when control of the goods or services is transferred to the customer.

ASU

2015

-

14

,

“Revenue from Contracts with Customers (Topic

606)

- Deferral of the Effective Date,”

issued in

August

2015,

defers the effective date of ASU

2014

-

09

by

one

year. ASU

2015

-

14

provides that the amendments of ASU

2014

-

09

become effective for interim and annual periods beginning after

December

15,

2017.

Earlier application is permitted only as of annual reporting periods beginning after

December

15,

2016,

including interim reporting periods within that reporting period. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements, as well as the most appropriate method of application. However, because this guidance does not significantly impact the treatment of revenue associated with financial instruments, including loans and securities accounted for under other U.S. GAAP, the adoption of ASU

2014

-

09

is not expected to have a material impact on the Company’s consolidated financial statements.

XML

Note 3 - Investment Securities

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

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

3. INVESTMENT SECURITIES

Details of investment securities available-for-sale and held-to-maturity as of

March

31,

2017

and

December

31,

2016

were as follows:

	Available-for-Sale
	March 31 , 201 7
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	97,003	$	434	$	(938	)	$	96,499
Commercial		77,606		51		(1,156	)		76,501
Obligations of states and political subdivisions		7,637		395		(8	)		8,024
Obligations of U.S. government-sponsored agencies		2,000		4		—			2,004
Corporate notes		750		—		—			750
U.S. Treasury securities		80		—		—			80
Total	$	185,076	$	884	$	(2,102	)	$	183,858

	Held-to-Maturity
	March 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	17,880	$	7	$	(132	)	$	17,755
Obligations of U.S. government-sponsored agencies		9,715		12		(152	)		9,575
Obligations of states and political subdivisions		2,044		6		(22	)		2,028
Total	$	29,639	$	25	$	(306	)	$	29,358

	Available-for-Sale
	December 31, 2016
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	99,922	$	490	$	(2,003	)	$	98,409
Commercial		71,761		56		(1,287	)		70,530
Obligations of states and political subdivisions		9,759		390		(7	)		10,142
Obligations of U.S. government-sponsored agencies		2,000		—		(7	)		1,993
Corporate notes		756		—		—			756
U.S. Treasury securities		80		—		—			80
Total	$	184,278	$	936	$	(3,304	)	$	181,910

	Held-to-Maturity
	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	14,684	$	5	$	(148	)	$	14,541
Obligations of U.S. government-sponsored agencies		9,129		13		(222	)		8,920
Obligations of states and political subdivisions		2,091		2		(46	)		2,047
Total	$	25,904	$	20	$	(416	)	$	25,508

The scheduled maturities of investment securities available-for-sale and held-to-maturity as of

March

31,

2017

are presented in the following table:

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Maturing within one year	$	1,089	$	1,093	$	—	$	—
Maturing after one to five years		6,172		6,245		2,289		2,303
Maturing after five to ten years		82,184		81,875		2,913		2,876
Maturing after ten years		95,631		94,645		24,437		24,179
Total	$	185,076	$	183,858	$	29,639	$	29,358

For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on the weighted-average contractual maturities of underlying collateral. The mortgage-backed securities generally mature earlier than their weighted-average contractual maturities because of principal prepayments.

The following table reflects gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of

March

31,

2017

and

December

31,

2016.

	Available-for-Sale
	March 31 , 201 7
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	75,284	$	(917	)	$	1,729	$	(21	)
Commercial		48,106		(807	)		18,066		(349	)
Obligations of states and political subdivisions		847		(8	)		—		—
U.S. Treasury securities		80		—			—		—
Total	$	124,317	$	(1,732	)	$	19,795	$	(370	)

	Held-to-Maturity
	March 31 , 2017
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	13,030	$	(132	)	$	—	$	—
Obligations of U.S. government-sponsored agencies		8,618		(152	)		—		—
Obligations of states and political subdivisions		1,056		(15	)		549		(7	)
Total	$	22,704	$	(299	)	$	549	$	(7	)

	Available-for-Sale
	December 31, 201 6
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	85,741	$	(1,976	)	$	1,904	$	(27	)
Commercial		54,475		(946	)		10,721		(341	)
Obligations of U.S. government-sponsored agencies		1,993		(7	)		—		—
Obligations of states and political subdivisions		434		(7	)		—		—
U.S. Treasury securities		80		—			—		—
Total	$	142,723	$	(2,936	)	$	12,625	$	(368	)

	Held-to-Maturity
	December 31, 2016
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	12,776	$	(148	)	$	—	$	—
Obligations of U.S. government-sponsored agencies		7,957		(222	)		—		—
Obligations of states and political subdivisions		1,628		(46	)		—		—
Total	$	22,361	$	(416	)	$	—	$	—

Management evaluates securities for other-than-temporary impairment no less frequently than quarterly and more frequently when economic or market concerns warrant such evaluation. Consideration is given to: (i) the length of time and the extent to which fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, (iii) whether the Company intends to sell securities, and (iv) whether it is more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases.

As of

March

31,

2017,

18

debt securities had been in a loss position for more than

12

months, and

126

debt securities had been in a loss position for less than

12

months. As of

December

31,

2016,

13

debt securities had been in a loss position for more than

12

months, and

130

debt securities had been in a loss position for less than

12

months. As of both

March

31,

2017

and

December

31,

2016,

the losses for all securities were considered to be a direct result of the effect that the prevailing interest rate environment had on the value of debt securities and were not related to the creditworthiness of the issuers. Further, the Company has the current intent and ability to retain its investments in the issuers for a period of time that management believes to be sufficient to allow for any anticipated recovery in fair value. Therefore, the Company did not recognize any other-than-temporary impairments as of

March

31,

2017

and

December

31,

2016.

Investment securities available-for-sale with a carrying value of

$95.2

million and

$87.7

million as of

March

31,

2017

and

December

31,

2016,

respectively, were pledged to secure public deposits and for other purposes.

No

investment securities were sold during the

three

months ended

March

31,

2017,

however, certain securities were paid prior to contractual maturity, and the Company realized gains on the prepayment of the securities. Gains realized on prepayments of investment securities were approximately

$0.05

 million for the

three

months ended

March

31,

2017.

Gains realized on sales of securities available-for-sale and  prepayments of investment securities were approximately

$0.6

million for the year ended

December

31,

2016.

There were no losses on sales of securities during the

three

months ended

March

31,

2017

or the year ended

December

31,

2016.

XML

Note 4 - Loans and Allowance for Loan Losses

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

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

4. LOANS AND ALLOWANCE FOR LOAN LOSSES

Portfolio Segments:

The Company has divided the loan portfolio into

eight

portfolio segments, each with different risk characteristics described as follows:

Construction, land development and other land loans

– Commercial construction, land and land development loans include the development of residential housing projects, loans for the development of commercial and industrial use property and loans for the purchase and improvement of raw land. These loans are secured in whole or in part by the underlying real estate collateral and are generally guaranteed by the principals of the borrowing entity.

Secured by

1

-

4

family residential properties

– These loans include conventional mortgage loans on

one

-to-

four

family residential properties. These properties

may

serve as the borrower’s primary residence, vacation home or investment property. Also included in this portfolio are home equity loans and lines of credit. This type of lending, which is secured by a

first

or

second

mortgage on the borrower’s residence, allows customers to borrow against the equity in their home.

Secured by multi-family residential properties

– This portfolio segment includes mortgage loans secured by apartment buildings.

Secured by non-farm, non-residential properties

– This portfolio segment includes real estate loans secured by commercial and industrial properties, office or mixed-use facilities, strip shopping centers or other commercial property. These loans are generally guaranteed by the principals of the borrowing entity.

Other real estate loans

– Other real estate loans are loans primarily for agricultural production, secured by mortgages on farm land.

Commercial and industrial loans

– This portfolio segment includes loans to commercial customers for use in the normal course of business. These credits

may

be loans and lines of credit to financially strong borrowers, secured by inventories, equipment or receivables, and are generally guaranteed by the principals of the borrowing entity.

Consumer loans

– This portfolio segment includes a variety of secured and unsecured personal loans, including automobile loans, loans for household and personal purposes and all other direct consumer installment loans.

Indirect Sales

– This portfolio segment includes loans secured by collateral that is purchased by consumers at retail stores with whom ALC has an established relationship to provide financing for the retail products sold if applicable underwriting standards are met.

As of

March

31,

2017

and

December

31,

2016,

the composition of the loan portfolio by reporting segment and portfolio segment was as follows:

	March 31 , 201 7
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	25,853	$	—	$	25,853
Secured by 1-4 family residential properties		32,535		12,993		45,528
Secured by multi-family residential properties		16,464		—		16,464
Secured by non-farm, non-residential properties		97,294		—		97,294
Other		230		—		230
Commercial and industrial loans		57,253		—		57,253
Consumer loans:
Consumer		6,057		32,892		38,949
Indirect sales		—		47,196		47,196
Total loans		235,686		93,081		328,767
Less: Unearned interest, fees and deferred cost		249		5,962		6,211
Allowance for loan losses		2,521		2,358		4,879
Net loans	$	232,916	$	84,761	$	317,677

	December 31, 2016
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	23,772	$	—	$	23,772
Secured by 1-4 family residential properties		32,955		13,724		46,679
Secured by multi-family residential properties		16,627		—		16,627
Secured by non-farm, non-residential properties		102,112		—		102,112
Other		234		—		234
Commercial and industrial loans		57,963		—		57,963
Consumer loans:
Consumer		6,206		36,413		42,619
Indirect sales		—		44,775		44,775
Total loans		239,869		94,912		334,781
Less: Unearned interest, fees and deferred cost		218		6,935		7,153
Allowance for loan losses		2,409		2,447		4,856
Net loans	$	237,242	$	85,530	$	322,772

The Company makes commercial, real estate and installment loans to its customers. Although the Company has a diversified loan portfolio,

56.4%

and

56.6%

of the portfolio was concentrated in loans secured by real estate located primarily within a single geographic region of the United States as of

March

31,

2017

and

December

31,

2016,

respectively.  

Related Party Loans:

In the ordinary course of business, the Bank makes loans to certain officers and directors of the Company, including companies with which they are associated. These loans are made on the same terms as those prevailing for comparable transactions with

non-related parties. Management believes that such loans do not represent more than a normal risk of collectability, nor do they present other unfavorable features. The aggregate balances of such related party loans and commitments as of both

March

31,

2017

and

December

 

31,

2016

were 

$2.7

million. During the

three

months ended

March

31,

2017,

there were no new loans to these parties, and repayments by active related parties were

$35

thousand. During the year ended

December

31,

2016,

there was

one

 new loan to these related parties, and repayments by active related parties was

$0.1

million.

Allowance for Loan Losses:

The following tables present changes in the allowance for loan losses and the related loan balances by loan portfolio segment and loan type as of

March

31,

2017

and

December

31,

2016:

	Bank
	Three M onths Ended March 31 , 201 7
	Construction, Land		1-4 Family			Real Estate Multi- Family			Non-Farm Non-Residential			Other		Commercial	Consumer			Indirect Sales		Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	535	$	304		$	88	$	903		$	2	$	527	$	50		$	—	$	2,409
Charge-offs		—		—			—		—			—		—		(2	)		—		(2	)
Recoveries		—		31			—		66			—		4		13			—		114
Provision		71		(52	)		27		(186	)		—		157		(17	)		—		—
Ending balance	$	606	$	283		$	115	$	783		$	2	$	688	$	44		$	—	$	2,521
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	422	$	5		$	—	$	102		$	—	$	45	$	—		$	—	$	574
Collectively evaluated for impairment		184		278			115		681			2		643		44			—		1,947
Total allowance for loan losses	$	606	$	283		$	115	$	783		$	2	$	688	$	44		$	—	$	2,521
Ending balance of loans receivable:
Individually evaluated for impairment	$	1,361	$	191		$	—	$	542		$	—	$	70	$	—		$	—	$	2,164
Collectively evaluated for impairment		24,492		32,344			16,464		96,752			230		57,183		6,057			—		233,522
Total loans receivable	$	25,853	$	32,535		$	16,464	$	97,294		$	230	$	57,253	$	6,057		$	—	$	235,686

	ALC
	Three Months Ended March 31, 2017
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential		Other		Commercial		Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447
Charge-offs		—		(13	)		—		—		—		—		(658	)		(135	)		(806	)
Recoveries		—		15			—		—		—		—		137			50			202
Provision		—		(33	)		—		—		—		—		470			78			515
Ending balance	$	—	$	76		$	—	$	—	$	—	$	—	$	1,666		$	616		$	2,358
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		76			—		—		—		—		1,666			616			2,358
Total allowance for loan losses	$	—	$	76		$	—	$	—	$	—	$	—	$	1,666		$	616		$	2,358
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		12,993			—		—		—		—		32,892			47,196			93,081
Total loans receivable	$	—	$	12,993		$	—	$	—	$	—	$	—	$	32,892		$	47,196		$	93,081

	Bank and ALC
	Three Months Ended March 31, 2017
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential			Other		Commercial		Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	535	$	411		$	88	$	903		$	2	$	527	$	1,767		$	623		$	4,856
Charge-offs		—		(13	)		—		—			—		—		(660	)		(135	)		(808	)
Recoveries		—		46			—		66			—		4		150			50			316
Provision		71		(85	)		27		(186	)		—		157		453			78			515
Ending balance	$	606	$	359		$	115	$	783		$	2	$	688	$	1,710		$	616		$	4,879
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	422	$	5		$	—	$	102		$	—	$	45	$	—		$	—		$	574
Collectively evaluated for impairment		184		354			115		681			2		643		1,710			616			4,305
Total allowance for loan losses	$	606	$	359		$	115	$	783		$	2	$	688	$	1,710		$	616		$	4,879
Ending balance of loans receivable:
Individually evaluated for impairment	$	1,361	$	191		$	—	$	542		$	—	$	70	$	—		$	—		$	2,164
Collectively evaluated for impairment		24,492		45,337			16,464		96,752			230		57,183		38,949			47,196			326,603
Total loans receivable	$	25,853	$	45,528		$	16,464	$	97,294		$	230	$	57,253	$	38,949		$	47,196		$	328,767

	Bank
	Year Ended December 31, 2016
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential			Other		Commercial			Consumer			Indirect Sales		Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	110	$	138		$	29	$	351		$	1	$	659		$	41		$	—	$	1,329
Charge-offs		—		(66	)		—		(40	)		—		(2	)		(43	)		—		(151	)
Recoveries		200		23			—		—			—		73			50			—		346
Provision		225		209			59		592			1		(203	)		2			—		885
Ending balance	$	535	$	304		$	88	$	903		$	2	$	527		$	50		$	—	$	2,409
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	423	$	5		$	—	$	107		$	—	$	—		$	—		$	—	$	535
Collectively evaluated for impairment		112		299			88		796			2		527			50			—		1,874
Total allowance for loan losses	$	535	$	304		$	88	$	903		$	2	$	527		$	50		$	—	$	2,409
Loan receivables:
Individually evaluated for impairment	$	1,361	$	193		$	—	$	549		$	—	$	—		$	—		$	—	$	2,103
Collectively evaluated for impairment		22,411		32,762			16,627		101,563			234		57,963			6,206			—		237,766
Total loans receivable	$	23,772	$	32,955		$	16,627	$	102,112		$	234	$	57,963		$	6,206		$	—	$	239,869

	ALC
	Year Ended December 31, 2016
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential		Other		Commercial		Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	—	$	250		$	—	$	—	$	—	$	—	$	1,584		$	618		$	2,452
Charge-offs		—		(56	)		—		—		—		—		(2,218	)		(752	)		(3,026	)
Recoveries		—		39			—		—		—		—		451			220			710
Provision		—		(126	)		—		—		—		—		1,900			537			2,311
Ending balance	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		107			—		—		—		—		1,717			623			2,447
Total allowance for loan losses	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		13,724			—		—		—		—		36,413			44,775			94,912
Total loans receivable	$	—	$	13,724		$	—	$	—	$	—	$	—	$	36,413		$	44,775		$	94,912

	Bank and ALC
	Year Ended December 31, 2016
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential			Other		Commercial			Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	110	$	388		$	29	$	351		$	1	$	659		$	1,625		$	618		$	3,781
Charge-offs		—		(122	)		—		(40	)		—		(2	)		(2,261	)		(752	)		(3,177	)
Recoveries		200		62			—		—			—		73			501			220			1,056
Provision		225		83			59		592			1		(203	)		1,902			537			3,196
Ending balance	$	535	$	411		$	88	$	903		$	2	$	527		$	1,767		$	623		$	4,856
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	423	$	5		$	—	$	107		$	—	$	—		$	—		$	—		$	535
Collectively evaluated for impairment		112		406			88		796			2		527			1,767			623			4,321
Total allowance for loan losses	$	535	$	411		$	88	$	903		$	2	$	527		$	1,767		$	623		$	4,856
Loan receivables:
Individually evaluated for impairment	$	1,361	$	193		$	—	$	549		$	—	$	—		$	—		$	—		$	2,103
Collectively evaluated for impairment		22,411		46,486			16,627		101,563			234		57,963			42,619			44,775			332,678
Total loans receivable	$	23,772	$	46,679		$	16,627	$	102,112		$	234	$	57,963		$	42,619		$	44,775		$	334,781

Credit Quality Indicators:

The Bank utilizes a

credit grading system that provides a uniform framework for establishing and monitoring credit risk in the loan portfolio. Under this system, each loan is graded, based on pre-determined risk metrics, and categorized into

one

of

nine

risk grades. These risk grades can be summarized into categories described as pass, special mention, substandard, doubtful and loss, as described in further detail below.

● Pass (Risk Grades 1 - 5): Loans in this category include obligations in which the probability of default is considered low.

● Special Mention (Risk Grade 6): Loans in this category exhibit potential credit weaknesses or downward trends deserving Bank management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. Although a special mention asset has a higher probability of default than pass-rated categories, its default is not imminent.

● Substandard (Risk Grade 7): Loans in this category have defined weaknesses that jeopardize the orderly liquidation of debt. A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. There is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.

● Doubtful (Risk Grade 8): Loans classified as doubtful have all of the weaknesses found in substandard loans, with the added characteristic that the weaknesses make collection of debt in full, based on currently existing facts, conditions and values, highly questionable or improbable. Serious problems exist such that partial loss of principal is likely; however, because of certain important, reasonably specific pending factors that may work to strengthen the assets, the loans’ classification as estimated losses is deferred until a more exact status may be determined. Such pending factors may include proposed merger, acquisition or liquidation procedures, capital injection, perfection of liens on additional collateral and refinancing plans. Loans classified as doubtful may include loans to borrowers that have demonstrated a history of failing to live up to agreements.

● Loss (Risk Grade 9): Loans are classified in this category when borrowers are deemed incapable of repayment of unsecured debt. Loans to such borrowers are considered uncollectable and of such little value that continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not prudent to defer writing off these worthless assets, even though partial recovery may be affected in the future.

At ALC, because the loan portfolio is more uniform in nature, each loan is categorized into

one

of

two

risk grades, depending on whether the loan is considered to be performing or nonperforming. Performing loans are loans that are paying principal and interest in accordance with

a contractual agreement. Nonperforming loans are loans that have demonstrated characteristics that indicate a probability of loss.

The tables below illustrate the carrying amount of loans by credit quality indicator as of

March

31,

2017.

	Bank
	Pass 1-5		Special Mention 6		Substandard 7		Doubtful 8		Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	24,323	$	—	$	1,530	$	—	$	25,853
Secured by 1-4 family residential properties		31,552		207		776		—		32,535
Secured by multi-family residential properties		16,464		—		—		—		16,464
Secured by non-farm, non-residential properties		94,324		2,281		689		—		97,294
Other		230		—		—		—		230
Commercial and industrial loans		54,816		2,187		250		—		57,253
Consumer loans		6,057		—		—		—		6,057
Other loans		—		—		—		—		—
Total	$	227,766	$	4,675	$	3,245	$	—	$	235,686

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	12,744	$	249	$	12,993
Consumer loans:
Consumer		31,994		898		32,892
Indirect sales		46,701		495		47,196
Total	$	91,439	$	1,642	$	93,081

The tables below illustrate the carrying amount of loans by credit quality indicator as of

December

 

31,

2016.

	Bank
	Pass 1-5		Special Mention 6		Substandard 7		Doubtful 8		Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	22,240	$	—	$	1,532	$	—	$	23,772
Secured by 1-4 family residential properties		31,995		213		747		—		32,955
Secured by multi-family residential properties		16,627		—		—		—		16,627
Secured by non-farm, non-residential properties		99,082		2,315		715		—		102,112
Other		234		—		—		—		234
Commercial and industrial loans		55,481		2,227		255		—		57,963
Consumer loans		6,126		—		80		—		6,206
Total	$	231,785	$	4,755	$	3,329	$	—	$	239,869

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	13,507	$	217	$	13,724
Consumer loans:
Consumer		35,278		1,135		36,413
Indirect sales		44,228		547		44,775
Total	$	93,013	$	1,899	$	94,912

The following tables provide an aging analysis of past due loans by class as of

March

31,

2017.

	Bank
	As of March 31 , 2017
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	86	$	86	$	25,767	$	25,853	$	—
Secured by 1-4 family residential properties		197		—		191		388		32,147		32,535		—
Secured by multi-family residential properties		—		—		—		—		16,464		16,464		—
Secured by non-farm, non-residential properties		—		—		—		—		97,294		97,294		—
Other		—		—		—		—		230		230		—
Commercial and industrial loans		—		6		15		21		57,232		57,253		—
Consumer loans		61		26		—		87		5,970		6,057		—
Total	$	258	$	32	$	292	$	582	$	235,104	$	235,686	$	—

	ALC
	As of March 31 , 2017
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Secured by 1-4 family residential properties		47		1		242		290		12,703		12,993		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans:
Consumer		434		336		889		1,659		31,233		32,892		—
Indirect sales		136		146		459		741		46,455		47,196		—
Total	$	617	$	483	$	1,590	$	2,690	$	90,391	$	93,081	$	—

The following tables provide an aging analysis of past due loans by class as of

December

31,

201

6.

	Bank
	As of December 31, 201 6
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	86	$	86	$	23,686	$	23,772	$	—
Secured by 1-4 family residential properties		164		69		145		378		32,577		32,955		—
Secured by multi-family residential properties		—		—		—		—		16,627		16,627		—
Secured by non-farm, non-residential properties		762		—		—		762		101,350		102,112		—
Other		—		—		—		—		234		234		—
Commercial and industrial loans		—		—		14		14		57,949		57,963		—
Consumer loans		—		28		—		28		6,178		6,206		—
Total	$	926	$	97	$	245	$	1,268	$	238,601	$	239,869	$	—

	ALC
	As of December 31, 201 6
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Secured by 1-4 family residential properties		61		29		213		303		13,421		13,724		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans:
Consumer		441		413		1,104		1,958		34,455		36,413		—
Indirect sales		191		139		489		819		43,956		44,775		—
Total	$	693	$	581	$	1,806	$	3,080	$	91,832	$	94,912	$	—

The following table provides an analysis of non-accruing loans by class as of

March

31,

2017

and

December

31,

2016.

	Loans on Non-Accrual Status
	March 31 , 2017		December 31, 201 6
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	86	$	86
Secured by 1-4 family residential properties		623		570
Secured by multi-family residential properties		—		—
Secured by non-farm, non-residential properties		39		53
Commercial and industrial loans		31		32
Consumer loans		1,426		1,676
Total loans	$	2,205	$	2,417

Impaired Loans:

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the related loan agreement. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported at the present value of estimated future cash flows using the loan

’s existing rate or at the fair value of collateral if repayment is expected solely from the liquidation of the collateral at the Bank. At management's discretion, additional loans

may

be impaired based on homogeneous factors such as changes in the nature and volume of the portfolio, portfolio quality, adequacy of the underlying collateral value, loan concentrations, historical charge-off trends, and economic conditions that

may

affect the borrower's ability to pay. At ALC, all real estate loans of

$0.1

million or more are identified for impairment analysis. There are currently no loans at ALC that meet that criteria. All loans of

$0.5

million or more that have a credit quality risk grade of

seven

or above are identified for impairment analysis. Impaired loans, or portions thereof, are charged off when deemed uncollectable.

As of

March

31,

2017,

the carrying amount of impaired loans consisted of the following:

	March 31 , 201 7
Impaired loans with no related allowance recorded	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		—		—		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		—		—		—
Total loans with no related allowance recorded	$	—	$	—	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	422
Secured by 1-4 family residential properties		191		191		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		542		542		102
Commercial and industrial		70		70		45
Total loans with an allowance recorded	$	2,164	$	2,164	$	574
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	422
Secured by 1-4 family residential properties		191		191		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		542		542		102
Commercial and industrial		70		70		45
Total impaired loans	$	2,164	$	2,164	$	574

As of

December

 

31,

2016,

the carrying amount of impaired loans consisted of the following:  

	December 31, 2016
Impaired loans with no related allowance recorded	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		—		—		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		—		—		—
Total loans with no related allowance recorded	$	—	$	—	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	423
Secured by 1-4 family residential properties		193		193		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		549		549		107
Commercial and industrial		—		—		—
Total loans with an allowance recorded	$	2,103	$	2,103	$	535
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	423
Secured by 1-4 family residential properties		193		193		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		549		549		107
Commercial and industrial		—		—		—
Total impaired loans	$	2,103	$	2,103	$	535

The average net investment in impaired loans and interest income recognized and received on impaired loans

as of the

three

months ended

March

31,

2017

and the year ended

December

31,

2016

were as follows:

	March 31 , 2017
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	10	$	10
Secured by 1-4 family residential properties		193		4		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		542		8		5
Commercial and industrial		23		3		2
Total	$	2,119	$	25	$	22

	December 31, 201 6
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	1,381	$	41	$	39
Secured by 1-4 family residential properties		232		14		14
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		557		33		31
Commercial and industrial		—		—		—
Total	$	2,170	$	88	$	84

Loans on which the accrual of interest has been discontinued amounted to

$2.2

million and

$2.4

million as of

March

31,

2017

and

December

 

31,

2016,

respectively. If interest on those loans had been accrued, there would have been

$9

thousand and

$35

thousand of interest accrued for the periods ended

March

31,

2017

and

December

31,

2016,

respectively. Interest income related to these loans as of

March

31,

2017

and

December

31,

2016

was

$1

thousand and

$4

thousand, respectively.

Troubled Debt Restructurings:

Troubled debt restructurings include loans with respect to which concessions have been granted to borrowers that generally would not have otherwise been considered had the borrowers not been experiencing financial difficulty. The concessions granted

may

include payment schedule modifications, interest rate reductions, maturity date extensions, modification

s of note structure, principal balance reductions or some combination of these concessions. There were no loans modified with concessions granted during the

three

month period ended

March

31,

2017.

 Restructured loans

may

involve loans remaining on non-accrual, moving to non-accrual or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Non-accrual restructured loans are included with all other non-accrual loans. In addition, all accruing restructured loans are reported as troubled debt restructurings. Generally, restructured loans remain on non-accrual until the customer has attained a sustained period of repayment performance under the modified loan terms (generally a minimum of

six

months). However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and whether the loan should be returned to or maintained on non-accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, then the loan remains on non-accrual. As of

March

31,

2017

and

December

31,

2016,

respectively, the Company had

$0.2

million and

$0.1

million of non-accruing loans that were previously restructured and that remained on non-accrual status. For the

three

months ended

March

31,

2017,

the Company had no loans that were restored to accrual status based on a sustained period of repayment performance. For the year ended

December

31,

2016,

the Company had

$0.3

million in restructured loans that were restored to accrual status based on a sustained period of repayment performance.

The following table provides the number of loans

remaining in each loan category, as of

March

31,

2017

and

December

31,

2016

that the Bank had previously modified in a troubled debt restructuring, as well as the pre- and post-modification principal balance as of each date.

	March 31 , 2017						December 31, 2016
	Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance		Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans		2	$	1,960	$	1,363		2	$	1,960	$	1,286
Secured by 1-4 family residential properties		3		318		246		3		318		249
Secured by non-farm, non-residential properties		1		53		40		1		53		41
Commercial loans		2		116		87		2		116		88
Total		8	$	2,447	$	1,736		8	$	2,447	$	1,664

For those loans as of

March

31,

2017

and

December

31,

2016

that were previously modified in a troubled debt restructuring, no loans were identified that defaulted subsequent to modifications as a troubled debt restructuring.

Restructured loan modifications primarily included maturity date extensions and payment schedule modifications. There were no modifications to principal balances of the loans that were restructured. Accordingly, there was no impact on the Company

’s allowance for loan losses resulting from the modifications.

All loans with a principal balance of

$0.5

million or more that have been modified in a troubled debt restructuring are considered impaired and evaluated individually for impairment. The nature and extent of impairment of restructured loans, including those that have experienced a subsequent payment default, are considered in the determination of an appropriate level of allowance for loan losses. This evaluation resulted in an allowance for loan losses attributable to such restructured loans of

$9

thousand as of 

March

31,

2017

and

$15

thousand as of

December

31,

2016,

respectively.

XML

Note 5 - Other Real Estate Owned

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Real Estate Owned [Text Block]

5. OTHER REAL ESTATE OWNED

Other real estate and certain other assets acquired in foreclosure are reported at the lower of the investment in the loan or the fair value of the property, less estimated costs to sell. The following table summarizes foreclosed property activity as of the

three

months ended

March

31,

2017

and

2016:

	March 31 , 2017
	Bank			ALC			Total
	(Dollars in Thousands)
Beginning balance	$	4,353		$	505		$	4,858
Transfers from loans		—			20			20
Sales proceeds		(204	)		(84	)		(288	)
Gross gains		13			—			13
Gross losses		(1	)		(15	)		(16	)
Net gains (losses)		12			(15	)		(3	)
Impairment		—			—			—
Ending balance	$	4,161		$	426		$	4,587

	March 31 , 2016
	Bank			ALC			Total
	(Dollars in Thousands)
Beginning balance	$	5,327		$	711		$	6,038
Transfers from loans		—			18			18
Sales proceeds		(609	)		(77	)		(686	)
Gross gains		—			25			25
Gross losses		(16	)		—			(16	)
Net gains (losses)		(16	)		25			9
Impairment		—			(23	)		(23	)
Ending balance	$	4,702		$	654		$	5,356

Valuation adjustments are recorded in other non-interest expense and are primarily post-foreclosure write-downs that are a result of continued declining property values based on updated appraisals or other indications of value, such as offers to purchase.

Fair value less estimated cost to sell of foreclosed residential real estate held by the Company was

$0.8

million and

$1.2

million as of

March

31,

2017

and

2016,

respectively. In addition, the Company held

$0.1

million and

$0.3

million in consumer mortgage loans collateralized by residential real estate that were in the process of foreclosure as of 

March

31,

2017

and

2016,

respectively.

XML

Note 6 - Investment in Limited Partnership

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Variable Interest Entity Disclosure [Text Block]

6. INVESTMENT IN LIMITED PARTNERSHIP

The Bank holds an investment in an affordable housing project for which it provides funding as a limited partner and has received tax credits related to its investment in the project based on its partnership share. The net assets of the partnership consist primarily of apartment complexes

, and the primary liabilities consist of those associated with the operation of the partnership. The Company has determined that this investment requires consolidation as a variable interest entity under

ASC

Topic

810,

Consolidation.

The Company holds a

99.9%

interest in the limited partnership. Assets recorded by the Company as a result of the consolidation were less than

$0.1

million as of both

March

31,

2017

and

December

31,

2016.

XML

Note 7 - Short-term Borrowings

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Short-term Debt [Text Block]

7. SHORT-TERM BORROWINGS

Short-term borrowings consist of federal funds purchased, securities sold under repurchase agreements,

and short-term Federal Home Loan Bank (“FHLB”) advances with original maturities of

one

year or less. Short-term borrowings totaled

$10.8

million and

$10.1

million as of

March

31,

2017

and

December

31,

2016,

respectively.

Federal funds purchased, which represent unsecured lines of credit that generally mature within

one

to

four

days, are available to the Bank through arrangements with correspondent banks and the Federal Reserve. As of both

March

31,

2017

and

December

31,

2016,

there were

no

federal funds purchased outstanding, and the Bank had

$18.8

million in available unused lines of credit with correspondent banks and the Federal Reserve.

Securities sold under repurchase agreements, which are secured borrowings, generally are reflected at the amount of cash received in

connection with the transaction. The Bank

may

be required to provide additional collateral based on the fair value of the underlying securities. The Bank monitors the fair value of the underlying securities on a daily basis. Securities sold under repurchase agreements as of 

March

31,

2017

and

December

31,

2016

totaled

$0.8

million and

$0.1

million, respectively.

Short-term FHLB advances are secured borrowings available to the Bank as an alternative funding source.

As of both

March

31,

2017

and

December

31,

2016,

the Bank had

$10.0

million in outstanding FHLB advances with original  maturities of less than

one

year. 

XML

Note 8 - Long-term Debt

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Long-term Debt [Text Block]

8. LONG-TERM DEBT

The Company uses

FHLB advances as an alternative to funding sources with similar maturities, such as certificates of deposit or other deposit programs. These advances generally offer more attractive rates than other mid-term financing options. They are also flexible, allowing the Company to quickly obtain the necessary maturities and rates that best suit its overall asset/liability strategy. FHLB advances with an original maturity of more than

one

year are classified as long-term. The Company had long-term FHLB advances outstanding of 

$15.0

million as of both

March

31,

2017

and

December

31,

2016.

Assets pledged associated with FHLB advances totaled

$26.1

million and

$28.0

million as of

March

31,

2017

and

December

31,

2016,

respectively. As of

March

31,

2017

and

December

31,

2016,

the Bank had

$157.0

million and

$155.0

million, respectively, in remaining credit from the FHLB (subject to available collateral).

XML

Note 9 - Income Taxes

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Income Tax Disclosure [Text Block]

9. INCOME TAXES

The provision for income taxes was 

$0.1

million for both of the

three

-month periods ended

March

31,

2017

and

2016.

The Company’s effective tax rate was

24.3%

and

24.0%

for the same periods. The effective tax rate is impacted by recurring permanent differences, such as those associated with bank-owned life insurance and tax-exempt investment and loan income.

The Company had a net deferred tax asset of

$8.2

million and

$8.7

million as of

March

31,

2017

and

December

31,

2016,

respectively. The reduction in the net deferred tax asset resulted primarily from the impact of changes in the fair value of securities available-for-sale.

XML

Note 10 - Deferred Compensation Plans

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

10. DEFERRED COMPENSATION PLANS

The Bank has entered into supplemental retirement compensation benefits agreements with certain directors and executive officers.  The measurement of the liability under these agreements includes estimates involving life expectancy, length of time before retirement and the expected returns on the bank-owned life insurance policies used to fund those agreements. Should these estimates prove materially wrong, the cost of these agreements could change accordingly. The

related deferred compensation obligation to these directors and executive officers included in other liabilities was

$3.5

million as of both

March

31,

2017

and

December

31,

2016.

Non-employee directors

may

elect to defer payment of all or any

portion of their Bancshares and Bank director fees under Bancshares’ Non-Employee Directors’ Deferred Compensation Plan (the “Deferral Plan”). The Deferral Plan, which was ratified by shareholders at the annual meeting held on

May

11,

2004,

permits non-employee directors to invest their directors’ fees and to receive the adjusted value of the deferred amounts in cash and/or shares of Bancshares’ common stock. Neither Bancshares nor the Bank makes any contribution to participants’ accounts under the Deferral Plan.

XML

Note 11 - Stock Awards

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

11. STOCK AWARDS

In accordance with the Company

’s

2013

Incentive Plan, stock awards, including stock options and restricted stock, have been granted to certain employees and non-employee directors.

Shares of common stock available for distribution to satisfy the grants

may

consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. Stock-based compensation expense related to stock awards totaled

$0.1

million for both of the

three

-month periods ended

March

31,

2017

and

2016.

Stock Options

The stock option awards were granted with an exercise price equal to the market price of the Company’s common stock on the date of the grant and have vesting periods ranging from

one

to

three

years, with

10

-year contractual terms. 

The Company recognizes the cost of services received in exchange for stock option awards based on the grant date fair value of the award, with compensation expense recognized on a straight-line b

asis over the award’s vesting period. The fair value of outstanding awards was determined using the Black-Scholes option pricing model based on the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Company’s common stock.

	2017			2016
Risk-free interest rate		2.23	%		1.58	%
Expected term	7.5 years			7.5 years
Expected stock price volatility		25.36	%		25.25	%
Dividend yield		1.50	%		1.50	%

The following table summarizes the Company's stock option activity for the periods presented.

	Three Months Ended
	March 31 , 2017				March 31 , 2016
	Number of Shares		Average Exercise Price		Number of Shares		Average Exercise Price
Options:
Outstanding, beginning of period		272,550	$	8.21		175,550	$	8.17
Granted		64,600		14.11		97,000		8.30
Exercised		16,650		8.15		—		—
Expired		—		—		—		—
Forfeited		—		—		—		—
Options outstanding, end of period		320,500	$	9.41		272,550	$	8.21
Options exercisable, end of period		210,633	$	8.20		175,550	$	8.17

The aggregate intrinsic value of stock options outstanding (calculated as the

amount by which the market value of underlying stock exceeds the exercise price of the option) was approximately 

$0.7

million and

$0.1

million as of 

March

31,

2017

and

2016,

respectively.

Restricted Stock

During the

first

three

months of

2017,

7,533

shares of restricted stock were granted with vesting periods of either

one

or

three

years. No shares of restricted stock were granted during the

first

three

months of

2016.

 The Company recognizes the cost of services received in exchange for restricted stock awards based on the grant date closing price of the stock, with compensation expense recognized on a straight-line basis over the award’s vesting period.

XML

Note 12 - Derivative Financial Instruments

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

12. DERIVATIVE FINANCIAL INSTRUMENTS

Derivatives Designated as Hedging Instruments

On

April

1,

2016,

the Bank entered into a forward interest rate swap contract on a variable rate FHLB advance (indexed to

three

-month LIBOR) with a total notional amount of

$10.0

million. The interest rate swap contract was designated as a derivative instrument in a cash flow hedge under

ASC Topic

815,

Derivatives and Hedging

, with the objective of protecting the quarterly interest rate payments on the FHLB advance from the risk of variability of those payments resulting from changes in the

three

-month LIBOR interest rate throughout the

seven

-year period beginning on

April

5,

2016

and ending on

April

5,

2023.

Under the swap arrangement, which became effective on

April

5,

2016,

the Bank will pay a fixed interest rate of

1.46%

and receive a variable interest rate based on

three

-month LIBOR on the total notional amount of

$10.0

million, with quarterly net settlements.

No ineffectiveness related to the interest rate swap designated as a cash flow hedge was recognized in the consolidated statements of operations for the

three

months ended

March

31,

2017.

The accumulated net after-tax gain related to the effective cash flow hedge included in accumulated other comprehensive income totaled

$0.2

million as of both

March

31,

2017

and

December

31,

2016.

Derivatives Not Designated as Hedging Instruments

In

2014,

the Bank entered into

three

separate interest rate cap agreements to mitigate risks associated with increases in interest rates on an aggregate notional amount of

$40

million. The interest rate caps qualify as derivatives but were not designated as hedging instruments. Accordingly, changes in the fair value of the instruments are included in results of operations. Under the

three

agreements, the Company paid an up-front premium totaling approximately

$0.1

million, in return for the ability to receive cash flows if interest rates rise above a strike rate indexed to

three

-month LIBOR. The agreements have contractual terms that mature at various dates in

2017.

As of

March

31,

2017,

the strike rate had not been achieved on any of the

three

agreements, and accordingly, the Company has received no cash flows associated with the agreements. Since the inception of the agreements, on a quarterly basis, the Company has recorded the current fair value of the derivatives within other assets on the Company’s consolidated balance sheet, with changes in the fair value included in interest expense on the Company’s consolidated statements of operations. As of both

March

31,

2017

and

December

31,

2016,

the fair value of each of the

three

derivative agreements was

zero.

XML

Note 13 - Segment Reporting

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

13. SEGMENT REPORTING

Under

ASC Topic

280,

Segment Reporting

, certain information is disclosed for the

two

reportable operating segments of Bancshares: the Bank and ALC. The reportable segments were determined using the internal management reporting system. These segments comprise Bancshares’ and the Bank’s significant subsidiaries. The accounting policies for each segment are the same as those described in Note

2,

“Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form

10

-K as of and for the year ended

December

31,

2016.

The segment results include certain overhead allocations and intercompany transactions that were recorded at current market prices. All intercompany transactions have been eliminated to determine the consolidated balances. The results for the

two

reportable segments of the Company are included in the tables below.

					All
	Bank		ALC		Other			Eliminations			Consolidated
	(Dollars in Thousands)
For the three months ended March 3 1 , 2017 :
Net interest income	$	3,911	$	3,005	$	3		$	—		$	6,919
Provision for loan losses		—		515		—			—			515
Total non-interest income		836		244		850			(763	)		1,167
Total non-interest expense		4,401		2,377		429			(170	)		7,037
Income before income taxes		346		357		424			(593	)		534
Provision for income taxes		98		130		(98	)		—			130
Net income	$	248	$	227	$	522		$	(593	)	$	404
Other significant items:
Total assets	$	622,528	$	88,233	$	82,667		$	(173,601	)	$	619,827
Total investment securities		213,417		—		80			—			213,497
Total loans, net		309,425		84,761		—			(76,509	)		317,677
Investment in subsidiaries		5		—		76,976			(76,976	)		5
Fixed asset additions		4,025		62		—			—			4,087
Depreciation and amortization expense		201		41		—			—			242
Total interest income from external customers		3,392		4,118		—			—			7,510
Total interest income from affiliates		1,114		—		3			(1,117	)		—

						All
	Bank			ALC		Other			Eliminations			Consolidated
	(Dollars in Thousands)
For the three months ended March 31 , 2016 :
Net interest income	$	3,598		$	3,060	$	3		$	—		$	6,661
Provision (reduction in reserve) for loan losses		(280	)		447		—			—			167
Total non-interest income		721			252		675			(659	)		989
Total non-interest expense		4,334			2,427		440			(135	)		7,066
Income before income taxes		265			438		238			(524	)		417
Provision for income taxes		48			158		(106	)		—			100
Net income	$	217		$	280	$	344		$	(524	)	$	317
Other significant items:
Total assets	$	577,945		$	84,353	$	83,129		$	(169,845	)	$	575,582
Total investment securities		231,386			—		80			—			231,466
Total loans, net		256,037			80,480		—			(72,542	)		263,975
Investment in subsidiaries		5			—		77,716			(77,716	)		5
Fixed asset addition		3,224			5		—			—			3,229
Depreciation and amortization expense		180			52		—			—			232
Total interest income from external customers		3,124			4,072		—			—			7,196
Total interest income from affiliates		1,012			—		3			(1,015	)		—

XML

Note 14 - Guarantees, Commitments and Contingencies

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

14 . GUARANTEES, COMMITMENTS AND CONTINGENCIES

The Bank

’s exposure to credit loss in the event of nonperformance by the other party for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making these commitments as it does for on-balance sheet instruments. For interest rate swap transactions and commitments to purchase or sell securities for forward delivery, the contract or notional amounts do not represent exposure to credit loss. The Bank controls the credit risk of these derivative instruments through credit approvals, limits and monitoring procedures. Certain derivative contracts have credit risk for the carrying value plus the amount to replace such contracts in the event of counterparty default. All of the Bank’s financial instruments are held for risk management and not for trading purposes. During the

three

-month periods ended

March

31,

2017

and

2016,

there were

no

credit losses associated with derivative contracts.

In the normal course of business, there are outstanding commitments and contingent liabilities, such as commitments to extend credit, letters of credit and others

that are not included in the consolidated financial statements. The financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the financial statements. A summary of these commitments and contingent liabilities is presented below:

	March 3 1 , 201 7		December 31, 201 6
	(Dollars in Thousands)
Standby letters of credit	$	183	$	183
Commitments to extend credit	$	43,806	$	41,267

Standby letters of credit are contingent commitments issued by the Bank generally to guarantee the performance of a customer to a

third

-party. The Bank has recourse against the customer for any amount that it is required to pay to a

third

-party under a standby letter of credit. Revenues are recognized over the lives of the standby letters of credit. As of

March

31,

2017

and

December

31,

2016,

the potential amount of future payments that the Bank could be required to make under its standby letters of credit, which represent the Bank’s total credit risk in this category, is included in the table above.

A commitment

to extend credit is an agreement to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and

may

require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon the extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but

may

include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.

Commitments to purchase securities for delayed delivery require the Bank to purchase a specified security at a specified price for delivery on a specified date. Similarly, commitments to sell securities for delayed delivery require the Bank to sell a specified security at a specified price for delivery on a specified date. Market risk arises from potential movements in security values and interest rates between the commitment and delivery dates. 

As of both

March

31,

2017

and

December

31,

2016,

there were

no

outstanding commitments to purchase securities for delayed delivery and

no

outstanding commitments to sell securities for delayed delivery.

The Company is self-insured for a significant portion of employee health benefits. However, we maintain stop-loss coverage with

third

party insurers to limit our individual claim and total exposure related to self-insurance.

We estimate our accrued liability for the ultimate costs to close known claims, as well as claims incurred but not yet reported, as of the balance sheet date. Our recorded estimated liability for self-insurance is based on the insurance companies incurred loss estimates and management’s judgment, including assumptions and factors related to the frequency and severity of claims, our claims development history and our claims settlement practices. The assessment of loss contingencies and self-insurance reserves is a highly subjective process that requires judgments about future events. Contingencies are reviewed at least quarterly to determine the adequacy of self-insurance accruals. The ultimate settlement of loss contingencies and self-insurance reserves

may

differ significantly from amounts we have accrued in our consolidated financial statements.

In

2016,

the Bank entered into an agreement with a general contractor to manage construction of an office complex on a parcel of land located in the Birmingham, Alabama area that was purchased by the Bank in

2016.

The office complex, which will be approximately

40,000

square feet in size, will house a retail branch of the Bank, as well as the Bank’s commercial lending team in the Birmingham area and certain other officers of the Bank. Approximately

25%

of the square footage of the office complex will be utilized by the Bank, with the remainder to be leased to commercial

tenants.

Construction began on the office complex during the

third

quarter of

2016

and is expected to be completed during

2017.

As of

March

31,

2017,

approximately

$8.2

million in cost had been incurred by the Bank associated with the construction project. Remaining contractual commitments with the general contractor totaled

$3.5

million. In addition to current commitments to the general contractor, the Bank estimates additional expenditures of approximately

$1.7

million will be incurred for office finishes,

tenant

improvements, furniture and fixtures, architectural fees and certain other development costs. Additional expenses could be incurred under the agreement based on changes to building specifications at the discretion of the Bank and the occurrence of certain events specified in the contract. As costs associated with the construction are incurred, they are recorded in premises and equipment as construction in process. Upon completion of construction and placement of the office complex into service, depreciation expense associated with the office complex is currently estimated to be approximately

$0.5

million annually.

Litigation

The Company is party to

certain ordinary course litigation, and the Company intends to vigorously defend itself in all such litigation. In the opinion of the Company, based on review and consultation with legal counsel, the outcome of such ordinary course litigation should not have a material adverse effect on the Company’s consolidated financial statements or results of operations.

XML

Note 15 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Fair Value Disclosures [Text Block]

15. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company follows the provisions of

ASC Topic

820,

Fair Value Measurements and Disclosures

, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The assumptions used in the estimation of the fair value of the Company’s financial instruments are detailed below. The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather represent a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance.

Fair Value Hierarchy

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. In determining fair value, the Company uses various methods, including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Assets and liabilities carried at fair value will be classified and disclosed in

one

of the following

three

categories:

● Level 1 — Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange or Nasdaq. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

● Level 2 — Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third -party pricing services for identical or similar assets or liabilities.

● Level 3 — Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

The Company rarely transfers assets and liabilities measured at fair value between Level

1

and Level

2

measurements. Trading account assets and securities available-for-sale

may

be periodically transferred to or from Level

3

valuation based on management

’s conclusion regarding the best method of pricing for an individual security. Such transfers are accounted for as if they occurred at the beginning of a reporting period. There were no such transfers during the

three

months ended

March

31,

2017

or the year ended

December

31,

2016.

Fair Value Measurements on a Recurring Basis

Securities

Available-for-Sale

Where quoted market prices are available in an active market, securities are classified within Level

1

of the valuation hierarchy. Level

1

securities include exchange-traded equities. Level

2

securities include U.S. Treasury and agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset-backed and other securities. Level

2

fair values are obtained from quoted prices of securities with similar characteristics. In certain cases, where Level

1

or Level

2

inputs are not available, securities are classified within Level

3

of the hierarchy.

Interest Rate Derivative Agreements

Interest rate derivative agreements are used by the Company to mitigate risk

 associated with changes in interest rates. The fair value of these agreements is based on information obtained from

third

-party financial institutions. This information is periodically evaluated by the Company and, as necessary, corroborated against other

third

-party valuations. The Company classifies these derivative assets within Level

2

of the valuation hierarchy.

The following table presents assets measured at fair value on a recurring basis as of

March

31,

2017

and

December

 

31,

2016.

There were no liabilities measured at fair value on a recurring basis for either period presented.

	Fair Value Measurements as of March 3 1 , 201 7 Using
	Totals At March 3 1 , 201 7		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	96,499	$	—	$	96,499	$	—
Commercial		76,501		—		76,501		—
Obligations of states and political subdivisions		8,024		—		8,024		—
Obligations of U.S. government-sponsored agencies		2,004		—		2,004		—
Corporate notes		750		—		750		—
U.S. Treasury securities		80		—		80		—
Other assets - derivatives		358		—		358		—

	Fair Value Measurements as of December 31, 201 6 Using
	Totals At December 31, 201 6		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	98,409	$	—	$	98,409	$	—
Commercial		70,530		—		70,530		—
Obligations of states and political subdivisions		10,142		—		10,142		—
Obligations of U.S. government-sponsored agencies		1,993		—		1,993		—
Corporate notes		756		—		756		—
U.S. Treasury securities		80		—		80		—
Other assets - derivatives		346		—		346		—

Fair Value Measurements on a Non-recurring Basis

Impaired Loans

Loans that are considered impaired are loans for which, based on current information and events, it is probable that the Company will be unable to collect all principal and interest payments due under the contractual terms of the loan agreement. Impaired loans can be measured based on the present value of expected payments using the loan

’s original effective rate as the discount rate, the loan’s observable market price, or the fair value of the collateral less estimated selling cost if the loan is collateral-dependent. For the Company, the fair value of impaired loans is primarily measured based on the value of the collateral securing the loans (typically real estate). The Company determines the fair value of the collateral based on independent appraisals performed by qualified licensed appraisers. The appraisals

may

include a single valuation approach or a combination of approaches, including comparable sales and income approaches. Appraised values are discounted for estimated costs to sell and

may

be discounted further based on management’s knowledge of the collateral, changes in market conditions since the most recent appraisal and/or management’s knowledge of the borrower and the borrower’s business. Such discounts by management are subjective and are typically significant unobservable inputs for determining fair value. Impaired loans are evaluated by management for additional impairment at least quarterly and are adjusted accordingly.

OREO

OREO consists of properties obtained through foreclosure or in satisfaction of loans and is recorded at the lower of the loan

’s carrying amount or the fair value of the property, less estimated cost to sell. Estimates of fair value are generally based on

third

-party appraisals of the property and are classified within Level

3

of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically significant unobservable inputs for determining fair value.

Other Assets

Included within other assets are certain assets that were formerly included as premises and equipment, but have been removed from service, and as of the balance sheet date, were designated as assets to be disposed of by sale. These include assets associated with branches of the Bank that have been closed. When an asset is designated as held for sale, the Company ceases depreciation of the asset, and the asset is recorded at the lower of its carrying amount or fair value less estimated cost to sell. Estimates of fair value are generally based on

third

-party appraisals of the property and are classified within Level

3

of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically unobservable inputs for determining fair value.

The following table presents the balances of impaired loans, OREO and other assets measured at fair value on a non-recurring basis as of

March

31,

2017

and

December

 

31,

2016.

	Fair Value Measurements as of March 3 1 , 2017 Using
	Totals At March 3 1 , 2017		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	1,590	$	—	$	—	$	1,590
OREO		4,587		—		—		4,587
Other assets		280		—		—		280

	Fair Value Measurements as of December 31, 201 6 Using
	Totals At December 31, 201 6		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	1,568	$	—	$	—	$	1,568
OREO		4,858		—		—		4,858
Other assets		280		—		—		280

Non-recurring Fair Value Measurements Using Significant Unobservable Inputs

The following table presents information regarding assets and liabilities measured at fair value using significant unobservable inputs (Level

3)

as of

March

31,

2017.

The table includes the valuation techniques and the significant unobservable inputs utilized. The range of each unobservable input and the weighted average within the range utilized as of

March

31,

2017

are both included. Following the table is a description of the valuation technique and the sensitivity of the technique to changes in the significant unobservable input.

	Level 3 Significant Unobservable Input Assumptions
	Fair Value March 3 1 , 2017		Valuation Technique	Unobservable Input	Quantitative Range of Unobservable Inputs (Weighted Average)
	(Dollars in Thousands)
Non-recurring fair value measurements:
Impaired loans	$	1,590	Multiple data points, including discount to appraised value of collateral based on recent market activity	Appraisal comparability adjustment (discount)	9 %	-	10%	( 9.5%)
OREO	$	4,587	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	9 %	-	10%	(9.5%)
Other assets	$	280	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	9 %	-	10%	( 9.5%)

Impaired Loans

Impaired loans are valued based on multiple data points indicating the fair value for each loan. The primary data point is the appraisal value of the underlying collateral, to which a discount is applied. Management establishes this discount or comparability adjustment based on recent sales of similar property types. As liquidity in the market increases or decreases, the comparability adjustment and the resulting asset valuation are impacted.

OREO

OREO under a binding contract for sale is valued based on contract price. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet.

Other Assets

Assets designated as held for sale that are under a binding contract are valued based on the contract price. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet.

Fair Value of Financial Instruments

ASC Topic

825,

Financial

Instruments

, requires disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

Cash, due from banks and federal funds sold:

The carrying amount of cash, due from banks and federal funds sold approximates fair value.

Federal Home Loan Bank stock:

Based on the redemption provision of the FHLB, the stock has no quoted market value and is carried at cost.

Investment securities:

Fair values of investment securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on market prices of comparable instruments.

Derivative instruments:

The fair value of derivative instruments is based on information obtained from a

third

-party financial institution. This information is periodically evaluated by the Company and, as necessary, corroborated against other

third

-party information.

Accrued interest receivable and payable:

The carrying amount of accrued interest approximates fair value.

Loans, net:

For variable-rate loans, fair values are based on carrying values. Fixed-rate commercial loans, other installment loans and certain real estate mortgage loans are valued using discounted cash flows. The discount rate used to determine the present value of these loans is based on interest rates charged by the Company on comparable loans as to credit risk and term at the determination date.

Demand and savings deposits:

The fair values of demand deposits are equal to the carrying value of such deposits. Demand deposits include non-interest-bearing demand deposits, savings accounts, NOW accounts and money market demand accounts.

Time deposits:

The fair values of relatively short-term time deposits are equal to their carrying values. Discounted cash flows are used to value long-term time deposits. The discount rate used is based on interest rates currently offered by the Company on comparable deposits as to amount and term.

Short-term borrowings:

These borrowings

may

consist of federal funds purchased, securities sold under agreements to repurchase and the floating rate borrowings from the FHLB account. Due to the short-term nature of these borrowings, fair values approximate carrying values.

Long-term debt:

The fair value of this debt is estimated using discounted cash flows based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements as of

March

31,

2017

and

December

 

31,

2016.

Off-balance sheet instruments:

The carrying amount of commitments to extend credit and standby letters of credit approximates fair value. The carrying amount of the off-balance sheet financial instruments is based on fees currently charged to enter into such agreements.

The estimated fair value and related carrying or notional amounts, as well as the level within the fair value hierarchy, of the Company

’s financial instruments as of

March

31,

2017

and

December

31,

2016,

were as follows:

	March 3 1 , 2017
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	32,905	$	32,905	$	32,905	$	—	$	—
Investment securities available-for-sale		183,858		183,858		—		183,858		—
Investment securities held-to-maturity		29,639		29,357		—		29,357		—
Federal Home Loan Bank stock		1,609		1,609		—		—		1,609
Loans, net of allowance for loan losses		317,677		313,079		—		—		313,079
Other assets – derivatives		358		358		—		358		—
Liabilities:
Deposits		509,078		508,634		—		508,634		—
Short-term borrowings		10,750		10,750		—		10,750		—
Long-term debt		15,000		15,001		—		15,001		—

	December 31, 2016
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	23,530	$	23,530	$	23,530	$	—	$	—
Investment securities available-for-sale		181,910		181,910		—		181,910		—
Investment securities held-to-maturity		25,904		25,508		—		25,508		—
Federal Home Loan Bank stock		1,581		1,581		—		—		1,581
Loans, net of allowance for loan losses		322,772		319,881		—		—		319,881
Other assets – derivatives		346		346		—		346		—
Liabilities:
Deposits		497,556		497,037		—		497,037		—
Short-term borrowings		10,119		10,119		—		10,119		—
Long-term debt		15,000		14,998		—		14,998		—

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Earnings Per Share, Policy [Policy Text Block]

Net Income Per Share and Comprehensive Income

Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding. Included in basic shares are certain shares that have

been accrued as of the balance sheet date as deferred compensation for members of Bancshares’ Board of Directors. Diluted net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding, adjusted for the effect of potentially dilutive stock awards outstanding during the period. The dilutive shares consist of nonqualified stock option grants issued to employees and members of Bancshares’ Board of Directors pursuant to Bancshares’

2013

Incentive Plan (the

“2013

Incentive Plan”) previously approved by Bancshares’ shareholders. The following table reflects weighted average shares used to calculate basic and diluted net income per share for the periods presented.

	Three Months Ended
	March 31,
	2017		2016
Basic shares		6,158,399		6,143,267
Dilutive shares		320,500		272,550
Diluted shares		6,478,899		6,415,817

	Three Months Ended
	March 31,
	2017		2016
	(Dollars in Thousands, Except Per Share Data)
Net income	$	404	$	317
Basic net income per share	$	0.07	$	0.05
Diluted net income per share	$	0.06	$	0.05

Comprehensive income consists of net income, as well as unrealized gains and losses that arise during the period associated with the Company’

s available-for-sale securities portfolio and the effective portion of cash flow hedge derivatives. In the calculation of comprehensive income, reclassification adjustments are made for gains or losses realized in the statement of operations associated with the sale of available-for-sale securities or changes in the fair value of cash flow derivatives.

New Accounting Pronouncements, Policy [Policy Text Block]

Accounting Policies Recently Adopted and Pending Accounting Pronouncements

Accounting Standards Update (“

ASU”)

2016

-

13,

"Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments

.” Issued in

June

2016,

ASU

2016

-

13

removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current U.S. GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all current recognition thresholds and will require companies to recognize an allowance for lifetime expected credit losses. Credit losses will be immediately recognized through net income; the amount recognized will be based on the current estimate of contractual cash flows not expected to be collected over the financial asset’s contractual term. ASU

2016

-

13

also amends the credit loss measurement guidance for available-for-sale debt securities. For public business entities, ASU

2016

-

13

is effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after

December

15,

2019.

Institutions will be required to apply the changes through a cumulative-effect adjustment to their retained earnings as of the beginning of the

first

reporting period in which the guidance is effective. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.

ASU

2016

-

09,

“

Compensation-Stock Compensation (Topic

718)

- Improvements to Employee Share-Based Payment Accounting.”  

Issued in

March

2016,

ASU

2016

-

09

seeks to reduce complexity in accounting standards by simplifying several aspects of the accounting for share-based payment transactions, including

(1)

accounting for income taxes;

(2)

classification of excess tax benefits on the statement of cash flows;

(3)

forfeitures;

(4)

minimum statutory tax withholding requirements;

(5)

classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax withholding purposes;

(6)

the practical expedient for estimating the expected term; and

(7)

intrinsic value.  ASU

2016

-

09

became effective for the Company on

January

1,

2017.

  The adoption of ASU

2016

-

09

 did not have a material impact on the Company’s consolidated financial statements.

ASU

2016

-

05,

“

Derivatives and Hedging (Topic

815):

Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.”

Issued in

March

2016,

ASU 

2016

-

05

clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic

815

does not, in and of itself, require de-designation of that hedging relationship, provided that all other hedge accounting criteria continue to be met.  ASU

2016

-

05

became effective for the Company on

January

1,

2017.

  The adoption of ASU

2016

-

05

did not have a material impact on the Company’s consolidated financial statements.

ASU

2016

-

02,

“

Leases (Topic

842).”

Issued in

February

2016,

ASU

2016

-

02

was issued by the FASB to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and by disclosing key information about leasing arrangements. ASU

2016

-

02

will require organizations that lease assets (lessees) to recognize on the balance sheet the assets and liabilities for the rights and obligations created by the lease for all operating leases under current U.S. GAAP with a term of more than

12

months. The recognition, measurement and presentation of expenses and cash flows arising from a lease are not significantly changed under ASU

2016

-

02,

and there will continue to be differentiation between finance leases and operating leases. The accounting applied by the lessor in a lease transaction remains largely unchanged from previous U.S. GAAP. ASU

2016

-

02

is effective for fiscal years beginning after

December

15,

2018.

Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.

ASU

2016

-

01,

“

Financial Instruments - Overall (Subtopic

825

-

10):

Recognition and Measurement of Financial Assets and Financial Liabilities (An Amendment of FASB ASC

825).”

Issued in

January

2016,

ASU

2016

-

01

is intended to enhance the reporting model for financial instruments to provide users of financial statements with improved decision-making information. The amendments of ASU

2016

-

01

include: (i) requiring equity investments, except those accounted for under the equity method of accounting or those that result in the consolidation of an investee, to be measured at fair value, with changes in fair value recognized in net income; (ii) requiring a qualitative assessment to identify impairment of equity investments without readily determinable fair values; and (iii) clarifying that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments of ASU

2016

-

01

are effective for interim and annual periods beginning after

December

15,

2017.

Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.

ASU

2014

-

09,

“

Revenue from Contracts with Customers (Topic

606

).” Issued in

May

2014,

ASU

2014

-

09

will add

FASB ASC Topic

606,

Revenue from Contracts with Customers,

and will supersede revenue recognition requirements in

FASB ASC Topic

605,

Revenue Recognition

and certain cost guidance in

FASB ASC Topic

605

-

35,

Revenue Recognition – Construction-Type and Production-Type Contracts.

ASU

2014

-

09

requires an entity to recognize revenue when (or as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue should be recognized either over time, in a manner that depicts the entity’s performance, or at a point in time, when control of the goods or services is transferred to the customer.

ASU

2015

-

14

,

“Revenue from Contracts with Customers (Topic

606)

- Deferral of the Effective Date,”

issued in

August

2015,

defers the effective date of ASU

2014

-

09

by

one

year. ASU

2015

-

14

provides that the amendments of ASU

2014

-

09

become effective for interim and annual periods beginning after

December

15,

2017.

Earlier application is permitted only as of annual reporting periods beginning after

December

15,

2016,

including interim reporting periods within that reporting period. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements, as well as the most appropriate method of application. However, because this guidance does not significantly impact the treatment of revenue associated with financial instruments, including loans and securities accounted for under other U.S. GAAP, the adoption of ASU

2014

-

09

is not expected to have a material impact on the Company’s consolidated financial statements.

XML

Note 2 - Basis of Presentation (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

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

	Three Months Ended
	March 31,
	2017		2016
Basic shares		6,158,399		6,143,267
Dilutive shares		320,500		272,550
Diluted shares		6,478,899		6,415,817

	Three Months Ended
	March 31,
	2017		2016
	(Dollars in Thousands, Except Per Share Data)
Net income	$	404	$	317
Basic net income per share	$	0.07	$	0.05
Diluted net income per share	$	0.06	$	0.05

XML

Note 3 - Investment Securities (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Investment Securities Available-for-sale and Held-to-Maturity [Table Text Block]

	Available-for-Sale
	March 31 , 201 7
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	97,003	$	434	$	(938	)	$	96,499
Commercial		77,606		51		(1,156	)		76,501
Obligations of states and political subdivisions		7,637		395		(8	)		8,024
Obligations of U.S. government-sponsored agencies		2,000		4		—			2,004
Corporate notes		750		—		—			750
U.S. Treasury securities		80		—		—			80
Total	$	185,076	$	884	$	(2,102	)	$	183,858

	Held-to-Maturity
	March 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	17,880	$	7	$	(132	)	$	17,755
Obligations of U.S. government-sponsored agencies		9,715		12		(152	)		9,575
Obligations of states and political subdivisions		2,044		6		(22	)		2,028
Total	$	29,639	$	25	$	(306	)	$	29,358

	Available-for-Sale
	December 31, 2016
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	99,922	$	490	$	(2,003	)	$	98,409
Commercial		71,761		56		(1,287	)		70,530
Obligations of states and political subdivisions		9,759		390		(7	)		10,142
Obligations of U.S. government-sponsored agencies		2,000		—		(7	)		1,993
Corporate notes		756		—		—			756
U.S. Treasury securities		80		—		—			80
Total	$	184,278	$	936	$	(3,304	)	$	181,910

	Held-to-Maturity
	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	14,684	$	5	$	(148	)	$	14,541
Obligations of U.S. government-sponsored agencies		9,129		13		(222	)		8,920
Obligations of states and political subdivisions		2,091		2		(46	)		2,047
Total	$	25,904	$	20	$	(416	)	$	25,508

Investments Classified by Contractual Maturity Date [Table Text Block]

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Maturing within one year	$	1,089	$	1,093	$	—	$	—
Maturing after one to five years		6,172		6,245		2,289		2,303
Maturing after five to ten years		82,184		81,875		2,913		2,876
Maturing after ten years		95,631		94,645		24,437		24,179
Total	$	185,076	$	183,858	$	29,639	$	29,358

Schedule of Unrealized Loss on Investments [Table Text Block]

	Available-for-Sale
	March 31 , 201 7
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	75,284	$	(917	)	$	1,729	$	(21	)
Commercial		48,106		(807	)		18,066		(349	)
Obligations of states and political subdivisions		847		(8	)		—		—
U.S. Treasury securities		80		—			—		—
Total	$	124,317	$	(1,732	)	$	19,795	$	(370	)

	Held-to-Maturity
	March 31 , 2017
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	13,030	$	(132	)	$	—	$	—
Obligations of U.S. government-sponsored agencies		8,618		(152	)		—		—
Obligations of states and political subdivisions		1,056		(15	)		549		(7	)
Total	$	22,704	$	(299	)	$	549	$	(7	)

	Available-for-Sale
	December 31, 201 6
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	85,741	$	(1,976	)	$	1,904	$	(27	)
Commercial		54,475		(946	)		10,721		(341	)
Obligations of U.S. government-sponsored agencies		1,993		(7	)		—		—
Obligations of states and political subdivisions		434		(7	)		—		—
U.S. Treasury securities		80		—			—		—
Total	$	142,723	$	(2,936	)	$	12,625	$	(368	)

	Held-to-Maturity
	December 31, 2016
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	12,776	$	(148	)	$	—	$	—
Obligations of U.S. government-sponsored agencies		7,957		(222	)		—		—
Obligations of states and political subdivisions		1,628		(46	)		—		—
Total	$	22,361	$	(416	)	$	—	$	—

XML

Note 4 - Loans and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

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

	March 31 , 201 7
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	25,853	$	—	$	25,853
Secured by 1-4 family residential properties		32,535		12,993		45,528
Secured by multi-family residential properties		16,464		—		16,464
Secured by non-farm, non-residential properties		97,294		—		97,294
Other		230		—		230
Commercial and industrial loans		57,253		—		57,253
Consumer loans:
Consumer		6,057		32,892		38,949
Indirect sales		—		47,196		47,196
Total loans		235,686		93,081		328,767
Less: Unearned interest, fees and deferred cost		249		5,962		6,211
Allowance for loan losses		2,521		2,358		4,879
Net loans	$	232,916	$	84,761	$	317,677

	December 31, 2016
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	23,772	$	—	$	23,772
Secured by 1-4 family residential properties		32,955		13,724		46,679
Secured by multi-family residential properties		16,627		—		16,627
Secured by non-farm, non-residential properties		102,112		—		102,112
Other		234		—		234
Commercial and industrial loans		57,963		—		57,963
Consumer loans:
Consumer		6,206		36,413		42,619
Indirect sales		—		44,775		44,775
Total loans		239,869		94,912		334,781
Less: Unearned interest, fees and deferred cost		218		6,935		7,153
Allowance for loan losses		2,409		2,447		4,856
Net loans	$	237,242	$	85,530	$	322,772

Allowance for Credit Losses on Financing Receivables [Table Text Block]

	Bank
	Three M onths Ended March 31 , 201 7
	Construction, Land		1-4 Family			Real Estate Multi- Family			Non-Farm Non-Residential			Other		Commercial	Consumer			Indirect Sales		Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	535	$	304		$	88	$	903		$	2	$	527	$	50		$	—	$	2,409
Charge-offs		—		—			—		—			—		—		(2	)		—		(2	)
Recoveries		—		31			—		66			—		4		13			—		114
Provision		71		(52	)		27		(186	)		—		157		(17	)		—		—
Ending balance	$	606	$	283		$	115	$	783		$	2	$	688	$	44		$	—	$	2,521
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	422	$	5		$	—	$	102		$	—	$	45	$	—		$	—	$	574
Collectively evaluated for impairment		184		278			115		681			2		643		44			—		1,947
Total allowance for loan losses	$	606	$	283		$	115	$	783		$	2	$	688	$	44		$	—	$	2,521
Ending balance of loans receivable:
Individually evaluated for impairment	$	1,361	$	191		$	—	$	542		$	—	$	70	$	—		$	—	$	2,164
Collectively evaluated for impairment		24,492		32,344			16,464		96,752			230		57,183		6,057			—		233,522
Total loans receivable	$	25,853	$	32,535		$	16,464	$	97,294		$	230	$	57,253	$	6,057		$	—	$	235,686

	ALC
	Three Months Ended March 31, 2017
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential		Other		Commercial		Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447
Charge-offs		—		(13	)		—		—		—		—		(658	)		(135	)		(806	)
Recoveries		—		15			—		—		—		—		137			50			202
Provision		—		(33	)		—		—		—		—		470			78			515
Ending balance	$	—	$	76		$	—	$	—	$	—	$	—	$	1,666		$	616		$	2,358
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		76			—		—		—		—		1,666			616			2,358
Total allowance for loan losses	$	—	$	76		$	—	$	—	$	—	$	—	$	1,666		$	616		$	2,358
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		12,993			—		—		—		—		32,892			47,196			93,081
Total loans receivable	$	—	$	12,993		$	—	$	—	$	—	$	—	$	32,892		$	47,196		$	93,081

	Bank and ALC
	Three Months Ended March 31, 2017
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential			Other		Commercial		Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	535	$	411		$	88	$	903		$	2	$	527	$	1,767		$	623		$	4,856
Charge-offs		—		(13	)		—		—			—		—		(660	)		(135	)		(808	)
Recoveries		—		46			—		66			—		4		150			50			316
Provision		71		(85	)		27		(186	)		—		157		453			78			515
Ending balance	$	606	$	359		$	115	$	783		$	2	$	688	$	1,710		$	616		$	4,879
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	422	$	5		$	—	$	102		$	—	$	45	$	—		$	—		$	574
Collectively evaluated for impairment		184		354			115		681			2		643		1,710			616			4,305
Total allowance for loan losses	$	606	$	359		$	115	$	783		$	2	$	688	$	1,710		$	616		$	4,879
Ending balance of loans receivable:
Individually evaluated for impairment	$	1,361	$	191		$	—	$	542		$	—	$	70	$	—		$	—		$	2,164
Collectively evaluated for impairment		24,492		45,337			16,464		96,752			230		57,183		38,949			47,196			326,603
Total loans receivable	$	25,853	$	45,528		$	16,464	$	97,294		$	230	$	57,253	$	38,949		$	47,196		$	328,767

	Bank
	Year Ended December 31, 2016
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential			Other		Commercial			Consumer			Indirect Sales		Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	110	$	138		$	29	$	351		$	1	$	659		$	41		$	—	$	1,329
Charge-offs		—		(66	)		—		(40	)		—		(2	)		(43	)		—		(151	)
Recoveries		200		23			—		—			—		73			50			—		346
Provision		225		209			59		592			1		(203	)		2			—		885
Ending balance	$	535	$	304		$	88	$	903		$	2	$	527		$	50		$	—	$	2,409
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	423	$	5		$	—	$	107		$	—	$	—		$	—		$	—	$	535
Collectively evaluated for impairment		112		299			88		796			2		527			50			—		1,874
Total allowance for loan losses	$	535	$	304		$	88	$	903		$	2	$	527		$	50		$	—	$	2,409
Loan receivables:
Individually evaluated for impairment	$	1,361	$	193		$	—	$	549		$	—	$	—		$	—		$	—	$	2,103
Collectively evaluated for impairment		22,411		32,762			16,627		101,563			234		57,963			6,206			—		237,766
Total loans receivable	$	23,772	$	32,955		$	16,627	$	102,112		$	234	$	57,963		$	6,206		$	—	$	239,869

	ALC
	Year Ended December 31, 2016
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential		Other		Commercial		Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	—	$	250		$	—	$	—	$	—	$	—	$	1,584		$	618		$	2,452
Charge-offs		—		(56	)		—		—		—		—		(2,218	)		(752	)		(3,026	)
Recoveries		—		39			—		—		—		—		451			220			710
Provision		—		(126	)		—		—		—		—		1,900			537			2,311
Ending balance	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		107			—		—		—		—		1,717			623			2,447
Total allowance for loan losses	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		13,724			—		—		—		—		36,413			44,775			94,912
Total loans receivable	$	—	$	13,724		$	—	$	—	$	—	$	—	$	36,413		$	44,775		$	94,912

	Bank and ALC
	Year Ended December 31, 2016
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential			Other		Commercial			Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	110	$	388		$	29	$	351		$	1	$	659		$	1,625		$	618		$	3,781
Charge-offs		—		(122	)		—		(40	)		—		(2	)		(2,261	)		(752	)		(3,177	)
Recoveries		200		62			—		—			—		73			501			220			1,056
Provision		225		83			59		592			1		(203	)		1,902			537			3,196
Ending balance	$	535	$	411		$	88	$	903		$	2	$	527		$	1,767		$	623		$	4,856
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	423	$	5		$	—	$	107		$	—	$	—		$	—		$	—		$	535
Collectively evaluated for impairment		112		406			88		796			2		527			1,767			623			4,321
Total allowance for loan losses	$	535	$	411		$	88	$	903		$	2	$	527		$	1,767		$	623		$	4,856
Loan receivables:
Individually evaluated for impairment	$	1,361	$	193		$	—	$	549		$	—	$	—		$	—		$	—		$	2,103
Collectively evaluated for impairment		22,411		46,486			16,627		101,563			234		57,963			42,619			44,775			332,678
Total loans receivable	$	23,772	$	46,679		$	16,627	$	102,112		$	234	$	57,963		$	42,619		$	44,775		$	334,781

Financing Receivable Credit Quality Indicators [Table Text Block]

	Bank
	Pass 1-5		Special Mention 6		Substandard 7		Doubtful 8		Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	24,323	$	—	$	1,530	$	—	$	25,853
Secured by 1-4 family residential properties		31,552		207		776		—		32,535
Secured by multi-family residential properties		16,464		—		—		—		16,464
Secured by non-farm, non-residential properties		94,324		2,281		689		—		97,294
Other		230		—		—		—		230
Commercial and industrial loans		54,816		2,187		250		—		57,253
Consumer loans		6,057		—		—		—		6,057
Other loans		—		—		—		—		—
Total	$	227,766	$	4,675	$	3,245	$	—	$	235,686

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	12,744	$	249	$	12,993
Consumer loans:
Consumer		31,994		898		32,892
Indirect sales		46,701		495		47,196
Total	$	91,439	$	1,642	$	93,081

	Bank
	Pass 1-5		Special Mention 6		Substandard 7		Doubtful 8		Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	22,240	$	—	$	1,532	$	—	$	23,772
Secured by 1-4 family residential properties		31,995		213		747		—		32,955
Secured by multi-family residential properties		16,627		—		—		—		16,627
Secured by non-farm, non-residential properties		99,082		2,315		715		—		102,112
Other		234		—		—		—		234
Commercial and industrial loans		55,481		2,227		255		—		57,963
Consumer loans		6,126		—		80		—		6,206
Total	$	231,785	$	4,755	$	3,329	$	—	$	239,869

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	13,507	$	217	$	13,724
Consumer loans:
Consumer		35,278		1,135		36,413
Indirect sales		44,228		547		44,775
Total	$	93,013	$	1,899	$	94,912

Past Due Financing Receivables [Table Text Block]

	Bank
	As of March 31 , 2017
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	86	$	86	$	25,767	$	25,853	$	—
Secured by 1-4 family residential properties		197		—		191		388		32,147		32,535		—
Secured by multi-family residential properties		—		—		—		—		16,464		16,464		—
Secured by non-farm, non-residential properties		—		—		—		—		97,294		97,294		—
Other		—		—		—		—		230		230		—
Commercial and industrial loans		—		6		15		21		57,232		57,253		—
Consumer loans		61		26		—		87		5,970		6,057		—
Total	$	258	$	32	$	292	$	582	$	235,104	$	235,686	$	—

	ALC
	As of March 31 , 2017
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Secured by 1-4 family residential properties		47		1		242		290		12,703		12,993		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans:
Consumer		434		336		889		1,659		31,233		32,892		—
Indirect sales		136		146		459		741		46,455		47,196		—
Total	$	617	$	483	$	1,590	$	2,690	$	90,391	$	93,081	$	—

	Bank
	As of December 31, 201 6
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	86	$	86	$	23,686	$	23,772	$	—
Secured by 1-4 family residential properties		164		69		145		378		32,577		32,955		—
Secured by multi-family residential properties		—		—		—		—		16,627		16,627		—
Secured by non-farm, non-residential properties		762		—		—		762		101,350		102,112		—
Other		—		—		—		—		234		234		—
Commercial and industrial loans		—		—		14		14		57,949		57,963		—
Consumer loans		—		28		—		28		6,178		6,206		—
Total	$	926	$	97	$	245	$	1,268	$	238,601	$	239,869	$	—

	ALC
	As of December 31, 201 6
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Secured by 1-4 family residential properties		61		29		213		303		13,421		13,724		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans:
Consumer		441		413		1,104		1,958		34,455		36,413		—
Indirect sales		191		139		489		819		43,956		44,775		—
Total	$	693	$	581	$	1,806	$	3,080	$	91,832	$	94,912	$	—

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

	Loans on Non-Accrual Status
	March 31 , 2017		December 31, 201 6
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	86	$	86
Secured by 1-4 family residential properties		623		570
Secured by multi-family residential properties		—		—
Secured by non-farm, non-residential properties		39		53
Commercial and industrial loans		31		32
Consumer loans		1,426		1,676
Total loans	$	2,205	$	2,417

Impaired Financing Receivables [Table Text Block]

	March 31 , 201 7
Impaired loans with no related allowance recorded	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		—		—		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		—		—		—
Total loans with no related allowance recorded	$	—	$	—	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	422
Secured by 1-4 family residential properties		191		191		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		542		542		102
Commercial and industrial		70		70		45
Total loans with an allowance recorded	$	2,164	$	2,164	$	574
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	422
Secured by 1-4 family residential properties		191		191		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		542		542		102
Commercial and industrial		70		70		45
Total impaired loans	$	2,164	$	2,164	$	574

	December 31, 2016
Impaired loans with no related allowance recorded	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		—		—		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		—		—		—
Total loans with no related allowance recorded	$	—	$	—	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	423
Secured by 1-4 family residential properties		193		193		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		549		549		107
Commercial and industrial		—		—		—
Total loans with an allowance recorded	$	2,103	$	2,103	$	535
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	423
Secured by 1-4 family residential properties		193		193		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		549		549		107
Commercial and industrial		—		—		—
Total impaired loans	$	2,103	$	2,103	$	535

Average Net Investment Impaired Loans and Interest Income Recognized and Received on Impaired Loans [Table Text Block]

	March 31 , 2017
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	10	$	10
Secured by 1-4 family residential properties		193		4		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		542		8		5
Commercial and industrial		23		3		2
Total	$	2,119	$	25	$	22

	December 31, 201 6
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	1,381	$	41	$	39
Secured by 1-4 family residential properties		232		14		14
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		557		33		31
Commercial and industrial		—		—		—
Total	$	2,170	$	88	$	84

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	March 31 , 2017						December 31, 2016
	Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance		Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans		2	$	1,960	$	1,363		2	$	1,960	$	1,286
Secured by 1-4 family residential properties		3		318		246		3		318		249
Secured by non-farm, non-residential properties		1		53		40		1		53		41
Commercial loans		2		116		87		2		116		88
Total		8	$	2,447	$	1,736		8	$	2,447	$	1,664

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Note 5 - Other Real Estate Owned (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Other Real Estate Assets Acquired in Foreclosure Roll Forward [Table Text Block]

	March 31 , 2017
	Bank			ALC			Total
	(Dollars in Thousands)
Beginning balance	$	4,353		$	505		$	4,858
Transfers from loans		—			20			20
Sales proceeds		(204	)		(84	)		(288	)
Gross gains		13			—			13
Gross losses		(1	)		(15	)		(16	)
Net gains (losses)		12			(15	)		(3	)
Impairment		—			—			—
Ending balance	$	4,161		$	426		$	4,587

	March 31 , 2016
	Bank			ALC			Total
	(Dollars in Thousands)
Beginning balance	$	5,327		$	711		$	6,038
Transfers from loans		—			18			18
Sales proceeds		(609	)		(77	)		(686	)
Gross gains		—			25			25
Gross losses		(16	)		—			(16	)
Net gains (losses)		(16	)		25			9
Impairment		—			(23	)		(23	)
Ending balance	$	4,702		$	654		$	5,356

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Note 11 - Stock Awards (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	2017			2016
Risk-free interest rate		2.23	%		1.58	%
Expected term	7.5 years			7.5 years
Expected stock price volatility		25.36	%		25.25	%
Dividend yield		1.50	%		1.50	%

Share-based Compensation, Stock Options, Activity [Table Text Block]

	Three Months Ended
	March 31 , 2017				March 31 , 2016
	Number of Shares		Average Exercise Price		Number of Shares		Average Exercise Price
Options:
Outstanding, beginning of period		272,550	$	8.21		175,550	$	8.17
Granted		64,600		14.11		97,000		8.30
Exercised		16,650		8.15		—		—
Expired		—		—		—		—
Forfeited		—		—		—		—
Options outstanding, end of period		320,500	$	9.41		272,550	$	8.21
Options exercisable, end of period		210,633	$	8.20		175,550	$	8.17

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Note 13 - Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

					All
	Bank		ALC		Other			Eliminations			Consolidated
	(Dollars in Thousands)
For the three months ended March 3 1 , 2017 :
Net interest income	$	3,911	$	3,005	$	3		$	—		$	6,919
Provision for loan losses		—		515		—			—			515
Total non-interest income		836		244		850			(763	)		1,167
Total non-interest expense		4,401		2,377		429			(170	)		7,037
Income before income taxes		346		357		424			(593	)		534
Provision for income taxes		98		130		(98	)		—			130
Net income	$	248	$	227	$	522		$	(593	)	$	404
Other significant items:
Total assets	$	622,528	$	88,233	$	82,667		$	(173,601	)	$	619,827
Total investment securities		213,417		—		80			—			213,497
Total loans, net		309,425		84,761		—			(76,509	)		317,677
Investment in subsidiaries		5		—		76,976			(76,976	)		5
Fixed asset additions		4,025		62		—			—			4,087
Depreciation and amortization expense		201		41		—			—			242
Total interest income from external customers		3,392		4,118		—			—			7,510
Total interest income from affiliates		1,114		—		3			(1,117	)		—

						All
	Bank			ALC		Other			Eliminations			Consolidated
	(Dollars in Thousands)
For the three months ended March 31 , 2016 :
Net interest income	$	3,598		$	3,060	$	3		$	—		$	6,661
Provision (reduction in reserve) for loan losses		(280	)		447		—			—			167
Total non-interest income		721			252		675			(659	)		989
Total non-interest expense		4,334			2,427		440			(135	)		7,066
Income before income taxes		265			438		238			(524	)		417
Provision for income taxes		48			158		(106	)		—			100
Net income	$	217		$	280	$	344		$	(524	)	$	317
Other significant items:
Total assets	$	577,945		$	84,353	$	83,129		$	(169,845	)	$	575,582
Total investment securities		231,386			—		80			—			231,466
Total loans, net		256,037			80,480		—			(72,542	)		263,975
Investment in subsidiaries		5			—		77,716			(77,716	)		5
Fixed asset addition		3,224			5		—			—			3,229
Depreciation and amortization expense		180			52		—			—			232
Total interest income from external customers		3,124			4,072		—			—			7,196
Total interest income from affiliates		1,012			—		3			(1,015	)		—

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Note 14 - Guarantees, Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

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

	March 3 1 , 201 7		December 31, 201 6
	(Dollars in Thousands)
Standby letters of credit	$	183	$	183
Commitments to extend credit	$	43,806	$	41,267

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Note 15 - Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

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

	Fair Value Measurements as of March 3 1 , 201 7 Using
	Totals At March 3 1 , 201 7		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	96,499	$	—	$	96,499	$	—
Commercial		76,501		—		76,501		—
Obligations of states and political subdivisions		8,024		—		8,024		—
Obligations of U.S. government-sponsored agencies		2,004		—		2,004		—
Corporate notes		750		—		750		—
U.S. Treasury securities		80		—		80		—
Other assets - derivatives		358		—		358		—

	Fair Value Measurements as of December 31, 201 6 Using
	Totals At December 31, 201 6		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	98,409	$	—	$	98,409	$	—
Commercial		70,530		—		70,530		—
Obligations of states and political subdivisions		10,142		—		10,142		—
Obligations of U.S. government-sponsored agencies		1,993		—		1,993		—
Corporate notes		756		—		756		—
U.S. Treasury securities		80		—		80		—
Other assets - derivatives		346		—		346		—

Fair Value Assets Measured On Nonrecurring Basis [Table Text Block]

	Fair Value Measurements as of March 3 1 , 2017 Using
	Totals At March 3 1 , 2017		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	1,590	$	—	$	—	$	1,590
OREO		4,587		—		—		4,587
Other assets		280		—		—		280

	Fair Value Measurements as of December 31, 201 6 Using
	Totals At December 31, 201 6		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	1,568	$	—	$	—	$	1,568
OREO		4,858		—		—		4,858
Other assets		280		—		—		280

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques [Table Text Block]

	Level 3 Significant Unobservable Input Assumptions
	Fair Value March 3 1 , 2017		Valuation Technique	Unobservable Input	Quantitative Range of Unobservable Inputs (Weighted Average)
	(Dollars in Thousands)
Non-recurring fair value measurements:
Impaired loans	$	1,590	Multiple data points, including discount to appraised value of collateral based on recent market activity	Appraisal comparability adjustment (discount)	9 %	-	10%	( 9.5%)
OREO	$	4,587	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	9 %	-	10%	(9.5%)
Other assets	$	280	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	9 %	-	10%	( 9.5%)

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

	March 3 1 , 2017
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	32,905	$	32,905	$	32,905	$	—	$	—
Investment securities available-for-sale		183,858		183,858		—		183,858		—
Investment securities held-to-maturity		29,639		29,357		—		29,357		—
Federal Home Loan Bank stock		1,609		1,609		—		—		1,609
Loans, net of allowance for loan losses		317,677		313,079		—		—		313,079
Other assets – derivatives		358		358		—		358		—
Liabilities:
Deposits		509,078		508,634		—		508,634		—
Short-term borrowings		10,750		10,750		—		10,750		—
Long-term debt		15,000		15,001		—		15,001		—

	December 31, 2016
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	23,530	$	23,530	$	23,530	$	—	$	—
Investment securities available-for-sale		181,910		181,910		—		181,910		—
Investment securities held-to-maturity		25,904		25,508		—		25,508		—
Federal Home Loan Bank stock		1,581		1,581		—		—		1,581
Loans, net of allowance for loan losses		322,772		319,881		—		—		319,881
Other assets – derivatives		346		346		—		346		—
Liabilities:
Deposits		497,556		497,037		—		497,037		—
Short-term borrowings		10,119		10,119		—		10,119		—
Long-term debt		15,000		14,998		—		14,998		—

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Note 1 - General (Details Textual)	3 Months Ended
	Mar. 31, 2017
Number of Reportable Segments	2

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Note 2 - Basis of Presentation - Summary of Basic and Diluted Net Income Per Share Calculations (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Basic shares (in shares)	6,158,399	6,143,267
Dilutive shares (in shares)	320,500	272,550
Diluted shares (in shares)	6,478,899	6,415,817
Net income	$ 404	$ 317
Basic net income per share (in dollars per share)	$ 0.07	$ 0.05
Diluted net income per share (in dollars per share)	$ 0.06	$ 0.05

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Note 3 - Investment Securities (Details Textual) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2017 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2016 USD ($)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year	18		13
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year	126		130
Available-for-sale Securities Pledged as Collateral	$ 95,200		$ 87,700
Proceeds from Sale of Available-for-sale Securities	0
Available-for-sale Securities, Gross Realized Gain (Loss)	49	$ 2	600
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net	0		0
Available-for-sale Securities, Gross Realized Losses	$ 0		$ 0

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Note 3 - Investment Securities - Available-for-sale and Held-to-maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Available-for-Sale, Amortized Cost	$ 185,076	$ 184,278
Available-for-Sale, Gross Unrealized Gains	884	936
Available-for-Sale, Gross Unrealized Losses	(2,102)	(3,304)
Available-for-Sale, Estimated Fair Value	183,858	181,910
Held-to-Maturity, Amortized Cost	29,639	25,904
Held-to-Maturity, Gross Unrealized Gains	25	20
Held-to-Maturity, Gross Unrealized Losses	(306)	(416)
Held-to-Maturity, Estimated Fair Value	29,358	25,508
Residential Mortgage Backed Securities [Member]
Available-for-Sale, Amortized Cost	97,003	99,922
Available-for-Sale, Gross Unrealized Gains	434	490
Available-for-Sale, Gross Unrealized Losses	(938)	(2,003)
Available-for-Sale, Estimated Fair Value	96,499	98,409
Commercial Mortgage Backed Securities [Member]
Available-for-Sale, Amortized Cost	77,606	71,761
Available-for-Sale, Gross Unrealized Gains	51	56
Available-for-Sale, Gross Unrealized Losses	(1,156)	(1,287)
Available-for-Sale, Estimated Fair Value	76,501	70,530
Held-to-Maturity, Amortized Cost	17,880	14,684
Held-to-Maturity, Gross Unrealized Gains	7	5
Held-to-Maturity, Gross Unrealized Losses	(132)	(148)
Held-to-Maturity, Estimated Fair Value	17,755	14,541
US Government Agencies Debt Securities [Member]
Available-for-Sale, Amortized Cost	2,000	2,000
Available-for-Sale, Gross Unrealized Gains	4
Available-for-Sale, Gross Unrealized Losses		(7)
Available-for-Sale, Estimated Fair Value	2,004	1,993
Held-to-Maturity, Amortized Cost	9,715	9,129
Held-to-Maturity, Gross Unrealized Gains	12	13
Held-to-Maturity, Gross Unrealized Losses	(152)	(222)
Held-to-Maturity, Estimated Fair Value	9,575	8,920
US States and Political Subdivisions Debt Securities [Member]
Available-for-Sale, Amortized Cost	7,637	9,759
Available-for-Sale, Gross Unrealized Gains	395	390
Available-for-Sale, Gross Unrealized Losses	(8)	(7)
Available-for-Sale, Estimated Fair Value	8,024	10,142
Held-to-Maturity, Amortized Cost	2,044	2,091
Held-to-Maturity, Gross Unrealized Gains	6	2
Held-to-Maturity, Gross Unrealized Losses	(22)	(46)
Held-to-Maturity, Estimated Fair Value	2,028	2,047
Corporate Debt Securities [Member]
Available-for-Sale, Amortized Cost	750	756
Available-for-Sale, Gross Unrealized Gains
Available-for-Sale, Gross Unrealized Losses
Available-for-Sale, Estimated Fair Value	750	756
US Treasury Securities [Member]
Available-for-Sale, Amortized Cost	80	80
Available-for-Sale, Gross Unrealized Gains
Available-for-Sale, Gross Unrealized Losses
Available-for-Sale, Estimated Fair Value	$ 80	$ 80

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Note 3 - Investment Securities - Scheduled Maturities of Investment Securities Available-for-sale and Held-to-maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Available-for-Sale, Maturing within one year, Amortized Cost	$ 1,089
Available-for-Sale, Maturing within one year, Estimated Fair Value	1,093
Held-to-Maturity, Maturing within one year, Amortized Cost
Held-to-Maturity, Maturing within one year, Estimated Fair Value
Available-for-Sale, Maturing after one to five years, Amortized Cost	6,172
Available-for-Sale, Maturing after one to five years, Estimated Fair Value	6,245
Held-to-Maturity, Maturing after one to five years, Amortized Cost	2,289
Held-to-Maturity, Maturing after one to five years, Estimated Fair Value	2,303
Available-for-Sale, Maturing after five to ten years, Amortized Cost	82,184
Available-for-Sale, Maturing after five to ten years, Estimated Fair Value	81,875
Held-to-Maturity, Maturing after five to ten years, Amortized Cost	2,913
Held-to-Maturity, Maturity after five to ten years, Estimated Fair Value	2,876
Available-for-Sale, Maturing after ten years, Amortized Cost	95,631
Available-for-Sale, Maturing after ten years, Estimated Fair Value	94,645
Held-to-Maturity, Maturing after ten years, Amortized Cost	24,437
Held-to-Maturity, Maturing after ten years, Estimated Fair Value	24,179
Available-for-Sale, Amortized Cost	185,076	$ 184,278
Available-for-Sale, Estimated Fair Value	183,858	181,910
Held-to-Maturity, Amortized Cost	29,639	25,904
Held-to-Maturity, Estimated Fair Value	$ 29,358	$ 25,508

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Note 3 - Investment Securities - Investments' Gross Unrealized Losses and Fair Value (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Available-for-Sale, Less than 12 Months, Fair Value	$ 124,317	$ 142,723
Available-for-Sale, Less than 12 Months, Unrealized Losses	(1,732)	(2,936)
Available-for-Sale, 12 Months or More, Fair Value	19,795	12,625
Available-for-Sale, 12 Months or More, Unrealized Losses	(370)	(368)
Held-to-Maturity, Less than 12 Months, Fair Value	22,704	22,361
Held-to-Maturity, Less than 12 Months, Unrealized Losses	(299)	(416)
Held-to-Maturity, 12 Months or More, Unrealized Losses	(549)
Held-to-Maturity, 12 Months or More, Fair Value	549
Held-to-Maturity, 12 Months or More, Unrealized Losses	(7)
Residential Mortgage Backed Securities [Member]
Available-for-Sale, Less than 12 Months, Fair Value	75,284	85,741
Available-for-Sale, Less than 12 Months, Unrealized Losses	(917)	(1,976)
Available-for-Sale, 12 Months or More, Fair Value	1,729	1,904
Available-for-Sale, 12 Months or More, Unrealized Losses	(21)	(27)
Commercial Mortgage Backed Securities [Member]
Available-for-Sale, Less than 12 Months, Fair Value	48,106	54,475
Available-for-Sale, Less than 12 Months, Unrealized Losses	(807)	(946)
Available-for-Sale, 12 Months or More, Fair Value	18,066	10,721
Available-for-Sale, 12 Months or More, Unrealized Losses	(349)	(341)
Held-to-Maturity, Less than 12 Months, Fair Value	13,030	12,776
Held-to-Maturity, Less than 12 Months, Unrealized Losses	(132)	(148)
Held-to-Maturity, 12 Months or More, Unrealized Losses
Held-to-Maturity, 12 Months or More, Fair Value
Held-to-Maturity, 12 Months or More, Unrealized Losses
US Government Agencies Debt Securities [Member]
Available-for-Sale, Less than 12 Months, Fair Value		1,993
Available-for-Sale, Less than 12 Months, Unrealized Losses		(7)
Available-for-Sale, 12 Months or More, Fair Value
Available-for-Sale, 12 Months or More, Unrealized Losses
Held-to-Maturity, Less than 12 Months, Fair Value	8,618	7,957
Held-to-Maturity, Less than 12 Months, Unrealized Losses	(152)	(222)
Held-to-Maturity, 12 Months or More, Unrealized Losses
Held-to-Maturity, 12 Months or More, Fair Value
Held-to-Maturity, 12 Months or More, Unrealized Losses
US States and Political Subdivisions Debt Securities [Member]
Available-for-Sale, Less than 12 Months, Fair Value	847	434
Available-for-Sale, Less than 12 Months, Unrealized Losses	(8)	(7)
Available-for-Sale, 12 Months or More, Fair Value
Available-for-Sale, 12 Months or More, Unrealized Losses
Held-to-Maturity, Less than 12 Months, Fair Value	1,056	1,628
Held-to-Maturity, Less than 12 Months, Unrealized Losses	(15)	(46)
Held-to-Maturity, 12 Months or More, Unrealized Losses	(549)
Held-to-Maturity, 12 Months or More, Fair Value	549
Held-to-Maturity, 12 Months or More, Unrealized Losses	(7)
US Treasury Securities [Member]
Available-for-Sale, Less than 12 Months, Fair Value	80	80
Available-for-Sale, Less than 12 Months, Unrealized Losses
Available-for-Sale, 12 Months or More, Fair Value
Available-for-Sale, 12 Months or More, Unrealized Losses

XML

Note 4 - Loans and Allowance for Loan Losses (Details Textual) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Number of Portfolio Segments	8
Number of Loans, Related Party	0	1
Financing Receivable, Recorded Investment, Nonaccrual Status	$ 2,205	$ 2,417
Loans and Leases Receivable, Impaired, Interest Lost on Nonaccrual Loans	9	35
Interest Income Recorded	$ 1	4
Troubled Debt Restructuring, Modified Period Term	180 days
Financing Receivable, Restructuring Recorded Investment With Nonaccrual Status	$ 200	100
Financing Receivable, Modifications, Recorded Investment		$ 300
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	0	0
Loans Modified in a Troubled Debt Restructuring, Individually Evaluated for Impairment, Principal Balance, Threshold	$ 500
Allowance for Credit Losses, Change in Method of Calculating Impairment	9	$ 15
Financing Receivable, Restructuring, Recorded Investment Restored to Accrual Status	0
Minimum [Member]
Loans and Leases Receivable, Nonperforming, Nonaccrual of Interest	500
Minimum [Member] | ALC [Member]
Loans and Leases Receivable, Nonperforming, Nonaccrual of Interest	100
Related Party Loan [Member]
Loans and Leases Receivable, Related Parties	2,700	2,700
Loans and Leases Receivable, Related Parties, Proceeds	$ 35	$ 100
Real Estate [Member]
Percentage of Loan Portfolio	56.40%	56.60%

XML

Note 4 - Loans and Allowance for Loan Losses - Loan Portfolio By Reporting Segment and Portfolio Segment (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
Total loans	$ 328,767	$ 334,781
Less: Unearned interest, fees and deferred cost	6,211	7,153
Allowance for loan losses	4,879	4,856
Net loans	317,677	322,772	$ 263,975
FUSB [Member]
Total loans	235,686	239,869
Less: Unearned interest, fees and deferred cost	249	218
Allowance for loan losses	2,521	2,409		$ 1,329
Net loans	232,916	237,242
ALC [Member]
Total loans	93,081	94,912
Less: Unearned interest, fees and deferred cost	5,962	6,935
Allowance for loan losses	2,358	2,447		2,452
Net loans	84,761	85,530
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Total loans	25,853	23,772
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member] | FUSB [Member]
Total loans	25,853	23,772
Allowance for loan losses	606	535		110
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member] | ALC [Member]
Total loans
Allowance for loan losses
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Total loans	45,528	46,679
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member] | FUSB [Member]
Total loans	32,535	32,955
Allowance for loan losses	283	304		138
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member] | ALC [Member]
Total loans	12,993	13,724
Allowance for loan losses	76	107		250
Real Estate [Member] | Secured by Multi-family Residential Properties [Member]
Total loans	16,464	16,627
Real Estate [Member] | Secured by Multi-family Residential Properties [Member] | FUSB [Member]
Total loans	16,464	16,627
Allowance for loan losses	115	88		29
Real Estate [Member] | Secured by Multi-family Residential Properties [Member] | ALC [Member]
Total loans
Allowance for loan losses
Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member]
Total loans	97,294	102,112
Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member] | FUSB [Member]
Total loans	97,294	102,112
Allowance for loan losses	783	903		351
Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member] | ALC [Member]
Total loans
Allowance for loan losses
Real Estate [Member] | Other Real Estate Loans [Member]
Total loans	230	234
Real Estate [Member] | Other Real Estate Loans [Member] | FUSB [Member]
Total loans	230	234
Allowance for loan losses	2	2		1
Real Estate [Member] | Other Real Estate Loans [Member] | ALC [Member]
Total loans
Allowance for loan losses
Commercial and Industrial Loans [Member]
Total loans	57,253	57,963
Commercial and Industrial Loans [Member] | FUSB [Member]
Total loans	57,253	57,963
Allowance for loan losses	688	527		659
Commercial and Industrial Loans [Member] | ALC [Member]
Total loans
Allowance for loan losses
Consumer Portfolio Segment [Member] | FUSB [Member]
Total loans	6,057	6,206
Consumer Portfolio Segment [Member] | Consumer Loans[Member]
Total loans	38,949	42,619
Consumer Portfolio Segment [Member] | Consumer Loans[Member] | FUSB [Member]
Total loans	6,057	6,206
Allowance for loan losses	44	50		41
Consumer Portfolio Segment [Member] | Consumer Loans[Member] | ALC [Member]
Total loans	32,892	36,413
Allowance for loan losses	1,666	1,717		1,584
Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Total loans	47,196	44,775
Consumer Portfolio Segment [Member] | Indirect Sales [Member] | FUSB [Member]
Total loans
Allowance for loan losses
Consumer Portfolio Segment [Member] | Indirect Sales [Member] | ALC [Member]
Total loans	47,196	44,775
Allowance for loan losses	$ 616	$ 623		$ 618

XML

Note 4 - Loans and Allowance for Loan Losses - Changes in Allowance for Loan Losses and Recorded Investment in Loans (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Beginning balance	$ 4,856
Provision for loan losses	515	$ 167
Ending balance	4,879		$ 4,856
Total loans receivable	328,767		334,781
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Total loans receivable	25,853		23,772
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Total loans receivable	45,528		46,679
Real Estate [Member] | Secured by Multi-family Residential Properties [Member]
Total loans receivable	16,464		16,627
Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member]
Total loans receivable	97,294		102,112
Real Estate [Member] | Other Real Estate Loans [Member]
Total loans receivable	230		234
Commercial and Industrial Loans [Member]
Total loans receivable	57,253		57,963
Consumer Portfolio Segment [Member] | Consumer Loans[Member]
Total loans receivable	38,949		42,619
Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Total loans receivable	47,196		44,775
FUSB [Member]
Beginning balance	2,409	1,329	1,329
Charge-offs	(2)		(151)
Recoveries	114		346
Provision for loan losses			885
Ending balance	2,521		2,409
Individually evaluated for impairment	574		535
Collectively evaluated for impairment	1,947		1,874
Individually evaluated for impairment	2,164		2,103
Collectively evaluated for impairment	233,522		237,766
Total loans receivable	235,686		239,869
FUSB [Member] | Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Beginning balance	535	110	110
Charge-offs
Recoveries			200
Provision for loan losses	71		225
Ending balance	606		535
Individually evaluated for impairment	422		423
Collectively evaluated for impairment	184		112
Individually evaluated for impairment	1,361		1,361
Collectively evaluated for impairment	24,492		22,411
Total loans receivable	25,853		23,772
FUSB [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Beginning balance	304	138	138
Charge-offs			(66)
Recoveries	31		23
Provision for loan losses	(52)		209
Ending balance	283		304
Individually evaluated for impairment	5		5
Collectively evaluated for impairment	278		299
Individually evaluated for impairment	191		193
Collectively evaluated for impairment	32,344		32,762
Total loans receivable	32,535		32,955
FUSB [Member] | Real Estate [Member] | Secured by Multi-family Residential Properties [Member]
Beginning balance	88	29	29
Charge-offs
Recoveries
Provision for loan losses	27		59
Ending balance	115		88
Individually evaluated for impairment
Collectively evaluated for impairment	115		88
Individually evaluated for impairment
Collectively evaluated for impairment	16,464		16,627
Total loans receivable	16,464		16,627
FUSB [Member] | Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member]
Beginning balance	903	351	351
Charge-offs			(40)
Recoveries	66
Provision for loan losses	(186)		592
Ending balance	783		903
Individually evaluated for impairment	102		107
Collectively evaluated for impairment	681		796
Individually evaluated for impairment	542		549
Collectively evaluated for impairment	96,752		101,563
Total loans receivable	97,294		102,112
FUSB [Member] | Real Estate [Member] | Other Real Estate Loans [Member]
Beginning balance	2	1	1
Charge-offs
Recoveries
Provision for loan losses			1
Ending balance	2		2
Individually evaluated for impairment
Collectively evaluated for impairment	2		2
Individually evaluated for impairment
Collectively evaluated for impairment	230		234
Total loans receivable	230		234
FUSB [Member] | Commercial and Industrial Loans [Member]
Beginning balance	527	659	659
Charge-offs			(2)
Recoveries	4		73
Provision for loan losses	157		(203)
Ending balance	688		527
Individually evaluated for impairment	45
Collectively evaluated for impairment	643		527
Individually evaluated for impairment	70
Collectively evaluated for impairment	57,183		57,963
Total loans receivable	57,253		57,963
FUSB [Member] | Consumer Portfolio Segment [Member]
Total loans receivable	6,057		6,206
FUSB [Member] | Consumer Portfolio Segment [Member] | Consumer Loans[Member]
Beginning balance	50	41	41
Charge-offs	(2)		(43)
Recoveries	13		50
Provision for loan losses	(17)		2
Ending balance	44		50
Individually evaluated for impairment
Collectively evaluated for impairment	44		50
Individually evaluated for impairment
Collectively evaluated for impairment	6,057		6,206
Total loans receivable	6,057		6,206
FUSB [Member] | Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Beginning balance
Charge-offs
Recoveries
Provision for loan losses
Ending balance
Individually evaluated for impairment
Collectively evaluated for impairment
Individually evaluated for impairment
Collectively evaluated for impairment
Total loans receivable
ALC [Member]
Beginning balance	2,447	2,452	2,452
Charge-offs	(806)		(3,026)
Recoveries	202		710
Provision for loan losses	515		2,311
Ending balance	2,358		2,447
Individually evaluated for impairment
Collectively evaluated for impairment	2,358		2,447
Individually evaluated for impairment
Collectively evaluated for impairment	93,081		94,912
Total loans receivable	93,081		94,912
ALC [Member] | Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Beginning balance
Charge-offs
Recoveries
Provision for loan losses
Ending balance
Individually evaluated for impairment
Collectively evaluated for impairment
Individually evaluated for impairment
Collectively evaluated for impairment
Total loans receivable
ALC [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Beginning balance	107	250	250
Charge-offs	(13)		(56)
Recoveries	15		39
Provision for loan losses	(33)		(126)
Ending balance	76		107
Individually evaluated for impairment
Collectively evaluated for impairment	76		107
Individually evaluated for impairment
Collectively evaluated for impairment	12,993		13,724
Total loans receivable	12,993		13,724
ALC [Member] | Real Estate [Member] | Secured by Multi-family Residential Properties [Member]
Beginning balance
Charge-offs
Recoveries
Provision for loan losses
Ending balance
Individually evaluated for impairment
Collectively evaluated for impairment
Individually evaluated for impairment
Collectively evaluated for impairment
Total loans receivable
ALC [Member] | Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member]
Beginning balance
Charge-offs
Recoveries
Provision for loan losses
Ending balance
Individually evaluated for impairment
Collectively evaluated for impairment
Individually evaluated for impairment
Collectively evaluated for impairment
Total loans receivable
ALC [Member] | Real Estate [Member] | Other Real Estate Loans [Member]
Beginning balance
Charge-offs
Recoveries
Provision for loan losses
Ending balance
Individually evaluated for impairment
Collectively evaluated for impairment
Individually evaluated for impairment
Collectively evaluated for impairment
Total loans receivable
ALC [Member] | Commercial and Industrial Loans [Member]
Beginning balance
Charge-offs
Recoveries
Provision for loan losses
Ending balance
Individually evaluated for impairment
Collectively evaluated for impairment
Individually evaluated for impairment
Collectively evaluated for impairment
Total loans receivable
ALC [Member] | Consumer Portfolio Segment [Member] | Consumer Loans[Member]
Beginning balance	1,717	1,584	1,584
Charge-offs	(658)		(2,218)
Recoveries	137		451
Provision for loan losses	470		1,900
Ending balance	1,666		1,717
Individually evaluated for impairment
Collectively evaluated for impairment	1,666		1,717
Individually evaluated for impairment
Collectively evaluated for impairment	32,892		36,413
Total loans receivable	32,892		36,413
ALC [Member] | Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Beginning balance	623	618	618
Charge-offs	(135)		(752)
Recoveries	50		220
Provision for loan losses	78		537
Ending balance	616		623
Individually evaluated for impairment
Collectively evaluated for impairment	616		623
Individually evaluated for impairment
Collectively evaluated for impairment	47,196		44,775
Total loans receivable	47,196		44,775
FUSB and ALC [Member]
Beginning balance	4,856	3,781	3,781
Charge-offs	(808)		(3,177)
Recoveries	316		1,056
Provision for loan losses	515		3,196
Ending balance	4,879		4,856
Individually evaluated for impairment	574		535
Collectively evaluated for impairment	4,305		4,321
Individually evaluated for impairment	2,164		2,103
Collectively evaluated for impairment	326,603		332,678
Total loans receivable	328,767		334,781
FUSB and ALC [Member] | Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Beginning balance	535	110	110
Charge-offs
Recoveries			200
Provision for loan losses	71		225
Ending balance	606		535
Individually evaluated for impairment	422		423
Collectively evaluated for impairment	184		112
Individually evaluated for impairment	1,361		1,361
Collectively evaluated for impairment	24,492		22,411
Total loans receivable	25,853		23,772
FUSB and ALC [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Beginning balance	411	388	388
Charge-offs	(13)		(122)
Recoveries	46		62
Provision for loan losses	(85)		83
Ending balance	359		411
Individually evaluated for impairment	5		5
Collectively evaluated for impairment	354		406
Individually evaluated for impairment	191		193
Collectively evaluated for impairment	45,337		46,486
Total loans receivable	45,528		46,679
FUSB and ALC [Member] | Real Estate [Member] | Secured by Multi-family Residential Properties [Member]
Beginning balance	88	29	29
Charge-offs
Recoveries
Provision for loan losses	27		59
Ending balance	115		88
Individually evaluated for impairment
Collectively evaluated for impairment	115		88
Individually evaluated for impairment
Collectively evaluated for impairment	16,464		16,627
Total loans receivable	16,464		16,627
FUSB and ALC [Member] | Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member]
Beginning balance	903	351	351
Charge-offs			(40)
Recoveries	66
Provision for loan losses	(186)		592
Ending balance	783		903
Individually evaluated for impairment	102		107
Collectively evaluated for impairment	681		796
Individually evaluated for impairment	542		549
Collectively evaluated for impairment	96,752		101,563
Total loans receivable	97,294		102,112
FUSB and ALC [Member] | Real Estate [Member] | Other Real Estate Loans [Member]
Beginning balance	2	1	1
Charge-offs
Recoveries
Provision for loan losses			1
Ending balance	2		2
Individually evaluated for impairment
Collectively evaluated for impairment	2		2
Individually evaluated for impairment
Collectively evaluated for impairment	230		234
Total loans receivable	230		234
FUSB and ALC [Member] | Commercial and Industrial Loans [Member]
Beginning balance	527	659	659
Charge-offs			(2)
Recoveries	4		73
Provision for loan losses	157		(203)
Ending balance	688		527
Individually evaluated for impairment	45
Collectively evaluated for impairment	643		527
Individually evaluated for impairment	70
Collectively evaluated for impairment	57,183		57,963
Total loans receivable	57,253		57,963
FUSB and ALC [Member] | Consumer Portfolio Segment [Member] | Consumer Loans[Member]
Beginning balance	1,767	1,625	1,625
Charge-offs	(660)		(2,261)
Recoveries	150		501
Provision for loan losses	453		1,902
Ending balance	1,710		1,767
Individually evaluated for impairment
Collectively evaluated for impairment	1,710		1,767
Individually evaluated for impairment
Collectively evaluated for impairment	38,949		42,619
Total loans receivable	38,949		42,619
FUSB and ALC [Member] | Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Beginning balance	623	$ 618	618
Charge-offs	(135)		(752)
Recoveries	50		220
Provision for loan losses	78		537
Ending balance	616		623
Individually evaluated for impairment
Collectively evaluated for impairment	616		623
Individually evaluated for impairment
Collectively evaluated for impairment	47,196		44,775
Total loans receivable	$ 47,196		$ 44,775

XML

Note 4 - Loans and Allowance for Loan Losses - Carrying Amount of Loans By Credit Quality Indicator (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Total loans	$ 328,767	$ 334,781
FUSB [Member]
Total loans	235,686	239,869
FUSB [Member] | Pass [Member]
Total loans	227,766	231,785
FUSB [Member] | Special Mention [Member]
Total loans	4,675	4,755
FUSB [Member] | Substandard [Member]
Total loans	3,245	3,329
FUSB [Member] | Doubtful [Member]
Total loans
ALC [Member]
Total loans	93,081	94,912
ALC [Member] | Performing Financial Instruments [Member]
Total loans	91,439	93,013
ALC [Member] | Nonperforming Financial Instruments [Member]
Total loans	1,642	1,899
Consumer Portfolio Segment [Member] | FUSB [Member]
Total loans	6,057	6,206
Consumer Portfolio Segment [Member] | FUSB [Member] | Pass [Member]
Total loans	6,057	6,126
Consumer Portfolio Segment [Member] | FUSB [Member] | Special Mention [Member]
Total loans
Consumer Portfolio Segment [Member] | FUSB [Member] | Substandard [Member]
Total loans		80
Consumer Portfolio Segment [Member] | FUSB [Member] | Doubtful [Member]
Total loans
Commercial and Industrial Loans [Member]
Total loans	57,253	57,963
Commercial and Industrial Loans [Member] | FUSB [Member]
Total loans	57,253	57,963
Commercial and Industrial Loans [Member] | FUSB [Member] | Pass [Member]
Total loans	54,816	55,481
Commercial and Industrial Loans [Member] | FUSB [Member] | Special Mention [Member]
Total loans	2,187	2,227
Commercial and Industrial Loans [Member] | FUSB [Member] | Substandard [Member]
Total loans	250	255
Commercial and Industrial Loans [Member] | FUSB [Member] | Doubtful [Member]
Total loans
Commercial and Industrial Loans [Member] | ALC [Member]
Total loans
Other Loans [Member] | FUSB [Member]
Total loans
Other Loans [Member] | FUSB [Member] | Pass [Member]
Total loans
Other Loans [Member] | FUSB [Member] | Special Mention [Member]
Total loans
Other Loans [Member] | FUSB [Member] | Substandard [Member]
Total loans
Other Loans [Member] | FUSB [Member] | Doubtful [Member]
Total loans
Construction, Land Development and Other Land Loans [Member] | Real Estate [Member]
Total loans	25,853	23,772
Construction, Land Development and Other Land Loans [Member] | Real Estate [Member] | FUSB [Member]
Total loans	25,853	23,772
Construction, Land Development and Other Land Loans [Member] | Real Estate [Member] | FUSB [Member] | Pass [Member]
Total loans	24,323	22,240
Construction, Land Development and Other Land Loans [Member] | Real Estate [Member] | FUSB [Member] | Special Mention [Member]
Total loans
Construction, Land Development and Other Land Loans [Member] | Real Estate [Member] | FUSB [Member] | Substandard [Member]
Total loans	1,530	1,532
Construction, Land Development and Other Land Loans [Member] | Real Estate [Member] | FUSB [Member] | Doubtful [Member]
Total loans
Construction, Land Development and Other Land Loans [Member] | Real Estate [Member] | ALC [Member]
Total loans
Secured by 1-4 Family Residential Properties [Member] | Real Estate [Member]
Total loans	45,528	46,679
Secured by 1-4 Family Residential Properties [Member] | Real Estate [Member] | FUSB [Member]
Total loans	32,535	32,955
Secured by 1-4 Family Residential Properties [Member] | Real Estate [Member] | FUSB [Member] | Pass [Member]
Total loans	31,552	31,995
Secured by 1-4 Family Residential Properties [Member] | Real Estate [Member] | FUSB [Member] | Special Mention [Member]
Total loans	207	213
Secured by 1-4 Family Residential Properties [Member] | Real Estate [Member] | FUSB [Member] | Substandard [Member]
Total loans	776	747
Secured by 1-4 Family Residential Properties [Member] | Real Estate [Member] | FUSB [Member] | Doubtful [Member]
Total loans
Secured by 1-4 Family Residential Properties [Member] | Real Estate [Member] | ALC [Member]
Total loans	12,993	13,724
Secured by 1-4 Family Residential Properties [Member] | Real Estate [Member] | ALC [Member] | Performing Financial Instruments [Member]
Total loans	12,744	13,507
Secured by 1-4 Family Residential Properties [Member] | Real Estate [Member] | ALC [Member] | Nonperforming Financial Instruments [Member]
Total loans	249	217
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member] | ALC [Member]
Total loans		13,724
Consumer Loans[Member] | Consumer Portfolio Segment [Member]
Total loans	38,949	42,619
Consumer Loans[Member] | Consumer Portfolio Segment [Member] | FUSB [Member]
Total loans	6,057	6,206
Consumer Loans[Member] | Consumer Portfolio Segment [Member] | ALC [Member]
Total loans	32,892	36,413
Consumer Loans[Member] | Consumer Portfolio Segment [Member] | ALC [Member] | Performing Financial Instruments [Member]
Total loans	31,994	35,278
Consumer Loans[Member] | Consumer Portfolio Segment [Member] | ALC [Member] | Nonperforming Financial Instruments [Member]
Total loans	898	1,135
Indirect Sales [Member] | Consumer Portfolio Segment [Member]
Total loans	47,196	44,775
Indirect Sales [Member] | Consumer Portfolio Segment [Member] | FUSB [Member]
Total loans
Indirect Sales [Member] | Consumer Portfolio Segment [Member] | ALC [Member]
Total loans	47,196	44,775
Indirect Sales [Member] | Consumer Portfolio Segment [Member] | ALC [Member] | Performing Financial Instruments [Member]
Total loans	46,701	44,228
Indirect Sales [Member] | Consumer Portfolio Segment [Member] | ALC [Member] | Nonperforming Financial Instruments [Member]
Total loans	495	547
Secured by Multi-family Residential Properties [Member] | Real Estate [Member]
Total loans	16,464	16,627
Secured by Multi-family Residential Properties [Member] | Real Estate [Member] | FUSB [Member]
Total loans	16,464	16,627
Secured by Multi-family Residential Properties [Member] | Real Estate [Member] | FUSB [Member] | Pass [Member]
Total loans	16,464	16,627
Secured by Multi-family Residential Properties [Member] | Real Estate [Member] | FUSB [Member] | Special Mention [Member]
Total loans
Secured by Multi-family Residential Properties [Member] | Real Estate [Member] | FUSB [Member] | Substandard [Member]
Total loans
Secured by Multi-family Residential Properties [Member] | Real Estate [Member] | FUSB [Member] | Doubtful [Member]
Total loans
Secured by Multi-family Residential Properties [Member] | Real Estate [Member] | ALC [Member]
Total loans
Secured by Non-farm, Non-residential Properties [Member] | Real Estate [Member]
Total loans	97,294	102,112
Secured by Non-farm, Non-residential Properties [Member] | Real Estate [Member] | FUSB [Member]
Total loans	97,294	102,112
Secured by Non-farm, Non-residential Properties [Member] | Real Estate [Member] | FUSB [Member] | Pass [Member]
Total loans	94,324	99,082
Secured by Non-farm, Non-residential Properties [Member] | Real Estate [Member] | FUSB [Member] | Special Mention [Member]
Total loans	2,281	2,315
Secured by Non-farm, Non-residential Properties [Member] | Real Estate [Member] | FUSB [Member] | Substandard [Member]
Total loans	689	715
Secured by Non-farm, Non-residential Properties [Member] | Real Estate [Member] | FUSB [Member] | Doubtful [Member]
Total loans
Secured by Non-farm, Non-residential Properties [Member] | Real Estate [Member] | ALC [Member]
Total loans
Other Real Estate Loans [Member] | Real Estate [Member]
Total loans	230	234
Other Real Estate Loans [Member] | Real Estate [Member] | FUSB [Member]
Total loans	230	234
Other Real Estate Loans [Member] | Real Estate [Member] | FUSB [Member] | Pass [Member]
Total loans	230	234
Other Real Estate Loans [Member] | Real Estate [Member] | FUSB [Member] | Special Mention [Member]
Total loans
Other Real Estate Loans [Member] | Real Estate [Member] | FUSB [Member] | Substandard [Member]
Total loans
Other Real Estate Loans [Member] | Real Estate [Member] | FUSB [Member] | Doubtful [Member]
Total loans
Other Real Estate Loans [Member] | Real Estate [Member] | ALC [Member]
Total loans

XML

Note 4 - Loans and Allowance for Loan Losses - Schedule of Aging Analysis of Past Due Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Total loans	$ 328,767	$ 334,781
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Total loans	25,853	23,772
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Total loans	45,528	46,679
Real Estate [Member] | Secured by Multi-family Residential Properties [Member]
Total loans	16,464	16,627
Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member]
Total loans	97,294	102,112
Real Estate [Member] | Other Real Estate Loans [Member]
Total loans	230	234
Commercial and Industrial Loans [Member]
Total loans	57,253	57,963
Consumer Portfolio Segment [Member] | Consumer Loans[Member]
Total loans	38,949	42,619
Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Total loans	47,196	44,775
FUSB [Member]
Total past due	582	1,268
Current	235,104	238,601
Total loans	235,686	239,869
Accruing loans past due 90 days or more amounted
FUSB [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total past due	292	245
FUSB [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Total past due	258	926
FUSB [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Total past due	32	97
FUSB [Member] | Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Total past due	86	86
Current	25,767	23,686
Total loans	25,853	23,772
Accruing loans past due 90 days or more amounted
FUSB [Member] | Real Estate [Member] | Construction, Land Development and Other Land Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total past due	86	86
FUSB [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Total past due	388	378
Current	32,147	32,577
Total loans	32,535	32,955
Accruing loans past due 90 days or more amounted
FUSB [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total past due	191	145
FUSB [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Total past due	197	164
FUSB [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Total past due		69
FUSB [Member] | Real Estate [Member] | Secured by Multi-family Residential Properties [Member]
Current	16,464	16,627
Total loans	16,464	16,627
Accruing loans past due 90 days or more amounted
FUSB [Member] | Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member]
Total past due		762
Current	97,294	101,350
Total loans	97,294	102,112
Accruing loans past due 90 days or more amounted
FUSB [Member] | Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Total past due		762
FUSB [Member] | Real Estate [Member] | Other Real Estate Loans [Member]
Current	230	234
Total loans	230	234
Accruing loans past due 90 days or more amounted
FUSB [Member] | Commercial and Industrial Loans [Member]
Total past due	21	14
Current	57,232	57,949
Total loans	57,253	57,963
Accruing loans past due 90 days or more amounted
FUSB [Member] | Commercial and Industrial Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total past due	15	14
FUSB [Member] | Commercial and Industrial Loans [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Total past due	6
FUSB [Member] | Consumer Portfolio Segment [Member]
Total past due	87	28
Current	5,970	6,178
Total loans	6,057	6,206
Accruing loans past due 90 days or more amounted
FUSB [Member] | Consumer Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Total past due	61
FUSB [Member] | Consumer Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Total past due	26	28
FUSB [Member] | Consumer Portfolio Segment [Member] | Consumer Loans[Member]
Total loans	6,057	6,206
FUSB [Member] | Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Total loans
ALC [Member]
Total past due	2,690	3,080
Current	90,391	91,832
Total loans	93,081	94,912
Accruing loans past due 90 days or more amounted
ALC [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total past due	1,590	1,806
ALC [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Total past due	617	693
ALC [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Total past due	483	581
ALC [Member] | Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Total loans
Accruing loans past due 90 days or more amounted
ALC [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Total past due	290	303
Current	12,703	13,421
Total loans	12,993	13,724
Accruing loans past due 90 days or more amounted
ALC [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total past due	242	213
ALC [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Total past due	47	61
ALC [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Total past due	1	29
ALC [Member] | Real Estate [Member] | Secured by Multi-family Residential Properties [Member]
Current
Total loans
Accruing loans past due 90 days or more amounted
ALC [Member] | Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member]
Current
Total loans
Accruing loans past due 90 days or more amounted
ALC [Member] | Real Estate [Member] | Other Real Estate Loans [Member]
Current
Total loans
Accruing loans past due 90 days or more amounted
ALC [Member] | Commercial and Industrial Loans [Member]
Current
Total loans
Accruing loans past due 90 days or more amounted
ALC [Member] | Consumer Portfolio Segment [Member] | Consumer Loans[Member]
Total past due	1,659	1,958
Current	31,233	34,455
Total loans	32,892	36,413
Accruing loans past due 90 days or more amounted
ALC [Member] | Consumer Portfolio Segment [Member] | Consumer Loans[Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total past due	889	1,104
ALC [Member] | Consumer Portfolio Segment [Member] | Consumer Loans[Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Total past due	434	441
ALC [Member] | Consumer Portfolio Segment [Member] | Consumer Loans[Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Total past due	336	413
ALC [Member] | Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Total past due	741	819
Current	46,455	43,956
Total loans	47,196	44,775
Accruing loans past due 90 days or more amounted
ALC [Member] | Consumer Portfolio Segment [Member] | Indirect Sales [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total past due	459	489
ALC [Member] | Consumer Portfolio Segment [Member] | Indirect Sales [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Total past due	136	191
ALC [Member] | Consumer Portfolio Segment [Member] | Indirect Sales [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Total past due	$ 146	$ 139

XML

Note 4 - Loans and Allowance for Loan Losses - Analysis of Non-accruing Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Total loans	$ 2,205	$ 2,417
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Total loans	86	86
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Total loans	623	570
Real Estate [Member] | Secured by Multi-family Residential Properties [Member]
Total loans		0
Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member]
Total loans	39	53
Commercial and Industrial Loans [Member]
Total loans	31	32
Consumer Portfolio Segment [Member]
Total loans	$ 1,426	$ 1,676

XML

Note 4 - Loans and Allowance for Loan Losses - Carrying Amount of Impaired Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Impaired loans with no related allowance recorded, Carrying Amount
Impaired loans with no related allowance recorded, Unpaid Principal Balance
Impaired loans with an allowance recorded, Carrying Amount	2,164	2,103
Impaired loans with an allowance recorded, Unpaid Principal Balance	2,164	2,103
Impaired loans with an allowance recorded, Related Allowances	574	535
Total impaired loans, Carrying Amount	2,164	2,103
Total impaired loans, Unpaid Principal Balance	2,164	2,103
Total impaired loans, Related Allowance	574	535
Total impaired loans, Carrying Amount	2,164	2,103
Total impaired loans, Unpaid Principal Balance	2,164	2,103
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Impaired loans with no related allowance recorded, Carrying Amount
Impaired loans with no related allowance recorded, Unpaid Principal Balance
Impaired loans with an allowance recorded, Carrying Amount	1,361	1,361
Impaired loans with an allowance recorded, Unpaid Principal Balance	1,361	1,361
Impaired loans with an allowance recorded, Related Allowances	422	423
Total impaired loans, Carrying Amount	1,361	1,361
Total impaired loans, Unpaid Principal Balance	1,361	1,361
Total impaired loans, Related Allowance	422	423
Total impaired loans, Carrying Amount	1,361	1,361
Total impaired loans, Unpaid Principal Balance	1,361	1,361
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Impaired loans with no related allowance recorded, Carrying Amount
Impaired loans with no related allowance recorded, Unpaid Principal Balance
Impaired loans with an allowance recorded, Carrying Amount	191	193
Impaired loans with an allowance recorded, Unpaid Principal Balance	191	193
Impaired loans with an allowance recorded, Related Allowances	5	5
Total impaired loans, Carrying Amount	191	193
Total impaired loans, Unpaid Principal Balance	191	193
Total impaired loans, Related Allowance	5	5
Total impaired loans, Carrying Amount	191	193
Total impaired loans, Unpaid Principal Balance	191	193
Real Estate [Member] | Secured by Multi-family Residential Properties [Member]
Impaired loans with no related allowance recorded, Carrying Amount
Impaired loans with no related allowance recorded, Unpaid Principal Balance
Impaired loans with an allowance recorded, Carrying Amount
Impaired loans with an allowance recorded, Unpaid Principal Balance
Impaired loans with an allowance recorded, Related Allowances
Total impaired loans, Carrying Amount
Total impaired loans, Unpaid Principal Balance
Total impaired loans, Related Allowance
Total impaired loans, Carrying Amount
Total impaired loans, Unpaid Principal Balance
Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member]
Impaired loans with no related allowance recorded, Carrying Amount
Impaired loans with no related allowance recorded, Unpaid Principal Balance
Impaired loans with an allowance recorded, Carrying Amount	542	549
Impaired loans with an allowance recorded, Unpaid Principal Balance	542	549
Impaired loans with an allowance recorded, Related Allowances	102	107
Total impaired loans, Carrying Amount	542	549
Total impaired loans, Unpaid Principal Balance	542	549
Total impaired loans, Related Allowance	102	107
Total impaired loans, Carrying Amount	542	549
Total impaired loans, Unpaid Principal Balance	542	549
Commercial and Industrial Loans [Member]
Impaired loans with no related allowance recorded, Carrying Amount
Impaired loans with no related allowance recorded, Unpaid Principal Balance
Impaired loans with an allowance recorded, Carrying Amount	70
Impaired loans with an allowance recorded, Unpaid Principal Balance	70
Impaired loans with an allowance recorded, Related Allowances	45
Total impaired loans, Carrying Amount	70
Total impaired loans, Unpaid Principal Balance	70
Total impaired loans, Related Allowance	45
Total impaired loans, Carrying Amount	70
Total impaired loans, Unpaid Principal Balance	$ 70

XML

Note 4 - Loans and Allowance for Loan Losses - Average Net Investment Impaired Loans and Interest Income Recognized and Received on Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Average Recorded Investment	$ 2,119	$ 2,170
Interest Income Recognized	25	88
Interest Income Received	22	84
Real Estate [Member]
Average Recorded Investment
Interest Income Recognized
Interest Income Received
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Average Recorded Investment	1,361	1,381
Interest Income Recognized	10	41
Interest Income Received	10	39
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Average Recorded Investment	193	232
Interest Income Recognized	4	14
Interest Income Received	5	14
Real Estate [Member] | Secured by Multi-family Residential Properties [Member]
Average Recorded Investment
Interest Income Recognized
Interest Income Received
Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member]
Average Recorded Investment	542	557
Interest Income Recognized	8	33
Interest Income Received	5	$ 31
Commercial and Industrial Loans [Member]
Average Recorded Investment	23
Interest Income Recognized	3
Interest Income Received	$ 2

XML

Note 4 - Loans and Allowance for Loan Losses - Number of Loans Modified Troubled Debt Restructuring by Loan Portfolio (Details) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Number of Loans | Security Loan	8	8
Pre-Modification Oustanding Principal Balance	$ 2,447	$ 2,447
Post-Modification Principal Balance	$ 1,736	$ 1,664
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Number of Loans | Security Loan	2	2
Pre-Modification Oustanding Principal Balance	$ 1,960	$ 1,960
Post-Modification Principal Balance	$ 1,363	$ 1,286
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Number of Loans | Security Loan	3	3
Pre-Modification Oustanding Principal Balance	$ 318	$ 318
Post-Modification Principal Balance	$ 246	$ 249
Real Estate [Member] | Secured by Non-farm, Non-residential Properties [Member]
Number of Loans | Security Loan	1	1
Pre-Modification Oustanding Principal Balance	$ 53	$ 53
Post-Modification Principal Balance	$ 40	$ 41
Commercial and Industrial Loans [Member]
Number of Loans | Security Loan	2	2
Pre-Modification Oustanding Principal Balance	$ 116	$ 116
Post-Modification Principal Balance	$ 87	$ 88

XML

Note 5 - Other Real Estate Owned (Details Textual) - USD ($) $ in Millions	Mar. 31, 2017	Mar. 31, 2016
Foreclosed Real Estate Owned, Fair Value Less Disposal Costs	$ 0.8	$ 1.2
Mortgage Loans in Process of Foreclosure, Amount	$ 0.1	$ 0.3

XML

Note 5 - Other Real Estate Owned - Foreclosed Property Activity (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Beginning balance	$ 4,858	$ 6,038
Transfers from loans	20	18
Sales proceeds	(288)	(686)
Gross gains	13	25
Gross losses	(16)	(16)
Net gains (losses)	(3)	9
Impairment		(23)
Ending balance	4,587	5,356
FUSB [Member]
Beginning balance	4,353	5,327
Transfers from loans
Sales proceeds	(204)	(609)
Gross gains	13
Gross losses	(1)	(16)
Net gains (losses)	12	(16)
Impairment
Ending balance	4,161	4,702
ALC [Member]
Beginning balance	505	711
Transfers from loans	20	18
Sales proceeds	(84)	(77)
Gross gains		25
Gross losses	(15)
Net gains (losses)	(15)	25
Impairment		(23)
Ending balance	$ 426	$ 654

XML

Note 6 - Investment in Limited Partnership (Details Textual) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Maximum [Member]
Variable Interest Entity, Consolidated, Carrying Amount, Assets	$ 0.1	$ 0.1
Partnership Interest [Member]
Noncontrolling Interest, Ownership Percentage by Parent	99.90%

XML

Note 7 - Short-term Borrowings (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Short-term Debt	$ 10,750	$ 10,119
Available Fund Lines From Correspondent Banks	18,800	18,800
Securities Sold under Agreements to Repurchase	800	100
Federal Home Loan Bank, Advances, Maturities Summary, Due in Next Twelve Months	10,000	10,000
Federal Funds Purchased	$ 0	$ 0
Minimum [Member]
Maturity Period of Federal Funds	1 day
Maximum [Member]
Maturity Period of Federal Funds	4 days

XML

Note 8 - Long-term Debt (Details Textual) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Long-term Federal Home Loan Bank Advances	$ 15.0	$ 15.0
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	26.1	28.0
Federal Home Loan Bank, Advances, General Debt Obligations, Amount of Available, Unused Funds	$ 157.0	$ 155.0

XML

Note 9 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Income Tax Expense (Benefit)	$ 130	$ 100
Period With Cumulative Gain Position			3 years
Effective Income Tax Rate Reconciliation, Percent	24.30%	24.00%
Deferred Tax Assets, Net	$ 8,200		$ 8,700

XML

Note 10 - Deferred Compensation Plans (Details Textual) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Other Liabilities [Member]
Deferred Compensation Liability, Current and Noncurrent	$ 3.5	$ 3.5

XML

Note 11 - Stock Awards (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value	$ 0.7	$ 0.1
Employee Stock Option [Member] | Omnibus Incentive Plan [Member]
Allocated Share-based Compensation Expense	$ 0.1	$ 0.1
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Remaining Contractual Term	10 years
Employee Stock Option [Member] | Omnibus Incentive Plan [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Employee Stock Option [Member] | Omnibus Incentive Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Restricted Stock [Member] | Omnibus Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	7,533
Restricted Stock [Member] | Omnibus Incentive Plan [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Restricted Stock [Member] | Omnibus Incentive Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years

XML

Note 11 - Stock Awards - Fair Value Assumptions (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Risk-free interest rate	2.23%	1.58%
Expected term (Year)	7 years 182 days	7 years 182 days
Expected stock price volatility	25.36%	25.25%
Dividend yield	1.50%	1.50%

XML

Note 11 - Stock Awards - Stock Option Activity (Details) - $ / shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Outstanding, beginning of period, Number of Shares (in shares)	272,550	175,550
Outstanding, beginning of period, Average Exercise Price (in dollars per share)	$ 8.21	$ 8.17
Stock Options Granted, Number of Shares (in shares)	64,600	97,000
Stock Options Granted, Average Exercise Price (in dollars per share)	$ 14.11	$ 8.30
Stock Options Exercised, Number of Shares (in shares)	16,650	0
Stock Options Exercised, Average Exercise Price (in dollars per share)	$ 8.15	$ 0
Stock Options Expired, Number of Shares (in shares)	0	0
Stock Options Expired, Average Exercise Price (in dollars per share)	$ 0	$ 0
Stock Options Forfeited, Number of Shares (in shares)	0
Stock Options Forfeited, Average Exercise Price (in dollars per share)	$ 0
Options outstanding, end of period, Number of Shares (in shares)	320,500	272,550
Options outstanding, end of period, Average Exercise Price (in dollars per share)	$ 9.41	$ 8.21
Options exercisable, end of period, Number of Shares (in shares)	210,633	175,550
Options exercisable, end of period, Average Exercise Price (in dollars per share)	$ 8.20	$ 8.17

XML

Note 12 - Derivative Financial Instruments (Details Textual) $ in Thousands		3 Months Ended	12 Months Ended
	Apr. 05, 2016 USD ($)	Mar. 31, 2017 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2016 USD ($)
Accumulated Other Comprehensive Income (Loss), Net of Tax		$ (543)		$ (1,277)
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax		200
FUSB [Member] | Interest Rate Swap [Member] | Cash Flow Hedging [Member] | Designated as Hedging Instrument [Member]
Derivative, Notional Amount	$ 10,000
Derivative, Term of Contract	7 years
Derivative, Fixed Interest Rate	1.46%
Derivative Instruments, Gain (Loss) Recognized in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing, Net		$ 0
FUSB [Member] | Interest Rate Cap [Member] | Not Designated as Hedging Instrument [Member]
Derivative, Notional Amount			$ 40,000
Derivative, Number of Instruments Held			3
Payments of Derivative Issuance Costs			$ 100
Derivative, Fair Value, Net				$ 0

XML

Note 13 - Segment Reporting (Details Textual)	3 Months Ended
	Mar. 31, 2017
Number of Reportable Segments	2

XML

Note 13 - Segment Reporting - Results for Reportable Segments (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Net interest income	$ 6,919	$ 6,661
Provision for loan losses	515	167
Total non-interest income	1,167	989
Total non-interest expense	7,037	7,066
Income before income taxes	534	417
Provision for income taxes	130	100
Net income	404	317
Total assets	619,827	575,582	$ 606,892
Total investment securities	213,497	231,466
Total loans, net	317,677	263,975	322,772
Investment in subsidiaries	5	5
Fixed asset additions	4,087	3,229
Depreciation and amortization expense	242	232
Total interest income from external customers	7,510	7,196
Total interest income from affiliates
Intersegment Eliminations [Member]
Net interest income
Provision for loan losses
Total non-interest income	(763)	(659)
Total non-interest expense	(170)	(135)
Income before income taxes	(593)	(524)
Provision for income taxes
Net income	(593)	(524)
Total assets	(173,601)	(169,845)
Total investment securities
Total loans, net	(76,509)	(72,542)
Investment in subsidiaries	(76,976)	(77,716)
Fixed asset additions
Depreciation and amortization expense
Total interest income from external customers
Total interest income from affiliates	(1,117)	(1,015)
FUSB [Member]
Provision for loan losses			885
Total loans, net	232,916		237,242
FUSB [Member] | Operating Segments [Member]
Net interest income	3,911	3,598
Provision for loan losses		(280)
Total non-interest income	836	721
Total non-interest expense	4,401	4,334
Income before income taxes	346	265
Provision for income taxes	98	48
Net income	248	217
Total assets	622,528	577,945
Total investment securities	213,417	231,386
Total loans, net	309,425	256,037
Investment in subsidiaries	5	5
Fixed asset additions	4,025	3,224
Depreciation and amortization expense	201	180
Total interest income from external customers	3,392	3,124
Total interest income from affiliates	1,114	1,012
ALC [Member]
Provision for loan losses	515		2,311
Total loans, net	84,761		$ 85,530
ALC [Member] | Operating Segments [Member]
Net interest income	3,005	3,060
Provision for loan losses	515	447
Total non-interest income	244	252
Total non-interest expense	2,377	2,427
Income before income taxes	357	438
Provision for income taxes	130	158
Net income	227	280
Total assets	88,233	84,353
Total investment securities
Total loans, net	84,761	80,480
Investment in subsidiaries
Fixed asset additions	62	5
Depreciation and amortization expense	41	52
Total interest income from external customers	4,118	4,072
Total interest income from affiliates
Other Segments [Member] | Operating Segments [Member]
Net interest income	3	3
Provision for loan losses
Total non-interest income	850	675
Total non-interest expense	429	440
Income before income taxes	424	238
Provision for income taxes	(98)	(106)
Net income	522	344
Total assets	82,667	83,129
Total investment securities	80	80
Total loans, net
Investment in subsidiaries	76,976	77,716
Fixed asset additions
Depreciation and amortization expense
Total interest income from external customers
Total interest income from affiliates	$ 3	$ 3

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Note 14 - Guarantees, Commitments and Contingencies (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Credit Losses Associated With Derivative Contracts	$ 0	$ 0
Securities Committed to Purchase Amount	0		$ 0
Securities Committed to Sell Amount	0		$ 0
Construction Management Agreement [Member]
Construction and Development Costs	8,200
Guarantor Obligations, Maximum Exposure, Undiscounted	3,500
Development in Process, Estimated Additional Expenditures	1,700
Estimated Depreciation	$ 500

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Note 14 - Guarantees, Commitments and Contingencies - Summary of Commitments and Contingent Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Standby Letters of Credit [Member]
Commitments and contingent liabilities	$ 183	$ 183
Commitments to Extend Credit [Member]
Commitments and contingent liabilities	$ 43,806	$ 41,267

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Note 15 - Fair Value of Financial Instruments - Schedule of Assets Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Investment securities available-for-sale, at fair value	$ 183,858	$ 181,910
Fair Value, Measurements, Recurring [Member] | Other Assets [Member]
Other assets - derivatives, fair value	358	346
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Other Assets [Member]
Other assets - derivatives, fair value
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Other Assets [Member]
Other assets - derivatives, fair value	358	346
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Other Assets [Member]
Other assets - derivatives, fair value
Residential Mortgage Backed Securities [Member]
Investment securities available-for-sale, at fair value	96,499	98,409
Residential Mortgage Backed Securities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities available-for-sale, at fair value	96,499	98,409
Residential Mortgage Backed Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investment securities available-for-sale, at fair value
Residential Mortgage Backed Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investment securities available-for-sale, at fair value	96,499	98,409
Residential Mortgage Backed Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investment securities available-for-sale, at fair value
Commercial Mortgage Backed Securities [Member]
Investment securities available-for-sale, at fair value	76,501	70,530
Commercial Mortgage Backed Securities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities available-for-sale, at fair value	76,501	70,530
Commercial Mortgage Backed Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investment securities available-for-sale, at fair value
Commercial Mortgage Backed Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investment securities available-for-sale, at fair value	76,501	70,530
Commercial Mortgage Backed Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investment securities available-for-sale, at fair value
US States and Political Subdivisions Debt Securities [Member]
Investment securities available-for-sale, at fair value	8,024	10,142
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities available-for-sale, at fair value	8,024	10,142
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investment securities available-for-sale, at fair value
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investment securities available-for-sale, at fair value	8,024	10,142
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investment securities available-for-sale, at fair value
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities available-for-sale, at fair value	2,004	1,993
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investment securities available-for-sale, at fair value
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investment securities available-for-sale, at fair value	2,004	1,993
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investment securities available-for-sale, at fair value
Corporate Debt Securities [Member]
Investment securities available-for-sale, at fair value	750	756
Corporate Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities available-for-sale, at fair value	750	756
Corporate Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investment securities available-for-sale, at fair value
Corporate Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investment securities available-for-sale, at fair value	750	756
Corporate Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investment securities available-for-sale, at fair value
US Treasury Securities [Member]
Investment securities available-for-sale, at fair value	80	80
US Treasury Securities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities available-for-sale, at fair value	80	80
US Treasury Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investment securities available-for-sale, at fair value
US Treasury Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investment securities available-for-sale, at fair value	80	80
US Treasury Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investment securities available-for-sale, at fair value

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Note 15 - Fair Value of Financial Instruments - Balances of Impaired Loans and OREO Measured at Fair Value on Nonrecurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Other Assets [Member]
Financial assets measured at fair value	$ 280	$ 280
Fair Value, Inputs, Level 1 [Member] | Other Assets [Member]
Financial assets measured at fair value
Fair Value, Inputs, Level 2 [Member] | Other Assets [Member]
Financial assets measured at fair value
Fair Value, Inputs, Level 3 [Member] | Other Assets [Member]
Financial assets measured at fair value	280	280
Impaired Loans [Member]
Financial assets measured at fair value	1,590	1,568
Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member]
Financial assets measured at fair value
Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets measured at fair value
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Financial assets measured at fair value	1,590	1,568
OREO [Member]
Financial assets measured at fair value	4,587	4,858
OREO [Member] | Fair Value, Inputs, Level 1 [Member]
Financial assets measured at fair value
OREO [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets measured at fair value
OREO [Member] | Fair Value, Inputs, Level 3 [Member]
Financial assets measured at fair value	$ 4,587	$ 4,858

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Note 15 - Fair Value of Financial Instruments - Summary of Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3) (Details) - Fair Value, Inputs, Level 3 [Member] $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)
Other Assets [Member]
Fair value	$ 280
Minimum [Member] | Other Assets [Member]
Quantitative range of unobservable inputs	9.00%
Maximum [Member] | Other Assets [Member]
Quantitative range of unobservable inputs	10.00%
Weighted Average [Member] | Other Assets [Member]
Quantitative range of unobservable inputs	9.50%
Impaired Loans [Member]
Fair value	$ 1,590
Impaired Loans [Member] | Minimum [Member]
Quantitative range of unobservable inputs	9.00%
Impaired Loans [Member] | Maximum [Member]
Quantitative range of unobservable inputs	10.00%
Impaired Loans [Member] | Weighted Average [Member]
Quantitative range of unobservable inputs	9.50%
OREO [Member]
Fair value	$ 4,587
OREO [Member] | Minimum [Member]
Quantitative range of unobservable inputs	9.00%
OREO [Member] | Maximum [Member]
Quantitative range of unobservable inputs	10.00%
OREO [Member] | Weighted Average [Member]
Quantitative range of unobservable inputs	9.50%

XML

Note 15 - Fair Value of Financial Instruments - Schedule of Estimated Fair Value and Related Carrying or Notional Amounts of Company's Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Investment securities available-for-sale, at fair value	$ 183,858	$ 181,910
Investment securities held-to-maturity	29,358	25,508
Reported Value Measurement [Member]
Cash and cash equivalents	32,905	23,530
Investment securities available-for-sale, at fair value	183,858	181,910
Investment securities held-to-maturity	29,639	25,904
Federal Home Loan Bank stock	1,609	1,581
Loans, net of allowance for loan losses	317,677	322,772
Other assets – derivatives	358	346
Deposits	509,078	497,556
Short-term borrowings	10,750	10,119
Long-term debt	15,000	15,000
Deposits	509,078	497,556
Estimate of Fair Value Measurement [Member]
Cash and cash equivalents	32,905	23,530
Investment securities available-for-sale, at fair value	183,858	181,910
Investment securities held-to-maturity	29,357	25,508
Federal Home Loan Bank stock	1,609	1,581
Loans, net of allowance for loan losses	313,079	319,881
Other assets – derivatives	358	346
Deposits	508,634	497,037
Short-term borrowings	10,750	10,119
Long-term debt	15,001	14,998
Deposits	508,634	497,037
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	32,905	23,530
Investment securities available-for-sale, at fair value
Investment securities held-to-maturity
Federal Home Loan Bank stock
Loans, net of allowance for loan losses
Other assets – derivatives
Deposits
Short-term borrowings
Long-term debt
Deposits
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Cash and cash equivalents
Investment securities available-for-sale, at fair value	183,858	181,910
Investment securities held-to-maturity	29,357	25,508
Federal Home Loan Bank stock
Loans, net of allowance for loan losses
Other assets – derivatives	358	346
Deposits	508,634	497,037
Short-term borrowings	10,750	10,119
Long-term debt	15,001	14,998
Deposits	508,634	497,037
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Cash and cash equivalents
Investment securities available-for-sale, at fair value
Investment securities held-to-maturity
Federal Home Loan Bank stock	1,609	1,581
Loans, net of allowance for loan losses	313,079	319,881
Other assets – derivatives
Deposits
Short-term borrowings
Long-term debt
Deposits