Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange
Act). Our internal control over financial reporting is a process designed 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. Our internal control over financial reporting includes those policies and procedures that:
Management assessed the effectiveness of our internal control over financial reporting as of Decemb
er 31, 2016. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework
(2013). Based on its assessment and those criteria, management has concluded that we maintained effective internal control over financial reporting as of December 31, 2016.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financia
l reporting. Our internal control over financial reporting is not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us, as a smaller reporting company, to provide only management’s report on internal control over financial reporting.
The accompanying notes are an integral part of these consolidated statements.
The accompanying notes are an integral part of these consolidated statements.
The accompanying notes are an integral part of these consolidated statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
1.
|
DESCRIPTION OF BUSINESS
|
First US Bancshares, Inc. (“Bancshares
”) and its wholly-owned subsidiary, First US Bank (the “Bank”), provide commercial banking services to customers through fifteen banking offices located in Bucksville, Butler, Calera, Centreville, Columbiana, Gilbertown, Grove Hill, Harpersville, Jackson, Thomasville, Tuscaloosa and Woodstock, Alabama. A loan production office was opened by the Bank in Jefferson County, Alabama, in April 2016.
The Bank owns all of the stock of Acceptance Loan Company, Inc. (“
ALC”), an Alabama corporation. ALC is a finance company organized for the purpose of making consumer loans and purchasing consumer loans from vendors. ALC has offices located within the communities served by the Bank, as well as offices outside of the Bank’s market area in Alabama and southeast Mississippi. The Bank also owns all of the stock of FUSB Reinsurance, Inc. (“FUSB Reinsurance”), an Arizona corporation. FUSB Reinsurance is an insurance company that underwrites credit life and accidental death insurance related to loans written by the Bank and ALC.
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Principles of Consolidation
The
consolidated financial statements include the accounts of Bancshares, the Bank and its wholly-owned subsidiaries (collectively, the “Company”) and one variable interest entity (“VIE”). All significant intercompany balances and transactions have been eliminated. The Company consolidates an entity if the Company has a controlling financial interest in the entity. VIEs are consolidated if the Company has the power to direct the significant economic activities of the VIE that impact financial performance and has the obligation to absorb losses or the right to receive benefits that could potentially be significant (i.e., the Company is the primary beneficiary). The assessment of whether or not the Company is the primary beneficiary of a VIE is performed on an ongoing basis. See Note 7, “Investment in Limited Partnership,” for further discussion of the consolidated VIE.
Use of Estimates
The accounting principles and reporting policies of the Company, and the methods of applying these principles, conform with accounting p
rinciples generally accepted in the United States of America (“U.S. GAAP”) and with general practices within the financial services industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated balance sheets and revenues and expenses for the period included in the consolidated statements of operations and of cash flows. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant changes in the near term relate to the accounting for the allowance for loan losses, the value of other real estate owned (“
OREO”) and certain collateral-dependent loans, and deferred tax asset valuation. In connection with the determination of the allowance for loan losses and OREO, management generally obtains independent appraisals for significant properties, evaluates the overall portfolio characteristics and delinquencies and monitors economic conditions.
A substantial portion of the Company
’s loans are secured by real estate in its primary market areas. Accordingly, the ultimate collectability of a substantial portion of the Company’s loan portfolio and the recovery of a portion of the carrying amount of foreclosed real estate are susceptible to changes in economic conditions in the Company’s primary market areas.
Cash and Cash Equivalents
For purpos
es of reporting cash flows, cash and cash equivalents include cash on hand, instruments with an original maturity of less than 90 days from issuance and amounts due from banks.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FI
NANCIAL STATEMENTS (CONTINUED)
Supplemental disclosures of cash flow information and non-cash transactions related to cash flows for the years ended December
31, 2016 and 2015 are as follows:
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in Thousands)
|
|
Cash paid
during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
2,210
|
|
|
$
|
2,330
|
|
Income taxes
|
|
|
105
|
|
|
|
63
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
Assets acquired in settlement
of loans
|
|
|
1,289
|
|
|
|
3,177
|
|
Reissuance of
treasury stock as compensation
|
|
|
53
|
|
|
|
69
|
|
Revenue Recognition
The main source of revenue for the Company is interest revenue, which is recognized on an accrual basis and calculated through the use of non-discretionary formulas based on written
contracts, such as loan agreements or securities contracts. Loan origination fees are amortized into interest income over the term of the loan. Other types of non-interest revenue, such as service charges on deposits, are accrued and recognized into income as services are provided and the amount of fees earned is reasonably determinable.
Reinsurance Activities
The Company assumes insurance risk related to credit life and credit accident and health insurance written by a non-affiliated insurance company for its customers that choose such coverage through a quota share reinsurance agreement. Assumed premiums on c
redit life insurance are deferred and earned over the period of insurance coverage using either a pro rata method or the effective yield method, depending on whether the amount of insurance coverage generally remains level or declines. Assumed premiums for accident and health policies are earned on an average of the pro rata and the effective yield methods.
Other liabilities include reserves for incurred but unpaid credit insurance claims for policies assumed under the quota share reinsurance agreement. Thes
e insurance liabilities are based on acceptable actuarial methods. Such liabilities are necessarily based on estimates, and, while management believes that the amount is adequate, the ultimate liability may be in excess of or less than the amounts provided. The methods for making such estimates and for establishing the resulting liabilities are continually reviewed, and any adjustments are reflected in earnings currently.
Investment Securities
Securities may be held in one of three portfolios: trading account secu
rities, securities held-to-maturity or securities available-for-sale. Trading account securities are carried at estimated fair value, with unrealized gains and losses included in operations. The Company held no trading account securities as of December 31, 2016 or 2015. Investment securities held-to-maturity are carried at cost, adjusted for amortization of premiums and accretion of discounts. With regard to investment securities held-to-maturity, management has the intent and the Bank has the ability to hold such securities until maturity. Investment securities available-for-sale are carried at fair value, with any unrealized gains or losses excluded from operations and reflected, net of tax, as a separate component of shareholders’ equity in accumulated other comprehensive income or loss. Investment securities available-for-sale are so classified because management may decide to sell certain securities prior to maturity for liquidity, tax planning or other valid business purposes. When the fair value of a security falls below carrying value, an evaluation must be made to determine if the unrealized loss is a temporary or other-than-temporary impairment. Impaired securities that are not deemed to be temporarily impaired are written down by a charge to operations to the extent that the impairment is related to credit losses. The amount of impairment related to other factors is recognized in other comprehensive income or loss. The Company uses a systematic methodology to evaluate potential impairment of its investments that considers, among other things, the magnitude and duration of the decline in fair value, the financial health and business outlook of the issuer and the Company’s ability and intent to hold the investment until such time as the security recovers its fair value.
Interest earned on investment securities available-for-sale is included in interest income. Amortization of premiums and discounts on investment securities is determined by the interest method and included in interest income. Gains and l
osses on the sale of investment securities available-for-sale, computed principally on the specific identification method, are shown separately in non-interest income.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL S
TATEMENTS (CONTINUED)
Derivatives and Hedging Activities
As part of the Company
’s overall interest rate risk management, the Company may use derivative instruments, which can include interest rate swaps, caps and floors.
Accounting Standards Codification (“ASC”) Topic 815,
Derivatives and Hedging,
requires all derivative instruments to be carried at fair value on the consolidated balance sheets. ASC Topic 815 provides special accounting provisions for derivative instruments that qualify for hedge accounting. To be eligible, the Company must specifically identify a derivative as a hedging instrument and identify the risk being hedged. The derivative instrument must be shown to meet specific requirements under ASC Topic 815.
Loans and Interest Income
Loans a
re reported at principal amounts outstanding, adjusted for unearned income, net deferred loan origination fees and costs, purchase premiums and discounts, write-downs and the allowance for loan losses. Loan origination fees, net of certain deferred origination costs, and purchase premiums and discounts are recognized as an adjustment to yield of the related loans, on an effective yield basis.
Interest on all loans is accrued and credited to income based on the principal amount outstanding.
The accrual of in
terest on loans is discontinued when, in the opinion of management, there is an indication that the borrower may be unable to meet payments as they become due. Upon such discontinuance, all unpaid accrued interest is reversed against current income unless the collateral for the loan is sufficient to cover the accrued interest. Interest received on non-accrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. The policy for interest recognition on impaired loans is consistent with the non-accrual interest recognition policy. Generally, loans are restored to accrual status when the obligation is brought current and the borrower has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.
Allowance for Loan Losses
The allowance for loan losses is determined based on various compo
nents for individually impaired loans and for homogeneous pools of loans. The allowance for loan losses is increased by a provision for loan losses, which is charged to expense, and reduced by charge-offs, net of recoveries by portfolio segment. The methodology for determining charge-offs is consistently applied to each segment. The allowance for loan losses is maintained at a level that, in management’s judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, and changes in its risk profile, credit concentrations, historical trends and economic conditions. This evaluation also considers the balance of impaired loans. Losses on individually identified impaired loans are measured based on the present value of expected future cash flows, discounted at each loan’s original effective market interest rate. As a practical expedient, impairment may be measured based on the loan’s observable market price or the fair value of the collateral if the loan is collateral-dependent. When the measure of the impaired loan is less than the recorded investment in the loan, the impairment is recorded through the provision added to the allowance for loan losses. One-to-four family residential mortgages and consumer installment loans are subjected to a collective evaluation for impairment, considering delinquency and repossession statistics, loss experience and other factors. Though management believes the allowance for loan losses to be adequate, ultimate losses may vary from estimates. However, estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings during periods in which they become known.
Premises and Equipment
Premises and equipment are carried at cost less accumulated depreciation, and amortization is computed principally by the straight-line method over the estimated useful lives of the assets or the expected lea
se terms for leasehold improvements, whichever is shorter. Useful lives for all premises and equipment range from three to forty years.
Other Real Estate Owned (OREO)
Other real estate consists of properties acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure. These properties are carried at the lower of cost or fair value based on appraised value, less estimated selling costs. Loss
es arising from the acquisition of properties are charged against the allowance for loan losses. Gains or losses realized upon the sale of OREO and additional losses related to subsequent valuation adjustments are determined on a specific property basis and are included as a component of non-interest expense along with carrying costs.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL S
TATEMENTS (CONTINUED)
Income Taxes
The Company accounts for income taxes on the accrua
l basis through the use of the asset and liability method. Under the asset and liability method, deferred taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the consolidated financial statement carrying amounts and the basis of existing assets and liabilities. Deferred tax assets are also recorded for any tax attributes, such as tax credit and net operating loss carryforwards. The net balance of deferred tax assets and liabilities is reported in other assets in the consolidated balance sheets. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company evaluates the r
ealization of deferred tax assets based on all positive and negative evidence available at the balance sheet date. Realization of deferred tax assets is based on the Company’s judgments about relevant factors affecting realization, including taxable income within any applicable carryback periods, future projected taxable income, reversal of taxable temporary differences and other tax planning strategies to maximize realization of deferred tax assets. A valuation allowance is recorded for any deferred tax assets that are not “more likely than not” to be realized.
A tax position is recognized as a benefit only if it is “
more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit for which there is a greater than 50% likelihood that such amount would be realized upon examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company recognizes interest expense, interest income and penalties related to unrecognized tax benefits within current income tax expense.
Treasury Stock
Treasury stock purchases and sales are accounted for using the cost method.
Advertising Costs
Advertising costs f
or promoting the Company are minimal and expensed as incurred.
Segment Reporting
Management has identified two reportable operating segments of Bancshares: the Bank and ALC. The reportable segments were determined based on the internal management
reporting system and comprise Bancshares’ and the Bank’s significant subsidiaries. Segment results include certain overhead allocations and intercompany transactions that were recorded at current market prices. All intercompany transactions were eliminated in the determination of consolidated balances.
Reclassification
Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the 2016 presentation.
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. Included in basic shares are certain shares that have been accrued as of the balance sheet date as deferred compensation for members of Bancshares’ Board of Directors. Diluted net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding, adjusted for the effect of potentially dilutive stock awards outstanding during the period. The dilutive shares consist of nonqualified stock option grants issued to employees and members of Bancshares’ Board of Directors pursuant to Bancshares
’
2013 Incentive Plan (the “2013 Incentive Plan”) previously approved by Bancshares’ shareholders. The following table reflects weighted average shares used to calculate basic and diluted net income per share for the years ended December 31, 2016 and 2015.
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Basic shares
|
|
|
6,149,192
|
|
|
|
6,137,704
|
|
Dilutive
shares
|
|
|
272,550
|
|
|
|
175,550
|
|
Diluted shares
|
|
|
6,421,742
|
|
|
|
6,313,254
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in Thousands,
Except Per Share Data)
|
|
Net income
|
|
$
|
1,224
|
|
|
$
|
2,595
|
|
Basic net income per share
|
|
$
|
0.20
|
|
|
$
|
0.42
|
|
Diluted net income per share
|
|
$
|
0.19
|
|
|
$
|
0.41
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL S
TATEMENTS (CONTINUED)
On February 22, 2017, the Company granted awards of nonqualified options to purchase a total of 64,600 shares of common stock
and restricted stock awards with respect to 7,533 shares of common stock to certain management employees and members of the Board of Directors. The shares underlying these awards are dilutive; however, since they were granted subsequent to December 31, 2016, they are not included in dilutive shares in the table above.
Acc
ounting Policies Recently Adopted and Pending Accounting Pronouncements
Accounting Standards Update (“
ASU”) 2016-13, "Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments.”
Issued in June 2016, ASU 2016-13 removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current U.S. GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all current recognition thresholds and will require companies to recognize an allowance for lifetime expected credit losses. Credit losses will be immediately recognized through net income; the amount recognized will be based on the current estimate of contractual cash flows not expected to be collected over the financial asset’s contractual term. ASU 2016-13 also amends the credit loss measurement guidance for available-for-sale debt securities. For public business entities, ASU 2016-13 is effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after December 15, 2019. Institutions will be required to apply the changes through a cumulative-effect adjustment to their retained earnings as of the beginning of the first reporting period in which the guidance is effective. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.
ASU 2016-09, “
Compensation-Stock Compensation (Topic 718)-Improvements to Employee Share-Based Payment Accounting.”
Issued in March 2016, ASU 2016-09 seeks to reduce complexity in accounting standards by simplifying several aspects of the accounting for share-based payment transactions, including (1) accounting for income taxes; (2) classification of excess tax benefits on the statement of cash flows; (3) forfeitures; (4) minimum statutory tax withholding requirements; (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax withholding purposes; (6) the practical expedient for estimating the expected term; and (7) intrinsic value. The amendments of ASU 2016-09 are effective for interim and annual periods beginning after December 15, 2016. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.
ASU 2016-05, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.”
Issued in March 2016, ASU 2016-05 clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument under ASC Topic 815 does not, in and of itself, require de-designation of that hedging relationship, provided that all other hedge accounting criteria continue to be met. The amendments of ASU 2016-05 are effective for interim and annual periods beginning after December 15, 2016. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FI
NANCIAL STATEMENTS (CONTINUED)
ASU 2016-02, “Leases (Topic 842).”
Issued in February 2016, ASU 2016-02 will require organizations that lease assets (lessees) to recognize on the balance sheet the assets and liabilities for the rights and obligations created by the lease for all leases with a term of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease are not significantly changed under ASU 2016-02. There will continue to be differentiation between finance leases and operating leases. For finance leases, a lessee will be required to (i) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position; (ii) recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of income; and (iii) classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability within operating activities on the statement of cash flows. For operating leases, a lessee will be required to (i) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position; (ii) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and (iii) classify all cash payments within operating activities in the statement of cash flows. The accounting applied by the lessor in a lease transaction remains largely unchanged from previous U.S. GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.
ASU 2016-01, “
Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (An Amendment of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification).”
Issued in January 2016, ASU 2016-01 is intended to enhance the reporting model for financial instruments to provide users of financial statements with improved decision-making information. The amendments to ASU 2016-01 include: (i) requiring equity investments, except those accounted for under the equity method of accounting or those that result in the consolidation of an investee, to be measured at fair value, with changes in fair value recognized in net income; (ii) requiring a qualitative assessment to identify impairment of equity investments without readily determinable fair values; and (iii) clarifying that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments of ASU 2016-01 are effective for interim and annual periods beginning after December 15, 2017. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements.
ASU 2
015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.”
Issued in April 2015, ASU 2015-05 provides guidance on how customers should evaluate whether cloud computing arrangements contain a software license that should be accounted for separately. A customer that determines that such an arrangement contains a software license must account for the license consistently with the acquisition of other software licenses. If an arrangement does not contain a software license, then the customer is required to account for it as a service contract. As a result, all software licenses within the scope of this guidance will be accounted for consistently with other licenses of intangible assets. The guidance is effective for annual and interim periods beginning after December 15, 2015. Entities can elect to apply the guidance either retrospectively or prospectively to all cloud computing arrangements entered into or materially modified after the effective date. ASU 2015-05 became effective for the Company on January 1, 2016 and was applied using the prospective transition method. The adoption of ASU 2015-05 did not have a material impact on the Company’s consolidated financial statements.
ASU 2015-02,
“
Consolidation (Topic 810): Amendments to the Consolidation Analysis.”
Issued in February 2015, ASU 2015-02 is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability companies and certain entities involved in securitization transactions. ASU 2015-02 focuses on the consolidation criteria for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. The new standard simplifies and improves current U.S. GAAP by: (i) placing more emphasis on risk of loss when determining a controlling financial interest; (ii) reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a VIE; and (iii) changing consolidation conclusions for companies in several industries that typically make use of limited partnerships or VIEs. ASU 2015-02 became effective for the Company on January 1, 2016. The adoption of ASU 2015-02 did not have a material impact on the Company’s consolidated financial statements.
ASU 2014-09, “
Revenue from Contracts with Customers (Topic 606).”
Issued in May 2014, ASU 2014-09 will add
FASB ASC Topic 606, Revenue from Contracts with Customers,
and will supersede revenue recognition requirements in
FASB ASC Topic 605, Revenue Recognition,
and certain cost guidance in
FASB ASC Topic 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts.
ASU 2014-09 provides a framework for revenue recognition that replaces the existing industry and transaction-specific requirements under the existing standards. ASU 2014-09 requires an entity to apply a five-step model to determine when to recognize revenue and at what amount. The model specifies that revenue should be recognized when (or as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue should be recognized either over time, in a manner that depicts the entity’s performance, or at a point in time, when control of the goods or services is transferred to the customer. ASU 2014-09 provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. In addition, the existing requirements for the recognition of a gain or loss on the transfer of non-financial assets that are not in a contract with a customer are amended to be consistent with the guidance on recognition and measurement in ASU 2014-09. The amendments of ASU 2014-09 may be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If the transition method of application is elected, the entity should also provide the additional disclosures in reporting periods that include the date of initial application of (1) the amount by which each financial statement line item is affected in the current reporting period, as compared to the guidance that was in effect before the change, and (2) an explanation of the reasons for significant changes.
In addition, the FASB has begun to issue targeted updates to clarify specific implementation issues of ASU 2014-09. These updates include
ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU 2016-10, “Identifying Performance Obligations and Licensing,” ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients,”
and
ASU 2016-20, “Technical Corrections and Improvements to Topic 606, ‘Revenue from Contracts with Customers.”
ASU 2015-14,
“Revenue from Contracts with Customers (Topic 606)-Deferral of the Effective Date,”
issued in August 2015, defers the effective date of ASU 2014-09 by one year. ASU 2015-14 provides that the amendments of ASU 2014-09 become effective for interim and annual periods beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Management is currently evaluating the impact that this ASU will have on the Company’s consolidated financial statements, as well as the most appropriate method of application; however, regardless of the method of application selected, the adoption of ASU 2014-09 is not expected to have a material impact on the Company’s consolidated financial statements.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Details of investment securities available-for-sale and
held-to-maturity as of December 31, 2016 and 2015 were as follows:
|
|
Available-for-Sale
|
|
|
|
December 31, 2016
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
99,922
|
|
|
$
|
490
|
|
|
$
|
(2,003
|
)
|
|
$
|
98,409
|
|
Commercial
|
|
|
71,761
|
|
|
|
56
|
|
|
|
(1,287
|
)
|
|
|
70,530
|
|
Obligations of states and political subdivisions
|
|
|
9,759
|
|
|
|
390
|
|
|
|
(7
|
)
|
|
|
10,142
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
2,000
|
|
|
|
—
|
|
|
|
(7
|
)
|
|
|
1,993
|
|
Corporate notes
|
|
|
756
|
|
|
|
—
|
|
|
|
—
|
|
|
|
756
|
|
U.S. Treasury securities
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
80
|
|
Total
|
|
$
|
184,278
|
|
|
$
|
936
|
|
|
$
|
(3,304
|
)
|
|
$
|
181,910
|
|
|
|
Held-to-Maturity
|
|
|
|
December 31, 2016
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
14,684
|
|
|
$
|
5
|
|
|
$
|
(148
|
)
|
|
$
|
14,541
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
9,129
|
|
|
|
13
|
|
|
|
(222
|
)
|
|
|
8,920
|
|
Obligations of states and political subdivisions
|
|
|
2,091
|
|
|
|
2
|
|
|
|
(46
|
)
|
|
|
2,047
|
|
Total
|
|
$
|
25,904
|
|
|
$
|
20
|
|
|
$
|
(416
|
)
|
|
$
|
25,508
|
|
|
|
Available-for-Sale
|
|
|
|
December 31, 2015
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
135,104
|
|
|
$
|
998
|
|
|
$
|
(608
|
)
|
|
$
|
135,494
|
|
Commercial
|
|
|
45,961
|
|
|
|
164
|
|
|
|
(616
|
)
|
|
|
45,509
|
|
Obligations of states and political subdivisions
|
|
|
14,071
|
|
|
|
931
|
|
|
|
(4
|
)
|
|
|
14,998
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
1,999
|
|
|
|
—
|
|
|
|
(17
|
)
|
|
|
1,982
|
|
Corporate notes
|
|
|
780
|
|
|
|
—
|
|
|
|
—
|
|
|
|
780
|
|
U.S. Treasury securities
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
80
|
|
Total
|
|
$
|
197,995
|
|
|
$
|
2,093
|
|
|
$
|
(1,245
|
)
|
|
$
|
198,843
|
|
|
|
Held-to-Maturity
|
|
|
|
December 31, 2015
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
(Dol
lars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
16,321
|
|
|
$
|
33
|
|
|
$
|
(170
|
)
|
|
$
|
16,184
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
13,766
|
|
|
|
19
|
|
|
|
(71
|
)
|
|
|
13,714
|
|
Obligations of states
and political subdivisions
|
|
|
2,272
|
|
|
|
18
|
|
|
|
(4
|
)
|
|
|
2,286
|
|
Total
|
|
$
|
32,359
|
|
|
$
|
70
|
|
|
$
|
(245
|
)
|
|
$
|
32,184
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The scheduled maturities of investment securities available-for-sale and held-to-maturity as of December 31,
2016 are presented in the following table:
|
|
Available-for-Sale
|
|
|
Held-to-Maturity
|
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair
Value
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair
Value
|
|
|
|
(Dollars in Thousands)
|
|
Maturing within one year
|
|
$
|
1,921
|
|
|
$
|
1,929
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Maturing after one to five years
|
|
|
4,654
|
|
|
|
4,705
|
|
|
|
1,986
|
|
|
|
1,995
|
|
Maturing after five to ten years
|
|
|
83,901
|
|
|
|
82,804
|
|
|
|
3,335
|
|
|
|
3,268
|
|
Maturing after ten years
|
|
|
93,802
|
|
|
|
92,472
|
|
|
|
20,583
|
|
|
|
20,245
|
|
Total
|
|
$
|
184,278
|
|
|
$
|
181,910
|
|
|
$
|
25,904
|
|
|
$
|
25,508
|
|
For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on the weighted-average
contractual maturities of underlying collateral. The mortgage-backed securities generally mature earlier than their weighted-average contractual maturities because of principal prepayments.
The following table reflects gross unrealized losses and fair valu
e, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of December 31, 2016 and 2015.
|
|
Available-for-Sale
|
|
|
|
December 31, 2016
|
|
|
|
Less than 12 Months
|
|
|
12
Months or More
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
85,741
|
|
|
$
|
(1,976
|
)
|
|
$
|
1,904
|
|
|
$
|
(27
|
)
|
Commercial
|
|
|
54,475
|
|
|
|
(946
|
)
|
|
|
10,721
|
|
|
|
(341
|
)
|
Obligations of U.S. government-sponsored agencies
|
|
|
1,993
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
|
434
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
—
|
|
U.S. Treasury securities
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
142,723
|
|
|
$
|
(2,936
|
)
|
|
$
|
12,625
|
|
|
$
|
(368
|
)
|
|
|
Held-to-Maturity
|
|
|
|
December 31, 2016
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
12,776
|
|
|
$
|
(148
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
7,957
|
|
|
|
(222
|
)
|
|
|
—
|
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
|
1,628
|
|
|
|
(46
|
)
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
22,361
|
|
|
$
|
(416
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
Available-for-Sale
|
|
|
|
December 31, 2015
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
83,403
|
|
|
$
|
(458
|
)
|
|
$
|
9,061
|
|
|
$
|
(150
|
)
|
Commercial
|
|
|
24,337
|
|
|
|
(272
|
)
|
|
|
8,918
|
|
|
|
(344
|
)
|
Obligations of U.S. government-sponsored agencies
|
|
|
1,982
|
|
|
|
(17
|
)
|
|
|
—
|
|
|
|
—
|
|
Corporate notes
|
|
|
779
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
|
707
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
111,208
|
|
|
$
|
(751
|
)
|
|
$
|
17,979
|
|
|
$
|
(494
|
)
|
|
|
Held-to-Maturity
|
|
|
|
December 31, 2015
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage-backed securities:
|
|
|
|
Commercial
|
|
$
|
14,143
|
|
|
$
|
(170
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
11,163
|
|
|
|
(44
|
)
|
|
|
1,560
|
|
|
|
(27
|
)
|
Obligations of states and political subdivisions
|
|
|
572
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
25,878
|
|
|
$
|
(218
|
)
|
|
$
|
1,560
|
|
|
$
|
(27
|
)
|
Management evaluates securities for other-than-temporary impairment no less frequently than quarterly and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (i) the length of
time and the extent to which fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, (iii) whether the Company intends to sell securities, and (iv) whether it is more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases.
As of December 31, 2016, 13 debt securities had been in a loss position for more than 12 months, and 130 debt securities had been in a loss position for less than 12 months. As
of December 31, 2015, 13 debt securities had been in a loss position for more than 12 months, and 102 debt securities had been in a loss position for less than 12 months. As of both December 31, 2016 and 2015, the losses for all securities were considered to be a direct result of the effect that the prevailing interest rate environment had on the value of debt securities and were not related to the creditworthiness of the issuers. Further, the Company has the current intent and ability to retain its investments in the issuers for a period of time that management believes to be sufficient to allow for any anticipated recovery in fair value. Therefore, the Company did not recognize any other-than-temporary impairments as of December 31, 2016 and 2015.
Investmen
t securities available-for-sale with a carrying value of $87.7 million and $61.3 million as of December 31, 2016 and December 31, 2015, respectively, were pledged to secure public deposits and for other purposes.
Gains realized on sales of securities avail
able-for-sale were approximately $0.6 million and $0.4 million in 2016 and 2015, respectively. There were no losses on sales of securities during 2016 and 2015.
4.
|
LOANS AND ALLOWANCE FOR LOAN LOSSES
|
Portfolio Segments:
The Company has divided the
loan portfolio into eight portfolio segments, each with different risk characteristics described as follows:
Construction, land development and other land loans
– Commercial construction, land and land development loans include the development of residential housing projects, loans for the development of commercial and industrial use property and loans for the purchase and improvement of raw land. These loans are secured in whole or in part by the underlying real estate collateral and are generally guaranteed by the principals of the borrowing entity.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 primarily includes mortgage loans secured by apartment buildings.
Secured by non-farm, non-residential properties
– This portfolio segment includes real estate loans secured by commercial and industrial properties, office or mixed-use facilities, strip shopping centers or other commercial property. These loans are generally guaranteed by the principals of the borrowing entity.
Other real estate loans
– Other real estate loans are loans primarily for agricultural production, secured by mortgages on farm land.
Comme
rcial and industrial loans
– This portfolio segment includes loans to commercial customers for use in the normal course of business. These credits may be loans and lines of credit to financially strong borrowers, secured by inventories, equipment or receivables, and are generally guaranteed by the principals of the borrowing entity.
Consumer loans
– This portfolio segment includes a variety of secured and unsecured personal loans, including automobile loans, loans for household and personal purposes and all other direct consumer installment loans.
Indirect Sales
– This portfolio segment includes loans secured by collateral that is purchased by consumers at retail stores with whom ALC has an established relationship to provide financing for the retail products sold if applicable underwriting standards are met.
As of December 31, 2016 and 2015, the composition of the loan portfolio by reporting
segment and portfolio segment was as follows:
|
|
December
31, 2016
|
|
|
|
Bank
|
|
|
ALC
|
|
|
Total
|
|
|
|
(Dollars
in Thousands)
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
23,772
|
|
|
$
|
—
|
|
|
$
|
23,772
|
|
Secured by 1-4 family residential properties
|
|
|
32,955
|
|
|
|
13,724
|
|
|
|
46,679
|
|
Secured by multi-family residential properties
|
|
|
16,627
|
|
|
|
—
|
|
|
|
16,627
|
|
Secured by non-farm, non-residential properties
|
|
|
102,112
|
|
|
|
—
|
|
|
|
102,112
|
|
Other
|
|
|
234
|
|
|
|
—
|
|
|
|
234
|
|
Commercial and industrial loans
|
|
|
57,963
|
|
|
|
—
|
|
|
|
57,963
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
6,206
|
|
|
|
36,413
|
|
|
|
42,619
|
|
Indirect sales
|
|
|
—
|
|
|
|
44,775
|
|
|
|
44,775
|
|
Total loans
|
|
|
239,869
|
|
|
|
94,912
|
|
|
|
334,781
|
|
Less: Unearned interest, fees and deferred cost
|
|
|
218
|
|
|
|
6,935
|
|
|
|
7,153
|
|
Allowance for loan losses
|
|
|
2,409
|
|
|
|
2,447
|
|
|
|
4,856
|
|
Net loans
|
|
$
|
237,242
|
|
|
$
|
85,530
|
|
|
$
|
322,772
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
December
31, 2015
|
|
|
|
Bank
|
|
|
ALC
|
|
|
Total
|
|
|
|
(Dollars
in Thousands)
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction,
land development and other land loans
|
|
$
|
11,827
|
|
|
$
|
—
|
|
|
$
|
11,827
|
|
Secured by 1-4 family residential properties
|
|
|
30,730
|
|
|
|
17,233
|
|
|
|
47,963
|
|
Secured by multi-family residential properties
|
|
|
11,845
|
|
|
|
—
|
|
|
|
11,845
|
|
Secured by
non-farm, non-residential properties
|
|
|
83,883
|
|
|
|
—
|
|
|
|
83,883
|
|
Other
|
|
|
115
|
|
|
|
—
|
|
|
|
115
|
|
Commercial and industrial loans
|
|
|
29,377
|
|
|
|
—
|
|
|
|
29,377
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
7,436
|
|
|
|
38,198
|
|
|
|
45,634
|
|
Indirect sales
|
|
|
—
|
|
|
|
37,933
|
|
|
|
37,933
|
|
Total loans
|
|
|
175,213
|
|
|
|
93,364
|
|
|
|
268,577
|
|
Less: Unearned interest, fees and deferred cost
|
|
|
149
|
|
|
|
9,215
|
|
|
|
9,364
|
|
Allowance for loan losses
|
|
|
1,329
|
|
|
|
2,452
|
|
|
|
3,781
|
|
Net loans
|
|
$
|
173,735
|
|
|
$
|
81,697
|
|
|
$
|
255,432
|
|
The Company makes commercial, real estate and installment loans to its customers. Although the Company has a diversified loan portfolio, 56.6% and 58.0% of the portfolio was concentrated in loans secured by real estate located primarily within
a single geographic region of the United States as of December 31, 2016 and 2015, 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 whic
h they are associated. These loans are made on the same terms as those prevailing for comparable transactions with non-related parties. Management believes that such loans do not represent more than a normal risk of collectability, nor do they present other unfavorable features. The aggregate balances of such related party loans and commitments as of December 31, 2016 and 2015 were $2.7 million and $2.9 million, respectively. During the year ended December 31, 2016, there was one new loan to these related parties, and repayments by active related parties was $0.1 million. During the year ended December 31, 2015, there were no new loans to these related parties, and repayments by active related parties were $0.2 million.
Allowance for Loan Losses:
The follo
wing tables present changes in the allowance for loan losses by loan portfolio segment and loan type as of December 31, 2016 and 2015:
|
|
Bank
|
|
|
|
December
31, 2016
|
|
|
|
Construction, Land
|
|
|
1-4 Family
|
|
|
Real Estate Multi-Family
|
|
|
Non-Farm
Non-Residential
|
|
|
Other
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Indirect Sales
|
|
|
Total
|
|
|
|
(Dollars
in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
110
|
|
|
$
|
138
|
|
|
$
|
29
|
|
|
$
|
351
|
|
|
$
|
1
|
|
|
$
|
659
|
|
|
$
|
41
|
|
|
$
|
—
|
|
|
$
|
1,329
|
|
Charge-offs
|
|
|
—
|
|
|
|
(66
|
)
|
|
|
—
|
|
|
|
(40
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(43
|
)
|
|
|
—
|
|
|
|
(151
|
)
|
Recoveries
|
|
|
200
|
|
|
|
23
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
73
|
|
|
|
50
|
|
|
|
—
|
|
|
|
346
|
|
Provision
|
|
|
225
|
|
|
|
209
|
|
|
|
59
|
|
|
|
592
|
|
|
|
1
|
|
|
|
(203
|
)
|
|
|
2
|
|
|
|
—
|
|
|
|
885
|
|
Ending balance
|
|
|
535
|
|
|
|
304
|
|
|
|
88
|
|
|
|
903
|
|
|
|
2
|
|
|
|
527
|
|
|
|
50
|
|
|
|
—
|
|
|
|
2,409
|
|
Ending balance individually evaluated for
impairment
|
|
|
423
|
|
|
|
5
|
|
|
|
—
|
|
|
|
107
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
535
|
|
Ending balance collectively evaluated for impairment
|
|
$
|
112
|
|
|
$
|
299
|
|
|
$
|
88
|
|
|
$
|
796
|
|
|
$
|
2
|
|
|
$
|
527
|
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
1,874
|
|
Loan receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
23,772
|
|
|
|
32,955
|
|
|
|
16,627
|
|
|
|
102,112
|
|
|
|
234
|
|
|
|
57,963
|
|
|
|
6,206
|
|
|
|
—
|
|
|
|
239,869
|
|
Ending balance individually evaluated for
impairment
|
|
|
1,361
|
|
|
|
193
|
|
|
|
—
|
|
|
|
549
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,103
|
|
Ending balance collectively evaluated for impairment
|
|
$
|
22,411
|
|
|
$
|
32,762
|
|
|
$
|
16,627
|
|
|
$
|
101,563
|
|
|
$
|
234
|
|
|
$
|
57,963
|
|
|
$
|
6,206
|
|
|
$
|
—
|
|
|
$
|
237,766
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
|
|
ALC
|
|
|
|
December
31, 2016
|
|
|
|
Construction, Land
|
|
|
1-4
Family
|
|
|
Real Estate Multi-Family
|
|
|
Non-Farm Non-Residential
|
|
|
Other
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Indirect Sales
|
|
|
Total
|
|
|
|
(Dollars
in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
—
|
|
|
$
|
250
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,584
|
|
|
$
|
618
|
|
|
$
|
2,452
|
|
Charge-offs
|
|
|
—
|
|
|
|
(56
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,218
|
)
|
|
|
(752
|
)
|
|
|
(3,026
|
)
|
Recoveries
|
|
|
—
|
|
|
|
39
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
451
|
|
|
|
220
|
|
|
|
710
|
|
Provision
|
|
|
—
|
|
|
|
(126
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,900
|
|
|
|
537
|
|
|
|
2,311
|
|
Ending balance
|
|
|
—
|
|
|
|
107
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,717
|
|
|
|
623
|
|
|
|
2,447
|
|
Ending balance individually evaluated for
impairment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Ending balance collectively evaluated for impairment
|
|
$
|
—
|
|
|
$
|
107
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,717
|
|
|
$
|
623
|
|
|
$
|
2,447
|
|
Loan receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
—
|
|
|
|
13,724
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
36,413
|
|
|
|
44,775
|
|
|
|
94,912
|
|
Ending balance individually evaluated for
impairment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Ending balance collectively evaluated for impairment
|
|
$
|
—
|
|
|
$
|
13,724
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
36,413
|
|
|
$
|
44,775
|
|
|
$
|
94,912
|
|
|
|
Bank
and ALC
|
|
|
|
December
31, 2016
|
|
|
|
Construction, Land
|
|
|
1-4
Family
|
|
|
Real Estate Multi-Family
|
|
|
Non-Farm Non-Residential
|
|
|
Other
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Indirect Sales
|
|
|
Total
|
|
|
|
(Dollars
in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
110
|
|
|
$
|
388
|
|
|
$
|
29
|
|
|
$
|
351
|
|
|
$
|
1
|
|
|
$
|
659
|
|
|
$
|
1,625
|
|
|
$
|
618
|
|
|
$
|
3,781
|
|
Charge-offs
|
|
|
—
|
|
|
|
(122
|
)
|
|
|
—
|
|
|
|
(40
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(2,261
|
)
|
|
|
(752
|
)
|
|
|
(3,177
|
)
|
Recoveries
|
|
|
200
|
|
|
|
62
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
73
|
|
|
|
501
|
|
|
|
220
|
|
|
|
1,056
|
|
Provision
|
|
|
225
|
|
|
|
83
|
|
|
|
59
|
|
|
|
592
|
|
|
|
1
|
|
|
|
(203
|
)
|
|
|
1,902
|
|
|
|
537
|
|
|
|
3,196
|
|
Ending balance
|
|
|
535
|
|
|
|
411
|
|
|
|
88
|
|
|
|
903
|
|
|
|
2
|
|
|
|
527
|
|
|
|
1,767
|
|
|
|
623
|
|
|
|
4,856
|
|
Ending balance individually evaluated for
impairment
|
|
|
423
|
|
|
|
5
|
|
|
|
—
|
|
|
|
107
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
535
|
|
Ending balance collectively evaluated for impairment
|
|
$
|
112
|
|
|
$
|
406
|
|
|
$
|
88
|
|
|
$
|
798
|
|
|
$
|
2
|
|
|
$
|
527
|
|
|
$
|
1,767
|
|
|
$
|
623
|
|
|
$
|
4,321
|
|
Loan receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
23,772
|
|
|
|
46,679
|
|
|
|
16,627
|
|
|
|
102,112
|
|
|
|
234
|
|
|
|
57,963
|
|
|
|
42,619
|
|
|
|
44,775
|
|
|
|
334,781
|
|
Ending balance individually evaluated for
impairment
|
|
|
1,361
|
|
|
|
193
|
|
|
|
—
|
|
|
|
549
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,103
|
|
Ending balance collectively evaluated for impairment
|
|
$
|
22,411
|
|
|
$
|
46,486
|
|
|
$
|
16,627
|
|
|
$
|
101,563
|
|
|
$
|
234
|
|
|
$
|
57,963
|
|
|
$
|
42,619
|
|
|
$
|
44,775
|
|
|
$
|
332,678
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
Bank
|
|
|
|
December
31, 2015
|
|
|
|
Construction, Land
|
|
|
1-4
Family
|
|
|
Real Estate Multi-Family
|
|
|
Non-Farm Non- Residential
|
|
|
Other
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Indirect Sales
|
|
|
Total
|
|
|
|
(Dollars
in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
10
|
|
|
$
|
437
|
|
|
$
|
1,460
|
|
|
$
|
1,323
|
|
|
$
|
1
|
|
|
$
|
141
|
|
|
$
|
114
|
|
|
$
|
—
|
|
|
$
|
3,486
|
|
Charge-offs
|
|
|
(53
|
)
|
|
|
(53
|
)
|
|
|
(690
|
)
|
|
|
(39
|
)
|
|
|
—
|
|
|
|
(17
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(852
|
)
|
Recoveries
|
|
|
—
|
|
|
|
40
|
|
|
|
11
|
|
|
|
45
|
|
|
|
—
|
|
|
|
61
|
|
|
|
97
|
|
|
|
—
|
|
|
|
254
|
|
Provision
|
|
|
153
|
|
|
|
(286
|
)
|
|
|
(752
|
)
|
|
|
(978
|
)
|
|
|
—
|
|
|
|
474
|
|
|
|
(170
|
)
|
|
|
—
|
|
|
|
(1,559
|
)
|
Ending balance
|
|
|
110
|
|
|
|
138
|
|
|
|
29
|
|
|
|
351
|
|
|
|
1
|
|
|
|
659
|
|
|
|
41
|
|
|
|
—
|
|
|
|
1,329
|
|
Ending balance individually evaluated for
impairment
|
|
|
95
|
|
|
|
5
|
|
|
|
—
|
|
|
|
130
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
310
|
|
Ending balance collectively evaluated for impairment
|
|
$
|
15
|
|
|
$
|
133
|
|
|
$
|
29
|
|
|
$
|
221
|
|
|
$
|
1
|
|
|
$
|
579
|
|
|
$
|
41
|
|
|
$
|
—
|
|
|
$
|
1,019
|
|
Loan receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
11,827
|
|
|
|
30,730
|
|
|
|
11,845
|
|
|
|
83,883
|
|
|
|
115
|
|
|
|
29,377
|
|
|
|
7,436
|
|
|
|
—
|
|
|
|
175,213
|
|
Ending balance individually evaluated for
impairment
|
|
|
1,445
|
|
|
|
252
|
|
|
|
—
|
|
|
|
573
|
|
|
|
—
|
|
|
|
444
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,714
|
|
Ending balance collectively evaluated for impairment
|
|
$
|
10,382
|
|
|
$
|
30,478
|
|
|
$
|
11,845
|
|
|
$
|
81,310
|
|
|
$
|
115
|
|
|
$
|
28,933
|
|
|
$
|
7,436
|
|
|
$
|
—
|
|
|
$
|
172,499
|
|
|
|
ALC
|
|
|
|
December
31, 2015
|
|
|
|
Construction, Land
|
|
|
1-4
Family
|
|
|
Real Estate Multi-Family
|
|
|
Non-Farm Non-Residential
|
|
|
Other
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Indirect Sales
|
|
|
Total
|
|
|
|
(Dollars
in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
—
|
|
|
$
|
346
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,962
|
|
|
$
|
374
|
|
|
$
|
2,682
|
|
Charge-offs
|
|
|
—
|
|
|
|
(187
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,638
|
)
|
|
|
(914
|
)
|
|
|
(2,739
|
)
|
Recoveries
|
|
|
—
|
|
|
|
22
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
547
|
|
|
|
165
|
|
|
|
734
|
|
Provision
|
|
|
—
|
|
|
|
69
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
713
|
|
|
|
993
|
|
|
|
1,775
|
|
Ending balance
|
|
|
—
|
|
|
|
250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,584
|
|
|
|
618
|
|
|
|
2,452
|
|
Ending balance individually evaluated for
impairment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Ending balance collectively evaluated for impairment
|
|
$
|
—
|
|
|
$
|
250
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,584
|
|
|
$
|
618
|
|
|
$
|
2,452
|
|
Loan receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
—
|
|
|
|
17,233
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,198
|
|
|
|
37,933
|
|
|
|
93,364
|
|
Ending balance individually evaluated for
impairment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Ending balance collectively evaluated for impairment
|
|
$
|
—
|
|
|
$
|
17,233
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
38,198
|
|
|
$
|
37,933
|
|
|
$
|
93,364
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
Bank
and ALC
|
|
|
|
December
31, 2015
|
|
|
|
Construction, Land
|
|
|
1-4
Family
|
|
|
Real Estate Multi-Family
|
|
|
Non-Farm Non-Residential
|
|
|
Other
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Indirect Sales
|
|
|
Total
|
|
|
|
(Dollars
in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
10
|
|
|
$
|
783
|
|
|
$
|
1,460
|
|
|
$
|
1,323
|
|
|
$
|
1
|
|
|
$
|
141
|
|
|
$
|
2,076
|
|
|
$
|
374
|
|
|
$
|
6,168
|
|
Charge-offs
|
|
|
(53
|
)
|
|
|
(240
|
)
|
|
|
(690
|
)
|
|
|
(39
|
)
|
|
|
—
|
|
|
|
(17
|
)
|
|
|
(2,039
|
)
|
|
|
(513
|
)
|
|
|
(3,591
|
)
|
Recoveries
|
|
|
—
|
|
|
|
62
|
|
|
|
11
|
|
|
|
45
|
|
|
|
—
|
|
|
|
61
|
|
|
|
737
|
|
|
|
72
|
|
|
|
988
|
|
Provision
|
|
|
153
|
|
|
|
(217
|
)
|
|
|
(752
|
)
|
|
|
(978
|
)
|
|
|
—
|
|
|
|
474
|
|
|
|
851
|
|
|
|
685
|
|
|
|
216
|
|
Ending balance
|
|
|
110
|
|
|
|
388
|
|
|
|
29
|
|
|
|
351
|
|
|
|
1
|
|
|
|
659
|
|
|
|
1,625
|
|
|
|
618
|
|
|
|
3,781
|
|
Ending balance individually evaluated for
impairment
|
|
|
95
|
|
|
|
5
|
|
|
|
—
|
|
|
|
130
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
310
|
|
Ending balance collectively evaluated for impairment
|
|
$
|
15
|
|
|
$
|
383
|
|
|
$
|
29
|
|
|
$
|
221
|
|
|
$
|
1
|
|
|
$
|
579
|
|
|
$
|
1,625
|
|
|
$
|
618
|
|
|
$
|
3,471
|
|
Loan receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
11,827
|
|
|
|
47,963
|
|
|
|
11,845
|
|
|
|
83,883
|
|
|
|
115
|
|
|
|
29,377
|
|
|
|
45,634
|
|
|
|
37,933
|
|
|
|
268,577
|
|
Ending balance individually evaluated for
impairment
|
|
|
1,445
|
|
|
|
252
|
|
|
|
—
|
|
|
|
573
|
|
|
|
—
|
|
|
|
444
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,714
|
|
Ending balance collectively evaluated for impairment
|
|
$
|
10,382
|
|
|
$
|
47,711
|
|
|
$
|
11,845
|
|
|
$
|
83,310
|
|
|
$
|
115
|
|
|
$
|
28,933
|
|
|
$
|
45,634
|
|
|
$
|
37,933
|
|
|
$
|
265,863
|
|
Credit Quality Indicators:
The Bank utilizes a credit grading system that provides a uniform framework for establishing and monitoring credit r
isk in the loan portfolio. Under this system, each loan is graded, based on pre-determined risk metrics, and categorized into one of nine risk grades. These risk grades can be further summarized into categories described as pass, special mention, substandard, doubtful and loss, as described in further detail below.
|
●
|
Pass (Risk Grades 1-5): Loans in this category include obligations in which the probability of default is considered low.
|
|
|
|
|
●
|
Special Mention (Risk Grade 6): Loans in this category exhibit
potential credit weaknesses or downward trends deserving Bank management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. Although a special mention asset has a higher probability of default than pass-rated categories, its default is not imminent.
|
|
|
|
|
●
|
Substandard (Risk Grade 7): Loans in this category have defined weaknesses that jeopardize the orderly liquidation of debt. A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or by
the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. There is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT
INUED)
|
●
|
Doubtful (Risk Grade 8): Loans classified as doubtful have all the weaknesses found in substandard loans, with the added characteristic that the weaknesses make collection of the debt in full, based on currently existing facts, conditions and
values, highly questionable and improbable. Serious problems exist such that partial loss of principal is likely; however, because of certain important, reasonably specific pending factors that may work to strengthen the assets, the loans’ classification as estimated losses is deferred until a more exact status may be determined. Such pending factors may include proposed merger, acquisition or liquidation procedures, capital injection, perfection of liens on additional collateral and refinancing plans. Loans classified as doubtful may include loans to borrowers that have demonstrated a history of failing to live up to agreements.
|
|
|
|
|
●
|
Loss (Risk Grade 9): Loans are classified in this category when borrowers are deemed incapable of repayment of unsecured
debt. Loans to such borrowers are considered uncollectable and of such little value that continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not prudent to defer writing off these worthless assets, even though partial recovery may be effected in the future.
|
At ALC, because the loan portfolio is more uniform in nature, each loan is categorized into one of two risk grades, depending on wh
ether 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 December 31, 2016.
|
|
Bank
|
|
|
|
Pass
1-5
|
|
|
Special
Mention
6
|
|
|
Substandard
7
|
|
|
Doubtful
8
|
|
|
Total
|
|
|
|
(Dollars
in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
22,240
|
|
|
$
|
—
|
|
|
$
|
1,532
|
|
|
$
|
—
|
|
|
$
|
23,772
|
|
Secured by 1-4 family residential properties
|
|
|
31,995
|
|
|
|
213
|
|
|
|
747
|
|
|
|
—
|
|
|
|
32,955
|
|
Secured by multi-family residential properties
|
|
|
16,627
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,627
|
|
Secured by non-farm, non-residential properties
|
|
|
99,082
|
|
|
|
2,315
|
|
|
|
715
|
|
|
|
—
|
|
|
|
102,112
|
|
Other
|
|
|
234
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
234
|
|
Commercial and industrial loans
|
|
|
55,481
|
|
|
|
2,227
|
|
|
|
255
|
|
|
|
—
|
|
|
|
57,963
|
|
Consumer loans
|
|
|
6,126
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
|
|
6,206
|
|
Total
|
|
$
|
231,785
|
|
|
$
|
4,755
|
|
|
$
|
3,329
|
|
|
$
|
—
|
|
|
$
|
239,869
|
|
|
|
ALC
|
|
|
|
Performing
|
|
|
Nonperforming
|
|
|
Total
|
|
|
|
(Dollars
in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by 1-4 family residential properties
|
|
$
|
13,507
|
|
|
$
|
217
|
|
|
$
|
13,724
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
35,278
|
|
|
|
1,135
|
|
|
|
36,413
|
|
Indirect sales
|
|
|
44,228
|
|
|
|
547
|
|
|
|
44,775
|
|
Total
|
|
$
|
93,013
|
|
|
$
|
1,899
|
|
|
$
|
94,912
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The tables below illustrate the carrying amount of loans by credit quality indicator as of December
31, 2015.
|
|
Bank
|
|
|
|
Pass
1-5
|
|
|
Special
Mention
6
|
|
|
Substandard
7
|
|
|
Doubtful
8
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
9,862
|
|
|
$
|
—
|
|
|
$
|
1,965
|
|
|
$
|
—
|
|
|
$
|
11,827
|
|
Secured by 1-4 family residential properties
|
|
|
29,252
|
|
|
|
228
|
|
|
|
1,250
|
|
|
|
—
|
|
|
|
30,730
|
|
Secured by multi-family residential properties
|
|
|
11,845
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,845
|
|
Secured by non-farm, non-residential properties
|
|
|
78,647
|
|
|
|
4,315
|
|
|
|
921
|
|
|
|
—
|
|
|
|
83,883
|
|
Other
|
|
|
115
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
115
|
|
Commercial and industrial loans
|
|
|
28,170
|
|
|
|
482
|
|
|
|
725
|
|
|
|
—
|
|
|
|
29,377
|
|
Consumer loans
|
|
|
7,284
|
|
|
|
—
|
|
|
|
152
|
|
|
|
—
|
|
|
|
7,436
|
|
Total
|
|
$
|
165,175
|
|
|
$
|
5,025
|
|
|
$
|
5,013
|
|
|
$
|
—
|
|
|
$
|
175,213
|
|
|
|
ALC
|
|
|
|
Performing
|
|
|
Nonperforming
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by 1-4 family
residential properties
|
|
$
|
16,964
|
|
|
$
|
269
|
|
|
$
|
17,233
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
37,195
|
|
|
|
1,003
|
|
|
|
38,198
|
|
Indirect sales
|
|
|
37,548
|
|
|
|
385
|
|
|
|
37,933
|
|
Total
|
|
$
|
91,707
|
|
|
$
|
1,657
|
|
|
$
|
93,364
|
|
The following tables provide an aging analysis of past due loans by class as of December 31,
2016.
|
|
Bank
|
|
|
|
As of December 31, 2016
|
|
|
|
30-59 Days
Past Due
|
|
|
60-89 Days
Past Due
|
|
|
90 Days
Or
Greater
|
|
|
Total
Past
Due
|
|
|
Current
|
|
|
Total
Loans
|
|
|
Recorded
Investment
>
90
Days And
Accruing
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other
land loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
86
|
|
|
$
|
86
|
|
|
$
|
23,686
|
|
|
$
|
23,772
|
|
|
$
|
—
|
|
Secured by 1-4 family residential properties
|
|
|
164
|
|
|
|
69
|
|
|
|
145
|
|
|
|
378
|
|
|
|
32,577
|
|
|
|
32,955
|
|
|
|
—
|
|
Secured by multi-family residential
properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,627
|
|
|
|
16,627
|
|
|
|
—
|
|
Secured by non-farm, non-residential
properties
|
|
|
762
|
|
|
|
—
|
|
|
|
—
|
|
|
|
762
|
|
|
|
101,350
|
|
|
|
102,112
|
|
|
|
—
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
234
|
|
|
|
234
|
|
|
|
—
|
|
Commercial and industrial loans
|
|
|
—
|
|
|
|
—
|
|
|
|
14
|
|
|
|
14
|
|
|
|
57,949
|
|
|
|
57,963
|
|
|
|
—
|
|
Consumer loans
|
|
|
—
|
|
|
|
28
|
|
|
|
—
|
|
|
|
28
|
|
|
|
6,178
|
|
|
|
6,206
|
|
|
|
—
|
|
Total
|
|
$
|
926
|
|
|
$
|
97
|
|
|
$
|
245
|
|
|
$
|
1,268
|
|
|
$
|
238,601
|
|
|
$
|
239,869
|
|
|
$
|
—
|
|
FIRST U
S BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
ALC
|
|
|
|
As of December 31, 2016
|
|
|
|
30-59
Days
Past Due
|
|
|
60-89
Days
Past Due
|
|
|
90 Days
Or
Greater
|
|
|
Total
Past
Due
|
|
|
Current
|
|
|
Total
Loans
|
|
|
Recorded
Investment
>
90
Days And
Accruing
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other
land loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Secured by 1-4 family residential properties
|
|
|
61
|
|
|
|
29
|
|
|
|
213
|
|
|
|
303
|
|
|
|
13,421
|
|
|
|
13,724
|
|
|
|
—
|
|
Secured by multi-family residential
properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential
properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Commercial and industrial loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
441
|
|
|
|
413
|
|
|
|
1,104
|
|
|
|
1,958
|
|
|
|
34,455
|
|
|
|
36,413
|
|
|
|
—
|
|
Indirect sales
|
|
|
191
|
|
|
|
139
|
|
|
|
489
|
|
|
|
819
|
|
|
|
43,956
|
|
|
|
44,775
|
|
|
|
—
|
|
Total
|
|
$
|
693
|
|
|
$
|
581
|
|
|
$
|
1,806
|
|
|
$
|
3,080
|
|
|
$
|
91,832
|
|
|
$
|
94,912
|
|
|
$
|
—
|
|
The following tables provide an aging analysis of past due loans by class as of December 31, 2015.
|
|
Bank
|
|
|
|
As of December 31, 2015
|
|
|
|
30-59
Days
Past Due
|
|
|
60-89
Days
Past Due
|
|
|
90 Days
Or
Greater
|
|
|
Total
Past
Due
|
|
|
Current
|
|
|
Total
Loans
|
|
|
Recorded
Investment
>
90
Days And
Accruing
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other
land loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
86
|
|
|
$
|
86
|
|
|
$
|
11,741
|
|
|
$
|
11,827
|
|
|
$
|
—
|
|
Secured by 1-4 family residential properties
|
|
|
118
|
|
|
|
206
|
|
|
|
360
|
|
|
|
684
|
|
|
|
30,046
|
|
|
|
30,730
|
|
|
|
—
|
|
Secured by multi-family residential
properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,845
|
|
|
|
11,845
|
|
|
|
—
|
|
Secured by non-farm, non-residential
properties
|
|
|
530
|
|
|
|
—
|
|
|
|
148
|
|
|
|
678
|
|
|
|
83,205
|
|
|
|
83,883
|
|
|
|
—
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
115
|
|
|
|
115
|
|
|
|
—
|
|
Commercial and industrial loans
|
|
|
22
|
|
|
|
52
|
|
|
|
—
|
|
|
|
74
|
|
|
|
29,303
|
|
|
|
29,377
|
|
|
|
—
|
|
Consumer loans
|
|
|
49
|
|
|
|
4
|
|
|
|
83
|
|
|
|
136
|
|
|
|
7,300
|
|
|
|
7,436
|
|
|
|
—
|
|
Total
|
|
$
|
719
|
|
|
$
|
262
|
|
|
$
|
677
|
|
|
$
|
1,658
|
|
|
$
|
173,555
|
|
|
$
|
175,213
|
|
|
$
|
—
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES T
O CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
ALC
|
|
|
|
As
of December 31, 2015
|
|
|
|
30-
59
Days
Past
Due
|
|
|
60-
89
Days
Past
Due
|
|
|
90
Days
Or
Greater
|
|
|
Total
Past
Due
|
|
|
Current
|
|
|
Total
Loans
|
|
|
Recorded
Investment
>
90
Days And
Accruing
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other
land loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Secured by 1-4 family residential properties
|
|
|
91
|
|
|
|
206
|
|
|
|
252
|
|
|
|
549
|
|
|
|
16,684
|
|
|
|
17,233
|
|
|
|
—
|
|
Secured by multi-family residential
properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential
properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Commercial and industrial loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
590
|
|
|
|
438
|
|
|
|
991
|
|
|
|
2,019
|
|
|
|
36,179
|
|
|
|
38,198
|
|
|
|
—
|
|
Indirect sales
|
|
|
375
|
|
|
|
129
|
|
|
|
386
|
|
|
|
890
|
|
|
|
37,043
|
|
|
|
37,933
|
|
|
|
—
|
|
Total
|
|
$
|
1,056
|
|
|
$
|
773
|
|
|
$
|
1,629
|
|
|
$
|
3,458
|
|
|
$
|
89,906
|
|
|
$
|
93,364
|
|
|
$
|
—
|
|
The following table provides an analysis of non-accruing loans by class as of December 31, 2016 and 2015.
|
|
Loans
on Non-Accrual Status
|
|
|
|
December
31,
2016
|
|
|
December
31,
2015
|
|
|
|
(Dollars
in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
86
|
|
|
$
|
339
|
|
Secured by 1-4 family residential properties
|
|
|
570
|
|
|
|
968
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm,
non-residential properties
|
|
|
53
|
|
|
|
213
|
|
Commercial and industrial loans
|
|
|
32
|
|
|
|
47
|
|
Consumer loans
|
|
|
1,676
|
|
|
|
1,535
|
|
Total loans
|
|
$
|
2,417
|
|
|
$
|
3,102
|
|
Impaired Loans:
A loan is considered impaired when, based on current
information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the related loan agreement. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the liquidation of the collateral at the Bank.
At management's discretion, additional loans may be impaired based on homogeneous factors such as changes in the nature and volume of the portfolio, portfolio quality, adequacy of the underlying collateral value, loan concentrations,
historical charge-off trends, and economic conditions that may affect the borrower's ability to pay. At ALC, all real estate loans of $0.1 million or more are identified for impairment analysis. There are currently no loans at ALC that meet that criteria.
All loans of $0.5 million or more that have a credit quality risk grade of seven or above are identified for impairment analysis. Impaired loans, or portions thereof, are charged off when deemed uncollectable.
FIRST US BANCSHARES, INC. AND SUBSIDIARI
ES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 2016, the carrying amount of impaired loans consisted of the following:
|
|
December
31, 2016
|
|
Impaired
loans with no related allowance recorded
|
|
Carrying
Amount
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowances
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Secured by 1-4 family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Commercial and industrial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total loans with no related allowance
recorded
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Impaired loans with an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
1,361
|
|
|
$
|
1,361
|
|
|
$
|
423
|
|
Secured by 1-4
family residential properties
|
|
|
193
|
|
|
|
193
|
|
|
|
5
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
549
|
|
|
|
549
|
|
|
|
107
|
|
Commercial and industrial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
loans with an allowance recorded
|
|
$
|
2,103
|
|
|
$
|
2,103
|
|
|
$
|
535
|
|
Total impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
1,361
|
|
|
$
|
1,361
|
|
|
$
|
423
|
|
Secured by 1-4 family residential properties
|
|
|
193
|
|
|
|
193
|
|
|
|
5
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
549
|
|
|
|
549
|
|
|
|
107
|
|
Commercial and industrial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total impaired loans
|
|
$
|
2,103
|
|
|
$
|
2,103
|
|
|
$
|
535
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of December
31, 2015, the carrying amount of impaired loans consisted of the following:
|
|
December
31, 2015
|
|
Impaired
loans with no related allowance recorded
|
|
Carrying
Amount
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowances
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land
loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Secured by 1-4 family residential properties
|
|
|
54
|
|
|
|
54
|
|
|
|
—
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Commercial and industrial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total loans with no related allowance recorded
|
|
$
|
54
|
|
|
$
|
54
|
|
|
$
|
—
|
|
Impaired loans with an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
1,445
|
|
|
$
|
1,445
|
|
|
$
|
95
|
|
Secured by 1-4 family residential properties
|
|
|
198
|
|
|
|
198
|
|
|
|
5
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
573
|
|
|
|
573
|
|
|
|
130
|
|
Commercial and industrial
|
|
|
444
|
|
|
|
444
|
|
|
|
80
|
|
Total loans with an allowance
recorded
|
|
$
|
2,660
|
|
|
$
|
2,660
|
|
|
$
|
310
|
|
Total impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
1,445
|
|
|
$
|
1,445
|
|
|
$
|
95
|
|
Secured by 1-4 family residential properties
|
|
|
252
|
|
|
|
252
|
|
|
|
5
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
573
|
|
|
|
573
|
|
|
|
130
|
|
Commercial and industrial
|
|
|
444
|
|
|
|
444
|
|
|
|
80
|
|
Total impaired loans
|
|
$
|
2,714
|
|
|
$
|
2,714
|
|
|
$
|
310
|
|
The average net investment in impaired loans and interest income recognized and received on impaired loans as of December 31, 2016 and 2015 were as follows:
|
|
December
31, 2016
|
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Interest
Income
Received
|
|
|
|
(Dollars
in Thousands)
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
1,381
|
|
|
$
|
41
|
|
|
$
|
39
|
|
Secured by 1-4 family residential properties
|
|
|
232
|
|
|
|
14
|
|
|
|
14
|
|
Secured by multi-family residential properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
557
|
|
|
|
33
|
|
|
|
31
|
|
Commercial and industrial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
2,170
|
|
|
$
|
88
|
|
|
$
|
84
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
December 31, 2015
|
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Interest
Income
Received
|
|
|
|
(Dollars in
Thousands)
|
|
Loans secured by real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land loans
|
|
$
|
1,493
|
|
|
$
|
44
|
|
|
$
|
46
|
|
Secured by 1-4 family residential properties
|
|
|
139
|
|
|
|
14
|
|
|
|
14
|
|
Secured by multi-family
residential properties
|
|
|
1,892
|
|
|
|
—
|
|
|
|
—
|
|
Secured by non-farm, non-residential properties
|
|
|
3,329
|
|
|
|
35
|
|
|
|
36
|
|
Commercial and industrial
|
|
|
264
|
|
|
|
26
|
|
|
|
26
|
|
Total
|
|
$
|
7,117
|
|
|
$
|
119
|
|
|
$
|
122
|
|
Loans on which the
accrual of interest has been discontinued amounted to $2.4 million and $3.1 million as of December 31, 2016 and 2015, respectively. If interest on those loans had been accrued, there would have been $35 thousand and $0.1 million of interest accrued as of December 31, 2016 and 2015, respectively. Interest income related to these loans as of December 31, 2016 and 2015 was $4 thousand and $0.3 million, respectively.
Troubled Debt Restructurings:
Troubled debt restructurings include loans with respect to which concessions have been gra
nted 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. 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 December 31, 2016 and 2015, respectively, the Company had $0.1 million and $0.5 million of non-accruing loans that were previously restructured and that remained on non-accrual status. During the year ended December 31, 2016, the Company had $0.3 million in restructured loans that were restored to accrual status based on a sustained period of repayment performance. The Company had no such loans in 2015.
The following table provides the number of loans remaining in each loan category as of December
31, 2016 and 2015 that the Bank had previously modified in a troubled debt restructuring, as well as the pre- and post-modification principal balance as of each date.
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
Number of
Loans
|
|
|
Pre-
Modification
Outstanding
Principal
Balance
|
|
|
Post-
Modification
Principal
Balance
|
|
|
Number
of
Loans
|
|
|
Pre-
Modification
Outstanding
Principal
Balance
|
|
|
Post-
Modification
Principal
Balance
|
|
|
|
(Dollars in Thousands)
|
|
Loans secured by real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land development and other land
loans
|
|
|
2
|
|
|
$
|
1,960
|
|
|
$
|
1,286
|
|
|
|
3
|
|
|
$
|
2,220
|
|
|
$
|
1,698
|
|
Secured by 1-4 family residential properties
|
|
|
3
|
|
|
|
318
|
|
|
|
249
|
|
|
|
4
|
|
|
|
200
|
|
|
|
103
|
|
Secured by non-farm, non-residential properties
|
|
|
1
|
|
|
|
53
|
|
|
|
41
|
|
|
|
2
|
|
|
|
113
|
|
|
|
52
|
|
Commercial loans
|
|
|
2
|
|
|
|
116
|
|
|
|
88
|
|
|
|
2
|
|
|
|
116
|
|
|
|
94
|
|
Total
|
|
|
8
|
|
|
$
|
2,447
|
|
|
$
|
1,664
|
|
|
|
11
|
|
|
$
|
2,649
|
|
|
$
|
1,947
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
For those loans as of December 31, 2016 and 2015 that were previously modified in a troubled debt restructuring, no loans were identified that defaulted subsequent to modification as a troubled de
bt restructuring.
Restructured loan modifications primarily included maturity date extensions and payment schedule modifications. There were no modifications to principal balances of the loans that were rest
ructured. 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 impai
red 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 $15 thousand and $1 thousand as of December 31, 2016 and 2015, respectively.
5.
|
OTHER REAL ESTATE OWNED
|
Other real estate and certain other
assets acquired in foreclosure are reported at the lower of the investment in the loan or fair value of the property, less estimated costs to sell. The following table summarizes foreclosed property activity as of December 31, 2016 and 2015.
|
|
December
31, 2016
|
|
|
|
Bank
|
|
|
ALC
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Beginning balance
|
|
$
|
5,327
|
|
|
$
|
711
|
|
|
$
|
6,038
|
|
Transfers from loans
|
|
|
273
|
|
|
|
199
|
|
|
|
472
|
|
Sales proceeds
|
|
|
(1,016
|
)
|
|
|
(281
|
)
|
|
|
(1,297
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross gains
|
|
|
16
|
|
|
|
37
|
|
|
|
53
|
|
Gross losses
|
|
|
(77
|
)
|
|
|
(80
|
)
|
|
|
(157
|
)
|
Net gains (losses)
|
|
|
(61
|
)
|
|
|
(43
|
)
|
|
|
(104
|
)
|
Impairment
|
|
|
(170
|
)
|
|
|
(81
|
)
|
|
|
(251
|
)
|
Ending balance
|
|
$
|
4,353
|
|
|
$
|
505
|
|
|
$
|
4,858
|
|
|
|
December 31, 2015
|
|
|
|
Bank
|
|
|
ALC
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Beginning balance
|
|
$
|
6,997
|
|
|
$
|
738
|
|
|
$
|
7,735
|
|
Transfers from loans
|
|
|
2,013
|
|
|
|
360
|
|
|
|
2,373
|
|
Sales proceeds
|
|
|
(3,374
|
)
|
|
|
(164
|
)
|
|
|
(3,538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
gains
|
|
|
4
|
|
|
|
—
|
|
|
|
4
|
|
Gross losses
|
|
|
(269
|
)
|
|
|
(75
|
)
|
|
|
(344
|
)
|
Net gains (losses)
|
|
|
(265
|
)
|
|
|
(75
|
)
|
|
|
(340
|
)
|
Impairment
|
|
|
(44
|
)
|
|
|
(148
|
)
|
|
|
(192
|
)
|
Ending balance
|
|
$
|
5,327
|
|
|
$
|
711
|
|
|
$
|
6,038
|
|
Valuation adjustments are recorded in other non-interest expense and are primarily post-foreclosure write-downs that are a result of continued declining property values based on updated appraisals or other indications of value, such as offers to purchase.
Fair value less estimated cost to sell of foreclosed residential real estate held by the Company was $1.1 million and $1.2 million as of December 31, 2016 and 2015, respectively. In addition, the Company held $0.1 million and $0.2 million in consumer mortgage loans collateralized by residential real estate that were in the process of foreclosure as of December 31, 2016 and 2015, respectively.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6.
|
PREMISES AND EQUIPMENT
|
Premises and equipment and applicable depreciable lives are summarized as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in Thousands)
|
|
Land
|
|
$
|
5,053
|
|
|
$
|
2,197
|
|
Premises (40 years)
|
|
|
14,530
|
|
|
|
14,527
|
|
Furniture, fixtures, and equipment (3-7
years)
|
|
|
14,011
|
|
|
|
13,474
|
|
Total
|
|
|
33,594
|
|
|
|
30,198
|
|
Less accumulated depreciation
|
|
|
(19,490
|
)
|
|
|
(19,333
|
)
|
|
|
|
14,104
|
|
|
|
10,865
|
|
Construction in progress
|
|
|
4,236
|
|
|
|
1,219
|
|
Total
|
|
$
|
18,340
|
|
|
$
|
12,084
|
|
Depreciation
expense of $0.9 million and $0.8 million was recorded in 2016 and 2015, respectively.
7.
|
INVESTMENT IN LIMITED PARTNERSHIP
|
The Bank holds an investment in an affordable housing project for which it provides funding as a limited partner
and has received tax credits related to its investment in the project based on its partnership share. The net assets of the partnership consist primarily of apartment complexes, and the primary liabilities consist of those associated with the operation of the partnership. The Company has determined that this investment requires consolidation as a VIE under
ASC Topic 810, Consolidation
. The Company holds a 99.9% interest in the limited partnership. Assets recorded by the Company as a result of the consolidation were less than $0.1 million as of both December 31, 2016 and 2015.
As of December
31, 2016, the scheduled maturities of the Bank’s time deposits were as follows:
|
|
|
December 31, 2016
|
|
|
|
(Dollars in Thousands)
|
2017
|
|
$
|
124,412
|
|
2018
|
|
|
28,159
|
|
2019
|
|
|
8,350
|
|
2020
|
|
|
12,937
|
|
2021 and thereafter
|
|
|
11,173
|
|
Total
|
|
$
|
185,031
|
|
Total time deposits greater than $250 thousand totaled $35.8 million and $25.0 million as of December 31, 2016
and 2015, respectively. In addition, included in total deposits, the Company held brokered certificates of deposit totaling $14.0 million and $8.8 million as of December 31, 2016 and 2015, respectively. Deposits from related parties held by the Company amounted to $4.7 million and $4.6 million at December 31, 2016 and 2015, respectively.
Short-term borrowings consist of federal funds purchased, securities sold under repurchase agreements, and short-term Federal Home Loan Bank
(“FHLB”) advances with original maturities of one year or less. Short-term borrowings totaled $10.1 million and $7.4 million as of December 31, 2016 and 2015, respectively.
Federal funds purchased, which represent unsecured lines of credit that generally mature within one to four days, are availabl
e to the Bank through arrangements with correspondent banks and the Federal Reserve. As of both December 31, 2016 and 2015, there were no federal funds purchased outstanding, and the Bank had $18.8 million in available unused lines of credit with correspondent banks and the Federal Reserve.
FIRST US BA
NCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Securities sold under repurchase agreements, which are secured borrowings, generally are reflected at the amount of cash received in connection with the transaction. T
he 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 December 31, 2016 and 2015 totaled $0.1 million and $0.4 million, respectively.
Short-term FHLB advances are secured borrowings available to the Bank as an alternative funding source.
As of December 31, 2016, the Bank had $10.0 million in outstanding FHLB advances with original maturities of less than one year. As of December 31, 2015, the Bank had $7.0 million in outstanding FHLB advances with original maturities of less than one year.
The Company uses FHLB advances as an alternative to funding sources with similar maturities, such
as certificates of deposit or other deposit programs. These advances generally offer more attractive rates than other mid-term financing options. They are also flexible, allowing the Company to quickly obtain the necessary maturities and rates that best suit its overall asset/liability strategy. FHLB advances with an original maturity of more than one year are classified as long-term. The Company had long-term FHLB advances outstanding of $15.0 million and $5.0 million as of December 31, 2016 and 2015, respectively.
The following summarizes information concerning long-term FHLB advances and other borrowings:
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in Thousands)
|
|
Balance at year-end
|
|
$
|
15,000
|
|
|
$
|
5,000
|
|
Average balance during the year
|
|
|
12,404
|
|
|
|
4,178
|
|
Maximum month-end balance during the year
|
|
|
15,000
|
|
|
|
5,000
|
|
Average rate paid during the year
|
|
|
0.71
|
%
|
|
|
0.59
|
%
|
Weighted average remaining
maturity (in years)
|
|
|
0.67 years
|
|
|
|
1.33 years
|
|
Assets pledged associated with FHLB advances totaled $28.0 million and $14.0 million as of December 31, 2016 and 2015, respectively. As of December 31, 2016 and 2015, the Bank had $155.0 million and $152.5 million,
respectively, in remaining credit from the FHLB (subject to available collateral).
The consolidated provisions for income taxes for the years ended December
31, 2016 and 2015 were as follows:
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in
Thousands)
|
|
Federal
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
30
|
|
|
$
|
10
|
|
Deferred
|
|
|
103
|
|
|
|
835
|
|
|
|
|
133
|
|
|
|
845
|
|
State
|
|
|
|
|
|
|
|
|
Current
|
|
|
19
|
|
|
|
15
|
|
Deferred
|
|
|
17
|
|
|
|
91
|
|
|
|
|
36
|
|
|
|
106
|
|
Total
|
|
$
|
169
|
|
|
$
|
951
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The consolidated tax expense (benefit) differed from the amount computed by applying the federal statutory income tax rate of 34.0%, as described in the
following table:
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in Thousands)
|
|
Income tax expense at federal statutory rate
|
|
$
|
475
|
|
|
$
|
1,206
|
|
Increase (decrease) resulting from:
|
|
|
|
|
|
|
|
|
Tax-exempt interest
|
|
|
(217
|
)
|
|
|
(240
|
)
|
Bank-owned life
insurance
|
|
|
(106
|
)
|
|
|
(108
|
)
|
State income tax expense, net of federal income taxes
|
|
|
29
|
|
|
|
100
|
|
Other
|
|
|
(12
|
)
|
|
|
(7
|
)
|
Total
|
|
$
|
169
|
|
|
$
|
951
|
|
The tax effects of temporary differences that gave rise to significant portions of the
deferred tax assets and deferred tax liabilities as of December 31, 2016 and 2015 are presented below:
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in Thousands)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
1,792
|
|
|
$
|
1,395
|
|
Deferred
compensation
|
|
|
1,603
|
|
|
|
1,617
|
|
Deferred commissions and fees
|
|
|
268
|
|
|
|
165
|
|
Impairment of other real estate owned
|
|
|
742
|
|
|
|
924
|
|
Federal net operating loss carryforwards
|
|
|
3,121
|
|
|
|
3,591
|
|
State net operating loss carryforwards
|
|
|
184
|
|
|
|
231
|
|
Federal alternative minimum tax and general business
credits carryforwards
|
|
|
279
|
|
|
|
254
|
|
Unrealized loss on securities available-for-sale
|
|
|
872
|
|
|
|
—
|
|
Other
|
|
|
500
|
|
|
|
467
|
|
Total gross deferred tax assets
|
|
|
9,361
|
|
|
|
8,644
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Premises and equipment
|
|
|
327
|
|
|
|
411
|
|
Limited partnerships
|
|
|
132
|
|
|
|
106
|
|
Unrealized gain on securities available-for-sale
|
|
|
—
|
|
|
|
312
|
|
Cash flow hedges
|
|
|
127
|
|
|
|
—
|
|
Other
|
|
|
41
|
|
|
|
17
|
|
Total gross deferred tax liabilities
|
|
|
627
|
|
|
|
846
|
|
Net deferred tax asset, included in other
assets
|
|
$
|
8,734
|
|
|
$
|
7,798
|
|
As of December 31, 2016 and 2015, the Company had $3.6 million and $4.1 million related to federal and state net operating loss and tax credit carryforwards that can be used to offset income in future periods and reduce
income taxes payable in those future periods. The majority of these carryforwards will not begin to expire until 2032. The remaining net deferred tax assets, which totaled $5.2 million and $3.7 million as of December 31, 2016 and 2015, respectively, do not have an expiration date.
The Company
’s determination of the realization of net deferred tax assets at December 31, 2016 and 2015 was based on management’s assessment of all available positive and negative evidence. As of both December 31, 2016 and December 31, 2015, the Company was not in a three-year cumulative loss position. In addition, the Company has positive evidence supporting the realization of its net deferred tax assets as of December 31, 2016, including the reversal of taxable temporary differences, a strong history of earnings, and tax planning strategies, including the conversion of tax-exempt investments to taxable investments to generate future taxable income to prevent tax attributes, such as net operating losses, from expiring unutilized. Accordingly, a valuation allowance was not established as of December 31, 2016 or December 31, 2015.
The Company files a consolidated income tax return with the federal government and the State of Alabama. ALC files a Mississippi state income tax
return related to operations from its Mississippi offices. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and the states in which it files for the years ended December 31, 2013 through 2016.
As of
December 31, 2016, the Company had no unrecognized tax benefits related to federal or state income tax matters and does not anticipate any material increase or decrease in unrecognized tax benefits relative to any tax positions taken prior to
December
31, 2016. As of December 31, 2016, the Company had accrued no interest and no penalties related to uncertain tax positions.
FIRST U
S BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12.
|
EMPLOYEE
BENEFIT PLANS
|
The Company sponsors a 401(k) Plan (the "401(k) Plan")
. The 401(k) Plan allows participants to defer a portion of their compensation on a pre-tax basis, subject to the statutory annual contribution limit. For 2016 and 2015, the Company made “safe harbor” contributions on behalf of participants in the form of a match that was equal to 100% of each participant’s elective deferrals, up to a maximum of 4% of the participant’s eligible compensation. The 401(k) Plan also allows the Company to make discretionary matching contributions on behalf of participants equal to 2% of each participant’s elective deferrals. No discretionary match was made in 2016 or 2015. The Company’s matching contributions to the 401(k) Plan totaled $0.4 million in both 2016 and 2015.
Participants can elect to invest up to 20% of incoming contributions (measured at the time of investment) in the 401(k) Plan in the form of Company stock. The 410(k) Plan held 254,182
and 286,725 shares of Company stock as of December 31, 2016 and 2015, respectively. These shares are allocated to participants in the 401(k) Plan and, accordingly, are included in the earnings per share calculations.
13.
|
DEFERRED COMPENSATION
PLANS
|
The Bank has entered into supplemental retirement compensation benefits agreements with certain directors and executive officers. The measurement of the liability under these agreements includes estimates involving life expectancy, length of time before retirem
ent and the expected returns on the bank-owned life insurance policies used to fund those agreements. Should these estimates prove materially wrong, the cost of these agreements could change accordingly. The related deferred compensation obligation to these directors and executive officers included in other liabilities was $3.5 million and $3.6 million as of December 31, 2016 and 2015, respectively.
Non-employee directors may elect to defer payment of all or any portion of their Bancshares and Bank director fees
under Bancshares
’
Non-Employee Directors’ Deferred Compensation Plan (the “Deferral Plan”). The Deferral Plan, which was ratified by shareholders at the annual meeting held on May 11, 2004, permits non-employee directors to invest their directors’ fees and to receive the adjusted value of the deferred amounts in cash and/or shares of Bancshares’ common stock.
Neither Bancshares nor the Bank makes any contribution to participants
’ accounts under the Deferral Plan.
In accordance with the Company's 2013 Incentive Plan, stock option awards have been
granted to certain employees and non-employee directors. The awards were granted with an exercise price equal to the market price of the Company’s common stock on the date of the grant and have vesting periods ranging from one to three years, with 10-year contractual terms. In accordance with the 2013 Incentive Plan, shares of common stock available for distribution to satisfy share option exercises may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares re-aquired by the Company in any manner.
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.
|
|
2016
|
|
|
2015
|
|
|
|
|
|
Risk-free interest rate
|
|
|
1.58
|
%
|
|
|
1.52
|
%
|
Expected term
|
|
|
7.5 years
|
|
|
|
7.5 years
|
|
Expected stock price volatility
|
|
|
25.25
|
%
|
|
|
54.04
|
%
|
Dividend yield
|
|
|
1.50
|
%
|
|
|
1.50
|
%
|
The following table summarizes the Company's stock option activity for the periods presented.
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
Number of
Shares
|
|
|
Average
Exercise
Price
|
|
|
Number of
Shares
|
|
|
Average
Exercise
Price
|
|
Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, beginning of year
|
|
|
175,550
|
|
|
$
|
8.17
|
|
|
|
83,400
|
|
|
$
|
8.09
|
|
Granted
|
|
|
97,000
|
|
|
|
8.30
|
|
|
|
96,150
|
|
|
|
8.23
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
|
|
4,000
|
|
|
|
8.08
|
|
Options outstanding, end of year
|
|
|
272,550
|
|
|
$
|
8.21
|
|
|
|
175,550
|
|
|
$
|
8.17
|
|
Options exercisable, end of year
|
|
|
175,550
|
|
|
$
|
8.17
|
|
|
|
80,400
|
|
|
$
|
8.09
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Stock-based compensation expense related to stock options totaled $0.1 million and $0.3 million for the years ended December 31, 2016 and 2015, respectively.
The aggregate intrinsic value of stock options outstanding (calculated as the amount by which the market value of underlying stock exceeds the exercise price of the option) was approximately $0.5 million and $0.1 million as of December 31, 2016 and 2015, respectively.
15.
|
SHAREHOLDERS
’ EQUITY
|
Dividends are paid at the discretion of the Company
’s Board of Directors, based on the Company’s operating performance and financial position, including earnings, capital and liquidity. Dividends from the Bank are the Company’s primary source of funds for the payment of dividends to shareholders. In addition, federal and state regulatory agencies have the authority to prevent the Company from paying a dividend to shareholders. During each of the years ended December 31, 2016 and 2015, the Company declared dividends of $0.5 million, or $0.08 per share.
Regulatory Capital
As of January 1, 2015, the Bank was subject to revised capital requirements as described in the section captioned “
Capital Adequacy Guidelines” included in Part I, Item I of this report. Under the revised requirements, the Bank is subject to minimum risk-based capital and leverage capital requirements, which are administered by the federal bank regulatory agencies. These capital requirements, as defined by federal regulations, involve quantitative and qualitative measures of assets, liabilities and certain off-balance sheet instruments. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements of the Bank and Bancshares, and could impact Bancshares’ ability to pay dividends. Effective January 1, 2016, the Bank's minimum risk-based capital requirements include the year one phased-in capital conservation buffer of 0.625%. As of December 31, 2016, the Bank exceeded all applicable minimum capital standards. In addition, the Bank met applicable regulatory guidelines to be considered well-capitalized as of December 31, 2016. To be categorized in this manner, the Bank maintained common equity Tier 1 risk-based capital, Tier 1 risk-based capital, total risk-based capital and Tier 1 leverage ratios as set forth in the table below. In addition, the Bank was not subject to any written agreement, order or capital directive or prompt corrective action directive issued by its primary federal regulator to meet and maintain a specific level for any capital measures.
The following table provides the Bank
’s actual regulatory capital amounts and ratios under regulatory capital standards in effect (Basel III) at December 31, 2016 and December 31, 2015:
|
|
2016
|
|
|
|
Actual Regulatory Capital
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Minimum
Requirement
|
|
|
To Be Well
Capitalized
|
|
|
|
(Dollars in Thousands)
|
|
Common equity Tier 1 capital (to risk-weighted assets)
|
|
$
|
73,433
|
|
|
|
19.01
|
%
|
|
|
5.125
|
%
|
|
|
6.50
|
%
|
Tier 1 capital (to risk-weighted assets)
|
|
|
73,433
|
|
|
|
19.01
|
%
|
|
|
6.625
|
%
|
|
|
8.00
|
%
|
Total capital (to risk-weighted assets)
|
|
|
78,279
|
|
|
|
20.26
|
%
|
|
|
8.625
|
%
|
|
|
10.00
|
%
|
Tier 1 leverage (to average assets)
|
|
|
73,433
|
|
|
|
12.27
|
%
|
|
|
4.00
|
%
|
|
|
5.00
|
%
|
|
|
2015
|
|
|
|
Actual
Regulatory Capital
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Minimum
Requirement
|
|
|
To Be Well
Capitalized
|
|
|
|
(Dollars in Thousands)
|
|
Common equity Tier 1 capital (to risk-weighted assets)
|
|
$
|
71,887
|
|
|
|
22.19
|
%
|
|
|
4.50
|
%
|
|
|
6.50
|
%
|
Tier 1 capital (to risk-weighted assets)
|
|
|
71,887
|
|
|
|
22.19
|
%
|
|
|
6.00
|
%
|
|
|
8.00
|
%
|
Total capital (to risk-weighted assets)
|
|
|
75,668
|
|
|
|
23.35
|
%
|
|
|
8.00
|
%
|
|
|
10.00
|
%
|
Tier 1 leverage (to average assets)
|
|
|
71,887
|
|
|
|
13.02
|
%
|
|
|
4.00
|
%
|
|
|
5.00
|
%
|
No significant conditions or events have occurred since December 31, 2016 that management believes have affected the Bank
’s classification as “well capitalized.” Because of the size of the Company’s balance sheet, there is currently no requirement for separate reporting of capital amounts and ratios for Bancshares. Accordingly, such amounts and ratios are not included herein.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The FDIC
issued a final rule that took effect in 2016 that sets forth several sign
ificant proposed changes to the methodology for calculating deposit insurance assessments for banks with less than $10 billion in assets. Under the rule, the rate is determined based on a
number of factors, including the bank
’s CAMELS ratings, leverage ratio, net income, non-performing loan ratios, OREO ratios, core deposit ratios, one-year organic asset growth and a loan mix index. The CAMELS rating system is a supervisory rating system developed to classify a bank’s overall condition by taking into account capital adequacy, assets, management capability, earnings, liquidity and sensitivity to market and interest rate risk. The loan mix index component of the assessment model requires banks to calculate each of their loan categories as a percentage of assets and then multiply each category by a standardized historical charge-off rate percentage provided by the FDIC, with a higher index leading to a higher assessment rate. The proposal would implement maximum assessment rates for institutions with a composite CAMELS rating of 1 or 2 and minimum rates for institutions with a rating of 3, 4 or 5.
Dividend R
estrictions
Under applicable Delaware law, dividends may be paid only out of “
surplus,” defined as an amount equal to the present fair value of the total assets of the corporation, minus the present fair value of the total liabilities of the corporation, minus the capital of the corporation as determined in accordance with the Delaware General Corporation Law. In the event that there is no surplus, dividends may be paid out of the net profits of the corporation for the fiscal year in which the dividend is declared and/or the immediately preceding fiscal year. Dividends may not be paid, however, out of net profits of the corporation if the capital represented by the issued and outstanding stock of all classes having a preference on the distribution of assets is impaired. Further, it is the policy of the Federal Reserve that bank holding companies should pay dividends only out of current earnings and only if future retained earnings would be consistent with the company’s capital, asset quality and financial condition.
Since it has no significant independent sources of income, Bancshares
’ ability to pay dividends depends on its ability to receive dividends from the Bank. Under Alabama law, a state-chartered bank must annually transfer to surplus at least 10% of its “net earnings” (defined as the remainder of all earnings from current operations plus actual recoveries on loans and investments and other assets, less all current operating expenses, actual losses, accrued dividends on preferred stock, and all federal, state and local taxes) until the bank’s surplus is at least 20% of its capital. Until the bank’s surplus reaches this level, a bank may not declare a dividend in excess of 90% of its net earnings. Once a bank’s surplus equals or exceeds 20% of its capital, if the total of all dividends declared by the bank in a calendar year will exceed the sum of its net earnings for that year and its retained net earnings for the preceding two years (less any required transfers to surplus), then the bank must obtain prior written approval from the Superintendent of the Alabama State Banking Department. The bank may not pay any dividends or make any withdrawals or transfers from surplus without the prior written approval of the Superintendent. The FDIC prohibits the payment of cash dividends if (i) as a result of such payment, the bank would be undercapitalized or (ii) the bank is in default with respect to any assessment due to the FDIC, including a deposit insurance assessment. These restrictions could materially influence the Bank’s, and therefore Bancshares’, ability to pay dividends.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16.
|
DERIVATIVE FINANCIAL INSTRUMENTS
|
Derivatives Designated as Hedging Instruments
On April 1, 2016, the Bank entered into a forward interest rate swap contract on a variable rate FHLB advance (indexed to three-month LIBOR) with a total notional
amount of $10.0 million. The interest rate swap contract was designated as a derivative instrument in a cash flow hedge under
ASC Topic 815, Derivatives and Hedging,
with the objective of protecting the quarterly interest rate payments on the FHLB advance from the risk of variability of those payments resulting from changes in the three-month LIBOR interest rate throughout the seven-year period beginning on April 5, 2016 and ending on April 5, 2023. Under the swap arrangement, which became effective on April 5, 2016, the Bank will pay a fixed interest rate of 1.46% and receive a variable interest rate based on three-month LIBOR on the total notional amount of $10.0 million, with quarterly net settlements.
No ineffectiveness related to the interest rate swap de
signated as a cash flow hedge was recognized in the consolidated statements of operations for the year ended December 31, 2016. The accumulated net after-tax gain related to the effective cash flow hedge included in accumulated other comprehensive income totaled $0.2 million as of December 31, 2016.
Derivatives Not Designated as Hedging Instruments
In 2014, the Bank entered into three separate interest rate cap agreements to mit
igate risks associated with increases in interest rates on an aggregate notional amount of $40 million. The interest rate caps qualify as derivatives but were not designated as hedging instruments. Accordingly, changes in the fair value of the instruments are included in results of operations. Under the three agreements, the Company paid an up-front premium totaling approximately $0.1 million, in return for the ability to receive cash flows if interest rates rise above a strike rate indexed to three-month LIBOR. The agreements have contractual terms that mature at various dates in 2017. As of December 31, 2016, the strike rate had not been achieved on any of the three agreements, and accordingly, the Company has received no cash flows associated with the agreements. Since the inception of the agreements, on a quarterly basis, the Company has recorded the current fair value of the derivatives within other assets on the Company’s consolidated balance sheet, with changes in the fair value included in interest expense on the Company’s consolidated statements of operations. As of December 31, 2016, the fair value of each of the three derivative agreements was zero.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.” 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.
|
|
2016
|
|
|
|
Bank
|
|
|
ALC
|
|
|
All
Other
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Dollars in Thousands)
|
|
Total interest income
|
|
$
|
17,307
|
|
|
$
|
17,070
|
|
|
$
|
12
|
|
|
$
|
(4,234
|
)
|
|
$
|
30,155
|
|
Total interest expense
|
|
|
2,281
|
|
|
|
4,224
|
|
|
|
—
|
|
|
|
(4,234
|
)
|
|
|
2,271
|
|
Net interest income
|
|
|
15,026
|
|
|
|
12,846
|
|
|
|
12
|
|
|
|
—
|
|
|
|
27,884
|
|
Provision for loan losses
|
|
|
886
|
|
|
|
2,311
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,197
|
|
Net interest income after provision
|
|
|
14,140
|
|
|
|
10,535
|
|
|
|
12
|
|
|
|
—
|
|
|
|
24,687
|
|
Total non-interest income
|
|
|
3,810
|
|
|
|
1,190
|
|
|
|
817
|
|
|
|
(616
|
)
|
|
|
5,201
|
|
Total non-interest expense
|
|
|
17,837
|
|
|
|
9,588
|
|
|
|
1,686
|
|
|
|
(616
|
)
|
|
|
28,495
|
|
Income (loss) before income taxes
|
|
|
113
|
|
|
|
2,137
|
|
|
|
(857
|
)
|
|
|
—
|
|
|
|
1,393
|
|
Provision for income taxes
|
|
|
(185
|
)
|
|
|
738
|
|
|
|
(384
|
)
|
|
|
—
|
|
|
|
169
|
|
Net income (loss)
|
|
$
|
298
|
|
|
$
|
1,399
|
|
|
$
|
(473
|
)
|
|
$
|
—
|
|
|
$
|
1,224
|
|
Other significant items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
608,324
|
|
|
$
|
89,392
|
|
|
$
|
81,565
|
|
|
$
|
(172,389
|
)
|
|
$
|
606,892
|
|
Total investment securities
|
|
|
207,734
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
|
|
207,814
|
|
Total loans, net
|
|
|
315,152
|
|
|
|
85,530
|
|
|
|
—
|
|
|
|
(77,910
|
)
|
|
|
322,772
|
|
Investment in subsidiaries
|
|
|
5
|
|
|
|
—
|
|
|
|
75,941
|
|
|
|
(75,941
|
)
|
|
|
5
|
|
Fixed asset additions
|
|
|
7,858
|
|
|
|
33
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,891
|
|
Depreciation and amortization expense
|
|
|
759
|
|
|
|
207
|
|
|
|
—
|
|
|
|
—
|
|
|
|
966
|
|
Total interest income from external customers
|
|
|
13,083
|
|
|
|
17,071
|
|
|
|
1
|
|
|
|
—
|
|
|
|
30,155
|
|
Total interest income from affiliates
|
|
|
4,224
|
|
|
|
—
|
|
|
|
11
|
|
|
|
(4,235
|
)
|
|
|
—
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
2015
|
|
|
|
Bank
|
|
|
ALC
|
|
|
All
Other
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Dollars in Thousands)
|
|
Total interest income
|
|
$
|
17,398
|
|
|
$
|
16,312
|
|
|
$
|
11
|
|
|
$
|
(3,824
|
)
|
|
$
|
29,897
|
|
Total interest expense
|
|
|
2,299
|
|
|
|
3,814
|
|
|
|
—
|
|
|
|
(3,824
|
)
|
|
|
2,289
|
|
Net interest income
|
|
|
15,099
|
|
|
|
12,498
|
|
|
|
11
|
|
|
|
—
|
|
|
|
27,608
|
|
Provision (reduction in reserve) for loan losses
|
|
|
(1,559
|
)
|
|
|
1,775
|
|
|
|
—
|
|
|
|
—
|
|
|
|
216
|
|
Net interest income after provision (reduction in reserve)
|
|
|
16,658
|
|
|
|
10,723
|
|
|
|
11
|
|
|
|
—
|
|
|
|
27,392
|
|
Total non-interest income
|
|
|
3,675
|
|
|
|
934
|
|
|
|
501
|
|
|
|
(579
|
)
|
|
|
4,531
|
|
Total non-interest expense
|
|
|
17,571
|
|
|
|
9,909
|
|
|
|
1,476
|
|
|
|
(579
|
)
|
|
|
28,377
|
|
Income (loss) before income taxes
|
|
|
2,762
|
|
|
|
1,748
|
|
|
|
(964
|
)
|
|
|
—
|
|
|
|
3,546
|
|
Provision for income taxes
|
|
|
697
|
|
|
|
617
|
|
|
|
(363
|
)
|
|
|
—
|
|
|
|
951
|
|
Net income (loss)
|
|
$
|
2,065
|
|
|
$
|
1,131
|
|
|
$
|
(601
|
)
|
|
$
|
—
|
|
|
$
|
2,595
|
|
Other significant items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
577,292
|
|
|
$
|
85,887
|
|
|
$
|
82,292
|
|
|
$
|
(169,689
|
)
|
|
$
|
575,782
|
|
Total investment securities
|
|
|
231,122
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
|
|
231,202
|
|
Total loans, net
|
|
|
248,601
|
|
|
|
81,697
|
|
|
|
—
|
|
|
|
(74,866
|
)
|
|
|
255,432
|
|
Investment in subsidiaries
|
|
|
5
|
|
|
|
—
|
|
|
|
76,891
|
|
|
|
(76,891
|
)
|
|
|
5
|
|
Fixed asset additions
|
|
|
3,375
|
|
|
|
289
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,664
|
|
Depreciation and amortization expense
|
|
|
627
|
|
|
|
244
|
|
|
|
—
|
|
|
|
—
|
|
|
|
871
|
|
Total interest income from external customers
|
|
|
13,584
|
|
|
|
16,312
|
|
|
|
1
|
|
|
|
—
|
|
|
|
29,897
|
|
Total interest income from affiliates
|
|
|
3,814
|
|
|
|
—
|
|
|
|
10
|
|
|
|
(3,824
|
)
|
|
|
—
|
|
18.
|
OTHER OPERATING EXPENSES
|
Other operating expenses for the years 2016 and 2015 consisted of the following:
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in Thousands)
|
|
Fees for professional services
|
|
$
|
948
|
|
|
$
|
995
|
|
Postage, stationery
and supplies
|
|
|
725
|
|
|
|
753
|
|
Telephone/data communication
|
|
|
691
|
|
|
|
671
|
|
Advertising and marketing
|
|
|
281
|
|
|
|
308
|
|
Computer services
|
|
|
1,383
|
|
|
|
967
|
|
Collection and recoveries
|
|
|
337
|
|
|
|
367
|
|
Other services
|
|
|
322
|
|
|
|
398
|
|
Insurance expense
|
|
|
611
|
|
|
|
579
|
|
FDIC insurance and state assessments
|
|
|
421
|
|
|
|
462
|
|
Impairment of closed branches
|
|
|
120
|
|
|
|
—
|
|
Other
|
|
|
2,124
|
|
|
|
2,070
|
|
Total
|
|
$
|
7,963
|
|
|
$
|
7,570
|
|
The Company leases equipment and office space under noncancellable
operating leases and month-to-month rental agreements.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following is a schedule, by year, of future minimum rental payments required under op
erating leases having initial or remaining noncancellable terms in excess of one year as of December 31, 2016:
Year ending December 31,
|
|
Minimum
Rental Payments
|
|
|
|
(Dollars in Thousands)
|
|
2017
|
|
$
|
476
|
|
2018
|
|
|
400
|
|
2019
|
|
|
322
|
|
2020
|
|
|
252
|
|
2021
|
|
|
157
|
|
2022 and thereafter
|
|
|
319
|
|
Total rental expense under all operating leases was $0.8 million for both 2016 and 2015.
20.
|
GUARANTEES, COMMITMENTS AND CONTINGENCIES
|
The Bank
’s exposure to credit loss in the event of nonperformance by the other party for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making these commitments as it does for on-balance sheet instruments. For interest rate swap transactions and commitments to purchase or sell securities for forward delivery, the contract or notional amounts do not represent exposure to credit loss. The Bank controls the credit risk of these derivative instruments through credit approvals, limits and monitoring procedures. Certain derivative contracts have credit risk for the carrying value plus the amount to replace such contracts in the event of counterparty default. All of the Bank’s financial instruments are held for risk management and not for trading purposes. During the years ended December 31, 2016 and 2015, there were no credit losses associated with derivative contracts.
In the normal course of business, there are outstanding commitments and contingent liabilities, such as co
mmitments 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:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in Thousands)
|
|
Standby letters of credit
|
|
$
|
183
|
|
|
$
|
683
|
|
Commitments to extend credit
|
|
$
|
41,267
|
|
|
$
|
61,427
|
|
Standby letters of credit are contingent commitments issued by the Bank generally to guarantee the performance of a customer to a third party. The Bank has recourse against the customer for any amount that it is required to pay to
a third party under a standby letter of credit. Revenues are recognized over the lives of the standby letters of credit. As of December 31, 2016 and 2015, the potential amount of future payments that the Bank could be required to make under its standby letters of credit, which represents the Bank’s total credit risk in this category, is included in the table above.
A commitment to extend credit is an agreement to lend to a customer as long as there is no violation of any condition established in the contrac
t. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon the extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.
Commitments to purchase securities for delayed delivery require the Bank to purchase a specified security
at a specified price for delivery on a specified date. Similarly, commitments to sell securities for delayed delivery require the Bank to sell a specified security at a specified price for delivery on a specified date. Market risk arises from potential movements in security values and interest rates between the commitment and delivery dates. As of both December 31, 2016 and 2015, there were no outstanding commitments to purchase securities for delayed delivery and no outstanding commitments to sell securities for delayed delivery.
During the third quarter of 2016, the Bank entered into an agreement with a general contractor to manage construction of an office complex on a parcel of land located in the Birmingham, Alabama area that was purchased by the Bank during
the first quarter of 2016. The office complex, which will be approximately 40,000 square feet in size, will house a retail branch of the Bank, as well as the Bank’s commercial lending team in the Birmingham area and certain other officers of the Bank. Approximately 25% of the square footage of the office complex will be utilized by the Bank, with the remainder to be leased to commercial tenants. Construction began on the office complex during the third quarter of 2016 and is expected to be completed during 2017.
As of December 31, 2016, approximately $4.2 million in cost had been incurred by the Bank associated with the construction project. Remaining contractual commitments with the general contractor total $7.1 million.
In addition to current commitments to the general contractor, the Bank estimates additional expenditures of approximately $2.2 million will be incurred for office finishes, tenant improvements, furniture and fixtures, architectural fees and certain other development costs.
Additional expenses could be incurred under the agreement based on changes to building specifications at the discretion of the Bank and the occurrence of certain events specified in the contract. As costs associated with the construction are incurred, they are recorded in premises and equipment as construction in process. Upon completion of construction and placement of the office complex into service, depreciation expense associated with the office complex is currently estimated to be approximately $0.5 million annually.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Litigation
The Company is party to certain ordinary course litigation, and the Company intends to vigorously defend itself in all such litigation. In the opinion of the Company, based on review and consultation with legal counsel, the outcome of such ordinary course
litigation should not have a material adverse effect on the Company’s consolidated financial statements or results of operations.
21.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
The Company follows the provisions of
ASC Topic 820,
Fair Value Measurements and Disclosures
, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The assumptions used in the estimation of the fair value of the Company’s financial instruments are detailed below. The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather represent a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance.
Fair Value Hierarchy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. In determining fair value, the Comp
any uses various methods, including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
|
●
|
Level 1
— Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange or Nasdaq. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
|
|
|
|
|
●
|
Level 2
— Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.
|
|
|
|
|
●
|
Level 3
— Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.
|
The Company rarely transfers assets and liabilities measured at fair value between Level 1 and Level 2 measurements. Trading account assets and securities available-for-sale may be periodically transferred to or from Level 3 valu
ation 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 periods ended December 31, 2016 or 2015.
Fair Value Measurements on a Recurring Basis
Securities Available-for-Sale
Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include
exchange-traded equities. Level 2 securities include U.S. Treasury and agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset-backed and other securities. Level 2 fair values are obtained from quoted prices of securities with similar characteristics. In certain cases, where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.
Interest Rate Derivative Agreements
Interest rate derivative agreements are used by the Company to mitigate risk associated with changes in interest rates. The fair value of these agreements is based on information obtained from third-party financial institutions. This information is periodically evaluated by the Company and, as necessary, corroborated against other third-party valuations. The Company classifies these derivative assets within Level 2 of the valuation hierarchy.
FIRST U
S BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table presents
assets measured at fair value on a recurring basis as of December 31, 2016 and 2015. There were no liabilities measured at fair value on a recurring basis for either period presented.
|
|
Fair Value Measurements as of December 31, 2016 Using
|
|
|
|
Totals
At
December 31,
2016
|
|
|
Quoted
Prices in
Active
Markets
For
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
(Dollars in Thousands)
|
|
Investment securities, available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
98,409
|
|
|
$
|
—
|
|
|
$
|
98,409
|
|
|
$
|
—
|
|
Commercial
|
|
|
70,530
|
|
|
|
—
|
|
|
|
70,530
|
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
|
10,142
|
|
|
|
—
|
|
|
|
10,142
|
|
|
|
—
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
1,993
|
|
|
|
—
|
|
|
|
1,993
|
|
|
|
—
|
|
Corporate notes
|
|
|
756
|
|
|
|
—
|
|
|
|
756
|
|
|
|
—
|
|
U.S. Treasury securities
|
|
|
80
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
Other assets - derivatives
|
|
|
346
|
|
|
|
—
|
|
|
|
346
|
|
|
|
—
|
|
|
|
Fair Value Measurements as of December 31, 2015 Using
|
|
|
|
Totals
At
December 31,
2015
|
|
|
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
|
|
$
|
135,494
|
|
|
$
|
—
|
|
|
$
|
135,494
|
|
|
$
|
—
|
|
Commercial
|
|
|
45,509
|
|
|
|
—
|
|
|
|
45,509
|
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
|
14,998
|
|
|
|
—
|
|
|
|
14,998
|
|
|
|
—
|
|
Obligations of U.S. government-sponsored agencies
|
|
|
1,982
|
|
|
|
—
|
|
|
|
1,982
|
|
|
|
—
|
|
Corporate notes
|
|
|
780
|
|
|
|
—
|
|
|
|
780
|
|
|
|
—
|
|
U.S. Treasury securities
|
|
|
80
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
Other assets - derivatives
|
|
|
3
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
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.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OREO
OREO consists of properties obtained through foreclosure or in satisfaction of loans and is recorded at the lower of the loan
’s carrying amount or the fair value of the property, less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically significant unobservable inputs for determining fair value.
Other Assets
Included within other assets are certain assets that were formerly included as premises and equipment, but have been removed from service, and as of the balance sheet date, were designated as assets to be disposed of by sale. These include assets
associated with branches of the Bank that have been closed. When an asset is designated as held for sale, the Company ceases depreciation of the asset, and the asset is recorded at the lower of its carrying amount or fair value less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically unobservable inputs for determining fair value.
The following table presents the balances of impaired loans, OREO and other assets measured at fair value on a non-recurring basis as of December
31, 2016 and 2015.
|
|
Fair Value Measurements as of December 31, 2016 Using
|
|
|
|
Totals
At
December 31,
2016
|
|
|
Quoted
Prices in
Active
Markets For
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
(Dollars in Thousands)
|
|
Impaired loans
|
|
$
|
1,568
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,568
|
|
OREO
|
|
|
4,858
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,858
|
|
Other assets
|
|
|
280
|
|
|
|
—
|
|
|
|
—
|
|
|
|
280
|
|
|
|
Fair Value Measurements as of December 31, 2015 Using
|
|
|
|
Totals
At
December 31,
2015
|
|
|
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
|
|
$
|
2,350
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,350
|
|
OREO
|
|
|
6,038
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,038
|
|
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 December 31, 2016. 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 December 31, 2016 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
as
of
December
31,
2016
|
|
|
Valuation
Technique
|
|
|
Unobservable
Input
|
|
|
Quantitative
Range
of
Unobservable
Inputs
(Weighted
Average)
|
|
|
(Dollars in Thousands)
|
Impaired loans
|
|
$
|
1,568
|
|
|
Multiple data points, including discount to appraised value of collateral based on recent market activity
|
|
|
Appraisal comparability adjustment (discount)
|
|
|
9%
|
-
(9.5)%
|
10%
|
OREO
|
|
$
|
4,858
|
|
|
Discount to appraised value of property based on recent market activity for sales of similar properties
|
|
|
Appraisal comparability adjustment (discount)
|
|
|
9%
|
-
(9.5)%
|
10%
|
Other assets
|
|
$
|
280
|
|
|
Discount to appraised value of property based on recent market
activity for sales of
similar properties
|
|
|
Appraisal comparability adjustment (discount)
|
|
|
9%
|
-
(9.5)%
|
10%
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Impaired loans
Impaired loans are
valued based on multiple data points indicating the fair value for each loan. The primary data point is the appraisal value of the underlying collateral, to which a discount is applied. Management establishes this discount or comparability adjustment based on recent sales of similar property types. As liquidity in the market increases or decreases, the comparability adjustment and the resulting asset valuation are impacted.
OREO
OREO under a binding contract for sale is valued based on contract price. If no
sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet.
Other Assets
Assets designated as held for sale that are under a binding contract are valued based on the contract price. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet.
Fair Value of Financial Instruments
ASC Topic 825,
Financial Instruments
, requires disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:
Ca
sh, 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.
Derivativ
e instruments:
The fair value of derivative instruments is based on information obtained from a third-party financial institution. This information is periodically evaluated by the Company and, as necessary, corroborated against other third-party information.
Accrued interest receivable and payable:
The carrying amount of accrued interest approximates fair value.
Loans, net:
For variable-rate loans, fair values are based on carrying values. Fixed-rate commercial loans, other installment loans and certain real estate mortgage loans are valued using discounted cash flows. The discount rate used to determine the present value of these loans is based on interest rates currently being charged by the Company on comparable loans as to credit risk and term.
Demand a
nd 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 December 31, 2016 and 2015.
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.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The estimated fair value and related carrying or notional amounts, as well as the level within the fair value hierarchy, o
f the Company’s financial instruments as of December 31, 2016 and 2015 were as follows:
|
|
December 31, 2016
|
|
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
(Dollars in Thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
23,530
|
|
|
$
|
23,530
|
|
|
$
|
23,530
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Investment securities available-for-sale
|
|
|
181,910
|
|
|
|
181,910
|
|
|
|
—
|
|
|
|
181,910
|
|
|
|
—
|
|
Investment securities held-to-maturity
|
|
|
25,904
|
|
|
|
25,508
|
|
|
|
—
|
|
|
|
25,508
|
|
|
|
—
|
|
Federal Home Loan Bank stock
|
|
|
1,581
|
|
|
|
1,581
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,581
|
|
Loans, net of allowance for loan losses
|
|
|
322,772
|
|
|
|
319,881
|
|
|
|
—
|
|
|
|
—
|
|
|
|
319,881
|
|
Other assets - derivatives
|
|
|
346
|
|
|
|
346
|
|
|
|
—
|
|
|
|
346
|
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
497,556
|
|
|
|
497,037
|
|
|
|
—
|
|
|
|
497,037
|
|
|
|
—
|
|
Short-term borrowings
|
|
|
10,119
|
|
|
|
10,119
|
|
|
|
—
|
|
|
|
10,119
|
|
|
|
—
|
|
Long-term borrowings
|
|
|
15,000
|
|
|
|
14,998
|
|
|
|
—
|
|
|
|
14,998
|
|
|
|
—
|
|
|
|
December 31, 2015
|
|
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
(Dollars in Thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
44,072
|
|
|
$
|
44,072
|
|
|
$
|
44,072
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Investment securities available-for-sale
|
|
|
198,843
|
|
|
|
198,843
|
|
|
|
—
|
|
|
|
198,843
|
|
|
|
—
|
|
Investment securities held-to-maturity
|
|
|
32,359
|
|
|
|
32,184
|
|
|
|
—
|
|
|
|
32,184
|
|
|
|
—
|
|
Federal Home Loan Bank stock
|
|
|
1,025
|
|
|
|
1,025
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,025
|
|
Loans, net of allowance for loan losses
|
|
|
255,432
|
|
|
|
256,392
|
|
|
|
—
|
|
|
|
—
|
|
|
|
256,392
|
|
Other assets
– derivatives
|
|
|
3
|
|
|
|
3
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
479,258
|
|
|
|
478,833
|
|
|
|
—
|
|
|
|
478,833
|
|
|
|
—
|
|
Short-term borrowings
|
|
|
7,354
|
|
|
|
7,352
|
|
|
|
—
|
|
|
|
7,352
|
|
|
|
—
|
|
Long-term debt
|
|
|
5,000
|
|
|
|
4,977
|
|
|
|
—
|
|
|
|
4,977
|
|
|
|
—
|
|
22.
|
FIRST US BANCSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
|
Balance Sheets
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in Thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
Cash on deposit
|
|
$
|
226
|
|
|
$
|
150
|
|
Investment in subsidiaries
|
|
|
75,739
|
|
|
|
76,499
|
|
Other assets
|
|
|
285
|
|
|
|
381
|
|
Total assets
|
|
$
|
76,250
|
|
|
$
|
77,030
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
9
|
|
|
$
|
—
|
|
Shareholders
’ equity
|
|
|
76,241
|
|
|
|
77,030
|
|
Total liabilities and shareholders’ equity
|
|
$
|
76,250
|
|
|
$
|
77,030
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Statements of Operations
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in Thousands)
|
|
Income:
|
|
|
|
|
|
|
|
|
Dividend income, First US Bank
|
|
$
|
1,204
|
|
|
$
|
1,453
|
|
Total income
|
|
$
|
1,204
|
|
|
$
|
1,453
|
|
Expense
|
|
|
743
|
|
|
|
707
|
|
Gain before equity in undistributed income of
subsidiaries
|
|
$
|
461
|
|
|
$
|
746
|
|
Equity in undistributed income of subsidiaries
|
|
|
763
|
|
|
|
1,849
|
|
Net income
|
|
$
|
1,224
|
|
|
$
|
2,595
|
|
Statements of Cash Flows
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in Thousands)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,224
|
|
|
$
|
2,595
|
|
Adjustments to reconcile net income to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
Distributions in excess of undistributed income (loss) of
subsidiaries
|
|
|
(763
|
)
|
|
|
(1,849
|
)
|
Change in other assets and liabilities
|
|
|
98
|
|
|
|
(176
|
)
|
Net cash provided by operating activities
|
|
|
559
|
|
|
|
570
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(483
|
)
|
|
|
(484
|
)
|
Net cash used in financing
activities
|
|
|
(483
|
)
|
|
|
(484
|
)
|
Net increase in cash
|
|
|
76
|
|
|
|
86
|
|
Cash at beginning of year
|
|
|
150
|
|
|
|
64
|
|
Cash at end of year
|
|
$
|
226
|
|
|
$
|
150
|
|
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINA
NCIAL STATEMENTS (CONTINUED)
23.
|
QUARTERLY DATA (UNAUDITED)
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Fourth
Quarter
|
|
|
Third
Quarter
|
|
|
Second
Quarter
|
|
|
First
Quarter
|
|
|
Fourth
Quarter
|
|
|
Third
Quarter
|
|
|
Second
Quarter
|
|
|
First
Quarter
|
|
|
|
(Dollars in Thousands)
|
|
Interest
income
|
|
$
|
7,721
|
|
|
$
|
7,760
|
|
|
$
|
7,478
|
|
|
$
|
7,196
|
|
|
$
|
7,513
|
|
|
$
|
7,328
|
|
|
$
|
7,735
|
|
|
$
|
7,321
|
|
Interest expense
|
|
|
588
|
|
|
|
587
|
|
|
|
561
|
|
|
|
535
|
|
|
|
549
|
|
|
|
561
|
|
|
|
565
|
|
|
|
614
|
|
Net interest income
|
|
|
7,133
|
|
|
|
7,173
|
|
|
|
6,917
|
|
|
|
6,661
|
|
|
|
6,964
|
|
|
|
6,767
|
|
|
|
7,170
|
|
|
|
6,707
|
|
Provision (reduction in reserve) for loan
losses
|
|
|
1,814
|
|
|
|
680
|
|
|
|
536
|
|
|
|
167
|
|
|
|
415
|
|
|
|
(78
|
)
|
|
|
45
|
|
|
|
(166
|
)
|
Net interest income after provision
(reduction in reserve) for loan losses
|
|
|
5,319
|
|
|
|
6,493
|
|
|
|
6,381
|
|
|
|
6,494
|
|
|
|
6,549
|
|
|
|
6,845
|
|
|
|
7,125
|
|
|
|
6,873
|
|
Non-interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
1,165
|
|
|
|
1,567
|
|
|
|
1,480
|
|
|
|
989
|
|
|
|
1,176
|
|
|
|
996
|
|
|
|
1,068
|
|
|
|
1,291
|
|
Expense
|
|
|
6,826
|
|
|
|
7,348
|
|
|
|
7,255
|
|
|
|
7,066
|
|
|
|
7,203
|
|
|
|
7,090
|
|
|
|
7,107
|
|
|
|
6,977
|
|
Income (loss) before income taxes
|
|
|
(342
|
)
|
|
|
712
|
|
|
|
606
|
|
|
|
417
|
|
|
|
522
|
|
|
|
751
|
|
|
|
1,086
|
|
|
|
1,187
|
|
Provision for (benefit from) income taxes
|
|
|
(237
|
)
|
|
|
162
|
|
|
|
144
|
|
|
|
100
|
|
|
|
81
|
|
|
|
207
|
|
|
|
312
|
|
|
|
351
|
|
Net income (loss) after taxes
|
|
$
|
(105
|
)
|
|
$
|
550
|
|
|
$
|
462
|
|
|
$
|
317
|
|
|
$
|
441
|
|
|
$
|
544
|
|
|
$
|
774
|
|
|
$
|
836
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
|
|
$
|
(0.02
|
)
|
|
$
|
0.09
|
|
|
$
|
0.08
|
|
|
$
|
0.05
|
|
|
$
|
0.07
|
|
|
$
|
0.09
|
|
|
$
|
0.13
|
|
|
$
|
0.14
|
|
Diluted earnings (loss)
|
|
$
|
(0.02
|
)
|
|
$
|
0.09
|
|
|
$
|
0.07
|
|
|
$
|
0.05
|
|
|
$
|
0.07
|
|
|
$
|
0.09
|
|
|
$
|
0.12
|
|
|
$
|
0.13
|
|