10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2020

OR

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

For the transition period

Commission File No. 001-38074

Community First Bancshares, Inc.

(Exact Name of Registrant as Specified in Its Charter)

United States of America	82-1147778
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
3175 Highway 278 Covington, Georgia	30014
(Address of Principal Executive Offices)	(Zip Code)

(770) 786-7088

(Registrant’s Telephone Number, Including Area Code)

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

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

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

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 requirements for the past 90 days.  YES ☒    NO ☐

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

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

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

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

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

As of August 10, 2020, 7,570,797 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding.

Community First Bancshares, Inc.

Form 10-Q

Table of Contents

		Page
PART I.  FINANCIAL INFORMATION
Item 1.	Financial Statements	2
	Consolidated Balance Sheets at June 30, 2020 (unaudited) and December 31, 2019 (audited)	2
	Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2020 and    .    2019 (unaudited)	3
	Consolidated Statements of Comprehensive (Loss) Income for the Three Months and Six Months Ended June 30, 2020 and 2019 (unaudited)	4
	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months and Six Months Ended June 30, 2020 and 2019 (unaudited)	5
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (unaudited)	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	38
	SIGNATURES	39

1

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

COMMUNITY FIRST BANCSHARES, INC.

Consolidated Balance Sheets

June 30, 2020             December 31, 2019

	(unaudited)			(audited)
	(In thousands)
Assets
Cash and due from banks, including reserve requirement of $0 and $1,523 at June 30, 2020 and December 31, 2019, respectively	$	14,254		$	3,965
Interest-earning deposits in other depository institutions		180,170			44,152
Cash and cash equivalents		194,424			48,117
Investment securities available-for-sale		19,387			3,818
Federal Home Loan Bank stock		2,834			278
Loans, net		635,601			247,956
Other real estate owned		1,232			140
Premises and equipment, net		8,861			8,513
Bank owned life insurance		15,112			7,462
Intangible assets		19,035			—
Accrued interest receivable and other assets		9,881			3,010
Total assets	$	906,367		$	319,294
Liabilities and Stockholders' Equity
Liabilities:
Savings accounts	$	101,205		$	22,691
Interest-bearing checking		69,029			47,324
Market rate checking		117,914			33,380
Non-interest-bearing checking		171,407			29,549
Certificates of deposit		166,195			105,237
Total deposits		625,750			238,181
Federal Home Loan Bank advances		54,323			—
Paycheck Protection Program Liquidity Facility borrowings		129,230			—
Repurchase agreements and other borrowings		14,491			—
Accrued interest payable and other liabilities		5,329			3,946
Total liabilities		829,123			242,127
Stockholders' equity:
Common stock (par value $0.01 per share, 19,000,000 shares authorized, 7,685,999 issued and 7,570,797 outstanding at June 30, 2020 and 7,671,224 issued and 7,557,848 outstanding at December 31, 2019)		78			77
Preferred stock (1,000,000 shares authorized, no shares outstanding)		—			—
Additional paid in capital		33,427			33,358
Treasury stock, 113,376 shares at June 30, 2020, and December 31, 2019, at cost		(1,268	)		(1,268	)
Unearned ESOP shares		(2,512	)		(2,571	)
Retained earnings		47,343			47,562
Accumulated other comprehensive income		176			9
Total stockholders' equity		77,244			77,167
Total liabilities and stockholders' equity	$	906,367		$	319,294

See accompanying notes to unaudited consolidated financial statements.

2

COMMUNITY FIRST BANCSHARES, INC.

Consolidated Statements of Operations

(unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019			2020			2019
			(In thousands)
Interest income:
Loans, including fees	$	7,124	$	3,549		$	13,520		$	6,793
Investment securities, including dividends		117		128			282			270
Interest-earning deposits		14		123			150			300
Total interest income		7,255		3,800			13,952			7,363
Interest expense:
Deposits		1,363		546			2,625			1,057
Borrowings		185		—			393			24
Total interest expense		1,548		546			3,018			1,081
Net interest income before provision for loan losses		5,707		3,254			10,934			6,282
Provision for loan losses		300		—			800			—
Net interest income after provision for loan losses		5,407		3,254			10,134			6,282
Non-interest income:
Service charges on deposit accounts		304		187			658			360
Gain on sales of investment securities available-for-sale		20		—			20			—
Other		214		152			374			335
Total non-interest income		538		339			1,052			695
Non-interest expenses:
Salaries and employee benefits		2,180		1,861			6,353			3,659
Deferred compensation		79		51			142			103
Occupancy		690		477			1,337			956
Advertising		71		35			133			67
Data processing		606		350			1,250			612
Other real estate owned		2		15			2			17
Net loss (gain) on sale of other real estate owned		—		(62	)		29			(96	)
Legal and accounting		282		259			965			533
Organizational dues and subscriptions		80		73			168			153
Director compensation		53		50			101			96
Federal deposit insurance premiums		140		16			253			32
Other		392		337			924			616
Total non-interest expenses		4,575		3,462			11,657			6,748
(Loss) income before income taxes		1,370		131			(471	)		229
Income tax expense (benefit)		291		13			(252	)		(6	)
Net (loss) income	$	1,079	$	118		$	(219	)	$	235
Basic and diluted (loss) earnings per share	$	0.14	$	0.02		$	(0.03	)	$	0.03

See accompanying notes to unaudited consolidated financial statements.

3

COMMUNITY FIRST BANCSHARES, INC.

Consolidated Statements of Comprehensive (Loss) Income

(unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
				(In thousands)
Net (loss) income	$	1,079		$	118	$	(219	)	$	235
Other comprehensive income:
Net unrealized gain on available-for-sale securities, net of taxes of $20, $77, $63 and $208		61			218		182			591
Reclassification adjustment for gain included in net income, net of taxes of ($5)		(15	)		—		(15	)		—
Total other comprehensive income		46			218		167			591
Total comprehensive (loss) income	$	1,125		$	336	$	(52	)	$	826

See accompanying notes to unaudited consolidated financial statements.

4

COMMUNITY FIRST BANCSHARES, INC.

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

	Three and Six Months Ended June 30, 2019 and 2020
																Accumulated
			Additional													Other
	Common		Paid In				Treasury			Unearned			Retained			Comprehensive
	Stock		Capital				Stock			ESOP Shares			Earnings			Income (Loss)			Total
						(In thousands)
Beginning balance December 31, 2018	$	75	$	33,078			$	(668	)	$	(2,689	)	$	47,043		$	(441	)	$	76,398
ESOP loan payment and release of ESOP shares		—		1				—			30			—			—			31
Purchase of treasury stock		—		—				(600	)		—			—			—			(600	)
Change in unrealized gain on investment securities available-for-sale, net of tax		—		—				—			—			—			373			373
Net income		—		—				—			—			117			—			117
Ending balance March 31, 2019	$	75	$	33,079			$	(1,268	)	$	(2,659	)	$	47,160		$	(68	)	$	76,319
ESOP loan payment and release of ESOP shares	$	—	$	2			$	—		$	29		$	—		$	—		$	31
Issuance of restricted stock awards		2		43				—			—			—			—			45
Stock-based compensation expense		—		24				—			—			—			—			24
Change in unrealized gain on investment securities available-for-sale		—		—				—			—			—			218			218
Net income		—		—				—			—			118			—			118
Ending balance June 30, 2019	$	77	$	33,148			$	(1,268	)	$	(2,630	)	$	47,278		$	150		$	76,755
Ending balance December 31, 2019	$	77	$	33,358			$	(1,268	)	$	(2,571	)	$	47,562		$	9		$	77,167
ESOP loan payment and release of ESOP shares		—		—				—			30			—			—			30
Stock-based compensation expense		—		(80	)			—			—			—			—			(80	)
Change in unrealized gain on investment securities available-for-sale, net of tax		—		—				—			—			—			121			121
Net loss		—		—				—			—			(1,298	)		—			(1,298	)
Ending balance March 31, 2020	$	77	$	33,278			$	(1,268	)	$	(2,541	)	$	46,264		$	130		$	75,940
ESOP loan payment and release of ESOP shares	$	—	$	(8	)		$	—		$	29		$	—		$	—		$	21
Issuance of restricted stock awards		1		16				—			—			—			—			17
Stock-based compensation expense		—		141				—			—			—			—			141
Change in unrealized gain on investment securities available-for-sale, net of tax		—		—				—			—			—			46			46
Net income		—		—				—			—			1,079			—			1,079
Ending balance June 30, 2020	$	78	$	33,427			$	(1,268	)	$	(2,512	)	$	47,343		$	176		$	77,244

See accompanying notes to unaudited consolidated financial statements.

5

COMMUNITY FIRST BANCSHARES, INC.

Consolidated Statements of Cash Flows

(unaudited)

	Six Months Ended June 30,
	2020			2019
	(In thousands)
Cash flows from operating activities:
Net (loss) income	$	(219	)	$	235
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities, net of effects of acquisition:
Depreciation and (accretion) amortization		(98	)		435
Stock-based compensation expense		78			69
Deferred income tax		—			(17	)
Provision for loan losses		800			—
ESOP expense		51			62
Net gain on sale of investment securities available-for-sale		(20	)		—
Net loss (gain) on sale of other real estate owned		29			(96	)
Increase in cash surrender value of bank owned life insurance		(198	)		(105	)
Change in:
Accrued interest receivable and other assets		(3,793	)		157
Accrued interest payable and other liabilities		536			704
Net cash (used in) provided by operating activities		(2,834	)		1,444
Cash flows from investing activities, net of effects of acquisition:
Purchases of investment securities available-for-sale		(4,025	)		—
Purchases of premises and equipment		(137	)		(220	)
Proceeds from disposal of premises and equipment		21			—
Proceeds from sale of investment securities available-for-sale		1,677			—
Proceeds from paydowns of investment securities available-for-sale		3,316			1,034
Purchases of other investments		(1,108	)		—
Proceeds from sales of other investments		213			302
Net change in loans		(126,246	)		(16,208	)
Proceeds from sales of other real estate owned		128			604
Net cash paid in business combination		(22,749	)		—
Net cash used in investing activities		(148,910	)		(14,488	)
Cash flows from financing activities, net of effects of acquisition:
Net change in demand and savings deposits		138,438			3,902
Purchase of treasury stock		—			(600	)
Proceeds from FHLB advances		40,000			—
Repayment of FHLB advances		(20,000	)		(7,570	)
Proceeds from holding company loan		5,000			—
Proceeds from Payroll Protection Program Liquidity Facility		129,230			—
Net change in repurchase agreements and other borrowings		5,383			—
Net cash provided by (used in) financing activities		298,051			(4,268	)
Net change in cash and cash equivalents		146,307			(17,312	)
Cash and cash equivalents at beginning of period		48,117			37,029
Cash and cash equivalents at end of period	$	194,424		$	19,717
Supplemental disclosures of cash flow information:
Cash paid for interest	$	2,761		$	1,101
Vacant land transferred to other real estate owned		460			—
Fair value of assets acquired	$	317,744			—
Fair value of liabilities assumed		288,732			—
Net assets acquired		29,012			—

See accompanying notes to unaudited consolidated financial statements.

6

COMMUNITY FIRST BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

(1) Basis of Presentation

Community First Bancshares, Inc. (the “Company”) is a savings and loan holding company headquartered in Covington, Georgia. The Company has one operating subsidiary, Newton Federal Bank (the “Bank”), a federally chartered savings association, conducting banking activities in Newton County, Georgia and surrounding counties and in Cobb, Jackson and Fulton County, Georgia and surrounding counties, and originating dental practice loans and indirect automobile loans throughout the Southeastern United States. The Bank offers such customary banking services as consumer and commercial checking accounts, savings accounts, certificates of deposit, mortgage, commercial and consumer loans, including indirect automobile loans, money transfers and a variety of other banking services.  

The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the financial position of the Company as of June 30, 2020 and the results of its operations and its cash flows for the periods presented. The interim consolidated financial information should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.  The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for a full year or for any other period.  

Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses, the valuation of acquired loans, the valuation of other real estate acquired in connection with foreclosure or in satisfaction of loans and valuation allowances associated with the realization of deferred tax assets, which are based on future taxable income.

Summary of Significant Accounting Policies – The accounting and reporting policies of the Company conform to GAAP and general practices within the banking industry. There have been no material changes or developments in the application of principles or in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies as disclosed in the Company’s financial statements for the year ended December 31, 2019 included in the Company’s Form 10-K.

Net earnings (loss) per share is calculated for the period that the Company’s shares of common stock were outstanding which includes the current period and the same period in the previous year.  The net income for the quarter ended June 30, 2020 was $1,079,000 and the weighted average common shares outstanding were 7,536,056.  The net income for the same quarter last year was $118,000 and the weighted average common shares outstanding were 7,525,700.  The net loss for the six months ended June 30, 2020 was $219,000 and the weighted average common shares outstanding were 7,537,319.  The net income for the six months ended June 30, 2019 was $235,000 and the weighted average common shares outstanding were 7,489,020.    

The COVID-19 pandemic has disrupted and adversely affected the Company’s business and results of operations, and the ultimate impacts of the pandemic on the Company’s business, financial condition and results of operations will depend on future developments and other factors that are highly uncertain and will be impacted by the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

The Bank received SBA authorization for 1,162 Payroll Protection Program loans totaling $130.2 million. In addition, the Bank has granted short-term deferrals on 842 loans that were otherwise performing of approximately $200.6 million.  Of these loans, 43 totaling $15.3 million have returned to normal performing status.

Recent Accounting Pronouncements

There have been no pronouncements issued during the quarter that would have a material impact on the Company's financial statements.                             

(2) Acquisition

On January 10, 2020, the Company consummated its merger with ABB Financial Group, Inc. (“ABB”) pursuant to the Agreement and Plan of Merger by and between the Company and ABB dated August 19, 2019, (the “Merger Agreement”), whereby ABB was merged with and into the Company, and Affinity Bank, ABB’s wholly owned commercial bank subsidiary

7

COMMUNITY FIRST BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

serving Cobb County, Georgia and Fulton County, Georgia and surrounding counties, was merged with and into Newton Federal Bank. The system integration is expected to be completed in September 2020.  Affinity Bank operated one branch office in Cobb County, Georgia and one loan production office in Fulton County, Georgia.

The purpose of the merger was for strategic reasons beneficial to the Company. The acquisition is consistent with its plan to drive growth and efficiency through increased scale, leverage the strengths of each bank across the combined customer base, enhance profitability, and add shareholder value.

Under the terms of the Merger Agreement, each outstanding share of ABB common stock was converted into the right to receive $7.50 in cash, for a total paid of $40.3 million in cash with no stock issued.  Pre-existing ABB equity awards (restricted stock units and stock options) immediately vested upon consummation of the merger. The Company paid $2.7 million reflecting the net value for the vested ABB restricted stock outstanding at the consummation of the merger.  

The Company accounted for the transaction under the acquisition method of accounting, and thus, the financial position and results of operations of ABB prior to the consummation date were not included in the accompanying consolidated financial statements. The accounting required assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determined the fair value of core deposit intangibles, securities, premises and equipment, loans, other real estate owned, bank owned life insurance and other assets, deposits, debt and deferred taxes with the assistance of third-party valuations, appraisals, and third-party advisors. The estimated fair values will be subject to refinement as additional information relative to the closing date fair values becomes available through the measurement period of approximately one year from consummation.

The fair value of the assets acquired and liabilities assumed on January 10, 2020 was as follows:

	As recorded by		Fair Value			As recorded by
	ABB		Adjustments			CFBI
			(in thousands)
Cash, cash equivalents and securities available-for-sale	$	41,561	$	—		$	41,561
Loans		264,176		(2,327	)		261,849
Other real estate owned		790		—			790
Core deposit intangible		—		1,913			1,913
Fixed assets and other assets		11,631		—			11,631
Total assets acquired		318,158		(414	)		317,744
Deposits		249,049		265			249,314
Borrowings and other liabilities		37,764		1,654			39,418
Total liabilities acquired		286,813		1,919			288,732
Excess of assets acquired over liabilities acquired		31,345		(2,333	)		29,012
Purchase price							40,338
Net assets acquired							29,012
Less preferred stock redeemed							(5,891	)
Net assets acquired less preferred stock							23,121
Goodwill						$	17,217

The following unaudited pro forma information presents the results of operations for six months ended June 30, 2020 and 2019, as if the acquisition had occurred January 1 of each period. The Company expects to achieve further operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts. These unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined company that would have been achieved had the acquisition occurred at the beginning of each period presented, nor are they intended to represent or be indicative of future results of operations.

8

COMMUNITY FIRST BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

	Six Months Ended June 30,
	2020			2019
	(In thousands except per share data)
Total revenues, net of interest expense	$	12,286		$	12,142
Net (loss) income		(1,279	)		1,617
Diluted (loss) earnings per share		(0.17	)		0.22

(3) Investment Securities

Investment securities available-for-sale at June 30, 2020 and December 31, 2019 are as follows: (in thousands)

	Amortized		Gross Unrealized		Gross Unrealized			Estimated
June 30, 2020	Cost		Gains		Losses			Fair Value
Government agency securities	$	4,524	$	5	$	—		$	4,529
Government agency mortgage-backed securities		11,907		391		—			12,298
Trust preferred securities		2,719		—		(159	)		2,560
Total	$	19,150	$	396	$	(159	)	$	19,387
December 31, 2019
Government agency securities	$	501	$	—	$	(1	)	$	500
Government agency mortgage-backed securities		3,305		13		—			3,318
Total	$	3,806	$	13	$	(1	)	$	3,818

There were four securities in an unrealized loss position as of June 30, 2020 for less than 12 months.  There were no securities in an unrealized loss position for 12 months or greater as of June 30, 2020.  The unrealized losses on the debt securities arose due to changing interest rates and market conditions and are considered to be temporary because of acceptable investment grades and are reviewed regularly.  One of the securities is an agency bond that is a direct obligation of the U.S. Government.  The other three securities are trust preferred securities where the Bank performs a credit review regularly and such review has raised no concerns.  The Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis which may be at maturity.  

The amortized cost and estimated fair value of investment securities available-for-sale at June 30, 2020, by contractual maturity, are shown below. Maturities of mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties. Therefore, these securities are not included in the maturity categories.  (in thousands)

	Amortized		Estimated
	Cost		Fair Value
Government agency securities
Within 1 year	$	500	$	502
Greater than 1 to 5 years		2,000		2,003
Greater than 5 to 10 years		—		—
Greater than 10 years		2,024		2,024
Trust preferred securities
Within 1 year		—		—
Greater than 1 to 5 years		—		—
Greater than 5 to 10 years		2,219		2,135
Greater than 10 years		500		425
		7,243		7,089
Government agency mortgage-backed securities		11,907		12,298
Total	$	19,150	$	19,387

9

COMMUNITY FIRST BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

During the three and six months ended June 30, 2020, the Company soldavailable-for-sale securities with a book value of $1.7 million at a gain of $20,000.  There were no sales of securities available-for-sale during the three and six months ended June 30, 2019.  

Securities with a carrying value of approximately $13.2 million and $3.8 millionwere pledged to secure public deposits and repurchase agreements at June 30, 2020 and December 31, 2019, respectively.

(4)Loans and Allowance for Loan Losses

Major classifications of loans, by collateral code, at June 30, 2020 and December 31, 2019 are summarized as follows: (in thousands)

	June 30, 2020			December 31, 2019
Commercial (secured by real estate)	$	171,793		$	54,488
Commercial and industrial		150,341			28,613
Payroll Protection Program loans		130,233			—
Construction, land and acquisition & development		43,930			20,502
Residential mortgage 1-4 family		104,421			116,843
Consumer installment		39,870			31,644
Total		640,588			252,090
Less allowance for loan losses		(4,987	)		(4,134	)
Total loans, net	$	635,601		$	247,956

The Bank grants loans and extensions of credit to individuals and a variety of firms and corporations located primarily in the Atlanta, Georgia MSA.  A substantial portion of the loan portfolio is collateralized by improved and unimproved real estate and is dependent upon the real estate market.  In addition, with the acquisition of Affinity Bank, the Bank has become a premier lender within professional markets, with a primary focus on the dental industry in Georgia and adjoining states.  The majority of these loans are commercial and industrial credits for practice acquisitions and equipment financing with the remainder being owner-occupied real estate.

Qualifying loans in the amount of $224.1 million and $115.4 million were pledged to secure the line of credit from the Federal Home Loan Bank of Atlanta (“FHLB”) at June 30, 2020 and December 31, 2019, respectively.

10

COMMUNITY FIRST BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of and for the six months ended June 30, 2020 and 2019: (in thousands)

June 30, 2020	Commercial (Secured by Real Estate)			Commercial and Industrial			Construction, Land and Acquisition & Development		Residential Mortgage			Consumer Installment			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	1,661		$	1,478		$	153	$	369		$	466		$	7		$	4,134
Provision		895			(821	)		149		520			53			4			800
Charge-offs		(30	)		—			—		(126	)		(15	)		—			(171	)
Recoveries		166			11			—		20			27			—			224
Ending balance	$	2,692		$	668		$	302	$	783		$	531		$	11		$	4,987
Ending allowance attributable to loans:
Individually evaluated for impairment	$	2		$	1		$	—	$	6		$	—		$	—		$	9
Collectively evaluated for impairment		2,690			667			302		777			531			11			4,978
Total ending allowance	$	2,692			668			302		783			531			11			4,987
Loans:
Individually evaluated for impairment	$	1,685		$	979		$	—	$	4,221		$	—		$	—		$	6,885
Collectively evaluated for impairment		170,108			279,595			43,930		100,200			39,870			—			633,703
Total loans	$	171,793		$	280,574		$	43,930	$	104,421		$	39,870		$	—		$	640,588
June 30, 2019
Allowance for loan losses:
Beginning balance	$	1,619		$	1,520		$	108	$	641		$	127		$	7		$	4,022
Provision		36			(113	)		37		(342	)		386			(4	)		—
Charge-offs		-			(26	)		—		(125	)		(5	)		—			(156	)
Recoveries		50			27			—		236			1			—			314
Ending balance	$	1,705		$	1,408		$	145	$	410		$	509		$	3		$	4,180
Ending allowance attributable to loans:
Individually evaluated for impairment	$	2		$	—		$	—	$	1		$	—		$	—		$	3
Collectively evaluated for impairment		1,703			1,408			145		409			509			3			4,177
Total ending allowance	$	1,705		$	1,408		$	145	$	410		$	509		$	3		$	4,180
Loans:
Individually evaluated for impairment	$	1,899		$	—		$	—	$	2,840		$	1		$	—		$	4,740
Collectively evaluated for impairment		52,906			25,286			19,452		125,967			19,461			—			243,072
Total loans	$	54,805		$	25,286		$	19,452	$	128,807		$	19,462		$			$	247,812

The Bank individually evaluates all loans for impairment that are on nonaccrual status or are rated substandard (as described below).  Additionally, all troubled debt restructurings are evaluated for impairment.  A loan is considered impaired when, based on current events and circumstances, it is probable that all amounts due according to the contractual terms of the loan will not be collected.  Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, at the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.  Interest payments received on impaired loans are applied as a reduction of the outstanding principal balance.

11

COMMUNITY FIRST BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

Impaired loans at June 30, 2020 and December 31, 2019 were as follows: (in thousands)

June 30, 2020	Recorded Investment		Unpaid Principal Balance		Allocated Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial (secured by real estate)	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		395		527		—		466		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		2,503		2,505		—		2,583		11
Consumer installment		—		—		—		—		—
		2,898		3,032		—		3,049		11
With an allowance recorded:
Commercial (secured by real estate)		1,685		1,686		2		1,727		45
Commercial and industrial		584		584		1		292		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		1,718		1,719		6		1,810		50
Consumer installment		—		—		—		—		—
		3,987		3,989		9		3,829		95
Total impaired loans	$	6,885	$	7,021	$	9	$	6,878	$	106
December 31, 2019
With no related allowance recorded:
Commercial (secured by real estate)	$	26	$	26	$	—	$	40	$	9
Commercial and industrial		395		527		—		463		29
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		3,749		3,878		—		3,912		153
Consumer installment		—		—		—		—		—
		4,170		4,431		—		4,415		190
With an allowance recorded:
Commercial (secured by real estate)		1,513		1,513		1		1,539		94
Commercial and industrial		—		—		—		—		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		412		412		5		405		—
Consumer installment		—		—		—		—		24
		1,925		1,925		6		1,944		118
Total impaired loans	$	6,095	$	6,356	$	6	$	6,359	$	308

12

COMMUNITY FIRST BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

The following table presents the aging of the recorded investment in past due loans, as well as the recorded investment in nonaccrual loans, as of June 30, 2020 and December 31, 2019 by class of loans: (in thousands)

June 30, 2020	30 -59 Days Past Due		60- 89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total		Nonaccrual
Commercial (secured by real estate)	$	—	$	—	$	—	$	—	$	171,793	$	171,793	$	225
Commercial and industrial		—		—		395		395		280,179		280,574		979
Construction, land and acquisition &    development		—		—		—		—		43,930		43,930		—
Residential mortgage		1,562		230		236		2,028		102,393		104,421		2,761
Consumer installment		14		31		—		45		39,825		39,870		—
Total	$	1,576	$	261	$	631	$	2,468	$	638,120	$	640,588	$	3,965
December 31, 2019
Commercial (secured by real estate)	$	114	$	24	$	10	$	148	$	54,340	$	54,488	$	246
Commercial and industrial		1,270		30		395		1,695		26,918		28,613		395
Construction, land and acquisition &    development		—		—		—		—		20,502		20,502		—
Residential mortgage		3,087		2,040		643		5,770		111,073		116,843		1,912
Consumer installment		58		34		—		92		31,552		31,644		14
Total	$	4,529	$	2,128	$	1,048	$	7,705	$	244,385	$	252,090	$	2,567

There were no loans past due 90 days or greater and still accruing interest as of June 30, 2020 and December 31, 2019.

There was one new troubled debt restructuring during the six months ended June 30, 2020 and no new troubled debt restructurings during the six months ended June 30, 2019. No troubled debt restructurings subsequently defaulted during the six months ended June 30, 2020 or 2019.

The Bank has allocated an allowance for loan losses of approximately $6,000 and $6,000 to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2020 and December 31, 2019, respectively.

The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors.  The Bank analyzes loans individually by classifying the loans as to credit risk.  This analysis is performed on a continuous basis.  The Bank uses the following definitions for its risk ratings:

Special Mention. Loans have potential weaknesses that may, if not corrected, weaken or inadequately protect the Bank's credit position at some future date.  Weaknesses are generally the result of deviation from prudent lending practices, such as over advances on collateral.  Credits in this category should, within a 12-month period, move to Pass if improved or drop to Substandard if poor trends continue.

Substandard. Inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any.  Loans have a well-defined weakness or weaknesses such as primary source of repayment is gone or severely impaired or cash flow is insufficient to reduce debt.  There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful.  Loans have the same weaknesses as those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable.  The likelihood of a loss on an asset or portion of an asset classified Doubtful is high.

Loss.  Loans considered uncollectible and of such little value that the continuance as a Bank asset is not warranted.  This does not mean that the loan has no recovery or salvage value, but rather the asset should be charged off even though partial recovery may be possible in the future.

13

COMMUNITY FIRST BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.  As of June 30, 2020 and December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: (in thousands)

June 30, 2020	Pass		Special Mention		Substandard		Doubtful/ Loss		Total
Commercial (secured by real estate)	$	170,986	$	785	$	22	$	—	$	171,793
Commercial and industrial		279,595		—		979		—		280,574
Construction, land and acquisition & development		43,930		—		—		—		43,930
Residential mortgage		100,894		224		3,303		—		104,421
Consumer installment		39,870		—		-		—		39,870
Total	$	635,275	$	1,009	$	4,304	$	—	$	640,588

December 31, 2019	Pass		Special Mention		Substandard		Doubtful/ Loss		Total
Commercial (secured by real estate)	$	54,454	$	—	$	34	$	—	$	54,488
Commercial and industrial		28,204		—		409		—		28,613
Construction, land and acquisition & development		20,502		—		—		—		20,502
Residential mortgage		110,034		229		6,580		—		116,843
Consumer installment		31,626		—		18		—		31,644
Total	$	244,820	$	229	$	7,041	$	—	$	252,090

(5) Deposits

The aggregate amounts of certificates of deposit greater than $250,000, the standard FDIC deposit insurance coverage limit per depositor, were approximately $45.0 million at June 30, 2020 and $30.2 million at December 31, 2019.      

(6) Borrowings

The following FHLB advances, which required monthly or quarterly interest payments, were outstanding at June 30, 2020:

Advance Date	Advance		Fair Value Adjustment		Interest Rate			Maturity	Rate	Call Feature
4/7/2020	$	10,000,000	$	—		0.31	%	8/7/2020	Fixed	None
4/7/2020		10,000,000		—		0.32	%	9/8/2020	Fixed	None
5/25/2018		10,000,000		100,595		2.91	%	5/25/2021	Fixed	None
5/23/2019		8,000,000		476,171		2.40	%	5/23/2029	Convertible	5/23/2022
12/16/2019		5,000,000		323,343		2.37	%	12/17/2029	Convertible	12/17/2021
11/29/2019		5,000,000		381,479		2.66	%	11/29/2029	Convertible	11/29/2022
7/10/2019		5,000,000		41,435		2.10	%	7/10/2024	Fixed	None
	$	53,000,000	$	1,323,023

There were no FHLB advances as of December 31, 2019.  At June 30, 2020, the FHLB advances were collateralized by certain loans which totaled approximately $224.1 million at June 30, 2020, and by the Company’s investment in FHLB stock which totaled approximately $2.8 million at June 30, 2020.  

The Company had one FHLB letter of credit of $8.0 million and $8.0 million, used to collateralize public deposits, outstanding at June 30, 2020 and December 31, 2019, respectively.

The Company borrowed $5.0 million from First National Bankers Bank during the quarter ended June 30, 2020.The loan has a ten-year term with a floating interest rate equal to the Wall Street Journal Prime Rate.  The initial interest payment is due September 30, 2020 and the initial principal payment is due June 29, 2021.  There is no prepayment penalty.

14

COMMUNITY FIRST BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

During the three months ended June 30, 2020, the Bank borrowed $129.2 million from the Federal Reserve Bank of Atlanta to fund Payroll Protection Program (PPP) loans under the U.S. CARES Act (the Payroll Protection Program Liquidity Facility).  This is secured by PPP loans totaling $130.2 million made during the three months ended June 30, 2020.  These borrowings have a fixed interest rate of 0.35% and a maturity date equal to the maturity date of the related PPP loans, with the PPP loans maturing either two or five years from the origination date of the PPP loan.  

15

COMMUNITY FIRST BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

(7) Employee Stock Ownership Plan

The Bank sponsors an employee stock ownership plan (“ESOP”) that covers all employees who meet certain service requirements. The Bank makes annual contributions to the ESOP in amounts as defined by the plan document. These contributions are used to pay debt service and purchase additional shares. Certain ESOP shares are pledged as collateral for debt. As the debt is repaid, shares are released from collateral and allocated to active employees, based on the proportion of debt service paid in the year.

In April 2017, the ESOP borrowed approximately $3.0 million payable to the Bank for the purpose of purchasing shares of the Company’s common stock. A total of 295,499 shares were purchased with the loan proceeds as part of the Company’s initial stock offering. Total ESOP expense for the three months and six months ended June 30, 2020 and 2019 was approximately $21,000 and $31,000 and $51,000 and $62,000, respectively.  The balance of the note payable of the ESOP was approximately $2.7 million at June 30, 2020 and December 31, 2019. Because the source of the loan payments is contributions received by the ESOP from the Bank, the related note receivable is shown as a reduction of stockholders’ equity. As of June 30, 2020 and December 31, 2019, 35,400 shares had been released.

(8) Stock-Based Compensation

In August 2018, shareholders approved the Company’s 2018 Equity Incentive Plan, which authorizes the issuance of up to 147,749 shares of common stock pursuant to restricted stock grants and up to 369,374 shares of common stock pursuant to the exercise of options.

A Black-Scholes model is utilized to estimate the fair value of stock option grants, while the market price of the Company’s stock at the date of grant is used to estimate the fair value of restricted stock awards. The weighted average assumptions used in the Black-Scholes model for valuing stock option grants were as follows.  Dividend yield is 0%, expected volatility is 25.40%, the risk-free interest rate is .53%, expected average life is 7.5 years and the weighted average per share fair value of options is $2.02.         

Stock options of 144,000shares with a weighted average exercise price of $7.05 were granted during the six months ended June 30, 2020.   No options were exercised and 147,749 options were forfeited during the six months ended June 30, 2020.   There are a total of 354,538 stock options outstanding as of June 30, 2020 with a weighted average exercise price of $8.86.  The weighted average remaining life of outstanding options at June 30, 2020, is 9.2 years and they have an aggregate intrinsic value of $63,000.  There are 42,108 options exercisable as of June 30, 2020 with a weighted average exercise price of $10.10.  The weighted average remaining life of exercisable options at June 30, 2020 is 8.8 years and they have no aggregate intrinsic value.

Restricted stock of 71,308shares with a weighted average grant date value of $7.05were granted during the six months ended June 30, 2020.  Shares totaling 15,289 of restricted stock had vested as of June 30, 2020, including 1,826 shares that were withheld for tax withholding purposes.  There were 145,923 restricted shares outstanding with a weighted average grant date fair value of $8.63 at June 30, 2020.  

The Company recognized approximately $158,000 and $78,000 stock-based compensation expense during the three months and six months ended June 30, 2020, respectively, associated with its common stock awards granted to directors and officers. Options and restricted stock totaling 147,749 and 56,533 shares, respectively were forfeited during the three months ended March 31, 2020 resulting in a reversal of previously recognized stock compensation expense of approximately $152,000 as none of the forfeited options or restricted stock had vested at the time of forfeiture.  As of June 30, 2020, there was approximately $1,834,000 of unrecognized compensation cost related to equity award grants. The cost is expected to be recognized over the weighted average remaining vesting period of approximately 4.5 years.

(9) Fair Value Measurements and Disclosures

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.  From time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans and other real estate owned. These nonrecurring fair value adjustments typically involve application of the lower of cost or market accounting or write-downs of individual assets. Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.

16

COMMUNITY FIRST BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

Fair Value Hierarchy

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  These levels are:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 – Valuation is based upon quoted prices for similar instruments 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.

Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Cash and Cash Equivalents

The carrying value of cash and cash equivalents is a reasonable estimate of fair value.

Investment Securities Available-for-Sale

Available-for-sale securities are recorded at market value.  Fair value measurement is based upon quoted prices, if available.  If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions.  Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, and U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter market funds.  Level 2 securities include mortgage-backed securities issued by government sponsored enterprises and state, county and municipal bonds.  Securities classified as Level 3 include asset-backed securities in less liquid markets.

FHLB Stock

The carrying value of FHLB stock approximates fair value.

Loans

The Company does not record loans at fair value on a recurring basis.  However, from time to time, a loan is considered impaired and a specific reserve may be required to be established within the allowance for loan losses.  Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired.  Once a loan is identified as individually impaired, management measures impairment in accordance with GAAP.  The fair value of impaired loans is estimated using one of three methods, including collateral value, market value of similar debt, and discounted cash flows.  Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.  In accordance with GAAP, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy.  When the fair value of the collateral is based on an observable market price, the Company records the impaired loan as nonrecurring Level 2.  When an appraised value is used or an appraisal is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3. For disclosure purposes, the fair value of fixed rate loans which are not considered impaired is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For unimpaired variable rate loans, the carrying amount is a reasonable estimate of fair value for disclosure purposes.

17

COMMUNITY FIRST BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

Other Real Estate Owned

Other real estate properties are adjusted to fair value upon transfer of the loans to other real estate.  Subsequently, other real estate assets are carried at fair value less estimated selling costs.  Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral.  When the fair value of the collateral is based on an observable market price, the Bank records the other real estate as nonrecurring Level 2.  When an appraised value is used or an appraisal is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Bank records the other real estate asset as nonrecurring Level 3.

Bank Owned Life Insurance

The carrying value of the cash surrender value of life insurance reasonably approximates fair value.

Deposits

The fair value of savings accounts, interest bearing checking accounts, non-interest bearing checking accounts and market rate checking accounts is the amount payable on demand at the reporting date, while the fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using current rates at which comparable certificates would be issued.

FHLB Advances

The fair value of FHLB fixed-rate borrowings is estimated using discounted cash flows, based on the current incremental borrowing rates for similar types of borrowing arrangements.

Repurchase Agreements, Payroll Protection Program Liquidity Facility and Other Borrowings

The carrying value of repurchase agreements and other borrowings reasonably approximates fair value.  The Payroll Protection Program Liquidity Facility funding has a fixed rate of 0.35% for all participants; thus, the carrying value approximates the estimated fair value.

Commitments to Extend Credit

Commitments to extend credit are short-term and, therefore, the carrying value and the fair value are considered immaterial for disclosure.

Assets Recorded at Fair Value on a Recurring Basis

The Company’s only assets recorded at fair value on a recurring basis are available-for-sale securities that had fair values of approximately $19.4 million and $3.8 million at June 30, 2020 and December 31, 2019.  They are classified as Level 2.   

Assets Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP.  These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period.  Assets measured at fair value on a nonrecurring basis are included in the table below as of June 30, 2020 and December 31, 2019 (in thousands).

June 30, 2020	Level 1		Level 2		Level 3		Total
Other real estate owned	$	—	$	—	$	1,232	$	1,232
Impaired loans		—		—		6,876		6,876
Total assets at fair value	$	—	$	—	$	8,108	$	8,108
December 31, 2019	Level 1		Level 2		Level 3		Total
Other real estate owned	$	—	$	—	$	140	$	140
Impaired loans		—		—		6,089		6,089
Total assets at fair value	$	—	$	—	$	6,229	$	6,229

18

COMMUNITY FIRST BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

The carrying amounts and estimated fair values (in thousands) of the Company’s financial instruments at June 30, 2020 and December 31, 2019 are as follows:

	June 30, 2020				December 31, 2019
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	194,424	$	194,424	$	48,117	$	48,117
Investment securities
available-for-sale		19,387		19,387		3,818		3,818
FHLB stock		2,834		2,834		278		278
Loans, net		635,601		625,075		247,956		219,991
Cash surrender value of life insurance		15,112		15,112		7,462		7,462
Financial liabilities:
Deposits		625,750		628,414		238,181		239,340
FHLB advances		54,323		49,609		—		—
Repurchase agreements and other borrowings		14,491		14,491		—		—

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment.  In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

19

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

General

Management’s discussion and analysis of financial condition and results of operations at June 30, 2020 and December 31, 2019 and for the three months and six months ended June 30, 2020 and 2019 is intended to assist in understanding the financial condition and results of operations of the Company.  The Company’s financial performance between the 2020 and 2019 periods was generally impacted by our acquisition of ABB Financial Group, Inc. (“ABB”) and its wholly owned banking subsidiary, Affinity Bank, in January 2020.  Since the assets and liabilities and results of operations of the acquired entity prior to consummation are appropriately not included in the accompanying consolidated financial statements, income statement results and average balances for the 2020 periods included partial period contributions from the acquisition in January 2020 of ABB as compared to no contribution from the acquisition in the 2019 periods.  The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this report on Form 10-Q.

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “target” and words of similar meaning.  These forward-looking statements include, but are not limited to:

• statements of our goals, intentions and expectations;

• statements regarding our business plans, prospects, growth and operating strategies;

• statements regarding the quality of our loan and investment portfolios; and

• estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control.  In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.  Accordingly, you should not place undue reliance on such statements.  We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this report.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

• general economic conditions, either nationally or in our market areas, that are worse than expected;

• changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;

• our ability to access cost-effective funding;

• fluctuations in real estate values and both residential and commercial real estate market conditions;

• demand for loans and deposits in our market area;

• our ability to implement and change our business strategies;

• competition among depository and other financial institutions;

• inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;

• adverse changes in the securities or secondary mortgage markets;

• changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

• changes in tax laws;

• the effects of any Federal government shutdown;

• changes in the quality or composition of our loan or investment portfolios;

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• technological changes that may be more difficult or expensive than expected;

• failure or breaches of our IT security systems;

• the inability of third-party providers to perform as expected;

• our ability to manage market risk, credit risk and operational risk in the current economic environment;

• our ability to introduce new products and services, enter new markets successfully and capitalize on growth opportunities;

• our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;

• changes in consumer spending, borrowing and savings habits;

• changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

• our ability to retain key employees;

• our compensation expense associated with equity allocated or awarded to our employees; and

• changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the novel coronavirus can be controlled and abated and when and how the economy may be reopened.  As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

• demand for products and services may decline, making it difficult to grow assets and income;

• if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

• collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

• the allowance for loan losses may have to be increased if borrowers experience financial difficulties, which will adversely affect our net income;

• we may experience losses on our PPP loans due to fraud or failures with respect to SBA guarantees;

• the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments;

• as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on assets may decline to a greater extent than the decline in the cost of interest-bearing liabilities, reducing net interest margin and spread and reducing net income;

• cyber-security risks are increased as the result of an increase in the number of employees working remotely; and

• FDIC premiums may increase if the agency experiences additional resolution costs.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Summary of Significant Accounting Policies

A summary of our accounting policies is described in Note 1 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.  The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with GAAP. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be significant accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ

21

from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

The following represent our significant accounting policies:

Business Combinations and Valuation of Loans Acquired in Business Combinations.  We account for acquisitions under Financial Accounting Standards Board (“FASB”) ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. Assets acquired and liabilities assumed in a business combination are recorded at estimated fair value on their purchase date. As provided for under GAAP, management has up to 12 months following the date of the acquisition to finalize the fair values of acquired assets and assumed liabilities, where it is not possible to estimate the acquisition date fair value upon consummation.

In particular, the valuation of acquired loans involves significant estimates, assumptions and judgment based on information available as of the acquisition date. Substantially all loans acquired in the transaction are evaluated in pools of loans with similar characteristics; and since the estimated fair value of acquired loans includes a credit consideration, no carryover of any previously recorded allowance for loan losses is recorded at acquisition. A number of factors are considered in determining the estimated fair value of purchased loans including, among other things, the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, estimated holding periods, contractual interest rates compared to market interest rates, and net present value of cash flows expected to be received.

In determining the Day 1 Fair Values of acquired loans, which are the fair value on all acquired loans at the time of the acquisition, management calculates a nonaccretable difference (the credit mark component of the acquired loans) and an accretable difference (the market rate or yield component of the acquired loans). The nonaccretable difference is the difference between the undiscounted contractually required payments and the undiscounted cash flows expected to be collected in accordance with management’s determination of the Day 1 Fair Values. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows will result in a reversal of the provision for loan losses to the extent of prior charges and then an adjustment to accretable yield, and nonaccretable difference which would have a positive impact on interest income.

The accretable yield on acquired loans is the difference between the expected cash flows and the initial investment in the acquired loans. The accretable yield is recognized into earnings using the effective yield method over the term of the loans. Management separately monitors the acquired loan portfolio and periodically reviews loans contained within this portfolio against the factors and assumptions used in determining the Day 1 Fair Values.

Allowance for Loan Losses.  The allowance for loan losses is a reserve for estimated credit losses on individually evaluated loans determined to be impaired as well as estimated credit losses inherent in the loan portfolio. Actual credit losses, net of recoveries, are deducted from the allowance for loan losses. Loans are charged off when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance for loan losses. A provision for loan losses, which is a charge against earnings, is recorded to bring the allowance for loan losses to a level that, in management’s judgment, is adequate to absorb probable losses in the loan portfolio. Management’s evaluation process used to determine the appropriateness of the allowance for loan losses is subject to the use of estimates, assumptions, and judgment. The evaluation process involves gathering and interpreting many qualitative and quantitative factors which could affect probable credit losses. Because interpretation and analysis involve judgment, current economic or business conditions can change, and future events are inherently difficult to predict, the anticipated amount of estimated loan losses and therefore the appropriateness of the allowance for loan losses could change significantly.

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The allocation methodology applied by the Bank is designed to assess the appropriateness of the allowance for loan losses and includes allocations for specifically identified impaired loans and loss factor allocations for all remaining loans, with a component primarily based on historical loss rates and a component primarily based on other qualitative factors. The methodology includes evaluation and consideration of several factors, such as, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or circumstances underlying the collectability of loans. Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the loan portfolio. Management believes the allowance for loan losses was appropriate at June 30, 2020. The allowance analysis is reviewed by the board of directors on a quarterly basis in compliance with regulatory requirements. In addition, various regulatory agencies periodically review the allowance for loan losses. As a result of such reviews, we may have to adjust our allowance for loan losses.  However, regulatory agencies are not directly involved in the process of establishing the allowance for loan losses as the process is the responsibility of the Bank and any increase or decrease in the allowance is the responsibility of management.  

Income Taxes.  The assessment of income tax assets and liabilities involves the use of estimates, assumptions, interpretation, and judgment concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be significant to the results of operations and reported earnings.

The Company and the Bank file consolidated federal and state income tax returns.  Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax law rates applicable to the periods in which the differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income tax expense. Valuation allowances are established when it is more likely than not that a portion of the full amount of the deferred tax asset will not be realized. In assessing the ability to realize deferred tax assets, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. The Company may also recognize a liability for unrecognized tax benefits from uncertain tax positions. Unrecognized tax benefits represent the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured in the financial statements. Penalties related to unrecognized tax benefits are classified as income tax expense.

Impact of COVID-19 Outbreak

During the first quarter of 2020, global financial markets experienced significant volatility resulting from the spread of a novel coronavirus known as COVID-19.  In March 2020, the World Health Organization declared COVID-19 a global pandemic and the United States declared a National Public Health Emergency.  The COVID-19 pandemic has restricted the level of economic activity in our markets.  In response to the pandemic, the governments of the state of Georgia and of most other states have taken preventative or protective actions, such as imposing restrictions on travel and business operations, advising or requiring individuals to limit or forego time outside of their homes, and ordering temporary closures of businesses that have been deemed to be non-essential. These measures have dramatically increased unemployment in the United States and have negatively impacted many businesses, and thereby threatened the repayment ability of some of our borrowers.

To address the economic impact in the United States, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020.  The CARES Act included a number of provisions that affected us, including accounting relief for troubled debt restructurings (“TDRs”).  The CARES Act also established the Paycheck Protection Program (“PPP”) through the Small Business Administration (“SBA”), which allowed us to lend money to small businesses to maintain employee payrolls through the crisis with guarantees from the SBA.  Under this program, loan amounts may be forgiven if the borrower maintains employee payrolls and meet certain other requirements.  In addition, the Federal Reserve took steps to bolster the economy by, among other things, reducing the federal funds rate and the discount-window borrowing rate to near zero

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In response to the pandemic, we have implemented protocols and processes to help protect our employees, customers and communities. These measures include:

• Operating our branches under a drive-through model with appointment-only lobby service for a period of time, leveraging our business continuity plans and capabilities that include critical operations teams being divided and dispersed to separate locations and, when possible, having employees work from home.

• Offering assistance to our customers affected by the COVID-19 pandemic, which includes payment deferrals, waiving certain fees, suspending property foreclosures, and participating in the CARES Act and lending programs for businesses, including the SBA PPP.

We have implemented various consumer and commercial loan modification programs to provide our borrowers relief from the economic impacts of COVID-19. Based on guidance in the CARES Act, COVID-19 related modifications to loans that were current as of December 31, 2019 are exempt from TDR classification under accounting principles generally accepted in the United States of America (GAAP). In addition, the bank regulatory agencies issued interagency guidance stating that COVID-19 related short-term modifications (i.e., six months or less) granted for loans that were current as of the loan modification program implementation date are not TDRs. The Bank received SBA authorization for 1,162 PPP loans totaling $130.2 million. In addition, the Bank has granted short-term deferrals on 842 loans that were otherwise performing of approximately $200.6 million.  Of these loans, 43 totaling $15.3 million have returned to normal performing status.

Given the unprecedented uncertainty and rapidly evolving economic effects and social impacts of the COVID-19 pandemic, the future direct and indirect impact on our business, results of operations and financial condition are highly uncertain. Should current economic conditions persist or continue to deteriorate, we expect that this macroeconomic environment will have a continued adverse effect on our business and results of operations, which could include, but not be limited to: decreased demand for our products and services, protracted periods of lower interest rates, increased noninterest expenses, including operational losses, and increased credit losses due to deterioration in the financial condition of our consumer and commercial borrowers, including declining asset and collateral values, which may continue to increase our provision for credit losses and net charge-offs.

Comparison of Financial Condition at June 30, 2020 and December 31, 2019

Total assets increased $587.1 million, or 183.9%, to $906.4 million at June 30, 2020 from $319.3 million at December 31, 2019.  The increase was due primarily to increases in loans and investment securities as a result of our acquisition of ABB and Affinity Bank in January 2020, to originating PPP loans and to increases in cash equivalents resulting from the deposit of PPP loan proceeds into customers’ accounts at the Bank.    

Cash and cash equivalents increased $146.3 million or 304.1%, to $194.4 million at June 30, 2020 from $48.1 million at December 31, 2019 as borrowings were obtained from the Federal Reserve Bank’s PPP Liquidity Facility to fund PPP loans; much of the loaned money remained in customers’ deposit accounts.

Loans increased $387.6 million, or 156.3%, to $635.6 million at June 30, 2020 from $248.0 million at December 31, 2019.  Commercial real estate loans increased $117.3 million, or 215.3%, to $171.8 million at June 30, 2020 from $54.5 million at December 31, 2019 and commercial and industrial loans, excluding PPP loans, increased $121.7 million, or 425.4%, to $150.3 million at June 30, 2020 from $28.6 million at December 31, 2019.  In addition, commercial and industrial loans increased as $130.2 million in PPP loans were made during the quarter ended June 30, 2020.  Construction loans increased $23.4 million, or 114.3%, to $43.9 million at June 30, 2020 from $20.5 million at December 31, 2019.  Consumer loans increased $8.2 million, or 26.0%, to $39.9 million at June 30, 2020 from $31.6 million at December 31, 2019.  These increases are primarily attributable to our acquisition of ABB and Affinity Bank in January 2020.  These increases were partially offset by a decrease in one-to-four family residential real estate loans of $12.4 million, or 10.6%, to $104.4 million at June 30, 2020 from $116.8 million at December 31, 2019, as mortgage loans continue to be refinanced at lower rates than we offer.  The acquisition of ABB and Affinity has shifted the composition of the loan portfolio toward more commercial and industrial loans and commercial real estate lending from one-to-four family mortgage lending.

Securities available-for-sale increased $15.6 million, or 407.8%, to $19.4 million at June 30, 2020 from $3.8 million at December 31, 2019, due to our acquisition of ABB and Affinity Bank in January 2020.  

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Total deposits increased $387.6 million, or 162.7%, to $625.8 million at June 30, 2020 from $238.2 million at December 31, 2019.  The increase included increases of $141.9 million, or 480.1%, in non-interest-bearing checking accounts, $84.5 million, or 253.2%, in market rate checking accounts, $78.5 million, or 346.0%, in savings accounts, $61.0 million, or 57.9%, in certificates of deposit, and $21.7 million, or 45.9%, in interest-bearing checking accounts.  These increases are primarily attributable to our acquisition of ABB and Affinity Bank in January 2020. In addition, many of our customers receiving PPP loans have deposited the loan proceeds in their accounts at the Bank.

We had $54.3 million of FHLB advances and $143.7 million of repurchase agreements and other borrowings at June 30, 2020, compared to no borrowings at December 31, 2019, primarily due to our acquisition of Affinity Bank in January 2020, which had both FHLB advances and repurchase agreements.  In addition, our borrowing increased due to borrowing $129.2 million from the Federal Reserve Bank to fund PPP loans.  We also borrowed $20.0 million from the FHLB in January 2020 to help fund the acquisition.   The Company borrowed $5.0 million from First National Bankers Bank during the quarter ended June 30, 2020.  The loan has a ten-year term with a floating interest rate equal to the Wall Street Journal Prime Rate.  The initial interest payment is due September 30, 2020 and the initial principal payment is due June 29, 2021.  There is no prepayment penalty.    

Stockholders’ equity increased by $77,000 to $77.2 million at June 30, 2020 compared to $77.2 million at December 31, 2019.

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Average Balance Sheets

The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated.  No tax-equivalent yield adjustments have been made, as the effects would be immaterial.  All average balances are monthly average balances.  Non-accrual loans were included in the computation of average balances.   The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.  

	For the Three Months Ended June 30,
	2020								2019
	Average Outstanding Balance			Interest		Average Yield/Rate			Average Outstanding Balance			Interest		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans excluding PPP loans	$	494,745		$	6,683		5.40	%	$	238,851		$	3,549		5.94	%
PPP loans		91,693			441		1.92	%		—			—		—
Securities		18,228			93		2.06	%		21,969			124		2.27	%
Interest-earning deposits		58,276			14		0.10	%		14,890			123		3.29	%
Depreciation and (accretion) amortization		2,837			24		3.32	%		290			4		5.99	%
Total interest-earning assets		665,779			7,255		4.36	%		276,000			3,800		5.51	%
Non-interest-earning assets		61,581								28,716
Total assets	$	727,360							$	304,716
Interest-bearing liabilities:
Savings accounts	$	87,552			280		1.28	%	$	25,054			8		0.12	%
Interest-bearing checking accounts		63,779			69		0.43	%		52,667			92		0.70	%
Market rate checking accounts		108,322			276		1.02	%		25,476			56		0.88	%
Certificates of deposit		169,794			738		1.74	%		91,794			390		1.70	%
Total interest-bearing deposits		429,447			1,363		1.27	%		194,991			546		1.12	%
FHLB advances		54,419			168		1.23	%		—			—		—
PPPLF borrowings		10,392			11		0.42	%		—			—		—
Repurchase agreements and other borrowings		10,300			6		0.23	%		—			—		—
Total interest-bearing liabilities		504,558			1,548		1.23	%		194,991			546		1.12	%
Non-interest-bearing liabilities		146,365								33,096
Total liabilities		650,923								228,087
Total stockholders' equity		76,437								76,629
Total liabilities and stockholders' equity	$	727,360							$	304,716
Net interest income				$	5,707							$	3,254
Net interest rate spread (1)							3.13	%							4.39	%
Net interest-earning assets (2)	$	161,221							$	81,009
Net interest margin (3)							3.43	%							4.72	%
Average interest-earning assets to interest-bearing liabilities		131.95	%							141.54	%

(1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

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	For the Six Months Ended June 30,
	2020								2019
	Average Outstanding Balance			Interest		Average Yield/Rate			Average Outstanding Balance			Interest		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans excluding PPP loans	$	486,021		$	13,079		5.38	%	$	235,368		$	6,793		5.77	%
PPP loans		45,847			441		1.92	%		—			—		—
Securities		17,987			224		2.49	%		22,107			257		2.33	%
Interest-earning deposits		50,705			150		0.59	%		18,258			300		3.28	%
Federal Home Loan Bank of Atlanta stock		2,677			58		4.33	%		380			13		6.62	%
Total interest-earning assets		603,237			13,952		4.63	%		276,113			7,363		5.33	%
Non-interest-earning assets		57,318								29,872
Total assets	$	660,555							$	305,986
Interest-bearing liabilities:
Savings accounts	$	77,641			519		1.34	%	$	25,215			14		0.11	%
Interest-bearing checking accounts		62,207			145		0.47	%		53,640			191		0.71	%
Market rate checking accounts		101,946			567		1.11	%		25,269			107		0.85	%
Certificates of deposit		159,911			1,394		1.74	%		90,081			745		1.65	%
Total interest-bearing deposits		401,705			2,625		1.31	%		194,205			1,057		1.09	%
FHLB advances		51,493			372		1.44	%		2,575			24		1.96	%
PPPLF borrowings		5,196			11		0.42	%		—			—		—
Repurchase agreements and other borrowings		7,560			10		0.26	%		—			—		—
Total interest-bearing liabilities		465,954			3,018		1.30	%		196,780			1,081		1.10	%
Non-interest-bearing liabilities		118,302								32,808
Total liabilities		584,256								229,588
Total stockholders' equity		76,299								76,398
Total liabilities and stockholders' equity	$	660,555							$	305,986
Net interest income				$	10,934							$	6,282
Net interest rate spread (1)							3.33	%							4.23	%
Net interest-earning assets (2)	$	137,283							$	79,333
Net interest margin (3)							3.63	%							4.55	%
Average interest-earning assets to interest-bearing    liabilities		129.46	%							140.32	%

(1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated.  The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume).  The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate).  The total column represents the sum of the prior columns.  For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.

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	Three Months Ended June 30, 2020 vs. 2019									Six Months Ended June 30, 2020 vs. 2019
	Increase (Decrease) Due to						Total			Increase (Decrease) Due to						Total
							Increase									Increase
	Volume			Rate			(Decrease)			Volume			Rate			(Decrease)
	(In thousands)
Interest-earning assets:
Loans excluding PPP loans	$	5,269		$	(2,135	)	$	3,134		$	7,638		$	(1,352	)	$	6,286
PPP loans		441			-			441			441			-			441
Securities		(21	)		(10	)		(31	)		(78	)		45			(33	)
Interest-earning deposits		632			(741	)		(109	)		570			(720	)		(150	)
FHLB stock		34			(14	)		20			59			(14	)		45
Total interest-earning assets		6,355			(2,900	)		3,455			8,630			(2,041	)		6,589
Interest-bearing liabilities:
Savings accounts		57			215			272			81			424			505
Interest-bearing checking accounts		92			(115	)		(23	)		68			(114	)		(46	)
Market rate checking accounts		210			10			220			418			42			460
Certificates of deposit		338			10			348			607			42			649
Total interest-bearing deposits		697			120			817			1,174			394			1,568
FHLB advances		168			—			168			369			(21	)		348
PPPLF borrowings		11			—			11			11			—			11
Repurchase agreements and other borrowings		6			—			6			10			—			10
Total interest-bearing liabilities		882			120			1,002			1,564			373			1,937
Change in net interest income	$	5,473		$	(3,020	)	$	2,453		$	7,066		$	(2,414	)	$	4,652

Comparison of Operating Results for the Three Months Ended June 30, 2020 and 2019

General. Net income increased $961,000 to $1.1 million for the three months ended June 30, 2020 compared to net income of $118,000 for the three months ended June 30, 2019.  The increase was due primarily to an increase in interest income on loans, due to our acquisition of ABB and Affinity Bank in January 2020, partially offset by increases in interest expense on deposits and non-interest expenses.  

Interest Income. Interest income increased $3.5 million, or 90.9%, to $7.3 million for the three months ended June 30, 2020 from $3.8 million for the three months ended June 30, 2019, due to an increase in interest income on loans, as loan volume increased primarily as a result of the ABB and Affinity Bank acquisition, slightly offset by a lower interest rate environment in the 2020 period as compared to the 2019 period.

Interest income on loans increased $3.6 million, or 100.7%, to $7.1 million for the three months ended June 30, 2020 from $3.5 million for the three months ended June 30, 2019. Our average balance of loans increased $347.6 million, or 145.6%, to $586.4 million for the three months ended June 30, 2020 from $238.9 million for the three months ended June 30, 2019.  The increase in the average balance of loans resulted primarily from our acquisition of ABB and Affinity Bank in January 2020 and to a lesser degree, the origination of PPP loans.  Our average yield on loans, not including PPP loans, decreased 54 basis points to 5.40% for the three months ended June 30, 2020 from 5.94% for the three months ended June 30, 2019, due primarily to changes in our loan portfolio composition resulting from the merger and competitive pressure on rates.

Interest income on securities (excluding FHLB stock) decreased $31,000 to $93,000 for the three months ended June 30, 2020 from $124,000 for the three months ended June 30, 2019.  The average balance of securities decreased $3.7 million, or 17.0%, to $18.2 million for the three months ended June 30, 2020 from $22.0 million for the three months ended June 30, 2019, due to the sale of most of our investment securities portfolio in 2019, offset by securities included in the acquisition of Affinity Bank in January 2020. The average yield on securities also decreased by 21 basis points, to 2.06% from 2.27%, as a result of the acquisition of Affinity Bank in January 2020.  

Interest income on interest-earning deposits decreased $109,000, or 88.6%, to $14,000 for the three months ended June 30, 2020 from $123,000 for the three months ended June 30, 2019.  The decrease in interest income on interest-earning deposits was due to a

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319 basis point decrease in the average yield, as interest rates dropped significantly in the 2020 period, partially offset by a $43.3 million increase in the average balance, as a result of the acquisition of Affinity Bank in January 2020.  

Interest Expense. Interest expense increased $1.0 million, or 181.5%, to $1.5 million for the three months ended June 30, 2020, compared to $546,000 for the three months ended June 30, 2019, due to increases in interest expense on deposits and borrowings as volumes increased related to the Affinity Bank acquisition and higher rates on some Affinity Bank products.  

Interest expense on certificates of deposit increased $348,000, or 89.2%, to $738,000 for the three months ended June 30, 2020 from $390,000 for the three months ended June 30, 2019.  The average balance of certificates of deposit increased to $170.0 million for the three months ended June 30, 2020 compared to $91.8 million for the three months ended June 30, 2019, and the average rate we paid on certificates of deposit increased four basis points to 1.74% for the three months ended June 30, 2020 from 1.70% for the three months ended June 30, 2019.  Interest expense on market rate checking accounts and savings accounts also increased $220,000, or 392.9%, and $272,000, or 3,400.0%, respectively.  These increases were due to deposits acquired in the acquisition of Affinity Bank.  These increases were partially offset by a decrease of $23,000, or 25.0%, in interest expense on interest-bearing checking accounts, which was due to a lower interest rate environment in the 2020 period as compared to the 2019 period.

Interest expense on borrowings increased to $185,000 for the three months ended June 30, 2020 compared to $0 for the three months ended June 30, 2019, as the average balance on borrowings increased to $75.1 million from zero for the same period in the prior year, primarily as a result of the acquisition of Affinity Bank in January 2020, FHLB advances used to fund the acquisition, FRB borrowings to fund PPP loans and the $5.0 million holding company loan.  

Net Interest Income. Net interest income increased $2.5 million, or 75.4%, and was $5.7 million for the three months ended June 30, 2020 compared to $3.3 million for the three months ended June 30, 2019.  Our average net interest-earning assets increased by $80.2 million, or 99.0%, to $161.2 million for the three months ended June 30, 2020 from $81.0 million for the three months ended June 30, 2019, while our net interest rate spread decreased by 126 basis points to 3.13% for the three months ended June 30, 2020 from 4.39% for the three months ended June 30, 2019, reflecting a 115 basis point decrease in the yield on interest-earning assets and an 11 basis point increase in the rate paid on interest-bearing liabilities as discussed above.  Our net interest margin was 3.43% for the three months ended June 30, 2020 compared to 4.72% for the three months ended June 30, 2019.

Provision for Loan Losses.  Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the consolidated financial statements. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. See “—Summary of Significant Accounting Policies” for additional information.

After an evaluation of these factors, particularly in light of the COVID-19 pandemic, we recorded a provision for loan losses of $300,000 for the three months ended June 30, 2020 as compared to no provision for the three months ended June 30, 2019.  Our allowance for loan losses was $5.0 million at June 30, 2020 compared to $4.1 million at December 31, 2019 and $4.1 million at June 30, 2019.  The allowance for loan losses to total loans was 0.78% at June 30, 2020 compared to 1.64% at December 31, 2019 and 1.69% at June 30, 2019.  The decline in the ratio was a result of recording the Affinity Bank loan portfolio at fair value with no carryover of its allowance for loan losses at the time of the merger.  The allowance for loan losses to non-performing loans was 125.78% at June 30, 2020 compared to 161.07% at December 31, 2019 and 315.7% at June 30, 2019.  We had net recoveries of $39,000 and $119,000 during the three months ended June 30, 2020 and 2019, respectively.

To the best of our knowledge, we have recorded all loan losses that are both probable and reasonable to estimate at June 30, 2020.  However, future changes in the factors described above, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for loan losses. In addition, the Office of the Comptroller of the Currency, as an integral part of its examination process, periodically reviews our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses.  However, regulatory agencies are not directly involved in the process of establishing the allowance for loan losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management.

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Non-interest Income. Non-interest income increased $199,000, or 58.7%, to $538,000 for the three months ended June 30, 2020 from $339,000 for the three months ended June 30, 2019.  This was a result of an increase in service charges on deposit accounts of $117,000 as a result of our acquisition of ABB and Affinity Bank, and other non-interest income of $62,000, also as a result of our acquisition of ABB and Affinity Bank.

Non-interest Expenses. Non-interest expenses information is as follows.

	Three Months Ended June 30,					Change
	2020		2019			Amount			Percent
	(Dollars in thousands)
Salaries and employee benefits	$	2,180	$	1,861		$	319			17.1	%
Deferred compensation		79		51			28			54.9	%
Occupancy		690		477			213			44.7	%
Advertising		71		35			36			102.9	%
Data processing		606		350			256			73.1	%
Other real estate owned		2		15			(13	)		(86.7	)%
Net gain (loss) on sale of other real estate owned		-		(62	)		62			100.0	%
Legal and accounting		282		259			23			8.9	%
Organizational dues and subscriptions		80		73			7			9.6	%
Director compensation		53		50			3			6.0	%
Federal deposit insurance premiums		140		16			124			775.0	%
Other		392		337			55			16.2	%
Total non-interest expenses	$	4,575	$	3,462		$	1,113			32.1	%

Salaries and employee benefits expense, occupancy expense, advertising expense, data processing expense, legal and accounting expense, federal deposit insurance premiums and other non-interest expense all increased due to our acquisition of ABB and Affinity Bank and related growth.  

Income Tax Expense. We recorded income tax expense of $291,000 for the three months ended June 30, 2020 compared to income tax of $13,000 for the three months ended June 30, 2019.  The increase in income tax expense was due to the higher net income before taxes in the 2020 period.

Comparison of Operating Results for the Six Months Ended June 30, 2020 and 2019

General. Net income decreased $454,000 to a net loss of $219,000 for the six months ended June 30, 2020 compared to net income of $235,000 for the six months ended June 30, 2019.  The decrease was due primarily to increases in interest expenses of $1.9 million and non-interest expense of $4.9 million and a provision for loan losses of $800,000, primarily related to our acquisition of ABB and Affinity Bank in January 2020, partially offset by increases in interest income of $6.6 million and non-interest income of $357,000.  Acquisition costs before tax were $2.8 million during the six months ended June 30, 2020.

Interest Income. Interest income increased $6.6 million, or 89.5%, to $14.0 million for the six months ended June 30, 2020 from $7.4 million for the six months ended June 30, 2019.  The increase was due to increases in interest income on loans and investment securities and increases in volumes related to the ABB and Affinity Bank acquisition, slightly offset by a lower interest rate environment between the two periods.

Interest income on loans increased $6.7 million, or 99.0%, to $13.5 million for the six months ended June 30, 2020 from $6.8 million for the six months ended June 30, 2019. Our average balance of loans increased $296.5 million, or 126.0%, to $531.9 million for the six months ended June 30, 2020 from $235.4 million for the six months ended June 30, 2019.  The increase in the average balance of loans resulted primarily from our acquisition of ABB and Affinity Bank in January 2020.  Our average yield on loans, not including PPP loans, decreased 39 basis points to 5.38% for the six months ended June 30, 2020 from 5.77% for the six months ended June 30, 2019, due primarily to changes in our loan portfolio composition from the merger and from competitive pressure on rates.

Interest income on securities (excluding FHLB stock) decreased $33,000 to $224,000 for the six months ended June 30, 2020 from $257,000 for the six months ended June 30, 2019.  The average balance of securities decreased $4.1 million, or 18.6%, to $18.0 million for the six months ended June 30, 2020 from $22.1 million for the six months ended June 30, 2019, due to the sale of most of our portfolio in 2019, offset by securities included in the acquisition of Affinity Bank in January 2020.  The average yield on securities also increased by 16 basis points, to 2.49% from 2.33%, as a result of the acquisition of Affinity Bank in January 2020.

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Interest income on interest-earning deposits decreased $150,000, or 50.0%, to $150,000 for the six months ended June 30, 2020 from $300,000 for the six months ended June 30, 2019.  The decrease in interest income on interest-earning deposits was due to a 269 basis point decrease in the average yield, as interest rates dropped significantly during the six months ended June 30, 2020, partially offset by a $32.4 million increase in the average balance, as a result of the acquisition of Affinity Bank in January 2020.  

Interest Expense. Interest expense increased $1.9 million, or 179.2%, to $3.0 million for the six months ended June 30, 2020, compared to $1.1 million for the six months ended June 30, 2019, due to increases in interest expense on deposits and borrowings, as volumes increased related to the Affinity Bank acquisition and higher rates on some Affinity Bank products.  

Interest expense on certificates of deposit increased $649,000, or 87.1%, to $1.4 million for the six months ended June 30, 2020 from $745,000 for the six months ended June 30, 2019.  The average rate we paid on certificates of deposit increased 9 basis points to 1.74% for the six months ended June 30, 2020 from 1.65% for the six months ended June 30, 2019, and the average balance of certificates of deposit increased to $159.9 million for the six months ended June 30, 2020 compared to $90.1 million for the six months ended June 30, 2019.  Interest expense on market rate checking accounts and savings accounts also increased $460,000, or 429.9%, and $505,000, or 3,607.1%, respectively.  These increases were due to deposits acquired in the merger.  These increases were partially offset by a decrease of $46,000, or 24.1%, in interest expense on interest-bearing checking accounts, which was due to a lower interest rate environment between the two periods.

Interest expense on borrowings increased to $393,000 for the six months ended June 30, 2020 compared to $24,000 for the six months ended June 30, 2019, as the average balance on borrowings increased $61.2 million from the previous year primarily as a result of the acquisition of Affinity Bank in January 2020, FHLB advances used to fund the acquisition, FRB borrowings used to fund PPP loans and the $5.0 million loan taken by the Company.  

Net Interest Income. Net interest income increased $4.7 million, or 74.1%, and was $10.9 million for the six months ended June 30, 2020 compared to $6.3 million for the six months ended June 30, 2019.  Our average net interest-earning assets increased by $58.0 million, or 73.0%, to $137.3 million for the six months ended June 30, 2020 from $79.3 million for the six months ended June 30, 2019, while our net interest rate spread decreased by 90 basis points to 3.33% for the six months ended June 30, 2020 from 4.23% for the six months ended June 30, 2019, reflecting a 70 basis point decrease in the yield on interest-earning assets, further reduced by a 20 basis point increase in the rate paid on interest-bearing liabilities.  Our net interest margin was 3.63% for the six months ended June 30, 2020 compared to 4.55% for the six months ended June 30, 2019.

Provision for Loan Losses.  Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the consolidated financial statements. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. See “—Summary of Significant Accounting Policies” for additional information.

After an evaluation of these factors, particularly in light of the COVID-19 pandemic, we recorded a provision for loan losses of $800,000 for the six months ended June 30, 2020 and no provision for the six months ended June 30, 2019.  Our allowance for loan losses was $5.0 million at June 30, 2020 compared to $4.1 million at December 31, 2019 and $4.1 million at June 30, 2019.  The allowance for loan losses to total loans was 0.78% at June 30, 2020 compared to 1.64% at December 31, 2019 and 1.69% at June 30, 2019.  The decline in the ratio was a result of recording the Affinity Bank loan portfolio at fair value with no carryover of its allowance at the time of the merger.  The allowance for loan losses to non-performing loans was 125.78% at June 30, 2020 compared to 161.07% at December 31, 2019 and 315.7% at June 30, 2019.  We had net recoveries of $53,000 and $158,000 during the six months ended June 30, 2020 and 2019, respectively.

To the best of our knowledge, we have recorded all loan losses that are both probable and reasonable to estimate at June 30, 2020.  However, future changes in the factors described above, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for loan losses. In addition, the Office of the Comptroller of the Currency, as an integral part of its examination process, periodically reviews our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses.  However, regulatory agencies are not directly involved in the process of establishing the allowance for loan losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management.

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Non-interest Income. Non-interest income increased $357,000, or 51.4%, to $1.1 million for the six months ended June 30, 2020 from $695,000 for the six months ended June 30, 2019.  This was a result of an increase in service charges on deposit accounts of $298,000 as a result of our acquisition of ABB and Affinity Bank, and an increase in non-interest income of $39,000, as a result of our acquisition of ABB and Affinity Bank.

Non-interest Expenses. Non-interest expenses information is as follows.

	Six Months Ended June 30,					Change
	2020		2019			Amount			Percent
	(Dollars in thousands)
Salaries and employee benefits	$	6,353	$	3,659		$	2,694			73.6	%
Deferred compensation		142		103			39			37.9	%
Occupancy		1,337		956			381			39.8	%
Advertising		133		67			66			98.5	%
Data processing		1,250		612			638			104.0	%
Other real estate owned		2		17			(15	)		(88.5	)%
Net loss (gain) on sale of other real estate owned		29		(96	)		125			130.2	%
Legal and accounting		965		533			432			81.1	%
Organizational dues and subscriptions		168		153			15			9.8	%
Director compensation		101		96			5			5.3	%
Federal deposit insurance premiums		253		32			221			690.6	%
Other		924		616			308			50.2	%
Total non-interest expenses	$	11,657	$	6,748		$	4,909			72.6	%

Salaries and employee benefits expense, occupancy expense, advertising expense, data processing expense, legal and accounting expense, federal deposit insurance premiums and other non-interest expense all increased due to our acquisition of ABB and Affinity Bank and related growth.  Other non-interest expense increased primarily as a result of core deposit intangible amortization and merger-related expenses.

Income Tax Expense. We recorded an income tax benefit of $252,000 for the six months ended June 30, 2020 compared to an income tax benefit of $6,000 for the six months ended June 30, 2019.  The increase in income tax benefit was due to the net loss before taxes in the 2020 period.

Management of Market Risk

General.  Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates.  Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates.  Our Asset/Liability Management Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors.  We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates.  We have implemented the following strategies to manage our interest rate risk:

• growing our volume of transaction deposit accounts;

• increasing our investment securities portfolio, with an average maturity of less than 15 years;

• diversifying our loan portfolio by adding more commercial-related loans and consumer loans, which typically have shorter maturities and/or balloon payments; and

• continuing to price our one-to-four family residential real estate loan products in a way that encourages borrowers to select our adjustable rate loans as opposed to longer-term, fixed-rate loans.  

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By following these strategies, we believe that we are better positioned to react to increases in market interest rates.  In addition, we originate adjustable-rate, one-to-four-family residential real estate loans and home equity loans and lines of credit, which are originated with adjustable interest rates.  

We do not engage in hedging activities, such as engaging in futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage backed securities.

Net Interest Income. We analyze our sensitivity to changes in interest rates through a net interest income model.  Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings.  We estimate what our net interest income would be for a 12-month period.  We then calculate what the net interest income would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by 200 and 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.  A basis point equals one-hundredth of one percent, and 100 basis points equals one percent.  An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below.

The table below sets forth, as of June 30, 2020, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve.

Change in Interest Rates (basis points) (1)	Net Interest Income Year 1 Forecast		Year 1 Change from Level
	(Dollars in thousands)
+400	$	15,834		(24.69	)%
+200		18,443		(12.27	)%
Level		21,022	—
-200		22,361		6.37	%
-400		21,857		3.97	%

(1) Assumes an immediate uniform change in interest rates at all maturities.

The table above indicates that at June 30, 2020, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced an 12.27% decrease in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would have experienced a 6.37% increase in net interest income.  At June 30, 2019, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 0.32% decrease in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would have experienced a 7.64% decrease in net interest income.

Net Economic Value. We also compute amounts by which the net present value of our assets and liabilities (net economic value or “NEV”) would change in the event of a range of assumed changes in market interest rates.  This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value.  The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by 200 and 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The table below sets forth, as of June 30, 2020, the calculation of the estimated changes in our NEV that would result from the designated immediate changes in the United States Treasury yield curve.

Change in Interest			Estimated Increase (Decrease) in NEV						NEV as a Percentage of Present Value of Assets (3)
Rates (basis points) (1)	Estimated NEV (2)		Amount			Percent			NEV Ratio (4)			Increase (Decrease) (basis points)
(Dollars in thousands)
+400	$	86,699	$	(11,751	)		(11.94	)%		9.90	%		(59	)
+200		93,984		(4,466	)		(4.54	)%		10.37	%		(12	)
—		98,450	—			—				10.49	%	—
-200		98,389		(61	)		(0.06	)%		10.46	%		(3	)
-400		96,550		(1,900	)		(1.93	)%		10.28	%		(21	)

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(1) Assumes an immediate uniform change in interest rates at all maturities.

(2) NEV is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

(3) Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

(4) NEV Ratio represents NEV divided by the present value of assets.

The table above indicates that at June 30, 2020, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 4.54% decrease in net economic value, and in the event of an instantaneous 200 basis point decrease in interest rates, we would have experienced a 0.06% decrease in net economic value. At June 30, 2019, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 10.55% decrease in net economic value, and in the event of an instantaneous 200 basis point decrease in interest rates, we would have experienced a 1.10% increase in net economic value.

GAP Analysis. In addition, we analyze our interest rate sensitivity by monitoring our interest rate sensitivity “gap.” Our interest rate sensitivity gap is the difference between the amount of our interest-earning assets maturing or repricing within a specific time period and the amount of our interest-bearing liabilities maturing or repricing within that same time period.  A gap is considered positive when the amount of interest rate sensitive assets maturing or repricing during a period exceeds the amount of interest rate sensitive liabilities maturing or repricing during the same period, and a gap is considered negative when the amount of interest rate sensitive liabilities maturing or repricing during a period exceeds the amount of interest rate sensitive assets maturing or repricing during the same period.

The following table sets forth our interest-earning assets and our interest-bearing liabilities at June 30, 2020, which are anticipated to reprice or mature in each of the future time periods shown based upon certain assumptions. The amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability.  The table sets forth an approximation of the projected repricing of assets and liabilities at June 30, 2020, on the basis of contractual maturities, anticipated prepayments and scheduled rate adjustments. The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and as a result of contractual rate adjustments on adjustable-rate loans.  Amounts are based on a preliminary balance sheet as of June 30, 2020, and may not equal amounts included in our unaudited consolidated financial statements for the quarter ended June 30, 2020.  However, we believe that there would be no material changes in the results of the gap analysis if the unaudited financial results included in Part 1, Item 1 of this quarterly report had been utilized.

	Time to Repricing
	Zero to 90 Days			Zero to 180 Days			Zero Days to One Year			Zero Days to Two Years			Zero Days to Five Years			Total
				(Dollars in thousands)
Assets:
Cash and due from banks	$	180,171		$	180,171		$	180,171		$	180,171		$	180,171		$	194,425
Investments		5,702			8,542			12,036			15,453			19,166			22,221
Net loans		77,237			111,672			202,661			364,210			524,853			635,599
Other assets		—			—			—			—			—			57,142
Total	$	263,110			300,385			394,868			559,834			724,190		$	909,387
Liabilities:
Non-maturity deposits	$	186,123			198,303			222,661			260,895			373,300		$	462,638
Certificates of deposit		70,461			83,144			102,018			127,385			156,182			166,238
Borrowings		161,407			161,407			171,407			171,407			176,407			195,730
Other liabilities		—			—			—			—			—			5,915
Equity capital		—			—			—			—			—			78,866
Total (1)	$	417,991			442,854			496,086			559,687			705,889		$	909,387
Asset/liability gap	$	(154,881	)		(142,469	)		(101,218	)		147			18,301
Gap/assets ratio (2)		(17.03	)%		(15.67	)%		(11.13	)%		0.02	%		2.01	%

(1) Amounts do not foot due to rounding.

(2) Gap/assets ratio equals the asset/liability gap for the period divided by total assets ($909.4 million).

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At June 30, 2020, our asset/liability gap from zero days to one year was negative $101.2 million, resulting in a gap/assets ratio of (11.13)%.At June 30, 2019, our asset/liability gap from zero days to one year was negative $6.5 million, resulting in a gap/assets ratio of (2.09)%.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net interest income and net economic value tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the net interest income and NEV tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on net interest income and NEV and will differ from actual results.  Furthermore, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates.  Additionally, certain assets, such as adjustable-rate loans, have features that restrict changes in interest rates both on a short-term basis and over the life of the asset. In the event of changes in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the gap table.

Interest rate risk calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business.  Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures.  Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities.  We also have the ability to borrow from the Federal Home Loan Bank of Atlanta.  At June 30, 2020, we had a $243.2million line of credit with the Federal Home Loan Bank of Atlanta, with advances of $53.0 million outstanding and an $8.0 million letter of credit outstanding, and we had a $5.0 million unsecured federal funds line of credit and a $7.5 million unsecured federal funds line of credit.  We also have a line of $36.4 million with the Federal Reserve Bank of Atlanta Discount Window secured by $70.7 million in loans.  No amount was outstanding on the unsecured lines of credit or the Discount Window at June 30, 2020. Under the Federal Reserve Bank’s PPP Liquidity Funding program we have borrowed $129.2 million to fund PPP loans that is secured by the $129.2 amount of PPP loans.  The Company also has a revolving loan with First National Bankers Bank for $5.0 million. The loan is secured by the stock of the Company’s wholly-owned subsidiary, Newton Federal Bank. The loan has a ten-year term with a floating interest rate equal to the Wall Street Journal Prime Rate.  The initial interest payment is due September 30, 2020 and the initial principal payment is due June 29, 2021.  There is no prepayment penalty.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities.  Net cash used in operating activities was $2.8 million for the six months ended June 30, 2020, compared to net cash provided by operating activities of $1.4 million for the six months ended June 30, 2019.  Net cash used in investing activities was $148.9 million and $14.5 million for the six months ended June 30, 2020 and 2019, respectively.  Net cash used in investing activities typically consists primarily of disbursements for loan originations but also included $22.7 million net cash disbursed in connection with our acquisition of ABB and Affinity Bank during the six months ended June 30, 2020.  Net cash provided by financing activities, which consists primarily of activity in deposit accounts and proceeds/repayments of FHLB advances, was $298.1 million for the six months ended June 30, 2020, compared to net cash used in financing activities of $4.3 million for the six months ended June 30, 2019.

We are committed to maintaining a strong liquidity position.  We monitor our liquidity position on a daily basis.  We anticipate that we will have sufficient funds to meet our current funding commitments.  Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

35

At June 30, 2020, we exceeded all of our regulatory capital requirements and the Bank is categorized as “well capitalized.”   Management is not aware of any conditions or events since the most recent notification that would change our category.  The Bank’s actual capital amounts and ratios for June 30, 2020 and December 31, 2019 are presented in the table below (in thousands).

						For Capital					To Be Well Capitalized
						Adequacy					Under Prompt Corrective
	Actual					Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of June 30, 2020:
Common Equity Tier 1
(to Risk Weighted Assets)	$	57,693		10.58	%	$	24,545		4.50	%	$	35,455		6.50	%
Total Capital
(to Risk Weighted Assets)	$	62,690		11.49	%	$	43,636		8.00	%	$	54,546		10.00	%
Tier I Capital
(to Risk Weighted Assets)	$	57,693		10.58	%	$	32,727		6.00	%	$	43,636		8.00	%
Tier I Capital
(to Average Assets)	$	57,693		9.31	%	$	24,777		4.00	%	$	30,971		5.00	%
As of December 31, 2019:
Common Equity Tier 1
(to Risk Weighted Assets)	$	62,349		27.33	%	$	10,267		4.50	%	$	14,830		6.50	%
Total Capital
(to Risk Weighted Assets)	$	65,217		29.58	%	$	18,252		8.00	%	$	22,816		10.00	%
Tier I Capital
(to Risk Weighted Assets)	$	62,349		27.33	%	$	13,689		6.00	%	$	18,252		8.00	%
Tier I Capital
(to Average Assets)	$	62,349		19.67	%	$	12,681		4.00	%	$	15,863		5.00	%

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit.  While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon.  Such commitments are subject to the same credit policies and approval process accorded to loans we make.  At June 30, 2020, we had outstanding commitments to originate loans of $58.2 million.  We anticipate that we will have sufficient funds available to meet our current lending commitments.  Time deposits that are scheduled to mature in less than one year from June 30, 2020 totaled $81.9 million.  Management expects that a substantial portion of the maturing time deposits will be renewed.  However, if a substantial portion of these deposits is not retained, we may utilize FHLB advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations.  Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is included in Part 1, Item 2 of this quarterly report under “Management of Market Risk.”

36

Item 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of June 30, 2020. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

During the quarter ended June 30, 2020, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

37

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not involved in any pending legal proceedings as a defendant other than routine legal proceedings occurring in the ordinary course of business.  At June 30, 2020, we were not involved in any legal proceedings the outcome of which would be material to our financial condition or results of operations.

Item 1A. Risk Factors

Not applicable.

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

Not applicable.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit
Number	Description
3.1	Charter of Community First Bancshares, Inc. (1)
3.2	Bylaws of Community First Bancshares, Inc. (2)
3.3	Amendment to Bylaws of Community First Bancshares, Inc. (3)
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Written Statement of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.0	The following materials for the quarter ended June 30, 2020, formatted in XBRL (Extensible Business Reporting Language): (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Comprehensive Income (Loss), (iv) Statements of Changes in Stockholders’ Equity, (v) Statements of Cash Flows, and (vi) Notes to Financial Statements

(1) Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-215041).

(2) Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-215041).

(3) Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on May 31, 2017 (Commission File No. 001-38074).

38

SIGNATURES

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

		COMMUNITY FIRST BANCSHARES, INC.
Date:	August 14, 2020	/s/ Edward J. Cooney
		Edward J. Cooney
		Chief Executive Officer and Director
Date:	August 14, 2020	/s/ Tessa M. Nolan
		Tessa M. Nolan
		Senior Vice President and Chief Financial Officer

39

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Edward J. Cooney, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Community First Bancshares, Inc.;

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

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

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

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

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

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

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

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

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

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

Date:   August 14, 2020	/s/ Edward J. Cooney
	Edward J. Cooney
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Tessa M. Nolan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Community First Bancshares, Inc.;

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

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

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

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

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

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

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

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

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

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

Date:  August 14, 2020	/s/ Tessa M. Nolan
	Tessa M. Nolan
	Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Edward J. Cooney, Chief Executive Officer of Community First Bancshares, Inc. (the “Company”), and Tessa M. Nolan, Senior Vice President and Chief Financial Officer of the Company, each certify in his or her capacity as an executive officer of the Company that he or she has reviewed the quarterly report on Form 10-Q for the quarter ended June 30, 2020 (the “Report”) and that to the best of his or her knowledge:

1. the Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

Date:  August 14, 2020	/s/ Edward J. Cooney
	Edward J. Cooney
	Chief Executive Officer
Date:  August 14, 2020	/s/ Tessa M. Nolan
	Tessa M. Nolan
	Senior Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Aug. 10, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Trading Symbol	CFBI
Entity Registrant Name	Community First Bancshares, Inc.
Entity Central Index Key	0001691507
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		7,570,797
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	001-38074
Entity Tax Identification Number	82-1147778
Entity Address, Address Line One	3175 Highway 278
Entity Address, City or Town	Covington
Entity Address, State or Province	GA
Entity Address, Postal Zip Code	30014
City Area Code	770
Local Phone Number	786-7088
Entity Interactive Data Current	Yes
Title of 12(b) Security	Common Stock, par value $0.01 per share
Entity Incorporation, State or Country Code	X1
Document Quarterly Report	true
Document Transition Report	false
Security Exchange Name	NASDAQ

XML

Consolidated Balance Sheets (unaudited) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Assets
Cash and due from banks, including reserve requirement of $0 and $1,523 at June 30, 2020 and December 31, 2019, respectively	$ 14,254,000	$ 3,965,000
Interest-earning deposits in other depository institutions	180,170,000	44,152,000
Cash and cash equivalents	194,424,000	48,117,000
Investment securities available-for-sale	19,387,000	3,818,000
Federal Home Loan Bank stock	2,834,000	278,000
Loans, net	635,601,000	247,956,000
Other real estate owned	1,232,000	140,000
Premises and equipment, net	8,861,000	8,513,000
Bank owned life insurance	15,112,000	7,462,000
Intangible assets	19,035,000
Accrued interest receivable and other assets	9,881,000	3,010,000
Total assets	906,367,000	319,294,000
Liabilities:
Savings accounts	101,205,000	22,691,000
Interest-bearing checking	69,029,000	47,324,000
Market rate checking	117,914,000	33,380,000
Non-interest-bearing checking	171,407,000	29,549,000
Certificates of deposit	166,195,000	105,237,000
Total deposits	625,750,000	238,181,000
Federal Home Loan Bank advances	54,323,000	0
Paycheck Protection Program Liquidity Facility borrowings	129,230,000
Repurchase agreements and other borrowings	14,491,000
Accrued interest payable and other liabilities	5,329,000	3,946,000
Total liabilities	829,123,000	242,127,000
Stockholders' equity:
Common stock (par value $0.01 per share, 19,000,000 shares authorized, 7,685,999 issued and 7,570,797 outstanding at June 30, 2020 and 7,671,224 issued and 7,557,848 outstanding at December 31, 2019)	78,000	77,000
Preferred stock (1,000,000 shares authorized, no shares outstanding)
Additional paid in capital	33,427,000	33,358,000
Treasury stock, 113,376 shares at June 30, 2020, and December 31, 2019, at cost	(1,268,000)	(1,268,000)
Unearned ESOP shares	(2,512,000)	(2,571,000)
Retained earnings	47,343,000	47,562,000
Accumulated other comprehensive income	176,000	9,000
Total stockholders' equity	77,244,000	77,167,000
Total liabilities and stockholders' equity	$ 906,367,000	$ 319,294,000

XML

Consolidated Balance Sheets (unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Statement Of Financial Position [Abstract]
Cash and due from banks, reserve requirement	$ 0	$ 1,523
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	19,000,000	19,000,000
Common stock, shares issued	7,685,999	7,671,224
Common stock, shares outstanding	7,570,797	7,557,848
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares outstanding	0	0
Treasury stock shares, at cost	113,376	113,376

XML

Consolidated Statements of Operations (unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Interest income:
Loans, including fees	$ 7,124,000	$ 3,549,000	$ 13,520,000	$ 6,793,000
Investment securities, including dividends	117,000	128,000	282,000	270,000
Interest-earning deposits	14,000	123,000	150,000	300,000
Total interest income	7,255,000	3,800,000	13,952,000	7,363,000
Interest expense:
Deposits	1,363,000	546,000	2,625,000	1,057,000
Borrowings	185,000		393,000	24,000
Total interest expense	1,548,000	546,000	3,018,000	1,081,000
Net interest income before provision for loan losses	5,707,000	3,254,000	10,934,000	6,282,000
Provision for loan losses	300,000		800,000
Net interest income after provision for loan losses	5,407,000	3,254,000	10,134,000	6,282,000
Non-interest income:
Service charges on deposit accounts	304,000	187,000	658,000	360,000
Gain on sales of investment securities available-for-sale	20,000		20,000	0
Other	214,000	152,000	374,000	335,000
Total non-interest income	538,000	339,000	1,052,000	695,000
Non-interest expenses:
Salaries and employee benefits	2,180,000	1,861,000	6,353,000	3,659,000
Deferred compensation	79,000	51,000	142,000	103,000
Occupancy	690,000	477,000	1,337,000	956,000
Advertising	71,000	35,000	133,000	67,000
Data processing	606,000	350,000	1,250,000	612,000
Other real estate owned	2,000	15,000	2,000	17,000
Net loss (gain) on sale of other real estate owned		(62,000)	29,000	(96,000)
Legal and accounting	282,000	259,000	965,000	533,000
Organizational dues and subscriptions	80,000	73,000	168,000	153,000
Director compensation	53,000	50,000	101,000	96,000
Federal deposit insurance premiums	140,000	16,000	253,000	32,000
Other	392,000	337,000	924,000	616,000
Total non-interest expenses	4,575,000	3,462,000	11,657,000	6,748,000
(Loss) income before income taxes	1,370,000	131,000	(471,000)	229,000
Income tax expense (benefit)	291,000	13,000	(252,000)	(6,000)
Net (loss) income	$ 1,079,000	$ 118,000	$ (219,000)	$ 235,000
Basic and diluted (loss) earnings per share	$ 0.14	$ 0.02	$ (0.03)	$ 0.03

XML

Consolidated Statements of Comprehensive (Loss) Income (unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Statement Of Income And Comprehensive Income [Abstract]
Net (loss) income	$ 1,079	$ 118	$ (219)	$ 235
Other comprehensive income:
Net unrealized gain on available-for-sale securities, net of taxes of $20, $77, $63 and $208	61	218	182	591
Reclassification adjustment for gain included in net income, net of taxes of ($5)	(15)		(15)
Total other comprehensive income	46	218	167	591
Total comprehensive (loss) income	$ 1,125	$ 336	$ (52)	$ 826

XML

Consolidated Statements of Comprehensive (Loss) Income (unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Statement Of Income And Comprehensive Income [Abstract]
Net unrealized gain on available for sale securities, tax	$ 20	$ 77	$ 63	$ 208
Reclassification adjustment from AOCI for sale of securities, tax expense	$ (5)		$ (5)

XML

Consolidated Statements of Changes in Stockholders' Equity (unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid In Capital	Treasury Stock	Unearned ESOP Shares	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Beginning balance at Dec. 31, 2018	$ 76,398	$ 75	$ 33,078	$ (668)	$ (2,689)	$ 47,043	$ (441)
ESOP loan payment and release of ESOP shares	31		1		30
Purchase of treasury stock	(600)			(600)
Change in unrealized gain on investment securities available-for-sale, net of tax	373						373
Net (loss) income	117					117
Ending balance at Mar. 31, 2019	76,319	75	33,079	(1,268)	(2,659)	47,160	(68)
Beginning balance at Dec. 31, 2018	76,398	75	33,078	(668)	(2,689)	47,043	(441)
Net (loss) income	235
Ending balance at Jun. 30, 2019	76,755	77	33,148	(1,268)	(2,630)	47,278	150
Beginning balance at Mar. 31, 2019	76,319	75	33,079	(1,268)	(2,659)	47,160	(68)
ESOP loan payment and release of ESOP shares	31		2		29
Issuance of restricted stock awards	45	2	43
Stock based compensation expense	24		24
Change in unrealized gain on investment securities available-for-sale, net of tax	218						218
Net (loss) income	118					118
Ending balance at Jun. 30, 2019	76,755	77	33,148	(1,268)	(2,630)	47,278	150
Beginning balance at Dec. 31, 2019	77,167	77	33,358	(1,268)	(2,571)	47,562	9
ESOP loan payment and release of ESOP shares	30				30
Stock based compensation expense	(80)		(80)
Change in unrealized gain on investment securities available-for-sale, net of tax	121						121
Net (loss) income	(1,298)					(1,298)
Ending balance at Mar. 31, 2020	75,940	77	33,278	(1,268)	(2,541)	46,264	130
Beginning balance at Dec. 31, 2019	77,167	77	33,358	(1,268)	(2,571)	47,562	9
Net (loss) income	(219)
Ending balance at Jun. 30, 2020	77,244	78	33,427	(1,268)	(2,512)	47,343	176
Beginning balance at Mar. 31, 2020	75,940	77	33,278	(1,268)	(2,541)	46,264	130
ESOP loan payment and release of ESOP shares	21		(8)		29
Issuance of restricted stock awards	17	1	16
Stock based compensation expense	141		141
Change in unrealized gain on investment securities available-for-sale, net of tax	46						46
Net (loss) income	1,079					1,079
Ending balance at Jun. 30, 2020	$ 77,244	$ 78	$ 33,427	$ (1,268)	$ (2,512)	$ 47,343	$ 176

XML

Consolidated Statements of Cash Flows (unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities:
Net (loss) income	$ (219,000)	$ 235,000
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities, net of effects of acquisition:
Depreciation and (accretion) amortization	(98,000)	435,000
Stock-based compensation expense	78,000	69,000
Deferred income tax	0	(17,000)
Provision for loan losses	800,000	0
ESOP expense	51,000	62,000
Net gain on sale of investment securities available-for-sale	(20,000)	0
Net loss (gain) on sale of other real estate owned	29,000	(96,000)
Increase in cash surrender value of bank owned life insurance	(198,000)	(105,000)
Change in:
Accrued interest receivable and other assets	(3,793,000)	157,000
Accrued interest payable and other liabilities	536,000	704,000
Net cash (used in) provided by operating activities	(2,834,000)	1,444,000
Cash flows from investing activities, net of effects of acquisition:
Purchases of investment securities available-for-sale	(4,025,000)	0
Purchases of premises and equipment	(137,000)	(220,000)
Proceeds from disposal of premises and equipment	21,000	0
Proceeds from sale of investment securities available-for-sale	1,677,000	0
Proceeds from paydowns of investment securities available-for-sale	3,316,000	1,034,000
Purchases of other investments	(1,108,000)	0
Proceeds from sales of other investments	213,000	302,000
Net change in loans	(126,246,000)	(16,208,000)
Proceeds from sales of other real estate owned	128,000	604,000
Net cash paid in business combination	(22,749,000)	0
Net cash used in investing activities	(148,910,000)	(14,488,000)
Cash flows from financing activities, net of effects of acquisition:
Net change in demand and savings deposits	138,438,000	3,902,000
Purchase of treasury stock	0	(600,000)
Proceeds from FHLB advances	40,000,000	0
Repayment of FHLB advances	(20,000,000)	(7,570,000)
Proceeds from holding company loan	5,000,000	0
Proceeds from Payroll Protection Program Liquidity Facility	129,230,000
Net change in repurchase agreements and other borrowings	5,383,000	0
Net cash provided by (used in) financing activities	298,051,000	(4,268,000)
Net change in cash and cash equivalents	146,307,000	(17,312,000)
Cash and cash equivalents at beginning of period	48,117,000	37,029,000
Cash and cash equivalents at end of period	194,424,000	19,717,000
Supplemental disclosures of cash flow information:
Cash paid for interest	2,761,000	1,101,000
Vacant land transferred to other real estate owned	460,000	0
Fair value of assets acquired	317,744,000	0
Fair value of liabilities assumed	288,732,000	0
Net assets acquired	$ 29,012,000	$ 0

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Basis of Presentation

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation

(1) Basis of Presentation

Community First Bancshares, Inc. (the “Company”) is a savings and loan holding company headquartered in Covington, Georgia. The Company has one operating subsidiary, Newton Federal Bank (the “Bank”), a federally chartered savings association, conducting banking activities in Newton County, Georgia and surrounding counties and in Cobb, Jackson and Fulton County, Georgia and surrounding counties, and originating dental practice loans and indirect automobile loans throughout the Southeastern United States. The Bank offers such customary banking services as consumer and commercial checking accounts, savings accounts, certificates of deposit, mortgage, commercial and consumer loans, including indirect automobile loans, money transfers and a variety of other banking services.  

The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the financial position of the Company as of June 30, 2020 and the results of its operations and its cash flows for the periods presented. The interim consolidated financial information should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.  The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for a full year or for any other period.  

Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses, the valuation of acquired loans, the valuation of other real estate acquired in connection with foreclosure or in satisfaction of loans and valuation allowances associated with the realization of deferred tax assets, which are based on future taxable income.

Summary of Significant Accounting Policies – The accounting and reporting policies of the Company conform to GAAP and general practices within the banking industry. There have been no material changes or developments in the application of principles or in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies as disclosed in the Company’s financial statements for the year ended December 31, 2019 included in the Company’s Form 10-K.

Net earnings (loss) per share is calculated for the period that the Company’s shares of common stock were outstanding which includes the current period and the same period in the previous year.  The net income for the quarter ended June 30, 2020 was $1,079,000 and the weighted average common shares outstanding were 7,536,056.  The net income for the same quarter last year was $118,000 and the weighted average common shares outstanding were 7,525,700.  The net loss for the six months ended June 30, 2020 was $219,000 and the weighted average common shares outstanding were 7,537,319.  The net income for the six months ended June 30, 2019 was $235,000 and the weighted average common shares outstanding were 7,489,020.    

The COVID-19 pandemic has disrupted and adversely affected the Company’s business and results of operations, and the ultimate impacts of the pandemic on the Company’s business, financial condition and results of operations will depend on future developments and other factors that are highly uncertain and will be impacted by the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

The Bank received SBA authorization for 1,162 Payroll Protection Program loans totaling $130.2 million. In addition, the Bank has granted short-term deferrals on 842 loans that were otherwise performing of approximately $200.6 million.  Of these loans, 43 totaling $15.3 million have returned to normal performing status.

Recent Accounting Pronouncements

There have been no pronouncements issued during the quarter that would have a material impact on the Company's financial statements.                             

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Acquisition

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Acquisition

(2) Acquisition

On January 10, 2020, the Company consummated its merger with ABB Financial Group, Inc. (“ABB”) pursuant to the Agreement and Plan of Merger by and between the Company and ABB dated August 19, 2019, (the “Merger Agreement”), whereby ABB was merged with and into the Company, and Affinity Bank, ABB’s wholly owned commercial bank subsidiary serving Cobb County, Georgia and Fulton County, Georgia and surrounding counties, was merged with and into Newton Federal Bank. The system integration is expected to be completed in September 2020.  Affinity Bank operated one branch office in Cobb County, Georgia and one loan production office in Fulton County, Georgia.

The purpose of the merger was for strategic reasons beneficial to the Company. The acquisition is consistent with its plan to drive growth and efficiency through increased scale, leverage the strengths of each bank across the combined customer base, enhance profitability, and add shareholder value.

Under the terms of the Merger Agreement, each outstanding share of ABB common stock was converted into the right to receive $7.50 in cash, for a total paid of $40.3 million in cash with no stock issued.  Pre-existing ABB equity awards (restricted stock units and stock options) immediately vested upon consummation of the merger. The Company paid $2.7 million reflecting the net value for the vested ABB restricted stock outstanding at the consummation of the merger.  

The Company accounted for the transaction under the acquisition method of accounting, and thus, the financial position and results of operations of ABB prior to the consummation date were not included in the accompanying consolidated financial statements. The accounting required assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determined the fair value of core deposit intangibles, securities, premises and equipment, loans, other real estate owned, bank owned life insurance and other assets, deposits, debt and deferred taxes with the assistance of third-party valuations, appraisals, and third-party advisors. The estimated fair values will be subject to refinement as additional information relative to the closing date fair values becomes available through the measurement period of approximately one year from consummation.

The fair value of the assets acquired and liabilities assumed on January 10, 2020 was as follows:

	As recorded by		Fair Value			As recorded by
	ABB		Adjustments			CFBI
			(in thousands)
Cash, cash equivalents and securities available-for-sale	$	41,561	$	—		$	41,561
Loans		264,176		(2,327	)		261,849
Other real estate owned		790		—			790
Core deposit intangible		—		1,913			1,913
Fixed assets and other assets		11,631		—			11,631
Total assets acquired		318,158		(414	)		317,744
Deposits		249,049		265			249,314
Borrowings and other liabilities		37,764		1,654			39,418
Total liabilities acquired		286,813		1,919			288,732
Excess of assets acquired over liabilities acquired		31,345		(2,333	)		29,012
Purchase price							40,338
Net assets acquired							29,012
Less preferred stock redeemed							(5,891	)
Net assets acquired less preferred stock							23,121
Goodwill						$	17,217

The following unaudited pro forma information presents the results of operations for six months ended June 30, 2020 and 2019, as if the acquisition had occurred January 1 of each period. The Company expects to achieve further operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts. These unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined company that would have been achieved had the acquisition occurred at the beginning of each period presented, nor are they intended to represent or be indicative of future results of operations.

	Six Months Ended June 30,
	2020			2019
	(In thousands except per share data)
Total revenues, net of interest expense	$	12,286		$	12,142
Net (loss) income		(1,279	)		1,617
Diluted (loss) earnings per share		(0.17	)		0.22

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Investment Securities

6 Months Ended

Jun. 30, 2020

Investments Debt And Equity Securities [Abstract]

Investment Securities

(3) Investment Securities

Investment securities available-for-sale at June 30, 2020 and December 31, 2019 are as follows: (in thousands)

	Amortized		Gross Unrealized		Gross Unrealized			Estimated
June 30, 2020	Cost		Gains		Losses			Fair Value
Government agency securities	$	4,524	$	5	$	—		$	4,529
Government agency mortgage-backed securities		11,907		391		—			12,298
Trust preferred securities		2,719		—		(159	)		2,560
Total	$	19,150	$	396	$	(159	)	$	19,387
December 31, 2019
Government agency securities	$	501	$	—	$	(1	)	$	500
Government agency mortgage-backed securities		3,305		13		—			3,318
Total	$	3,806	$	13	$	(1	)	$	3,818

There were four securities in an unrealized loss position as of June 30, 2020 for less than 12 months.  There were no securities in an unrealized loss position for 12 months or greater as of June 30, 2020.  The unrealized losses on the debt securities arose due to changing interest rates and market conditions and are considered to be temporary because of acceptable investment grades and are reviewed regularly.  One of the securities is an agency bond that is a direct obligation of the U.S. Government.  The other three securities are trust preferred securities where the Bank performs a credit review regularly and such review has raised no concerns.  The Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis which may be at maturity.  

The amortized cost and estimated fair value of investment securities available-for-sale at June 30, 2020, by contractual maturity, are shown below. Maturities of mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties. Therefore, these securities are not included in the maturity categories.  (in thousands)

	Amortized		Estimated
	Cost		Fair Value
Government agency securities
Within 1 year	$	500	$	502
Greater than 1 to 5 years		2,000		2,003
Greater than 5 to 10 years		—		—
Greater than 10 years		2,024		2,024
Trust preferred securities
Within 1 year		—		—
Greater than 1 to 5 years		—		—
Greater than 5 to 10 years		2,219		2,135
Greater than 10 years		500		425
		7,243		7,089
Government agency mortgage-backed securities		11,907		12,298
Total	$	19,150	$	19,387

During the three and six months ended June 30, 2020, the Company soldavailable-for-sale securities with a book value of $1.7 million at a gain of $20,000.  There were no sales of securities available-for-sale during the three and six months ended June 30, 2019.  

Securities with a carrying value of approximately $13.2 million and $3.8 millionwere pledged to secure public deposits and repurchase agreements at June 30, 2020 and December 31, 2019, respectively.

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Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2020

Receivables [Abstract]

Loans and Allowance for Loan Losses

(4)Loans and Allowance for Loan Losses

Major classifications of loans, by collateral code, at June 30, 2020 and December 31, 2019 are summarized as follows: (in thousands)

	June 30, 2020			December 31, 2019
Commercial (secured by real estate)	$	171,793		$	54,488
Commercial and industrial		150,341			28,613
Payroll Protection Program loans		130,233			—
Construction, land and acquisition & development		43,930			20,502
Residential mortgage 1-4 family		104,421			116,843
Consumer installment		39,870			31,644
Total		640,588			252,090
Less allowance for loan losses		(4,987	)		(4,134	)
Total loans, net	$	635,601		$	247,956

The Bank grants loans and extensions of credit to individuals and a variety of firms and corporations located primarily in the Atlanta, Georgia MSA.  A substantial portion of the loan portfolio is collateralized by improved and unimproved real estate and is dependent upon the real estate market.  In addition, with the acquisition of Affinity Bank, the Bank has become a premier lender within professional markets, with a primary focus on the dental industry in Georgia and adjoining states.  The majority of these loans are commercial and industrial credits for practice acquisitions and equipment financing with the remainder being owner-occupied real estate.

Qualifying loans in the amount of $224.1 million and $115.4 million were pledged to secure the line of credit from the Federal Home Loan Bank of Atlanta (“FHLB”) at June 30, 2020 and December 31, 2019, respectively.

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of and for the six months ended June 30, 2020 and 2019: (in thousands)

June 30, 2020	Commercial (Secured by Real Estate)			Commercial and Industrial			Construction, Land and Acquisition & Development		Residential Mortgage			Consumer Installment			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	1,661		$	1,478		$	153	$	369		$	466		$	7		$	4,134
Provision		895			(821	)		149		520			53			4			800
Charge-offs		(30	)		—			—		(126	)		(15	)		—			(171	)
Recoveries		166			11			—		20			27			—			224
Ending balance	$	2,692		$	668		$	302	$	783		$	531		$	11		$	4,987
Ending allowance attributable to loans:
Individually evaluated for impairment	$	2		$	1		$	—	$	6		$	—		$	—		$	9
Collectively evaluated for impairment		2,690			667			302		777			531			11			4,978
Total ending allowance	$	2,692			668			302		783			531			11			4,987
Loans:
Individually evaluated for impairment	$	1,685		$	979		$	—	$	4,221		$	—		$	—		$	6,885
Collectively evaluated for impairment		170,108			279,595			43,930		100,200			39,870			—			633,703
Total loans	$	171,793		$	280,574		$	43,930	$	104,421		$	39,870		$	—		$	640,588
June 30, 2019
Allowance for loan losses:
Beginning balance	$	1,619		$	1,520		$	108	$	641		$	127		$	7		$	4,022
Provision		36			(113	)		37		(342	)		386			(4	)		—
Charge-offs		-			(26	)		—		(125	)		(5	)		—			(156	)
Recoveries		50			27			—		236			1			—			314
Ending balance	$	1,705		$	1,408		$	145	$	410		$	509		$	3		$	4,180
Ending allowance attributable to loans:
Individually evaluated for impairment	$	2		$	—		$	—	$	1		$	—		$	—		$	3
Collectively evaluated for impairment		1,703			1,408			145		409			509			3			4,177
Total ending allowance	$	1,705		$	1,408		$	145	$	410		$	509		$	3		$	4,180
Loans:
Individually evaluated for impairment	$	1,899		$	—		$	—	$	2,840		$	1		$	—		$	4,740
Collectively evaluated for impairment		52,906			25,286			19,452		125,967			19,461			—			243,072
Total loans	$	54,805		$	25,286		$	19,452	$	128,807		$	19,462		$			$	247,812

The Bank individually evaluates all loans for impairment that are on nonaccrual status or are rated substandard (as described below).  Additionally, all troubled debt restructurings are evaluated for impairment.  A loan is considered impaired when, based on current events and circumstances, it is probable that all amounts due according to the contractual terms of the loan will not be collected.  Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, at the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.  Interest payments received on impaired loans are applied as a reduction of the outstanding principal balance.

Impaired loans at June 30, 2020 and December 31, 2019 were as follows: (in thousands)

June 30, 2020	Recorded Investment		Unpaid Principal Balance		Allocated Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial (secured by real estate)	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		395		527		—		466		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		2,503		2,505		—		2,583		11
Consumer installment		—		—		—		—		—
		2,898		3,032		—		3,049		11
With an allowance recorded:
Commercial (secured by real estate)		1,685		1,686		2		1,727		45
Commercial and industrial		584		584		1		292		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		1,718		1,719		6		1,810		50
Consumer installment		—		—		—		—		—
		3,987		3,989		9		3,829		95
Total impaired loans	$	6,885	$	7,021	$	9	$	6,878	$	106
December 31, 2019
With no related allowance recorded:
Commercial (secured by real estate)	$	26	$	26	$	—	$	40	$	9
Commercial and industrial		395		527		—		463		29
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		3,749		3,878		—		3,912		153
Consumer installment		—		—		—		—		—
		4,170		4,431		—		4,415		190
With an allowance recorded:
Commercial (secured by real estate)		1,513		1,513		1		1,539		94
Commercial and industrial		—		—		—		—		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		412		412		5		405		—
Consumer installment		—		—		—		—		24
		1,925		1,925		6		1,944		118
Total impaired loans	$	6,095	$	6,356	$	6	$	6,359	$	308

The following table presents the aging of the recorded investment in past due loans, as well as the recorded investment in nonaccrual loans, as of June 30, 2020 and December 31, 2019 by class of loans: (in thousands)

June 30, 2020	30 -59 Days Past Due		60- 89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total		Nonaccrual
Commercial (secured by real estate)	$	—	$	—	$	—	$	—	$	171,793	$	171,793	$	225
Commercial and industrial		—		—		395		395		280,179		280,574		979
Construction, land and acquisition &    development		—		—		—		—		43,930		43,930		—
Residential mortgage		1,562		230		236		2,028		102,393		104,421		2,761
Consumer installment		14		31		—		45		39,825		39,870		—
Total	$	1,576	$	261	$	631	$	2,468	$	638,120	$	640,588	$	3,965
December 31, 2019
Commercial (secured by real estate)	$	114	$	24	$	10	$	148	$	54,340	$	54,488	$	246
Commercial and industrial		1,270		30		395		1,695		26,918		28,613		395
Construction, land and acquisition &    development		—		—		—		—		20,502		20,502		—
Residential mortgage		3,087		2,040		643		5,770		111,073		116,843		1,912
Consumer installment		58		34		—		92		31,552		31,644		14
Total	$	4,529	$	2,128	$	1,048	$	7,705	$	244,385	$	252,090	$	2,567

There were no loans past due 90 days or greater and still accruing interest as of June 30, 2020 and December 31, 2019.

There was one new troubled debt restructuring during the six months ended June 30, 2020 and no new troubled debt restructurings during the six months ended June 30, 2019. No troubled debt restructurings subsequently defaulted during the six months ended June 30, 2020 or 2019.

The Bank has allocated an allowance for loan losses of approximately $6,000 and $6,000 to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2020 and December 31, 2019, respectively.

The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors.  The Bank analyzes loans individually by classifying the loans as to credit risk.  This analysis is performed on a continuous basis.  The Bank uses the following definitions for its risk ratings:

Special Mention. Loans have potential weaknesses that may, if not corrected, weaken or inadequately protect the Bank's credit position at some future date.  Weaknesses are generally the result of deviation from prudent lending practices, such as over advances on collateral.  Credits in this category should, within a 12-month period, move to Pass if improved or drop to Substandard if poor trends continue.

Substandard. Inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any.  Loans have a well-defined weakness or weaknesses such as primary source of repayment is gone or severely impaired or cash flow is insufficient to reduce debt.  There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful.  Loans have the same weaknesses as those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable.  The likelihood of a loss on an asset or portion of an asset classified Doubtful is high.

Loss.  Loans considered uncollectible and of such little value that the continuance as a Bank asset is not warranted.  This does not mean that the loan has no recovery or salvage value, but rather the asset should be charged off even though partial recovery may be possible in the future.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.  As of June 30, 2020 and December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: (in thousands)

June 30, 2020	Pass		Special Mention		Substandard		Doubtful/ Loss		Total
Commercial (secured by real estate)	$	170,986	$	785	$	22	$	—	$	171,793
Commercial and industrial		279,595		—		979		—		280,574
Construction, land and acquisition & development		43,930		—		—		—		43,930
Residential mortgage		100,894		224		3,303		—		104,421
Consumer installment		39,870		—		-		—		39,870
Total	$	635,275	$	1,009	$	4,304	$	—	$	640,588

December 31, 2019	Pass		Special Mention		Substandard		Doubtful/ Loss		Total
Commercial (secured by real estate)	$	54,454	$	—	$	34	$	—	$	54,488
Commercial and industrial		28,204		—		409		—		28,613
Construction, land and acquisition & development		20,502		—		—		—		20,502
Residential mortgage		110,034		229		6,580		—		116,843
Consumer installment		31,626		—		18		—		31,644
Total	$	244,820	$	229	$	7,041	$	—	$	252,090

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Deposits

6 Months Ended

Jun. 30, 2020

Deposits [Abstract]

Deposits

(5) Deposits

The aggregate amounts of certificates of deposit greater than $250,000, the standard FDIC deposit insurance coverage limit per depositor, were approximately $45.0 million at June 30, 2020 and $30.2 million at December 31, 2019.      

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Borrowings

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Borrowings

(6) Borrowings

The following FHLB advances, which required monthly or quarterly interest payments, were outstanding at June 30, 2020:

Advance Date	Advance		Fair Value Adjustment		Interest Rate			Maturity	Rate	Call Feature
4/7/2020	$	10,000,000	$	—		0.31	%	8/7/2020	Fixed	None
4/7/2020		10,000,000		—		0.32	%	9/8/2020	Fixed	None
5/25/2018		10,000,000		100,595		2.91	%	5/25/2021	Fixed	None
5/23/2019		8,000,000		476,171		2.40	%	5/23/2029	Convertible	5/23/2022
12/16/2019		5,000,000		323,343		2.37	%	12/17/2029	Convertible	12/17/2021
11/29/2019		5,000,000		381,479		2.66	%	11/29/2029	Convertible	11/29/2022
7/10/2019		5,000,000		41,435		2.10	%	7/10/2024	Fixed	None
	$	53,000,000	$	1,323,023

There were no FHLB advances as of December 31, 2019.  At June 30, 2020, the FHLB advances were collateralized by certain loans which totaled approximately $224.1 million at June 30, 2020, and by the Company’s investment in FHLB stock which totaled approximately $2.8 million at June 30, 2020.  

The Company had one FHLB letter of credit of $8.0 million and $8.0 million, used to collateralize public deposits, outstanding at June 30, 2020 and December 31, 2019, respectively.

The Company borrowed $5.0 million from First National Bankers Bank during the quarter ended June 30, 2020.The loan has a ten-year term with a floating interest rate equal to the Wall Street Journal Prime Rate.  The initial interest payment is due September 30, 2020 and the initial principal payment is due June 29, 2021.  There is no prepayment penalty.

During the three months ended June 30, 2020, the Bank borrowed $129.2 million from the Federal Reserve Bank of Atlanta to fund Payroll Protection Program (PPP) loans under the U.S. CARES Act (the Payroll Protection Program Liquidity Facility).  This is secured by PPP loans totaling $130.2 million made during the three months ended June 30, 2020.  These borrowings have a fixed interest rate of 0.35% and a maturity date equal to the maturity date of the related PPP loans, with the PPP loans maturing either two or five years from the origination date of the PPP loan.  

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Employee Stock Ownership Plan

6 Months Ended

Jun. 30, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Employee Stock Ownership Plan

(7) Employee Stock Ownership Plan

The Bank sponsors an employee stock ownership plan (“ESOP”) that covers all employees who meet certain service requirements. The Bank makes annual contributions to the ESOP in amounts as defined by the plan document. These contributions are used to pay debt service and purchase additional shares. Certain ESOP shares are pledged as collateral for debt. As the debt is repaid, shares are released from collateral and allocated to active employees, based on the proportion of debt service paid in the year.

In April 2017, the ESOP borrowed approximately $3.0 million payable to the Bank for the purpose of purchasing shares of the Company’s common stock. A total of 295,499 shares were purchased with the loan proceeds as part of the Company’s initial stock offering. Total ESOP expense for the three months and six months ended June 30, 2020 and 2019 was approximately $21,000 and $31,000 and $51,000 and $62,000, respectively.  The balance of the note payable of the ESOP was approximately $2.7 million at June 30, 2020 and December 31, 2019. Because the source of the loan payments is contributions received by the ESOP from the Bank, the related note receivable is shown as a reduction of stockholders’ equity. As of June 30, 2020 and December 31, 2019, 35,400 shares had been released.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2020

Share Based Compensation Arrangement By Share Based Payment Award Additional General Disclosures [Abstract]

Stock-Based Compensation

(8) Stock-Based Compensation

In August 2018, shareholders approved the Company’s 2018 Equity Incentive Plan, which authorizes the issuance of up to 147,749 shares of common stock pursuant to restricted stock grants and up to 369,374 shares of common stock pursuant to the exercise of options.

A Black-Scholes model is utilized to estimate the fair value of stock option grants, while the market price of the Company’s stock at the date of grant is used to estimate the fair value of restricted stock awards. The weighted average assumptions used in the Black-Scholes model for valuing stock option grants were as follows.  Dividend yield is 0%, expected volatility is 25.40%, the risk-free interest rate is .53%, expected average life is 7.5 years and the weighted average per share fair value of options is $2.02.         

Stock options of 144,000shares with a weighted average exercise price of $7.05 were granted during the six months ended June 30, 2020.   No options were exercised and 147,749 options were forfeited during the six months ended June 30, 2020.   There are a total of 354,538 stock options outstanding as of June 30, 2020 with a weighted average exercise price of $8.86.  The weighted average remaining life of outstanding options at June 30, 2020, is 9.2 years and they have an aggregate intrinsic value of $63,000.  There are 42,108 options exercisable as of June 30, 2020 with a weighted average exercise price of $10.10.  The weighted average remaining life of exercisable options at June 30, 2020 is 8.8 years and they have no aggregate intrinsic value.

Restricted stock of 71,308shares with a weighted average grant date value of $7.05were granted during the six months ended June 30, 2020.  Shares totaling 15,289 of restricted stock had vested as of June 30, 2020, including 1,826 shares that were withheld for tax withholding purposes.  There were 145,923 restricted shares outstanding with a weighted average grant date fair value of $8.63 at June 30, 2020.  

The Company recognized approximately $158,000 and $78,000 stock-based compensation expense during the three months and six months ended June 30, 2020, respectively, associated with its common stock awards granted to directors and officers. Options and restricted stock totaling 147,749 and 56,533 shares, respectively were forfeited during the three months ended March 31, 2020 resulting in a reversal of previously recognized stock compensation expense of approximately $152,000 as none of the forfeited options or restricted stock had vested at the time of forfeiture.  As of June 30, 2020, there was approximately $1,834,000 of unrecognized compensation cost related to equity award grants. The cost is expected to be recognized over the weighted average remaining vesting period of approximately 4.5 years.

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Fair Value Measurements and Disclosures

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements and Disclosures

(9) Fair Value Measurements and Disclosures

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.  From time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans and other real estate owned. These nonrecurring fair value adjustments typically involve application of the lower of cost or market accounting or write-downs of individual assets. Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.

Fair Value Hierarchy

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  These levels are:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 – Valuation is based upon quoted prices for similar instruments 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.

Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Cash and Cash Equivalents

The carrying value of cash and cash equivalents is a reasonable estimate of fair value.

Investment Securities Available-for-Sale

Available-for-sale securities are recorded at market value.  Fair value measurement is based upon quoted prices, if available.  If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions.  Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, and U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter market funds.  Level 2 securities include mortgage-backed securities issued by government sponsored enterprises and state, county and municipal bonds.  Securities classified as Level 3 include asset-backed securities in less liquid markets.

FHLB Stock

The carrying value of FHLB stock approximates fair value.

Loans

The Company does not record loans at fair value on a recurring basis.  However, from time to time, a loan is considered impaired and a specific reserve may be required to be established within the allowance for loan losses.  Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired.  Once a loan is identified as individually impaired, management measures impairment in accordance with GAAP.  The fair value of impaired loans is estimated using one of three methods, including collateral value, market value of similar debt, and discounted cash flows.  Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.  In accordance with GAAP, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy.  When the fair value of the collateral is based on an observable market price, the Company records the impaired loan as nonrecurring Level 2.  When an appraised value is used or an appraisal is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3. For disclosure purposes, the fair value of fixed rate loans which are not considered impaired is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For unimpaired variable rate loans, the carrying amount is a reasonable estimate of fair value for disclosure purposes.

Other Real Estate Owned

Other real estate properties are adjusted to fair value upon transfer of the loans to other real estate.  Subsequently, other real estate assets are carried at fair value less estimated selling costs.  Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral.  When the fair value of the collateral is based on an observable market price, the Bank records the other real estate as nonrecurring Level 2.  When an appraised value is used or an appraisal is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Bank records the other real estate asset as nonrecurring Level 3.

Bank Owned Life Insurance

The carrying value of the cash surrender value of life insurance reasonably approximates fair value.

Deposits

The fair value of savings accounts, interest bearing checking accounts, non-interest bearing checking accounts and market rate checking accounts is the amount payable on demand at the reporting date, while the fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using current rates at which comparable certificates would be issued.

FHLB Advances

The fair value of FHLB fixed-rate borrowings is estimated using discounted cash flows, based on the current incremental borrowing rates for similar types of borrowing arrangements.

Repurchase Agreements, Payroll Protection Program Liquidity Facility and Other Borrowings

The carrying value of repurchase agreements and other borrowings reasonably approximates fair value.  The Payroll Protection Program Liquidity Facility funding has a fixed rate of 0.35% for all participants; thus, the carrying value approximates the estimated fair value.

Commitments to Extend Credit

Commitments to extend credit are short-term and, therefore, the carrying value and the fair value are considered immaterial for disclosure.

Assets Recorded at Fair Value on a Recurring Basis

The Company’s only assets recorded at fair value on a recurring basis are available-for-sale securities that had fair values of approximately $19.4 million and $3.8 million at June 30, 2020 and December 31, 2019.  They are classified as Level 2.   

Assets Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP.  These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period.  Assets measured at fair value on a nonrecurring basis are included in the table below as of June 30, 2020 and December 31, 2019 (in thousands).

June 30, 2020	Level 1		Level 2		Level 3		Total
Other real estate owned	$	—	$	—	$	1,232	$	1,232
Impaired loans		—		—		6,876		6,876
Total assets at fair value	$	—	$	—	$	8,108	$	8,108
December 31, 2019	Level 1		Level 2		Level 3		Total
Other real estate owned	$	—	$	—	$	140	$	140
Impaired loans		—		—		6,089		6,089
Total assets at fair value	$	—	$	—	$	6,229	$	6,229

The carrying amounts and estimated fair values (in thousands) of the Company’s financial instruments at June 30, 2020 and December 31, 2019 are as follows:

	June 30, 2020				December 31, 2019
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	194,424	$	194,424	$	48,117	$	48,117
Investment securities
available-for-sale		19,387		19,387		3,818		3,818
FHLB stock		2,834		2,834		278		278
Loans, net		635,601		625,075		247,956		219,991
Cash surrender value of life insurance		15,112		15,112		7,462		7,462
Financial liabilities:
Deposits		625,750		628,414		238,181		239,340
FHLB advances		54,323		49,609		—		—
Repurchase agreements and other borrowings		14,491		14,491		—		—

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment.  In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation

Community First Bancshares, Inc. (the “Company”) is a savings and loan holding company headquartered in Covington, Georgia. The Company has one operating subsidiary, Newton Federal Bank (the “Bank”), a federally chartered savings association, conducting banking activities in Newton County, Georgia and surrounding counties and in Cobb, Jackson and Fulton County, Georgia and surrounding counties, and originating dental practice loans and indirect automobile loans throughout the Southeastern United States. The Bank offers such customary banking services as consumer and commercial checking accounts, savings accounts, certificates of deposit, mortgage, commercial and consumer loans, including indirect automobile loans, money transfers and a variety of other banking services.  

The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the financial position of the Company as of June 30, 2020 and the results of its operations and its cash flows for the periods presented. The interim consolidated financial information should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.  The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for a full year or for any other period.  

Use of Estimates

Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses, the valuation of acquired loans, the valuation of other real estate acquired in connection with foreclosure or in satisfaction of loans and valuation allowances associated with the realization of deferred tax assets, which are based on future taxable income.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

There have been no pronouncements issued during the quarter that would have a material impact on the Company's financial statements.                             

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Acquisition (Tables)

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Schedule of Fair Value of Assets Acquired and Liabilities Assumed

The fair value of the assets acquired and liabilities assumed on January 10, 2020 was as follows:

	As recorded by		Fair Value			As recorded by
	ABB		Adjustments			CFBI
			(in thousands)
Cash, cash equivalents and securities available-for-sale	$	41,561	$	—		$	41,561
Loans		264,176		(2,327	)		261,849
Other real estate owned		790		—			790
Core deposit intangible		—		1,913			1,913
Fixed assets and other assets		11,631		—			11,631
Total assets acquired		318,158		(414	)		317,744
Deposits		249,049		265			249,314
Borrowings and other liabilities		37,764		1,654			39,418
Total liabilities acquired		286,813		1,919			288,732
Excess of assets acquired over liabilities acquired		31,345		(2,333	)		29,012
Purchase price							40,338
Net assets acquired							29,012
Less preferred stock redeemed							(5,891	)
Net assets acquired less preferred stock							23,121
Goodwill						$	17,217

Schedule of Unaudited Proforma Information Results of Operations

The following unaudited pro forma information presents the results of operations for six months ended June 30, 2020 and 2019, as if the acquisition had occurred January 1 of each period. The Company expects to achieve further operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts. These unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined company that would have been achieved had the acquisition occurred at the beginning of each period presented, nor are they intended to represent or be indicative of future results of operations.

	Six Months Ended June 30,
	2020			2019
	(In thousands except per share data)
Total revenues, net of interest expense	$	12,286		$	12,142
Net (loss) income		(1,279	)		1,617
Diluted (loss) earnings per share		(0.17	)		0.22

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Investment Securities (Tables)

6 Months Ended

Jun. 30, 2020

Investments Debt And Equity Securities [Abstract]

Schedule of Investment Securities Available-for-Sale

Investment securities available-for-sale at June 30, 2020 and December 31, 2019 are as follows: (in thousands)

	Amortized		Gross Unrealized		Gross Unrealized			Estimated
June 30, 2020	Cost		Gains		Losses			Fair Value
Government agency securities	$	4,524	$	5	$	—		$	4,529
Government agency mortgage-backed securities		11,907		391		—			12,298
Trust preferred securities		2,719		—		(159	)		2,560
Total	$	19,150	$	396	$	(159	)	$	19,387
December 31, 2019
Government agency securities	$	501	$	—	$	(1	)	$	500
Government agency mortgage-backed securities		3,305		13		—			3,318
Total	$	3,806	$	13	$	(1	)	$	3,818

Schedule of Amortized Cost and Estimated Fair Value of Investment Securities Available-for-Sale by Contractual Maturity

The amortized cost and estimated fair value of investment securities available-for-sale at June 30, 2020, by contractual maturity, are shown below. Maturities of mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties. Therefore, these securities are not included in the maturity categories.  (in thousands)

	Amortized		Estimated
	Cost		Fair Value
Government agency securities
Within 1 year	$	500	$	502
Greater than 1 to 5 years		2,000		2,003
Greater than 5 to 10 years		—		—
Greater than 10 years		2,024		2,024
Trust preferred securities
Within 1 year		—		—
Greater than 1 to 5 years		—		—
Greater than 5 to 10 years		2,219		2,135
Greater than 10 years		500		425
		7,243		7,089
Government agency mortgage-backed securities		11,907		12,298
Total	$	19,150	$	19,387

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Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2020

Receivables [Abstract]

Summary of Major Classifications of Loans

Major classifications of loans, by collateral code, at June 30, 2020 and December 31, 2019 are summarized as follows: (in thousands)

	June 30, 2020			December 31, 2019
Commercial (secured by real estate)	$	171,793		$	54,488
Commercial and industrial		150,341			28,613
Payroll Protection Program loans		130,233			—
Construction, land and acquisition & development		43,930			20,502
Residential mortgage 1-4 family		104,421			116,843
Consumer installment		39,870			31,644
Total		640,588			252,090
Less allowance for loan losses		(4,987	)		(4,134	)
Total loans, net	$	635,601		$	247,956

Summary of Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment and Based on Impairment Method

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of and for the six months ended June 30, 2020 and 2019: (in thousands)

June 30, 2020	Commercial (Secured by Real Estate)			Commercial and Industrial			Construction, Land and Acquisition & Development		Residential Mortgage			Consumer Installment			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	1,661		$	1,478		$	153	$	369		$	466		$	7		$	4,134
Provision		895			(821	)		149		520			53			4			800
Charge-offs		(30	)		—			—		(126	)		(15	)		—			(171	)
Recoveries		166			11			—		20			27			—			224
Ending balance	$	2,692		$	668		$	302	$	783		$	531		$	11		$	4,987
Ending allowance attributable to loans:
Individually evaluated for impairment	$	2		$	1		$	—	$	6		$	—		$	—		$	9
Collectively evaluated for impairment		2,690			667			302		777			531			11			4,978
Total ending allowance	$	2,692			668			302		783			531			11			4,987
Loans:
Individually evaluated for impairment	$	1,685		$	979		$	—	$	4,221		$	—		$	—		$	6,885
Collectively evaluated for impairment		170,108			279,595			43,930		100,200			39,870			—			633,703
Total loans	$	171,793		$	280,574		$	43,930	$	104,421		$	39,870		$	—		$	640,588
June 30, 2019
Allowance for loan losses:
Beginning balance	$	1,619		$	1,520		$	108	$	641		$	127		$	7		$	4,022
Provision		36			(113	)		37		(342	)		386			(4	)		—
Charge-offs		-			(26	)		—		(125	)		(5	)		—			(156	)
Recoveries		50			27			—		236			1			—			314
Ending balance	$	1,705		$	1,408		$	145	$	410		$	509		$	3		$	4,180
Ending allowance attributable to loans:
Individually evaluated for impairment	$	2		$	—		$	—	$	1		$	—		$	—		$	3
Collectively evaluated for impairment		1,703			1,408			145		409			509			3			4,177
Total ending allowance	$	1,705		$	1,408		$	145	$	410		$	509		$	3		$	4,180
Loans:
Individually evaluated for impairment	$	1,899		$	—		$	—	$	2,840		$	1		$	—		$	4,740
Collectively evaluated for impairment		52,906			25,286			19,452		125,967			19,461			—			243,072
Total loans	$	54,805		$	25,286		$	19,452	$	128,807		$	19,462		$			$	247,812

Summary of Impaired Loans

Impaired loans at June 30, 2020 and December 31, 2019 were as follows: (in thousands)

June 30, 2020	Recorded Investment		Unpaid Principal Balance		Allocated Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial (secured by real estate)	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		395		527		—		466		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		2,503		2,505		—		2,583		11
Consumer installment		—		—		—		—		—
		2,898		3,032		—		3,049		11
With an allowance recorded:
Commercial (secured by real estate)		1,685		1,686		2		1,727		45
Commercial and industrial		584		584		1		292		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		1,718		1,719		6		1,810		50
Consumer installment		—		—		—		—		—
		3,987		3,989		9		3,829		95
Total impaired loans	$	6,885	$	7,021	$	9	$	6,878	$	106
December 31, 2019
With no related allowance recorded:
Commercial (secured by real estate)	$	26	$	26	$	—	$	40	$	9
Commercial and industrial		395		527		—		463		29
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		3,749		3,878		—		3,912		153
Consumer installment		—		—		—		—		—
		4,170		4,431		—		4,415		190
With an allowance recorded:
Commercial (secured by real estate)		1,513		1,513		1		1,539		94
Commercial and industrial		—		—		—		—		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		412		412		5		405		—
Consumer installment		—		—		—		—		24
		1,925		1,925		6		1,944		118
Total impaired loans	$	6,095	$	6,356	$	6	$	6,359	$	308

Summary of Recorded Investment in Past Due Loans, as Well as Nonaccrual Loans

The following table presents the aging of the recorded investment in past due loans, as well as the recorded investment in nonaccrual loans, as of June 30, 2020 and December 31, 2019 by class of loans: (in thousands)

June 30, 2020	30 -59 Days Past Due		60- 89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total		Nonaccrual
Commercial (secured by real estate)	$	—	$	—	$	—	$	—	$	171,793	$	171,793	$	225
Commercial and industrial		—		—		395		395		280,179		280,574		979
Construction, land and acquisition &    development		—		—		—		—		43,930		43,930		—
Residential mortgage		1,562		230		236		2,028		102,393		104,421		2,761
Consumer installment		14		31		—		45		39,825		39,870		—
Total	$	1,576	$	261	$	631	$	2,468	$	638,120	$	640,588	$	3,965
December 31, 2019
Commercial (secured by real estate)	$	114	$	24	$	10	$	148	$	54,340	$	54,488	$	246
Commercial and industrial		1,270		30		395		1,695		26,918		28,613		395
Construction, land and acquisition &    development		—		—		—		—		20,502		20,502		—
Residential mortgage		3,087		2,040		643		5,770		111,073		116,843		1,912
Consumer installment		58		34		—		92		31,552		31,644		14
Total	$	4,529	$	2,128	$	1,048	$	7,705	$	244,385	$	252,090	$	2,567

Summary of Risk Category of Loans by Class of Loans

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.  As of June 30, 2020 and December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: (in thousands)

June 30, 2020	Pass		Special Mention		Substandard		Doubtful/ Loss		Total
Commercial (secured by real estate)	$	170,986	$	785	$	22	$	—	$	171,793
Commercial and industrial		279,595		—		979		—		280,574
Construction, land and acquisition & development		43,930		—		—		—		43,930
Residential mortgage		100,894		224		3,303		—		104,421
Consumer installment		39,870		—		-		—		39,870
Total	$	635,275	$	1,009	$	4,304	$	—	$	640,588

December 31, 2019	Pass		Special Mention		Substandard		Doubtful/ Loss		Total
Commercial (secured by real estate)	$	54,454	$	—	$	34	$	—	$	54,488
Commercial and industrial		28,204		—		409		—		28,613
Construction, land and acquisition & development		20,502		—		—		—		20,502
Residential mortgage		110,034		229		6,580		—		116,843
Consumer installment		31,626		—		18		—		31,644
Total	$	244,820	$	229	$	7,041	$	—	$	252,090

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Borrowings (Tables)

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Schedule of Federal Home Loan Bank of Atlanta (FHLB) Advances

The following FHLB advances, which required monthly or quarterly interest payments, were outstanding at June 30, 2020:

Advance Date	Advance		Fair Value Adjustment		Interest Rate			Maturity	Rate	Call Feature
4/7/2020	$	10,000,000	$	—		0.31	%	8/7/2020	Fixed	None
4/7/2020		10,000,000		—		0.32	%	9/8/2020	Fixed	None
5/25/2018		10,000,000		100,595		2.91	%	5/25/2021	Fixed	None
5/23/2019		8,000,000		476,171		2.40	%	5/23/2029	Convertible	5/23/2022
12/16/2019		5,000,000		323,343		2.37	%	12/17/2029	Convertible	12/17/2021
11/29/2019		5,000,000		381,479		2.66	%	11/29/2029	Convertible	11/29/2022
7/10/2019		5,000,000		41,435		2.10	%	7/10/2024	Fixed	None
	$	53,000,000	$	1,323,023

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Fair Value Measurements and Disclosures (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Schedule of Assets Measured at Fair Value on Nonrecurring Basis

Assets measured at fair value on a nonrecurring basis are included in the table below as of June 30, 2020 and December 31, 2019 (in thousands).

June 30, 2020	Level 1		Level 2		Level 3		Total
Other real estate owned	$	—	$	—	$	1,232	$	1,232
Impaired loans		—		—		6,876		6,876
Total assets at fair value	$	—	$	—	$	8,108	$	8,108
December 31, 2019	Level 1		Level 2		Level 3		Total
Other real estate owned	$	—	$	—	$	140	$	140
Impaired loans		—		—		6,089		6,089
Total assets at fair value	$	—	$	—	$	6,229	$	6,229

Schedule of Carrying Amounts and Estimated Fair Values of Company's Financial Instruments

The carrying amounts and estimated fair values (in thousands) of the Company’s financial instruments at June 30, 2020 and December 31, 2019 are as follows:

	June 30, 2020				December 31, 2019
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	194,424	$	194,424	$	48,117	$	48,117
Investment securities
available-for-sale		19,387		19,387		3,818		3,818
FHLB stock		2,834		2,834		278		278
Loans, net		635,601		625,075		247,956		219,991
Cash surrender value of life insurance		15,112		15,112		7,462		7,462
Financial liabilities:
Deposits		625,750		628,414		238,181		239,340
FHLB advances		54,323		49,609		—		—
Repurchase agreements and other borrowings		14,491		14,491		—		—

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Basis of Presentation - Additional Information (Details) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2020 USD ($) shares	Mar. 31, 2020 USD ($)	Jun. 30, 2019 USD ($) shares	Mar. 31, 2019 USD ($)	Jun. 30, 2020 USD ($) loan shares	Jun. 30, 2019 USD ($) shares
Basis Of Presentation [Line Items]
Net income (loss)	$ 1,079	$ (1,298)	$ 118	$ 117	$ (219)	$ 235
Weighted average common shares outstanding | shares	7,536,056		7,525,700		7,537,319	7,489,020
Number of loans eligible for short term deferrals | loan					842
Short-term deferrals on loans granted	$ 200,600				$ 200,600
Number of loans returned to normal performing status | loan					43
Loans returned to normal performing status value	15,300				$ 15,300
Small Business Administration
Basis Of Presentation [Line Items]
Number of payroll protection program loans | loan					1,162
Payroll protection program loans	$ 130,200				$ 130,200

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Acquisition - Additional Information (Details) $ / shares in Units, $ in Millions	Jan. 10, 2020 USD ($) loan branch $ / shares shares
Affinity Bank | Cobb County, Georgia
Business Acquisition [Line Items]
Number of branch office | branch	1
Affinity Bank | Fulton County, Georgia
Business Acquisition [Line Items]
Number of loan production office | loan	1
ABB Financial Group, Inc.
Business Acquisition [Line Items]
Date of merger	Jan. 10, 2020
Common stock holder right to receive cash per share | $ / shares	$ 7.50
Cash paid	$ 40.3
Stock issued | shares	0
Payments for vested restricted stock, net	$ 2.7

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Acquisition - Schedule of Fair Value of Assets Acquired and Liabilities Assumed (Details) $ in Thousands	Jan. 10, 2020 USD ($)
Business Acquisition [Line Items]
Cash, cash equivalents and securities available-for-sale	$ 41,561
Loans	261,849
Other real estate owned	790
Core deposit intangible	1,913
Fixed assets and other assets	11,631
Total assets acquired	317,744
Deposits	249,314
Borrowings and other liabilities	39,418
Total liabilities acquired	288,732
Excess of assets acquired over liabilities acquired	29,012
Purchase price	40,338
Net assets acquired	29,012
Less preferred stock redeemed	(5,891)
Net assets acquired less preferred stock	23,121
Goodwill	17,217
Fair Value Adjustments
Business Acquisition [Line Items]
Loans	(2,327)
Core deposit intangible	1,913
Total assets acquired	(414)
Deposits	265
Borrowings and other liabilities	1,654
Total liabilities acquired	1,919
Excess of assets acquired over liabilities acquired	(2,333)
Net assets acquired	(2,333)
ABB Financial Group, Inc.
Business Acquisition [Line Items]
Cash, cash equivalents and securities available-for-sale	41,561
Loans	264,176
Other real estate owned	790
Fixed assets and other assets	11,631
Total assets acquired	318,158
Deposits	249,049
Borrowings and other liabilities	37,764
Total liabilities acquired	286,813
Excess of assets acquired over liabilities acquired	31,345
Net assets acquired	$ 31,345

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Acquisition - Schedule of Unaudited Proforma Information Results of Operations (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Business Combinations [Abstract]
Total revenues, net of interest expense	$ 12,286	$ 12,142
Net (loss) income	$ (1,279)	$ 1,617
Diluted (loss) earnings per share	$ (0.17)	$ 0.22

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Investment Securities - Schedule of Investment Securities Available-for-Sale (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Schedule Of Available For Sale Securities [Line Items]
Investment securities available-for-sale, Amortized Cost	$ 19,150	$ 3,806
Investment securities available-for-sale, Gross Unrealized Gains	396	13
Investment securities available-for-sale, Gross Unrealized Losses	(159)	(1)
Investment securities available-for-sale, Estimated Fair Value	19,387	3,818
Government Agency Securities
Schedule Of Available For Sale Securities [Line Items]
Investment securities available-for-sale, Amortized Cost	4,524	501
Investment securities available-for-sale, Gross Unrealized Gains	5
Investment securities available-for-sale, Gross Unrealized Losses		(1)
Investment securities available-for-sale, Estimated Fair Value	4,529	500
Trust Preferred Securities
Schedule Of Available For Sale Securities [Line Items]
Investment securities available-for-sale, Amortized Cost	2,719
Investment securities available-for-sale, Gross Unrealized Losses	(159)
Investment securities available-for-sale, Estimated Fair Value	2,560
Government Agency Mortgage-Backed Securities
Schedule Of Available For Sale Securities [Line Items]
Investment securities available-for-sale, Amortized Cost	11,907	3,305
Investment securities available-for-sale, Gross Unrealized Gains	391	13
Investment securities available-for-sale, Estimated Fair Value	$ 12,298	$ 3,318

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Investment Securities - Additional Information (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2020 USD ($) Security	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) Security	Jun. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Schedule Of Available For Sale And Held To Maturity Securities [Line Items]
Number of available-for-sale securities in unrealized loss position less than 12 months | Security	4		4
Number of available-for-sale securities in unrealized loss position 12 months or greater | Security	0		0
Gain on sale of available for sale securities	$ 20,000		$ 20,000	$ 0
Sales of available-for-sale securities	1,700,000	$ 0	1,677,000	$ 0
Carrying value of available-for-sale securities pledged to secure public deposits and repurchase agreements	19,387,000		19,387,000		$ 3,818,000
Collateral Pledged
Schedule Of Available For Sale And Held To Maturity Securities [Line Items]
Carrying value of available-for-sale securities pledged to secure public deposits and repurchase agreements	$ 13,200,000		$ 13,200,000		3,800,000
Government Agency Securities
Schedule Of Available For Sale And Held To Maturity Securities [Line Items]
Number of available-for-sale securities in unrealized loss position less than 12 months | Security	1		1
Carrying value of available-for-sale securities pledged to secure public deposits and repurchase agreements	$ 4,529,000		$ 4,529,000		$ 500,000
Trust Preferred Securities
Schedule Of Available For Sale And Held To Maturity Securities [Line Items]
Number of available-for-sale securities in unrealized loss position less than 12 months | Security	3		3
Carrying value of available-for-sale securities pledged to secure public deposits and repurchase agreements	$ 2,560,000		$ 2,560,000

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Investment Securities - Schedule of Amortized Cost and Estimated Fair Value of Investment Securities Available-for-Sale by Contractual Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Schedule Of Available For Sale Securities [Line Items]
Investment securities available-for-sale, Amortized Cost	$ 19,150	$ 3,806
Investment securities available-for-sale, Estimated Fair Value	19,387	3,818
Trust Preferred Securities
Schedule Of Available For Sale Securities [Line Items]
Investment securities available-for-sale, Greater than 5 to 10 years, Amortized Cost	2,219
Investment securities available-for-sale, Greater than 10 years, Amortized Cost	500
Investment securities available-for-sale, Amortized Cost	2,719
Investment securities available-for-sale, Greater than 5 to 10 years, Estimated Fair Value	2,135
Investment securities available-for-sale, Greater than10 years, Estimated Fair Value	425
Investment securities available-for-sale, Estimated Fair Value	2,560
Government Agency Securities
Schedule Of Available For Sale Securities [Line Items]
Investment securities available-for-sale, within 1 year, Amortized Cost	500
Investment securities available-for-sale, Greater than 1 to 5 years, Amortized Cost	2,000
Investment securities available-for-sale, Greater than 10 years, Amortized Cost	2,024
Investment securities available-for-sale, Amortized Cost	4,524	501
Investment securities available-for-sale, within 1 year, Estimated Fair Value	502
Investment securities available-for-sale, Greater than 1 to 5 years, Estimated Fair Value	2,003
Investment securities available-for-sale, Greater than10 years, Estimated Fair Value	2,024
Investment securities available-for-sale, Estimated Fair Value	4,529	500
Government Agency Securities and Trust Preferred Securities
Schedule Of Available For Sale Securities [Line Items]
Investment securities available-for-sale, Amortized Cost	7,243
Investment securities available-for-sale, Estimated Fair Value	7,089
Government Agency Mortgage-Backed Securities
Schedule Of Available For Sale Securities [Line Items]
Investment securities available-for-sale, Amortized Cost	11,907	3,305
Investment securities available-for-sale, Estimated Fair Value	$ 12,298	$ 3,318

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Loans and Allowance for Loan Losses - Summary of Major Classifications of Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
Loans And Leases Receivable Disclosure [Line Items]
Loans, gross	$ 640,588	$ 252,090	$ 247,812
Less allowance for loan losses	(4,987)	(4,134)	(4,180)	$ (4,022)
Total loans, net	635,601	247,956
Commercial (Secured by Real Estate)
Loans And Leases Receivable Disclosure [Line Items]
Loans, gross	171,793	54,488	54,805
Less allowance for loan losses	(2,692)	(1,661)	(1,705)	(1,619)
Commercial and Industrial
Loans And Leases Receivable Disclosure [Line Items]
Loans, gross	150,341	28,613
Payroll Protection Program Loans
Loans And Leases Receivable Disclosure [Line Items]
Loans, gross	130,233
Construction, Land and Acquisition & Development
Loans And Leases Receivable Disclosure [Line Items]
Loans, gross	43,930	20,502	19,452
Less allowance for loan losses	(302)	(153)	(145)	(108)
Residential Mortgage 1-4 Family
Loans And Leases Receivable Disclosure [Line Items]
Loans, gross	104,421	116,843
Consumer Installment
Loans And Leases Receivable Disclosure [Line Items]
Loans, gross	39,870	31,644	19,462
Less allowance for loan losses	$ (531)	$ (466)	$ (509)	$ (127)

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Loans and Allowance for Loan Losses - Additional Information (Details)	6 Months Ended
	Jun. 30, 2020 USD ($) Contract	Jun. 30, 2019 USD ($) Contract	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Financing Receivable Recorded Investment Past Due [Line Items]
Qualifying loans pledged to secure the line of credit from FHLB	$ 224,100,000		$ 115,400,000
Troubled debt restructurings that have subsequently defaulted, recorded investment	$ 1	$ 0
Troubled Debt Restructurings that have Subsequently Defaulted, Number of Contracts | Contract	0	0
Allowance for loan losses	$ 4,987,000	$ 4,180,000	4,134,000	$ 4,022,000
Modified Loan Terms
Financing Receivable Recorded Investment Past Due [Line Items]
Allowance for loan losses	6,000		6,000
90 Days or Greater Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	$ 0		$ 0

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Loans and Allowance for Loan Losses - Summary of Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment and Based on Impairment Method (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Allowance for loan losses:
Beginning balance	$ 4,134	$ 4,022
Provision	800	0
Charge-offs	(171)	(156)
Recoveries	224	314
Ending balance	4,987	4,180
Ending allowance attributable to loans:
Individually evaluated for impairment	9	3
Collectively evaluated for impairment	4,978	4,177
Ending balance	4,987	4,180
Loans:
Individually evaluated for impairment	6,885	4,740
Collectively evaluated for impairment	633,703	243,072
Total loans	640,588	247,812	$ 252,090
Commercial (Secured by Real Estate)
Allowance for loan losses:
Beginning balance	1,661	1,619
Provision	895	36
Charge-offs	(30)
Recoveries	166	50
Ending balance	2,692	1,705
Ending allowance attributable to loans:
Individually evaluated for impairment	2	2
Collectively evaluated for impairment	2,690	1,703
Ending balance	2,692	1,705
Loans:
Individually evaluated for impairment	1,685	1,899
Collectively evaluated for impairment	170,108	52,906
Total loans	171,793	54,805	54,488
Commercial and Industrial
Allowance for loan losses:
Beginning balance	1,478	1,520
Provision	(821)	(113)
Charge-offs		(26)
Recoveries	11	27
Ending balance	668	1,408
Ending allowance attributable to loans:
Individually evaluated for impairment	1
Collectively evaluated for impairment	667	1,408
Ending balance	668	1,408
Loans:
Individually evaluated for impairment	979
Collectively evaluated for impairment	279,595	25,286
Total loans	280,574	25,286	28,613
Construction, Land and Acquisition & Development
Allowance for loan losses:
Beginning balance	153	108
Provision	149	37
Ending balance	302	145
Ending allowance attributable to loans:
Collectively evaluated for impairment	302	145
Ending balance	302	145
Loans:
Collectively evaluated for impairment	43,930	19,452
Total loans	43,930	19,452	20,502
Residential Mortgage
Allowance for loan losses:
Beginning balance	369	641
Provision	520	(342)
Charge-offs	(126)	(125)
Recoveries	20	236
Ending balance	783	410
Ending allowance attributable to loans:
Individually evaluated for impairment	6	1
Collectively evaluated for impairment	777	409
Ending balance	783	410
Loans:
Individually evaluated for impairment	4,221	2,840
Collectively evaluated for impairment	100,200	125,967
Total loans	104,421	128,807	116,843
Consumer Installment
Allowance for loan losses:
Beginning balance	466	127
Provision	53	386
Charge-offs	(15)	(5)
Recoveries	27	1
Ending balance	531	509
Ending allowance attributable to loans:
Collectively evaluated for impairment	531	509
Ending balance	531	509
Loans:
Individually evaluated for impairment		1
Collectively evaluated for impairment	39,870	19,461
Total loans	39,870	19,462	$ 31,644
Unallocated
Allowance for loan losses:
Beginning balance	7	7
Provision	4	(4)
Ending balance	11	3
Ending allowance attributable to loans:
Collectively evaluated for impairment	11	3
Ending balance	$ 11	$ 3

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Loans and Allowance for Loan Losses - Summary of Impaired Loans (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Financing Receivable Impaired [Line Items]
Recorded Investment, With no related allowance recorded	$ 2,898	$ 4,170
Unpaid Principal Balance, With no related allowance recorded	3,032	4,431
Average Recorded Investment, With no related allowance recorded	3,049	4,415
Interest Income Recognized, With no related allowance recorded	11	190
Recorded Investment, With an allowance recorded	3,987	1,925
Unpaid Principal Balance, With an allowance recorded	3,989	1,925
Allocated Related Allowance, With an allowance recorded	9	6
Average Recorded Investment, With an allowance recorded	3,829	1,944
Interest Income Recognized, With an allowance recorded	95	118
Total impaired loans, Recorded Investment	6,885	6,095
Total impaired loans, Unpaid Principal Balance	7,021	6,356
Total impaired loans, Allocated Related Allowance	9	6
Total impaired loans, Average Recorded Investment	6,878	6,359
Total impaired loans, Interest Income Recognized	106	308
Commercial (Secured by Real Estate)
Financing Receivable Impaired [Line Items]
Recorded Investment, With no related allowance recorded		26
Unpaid Principal Balance, With no related allowance recorded		26
Average Recorded Investment, With no related allowance recorded		40
Interest Income Recognized, With no related allowance recorded		9
Recorded Investment, With an allowance recorded	1,685	1,513
Unpaid Principal Balance, With an allowance recorded	1,686	1,513
Allocated Related Allowance, With an allowance recorded	2	1
Average Recorded Investment, With an allowance recorded	1,727	1,539
Interest Income Recognized, With an allowance recorded	45	94
Commercial and Industrial
Financing Receivable Impaired [Line Items]
Recorded Investment, With no related allowance recorded	395	395
Unpaid Principal Balance, With no related allowance recorded	527	527
Average Recorded Investment, With no related allowance recorded	466	463
Interest Income Recognized, With no related allowance recorded		29
Recorded Investment, With an allowance recorded	584
Unpaid Principal Balance, With an allowance recorded	584
Allocated Related Allowance, With an allowance recorded	1
Average Recorded Investment, With an allowance recorded	292
Residential Mortgage
Financing Receivable Impaired [Line Items]
Recorded Investment, With no related allowance recorded	2,503	3,749
Unpaid Principal Balance, With no related allowance recorded	2,505	3,878
Average Recorded Investment, With no related allowance recorded	2,583	3,912
Interest Income Recognized, With no related allowance recorded	11	153
Recorded Investment, With an allowance recorded	1,718	412
Unpaid Principal Balance, With an allowance recorded	1,719	412
Allocated Related Allowance, With an allowance recorded	6	5
Average Recorded Investment, With an allowance recorded	1,810	405
Interest Income Recognized, With an allowance recorded	$ 50
Consumer Installment
Financing Receivable Impaired [Line Items]
Interest Income Recognized, With an allowance recorded		$ 24

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Loans and Allowance for Loan Losses - Summary of Recorded Investment in Past Due Loans, as Well as Nonaccrual Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	$ 2,468	$ 7,705
Current	638,120	244,385
Total loans	640,588	252,090	$ 247,812
Nonaccrual	3,965	2,567
30 -59 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	1,576	4,529
60- 89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	261	2,128
90 Days or Greater Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	631	1,048
Commercial (Secured by Real Estate)
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		148
Current	171,793	54,340
Total loans	171,793	54,488	54,805
Nonaccrual	225	246
Commercial (Secured by Real Estate) | 30 -59 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		114
Commercial (Secured by Real Estate) | 60- 89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		24
Commercial (Secured by Real Estate) | 90 Days or Greater Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		10
Commercial and Industrial
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	395	1,695
Current	280,179	26,918
Total loans	280,574	28,613	25,286
Nonaccrual	979	395
Commercial and Industrial | 30 -59 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		1,270
Commercial and Industrial | 60- 89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		30
Commercial and Industrial | 90 Days or Greater Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	395	395
Construction, Land and Acquisition & Development
Financing Receivable Recorded Investment Past Due [Line Items]
Current	43,930	20,502
Total loans	43,930	20,502	19,452
Residential Mortgage
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	2,028	5,770
Current	102,393	111,073
Total loans	104,421	116,843	128,807
Nonaccrual	2,761	1,912
Residential Mortgage | 30 -59 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	1,562	3,087
Residential Mortgage | 60- 89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	230	2,040
Residential Mortgage | 90 Days or Greater Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	236	643
Consumer Installment
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	45	92
Current	39,825	31,552
Total loans	39,870	31,644	$ 19,462
Nonaccrual		14
Consumer Installment | 30 -59 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	14	58
Consumer Installment | 60- 89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	$ 31	$ 34

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Loans and Allowance for Loan Losses - Summary of Risk Category of Loans by Class of Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019
Composition Of Loan Portfolio [Line Items]
Total	$ 640,588	$ 252,090	$ 247,812
Pass
Composition Of Loan Portfolio [Line Items]
Total	635,275	244,820
Special Mention
Composition Of Loan Portfolio [Line Items]
Total	1,009	229
Substandard
Composition Of Loan Portfolio [Line Items]
Total	4,304	7,041
Commercial (Secured by Real Estate)
Composition Of Loan Portfolio [Line Items]
Total	171,793	54,488	54,805
Commercial (Secured by Real Estate) | Pass
Composition Of Loan Portfolio [Line Items]
Total	170,986	54,454
Commercial (Secured by Real Estate) | Special Mention
Composition Of Loan Portfolio [Line Items]
Total	785
Commercial (Secured by Real Estate) | Substandard
Composition Of Loan Portfolio [Line Items]
Total	22	34
Commercial and Industrial
Composition Of Loan Portfolio [Line Items]
Total	280,574	28,613	25,286
Commercial and Industrial | Pass
Composition Of Loan Portfolio [Line Items]
Total	279,595	28,204
Commercial and Industrial | Substandard
Composition Of Loan Portfolio [Line Items]
Total	979	409
Construction, Land and Acquisition & Development
Composition Of Loan Portfolio [Line Items]
Total	43,930	20,502	19,452
Construction, Land and Acquisition & Development | Pass
Composition Of Loan Portfolio [Line Items]
Total	43,930	20,502
Residential Mortgage
Composition Of Loan Portfolio [Line Items]
Total	104,421	116,843	128,807
Residential Mortgage | Pass
Composition Of Loan Portfolio [Line Items]
Total	100,894	110,034
Residential Mortgage | Special Mention
Composition Of Loan Portfolio [Line Items]
Total	224	229
Residential Mortgage | Substandard
Composition Of Loan Portfolio [Line Items]
Total	3,303	6,580
Consumer Installment
Composition Of Loan Portfolio [Line Items]
Total	39,870	31,644	$ 19,462
Consumer Installment | Pass
Composition Of Loan Portfolio [Line Items]
Total	$ 39,870	31,626
Consumer Installment | Substandard
Composition Of Loan Portfolio [Line Items]
Total		$ 18

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Deposits - Additional Information (Details) - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019
Deposits [Abstract]
Time certificates of deposit in denomination of greater than $250,000	$ 45.0	$ 30.2

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Borrowings - Schedule of Federal Home Loan Bank of Atlanta (FHLB) Advances (Details) - Federal Home Loan Bank of Atlanta	6 Months Ended
	Jun. 30, 2020 USD ($)
Federal Home Loan Bank Advances [Line Items]
Advances from FHLB	$ 53,000,000
Advances from FHLB, Fair Value Adjustment	$ 1,323,023,000
August 7, 2020
Federal Home Loan Bank Advances [Line Items]
Advances from FHLB, Advance Date	Apr. 07, 2020
Advances from FHLB	$ 10,000,000
Advances from FHLB, Interest Rate	0.31%
Advances from FHLB, Maturity	Aug. 07, 2020
Advances from FHLB, Rate	Fixed
Advances from FHLB, Call Feature	None
September 8, 2020
Federal Home Loan Bank Advances [Line Items]
Advances from FHLB, Advance Date	Apr. 07, 2020
Advances from FHLB	$ 10,000,000
Advances from FHLB, Interest Rate	0.32%
Advances from FHLB, Maturity	Sep. 08, 2020
Advances from FHLB, Rate	Fixed
Advances from FHLB, Call Feature	None
May 25, 2021
Federal Home Loan Bank Advances [Line Items]
Advances from FHLB, Advance Date	May 25, 2018
Advances from FHLB	$ 10,000,000
Advances from FHLB, Fair Value Adjustment	$ 100,595,000
Advances from FHLB, Interest Rate	2.91%
Advances from FHLB, Maturity	May 25, 2021
Advances from FHLB, Rate	Fixed
Advances from FHLB, Call Feature	None
May 23, 2029
Federal Home Loan Bank Advances [Line Items]
Advances from FHLB, Advance Date	May 23, 2019
Advances from FHLB	$ 8,000,000
Advances from FHLB, Fair Value Adjustment	$ 476,171,000
Advances from FHLB, Interest Rate	2.40%
Advances from FHLB, Maturity	May 23, 2029
Advances from FHLB, Rate	Convertible
Advances from FHLB, Call Feature	5/23/2022
December 17, 2029
Federal Home Loan Bank Advances [Line Items]
Advances from FHLB, Advance Date	Dec. 16, 2019
Advances from FHLB	$ 5,000,000
Advances from FHLB, Fair Value Adjustment	$ 323,343,000
Advances from FHLB, Interest Rate	2.37%
Advances from FHLB, Maturity	Dec. 17, 2029
Advances from FHLB, Rate	Convertible
Advances from FHLB, Call Feature	12/17/2021
November 29, 2029
Federal Home Loan Bank Advances [Line Items]
Advances from FHLB, Advance Date	Nov. 29, 2019
Advances from FHLB	$ 5,000,000
Advances from FHLB, Fair Value Adjustment	$ 381,479,000
Advances from FHLB, Interest Rate	2.66%
Advances from FHLB, Maturity	Nov. 29, 2029
Advances from FHLB, Rate	Convertible
Advances from FHLB, Call Feature	11/29/2022
July 10, 2024
Federal Home Loan Bank Advances [Line Items]
Advances from FHLB, Advance Date	Jul. 10, 2019
Advances from FHLB	$ 5,000,000
Advances from FHLB, Fair Value Adjustment	$ 41,435,000
Advances from FHLB, Interest Rate	2.10%
Advances from FHLB, Maturity	Jul. 10, 2024
Advances from FHLB, Rate	Fixed
Advances from FHLB, Call Feature	None

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Borrowings - Additional Information (Details) - USD ($)	3 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Line Of Credit Facility [Line Items]
Federal Home Loan Bank advances	$ 54,323,000	$ 0
Advances from FHLB collateralized by certain loans	224,100,000
Investment in FHLB stock	2,834,000	278,000
Line of credit amount outstanding	8,000,000	$ 8,000,000
Payroll protection program loans	129,230,000
Small Business Administration
Line Of Credit Facility [Line Items]
Secured payroll protection program loans	130,200,000
Federal Reserve Bank of Atlanta | Small Business Administration
Line Of Credit Facility [Line Items]
Payroll protection program loans	$ 129,200,000
Payroll protection program loans, fixed interest rate	0.35%
Federal Reserve Bank of Atlanta | Small Business Administration | Minimum
Line Of Credit Facility [Line Items]
Payroll protection program loans, maturity period	2 years
Federal Reserve Bank of Atlanta | Small Business Administration | Maximum
Line Of Credit Facility [Line Items]
Payroll protection program loans, maturity period	5 years
Revolving Credit Facility | First National Bankers Bank
Line Of Credit Facility [Line Items]
Line of credit amount outstanding	$ 5,000,000
Line of credit, term	10 years
Line of credit, initial interest payment due date	Sep. 30, 2020
Line of credit, initial principal payment due date	Jun. 29, 2021
Line of credit, prepayment penalty	$ 0

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Employee Stock Ownership Plan - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019	Apr. 30, 2017
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Note payable balance of ESOP	$ 2,700,000		$ 2,700,000		$ 2,700,000	$ 3,000,000
Shares purchased by ESOP						295,499
ESOP expense	$ 21,000	$ 31,000	$ 51,000	$ 62,000
ESOP released shares	35,400		35,400		35,400

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Stock-Based Compensation - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2020	Aug. 31, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Dividend yield rate			0.00%
Expected volatility rate			25.40%
Risk-free interest rate			0.53%
Expected average life			7 years 6 months
Weighted average per share fair value of options	$ 2.02		$ 2.02
Number of stock options granted			144,000
Weighted average exercise price of stock options granted			$ 7.05
Number of stock options exercised			0
Number of stock options forfeited		147,749	147,749
Weighted average exercise price of exercise price			$ 8.86
Stock options outstanding	354,538		354,538
Weighted average remaining life of outstanding options			9 years 2 months 12 days
Aggregate intrinsic value of outstanding options	$ 63,000		$ 63,000
Number of options exercisable	42,108		42,108
Weighted average exercisable price of exercise price	$ 10.10		$ 10.10
Weighted average remaining exercisable options			8 years 9 months 18 days
Exercisable, aggregate intrinsic value	$ 0		$ 0
Stock-based compensation expense	158,000		78,000
Reversal of stock compensation expense		$ 152,000
Number of stock options restricted stock		56,533
Number of forfeited options vested		0
Unrecognized compensation cost related to equity award grants	$ 1,834,000		$ 1,834,000
Unrecognized compensation cost expected weighted average remaining vesting period			4 years 6 months
Restricted Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares granted			71,308
Weighted average grant date fair value			$ 7.05
Number of shares vested			15,289
Number of shares withheld for tax withholding purposes			1,826
Number of shares outstanding	145,923		145,923
Weighted average grant date fair value of shares outstanding	$ 8.63		$ 8.63
2018 Equity Incentive Plan | Restricted Stock | Common Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares approved under the plan				147,749
2018 Equity Incentive Plan | Stock Options | Common Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares approved under the plan				369,374

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Fair Value Measurements and Disclosures - Additional Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, Estimated Fair Value	$ 19,387	$ 3,818
Fair Value, Measurements, Recurring | Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, Estimated Fair Value	$ 19,400	$ 3,800
Payroll Protection Program Loans Federal Borrowings | Small Business Administration
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Payroll protection program loans, fixed interest rate	0.35%

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Fair Value Measurements and Disclosures - Schedule of Assets Measured at Fair Value on Nonrecurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loans	$ 6,885	$ 6,095
Fair Value, Measurements, Nonrecurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Other real estate owned	1,232	140
Impaired loans	6,876	6,089
Total assets at fair value	8,108	6,229
Level 3 | Fair Value, Measurements, Nonrecurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Other real estate owned	1,232	140
Impaired loans	6,876	6,089
Total assets at fair value	$ 8,108	$ 6,229

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Fair Value Measurements and Disclosures - Schedule of Carrying Amounts and Estimated Fair Values of Company's Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Financial assets:
Investment securities available-for-sale	$ 19,387	$ 3,818
Carrying Amount
Financial assets:
Cash and cash equivalents	194,424	48,117
Investment securities available-for-sale	19,387	3,818
FHLB stock	2,834	278
Loans, net	635,601	247,956
Cash surrender value of life insurance	15,112	7,462
Financial liabilities:
Deposits	625,750	238,181
FHLB advances	54,323
Repurchase agreements and other borrowings	14,491
Estimated Fair Value
Financial assets:
Cash and cash equivalents	194,424	48,117
Investment securities available-for-sale	19,387	3,818
FHLB stock	2,834	278
Loans, net	625,075	219,991
Cash surrender value of life insurance	15,112	7,462
Financial liabilities:
Deposits	628,414	$ 239,340
FHLB advances	49,609
Repurchase agreements and other borrowings	$ 14,491