10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM10-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 fromto

Commission File Number: 0-14549

First US Bancshares, Inc.

(Exact Name of Registrant as Specified in Its Charter)

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

3291 U.S. Highway 280 Birmingham, AL	35243
(Address of Principal Executive Offices)	(Zip Code)

(205) 582-1200

(Registrant’s Telephone Number, Including Area Code)

N/A

(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, $0.01 par value	FUSB	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 filing requirements for the past 90 days.

Yes    ☒  No    ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes    ☒  No    ☐

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes    ☐  No    ☒

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

Class	Outstanding at August 10, 2020
Common Stock, $0.01 par value	6,176,756 shares

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

	PAGE
PART I.  FINANCIAL INFORMATION	4
ITEM  1. FINANCIAL STATEMENTS	4
Interim Condensed Consolidated Balance Sheets at June 30, 2020 (Unaudited) and December 31, 2019	4
Interim Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)	5
Interim Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)	6
Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)	7
Interim Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (Unaudited)	9
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)	10
ITEM  2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	42
ITEM  3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	55
ITEM  4. CONTROLS AND PROCEDURES	56
PART II. OTHER INFORMATION	57
ITEM  1. LEGAL PROCEEDINGS	57
ITEM  1A. RISK FACTORS	57
ITEM  2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	59
ITEM  6. EXHIBITS	60
Signature Page	61

2

FORWARD-LOOKING STATEMENTS

Statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). In addition, First US Bancshares, Inc. (“Bancshares” and, together with its subsidiaries, the “Company”), through its senior management, from time to time makes forward-looking statements concerning its expected future operations, performance and other developments. The words “estimate,” “project,” “intend,” “anticipate,” “expect,” “believe,” “continues” and similar expressions are indicative of forward-looking statements. Such forward-looking statements are necessarily estimates reflecting the Company’s best judgment based on current information and involve a number of risks and uncertainties, and various factors could cause results to differ materially from those contemplated by such forward-looking statements. Such factors could include those identified from time to time in the Company’s Securities and Exchange Commission (“SEC”) filings and other public announcements, including the risk factors described in Part I, Item 1A of the Company's Annual Report on Form 10-K as of and for the year ended December 31, 2019 and in Part II, Item 1A of this Quarterly Report on Form 10-Q. Specifically, with respect to statements relating to the sufficiency of the allowance for loan and lease losses, loan demand, cash flows, interest costs, growth and earnings potential, expansion and the Company’s positioning to handle the challenges presented by COVID-19, these factors include, but are not limited to, the rate of growth (or lack thereof) in the economy generally and in the Bank’s and ALC’s service areas; market conditions and investment returns; changes in interest rates; the impact of the current COVID-19 pandemic on the Company’s business, the Company’s customers, the communities that the Company serves and the United States economy, including the impact of actions taken by governmental authorities to try to contain the virus or address the impact of the virus on the United States economy (including, without limitation, the Coronavirus Aid, Relief and Economic Security Act and subsequent federal legislation) and the resulting effect on the Company’s operations, liquidity and capital position and on the financial condition of the Company’s borrowers and other customers; the pending discontinuation of LIBOR as an interest rate benchmark; the availability of quality loans in the Company’s service areas; the relative strength and weakness in the consumer and commercial credit sectors and in the real estate markets; collateral values; and cybersecurity threats. There can be no assurance that such factors or other factors will not affect the accuracy of such forward-looking statements.

3

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

	June 30,			December 31,
	2020			2019
	(Unaudited)
ASSETS
Cash and due from banks	$	12,751		$	11,939
Interest-bearing deposits in banks		95,517			45,091
Total cash and cash equivalents		108,268			57,030
Federal funds sold		80			10,080
Investment securities available-for-sale, at fair value		94,658			94,016
Investment securities held-to-maturity, at amortized cost		9,306			14,340
Federal Home Loan Bank stock, at cost		1,135			1,137
Loans, net of allowance for loan and lease losses of $6,423 and $5,762, respectively		566,062			545,243
Premises and equipment, net of accumulated depreciation of $23,195 and $22,570,    respectively		28,724			29,216
Cash surrender value of bank-owned life insurance		15,696			15,546
Accrued interest receivable		3,140			2,488
Goodwill and core deposit intangible, net		8,605			8,825
Other real estate owned		1,003			1,078
Other assets		9,070			9,739
Total assets	$	845,747		$	788,738
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest-bearing	$	153,664		$	112,729
Interest-bearing		584,626			570,933
Total deposits		738,290			683,662
Accrued interest expense		438			537
Other liabilities		11,404			9,766
Short-term borrowings		10,334			10,025
Total liabilities		760,466			703,990
Shareholders’ equity:
Common stock, par value $0.01 per share, 10,000,000 shares authorized; 7,596,551 and    7,568,053 shares issued, respectively; 6,176,433 and 6,157,692 shares outstanding,    respectively		75			75
Additional paid-in capital		13,573			13,814
Accumulated other comprehensive loss, net of tax		(145	)		(46	)
Retained earnings		93,636			92,755
Less treasury stock: 1,420,118 and 1,410,361 shares at cost, respectively		(21,858	)		(21,850	)
Total shareholders’ equity		85,281			84,748
Total liabilities and shareholders’ equity	$	845,747		$	788,738

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

4

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(Unaudited)				(Unaudited)
Interest income:
Interest and fees on loans	$	9,237	$	9,833	$	18,876	$	19,506
Interest on investment securities		543		1,090		1,301		2,230
Total interest income		9,780		10,923		20,177		21,736
Interest expense:
Interest on deposits		1,131		1,690		2,606		3,330
Interest on borrowings		26		—		62		—
Total interest expense		1,157		1,690		2,668		3,330
Net interest income		8,623		9,233		17,509		18,406
Provision for loan and lease losses		850		715		1,430		1,115
Net interest income after provision for loan and lease losses		7,773		8,518		16,079		17,291
Non-interest income:
Service and other charges on deposit accounts		263		443		697		903
Credit insurance income		45		108		198		251
Net gain on sales and prepayments of investment securities		326		9		326		22
Mortgage fees from secondary market		176		186		303		289
Lease income		212		212		424		421
Other income, net		308		333		679		670
Total non-interest income		1,330		1,291		2,627		2,556
Non-interest expense:
Salaries and employee benefits		5,193		5,195		10,329		10,183
Net occupancy and equipment		995		1,046		1,996		2,135
Computer services		424		333		841		684
Fees for professional services		401		321		679		563
Other expense		1,568		1,609		3,230		3,392
Total non-interest expense		8,581		8,504		17,075		16,957
Income before income taxes		522		1,305		1,631		2,890
Provision for income taxes		118		300		380		651
Net income	$	404	$	1,005	$	1,251	$	2,239
Basic net income per share	$	0.07	$	0.16	$	0.20	$	0.35
Diluted net income per share	$	0.06	$	0.15	$	0.19	$	0.33
Dividends per share	$	0.03	$	0.02	$	0.06	$	0.04

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

5

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
	(Unaudited)						(Unaudited)
Net income	$	404		$	1,005		$	1,251		$	2,239
Other comprehensive income (loss):
Unrealized holding gains on securities available-for-sale arising    during period, net of tax expense of $343, $402, $550 and $686, respectively		1,031			1,205			1,653			2,056
Reclassification adjustment for net gains on securities available-for    -sale realized in net income, net of tax of $81, $2, $81 and $5,    respectively		(245	)		(7	)		(245	)		(17	)
Unrealized holding losses arising during the period on    effective cash flow hedge derivatives, net of tax benefit    of $56, $0, $503 and $0, respectively		(168	)		—			(1,507	)		—
Other comprehensive income (loss)		618			1,198			(99	)		2,039
Total comprehensive income	$	1,022		$	2,203		$	1,152		$	4,278

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

6

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

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

For the three months ended June 30, 2020 and 2019 (Unaudited)

	Common Stock Shares Outstanding		Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock, at Cost			Total Shareholders’ Equity
Balance, March 31, 2019		6,303,582	$	75	$	13,589		$	(1,536	)	$	89,859		$	(20,414	)	$	81,573
Net income		—		—		—			—			1,005			—			1,005
Net change in fair value of    securities available-for-sale,    net of tax		—		—		—			1,198			—			—			1,198
Dividends declared: $.02 per    share		—		—		—			—			(127	)		—			(127	)
Impact of stock-based    compensation plans, net		—		—		99			—			—			—			99
Reissuance of treasury stock as    compensation		2,579		—		(42	)		—			—			42			—
Balance, June 30, 2019		6,306,161	$	75	$	13,646		$	(338	)	$	90,737		$	(20,372	)	$	83,748
Balance, March 31, 2020		6,143,286	$	75	$	13,904		$	(763	)	$	93,418		$	(22,302	)	$	84,332
Net income		—		—		—			—			404			—			404
Net change in fair value of    securities available-for-sale,    net of tax		—		—		—			786			—			—			786
Net change in fair value of    derivative instruments, net    of tax		—		—		—			(168	)		—			—			(168	)
Dividends declared: $.03 per    share		—		—		—			—			(186	)		—			(186	)
Impact of stock-based    compensation plans, net		4,300		—		113			—			—			—			113
Reissuance of treasury stock as    compensation		28,847		—		(444	)		—			—			444			—
Balance, June 30, 2020		6,176,433	$	75	$	13,573		$	(145	)	$	93,636		$	(21,858	)	$	85,281

7

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

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

For the six months ended June 30, 2020 and 2019 (Unaudited)

	Common Stock Shares Outstanding			Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock, at Cost			Non- controlling Interest			Total Shareholders’ Equity
Balance, January 1, 2019		6,298,062		$	75	$	13,496		$	(2,377	)	$	88,668		$	(20,414	)	$	(11	)	$	79,437
Net income		—			—		—			—			2,239			—			—			2,239
Net change in fair value of    securities available-for-sale,    net of tax		—			—		—			2,039			—			—			—			2,039
Dividends declared: $.04 per    share		—			—		—			—			(253	)		—			—			(253	)
Impact of stock-based    compensation plans, net		5,520			—		192			—			—			—			—			192
Reissuance of treasury stock as    compensation		2,579			—		(42	)		—			—			42			—			—
Discontinuation of partnership    consolidation		—			—		—			—			83			—			11			94
Balance, June 30, 2019		6,306,161		$	75	$	13,646		$	(338	)	$	90,737		$	(20,372	)	$	—		$	83,748
Balance, January 1, 2020		6,157,692		$	75	$	13,814		$	(46	)	$	92,755		$	(21,850	)	$	—		$	84,748
Net income		—			—		—			—			1,251			—			—			1,251
Net change in fair value of    securities available-for-sale,    net of tax		—			—		—			1,408			—			—			—			1,408
Net change in fair value of    derivative instruments,    net of tax		—			—		—			(1,507	)		—			—			—			(1,507	)
Dividends declared: $.06 per    share		—			—		—			—			(370	)		—			—			(370	)
Impact of stock-based    compensation plans, net		28,498			—		203			—			—			—			—			203
Reissuance of treasury stock as    compensation		28,847			—		(444	)		—			—			444			—			—
Treasury stock repurchases		(38,604	)		—		—			—			—			(452	)		—			(452	)
Balance, June 30, 2020		6,176,433		$	75	$	13,573		$	(145	)	$	93,636		$	(21,858	)	$	—		$	85,281

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

8

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	Six Months Ended
	June 30,
	2020			2019
	(Unaudited)
Cash flows from operating activities:
Net income	$	1,251		$	2,239
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		806			796
Provision for loan and lease losses		1,430			1,115
Deferred income tax provision		366			624
Net gain on sale and prepayment of investment securities		(326	)		(22	)
Stock-based compensation expense		203			192
Net amortization of securities		170			306
Amortization of intangible assets		220			256
Net loss on premises and equipment and other real estate		288			245
Changes in assets and liabilities:
(Increase) decrease in accrued interest receivable		(652	)		340
Decrease (increase) in other assets		28			(4,079	)
(Decrease) increase in accrued interest expense		(99	)		102
(Decrease) increase in other liabilities		(1,278	)		3,192
Net cash provided by operating activities		2,407			5,306
Cash flows from investing activities:
Net decrease (increase) in federal funds sold		10,000			(6,727	)
Purchases of investment securities, available-for-sale		(26,296	)		(2,784	)
Proceeds from sale of investment securities, available-for-sale		12,203			—
Proceeds from maturities and prepayments of investment securities, available-for-sale		15,513			19,787
Proceeds from maturities and prepayments of investment securities, held-to-maturity		5,005			2,733
Net decrease (increase) in Federal Home Loan Bank stock		2			(10	)
Proceeds from the sale of premises and equipment and other real estate		646			768
Net (increase) decrease in loans		(21,896	)		1,455
Purchases of premises and equipment		(461	)		(2,642	)
Net cash (used in) provided by investing activities		(5,284	)		12,580
Cash flows from financing activities:
Net increase (decrease) in deposits		54,628			(21,919	)
Net increase (decrease) in short-term borrowings		309			(454	)
Treasury stock repurchases		(452	)		—
Dividends paid		(370	)		(253	)
Net cash provided by (used in) financing activities		54,115			(22,626	)
Net increase (decrease) in cash and cash equivalents		51,238			(4,740	)
Cash and cash equivalents, beginning of period		57,030			49,599
Cash and cash equivalents, end of period	$	108,268		$	44,859
Supplemental disclosures:
Cash paid for:
Interest	$	2,767		$	3,228
Income taxes		185			151
Non-cash transactions:
Assets acquired in settlement of loans		854			782
Reissuance of treasury stock as compensation		444			42

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

9

FIRST US BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. GENERAL

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

The unaudited interim condensed consolidated financial statements, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. The results of operations for any interim period are not necessarily indicative of results expected for the fiscal year ending December 31, 2020. While certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), management believes that the disclosures herein are adequate to make the information presented not misleading. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2019.

Risks and Uncertainties

The COVID-19 pandemic and its associated impacts on trade (including supply chains and export levels), travel, employee productivity and other economic activities have had, are currently having, and may for some time continue to have a destabilizing effect on financial markets and economic activity. The extent of the impact of COVID-19 on the Company’s operational and financial performance is currently uncertain, cannot be predicted and will depend on certain developments, including, among others, the duration and spread of COVID-19, its impact on our customers, employees and vendors, and the continued governmental, regulatory and private sector responses, which may be precautionary, to the coronavirus.  

The Company’s business, financial condition and results of operations generally rely upon the ability of the Company’s borrowers to repay their loans, the value of collateral underlying those loans, and demand for loans and other products and services that the Company offers, which are highly dependent on the business environment in the Company’s primary markets and the United States economy as a whole.

In light of the changing economic outlook as a result of COVID-19, as well as other factors, in March 2020, the 10-year Treasury yield was reduced to historic lows, and the equity markets were significantly impacted. In response, the Federal Reserve reduced the target federal funds rate by 50 basis points on March 3, 2020, and then by an additional 100 basis points on March 15, 2020. These reductions in interest rates and other economic uncertainties that have arisen as a result primarily of the COVID-19 pandemic have negatively impacted net interest income, provisions for loan losses and noninterest income. Additional negative financial impacts could occur; however, the ultimate potential impact is not known at this time.

2. BASIS OF PRESENTATION

Summary of Significant Accounting Policies

Certain significant accounting policies followed by the Company are set forth in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2019.

Reclassification

Certain disclosures in the notes to the prior period consolidated financial statements have been reclassified to conform to the 2020 presentation. These reclassifications had no effect on the Company’s results of operations, financial position or net cash flow.

10

Net Income Per Share

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Basic shares		6,276,001		6,423,642		6,279,079		6,420,653
Dilutive shares		422,000		427,282		422,000		427,282
Diluted shares		6,698,001		6,850,924		6,701,079		6,847,935

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(Dollars in Thousands, Except Per Share Data)
Net income	$	404	$	1,005	$	1,251	$	2,239
Basic net income per share	$	0.07	$	0.16	$	0.20	$	0.35
Diluted net income per share	$	0.06	$	0.15	$	0.19	$	0.33

Comprehensive Income

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

Accounting Policies Recently Adopted

Accounting Standards Update (“ASU”) 2018-15, “Intangibles-Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force).” Issued in August 2018, ASU 2018-15 aims to reduce complexity in the accounting for costs of implementing a cloud computing service arrangement. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments of ASU 2018-15 require an entity to follow the guidance in FASB Accounting Standards Codification (“ASC”) Subtopic 350-40, “Intangibles-Goodwill and Other – Internal-Use Software,” in order to determine which implementation costs to capitalize as assets related to the service contract and which costs to expense. The amendments of ASU 2018-15 also require an entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement (i.e., the noncancelable period of the arrangement plus periods covered by (1) an option to extend the arrangement if the entity is reasonably certain to exercise that option, (2) an option to terminate the arrangement if the entity is reasonably certain not to exercise the option and (3) an option to extend (or not to terminate) the arrangement in which exercise of the option is in the control of the vendor). ASU 2018-15 also requires an entity to present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement, and to classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. ASU 2018-15 became effective for the Company on January 1, 2020. The adoption of ASU 2018-15 did not have a material impact on the Company’s consolidated financial statements.

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ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” Issued in August 2018, the amendments in this ASU remove disclosure requirements in ASC Topic 820 related to (1) the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels and (3) the valuation processes for Level 3 fair value measurements. The ASU also modifies disclosure requirements such that (1) for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date that restrictions from redemption might lapse, only if the investee has communicated the timing to the entity or announced the timing publicly, and (2) it is clear that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. Additionally, this ASU adds disclosure requirements for public entities about (1) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 became effective for the Company on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements.

Pending Accounting Pronouncements

ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.”  Issued in March 2020, ASU 2020-04 seeks to provide guidance, for a limited time, to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. ASU 2020-04 was issued in response to concerns about the structural risks of interbank offered rates, and, specifically, the risk that the London Interbank Offer Rate (LIBOR) will no longer be used. Regulators have begun reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. ASU 2020-04 provides temporary optional expedients to U.S. GAAP guidance on contract modifications, hedge accounting and other transactions that reference LIBOR or another reference rate expected to be discontinued. As the guidance in ASU 2020-04 is intended to assist entities during the global market-wide reference rate transition period, it is in effect for a limited time, from March 12, 2020 through December 31, 2022. Management is currently evaluating the impact of the potential discontinuance of LIBOR, and a determination cannot be made at this time as to the impact that the amendments of ASU 2020-04 or the reference rate reform will have on the Company’s consolidated financial statements.

ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” Issued in December 2019, ASU 2019-12 seeks to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company intends to adopt the amendments in ASU 2019-12 on January 1, 2021. Adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated financial statements.

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

ASU 2016-13, "Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” Issued in June 2016, ASU 2016-13 removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables and held-to-maturity debt securities. Under current U.S. GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance removes all current recognition thresholds and requires companies to recognize an allowance for lifetime expected credit losses. Credit losses will be immediately recognized through net income; the amount recognized will be based on the current estimate of contractual cash flows not expected to be collected over the financial asset’s contractual term. ASU 2016-13 also amends the credit loss measurement guidance for available-for-sale debt securities. The standard will add new disclosures related to factors that influenced management’s estimate, including current expected credit losses, the changes in those factors and reasons for the changes, as well as the method applied to revert to historical credit loss experience. As originally issued, ASU 2016-13 was effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after December 15, 2019, with institutions required to apply the changes through a cumulative-effect adjustment to their retained earnings balance as of the beginning of the first reporting period in which the guidance is effective. On October 16, 2019, the FASB approved a delay in the implementation of ASU 2016-13 by three years for smaller reporting companies, including the Company. Management has been in the process of developing a revised model to calculate the allowance for loan and lease losses upon implementation of ASU 2016-13 in order to determine the impact on the Company’s consolidated financial statements and, at this time, expects to recognize a one-time cumulative effect adjustment to the allowance for loan and lease losses as of the beginning of the first reporting period in which the new standard is effective. The magnitude of any such one-time adjustment is not yet known.

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3. INVESTMENT SECURITIES

Details of investment securities available-for-sale and held-to-maturity as of June 30, 2020 and December 31, 2019 were as follows:

	Available-for-Sale
	June 30, 2020
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	31,638	$	1,009	$	(13	)	$	32,634
Commercial		52,201		858		(212	)		52,847
Obligations of states and political subdivisions		6,211		113		(1	)		6,323
Corporate notes		2,706		67		—			2,773
U.S. Treasury securities		81		—		—			81
Total	$	92,837	$	2,047	$	(226	)	$	94,658

	Held-to-Maturity
	June 30, 2020
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	7,052	$	105	$	(4	)	$	7,153
Obligations of U.S. government-sponsored agencies		1,205		38		—			1,243
Obligations of states and political subdivisions		1,049		24		—			1,073
Total	$	9,306	$	167	$	(4	)	$	9,469

	Available-for-Sale
	December 31, 2019
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	46,182	$	372	$	(209	)	$	46,345
Commercial		43,686		73		(386	)		43,373
Obligations of states and political subdivisions		4,123		95		—			4,218
U.S. Treasury securities		80		—		—			80
Total	$	94,071	$	540	$	(595	)	$	94,016

	Held-to-Maturity
	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	8,923	$	2	$	(46	)	$	8,879
Obligations of U.S. government-sponsored agencies		4,324		5		(10	)		4,319
Obligations of states and political subdivisions		1,093		15		—			1,108
Total	$	14,340	$	22	$	(56	)	$	14,306

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The scheduled maturities of investment securities available-for-sale and held-to-maturity as of June 30, 2020 are presented in the following table:

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Maturing within one year	$	3,493	$	3,523	$	22	$	22
Maturing after one to five years		4,655		4,802		765		783
Maturing after five to ten years		47,024		48,326		3,594		3,659
Maturing after ten years		37,665		38,007		4,925		5,005
Total	$	92,837	$	94,658	$	9,306	$	9,469

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

The following tables reflect gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of June 30, 2020 and December 31, 2019.

	Available-for-Sale
	June 30, 2020
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	1,414	$	(6	)	$	866	$	(7	)
Commercial		4,415		(6	)		3,469		(206	)
Obligations of states and political subdivisions		1,139		(1	)		146		—
U.S. Treasury securities		81		—			—		—
Total	$	7,049	$	(13	)	$	4,481	$	(213	)

	Held-to-Maturity
	June 30, 2020
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	771	$	(4	)	$	—	$	—
Total	$	771	$	(4	)	$	—	$	—

	Available-for-Sale
	December 31, 2019
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	17,340	$	(66	)	$	10,094	$	(143	)
Commercial		3,794		(25	)		29,754		(361	)
U.S. Treasury securities		80		—			—		—
Total	$	21,214	$	(91	)	$	39,848	$	(504	)

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	Held-to-Maturity
	December 31, 2019
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	685	$	—		$	6,405	$	(46	)
Obligations of U.S. government-sponsored agencies		846		(4	)		2,994		(6	)
Total	$	1,531	$	(4	)	$	9,399	$	(52	)

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

As of June 30, 2020, 8 debt securities had been in a loss position for more than 12 months, and 11 debt securities had been in a loss position for less than 12 months. As of December 31, 2019, 69 debt securities had been in a loss position for more than 12 months, and 35 debt securities had been in a loss position for less than 12 months. As of both June 30, 2020 and December 31, 2019, the losses for all securities were considered to be a direct result of the effect that the prevailing interest rate environment had on the value of debt securities and were not related to the creditworthiness of the issuers. There was a substantial decrease in interest rates during the first six months of 2020, including a 150-basis point reduction in the federal funds rate in March 2020. This resulted in significant increases in the fair value of debt securities and a corresponding decline in the number of securities in a loss position as of June 30, 2020 compared to December 31, 2019. Most of the securities in an unrealized loss position as of both June 30, 2020 and December 31, 2019 were residential or commercial mortgage-backed securities that are either direct obligations of the U.S. government or government-sponsored entities and, accordingly, have little associated credit risk. Further, the Company has the current intent and ability to retain its investments in the issuers for a period of time that management believes to be sufficient to allow for any anticipated recovery in fair value. Therefore, the Company did not recognize any other-than-temporary impairments as of June 30, 2020 or December 31, 2019.

Investment securities with a carrying value of $64.4 million and $51.7 million as of June 30, 2020 and December 31, 2019, respectively, were pledged to secure public deposits and for other purposes.

4. LOANS AND ALLOWANCE FOR LOAN LOSSES

Portfolio Segments

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

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

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

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

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

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

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

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Branch retail – This portfolio segment includes loans secured by collateral purchased by consumers at retail stores with whom ALC has an established relationship through its branch network to provide financing for the retail products sold if applicable underwriting standards are met. The collateral securing these loans generally includes personal property items such as furniture, ATVs and home appliances.

Indirect sales – This portfolio segment includes loans secured by collateral purchased by consumers at retail stores with whom the Company has an established relationship to provide financing for the retail products sold if applicable underwriting standards are met. The collateral securing these loans generally includes recreational vehicles, campers, boats and horse trailers.

As of June 30, 2020 and December 31, 2019, the composition of the loan portfolio by reporting segment and portfolio segment was as follows:

	June 30, 2020
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	31,384	$	—	$	31,384
Secured by 1-4 family residential properties		88,549		4,461		93,010
Secured by multi-family residential properties		48,807		—		48,807
Secured by non-farm, non-residential properties		160,683		—		160,683
Commercial and industrial loans (1)		87,771		—		87,771
Consumer loans:
Direct consumer		7,340		25,959		33,299
Branch retail		—		33,000		33,000
Indirect sales (2)		89,932		—		89,932
Total loans		514,466		63,420		577,886
Less: Unearned interest, fees and deferred cost		578		4,823		5,401
Allowance for loan losses		4,568		1,855		6,423
Net loans	$	509,320	$	56,742	$	566,062

	December 31, 2019
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	30,820	$	—	$	30,820
Secured by 1-4 family residential properties		98,971		5,566		104,537
Secured by multi-family residential properties		50,910		—		50,910
Secured by non-farm, non-residential properties		162,981		—		162,981
Commercial and industrial loans (1)		90,957		—		90,957
Consumer loans:
Direct consumer		7,816		30,224		38,040
Branch retail		—		32,305		32,305
Indirect sales (2)		—		45,503		45,503
Total loans		442,455		113,598		556,053
Less: Unearned interest, fees and deferred cost		262		4,786		5,048
Allowance for loan losses		3,483		2,279		5,762
Net loans	$	438,710	$	106,533	$	545,243

(1) Includes equipment financing leases.

(2) Effective January 1, 2020, the Company transferred a total of $45.5 million of its indirect sales portfolio from ALC to the Bank.

The Company makes commercial, real estate and installment loans to its customers. Although the Company has a diversified loan portfolio, 57.8% and 62.8% of the portfolio was concentrated in loans secured by real estate as of June 30, 2020 and December 31, 2019, respectively.

Loans with a carrying value of $32.6 million and $34.6 million were pledged as collateral to secure Federal Home Loan Bank (“FHLB”) borrowings as of June 30, 2020 and December 31, 2019, respectively.

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Related Party Loans

In the ordinary course of business, the Bank makes loans to certain officers and directors of the Company, including companies with which they are associated. These loans are made on the same terms as those prevailing for comparable transactions with unrelated parties. Management believes that such loans do not represent more than a normal risk of collectability, nor do they present other unfavorable features. The aggregate balances of such related party loans and commitments were $0.5 million and $0.9 million as of June 30, 2020 and December 31, 2019, respectively. During the six months ended June 30, 2020, there were no new loans to these parties, and repayments by active related parties were $0.4 million. During the year ended December 31, 2019, there were $0.1 million of new loans to these parties, and repayments by active related parties were $22 thousand.

Acquired Loans

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

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

The carrying amount of PCI loans, which is included within loans on the condensed consolidated balance sheet, is set forth in the table below as of June 30, 2020 and December 31, 2019:

	June 30, 2020			December 31, 2019
	(Dollars in Thousands)
Real estate loans:
Secured by 1-4 family residential properties	$	200		$	224
Outstanding balance		200			224
Fair value adjustment		(33	)		(49	)
Carrying amount, net of fair value adjustment	$	167		$	175

During both the six months ended June 30, 2020 and the year ended December 31, 2019, the Company did not recognize any accretable yield, or income expected to be collected, associated with these loans. Additionally, the Company did not increase or reverse the allowance for loan losses related to the remaining PCI loans.

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Allowance for Loan Losses

The following tables present changes in the allowance for loan losses during the six months ended June 30, 2020 and 2019 and the related loan balances by loan type as of June 30, 2020 and 2019:

	As of and for the Six Months Ended June 30, 2020
	Construction, Land Development, and Other		1-4 Family			Real Estate Multi- Family		Non- Farm Non- Residential		Commercial and Industrial			Direct Consumer			Branch Retail			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	197	$	466		$	422	$	964	$	1,377		$	1,625		$	395		$	316		$	5,762
Charge-offs		—		(42	)		—		—		—			(962	)		(221	)		(38	)		(1,263	)
Recoveries		—		14			—		8		—			381			90			1			494
Provision		72		84			70		272		(448	)		373			211			796			1,430
Ending balance	$	269	$	522		$	492	$	1,244	$	929		$	1,417		$	475		$	1,075		$	6,423
Ending balance of allowance attributable to    loans:
Individually evaluated for impairment	$	—	$	13		$	—	$	—	$	62		$	3		$	—		$	—		$	78
Collectively evaluated for impairment		269		509			492		1,244		867			1,414			475			1,075			6,345
Total allowance for loan losses	$	269	$	522		$	492	$	1,244	$	929		$	1,417		$	475		$	1,075		$	6,423
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	785		$	—	$	2,748	$	62		$	25		$	—		$	—		$	3,620
Collectively evaluated for impairment		31,384		92,058			48,807		157,935		87,709			33,274			33,000			89,932			574,099
Loans acquired with deteriorated credit quality		—		167			—		—		—			—			—			—			167
Total loans receivable	$	31,384	$	93,010		$	48,807	$	160,683	$	87,771		$	33,299		$	33,000		$	89,932		$	577,886

	As of and for the Six Months Ended June 30, 2019
	Construction, Land Development, and Other			1-4 Family			Real Estate Multi- Family		Non- Farm Non- Residential			Commercial and Industrial		Direct Consumer			Branch Retail			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	241		$	346		$	128	$	831		$	1,138	$	1,799		$	427		$	145		$	5,055
Charge-offs		—			(77	)		—		—			—		(1,090	)		(201	)		(128	)		(1,496	)
Recoveries		—			15			—		—			3		334			59			2			413
Provision		(50	)		105			38		(22	)		63		646			151			184			1,115
Ending balance	$	191		$	389		$	166	$	809		$	1,204	$	1,689		$	436		$	203		$	5,087
Ending balance of allowance attributable to    loans:
Individually evaluated for impairment	$	95		$	16		$	—	$	—		$	65	$	12		$	—		$	—		$	188
Collectively evaluated for impairment		96			373			166		809			1,139		1,677			436			203			4,899
Total allowance for loan losses	$	191		$	389		$	166	$	809		$	1,204	$	1,689		$	436		$	203		$	5,087
Ending balance of loans receivable:
Individually evaluated for impairment	$	421		$	1,141		$	—	$	504		$	65	$	35		$	—		$	—		$	2,166
Collectively evaluated for impairment		27,980			102,043			28,033		158,244			91,424		37,125			29,609			45,466			519,924
Loans acquired with deteriorated credit quality		—			170			—		—			—		—			—			—			170
Total loans receivable	$	28,401		$	103,354		$	28,033	$	158,748		$	91,489	$	37,160		$	29,609		$	45,466		$	522,260

Credit Quality Indicators

The Company utilizes a credit grading system that provides a uniform framework for establishing and monitoring credit risk in the loan portfolio. Under this system, construction, land, multi-family real estate, other commercial real estate, and commercial and industrial loans are graded based on pre-determined risk metrics and categorized into one of nine risk grades. These risk grades can be summarized into categories described as pass, special mention, substandard, doubtful and loss, as described in further detail below.

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

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

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

• Doubtful (Risk Grade 8): Loans classified as doubtful have all of the weaknesses found in substandard loans, with the added characteristic that the weaknesses make collection of debt in full, based on currently existing facts, conditions and values, highly questionable or improbable. Serious problems exist such that partial loss of principal is likely; however, because of certain important, reasonably specific pending factors that may work to strengthen the assets, the loans’ classification as estimated losses is deferred until a more exact status may be determined. Such pending factors may include proposed merger, acquisition or liquidation procedures, capital injection, perfection of liens on additional collateral and refinancing plans. Loans classified as doubtful may include loans to borrowers that have demonstrated a history of failing to live up to agreements. The Company did not have any loans classified as Doubtful (Risk Grade 8) as of June 30, 2020 or December 31, 2019.

• Loss (Risk Grade 9): Loans are classified in this category when borrowers are deemed incapable of repayment of unsecured debt. Loans to such borrowers are considered uncollectable and of such little value that continuance as active assets of the Company is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not prudent to defer writing off these assets, even though partial recovery may be realized in the future. The Company did not have any loans classified as Loss (Risk Grade 9) as of June 30, 2020 or December 31, 2019.

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

The tables below illustrate the carrying amount of loans by credit quality indicator as of June 30, 2020:

	June 30, 2020
	Pass 1-5			Special Mention 6			Substandard 7			Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	31,302		$	77		$	5		$	31,384
Secured by multi-family residential properties		48,807			—			—			48,807
Secured by non-farm, non-residential properties		156,033			2,783			1,867			160,683
Commercial and industrial loans		86,129			1,186			456			87,771
Total	$	322,271		$	4,046		$	2,328		$	328,645
As a percentage of total loans		98.06	%		1.23	%		0.71	%		100.00	%

	June 30, 2020
	Performing			Nonperforming			Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	91,012		$	1,998		$	93,010
Consumer loans:
Direct consumer		32,942			357			33,299
Branch retail		32,933			67			33,000
Indirect sales		89,873			59			89,932
Total	$	246,760		$	2,481		$	249,241
As a percentage of total loans		99.00	%		1.00	%		100.00	%

The above amounts include PCI loans. As of June 30, 2020, $0.2 million of PCI loans were classified as “Nonperforming.”

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The tables below illustrate the carrying amount of loans by credit quality indicator as of December 31, 2019:

	December 31, 2019
	Pass 1-5			Special Mention 6			Substandard 7			Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	30,466		$	354		$	—		$	30,820
Secured by multi-family residential properties		50,910			—			—			50,910
Secured by non-farm, non-residential properties		157,718			2,961			2,302			162,981
Commercial and industrial loans		88,463			714			1,780			90,957
Total	$	327,557		$	4,029		$	4,082		$	335,668
As a percentage of total loans		97.58	%		1.20	%		1.22	%		100.00	%

	December 31, 2019
	Performing			Nonperforming			Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	102,176		$	2,361		$	104,537
Consumer loans:
Direct consumer		37,474			566			38,040
Branch retail		32,024			281			32,305
Indirect sales		45,503			—			45,503
Total	$	217,177		$	3,208		$	220,385
As a percentage of total loans		98.54	%		1.46	%		100.00	%

The above amounts include PCI loans. As of December 31, 2019, $0.2 million of PCI loans were classified as “Nonperforming.”

The following table provides an aging analysis of past due loans by class as of June 30, 2020:

	As of June 30, 2020
	30-59 Days Past Due			60-89 Days Past Due			90 Days Or Greater			Total Past Due			Current			Total Loans			Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development    and other land loans	$	—		$	—		$	—		$	—		$	31,384		$	31,384		$	—
Secured by 1-4 family residential    properties		97			31			96			224			92,786			93,010			—
Secured by multi-family residential    properties		—			—			—			—			48,807			48,807			—
Secured by non-farm, non-residential    properties		22			—			1,417			1,439			159,244			160,683			—
Commercial and industrial loans		58			12			—			70			87,701			87,771			—
Consumer loans:
Direct consumer		253			113			326			692			32,607			33,299			—
Branch retail		132			30			67			229			32,771			33,000			—
Indirect sales		166			—			59			225			89,707			89,932			—
Total	$	728		$	186		$	1,965		$	2,879		$	575,007		$	577,886		$	—
As a percentage of total loans		0.13	%		0.03	%		0.34	%		0.50	%		99.50	%		100.00	%

The above amounts include PCI loans. As of June 30, 2020, $0.2 million of PCI loans were 60-89 days past due.

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The following table provides an aging analysis of past due loans by class as of December 31, 2019:

	As of December 31, 2019
	30-59 Days Past Due			60-89 Days Past Due			90 Days Or Greater			Total Past Due			Current			Total Loans			Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development    and other land loans	$	—		$	—		$	—		$	—		$	30,820		$	30,820		$	—
Secured by 1-4 family residential    properties		259			108			844			1,211			103,326			104,537			—
Secured by multi-family residential    properties		—			—			—			—			50,910			50,910			—
Secured by non-farm, non-residential    properties		30			—			1,419			1,449			161,532			162,981			—
Commercial and industrial loans		56			—			—			56			90,901			90,957			—
Consumer loans:
Direct consumer		387			287			531			1,205			36,835			38,040			—
Branch retail		444			189			281			914			31,391			32,305			—
Indirect sales		132			—			—			132			45,371			45,503			—
Total	$	1,308		$	584		$	3,075		$	4,967		$	551,086		$	556,053		$	—
As a percentage of total loans		0.24	%		0.11	%		0.55	%		0.89	%		99.11	%		100.00	%

The above amounts include PCI loans. As of December 31, 2019, $0.2 million of PCI loans were 60-89 days past due.

The following table provides an analysis of non-accruing loans by class as of June 30, 2020 and December 31, 2019:

	Loans on Non-Accrual Status
	June 30, 2020		December 31, 2019
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	5	$	8
Secured by 1-4 family residential properties		1,421		1,423
Secured by multi-family residential properties		—		—
Secured by non-farm, non-residential properties		1,421		1,426
Commercial and industrial loans		106		27
Consumer loans:
Direct consumer		336		558
Branch retail		67		281
Indirect sales		59		—
Total loans	$	3,415	$	3,723

As of both June 30, 2020 and December 31, 2019, PCI loans comprised $0.2 million of nonaccrual loans.

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COVID-19 Loan Deferments and Risk Identification

A significant amount of uncertainty continues to exist as to what the ultimate economic impact of the COVID-19 pandemic will be on the Company’s borrowers. In response to this uncertainty, during the first six months of 2020, the Company has increased qualitative factors in the calculation of the allowance for loan and lease losses. Although we believe that the allowance was sufficient to absorb losses in the portfolio based on circumstances existing as of June 30, 2020, management is continuing to closely monitor the Company’s loan portfolio for indications of credit deterioration, particularly with respect to those loans that have had payments deferred in connection with the pandemic, as well as those loans that management currently considers to potentially be more vulnerable (“at-risk”) as a result of the pandemic. The aggregate balances and categories of these loans are identified in the tables below. It should be noted that the tables below are not necessarily indicative of loans that have experienced credit deterioration; rather, they represent loans that are currently being given heightened attention by management as a result of the pandemic.

Loan Deferments

In accordance with section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the Company implemented initiatives to provide short-term payment relief to borrowers who have been negatively impacted by COVID-19. Over 1,700 of the Company’s borrowers requested and were granted COVID-19 pandemic-related deferments by the Company during the six months ended June 30, 2020. Although the interpretive guidance defines short-term as six months, the deferments granted by the Company were generally for terms of 90 days or less. The table below summarizes all remaining COVID-19 loan payment deferments made by the Company as of June 30, 2020.

	As of June 30, 2020
	Number of Loans Deferred		Principal Balance of Loans Deferred		% of Portfolio Balance			Principal and Interest Deferments		Principal Only Deferments
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans		7	$	4,544		14.5	%	$	4,544	$	—
Secured by 1-4 family residential properties		50		9,474		10.2	%		8,078		1,396
Secured by multi-family residential properties		12		29,726		60.9	%		15,523		14,203
Secured by non-farm, non-residential properties		49		42,797		26.6	%		37,073		5,724
Commercial and industrial loans		9		1,460		1.7	%		831		629
Consumer loans:
Direct consumer		442		2,188		6.6	%		2,188		—
Branch retail		172		1,856		5.6	%		1,856		—
Indirect sales		123		3,199		3.6	%		3,199		—
Total loans		864	$	95,244		16.5	%	$	73,292	$	21,952

The credit quality of COVID-19 deferred loans will be evaluated on an ongoing basis in accordance with the Company’s uniform framework for establishing and monitoring credit risk.  However, in accordance with regulatory guidance related to the CARES Act, loans for which payments were deferred related to COVID-19 will generally not be considered troubled debt restructurings or placed in past due or nonaccrual status during the COVID-19 deferment period.  

At-Risk Categories

While most industries have and will continue to experience adverse impacts as a result of the COVID-19 pandemic, the Company has identified certain loan categories considered to be “at-risk” of significant impact. The “at-risk” categories have been further subdivided into those deemed by management to be of “high-risk” and those deemed to be of “moderate-risk.” The categories were determined based on management’s current judgment as to the risk that the borrower and underlying collateral supporting the loans could ultimately be negatively impacted by the economic impact of the COVID-19 pandemic.  

Hotels/motels – These are loans that are secured by real estate and furniture, fixtures and equipment for hotel or motel facilities. This category may also include hotel or motel facilities that were under construction as of June 30, 2020 and for which the Company is financing the construction costs. While all loans in this category are to individual owner groups, 90% of the loan balance is to major franchises. The primary source of income for the borrowers comes from nightly occupancy of the facilities. Due to an overall decrease in travel during the COVID-19 pandemic, and due to restrictions on travel by many state and local governmental authorities, employers and other entities, the hotel industry has seen declines in occupancy rates, resulting in decreased revenue. Additionally, there is uncertainty as to when the public will have the confidence to utilize hotels and motels at the levels that the industry experienced prior to COVID-19. Therefore, these loans are currently considered by management to be of high-risk of potential loss.

Restaurants – These are loans that are secured by real estate, equipment and leasehold improvements for restaurant facilities. This category may also include restaurant facilities that were under construction as of June 30, 2020 and for which the Company is financing the construction

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costs. The restaurant category is comprised of franchised fast food restaurants, which account for 54% of the restaurants loan balance, and dine-in restaurants, which represent the remaining 46% of the loan balance. The primary source of income for the borrowers comes from the operation of the restaurant facilities. Fast food restaurants have shown the ability to adapt more quickly to governmental restrictions due to COVID-19 because of their established presence with drive-through business, and, therefore, are considered by management to be of moderate risk of potential loss. Dine-in restaurants, which rely more heavily on the presence of diners within the facilities, have had to adapt to decreased dining capacities, as well as offering a drive-up concept, in the current environment. Due to the greater impact that restrictions placed by governmental authorities have had on dine-in restaurants, these loans are currently considered by management to be of high-risk of potential loss.

Retail – These are loans that are generally secured by retail centers of various sizes. Typically, they have multiple retail-styled tenants. The tenants can range from national or regional retail outlets to small box retailers, restaurants, finance companies, hair and nail salons, and other similar retailers. The primary source of income for these borrowers is from the rental income of tenants that could be experiencing decreased business during the COVID-19 pandemic. These loans are currently considered by management to be of moderate-risk of potential loss.

1-4 family investment – These are loans that are generally secured by residential dwellings. The borrowers may be companies or individuals that have purchased 1-4 family property for the purpose of leasing the property to households as a residence. Lease terms are typically for 12 months. The primary source of income for the borrower is rental income from the tenant. The borrowers may hold the properties for an indefinite period of time or may sell the properties to similar investors of like properties. These loans are currently considered by management to be of moderate-risk of potential loss.

The table below summarizes the “at-risk” categories and the relative percentage of the Company’s loan portfolio for each as of June 30, 2020.

	June 30, 2020
	Balance of Risk Category		% of Total Loan Balance
	(Dollars in Thousands)
High-risk loan categories:
Hotels/motels	$	10,410		1.8	%
Dine-in restaurants		4,459		0.8	%
Total high-risk loans		14,869		2.6	%
Moderate-risk loan categories:
Fast food restaurants		5,326		0.9	%
Retail		34,587		6.0	%
1-4 family investment		21,874		3.8	%
Total moderate-risk loans		61,787		10.7	%
Total at-risk loans	$	76,656		13.3	%

Management will continue to evaluate credit exposures on these loans on an ongoing basis in accordance with the Company’s uniform framework for establishing and monitoring credit risk.

Paycheck Protection Program

Sections 1102 and 1106 of the CARES Act added a new loan program administered by the Small Business Administration (“SBA”) entitled the Paycheck Protection Program (“PPP”). The PPP is intended to provide economic relief to small businesses throughout the United States that have been adversely impacted by COVID-19. An Interim Final Rule related to the PPP was issued on April 2, 2020, and additional clarifications to the Interim Final Rule have been provided subsequently by the SBA. PPP loans are 100% guaranteed by the SBA and are forgivable in whole, or in part, if the proceeds are used by the borrower for payroll and other permitted purposes in accordance with the requirements of the PPP. If not forgiven in whole or in part, the loans carry a fixed interest rate of 1.00% per annum with payments deferred for the first six months of the loan. As compensation for originating a PPP loan, the Company receives lender processing fees from the SBA ranging from 1% to 5% of the original loan balance, depending on the size of the loan. Processing fees, net of origination costs, are deferred and amortized over the contractual life of the loan as interest income. Upon forgiveness of a loan by the SBA, any unrecognized net deferred fees will be recognized as interest income in that period.

PPP loans were initially originated for a term of two years; however, a June 5, 2020 amendment to the CARES Act (i) provided for a five-year minimum loan term for loans originated beginning on that date and (ii) permitted lenders and borrowers to amend loans previously issued under two-year terms to terms of five to ten years if mutually agreed upon by both the lender and the borrower. As of June 30, 2020, the Company had originated 158 PPP loans with an aggregate principal balance of $13.8 million. Of this amount, $13.7 million of the loans were originated under two-year terms, while $0.1 million of the loans were originated under five-year terms.

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Impaired Loans

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the related loan agreement. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the liquidation of the collateral. At the Bank, all loans of $0.5 million or more that have a credit quality risk grade of seven or above are identified for impairment analysis. Loans of less than $0.5 million may also be impaired if in management’s judgement circumstances warrant impairment. At ALC, all loans of $50 thousand or more that are 90 days or more past due are identified for impairment analysis. As of both June 30, 2020 and December 31, 2019, there were $0.1 million of impaired loans with no related allowance recorded at ALC. Impaired loans, or portions thereof, are charged off when deemed uncollectable.

As of June 30, 2020, the carrying amount of the Company’s impaired loans consisted of the following:

	June 30, 2020
	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Impaired loans with no related allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		932		932		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		2,748		2,748		—
Commercial and industrial		—		—		—
Direct consumer		—		—		—
Total loans with no related allowance recorded	$	3,680	$	3,680	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		20		20		13
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		62		62		62
Direct consumer		25		25		3
Total loans with an allowance recorded	$	107	$	107	$	78
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		952		952		13
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		2,748		2,748		—
Commercial and industrial		62		62		62
Direct consumer		25		25		3
Total impaired loans	$	3,787	$	3,787	$	78

The above amounts include PCI loans. As of June 30, 2020, PCI loans comprised $0.2 million of impaired loans without a related allowance recorded.

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As of December 31, 2019, the carrying amount of the Company’s impaired loans consisted of the following:  

	December 31, 2019
	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Impaired loans with no related allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		984		984		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		1,877		1,877		—
Commercial and industrial		—		—		—
Direct consumer		—		—		—
Total loans with no related allowance recorded	$	2,861	$	2,861	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		21		21		14
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		206		206		206
Direct consumer		29		29		7
Total loans with an allowance recorded	$	256	$	256	$	227
Total impaired loans
Loans secured by real estate	.
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		1,005		1,005		14
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		1,877		1,877		—
Commercial and industrial		206		206		206
Direct consumer		29		29		7
Total impaired loans	$	3,117	$	3,117	$	227

The above amounts include PCI loans. As of December 31, 2019, PCI loans comprised $0.2 million of impaired loans without a related allowance recorded.

The average net investment in impaired loans and interest income recognized and received on impaired loans during the six months ended June 30, 2020 and the year ended December 31, 2019 were as follows:

	Six Months Ended June 30, 2020
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		890		5		4
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		2,754		14		14
Commercial and industrial		86		3		3
Direct consumer		26		1		2
Total	$	3,756	$	23	$	23

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	Year Ended December 31, 2019
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	181	$	—	$	—
Secured by 1-4 family residential properties		1,021		48		48
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		645		29		29
Commercial and industrial		991		7		7
Direct consumer		38		2		2
Total	$	2,876	$	86	$	86

Loans on which the accrual of interest has been discontinued amounted to $3.4 million and $3.7 million as of June 30, 2020 and December 31, 2019, respectively. If interest on those loans had been accrued, there would have been $45 thousand and $41 thousand of interest accrued for the periods ended June 30, 2020 and December 31, 2019, respectively. Interest income related to these loans for the six months ended June 30, 2020 and the year ended December 31, 2019 was $27 thousand and $147 thousand, respectively.

Troubled Debt Restructurings

Troubled debt restructurings include loans with respect to which concessions have been granted to borrowers that generally would not have otherwise been considered had the borrowers not been experiencing financial difficulty. The concessions granted may include payment schedule modifications, interest rate reductions, maturity date extensions, modifications of note structure, principal balance reductions or some combination of these concessions. There were no loans modified with concessions granted during the six months ended June 30, 2020 or the year ended December 31, 2019. Restructured loans may involve loans remaining on non-accrual, moving to non-accrual or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Non-accrual restructured loans are included with all other non-accrual loans. In addition, all accruing restructured loans are reported as troubled debt restructurings. Generally, restructured loans remain on non-accrual until the customer has attained a sustained period of repayment performance under the modified loan terms (generally a minimum of six months). However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and whether the loan should be returned to or maintained on non-accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, then the loan remains on non-accrual. As of June 30, 2020 and December 31, 2019, the Company had $12 thousand and $16 thousand, respectively, of non-accruing loans that were previously restructured and that remained on non-accrual status. For both the six months ended June 30, 2020 and the year ended December 31, 2019, the Company had no loans that were restored to accrual status based on a sustained period of repayment performance.

The following table provides, as of June 30, 2020 and December 31, 2019, the number of loans remaining in each loan category that the Company had previously modified in a troubled debt restructuring, as well as the pre- and post-modification principal balance as of each date.

	June 30, 2020						December 31, 2019
	Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance		Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land    loans		1	$	107	$	—		1	$	107	$	62
Secured by 1-4 family residential properties		2		59		13		2		59		14
Commercial loans		2		116		55		2		116		60
Total		5	$	282	$	68		5	$	282	$	136

As of June 30, 2020 and December 31, 2019, no loans that previously had been modified in a troubled debt restructuring had defaulted subsequent to modification.

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

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All loans with a principal balance of $0.5 million or more that have been modified in a troubled debt restructuring are considered impaired and evaluated individually for impairment. The nature and extent of impairment of restructured loans, including those that have experienced a subsequent payment default, are considered in the determination of an appropriate level of allowance for loan losses. This evaluation resulted in an allowance for loan losses attributable to such restructured loans of $1 thousand as of both June 30, 2020 and December 31, 2019.

5. OTHER REAL ESTATE OWNED AND REPOSSESSED ASSETS

Other Real Estate Owned

Other real estate and certain other assets acquired in foreclosure are reported at the net realizable value of the property, less estimated costs to sell. The following table summarizes foreclosed property activity as of the six months ended June 30, 2020 and 2019:

	June 30, 2020			June 30, 2019
	(Dollars in Thousands)
Beginning balance	$	1,078		$	1,505
Additions (1)		293			262
Sales proceeds		(358	)		(483	)
Gross gains		38			39
Gross losses		(38	)		(27	)
Net gains		—			12
Impairment		(10	)		(38	)
Ending balance	$	1,003		$	1,258

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

Valuation adjustments are recorded in other non-interest expense and are primarily post-foreclosure write-downs that are a result of continued declining property values based on updated appraisals or other indications of value, such as offers to purchase. Net realizable value less estimated costs to sell of foreclosed residential real estate held by the Company was $0.1 million as of both June 30, 2020 and 2019. In addition, the Company did not hold any consumer mortgage loans collateralized by residential real estate that were in the process of foreclosure as of both June 30, 2020 and 2019.

Repossessed Assets

In addition to the other real estate and other assets acquired in foreclosure, the Company also acquires assets through the repossession of the underlying collateral of loans in default. The following table summarizes repossessed asset activity as of the six months ended June 30, 2020 and 2019:

	June 30, 2020			June 30, 2019
	(Dollars in Thousands)
Beginning balance	$	256		$	229
Transfers from loans		561			520
Sales proceeds		(270	)		(278	)
Gross gains		—			2
Gross losses		(286	)		(227	)
Net losses		(286	)		(225	)
Impairment		—			—
Ending balance	$	261		$	246

Repossessed assets are included in Other Assets in the Company’s condensed consolidated balance sheet.

27

6. GOODWILL AND OTHER INTANGIBLE ASSETS

The Company recorded goodwill associated with its acquisition of TPB in 2018. As of both June 30, 2020 and December 31, 2019, goodwill totaled $7.4 million. Goodwill must be tested for impairment annually, or more often if circumstances warrant. If, as a result of impairment testing, it is determined that the implied fair value of goodwill is lower than its carrying amount, impairment is indicated, and the goodwill must be written down to its implied fair value.

The Company’s annual test date for goodwill impairment is October 1; however, goodwill may be tested between annual test dates if events or changes in circumstances indicate that it is more likely than not that goodwill is impaired. Factors that are considered when evaluating whether it is more likely than not that goodwill is impaired may include (but are not limited to) significant and sustained reductions in stock price, significant earnings deterioration below forecasted levels, significant deterioration in the credit quality of borrowers, changes in the overall business outlook for an organization, losses in operating cash flows and significant impairment losses recognized by competitors.

Based on a number of considerations, as of June 30, 2020, the Company’s management concluded that circumstances did not indicate that it was more likely than not that goodwill was impaired. Accordingly, the Company’s goodwill was not tested for impairment as of June 30, 2020. However, the ultimate economic impact of the COVID-19 pandemic on the Company’s operations, as well as its stock price, is not yet known. The COVID-19 pandemic and resulting economic implications, including changes in the interest rate environment and potential implications on credit quality, have impacted the Company’s operations and earnings during the course of the first six months of 2020. In addition, the Company’s stock price has remained at discounted levels since the onset of the pandemic in March 2020. Should the Company’s future operations and/or stock price be negatively impacted for a sustained period of time, management may determine that goodwill testing at an interim period between annual testing dates is appropriate.

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

The Company’s goodwill and other intangibles (carrying basis and accumulated amortization) as of June 30, 2020 were as follows:

	June 30, 2020
	(Dollars in Thousands)
Goodwill	$	7,435
Core deposit intangible:
Gross carrying amount		2,048
Accumulated amortization		(878	)
Core deposit intangible, net		1,170
Total	$	8,605

The Company’s estimated remaining amortization expense on intangibles as of June 30, 2020 was as follows:

	Amortization Expense
	(Dollars in Thousands)
2020	$	195
2021		341
2022		268
2023		195
2024		122
2025		49
Total	$	1,170

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

7. BORROWINGS

Short-term borrowings consist of federal funds purchased, securities sold under repurchase agreements, and short-term FHLB advances with original maturities of one year or less. Short-term borrowings totaled $10.3 million and $10.0 million as of June 30, 2020 and December 31, 2019, respectively.

Federal funds purchased, which represent unsecured lines of credit that generally mature within one to four days, are available to the Bank through arrangements with correspondent banks and the Federal Reserve. As of both June 30, 2020 and December 31, 2019, there were no federal funds purchased outstanding. The Bank had $61.7 million in available unused lines of credit with correspondent banks and the Federal Reserve as of both June 30, 2020 and December 31, 2019.

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Securities sold under repurchase agreements, which are secured borrowings, generally are reflected at the amount of cash received in connection with the transaction. The Bank may be required to provide additional collateral based on the fair value of the underlying securities. The Bank monitors the fair value of the underlying securities on a daily basis. Securities sold under repurchase agreements as of June 30, 2020 and December 31, 2019 totaled $0.3 million and $25thousand, respectively.

Short-term FHLB advances are secured borrowings available to the Bank as an alternative funding source. As of both June 30, 2020 and December 31, 2019, the Bank had $10.0 million in outstanding FHLB advances with original maturities of less than one year.

The Company may use FHLB advances with original maturities of more than one year as an alternative to funding sources with similar maturities, such as certificates of deposit or other deposit programs. These advances generally offer more attractive rates than other mid-term financing options. They are also flexible, allowing the Company to quickly obtain the necessary maturities and rates that best suit its overall asset/liability strategy. FHLB advances with an original maturity of more than one year are classified as long-term. As of both June 30, 2020 and December 31, 2019, the Company did not have any long-term FHLB advances outstanding.

Assets pledged (including loans and investment securities) associated with FHLB advances totaled $32.6 million and $34.6 million as of June 30, 2020 and December 31, 2019, respectively. As of June 30, 2020 and December 31, 2019, the Bank had $216.5 million and $211.5 million, respectively, in remaining credit from the FHLB (subject to available collateral).

8. INCOME TAXES

The provision for income taxes was $0.4 million and $0.7 million for the six-month periods ended June 30, 2020 and 2019, respectively. The Company’s effective tax rate was 23.3% and 22.5%, respectively, for the same periods. The effective tax rate is impacted by recurring permanent differences, such as those associated with bank-owned life insurance and tax-exempt investment and loan income.

The Company had a net deferred tax asset of $2.4 million and $2.8 million as of June 30, 2020 and December 31, 2019, respectively. The decrease in the net deferred tax asset resulted primarily from the impact of changes in the fair value of securities available-for-sale, combined with reductions in net operating loss carryforwards and other book-to-tax temporary differences.

9. DEFERRED COMPENSATION PLANS

The Company has entered into supplemental retirement compensation benefits agreements with certain directors and former executive officers. The measurement of the liability under these agreements includes estimates involving life expectancy, length of time before retirement and the expected returns on the bank-owned life insurance policies used to fund those agreements. Should these estimates prove to be materially wrong, the cost of these agreements could change accordingly. The related deferred compensation obligation to these directors and executive officers included in other liabilities was $3.2 million as of both June 30, 2020 and December 31, 2019.

Non-employee directors may elect to defer payment of all or any portion of their Bancshares and Bank director fees under Bancshares’ Non-Employee Directors’ Deferred Compensation Plan (the “Deferral Plan”). The Deferral Plan permits non-employee directors to invest their directors’ fees and to receive the adjusted value of the deferred amounts in cash and/or shares of Bancshares’ common stock. Neither Bancshares nor the Bank makes any contribution to participants’ accounts under the Deferral Plan. As of June 30, 2020 and December 31, 2019, a total of 104,794 and 124,392 shares of Bancshares common stock, respectively, were deferred in connection with the Deferral Plan. All deferred fees, whether in the form of cash or shares of Bancshares common stock, are reflected as compensation expense in the period earned. The Company classifies all deferred directors’ fees allocated to be paid in shares as equity additional paid-in capital. The Company may use issued shares or shares of treasury stock to satisfy these obligations when due.

10. STOCK AWARDS

In accordance with the 2013 Incentive Plan, stock awards, including stock options and restricted stock, have been granted to certain employees and non-employee directors. Shares of common stock available for distribution to satisfy the grants may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. Stock-based compensation expense related to stock awards totaled $0.2 million and $0.1 million for the six-month periods ended June 30, 2020 and 2019, respectively.

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Stock Options

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

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

	2020			2019
Risk-free interest rate		1.24	%		2.59	%
Expected term (in years)		7.5			7.5
Expected stock price volatility		28.9	%		30.9	%
Dividend yield		1.25	%		1.25	%
Fair value of stock option		3.34			3.30

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

	Six Months Ended
	June 30, 2020				June 30, 2019
	Number of Shares		Average Exercise Price		Number of Shares		Average Exercise Price
Options:
Outstanding, beginning of period		412,800	$	9.72		377,950	$	9.80
Granted		10,200		11.95		66,150		10.01
Exercised		666		10.75		—		—
Expired		—		—		—		—
Forfeited		334		10.75		16,819		11.39
Options outstanding, end of period		422,000	$	9.77		427,281	$	9.77
Options exercisable, end of period		353,183	$	9.59		309,682	$	9.20

The aggregate intrinsic value of stock options outstanding (calculated as the amount by which the market value of underlying stock exceeds the exercise price of the option) was approximately zero and $0.3 million as of June 30, 2020 and 2019, respectively.

Restricted Stock

During the six months ended June 30, 2020 and 2019, respectively, 28,460 shares and 5,520 shares of restricted stock were granted. The Company recognizes the cost of services received in exchange for restricted stock awards based on the grant date closing price of the stock, with compensation expense recognized on a straight-line basis over the award’s vesting period.

11. LEASES

The Bank and ALC are involved in a number of operating leases, primarily for branch locations. Branch leases have remaining lease terms ranging from less than one year to 14 years, some of which include options to extend the leases for up to five years, and some of which include an option to terminate the lease within one year. The Bank leases certain office facilities to third parties and classifies these leases as operating leases.

The following table provides a summary of the components of lease expense, as well as the reporting location in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019:

	Location in the Condensed	Three Months Ended				Six Months Ended
	Consolidated Statements of Operations	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
		(Dollars in Thousands)				(Dollars in Thousands)
Operating lease expense (1)	Net occupancy and equipment	$	212	$	210	$	423	$	420
Operating lease income (2)	Other income, net	$	212	$	212	$	424	$	421

⁽¹⁾ Includes short-term lease costs. For the three- and six-month periods ended June 30, 2020 and 2019, short-term lease costs were nominal in amount.

⁽²⁾ Operating lease income includes rental income from owned properties.

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The following table provides supplemental lease information for operating leases on the Condensed Consolidated Balance Sheet as of June 30, 2020:

	Location in the Condensed
	Consolidated Balance Sheet	June 30, 2020
		(Dollars in Thousands)
Operating lease right-of-use assets	Other assets	$	3,269
Operating lease liabilities	Other liabilities	$	3,312
Weighted-average remaining lease term (in years)			6.28
Weighted-average discount rate			3.14	%

The following table provides supplemental lease information for the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019:

	Six Months Ended
	June 30, 2020		June 30, 2019
	(Dollars in Thousands)
Cash paid for amounts included in the measurement of    lease liabilities:
Operating cash flows from operating leases	$	373	$	385

The following table is a schedule of remaining future minimum lease payments for operating leases that had an initial or remaining non-cancellable lease term in excess of one year as of June 30, 2020:

	Minimum Rental Payments
	(Dollars in Thousands)
2020	$	352
2021		628
2022		558
2023		458
2024		438
2025 and thereafter		1,276
Total future minimum lease payments	$	3,710
Less: Imputed interest		398
Total operating lease liabilities	$	3,312

12. DERIVATIVE FINANCIAL INSTRUMENTS

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

Cash Flow Hedges

Effective July 8, 2019, the Bank entered into a forward interest rate swap contract on certain variable-rate money market deposit accounts (indexed to the Federal Funds effective rate’s daily weighted average) with a total notional amount of $10.0 million. The money market account balances are expected to exceed $10 million for the next seven years, and the rates on these deposits are anticipated to move closely with changes in one-month LIBOR, or a comparable benchmark interest rate. The interest rate swap was designated as a derivative instrument in a cash flow hedge with the objective of converting the floating interest payments to a fixed rate throughout the seven-year period beginning on July 8, 2019 and ending on July 8, 2026. Under the swap arrangement, the Bank will pay a fixed interest rate of 1.790% and receive a variable interest rate based on one-month LIBOR, or a comparable benchmark interest rate, on the notional amount of $10.0 million, with monthly net settlements.

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Effective July 22, 2019, the Bank entered into a forward interest rate swap contract on certain variable-rate money market deposit accounts (indexed to the Federal Funds effective rate’s daily weighted average) with a total notional amount of $10.0 million. The money market account balances are expected to exceed $10 million for the next five years, and the rates on these deposits are anticipated to move closely with changes in one-month LIBOR, or a comparable benchmark interest rate. The interest rate swap was designated as a derivative instrument in a cash flow hedge with the objective of converting the floating interest payments to a fixed rate throughout the five-year period beginning on July 22, 2019 and ending on July 22, 2024. Under the swap arrangement, the Bank will pay a fixed interest rate of 1.698% and receive a variable interest rate based on one-month LIBOR, or a comparable benchmark interest rate, on the notional amount of $10.0 million, with monthly net settlements.

Effective October 1, 2019, the Bank entered into a forward interest rate swap contract on a variable-rate FHLB advance (indexed to one-month LIBOR) with a total notional amount of $10.0 million. The FHLB advance will be renewed on a monthly basis and will remain outstanding until October 1, 2024. The interest rate swap was designated as a derivative instrument in a cash flow hedge with the objective of converting the floating interest payments to a fixed rate throughout the five-year period beginning on October 1, 2019 and ending on October 1, 2024. Under the swap arrangement, the Bank will pay a fixed interest rate of 1.357% and receive a variable interest rate based on one-month LIBOR, or a comparable benchmark interest rate, on the notional amount of $10.0 million, with monthly net settlements.

Fair Value Hedges

Effective August 9, 2019, the Bank entered into a forward interest rate swap contract on fixed rate commercial real estate loans with a total notional amount of $10.0 million. The interest rate swap was designated as a derivative instrument in a fair value hedge with the objective of effectively converting a pool of fixed rate assets to variable rate throughout the five-year period beginning on August 9, 2019 and ending on August 9, 2024. Under the swap arrangement, the Bank will pay a fixed interest rate of 1.406% and receive a variable interest rate based on one-month LIBOR, or a comparable benchmark interest rate, on the notional amount of $10.0 million, with monthly net settlements.

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

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

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

Location in the Condensed Consolidated Balance Sheet in Which the Hedged	Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
Item is Included	June 30, 2020
	(Dollars in Thousands)
Loans and leases, net of allowance for loan and    lease losses (1)	$	39,291	$	900

⁽¹⁾ These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. As of June 30, 2020, the amortized cost basis of the closed portfolios used in these hedging relationships was $38.4 million, the cumulative basis adjustments associated with these hedging relationships were $0.9 million, and the amounts of the designated hedged items were $20.0 million.

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13. SEGMENT REPORTING

Under ASC Topic 280, Segment Reporting, certain information is disclosed for the two reportable operating segments of Bancshares: the Bank and ALC. The reportable segments were determined using the internal management reporting system. These segments comprise Bancshares’ and the Bank’s significant subsidiaries. The accounting policies for each segment are the same as those described in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2019. The segment results include certain overhead allocations and intercompany transactions that were recorded at current market prices. All intercompany transactions have been eliminated to determine the consolidated balances. The results for the two reportable segments of the Company are included in the tables below.

						All
	Bank		ALC			Other			Eliminations			Consolidated
	(Dollars in Thousands)
As of and for the three months ended June 30, 2020:
Net interest income	$	6,442	$	2,174		$	7		$	—		$	8,623
Provision for loan losses		530		320			—			—			850
Total non-interest income		1,251		191			784			(896	)		1,330
Total non-interest expense		6,110		2,091			538			(158	)		8,581
Income before income taxes		1,053		(46	)		253			(738	)		522
Provision for income taxes		220		(14	)		(88	)		—			118
Net income	$	833	$	(32	)	$	341		$	(738	)	$	404
Other significant items:
Total assets	$	848,376	$	60,044		$	90,684		$	(153,357	)	$	845,747
Total investment securities		103,883		—			81			—			103,964
Total loans, net		561,253		56,742			—			(51,933	)		566,062
Goodwill and core deposit intangible, net		8,605		—			—			—			8,605
Investment in subsidiaries		—		—			84,718			(84,718	)		—
Fixed asset additions		223		5			—			—			228
Depreciation and amortization expense		376		31			—			—			407
Total interest income from external customers		6,872		2,907			1			—			9,780
Total interest income from affiliates		733		—			6			(739	)		—
For the six months ended June 30, 2020:
Net interest income	$	12,922	$	4,574		$	13		$	—		$	17,509
Provision for loan losses		778		652			—			—			1,430
Total non-interest income		2,345		428			2,018			(2,164	)		2,627
Total non-interest expense		12,266		4,260			894			(345	)		17,075
Income before income taxes		2,223		90			1,137			(1,819	)		1,631
Provision for income taxes		494		37			(151	)		—			380
Net income	$	1,729	$	53		$	1,288		$	(1,819	)	$	1,251
Other significant items:
Fixed asset additions		442		19			—			—			461
Depreciation and amortization expense		742		64			—			—			806
Total interest income from external customers		14,129		6,047			1			—			20,177
Total interest income from affiliates		1,473		—			12			(1,485	)		—

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					All
	Bank		ALC		Other			Eliminations			Consolidated
	(Dollars in Thousands)
As of and for the three months ended June 30, 2019:
Net interest income	$	5,986	$	3,240	$	7		$	—		$	9,233
Provision for loan losses		90		625		—			—			715
Total non-interest income		1,108		228		1,384			(1,429	)		1,291
Total non-interest expense		5,798		2,366		493			(153	)		8,504
Income before income taxes		1,206		477		898			(1,276	)		1,305
Provision for income taxes		249		121		(70	)		—			300
Net income	$	957	$	356	$	968		$	(1,276	)	$	1,005
Other significant items:
Total assets	$	778,252	$	107,911	$	89,102		$	(198,094	)	$	777,171
Total investment securities		136,569		—		80			—			136,649
Total loans, net		501,177		104,007		—			(93,669	)		511,515
Goodwill and core deposit intangible, net		9,056		—		—			—			9,056
Investment in subsidiaries		5		—		83,436			(83,436	)		5
Fixed asset additions		887		64		—			—			951
Depreciation and amortization expense		361		35		—			—			396
Total interest income from external customers		6,476		4,447		—			—			10,923
Total interest income from affiliates		1,206		—		7			(1,213	)		—
For the six months ended June 30, 2019:
Net interest income	$	11,995	$	6,398	$	13		$	—		$	18,406
Provision for loan losses		90		1,025		—			—			1,115
Total non-interest income		2,186		447		2,965			(3,042	)		2,556
Total non-interest expense		11,631		4,734		920			(328	)		16,957
Income before income taxes		2,460		1,086		2,058			(2,714	)		2,890
Provision for income taxes		511		264		(124	)		—			651
Net income	$	1,949	$	822	$	2,182		$	(2,714	)	$	2,239
Other significant items:
Fixed asset additions		2,564		78		—			—			2,642
Depreciation and amortization expense		728		68		—			—			796
Total interest income from external customers		12,969		8,766		1			—			21,736
Total interest income from affiliates		2,367		—		12			(2,379	)		—

14. OTHER OPERATING INCOME AND EXPENSE

Other Operating Income

Other operating income for the three and six months ended June 30, 2020 and 2019 consisted of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(Dollars in Thousands, Except Per Share Data)
Bank-owned life insurance	$	107	$	108	$	215	$	214
Auto Club revenue		18		62		53		100
ATM fee income		116		111		216		215
Wire transfer fees		15		11		28		22
Other income		52		41		167		119
Total	$	308	$	333	$	679	$	670

On January 1, 2018, the Company implemented ASU 2014-09, Revenue from Contracts with Customers, codified at ASC Topic 606. The majority of the Company’s revenue is generated through interest earned on financial instruments, including loans and investment securities, which falls outside the scope of ASC Topic 606. The Company also generates revenue from insurance- and lease-related contracts that fall outside the scope of ASC Topic 606.

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All of the Company’s revenue that is subject to ASC Topic 606 is included in non-interest income; however, not all non-interest income is subject to ASC Topic 606. Revenue earned by the Company that is subject to ASC Topic 606 primarily consists of service and other charges on deposit accounts, mortgage fees from secondary market transactions at the Bank, ATM fee income and other non-interest income. Revenue generated from these sources for the six-month periods ended June 30, 2020 and 2019 was $1.4 million and $1.6 million, respectively, and for the three-month periods ended June 30, 2020 and 2019 was $0.6 million and $0.8 million, respectively. All sources of the Company’s revenue subject to ASC Topic 606 are transaction-based, and revenue is recognized at the time at which the transaction is executed, which is the same time at which the Company’s performance obligation is satisfied. The Company had no contract liabilities or unsatisfied performance obligations with customers as of June 30, 2020.

Other Operating Expense

Other operating expense for the three and six months ended June 30, 2020 and 2019 consisted of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(Dollars in Thousands, Except Per Share Data)
Postage, stationery and supplies	$	218	$	212	$	432	$	450
Telephone/data communication		229		205		452		418
Advertising and marketing		42		58		86		92
Travel and business development		23		102		149		213
Collection and recoveries		60		20		145		100
Other services		85		71		176		143
Insurance expense		141		153		303		315
FDIC insurance and state assessments		116		39		196		158
Loss on sale of fixed assets		121		134		287		219
Core deposit intangible amortization		109		128		219		256
Other real estate/foreclosure expense, net		22		31		41		89
Other expense		402		456		744		939
Total	$	1,568	$	1,609	$	3,230	$	3,392

15. GUARANTEES, COMMITMENTS AND CONTINGENCIES

The Bank’s exposure to credit loss in the event of nonperformance by the other party for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making these commitments as it does for on-balance sheet instruments.

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

	June 30, 2020		December 31, 2019
	(Dollars in Thousands)
Standby letters of credit	$	180	$	180
Standby performance letters of credit	$	555	$	647
Commitments to extend credit	$	93,733	$	96,967

Standby letters of credit and standby performance letters of credit are contingent commitments issued by the Bank generally to guarantee the performance of a customer to a third party. The Bank has recourse against the customer for any amount that it is required to pay to a third party under a standby letter of credit or standby performance letter of credit. Revenues are recognized over the lives of the standby letters of credit and standby performance letters of credit. As of June 30, 2020 and December 31, 2019, the potential amounts of future payments that the Bank could be required to make under its standby letters of credit and standby performance letters of credit, which represent the Bank’s total credit risk in these categories, are included in the table above.

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

The Company is self-insured for a significant portion of employee health benefits. However, the Company maintains stop-loss coverage with third-party insurers to limit the Company’s individual claim and total exposure related to self-insurance. The Company estimates accrued

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liability for the ultimate costs to settle known claims, as well as claims incurred but not yet reported, as of the balance sheet date. The Company’s recorded estimated liability for self-insurance is based on the insurance companies’ incurred loss estimates and management’s judgment, including assumptions and evaluation of factors related to the frequency and severity of claims, the Company’s claims development history and the Company’s claims settlement practices. The assessment of loss contingencies and self-insurance reserves is a highly subjective process that requires judgments about future events. Contingencies are reviewed at least quarterly to determine the adequacy of self-insurance accruals. Self-insurance accruals totaled $0.2 million as of both June 30, 2020 and December 31, 2019. The ultimate settlement of loss contingencies and self-insurance reserves may differ significantly from amounts accrued in the Company’s consolidated financial statements.

Litigation

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

16. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

Fair Value Hierarchy

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

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

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

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

The Company rarely transfers assets and liabilities measured at fair value between Level 1 and Level 2 measurements. Trading account assets and securities available-for-sale may be periodically transferred to or from Level 3 valuation based on management’s conclusion regarding the best method of pricing for an individual security. Such transfers are accounted for as if they occurred at the beginning of a reporting period. There were no such transfers during the six months ended June 30, 2020 or the year ended December 31, 2019.

Fair Value Measurements on a Recurring Basis

Securities Available-for-Sale

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

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The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019. There were no liabilities measured at fair value on a recurring basis as of December 31, 2019.

	Fair Value Measurements as of June 30, 2020 Using
	Totals At June 30, 2020		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	32,634	$	—	$	32,634	$	—
Commercial		52,847		—		52,847		—
Obligations of states and political subdivisions		6,323		—		6,323		—
Corporate notes		2,773		—		2,773		—
U.S. Treasury securities		81		—		81		—
Other liabilities - derivatives		2,915		—		2,915		—

	Fair Value Measurements as of December 31, 2019 Using
	Totals At December 31, 2019		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	46,345	$	—	$	46,345	$	—
Commercial		43,373		—		43,373		—
Obligations of states and political subdivisions		4,218		—		4,218		—
U.S. Treasury securities		80		—		80		—
Other assets - derivatives		301		—		301		—

Fair Value Measurements on a Non-recurring Basis

Impaired Loans

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

OREO and Other Assets Held-for-Sale

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

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As of June 30, 2020, included within OREOwere certain assets that were formerly included as premises and equipment but have been removed from service, and as of the balance sheet date, were designated as assets to be disposed of by sale. These include assets associated with branches of the Bank that have been closed. When an asset is designated as held-for-sale, the Company ceases depreciation of the asset, and the asset is recorded at the lower of its carrying amount or fair value less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically unobservable inputs for determining fair value. These assets were included within other assets on the balance sheet as of December 31, 2019.

The following table presents the balances of impaired loans, OREO and other assets held-for-sale measured at fair value on a non-recurring basis as of June 30, 2020 and December 31, 2019:

	Fair Value Measurements as of June 30, 2020 Using
	Totals At June 30, 2020		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	29	$	—	$	—	$	29
OREO and other assets held-for-sale		1,003		—		—		1,003

	Fair Value Measurements as of December 31, 2019 Using
	Totals At December 31, 2019		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	29	$	—	$	—	$	29
OREO and other assets held-for-sale		1,276		—		—		1,276

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Non-recurring Fair Value Measurements Using Significant Unobservable Inputs

The following table presents information regarding assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of June 30, 2020. The table includes the valuation techniques and the significant unobservable inputs utilized. The range of each unobservable input and the weighted average within the range utilized as of June 30, 2020 are both included. Following the table is a description of the valuation technique and the sensitivity of the technique to changes in the significant unobservable input.

	Level 3 Significant Unobservable Input Assumptions
	Fair Value June 30, 2020		Valuation Technique	Unobservable Input	Quantitative Range of Unobservable Inputs (Weighted Average)
	(Dollars in Thousands)
Non-recurring fair value measurements:
Impaired loans	$	29	Multiple data points, including discount to appraised value of collateral based on recent market activity	Appraisal comparability adjustment (discount)	9%-10%	(9.5%)
OREO and other assets held-for-sale	$	1,003	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	9%-10%	(9.5%)

Impaired Loans

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

OREO

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

Other Assets Held-for-Sale

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

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Fair Value of Financial Instruments

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

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

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

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

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

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

Loans, net – The fair value of loans is estimated on an exit price basis incorporating contractual cash flow, prepayment discount spreads, credit loss and liquidity premiums.

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

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

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

Long-term debt – The fair value of this debt is estimated using discounted cash flows based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements as of the determination date.

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

The estimated fair value and related carrying or notional amounts, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of June 30, 2020 and December 31, 2019 were as follows:

	June 30, 2020
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	108,268	$	108,268	$	108,268	$	—	$	—
Investment securities available-for-sale		94,658		94,658		—		94,658		—
Investment securities held-to-maturity		9,306		9,469		—		9,469		—
Federal funds sold		80		80		—		80		—
Federal Home Loan Bank stock		1,135		1,135		—		—		1,135
Loans, net of allowance for loan losses		566,062		577,172		—		—		577,172
Liabilities:
Deposits		738,290		741,062		—		741,062		—
Short-term borrowings		10,334		10,334		—		10,334		—
Other liabilities - derivatives		2,915		2,915		—		2,915		—

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	December 31, 2019
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	57,030	$	57,030	$	57,030	$	—	$	—
Investment securities available-for-sale		94,016		94,016		—		94,016		—
Investment securities held-to-maturity		14,340		14,306		—		14,306		—
Federal funds sold		10,080		10,080		—		10,080		—
Federal Home Loan Bank stock		1,137		1,137		—		—		1,137
Loans, net of allowance for loan losses		545,243		559,911		—		—		559,911
Other assets - derivatives		301		301		—		301		—
Liabilities:
Deposits		683,662		682,828		—		682,828		—
Short-term borrowings		10,025		10,025		—		10,025		—

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

DESCRIPTION OF THE BUSINESS

First US Bancshares, Inc., a Delaware corporation (“Bancshares” and, together with its subsidiaries, the “Company”), is a bank holding company with its principal offices in Birmingham, Alabama. Bancshares operates one commercial banking subsidiary, First US Bank (the “Bank”). As of June 30, 2020, the Bank operated and served its customers through 20 banking offices located in Birmingham, Bucksville, Butler, Calera, Centreville, Columbiana, Gilbertown, Grove Hill, Harpersville, Jackson, Thomasville, Tuscaloosa and Woodstock, Alabama; Knoxville and Powell, Tennessee; and Rose Hill and Ewing, Virginia. In addition, the Bank operates loan production offices in Mobile, Alabama and the Chattanooga, Tennessee area. The Bank provides a wide range of commercial banking services to small- and medium-sized businesses, property managers, business executives, professionals and other individuals. In July 2020, the Bank permanently closed one banking office in Thomasville, Alabama.

The Bank owns all of the stock of Acceptance Loan Company, Inc., an Alabama corporation (“ALC”). ALC is a finance company headquartered in Mobile, Alabama that performs both indirect lending and conventional consumer finance lending through a branch network. ALC’s branch network serves customers through 21 offices located in Alabama and southeast Mississippi. The Bank serves as the primary funding source for ALC’s operations.

Effective January 1, 2020, the Company transferred a total of $45.5 million of its indirect loan portfolio from the ALC to the Bank. The loans transferred include indirect sales lending relationships originated through prominent national or regional retailers that are managed by the Company on a centralized basis  The Company currently conducts this lending in 11 states, including Alabama, Florida, Georgia, Kentucky, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Texas and Virginia.

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

Delivery of the best possible financial services to customers remains an overall operational focus of the Company. The Company recognizes that attention to detail and responsiveness to customers’ desires are critical to customer satisfaction. The Company continues to upgrade technology, both in its financial services and in the training of its 285 full-time equivalent employees (as of June 30, 2020), to ensure customer satisfaction and convenience.

The preparation of the Company’s consolidated financial statements requires management to make subjective judgments associated with estimates. These estimates are necessary to comply with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and general banking practices. These estimates include accounting for the allowance for loan and lease losses, the right-of-use asset and lease liability, the value of other real estate owned and certain collateral-dependent loans, consideration related to goodwill impairment testing and deferred tax asset valuation. A description of these estimates, which significantly affect the determination of the Company’s consolidated financial position, results of operations and cash flows, is set forth in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Bancshares’ Annual Report on Form 10-K as of and for the year ended December 31, 2019.

The emphasis of this discussion is a comparison of assets, liabilities and shareholders’ equity as of June 30, 2020 to December 31, 2019, while comparing income and expense for the three- and six-month periods ended June 30, 2020 and 2019.

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

This information should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and related notes appearing elsewhere in this report and Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in Bancshares’ Annual Report on Form 10-K as of and for the year ended December 31, 2019. As used in the following discussion, the words “we,” “us,” “our” and the “Company” refer to Bancshares and its consolidated subsidiaries, unless the context indicates otherwise.

RECENT MARKET CONDITIONS: COVID-19 PANDEMIC

During the first quarter of 2020, an outbreak of a novel strain of coronavirus (COVID-19) spread to a number of countries around the world, including the United States. 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 severely restricted the level of economic activity in the Company’s markets. In response to the pandemic, the governments of the states in which both the Bank and ALC have retail offices and lending operations have taken preventive or protective actions, including imposing restrictions on business operations and travel, advising or requiring individuals to limit or forego time outside of their homes, and ordering temporary closures of businesses that have been determined to be non-essential.

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The COVID-19 pandemic and its associated impacts on trade (including supply chains and export levels), travel, employee productivity and other economic activities have had, are currently having, and may for some time continue to have a destabilizing effect on financial markets and economic activity. The extent of the impact of COVID-19 on the Company’s operational and financial performance is currently uncertain, cannot be predicted and will depend on certain developments, including, among others, the duration and spread of COVID-19, its impact on our customers, employees and vendors, and the continued governmental, regulatory and private sector responses, which may be precautionary, to the coronavirus.

The Company’s business, financial condition and results of operations generally rely upon the ability of the Company’s borrowers to repay their loans, the value of collateral underlying those loans, and demand for loans and other products and services that the Company offers, which are highly dependent on the business environment in the Company’s primary markets and the United States economy as a whole.

In light of the changing economic outlook as a result of COVID-19, as well as other factors, in March 2020, the 10-year Treasury yield was reduced to historic lows, and the equity markets were significantly impacted. In response, the Federal Reserve reduced the target federal funds rate by 150 basis points. These reductions in interest rates and other economic uncertainties that have arisen as a result primarily of the COVID-19 pandemic have and are likely to continue to negatively impact net interest income, provisions for loan losses and noninterest income. Additional negative financial impacts could occur; however, the ultimate potential impact is not known at this time.

EXECUTIVE OVERVIEW

Response to the COVID-19 Pandemic and the CARES Act

Loan Deferments and Credit Risk Identification

In accordance with section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the Company implemented initiatives to provide short-term payment relief to borrowers who have been negatively impacted by COVID-19. Over 1,700 of the Company’s borrowers requested and were granted COVID-19 pandemic-related deferments by the Company during the six months ended June 30, 2020. Although the interpretive guidance defines short-term as six months, the deferments granted by the Company were generally for terms of 90 days or less. As of June 30, 2020, 864 borrowers with an aggregate principal balance totaling approximately $95.3 million had active loan payment deferments. Of the active deferments granted by the Company as of June 30, 2020, approximately $73.3 million of the aggregate principal balance, or 77.0%, were deferments of both principal and interest payments, while $22.0 million, or 23.0%, were deferments of principal payments only. In accordance with the interpretive guidance from banking regulatory agencies, the Company’s management has granted the COVID-19 loan deferments on a good faith basis to borrowers who were current on their payments prior to the payment relief. More COVID-19-related payment deferments are expected to be granted by the Company during the third quarter of 2020. The ultimate amount of such deferments cannot be predicted as of the date of this report.

With respect to credit risk, management has also identified certain categories of loans that it currently believes to be “at-risk” of potential credit loss based on circumstances associated with the COVID-19 pandemic. Management has further subdivided the “at-risk” categories into those deemed to be of “high-risk” and those deemed to be of “moderate-risk.”  The categories considered to be of “high-risk” in the current environment include loans collateralized by hotels/motels and dine-in restaurants.  Loans in the “high-risk” category totaled $14.9 million as of June 30, 2020, or 2.6% of the portfolio.  The “moderate-risk” category includes loans collateralized by fast food restaurants, retail centers and 1-4 family investment properties. “Moderate-risk” loans totaled $61.8 million, or 10.7% of the Company’s loan portfolio as of June 30, 2020.

Refer to Note 4 in the Notes to Interim Condensed Consolidated Financial Statements (Unaudited) contained herein under the heading “COVID-19 Loan Deferments and Risk Identification” for additional details related to COVID-19 deferred loan payments and loans considered to be “at-risk.”

In accordance with the Company’s uniform framework for establishing and monitoring credit risk, management will continue to closely evaluate all loans that request and receive COVID-19 deferments or that are considered to be “at-risk” with respect to the pandemic. However, there continues to be a significant level of uncertainty as to the ultimate impact that the pandemic will have on these borrowers.

Paycheck Protection Program

Sections 1102 and 1106 of the CARES Act added a new loan program administered by the Small Business Administration (“SBA”) entitled the Paycheck Protection Program (“PPP”). The PPP is intended to provide economic relief to small businesses throughout the United States that have been adversely impacted by COVID-19. An Interim Final Rule related to the PPP was issued on April 2, 2020, and additional clarifications to the Interim Final Rule have been provided subsequently by the SBA. PPP loans are 100% guaranteed by the SBA and are forgivable in whole, or in part, if the proceeds are used by the borrower for payroll and other permitted purposes in accordance with the requirements of the PPP. If not forgiven in whole or in part, the loans carry a fixed interest rate of 1.00% per annum with payments deferred for the first six months of the loan. As compensation for originating a PPP loan, the Company receives lender processing fees from the SBA ranging from 1% to 5% of the original loan balance, depending on the size of the loan. Processing fees, net of origination costs, are deferred and amortized over the contractual life of the loan as interest income. Upon forgiveness of a loan by the SBA, any unrecognized net deferred fees will be recognized as interest income in that period.

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PPP loans were initially originated for a term of two years; however, a June 5, 2020 amendment to the CARES Act (i) provided for a five-year minimum loan term for loans originated beginning on that date and (ii) permitted lenders and borrowers to amend loans previously issued under two-year terms to terms of fivetoten years if mutually agreed upon by both the lender and the borrower. As of June 30, 2020, the Company had originated 158 PPP loans with an aggregate principal balance of $13.8 million.  Of this amount, $13.7 million of the loans were originated under two-year terms, while $0.1 million of the loans were originated under five-year terms.

Earnings Highlights

The Company earned net income of $0.4 million, or $0.06 per diluted common share, during the three months ended June 30, 2020, compared to $1.0 million, or $0.15 per diluted common share, for the three months ended June 30, 2019. For the six months ended June 30, 2020, net income totaled $1.3 million, or $0.19 per diluted common share, compared to $2.2 million, or $0.33 per diluted common share, for the corresponding six-month period of 2019.

Summarized condensed consolidated statements of operations are included below for the three- and six-month periods ended June 30, 2020 and 2019, respectively.

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2020		2019		2020		2019
	(Dollars in Thousands)
Interest income	$	9,780	$	10,923	$	20,177	$	21,736
Interest expense		1,157		1,690		2,668		3,330
Net interest income		8,623		9,233		17,509		18,406
Provision for loan and lease losses		850		715		1,430		1,115
Net interest income after provision for loan and lease losses		7,773		8,518		16,079		17,291
Non-interest income		1,330		1,291		2,627		2,556
Non-interest expense		8,581		8,504		17,075		16,957
Income before income taxes		522		1,305		1,631		2,890
Provision for income taxes		118		300		380		651
Net income	$	404	$	1,005	$	1,251	$	2,239

The following discussion summarizes the most significant activity that drove changes in the Company’s net income during the six months ended June 30, 2020, as compared to the six months ended June 30, 2019.

Net Interest Income

Net interest income decreased $0.9 million comparing the six months ended June 30, 2020 to the six months ended June 30, 2019, primarily due to margin compression, as interest-earning assets repriced more quickly than interest-bearing liabilities following the 150-basis point reduction in the federal funds rate in March. Net interest margin decreased 38 basis points comparing the six months ended June 30, 2020 to the six months ended June 30, 2019.

The COVID-19 pandemic has reduced economic activity and increased liquidity amongst deposit customers, consequently increasing the Company’s cash balances significantly during the six-month period ended June 30, 2020. In the current environment, the excess cash balances earn low yields, which has put significant downward pressure on net interest margin. In addition, higher-yielding direct consumer loans at ALC decreased during the six months ended June 30, 2020 due to reduced economic activity and greater availability of cash amongst consumer borrowers. The decrease in direct consumer volume is contrary to historical seasonal trends at ALC.

During the first half of 2020, management has made efforts to reprice deposit products in a manner consistent with the declining interest rate environment. The weighted average annualized rate paid for interest-bearing liabilities decreased to 0.92% for the six-month period ended June 30, 2020, compared to 1.14% for the same period of 2019. Annualized total funding costs (including both interest-bearing and non-interest-bearing deposits and borrowings) decreased to 0.75% for the six months ended June 30, 2020, compared to 0.96% for corresponding period of 2019. If the current interest rate environment continues, management expects to further reduce interest costs as interest-bearing liabilities continue to reprice.

Provision for Loan and Lease Losses

The provision for loan and lease losses was $1.4 million during the six months ended June 30, 2020, compared to $1.1 million during the six months ended June 30, 2019, and the ratio of net charge-offs to average loans was 0.28% annualized and 0.43% annualized for the respective periods. Although net charge-off experience improved, due to uncertainty related to the ultimate economic impact of the pandemic, the Company continued to increase qualitative factors in the calculation of the allowance for loan and lease losses, resulting in increased loan loss provisioning during the six-month period ended June 30, 2020. The allowance as a percentage of total loans increased to 1.15% (excluding PPP loans, which are guaranteed by the SBA) as of June 30, 2020, compared to 0.98% as of June 30, 2019.  

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In accordance with relevant accounting guidance for smaller reporting companies, the Company has not yet adopted the Current Expected Credit Loss (CECL) accounting model for the calculation of credit losses. Management believes that the allowance for loan and lease losses as of June 30, 2020, which was calculated under an incurred loss model, was sufficient to absorb losses in the Company’s loan portfolio based on circumstances existing as of the balance sheet date. However, the economic environment as a result of the COVID-19 pandemic remains uncertain, and accordingly, management will continue to closely monitor the impact of changing economic circumstances on the Company’s loan portfolio.

Non-interest Income

Non-interest income increased by $0.1 million comparing the first half of 2020 to the first half of 2019. However, as a result of reduced economic activity, the Company did experience reductions in certain components of non-interest income, including service charges and credit insurance income, during the first six months of 2020 as compared to the same period of 2019. These reductions, which totaled approximately $0.3 million, were offset by gains on the sale of investment securities of approximately $0.3 million during the six months ended June 30, 2020.

Non-interest Expense

Non-interest expense remained relatively consistent, totaling $17.1 million for the six months ended June 30, 2020, compared to $17.0 million for the six months ended June 30, 2019.

Provision for Income Taxes

The Company’s effective tax rate was 23.3% for the six months ended June 30, 2020, an increase from 22.5% for the six months ended June 30, 2019.

Balance Sheet Management

The Company’s asset base increased during the first half of 2020. As of June 30, 2020, assets totaled $845.7 million, compared to $788.7 million as of December 31, 2019.  The discussion below presents significant balance sheet components comparing June 30, 2020 to December 31, 2019.

Loans and Credit Quality

Gross loans increased by $21.8 million during the six months ended June 30, 2020. Growth in indirect sales lending totaled $44.4 million during this period. The Company’s indirect sales portfolio is comprised of loans secured by collateral that generally includes recreational vehicles, campers, boats and horse trailers. Effective January 1, 2020, the portfolio was transferred from ALC to the Bank, and, during the pandemic, demand for this financing grew substantially as consumers sought alternatives to more traditional travel and leisure activities. The Company currently operates this lending in 11 states located in the southeastern United States. Management believes that the movement of this portfolio under the Bank’s brand has afforded and will continue to afford greater opportunity for growth and diversification of the portfolio over time.

In addition to indirect lending, the Bank’s commercial lending activities resulted in growth of $13.8 million from the PPP. Loan growth during the quarter was partially offset by decreases in real estate loans totaling $15.4 million, in the Bank’s commercial and industrial portfolio totaling $17.0 million and in consumer lending, primarily through ALC’s branch system, totaling $4.0 million.

Nonperforming assets, including loans in non-accrual status and other real estate owned (OREO), decreased to $4.4 million as June 30, 2020, compared to $4.8 million as of  December 31, 2019. As a percentage of total assets, non-performing assets totaled 0.52% as of June 30, 2020, compared to 0.61% as of December 31, 2019.

Investment Securities

The investment securities portfolio continues to provide the Company with additional liquidity and allows management to fund a portion of loan growth from the maturity and payoff of securities within the portfolio. As of June 30, 2020, the investment securities portfolio totaled $104.0 million, compared to $108.4 million as of December 31, 2019. Management monitors its liquidity position, including forecasted expectations related to loan growth, when making determinations about whether to re-invest in the securities portfolio.

Deposits and Borrowings

Deposits totaled $738.3 million as of June 30, 2020, compared to $683.7 million as of December 31, 2019. The deposit growth during the first half of 2020 reflected the impact of the COVID-19 pandemic on both business and consumer deposit holders, including preferences for liquidity, loan payment deferrals, tax payment deferrals, stimulus checks and lower consumer spending. Of the total increase in deposits, $40.9 million represented non-interest-bearing deposits, while $13.7 million were interest-bearing deposits.

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Liquidity and Capital

The Company continues to maintain excess funding capacity to provide adequate liquidity for loan growth, capital expenditures and ongoing operations. The Company benefits from a strong deposit base, a liquid investment securities portfolio and access to funding from a variety of sources, including federal funds lines, Federal Home Loan Bank (“FHLB”) advances and brokered deposits.

During the second quarter of 2020, the Bank continued to maintain capital ratios at higher levels than the ratios required to be considered a “well-capitalized” institution under applicable banking regulations. As of June 30, 2020, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 12.84%. Its total capital ratio was 13.94%, and its Tier 1 leverage ratio was 9.36%.

Cash Dividend

The Company declared a cash dividend of $0.03 per share on its common stock in both the first and second quarters of 2020, resulting in a dividend of $0.06 per share for the six months ended June 30, 2020, compared to $0.04 per share for the six months ended June 30, 2019.

Share Repurchases

During the first half of 2020, the Company completed share repurchases totaling 38,604 shares of its $0.01 par value common stock at a weighted average price of $11.70 per share.  The shares were repurchased under the Company’s existing share repurchase program, which was originally approved by the Company’s Board of Directors in 2006. As of June 30, 2020, a total of 54,961 shares remained available for repurchase under the program.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income is calculated as the difference between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest-bearing liabilities, can materially impact net interest income. The Company’s earning assets consist of loans, taxable and tax-exempt investments, Federal Home Loan Bank stock, federal funds sold by the Bank and interest-bearing deposits in banks. Interest-bearing liabilities consist of interest-bearing demand deposits and savings and time deposits, as well as short-term borrowings.

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The following tables show the average balances of each principal category of assets, liabilities and shareholders’ equity for the three- and six-month periods ended June 30, 2020 and 2019. Additionally, the tables provide an analysis of interest revenue or expense associated with each category, along with the accompanying yield or rate percentage. Net interest margin is calculated for each period presented as net interest income divided by average total interest-earning assets.

	Three Months Ended							Three Months Ended
	June 30, 2020							June 30, 2019
	Average Balance		Interest		Annualized Yield/ Rate %			Average Balance		Interest		Annualized Yield/ Rate %
	(Dollars in Thousands)
ASSETS
Interest-earning assets:
Total loans (Note A)	$	557,511	$	9,237		6.66	%	$	513,284	$	9,833		7.68	%
Taxable investment securities		104,449		493		1.90	%		140,716		735		2.10	%
Tax-exempt investment securities		1,737		12		2.78	%		2,197		15		2.74	%
Federal Home Loan Bank stock		1,135		15		5.32	%		713		12		6.75	%
Federal funds sold		6,233		4		0.26	%		15,080		98		2.61	%
Interest-bearing deposits in banks		74,596		19		0.10	%		39,492		230		2.34	%
Total interest-earning assets		745,661		9,780		5.28	%		711,482		10,923		6.16	%
Non-interest-earning assets:
Other assets		72,990							73,189
Total	$	818,651						$	784,671
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Demand deposits	$	183,536	$	138		0.30	%	$	169,745	$	215		0.51	%
Savings deposits		155,953		146		0.38	%		165,318		460		1.12	%
Time deposits		234,041		847		1.46	%		244,984		1,015		1.66	%
Total interest-bearing deposits (Note B)		573,530		1,131		0.79	%		580,047		1,690		1.17	%
Borrowings		10,230		26		1.02	%		98		—		—
Total interest-bearing liabilities		583,760		1,157		0.80	%		580,145		1,690		1.17	%
Non-interest-bearing liabilities:
Demand deposits		140,621							111,929
Other liabilities		9,317							10,262
Shareholders’ equity		84,953							82,335
Total	$	818,651						$	784,671
Net interest income (Note C)			$	8,623						$	9,233
Net interest margin						4.65	%						5.21	%

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Note A	—	For the purpose of these computations, non-accruing loans are included in the average loan amounts outstanding. These loans averaged $3.5 million and $1.6 million for the three months ended June 30, 2020 and 2019, respectively.
Note B	—	The annualized rate on total average funding costs, including total average interest-bearing liabilities and average non-interest-bearing demand deposits, was 0.64% and 0.98% for the three-month periods ended June 30, 2020 and 2019, respectively.
Note C	—	Loan fees are included in the interest amounts presented. Loan fees totaled $0.4 million and $0.5 million for the three-month periods ended June 30, 2020 and 2019, respectively.

	Six Months Ended							Six Months Ended
	June 30, 2020							June 30, 2019
	Average Balance		Interest		Annualized Yield/ Rate %			Average Balance		Interest		Annualized Yield/ Rate %
	(Dollars in Thousands)
ASSETS
Interest-earning assets:
Total loans (Note A)	$	552,810	$	18,876		6.87	%	$	512,669	$	19,506		7.67	%
Taxable investment securities		104,286		1,024		1.97	%		144,503		1,529		2.13	%
Tax-exempt investment securities		1,464		23		3.16	%		2,199		30		2.75	%
Federal Home Loan Bank stock		1,136		30		5.31	%		708		23		6.55	%
Federal funds sold		9,448		45		0.96	%		11,129		142		2.57	%
Interest-bearing deposits in banks		63,311		179		0.57	%		43,989		506		2.32	%
Total interest-earning assets		732,455		20,177		5.54	%		715,197		21,736		6.13	%
Non-interest-earning assets:
Other assets		73,199							71,539
Total	$	805,654						$	786,736
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Demand deposits	$	176,480	$	313		0.36	%	$	169,507	$	421		0.50	%
Savings deposits		160,686		458		0.57	%		167,111		921		1.11	%
Time deposits		236,137		1,835		1.56	%		249,771		1,988		1.61	%
Total interest-bearing deposits (Note B)		573,303		2,606		0.91	%		586,389		3,330		1.15	%
Borrowings		10,176		62		1.23	%		223		—		—
Total interest-bearing liabilities		583,479		2,668		0.92	%		586,612		3,330		1.14	%
Non-interest-bearing liabilities:
Demand deposits		127,431							109,501
Other liabilities		9,906							9,151
Shareholders’ equity		84,838							81,472
Total	$	805,654						$	786,736
Net interest income (Note C)			$	17,509						$	18,406
Net interest margin						4.81	%						5.19	%

Note A	—	For the purpose of these computations, non-accruing loans are included in the average loan amounts outstanding. These loans averaged $3.6 million and $2.0 million for the six months ended June 30, 2020 and 2019, respectively.
Note B	—	The annualized rate on total average funding costs, including total average interest-bearing liabilities and average non-interest-bearing demand deposits, was 0.75% and 0.96% for the six-month periods ended June 30, 2020 and 2019, respectively.
Note C	—	Loan fees are included in the interest amounts presented. Loan fees totaled $0.9 million and $1.1 million for the six-month periods ended June 30, 2020 and 2019, respectively.

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The following tables summarize the impact of variances in volume and rate of interest-earning assets and interest-bearing liabilities on components of net interest income.

	Three Months Ended June 30, 2020									Six Months Ended June 30, 2020
	Compared to									Compared to
	Three Months Ended June 30, 2019									Six Months Ended June 30, 2019
	Increase (Decrease)									Increase (Decrease)
	Due to Change In:									Due to Change In:
	Volume			Average Rate			Net			Volume			Average Rate			Net
	(Dollars in Thousands)
Interest earned on:
Total loans	$	847		$	(1,443	)	$	(596	)	$	1,527		$	(2,157	)	$	(630	)
Taxable investment securities		(189	)		(53	)		(242	)		(426	)		(79	)		(505	)
Tax-exempt investment securities		(3	)		—			(3	)		(10	)		3			(7	)
Federal Home Loan Bank stock		7			(4	)		3			14			(7	)		7
Federal funds sold		(57	)		(37	)		(94	)		(21	)		(76	)		(97	)
Interest-bearing deposits in banks		204			(415	)		(211	)		222			(549	)		(327	)
Total interest-earning assets		809			(1,952	)		(1,143	)		1,306			(2,865	)		(1,559	)
Interest expense on:
Demand deposits		17			(94	)		(77	)		17			(125	)		(108	)
Savings deposits		(26	)		(288	)		(314	)		(35	)		(428	)		(463	)
Time deposits		(45	)		(123	)		(168	)		(109	)		(44	)		(153	)
Borrowings		—			26			26			—			62			62
Total interest-bearing liabilities		(54	)		(479	)		(533	)		(127	)		(535	)		(662	)
Increase (decrease) in net interest income	$	863		$	(1,473	)	$	(610	)	$	1,433		$	(2,330	)	$	(897	)

Net interest margin was reduced by 56 basis points to 4.65% during the second quarter of 2020, compared to 5.21% during the second quarter of 2019. Net interest margin decreased 38 basis points to 4.81% for the six months ended June 30, 2020 compared to 5.19% for the six months ended June 30, 2019. The reduction in net interest margin resulted from the prevailing interest rate environment. Since August 2019, the federal funds rate has been reduced by 225 basis points, including decreases totaling 150 basis points in March 2020 in response to the COVID-19 pandemic.  

The Company’s average loan balance increased by $44.2 million comparing the second quarter of 2020 to the second quarter of 2019 and increased by $40.1 million comparing the six-month period ended June 30, 2020 to the same period of 2019. However, as a result of declining yields, interest earned on loans decreased $0.6 million comparing both of the three- and six-month periods ended June 30, 2020 to the corresponding periods of 2019. The growth in average loans over the course of 2020 was funded largely through maturities, sales and pay-downs in the Company’s investment portfolio. Accordingly, the average balance of the investment portfolio (taxable and tax-exempt combined) was reduced by $36.7 million and $41.0 million comparing the three and six months ended June 30, 2020 to the same periods in 2019. Based primarily on this volume reduction, interest earned on the investment portfolio declined by $0.2 million comparing the second quarter of 2020 to the second quarter of 2019 and by $0.5 million comparing six months ended June 30, 2020 to the six months ended June 30, 2019.

The COVID-19 pandemic has reduced economic activity and increased liquidity amongst deposit customers, consequently increasing the Company’s cash balances significantly during 2020. In the current environment, the excess cash balances earn low yields, which has put significant downward pressure on net interest margin. Interest earned on excess cash balances (including federal funds sold and interest-bearing deposits in banks) decreased by $0.3 million comparing the three-month periods ended June 30, 2020 and 2019 and by $0.4 million comparing the six-month periods ended June 30, 2020 and 2019, due primarily to the decrease in the federal funds rate.

During the first half of 2020, management has made efforts to reprice deposit products in a manner consistent with the declining interest rate environment. The weighted average annualized rate paid for interest-bearing liabilities decreased to 0.80% for the three-month period ended June 30, 2020, compared to 1.17% for the three-month period ended June 30, 2019, and decreased to 0.92% for the six-month period ended June 30, 2020, compared to 1.14% for the same period of 2019. Including non-interest-bearing demand deposits and borrowings, the Company’s aggregate funding costs totaled 0.64% for the second quarter of 2020, compared to 0.98% for the second quarter of 2019, and totaled 0.75% for the six months ended June 30, 2020, compared to 0.96% for the corresponding period of 2019.

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In the current interest rate environment, management expects to further reduce interest costs as interest-bearing liabilities continue to reprice; however, there continues to be significant economic uncertainty as a result of the COVID-19 pandemic. We expect that growth in net loan volume with loans of sufficient credit quality will enhance net income, particularly as resources are shifted from lower earning excess cash balances and federal funds sold into loan assets. However, there continues to be competitive pressure to generate loans of sufficient credit quality. Management is maintaining vigilance in the deployment of strategies to effectively manage risks associated with interest rate fluctuations. However, net interest income could continue to experience downward pressure as a result of the interest rate environment, as well as increased competition for quality loan and deposit funding opportunities.

Provision for Loan and Lease Losses

The provision for loan and lease losses was $0.9 million during the second quarter of 2020, compared to $0.7 million during the second quarter of 2019 and was $1.4 million for the six months ended June 30, 2020, compared to $1.1 million for the six months ended June 30, 2019. Net charge-offs during the six months ended June 30, 2020 decreased to $0.8 million, compared to $1.1 million during the six months ended June 30, 2019. Although net charge-off experience improved, due to uncertainty related to the ultimate economic impact of the pandemic, the Company continued to increase qualitative factors in the calculation of the allowance for loan and lease losses, resulting in increased loan loss provisioning during the six months ended June 30, 2020. The allowance as a percentage of total loans increased to 1.15% (excluding PPP loans, which are guaranteed by the SBA) as of June 30, 2020, compared to 0.98% as of June 30, 2019.  

Management believes that the allowance for loan and lease losses as of June 30, 2020, which was calculated under an incurred loss model, was sufficient to absorb losses in the Company’s loan portfolio based on circumstances existing as of the balance sheet date. However, the economic environment as a result of the COVID-19 pandemic continues to contain a significant level of uncertainty. Management will continue to monitor circumstances associated with the loan portfolio, particularly those loans for which payment deferments have been provided and those portfolio categories characterized as “at-risk.” Should economic circumstances continue to deteriorate, additional loan loss provisioning may be required.

Non-Interest Income

Non-interest income represents fees and income derived from sources other than interest-earning assets. The following table presents the major components of non-interest income for the periods indicated:

	Three Months Ended June 30,										Six Months Ended June 30,
	2020		2019		$ Change			% Change			2020		2019		$ Change			% Change
	(Dollars in Thousands)										(Dollars in Thousands)
Service charges and other fees on    deposit accounts	$	263	$	443	$	(180	)		(40.6	)%	$	697	$	903	$	(206	)		(22.8	)%
Credit insurance commissions and fees		45		108		(63	)		(58.3	)%		198		251		(53	)		(21.1	)%
Bank-owned life insurance		107		107		—			—			215		214		1			0.5	%
Net gain on sale and prepayment of    investment securities		326		9		317		NM				326		22		304		NM
Mortgage fees from secondary market		176		186		(10	)		(5.4	)%		303		289		14			4.8	%
Lease income		212		212		—			—			424		421		3			0.7	%
Other income		201		226		(25	)		(11.1	)%		464		456		8			1.8	%
Total non-interest income	$	1,330	$	1,291	$	39			3.0	%	$	2,627	$	2,556	$	71			2.8	%

NM: Not meaningful

Non-interest income at the Bank consists of service charges and other fees on deposit accounts; bank-owned life insurance; net gains on the sale and prepayment of investment securities; net gains on the settlement of derivative contracts; fees from the secondary market mortgage activities; lease income; and other non-interest income, which includes fee income generated by the Bank, such as ATM fees and real estate rental income. Non-interest income at ALC consists of credit insurance commissions and fees and other non-interest income generated for ancillary services, such as ALC’s auto club membership program. Non-interest income increased modestly comparing both the three- and six-month periods ended June 30, 2020 to the corresponding periods of 2019. However, as a result of reduced economic activity, the Company did experience reductions in certain components of non-interest income, including service charges and credit insurance income, during the first half of 2020. These reductions were offset by gains on the sale of investment securities during the period. Certain categories of non-interest income are expected to provide a relatively stable source of revenues, while others may fluctuate significantly based on changes in economic conditions, regulation or other factors. Non-interest income is expected to continue to weaken in the near-term due to the decline in economic activities resulting from the COVID-19 pandemic.

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Non-Interest Expense

Non-interest expense represents expenses incurred from sources other than interest-bearing liabilities. The following table presents the major components of non-interest expense for the periods indicated:

	Three Months Ended June 30,										Six Months Ended June 30,
	2020		2019		$ Change			% Change			2020		2019		$ Change			% Change
	(Dollars in Thousands)										(Dollars in Thousands)
Salaries and employee benefits	$	5,193	$	5,195	$	(2	)		0.0	%	$	10,329	$	10,183	$	146			1.4	%
Net occupancy and equipment expense		995		1,046		(51	)		(4.9	)%		1,996		2,135		(139	)		(6.5	)%
Computer services		424		333		91			27.3	%		841		684		157			23.0	%
Insurance expense and assessments		257		192		65			33.9	%		499		473		26			5.5	%
Fees for professional services		401		321		80			24.9	%		679		563		116			20.6	%
Postage, stationery and supplies		218		212		6			2.8	%		432		450		(18	)		(4.0	)%
Telephone/data communications		229		205		24			11.7	%		452		418		34			8.1	%
Other real estate/foreclosure expense, net		22		31		(9	)		(29.0	)%		41		89		(48	)		(53.9	)%
Other expense		842		969		(127	)		(13.1	)%		1,806		1,962		(156	)		(8.0	)%
Total non-interest expense	$	8,581	$	8,504	$	77			0.9	%	$	17,075	$	16,957	$	118			0.7	%

Non-interest expense increased modestly comparing the second quarter of 2020 to the second quarter of 2019, as well as comparing the six-month periods ended June 30, 2020 and 2019, due to consistent operations during the respective periods. In general, non-interest expense is expected to increase over time due to inflationary pressures; however, management continues to maintain vigilance in efforts to reduce these costs where opportunities to do so exist. In the near-term, non-interest expense may increase due to expenditures incurred by the Company in response to the COVID-19 pandemic. Such expenses could include salary and employee benefits payments for increased work levels in response to the pandemic, costs to modify office space and retail banking centers to protect the safety of employees and customers, and expenses incurred to upgrade the Company’s technological systems to enhance remote interactions between employees and customers, as well as to respond to emerging threats associated with cybersecurity.

In addition to potential increases in expenditures required to operate, as a result of deteriorating economic circumstances in the wake of the COVID-19 pandemic, the Company could also experience increases in non-interest expenses associated with the valuation of certain assets. Such expenditures could include, but are not limited to, impairment of goodwill or other intangible assets, write downs of assets taken out of operations, or impairments of available-for-sale investment securities for losses that are considered to be other-than-temporary.

Provision for Income Taxes

The provision for income taxes was $0.4 million and $0.7 million for the six-month periods ended June 30, 2020 and 2019, respectively. The Company’s effective tax rate was 23.3% and 22.5%, respectively, for the same periods.

The effective tax rate is impacted by recurring items, such as changes in tax-exempt interest income earned from bank-qualified municipal bonds and loans and the cash surrender value of bank-owned life insurance. Management makes decisions about whether to invest in tax-exempt instruments on a case-by-case basis after considering a number of factors, including investment return, credit quality and the consistency of such investments with the Company’s overall strategy. The Company’s effective tax rate is expected to fluctuate commensurate with the level of these investments as compared to total pre-tax income.

BALANCE SHEET ANALYSIS

Investment Securities

The investment securities portfolio is used by management to provide liquidity, to generate interest income and for use as collateral for public deposits and wholesale funding. Risk and return can be adjusted by altering the duration, composition and/or balance of the portfolio. The expected average life of securities in the investment portfolio was 2.6 years as of both June 30, 2020 and December 31, 2019.

Available-for-sale securities are recorded at estimated fair value, with unrealized gains or losses recognized, net of taxes, in accumulated other comprehensive income, a separate component of shareholders’ equity. As of June 30, 2020, available-for-sale securities totaled $94.7 million, or 91.0% of the total investment portfolio, compared to $94.0 million, or 86.8% of the total investment portfolio, as of December 31, 2019. Available-for-sale securities consisted of residential and commercial mortgage-backed securities, U.S. Treasury securities, corporate bonds and obligations of state and political subdivisions.

Held-to-maturity securities are recorded at amortized cost and represent securities that the Company both intends and has the ability to hold to maturity. As of June 30, 2020, held-to-maturity securities totaled $9.3 million, or 9.0% of the total investment portfolio, compared to $14.3 million, or 13.2% of the total investment portfolio, as of December 31, 2019. Held-to-maturity securities consisted of commercial mortgage-backed securities, obligations of U.S. government-sponsored agencies and obligations of states and political subdivisions.

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Loans and Allowance for Loan and Lease Losses

The tables below summarize loan balances by portfolio category at the end of each of the most recent five quarters as of June 30, 2020:

	Quarter Ended
	2020				2019
	June 30,		March 31,		December 31,		September 30,		June 30,
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	31,384	$	31,927	$	30,820	$	28,190	$	28,401
Secured by 1-4 family residential properties		93,010		100,186		104,537		109,336		103,354
Secured by multi-family residential properties		48,807		44,029		50,910		46,843		28,033
Secured by non-farm, non-residential properties		160,683		156,222		162,981		164,941		158,748
Commercial and industrial loans		87,771		80,771		90,957		90,470		91,489
Consumer loans:
Direct consumer		33,299		36,307		38,040		37,477		37,160
Branch retail		33,000		31,568		32,305		30,008		29,609
Indirect sales		89,932		69,982		45,503		48,073		45,466
Total loans	$	577,886	$	550,992	$	556,053	$	555,338	$	522,260
Less unearned interest, fees and deferred cost		5,401		5,353		5,048		5,234		5,658
Allowance for loan and lease losses		6,423		5,954		5,762		5,585		5,087
Net loans	$	566,062	$	539,685	$	545,243	$	544,519	$	511,515

The tables below summarize changes in the allowance for loan and lease losses for each of the most recent five quarters as of June 30, 2020:

	Quarter Ended
	2020						2019
	June 30,			March 31,			December 31,			September 30,			June 30,
	(Dollars in Thousands)
Balance at beginning of period	$	5,954		$	5,762		$	5,585		$	5,087		$	4,924
Charge-offs:
Real estate loans:
Construction, land development and other land loans		—			—			—			—			—
Secured by 1-4 family residential properties		(22	)		(20	)		(20	)		(4	)		(24	)
Secured by multi-family residential properties		—			—			—			—			—
Secured by non-farm, non-residential properties		—			—			—			—			—
Commercial and industrial loans		—			—			—			—			—
Consumer loans:
Direct consumer		(470	)		(492	)		(467	)		(443	)		(554	)
Branch retail		(79	)		(142	)		(131	)		(93	)		(103	)
Indirect sales		(38	)		—			(107	)		(66	)		(76	)
Total charge-offs		(609	)		(654	)		(725	)		(606	)		(757	)
Recoveries		228			266			186			221			205
Net recoveries (charge-offs)		(381	)		(388	)		(539	)		(385	)		(552	)
Provision (reduction in reserve) for loan losses		850			580			716			883			715
Ending balance	$	6,423		$	5,954		$	5,762		$	5,585		$	5,087
Ending balance as a percentage of loans (1)		1.12	%		1.09	%		1.05	%		1.02	%		0.98	%
Net charge-offs as a percentage of average loans		0.27	%		0.28	%		0.39	%		0.28	%		0.43	%

⁽¹⁾   The allowance for loan losses as a % of loans excluding PPP loans, which are guaranteed by the SBA, was 1.15% as of June 30, 2020.

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Nonperforming Assets

Nonperforming assets at the end of the five most recent quarters as of June 30, 2020 were as follows:

	Quarter Ended
	2020						2019
	June 30,			March 31,			December 31,			September 30,			June 30,
	(Dollars in Thousands)
Non-accrual loans	$	3,415		$	3,695		$	3,723		$	1,468		$	1,479
Other real estate owned		1,003			1,054			1,078			1,248			1,258
Total	$	4,418		$	4,749		$	4,801		$	2,716		$	2,737
Nonperforming assets as a percentage of total assets		0.52	%		0.60	%		0.61	%		0.35	%		0.35	%

Allocation of Allowance for Loan and Lease Losses

While no portion of the allowance is in any way restricted to any individual loan or group of loans, and the entire allowance is available to absorb losses from any and all loans, the following table shows an allocation of the allowance for loan and lease losses as of June 30, 2020 and December 31, 2019:

	June 30, 2020								December 31, 2019
	Allocation Allowance		Percent of Allowance in Each Category to Total Allowance			Percent of Loans in Each Category to Total Loans			Allocation Allowance		Percent of Allowance in Each Category to Total Allowance			Percent of Loans in Each Category to Total Loans
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	269		4.2	%		5.4	%	$	197		3.4	%		5.5	%
Secured by 1-4 family residential properties		522		8.1	%		16.1	%		466		8.1	%		18.8	%
Secured by multi-family residential properties		492		7.7	%		8.4	%		422		7.3	%		9.2	%
Secured by non-farm, non-residential properties		1,244		19.4	%		27.8	%		964		16.7	%		29.3	%
Commercial and industrial loans		929		14.5	%		15.2	%		1,377		23.9	%		16.4	%
Consumer loans:
Direct consumer		1,417		22.1	%		5.8	%		1,625		28.2	%		6.8	%
Branch retail		475		7.4	%		5.7	%		395		6.9	%		5.8	%
Indirect sales		1,075		16.7	%		15.6	%		316		5.5	%		8.2	%
Total loans	$	6,423		100.0	%		100.0	%	$	5,762		100.0	%		100.0	%

Deposits

Total deposits increased by 8.0% to $738.3 million as of June 30, 2020, from $683.7 million as of December 31, 2019. Core deposits, which exclude time deposits of $250 thousand or more, provide a relatively stable funding source that supports earning assets. Core deposits increased to $711.1 million, or 96.3% of total deposits, as of June 30, 2020, compared to $635.5 million, or 93.0% of total deposits, as of December 31, 2019. The deposit growth during the first half of 2020 reflected the impact of the COVID-19 pandemic on both business and consumer deposit holders, including preferences for liquidity, loan payment deferrals, tax payment deferrals, stimulus checks and lower consumer spending. Of the total increase in deposits, $40.9 million represented non-interest-bearing deposits, while $13.7 million were interest-bearing deposits.

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

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Average Daily Amount of Deposits and Rates

The average daily amount of deposits and rates paid on such deposits are summarized for the periods indicated in the following table:

	Three Months Ended										Six Months Ended
	June 30, 2020					June 30, 2019					June 30, 2020					June 30, 2019
	Average Amount		Rate			Average Amount		Rate			Average Amount		Rate			Average Amount		Rate
	(Dollars in Thousands)										(Dollars in Thousands)
Non-interest-bearing demand deposit accounts	$	140,621		—		$	111,929		—		$	127,431		—		$	109,501		—
Interest-bearing demand deposit accounts		183,536		0.30	%		169,745		0.51	%		176,480		0.36	%		169,507		0.50	%
Savings deposits		155,953		0.38	%		165,318		1.12	%		160,686		0.57	%		167,111		1.11	%
Time deposits		234,041		1.46	%		244,984		1.66	%		236,137		1.56	%		249,771		1.61	%
Total deposits	$	714,151		0.64	%	$	691,976		0.98	%	$	700,734		0.75	%	$	695,890		0.96	%
Total interest-bearing deposits	$	573,530		0.79	%	$	580,047		1.17	%	$	573,303		0.91	%	$	586,389		1.15	%

Other Interest-Bearing Liabilities

Other interest-bearing liabilities consist of federal funds purchased, securities sold under agreements to repurchase and FHLB advances. This category continues to be utilized as an alternative source of funds. During the second quarter of 2020, these borrowings represented 1.8% of average interest-bearing liabilities, compared to 0% in the second quarter of 2019, and during the six-month period ended June 30, 2020, these borrowings represented 1.7% of average interest-bearing liabilities, compared to 0% in the same period of 2019.

Shareholders’ Equity

The Company has historically placed significant emphasis on maintaining its strong capital base and continues to do so. As of June 30, 2020, shareholders’ equity totaled $85.3 million, or 10.1% of total assets, compared to $84.7 million, or 10.7% of total assets, as of December 31, 2019. Management believes that this level of equity is an indicator of the financial soundness of the Company and the Company’s ability to sustain future growth and profitability. Growth in retained earnings during the six months ended June 30, 2020 was offset by a decrease in additional paid-in capital, as well as an increase in accumulated other comprehensive loss associated with decreases in the fair value of cash flow hedges during the six months ended June 30, 2020. The fair value of the cash flow hedges fluctuates based on changes in interest rates. Accordingly, the negative fair value of the hedges during the six months ended June 30, 2020 is not necessarily indicative of future performance of the portfolio.

Bancshares’ Board of Directors evaluates dividend payments based on the Company’s level of earnings and the desire to maintain a strong capital base, as well as regulatory requirements relating to the payment of dividends. During the six-month periods ended June 30, 2020 and 2019, Bancshares declared a dividend of $0.06 and $0.04 per common share, respectively, or approximately $0.4 million and $0.3 million, respectively, in aggregate amount.

As of both June 30, 2020 and December 31, 2019, the Company retained approximately $21.9 million in treasury stock. The Company initiated a share repurchase program in January 2006, under which the Company was authorized to repurchase up to 642,785 shares of Bancshares’ common stock before December 31, 2007. In December 2007, and in each year since, the Board of Directors has extended the expiration date of the share repurchase program for an additional year. Currently, the share repurchase program is set to expire on December 31, 2020. There were 54,961 shares available for repurchase under this program as of June 30, 2020. During the six months ended June 30, 2020, 38,604 shares were repurchased under this program at a weighted average price of $11.70 per share, or $0.5 million in total. During the year ended December 31, 2019, 148,738 shares were repurchased under this program at a weighted average price of $9.94 per share, or $1.5 million in total. Share repurchases under the program may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate, subject to applicable regulatory requirements.

As of June 30, 2020 and December 31, 2019, a total of 104,794 and 124,392 shares of stock, respectively, were deferred in connection with Bancshares’ Non-Employee Directors’ Deferred Compensation Plan. The plan permits non-employee directors to invest their directors’ fees and to receive the adjusted value of the deferred amounts in cash or shares of Bancshares common stock. All deferred fees, whether in the form of cash or shares of Bancshares common stock, are reflected as compensation expense in the period earned. The Company classifies all deferred directors’ fees allocated to be paid in shares of stock as equity additional paid-in capital. The Company may use issued shares or shares of treasury stock to satisfy these obligations when due.

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LIQUIDITY AND CAPITAL RESOURCES

The asset portion of the balance sheet provides liquidity primarily from the following sources: (1) excess cash and interest-bearing deposits in banks, (2) federal funds sold, (3) principal payments and maturities of loans and (4) principal payments and maturities from the investment portfolio. Loans maturing or repricing in one year or less amounted to $95.4 million as of June 30, 2020 and $125.9 million as of December 31, 2019. Investment securities forecasted to mature or reprice in one year or less were estimated to be $10.8 million and $6.9 million of the investment portfolio as of June 30, 2020 and December 31, 2019, respectively.

Although some securities in the investment portfolio have legal final maturities exceeding 10 years, a substantial percentage of the portfolio provides monthly principal and interest payments and consists of securities that are readily marketable and easily convertible into cash on short notice. As of June 30, 2020, the investment securities portfolio had an estimated average life of 2.6 years. However, management does not rely solely upon the investment portfolio to generate cash flows to fund loans, capital expenditures, dividends, debt repayment and other cash requirements. These activities are also funded by cash flows from loan payments, as well as increases in deposits and short-term borrowings.

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

As of both June 30, 2020 and December 31, 2019, the Company had $10.0 million of outstanding borrowings under FHLB advances. The Company had up to $216.5 million and $211.5 million in remaining unused credit from the FHLB (subject to available collateral) as of June 30, 2020 and December 31, 2019, respectively. In addition, the Company had $61.7 million in unused established federal funds lines as of both June 30, 2020 and December 31, 2019.

Management believes that the Company has adequate sources of liquidity to cover its contractual obligations and commitments over the next twelve months.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

Assessing Short-Term Interest Rate Risk – Net Interest Margin Simulation

On a monthly basis, management simulates how changes in short- and long-term interest rates will impact future profitability, as reflected by changes in the Bank’s net interest margin and net interest income. The tables below depict how, as of June 30, 2020, pre-tax net interest margin and net interest income are forecasted to change over timeframes of six months, one year, two years and five years under the four listed interest rate scenarios. The interest rate scenarios contemplate immediate and parallel shifts in short- and long-term interest rates.

Average Change in Net Interest Margin from Level Interest Rate Forecast (basis points, pre-tax):

	6 Months			1 Year			2 Years			5 Years
+1%		9			8			11			21
+2%		13			11			15			35
-1%		(2	)		(3	)		(6	)		(13	)
-2%		(6	)		(9	)		(14	)		(23	)

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Cumulative Change in Net Interest Income from Level Interest Rate Forecast (dollars in thousands, pre-tax):

	6 Months			1 Year			2 Years			5 Years
+1%	$	364		$	674		$	1,805		$	8,849
+2%		539			920			2,552			14,875
-1%		(65	)		(241	)		(1,049	)		(5,414	)
-2%		(244	)		(733	)		(2,395	)		(9,712	)

Assessing Long-Term Interest Rate Risk – Market Value of Equity and Estimating Modified Durations for Assets and Liabilities

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

The table below is a summary of estimated market value changes in the Company’s assets, liabilities and equity as of June 30, 2020, for the four listed scenarios.

	+1%			+2%			-1%		-2%
	(Dollars in Thousands)
Change in market value of assets	$	(13,581	)	$	(28,057	)	$	5,763	$	7,950
Change in market value of liabilities		(18,362	)		(32,595	)		5,467		4,641
Net change in market value of equity		4,781			4,538			296		3,309
Beginning market value of equity		105,337			107,422			102,695		102,618
Resulting market value of equity	$	110,118		$	111,960		$	102,991	$	105,927

ITEM 4. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Bancshares maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in Bancshares’ reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to Bancshares’ management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Bancshares’ management carried out an evaluation, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Bancshares’ disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of June 30, 2020, pursuant to the evaluation of these controls and procedures required by Rule 13a-15 of the Exchange Act. Based on that evaluation, Bancshares’ management concluded, as of June 30, 2020, that Bancshares’ disclosure controls and procedures were effective at the reasonable assurance level to ensure that the information required to be disclosed in Bancshares’ periodic filings with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control Over Financial Reporting

There were no changes in Bancshares’ internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

A list of factors that could materially affect the Company’s business, financial condition and/or operating results is included in Part I, Item 1A, “Risk Factors” in Bancshares’ Annual Report on Form 10-K as of and for the year ended December 31, 2019. There have been no material changes to such risk factors, other than as described in the risk factors below. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.

The novel coronavirus (COVID-19) global pandemic has adversely impacted our business, and the ultimate effect on our business, liquidity, results of operations and financial condition will depend on future developments that are highly uncertain, including the severity, scope and duration of the pandemic, its cumulative economic effects and actions taken by governmental authorities in response to the pandemic.

Beginning in 2020, the global pandemic related to COVID-19 began to impact the worldwide economy and our results of operations. Because of the size and breadth of this pandemic, all of the direct and indirect consequences of COVID-19 are not yet known and may not emerge for some time. The COVID-19 pandemic has resulted, and may for some time continue to result, in illness, increased unemployment, temporary closures of many businesses, disruption to trade, travel, employee productivity and other economic activities, and destabilization of financial markets and economic activity. In response to the COVID-19 pandemic, the governments of the states in which we operate, 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 their time outside of their homes, and ordering temporary closures of businesses that have been deemed to be non-essential. The extent of the impact of COVID-19 on the Company’s operational and financial performance is currently uncertain, cannot be predicted and will depend on certain developments, including, among others, the severity, scope and duration of the pandemic, its impact on our customers, employees and vendors, and the continued governmental, regulatory and private sector responses, which may be precautionary, to the coronavirus.

Risks presented by the ongoing effects of the COVID-19 pandemic include the following:

• Impact to Financial Markets. There has been, and we may continue to experience, significant volatility in U.S. financial markets, including equity, fixed-income and commodity markets, and in our investment securities portfolio. Actual and potential declines in the credit quality of our loan portfolio, owing to the effects of the COVID-19 pandemic in the markets that we serve, caused us to increase our loan loss provision during the six months ended June 30, 2020 and may lead to further increased provisions for loan losses and increases in our allowance for loan and lease losses. Even after the pandemic subsides, the U.S. economy may experience a recession, and the Company anticipates that the Company’s businesses would be materially and adversely affected by a prolonged recession.

• Interest Rate Environment. The COVID-19 pandemic has resulted in a number of Federal Reserve actions. Market interest rates have declined significantly, which has caused a decrease in our net interest margin. We expect that these reductions in interest rates, especially if prolonged, could continue to adversely affect our net interest income and margins and our profitability.

• Loan Deferments and At-Risk Loans. The Company has implemented initiatives, and may implement additional or expanded initiatives, to provide short-term payment relief to borrowers who have been negatively impacted by COVID-19, such as a deferral of loan payments and the suspension of foreclosures due to unfavorable market conditions. In accordance with the Company’s uniform framework for establishing and monitoring credit risk, management will continue to closely evaluate all loans that request and receive COVID-19 deferments or that are considered to be “at-risk” with respect to the pandemic. However, there continues to be a significant level of uncertainty as to the ultimate impact that the pandemic will have on these borrowers, and such initiatives or accommodations may have a negative impact on the Company’s business, financial condition, liquidity, revenues and results of operations in the near term and, if not effective in mitigating the effect of COVID-19 on the Company’s customers, may adversely affect the Company’s business and results of operations more substantially over a longer period of time.  Loan modifications and payment deferrals may also increase our credit risks.

• Impact on our Customers’ Financial Condition. The Company’s business, financial condition and results of operations generally rely upon the ability of the Company’s borrowers to repay their loans, the value of collateral underlying those loans, and demand for loans and other products and services that the Company offers, which are highly dependent on the business environment in the Company’s primary markets and the U.S. economy as a whole.  As a result of the COVID-19 pandemic and its impact on the economy, including credit deterioration and defaults in many industries, including natural resources, hospitality, transportation and commercial real estate, we could have an increase in customer delinquencies and loan defaults, including defaults on unsecured loans, credit losses in the Company’s loan portfolio, and further increases in our allowance for loan losses and foreclosures. Declines in the net worth and liquidity of borrowers and loan guarantors could impair their ability to honor commitments to us. Customers may draw on lines of credit, which could impact our liquidity or cause us to pay higher rates than normal for deposits and other funding.

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• Reduced Demand. There has been and may continue to be reduced consumer spending resulting from job losses, from businesses being deemed to be “non-essential” by governments in the markets that the Bank serves, and from “non-essential” and “essential” businesses suffering adverse effects from reduced levels of economic activity in the Company’s markets from and other effects attributable to the pandemic. Reduced demand for the Bank’s banking products and services could negatively impact, among other things, our liquidity, regulatory capital and growth strategy. Our asset size and the amounts of deposits have and may continue to fluctuate significantly based on changes in the financial behaviors of our deposit customers.

• Regulation. The effects of government fiscal and monetary policies on the economy and financial stability, generally, and on our business, results of operations and financial condition cannot be predicted.

• Business Disruption. The Company and the Bank have experienced, and may continue to experience, disruptions to the conduct of business due to the following:

o Adverse effects to employees’ health, which may necessitate their recovery away from work.

o Shelter in place, or other restrictions and interruptions of our business and contact with our customers;

o Unavailability of key personnel necessary to conduct the Company’s and the Bank’s business activities;

o Sustained closures of our branch lobbies or the offices of our customers;

o Inability to provide customer support; and

o Inability of vendors and third-party service providers to work or provide services effectively, including because of illness, quarantines, government actions or other restrictions in connection with the pandemic.

As we sought to protect the health and safety of our employees and customers during the first and second quarters of 2020, we took numerous actions to modify our business operations, including restricting employee travel, directing a significant percentage of our employees that were able to do so to work from home, closing the lobbies of many of our branches, and, in some cases, the branch itself, and implementing our business continuity plans and protocols. We may take further actions in the future either of our own volition or as a result of government orders or directives. Although we believe that we have been able to adequately service our customers under these restrictions, we cannot provide any assurances that our ability to do so would not be negatively impacted if additional restrictions are necessary or imposed on us in the future. If the Company is unable to recover from a business disruption on a timely basis, our business, financial condition and results of operations could be materially and adversely affected. The Company may also incur additional costs to remedy damages caused by such disruptions, which could further adversely affect our business, financial condition and results of operations.

• Security Concerns. The COVID-19 pandemic has contributed to or resulted in heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements and increased levels of remote access. Cybercriminals may increase their attempts to compromise business and consumer e-mails, including an increase in phishing attempts, and fraudulent vendors or other parties may view the pandemic as an opportunity to prey upon consumers and businesses during this time. This could result in increased fraud losses to us or our customers. The increase in online and remote banking activities may also increase the risk of fraud against our customers.

• Increase in Expenses. In the near-term, non-interest expense may increase due to expenditures incurred by the Company in response to the COVID-19 pandemic. Such expenses could include salary and employee benefits payments for increased work levels in response to the pandemic, costs to modify office space and retail banking centers to protect the safety of employees and customers, and expenses incurred to upgrade the Company’s technological systems to enhance remote interactions between employees and customers, as well as to respond to emerging threats associated with cybersecurity.

Any of the above events could cause, contribute to or exacerbate the risks and uncertainties enumerated in our Annual Report on Form 10-K as of and for the year ended December 31, 2019 or otherwise in this report, and could materially adversely affect our business, results of operations or financial condition. We have implemented our business contingency plan and taken other precautions with respect to the COVID-19 global pandemic. However, such measures may not adequately protect our business from the full impacts of the pandemic.

Since the Bank is a participating lender in the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), the Company and the Bank are subject to additional risks of litigation from the Bank’s customers or other parties regarding the Bank’s processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties.

On March 27, 2020, President Trump signed the CARES Act, which included a $349 billion loan program administered through the SBA referred to as the PPP. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. The Bank is participating as a lender in the PPP. The PPP opened on April 3, 2020; however, because of the short timeframe between the passing of the CARES Act and the opening of the PPP, there was and is some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes the Company to risks relating to noncompliance with the PPP. On or about April 16, 2020, the SBA notified lenders that the $349 billion

58

earmarked for the PPP was exhausted. Congress approved approximately $310 billion of additional funding for the PPP on April 24, 2020. As of June 30, 2020, the Company had obtained approval from the SBA for 158 loans to small businesses, with an aggregate principal balance of $13.8 million.

Since the opening of the PPP, several other larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP. The Company and the Bank may be exposed to the risk of litigation, from both customers and non-customers that approached the Bank regarding PPP loans, regarding the process and procedures used in processing applications for the PPP. If any such litigation is filed against the Company or the Bank and is not resolved in a manner favorable to the Company or the Bank, it may result in significant financial liability or adversely affect the Company’s reputation. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs or reputational damage caused by PPP related litigation could have a material adverse impact on our business, financial condition and results of operations.

The Bank also has credit risk on PPP loans, if the SBA determines deficiencies in the manner in which PPP loans were originated, funded or serviced by the Bank, such as an issue with the eligibility of a borrower to receive a PPP loan, including those related to the ambiguity in the laws, rules and guidance regarding the PPP’s operation. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there were deficiencies in the manner in which the PPP loan was originated, funded or serviced by the Company, the SBA may deny its liability under the PPP loan guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Company. Similar issues may also result in the denial of forgiveness of PPP loans, which would adversely affect and could result in losses, including possible bankruptcies, which may expose us to further costs and potential losses.

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

The following table sets forth purchases made by or on behalf of Bancshares or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act, of shares of Bancshares’ common stock during the second quarter of 2020:

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs (2)		Maximum Number of Shares that May Yet Be Purchased Under the Programs (2)
April 1 – April 30		7,492	$	6.34		—		54,961
May 1 – May 31		2,045	$	7.54		—		54,961
June 1 – June 30		1,416	$	7.28		—		54,961
Total		10,953	$	6.68		—		54,961

(1) 10,953 shares were purchased in open-market transactions by an independent trustee for Bancshares’ 401(k) Plan during the second quarter of 2020.

(2) On December 18, 2019, the Board of Directors extended the share repurchase program initially approved by the Board on January 19, 2006, which authorized the repurchase of up to 642,785 shares of common stock. As of June 30, 2020, Bancshares was authorized to repurchase up to 54,961 shares of common stock prior to the expiration date of December 31, 2020.

59

ITEM 6. EXHIBITS

Exhibit No.	Description
3.1	Certificate of Incorporation of United Security Bancshares, Inc. (incorporated by reference to Exhibit 3(i) to the Quarterly Report on Form 10-Q (File No. 000-14549), filed on November 12, 1999).
3.1A	Certificate of Amendment to the Certificate of Incorporation of United Security Bancshares, Inc., effective as of October 11, 2016 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 000-14549), filed on October 11, 2016).
3.2	Bylaws of First US Bancshares, Inc., effective as of October 11, 2016 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K (File No. 000-14549), filed on October 11, 2016).
10.1*	First US Bancshares, Inc. Non-Employee Director Fee Schedule.
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32*	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*	Interactive Data Files for the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020.

________________

*Filed herewith

60

SIGNATURES

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

FIRST US BANCSHARES, INC.

DATE: August 12, 2020

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

61

EX-10.1

Exhibit 10.1

FIRST US BANCSHARES, INC. NON-EMPLOYEE DIRECTOR FEE SCHEDULE

(Effective 7/1/2020)

RETAINER SCHEDULE

DIRECTOR:		$24,000 annually
NON-EXECUTIVE BOARD CHAIR:		+ $10,000 annually
COMMITTEE CHAIR:
	Audit	+ $7,500 annually
	Compensation	+ $5,000 annually
	Executive, Nominating & Corporate Governance	+ $5,000 annually
	Other (ALCO, DLC, ROTC, ALC Board)	+ $3,000 annually

Annual Equity Awards

Non-employee directors will be eligible for annual equity awards under the First US Bancshares, Inc. 2013 Incentive Plan, as amended, in such form and amount as determined by the Compensation Committee.

Mileage

Any non-employee director attending a board, committee or special meeting outside the county in which the director resides will be paid mileage at the Company’s mileage reimbursement rate. Any officer or employee attending such meeting will be paid mileage at the same rate if a Company vehicle is not assigned to the officer or employee.

Other Expenses

Any non-employee director that may incur expenses for travel, training, customer entertainment or other such Company-related item shall complete the Company’s standard reimbursement claim form and submit it to the CEO.  If approved by the CEO, the non-employee director will be reimbursed for such Company-related expense according to existing Company Policy.

Meetings may be attended in person or via conference call.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, James F. House, certify that:

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

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

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

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

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

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

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

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (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 the equivalent functions):

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

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

Date: August 12, 2020

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

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Thomas S. Elley, certify that:

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

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

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

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

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

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

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

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (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 the equivalent functions):

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

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

Date: August 12, 2020

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

EX-32

Exhibit 32

CERTIFICATION

PURSUANT TO 18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, James F. House, President and Chief Executive Officer of First US Bancshares, Inc., and Thomas S. Elley, Vice President, Treasurer and Assistant Secretary, Chief Financial Officer and Principal Accounting Officer of First US Bancshares, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of First US Bancshares, Inc. for the fiscal quarter ended June 30, 2020 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of First US Bancshares, Inc.

By:	/s/ James F. House
	James F. House
	President and Chief Executive Officer
	August 12, 2020
By:	/s/ Thomas S. Elley
	Thomas S. Elley
	Vice President, Treasurer and Assistant
	Secretary, Chief Financial Officer and Principal
	Accounting Officer
	August 12, 2020

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
Entity Registrant Name	FIRST US BANCSHARES INC
Entity Central Index Key	0000717806
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		6,176,756
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	0-14549
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	63-0843362
Entity Address, Address Line One	3291 U.S. Highway 280
Entity Address, City or Town	Birmingham
Entity Address, State or Province	AL
Entity Address, Postal Zip Code	35243
City Area Code	205
Local Phone Number	582-1200
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	FUSB
Security Exchange Name	NASDAQ

XML

Interim Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
ASSETS
Cash and due from banks	$ 12,751	$ 11,939
Interest-bearing deposits in banks	95,517	45,091
Total cash and cash equivalents	108,268	57,030
Federal funds sold	80	10,080
Investment securities available-for-sale, at fair value	94,658	94,016
Investment securities held-to-maturity, at amortized cost	9,306	14,340
Federal Home Loan Bank stock, at cost	1,135	1,137
Loans, net of allowance for loan and lease losses of $6,423 and $5,762, respectively	566,062	545,243
Premises and equipment, net of accumulated depreciation of $23,195 and $22,570, respectively	28,724	29,216
Cash surrender value of bank-owned life insurance	15,696	15,546
Accrued interest receivable	3,140	2,488
Goodwill and core deposit intangible, net	8,605	8,825
Other real estate owned	1,003	1,078
Other assets	9,070	9,739
Total assets	845,747	788,738
LIABILITIES AND SHAREHOLDERS’ EQUITY
Non-interest-bearing	153,664	112,729
Interest-bearing	584,626	570,933
Total deposits	738,290	683,662
Accrued interest expense	438	537
Other liabilities	11,404	9,766
Short-term borrowings	10,334	10,025
Total liabilities	760,466	703,990
Shareholders’ equity:
Common stock, par value $0.01 per share, 10,000,000 shares authorized; 7,596,551 and 7,568,053 shares issued, respectively; 6,176,433 and 6,157,692 shares outstanding, respectively	75	75
Additional paid-in capital	13,573	13,814
Accumulated other comprehensive loss, net of tax	(145)	(46)
Retained earnings	93,636	92,755
Less treasury stock: 1,420,118 and 1,410,361 shares at cost, respectively	(21,858)	(21,850)
Total shareholders’ equity	85,281	84,748
Total liabilities and shareholders’ equity	$ 845,747	$ 788,738

XML

Interim Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Statement Of Financial Position [Abstract]
Loans, allowance for loan losses	$ 6,423	$ 5,762
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	10,000,000	10,000,000
Common stock, shares issued (in shares)	7,596,551	7,568,053
Common stock, shares outstanding (in shares)	6,176,433	6,157,692
Treasury stock, shares (in shares)	1,420,118	1,410,361
Accumulated depreciation	$ 23,195	$ 22,570

XML

Interim Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Interest income:
Interest and fees on loans	$ 9,237	$ 9,833	$ 18,876	$ 19,506
Interest on investment securities	543	1,090	1,301	2,230
Total interest income	9,780	10,923	20,177	21,736
Interest expense:
Interest on deposits	1,131	1,690	2,606	3,330
Interest on borrowings	26		62
Total interest expense	1,157	1,690	2,668	3,330
Net interest income	8,623	9,233	17,509	18,406
Provision for loan and lease losses	850	715	1,430	1,115
Net interest income after provision for loan and lease losses	7,773	8,518	16,079	17,291
Non-interest income:
Credit insurance income	45	108	198	251
Net gain on sales and prepayments of investment securities	326	9	326	22
Lease income	212	212	424	421
Other income, net	308	333	679	670
Total non-interest income	1,330	1,291	2,627	2,556
Non-interest expense:
Salaries and employee benefits	5,193	5,195	10,329	10,183
Net occupancy and equipment	995	1,046	1,996	2,135
Computer services	424	333	841	684
Fees for professional services	401	321	679	563
Other expense	1,568	1,609	3,230	3,392
Total non-interest expense	8,581	8,504	17,075	16,957
Income before income taxes	522	1,305	1,631	2,890
Provision for income taxes	118	300	380	651
Net income	$ 404	$ 1,005	$ 1,251	$ 2,239
Basic net income per share	$ 0.07	$ 0.16	$ 0.20	$ 0.35
Diluted net income per share	0.06	0.15	0.19	0.33
Dividends per share	$ 0.03	$ 0.02	$ 0.06	$ 0.04
Service [Member]
Non-interest income:
Revenue from Contract with Customer, Including Assessed Tax	$ 263	$ 443	$ 697	$ 903
Mortgage Banking [Member]
Non-interest income:
Revenue from Contract with Customer, Including Assessed Tax	$ 176	$ 186	$ 303	$ 289

XML

Interim Condensed Consolidated Statements of Comprehensive 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 income	$ 404	$ 1,005	$ 1,251	$ 2,239
Other comprehensive income (loss):
Unrealized holding gains on securities available-for-sale arising during period, net of tax expense of $343, $402, $550 and $686, respectively	1,031	1,205	1,653	2,056
Reclassification adjustment for net gains on securities available-for -sale realized in net income, net of tax of $81, $2, $81 and $5, respectively	(245)	(7)	(245)	(17)
Unrealized holding losses arising during the period on effective cash flow hedge derivatives, net of tax benefit of $56, $0, $503 and $0, respectively	(168)		(1,507)
Other comprehensive income (loss)	618	1,198	(99)	2,039
Total comprehensive income	$ 1,022	$ 2,203	$ 1,152	$ 4,278

XML

Interim Condensed Consolidated Statements of Comprehensive 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]
Unrealized holding gains (losses) on securities available-for-sale arising during period, tax expense (benefit)	$ 343	$ 402	$ 550	$ 686
Reclassification adjustment for net gains on securities available-for-sale realized in net income, tax expense (benefit)	81	2	81	5
Unrealized holding gains (losses) arising during the period on effective cash flow hedge derivatives, tax expense (benefit)	$ 56	$ 0	$ 503	$ 0

XML

Interim Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Non-controlling Interest [Member]
Beginning balance, value at Dec. 31, 2018	$ 79,437	$ 75	$ 13,496	$ (2,377)	$ 88,668	$ (20,414)	$ (11)
Balance (in shares) at Dec. 31, 2018		6,298,062
Net income	2,239				2,239
Net change in fair value of securities available-for-sale, net of tax	2,039			2,039
Dividends declared	(253)				(253)
Impact of stock-based compensation plans, net	192		192
Impact of stock-based compensation plans, net (in shares)		5,520
Reissuance of treasury stock as compensation			(42)			42
Reissuance of treasury stock as compensation (in shares)		2,579
Discontinuation of partnership consolidation	94				83		$ 11
Ending balance, value at Jun. 30, 2019	83,748	$ 75	13,646	(338)	90,737	(20,372)
Balance (in shares) at Jun. 30, 2019		6,306,161
Beginning balance, value at Mar. 31, 2019	81,573	$ 75	13,589	(1,536)	89,859	(20,414)
Balance (in shares) at Mar. 31, 2019		6,303,582
Net income	1,005				1,005
Net change in fair value of securities available-for-sale, net of tax	1,198			1,198
Dividends declared	(127)				(127)
Impact of stock-based compensation plans, net	99		99
Reissuance of treasury stock as compensation			(42)			42
Reissuance of treasury stock as compensation (in shares)		2,579
Ending balance, value at Jun. 30, 2019	83,748	$ 75	13,646	(338)	90,737	(20,372)
Balance (in shares) at Jun. 30, 2019		6,306,161
Beginning balance, value at Dec. 31, 2019	84,748	$ 75	13,814	(46)	92,755	(21,850)
Balance (in shares) at Dec. 31, 2019		6,157,692
Net income	1,251				1,251
Net change in fair value of securities available-for-sale, net of tax	1,408			1,408
Net change in fair value of derivative instruments, net of tax	(1,507)			(1,507)
Dividends declared	(370)				(370)
Impact of stock-based compensation plans, net	203		203
Impact of stock-based compensation plans, net (in shares)		28,498
Treasury stock repurchases	(452)					(452)
Treasury stock repurchases (in shares)		(38,604)
Reissuance of treasury stock as compensation			(444)			444
Reissuance of treasury stock as compensation (in shares)		28,847
Ending balance, value at Jun. 30, 2020	85,281	$ 75	13,573	(145)	93,636	(21,858)
Balance (in shares) at Jun. 30, 2020		6,176,433
Beginning balance, value at Mar. 31, 2020	84,332	$ 75	13,904	(763)	93,418	(22,302)
Balance (in shares) at Mar. 31, 2020		6,143,286
Net income	404				404
Net change in fair value of securities available-for-sale, net of tax	786			786
Net change in fair value of derivative instruments, net of tax	(168)			(168)
Dividends declared	(186)				(186)
Impact of stock-based compensation plans, net	113		113
Impact of stock-based compensation plans, net (in shares)		4,300
Reissuance of treasury stock as compensation			(444)			444
Reissuance of treasury stock as compensation (in shares)		28,847
Ending balance, value at Jun. 30, 2020	$ 85,281	$ 75	$ 13,573	$ (145)	$ 93,636	$ (21,858)
Balance (in shares) at Jun. 30, 2020		6,176,433

XML

Interim Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Statement Of Stockholders Equity [Abstract]
Dividends per share	$ 0.03	$ 0.02	$ 0.06	$ 0.04

XML

Interim Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities:
Net income	$ 1,251	$ 2,239
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	806	796
Provision for loan and lease losses	1,430	1,115
Deferred income tax provision	366	624
Net gain on sale and prepayment of investment securities	(326)	(22)
Stock-based compensation expense	203	192
Net amortization of securities	170	306
Amortization of intangible assets	220	256
Net loss on premises and equipment and other real estate	288	245
Changes in assets and liabilities:
(Increase) decrease in accrued interest receivable	(652)	340
Decrease (increase) in other assets	28	(4,079)
(Decrease) increase in accrued interest expense	(99)	102
(Decrease) increase in other liabilities	(1,278)	3,192
Net cash provided by operating activities	2,407	5,306
Cash flows from investing activities:
Net decrease (increase) in federal funds sold	10,000	(6,727)
Purchases of investment securities, available-for-sale	(26,296)	(2,784)
Proceeds from sale of investment securities, available-for-sale	12,203
Proceeds from maturities and prepayments of investment securities, available-for-sale	15,513	19,787
Proceeds from maturities and prepayments of investment securities, held-to-maturity	5,005	2,733
Net decrease (increase) in Federal Home Loan Bank stock	2	(10)
Proceeds from the sale of premises and equipment and other real estate	646	768
Net (increase) decrease in loans	(21,896)	1,455
Purchases of premises and equipment	(461)	(2,642)
Net cash (used in) provided by investing activities	(5,284)	12,580
Cash flows from financing activities:
Net increase (decrease) in deposits	54,628	(21,919)
Net increase (decrease) in short-term borrowings	309	(454)
Treasury stock repurchases	(452)
Dividends paid	(370)	(253)
Net cash provided by (used in) financing activities	54,115	(22,626)
Net increase (decrease) in cash and cash equivalents	51,238	(4,740)
Cash and cash equivalents, beginning of period	57,030	49,599
Cash and cash equivalents, end of period	108,268	44,859
Supplemental disclosures:
Interest	2,767	3,228
Income taxes	185	151
Non-cash transactions:
Assets acquired in settlement of loans	854	782
Reissuance of treasury stock as compensation	$ 444	$ 42

XML

General

6 Months Ended

Jun. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

General

1. GENERAL

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

The unaudited interim condensed consolidated financial statements, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. The results of operations for any interim period are not necessarily indicative of results expected for the fiscal year ending December 31, 2020. While certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), management believes that the disclosures herein are adequate to make the information presented not misleading. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2019.

Risks and Uncertainties

The COVID-19 pandemic and its associated impacts on trade (including supply chains and export levels), travel, employee productivity and other economic activities have had, are currently having, and may for some time continue to have a destabilizing effect on financial markets and economic activity. The extent of the impact of COVID-19 on the Company’s operational and financial performance is currently uncertain, cannot be predicted and will depend on certain developments, including, among others, the duration and spread of COVID-19, its impact on our customers, employees and vendors, and the continued governmental, regulatory and private sector responses, which may be precautionary, to the coronavirus.  

The Company’s business, financial condition and results of operations generally rely upon the ability of the Company’s borrowers to repay their loans, the value of collateral underlying those loans, and demand for loans and other products and services that the Company offers, which are highly dependent on the business environment in the Company’s primary markets and the United States economy as a whole.

In light of the changing economic outlook as a result of COVID-19, as well as other factors, in March 2020, the 10-year Treasury yield was reduced to historic lows, and the equity markets were significantly impacted. In response, the Federal Reserve reduced the target federal funds rate by 50 basis points on March 3, 2020, and then by an additional 100 basis points on March 15, 2020. These reductions in interest rates and other economic uncertainties that have arisen as a result primarily of the COVID-19 pandemic have negatively impacted net interest income, provisions for loan losses and noninterest income. Additional negative financial impacts could occur; however, the ultimate potential impact is not known at this time.

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Basis of Presentation

6 Months Ended

Jun. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

2. BASIS OF PRESENTATION

Summary of Significant Accounting Policies

Certain significant accounting policies followed by the Company are set forth in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2019.

Reclassification

Certain disclosures in the notes to the prior period consolidated financial statements have been reclassified to conform to the 2020 presentation. These reclassifications had no effect on the Company’s results of operations, financial position or net cash flow.

Net Income Per Share

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Basic shares		6,276,001		6,423,642		6,279,079		6,420,653
Dilutive shares		422,000		427,282		422,000		427,282
Diluted shares		6,698,001		6,850,924		6,701,079		6,847,935

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(Dollars in Thousands, Except Per Share Data)
Net income	$	404	$	1,005	$	1,251	$	2,239
Basic net income per share	$	0.07	$	0.16	$	0.20	$	0.35
Diluted net income per share	$	0.06	$	0.15	$	0.19	$	0.33

Comprehensive Income

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

Accounting Policies Recently Adopted

Accounting Standards Update (“ASU”) 2018-15, “Intangibles-Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force).” Issued in August 2018, ASU 2018-15 aims to reduce complexity in the accounting for costs of implementing a cloud computing service arrangement. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments of ASU 2018-15 require an entity to follow the guidance in FASB Accounting Standards Codification (“ASC”) Subtopic 350-40, “Intangibles-Goodwill and Other – Internal-Use Software,” in order to determine which implementation costs to capitalize as assets related to the service contract and which costs to expense. The amendments of ASU 2018-15 also require an entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement (i.e., the noncancelable period of the arrangement plus periods covered by (1) an option to extend the arrangement if the entity is reasonably certain to exercise that option, (2) an option to terminate the arrangement if the entity is reasonably certain not to exercise the option and (3) an option to extend (or not to terminate) the arrangement in which exercise of the option is in the control of the vendor). ASU 2018-15 also requires an entity to present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement, and to classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. ASU 2018-15 became effective for the Company on January 1, 2020. The adoption of ASU 2018-15 did not have a material impact on the Company’s consolidated financial statements.

ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” Issued in August 2018, the amendments in this ASU remove disclosure requirements in ASC Topic 820 related to (1) the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels and (3) the valuation processes for Level 3 fair value measurements. The ASU also modifies disclosure requirements such that (1) for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date that restrictions from redemption might lapse, only if the investee has communicated the timing to the entity or announced the timing publicly, and (2) it is clear that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. Additionally, this ASU adds disclosure requirements for public entities about (1) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 became effective for the Company on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements.

Pending Accounting Pronouncements

ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.”  Issued in March 2020, ASU 2020-04 seeks to provide guidance, for a limited time, to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. ASU 2020-04 was issued in response to concerns about the structural risks of interbank offered rates, and, specifically, the risk that the London Interbank Offer Rate (LIBOR) will no longer be used. Regulators have begun reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. ASU 2020-04 provides temporary optional expedients to U.S. GAAP guidance on contract modifications, hedge accounting and other transactions that reference LIBOR or another reference rate expected to be discontinued. As the guidance in ASU 2020-04 is intended to assist entities during the global market-wide reference rate transition period, it is in effect for a limited time, from March 12, 2020 through December 31, 2022. Management is currently evaluating the impact of the potential discontinuance of LIBOR, and a determination cannot be made at this time as to the impact that the amendments of ASU 2020-04 or the reference rate reform will have on the Company’s consolidated financial statements.

ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” Issued in December 2019, ASU 2019-12 seeks to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company intends to adopt the amendments in ASU 2019-12 on January 1, 2021. Adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated financial statements.

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

ASU 2016-13, "Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” Issued in June 2016, ASU 2016-13 removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables and held-to-maturity debt securities. Under current U.S. GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance removes all current recognition thresholds and requires companies to recognize an allowance for lifetime expected credit losses. Credit losses will be immediately recognized through net income; the amount recognized will be based on the current estimate of contractual cash flows not expected to be collected over the financial asset’s contractual term. ASU 2016-13 also amends the credit loss measurement guidance for available-for-sale debt securities. The standard will add new disclosures related to factors that influenced management’s estimate, including current expected credit losses, the changes in those factors and reasons for the changes, as well as the method applied to revert to historical credit loss experience. As originally issued, ASU 2016-13 was effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after December 15, 2019, with institutions required to apply the changes through a cumulative-effect adjustment to their retained earnings balance as of the beginning of the first reporting period in which the guidance is effective. On October 16, 2019, the FASB approved a delay in the implementation of ASU 2016-13 by three years for smaller reporting companies, including the Company. Management has been in the process of developing a revised model to calculate the allowance for loan and lease losses upon implementation of ASU 2016-13 in order to determine the impact on the Company’s consolidated financial statements and, at this time, expects to recognize a one-time cumulative effect adjustment to the allowance for loan and lease losses as of the beginning of the first reporting period in which the new standard is effective. The magnitude of any such one-time adjustment is not yet known.

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Investment Securities

6 Months Ended

Jun. 30, 2020

Investments Debt And Equity Securities [Abstract]

Investment Securities

3. INVESTMENT SECURITIES

Details of investment securities available-for-sale and held-to-maturity as of June 30, 2020 and December 31, 2019 were as follows:

	Available-for-Sale
	June 30, 2020
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	31,638	$	1,009	$	(13	)	$	32,634
Commercial		52,201		858		(212	)		52,847
Obligations of states and political subdivisions		6,211		113		(1	)		6,323
Corporate notes		2,706		67		—			2,773
U.S. Treasury securities		81		—		—			81
Total	$	92,837	$	2,047	$	(226	)	$	94,658

	Held-to-Maturity
	June 30, 2020
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	7,052	$	105	$	(4	)	$	7,153
Obligations of U.S. government-sponsored agencies		1,205		38		—			1,243
Obligations of states and political subdivisions		1,049		24		—			1,073
Total	$	9,306	$	167	$	(4	)	$	9,469

	Available-for-Sale
	December 31, 2019
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	46,182	$	372	$	(209	)	$	46,345
Commercial		43,686		73		(386	)		43,373
Obligations of states and political subdivisions		4,123		95		—			4,218
U.S. Treasury securities		80		—		—			80
Total	$	94,071	$	540	$	(595	)	$	94,016

	Held-to-Maturity
	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	8,923	$	2	$	(46	)	$	8,879
Obligations of U.S. government-sponsored agencies		4,324		5		(10	)		4,319
Obligations of states and political subdivisions		1,093		15		—			1,108
Total	$	14,340	$	22	$	(56	)	$	14,306

The scheduled maturities of investment securities available-for-sale and held-to-maturity as of June 30, 2020 are presented in the following table:

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Maturing within one year	$	3,493	$	3,523	$	22	$	22
Maturing after one to five years		4,655		4,802		765		783
Maturing after five to ten years		47,024		48,326		3,594		3,659
Maturing after ten years		37,665		38,007		4,925		5,005
Total	$	92,837	$	94,658	$	9,306	$	9,469

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

The following tables reflect gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of June 30, 2020 and December 31, 2019.

	Available-for-Sale
	June 30, 2020
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	1,414	$	(6	)	$	866	$	(7	)
Commercial		4,415		(6	)		3,469		(206	)
Obligations of states and political subdivisions		1,139		(1	)		146		—
U.S. Treasury securities		81		—			—		—
Total	$	7,049	$	(13	)	$	4,481	$	(213	)

	Held-to-Maturity
	June 30, 2020
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	771	$	(4	)	$	—	$	—
Total	$	771	$	(4	)	$	—	$	—

	Available-for-Sale
	December 31, 2019
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	17,340	$	(66	)	$	10,094	$	(143	)
Commercial		3,794		(25	)		29,754		(361	)
U.S. Treasury securities		80		—			—		—
Total	$	21,214	$	(91	)	$	39,848	$	(504	)

	Held-to-Maturity
	December 31, 2019
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	685	$	—		$	6,405	$	(46	)
Obligations of U.S. government-sponsored agencies		846		(4	)		2,994		(6	)
Total	$	1,531	$	(4	)	$	9,399	$	(52	)

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

As of June 30, 2020, 8 debt securities had been in a loss position for more than 12 months, and 11 debt securities had been in a loss position for less than 12 months. As of December 31, 2019, 69 debt securities had been in a loss position for more than 12 months, and 35 debt securities had been in a loss position for less than 12 months. As of both June 30, 2020 and December 31, 2019, the losses for all securities were considered to be a direct result of the effect that the prevailing interest rate environment had on the value of debt securities and were not related to the creditworthiness of the issuers. There was a substantial decrease in interest rates during the first six months of 2020, including a 150-basis point reduction in the federal funds rate in March 2020. This resulted in significant increases in the fair value of debt securities and a corresponding decline in the number of securities in a loss position as of June 30, 2020 compared to December 31, 2019. Most of the securities in an unrealized loss position as of both June 30, 2020 and December 31, 2019 were residential or commercial mortgage-backed securities that are either direct obligations of the U.S. government or government-sponsored entities and, accordingly, have little associated credit risk. Further, the Company has the current intent and ability to retain its investments in the issuers for a period of time that management believes to be sufficient to allow for any anticipated recovery in fair value. Therefore, the Company did not recognize any other-than-temporary impairments as of June 30, 2020 or December 31, 2019.

Investment securities with a carrying value of $64.4 million and $51.7 million as of June 30, 2020 and December 31, 2019, respectively, were pledged to secure public deposits and for other purposes.

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Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2020

Allowance For Loan And Lease Losses Writeoffs Net [Abstract]

Loans and Allowance for Loan Losses

4. LOANS AND ALLOWANCE FOR LOAN LOSSES

Portfolio Segments

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

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

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

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

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

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

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

Branch retail – This portfolio segment includes loans secured by collateral purchased by consumers at retail stores with whom ALC has an established relationship through its branch network to provide financing for the retail products sold if applicable underwriting standards are met. The collateral securing these loans generally includes personal property items such as furniture, ATVs and home appliances.

Indirect sales – This portfolio segment includes loans secured by collateral purchased by consumers at retail stores with whom the Company has an established relationship to provide financing for the retail products sold if applicable underwriting standards are met. The collateral securing these loans generally includes recreational vehicles, campers, boats and horse trailers.

As of June 30, 2020 and December 31, 2019, the composition of the loan portfolio by reporting segment and portfolio segment was as follows:

	June 30, 2020
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	31,384	$	—	$	31,384
Secured by 1-4 family residential properties		88,549		4,461		93,010
Secured by multi-family residential properties		48,807		—		48,807
Secured by non-farm, non-residential properties		160,683		—		160,683
Commercial and industrial loans (1)		87,771		—		87,771
Consumer loans:
Direct consumer		7,340		25,959		33,299
Branch retail		—		33,000		33,000
Indirect sales (2)		89,932		—		89,932
Total loans		514,466		63,420		577,886
Less: Unearned interest, fees and deferred cost		578		4,823		5,401
Allowance for loan losses		4,568		1,855		6,423
Net loans	$	509,320	$	56,742	$	566,062

	December 31, 2019
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	30,820	$	—	$	30,820
Secured by 1-4 family residential properties		98,971		5,566		104,537
Secured by multi-family residential properties		50,910		—		50,910
Secured by non-farm, non-residential properties		162,981		—		162,981
Commercial and industrial loans (1)		90,957		—		90,957
Consumer loans:
Direct consumer		7,816		30,224		38,040
Branch retail		—		32,305		32,305
Indirect sales (2)		—		45,503		45,503
Total loans		442,455		113,598		556,053
Less: Unearned interest, fees and deferred cost		262		4,786		5,048
Allowance for loan losses		3,483		2,279		5,762
Net loans	$	438,710	$	106,533	$	545,243

(1) Includes equipment financing leases.

(2) Effective January 1, 2020, the Company transferred a total of $45.5 million of its indirect sales portfolio from ALC to the Bank.

The Company makes commercial, real estate and installment loans to its customers. Although the Company has a diversified loan portfolio, 57.8% and 62.8% of the portfolio was concentrated in loans secured by real estate as of June 30, 2020 and December 31, 2019, respectively.

Loans with a carrying value of $32.6 million and $34.6 million were pledged as collateral to secure Federal Home Loan Bank (“FHLB”) borrowings as of June 30, 2020 and December 31, 2019, respectively.

Related Party Loans

In the ordinary course of business, the Bank makes loans to certain officers and directors of the Company, including companies with which they are associated. These loans are made on the same terms as those prevailing for comparable transactions with unrelated parties. Management believes that such loans do not represent more than a normal risk of collectability, nor do they present other unfavorable features. The aggregate balances of such related party loans and commitments were $0.5 million and $0.9 million as of June 30, 2020 and December 31, 2019, respectively. During the six months ended June 30, 2020, there were no new loans to these parties, and repayments by active related parties were $0.4 million. During the year ended December 31, 2019, there were $0.1 million of new loans to these parties, and repayments by active related parties were $22 thousand.

Acquired Loans

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

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

The carrying amount of PCI loans, which is included within loans on the condensed consolidated balance sheet, is set forth in the table below as of June 30, 2020 and December 31, 2019:

	June 30, 2020			December 31, 2019
	(Dollars in Thousands)
Real estate loans:
Secured by 1-4 family residential properties	$	200		$	224
Outstanding balance		200			224
Fair value adjustment		(33	)		(49	)
Carrying amount, net of fair value adjustment	$	167		$	175

During both the six months ended June 30, 2020 and the year ended December 31, 2019, the Company did not recognize any accretable yield, or income expected to be collected, associated with these loans. Additionally, the Company did not increase or reverse the allowance for loan losses related to the remaining PCI loans.

Allowance for Loan Losses

The following tables present changes in the allowance for loan losses during the six months ended June 30, 2020 and 2019 and the related loan balances by loan type as of June 30, 2020 and 2019:

	As of and for the Six Months Ended June 30, 2020
	Construction, Land Development, and Other		1-4 Family			Real Estate Multi- Family		Non- Farm Non- Residential		Commercial and Industrial			Direct Consumer			Branch Retail			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	197	$	466		$	422	$	964	$	1,377		$	1,625		$	395		$	316		$	5,762
Charge-offs		—		(42	)		—		—		—			(962	)		(221	)		(38	)		(1,263	)
Recoveries		—		14			—		8		—			381			90			1			494
Provision		72		84			70		272		(448	)		373			211			796			1,430
Ending balance	$	269	$	522		$	492	$	1,244	$	929		$	1,417		$	475		$	1,075		$	6,423
Ending balance of allowance attributable to    loans:
Individually evaluated for impairment	$	—	$	13		$	—	$	—	$	62		$	3		$	—		$	—		$	78
Collectively evaluated for impairment		269		509			492		1,244		867			1,414			475			1,075			6,345
Total allowance for loan losses	$	269	$	522		$	492	$	1,244	$	929		$	1,417		$	475		$	1,075		$	6,423
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	785		$	—	$	2,748	$	62		$	25		$	—		$	—		$	3,620
Collectively evaluated for impairment		31,384		92,058			48,807		157,935		87,709			33,274			33,000			89,932			574,099
Loans acquired with deteriorated credit quality		—		167			—		—		—			—			—			—			167
Total loans receivable	$	31,384	$	93,010		$	48,807	$	160,683	$	87,771		$	33,299		$	33,000		$	89,932		$	577,886

	As of and for the Six Months Ended June 30, 2019
	Construction, Land Development, and Other			1-4 Family			Real Estate Multi- Family		Non- Farm Non- Residential			Commercial and Industrial		Direct Consumer			Branch Retail			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	241		$	346		$	128	$	831		$	1,138	$	1,799		$	427		$	145		$	5,055
Charge-offs		—			(77	)		—		—			—		(1,090	)		(201	)		(128	)		(1,496	)
Recoveries		—			15			—		—			3		334			59			2			413
Provision		(50	)		105			38		(22	)		63		646			151			184			1,115
Ending balance	$	191		$	389		$	166	$	809		$	1,204	$	1,689		$	436		$	203		$	5,087
Ending balance of allowance attributable to    loans:
Individually evaluated for impairment	$	95		$	16		$	—	$	—		$	65	$	12		$	—		$	—		$	188
Collectively evaluated for impairment		96			373			166		809			1,139		1,677			436			203			4,899
Total allowance for loan losses	$	191		$	389		$	166	$	809		$	1,204	$	1,689		$	436		$	203		$	5,087
Ending balance of loans receivable:
Individually evaluated for impairment	$	421		$	1,141		$	—	$	504		$	65	$	35		$	—		$	—		$	2,166
Collectively evaluated for impairment		27,980			102,043			28,033		158,244			91,424		37,125			29,609			45,466			519,924
Loans acquired with deteriorated credit quality		—			170			—		—			—		—			—			—			170
Total loans receivable	$	28,401		$	103,354		$	28,033	$	158,748		$	91,489	$	37,160		$	29,609		$	45,466		$	522,260

Credit Quality Indicators

The Company utilizes a credit grading system that provides a uniform framework for establishing and monitoring credit risk in the loan portfolio. Under this system, construction, land, multi-family real estate, other commercial real estate, and commercial and industrial loans are graded based on pre-determined risk metrics and categorized into one of nine risk grades. These risk grades can be summarized into categories described as pass, special mention, substandard, doubtful and loss, as described in further detail below.

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

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

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

• Doubtful (Risk Grade 8): Loans classified as doubtful have all of the weaknesses found in substandard loans, with the added characteristic that the weaknesses make collection of debt in full, based on currently existing facts, conditions and values, highly questionable or improbable. Serious problems exist such that partial loss of principal is likely; however, because of certain important, reasonably specific pending factors that may work to strengthen the assets, the loans’ classification as estimated losses is deferred until a more exact status may be determined. Such pending factors may include proposed merger, acquisition or liquidation procedures, capital injection, perfection of liens on additional collateral and refinancing plans. Loans classified as doubtful may include loans to borrowers that have demonstrated a history of failing to live up to agreements. The Company did not have any loans classified as Doubtful (Risk Grade 8) as of June 30, 2020 or December 31, 2019.

• Loss (Risk Grade 9): Loans are classified in this category when borrowers are deemed incapable of repayment of unsecured debt. Loans to such borrowers are considered uncollectable and of such little value that continuance as active assets of the Company is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not prudent to defer writing off these assets, even though partial recovery may be realized in the future. The Company did not have any loans classified as Loss (Risk Grade 9) as of June 30, 2020 or December 31, 2019.

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

The tables below illustrate the carrying amount of loans by credit quality indicator as of June 30, 2020:

	June 30, 2020
	Pass 1-5			Special Mention 6			Substandard 7			Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	31,302		$	77		$	5		$	31,384
Secured by multi-family residential properties		48,807			—			—			48,807
Secured by non-farm, non-residential properties		156,033			2,783			1,867			160,683
Commercial and industrial loans		86,129			1,186			456			87,771
Total	$	322,271		$	4,046		$	2,328		$	328,645
As a percentage of total loans		98.06	%		1.23	%		0.71	%		100.00	%

	June 30, 2020
	Performing			Nonperforming			Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	91,012		$	1,998		$	93,010
Consumer loans:
Direct consumer		32,942			357			33,299
Branch retail		32,933			67			33,000
Indirect sales		89,873			59			89,932
Total	$	246,760		$	2,481		$	249,241
As a percentage of total loans		99.00	%		1.00	%		100.00	%

The above amounts include PCI loans. As of June 30, 2020, $0.2 million of PCI loans were classified as “Nonperforming.”

The tables below illustrate the carrying amount of loans by credit quality indicator as of December 31, 2019:

	December 31, 2019
	Pass 1-5			Special Mention 6			Substandard 7			Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	30,466		$	354		$	—		$	30,820
Secured by multi-family residential properties		50,910			—			—			50,910
Secured by non-farm, non-residential properties		157,718			2,961			2,302			162,981
Commercial and industrial loans		88,463			714			1,780			90,957
Total	$	327,557		$	4,029		$	4,082		$	335,668
As a percentage of total loans		97.58	%		1.20	%		1.22	%		100.00	%

	December 31, 2019
	Performing			Nonperforming			Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	102,176		$	2,361		$	104,537
Consumer loans:
Direct consumer		37,474			566			38,040
Branch retail		32,024			281			32,305
Indirect sales		45,503			—			45,503
Total	$	217,177		$	3,208		$	220,385
As a percentage of total loans		98.54	%		1.46	%		100.00	%

The above amounts include PCI loans. As of December 31, 2019, $0.2 million of PCI loans were classified as “Nonperforming.”

The following table provides an aging analysis of past due loans by class as of June 30, 2020:

	As of June 30, 2020
	30-59 Days Past Due			60-89 Days Past Due			90 Days Or Greater			Total Past Due			Current			Total Loans			Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development    and other land loans	$	—		$	—		$	—		$	—		$	31,384		$	31,384		$	—
Secured by 1-4 family residential    properties		97			31			96			224			92,786			93,010			—
Secured by multi-family residential    properties		—			—			—			—			48,807			48,807			—
Secured by non-farm, non-residential    properties		22			—			1,417			1,439			159,244			160,683			—
Commercial and industrial loans		58			12			—			70			87,701			87,771			—
Consumer loans:
Direct consumer		253			113			326			692			32,607			33,299			—
Branch retail		132			30			67			229			32,771			33,000			—
Indirect sales		166			—			59			225			89,707			89,932			—
Total	$	728		$	186		$	1,965		$	2,879		$	575,007		$	577,886		$	—
As a percentage of total loans		0.13	%		0.03	%		0.34	%		0.50	%		99.50	%		100.00	%

The above amounts include PCI loans. As of June 30, 2020, $0.2 million of PCI loans were 60-89 days past due.

The following table provides an aging analysis of past due loans by class as of December 31, 2019:

	As of December 31, 2019
	30-59 Days Past Due			60-89 Days Past Due			90 Days Or Greater			Total Past Due			Current			Total Loans			Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development    and other land loans	$	—		$	—		$	—		$	—		$	30,820		$	30,820		$	—
Secured by 1-4 family residential    properties		259			108			844			1,211			103,326			104,537			—
Secured by multi-family residential    properties		—			—			—			—			50,910			50,910			—
Secured by non-farm, non-residential    properties		30			—			1,419			1,449			161,532			162,981			—
Commercial and industrial loans		56			—			—			56			90,901			90,957			—
Consumer loans:
Direct consumer		387			287			531			1,205			36,835			38,040			—
Branch retail		444			189			281			914			31,391			32,305			—
Indirect sales		132			—			—			132			45,371			45,503			—
Total	$	1,308		$	584		$	3,075		$	4,967		$	551,086		$	556,053		$	—
As a percentage of total loans		0.24	%		0.11	%		0.55	%		0.89	%		99.11	%		100.00	%

The above amounts include PCI loans. As of December 31, 2019, $0.2 million of PCI loans were 60-89 days past due.

The following table provides an analysis of non-accruing loans by class as of June 30, 2020 and December 31, 2019:

	Loans on Non-Accrual Status
	June 30, 2020		December 31, 2019
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	5	$	8
Secured by 1-4 family residential properties		1,421		1,423
Secured by multi-family residential properties		—		—
Secured by non-farm, non-residential properties		1,421		1,426
Commercial and industrial loans		106		27
Consumer loans:
Direct consumer		336		558
Branch retail		67		281
Indirect sales		59		—
Total loans	$	3,415	$	3,723

As of both June 30, 2020 and December 31, 2019, PCI loans comprised $0.2 million of nonaccrual loans.

COVID-19 Loan Deferments and Risk Identification

A significant amount of uncertainty continues to exist as to what the ultimate economic impact of the COVID-19 pandemic will be on the Company’s borrowers. In response to this uncertainty, during the first six months of 2020, the Company has increased qualitative factors in the calculation of the allowance for loan and lease losses. Although we believe that the allowance was sufficient to absorb losses in the portfolio based on circumstances existing as of June 30, 2020, management is continuing to closely monitor the Company’s loan portfolio for indications of credit deterioration, particularly with respect to those loans that have had payments deferred in connection with the pandemic, as well as those loans that management currently considers to potentially be more vulnerable (“at-risk”) as a result of the pandemic. The aggregate balances and categories of these loans are identified in the tables below. It should be noted that the tables below are not necessarily indicative of loans that have experienced credit deterioration; rather, they represent loans that are currently being given heightened attention by management as a result of the pandemic.

Loan Deferments

In accordance with section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the Company implemented initiatives to provide short-term payment relief to borrowers who have been negatively impacted by COVID-19. Over 1,700 of the Company’s borrowers requested and were granted COVID-19 pandemic-related deferments by the Company during the six months ended June 30, 2020. Although the interpretive guidance defines short-term as six months, the deferments granted by the Company were generally for terms of 90 days or less. The table below summarizes all remaining COVID-19 loan payment deferments made by the Company as of June 30, 2020.

	As of June 30, 2020
	Number of Loans Deferred		Principal Balance of Loans Deferred		% of Portfolio Balance			Principal and Interest Deferments		Principal Only Deferments
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans		7	$	4,544		14.5	%	$	4,544	$	—
Secured by 1-4 family residential properties		50		9,474		10.2	%		8,078		1,396
Secured by multi-family residential properties		12		29,726		60.9	%		15,523		14,203
Secured by non-farm, non-residential properties		49		42,797		26.6	%		37,073		5,724
Commercial and industrial loans		9		1,460		1.7	%		831		629
Consumer loans:
Direct consumer		442		2,188		6.6	%		2,188		—
Branch retail		172		1,856		5.6	%		1,856		—
Indirect sales		123		3,199		3.6	%		3,199		—
Total loans		864	$	95,244		16.5	%	$	73,292	$	21,952

The credit quality of COVID-19 deferred loans will be evaluated on an ongoing basis in accordance with the Company’s uniform framework for establishing and monitoring credit risk.  However, in accordance with regulatory guidance related to the CARES Act, loans for which payments were deferred related to COVID-19 will generally not be considered troubled debt restructurings or placed in past due or nonaccrual status during the COVID-19 deferment period.  

At-Risk Categories

While most industries have and will continue to experience adverse impacts as a result of the COVID-19 pandemic, the Company has identified certain loan categories considered to be “at-risk” of significant impact. The “at-risk” categories have been further subdivided into those deemed by management to be of “high-risk” and those deemed to be of “moderate-risk.” The categories were determined based on management’s current judgment as to the risk that the borrower and underlying collateral supporting the loans could ultimately be negatively impacted by the economic impact of the COVID-19 pandemic.  

Hotels/motels – These are loans that are secured by real estate and furniture, fixtures and equipment for hotel or motel facilities. This category may also include hotel or motel facilities that were under construction as of June 30, 2020 and for which the Company is financing the construction costs. While all loans in this category are to individual owner groups, 90% of the loan balance is to major franchises. The primary source of income for the borrowers comes from nightly occupancy of the facilities. Due to an overall decrease in travel during the COVID-19 pandemic, and due to restrictions on travel by many state and local governmental authorities, employers and other entities, the hotel industry has seen declines in occupancy rates, resulting in decreased revenue. Additionally, there is uncertainty as to when the public will have the confidence to utilize hotels and motels at the levels that the industry experienced prior to COVID-19. Therefore, these loans are currently considered by management to be of high-risk of potential loss.

Restaurants – These are loans that are secured by real estate, equipment and leasehold improvements for restaurant facilities. This category may also include restaurant facilities that were under construction as of June 30, 2020 and for which the Company is financing the construction costs. The restaurant category is comprised of franchised fast food restaurants, which account for 54% of the restaurants loan balance, and dine-in restaurants, which represent the remaining 46% of the loan balance. The primary source of income for the borrowers comes from the operation of the restaurant facilities. Fast food restaurants have shown the ability to adapt more quickly to governmental restrictions due to COVID-19 because of their established presence with drive-through business, and, therefore, are considered by management to be of moderate risk of potential loss. Dine-in restaurants, which rely more heavily on the presence of diners within the facilities, have had to adapt to decreased dining capacities, as well as offering a drive-up concept, in the current environment. Due to the greater impact that restrictions placed by governmental authorities have had on dine-in restaurants, these loans are currently considered by management to be of high-risk of potential loss.

Retail – These are loans that are generally secured by retail centers of various sizes. Typically, they have multiple retail-styled tenants. The tenants can range from national or regional retail outlets to small box retailers, restaurants, finance companies, hair and nail salons, and other similar retailers. The primary source of income for these borrowers is from the rental income of tenants that could be experiencing decreased business during the COVID-19 pandemic. These loans are currently considered by management to be of moderate-risk of potential loss.

1-4 family investment – These are loans that are generally secured by residential dwellings. The borrowers may be companies or individuals that have purchased 1-4 family property for the purpose of leasing the property to households as a residence. Lease terms are typically for 12 months. The primary source of income for the borrower is rental income from the tenant. The borrowers may hold the properties for an indefinite period of time or may sell the properties to similar investors of like properties. These loans are currently considered by management to be of moderate-risk of potential loss.

The table below summarizes the “at-risk” categories and the relative percentage of the Company’s loan portfolio for each as of June 30, 2020.

	June 30, 2020
	Balance of Risk Category		% of Total Loan Balance
	(Dollars in Thousands)
High-risk loan categories:
Hotels/motels	$	10,410		1.8	%
Dine-in restaurants		4,459		0.8	%
Total high-risk loans		14,869		2.6	%
Moderate-risk loan categories:
Fast food restaurants		5,326		0.9	%
Retail		34,587		6.0	%
1-4 family investment		21,874		3.8	%
Total moderate-risk loans		61,787		10.7	%
Total at-risk loans	$	76,656		13.3	%

Management will continue to evaluate credit exposures on these loans on an ongoing basis in accordance with the Company’s uniform framework for establishing and monitoring credit risk.

Paycheck Protection Program

Sections 1102 and 1106 of the CARES Act added a new loan program administered by the Small Business Administration (“SBA”) entitled the Paycheck Protection Program (“PPP”). The PPP is intended to provide economic relief to small businesses throughout the United States that have been adversely impacted by COVID-19. An Interim Final Rule related to the PPP was issued on April 2, 2020, and additional clarifications to the Interim Final Rule have been provided subsequently by the SBA. PPP loans are 100% guaranteed by the SBA and are forgivable in whole, or in part, if the proceeds are used by the borrower for payroll and other permitted purposes in accordance with the requirements of the PPP. If not forgiven in whole or in part, the loans carry a fixed interest rate of 1.00% per annum with payments deferred for the first six months of the loan. As compensation for originating a PPP loan, the Company receives lender processing fees from the SBA ranging from 1% to 5% of the original loan balance, depending on the size of the loan. Processing fees, net of origination costs, are deferred and amortized over the contractual life of the loan as interest income. Upon forgiveness of a loan by the SBA, any unrecognized net deferred fees will be recognized as interest income in that period.

PPP loans were initially originated for a term of two years; however, a June 5, 2020 amendment to the CARES Act (i) provided for a five-year minimum loan term for loans originated beginning on that date and (ii) permitted lenders and borrowers to amend loans previously issued under two-year terms to terms of five to ten years if mutually agreed upon by both the lender and the borrower. As of June 30, 2020, the Company had originated 158 PPP loans with an aggregate principal balance of $13.8 million. Of this amount, $13.7 million of the loans were originated under two-year terms, while $0.1 million of the loans were originated under five-year terms.

Impaired Loans

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the related loan agreement. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the liquidation of the collateral. At the Bank, all loans of $0.5 million or more that have a credit quality risk grade of seven or above are identified for impairment analysis. Loans of less than $0.5 million may also be impaired if in management’s judgement circumstances warrant impairment. At ALC, all loans of $50 thousand or more that are 90 days or more past due are identified for impairment analysis. As of both June 30, 2020 and December 31, 2019, there were $0.1 million of impaired loans with no related allowance recorded at ALC. Impaired loans, or portions thereof, are charged off when deemed uncollectable.

As of June 30, 2020, the carrying amount of the Company’s impaired loans consisted of the following:

	June 30, 2020
	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Impaired loans with no related allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		932		932		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		2,748		2,748		—
Commercial and industrial		—		—		—
Direct consumer		—		—		—
Total loans with no related allowance recorded	$	3,680	$	3,680	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		20		20		13
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		62		62		62
Direct consumer		25		25		3
Total loans with an allowance recorded	$	107	$	107	$	78
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		952		952		13
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		2,748		2,748		—
Commercial and industrial		62		62		62
Direct consumer		25		25		3
Total impaired loans	$	3,787	$	3,787	$	78

The above amounts include PCI loans. As of June 30, 2020, PCI loans comprised $0.2 million of impaired loans without a related allowance recorded.

As of December 31, 2019, the carrying amount of the Company’s impaired loans consisted of the following:  

	December 31, 2019
	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Impaired loans with no related allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		984		984		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		1,877		1,877		—
Commercial and industrial		—		—		—
Direct consumer		—		—		—
Total loans with no related allowance recorded	$	2,861	$	2,861	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		21		21		14
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		206		206		206
Direct consumer		29		29		7
Total loans with an allowance recorded	$	256	$	256	$	227
Total impaired loans
Loans secured by real estate	.
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		1,005		1,005		14
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		1,877		1,877		—
Commercial and industrial		206		206		206
Direct consumer		29		29		7
Total impaired loans	$	3,117	$	3,117	$	227

The above amounts include PCI loans. As of December 31, 2019, PCI loans comprised $0.2 million of impaired loans without a related allowance recorded.

The average net investment in impaired loans and interest income recognized and received on impaired loans during the six months ended June 30, 2020 and the year ended December 31, 2019 were as follows:

	Six Months Ended June 30, 2020
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		890		5		4
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		2,754		14		14
Commercial and industrial		86		3		3
Direct consumer		26		1		2
Total	$	3,756	$	23	$	23

	Year Ended December 31, 2019
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	181	$	—	$	—
Secured by 1-4 family residential properties		1,021		48		48
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		645		29		29
Commercial and industrial		991		7		7
Direct consumer		38		2		2
Total	$	2,876	$	86	$	86

Loans on which the accrual of interest has been discontinued amounted to $3.4 million and $3.7 million as of June 30, 2020 and December 31, 2019, respectively. If interest on those loans had been accrued, there would have been $45 thousand and $41 thousand of interest accrued for the periods ended June 30, 2020 and December 31, 2019, respectively. Interest income related to these loans for the six months ended June 30, 2020 and the year ended December 31, 2019 was $27 thousand and $147 thousand, respectively.

Troubled Debt Restructurings

Troubled debt restructurings include loans with respect to which concessions have been granted to borrowers that generally would not have otherwise been considered had the borrowers not been experiencing financial difficulty. The concessions granted may include payment schedule modifications, interest rate reductions, maturity date extensions, modifications of note structure, principal balance reductions or some combination of these concessions. There were no loans modified with concessions granted during the six months ended June 30, 2020 or the year ended December 31, 2019. Restructured loans may involve loans remaining on non-accrual, moving to non-accrual or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Non-accrual restructured loans are included with all other non-accrual loans. In addition, all accruing restructured loans are reported as troubled debt restructurings. Generally, restructured loans remain on non-accrual until the customer has attained a sustained period of repayment performance under the modified loan terms (generally a minimum of six months). However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and whether the loan should be returned to or maintained on non-accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, then the loan remains on non-accrual. As of June 30, 2020 and December 31, 2019, the Company had $12 thousand and $16 thousand, respectively, of non-accruing loans that were previously restructured and that remained on non-accrual status. For both the six months ended June 30, 2020 and the year ended December 31, 2019, the Company had no loans that were restored to accrual status based on a sustained period of repayment performance.

The following table provides, as of June 30, 2020 and December 31, 2019, the number of loans remaining in each loan category that the Company had previously modified in a troubled debt restructuring, as well as the pre- and post-modification principal balance as of each date.

	June 30, 2020						December 31, 2019
	Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance		Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land    loans		1	$	107	$	—		1	$	107	$	62
Secured by 1-4 family residential properties		2		59		13		2		59		14
Commercial loans		2		116		55		2		116		60
Total		5	$	282	$	68		5	$	282	$	136

As of June 30, 2020 and December 31, 2019, no loans that previously had been modified in a troubled debt restructuring had defaulted subsequent to modification.

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

All loans with a principal balance of $0.5 million or more that have been modified in a troubled debt restructuring are considered impaired and evaluated individually for impairment. The nature and extent of impairment of restructured loans, including those that have experienced a subsequent payment default, are considered in the determination of an appropriate level of allowance for loan losses. This evaluation resulted in an allowance for loan losses attributable to such restructured loans of $1 thousand as of both June 30, 2020 and December 31, 2019.

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Other Real Estate Owned and Repossessed Assets

6 Months Ended

Jun. 30, 2020

Other Real Estate [Abstract]

Other Real Estate Owned and Repossessed Assets

5. OTHER REAL ESTATE OWNED AND REPOSSESSED ASSETS

Other Real Estate Owned

Other real estate and certain other assets acquired in foreclosure are reported at the net realizable value of the property, less estimated costs to sell. The following table summarizes foreclosed property activity as of the six months ended June 30, 2020 and 2019:

	June 30, 2020			June 30, 2019
	(Dollars in Thousands)
Beginning balance	$	1,078		$	1,505
Additions (1)		293			262
Sales proceeds		(358	)		(483	)
Gross gains		38			39
Gross losses		(38	)		(27	)
Net gains		—			12
Impairment		(10	)		(38	)
Ending balance	$	1,003		$	1,258

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

Valuation adjustments are recorded in other non-interest expense and are primarily post-foreclosure write-downs that are a result of continued declining property values based on updated appraisals or other indications of value, such as offers to purchase. Net realizable value less estimated costs to sell of foreclosed residential real estate held by the Company was $0.1 million as of both June 30, 2020 and 2019. In addition, the Company did not hold any consumer mortgage loans collateralized by residential real estate that were in the process of foreclosure as of both June 30, 2020 and 2019.

Repossessed Assets

In addition to the other real estate and other assets acquired in foreclosure, the Company also acquires assets through the repossession of the underlying collateral of loans in default. The following table summarizes repossessed asset activity as of the six months ended June 30, 2020 and 2019:

	June 30, 2020			June 30, 2019
	(Dollars in Thousands)
Beginning balance	$	256		$	229
Transfers from loans		561			520
Sales proceeds		(270	)		(278	)
Gross gains		—			2
Gross losses		(286	)		(227	)
Net losses		(286	)		(225	)
Impairment		—			—
Ending balance	$	261		$	246

Repossessed assets are included in Other Assets in the Company’s condensed consolidated balance sheet.

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Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

6. GOODWILL AND OTHER INTANGIBLE ASSETS

The Company recorded goodwill associated with its acquisition of TPB in 2018. As of both June 30, 2020 and December 31, 2019, goodwill totaled $7.4 million. Goodwill must be tested for impairment annually, or more often if circumstances warrant. If, as a result of impairment testing, it is determined that the implied fair value of goodwill is lower than its carrying amount, impairment is indicated, and the goodwill must be written down to its implied fair value.

The Company’s annual test date for goodwill impairment is October 1; however, goodwill may be tested between annual test dates if events or changes in circumstances indicate that it is more likely than not that goodwill is impaired. Factors that are considered when evaluating whether it is more likely than not that goodwill is impaired may include (but are not limited to) significant and sustained reductions in stock price, significant earnings deterioration below forecasted levels, significant deterioration in the credit quality of borrowers, changes in the overall business outlook for an organization, losses in operating cash flows and significant impairment losses recognized by competitors.

Based on a number of considerations, as of June 30, 2020, the Company’s management concluded that circumstances did not indicate that it was more likely than not that goodwill was impaired. Accordingly, the Company’s goodwill was not tested for impairment as of June 30, 2020. However, the ultimate economic impact of the COVID-19 pandemic on the Company’s operations, as well as its stock price, is not yet known. The COVID-19 pandemic and resulting economic implications, including changes in the interest rate environment and potential implications on credit quality, have impacted the Company’s operations and earnings during the course of the first six months of 2020. In addition, the Company’s stock price has remained at discounted levels since the onset of the pandemic in March 2020. Should the Company’s future operations and/or stock price be negatively impacted for a sustained period of time, management may determine that goodwill testing at an interim period between annual testing dates is appropriate.

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

The Company’s goodwill and other intangibles (carrying basis and accumulated amortization) as of June 30, 2020 were as follows:

	June 30, 2020
	(Dollars in Thousands)
Goodwill	$	7,435
Core deposit intangible:
Gross carrying amount		2,048
Accumulated amortization		(878	)
Core deposit intangible, net		1,170
Total	$	8,605

The Company’s estimated remaining amortization expense on intangibles as of June 30, 2020 was as follows:

	Amortization Expense
	(Dollars in Thousands)
2020	$	195
2021		341
2022		268
2023		195
2024		122
2025		49
Total	$	1,170

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

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Short-term Borrowings

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Short-Term Borrowings

7. BORROWINGS

Short-term borrowings consist of federal funds purchased, securities sold under repurchase agreements, and short-term FHLB advances with original maturities of one year or less. Short-term borrowings totaled $10.3 million and $10.0 million as of June 30, 2020 and December 31, 2019, respectively.

Federal funds purchased, which represent unsecured lines of credit that generally mature within one to four days, are available to the Bank through arrangements with correspondent banks and the Federal Reserve. As of both June 30, 2020 and December 31, 2019, there were no federal funds purchased outstanding. The Bank had $61.7 million in available unused lines of credit with correspondent banks and the Federal Reserve as of both June 30, 2020 and December 31, 2019.

Securities sold under repurchase agreements, which are secured borrowings, generally are reflected at the amount of cash received in connection with the transaction. The Bank may be required to provide additional collateral based on the fair value of the underlying securities. The Bank monitors the fair value of the underlying securities on a daily basis. Securities sold under repurchase agreements as of June 30, 2020 and December 31, 2019 totaled $0.3 million and $25 thousand, respectively.

Short-term FHLB advances are secured borrowings available to the Bank as an alternative funding source. As of both June 30, 2020 and December 31, 2019, the Bank had $10.0 million in outstanding FHLB advances with original maturities of less than one year.

The Company may use FHLB advances with original maturities of more than one year as an alternative to funding sources with similar maturities, such as certificates of deposit or other deposit programs. These advances generally offer more attractive rates than other mid-term financing options. They are also flexible, allowing the Company to quickly obtain the necessary maturities and rates that best suit its overall asset/liability strategy. FHLB advances with an original maturity of more than one year are classified as long-term. As of both June 30, 2020 and December 31, 2019, the Company did not have any long-term FHLB advances outstanding.

Assets pledged (including loans and investment securities) associated with FHLB advances totaled $32.6 million and $34.6 million as of June 30, 2020 and December 31, 2019, respectively. As of June 30, 2020 and December 31, 2019, the Bank had $216.5 million and $211.5 million, respectively, in remaining credit from the FHLB (subject to available collateral).

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Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

8. INCOME TAXES

The provision for income taxes was $0.4 million and $0.7 million for the six-month periods ended June 30, 2020 and 2019, respectively. The Company’s effective tax rate was 23.3% and 22.5%, respectively, for the same periods. The effective tax rate is impacted by recurring permanent differences, such as those associated with bank-owned life insurance and tax-exempt investment and loan income.

The Company had a net deferred tax asset of $2.4 million and $2.8 million as of June 30, 2020 and December 31, 2019, respectively. The decrease in the net deferred tax asset resulted primarily from the impact of changes in the fair value of securities available-for-sale, combined with reductions in net operating loss carryforwards and other book-to-tax temporary differences.

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Deferred Compensation Plans

6 Months Ended

Jun. 30, 2020

Compensation Related Costs [Abstract]

Deferred Compensation Plans

9. DEFERRED COMPENSATION PLANS

The Company has entered into supplemental retirement compensation benefits agreements with certain directors and former executive officers. The measurement of the liability under these agreements includes estimates involving life expectancy, length of time before retirement and the expected returns on the bank-owned life insurance policies used to fund those agreements. Should these estimates prove to be materially wrong, the cost of these agreements could change accordingly. The related deferred compensation obligation to these directors and executive officers included in other liabilities was $3.2 million as of both June 30, 2020 and December 31, 2019.

Non-employee directors may elect to defer payment of all or any portion of their Bancshares and Bank director fees under Bancshares’ Non-Employee Directors’ Deferred Compensation Plan (the “Deferral Plan”). The Deferral Plan permits non-employee directors to invest their directors’ fees and to receive the adjusted value of the deferred amounts in cash and/or shares of Bancshares’ common stock. Neither Bancshares nor the Bank makes any contribution to participants’ accounts under the Deferral Plan. As of June 30, 2020 and December 31, 2019, a total of 104,794 and 124,392 shares of Bancshares common stock, respectively, were deferred in connection with the Deferral Plan. All deferred fees, whether in the form of cash or shares of Bancshares common stock, are reflected as compensation expense in the period earned. The Company classifies all deferred directors’ fees allocated to be paid in shares as equity additional paid-in capital. The Company may use issued shares or shares of treasury stock to satisfy these obligations when due.

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Stock Awards

6 Months Ended

Jun. 30, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Awards

10. STOCK AWARDS

In accordance with the 2013 Incentive Plan, stock awards, including stock options and restricted stock, have been granted to certain employees and non-employee directors. Shares of common stock available for distribution to satisfy the grants may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. Stock-based compensation expense related to stock awards totaled $0.2 million and $0.1 million for the six-month periods ended June 30, 2020 and 2019, respectively.

Stock Options

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

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

	2020			2019
Risk-free interest rate		1.24	%		2.59	%
Expected term (in years)		7.5			7.5
Expected stock price volatility		28.9	%		30.9	%
Dividend yield		1.25	%		1.25	%
Fair value of stock option		3.34			3.30

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

	Six Months Ended
	June 30, 2020				June 30, 2019
	Number of Shares		Average Exercise Price		Number of Shares		Average Exercise Price
Options:
Outstanding, beginning of period		412,800	$	9.72		377,950	$	9.80
Granted		10,200		11.95		66,150		10.01
Exercised		666		10.75		—		—
Expired		—		—		—		—
Forfeited		334		10.75		16,819		11.39
Options outstanding, end of period		422,000	$	9.77		427,281	$	9.77
Options exercisable, end of period		353,183	$	9.59		309,682	$	9.20

The aggregate intrinsic value of stock options outstanding (calculated as the amount by which the market value of underlying stock exceeds the exercise price of the option) was approximately zero and $0.3 million as of June 30, 2020 and 2019, respectively.

Restricted Stock

During the six months ended June 30, 2020 and 2019, respectively, 28,460 shares and 5,520 shares of restricted stock were granted. The Company recognizes the cost of services received in exchange for restricted stock awards based on the grant date closing price of the stock, with compensation expense recognized on a straight-line basis over the award’s vesting period.

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Leases

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Leases

11. LEASES

The Bank and ALC are involved in a number of operating leases, primarily for branch locations. Branch leases have remaining lease terms ranging from less than one year to 14 years, some of which include options to extend the leases for up to five years, and some of which include an option to terminate the lease within one year. The Bank leases certain office facilities to third parties and classifies these leases as operating leases.

The following table provides a summary of the components of lease expense, as well as the reporting location in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019:

	Location in the Condensed	Three Months Ended				Six Months Ended
	Consolidated Statements of Operations	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
		(Dollars in Thousands)				(Dollars in Thousands)
Operating lease expense (1)	Net occupancy and equipment	$	212	$	210	$	423	$	420
Operating lease income (2)	Other income, net	$	212	$	212	$	424	$	421

⁽¹⁾ Includes short-term lease costs. For the three- and six-month periods ended June 30, 2020 and 2019, short-term lease costs were nominal in amount.

⁽²⁾ Operating lease income includes rental income from owned properties.

The following table provides supplemental lease information for operating leases on the Condensed Consolidated Balance Sheet as of June 30, 2020:

	Location in the Condensed
	Consolidated Balance Sheet	June 30, 2020
		(Dollars in Thousands)
Operating lease right-of-use assets	Other assets	$	3,269
Operating lease liabilities	Other liabilities	$	3,312
Weighted-average remaining lease term (in years)			6.28
Weighted-average discount rate			3.14	%

The following table provides supplemental lease information for the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019:

	Six Months Ended
	June 30, 2020		June 30, 2019
	(Dollars in Thousands)
Cash paid for amounts included in the measurement of    lease liabilities:
Operating cash flows from operating leases	$	373	$	385

The following table is a schedule of remaining future minimum lease payments for operating leases that had an initial or remaining non-cancellable lease term in excess of one year as of June 30, 2020:

	Minimum Rental Payments
	(Dollars in Thousands)
2020	$	352
2021		628
2022		558
2023		458
2024		438
2025 and thereafter		1,276
Total future minimum lease payments	$	3,710
Less: Imputed interest		398
Total operating lease liabilities	$	3,312

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2020

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

12. DERIVATIVE FINANCIAL INSTRUMENTS

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

Cash Flow Hedges

Effective July 8, 2019, the Bank entered into a forward interest rate swap contract on certain variable-rate money market deposit accounts (indexed to the Federal Funds effective rate’s daily weighted average) with a total notional amount of $10.0 million. The money market account balances are expected to exceed $10 million for the next seven years, and the rates on these deposits are anticipated to move closely with changes in one-month LIBOR, or a comparable benchmark interest rate. The interest rate swap was designated as a derivative instrument in a cash flow hedge with the objective of converting the floating interest payments to a fixed rate throughout the seven-year period beginning on July 8, 2019 and ending on July 8, 2026. Under the swap arrangement, the Bank will pay a fixed interest rate of 1.790% and receive a variable interest rate based on one-month LIBOR, or a comparable benchmark interest rate, on the notional amount of $10.0 million, with monthly net settlements.

Effective July 22, 2019, the Bank entered into a forward interest rate swap contract on certain variable-rate money market deposit accounts (indexed to the Federal Funds effective rate’s daily weighted average) with a total notional amount of $10.0 million. The money market account balances are expected to exceed $10 million for the next five years, and the rates on these deposits are anticipated to move closely with changes in one-month LIBOR, or a comparable benchmark interest rate. The interest rate swap was designated as a derivative instrument in a cash flow hedge with the objective of converting the floating interest payments to a fixed rate throughout the five-year period beginning on July 22, 2019 and ending on July 22, 2024. Under the swap arrangement, the Bank will pay a fixed interest rate of 1.698% and receive a variable interest rate based on one-month LIBOR, or a comparable benchmark interest rate, on the notional amount of $10.0 million, with monthly net settlements.

Effective October 1, 2019, the Bank entered into a forward interest rate swap contract on a variable-rate FHLB advance (indexed to one-month LIBOR) with a total notional amount of $10.0 million. The FHLB advance will be renewed on a monthly basis and will remain outstanding until October 1, 2024. The interest rate swap was designated as a derivative instrument in a cash flow hedge with the objective of converting the floating interest payments to a fixed rate throughout the five-year period beginning on October 1, 2019 and ending on October 1, 2024. Under the swap arrangement, the Bank will pay a fixed interest rate of 1.357% and receive a variable interest rate based on one-month LIBOR, or a comparable benchmark interest rate, on the notional amount of $10.0 million, with monthly net settlements.

Fair Value Hedges

Effective August 9, 2019, the Bank entered into a forward interest rate swap contract on fixed rate commercial real estate loans with a total notional amount of $10.0 million. The interest rate swap was designated as a derivative instrument in a fair value hedge with the objective of effectively converting a pool of fixed rate assets to variable rate throughout the five-year period beginning on August 9, 2019 and ending on August 9, 2024. Under the swap arrangement, the Bank will pay a fixed interest rate of 1.406% and receive a variable interest rate based on one-month LIBOR, or a comparable benchmark interest rate, on the notional amount of $10.0 million, with monthly net settlements.

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

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

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

Location in the Condensed Consolidated Balance Sheet in Which the Hedged	Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
Item is Included	June 30, 2020
	(Dollars in Thousands)
Loans and leases, net of allowance for loan and    lease losses (1)	$	39,291	$	900

⁽¹⁾ These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. As of June 30, 2020, the amortized cost basis of the closed portfolios used in these hedging relationships was $38.4 million, the cumulative basis adjustments associated with these hedging relationships were $0.9 million, and the amounts of the designated hedged items were $20.0 million.

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Segment Reporting

6 Months Ended

Jun. 30, 2020

Segment Reporting Disclosure Of Entitys Reportable Segments [Abstract]

Segment Reporting

13. SEGMENT REPORTING

Under ASC Topic 280, Segment Reporting, certain information is disclosed for the two reportable operating segments of Bancshares: the Bank and ALC. The reportable segments were determined using the internal management reporting system. These segments comprise Bancshares’ and the Bank’s significant subsidiaries. The accounting policies for each segment are the same as those described in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2019. The segment results include certain overhead allocations and intercompany transactions that were recorded at current market prices. All intercompany transactions have been eliminated to determine the consolidated balances. The results for the two reportable segments of the Company are included in the tables below.

						All
	Bank		ALC			Other			Eliminations			Consolidated
	(Dollars in Thousands)
As of and for the three months ended June 30, 2020:
Net interest income	$	6,442	$	2,174		$	7		$	—		$	8,623
Provision for loan losses		530		320			—			—			850
Total non-interest income		1,251		191			784			(896	)		1,330
Total non-interest expense		6,110		2,091			538			(158	)		8,581
Income before income taxes		1,053		(46	)		253			(738	)		522
Provision for income taxes		220		(14	)		(88	)		—			118
Net income	$	833	$	(32	)	$	341		$	(738	)	$	404
Other significant items:
Total assets	$	848,376	$	60,044		$	90,684		$	(153,357	)	$	845,747
Total investment securities		103,883		—			81			—			103,964
Total loans, net		561,253		56,742			—			(51,933	)		566,062
Goodwill and core deposit intangible, net		8,605		—			—			—			8,605
Investment in subsidiaries		—		—			84,718			(84,718	)		—
Fixed asset additions		223		5			—			—			228
Depreciation and amortization expense		376		31			—			—			407
Total interest income from external customers		6,872		2,907			1			—			9,780
Total interest income from affiliates		733		—			6			(739	)		—
For the six months ended June 30, 2020:
Net interest income	$	12,922	$	4,574		$	13		$	—		$	17,509
Provision for loan losses		778		652			—			—			1,430
Total non-interest income		2,345		428			2,018			(2,164	)		2,627
Total non-interest expense		12,266		4,260			894			(345	)		17,075
Income before income taxes		2,223		90			1,137			(1,819	)		1,631
Provision for income taxes		494		37			(151	)		—			380
Net income	$	1,729	$	53		$	1,288		$	(1,819	)	$	1,251
Other significant items:
Fixed asset additions		442		19			—			—			461
Depreciation and amortization expense		742		64			—			—			806
Total interest income from external customers		14,129		6,047			1			—			20,177
Total interest income from affiliates		1,473		—			12			(1,485	)		—

					All
	Bank		ALC		Other			Eliminations			Consolidated
	(Dollars in Thousands)
As of and for the three months ended June 30, 2019:
Net interest income	$	5,986	$	3,240	$	7		$	—		$	9,233
Provision for loan losses		90		625		—			—			715
Total non-interest income		1,108		228		1,384			(1,429	)		1,291
Total non-interest expense		5,798		2,366		493			(153	)		8,504
Income before income taxes		1,206		477		898			(1,276	)		1,305
Provision for income taxes		249		121		(70	)		—			300
Net income	$	957	$	356	$	968		$	(1,276	)	$	1,005
Other significant items:
Total assets	$	778,252	$	107,911	$	89,102		$	(198,094	)	$	777,171
Total investment securities		136,569		—		80			—			136,649
Total loans, net		501,177		104,007		—			(93,669	)		511,515
Goodwill and core deposit intangible, net		9,056		—		—			—			9,056
Investment in subsidiaries		5		—		83,436			(83,436	)		5
Fixed asset additions		887		64		—			—			951
Depreciation and amortization expense		361		35		—			—			396
Total interest income from external customers		6,476		4,447		—			—			10,923
Total interest income from affiliates		1,206		—		7			(1,213	)		—
For the six months ended June 30, 2019:
Net interest income	$	11,995	$	6,398	$	13		$	—		$	18,406
Provision for loan losses		90		1,025		—			—			1,115
Total non-interest income		2,186		447		2,965			(3,042	)		2,556
Total non-interest expense		11,631		4,734		920			(328	)		16,957
Income before income taxes		2,460		1,086		2,058			(2,714	)		2,890
Provision for income taxes		511		264		(124	)		—			651
Net income	$	1,949	$	822	$	2,182		$	(2,714	)	$	2,239
Other significant items:
Fixed asset additions		2,564		78		—			—			2,642
Depreciation and amortization expense		728		68		—			—			796
Total interest income from external customers		12,969		8,766		1			—			21,736
Total interest income from affiliates		2,367		—		12			(2,379	)		—

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Other Operating Income and Expense

6 Months Ended

Jun. 30, 2020

Other Income And Expenses [Abstract]

Other Operating Income and Expense

14. OTHER OPERATING INCOME AND EXPENSE

Other Operating Income

Other operating income for the three and six months ended June 30, 2020 and 2019 consisted of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(Dollars in Thousands, Except Per Share Data)
Bank-owned life insurance	$	107	$	108	$	215	$	214
Auto Club revenue		18		62		53		100
ATM fee income		116		111		216		215
Wire transfer fees		15		11		28		22
Other income		52		41		167		119
Total	$	308	$	333	$	679	$	670

On January 1, 2018, the Company implemented ASU 2014-09, Revenue from Contracts with Customers, codified at ASC Topic 606. The majority of the Company’s revenue is generated through interest earned on financial instruments, including loans and investment securities, which falls outside the scope of ASC Topic 606. The Company also generates revenue from insurance- and lease-related contracts that fall outside the scope of ASC Topic 606.

All of the Company’s revenue that is subject to ASC Topic 606 is included in non-interest income; however, not all non-interest income is subject to ASC Topic 606. Revenue earned by the Company that is subject to ASC Topic 606 primarily consists of service and other charges on deposit accounts, mortgage fees from secondary market transactions at the Bank, ATM fee income and other non-interest income. Revenue generated from these sources for the six-month periods ended June 30, 2020 and 2019 was $1.4 million and $1.6 million, respectively, and for the three-month periods ended June 30, 2020 and 2019 was $0.6 million and $0.8 million, respectively. All sources of the Company’s revenue subject to ASC Topic 606 are transaction-based, and revenue is recognized at the time at which the transaction is executed, which is the same time at which the Company’s performance obligation is satisfied. The Company had no contract liabilities or unsatisfied performance obligations with customers as of June 30, 2020.

Other Operating Expense

Other operating expense for the three and six months ended June 30, 2020 and 2019 consisted of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(Dollars in Thousands, Except Per Share Data)
Postage, stationery and supplies	$	218	$	212	$	432	$	450
Telephone/data communication		229		205		452		418
Advertising and marketing		42		58		86		92
Travel and business development		23		102		149		213
Collection and recoveries		60		20		145		100
Other services		85		71		176		143
Insurance expense		141		153		303		315
FDIC insurance and state assessments		116		39		196		158
Loss on sale of fixed assets		121		134		287		219
Core deposit intangible amortization		109		128		219		256
Other real estate/foreclosure expense, net		22		31		41		89
Other expense		402		456		744		939
Total	$	1,568	$	1,609	$	3,230	$	3,392

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Guarantees, Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Guarantees, Commitments and Contingencies

15. GUARANTEES, COMMITMENTS AND CONTINGENCIES

The Bank’s exposure to credit loss in the event of nonperformance by the other party for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making these commitments as it does for on-balance sheet instruments.

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

	June 30, 2020		December 31, 2019
	(Dollars in Thousands)
Standby letters of credit	$	180	$	180
Standby performance letters of credit	$	555	$	647
Commitments to extend credit	$	93,733	$	96,967

Standby letters of credit and standby performance letters of credit are contingent commitments issued by the Bank generally to guarantee the performance of a customer to a third party. The Bank has recourse against the customer for any amount that it is required to pay to a third party under a standby letter of credit or standby performance letter of credit. Revenues are recognized over the lives of the standby letters of credit and standby performance letters of credit. As of June 30, 2020 and December 31, 2019, the potential amounts of future payments that the Bank could be required to make under its standby letters of credit and standby performance letters of credit, which represent the Bank’s total credit risk in these categories, are included in the table above.

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

The Company is self-insured for a significant portion of employee health benefits. However, the Company maintains stop-loss coverage with third-party insurers to limit the Company’s individual claim and total exposure related to self-insurance. The Company estimates accrued liability for the ultimate costs to settle known claims, as well as claims incurred but not yet reported, as of the balance sheet date. The Company’s recorded estimated liability for self-insurance is based on the insurance companies’ incurred loss estimates and management’s judgment, including assumptions and evaluation of factors related to the frequency and severity of claims, the Company’s claims development history and the Company’s claims settlement practices. The assessment of loss contingencies and self-insurance reserves is a highly subjective process that requires judgments about future events. Contingencies are reviewed at least quarterly to determine the adequacy of self-insurance accruals. Self-insurance accruals totaled $0.2 million as of both June 30, 2020 and December 31, 2019. The ultimate settlement of loss contingencies and self-insurance reserves may differ significantly from amounts accrued in the Company’s consolidated financial statements.

Litigation

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

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

16. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

Fair Value Hierarchy

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

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

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

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

The Company rarely transfers assets and liabilities measured at fair value between Level 1 and Level 2 measurements. Trading account assets and securities available-for-sale may be periodically transferred to or from Level 3 valuation based on management’s conclusion regarding the best method of pricing for an individual security. Such transfers are accounted for as if they occurred at the beginning of a reporting period. There were no such transfers during the six months ended June 30, 2020 or the year ended December 31, 2019.

Fair Value Measurements on a Recurring Basis

Securities Available-for-Sale

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

The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019. There were no liabilities measured at fair value on a recurring basis as of December 31, 2019.

	Fair Value Measurements as of June 30, 2020 Using
	Totals At June 30, 2020		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	32,634	$	—	$	32,634	$	—
Commercial		52,847		—		52,847		—
Obligations of states and political subdivisions		6,323		—		6,323		—
Corporate notes		2,773		—		2,773		—
U.S. Treasury securities		81		—		81		—
Other liabilities - derivatives		2,915		—		2,915		—

	Fair Value Measurements as of December 31, 2019 Using
	Totals At December 31, 2019		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	46,345	$	—	$	46,345	$	—
Commercial		43,373		—		43,373		—
Obligations of states and political subdivisions		4,218		—		4,218		—
U.S. Treasury securities		80		—		80		—
Other assets - derivatives		301		—		301		—

Fair Value Measurements on a Non-recurring Basis

Impaired Loans

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

OREO and Other Assets Held-for-Sale

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

As of June 30, 2020, included within OREO were certain assets that were formerly included as premises and equipment but have been removed from service, and as of the balance sheet date, were designated as assets to be disposed of by sale. These include assets associated with branches of the Bank that have been closed. When an asset is designated as held-for-sale, the Company ceases depreciation of the asset, and the asset is recorded at the lower of its carrying amount or fair value less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically unobservable inputs for determining fair value. These assets were included within other assets on the balance sheet as of December 31, 2019.

The following table presents the balances of impaired loans, OREO and other assets held-for-sale measured at fair value on a non-recurring basis as of June 30, 2020 and December 31, 2019:

	Fair Value Measurements as of June 30, 2020 Using
	Totals At June 30, 2020		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	29	$	—	$	—	$	29
OREO and other assets held-for-sale		1,003		—		—		1,003

	Fair Value Measurements as of December 31, 2019 Using
	Totals At December 31, 2019		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	29	$	—	$	—	$	29
OREO and other assets held-for-sale		1,276		—		—		1,276

Non-recurring Fair Value Measurements Using Significant Unobservable Inputs

The following table presents information regarding assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of June 30, 2020. The table includes the valuation techniques and the significant unobservable inputs utilized. The range of each unobservable input and the weighted average within the range utilized as of June 30, 2020 are both included. Following the table is a description of the valuation technique and the sensitivity of the technique to changes in the significant unobservable input.

	Level 3 Significant Unobservable Input Assumptions
	Fair Value June 30, 2020		Valuation Technique	Unobservable Input	Quantitative Range of Unobservable Inputs (Weighted Average)
	(Dollars in Thousands)
Non-recurring fair value measurements:
Impaired loans	$	29	Multiple data points, including discount to appraised value of collateral based on recent market activity	Appraisal comparability adjustment (discount)	9%-10%	(9.5%)
OREO and other assets held-for-sale	$	1,003	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	9%-10%	(9.5%)

Impaired Loans

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

OREO

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

Other Assets Held-for-Sale

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

Fair Value of Financial Instruments

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

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

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

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

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

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

Loans, net – The fair value of loans is estimated on an exit price basis incorporating contractual cash flow, prepayment discount spreads, credit loss and liquidity premiums.

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

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

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

Long-term debt – The fair value of this debt is estimated using discounted cash flows based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements as of the determination date.

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

The estimated fair value and related carrying or notional amounts, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of June 30, 2020 and December 31, 2019 were as follows:

	June 30, 2020
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	108,268	$	108,268	$	108,268	$	—	$	—
Investment securities available-for-sale		94,658		94,658		—		94,658		—
Investment securities held-to-maturity		9,306		9,469		—		9,469		—
Federal funds sold		80		80		—		80		—
Federal Home Loan Bank stock		1,135		1,135		—		—		1,135
Loans, net of allowance for loan losses		566,062		577,172		—		—		577,172
Liabilities:
Deposits		738,290		741,062		—		741,062		—
Short-term borrowings		10,334		10,334		—		10,334		—
Other liabilities - derivatives		2,915		2,915		—		2,915		—

	December 31, 2019
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	57,030	$	57,030	$	57,030	$	—	$	—
Investment securities available-for-sale		94,016		94,016		—		94,016		—
Investment securities held-to-maturity		14,340		14,306		—		14,306		—
Federal funds sold		10,080		10,080		—		10,080		—
Federal Home Loan Bank stock		1,137		1,137		—		—		1,137
Loans, net of allowance for loan losses		545,243		559,911		—		—		559,911
Other assets - derivatives		301		301		—		301		—
Liabilities:
Deposits		683,662		682,828		—		682,828		—
Short-term borrowings		10,025		10,025		—		10,025		—

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Reclassification

Reclassification

Certain disclosures in the notes to the prior period consolidated financial statements have been reclassified to conform to the 2020 presentation. These reclassifications had no effect on the Company’s results of operations, financial position or net cash flow.

Net Income Per Share

Net Income Per Share

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Basic shares		6,276,001		6,423,642		6,279,079		6,420,653
Dilutive shares		422,000		427,282		422,000		427,282
Diluted shares		6,698,001		6,850,924		6,701,079		6,847,935

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(Dollars in Thousands, Except Per Share Data)
Net income	$	404	$	1,005	$	1,251	$	2,239
Basic net income per share	$	0.07	$	0.16	$	0.20	$	0.35
Diluted net income per share	$	0.06	$	0.15	$	0.19	$	0.33

Comprehensive Income

Comprehensive Income

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

Accounting Policies Recently Adopted

Accounting Policies Recently Adopted

Accounting Standards Update (“ASU”) 2018-15, “Intangibles-Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force).” Issued in August 2018, ASU 2018-15 aims to reduce complexity in the accounting for costs of implementing a cloud computing service arrangement. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments of ASU 2018-15 require an entity to follow the guidance in FASB Accounting Standards Codification (“ASC”) Subtopic 350-40, “Intangibles-Goodwill and Other – Internal-Use Software,” in order to determine which implementation costs to capitalize as assets related to the service contract and which costs to expense. The amendments of ASU 2018-15 also require an entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement (i.e., the noncancelable period of the arrangement plus periods covered by (1) an option to extend the arrangement if the entity is reasonably certain to exercise that option, (2) an option to terminate the arrangement if the entity is reasonably certain not to exercise the option and (3) an option to extend (or not to terminate) the arrangement in which exercise of the option is in the control of the vendor). ASU 2018-15 also requires an entity to present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement, and to classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. ASU 2018-15 became effective for the Company on January 1, 2020. The adoption of ASU 2018-15 did not have a material impact on the Company’s consolidated financial statements.

ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” Issued in August 2018, the amendments in this ASU remove disclosure requirements in ASC Topic 820 related to (1) the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels and (3) the valuation processes for Level 3 fair value measurements. The ASU also modifies disclosure requirements such that (1) for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date that restrictions from redemption might lapse, only if the investee has communicated the timing to the entity or announced the timing publicly, and (2) it is clear that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. Additionally, this ASU adds disclosure requirements for public entities about (1) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 became effective for the Company on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements.

Pending Accounting Pronouncements

ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.”  Issued in March 2020, ASU 2020-04 seeks to provide guidance, for a limited time, to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. ASU 2020-04 was issued in response to concerns about the structural risks of interbank offered rates, and, specifically, the risk that the London Interbank Offer Rate (LIBOR) will no longer be used. Regulators have begun reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. ASU 2020-04 provides temporary optional expedients to U.S. GAAP guidance on contract modifications, hedge accounting and other transactions that reference LIBOR or another reference rate expected to be discontinued. As the guidance in ASU 2020-04 is intended to assist entities during the global market-wide reference rate transition period, it is in effect for a limited time, from March 12, 2020 through December 31, 2022. Management is currently evaluating the impact of the potential discontinuance of LIBOR, and a determination cannot be made at this time as to the impact that the amendments of ASU 2020-04 or the reference rate reform will have on the Company’s consolidated financial statements.

ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” Issued in December 2019, ASU 2019-12 seeks to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company intends to adopt the amendments in ASU 2019-12 on January 1, 2021. Adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated financial statements.

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

ASU 2016-13, "Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” Issued in June 2016, ASU 2016-13 removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables and held-to-maturity debt securities. Under current U.S. GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance removes all current recognition thresholds and requires companies to recognize an allowance for lifetime expected credit losses. Credit losses will be immediately recognized through net income; the amount recognized will be based on the current estimate of contractual cash flows not expected to be collected over the financial asset’s contractual term. ASU 2016-13 also amends the credit loss measurement guidance for available-for-sale debt securities. The standard will add new disclosures related to factors that influenced management’s estimate, including current expected credit losses, the changes in those factors and reasons for the changes, as well as the method applied to revert to historical credit loss experience. As originally issued, ASU 2016-13 was effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after December 15, 2019, with institutions required to apply the changes through a cumulative-effect adjustment to their retained earnings balance as of the beginning of the first reporting period in which the guidance is effective. On October 16, 2019, the FASB approved a delay in the implementation of ASU 2016-13 by three years for smaller reporting companies, including the Company. Management has been in the process of developing a revised model to calculate the allowance for loan and lease losses upon implementation of ASU 2016-13 in order to determine the impact on the Company’s consolidated financial statements and, at this time, expects to recognize a one-time cumulative effect adjustment to the allowance for loan and lease losses as of the beginning of the first reporting period in which the new standard is effective. The magnitude of any such one-time adjustment is not yet known.

Revenue

On January 1, 2018, the Company implemented ASU 2014-09, Revenue from Contracts with Customers, codified at ASC Topic 606. The majority of the Company’s revenue is generated through interest earned on financial instruments, including loans and investment securities, which falls outside the scope of ASC Topic 606. The Company also generates revenue from insurance- and lease-related contracts that fall outside the scope of ASC Topic 606.

All of the Company’s revenue that is subject to ASC Topic 606 is included in non-interest income; however, not all non-interest income is subject to ASC Topic 606. Revenue earned by the Company that is subject to ASC Topic 606 primarily consists of service and other charges on deposit accounts, mortgage fees from secondary market transactions at the Bank, ATM fee income and other non-interest income. Revenue generated from these sources for the six-month periods ended June 30, 2020 and 2019 was $1.4 million and $1.6 million, respectively, and for the three-month periods ended June 30, 2020 and 2019 was $0.6 million and $0.8 million, respectively. All sources of the Company’s revenue subject to ASC Topic 606 are transaction-based, and revenue is recognized at the time at which the transaction is executed, which is the same time at which the Company’s performance obligation is satisfied. The Company had no contract liabilities or unsatisfied performance obligations with customers as of June 30, 2020.

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Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table reflects weighted average shares used to calculate basic and diluted net income per share for the periods presented.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Basic shares		6,276,001		6,423,642		6,279,079		6,420,653
Dilutive shares		422,000		427,282		422,000		427,282
Diluted shares		6,698,001		6,850,924		6,701,079		6,847,935

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(Dollars in Thousands, Except Per Share Data)
Net income	$	404	$	1,005	$	1,251	$	2,239
Basic net income per share	$	0.07	$	0.16	$	0.20	$	0.35
Diluted net income per share	$	0.06	$	0.15	$	0.19	$	0.33

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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 and Held-to-Maturity

Details of investment securities available-for-sale and held-to-maturity as of June 30, 2020 and December 31, 2019 were as follows:

	Available-for-Sale
	June 30, 2020
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	31,638	$	1,009	$	(13	)	$	32,634
Commercial		52,201		858		(212	)		52,847
Obligations of states and political subdivisions		6,211		113		(1	)		6,323
Corporate notes		2,706		67		—			2,773
U.S. Treasury securities		81		—		—			81
Total	$	92,837	$	2,047	$	(226	)	$	94,658

	Held-to-Maturity
	June 30, 2020
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	7,052	$	105	$	(4	)	$	7,153
Obligations of U.S. government-sponsored agencies		1,205		38		—			1,243
Obligations of states and political subdivisions		1,049		24		—			1,073
Total	$	9,306	$	167	$	(4	)	$	9,469

	Available-for-Sale
	December 31, 2019
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	46,182	$	372	$	(209	)	$	46,345
Commercial		43,686		73		(386	)		43,373
Obligations of states and political subdivisions		4,123		95		—			4,218
U.S. Treasury securities		80		—		—			80
Total	$	94,071	$	540	$	(595	)	$	94,016

	Held-to-Maturity
	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	8,923	$	2	$	(46	)	$	8,879
Obligations of U.S. government-sponsored agencies		4,324		5		(10	)		4,319
Obligations of states and political subdivisions		1,093		15		—			1,108
Total	$	14,340	$	22	$	(56	)	$	14,306

Maturities of Investment Securities Available-for-Sale and Held-to-Maturity

The scheduled maturities of investment securities available-for-sale and held-to-maturity as of June 30, 2020 are presented in the following table:

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Maturing within one year	$	3,493	$	3,523	$	22	$	22
Maturing after one to five years		4,655		4,802		765		783
Maturing after five to ten years		47,024		48,326		3,594		3,659
Maturing after ten years		37,665		38,007		4,925		5,005
Total	$	92,837	$	94,658	$	9,306	$	9,469

Schedule of Unrealized Loss on Investments

The following tables reflect gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of June 30, 2020 and December 31, 2019.

	Available-for-Sale
	June 30, 2020
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	1,414	$	(6	)	$	866	$	(7	)
Commercial		4,415		(6	)		3,469		(206	)
Obligations of states and political subdivisions		1,139		(1	)		146		—
U.S. Treasury securities		81		—			—		—
Total	$	7,049	$	(13	)	$	4,481	$	(213	)

	Held-to-Maturity
	June 30, 2020
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	771	$	(4	)	$	—	$	—
Total	$	771	$	(4	)	$	—	$	—

	Available-for-Sale
	December 31, 2019
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	17,340	$	(66	)	$	10,094	$	(143	)
Commercial		3,794		(25	)		29,754		(361	)
U.S. Treasury securities		80		—			—		—
Total	$	21,214	$	(91	)	$	39,848	$	(504	)

	Held-to-Maturity
	December 31, 2019
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	685	$	—		$	6,405	$	(46	)
Obligations of U.S. government-sponsored agencies		846		(4	)		2,994		(6	)
Total	$	1,531	$	(4	)	$	9,399	$	(52	)

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Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2020

Allowance For Loan And Lease Losses Writeoffs Net [Abstract]

Schedule of Loan Portfolio

As of June 30, 2020 and December 31, 2019, the composition of the loan portfolio by reporting segment and portfolio segment was as follows:

	June 30, 2020
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	31,384	$	—	$	31,384
Secured by 1-4 family residential properties		88,549		4,461		93,010
Secured by multi-family residential properties		48,807		—		48,807
Secured by non-farm, non-residential properties		160,683		—		160,683
Commercial and industrial loans (1)		87,771		—		87,771
Consumer loans:
Direct consumer		7,340		25,959		33,299
Branch retail		—		33,000		33,000
Indirect sales (2)		89,932		—		89,932
Total loans		514,466		63,420		577,886
Less: Unearned interest, fees and deferred cost		578		4,823		5,401
Allowance for loan losses		4,568		1,855		6,423
Net loans	$	509,320	$	56,742	$	566,062

	December 31, 2019
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	30,820	$	—	$	30,820
Secured by 1-4 family residential properties		98,971		5,566		104,537
Secured by multi-family residential properties		50,910		—		50,910
Secured by non-farm, non-residential properties		162,981		—		162,981
Commercial and industrial loans (1)		90,957		—		90,957
Consumer loans:
Direct consumer		7,816		30,224		38,040
Branch retail		—		32,305		32,305
Indirect sales (2)		—		45,503		45,503
Total loans		442,455		113,598		556,053
Less: Unearned interest, fees and deferred cost		262		4,786		5,048
Allowance for loan losses		3,483		2,279		5,762
Net loans	$	438,710	$	106,533	$	545,243

(1) Includes equipment financing leases.

(2) Effective January 1, 2020, the Company transferred a total of $45.5 million of its indirect sales portfolio from ALC to the Bank.

Summary of Acquired Loans

The carrying amount of PCI loans, which is included within loans on the condensed consolidated balance sheet, is set forth in the table below as of June 30, 2020 and December 31, 2019:

	June 30, 2020			December 31, 2019
	(Dollars in Thousands)
Real estate loans:
Secured by 1-4 family residential properties	$	200		$	224
Outstanding balance		200			224
Fair value adjustment		(33	)		(49	)
Carrying amount, net of fair value adjustment	$	167		$	175

Allowance for Loan Losses

The following tables present changes in the allowance for loan losses during the six months ended June 30, 2020 and 2019 and the related loan balances by loan type as of June 30, 2020 and 2019:

	As of and for the Six Months Ended June 30, 2020
	Construction, Land Development, and Other		1-4 Family			Real Estate Multi- Family		Non- Farm Non- Residential		Commercial and Industrial			Direct Consumer			Branch Retail			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	197	$	466		$	422	$	964	$	1,377		$	1,625		$	395		$	316		$	5,762
Charge-offs		—		(42	)		—		—		—			(962	)		(221	)		(38	)		(1,263	)
Recoveries		—		14			—		8		—			381			90			1			494
Provision		72		84			70		272		(448	)		373			211			796			1,430
Ending balance	$	269	$	522		$	492	$	1,244	$	929		$	1,417		$	475		$	1,075		$	6,423
Ending balance of allowance attributable to    loans:
Individually evaluated for impairment	$	—	$	13		$	—	$	—	$	62		$	3		$	—		$	—		$	78
Collectively evaluated for impairment		269		509			492		1,244		867			1,414			475			1,075			6,345
Total allowance for loan losses	$	269	$	522		$	492	$	1,244	$	929		$	1,417		$	475		$	1,075		$	6,423
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	785		$	—	$	2,748	$	62		$	25		$	—		$	—		$	3,620
Collectively evaluated for impairment		31,384		92,058			48,807		157,935		87,709			33,274			33,000			89,932			574,099
Loans acquired with deteriorated credit quality		—		167			—		—		—			—			—			—			167
Total loans receivable	$	31,384	$	93,010		$	48,807	$	160,683	$	87,771		$	33,299		$	33,000		$	89,932		$	577,886

	As of and for the Six Months Ended June 30, 2019
	Construction, Land Development, and Other			1-4 Family			Real Estate Multi- Family		Non- Farm Non- Residential			Commercial and Industrial		Direct Consumer			Branch Retail			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	241		$	346		$	128	$	831		$	1,138	$	1,799		$	427		$	145		$	5,055
Charge-offs		—			(77	)		—		—			—		(1,090	)		(201	)		(128	)		(1,496	)
Recoveries		—			15			—		—			3		334			59			2			413
Provision		(50	)		105			38		(22	)		63		646			151			184			1,115
Ending balance	$	191		$	389		$	166	$	809		$	1,204	$	1,689		$	436		$	203		$	5,087
Ending balance of allowance attributable to    loans:
Individually evaluated for impairment	$	95		$	16		$	—	$	—		$	65	$	12		$	—		$	—		$	188
Collectively evaluated for impairment		96			373			166		809			1,139		1,677			436			203			4,899
Total allowance for loan losses	$	191		$	389		$	166	$	809		$	1,204	$	1,689		$	436		$	203		$	5,087
Ending balance of loans receivable:
Individually evaluated for impairment	$	421		$	1,141		$	—	$	504		$	65	$	35		$	—		$	—		$	2,166
Collectively evaluated for impairment		27,980			102,043			28,033		158,244			91,424		37,125			29,609			45,466			519,924
Loans acquired with deteriorated credit quality		—			170			—		—			—		—			—			—			170
Total loans receivable	$	28,401		$	103,354		$	28,033	$	158,748		$	91,489	$	37,160		$	29,609		$	45,466		$	522,260

Loans By Credit Quality Indicators

The tables below illustrate the carrying amount of loans by credit quality indicator as of June 30, 2020:

	June 30, 2020
	Pass 1-5			Special Mention 6			Substandard 7			Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	31,302		$	77		$	5		$	31,384
Secured by multi-family residential properties		48,807			—			—			48,807
Secured by non-farm, non-residential properties		156,033			2,783			1,867			160,683
Commercial and industrial loans		86,129			1,186			456			87,771
Total	$	322,271		$	4,046		$	2,328		$	328,645
As a percentage of total loans		98.06	%		1.23	%		0.71	%		100.00	%

	June 30, 2020
	Performing			Nonperforming			Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	91,012		$	1,998		$	93,010
Consumer loans:
Direct consumer		32,942			357			33,299
Branch retail		32,933			67			33,000
Indirect sales		89,873			59			89,932
Total	$	246,760		$	2,481		$	249,241
As a percentage of total loans		99.00	%		1.00	%		100.00	%

The above amounts include PCI loans. As of June 30, 2020, $0.2 million of PCI loans were classified as “Nonperforming.”

The tables below illustrate the carrying amount of loans by credit quality indicator as of December 31, 2019:

	December 31, 2019
	Pass 1-5			Special Mention 6			Substandard 7			Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	30,466		$	354		$	—		$	30,820
Secured by multi-family residential properties		50,910			—			—			50,910
Secured by non-farm, non-residential properties		157,718			2,961			2,302			162,981
Commercial and industrial loans		88,463			714			1,780			90,957
Total	$	327,557		$	4,029		$	4,082		$	335,668
As a percentage of total loans		97.58	%		1.20	%		1.22	%		100.00	%

	December 31, 2019
	Performing			Nonperforming			Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	102,176		$	2,361		$	104,537
Consumer loans:
Direct consumer		37,474			566			38,040
Branch retail		32,024			281			32,305
Indirect sales		45,503			—			45,503
Total	$	217,177		$	3,208		$	220,385
As a percentage of total loans		98.54	%		1.46	%		100.00	%

Aging Analysis of Past Due Loans

The following table provides an aging analysis of past due loans by class as of June 30, 2020:

	As of June 30, 2020
	30-59 Days Past Due			60-89 Days Past Due			90 Days Or Greater			Total Past Due			Current			Total Loans			Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development    and other land loans	$	—		$	—		$	—		$	—		$	31,384		$	31,384		$	—
Secured by 1-4 family residential    properties		97			31			96			224			92,786			93,010			—
Secured by multi-family residential    properties		—			—			—			—			48,807			48,807			—
Secured by non-farm, non-residential    properties		22			—			1,417			1,439			159,244			160,683			—
Commercial and industrial loans		58			12			—			70			87,701			87,771			—
Consumer loans:
Direct consumer		253			113			326			692			32,607			33,299			—
Branch retail		132			30			67			229			32,771			33,000			—
Indirect sales		166			—			59			225			89,707			89,932			—
Total	$	728		$	186		$	1,965		$	2,879		$	575,007		$	577,886		$	—
As a percentage of total loans		0.13	%		0.03	%		0.34	%		0.50	%		99.50	%		100.00	%

The above amounts include PCI loans. As of June 30, 2020, $0.2 million of PCI loans were 60-89 days past due.

The following table provides an aging analysis of past due loans by class as of December 31, 2019:

	As of December 31, 2019
	30-59 Days Past Due			60-89 Days Past Due			90 Days Or Greater			Total Past Due			Current			Total Loans			Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development    and other land loans	$	—		$	—		$	—		$	—		$	30,820		$	30,820		$	—
Secured by 1-4 family residential    properties		259			108			844			1,211			103,326			104,537			—
Secured by multi-family residential    properties		—			—			—			—			50,910			50,910			—
Secured by non-farm, non-residential    properties		30			—			1,419			1,449			161,532			162,981			—
Commercial and industrial loans		56			—			—			56			90,901			90,957			—
Consumer loans:
Direct consumer		387			287			531			1,205			36,835			38,040			—
Branch retail		444			189			281			914			31,391			32,305			—
Indirect sales		132			—			—			132			45,371			45,503			—
Total	$	1,308		$	584		$	3,075		$	4,967		$	551,086		$	556,053		$	—
As a percentage of total loans		0.24	%		0.11	%		0.55	%		0.89	%		99.11	%		100.00	%

The above amounts include PCI loans. As of December 31, 2019, $0.2 million of PCI loans were 60-89 days past due.

Non-accruing Loans

The following table provides an analysis of non-accruing loans by class as of June 30, 2020 and December 31, 2019:

	Loans on Non-Accrual Status
	June 30, 2020		December 31, 2019
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	5	$	8
Secured by 1-4 family residential properties		1,421		1,423
Secured by multi-family residential properties		—		—
Secured by non-farm, non-residential properties		1,421		1,426
Commercial and industrial loans		106		27
Consumer loans:
Direct consumer		336		558
Branch retail		67		281
Indirect sales		59		—
Total loans	$	3,415	$	3,723

Summarizes of All COVID19 Loan Payment Deferment and the Percentage of Loans

The table below summarizes all remaining COVID-19 loan payment deferments made by the Company as of June 30, 2020.

	As of June 30, 2020
	Number of Loans Deferred		Principal Balance of Loans Deferred		% of Portfolio Balance			Principal and Interest Deferments		Principal Only Deferments
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans		7	$	4,544		14.5	%	$	4,544	$	—
Secured by 1-4 family residential properties		50		9,474		10.2	%		8,078		1,396
Secured by multi-family residential properties		12		29,726		60.9	%		15,523		14,203
Secured by non-farm, non-residential properties		49		42,797		26.6	%		37,073		5,724
Commercial and industrial loans		9		1,460		1.7	%		831		629
Consumer loans:
Direct consumer		442		2,188		6.6	%		2,188		—
Branch retail		172		1,856		5.6	%		1,856		—
Indirect sales		123		3,199		3.6	%		3,199		—
Total loans		864	$	95,244		16.5	%	$	73,292	$	21,952

Summarizes the At Risk Categories and the Relative Percentage of the Loan Portfolio

The table below summarizes the “at-risk” categories and the relative percentage of the Company’s loan portfolio for each as of June 30, 2020.

	June 30, 2020
	Balance of Risk Category		% of Total Loan Balance
	(Dollars in Thousands)
High-risk loan categories:
Hotels/motels	$	10,410		1.8	%
Dine-in restaurants		4,459		0.8	%
Total high-risk loans		14,869		2.6	%
Moderate-risk loan categories:
Fast food restaurants		5,326		0.9	%
Retail		34,587		6.0	%
1-4 family investment		21,874		3.8	%
Total moderate-risk loans		61,787		10.7	%
Total at-risk loans	$	76,656		13.3	%

Impaired Loans

As of June 30, 2020, the carrying amount of the Company’s impaired loans consisted of the following:

	June 30, 2020
	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Impaired loans with no related allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		932		932		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		2,748		2,748		—
Commercial and industrial		—		—		—
Direct consumer		—		—		—
Total loans with no related allowance recorded	$	3,680	$	3,680	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		20		20		13
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		62		62		62
Direct consumer		25		25		3
Total loans with an allowance recorded	$	107	$	107	$	78
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		952		952		13
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		2,748		2,748		—
Commercial and industrial		62		62		62
Direct consumer		25		25		3
Total impaired loans	$	3,787	$	3,787	$	78

The above amounts include PCI loans. As of June 30, 2020, PCI loans comprised $0.2 million of impaired loans without a related allowance recorded.

As of December 31, 2019, the carrying amount of the Company’s impaired loans consisted of the following:  

	December 31, 2019
	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Impaired loans with no related allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		984		984		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		1,877		1,877		—
Commercial and industrial		—		—		—
Direct consumer		—		—		—
Total loans with no related allowance recorded	$	2,861	$	2,861	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		21		21		14
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		206		206		206
Direct consumer		29		29		7
Total loans with an allowance recorded	$	256	$	256	$	227
Total impaired loans
Loans secured by real estate	.
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		1,005		1,005		14
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		1,877		1,877		—
Commercial and industrial		206		206		206
Direct consumer		29		29		7
Total impaired loans	$	3,117	$	3,117	$	227

The average net investment in impaired loans and interest income recognized and received on impaired loans during the six months ended June 30, 2020 and the year ended December 31, 2019 were as follows:

	Six Months Ended June 30, 2020
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		890		5		4
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		2,754		14		14
Commercial and industrial		86		3		3
Direct consumer		26		1		2
Total	$	3,756	$	23	$	23

	Year Ended December 31, 2019
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	181	$	—	$	—
Secured by 1-4 family residential properties		1,021		48		48
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		645		29		29
Commercial and industrial		991		7		7
Direct consumer		38		2		2
Total	$	2,876	$	86	$	86

Loans Modified in a Troubled Debt Restructuring

The following table provides, as of June 30, 2020 and December 31, 2019, the number of loans remaining in each loan category that the Company had previously modified in a troubled debt restructuring, as well as the pre- and post-modification principal balance as of each date.

	June 30, 2020						December 31, 2019
	Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance		Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land    loans		1	$	107	$	—		1	$	107	$	62
Secured by 1-4 family residential properties		2		59		13		2		59		14
Commercial loans		2		116		55		2		116		60
Total		5	$	282	$	68		5	$	282	$	136

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Other Real Estate Owned and Repossessed Assets (Tables)

6 Months Ended

Jun. 30, 2020

Other Real Estate [Abstract]

Summary of Foreclosed Property Activity

Other real estate and certain other assets acquired in foreclosure are reported at the net realizable value of the property, less estimated costs to sell. The following table summarizes foreclosed property activity as of the six months ended June 30, 2020 and 2019:

	June 30, 2020			June 30, 2019
	(Dollars in Thousands)
Beginning balance	$	1,078		$	1,505
Additions (1)		293			262
Sales proceeds		(358	)		(483	)
Gross gains		38			39
Gross losses		(38	)		(27	)
Net gains		—			12
Impairment		(10	)		(38	)
Ending balance	$	1,003		$	1,258

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

Summary of Repossessed Assets Activity

The following table summarizes repossessed asset activity as of the six months ended June 30, 2020 and 2019:

	June 30, 2020			June 30, 2019
	(Dollars in Thousands)
Beginning balance	$	256		$	229
Transfers from loans		561			520
Sales proceeds		(270	)		(278	)
Gross gains		—			2
Gross losses		(286	)		(227	)
Net losses		(286	)		(225	)
Impairment		—			—
Ending balance	$	261		$	246

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Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Summary of Goodwill and Other Intangible Assets

The Company’s goodwill and other intangibles (carrying basis and accumulated amortization) as of June 30, 2020 were as follows:

	June 30, 2020
	(Dollars in Thousands)
Goodwill	$	7,435
Core deposit intangible:
Gross carrying amount		2,048
Accumulated amortization		(878	)
Core deposit intangible, net		1,170
Total	$	8,605

Schedule of Estimated Remaining Amortization Expense

The Company’s estimated remaining amortization expense on intangibles as of June 30, 2020 was as follows:

	Amortization Expense
	(Dollars in Thousands)
2020	$	195
2021		341
2022		268
2023		195
2024		122
2025		49
Total	$	1,170

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Stock Awards (Tables)

6 Months Ended

Jun. 30, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Schedule of Fair Value Assumptions

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

	2020			2019
Risk-free interest rate		1.24	%		2.59	%
Expected term (in years)		7.5			7.5
Expected stock price volatility		28.9	%		30.9	%
Dividend yield		1.25	%		1.25	%
Fair value of stock option		3.34			3.30

Stock Option Activity

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

	Six Months Ended
	June 30, 2020				June 30, 2019
	Number of Shares		Average Exercise Price		Number of Shares		Average Exercise Price
Options:
Outstanding, beginning of period		412,800	$	9.72		377,950	$	9.80
Granted		10,200		11.95		66,150		10.01
Exercised		666		10.75		—		—
Expired		—		—		—		—
Forfeited		334		10.75		16,819		11.39
Options outstanding, end of period		422,000	$	9.77		427,281	$	9.77
Options exercisable, end of period		353,183	$	9.59		309,682	$	9.20

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Leases (Tables)

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Components of Lease Expense

	Location in the Condensed	Three Months Ended				Six Months Ended
	Consolidated Statements of Operations	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
		(Dollars in Thousands)				(Dollars in Thousands)
Operating lease expense (1)	Net occupancy and equipment	$	212	$	210	$	423	$	420
Operating lease income (2)	Other income, net	$	212	$	212	$	424	$	421

	Location in the Condensed
	Consolidated Balance Sheet	June 30, 2020
		(Dollars in Thousands)
Operating lease right-of-use assets	Other assets	$	3,269
Operating lease liabilities	Other liabilities	$	3,312
Weighted-average remaining lease term (in years)			6.28
Weighted-average discount rate			3.14	%

	Six Months Ended
	June 30, 2020		June 30, 2019
	(Dollars in Thousands)
Cash paid for amounts included in the measurement of    lease liabilities:
Operating cash flows from operating leases	$	373	$	385

Future Minimum Operating Lease Payments

	Minimum Rental Payments
	(Dollars in Thousands)
2020	$	352
2021		628
2022		558
2023		458
2024		438
2025 and thereafter		1,276
Total future minimum lease payments	$	3,710
Less: Imputed interest		398
Total operating lease liabilities	$	3,312

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2020

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Schedule Of Cumulative Basis Adjustments For Fair Value Hedges

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

Location in the Condensed Consolidated Balance Sheet in Which the Hedged	Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
Item is Included	June 30, 2020
	(Dollars in Thousands)
Loans and leases, net of allowance for loan and    lease losses (1)	$	39,291	$	900

⁽¹⁾ These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. As of June 30, 2020, the amortized cost basis of the closed portfolios used in these hedging relationships was $38.4 million, the cumulative basis adjustments associated with these hedging relationships were $0.9 million, and the amounts of the designated hedged items were $20.0 million.

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2020

Segment Reporting Disclosure Of Entitys Reportable Segments [Abstract]

Schedule of Segment Reporting Information, by Segment

The results for the two reportable segments of the Company are included in the tables below.

						All
	Bank		ALC			Other			Eliminations			Consolidated
	(Dollars in Thousands)
As of and for the three months ended June 30, 2020:
Net interest income	$	6,442	$	2,174		$	7		$	—		$	8,623
Provision for loan losses		530		320			—			—			850
Total non-interest income		1,251		191			784			(896	)		1,330
Total non-interest expense		6,110		2,091			538			(158	)		8,581
Income before income taxes		1,053		(46	)		253			(738	)		522
Provision for income taxes		220		(14	)		(88	)		—			118
Net income	$	833	$	(32	)	$	341		$	(738	)	$	404
Other significant items:
Total assets	$	848,376	$	60,044		$	90,684		$	(153,357	)	$	845,747
Total investment securities		103,883		—			81			—			103,964
Total loans, net		561,253		56,742			—			(51,933	)		566,062
Goodwill and core deposit intangible, net		8,605		—			—			—			8,605
Investment in subsidiaries		—		—			84,718			(84,718	)		—
Fixed asset additions		223		5			—			—			228
Depreciation and amortization expense		376		31			—			—			407
Total interest income from external customers		6,872		2,907			1			—			9,780
Total interest income from affiliates		733		—			6			(739	)		—
For the six months ended June 30, 2020:
Net interest income	$	12,922	$	4,574		$	13		$	—		$	17,509
Provision for loan losses		778		652			—			—			1,430
Total non-interest income		2,345		428			2,018			(2,164	)		2,627
Total non-interest expense		12,266		4,260			894			(345	)		17,075
Income before income taxes		2,223		90			1,137			(1,819	)		1,631
Provision for income taxes		494		37			(151	)		—			380
Net income	$	1,729	$	53		$	1,288		$	(1,819	)	$	1,251
Other significant items:
Fixed asset additions		442		19			—			—			461
Depreciation and amortization expense		742		64			—			—			806
Total interest income from external customers		14,129		6,047			1			—			20,177
Total interest income from affiliates		1,473		—			12			(1,485	)		—

					All
	Bank		ALC		Other			Eliminations			Consolidated
	(Dollars in Thousands)
As of and for the three months ended June 30, 2019:
Net interest income	$	5,986	$	3,240	$	7		$	—		$	9,233
Provision for loan losses		90		625		—			—			715
Total non-interest income		1,108		228		1,384			(1,429	)		1,291
Total non-interest expense		5,798		2,366		493			(153	)		8,504
Income before income taxes		1,206		477		898			(1,276	)		1,305
Provision for income taxes		249		121		(70	)		—			300
Net income	$	957	$	356	$	968		$	(1,276	)	$	1,005
Other significant items:
Total assets	$	778,252	$	107,911	$	89,102		$	(198,094	)	$	777,171
Total investment securities		136,569		—		80			—			136,649
Total loans, net		501,177		104,007		—			(93,669	)		511,515
Goodwill and core deposit intangible, net		9,056		—		—			—			9,056
Investment in subsidiaries		5		—		83,436			(83,436	)		5
Fixed asset additions		887		64		—			—			951
Depreciation and amortization expense		361		35		—			—			396
Total interest income from external customers		6,476		4,447		—			—			10,923
Total interest income from affiliates		1,206		—		7			(1,213	)		—
For the six months ended June 30, 2019:
Net interest income	$	11,995	$	6,398	$	13		$	—		$	18,406
Provision for loan losses		90		1,025		—			—			1,115
Total non-interest income		2,186		447		2,965			(3,042	)		2,556
Total non-interest expense		11,631		4,734		920			(328	)		16,957
Income before income taxes		2,460		1,086		2,058			(2,714	)		2,890
Provision for income taxes		511		264		(124	)		—			651
Net income	$	1,949	$	822	$	2,182		$	(2,714	)	$	2,239
Other significant items:
Fixed asset additions		2,564		78		—			—			2,642
Depreciation and amortization expense		728		68		—			—			796
Total interest income from external customers		12,969		8,766		1			—			21,736
Total interest income from affiliates		2,367		—		12			(2,379	)		—

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Other Operating Income and Expense (Tables)

6 Months Ended

Jun. 30, 2020

Other Income And Expenses [Abstract]

Other Operating Income

Other operating income for the three and six months ended June 30, 2020 and 2019 consisted of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(Dollars in Thousands, Except Per Share Data)
Bank-owned life insurance	$	107	$	108	$	215	$	214
Auto Club revenue		18		62		53		100
ATM fee income		116		111		216		215
Wire transfer fees		15		11		28		22
Other income		52		41		167		119
Total	$	308	$	333	$	679	$	670

Other Operating Expense

Other Operating Expense

Other operating expense for the three and six months ended June 30, 2020 and 2019 consisted of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(Dollars in Thousands, Except Per Share Data)
Postage, stationery and supplies	$	218	$	212	$	432	$	450
Telephone/data communication		229		205		452		418
Advertising and marketing		42		58		86		92
Travel and business development		23		102		149		213
Collection and recoveries		60		20		145		100
Other services		85		71		176		143
Insurance expense		141		153		303		315
FDIC insurance and state assessments		116		39		196		158
Loss on sale of fixed assets		121		134		287		219
Core deposit intangible amortization		109		128		219		256
Other real estate/foreclosure expense, net		22		31		41		89
Other expense		402		456		744		939
Total	$	1,568	$	1,609	$	3,230	$	3,392

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Guarantees, Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Summary of Commitment and Contingent Liabilities

A summary of these commitments and contingent liabilities is presented below:

	June 30, 2020		December 31, 2019
	(Dollars in Thousands)
Standby letters of credit	$	180	$	180
Standby performance letters of credit	$	555	$	647
Commitments to extend credit	$	93,733	$	96,967

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring Basis

The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019. There were no liabilities measured at fair value on a recurring basis as of December 31, 2019.

	Fair Value Measurements as of June 30, 2020 Using
	Totals At June 30, 2020		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	32,634	$	—	$	32,634	$	—
Commercial		52,847		—		52,847		—
Obligations of states and political subdivisions		6,323		—		6,323		—
Corporate notes		2,773		—		2,773		—
U.S. Treasury securities		81		—		81		—
Other liabilities - derivatives		2,915		—		2,915		—

	Fair Value Measurements as of December 31, 2019 Using
	Totals At December 31, 2019		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	46,345	$	—	$	46,345	$	—
Commercial		43,373		—		43,373		—
Obligations of states and political subdivisions		4,218		—		4,218		—
U.S. Treasury securities		80		—		80		—
Other assets - derivatives		301		—		301		—

Fair Value Assets Measured on Nonrecurring Basis

The following table presents the balances of impaired loans, OREO and other assets held-for-sale measured at fair value on a non-recurring basis as of June 30, 2020 and December 31, 2019:

	Fair Value Measurements as of June 30, 2020 Using
	Totals At June 30, 2020		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	29	$	—	$	—	$	29
OREO and other assets held-for-sale		1,003		—		—		1,003

	Fair Value Measurements as of December 31, 2019 Using
	Totals At December 31, 2019		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	29	$	—	$	—	$	29
OREO and other assets held-for-sale		1,276		—		—		1,276

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques

The following table presents information regarding assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of June 30, 2020. The table includes the valuation techniques and the significant unobservable inputs utilized. The range of each unobservable input and the weighted average within the range utilized as of June 30, 2020 are both included. Following the table is a description of the valuation technique and the sensitivity of the technique to changes in the significant unobservable input.

	Level 3 Significant Unobservable Input Assumptions
	Fair Value June 30, 2020		Valuation Technique	Unobservable Input	Quantitative Range of Unobservable Inputs (Weighted Average)
	(Dollars in Thousands)
Non-recurring fair value measurements:
Impaired loans	$	29	Multiple data points, including discount to appraised value of collateral based on recent market activity	Appraisal comparability adjustment (discount)	9%-10%	(9.5%)
OREO and other assets held-for-sale	$	1,003	Discount to appraised value of property based on recent market activity for sales of similar properties	Appraisal comparability adjustment (discount)	9%-10%	(9.5%)

Fair Value, by Balance Sheet Grouping

The estimated fair value and related carrying or notional amounts, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of June 30, 2020 and December 31, 2019 were as follows:

	June 30, 2020
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	108,268	$	108,268	$	108,268	$	—	$	—
Investment securities available-for-sale		94,658		94,658		—		94,658		—
Investment securities held-to-maturity		9,306		9,469		—		9,469		—
Federal funds sold		80		80		—		80		—
Federal Home Loan Bank stock		1,135		1,135		—		—		1,135
Loans, net of allowance for loan losses		566,062		577,172		—		—		577,172
Liabilities:
Deposits		738,290		741,062		—		741,062		—
Short-term borrowings		10,334		10,334		—		10,334		—
Other liabilities - derivatives		2,915		2,915		—		2,915		—

	December 31, 2019
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	57,030	$	57,030	$	57,030	$	—	$	—
Investment securities available-for-sale		94,016		94,016		—		94,016		—
Investment securities held-to-maturity		14,340		14,306		—		14,306		—
Federal funds sold		10,080		10,080		—		10,080		—
Federal Home Loan Bank stock		1,137		1,137		—		—		1,137
Loans, net of allowance for loan losses		545,243		559,911		—		—		559,911
Other assets - derivatives		301		301		—		301		—
Liabilities:
Deposits		683,662		682,828		—		682,828		—
Short-term borrowings		10,025		10,025		—		10,025		—

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General - Additional Information (Details)	6 Months Ended
	Jun. 30, 2020 Segment
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Number of Reportable Segments	2

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Basis of Presentation - Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings Per Share Basic And Diluted [Abstract]
Basic shares	6,276,001	6,423,642	6,279,079	6,420,653
Dilutive shares	422,000	427,282	422,000	427,282
Diluted shares	6,698,001	6,850,924	6,701,079	6,847,935
Net income	$ 404	$ 1,005	$ 1,251	$ 2,239
Basic net income per share	$ 0.07	$ 0.16	$ 0.20	$ 0.35
Diluted net income per share	$ 0.06	$ 0.15	$ 0.19	$ 0.33

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Investment Securities - Available-for-Sale and Held-to-Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Schedule Of Investments [Line Items]
Available-for-sale, amortized cost	$ 92,837	$ 94,071
Available-for-sale, gross unrealized gains	2,047	540
Available-for-sale, gross unrealized losses	(226)	(595)
Investment securities available-for-sale, at fair value	94,658	94,016
Held-to-maturity, amortized cost	9,306	14,340
Held-to-maturity, gross unrealized gains	167	22
Held-to-maturity, gross unrealized losses	(4)	(56)
Held-to-maturity, estimated fair value	9,469	14,306
Residential Mortgage Backed Securities [Member]
Schedule Of Investments [Line Items]
Available-for-sale, amortized cost	31,638	46,182
Available-for-sale, gross unrealized gains	1,009	372
Available-for-sale, gross unrealized losses	(13)	(209)
Investment securities available-for-sale, at fair value	32,634	46,345
Commercial Mortgage Backed Securities [Member]
Schedule Of Investments [Line Items]
Available-for-sale, amortized cost	52,201	43,686
Available-for-sale, gross unrealized gains	858	73
Available-for-sale, gross unrealized losses	(212)	(386)
Investment securities available-for-sale, at fair value	52,847	43,373
Held-to-maturity, amortized cost	7,052	8,923
Held-to-maturity, gross unrealized gains	105	2
Held-to-maturity, gross unrealized losses	(4)	(46)
Held-to-maturity, estimated fair value	7,153	8,879
US States and Political Subdivisions Debt Securities [Member]
Schedule Of Investments [Line Items]
Available-for-sale, amortized cost	6,211	4,123
Available-for-sale, gross unrealized gains	113	95
Available-for-sale, gross unrealized losses	(1)
Investment securities available-for-sale, at fair value	6,323	4,218
Held-to-maturity, amortized cost	1,049	1,093
Held-to-maturity, gross unrealized gains	24	15
Held-to-maturity, estimated fair value	1,073	1,108
Corporate Notes [Member]
Schedule Of Investments [Line Items]
Available-for-sale, amortized cost	2,706
Available-for-sale, gross unrealized gains	67
Investment securities available-for-sale, at fair value	2,773
US Treasury Securities [Member]
Schedule Of Investments [Line Items]
Available-for-sale, amortized cost	81	80
Investment securities available-for-sale, at fair value	81	80
US Government Agencies Debt Securities [Member]
Schedule Of Investments [Line Items]
Held-to-maturity, amortized cost	1,205	4,324
Held-to-maturity, gross unrealized gains	38	5
Held-to-maturity, gross unrealized losses		(10)
Held-to-maturity, estimated fair value	$ 1,243	$ 4,319

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Investment Securities - Scheduled Maturities of Investment Securities Available-for-Sale and Held-to-Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Investments Debt And Equity Securities [Abstract]
Available-for-sale, maturing within one year, amortized cost	$ 3,493
Available-for-sale, maturing after one to five years, amortized cost	4,655
Available-for-sale, maturing after five to ten years, amortized cost	47,024
Available-for-sale, maturing after ten years, amortized cost	37,665
Available-for-sale, amortized cost	92,837	$ 94,071
Available-for-sale, maturing within one year, estimated fair value	3,523
Available-for-sale, maturing after one to five years, estimated fair value	4,802
Available-for-sale, maturing after five to ten years, estimated fair value	48,326
Available-for-sale, maturing after ten years, estimated fair value	38,007
Available-for-sale, amortized cost	94,658	94,016
Held-to-maturity, maturing within one year, amortized cost	22
Held-to-maturity, maturing after one to five years, amortized cost	765
Held-to-maturity, maturing after five to ten years, amortized cost	3,594
Held-to-maturity, maturing after ten years, amortized cost	4,925
Held-to-maturity, amortized cost	9,306	14,340
Held-to-maturity, maturing within one year, estimated fair value	22
Held-to-maturity, maturing after one to five years, estimated fair value	783
Held-to-maturity, maturity after five to ten years, estimated fair value	3,659
Held-to-maturity, maturing after ten years, estimated fair value	5,005
Held-to-maturity, amortized cost	$ 9,469	$ 14,306

XML

Investment Securities - Securities in Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Schedule Of Investments [Line Items]
Available-for-sale, less than 12 months, fair value	$ 7,049	$ 21,214
Available-for-sale, less than 12 months, unrealized losses	(13)	(91)
Available-for-sale, 12 months or more, fair value	4,481	39,848
Available-for-sale, 12 months or more, unrealized losses	(213)	(504)
Held-to-maturity, less than 12 months, fair value	771	1,531
Held-to-maturity, less than 12 months, unrealized losses	(4)	(4)
Held-to-maturity, 12 months or more, fair value		9,399
Held-to-maturity, 12 months or more, unrealized losses		(52)
Residential Mortgage Backed Securities [Member]
Schedule Of Investments [Line Items]
Available-for-sale, less than 12 months, fair value	1,414	17,340
Available-for-sale, less than 12 months, unrealized losses	(6)	(66)
Available-for-sale, 12 months or more, fair value	866	10,094
Available-for-sale, 12 months or more, unrealized losses	(7)	(143)
Commercial Mortgage Backed Securities [Member]
Schedule Of Investments [Line Items]
Available-for-sale, less than 12 months, fair value	4,415	3,794
Available-for-sale, less than 12 months, unrealized losses	(6)	(25)
Available-for-sale, 12 months or more, fair value	3,469	29,754
Available-for-sale, 12 months or more, unrealized losses	(206)	(361)
Held-to-maturity, less than 12 months, fair value	771	685
Held-to-maturity, less than 12 months, unrealized losses	(4)
Held-to-maturity, 12 months or more, fair value		6,405
Held-to-maturity, 12 months or more, unrealized losses		(46)
US States and Political Subdivisions Debt Securities [Member]
Schedule Of Investments [Line Items]
Available-for-sale, less than 12 months, fair value	1,139
Available-for-sale, less than 12 months, unrealized losses	(1)
Available-for-sale, 12 months or more, fair value	146
US Treasury Securities [Member]
Schedule Of Investments [Line Items]
Available-for-sale, less than 12 months, fair value	$ 81	80
US Government Agencies Debt Securities [Member]
Schedule Of Investments [Line Items]
Held-to-maturity, less than 12 months, fair value		846
Held-to-maturity, less than 12 months, unrealized losses		(4)
Held-to-maturity, 12 months or more, fair value		2,994
Held-to-maturity, 12 months or more, unrealized losses		$ (6)

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Investment Securities - Additional Information (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
Investments Debt And Equity Securities [Abstract]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year	8	69
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year	11	35
Other than temporary impairment loss debt securities available for sale interest rate	1.50%
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Total	$ 0	$ 0
Debt Securities, Available-for-sale, Restricted	$ 64,400,000	$ 51,700,000

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Loans and Allowance for Loan Losses - Schedule of Loan Portfolio (Details) - USD ($) $ in Thousands		Jun. 30, 2020		Dec. 31, 2019		Jun. 30, 2019	Dec. 31, 2018
Loans		$ 577,886		$ 556,053
Less: Unearned interest, fees and deferred cost		5,401		5,048
Loans, allowance for loan losses		6,423		5,762
Net loans		566,062		545,243		$ 511,515
Construction, Land Development and Other Land Loans [Member]
Loans		31,384
Loans, allowance for loan losses		269		197
Secured by 1-4 Family Residential Properties [Member]
Loans		93,010
Loans, allowance for loan losses		522		466
Secured By Multi family Residential Properties [Member]
Loans		48,807
Loans, allowance for loan losses		492		422
Secured By Non-farm Non residential Properties [Member]
Loans		160,683
Loans, allowance for loan losses		1,244		964
Direct Consumer [Member]
Loans		33,299
Branch Retail [Member]
Loans		33,000
Indirect Sales [Member]
Loans		89,932
FUSB [Member]
Loans		514,466		442,455		522,260
Less: Unearned interest, fees and deferred cost		578		262
Loans, allowance for loan losses		4,568		3,483		5,087	$ 5,055
Net loans		509,320		438,710
FUSB [Member] | Construction, Land Development and Other Land Loans [Member]
Loans						28,401
Loans, allowance for loan losses						191	241
FUSB [Member] | Secured by 1-4 Family Residential Properties [Member]
Loans						103,354
Loans, allowance for loan losses						389	346
FUSB [Member] | Secured By Multi family Residential Properties [Member]
Loans						28,033
Loans, allowance for loan losses						166	128
FUSB [Member] | Secured By Non-farm Non residential Properties [Member]
Loans						158,748
Loans, allowance for loan losses						809	831
ALC [Member]
Loans		63,420		113,598
Less: Unearned interest, fees and deferred cost		4,823		4,786
Loans, allowance for loan losses		1,855		2,279
Net loans		56,742		106,533
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Loans		31,384		30,820
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Loans		93,010		104,537
Real Estate [Member] | Secured By Multi family Residential Properties [Member]
Loans		48,807		50,910
Real Estate [Member] | Secured By Non-farm Non residential Properties [Member]
Loans		160,683		162,981
Real Estate [Member] | FUSB [Member] | Construction, Land Development and Other Land Loans [Member]
Loans		31,384		30,820
Real Estate [Member] | FUSB [Member] | Secured by 1-4 Family Residential Properties [Member]
Loans		88,549		98,971
Real Estate [Member] | FUSB [Member] | Secured By Multi family Residential Properties [Member]
Loans		48,807		50,910
Real Estate [Member] | FUSB [Member] | Secured By Non-farm Non residential Properties [Member]
Loans		160,683		162,981
Real Estate [Member] | ALC [Member] | Secured by 1-4 Family Residential Properties [Member]
Loans		4,461		5,566
Commercial and Industrial Loans [Member]
Loans	[1]	87,771		90,957
Loans, allowance for loan losses		929		1,377
Commercial and Industrial Loans [Member] | FUSB [Member]
Loans		87,771	[1]	90,957	[1]	91,489
Loans, allowance for loan losses						1,204	1,138
Consumer Portfolio Segment [Member] | Direct Consumer [Member]
Loans		33,299		38,040
Loans, allowance for loan losses		1,417		1,625
Consumer Portfolio Segment [Member] | Branch Retail [Member]
Loans		33,000		32,305
Loans, allowance for loan losses		475		395
Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Loans	[2]	89,932		45,503
Loans, allowance for loan losses		1,075		316
Consumer Portfolio Segment [Member] | FUSB [Member] | Direct Consumer [Member]
Loans		7,340		7,816		37,160
Loans, allowance for loan losses						1,689	1,799
Consumer Portfolio Segment [Member] | FUSB [Member] | Branch Retail [Member]
Loans						29,609
Loans, allowance for loan losses						436	427
Consumer Portfolio Segment [Member] | FUSB [Member] | Indirect Sales [Member]
Loans		89,932	[2]			45,466
Loans, allowance for loan losses						$ 203	$ 145
Consumer Portfolio Segment [Member] | ALC [Member] | Direct Consumer [Member]
Loans		25,959		30,224
Consumer Portfolio Segment [Member] | ALC [Member] | Branch Retail [Member]
Loans		$ 33,000		32,305
Consumer Portfolio Segment [Member] | ALC [Member] | Indirect Sales [Member]
Loans	[2]			$ 45,503

[1] Includes equipment financing leases.

[2] Effective January 1, 2020, the Company transferred a total of $45.5 million of its indirect sales portfolio from ALC to the Bank.

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Loans and Allowance for Loan Losses - Schedule of Loan Portfolio (Parenthetical) (Details) $ in Millions	3 Months Ended
	Dec. 31, 2019 USD ($)
Receivables [Abstract]
Transfer of indirect loan portfolio to bank	$ 45.5

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Loans and Allowance for Loan Losses - Additional Information (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2020 USD ($) Loan Contract	Dec. 31, 2019 USD ($) Contract	Aug. 31, 2018 USD ($)
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Loans Pledged as Collateral	$ 32,600,000	$ 34,600,000
Loans and Leases Receivable, Related Parties, Ending Balance	500,000	900,000
Loans and Leases Receivable, Related Parties, Additions	0	100,000
Loans and Leases Receivable, Related Parties, Proceeds	400	22,000,000
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Outstanding Balance, Total			$ 2,900,000
Purchased credit impaired loans			$ 2,800,000
Certain Loans Acquired in Transfer, Accretable Yield	0	0
Loans and Leases Receivable, Gross, Total	577,886,000	556,053,000
Non-accruing loans	$ 3,415,000	3,723,000
Percentage of loan balance to Major Franchises	90.00%
Percentage of restaurants loan balance accounted to franchised fast food	54.00%
Percentage of loan balance accounted to dine in restaurant	46.00%
Lease term for Contract	12 months
Loans and Leases Receivable, Nonperforming, Nonaccrual of Interest	$ 3,400,000	3,700,000
Financing Receivable, Troubled Debt Restructuring	100,000	100,000
Impaired loans with no related allowance recorded, carrying amount	3,680,000	2,861,000
Loans and Leases Receivable, Impaired, Interest Lost on Nonaccrual Loans	45,000	41,000
Interest Income Recorded	27,000	147,000
Financing Receivable, Restructuring Recorded Investment With Nonaccrual Status	12,000	16,000
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Acquired During Period, Cash Flows Expected to be Collected at Acquisition	$ 0	$ 0
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts | Contract	0	0
Loans, allowance for loan losses	$ 6,423,000	$ 5,762,000
Restructured Loan Modified through Extended Maturity and Payment Schedule Modification [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Financing Receivable, Restructuring Recorded Investment With Nonaccrual Status	500,000
Loans, allowance for loan losses	1,000	1,000
Minimum [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Loans Modified in a Troubled Debt Restructuring, Individually Evaluated for Impairment, Principal Balance, Threshold	$ 500,000
Minimum [Member] | ALC [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Loans and Leases Receivable, Nonperforming, Nonaccrual of Interest		50,000
Paycheck Protection Program [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Loan, fixed interest rate	1.00%
Loan, aggregate principal balance	$ 13,800,000
Number of loans to small businesses | Loan	158
Paycheck Protection Program [Member] | Minimum [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Loan fee percentage	1.00%
Paycheck Protection Program [Member] | Maximum [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Loan fee percentage	5.00%
Paycheck Protection Program [Member] | Two Year Term Loan [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Loan, aggregate principal balance	$ 13,700,000
Loan payment term	two-year
Paycheck Protection Program [Member] | Five Year Term Loan [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Loan, aggregate principal balance	$ 100,000
Loan payment term	five-year
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Loans and Leases Receivable, Gross, Total	$ 1,965,000
Financial Asset Acquired With Credit Deterioration [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Loans and Leases Receivable, Gross, Total	167,000
Non-accruing loans	200,000	200,000
Impaired loans with no related allowance recorded, carrying amount	200,000	200,000
Financial Asset Acquired With Credit Deterioration [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Loans and Leases Receivable, Gross, Total	200,000	200,000
Financial Asset Acquired With Credit Deterioration [Member] | Substandard [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Loans and Leases Receivable, Gross, Total	$ 200,000	$ 200,000
Real Estate [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Percentage of Loan Portfolio	57.80%	62.80%

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Loans and Allowance for Loan Losses - Summary of Acquired Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Outstanding balance	$ 200	$ 224
Fair value adjustment	(33)	(49)
Carrying amount, net of fair value adjustment	167	175
Secured by 1-4 Family Residential Properties [Member] | Real Estate [Member]
Outstanding balance	$ 200	$ 224

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Loans and Allowance for Loan Losses - Allowance for Loan Losses (Details) - USD ($) $ in Thousands		3 Months Ended			6 Months Ended
		Jun. 30, 2020		Jun. 30, 2019	Jun. 30, 2020		Jun. 30, 2019
Beginning balance					$ 5,762
Charge-offs					(1,263)
Recoveries					494
Provision		$ 850		$ 715	1,430		$ 1,115
Ending balance		6,423			6,423
Individually evaluated for impairment		78			78
Collectively evaluated for impairment		6,345			6,345
Individually evaluated for impairment		3,620			3,620
Collectively evaluated for impairment		574,099			574,099
Loans acquired with deteriorated credit quality		577,886			577,886
FUSB [Member]
Beginning balance					3,483		5,055
Charge-offs							(1,496)
Recoveries							413
Provision							1,115
Ending balance		4,568		5,087	4,568		5,087
Individually evaluated for impairment				188			188
Collectively evaluated for impairment				4,899			4,899
Individually evaluated for impairment				2,166			2,166
Collectively evaluated for impairment				519,924			519,924
Loans acquired with deteriorated credit quality		514,466		522,260	514,466		522,260
Financial Asset Acquired With Credit Deterioration [Member]
Loans acquired with deteriorated credit quality		167			167
Financial Asset Acquired With Credit Deterioration [Member] | FUSB [Member]
Loans acquired with deteriorated credit quality				170			170
Construction, Land Development and Other Land Loans [Member]
Beginning balance					197
Provision					72
Ending balance		269			269
Collectively evaluated for impairment		269			269
Collectively evaluated for impairment		31,384			31,384
Loans acquired with deteriorated credit quality		31,384			31,384
Construction, Land Development and Other Land Loans [Member] | FUSB [Member]
Beginning balance							241
Provision							(50)
Ending balance				191			191
Individually evaluated for impairment				95			95
Collectively evaluated for impairment				96			96
Individually evaluated for impairment				421			421
Collectively evaluated for impairment				27,980			27,980
Loans acquired with deteriorated credit quality				28,401			28,401
Secured by 1-4 Family Residential Properties [Member]
Beginning balance					466
Charge-offs					(42)
Recoveries					14
Provision					84
Ending balance		522			522
Individually evaluated for impairment		13			13
Collectively evaluated for impairment		509			509
Individually evaluated for impairment		785			785
Collectively evaluated for impairment		92,058			92,058
Loans acquired with deteriorated credit quality		93,010			93,010
Secured by 1-4 Family Residential Properties [Member] | FUSB [Member]
Beginning balance							346
Charge-offs							(77)
Recoveries							15
Provision							105
Ending balance				389			389
Individually evaluated for impairment				16			16
Collectively evaluated for impairment				373			373
Individually evaluated for impairment				1,141			1,141
Collectively evaluated for impairment				102,043			102,043
Loans acquired with deteriorated credit quality				103,354			103,354
Secured by 1-4 Family Residential Properties [Member] | Financial Asset Acquired With Credit Deterioration [Member]
Loans acquired with deteriorated credit quality		167			167
Secured by 1-4 Family Residential Properties [Member] | Financial Asset Acquired With Credit Deterioration [Member] | FUSB [Member]
Loans acquired with deteriorated credit quality				170			170
Secured By Multi family Residential Properties [Member]
Beginning balance					422
Provision					70
Ending balance		492			492
Collectively evaluated for impairment		492			492
Collectively evaluated for impairment		48,807			48,807
Loans acquired with deteriorated credit quality		48,807			48,807
Secured By Multi family Residential Properties [Member] | FUSB [Member]
Beginning balance							128
Provision							38
Ending balance				166			166
Collectively evaluated for impairment				166			166
Collectively evaluated for impairment				28,033			28,033
Loans acquired with deteriorated credit quality				28,033			28,033
Secured By Non-farm Non residential Properties [Member]
Beginning balance					964
Recoveries					8
Provision					272
Ending balance		1,244			1,244
Collectively evaluated for impairment		1,244			1,244
Individually evaluated for impairment		2,748			2,748
Collectively evaluated for impairment		157,935			157,935
Loans acquired with deteriorated credit quality		160,683			160,683
Secured By Non-farm Non residential Properties [Member] | FUSB [Member]
Beginning balance							831
Provision							(22)
Ending balance				809			809
Collectively evaluated for impairment				809			809
Individually evaluated for impairment				504			504
Collectively evaluated for impairment				158,244			158,244
Loans acquired with deteriorated credit quality				158,748			158,748
Direct Consumer [Member]
Loans acquired with deteriorated credit quality		33,299			33,299
Branch Retail [Member]
Loans acquired with deteriorated credit quality		33,000			33,000
Indirect Sales [Member]
Loans acquired with deteriorated credit quality		89,932			89,932
Commercial and Industrial Loans [Member]
Beginning balance					1,377
Provision					(448)
Ending balance		929			929
Individually evaluated for impairment		62			62
Collectively evaluated for impairment		867			867
Individually evaluated for impairment		62			62
Collectively evaluated for impairment		87,709			87,709
Loans acquired with deteriorated credit quality	[1]	87,771			87,771
Commercial and Industrial Loans [Member] | FUSB [Member]
Beginning balance							1,138
Recoveries							3
Provision							63
Ending balance				1,204			1,204
Individually evaluated for impairment				65			65
Collectively evaluated for impairment				1,139			1,139
Individually evaluated for impairment				65			65
Collectively evaluated for impairment				91,424			91,424
Loans acquired with deteriorated credit quality		87,771	[1]	91,489	87,771	[1]	91,489
Consumer Portfolio Segment [Member] | Direct Consumer [Member]
Beginning balance					1,625
Charge-offs					(962)
Recoveries					381
Provision					373
Ending balance		1,417			1,417
Individually evaluated for impairment		3			3
Collectively evaluated for impairment		1,414			1,414
Individually evaluated for impairment		25			25
Collectively evaluated for impairment		33,274			33,274
Loans acquired with deteriorated credit quality		33,299			33,299
Consumer Portfolio Segment [Member] | Direct Consumer [Member] | FUSB [Member]
Beginning balance							1,799
Charge-offs							(1,090)
Recoveries							334
Provision							646
Ending balance				1,689			1,689
Individually evaluated for impairment				12			12
Collectively evaluated for impairment				1,677			1,677
Individually evaluated for impairment				35			35
Collectively evaluated for impairment				37,125			37,125
Loans acquired with deteriorated credit quality		7,340		37,160	7,340		37,160
Consumer Portfolio Segment [Member] | Branch Retail [Member]
Beginning balance					395
Charge-offs					(221)
Recoveries					90
Provision					211
Ending balance		475			475
Collectively evaluated for impairment		475			475
Collectively evaluated for impairment		33,000			33,000
Loans acquired with deteriorated credit quality		33,000			33,000
Consumer Portfolio Segment [Member] | Branch Retail [Member] | FUSB [Member]
Beginning balance							427
Charge-offs							(201)
Recoveries							59
Provision							151
Ending balance				436			436
Collectively evaluated for impairment				436			436
Collectively evaluated for impairment				29,609			29,609
Loans acquired with deteriorated credit quality				29,609			29,609
Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Beginning balance					316
Charge-offs					(38)
Recoveries					1
Provision					796
Ending balance		1,075			1,075
Collectively evaluated for impairment		1,075			1,075
Collectively evaluated for impairment		89,932			89,932
Loans acquired with deteriorated credit quality	[2]	89,932			89,932
Consumer Portfolio Segment [Member] | Indirect Sales [Member] | FUSB [Member]
Beginning balance							145
Charge-offs							(128)
Recoveries							2
Provision							184
Ending balance				203			203
Collectively evaluated for impairment				203			203
Collectively evaluated for impairment				45,466			45,466
Loans acquired with deteriorated credit quality		$ 89,932	[2]	$ 45,466	$ 89,932	[2]	$ 45,466

[1] Includes equipment financing leases.

[2] Effective January 1, 2020, the Company transferred a total of $45.5 million of its indirect sales portfolio from ALC to the Bank.

XML

Loans and Allowance for Loan Losses - Loans By Credit Quality Indicators (Details) - USD ($) $ in Thousands		Jun. 30, 2020		Dec. 31, 2019		Jun. 30, 2019
Financing Receivable Recorded Investment [Line Items]
Loans		$ 577,886		$ 556,053
As a percentage of total loans		100.00%		100.00%
Construction, Land Development and Other Land Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		$ 31,384
Secured By Multi family Residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		48,807
Secured By Non-farm Non residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		160,683
Secured by 1-4 Family Residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		93,010
Direct Consumer [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		33,299
Branch Retail [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		33,000
Indirect Sales [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		89,932
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		31,384		$ 30,820
Real Estate [Member] | Secured By Multi family Residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		48,807		50,910
Real Estate [Member] | Secured By Non-farm Non residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		160,683		162,981
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		93,010		104,537
Commercial and Industrial Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans	[1]	87,771		90,957
Consumer Portfolio Segment [Member] | Direct Consumer [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		33,299		38,040
Consumer Portfolio Segment [Member] | Branch Retail [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		33,000		32,305
Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Financing Receivable Recorded Investment [Line Items]
Loans	[2]	89,932		45,503
FUSB [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		514,466		442,455		$ 522,260
FUSB [Member] | Construction, Land Development and Other Land Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans						28,401
FUSB [Member] | Secured By Multi family Residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans						28,033
FUSB [Member] | Secured By Non-farm Non residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans						158,748
FUSB [Member] | Secured by 1-4 Family Residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans						103,354
FUSB [Member] | Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		31,384		30,820
FUSB [Member] | Real Estate [Member] | Secured By Multi family Residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		48,807		50,910
FUSB [Member] | Real Estate [Member] | Secured By Non-farm Non residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		160,683		162,981
FUSB [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		88,549		98,971
FUSB [Member] | Commercial and Industrial Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		87,771	[1]	90,957	[1]	91,489
FUSB [Member] | Consumer Portfolio Segment [Member] | Direct Consumer [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		7,340		7,816		37,160
FUSB [Member] | Consumer Portfolio Segment [Member] | Branch Retail [Member]
Financing Receivable Recorded Investment [Line Items]
Loans						29,609
FUSB [Member] | Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		89,932	[2]			$ 45,466
FUSB [Member] | Pass
Financing Receivable Recorded Investment [Line Items]
Loans		$ 322,271		$ 327,557
As a percentage of total loans		98.06%		97.58%
FUSB [Member] | Pass | Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		$ 31,302		$ 30,466
FUSB [Member] | Pass | Real Estate [Member] | Secured By Multi family Residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		48,807		50,910
FUSB [Member] | Pass | Real Estate [Member] | Secured By Non-farm Non residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		156,033		157,718
FUSB [Member] | Pass | Commercial and Industrial Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		86,129		88,463
FUSB [Member] | Special Mention
Financing Receivable Recorded Investment [Line Items]
Loans		$ 4,046		$ 4,029
As a percentage of total loans		1.23%		1.20%
FUSB [Member] | Special Mention | Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		$ 77		$ 354
FUSB [Member] | Special Mention | Real Estate [Member] | Secured By Non-farm Non residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		2,783		2,961
FUSB [Member] | Special Mention | Commercial and Industrial Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		1,186		714
FUSB [Member] | Substandard [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		$ 2,328		$ 4,082
As a percentage of total loans		0.71%		1.22%
FUSB [Member] | Substandard [Member] | Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		$ 5
FUSB [Member] | Substandard [Member] | Real Estate [Member] | Secured By Non-farm Non residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		1,867		$ 2,302
FUSB [Member] | Substandard [Member] | Commercial and Industrial Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		456		1,780
FUSB [Member] | Pass And Criticized [Member}
Financing Receivable Recorded Investment [Line Items]
Loans		$ 328,645		$ 335,668
As a percentage of total loans		100.00%		100.00%
FUSB [Member] | Pass And Criticized [Member} | Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		$ 31,384		$ 30,820
FUSB [Member] | Pass And Criticized [Member} | Real Estate [Member] | Secured By Multi family Residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		48,807		50,910
FUSB [Member] | Pass And Criticized [Member} | Real Estate [Member] | Secured By Non-farm Non residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		160,683		162,981
FUSB [Member] | Pass And Criticized [Member} | Commercial and Industrial Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		87,771		90,957
ALC [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		63,420		113,598
ALC [Member] | Performing Financial Instruments
Financing Receivable Recorded Investment [Line Items]
Loans		$ 246,760		$ 217,177
As a percentage of total loans		99.00%		98.54%
ALC [Member] | Nonperforming Financial Instruments
Financing Receivable Recorded Investment [Line Items]
Loans		$ 2,481		$ 3,208
As a percentage of total loans		1.00%		1.46%
ALC [Member] | Performing And Non Performing [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		$ 249,241		$ 220,385
As a percentage of total loans		100.00%		100.00%
ALC [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		$ 4,461		$ 5,566
ALC [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member] | Performing Financial Instruments
Financing Receivable Recorded Investment [Line Items]
Loans		91,012		102,176
ALC [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member] | Nonperforming Financial Instruments
Financing Receivable Recorded Investment [Line Items]
Loans		1,998		2,361
ALC [Member] | Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member] | Performing And Non Performing [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		93,010		104,537
ALC [Member] | Consumer Portfolio Segment [Member] | Direct Consumer [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		25,959		30,224
ALC [Member] | Consumer Portfolio Segment [Member] | Direct Consumer [Member] | Performing Financial Instruments
Financing Receivable Recorded Investment [Line Items]
Loans		32,942		37,474
ALC [Member] | Consumer Portfolio Segment [Member] | Direct Consumer [Member] | Nonperforming Financial Instruments
Financing Receivable Recorded Investment [Line Items]
Loans		357		566
ALC [Member] | Consumer Portfolio Segment [Member] | Direct Consumer [Member] | Performing And Non Performing [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		33,299		38,040
ALC [Member] | Consumer Portfolio Segment [Member] | Branch Retail [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		33,000		32,305
ALC [Member] | Consumer Portfolio Segment [Member] | Branch Retail [Member] | Performing Financial Instruments
Financing Receivable Recorded Investment [Line Items]
Loans		32,933		32,024
ALC [Member] | Consumer Portfolio Segment [Member] | Branch Retail [Member] | Nonperforming Financial Instruments
Financing Receivable Recorded Investment [Line Items]
Loans		67		281
ALC [Member] | Consumer Portfolio Segment [Member] | Branch Retail [Member] | Performing And Non Performing [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		33,000		32,305
ALC [Member] | Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Financing Receivable Recorded Investment [Line Items]
Loans	[2]			45,503
ALC [Member] | Consumer Portfolio Segment [Member] | Indirect Sales [Member] | Performing Financial Instruments
Financing Receivable Recorded Investment [Line Items]
Loans		89,873		45,503
ALC [Member] | Consumer Portfolio Segment [Member] | Indirect Sales [Member] | Nonperforming Financial Instruments
Financing Receivable Recorded Investment [Line Items]
Loans		59
ALC [Member] | Consumer Portfolio Segment [Member] | Indirect Sales [Member] | Performing And Non Performing [Member]
Financing Receivable Recorded Investment [Line Items]
Loans		$ 89,932		$ 45,503

[1] Includes equipment financing leases.

[2] Effective January 1, 2020, the Company transferred a total of $45.5 million of its indirect sales portfolio from ALC to the Bank.

XML

Loans and Allowance for Loan Losses - Aging Analysis of Past Due Loans (Details) - USD ($) $ in Thousands		Jun. 30, 2020	Dec. 31, 2019
Loans		$ 577,886	$ 556,053
As a percentage of total loans		100.00%	100.00%
Total Past Due		$ 2,879	$ 4,967
Current		$ 575,007	$ 551,086
As a percentage of total loans, Total Past Due		0.50%	0.89%
As a percentage of total loans, Current		99.50%	99.11%
ALC [Member]
Loans		$ 63,420	$ 113,598
Construction, Land Development and Other Land Loans [Member]
Loans		31,384
Secured by 1-4 Family Residential Properties [Member]
Loans		93,010
Secured By Multi family Residential Properties [Member]
Loans		48,807
Secured By Non-farm Non residential Properties [Member]
Loans		160,683
Direct Consumer [Member]
Loans		33,299
Total Past Due		692
Current		32,607
Branch Retail [Member]
Loans		33,000
Total Past Due		229
Current		32,771
Indirect Sales [Member]
Loans		89,932
Total Past Due		225
Current		89,707
Financial Asset, 30 to 59 Days Past Due
Loans		$ 728
As a percentage of total loans		0.13%	0.24%
Financial Asset, 30 to 59 Days Past Due | ALC [Member]
Loans			$ 1,308
Financial Asset, 60 to 89 Days Past Due
Loans		$ 186
As a percentage of total loans		0.03%	0.11%
Financial Asset, 60 to 89 Days Past Due | ALC [Member]
Loans			$ 584
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans		$ 1,965
As a percentage of total loans		0.34%	0.55%
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | ALC [Member]
Loans			$ 3,075
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Loans		$ 31,384	30,820
Current		31,384	30,820
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Loans		93,010	104,537
Total Past Due		224	1,211
Current		92,786	103,326
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member] | ALC [Member]
Loans		4,461	5,566
Real Estate [Member] | Secured By Multi family Residential Properties [Member]
Loans		48,807	50,910
Current		48,807	50,910
Real Estate [Member] | Secured By Non-farm Non residential Properties [Member]
Loans		160,683	162,981
Total Past Due		1,439	1,449
Current		159,244	161,532
Real Estate [Member] | Financial Asset, 30 to 59 Days Past Due | Secured by 1-4 Family Residential Properties [Member]
Loans		97
Real Estate [Member] | Financial Asset, 30 to 59 Days Past Due | Secured by 1-4 Family Residential Properties [Member] | ALC [Member]
Loans			259
Real Estate [Member] | Financial Asset, 30 to 59 Days Past Due | Secured By Non-farm Non residential Properties [Member]
Loans		22
Real Estate [Member] | Financial Asset, 30 to 59 Days Past Due | Secured By Non-farm Non residential Properties [Member] | ALC [Member]
Loans			30
Real Estate [Member] | Financial Asset, 60 to 89 Days Past Due | Secured by 1-4 Family Residential Properties [Member]
Loans		31
Real Estate [Member] | Financial Asset, 60 to 89 Days Past Due | Secured by 1-4 Family Residential Properties [Member] | ALC [Member]
Loans			108
Real Estate [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Secured by 1-4 Family Residential Properties [Member]
Loans		96
Real Estate [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Secured by 1-4 Family Residential Properties [Member] | ALC [Member]
Loans			844
Real Estate [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Secured By Non-farm Non residential Properties [Member]
Loans		1,417
Real Estate [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Secured By Non-farm Non residential Properties [Member] | ALC [Member]
Loans			1,419
Commercial and Industrial Loans [Member]
Loans	[1]	87,771	90,957
Total Past Due		70	56
Current		87,701	90,901
Commercial and Industrial Loans [Member] | Financial Asset, 30 to 59 Days Past Due
Loans		58
Commercial and Industrial Loans [Member] | Financial Asset, 30 to 59 Days Past Due | ALC [Member]
Loans			56
Commercial and Industrial Loans [Member] | Financial Asset, 60 to 89 Days Past Due
Loans		12
Consumer Portfolio Segment [Member] | Direct Consumer [Member]
Loans		33,299	38,040
Total Past Due			1,205
Current			36,835
Consumer Portfolio Segment [Member] | Direct Consumer [Member] | ALC [Member]
Loans		25,959	30,224
Consumer Portfolio Segment [Member] | Branch Retail [Member]
Loans		33,000	32,305
Total Past Due			914
Current			31,391
Consumer Portfolio Segment [Member] | Branch Retail [Member] | ALC [Member]
Loans		33,000	32,305
Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Loans	[2]	89,932	45,503
Total Past Due			132
Current			45,371
Consumer Portfolio Segment [Member] | Indirect Sales [Member] | ALC [Member]
Loans	[2]		45,503
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due | Direct Consumer [Member]
Loans		253	387
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due | Branch Retail [Member]
Loans		132
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due | Branch Retail [Member] | ALC [Member]
Loans			444
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due | Indirect Sales [Member]
Loans		166
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due | Indirect Sales [Member] | ALC [Member]
Loans			132
Consumer Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due | Direct Consumer [Member]
Loans		113	287
Consumer Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due | Branch Retail [Member]
Loans		30
Consumer Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due | Branch Retail [Member] | ALC [Member]
Loans			189
Consumer Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Direct Consumer [Member]
Loans		326	531
Consumer Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Branch Retail [Member]
Loans		67
Consumer Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Branch Retail [Member] | ALC [Member]
Loans			$ 281
Consumer Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Indirect Sales [Member]
Loans		$ 59

[1] Includes equipment financing leases.

[2] Effective January 1, 2020, the Company transferred a total of $45.5 million of its indirect sales portfolio from ALC to the Bank.

XML

Loans and Allowance for Loan Losses - Non-accruing Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Non-accruing loans	$ 3,415	$ 3,723
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Non-accruing loans	5	8
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Non-accruing loans	1,421	1,423
Real Estate [Member] | Secured By Non-farm Non residential Properties [Member]
Non-accruing loans	1,421	1,426
Commercial and Industrial Loans [Member]
Non-accruing loans	106	27
Consumer Portfolio Segment [Member] | Direct Consumer [Member]
Non-accruing loans	336	558
Consumer Portfolio Segment [Member] | Branch Retail [Member]
Non-accruing loans	67	$ 281
Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Non-accruing loans	$ 59

XML

Loans and Allowance for Loan Losses - Summarizes of All COVID19 Loan Payment Deferment and the Percentage of Loans (Details) - COVID-19 [Member] $ in Thousands	Jun. 30, 2020 USD ($) DeferredLoan
Financing Receivable Modifications [Line Items]
Number of Loans Deferred | DeferredLoan	864
Principal Balance of Loans Deferred	$ 95,244
Percentage of Portfolio Balance as of March 31, 2020	16.50%
Principal and Interest Deferments	$ 73,292
Principal Only Deferments	$ 21,952
Construction, Land Development and Other Land Loans [Member]
Financing Receivable Modifications [Line Items]
Number of Loans Deferred | DeferredLoan	7
Principal Balance of Loans Deferred	$ 4,544
Percentage of Portfolio Balance as of March 31, 2020	14.50%
Principal and Interest Deferments	$ 4,544
Secured by 1-4 Family Residential Properties [Member]
Financing Receivable Modifications [Line Items]
Number of Loans Deferred | DeferredLoan	50
Principal Balance of Loans Deferred	$ 9,474
Percentage of Portfolio Balance as of March 31, 2020	10.20%
Principal and Interest Deferments	$ 8,078
Principal Only Deferments	$ 1,396
Secured By Multi family Residential Properties [Member]
Financing Receivable Modifications [Line Items]
Number of Loans Deferred | DeferredLoan	12
Principal Balance of Loans Deferred	$ 29,726
Percentage of Portfolio Balance as of March 31, 2020	60.90%
Principal and Interest Deferments	$ 15,523
Principal Only Deferments	$ 14,203
Secured By Non-farm Non residential Properties [Member]
Financing Receivable Modifications [Line Items]
Number of Loans Deferred | DeferredLoan	49
Principal Balance of Loans Deferred	$ 42,797
Percentage of Portfolio Balance as of March 31, 2020	26.60%
Principal and Interest Deferments	$ 37,073
Principal Only Deferments	$ 5,724
Commercial and Industrial Loans [Member]
Financing Receivable Modifications [Line Items]
Number of Loans Deferred | DeferredLoan	9
Principal Balance of Loans Deferred	$ 1,460
Percentage of Portfolio Balance as of March 31, 2020	1.70%
Principal and Interest Deferments	$ 831
Principal Only Deferments	$ 629
Consumer Portfolio Segment [Member] | Direct Consumer [Member]
Financing Receivable Modifications [Line Items]
Number of Loans Deferred | DeferredLoan	442
Principal Balance of Loans Deferred	$ 2,188
Percentage of Portfolio Balance as of March 31, 2020	6.60%
Principal and Interest Deferments	$ 2,188
Consumer Portfolio Segment [Member] | Branch Retail [Member]
Financing Receivable Modifications [Line Items]
Number of Loans Deferred | DeferredLoan	172
Principal Balance of Loans Deferred	$ 1,856
Percentage of Portfolio Balance as of March 31, 2020	5.60%
Principal and Interest Deferments	$ 1,856
Consumer Portfolio Segment [Member] | Indirect Sales [Member]
Financing Receivable Modifications [Line Items]
Number of Loans Deferred | DeferredLoan	123
Principal Balance of Loans Deferred	$ 3,199
Percentage of Portfolio Balance as of March 31, 2020	3.60%
Principal and Interest Deferments	$ 3,199

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Loans and Allowance for Loan Losses - Summarizes the At Risk Categories and the Relative Percentage of the Loan Portfolio (Details) - COVID-19 [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($)
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Balance of Risk Category	$ 76,656
Percentage of Total Loan Balance	13.30%
High-Risk Loan [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Balance of Risk Category	$ 14,869
Percentage of Total Loan Balance	2.60%
Moderate-Risk Loan [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Balance of Risk Category	$ 61,787
Percentage of Total Loan Balance	10.70%
Hotels/Motels [Member] | Product Concentration Risk | High-Risk Loan [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Balance of Risk Category	$ 10,410
Percentage of Total Loan Balance	1.80%
Dine In Restaurants | Product Concentration Risk | High-Risk Loan [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Balance of Risk Category	$ 4,459
Percentage of Total Loan Balance	0.80%
Retail [Member] | Product Concentration Risk | Moderate-Risk Loan [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Balance of Risk Category	$ 34,587
Percentage of Total Loan Balance	6.00%
1-4 Investment [Member] | Product Concentration Risk | Moderate-Risk Loan [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Balance of Risk Category	$ 21,874
Percentage of Total Loan Balance	3.80%
Fast Food Restaurants | Product Concentration Risk | Moderate-Risk Loan [Member]
Debt Securities Heldtomaturity Allowance For Credit Loss [Line Items]
Balance of Risk Category	$ 5,326
Percentage of Total Loan Balance	0.90%

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Loans and Allowance for Loan Losses - Impaired Loans (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Impaired loans with no related allowance recorded, carrying amount	$ 3,680	$ 2,861
Impaired loans with no related allowance recorded, unpaid principal balance	3,680	2,861
Impaired loans, related allowances	78	227
Impaired loans with no related allowance recorded, carrying amount	107	256
Impaired loans with no related allowance recorded, unpaid principal balance	107	256
Impaired loans, carrying amount	3,787	3,117
Impaired loans, unpaid principal balance	3,787	3,117
Impaired loans, average recorded investment	3,756	2,876
Impaired loans, interest income recognized	23	86
Impaired loans, interest income received	23	86
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Impaired loans, average recorded investment		181
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Impaired loans with no related allowance recorded, carrying amount	932	984
Impaired loans with no related allowance recorded, unpaid principal balance	932	984
Impaired loans, related allowances	13	14
Impaired loans with no related allowance recorded, carrying amount	20	21
Impaired loans with no related allowance recorded, unpaid principal balance	20	21
Impaired loans, carrying amount	952	1,005
Impaired loans, unpaid principal balance	952	1,005
Impaired loans, average recorded investment	890	1,021
Impaired loans, interest income recognized	5	48
Impaired loans, interest income received	4	48
Real Estate [Member] | Secured By Non-farm Non residential Properties [Member]
Impaired loans with no related allowance recorded, carrying amount	2,748	1,877
Impaired loans with no related allowance recorded, unpaid principal balance	2,748	1,877
Impaired loans, carrying amount	2,748	1,877
Impaired loans, unpaid principal balance	2,748	1,877
Impaired loans, average recorded investment	2,754	645
Impaired loans, interest income recognized	14	29
Impaired loans, interest income received	14	29
Commercial and Industrial Loans [Member]
Impaired loans, related allowances	62	206
Impaired loans with no related allowance recorded, carrying amount	62	206
Impaired loans with no related allowance recorded, unpaid principal balance	62	206
Impaired loans, carrying amount	62	206
Impaired loans, unpaid principal balance	62	206
Impaired loans, average recorded investment	86	991
Impaired loans, interest income recognized	3	7
Impaired loans, interest income received	3	7
Direct Consumer [Member]
Impaired loans, related allowances	3	7
Impaired loans with no related allowance recorded, carrying amount	25	29
Impaired loans with no related allowance recorded, unpaid principal balance	25	29
Impaired loans, carrying amount	25	29
Impaired loans, unpaid principal balance	25	29
Impaired loans, average recorded investment	26	38
Impaired loans, interest income recognized	1	2
Impaired loans, interest income received	$ 2	$ 2

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Loans and Allowance for Loan Losses - Loans Modified in a Troubled Debt Restructuring (Details) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2020 USD ($) DebtSecurityNumber	Dec. 31, 2019 USD ($) DebtSecurityNumber
Number of Loans | DebtSecurityNumber	5	5
Pre- Modification Outstanding Principal Balance	$ 282	$ 282
Post- Modification Principal Balance	$ 68	$ 136
Real Estate [Member] | Construction, Land Development and Other Land Loans [Member]
Number of Loans | DebtSecurityNumber	1	1
Pre- Modification Outstanding Principal Balance	$ 107	$ 107
Post- Modification Principal Balance		$ 62
Real Estate [Member] | Secured by 1-4 Family Residential Properties [Member]
Number of Loans | DebtSecurityNumber	2	2
Pre- Modification Outstanding Principal Balance	$ 59	$ 59
Post- Modification Principal Balance	$ 13	$ 14
Commercial and Industrial Loans [Member]
Number of Loans | DebtSecurityNumber	2	2
Pre- Modification Outstanding Principal Balance	$ 116	$ 116
Post- Modification Principal Balance	$ 55	$ 60

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Other Real Estate Owned and Repossessed Assets - Summary of Foreclosed Property Activity (Details) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2020	Jun. 30, 2019
Other Real Estate [Abstract]
Beginning balance		$ 1,078	$ 1,505
Additions	[1]	293	262
Sales proceeds		(358)	(483)
Gross gains		38	39
Gross losses		(38)	(27)
Net gains (losses)			12
Impairment		(10)	(38)
Ending balance		$ 1,003	$ 1,258

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

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Other Real Estate Owned and Repossessed Assets - Additional Information (Details) - USD ($) $ in Millions	Jun. 30, 2020	Jun. 30, 2019
Other Real Estate [Abstract]
Foreclosed real estate owned, fair value less disposal costs	$ 0.1	$ 0.1
Mortgage loans in process of foreclosure, amount	$ 0.0	$ 0.0

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Other Real Estate Owned and Repossessed Assets - Summary of Repossessed Assets Activity (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Other Real Estate And Other Assets Acquired In Foreclosure [Line Items]
Sales proceeds	$ (358)	$ (483)
Gross gains	38	39
Gross losses	(38)	(27)
Net gains (losses)		12
Impairment	(10)	(38)
Repossessed Assets [Member]
Other Real Estate And Other Assets Acquired In Foreclosure [Line Items]
Beginning balance	256	229
Transfers from loans	561	520
Sales proceeds	(270)	(278)
Gross gains		2
Gross losses	(286)	(227)
Net gains (losses)	(286)	(225)
Ending balance	$ 261	$ 246

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Goodwill and Other Intangible Assets - Additional Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019	Dec. 31, 2018
Goodwill And Other Intangible Assets [Line Items]
Goodwill, Ending Balance	$ 7,435
Finite-Lived Intangible Assets, Net, Ending Balance	$ 1,170
Core Deposits [Member]
Goodwill And Other Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	7 years
Finite-Lived Intangible Assets, Net, Ending Balance			$ 2,000
The Peoples Bank [Member]
Goodwill And Other Intangible Assets [Line Items]
Goodwill, Ending Balance	$ 7,400	$ 7,400

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Goodwill and Other Intangible Assets - Summary of Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019
Goodwill And Intangible Assets Disclosure [Abstract]
Goodwill	$ 7,435
Gross carrying amount	2,048
Accumulated amortization	(878)
Core deposit intangible, net	1,170
Total	$ 8,605	$ 8,825	$ 9,056

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Goodwill and Other Intangible Assets - Estimated Remaining Amortization Expense (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
2020	$ 195
2021	341
2022	268
2023	195
2024	122
2025	49
Core deposit intangible, net	$ 1,170

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Short-Term Borrowings - Additional Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Short Term Debt [Line Items]
Short-term Debt, Total	$ 10,334	$ 10,025
Federal Funds Purchased	0	0
Available Fund Lines From Correspondent Banks	61,700	61,700
Securities Sold under Agreements to Repurchase, Total	300	25
Federal Home Loan Bank, Advances, Maturities Summary, Due in Next Twelve Months, Total	10,000	10,000
Long-term Federal Home Loan Bank advances	0	0
Federal Home Loan Bank, advances, general debt obligations, disclosures, collateral pledged	32,600	34,600
Federal Home Loan Bank, advances, general debt obligations, amount of available, unused funds	$ 216,500	$ 211,500
Minimum [Member]
Short Term Debt [Line Items]
Maturity Period of Federal Funds	1 day
Maximum [Member]
Short Term Debt [Line Items]
Maturity Period of Federal Funds	4 days

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Income Taxes - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 118	$ 300	$ 380	$ 651
Effective Income Tax Rate Reconciliation, Percent			23.30%	22.50%
Deferred Tax Assets, Net	$ 2,400		$ 2,400		$ 2,800

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Deferred Compensation Plans - Additional Information (Details) - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019
Deferred Compensation Arrangement With Individual Share Based Payments [Line Items]
Deferred Compensation Arrangement with Individual, Common Stock Reserved for Future Issuance	104,794	124,392
Other Liabilities [Member]
Deferred Compensation Arrangement With Individual Share Based Payments [Line Items]
Deferred Compensation Liability, Current and Noncurrent, Total	$ 3.2	$ 3.2

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Stock Awards - Additional Information (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, options, outstanding, intrinsic value	$ 0.0	$ 0.3
Employee Stock Option [Member] | Omnibus Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based payment arrangement, expense	$ 0.2	$ 0.1
Share-based compensation arrangement by share-based payment award, options, vested and expected to vest, outstanding, weighted average remaining contractual term	10 years
Employee Stock Option [Member] | Omnibus Incentive Plan [Member] | Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, award vesting period	1 year
Employee Stock Option [Member] | Omnibus Incentive Plan [Member] | Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, award vesting period	3 years
Restricted Stock [Member] | Omnibus Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, equity instruments other than options, grants in period	28,460	5,520

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Stock Awards - Fair Value Assumptions (Details) - $ / shares	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Risk-free interest rate	1.24%	2.59%
Expected term (in years)	7 years 6 months	7 years 6 months
Expected stock price volatility	28.90%	30.90%
Dividend yield	1.25%	1.25%
Fair value of stock option	$ 3.34	$ 3.30

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Stock Awards - Stock Option Activity (Details) - $ / shares	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	412,800	377,950
Granted (in shares)	10,200	66,150
Exercised (in shares)	666
Forfeited (in shares)	334	16,819
Options outstanding, end of period (in shares)	422,000	427,281
Options exercisable, end of period (in shares)	353,183	309,682
Outstanding, beginning of period, average exercise price (in dollars per share)	$ 9.72	$ 9.80
Granted, average exercise price (in dollars per share)	11.95	10.01
Exercised, average exercise price (in dollars per share)	10.75
Forfeited, average exercise price (in dollars per share)	10.75	11.39
Options outstanding, end of period, average exercise price (in dollars per share)	9.77	9.77
Options exercisable, end of period, average exercise price (in dollars per share)	$ 9.59	$ 9.20

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Leases - Additional Information (Details)	6 Months Ended
	Jun. 30, 2020
Lessee Lease Description [Line Items]
Lessee, Operating Lease, Renewal Term	5 years
Lessee, Operating Lease, Period of Option to Terminate	1 year
Minimum [Member]
Lessee Lease Description [Line Items]
Lessee, Operating Lease, Remaining Term of Contract	0 years
Maximum [Member]
Lessee Lease Description [Line Items]
Lessee, Operating Lease, Remaining Term of Contract	14 years

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Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Leases [Abstract]
Operating lease expense	[1]	$ 212	$ 210	$ 423	$ 420
Operating lease income	[2]	212	$ 212	424	421
Operating lease, right-of-use asset		3,269		3,269
Operating lease, liability		$ 3,312		$ 3,312
Weighted-average remaining lease term (in years)		6 years 3 months 10 days		6 years 3 months 10 days
Weighted-average discount rate		3.14%		3.14%
Operating cash flows from operating leases				$ 373	$ 385

[1] Includes short-term lease costs. For the three- and six-month periods ended June 30, 2020 and 2019, short-term lease costs were nominal in amount.

[2] Operating lease income includes rental income from owned properties.

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Leases - Future Minimum Operating Lease Payments (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Leases [Abstract]
2020	$ 352
2021	628
2022	558
2023	458
2024	438
2025 and thereafter	1,276
Total future minimum lease payments	3,710
Less: Imputed interest	398
Total operating lease liabilities	$ 3,312

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Derivative Financial Instruments - Additional Information (Details) - USD ($)	Oct. 01, 2019	Aug. 21, 2019	Aug. 09, 2019	Jul. 22, 2019	Jul. 08, 2019	Jun. 30, 2020
Forward Interest Rate Swap Contract One [Member]
Derivative [Line Items]
Notional amount, total					$ 10,000,000
Derivative term of contract					7 years
Derivative, fixed interest rate					1.79%
Forward Interest Rate Swap Contract One [Member] | Minimum [Member]
Derivative [Line Items]
Expected derivative notional amount for next seven years						$ 10,000,000
Forward Interest Rate Swap Contract Two [Member]
Derivative [Line Items]
Notional amount, total				$ 10,000,000
Derivative term of contract				5 years
Derivative, fixed interest rate				1.698%
Forward Interest Rate Swap Contract Two [Member] | Minimum [Member]
Derivative [Line Items]
Expected derivative notional amount for next five years				$ 10,000
Forward Interest Rate Swap Contract Five [Member]
Derivative [Line Items]
Notional amount, total	$ 10,000,000
Derivative term of contract	5 years
Derivative, fixed interest rate	1.357%
Forward Interest Rate Swap Contract Three [Member]
Derivative [Line Items]
Notional amount, total			$ 10,000,000
Derivative term of contract			5 years
Derivative, fixed interest rate			1.406%
Forward Interest Rate Swap Contract Four [Member]
Derivative [Line Items]
Notional amount, total		$ 10,000,000
Derivative term of contract		5 years
Derivative, fixed interest rate		1.292%

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Derivative Financial Instruments - Schedule of Cumulative Basis Adjustments For Fair Value Hedges (Details) $ in Thousands	Jun. 30, 2020 USD ($)	[1]
Derivative Instruments And Hedging Activities Disclosure [Abstract]
Carrying Amount of the Hedged Assets	$ 39,291
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets	$ 900

[1] These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. As of June 30, 2020, the amortized cost basis of the closed portfolios used in these hedging relationships was $38.4 million, the cumulative basis adjustments associated with these hedging relationships were $0.9 million, and the amounts of the designated hedged items were $20.0 million.

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Derivative Financial Instruments - Schedule of Cumulative Basis Adjustments For Fair Value Hedges (Parenthetical) (Details) $ in Millions	Jun. 30, 2020 USD ($)
Derivative Instruments And Hedging Activities Disclosure [Abstract]
Amortized cost basis of closed portfolios used in hedging relationships	$ 38.4
Cumulative basis adjustments associated with hedging relationships	0.9
Designated hedged items	$ 20.0

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Segment Reporting - Additional Information (Details)	6 Months Ended
	Jun. 30, 2020 Segment
Segment Reporting [Abstract]
Number of Reportable Segments	2

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Segment Reporting - Results for Reportable Segments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Segment Reporting Revenue Reconciling Item [Line Items]
Net interest income	$ 8,623	$ 9,233	$ 17,509	$ 18,406
Provision for loan losses	850	715	1,430	1,115
Total non-interest income	1,330	1,291	2,627	2,556
Total non-interest expense	8,581	8,504	17,075	16,957
Income before income taxes	522	1,305	1,631	2,890
Provision for income taxes	118	300	380	651
Net income	404	1,005	1,251	2,239
Total assets	845,747	777,171	845,747	777,171	$ 788,738
Total investment securities	103,964	136,649	103,964	136,649
Total loans, net	566,062	511,515	566,062	511,515	545,243
Goodwill and core deposit intangible, net	8,605	9,056	8,605	9,056	8,825
Investment in subsidiaries		5		5
Fixed asset additions	228	951	461	2,642
Depreciation and amortization expense	407	396	806	796
Total interest income from external customers	9,780	10,923	20,177	21,736
Intersegment Eliminations [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Total non-interest income	(896)	(1,429)	(2,164)	(3,042)
Total non-interest expense	(158)	(153)	(345)	(328)
Income before income taxes	(738)	(1,276)	(1,819)	(2,714)
Net income	(738)	(1,276)	(1,819)	(2,714)
Total assets	(153,357)	(198,094)	(153,357)	(198,094)
Total loans, net	(51,933)	(93,669)	(51,933)	(93,669)
Investment in subsidiaries	(84,718)	(83,436)	(84,718)	(83,436)
Total interest income from affiliates	(739)	(1,213)	(1,485)	(2,379)
FUSB [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Provision for loan losses				1,115
Total loans, net	509,320		509,320		438,710
FUSB [Member] | Operating Segments [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Net interest income	6,442	5,986	12,922	11,995
Provision for loan losses	530	90	778	90
Total non-interest income	1,251	1,108	2,345	2,186
Total non-interest expense	6,110	5,798	12,266	11,631
Income before income taxes	1,053	1,206	2,223	2,460
Provision for income taxes	220	249	494	511
Net income	833	957	1,729	1,949
Total assets	848,376	778,252	848,376	778,252
Total investment securities	103,883	136,569	103,883	136,569
Total loans, net	561,253	501,177	561,253	501,177
Goodwill and core deposit intangible, net	8,605	9,056	8,605	9,056
Investment in subsidiaries		5		5
Fixed asset additions	223	887	442	2,564
Depreciation and amortization expense	376	361	742	728
Total interest income from external customers	6,872	6,476	14,129	12,969
Total interest income from affiliates	733	1,206	1,473	2,367
ALC [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Total loans, net	56,742		56,742		$ 106,533
ALC [Member] | Operating Segments [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Net interest income	2,174	3,240	4,574	6,398
Provision for loan losses	320	625	652	1,025
Total non-interest income	191	228	428	447
Total non-interest expense	2,091	2,366	4,260	4,734
Income before income taxes	(46)	477	90	1,086
Provision for income taxes	(14)	121	37	264
Net income	(32)	356	53	822
Total assets	60,044	107,911	60,044	107,911
Total loans, net	56,742	104,007	56,742	104,007
Fixed asset additions	5	64	19	78
Depreciation and amortization expense	31	35	64	68
Total interest income from external customers	2,907	4,447	6,047	8,766
Other Segments [Member] | Operating Segments [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Net interest income	7	7	13	13
Total non-interest income	784	1,384	2,018	2,965
Total non-interest expense	538	493	894	920
Income before income taxes	253	898	1,137	2,058
Provision for income taxes	(88)	(70)	(151)	(124)
Net income	341	968	1,288	2,182
Total assets	90,684	89,102	90,684	89,102
Total investment securities	81	80	81	80
Investment in subsidiaries	84,718	83,436	84,718	83,436
Total interest income from external customers	1		1	1
Total interest income from affiliates	$ 6	$ 7	$ 12	$ 12

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Other Operating Income and Expense - Other Operating Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Other Income And Expenses [Abstract]
Bank-owned life insurance	$ 107	$ 108	$ 215	$ 214
Auto Club revenue	18	62	53	100
ATM fee income	116	111	216	215
Wire transfer fees	15	11	28	22
Other income	52	41	167	119
Total	$ 308	$ 333	$ 679	$ 670

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Other Operating Income and Expense - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Finite Lived Intangible Assets [Line Items]
Revenue, remaining performance obligation, amount	$ 0		$ 0
Contract with customer, liability, total	0		0
Service and Other Charges on Deposit Accounts, Mortgage Fees From Secondary Market Transactions at The Bank ATM Fee Income and Other Noninterest Income [Member]
Finite Lived Intangible Assets [Line Items]
Revenue from Contract with Customer, Including Assessed Tax	$ 600	$ 800	$ 1,400	$ 1,600

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Other Operating Income and Expense - Other Operating Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Postage, stationery and supplies	$ 218	$ 212	$ 432	$ 450
Telephone/data communication	229	205	452	418
Advertising and marketing	42	58	86	92
Travel and business development	23	102	149	213
Collection and recoveries	60	20	145	100
Other services	85	71	176	143
Insurance expense	141	153	303	315
FDIC insurance and state assessments	116	39	196	158
Loss on sale of fixed assets	121	134	287	219
Amortization of intangible assets			220	256
Other real estate/foreclosure expense, net	22	31	41	89
Other expense	402	456	744	939
Total	1,568	1,609	3,230	3,392
Core Deposits [Member]
Amortization of intangible assets	$ 109	$ 128	$ 219	$ 256

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Guarantees, Commitments and Contingencies - Summary of Commitment and Contingent Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Standby Letters of Credit [Member]
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]
Commitments and contingent liabilities	$ 180	$ 180
Standby Performance Letters of Credit [Member]
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]
Commitments and contingent liabilities	555	647
Commitments to Extend Credit [Member]
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]
Commitments and contingent liabilities	$ 93,733	$ 96,967

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Guarantees, Commitments and Contingencies - Additional Information (Details) - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019
Commitments And Contingencies Disclosure [Abstract]
Self Insurance Reserve	$ 0.2	$ 0.2

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Fair Value of Financial Instruments - Additional Information (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Fair Value, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial and Nonfinancial Liabilities, Fair Value Disclosure	$ 0	$ 0

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Fair Value of Financial Instruments - Assets Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	$ 94,658	$ 94,016
Fair Value, Recurring [Member] | Other Assets [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value		301
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Other Assets [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value		301
Residential Mortgage Backed Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	32,634	46,345
Residential Mortgage Backed Securities [Member] | Fair Value, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	32,634	46,345
Residential Mortgage Backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	32,634	46,345
Commercial Mortgage Backed Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	52,847	43,373
Commercial Mortgage Backed Securities [Member] | Fair Value, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	52,847	43,373
Commercial Mortgage Backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	52,847	43,373
US States and Political Subdivisions Debt Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	6,323	4,218
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	6,323	4,218
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	6,323	4,218
Corporate Notes [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	2,773
Corporate Notes [Member] | Fair Value, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	2,773
Corporate Notes [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	2,773
US Treasury Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	81	80
US Treasury Securities [Member] | Fair Value, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	81	80
US Treasury Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	81	$ 80
Other Liabilities [Member] | Fair Value, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	2,915
Other Liabilities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	$ 2,915

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Fair Value of Financial Instruments - Assets Measured at Fair Value on Non-recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Fair Value, Inputs, Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loans	$ 29
OREO and other assets held-for-sale	1,003
Fair Value, Nonrecurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loans	29	$ 29
OREO and other assets held-for-sale	1,003	1,276
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loans	29	29
OREO and other assets held-for-sale	$ 1,003	$ 1,276

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Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3) (Details) - Fair Value, Inputs, Level 3 [Member] $ in Thousands	Jun. 30, 2020 USD ($)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loans	$ 29
OREO and other assets held-for-sale	$ 1,003
Minimum [Member] | Measurement Input, Comparability Adjustment [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loans	0.09
OREO and other assets held-for-sale	0.09
Maximum [Member] | Measurement Input, Comparability Adjustment [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loans	0.10
OREO and other assets held-for-sale	0.10
Weighted Average [Member] | Measurement Input, Comparability Adjustment [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loans	0.095
OREO and other assets held-for-sale	0.095

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Fair Value of Financial Instruments - Estimated Fair Value and Related Carrying or Notional Amounts of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Assets:
Investment securities available-for-sale	$ 94,658	$ 94,016
Investment securities held-to-maturity	9,469	14,306
Reported Value Measurement [Member]
Assets:
Cash and cash equivalents	108,268	57,030
Investment securities available-for-sale	94,658	94,016
Investment securities held-to-maturity	9,306	14,340
Federal funds sold	80	10,080
Federal Home Loan Bank stock	1,135	1,137
Loans, net of allowance for loan losses	566,062	545,243
Other assets - derivatives		301
Liabilities:
Deposits	738,290	683,662
Short-term borrowings	10,334	10,025
Other liabilities - derivatives	2,915
Estimate of Fair Value Measurement [Member]
Assets:
Cash and cash equivalents	108,268	57,030
Investment securities available-for-sale	94,658	94,016
Investment securities held-to-maturity	9,469	14,306
Federal funds sold	80	10,080
Federal Home Loan Bank stock	1,135	1,137
Loans, net of allowance for loan losses	577,172	559,911
Other assets - derivatives		301
Liabilities:
Deposits	741,062	682,828
Short-term borrowings	10,334	10,025
Other liabilities - derivatives	2,915
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Assets:
Cash and cash equivalents	108,268	57,030
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Investment securities available-for-sale	94,658	94,016
Investment securities held-to-maturity	9,469	14,306
Federal funds sold	80	10,080
Other assets - derivatives		301
Liabilities:
Deposits	741,062	682,828
Short-term borrowings	10,334	10,025
Other liabilities - derivatives	2,915
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Assets:
Federal Home Loan Bank stock	1,135	1,137
Loans, net of allowance for loan losses	$ 577,172	$ 559,911