Business First Bancshares (BFST) 8-K/A Financial Statements and Exhibits

Exhibit 99.2

MINDEN BANCORP, INC. AND SUBSIDIARY

MINDEN, LOUISIANA

SEPTEMBER 30, 2017 AND DECEMBER 31, 2016

MINDEN BANCORP, INC. AND SUBSIDIARY

MINDEN, LOUISIANA

SEPTEMBER 30, 2017 AND DECEMBER 31, 2016

TABLE OF CONTENTS

Page

Consolidated Balance Sheets as of September 30, 2017 (Unaudited) and December 31, 2016	1-2
Unaudited  Consolidated Statements of Income for the nine months ended September 30, 2017 and 2016	3
Unaudited Consolidated Statements of Comprehensive Income for the nine months ended September 30, 2017 and 2016	4
Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 30, 2017 and 2016	5
Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	6-7
Notes to Unaudited Consolidated Financial Statements	8-27

MINDEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2017 AND DECEMBER 31, 2016

(in thousands, except shares and per share)

	September 30,
	2017		December 31,
	(unaudited)		2016
A S S E T S
Cash and noninterest-bearing deposits		4,310		4,381
Interest-bearing demand deposits		12,828		20,953
Federal funds sold		1,000		1,000
Total cash and cash equivalents		18,138		26,334
Securities available-for-sale, at estimated market value		104,895		108,846
First National Banker’s Bank stock, at cost		210		210
Federal Home Loan Bank stock, at cost		133		129
Financial Institution Service Corp. stock, at cost		10		10
Loans, net of allowance for loan losses of $2,048- 2017 and $2,058-2016		190,070		188,710
Accrued interest receivable		993		1,339
Premises and equipment, net		2,711		4,187
Prepaid and other assets		1,012		1,589
Total assets		318,172		331,354

The accompanying notes are an integral part of the consolidated financial statements.

1

MINDEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2017 AND DECEMBER 31, 2016

(in thousands, except shares and per share)

	September 30,
	2017			December 31,
	(unaudited)			2016
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing		33,309			31,938
Interest-bearing		216,010			235,518
Total deposits		249,319			267,456
Securities sold under agreements to repurchase		18,174			11,387
Accrued interest payable		220			206
Other liabilities		1,215			1,176
Total liabilities		268,928			280,225
Shareholders' equity:
Preferred stock-$.01 par value; authorized 10,000,000 shares; none issued-no rights/preferences set by board		-			-
Common stock-$.01 par value; authorized 40,000,000 shares; 2,408,154 shares-2017 and 2,390,995 shares- 2016 issued and 2,408,154 shares-2017 and 2,390,995 shares-2016 outstanding		24			24
Additional paid-in capital		31,363			31,142
Retained earnings		18,313			21,803
Accumulated other comprehensive income (loss)		(81	)		(1,418	)
Unearned common stock held by Recognition
Retention Plan (RRP) (6,527 shares-2017 and 7,637 shares-2016)		(31	)		(45	)
Unallocated common stock held by ESOP (31,059 shares-2017 and 34,509 shares-2016)		(344	)		(377	)
Total shareholders' equity		49,244			51,129
Total liabilities and shareholders' equity		318,172			331,354

The accompanying notes are an integral part of the consolidated financial statements.

2

MINDEN BANCORP, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

(in thousands, except per share)

	2017			2016
Interest income:
Loans, including fees		8,473			8,003
Investments:
Securities		357			305
Mortgage-backed securities		1,273			1,123
Other		99			63
Total interest income		10,202			9,494
Interest expense:
Interest-bearing demand deposits, savings, and repurchase agreements		383			449
Certificates of deposit		717			734
Total interest expense		1,100			1,183
Net interest income		9,102			8,311
Provision for loan losses		98			152
Net interest income after provision for loan losses		9,004			8,159
Noninterest income:
Customer service fees		693			673
Gain (loss) on sale of assets-net		(274	)		4
Total noninterest income		419			677
Noninterest expenses:
Salaries and benefits		2,067			2,003
Office occupancy expense		511			549
Professional fees and supervisory examinations		156			219
FDIC insurance premium		74			108
Computer department expenses		324			286
Other general and administrative expenses		343			340
Total noninterest expenses		3,475			3,505
Income before income taxes		5,948			5,331
Income tax expense		1,917			1,722
Net income		4,031			3,609
Earnings per share (EPS)-basic		1.70			1.54
Diluted EPS		1.66			1.49

The accompanying notes are an integral part of the consolidated financial statements.

3

MINDEN BANCORP, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

(in thousands)

	2017		2016
Consolidated net income		4,031		3,609
Other comprehensive income before income tax:
Unrealized gains on securities available for sale:
Unrealized holdings arising during period		2,026		1,077
Less reclassification adjustment for losses realized in net income		-		-
		2,026		1,077
Income tax:
Unrealized holdings on securities available for sale		689		366
		689		366
Other comprehensive income		1,337		711
Comprehensive income		5,368		4,320

The accompanying notes are an integral part of the consolidated financial statements.

4

MINDEN BANCORP, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

 (in thousands, except per share)

									Accumulated
			Additional						Other
	Common		Paid-In			Retained			Comprehensive			Unearned			Unallocated
	Stock		Capital			Earnings			Income (Loss)			RRP			ESOP			Total
Balance-January 1, 2016		24		31,185			18,286			169			(230	)		(421	)		49,013
Net income		-		-			3,609			-			-			-			3,609
Other comprehensive (loss)		-		-			-			711			-			-			711
Exercise of stock options		-		274			-			-			-			-			274
Dividends (.42 per share)		-		-			(998	)		-			-			-			(998	)
Amortization of awards under RRP- net of release of RRP/SOP		-		23			-			-			61			-			84
Unearned ESOP		-		-			-			-			-			33			33
Company stock purchased		-		(227	)		-			-			-			-			(227	)
Balance-September 30, 2016		24		31,255			20,897			880			(169	)		(388	)		52,499
Balance-January 1, 2017		24		31,142			21,803			(1,418	)		(45	)		(377	)		51,129
Net income		-		-			4,031			-			-			-			4,031
Other comprehensive (loss)		-		-			-			1,337			-			-			1,337
Exercise of stock options		-		216			-			-			-			-			216
Dividends (3.14 per share)		-		-			(7,521	)		-			-			-			(7,521	)
Amortization of awards under RRP- net of release of RRP/SOP		-		5			-			-			14			-			19
Unearned ESOP		-		-			-			-			-			33			33
Balance-September 30, 2017		24		31,363			18,313			(81	)		(31	)		(344	)		49,244

The accompanying notes are an integral part of the consolidated financial statements.

5

MINDEN BANCORP, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND SEPTEMBER 30, 2016

(in thousands)

	September 30,			September 30,
	2017			2016
Cash flows from operating activities:
Net income		4,031			3,609
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		129			191
Provision for loan losses		98			152
Deferred income taxes		(77	)		(63	)
RRP and other expenses		51			116
Net amortization of securities		655			742
(Gain) loss on sale of assets		274			(4	)
Decrease (increase) in prepaid expenses and accrued income		311			(232	)
Increase in interest payable and other liabilities		53			64
Net cash provided by operating activities		5,525			4,575
Cash flows from investing activities:
Activity in available for sale securities:
Sales, maturities and pay-downs		16,097			13,796
Purchases		(10,774	)		(17,376	)
Purchases of Federal Home Loan Bank stock		(4	)		(5	)
Net (increase) in loans		(1,450	)		(5,208	)
Proceeds from sale of other assets		1,064			8
Net cash provided (used) by investing activities		4,933			(8,785	)
Cash flows from financing activities:
Net increase (decrease) in deposits		(18,136	)		(8,071	)
Net increase (decrease) in repurchase agreements		6,787			2,029
Dividends paid		(7,521	)		(998	)
Proceeds from stock options exercised		216			274
Company stock purchased		-			(227	)
Net cash (used) by financing activities		(18,654	)		(6,993	)
Net (decrease) in cash and cash equivalents		(8,196	)		(11,203	)
Cash and cash equivalents at beginning of period		26,334			27,547
Cash and cash equivalents at end of period		18,138			16,344

The accompanying notes are an integral part of the consolidated financial statements.

6

MINDEN BANCORP, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND SEPTEMBER 30, 2016

(in thousands)

	September 30,		September 30,
	2017		2016
Supplemental disclosures:
Interest paid on deposits and borrowed funds		1,086		1,175
Income taxes paid		2,026		1,793
Noncash investing and financing activities:
Transfer of loans to real estate owned and other repossessed assets		15		4
Increase in unrealized gain on securities available for sale		2,026		1,077

The accompanying notes are an integral part of the consolidated financial statements.

7

MINDEN BANCORP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND DECEMBER 31, 2016

1.Summary of Significant Accounting Policies

Minden Bancorp, Inc. is a holding company (the “Company”) established in 2010 as the successor to Minden Bancorp, Inc., a Federal corporation established in 2001 as described below. MBL Bank (the “Bank”) is the wholly-owned subsidiary of the Company. The Company's significant assets and business activity are its investment in the Bank. All intercompany transactions have been eliminated in consolidation of Minden Bancorp, Inc. and MBL Bank. The Bank accepts customer demand, savings, and time deposits and provides residential mortgages, commercial mortgages, and consumer and business loans to customers. The Bank is subject to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities. The Company was a savings and loan holding company prior to February 5, 2014, at which time it became a bank holding company as a result of the conversion of the Bank to a state-chartered commercial bank.

Basis of Presentation. In accordance with the subsequent events topic of the ASC, the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements. The effects of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date are recognized in the financial statements as of September 30, 2017. In preparing these financial statements, the Company evaluated subsequent events through the date these financial statements were issued.

Use of Estimates. In preparing financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP), management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, and the valuation of foreclosed real estate, deferred tax assets and fair value of financial instruments.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses on loans, deferred tax assets, fair value of financial instruments, and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowances for losses on credits and foreclosed real estate, management obtains independent appraisals for significant properties. While management uses available information to recognize losses on credits, future additions to the allowances may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowances for losses on loans. Such agencies may require the Bank to recognize additions to the allowances based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the allowances for credit losses on loans may change materially in the future.

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MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.Summary of Significant Accounting Policies   (Continued)

Significant Group Concentrations of Credit Risk. Most of the Bank's activities are with customers located within Webster Parish, Louisiana. Note 2 to the financial statements summarizes the types of investment securities in which the Bank makes investments, and Note 3 summarizes the types of loans included in the Bank's loan portfolio. The Bank does not have any significant concentrations to any one industry or customer.

Cash and Cash Equivalents. For purposes of the statements of cash flows, cash and cash equivalents include cash and balances due from banks, federal funds sold and interest-bearing deposits at other banks, all of which mature within ninety days.

Investment Securities. Management determines the appropriate classification of securities at the time of purchase. If management has the positive intent and ability to hold investments in bonds, notes, and debentures until maturity, they are classified as held to maturity and carried at cost, adjusted for amortization of premiums and accretion of discounts which are recognized in interest income using the effective interest method over the period to maturity. Securities to be held for indefinite periods of time yet not intended to be held to maturity or on a long-term basis are classified as securities available for sale and carried at fair value. Unrealized gains and losses on securities available for sale which have been reported as direct increases or decreases in stockholders' equity, net of related deferred tax effects, are accounted for as other comprehensive income. The cumulative changes in unrealized gains and losses on such securities are accounted for in accumulated other comprehensive income as part of stockholders' equity. Gains and losses on the sale of securities available for sale are determined using the specific-identification method. Other-than-temporary impairments of debt securities is based upon the guidance as follows: (a) if a company does not have the intent to sell a debt security prior to recovery and (b) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When an entity does not intend to sell the security, and it is more likely than not the entity will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. For held-to- maturity debt securities, the amount of an other-than-temporary impairment recorded in other comprehensive income for the noncredit portion of a previous other-than-temporary impairment will be amortized prospectively over the remaining life of the security on the basis of the timing of future estimated cash flows of the security.

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Loans. The Bank grants mortgage, business and consumer loans to customers. A substantial portion of the loan portfolio is represented by mortgage loans secured by properties throughout Webster Parish, Louisiana and the surrounding parishes. The ability of the Bank's debtors to honor their contracts is dependent upon the real estate and general economic conditions in this area.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any net deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

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MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.Summary of Significant Accounting Policies   (Continued)

The accrual of interest on mortgage, commercial real estate and commercial business, and consumer loans is discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. Past due status is based upon contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured or, when the loan becomes well secured and in the process of collection.

Allowance for Loan Losses. The allowance for loan losses is established as a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis by management and is based upon an amount management believes will cover known and inherent losses in the loan portfolio based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis using either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment.

Credit Related Financial Instruments. In the ordinary course of business, the Bank has entered into commitments to extend credit, including commitments under commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded.

Other Real Estate Owned. Other real estate owned represents properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure on loans on which the borrowers have defaulted as to payment of principal and interest. These properties are carried at the lower of cost of acquisition or the asset's fair value, less estimated selling costs. Reductions in the balance at the date of acquisition are charged to the allowance for loan losses. Any subsequent write-downs to reflect current fair value are charged to noninterest expense. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets.

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MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.Summary of Significant Accounting Policies   (Continued)

Premises and Equipment. Premises and equipment are stated at cost less accumulated depreciation. The Bank records depreciation on property and equipment using accelerated and straight-line methods with lives ranging from 5 to 15 years on furniture, fixtures and equipment and to 40 years on the buildings.

Income Taxes. The Company files a consolidated federal income tax return with its subsidiary. Income taxes and benefits are generally allocated based on the subsidiary's contribution to the total federal tax liability. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities. Current recognition is given to changes in tax rates and laws.

Securities Sold Under Agreements to Repurchase. Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature within one to four days from the transaction date. Securities sold under agreements to repurchase 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.

Advertising Costs. Advertising costs are expensed as incurred. Such costs (in thousands) amounted to approximately $19 and $25 for the nine months ended September 30, 2017 and September 30, 2016, respectively, and are included in other general expense.

Stock Compensation. The cost of employee services received in exchange for stock options and stock grants (RRP) is measured using the fair value of the award on the grant date and is recognized over the service period, which is usually the vesting period.

Company Stock Repurchased. Common stock shares repurchased are recorded at cost.

Earnings Per Share. Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period less ESOP & RRP shares not released. Diluted earnings per share reflects additional potential common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.

Comprehensive Income (Loss). Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income. ASU 2011-05 requires entities to present the total comprehensive income, and the components of net income and the components of other comprehensive income in a single continuous statement of comprehensive income or in two separate consecutive statements. The effective date for ASU 2011-05 was for annual and interim periods beginning after December 15, 2011. The Company has adopted ASU 2011-05 with the inclusion of the Consolidated Statements of Other Comprehensive Income in the financial statements.

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MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2.      Investment Securities

There were no securities held-to-maturity at September 30, 2017 and December 31, 2016.

Securities available-for-sale (in thousands) consists of the following:

	September 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Municipals		21,624		227		172		21,679
CMO		1,767		-		30		1,737
Mortgage Pools		81,627		276		424		81,479
		105,018		503		626		104,895

	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Municipals		23,656		24		867		22,813
CMO		2,153		2		55		2,100
Mortgage Pools		85,185		77		1,329		83,933
		110,994		103		2,251		108,846

The amortized cost and estimated fair value (in thousands) of investment securities at September 30, 2017, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale
	Amortized		Fair
	Cost		Value
One year or less		-		-
After 1 year thru 5 years		65,323		65,090
After 5 years thru 10 years		31,792		31,961
After 10 years		7,903		7,844
		105,018		104,895

At September 30, 2017 and December 31, 2016, investment securities with a financial statement carrying amount (in thousands) of $72,569 and $80,656, respectively, were pledged to secure public and private deposits. There were no gains or losses recognized on sale of investments in 2016. A net gain of (in thousands) $3 was recognized on sale of investments in 2017. Sales, maturities and calls are detailed on the statements of cash flows.

Information pertaining to securities with gross unrealized losses (in thousands) at September 30, 2017 and December 31, 2016, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

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MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2.       Investment Securities   (Continued)

	Less than 12 Months				12 Months or Greater				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
September 30, 2017:
Municipals		5,144		96		3,228		76		8,372		172
CMO		-		-		1,396		30		1,396		30
Mortgage Pools		35,825		362		3,932		62		39,757		424
		40,969		458		8,556		168		49,525		626
December 31, 2016:
Municipals		20,832		847		230		20		21,062		867
CMO		-		-		1,650		55		1,650		55
Mortgage Pools		65,130		1,315		958		14		66,088		1,329
		85,962		2,162		2,838		89		88,800		2,251

Management evaluates securities for other-than-temporary impairment on a monthly basis. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

The majority of these securities are guaranteed directly by the U.S. Government or other U.S. Government agencies. These unrealized losses relate principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other-than-temporary.

3.       Loans and Allowance for Loan Losses

The composition of the Company’s loan portfolio (in thousands) at September 30, 2017 and December 31, 2016 consisted of the following:

	September 30,			December 31,
	2017			2016
Loans secured by real estate:
Secured by 1-4 family residential properties		65,043			67,537
Secured by nonresidential properties		88,735			86,055
Commercial and industrial loans		29,168			28,593
Consumer loans (including overdrafts of $56 and $88)		5,434			5,324
Loans secured by deposits		3,738			3,259
Total		192,118			190,768
Less: Allowance for loan losses		(2,048	)		(2,058	)
Loans, net		190,070			188,710

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MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3.     Loans and Allowance for Loan Losses   (Continued)

Changes in the allowance for loan losses (in thousands) are summarized as follows:

	September 30,			December 31,
	2017			2016
Balance, beginning of period		2,058			1,852
Provision for loan losses		98			211
Recoveries		5			5
Loans charged off		(113	)		(10	)
Balance, end of period		2,048			2,058

The following tables detail the balance in the allowance for loan losses (in thousands) by portfolio segment at September 30, 2017 and December 31, 2016:

	Balance						Provision			Balance
	January 1,		Charge-				for Loan			September
	2017		offs		Recoveries		Losses			30, 2017
Loans secured by real estate:
Secured by 1-4 family residential properties		723		1		1		(34	)		689
Secured by nonresidential properties		1,021		-		-		(22	)		999
Commercial and industrial loans		231		-		-		32			263
Consumer loans		83		112		4		122			97
Loans secured by deposits		-		-		-		-			-
Total		2,058		113		5		98			2,048

	Balance						Provision			Balance
	January 1,		Charge-				for Loan			December
	2016		offs		Recoveries		Losses			31, 2016
Loans secured by real estate:
Secured by 1-4 family residential properties		690		-		-		33			723
Secured by nonresidential properties		780		-		-		241			1,021
Commercial and industrial loans		291		-		-		(60	)		231
Consumer loans		91		10		5		(3	)		83
Loans secured by deposits		-		-		-		-			-
Total		1,852		10		5		211			2,058

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MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3.     Loans and Allowance for Loan Losses   (Continued)

	September 30, 2017
	Allowance for Loan Losses
	Disaggregated by Impairment Method
	Individually		Collectively		Total
Loans secured by real estate:
Secured by 1-4 family residential properties		-		689		689
Secured by nonresidential properties		-		999		999
Commercial and industrial loans		-		263		263
Consumer loans		-		97		97
Loans secured by deposits		-		-		-
		-		2,048		2,048

	December 31, 2016
	Allowance for Loan Losses
	Disaggregated by Impairment Method
	Individually		Collectively		Total
Loans secured by real estate:
Secured by 1-4 family residential properties		-		723		723
Secured by nonresidential properties		-		1,021		1,021
Commercial and industrial loans		-		231		231
Consumer loans		-		83		83
Loans secured by deposits		-		-		-
		-		2,058		2,058

The following table summarizes loans restructured in troubled debt restructurings ("TDR's") (in thousands, except for number of contracts) as of September 30, 2017 and December 31, 2016.

	September 30, 2017
			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
Loans secured by real estate:
Secured by 1-4 family residential properties		-		-		-
Secured by nonresidential properties		3		7,427		7,427
Commercial and industrial loans		-		-		-
Consumer loans		-		-		-
Loans secured by deposits		-		-		-
Total loans		3		7,427		7,427

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MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3.     Loans and Allowance for Loan Losses   (Continued)

	December 31, 2016
			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
Loans secured by real estate:
Secured by 1-4 family residential properties		-		-		-
Secured by nonresidential properties		1		3,144		3,144
Commercial and industrial loans		-		-		-
Consumer loans		-		-		-
Loans secured by deposits		-		-		-
Total loans		1		3,144		3,144

The following tables detail loans individually and collectively evaluated for impairment (in thousands) at September 30, 2017 and December 31, 2016:

	September 30, 2017
	Loans Evaluated for Impairment
	Individually		Collectively		Total
Loans secured by real estate:
Secured by 1-4 family residential properties		1,488		63,555		65,043
Secured by nonresidential properties		7,489		81,246		88,735
Commercial and industrial loans		288		28,880		29,168
Consumer loans		152		5,282		5,434
Loans secured by deposits		-		3,738		3,738
Total		9,417		182,701		192,118

	December 31, 2016
	Loans Evaluated for Impairment
	Individually		Collectively		Total
Loans secured by real estate:
Secured by 1-4 family residential properties		1,388		66,149		67,537
Secured by nonresidential properties		5,051		81,004		86,055
Commercial and industrial loans		434		28,159		28,593
Consumer loans		141		5,183		5,324
Loans secured by deposits		-		3,259		3,259
Total		7,014		183,754		190,768

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MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3.      Loans and Allowance for Loan Losses   (Continued)

	Impaired Loans
	For the Nine Months Ended September 30, 2017
			Unpaid				Interest
	Recorded		Principal		Related		Income
	Investment		Balance		Allowance		Recognized
With no related allowance recorded:
Secured by 1-4 family residential properties		926		926		-		35
Secured by nonresidential properties		4,846		4,846		-		106
Commercial and industrial loans		163		163		-		1
Consumer loans		98		98		-		6
Loans secured by deposits		-		-		-		-
		6,033		6,033		-		148
With an allowance recorded:
Secured by 1-4 family residential properties		-		-		-		-
Secured by nonresidential properties		-		-		-		-
Commercial and industrial loans		-		-		-		-
Consumer loans		-		-		-		-
Loans secured by deposits		-		-		-		-
		-		-		-
Total:
Secured by 1-4 family residential properties		926		926		35
Secured by nonresidential properties		4,846		4,846		-		106
Commercial and industrial loans		163		163		-		1
Consumer loans		98		98		-		6
Loans secured by deposits		-		-		-		-
		6,033		6,033		-		148

	Impaired Loans
	For the Year Ended December 31, 2016
			Unpaid				Interest
	Recorded		Principal		Related		Income
	Investment		Balance		Allowance		Recognized
With no related allowance recorded:
Secured by 1-4 family residential properties		767		767		-		22
Secured by nonresidential properties		5,051		5,051		-		165
Commercial and industrial loans		154		154		-		2
Consumer loans		103		103		-		4
Loans secured by deposits		-		-		-		-
		6,075		6,075		-		193
With an allowance recorded:
Secured by 1-4 family residential properties		-		-		-		-
Secured by nonresidential properties		-		-		-		-
Commercial and industrial loans		-		-		-		-
Consumer loans		-		-		-		-
Loans secured by deposits		-		-		-		-
		-		-		-
Total:
Secured by 1-4 family residential properties		767		767		22
Secured by nonresidential properties		5,051		5,051		-		165
Commercial and industrial loans		154		154		-		2
Consumer loans		103		103		-		4
Loans secured by deposits		-		-		-		-
		6,075		6,075		-		193

The average recorded investment in the impaired loans (in thousands) for the nine months ended September 30, 2017 and the year ended December 31, 2016 was $6,054 and $3,489, respectively.

17

MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3.      Loans and Allowance for Loan Losses   (Continued)

Total non-accrual loans (in thousands) at September 30, 2017 and December 31, 2016 were $865 and $810, respectively. Additional interest income (in thousands) of approximately $40 would have been recognized for both periods ended September 30, 2017 and December 31, 2016, respectively, had the loans not been on non-accrual.

Credit Indicators

Loans are categorized into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The following definitions are utilized for risk ratings, which are consistent with the definitions used in supervisory guidance:

Special Mention – Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss – Loans classified as loss are considered uncollectible and their continuance as a Bank asset is unwarranted.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

The table below illustrates the carrying amount (in thousands) of loans by credit quality indicator:

	September 30, 2017
			Special
	Pass		Mention		Substandard		Doubtful		Loss		Total
Loans secured by real estate:
Secured by 1-4 family residential properties		63,555		562		926		-		-		65,043
Secured by nonresidential properties		81,246		2,643		4,846		-		-		88,735
Commercial and industrial loans		28,880		125		163		-		-		29,168
Consumer loans		5,282		54		98		-		-		5,434
Loans secured by deposits		3,738		-		-		-		-		3,738
Total		182,701		3,384		6,033		-		-		192,118

18

MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3.     Loans and Allowance for Loan Losses   (Continued)

	December 31, 2016
			Special
	Pass		Mention		Substandard		Doubtful		Loss		Total
Loans secured by real estate:
Secured by 1-4 family residential properties		66,149		621		767		-		-		67,537
Secured by nonresidential properties		81,004		-		5,051		-		-		86,055
Commercial and industrial loans		28,159		280		154		-		-		28,593
Consumer loans		5,183		38		103		-		-		5,324
Loans secured by deposits		3,259		-		-		-		-		3,259
Total		183,754		939		6,075		-		-		190,768

A summary of current, past due and nonaccrual loans (in thousands) was as follows:

	September 30, 2017
			Past Due
	Past Due		Over 90 Days
	30-89		and		Non-		Total				Total
	Days		Accruing		Accruing		Past Due		Current		Loans
Loans secured by real estate:
Secured by 1-4 family residential properties		642		75		593		1,310		63,733		65,043
Secured by nonresidential properties		1,844		-		61		1,905		86,830		88,735
Commercial and industrial loans		298		-		163		461		28,707		29,168
Consumer loans		152		11		48		211		5,223		5,434
Loans secured by deposits		-		-		-		-		3,738		3,738
Total		2,936		86		865		3,887		188,231		192,118

	December 31, 2016
			Past Due
	Past Due		Over 90 Days
	30-89		and		Non-		Total				Total
	Days		Accruing		Accruing		Past Due		Current		Loans
Loans secured by real estate:
Secured by 1-4 family residential properties		2,042		193		442		2,677		64,860		67,537
Secured by nonresidential properties		759		-		148		907		85,148		86,055
Commercial and industrial loans		1,622		-		154		1,776		26,817		28,593
Consumer loans		168		17		66		251		5,073		5,324
Loans secured by deposits		-		-		-		-		3,259		3,259
Total		4,591		210		810		5,611		185,157		190,768

The Company charges a flat rate for the origination or assumption of a loan. These fees are designed to offset direct loan origination costs and the net amount, if material, is deferred and amortized, as required by accounting standards.

The Company’s lending activity is concentrated within Webster Parish, Louisiana. The Company’s lending activities include one-to-four-family dwelling units, commercial real estate, commercial business and consumer loans. The Company requires collateral sufficient in value to cover the principal amount of the loan. Such collateral is evidenced by mortgages on property held and readily accessible to the Bank.

19

MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

4.       Prepaid and Other Assets

Prepaid and other assets (in thousands) consist of the following:

	September 30,		December 31,
	2017		2016
Cash value of life insurance		736		719
Prepaid expenses		52		57
Other		224		813
		1,012		1,589

5.       Deposits

Deposits (in thousands) as of September 30, 2017 and December 31, 2016 are summarized as follows:

	September 30,		December 31,
	2017		2016
Demand deposit accounts (including official checks of $556 in 2017 and $1,189 in 2016)		132,127		150,672
Savings		22,281		21,472
Certificates of deposit:
0.00% – 0.99%		39,089		46,668
1.00% – 1.99%		55,822		48,644
Total certificates of deposit		94,911		95,312
Total deposits		249,319		267,456

Scheduled maturities of certificates of deposit (in thousands) at September 30, 2017 are as follows:

			2017		2018		2019		2020		2021		2022		Total
0.00%	–	0.99%		13,689		25,400		-		-		-		-		39,089
1.00%	–	1.99%		3,883		17,633		13,927		12,150		3,607		4,622		55,822
				17,572		43,033		13,927		12,150		3,607		4,622		94,911

Included in deposits (in thousands) at September 30, 2017 and December 31, 2016 are $32,959 and $29,545, respectively, of certificates of deposit (CD) in denominations of $250,000 or more.

6.       Other Borrowed Funds

Federal Home Loan Bank (FHLB) advances represent short-term, fixed-rate borrowings from the Federal Home Loan Bank of Dallas. The Bank has an available line of credit with the FHLB of $90.4 million at September 30, 2017 with $90.3 million available for use. Interest rates paid on the advances vary by term and are set by FHLB. There were no advances outstanding at September 30, 2017 and December 31, 2016.

The Bank also has the ability to borrow under a federal funds line of credit with First National Bankers Bank (FNBB) of $19 million. Borrowings under this line, including the rates and maturities for such borrowings, are at the sole discretion of the issuing bank.

20

MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

7.       Pension/ESOP Plan

In 2001, the Bank adopted a 401(k) retirement plan covering all employees based upon years of service. The Bank contributes up to a 6% match of the employees' contribution based upon Board approval. Plan contributions (in thousands) for the nine months ended September 30, 2017 and 2016 were $79 and $71, respectively.

The ESOP was extended a loan in 2011 in connection with the second-step conversion in the amount of (in thousands) $558, to purchase 55,772 shares of common stock. The remaining balance (in thousands) due of $344 at $57 (in thousands) per year including interest is payable over approximately seven years. The Bank made contributions to the ESOP to enable it to make the note payments (in thousands) of $43 and $43 during the nine months ended September 30, 2017 and September 30, 2016, respectively, which is included in salaries and benefits on the income statement. As the note on the loan is paid, the shares will be released and allocated to the participants of the ESOP. The market value at September 30, 2017 of the unreleased ESOP shares (31,059) was approximately $792 (in thousands).

8.       Retained Earnings and Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below, in thousands) of total, Tier I, and common equity Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of September 30, 2017, that the Bank met all capital adequacy requirements to which it is subject.

As of September 30, 2017, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier I risk-based, common equity Tier I risk-based, and Tier I leverage ratios as set forth in the table (amounts in thousands). The Bank’s actual capital amounts (in thousands) and ratios are also presented in the table. There are no conditions or events since that notification that management believes have changed the institution's category.

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MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8.Retained Earnings and Regulatory Capital   (Continued)

											To Be Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes:					Action Provisions:
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2017
Total capital ratio (to Risk Weighted Assets)		51,054		26.90	%		>15,181		>8	%		>18,977		>10	%
Common Equity Tier I Capital Ratio (to Risk Weighted Assets)		49,006		25.83	%		>8,539		>4.5			>12,334		>6.5	%
Tier I Capital ratio (to Risk Weighted Assets)		49,006		25.83	%		>11,386		>6	%		>15,181		>8	%
Leverage Capital Ratio (to Total Assets)		49,006		15.24	%		>12,866		>4	%		>16,083		>5	%
As of December 31, 2016
Total capital ratio (to Risk Weighted Assets)		54,175		27.97	%		>15,496		>8	%		>19,370		>10	%
Common Equity Tier I Capital Ratio (to Risk Weighted Assets)		52,117		26.91	%		>8,717		>4.5			>12,591		>6.5	%
Tier I Capital ratio (to Risk Weighted Assets)		52,117		26.91	%		>11,622		>6	%		>15,496		>8	%
Leverage Capital Ratio (to Total Assets)		52,117		16.28	%		>12,802		>4	%		>16,002		>5	%

Capital for the Company is not significantly different than those above for the Bank. The following is a reconciliation of the Bank’s equity under GAAP to regulatory capital at the dates indicated (dollars in thousands):

	September 30,		December 31,
	2017		2016
GAAP equity		48,925		50,699
Accumulated other comprehensive unrealized (gain) loss		81		1,418
Tier 1 Capital		49,006		52,117
Allowance for loan losses		2,048		2,058
Total capital		51,054		54,175

9.      Fair Value of Financial Instruments

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. FASB Accounting Standards Codification Topic 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

22

MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

9.      Fair Value of Financial Instruments   (Continued)

The following methods and assumptions were used by the Bank in estimating fair value disclosures for financial instruments:

Cash and cash equivalents: The carrying amounts of cash and short-term instruments approximate fair values.

Interest-bearing deposits in banks: The carrying amounts of interest-bearing deposits approximate their fair values.

Securities: Fair values for securities, excluding Federal Home Loan Bank stock, First National Bankers Bank (“FNBB”) stock and Financial Institution Service Corporation (“FISC”) stock are based on quoted market prices. The carrying value of Federal Home Loan Bank stock approximates fair value based on the redemption provisions of the Federal Home Loan Bank. The carrying value of FNBB and FISC stock is based on the purchase price which approximates fair value.

Loans receivable: For variable-rate loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for certain mortgage loans (e.g., one-to-four family residential), and other consumer loans are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. Fair values for other loans (e.g., commercial real estate and investment property mortgage loans, commercial and industrial loans) are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Deposit liabilities: The fair values disclosed for demand deposits (e.g., interest and noninterest checking, savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-term borrowings: The carrying amounts of Federal Home Loan Bank advances maturing within ninety days approximate their fair values.

Accrued interest: The carrying amounts of accrued interest approximate fair value.

Off-balance-sheet instruments: Fair values for off-balance-sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing. Fair values for off-balance sheet commitments to extend credit approximate their carrying value.

23

MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

9.      Fair Value of Financial Instruments   (Continued)

From time to time, certain assets may be recorded at fair value on a non-recurring basis, typically as a result of the application of lower of cost or fair value accounting or a write-down occurring during the period. The only item recorded at fair value on a non-recurring basis is foreclosed real estate, which is recorded at the lower of cost or fair value less estimated costs to sell. Fair value is determined by reference to appraisals (performed either by the Bank or by independent appraisers) on the subject property, using market prices of similar real estate assets (level 2 measurements). The Bank held no foreclosed real estate at September 30, 2017 or December 31, 2016.

The estimated fair values (in thousands), and related carrying or notional amounts, of the Company’s financial instruments are as follows:

	September 30,				December 31,
	2017				2016
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents		18,138		18,138		26,334		26,334
Securities available for sale		104,895		104,895		108,846		108,846
FNBB, FHLB and FISC stock		353		353		349		349
Loans, net		190,070		189,481		188,710		188,125
Accrued interest receivable		993		993		1,339		1,339
Financial liabilities:
Deposits		249,319		249,543		267,456		267,696
Accrued interest payable		220		220		206		206
Off-balance sheet credit related to financial instruments:
Commitments to extend credit		39,271		39,271		37,026		37,026

Off-balance sheet derivative financial instruments: None

The Company adopted FASB Accounting Standards Topic 820, “Fair Value Measurements” (Topic 820), as of January 1, 2008. Topic 820 requires disclosures that stratify balance sheet amounts measured at fair value based on the inputs used to derive fair value measurements. These strata included:

● Level 1 valuations, where the valuation is based on quoted market prices for identical assets or liabilities traded in active markets (which include exchanges and over-the-counter markets with sufficient volume),

● Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and

24

MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

9.      Fair Value of Financial Instruments   (Continued)

● Level 3 valuations, where the valuation is generated from model-based techniques that use significant assumptions not observable in the market, but observable based on the Company’s-specific data. These unobservable assumptions reflect the Company’s own estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.

Fair values of assets and liabilities (in thousands) measured on a recurring basis at September 30, 2017 and December 31, 2016 are as follows:

	Level 1		Level 2		Level 3		Fair Value
September 30, 2017:
Securities available for sale		-		104,895		-		104,895
December 31, 2016:
Securities available for sale		-		108,846		-		108,846

10. Segment Reporting

The Company, due to its size (both assets and employees), has only one reportable segment. The Company reports its lending activities (mortgages, consumer and commercial) as one segment. It does not operate as multiple segments nor does it manage or report as other than one segment.

The Company does not have a single external customer from which it derives 10% or more of its revenue. Refer to Note 3 for the one geographical area in which it operates.

11. Stock Based Benefits Plans

In 2011, the Company established a recognition and retention plan and trust agreement (“RRP”), which is a stock-based incentive plan. Shares subject to awards under the agreement vest at the rate of 20% per year.

The Company authorized 49,534 shares of the Company’s common stock to be awarded under the RRP agreement and purchased the shares in the open market to fund the RRP plan at a cost of $686,000. As of September 30, 2017, 44,487 shares had been awarded under the RRP agreement. As of September 30, 2017, 6,527 authorized shares had not vested. Shares vested during the nine months ended September 30, 2017 and year ended December 31, 2016 were 1,110 and 8,891, respectively.

Expense for the RRP is being amortized over a 60-month period and is based on the market value of the Company’s stock as of the date of the awards which was $12.00, $17.15 and $17.65 for the 2011, 2013 and 2014 awards, respectively. Total compensation under the RRP agreement for the nine months ended September 30, 2017 and 2016 was $14,000 and $61,000, respectively, and is included in salaries and benefits.

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MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

11. Stock Based Benefits Plans (Continued)

The Company established the 2011 Stock Option Plan (“the 2011 Option Plan”) under which 123,836 shares of Company stock are reserved for the grant of stock options to directors, officers and employees. The Plan provides for vesting of options granted to participants at 20% per year and the options expire in ten years. The exercise price of the options is equal to the fair market value of the common stock on the grant date. As of September 30, 2017, options covering 23,822 shares were outstanding and had an average exercise price of $14.87. Options totaling 20,037 shares were vested and exercisable at September 30, 2017 with an average exercise price of $14.39.

The fair value of each outstanding option is estimated on the date of the grant using the Black-Scholes option-pricing formula with the following weighted average assumptions; 1% dividend yield, 10 years expected life, 30.07% expected volatility and 3.53% risk free interest. Option Plan shares granted at September 30, 2017 (23,822) had an approximate value of $45,000 under the Black-Scholes option-pricing formula.

The expected volatility is based on historical volatility. The risk-free interest rates for periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life is based on historical exercise experience. The dividend yield assumption is based upon the Company’s history and expectation of dividend payouts.

The Company's Stock Benefits Administration Committee of the Board of Directors oversees the RRP and Option Plans.

12.  Supplemental Retirement Benefit Agreement

The Bank has entered into supplemental retirement benefit agreements (the “Agreements”) with certain members of management. The Agreements provide for monthly retirement benefits in the amount of $5,000 per month for ten to fifteen years from the date they retire for the executive group as a whole. As of September 30, 2017 and December 31, 2016, a liability (in thousands) of $283 and $300, respectively, was accrued in accordance for the Agreements.

13.  Earnings Per Share (EPS)

EPS is calculated based on average weighted common shares outstanding less ESOP and RRP shares not released. The number of shares used in the EPS computation at September 30, 2017 was 2,367,721 and at September 30, 2016 was 2,339,054.

14.     Stock Repurchase Plan

The Board of Directors approved a stock repurchase plan which provided for the repurchase of 150,000 shares, of the Company’s issued and outstanding shares of common stock on September 30, 2013. A total of 80,223 shares have been repurchased at a cost of $1.5 million under this plan as of September 30, 2017. Upon completion of the repurchase program, the Company will have repurchased approximately 10% of its issued and outstanding shares of common stock.

The shares for the stock repurchase plan may be purchased in the open market or in privately negotiated transactions from time to time depending upon the market conditions and other factors.

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MINDEN BANCORP, INC AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

15.    Subsequent Events

The Company has evaluated events and transactions that occurred after the balance sheet date through February 7, 2018, the date the financial statements were available to be issued.

On October 5, 2017, Minden Bancorp, Inc. entered into an Agreement and Plan of Reorganization by and among Business First Bancshares, Inc., Minden Bancorp, Inc., and BFB Acquisition Company providing for the acquisition of Minden Bancorp, Inc. by Business First Bancshares, Inc. at a price of $31.50 per share, less a per share special dividend of $8.30 paid by Minden Bancorp, Inc. on December 29, 2017.

Effective January 1, 2018, BFB Acquisition Company merged with and into Minden Bancorp, Inc., with Minden Bancorp, Inc. surviving the merger as a wholly-owned subsidiary of Business First Bancshares, Inc. Immediately following the merger, Minden Bancorp, Inc. merged with and into Business First Bancshares, Inc. and MBL Bank, our subsidiary bank, merged with and into Business First Bank, a Louisiana state bank, and wholly-owned subsidiary of Business First Bancshares, Inc. As a result of these transactions, Minden Bancorp, Inc. and MBL Bank were combined with those of Business First Bancshares, Inc., and Minden Bancorp, Inc. and MBL Bank ceased to exist as separate corporate entities.

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