(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.

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~~Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

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

If an emerging growth company, indicate by check mark ofif 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).

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


Class	Outstanding at November 4, 8~~, 2017~~2019
Common Stock, $0.01 par value	~~6,077,354~~6,222,230 shares

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

		PAGE

	PART I. FINANCIAL INFORMATION
		4
~~ITEM~~ 1.
ITEM 1. FINANCIAL STATEMENTS		4

Interim C~~ondensed~~Condensed Consolidated Balance Sheets at September 30, ~~2017~~2019 (Unaudited) and December 31, ~~2016~~2018		4

Interim C~~ondensed~~Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018 (Unaudited)		5

Interim C~~ondensed~~Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)		6

Interim Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018 (Unaudited)	6	8

Interim C~~ondensed~~Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018 (Unaudited)	7	9

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)	8
		10
~~ITEM~~ 2.
~~MANAGEMENT~~’SITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	35
		45
~~ITEM~~ 3.		��
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	50
		57
~~ITEM~~ 4.
ITEM 4. CONTROLS AND PROCEDURES	51	57

	PART II.II. OTHER INFORMATION	52
		58
~~ITEM~~ 1.
ITEM 1. LEGAL PROCEEDINGS	52
		58
~~ITEM~~ ~~1A.~~
ITEM 1A. RISK FACTORS	52
		58
~~ITEM~~ 2.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	52
		58
~~ITEM~~ 6.
ITEM 6. EXHIBITS	52	59

Signature Page	53	60

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~~”“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~~Company's Annual Report on Form 10-K as of and for the year ended December 31, ~~2016.~~2018. Specifically, with respect to statements relating to ~~loan demand, growth and earnings potential, geographic expansion and~~ the ~~adequacy~~sufficiency of the allowance for loan and lease losses, ~~for the Company,~~loan demand, cash flows, growth and earnings potential and expansion, 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, market conditions and investment returns, changes in interest rates, the pending discontinuation of LIBOR as an interest rate benchmark, 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, collateral values and ~~collateral values.~~cybersecurity threats. With respect to the Company’s acquisition of The Peoples Bank, these factors include, but are not limited to, difficulties, delays and unanticipated costs in integrating the organizations’ businesses or realized expected cost savings and other benefits; business disruptions as a result of the integration of the organizations, including possible loss of customers; diversion of management time to address integration-related issues; and changes in asset quality and credit risk as a result of the transaction. 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.

P~~ART~~PART I. ~~FINANCIAL~~FINANCIAL INFORMATION

I~~TEM~~ITEM 1.

FINANCIAL STATEMENTS

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

		September 30,			December 31,				September 30,			December 31,
		2017			2016				2019			2018
		(Unaudited)							(Unaudited)
ASSETS	ASSETS							ASSETS
Cash and due from banks		$	8,705		$	7,018			$	12,358		$	9,796
Interest-bearing deposits in banks			23,849			16,512				23,077			39,803
Total cash and cash equivalents			32,554			23,530				35,435			49,599
Federal funds sold										10,080			8,354
Investment securities available-for-sale, at fair value			158,425			181,910				96,550			132,487
Investment securities held-to-maturity, at amortized cost			27,377			25,904				17,759			21,462
Federal Home Loan Bank stock, at cost			1,396			1,581				713			703
Loans, net of allowance for loan losses of $4,808 and $4,856, respectively			338,026			322,772
Premises and equipment, net			26,242			18,340
Loans, net of allowance for loan and lease losses of $5,585 and $5,055, respectively										544,519			514,867
Premises and equipment, net of accumulated depreciation										29,319			27,643
Cash surrender value of bank-owned life insurance			14,843			14,603				15,469			15,237
Accrued interest receivable			1,877			1,987				2,348			2,816
Goodwill and core deposit intangible, net										8,934			9,312
Other real estate owned			3,819			4,858				1,248			1,505
Other assets			10,040			11,407				9,556			7,954
Total assets		$	614,599		$	606,892			$	771,930		$	791,939
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES AND SHAREHOLDERS’ EQUITY								LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits		$	508,385		$	497,556			$	677,640		$	704,725
Accrued interest expense			281			241				548			424
Other liabilities			6,444			7,735				9,731			6,826
Short-term borrowings			10,635			10,119				221			527
Long-term debt			10,000			15,000
Total liabilities			535,745			530,651				688,140			712,502
Commitments and contingencies
Shareholders’ equity:
Common stock, par value $0.01 per share, 10,000,000 shares authorized; 7,341,556 and 7,329,060 shares issued, respectively; 6,077,354 and 6,043,102 shares outstanding, respectively			73			73
Shareholders’ equity:
Common stock, par value $0.01 per share, 10,000,000 shares authorized; 7,568,053 and 7,562,264 shares issued, respectively; 6,222,230 and 6,298,062 shares outstanding, respectively										75			75
Surplus			10,657			10,786				13,730			13,496
Accumulated other comprehensive income (loss), net of tax			25			(1,277	)
Accumulated other comprehensive loss, net of tax										(573	)		(2,377	)
Retained earnings			88,525			87,434				91,731			88,668
Less treasury stock: 1,264,202 and 1,285,958 shares at cost, respectively			(20,414	)		(20,764	)
Less treasury stock: 1,345,823 and 1,264,202 shares at cost, respectively										(21,173	)		(20,414	)
Noncontrolling interest			(12	)		(11	)			—			(11	)
Total shareholders’ equity			78,854			76,241
Total liabilities and shareholders’ equity		$	614,599		$	606,892
Total shareholders’ equity										83,790			79,437
Total liabilities and shareholders’ equity									$	771,930		$	791,939

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

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)

	Three Months Ended					Nine Months Ended			Three Months Ended				Nine Months Ended
	September 30,					September 30,			September 30,				September 30,
	2017		2016		2017		2016		2019		2018		2019		2018
	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Interest income:
Interest and fees on loans	$	6,802	$	6,773	$	19,928	$	19,192	$	10,114	$	8,395	$	29,620	$	22,815
Interest on investment securities		1,018		987		3,085		3,242		913		1,057		3,143		3,146
Total interest income		7,820		7,760		23,013		22,434		11,027		9,452		32,763		25,961

Interest expense:
Interest on deposits		617		532		1,713		1,568		1,622		1,120		4,952		2,619
Interest on borrowings		68		55		189		115		58		4		58		198
Total interest expense		685		587		1,902		1,683		1,680		1,124		5,010		2,817

Net interest income		7,135		7,173		21,111		20,751		9,347		8,328		27,753		23,144

Provision for loan losses		373		680		1,464		1,383

Net interest income after provision for loan losses		6,762		6,493		19,647		19,368

Provision for loan and lease losses										883		789		1,998		2,149
Net interest income after provision for loan and lease losses										8,464		7,539		25,755		20,995
Non-interest income:
Service and other charges on deposit accounts		481		463		1,406		1,306		472		489		1,375		1,400
Credit insurance income		160		256		459		570		175		198		426		516
Net gain on sales and prepayments of investment securities		178		259		228		657		45		—		67		105
Net gain on settlement of derivative contracts										—		981		—		981
Mortgage fees from secondary market										91		128		380		389
Other income, net		417		589		1,240		1,503		631		316		1,722		993
Total non-interest income		1,236		1,567		3,333		4,036		1,414		2,112		3,970		4,384

Non-interest expense:
Salaries and employee benefits		4,370		4,334		13,048		12,734		5,089		4,643		15,272		13,743
Net occupancy and equipment		806		830		2,276		2,381		1,055		983		3,190		2,745
Other real estate/foreclosure expense, net		244		124		461		370
Computer services										421		328		1,105		937
Fees for professional services										316		242		879		781
Acquisition expenses										—		1,492		—		1,492
Other expense		1,770		2,060		5,305		6,184		1,665		1,454		5,057		4,237
Total non-interest expense		7,190		7,348		21,090		21,669		8,546		9,142		25,503		23,935

Income before income taxes		808		712		1,890		1,735		1,332		509		4,222		1,444
Provision for income taxes		173		162		435		406		214		269		865		431
Net income	$	635	$	550	$	1,455	$	1,329	$	1,118	$	240	$	3,357	$	1,013
Basic net income per share	$	0.10	$	0.09	$	0.24	$	0.22	$	0.17	$	0.04	$	0.52	$	0.17
Diluted net income per share	$	0.10	$	0.09	$	0.22	$	0.21	$	0.16	$	0.03	$	0.49	$	0.15
Dividends per share	$	0.02	$	0.02	$	0.06	$	0.06	$	0.02	$	0.02	$	0.06	$	0.06

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

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE INCOME~~CHANGES IN SHAREHOLDERS’ EQUITY

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

For the three months ended September 30, 2019 and 2018 (Unaudited)

Three Months Ended
     Nine Months Ended

September 30,
     September 30,

2017

2016
  2017   2016

(Unaudited)
     (Unaudited)
Net income
$ 635 $ 550 $ 1,455 $ 1,329
Other comprehensive income:

Unrealized holding gains (losses) on securities available-for-sale arising during period, net of tax expense (benefit) of $(7), $(39), $864 and $656, respectively
(12 ) (66 ) 1,481 1,125
Reclassification adjustment for net gains on securities available-for-sale realized in net income, net of tax expense of $66, $93, $84 and $238, respectively
(113 ) (160
)
(144 ) (410 )
Unrealized holding gains (losses) arising during the period on effective cash flow hedge derivatives, net of tax expense (benefit) of $(1), $34, $(20) and $(48), respectively (1 )
57
(35 )
(82
)
Other comprehensive income (loss)
(126 ) (169
)
1,302 633
Total comprehensive income
$ 509 $ 381 $ 2,757 $ 1,962

	Common Stock Shares Outstanding			Common Stock		Surplus		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock, at Cost			Non- controlling Interest			Total Shareholders’ Equity
Balance, June 30, 2018		6,092,264		$	73	$	10,970	$	(2,187	)	$	87,203		$	(20,414	)	$	(11	)	$	75,634
Net income		—			—		—		—			240			—			—			240
Net change in fair value of securities available-for-sale, net of tax		—			—		—		39			—			—			—			39
Net change in fair value of derivative instruments, net of tax		—			—		—		(734	)		—			—			—			(734	)
Dividends declared: $.02 per share		—			—		—		—			(126	)		—			—			(126	)
Impact of stock-based compensation plans, net		93			—		118		—			—			—			—			118
Issuance of common stock		204,355			2		2,297		—			—			—			—			2,299
Balance, September 30, 2018		6,296,712		$	75	$	13,385	$	(2,882	)	$	87,317		$	(20,414	)	$	(11	)	$	77,470

Balance, June 30, 2019		6,306,161		$	75	$	13,646	$	(338	)	$	90,737		$	(20,372	)	$	—		$	83,748
Net income		—			—		—		—			1,118			—			—			1,118
Net change in fair value of securities available-for-sale, net of tax		—			—		—		88			—			—			—			88
Net change in fair value of derivative instruments, net of tax		—			—		—		(323	)		—			—			—			(323	)
Dividends declared: $.02 per share		—			—		—		—			(124	)		—			—			(124	)
Impact of stock-based compensation plans, net		269			—		84		—			—			—			—			84
Treasury stock repurchases		(84,200	)		—		—		—			—			(801	)		—			(801	)
Balance, September 30, 2019		6,222,230		$	75	$	13,730	$	(573	)	$	91,731		$	(21,173	)	$	—		$	83,790

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

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN SHAREHOLDERS’ EQUITY

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

Nine Months Ended

September 30,

2017

2016

(Unaudited)

Cash flows from operating activities:

Net income
$ 1,455 $ 1,329
Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization
781 726
Provision for loan losses
1,464

1,383

Deferred income tax provision
231 368
Net gain on sale and prepayment of investment securities

(228
)
(657
)
Stock-based compensation expense
262 218
Net amortization of securities
869 1,163
Net loss on premises and equipment and other real estate
453 573
Changes in assets and liabilities:

Decrease (increase) in accrued interest receivable
110 (14 )
Decrease in other assets
57 224
Increase in accrued interest expense
40

51

Decrease in other liabilities
(114
)
(27
)
Net cash provided by operating activities
5,380 5,337
Cash flows from investing activities:

Purchases of investment securities, available-for-sale
(15,254
)
(49,236
)
Purchases of investment securities, held-to-maturity
(4,696
)
(13,850
)
Proceeds from sales of investment securities, available-for-sale

1,749
30,439
Proceeds from maturities and prepayments of investment securities, available-for-sale
38,570 37,131
Proceeds from maturities and prepayments of investment securities, held-to-maturity
3,119 17,779
Net decrease (increase) in Federal Home Loan Bank stock

185

(343
)
Proceeds from the sale of premises and equipment and other real estate
1,215 1,208
Net change in loan portfolio
(17,326 ) (64,081 )
Purchases of premises and equipment
(9,858
)
(4,554
)
Net cash used in investing activities
(2,296 ) (45,507 )
Cash flows from financing activities:

Net increase in customer deposits
10,829

14,570

Net increase (decrease) in other borrowings
516 (2,017 )
Net increase (decrease) in Federal Home Loan Bank advances (5,000 ) 10,000
Net share-based compensation transactions (41 ) —
Dividends paid
(364
)
(362
)
Net cash provided by financing activities
5,940

22,191

Net increase (decrease) in cash and cash equivalents
9,024

(17,979
)
Cash and cash equivalents, beginning of period
23,530 44,072
Cash and cash equivalents, end of period
$ 32,554 $ 26,093
Supplemental disclosures:

Cash paid for:

Interest
$ 1,862 $ 1,632
Income taxes

77
85
Non-cash transactions:

Assets acquired in settlement of loans 608 1,009
Reissuance of treasury stock as compensation
$ 350 $ 53

For the nine months ended September 30, 2019 and 2018 (Unaudited)

	Common Stock Shares Outstanding			Common Stock		Surplus			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock, at Cost			Non- controlling Interest			Total Shareholders’ Equity
Balance, January 1, 2018		6,081,744		$	73	$	10,755		$	(868	)	$	86,673		$	(20,414	)	$	(11	)	$	76,208
Net income		—			—		—			—			1,013			—			—			1,013
Net change in fair value of securities available-for-sale, net of tax		—			—		—			(1,681	)		—			—			—			(1,681	)
Net change in fair value of derivative instruments, net of tax		—			—		—			(333	)		—			—			—			(333	)
Dividends declared: $.06 per share		—			—		—			—			(369	)		—			—			(369	)
Impact of stock-based compensation plans, net		10,613			—		333			—			—			—			—			333
Issuance of common stock		204,355			2		2,297			—			—			—			—			2,299
Balance, September 30, 2018		6,296,712		$	75	$	13,385		$	(2,882	)	$	87,317		$	(20,414	)	$	(11	)	$	77,470

Balance, January 1, 2019		6,298,062		$	75	$	13,496		$	(2,377	)	$	88,668		$	(20,414	)	$	(11	)	$	79,437
Net income		—			—		—			—			3,357			—			—			3,357
Net change in fair value of securities available-for-sale, net of tax		—			—		—			2,127			—			—			—			2,127
Net change in fair value of derivative instruments, net of tax		—			—		—			(323	)		—			—			—			(323	)
Dividends declared: $.06 per share		—			—		—			—			(377	)		—			—			(377	)
Impact of stock-based compensation plans, net		5,789			—		276			—			—			—			—			276
Reissuance of treasury stock as compensation		2,579			—		(42	)		—			—			42			—			—
Treasury stock repurchases		(84,200	)		—		—			—			—			(801	)		—			(801	)
Discontinuation of partnership consolidation		—			—		—			—			83			—			11			94
Balance, September 30, 2019		6,222,230		$	75	$	13,730		$	(573	)	$	91,731		$	(21,173	)	$	—		$	83,790

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

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

NINTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(Unaudited)						(Unaudited)
Net income	$	1,118		$	240		$	3,357		$	1,013
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available-for-sale arising during period, net of tax expense (benefit) of $40, $13, $726 and $(533), respectively		122			39			2,178			(1,602	)
Reclassification adjustment for net gains on securities available-for -sale realized in net income, net of tax of $11, $0, $16 and $26, respectively		(34	)	—				(51	)		(79	)
Unrealized holding gains (losses) arising during the period on effective cash flow hedge derivatives, net of tax expense (benefit) of $(108), $0, $(108) and $133, respectively		(323	)		(3	)		(323	)		398
Reclassification adjustment for net gains on cash flow hedge derivatives realized in net income, net of tax of $0, $243, $0 and $243, respectively	—				(731	)	—				(731	)
Other comprehensive income (loss)		(235	)		(695	)		1,804			(2,014	)
Total comprehensive income (loss)	$	883		$	(455	)	$	5,161		$	(1,001	)

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

~~OTES~~FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	Nine Months Ended
	September 30,
	2019			2018
	(Unaudited)
Cash flows from operating activities:
Net income	$	3,357		$	1,013
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		1,205			1,078
Provision for loan and lease losses		1,998			2,149
Deferred income tax provision		738			821
Net gain on sale and prepayment of investment securities		(67	)		(105	)
Stock-based compensation expense		276			333
Net amortization of securities		452			618
Amortization of intangible assets		378			43
Net loss on premises and equipment and other real estate		392			330
Changes in assets and liabilities:
Decrease in accrued interest receivable		468			148
Increase in other assets		(3,218	)		(900	)
Increase (decrease) in accrued interest expense		124			(26	)
Increase in other liabilities		2,474			2,061
Net cash provided by operating activities		8,577			7,563
Cash flows from investing activities:
Net (increase) decrease in federal funds sold		(1,726	)		6,439
Purchases of investment securities, available-for-sale		(2,784	)		(15,224	)
Proceeds from sales of investment securities, available-for-sale		12,668			4,221
Proceeds from maturities and prepayments of investment securities, available-for-sale		28,568			30,909
Proceeds from maturities and prepayments of investment securities, held-to-maturity		3,640		��	3,950
Net (increase) decrease in Federal Home Loan Bank stock		(10	)		1,471
Net cash paid for acquisition		—			(19,014	)
Proceeds from the sale of premises and equipment and other real estate		1,026			2,883
Net increase in loans		(32,698	)		(22,122	)
Purchases of premises and equipment		(2,856	)		(653	)
Net cash provided by (used in) investing activities		5,828			(7,140	)
Cash flows from financing activities:
Net increase (decrease) in deposits		(27,085	)		58,307
Net decrease in short-term borrowings		(306	)		(25,402	)
Payments on long-term Federal Home Loan Bank advances		—			(10,000	)
Treasury stock repurchases		(801	)		—
Dividends paid		(377	)		(369	)
Net cash provided by (used in) financing activities		(28,569	)		22,536
Net increase (decrease) in cash and cash equivalents		(14,164	)		22,959
Cash and cash equivalents, beginning of period		49,599			27,124
Cash and cash equivalents, end of period	$	35,435		$	50,083
Supplemental disclosures:
Cash paid for:
Interest	$	3,206		$	2,843
Income taxes		188			137
Non-cash transactions:
Assets acquired in settlement of loans		1,048			649
Reissuance of treasury stock as compensation		42			—

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

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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~~.2019. While certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“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.~~2018.

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.~~

2018.

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 ~~during the period.~~(basic shares). Included in basic shares are certain shares that have been accrued as of the balance sheet date as deferred ~~compensation~~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, ~~during the period,~~ adjusted for the effect of potentially dilutive stock awards outstanding during the ~~period.~~period (dilutive shares). 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~~(as amended, 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				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Basic shares		6,176,381		6,151,701		6,170,892		6,147,325		6,397,290		6,304,717		6,410,805		6,236,197
Dilutive shares		320,501		272,550		320,501		272,550		419,081		377,951		419,081		377,951
Diluted shares		6,496,882		6,424,251		6,491,393		6,419,875		6,816,371		6,682,668		6,829,886		6,614,148

	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2017		2016		2017		2016		2019		2018		2019		2018
	(Dollars in Thousands, Except Per Share Data)								(Dollars in Thousands, Except Per Share Data)
Net income	$	635	$	550	$	1,455	$	1,329	$	1,118	$	240	$	3,357	$	1,013
Basic net income per share	$	0.10	$	0.09	$	0.24	$	0.22	$	0.17	$	0.04	$	0.52	$	0.17
Diluted net income per share	$	0.10	$	0.09	$	0.22	$	0.21	$	0.16	$	0.03	$	0.49	$	0.15

Comprehensive Income

Comprehensive income consists of net income, as well as unrealized holding gains and losses that arise during the period associated with the ~~Company’~~sCompany’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, settlement of derivative contracts or changes in the fair value of cash flow derivatives.

Accounting Policies Recently Adopted

Accounting Standards Update (“ASU”) 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” This ASU simplifies and expands the eligible hedging strategies for financial and nonfinancial risks by more closely aligning hedge accounting with a company’s risk management activities, and also simplifies the application of Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, through targeted improvements in key practice areas. This includes expanding the list of items eligible to be hedged and amending the methods used to measure the effectiveness of hedging relationships. In addition, the ASU prescribes how hedging results should be presented and requires incremental disclosures. These changes are intended to allow preparers more flexibility and to enhance the transparency of how hedging results are presented and disclosed. Further, the ASU provides partial relief on the timing of certain aspects of hedge documentation and eliminates the requirement to recognize hedge ineffectiveness separately in earnings in the current period. ASU 2017-12 became effective for the Company on January 1, 2019. The adoption of ASU 2017-12 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 Financial Accounting Standards Board (“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 requires 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. ASU 2016-02 became effective for the Company on January 1, 2019. Refer to Note 13, Leases, for additional information regarding the adoption of ASU 2016-02. As a result of implementation of the standard, the Company recorded a right-of-use asset and lease liability. As of September 30, 2019, both the right-of-use asset and lease liability totaled approximately $3.6 million.

Pending Accounting Pronouncements

ASU 2018-15, “Intangibles-Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force).” Issued in August 2018, ASU 2018-15 aims to reduce complexity in the accounting for costs of implementing a cloud computing service arrangement. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments of ASU 2018-15 require an entity to follow the guidance in FASB ASC Subtopic 350-40, “Intangibles-Goodwill and Other – Internal-Use Software,” in order to determine which implementation costs to capitalize as assets related to the service contract and which costs to expense. The amendments of ASU 2018-15 also require an entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement (i.e., the noncancelable period of the arrangement plus periods covered by (1) an option to extend the arrangement if the entity is reasonably certain to exercise that option, (2) an option to terminate the arrangement if the entity is reasonably certain not to exercise the option and (3) an option to extend (or not to terminate) the arrangement in which exercise of the option is in the control of the vendor). ASU 2018-15 also requires an entity to present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement, and to classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. ASU 2018-15 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company does not currently have any material amount of implementation costs related to hosting arrangements that are service contracts, and the Company does not expect the adoption of ASU 2018-15 to have a material impact on the Company’s consolidated financial statements.

~~Accounting Standards Update (“~~ASU~~ASU”) 2016-13~~ 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” Issued in August 2018, the amendments in this ASU remove disclosure requirements in ASC Topic 820 related to (1) the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels and (3) the valuation processes for Level 3 fair value measurements. The ASU also modifies disclosure requirements such that (1) for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date that restrictions from redemption might lapse, only if the investee has communicated the timing to the entity or announced the timing publicly, and (2) it is clear that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. Additionally, this ASU adds disclosure requirements for public entities about (1) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments of ASU 2018-13 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements but does not expect the adoption of ASU 2018-13 to have a material impact on the Company’s consolidated financial statements.

ASU 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” Issued in January 2017, ASU 2017-04 simplifies the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. In computing the implied fair value of goodwill under Step 2, an entity, prior to the amendments in ASU 2017-04, had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities, including unrecognized assets and liabilities, in accordance with the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. However, under the amendments in ASU 2017-04, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, ASU 2017-04 removes the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test. As originally issued, ASU 2017-04 was effective prospectively for annual, or any interim, goodwill impairment tests in fiscal years beginning after December 15, 2019. On October 16, 2019, the FASB approved a delay in the implementation of ASU 2017-04 by three years for smaller reporting companies, including the Company. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.

ASU 2016-13, "Financial Instruments -– Credit Losses: Measurement of Credit Losses on Financial ~~Instruments.~~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~~removes all current recognition thresholds and ~~will require~~requires companies to recognize an allowance for lifetime expected credit losses. Credit losses will be immediately recognized through net ~~income;~~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,~~The standard will add new disclosures related to factors that influenced management’s estimate, including current expected credit losses, the changes in those factors and reasons for the changes, as well as the method applied to revert to historical credit loss experience. As originally issued, ASU 2016-13 iswas effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after December 15, ~~2019. Institutions will be~~2019, with institutions required to apply the changes through a cumulative-effect adjustment to their retained earnings balance as of the beginning of the first reporting period in which the guidance is effective. ~~Management is currently evaluating~~On October 16, 2019, the ~~impact that this ASU will have on~~FASB approved a delay in 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 adoptionimplementation of ASU ~~2016-09 did not have~~2016-13 by three years for smaller reporting companies, including the Company. Management has been in the process of developing a ~~material~~revised model to calculate the allowance for loan and lease losses upon implementation of ASU 2016-13 in order to determine the impact on the Company’s consolidated financial ~~statements.~~statements and, at this time, expects to recognize a one-time cumulative effect adjustment to the allowance for loan and lease losses as of the beginning of the first reporting period in which the new standard is effective. The magnitude of any such one-time adjustment is not yet known.

Revenue

~~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 forOn January 1, 2018, the Company ~~on January 1, 2017. The adoption of~~ implemented 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 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~~, codified at ASC Topic ~~605, Revenue Recognition~~~~and certain cost guidance in~~ ~~FASB~~606. The Company adopted ASC Topic ~~605-35, Revenue Recognition – Construction-Type~~606 using the modified retrospective transition method. As of the implementation date, the Company had no uncompleted customer contracts and, ~~Production-Type Contracts.~~ ~~ASU 2014-09 requires an entity~~as a result, no cumulative transition adjustment was made to ~~recognize revenue when (or as) an entity transfers control of goods~~the Company’s accumulated deficit during the year ended December 31, 2018. Results for reporting periods beginning on or ~~services to a customer at the amount to which the entity expects~~after January 1, 2018 are presented under ASC Topic 606, while prior period amounts continue 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~~reported under legacy U.S. GAAP.

The majority of the ~~goods or services~~Company’s revenue 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. Management is currently evaluating the impact that this ASU will havegenerated through interest earned on ~~the Company’s consolidated financial statements, as well as the most appropriate method of application. However, because this guidance does not apply to revenue associated with~~ financial instruments, including loans and investment securities, which falls outside the scope of ASC Topic 606. The Company also generates revenue from insurance- and lease-related contracts that fall outside the scope of ASC Topic 606.

All of the Company’s revenue that is subject to ASC Topic 606 is included in non-interest income; however, not all non-interest income is subject to ASC Topic 606. Revenue earned by the Company that is subject to ASC Topic 606 primarily consists of service and other charges on deposit accounts, mortgage fees from secondary market transactions at the Bank, ATM fee income and other non-interest income. Revenue generated from these sources for both of the nine-month periods ended September 30, 2019 and 2018 was $2.4 million, and was $0.9 million and $0.8 million for the three-month periods ended September 30, 2019 and 2018, respectively. All sources of the Company’s revenue subject to ASC Topic 606 are transaction-based, and revenue is recognized at the time at which the transaction is executed, which is the same time at which the Company’s performance obligation is satisfied. The Company had no contract liabilities or unsatisfied performance obligations with customers as of September 30, 2019.

3.	ACQUISITION ACTIVITY

On August 31, 2018, the Company completed the acquisition of The Peoples Bank (“TPB”) and then merged TPB with and into the Bank. The acquisition of TPB provided the Company with an opportunity to enter the Knoxville, Tennessee market, as well as southwest Virginia, and was consistent with the Company’s strategy to expand in selected high-growth metropolitan markets. As of the acquisition date, TPB’s assets totaled $166.5 million, consisting primarily of pre-discounted gross loans totaling $156.8 million. Total deposits were $140.0 million. Purchase accounting adjustments were recorded as of the acquisition date, resulting in goodwill of $7.4 million.

The acquisition of TPB was accounted for ~~under~~using the purchase method of accounting in accordance with ASC Topic 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding the methods and assumptions to be used. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available. No adjustments to fair value were recorded during the nine months ended September 30, 2019.

In accordance with the transaction agreement, the Company acquired 100% of the capital stock of TPB for the purchase price of $23.4 million calculated on the net book value of TPB as of December 31, 2017 and a mutually agreed upon multiple of 1.62, less certain mutually agreed upon deductions that are described in the transaction agreement, which reduced the purchase price by approximately $0.4 million. Approximately 90% of the purchase price was paid in cash, which totaled approximately $20.7 million, and approximately 10% was paid in the form of unregistered shares of the Company’s common stock, which consisted of 204,355 shares of Bancshares common stock. The aggregate purchase price was subject to adjustment following the closing date of the transaction based on determination of TPB’s final net book value as of the date of closing, which resulted in the payment by the Company of an additional cash amount of approximately $1.4 million.

A summary, at fair value, of the assets acquired and liabilities assumed in the TPB transaction, as of the acquisition date, is as follows:

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

ASSETS ACQUIRED AND LIABILITIES ASSUMED FROM THE PEOPLES BANK

AUGUST 31, 2018

(Dollars in Thousands)

	Acquired from TPB			Fair Value Adjustments			Fair Value as of August 31, 2018
Assets Acquired:
Cash and cash equivalents	$	3,085		$	—		$	3,085
Investment securities, available-for-sale		5,977			—			5,977
Federal Home Loan Bank stock, at cost		565			—			565
Loans		156,772			(2,195	)		154,577
Allowance for loan losses		(1,702	)		1,702			—
Net loans		155,070			(493	)		154,577
Premises and equipment, net		1,198			17			1,215
Other real estate owned		85			—			85
Other assets		551			(328	)		223
Core deposit intangible		—			2,048			2,048
Total assets acquired	$	166,531		$	1,244		$	167,775
Liabilities Assumed:
Deposits		140,033			342			140,375
Short-term borrowings		10,000			—			10,000
Other liabilities		437			—			437
Total liabilities assumed		150,470			342			150,812
Shareholders’ Equity Assumed:
Common stock		1,027			(1,027	)		—
Surplus		5,280			(5,280	)		—
Accumulated other comprehensive income, net of tax		17			(17	)		—
Retained earnings		9,737			(9,737	)		—
Total shareholders’ equity assumed		16,061			(16,061	)		—
Total liabilities and shareholders’ equity assumed	$	166,531		$	(15,719	)	$	150,812
Net assets acquired							$	16,963
Purchase price								24,398
Goodwill							$	7,435

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above.

Cash and cash equivalents — The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of the assets.

Investment securities — Prior to acquisition, the investment securities acquired were classified as available-for-sale and, accordingly, were recorded at fair value on a recurring basis. Fair value for most of the securities was based upon quoted prices of like or similar securities and determined using observable data including, among other things, dealer quotes, market spreads, cash flow, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus, prepayment speeds, credit information and the securities’ terms and conditions.

Federal Home Loan Bank stock, at cost — Prior to acquisition, TPB maintained a required investment in the Federal Home Loan Bank (“FHLB”) of Atlanta, which was, in part, based on TPB’s amount of borrowings with the FHLB. The investment was carried at cost as it is not readily marketable, and, accordingly, there is no established market price for the investment. Upon acquisition, the Bank was able to absorb the investment into its own holdings of stock with the FHLB of Atlanta. The Bank has the ability to be reimbursed by the FHLB of Atlanta at cost for stock holdings as borrowings with the FHLB are paid down. Accordingly, the carrying amount of the assets is considered a reasonable estimate of fair value.

Loans — Fair values for performing loans were determined based on a discounted cash flow methodology that aggregated model inputs and loan information into selected pools and calculated the loan level cash flows used to value the pools. The model calculated the contractual cash flows and expected cash flows, and then discounted the expected cash flows to present value in order to determine fair value. The assumptions used to estimate the fair value of the loans included unpaid principal balance, maturity date, coupon, prepayment speed, expected credit losses and discount rates. The fair value adjustment, also described as the discount on the purchased loans, for the performing loans is being accreted into income over the lives of the loans. Purchased credit impaired (“PCI”) loans were valued using the cost recovery method. The Company did not recognize any accretable yield, or income expected to be collected, associated with the PCI loans. The table below summarizes the carrying amounts and fair value adjustments of the loans acquired from TPB as of the acquisition date.

	August 31, 2018
	Acquired from TPB		Fair Value Adjustments			Fair Value as of August 31, 2018
	(Dollars in Thousands)
Purchased performing loans	$	153,862	$	(2,116	)	$	151,746
Purchased credit impaired loans		2,910		(79	)		2,831
Total purchased loans	$	156,772	$	(2,195	)	$	154,577

Allowance for loan losses — In accordance with U.S. GAAP, the ~~adoption~~acquired loans were adjusted to fair value, and the pre-acquisition allowance for loan losses on TPB’s balance sheet was reversed.

Premises and equipment — The fair values of ~~ASU 2014-09 is not~~acquired land and buildings were determined based on independent appraisals performed by a third-party appraiser. The fair value adjustment represents the difference between fair value and the carrying value at the date of acquisition. For furniture and fixtures, carrying value was considered to be a reasonable estimate of fair value.

Other real estate owned — These assets are presented at the estimated net realizable value that management expects to receive when the properties are sold, net of related costs of disposal.

Other assets — The fair value adjustment was due primarily to changes in deferred tax assets related to the transaction, as well as adjustment of certain prepaid assets associated with TPB’s core processing vendor. Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value.

Core deposit intangible — This intangible asset represents the value of the relationships that TPB had with its deposit customers. The fair value of the core deposit intangible was estimated using a discounted cash flow methodology that gave consideration to expected customer attrition rates, cost of the deposit base and the net maintenance cost attributable to ~~have~~customer deposits.

Deposits — The fair values used for the demand and savings deposits that comprise the transaction accounts acquired equal the amount payable on demand at the acquisition date. The fair value of certificates of deposit was determined using a ~~material impact~~discounted cash flow methodology whereby an estimate of the present value of contractual payments over the remaining life of the time deposit was determined. Future cash flows were discounted using market interest rates estimated based on the ~~Company’s consolidated financial statements. Further, management has determined that~~median offering rates of peer institutions at the ~~adoption of this ASU for revenue streams reported within non-interest income that are within the scope~~time of the ~~accounting standard will not materially impact~~acquisition.

Short-term borrowings — TPB’s short-term borrowings were comprised of daily renewable FHLB advances. Based on the ~~Company’s consolidated financial statements.~~ short-term nature of the borrowings, the carrying amount of the liability was determined to be a reasonable approximation of fair value.

Other liabilities — The carrying amount of these other liabilities was deemed to be a reasonable estimate of fair value.

3.4.	INVESTMENT SECURITIES

Details of investment securities available-for-sale and held-to-maturity as of September 30, ~~2017~~2019 and December 31, ~~2016~~2018 were as follows:

	Available-for-Sale									Available-for-Sale
	September 30, 2017									September 30, 2019
			Gross		Gross			Estimated				Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
	(Dollars in Thousands)									(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	83,391	$	477	$	(318	)	$	83,550	$	47,107	$	321	$	(320	)	$	47,108
Commercial		67,781		62		(705	)		67,138		45,496		46		(485	)		45,057
Obligations of states and political subdivisions		5,424		231		—			5,655		4,199		106		—			4,305
Obligations of U.S. government-sponsored agencies		2,000		2		—			2,002
U.S. Treasury securities		80		—		—			80		80		—		—			80
Total	$	158,676	$	772	$	(1,023	)	$	158,425	$	96,882	$	473	$	(805	)	$	96,550

	Held-to-Maturity									Held-to-Maturity
	September 30, 2017									September 30, 2019
			Gross		Gross			Estimated				Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
	(Dollars in Thousands)									(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	15,976	$	18	$	(61	)	$	15,933	$	9,722	$	1	$	(83	)	$	9,640
Obligations of U.S. government-sponsored agencies		9,458		25		(79	)		9,404		6,410		—		(29	)		6,381
Obligations of states and political subdivisions		1,943		26		(3	)		1,966		1,627		13		—			1,640
Total	$	27,377	$	69	$	(143	)	$	27,303	$	17,759	$	14	$	(112	)	$	17,661

	Available-for-Sale									Available-for-Sale
	December 31, 2016									December 31, 2018
			Gross		Gross			Estimated				Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
	(Dollars in Thousands)									(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	99,922	$	490	$	(2,003	)	$	98,409	$	73,859	$	113	$	(1,517	)	$	72,455
Commercial		71,761		56		(1,287	)		70,530		56,101		10		(1,822	)		54,289
Obligations of states and political subdivisions		9,759		390		(7	)		10,142		5,617		51		(4	)		5,664
Obligations of U.S. government-sponsored agencies		2,000		—		(7	)		1,993
Corporate notes		756		—		—			756
U.S. Treasury securities		80		—		—			80		79		—		—			79
Total	$	184,278	$	936	$	(3,304	)	$	181,910	$	135,656	$	174	$	(3,343	)	$	132,487

	Held-to-Maturity									Held-to-Maturity
	December 31, 2016									December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in Thousands)									(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	14,684	$	5	$	(148	)	$	14,541	$	11,716	$	—	$	(349	)	$	11,367
Obligations of U.S. government-sponsored agencies		9,129		13		(222	)		8,920		8,026		—		(244	)		7,782
Obligations of states and political subdivisions		2,091		2		(46	)		2,047		1,720		—		(17	)		1,703
Total	$	25,904	$	20	$	(416	)	$	25,508	$	21,462	$	—	$	(610	)	$	20,852

The scheduled maturities of investment securities available-for-sale and held-to-maturity as of September 30,~~, 2017~~ 2019 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
$ 490 $ 496 $
—
$
—

Maturing after one to five years
8,674 8,723 2,048 �� 2,079
Maturing after five to ten years
71,462 71,596 2,904 2,899
Maturing after ten years
78,050 77,610 22,425 22,325
Total
$ 158,676 $ 158,425 $ 27,377 $ 27,303

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Maturing within one year	$	102	$	103	$	—	$	—
Maturing after one to five years		20,916		20,843		3,359		3,365
Maturing after five to ten years		43,510		43,446		7,250		7,194
Maturing after ten years		32,354		32,158		7,150		7,102
Total	$	96,882	$	96,550	$	17,759	$	17,661

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 September 30, ~~2017~~2019 and December 31, ~~2016.~~2018.

	Available-for-Sale										Available-for-Sale
	September 30, 2017										September 30, 2019
	Less than 12 Months					12 Months or More					Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)										(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	38,784	$	(115	)	$	14,350	$	(203	)	$	16,466	$	(135	)	$	11,030	$	(185	)
Commercial		19,576		(145	)		37,291		(560	)		4,140		(10	)		32,825		(475	)
U.S. Treasury securities		80		—			—		—			80		—			—		—
Total	$	58,440	$	(260	)	$	51,641	$	(763	)	$	20,686	$	(145	)	$	43,855	$	(660	)

	Held-to-Maturity										Held-to-Maturity
	September 30, 2017										September 30, 2019
	Less than 12 Months					12 Months or More					Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)										(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	9,643	$	(58	)	$	423	$	(3	)	$	1,522	$	(9	)	$	7,902	$	(74	)
Obligations of U.S. government-sponsored agencies		3,217		(27	)		4,345		(52	)		1,403		(8	)		4,979		(21	)
Obligations of states and political subdivisions		—		—			543		(3	)		—		—			503		—
Total	$	12,860	$	(85	)	$	5,311	$	(58	)	$	2,925	$	(17	)	$	13,384	$	(95	)

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									Available-for-Sale
	December 31, 2016									December 31, 2018
	Less than 12 Months					12 Months or More				Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)									(Dollars in Thousands)
Mortgage-backed securities:
Residential										$	9,417	$	(87	)	$	53,507	$	(1,430	)
Commercial	$	12,776	$	(148	)	$	—	$	—		461		(3	)		53,430		(1,819	)
Obligations of U.S. government-sponsored agencies		7,957		(222	)		—		—
Obligations of states and political subdivisions		1,628		(46	)		—		—		879		(2	)		420		(2	)
U.S. Treasury securities											79		—			—		—
Total	$	22,361	$	(416	)	$	—	$	—	$	10,836	$	(92	)	$	107,357	$	(3,251	)

	Held-to-Maturity
	December 31, 2018
	Less than 12 Months				12 Months or More
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	—	$	—	$	11,367	$	(349	)
Obligations of U.S. government-sponsored agencies		—		—		7,782		(244	)
Obligations of states and political subdivisions		770		—		933		(17	)
Total	$	770	$	—	$	20,082	$	(610	)

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,~~cost; (ii) the financial condition and near-term prospects of the ~~issuer,~~issuer; (iii) whether the Company intends to sell ~~securities,~~the 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 September 30, ~~2017, 46~~2019, 74 debt securities had been in a loss position for more than 12 months, and 7539 debt securities had been in a loss position for less than 12 months. As of December 31, ~~2016, 13~~2018, 153 debt securities had been in a loss position for more than 12 months, and ~~130~~21 debt securities had been in a loss position for less than 12 months. As of both September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, 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. Most of the securities in an unrealized loss position are residential or commercial mortgage-backed securities that are either direct obligations of the U.S. government or government-sponsored entities and, accordingly, have little associated credit risk. 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 September 30, ~~2017 and~~2019 or December 31, ~~2016.~~

2018.

Investment securities ~~available-for-sale~~ with a carrying value of ~~$87.1~~$55.4 million and ~~$87.7~~$46.7 million as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively, were pledged to secure public deposits and for other purposes.

4.5.	LOANS AND ALLOWANCE FOR LOAN LOSSES

Portfolio Segments

The Company has divided the loan portfolio into ~~eight~~nine 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 ~~homes.~~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 farmland.

Commercial and industrial loans and leases – This portfolio segment includes loans and leases to commercial customers for use in the normal course of business. These credits may be loans, ~~and~~ lines of credit and leases 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.

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

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

As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the composition of the loan portfolio by reporting segment and portfolio segment was as follows:

	September 30, 2017						September 30, 2019
	Bank		ALC		Total		Bank		ALC		Total
	(Dollars in Thousands)						(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	20,213	$	—	$	20,213	$	27,348	$	—	$	27,348
Secured by 1-4 family residential properties		35,125		11,490		46,615		103,269		6,067		109,336
Secured by multi-family residential properties		16,498		—		16,498		46,843		—		46,843
Secured by non-farm, non-residential properties		107,679		—		107,679		164,941		—		164,941
Other		223		—		223		842		—		842
Commercial and industrial loans(1)		66,320		—		66,320		90,470		—		90,470
Consumer loans:
Consumer		5,431		35,650		41,081		8,136		29,341		37,477
Branch retail								—		30,008		30,008
Indirect sales		—		50,553		50,553		—		48,073		48,073
Total loans		251,489		97,693		349,182		441,849		113,489		555,338
Less: Unearned interest, fees and deferred cost		367		5,981		6,348		204		5,030		5,234
Allowance for loan losses		2,422		2,386		4,808		3,349		2,236		5,585
Net loans	$	248,700	$	89,326	$	338,026	$	438,296	$	106,223	$	544,519

	December 31, 2016						December 31, 2018
	Bank		ALC		Total		Bank		ALC		Total
	(Dollars in Thousands)						(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	23,772	$	—	$	23,772	$	41,340	$	—	$	41,340
Secured by 1-4 family residential properties		32,955		13,724		46,679		102,971		7,785		110,756
Secured by multi-family residential properties		16,627		—		16,627		23,009		—		23,009
Secured by non-farm, non-residential properties		102,112		—		102,112		156,162		—		156,162
Other		234		—		234		1,308		—		1,308
Commercial and industrial loans(1)		57,963		—		57,963		85,779		—		85,779
Consumer loans:
Consumer		6,206		36,413		42,619		6,927		31,656		38,583
Branch retail								—		28,324		28,324
Indirect sales		—		44,775		44,775		—		40,609		40,609
Total loans		239,869		94,912		334,781		417,496		108,374		525,870
Less: Unearned interest, fees and deferred cost		218		6,935		7,153		331		5,617		5,948
Allowance for loan losses		2,409		2,447		4,856		2,735		2,320		5,055
Net loans	$	237,242	$	85,530	$	322,772	$	414,430	$	100,437	$	514,867

(1)

Includes equipment financing leases.

The Company makes commercial, real estate and installment loans to its customers. Although the Company has a diversified loan portfolio, 54~~.8%~~62.9% and ~~56.6%~~63.2% of the portfolio was concentrated in loans secured by real estate ~~located primarily within a single geographic region of the United States~~ as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively.

Loans with a carrying value of $29.6 million and $27.0 million were pledged as collateral to secure FHLB borrowings as of September 30, 2019 and December 31, 2018, 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~~unrelated 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 September 30, ~~2017~~2019 and December 31, ~~2016~~2018 were ~~$0.5~~$0.9 million and ~~$2.7~~$0.8 million, respectively. During the nine months ended September 30, ~~2017,~~2019, there were no$0.1 million of new loans to these parties, and repayments by active related parties were $7$8 thousand. ~~In addition, during~~During the year ended December 31, 2018, there were $0.5 million of new loans to these parties, and repayments by active related parties were $0.2 million.

Acquired Loans

The Company acquired loans through the TPB acquisition completed on August 31, 2018. At acquisition, certain acquired loans evidenced deterioration of credit quality since origination and it was probable that all contractually-required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. PCI loans are accounted for under ASC Topic 310-30, Accounting for Purchased Loans with Deteriorated Credit Quality, and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date. On the date of completion of the acquisition, the outstanding principal balance and carrying value of PCI loans accounted for under ASC Topic 310-30 were $2.9 million and $2.8 million, respectively.

The carrying amount of PCI loans, which is included within loans on the balance sheet, is set forth in the table below as of September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	—		$	75
Secured by 1-4 family residential properties		231			492
Outstanding balance		231			567
Fair value adjustment		(51	)		(70	)
Carrying amount, net of fair value adjustment	$	180		$	497

During both the nine months ended September 30, ~~2017, approximately $2.5 million in related party loans were reclassified as unrelated party loans due to the retirement of certain members of the Company’s Board of Directors. During~~2019 and the year ended December 31, ~~2016, there was one new~~2018, the Company did not recognize any accretable yield, or income expected to be collected, associated with these loans. Additionally, the Company did not increase or reverse the allowance for loan losses related to ~~a related party, and repayments by active related parties totaled $0.1 million.~~the remaining PCI loans.

Allowance for Loan Losses

The following tables present changes in the allowance for loan losses during the nine months ended September 30, 2019 and the year ended December 31, 2018 and the related loan balances by loan portfolio segment and loan type as of September 30, ~~2017~~2019 and December 31, ~~2016.~~2018:

Bank

Nine Months Ended September 30, 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
— — — — — (16 ) (63 ) — (79 )
Recoveries
— 85 — 69 — 16 52 — 222
Provision
(328 ) (141 ) 27 (142 ) — 440 14 — (130 )
Ending balance
$ 207 $ 248 $ 115 $ 830 $ 2 $ 967 $ 53 $ — $ 2,422

Ending balance of allowance attributable to loans:
Individually evaluated for impairment
$ 62 $ 5 $ — $ 55 $ — $ 72 $ — $ — $ 194
Collectively evaluated for impairment
145 243 115 775 2 895 53 — 2,228
Total allowance for loan losses $ 207 $ 248 $ 115 $ 830 $ 2 $ 967 $ 53 $ — $ 2,422
Ending balance of loans receivable:

Individually evaluated for impairment $ 86 $ 189 $ — $ 535 $ — $ 70 $ — $ — $ 880
Collectively evaluated for impairment
20,127 34,936 16,498 107,144 223 66,250 5,431 — 250,609
Total loans receivable
$ 20,213 $ 35,125 $ 16,498 $ 107,679 $ 223 $ 66,320 $ 5,431 $ — $ 251,489

	ALC																						Bank
	Nine Months Ended September 30, 2017																						Nine Months Ended September 30, 2019
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential		Other		Commercial		Consumer			Indirect Sales			Total			Construction, Land			1-4 Family			Real Estate Multi- Family		Non- Farm Non- Residential		Other		Commercial		Consumer			Branch Retail		Indirect Sales		Total
	(Dollars in Thousands)																						(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447		$	240		$	322		$	128	$	831	$	1	$	1,138	$	75		$	—	$	—	$	2,735
Charge-offs		—		(27	)		—		—		—		—		(1,721	)		(445	)		(2,193	)		—			(47	)		—		—		—		—		(32	)		—		—		(79	)
Recoveries		—		28			—		—		—		—		435			75			538			—			22			—		—		—		3		33			—		—		58
Provision		—		(5	)		—		—		—		—		1,134			465			1,594			(78	)		139			233		72		—		259		10			—		—		635
Ending balance	$	—	$	103		$	—	$	—	$	—	$	—	$	1,565		$	718		$	2,386		$	162		$	436		$	361	$	903	$	1	$	1,400	$	86		$	—	$	—	$	3,349

Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—		$	—		$	15		$	—	$	—	$	—	$	394	$	9		$	—	$	—	$	418
Collectively evaluated for impairment		—		103			—		—		—		—		1,565			718			2,386			162			421			361		903		1		1,006		77			—		—		2,931
Loans acquired with deteriorated credit quality																								—			—			—		—		—		—		—			—		—		—
Total allowance for loan losses	$	—	$	103		$	—	$	—	$	—	$	—	$	1,565		$	718		$	2,386		$	162		$	436		$	361	$	903	$	1	$	1,400	$	86		$	—	$	—	$	3,349
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—		$	—		$	702		$	—	$	496	$	—	$	4,025	$	32		$	—	$	—	$	5,255
Collectively evaluated for impairment		—		11,490			—		—		—		—		35,650			50,553			97,693			27,348			102,387			46,843		164,445		842		86,445		8,104			—		—		436,414
Loans acquired with deteriorated credit quality																								—			180			—		—		—		—		—			—		—		180
Total loans receivable	$	—	$	11,490		$	—	$	—	$	—	$	—	$	35,650		$	50,553		$	97,693		$	27,348		$	103,269		$	46,843	$	164,941	$	842	$	90,470	$	8,136		$	—	$	—	$	441,849

	ALC
	Nine Months Ended September 30, 2019
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non- Farm Non- Residential		Other		Commercial		Consumer			Branch Retail			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	—	$	24		$	—	$	—	$	—	$	—	$	1,724		$	427		$	145		$	2,320
Charge-offs		—		(34	)		—		—		—		—		(1,501	)		(294	)		(194	)		(2,023	)
Recoveries		—		6			—		—		—		—		470			94			6			576
Provision		—		29			—		—		—		—		862			204			268			1,363
Ending balance	$	—	$	25		$	—	$	—	$	—	$	—	$	1,555		$	431		$	225		$	2,236
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—		$	—
Collectively evaluated for impairment		—		25			—		—		—		—		1,555			431			225			2,236
Total allowance for loan losses	$	—	$	25		$	—	$	—	$	—	$	—	$	1,555		$	431		$	225		$	2,236
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	137		$	—	$	—	$	—	$	—	$	—		$	—		$	—		$	137
Collectively evaluated for impairment		—		5,930			—		—		—		—		29,341			30,008			48,073			113,352
Total loans receivable	$	—	$	6,067		$	—	$	—	$	—	$	—	$	29,341		$	30,008		$	48,073		$	113,489

Bank and ALC

Nine Months Ended September 30, 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
— (27 ) — — — (16 ) (1,784 ) (445 ) (2,272 )
Recoveries
— 113 — 69 — 16 487 75 760
Provision
(328 ) (146 ) 27 (142 ) — 440 1,148 465 1,464
Ending balance
$ 207 $ 351 $ 115 $ 830 $ 2 $ 967 $ 1,618 $ 718 $ 4,808

Ending balance of allowance attributable to loans:
Individually evaluated for impairment
$ 62 $ 5 $ — $ 55 $ — $ 72 $ — $ — $ 194
Collectively evaluated for impairment
145 346 115 775 2 895 1,618 718 4,614
Total allowance for loan losses $ 207 $ 351 $ 115 $ 830 $ 2 $ 967 $ 1,618 $ 718 $ 4,808
Ending balance of loans receivable:

Individually evaluated for impairment
$ 86 $ 189 $ — $ 535 $ — $ 70 $ — $ — $ 880
Collectively evaluated for impairment 20,127 46,426 16,498 107,144 223 66,250 41,081 50,553 348,302
Total loans receivable
$ 20,213 $ 46,615 $ 16,498 $ 107,679 $ 223 $ 66,320 $ 41,081 $ 50,553 $ 349,182

	Bank																							Bank and ALC
	Year Ended December 31, 2016																							Nine Months Ended September 30, 2019
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential			Other		Commercial			Consumer			Indirect Sales		Total			Construction, Land			1-4 Family			Real Estate Multi- Family		Non- Farm Non- Residential		Other		Commercial		Consumer			Branch Retail			Indirect Sales			Total
	(Dollars in Thousands)																							(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	110	$	138		$	29	$	351		$	1	$	659		$	41		$	—	$	1,329		$	240		$	346		$	128	$	831	$	1	$	1,138	$	1,799		$	427		$	145		$	5,055
Charge-offs		—		(66	)		—		(40	)		—		(2	)		(43	)		—		(151	)		—			(81	)		—		—		—		—		(1,533	)		(294	)		(194	)		(2,102	)
Recoveries		200		23			—		—			—		73			50			—		346			—			28			—		—		—		3		503			94			6			634
Provision		225		209			59		592			1		(203	)		2			—		885			(78	)		168			233		72		—		259		872			204			268			1,998
Ending balance	$	535	$	304		$	88	$	903		$	2	$	527		$	50		$	—	$	2,409		$	162		$	461		$	361	$	903	$	1	$	1,400	$	1,641		$	431		$	225		$	5,585

Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	423	$	5		$	—	$	107		$	—	$	—		$	—		$	—	$	535		$	—		$	15		$	—	$	—	$	—	$	394	$	9		$	—		$	—		$	418
Collectively evaluated for impairment		112		299			88		796			2		527			50			—		1,874			162			446			361		903		1		1,006		1,632			431			225			5,167
Loans acquired with deteriorated credit quality																									—			—			—		—		—		—		—			—			—			—
Total allowance for loan losses	$	535	$	304		$	88	$	903		$	2	$	527		$	50		$	—	$	2,409		$	162		$	461		$	361	$	903	$	1	$	1,400	$	1,641		$	431		$	225		$	5,585
Ending balance of loans receivable:
Individually evaluated for impairment	$	1,361	$	193		$	—	$	549		$	—	$	—		$	—		$	—	$	2,103		$	—		$	839		$	—	$	496	$	—	$	4,025	$	32		$	—		$	—		$	5,392
Collectively evaluated for impairment		22,411		32,762			16,627		101,563			234		57,963			6,206			—		237,766			27,348			108,317			46,843		164,445		842		86,445		37,445			30,008			48,073			549,766
Loans acquired with deteriorated credit quality																									—			180			—		—		—		—		—			—			—			180
Total loans receivable	$	23,772	$	32,955		$	16,627	$	102,112		$	234	$	57,963		$	6,206		$	—	$	239,869		$	27,348		$	109,336		$	46,843	$	164,941	$	842	$	90,470	$	37,477		$	30,008		$	48,073		$	555,338

	Bank
	Year Ended December 31, 2018
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non- Farm Non- Residential		Other			Commercial			Consumer			Branch Retail		Indirect Sales		Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	203	$	238		$	116	$	777	$	2		$	1,049		$	62		$	—	$	—	$	2,447
Charge-offs		—		(9	)		—		—		—			(3	)		(4	)		—		—		(16	)
Recoveries		—		51			—		4		—			11			23			—		—		89
Provision		37		42			12		50		(1	)		81			(6	)		—		—		215
Ending balance	$	240	$	322		$	128	$	831	$	1		$	1,138		$	75		$	—	$	—	$	2,735
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	28	$	50		$	—	$	1	$	—		$	67		$	20		$	—	$	—	$	166
Collectively evaluated for impairment		212		272			128		830		1			1,071			55			—		—		2,569
Loans acquired with deteriorated credit quality		—		—			—		—		—			—			—			—		—		—
Total allowance for loan losses	$	240	$	322		$	128	$	831	$	1		$	1,138		$	75		$	—	$	—	$	2,735
Ending balance of loans receivable:
Individually evaluated for impairment	$	153	$	57		$	—	$	511	$	—		$	67		$	43		$	—	$	—	$	831
Collectively evaluated for impairment		41,114		102,490			23,009		155,651		1,308			85,712			6,884			—		—		416,168
Loans acquired with deteriorated credit quality		73		424			—		—		—			—			—			—		—		497
Total loans receivable	$	41,340	$	102,971		$	23,009	$	156,162	$	1,308		$	85,779		$	6,927		$	—	$	—	$	417,496

	ALC																						ALC
	Year Ended December 31, 2016																						Year Ended December 31, 2018
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non-Farm Non-Residential		Other		Commercial		Consumer			Indirect Sales			Total			Construction, Land		1-4 Family			Real Estate Multi- Family		Non- Farm Non- Residential		Other		Commercial		Consumer			Branch Retail			Indirect Sales			Total
	(Dollars in Thousands)																						(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	—	$	250		$	—	$	—	$	—	$	—	$	1,584		$	618		$	2,452		$	—	$	52		$	—	$	—	$	—	$	—	$	1,653		$	393		$	229		$	2,327
Charge-offs		—		(56	)		—		—		—		—		(2,218	)		(752	)		(3,026	)		—		(92	)		—		—		—		—		(2,478	)		(415	)		(116	)		(3,101	)
Recoveries		—		39			—		—		—		—		451			220			710			—		23			—		—		—		—		545			113			6			687
Provision		—		(126	)		—		—		—		—		1,900			537			2,311			—		41			—		—		—		—		2,004			336			26			2,407
Ending balance	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447		$	—	$	24		$	—	$	—	$	—	$	—	$	1,724		$	427		$	145		$	2,320

Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—		$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—		$	—
Collectively evaluated for impairment		—		107			—		—		—		—		1,717			623			2,447			—		24			—		—		—		—		1,724			427			145			2,320
Total allowance for loan losses	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447		$	—	$	24		$	—	$	—	$	—	$	—	$	1,724		$	427		$	145		$	2,320
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—		$	—	$	211		$	—	$	—	$	—	$	—	$	—		$	—		$	—		$	211
Collectively evaluated for impairment		—		13,724			—		—		—		—		36,413			44,775			94,912			—		7,574			—		—		—		—		31,656			28,324			40,609			108,163
Total loans receivable	$	—	$	13,724		$	—	$	—	$	—	$	—	$	36,413		$	44,775		$	94,912		$	—	$	7,785		$	—	$	—	$	—	$	—	$	31,656		$	28,324		$	40,609		$	108,374

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
Ending balance of loans receivable:

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

	Bank and ALC
	Year Ended December 31, 2018
	Construction, Land		1-4 Family			Real Estate Multi- Family		Non- Farm Non- Residential		Other			Commercial			Consumer			Branch Retail			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	203	$	290		$	116	$	777	$	2		$	1,049		$	1,715		$	393		$	229		$	4,774
Charge-offs		—		(101	)		—		—		—			(3	)		(2,482	)		(415	)		(116	)		(3,117	)
Recoveries		—		74			—		4		—			11			568			113			6			776
Provision		37		83			12		50		(1	)		81			1,998			336			26			2,622
Ending balance	$	240	$	346		$	128	$	831	$	1		$	1,138		$	1,799		$	427		$	145		$	5,055
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	28	$	50		$	—	$	1	$	—		$	67		$	20		$	—		$	—		$	166
Collectively evaluated for impairment		212		296			128		830		1			1,071			1,779			427			145			4,889
Loans acquired with deteriorated credit quality		—		—			—		—		—			—			—			—			—			—
Total allowance for loan losses	$	240	$	346		$	128	$	831	$	1		$	1,138		$	1,799		$	427		$	145		$	5,055
Ending balance of loans receivable:
Individually evaluated for impairment	$	153	$	268		$	—	$	511	$	—		$	67		$	43		$	—		$	—		$	1,042
Collectively evaluated for impairment		41,114		110,064			23,009		155,651		1,308			85,712			38,540			28,324			40,609			524,331
Loans acquired with deteriorated credit quality		73		424			—		—		—			—			—			—			—			497
Total loans receivable	$	41,340	$	110,756		$	23,009	$	156,162	$	1,308		$	85,779		$	38,583		$	28,324		$	40,609		$	525,870

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 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.

●

~~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. The Bank did not have any loans classified as Doubtful (Risk Grade 8) as of September 30, 2019 or December 31, 2018.

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 assets, even though partial recovery may be realized in the future. The Bank did not have any loans classified as Loss (Risk Grade 9) as of September 30, 2019 or December 31, 2018.

●

~~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 occur 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 September 30, ~~2017.~~2019:

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
$ 19,939 $
—
$ 274 $
—
$ 20,213
Secured by 1-4 family residential properties
34,069 201 855
—
35,125
Secured by multi-family residential properties
16,498
—

—

—
16,498
Secured by non-farm, non-residential properties
102,264 4,884 531
—
107,679
Other
223
—

—

—
223
Commercial and industrial loans
63,995 2,105 220
—
66,320
Consumer loans
5,366
—

65

—
5,431
Total
$ 242,354 $ 7,190 $ 1,945 $
—
$ 251,489

ALC

Performing

Nonperforming

Total

(Dollars in Thousands)

Loans secured by real estate:

Secured by 1-4 family residential properties
$ 11,292 $ 198 $ 11,490
Consumer loans:
Consumer 34,609 1,041 35,650
Indirect sales
50,168 385 50,553
Total
$ 96,069 $ 1,624 $ 97,693

	Bank
	Pass 1-5		Special Mention 6		Substandard 7		Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	26,997	$	351	$	—	$	27,348
Secured by 1-4 family residential properties		101,001		137		2,131		103,269
Secured by multi-family residential properties		46,843		—		—		46,843
Secured by non-farm, non-residential properties		159,511		4,422		1,008		164,941
Other		842		—		—		842
Commercial and industrial loans		85,353		720		4,397		90,470
Consumer loans		8,096		—		40		8,136
Total	$	428,643	$	5,630	$	7,576	$	441,849

The above amounts include purchased credit impaired loans. As of September 30, 2019, $0.2 million of purchased credit impaired loans were rated “Substandard.”

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	5,936	$	131	$	6,067
Consumer loans:
Consumer		28,908		433		29,341
Branch retail		29,858		150		30,008
Indirect sales		48,003		70		48,073
Total	$	112,705	$	784	$	113,489

The tables below illustrate the carrying amount of loans by credit quality indicator as of December 31, ~~2016.~~2018:

	Bank										Bank
	Pass 1-5		Special Mention 6		Substandard 7		Doubtful 8		Total		Pass 1-5		Special Mention 6		Substandard 7		Total
	(Dollars in Thousands)										(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	22,240	$	—	$	1,532	$	—	$	23,772	$	40,200	$	914	$	226	$	41,340
Secured by 1-4 family residential properties		31,995		213		747		—		32,955		100,485		154		2,332		102,971
Secured by multi-family residential properties		16,627		—		—		—		16,627		23,009		—		—		23,009
Secured by non-farm, non-residential properties		99,082		2,315		715		—		102,112		153,077		1,996		1,089		156,162
Other		234		—		—		—		234		1,308		—		—		1,308
Commercial and industrial loans		55,481		2,227		255		—		57,963		83,261		1,977		541		85,779
Consumer loans		6,126		—		80		—		6,206		6,848		—		79		6,927
Total	$	231,785	$	4,755	$	3,329	$	—	$	239,869	$	408,188	$	5,041	$	4,267	$	417,496

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 above amounts include purchased credit impaired loans. As of December 31, 2018, $0.5 million of purchased credit impaired loans were rated “Substandard.”

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	7,657	$	128	$	7,785
Consumer loans:
Consumer		30,826		830		31,656
Branch retail		28,171		153		28,324
Indirect sales		40,491		118		40,609
Total	$	107,145	$	1,229	$	108,374

The following tables provide an aging analysis of past due loans by class as of September 30, ~~2017.~~2019:

	Bank														Bank
	As of September 30, 2017														As of September 30, 2019
	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		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)														(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	23	$	—	$	—	$	23	$	20,190	$	20,213	$	—	$	349	$	—	$	—	$	349	$	26,999	$	27,348	$	—
Secured by 1-4 family residential properties		149		—		91		240		34,885		35,125		—		1,949		212		—		2,161		101,108		103,269		—
Secured by multi-family residential properties		—		—		—		—		16,498		16,498		—		—		—		—		—		46,843		46,843		—
Secured by non-farm, non-residential properties		15		117		—		132		107,547		107,679		—		1,334		—		14		1,348		163,593		164,941		—
Other		—		—		—		—		223		223		—		—		—		—		—		842		842		—
Commercial and industrial loans		31		—		—		31		66,289		66,320		—		918		—		—		918		89,552		90,470		—
Consumer loans		—		—		23		23		5,408		5,431		—		16		—		1		17		8,119		8,136		—
Total	$	218	$	117	$	114	$	449	$	251,040	$	251,489	$	—	$	4,566	$	212	$	15	$	4,793	$	437,056	$	441,849	$	—

The above amounts include purchased credit impaired loans. As of September 30, 2019, $0.2 million of purchased credit impaired loans were 60-89 days past due.

	ALC
	As of September 30, 2019
	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		60		—		131		191		5,876		6,067		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans:
Consumer		535		275		434		1,244		28,097		29,341		—
Branch retail		122		73		150		345		29,663		30,008		—
Indirect sales		194		75		70		339		47,734		48,073		—
Total	$	911	$	423	$	785	$	2,119	$	111,370	$	113,489	$	—

ALC

As of September 30, 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
73 70 71 214 11,276 11,490
—

Secured by multi-family residential properties

—

—

—

—

—

—

—

Secured by non-farm, non-residential properties

—

—

—

—

—

—

—

Other

—

—

—

—

—

—

—

Commercial and industrial loans

—

—

—

—

—

—

—

Consumer loans:
Consumer
506 433 1,016 1,955 33,695 35,650
—

Indirect sales

214

221

383

818

49,735

50,553

—

Total
$ 793 $ 724 $ 1,470 $ 2,987 $ 94,706 $ 97,693 $
—

The following tables provide an aging analysis of past due loans by class as of December 31, ~~2016~~.2018:

	Bank														Bank
	As of December 31, 2016														As of December 31, 2018
	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		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)														(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	86	$	86	$	23,686	$	23,772	$	—	$	415	$	582	$	74	$	1,071	$	40,269	$	41,340	$	—
Secured by 1-4 family residential properties		164		69		145		378		32,577		32,955		—		991		36		539		1,566		101,405		102,971		—
Secured by multi-family residential properties		—		—		—		—		16,627		16,627		—		—		—		—		—		23,009		23,009		—
Secured by non-farm, non-residential properties		762		—		—		762		101,350		102,112		—		458		13		—		471		155,691		156,162		—
Other		—		—		—		—		234		234		—		—		—		—		—		1,308		1,308		—
Commercial and industrial loans		—		—		14		14		57,949		57,963		—		2,608		30		384		3,022		82,757		85,779		—
Consumer loans		—		28		—		28		6,178		6,206		—		80		—		4		84		6,843		6,927		—
Total	$	926	$	97	$	245	$	1,268	$	238,601	$	239,869	$	—	$	4,552	$	661	$	1,001	$	6,214	$	411,282	$	417,496	$	—

The above amounts include purchased credit impaired loans. As of December 31, 2018, $0.3 million of purchased credit impaired loans were 90 or more days past due.

	ALC
	As of December 31, 2018
	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		60		65		128		253		7,532		7,785		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans:
Consumer		563		354		830		1,747		29,909		31,656		—
Branch retail		164		98		153		415		27,909		28,324
Indirect sales		184		79		118		381		40,228		40,609		—
Total	$	971	$	596	$	1,229	$	2,796	$	105,578	$	108,374	$	—

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 September 30, ~~2017~~2019 and December 31, ~~2016.~~2018:

	Loans on Non-Accrual Status				Loans on Non-Accrual Status
	September 30, 2017		December 31, 2016		September 30, 2019		December 31, 2018
	(Dollars in Thousands)				(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	86	$	—	$	73
Secured by 1-4 family residential properties		418		570		719		1,097
Secured by multi-family residential properties		—		—		—		—
Secured by non-farm, non-residential properties		33		53		23		14
Other						8		—
Commercial and industrial loans		14		32		30		424
Consumer loans:
Consumer		1,106		1,676		468		879
Branch retail						150		153
Indirect sales		385		—		70		119
Total loans	$	1,956	$	2,417	$	1,468	$	2,759

As of September 30, 2019 and December 31, 2018, purchased credit impaired loans comprised $0.2 million and $0.5 million of nonaccrual loans, respectively.

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~~’sloan’s existing rate or at the fair value of collateral if repayment is expected solely from the liquidation of the collateral at the Bank. All loans of $0.5 million or more that have a credit quality risk grade of seven or above are identified for impairment analysis. 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 athe borrower’s ability to pay. At ALC, all ~~real estate~~ loans of ~~$0.1 million~~$50 thousand or more that are 90 days or more past due are identified for impairment analysis. ~~There are currently~~As of September 30, 2019 and December 31, 2018, there were $0.1 million and $0.2 million, respectively, of impaired loans with no ~~loans~~related allowance recorded 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.~~ALC. Impaired loans, or portions thereof, are charged off when deemed uncollectable.

As of September 30, ~~2017,~~2019, the carrying amount of impaired loans at the Bank and ALC consisted of the following:

September 30, 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
$ 86 $ 86 $ 62
Secured by 1-4 family residential properties
189 189 5
Secured by multi-family residential properties
— — —
Secured by non-farm, non-residential properties
535 535 55
Commercial and industrial
70 70 72
Total loans with an allowance recorded
$ 880 $ 880 $ 194

Total impaired loans

Loans secured by real estate

Construction, land development and other land loans
$ 86 $ 86 $ 62
Secured by 1-4 family residential properties
189 189 5
Secured by multi-family residential properties
— — —
Secured by non-farm, non-residential properties
535 535 55
Commercial and industrial
70 70 72
Total impaired loans
$ 880 $ 880 $ 194

	September 30, 2019
	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Impaired loans with no related allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		997		997		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		496		496		—
Commercial and industrial		—		—		—
Consumer		—		—		—
Total loans with no related allowance recorded	$	1,493	$	1,493	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		22		22		15
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		4,025		4,025		394
Consumer		32		32		9
Total loans with an allowance recorded	$	4,079	$	4,079	$	418
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		1,019		1,019		15
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		496		496		—
Commercial and industrial		4,025		4,025		394
Consumer		32		32		9
Total impaired loans	$	5,572	$	5,572	$	418

The above amounts include purchased credit impaired loans. As of September 30, 2019, purchased credit impaired loans comprised $0.2 million of impaired loans without a related allowance recorded.

As of December 31, ~~2016,~~2018, the carrying amount of impaired loans at the Bank and ALC consisted of the following:

							December 31, 2018
							Carrying Amount		Unpaid Principal Balance		Related Allowances
	December 31, 2016						(Dollars in Thousands)
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	$	—	$	—	$	—	$	73	$	73	$	—
Secured by 1-4 family residential properties		—		—		—		635		635		—
Secured by multi-family residential properties		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer								—		—		—
Total loans with no related allowance recorded	$	—	$	—	$	—	$	708	$	708	$	—

Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	423	$	153	$	153	$	28
Secured by 1-4 family residential properties		193		193		5		57		57		50
Secured by multi-family residential properties		—		—		—		—		—		—
Secured by non-farm, non-residential properties		549		549		107		511		511		1
Commercial and industrial		—		—		—		67		67		67
Consumer								43		43		20
Total loans with an allowance recorded	$	2,103	$	2,103	$	535	$	831	$	831	$	166

Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	423	$	226	$	226	$	28
Secured by 1-4 family residential properties		193		193		5		692		692		50
Secured by multi-family residential properties		—		—		—		—		—		—
Secured by non-farm, non-residential properties		549		549		107		511		511		1
Commercial and industrial		—		—		—		67		67		67
Consumer								43		43		20
Total impaired loans	$	2,103	$	2,103	$	535	$	1,539	$	1,539	$	166

The above amounts include purchased credit impaired loans. As of December 31, 2018, purchased credit impaired loans comprised $0.5 million of impaired loans without a related allowance recorded.

The average net investment in impaired loans and interest income recognized and received on impaired loans ~~as of~~during the nine months ended September 30, ~~2017~~2019 and the year ended December 31, ~~2016~~2018 were as follows:

September 30, 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
$ 1,183 $ 1 $ 1
Secured by 1-4 family residential properties
191 10 11
Secured by multi-family residential properties
— — —
Secured by non-farm, non-residential properties
539 27 25
Commercial and industrial
55 6 3
Total
$ 1,968 $ 44 $ 40

	Nine Months Ended September 30, 2019
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	181	$	—	$	—
Secured by 1-4 family residential properties		1,021		43		37
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		645		22		21
Other		—		—		—
Commercial and industrial		991		5		5
Consumer		38		1		1
Total	$	2,876	$	71	$	64

	Year Ended December 31, 2018
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	70	$	8	$	8
Secured by 1-4 family residential properties		794		16		16
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		523		34		35
Other		1		—		—
Commercial and industrial		57		4		5
Consumer		15		3		3
Total	$	1,460	$	65	$	67

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 ~~$2.0~~$1.5 million and ~~$2.4~~$2.8 million as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. If interest on those loans had been accrued, there would have been $5$30 thousand and ~~$35~~$44 thousand of interest accrued for the periods ended September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. Interest income related to these loans ~~as of~~for the nine months ended September 30, ~~2017~~2019 and the year ended December 31, ~~2016~~2018 was $3$13 thousand and $4$27 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~~smodifications of note structure, principal balance reductions or some combination of these concessions. There were no loans modified with concessions granted during the nine-month period ended September 30, ~~2017.~~2019 or the year ended December 31, 2018. 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 ~~both~~ September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company had ~~$0.1 million~~$18 thousand and $65 thousand, respectively, of non-accruing loans that were previously restructured and that remained on non-accrual status. For both the nine months ended September 30, ~~2017,~~2019 and the year ended December 31, 2018, 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, as of September 30, 2019 and December 31, 2018, the number of loans remaining in each loan category ~~as of September 30, 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.

September 30, 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
1 $ 107 $ 84 2 $ 1,960 $ 1,286
Secured by 1-4 family residential properties
3 318 188 3 318 249
Secured by non-farm, non-residential properties
1 53 38 1 53 41
Commercial loans
2 116 83 2 116 88
Total
7 $ 594 $ 393 8 $ 2,447 $ 1,664

	September 30, 2019						December 31, 2018
	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		1	$	107	$	66		1	$	107	$	73
Secured by 1-4 family residential properties		3		318		30		3		318		118
Secured by non-farm, non-residential properties		—		—		—		1		53		34
Commercial loans		2		116		63		2		116		72
Total		6	$	541	$	159		7	$	594	$	297

As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, 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~~’sCompany’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 $3$1 thousand and $2 thousand as of September 30, ~~2017~~2019 and ~~$15 thousand as of~~ December 31, ~~2016.~~2018, respectively.

5.6.	OTHER REAL ESTATE OWNED AND REPOSSESSIONS

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~~net realizable value of the property, less estimated costs to sell. The following ~~table summarizes~~tables summarize foreclosed property activity ~~for~~as of the nine months ended September 30, ~~2017~~2019 and ~~2016.~~2018:

	September 30, 2017									September 30, 2019
	Bank			ALC			Total			Bank			ALC			Total
	(Dollars in Thousands)									(Dollars in Thousands)
Beginning balance	$	4,353		$	505		$	4,858		$	1,401		$	104		$	1,505
Transfers from loans		—			87			87
Additions ⁽¹⁾											224			88			312
Sales proceeds		(649	)		(199	)		(848	)		(443	)		(80	)		(523	)
Gross gains		14			—			14			37			2			39
Gross losses		(20	)		(101	)		(121	)		(21	)		(26	)		(47	)
Net gains (losses)		(6	)		(101	)		(107	)		16			(24	)		(8	)
Impairment		(171	)		—			(171	)		—			(38	)		(38	)
Ending balance	$	3,527		$	292		$	3,819		$	1,198		$	50		$	1,248

	September 30, 2016									September 30, 2018
	Bank			ALC			Total			Bank			ALC			Total
	(Dollars in Thousands)									(Dollars in Thousands)
Beginning balance	$	5,327		$	711		$	6,038		$	3,527		$	265		$	3,792
Transfers from loans		255			149			404
Additions ⁽¹⁾											191			58			249
Sales proceeds		(655	)		(259	)		(914	)		(2,453	)		(77	)		(2,530	)
Gross gains		—			27			27			267			8			275
Gross losses		(40	)		(73	)		(113	)		(46	)		(54	)		(100	)
Net gains (losses)		(40	)		(46	)		(86	)		221			(46	)		175
Impairment		—			(51	)		(51	)		(167	)		(30	)		(197	)
Ending balance	$	4,887		$	504		$	5,391		$	1,319		$	170		$	1,489

(1)

Additions to other real estate owned (“OREO”) include transfers from loans and capitalized improvements to existing OREO properties.

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~~Net realizable value less estimated ~~cost~~costs to sell of foreclosed residential real estate held by the Company was ~~$0.6~~$0.2 million and ~~$1.1~~$0.5 million as of September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. In addition, the Company held ~~$20~~$40 thousand ~~and $0.1 million in~~of consumer mortgage loans collateralized by residential real estate that were in the process of foreclosure as of September 30, ~~2017~~2019, and ~~2016,~~did not hold any of these loans as of September 30, 2018.

Repossessions

In addition to the other real estate and other assets acquired in foreclosure, the Bank and ALC also acquire assets through the repossession of the underlying collateral of loans in default. Total repossessed assets as of September 30, 2019 and December 31, 2018 were $0.1 million and $0.2 million, respectively.

6.7.	~~INVESTMENT IN LIMITED PARTNERSHIP~~GOODWILL AND OTHER INTANGIBLE ASSETS

The Company 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 assetsrecorded $7.4 million 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~~goodwill as a result of its acquisition of TPB in 2018. The Company’s goodwill impairment testing is being performed during the ~~consolidation were less~~fourth quarter of 2019. Goodwill impairment was neither indicated nor recorded during the nine months ended September 30, 2019 or the year ended December 31, 2018.

Goodwill is tested annually, or more often if circumstances warrant, for impairment. If the implied fair value of goodwill is lower than ~~$0.1~~its carrying amount, goodwill impairment is indicated, and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the consolidated financial statements. Goodwill totaled $7.4 million as of both September 30, ~~2017~~2019 and December 31, ~~2016.~~2018.

Core deposit premiums are amortized over a seven-year period and are periodically evaluated, at least annually, as to the recoverability of their carrying value. Core deposit premiums of $2.0 million were recorded during 2018 as part of the TPB acquisition.

The Company’s goodwill and other intangibles (carrying basis and accumulated amortization) as of September 30, 2019 were as follows:

	September 30, 2019
	(Dollars in Thousands)
Goodwill	$	7,435
Core deposit intangible:
Gross carrying amount		2,048
Accumulated amortization		(549	)
Core deposit intangible, net		1,499
Total	$	8,934

The Company’s estimated remaining amortization expense on intangibles as of September 30, 2019 was as follows:

	Amortization Expense
	(Dollars in Thousands)
2019	$	110
2020		414
2021		341
2022		268
2023		195
2024		122
2025		49
Total	$	1,499

The net carrying amount of the Company’s core deposit premiums is not considered recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition. That assessment is based on the carrying amount of the intangible assets subject to amortization at the date on which it is tested for recoverability. Intangible assets subject to amortization are tested by the Company for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

7.8.	SHORT-TERM BORROWINGS

Short-term borrowings consist of federal funds purchased, securities sold under repurchase agreements, and short-term ~~Federal Home Loan Bank (“FHLB”)~~FHLB advances with original maturities of one year or less. Short-term borrowings totaled ~~$10.6~~$0.2 million and ~~$10.1~~$0.5 million as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, 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 September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, there were no federal funds purchased ~~outstanding, and the~~outstanding. The Bank had ~~$18.8~~$61.8 million and $72.2 million in available unused lines of credit with correspondent banks and the Federal ~~Reserve.~~

Reserve as of September 30, 2019 and December 31, 2018, respectively.

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 September 30, ~~2017~~2019 and December 31, ~~2016~~2018 totaled ~~$0.6~~$0.2 million and ~~$0.1~~$0.5 million, respectively.

Short-term FHLB advances are secured borrowings available to the Bank as an alternative funding source. As of both September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Bank ~~had $10.0 million in~~ did not have any outstanding FHLB advances with original maturities of less than one year.

8.9.	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~~As of both September 30, 2019 and December 31, 2018, the Company ~~had~~did not have any long-term FHLB advances ~~outstanding of $10.0~~outstanding.

Assets pledged (including loans and investment securities) associated with FHLB advances totaled $29.6 million and ~~$15.0~~$27.0 million as of September 30, ~~2017~~2019 and December 31, ~~2016, respectively.~~

~~Assets pledged associated with FHLB advances totaled $22.3 million and $28.0 million as of September 30, 2017 and~~ ~~December 31, 2016,~~2018, respectively. As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the ~~Company~~Bank had ~~$164.8~~$233.0 million and ~~$155.0~~$282.2 million, respectively, in remaining credit from the FHLB (subject to available collateral).

9.10.

INCOME TAXES

The provision for income taxes was ~~$0.4~~$0.9 million and $0.4 million for ~~both of~~ the nine-month periods ended September 30, ~~2017~~2019 and ~~2016.~~2018, respectively. The Company’s effective tax rate was ~~23.0%~~20.5% and ~~23.4%~~29.8%, respectively, 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 ~~investments~~investment and loan income.

Additionally, the Company’s increased effective tax rate in 2018 was primarily due to certain non-deductible expenses associated with the acquisition of TPB in 2018.

The Company had a net deferred tax asset of ~~$7.7~~$3.3 million and ~~$8.7~~$4.6 million as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. The ~~reduction~~decrease in the net deferred tax asset resulted primarily from the impact of changes in the fair value of securities available-for-sale, ~~as well as the reduction of federal~~combined with reductions in net operating loss ~~carry-forwards.~~

carryforwards and other book-to-tax temporary differences.

~~10.~~11.

DEFERRED COMPENSATION PLANS

The ~~Bank~~Company 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 to be 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 ~~$3.4~~$3.3 million and ~~$3.5~~$3.4 million as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively.

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 Bancshares’ 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. As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, a total of ~~100,990~~122,271 and ~~114,547~~116,766 shares of Bancshares common stock, respectively, were deferred in connection with the Deferral Plan. All deferred fees, whether in the form of cash or shares of Bancshares common stock, are reflected as compensation expense in the period earned. The Company classifies all deferred ~~directors'~~directors’ fees allocated to be paid in shares ~~of stock~~ as equity surplus. The Company ~~uses~~may use issued shares or shares of treasury stock to satisfy these obligations when due.

~~11.~~12.

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 $0.2 million ~~and $0.1 million~~ for both of the nine-month periods ended September 30, ~~2017~~2019 and ~~2016, respectively.~~2018.

Stock Options

~~The stock~~Stock option awards ~~were~~have been granted with an exercise price equal to the market price of ~~Bancshares’~~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~~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 ~~Bancshares’~~the Company’s common stock.

	2017			2016			2019			2018
Risk-free interest rate		2.23	%		1.58	%		2.59	%		2.77	%
Expected term	7.5 years			7.5 years
Expected term (in years)								7.5			7.5
Expected stock price volatility		25.36	%		25.25	%		30.9	%		28.3	%
Dividend yield		1.50	%		1.50	%		1.25	%		1.50	%
Fair value of stock option								3.30			3.51

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

	Nine Months Ended								Nine Months Ended
	September 30, 2017				September 30, 2016				September 30, 2019				September 30, 2018
	Number of Shares		Average Exercise Price		Number of Shares		Average Exercise Price		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		377,950	$	9.80		318,000	$	9.43
Granted		70,600		13.84		97,000		8.30		68,150		9.99		62,150		11.71
Exercised		19,316		8.15		—		—		719		8.30		500		8.12
Expired		—		—		—		—		—		—		—		—
Forfeited		3,334		11.79		—		—		26,300		11.96		1,700		11.15
Options outstanding, end of period		320,500	$	9.42		272,550	$	8.21		419,081	$	9.70		377,950	$	9.80
Options exercisable, end of period		208,633	$	8.20		175,550	$	8.17		304,748	$	9.14		249,467	$	8.72

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 ~~$0.8~~$0.2 million and ~~$0.4~~$0.7 million as of September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

Restricted Stock

During ~~the first nine 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 nine months ended September 30, ~~2016.~~2019 and 2018, respectively, 5,520 shares and 10,520 shares of restricted stock were granted. 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.

13.

LEASES

The Bank and ALC are involved in a number of operating leases, primarily for branch locations. Branch leases have remaining lease terms ranging from less than one year to 15 years, some of which include options to extend the leases for up to five years, and some of which include an option to terminate the lease within one year. The Bank leases certain office facilities to third parties and classifies these leases as operating leases.

The following table provides a summary of the components of lease expense, as well as the reporting location in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018:

	Location in the Condensed	Three Months Ended				Nine Months Ended
	Consolidated Statements of Operations	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
		(Dollars in Thousands)				(Dollars in Thousands)
Operating lease expense ⁽¹⁾	Net occupancy and equipment	$	206	$	136	$	627	$	431
Operating lease income ⁽²⁾	Other income, net	$	212	$	10	$	633	$	44

~~12.~~⁽¹⁾

Includes short-term lease costs. For the three- and nine-month periods ended September 30, 2019 and 2018, short-term lease costs were nominal in amount.

The following table provides supplemental lease information for operating leases on the Condensed Consolidated Balance Sheet as of September 30, 2019:

The following table provides supplemental lease information for the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018:

The following table is a schedule of remaining future minimum lease payments for operating leases that had an initial or remaining non-cancellable lease term in excess of one year as of September 30, 2019:

~~On April 1, 2016,~~The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of certain balance sheet assets and liabilities. In the normal course of business, the Company also uses derivative financial instruments to add stability to interest income or expense and to manage its exposure to movements in interest rates. The Company does not use derivatives for trading or speculative purposes and only enters into transactions that have a qualifying hedge relationship. The Company’s hedging strategies involving interest rate derivatives are classified as either fair value hedges or cash flow hedges, depending upon the rate characteristic of the hedged item.

Effective July 8, 2019, the Bank entered into a forward interest rate swap contract on ~~a variable rate FHLB advance~~certain variable-rate money market deposit accounts (indexed to ~~three-month LIBOR)~~the Federal Funds effective rate’s daily weighted average) with a total notional amount of $10.0 million. The money market account balances are expected to exceed $10 million for the next seven years and the rates on these deposits are anticipated to move closely with changes in one-month LIBOR, or a comparable benchmark interest rate. 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~~converting the ~~quarterly~~floating interest ~~rate~~ payments ~~on the FHLB advance from the risk of variability of those payments resulting from changes in the three-month LIBOR interest~~to a fixed rate throughout the seven-year period beginning on ~~April 5, 2016~~July 8, 2019 and ending on ~~April 5, 2023.~~July 8, 2026. Under the swap arrangement, ~~which became effective on April 5, 2016,~~ the Bank will pay a fixed interest rate of ~~1.46%~~1.790% and receive a variable interest rate based on ~~three-month~~one-month LIBOR, or a comparable benchmark interest rate, on the ~~total~~ notional amount of $10.0 million, with ~~quarterly~~monthly net settlements.

~~No ineffectiveness related to~~Effective July 22, 2019, the Bank entered into a forward interest rate swap contract on certain variable-rate money market deposit accounts (indexed to the Federal Funds effective rate’s daily weighted average) with a total notional amount of $10.0 million. The money market account balances are expected to exceed $10 million for the next five years and the rates on these deposits are anticipated to move closely with changes in one-month LIBOR, or a comparable benchmark interest rate. The interest rate swap was designated as a ~~cash~~ ~~flow hedge was recognized~~derivative instrument in ~~the consolidated statements of operations for the three- or nine-month periods ended September 30, 2017. The accumulated net after-tax gain related to the effective~~a cash flow hedge ~~included in accumulated other comprehensive income totaled $0.2~~with the objective of converting the floating interest payments to a fixed rate throughout the five-year period beginning on July 22, 2019 and ending on July 22, 2024. Under the swap arrangement, the Bank will pay a fixed interest rate of 1.698% and receive a variable interest rate based on one-month LIBOR, or a comparable benchmark interest rate, on the notional amount of $10.0 million, ~~as of both September 30, 2017 and December 31, 2016.~~with monthly net settlements.

Effective August 9, 2019, the Bank entered into a forward interest rate swap contract on fixed rate commercial real estate loans with a total notional amount of $10.0 million. The interest rate swap was designated as a derivative instrument in a fair value hedge with the objective of effectively converting a pool of fixed rate assets to variable rate throughout the five-year period beginning on August 9, 2019 and ending on

August 9, 2024. Under the swap arrangement, the Bank will pay a fixed interest rate of 1.406% and receive a variable interest rate based on one-month LIBOR, or a comparable benchmark interest rate, on the notional amount of $10.0 million, with monthly net settlements.

Effective August 21, 2019, the Bank entered into a forward interest rate swap contract on fixed rate commercial real estate loans with a total notional amount of $10.0 million. The interest rate swap was designated as a derivative instrument in a fair value hedge with the objective of effectively converting a pool of fixed rate assets to variable rate throughout the five-year period beginning on August 21, 2019 and ending on August 21, 2024. Under the swap arrangement, the Bank will pay a fixed interest rate of 1.292% and receive a variable interest rate based on one-month LIBOR, or a comparable benchmark interest rate, on the notional amount of $10.0 million, with monthly net settlements.

The Company has elected the last-of-layer method with respect to both of its fair value hedges. This approach allows the Company to designate as the hedged item a stated amount of the assets that are not expected to be affected by prepayments, defaults and other factors affecting the timing and amount of cash flows. Relative to the identified pools of loans, this represents the last dollar amount of the designated commercial loans, which is equivalent to the notional amounts of the derivative instruments.

The following amounts were recorded on the balance sheet related to cumulative basis adjustments for fair value hedges:

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.~~2018. 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.

Other operating income for the three and nine months ended September 30, 2019 and 2018 consisted of the following:

Other operating expenses for the three and nine months ended September 30, 2019 and 2018 consisted of the following:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	FUSB	The Nasdaq Stock Market LLC

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☒
Emerging growth company	☐

	Nine Months Ended
	September 30,
	2017			2016
	(Unaudited)
Cash flows from operating activities:
Net income	$	1,455		$	1,329
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		781			726
Provision for loan losses		1,464			1,383
Deferred income tax provision		231			368
Net gain on sale and prepayment of investment securities		(228	)		(657	)
Stock-based compensation expense		262			218
Net amortization of securities		869			1,163
Net loss on premises and equipment and other real estate		453			573
Changes in assets and liabilities:
Decrease (increase) in accrued interest receivable		110			(14	)
Decrease in other assets		57			224
Increase in accrued interest expense		40			51
Decrease in other liabilities		(114	)		(27	)
Net cash provided by operating activities		5,380			5,337
Cash flows from investing activities:
Purchases of investment securities, available-for-sale		(15,254	)		(49,236	)
Purchases of investment securities, held-to-maturity		(4,696	)		(13,850	)
Proceeds from sales of investment securities, available-for-sale		1,749			30,439
Proceeds from maturities and prepayments of investment securities, available-for-sale		38,570			37,131
Proceeds from maturities and prepayments of investment securities, held-to-maturity		3,119			17,779
Net decrease (increase) in Federal Home Loan Bank stock		185			(343	)
Proceeds from the sale of premises and equipment and other real estate		1,215			1,208
Net change in loan portfolio		(17,326	)		(64,081	)
Purchases of premises and equipment		(9,858	)		(4,554	)
Net cash used in investing activities		(2,296	)		(45,507	)
Cash flows from financing activities:
Net increase in customer deposits		10,829			14,570
Net increase (decrease) in other borrowings		516			(2,017	)
Net increase (decrease) in Federal Home Loan Bank advances		(5,000	)		10,000
Net share-based compensation transactions		(41	)		—
Dividends paid		(364	)		(362	)
Net cash provided by financing activities		5,940			22,191
Net increase (decrease) in cash and cash equivalents		9,024			(17,979	)
Cash and cash equivalents, beginning of period		23,530			44,072
Cash and cash equivalents, end of period	$	32,554		$	26,093
Supplemental disclosures:
Cash paid for:
Interest	$	1,862		$	1,632
Income taxes		77			85
Non-cash transactions:
Assets acquired in settlement of loans		608			1,009
Reissuance of treasury stock as compensation	$	350		$	53

	Bank
	Nine Months Ended September 30, 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		—			—			—		—			—		(16	)		(63	)		—		(79	)
Recoveries		—			85			—		69			—		16			52			—		222
Provision		(328	)		(141	)		27		(142	)		—		440			14			—		(130	)
Ending balance	$	207		$	248		$	115	$	830		$	2	$	967		$	53		$	—	$	2,422

Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	62		$	5		$	—	$	55		$	—	$	72		$	—		$	—	$	194
Collectively evaluated for impairment		145			243			115		775			2		895			53			—		2,228
Total allowance for loan losses	$	207		$	248		$	115	$	830		$	2	$	967		$	53		$	—	$	2,422
Ending balance of loans receivable:
Individually evaluated for impairment	$	86		$	189		$	—	$	535		$	—	$	70		$	—		$	—	$	880
Collectively evaluated for impairment		20,127			34,936			16,498		107,144			223		66,250			5,431			—		250,609
Total loans receivable	$	20,213		$	35,125		$	16,498	$	107,679		$	223	$	66,320		$	5,431		$	—	$	251,489

	Bank and ALC
	Nine Months Ended September 30, 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		—			(27	)		—		—			—		(16	)		(1,784	)		(445	)		(2,272	)
Recoveries		—			113			—		69			—		16			487			75			760
Provision		(328	)		(146	)		27		(142	)		—		440			1,148			465			1,464
Ending balance	$	207		$	351		$	115	$	830		$	2	$	967		$	1,618		$	718		$	4,808

Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	62		$	5		$	—	$	55		$	—	$	72		$	—		$	—		$	194
Collectively evaluated for impairment		145			346			115		775			2		895			1,618			718			4,614
Total allowance for loan losses	$	207		$	351		$	115	$	830		$	2	$	967		$	1,618		$	718		$	4,808
Ending balance of loans receivable:
Individually evaluated for impairment	$	86		$	189		$	—	$	535		$	—	$	70		$	—		$	—		$	880
Collectively evaluated for impairment		20,127			46,426			16,498		107,144			223		66,250			41,081			50,553			348,302
Total loans receivable	$	20,213		$	46,615		$	16,498	$	107,679		$	223	$	66,320		$	41,081		$	50,553		$	349,182

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	11,292	$	198	$	11,490
Consumer loans:
Consumer		34,609		1,041		35,650
Indirect sales		50,168		385		50,553
Total	$	96,069	$	1,624	$	97,693

	ALC
	As of September 30, 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		73		70		71		214		11,276		11,490		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans:
Consumer		506		433		1,016		1,955		33,695		35,650		—
Indirect sales		214		221		383		818		49,735		50,553		—
Total	$	793	$	724	$	1,470	$	2,987	$	94,706	$	97,693	$	—

	September 30, 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	$	1,183	$	1	$	1
Secured by 1-4 family residential properties		191		10		11
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		539		27		25
Commercial and industrial		55		6		3
Total	$	1,968	$	44	$	40

	September 30, 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		1	$	107	$	84		2	$	1,960	$	1,286
Secured by 1-4 family residential properties		3		318		188		3		318		249
Secured by non-farm, non-residential properties		1		53		38		1		53		41
Commercial loans		2		116		83		2		116		88
Total		7	$	594	$	393		8	$	2,447	$	1,664

	Location in the Condensed
	Consolidated Balance Sheet	September 30, 2019
		(Dollars in Thousands)
Operating lease right-of-use assets	Other assets	$	3,609
Operating lease liabilities	Other liabilities	$	3,633
Weighted-average remaining lease term (in years)			7.03
Weighted-average discount rate			3.19	%

	Minimum Rental Payments
	(Dollars in Thousands)
2019	$	190
2020		677
2021		574
2022		512
2023		453
2024 and thereafter		1,714
Total future minimum lease payments	$	4,120
Less: Imputed interest		487
Total operating lease liabilities	$	3,633

Location in the Condensed Consolidated Balance Sheet in Which the Hedged	Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
Item is Included	September 30, 2019
	(Dollars in Thousands)
Loans and leases, net of allowance for loan and lease losses ⁽¹⁾	$	64,189	$	(133	)

						All												All
	Bank			ALC		Other			Eliminations			Consolidated		Bank		ALC		Other			Eliminations			Consolidated
	(Dollars in Thousands)													(Dollars in Thousands)
As of and for the three months ended September 30, 2017:
As of and for the three months ended September 30, 2019:
Net interest income	$	4,192		$	2,940	$	3		$	—		$	7,135	$	6,205	$	3,136	$	6		$	—		$	9,347
Provision (reduction in reserve) for loan losses		(130	)		503		—			—			373
Provision for loan losses															545		338		—			—			883
Total non-interest income		1,005			219		954			(942	)		1,236		1,176		212		1,520			(1,494	)		1,414
Total non-interest expense		4,699			2,303		336			(148	)		7,190		5,773		2,467		455			(149	)		8,546
Income before income taxes		628			353		621			(794	)		808		1,063		543		1,071			(1,345	)		1,332
Provision for income taxes		48			202		(77	)		—			173		136		139		(61	)		—			214
Net income	$	580		$	151	$	698		$	(794	)	$	635	$	927	$	404	$	1,132		$	(1,345	)	$	1,118
Other significant items:
Total assets	$	616,820		$	92,942	$	84,170		$	(179,333	)	$	614,599	$	773,036	$	109,852	$	89,141		$	(200,099	)	$	771,930
Total investment securities		185,722			—		80			—			185,802		114,229		—		80			—			114,309
Total loans, net		329,327			89,326		—			(80,627	)		338,026		533,861		106,223		—			(95,565	)		544,519
Goodwill and core deposit intangible, net															8,934		—		—			—			8,934
Investment in subsidiaries		5			—		78,469			(78,469	)		5		5		—		83,460			(83,460	)		5
Fixed asset additions		818			13		—			—			831		172		42		—			—			214
Depreciation and amortization expense		238			41		—			—			279		372		37		—			—			409
Total interest income from external customers		3,596			4,224		—			—			7,820		6,546		4,480		1			—			11,027
Total interest income from affiliates		1,284			—		3			(1,287	)		—		1,345		—		6			(1,351	)		—

For the nine months ended September 30, 2017:
For the nine months ended September 30, 2019:
Net interest income	$	12,168		$	8,933	$	10		$	—		$	21,111	$	18,200	$	9,534	$	19		$	—		$	27,753
Provision (reduction in reserve) for loan losses		(130	)		1,594		—			—			1,464
Provision for loan losses															635		1,363		—			—			1,998
Total non-interest income		2,647			700		2,451			(2,465	)		3,333		3,362		659		4,485			(4,536	)		3,970
Total non-interest expense		13,522			6,966		1,074			(472	)		21,090		17,404		7,201		1,375			(477	)		25,503
Income before income taxes		1,423			1,073		1,387			(1,993	)		1,890		3,523		1,629		3,129			(4,059	)		4,222
Provision for income taxes		249			458		(272	)		—			435		647		403		(185	)		—			865
Net income	$	1,174		$	615	$	1,659		$	(1,993	)	$	1,455	$	2,876	$	1,226	$	3,314		$	(4,059	)	$	3,357
Other significant items:
Fixed asset additions		8,578			103		—			—			8,681		2,736		120		—			—			2,856
Depreciation and amortization expense		657			124		—			—			781		1,100		105		—			—			1,205
Total interest income from external customers		10,493			12,520		—			—			23,013		19,515		13,246		2			—			32,763
Total interest income from affiliates		3,587			—		9			(3,596	)		—		3,712		—		18			(3,730	)		—

	September 30, 2017		December 31, 2016		September 30, 2019		December 31, 2018
	(Dollars in Thousands)				(Dollars in Thousands)
Standby letters of credit	$	180	$	183	$	180	$	180
Standby performance letters of credit						652		704
Commitments to extend credit	$	53,231	$	41,267	$	103,360	$	85,972

	Fair Value Measurements as of September 30, 2017 Using								Fair Value Measurements as of September 30, 2019 Using
	Totals At September 30, 2017		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Totals At September 30, 2019		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)								(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	83,550	$	—	$	83,550	$	—	$	47,108	$	—	$	47,108	$	—
Commercial		67,138		—		67,138		—		45,057		—		45,057		—
Obligations of states and political subdivisions		5,655		—		5,655		—		4,305		—		4,305		—
Obligations of U.S. government-sponsored agencies		2,002		—		2,002		—
U.S. Treasury securities		80		—		80		—		80		—		80		—
Other assets - derivatives		291		—		291		—
Other liabilities - derivatives										298		—		298		—

	Fair Value Measurements as of December 31, 2016 Using								Fair Value Measurements as of December 31, 2018 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)		Totals At December 31, 2018		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)								(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	98,409	$	—	$	98,409	$	—	$	72,455	$	—	$	72,455	$	—
Commercial		70,530		—		70,530		—		54,289		—		54,289		—
Obligations of states and political subdivisions		10,142		—		10,142		—		5,664		—		5,664		—
Obligations of U.S. government-sponsored agencies		1,993		—		1,993		—
Corporate notes		756		—		756		—
U.S. Treasury securities		80		—		80		—		79		—		79		—
Other assets - derivatives		346		—		346		—

	Fair Value Measurements as of December 31, 2016 Using								Fair Value Measurements as of September 30, 2019 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)		Totals At September 30, 2019		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)								(Dollars in Thousands)
Impaired loans	$	1,568	$	—	$	—	$	1,568	$	3,661	$	—	$	—	$	3,661
OREO		4,858		—		—		4,858		1,248		—		—		1,248
Other assets		280		—		—		280
Assets held-for-sale										198		—		—		198

	Level 3 Significant Unobservable Input Assumptions					Level 3 Significant Unobservable Input Assumptions
	Fair Value September 30, 2017		Valuation Technique	Unobservable Input	Quantitative Range of Unobservable Inputs (Weighted Average)	Fair Value September 30, 2019		Valuation Technique	Unobservable Input	Quantitative Range of Unobservable Inputs (Weighted Average)
	(Dollars in Thousands)					(Dollars in Thousands)
Non-recurring fair value measurements:

Impaired loans	$	686	Multiple data points, including discount to appraised value of collateral based on recent market activity	Appraisal comparability adjustment (discount)	9% - 10% (9.5%)	$	3,661	Multiple data points, including discount to appraised value of collateral based on recent market activity	Appraisal comparability adjustment (discount)	9%-10%	(9.5%)

OREO	$	3,819	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	9% - 10% (9.5%)	$	1,248	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	$	228	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	9% - 10% (9.5%)
Assets held-for-sale						$	198	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	9%-10%	(9.5%)

	September 30, 2017										September 30, 2019
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3		Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)										(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	32,554	$	32,554	$	32,554	$	—	$	—	$	35,435	$	35,435	$	35,435	$	—	$	—
Investment securities available-for-sale		158,425		158,425		—		158,425		—		96,550		96,550		—		96,550		—
Investment securities held-to-maturity		27,377		27,303		—		27,303		—		17,759		17,661		—		17,661		—
Federal funds sold												10,080		10,080		—		10,080		—
Federal Home Loan Bank stock		1,396		1,396		—		—		1,396		713		713		—		—		713
Loans, net of allowance for loan losses		338,026		327,251		—		—		327,251		544,519		561,998		—		—		561,998
Other assets - derivatives		291		291		—		291		—
Liabilities:
Deposits		508,385		507,298		—		507,298		—		677,640		678,370		—		678,370		—
Short-term borrowings		10,635		10,634		—		10,634		—		221		221		—		221		—
Long-term debt		10,000		10,000		—		10,000		—
Other liabilities - derivatives												298		298		—		298		—


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-month periods ended September 30, 2019 and 2018. At ALC, loan fees totaled $0.2 million and $0.4 million for the respective periods presented.


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 $0.9 million and $0.6 million for the nine months ended September 30, 2019 and 2018, respectively. At ALC, these loans averaged $0.9 million and $1.5 million for the respective periods presented.

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-month periods ended September 30, 2017 and 2016. At ALC, loan fees totaled $0.5~~$0.3 million and ~~$0.7~~$0.4 million for ~~the respective periods presented.~~

	Nine Months Ended							Nine Months Ended
	September 30, 2017							September 30, 2016
	Average Balance		Interest		Annualized Yield/ Rate %			Average Balance		Interest		Annualized Yield/ Rate %
	(Dollars in Thousands)
ASSETS
Interest-earning assets:
Loans – Bank (Note A)	$	238,428	$	7,408		4.15	%	$	197,460	$	6,508		4.39	%
Loans – ALC (Note A)		88,918		12,520		18.83	%		85,504		12,684		19.78	%
Taxable investment securities		196,200		2,659		1.81	%		213,828		2,765		1.73	%
Non-taxable investment securities		8,989		245		3.64	%		14,073		382		3.62	%
Federal funds sold		—		—		—	%		4,288		17		0.53	%
Interest-bearing deposits in banks		22,705		181		1.07	%		20,581		78		0.51	%
Total interest-earning assets		555,240		23,013		5.54	%		535,734		22,434		5.58	%
Non-interest-earning assets:
Other assets		56,012							49,222
Total	$	611,252						$	584,956
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Demand deposits	$	162,920	$	465		0.38	%	$	149,162	$	410		0.37	%
Savings deposits		80,364		132		0.22	%		77,411		108		0.19	%
Time deposits		183,242		1,116		0.81	%		180,949		1,050		0.77	%
Borrowings		21,596		189		1.17	%		15,467		115		0.99	%
Total interest-bearing liabilities		448,122		1,902		0.57	%		422,989		1,683		0.53	%
Non-interest-bearing liabilities:
Demand deposits		77,976							76,157
Other liabilities		7,223							7,750
Shareholders’ equity		77,931							78,060
Total	$	611,252						$	584,956
Net interest income (Note B)			$	21,111						$	20,751
Net yield on interest-earning assets						5.08	%						5.16	%

	Three Months Ended September 30,											Nine Months Ended September 30,											Three Months Ended September 30,										Nine Months Ended September 30,
	2017		2016		$ Change			% Change				2017		2016		$ Change			% Change				2019		2018		$ Change			% Change			2019		2018		$ Change			% Change
	(Dollars in Thousands)											(Dollars in Thousands)											(Dollars in Thousands)										(Dollars in Thousands)
Service charges and other fees on deposit accounts	$	481	$	463	$	18			3.9		%	$	1,406	$	1,306	$	100			7.7		%	$	472	$	489	$	(17	)		(3.5	)%	$	1,375	$	1,400	$	(25	)		(1.8	)%
Credit insurance commissions and fees		160		256		(96	)		(37.5	)	%		459		570		(111	)		(19.5	)	%		175		198		(23	)		(11.6	)%		426		516		(90	)		(17.4	)%
Bank-owned life insurance		106		105		1			0.1		%		318		316		2			0.6		%		109		108		1			0.9	%		323		319		4			1.3	%
Net gain on sale and prepayment of investment securities		178		259		(81	)		(31.3	)	%		228		657		(429	)		(65.3	)	%		45		—		45		NM				67		105		(38	)		(36.2	)%
Net gain on settlement of derivative contracts																								—		981		(981	)	NM				—		981		(981	)	NM
Mortgage fees from secondary market																								91		128		(37	)		(28.9	)%		380		389		(9	)		(2.3	)%
Lease income																								212		10		202		NM				633		44		589		NM
Other income		311		484		(173	)		(35.7	)	%		922		1,187		(265	)		(22.3	)	%		310		198		112			56.6	%		766		630		136			21.6	%
Total non-interest income	$	1,236	$	1,567	$	(331	)		(21.1	)	%	$	3,333	$	4,036	$	(703	)		(17.4	)	%	$	1,414	$	2,112	$	(698	)		(33.0	)%	$	3,970	$	4,384	$	(414	)		(9.4	)%

	ALC
	2019									2018
	Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter
	(Dollars in Thousands)
Balance at beginning of period	$	2,289		$	2,213		$	2,320		$	2,407		$	2,432
Charge-offs:
Real estate loans:
Construction, land development and other land loans		—			—			—			—			—
Secured by 1-4 family residential properties		(4	)		(11	)		(19	)		(19	)		(41	)
Secured by multi-family residential properties		—			—			—			—			—
Secured by non-farm, non-residential properties		—			—			—			—			—
Other		—			—			—			—			—
Commercial and industrial		—			—			—			—			—
Consumer loans:
Consumer		(426	)		(554	)		(521	)		(637	)		(628	)
Branch retail		(93	)		(103	)		(98	)		(73	)		(123	)
Indirect sales		(66	)		(76	)		(52	)		(36	)		(21	)
Other loans		—			—			—			—			—
Total charge-offs		(589	)		(744	)		(690	)		(765	)		(813	)
Recoveries		198			195			183			204			176
Net recoveries (charge-offs)		(391	)		(549	)		(507	)		(561	)		(637	)
Provision (reduction in reserve) for loan losses		338			625			400			474			612
Ending balance	$	2,236		$	2,289		$	2,213		$	2,320		$	2,407
as a percentage of loans		2.06	%		2.15	%		2.19	%		2.26	%		2.28	%

Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs (1)		Maximum Number of Shares that May Yet Be Purchased Under the Programs (1)
July 1 – July 31		—	$	—		—		242,303
August 1 – August 31		33,100	$	9.48		33,100		209,203
September 1 – September 30		51,100	$	9.53		51,100		158,103
Total		84,200	$	9.51		84,200		158,103

Exhibit No.		Description

3.1		Certificate of Incorporation of United Security Bancshares, Inc. (incorporated by reference to Exhibit 3(i) to the Quarterly Report on Form 10-Q (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 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 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 September 30, 2019.

~~BY:~~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)

~~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), as 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~~ ~~September 30, 2017.~~