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Revenue Growth – Increased first quarter earnings were driven by growth in revenue, including both interest and non-interest income, which increased on a combined basis by $0.5 million, or 6.0%, compared to the first quarter of 2016. The increase in interest income resulted from loan growth that occurred in 2016 primarily at the Company’s banking subsidiary, First US Bank (the “Bank”). Net loans totaled $317.7 million as of March 31, 2017, compared to $264.0 million as of March 31, 2016. The increase in non-interest income resulted from increases in credit insurance income at the Company’s finance company subsidiary, Acceptance Loan Company (ALC), as well as increases in service and other charges on deposit accounts at the Bank.

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Provision for Loan Loss – The revenue growth experienced by the Company during the first quarter of 2017 was partially offset by an increase in the Company’s provision for loan losses of $0.3 million, comparing the first quarter of 2017 to the first quarter of 2016. The increase resulted primarily from a negative provision of $0.3 million at the Bank during the first quarter of 2016 that was not repeated during the first quarter of 2017. Total provision expense, including both the Bank and ALC, was $0.5 million in the first quarter of 2017, compared to $0.2 million during the first quarter of 2016.

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Asset Quality Improvement – Non-performing assets, including loans in non-accrual status and other real estate owned, decreased to $6.8 million, or 1.10% of total assets, as of March 31, 2017, compared to $8.6 million, or 1.50% of total assets, as of March 31, 2016.

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Deposit Growth – Deposits, which represent the Company’s largest funding source, remained strong during the first quarter of 2017. Deposits totaled $509.1 million as of March 31, 2017, compared to $485.5 million as of March 31, 2016, an increase of 4.8% over the 12-month period.

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Pre-provision net interest income totaled $6.9 million in the first quarter of 2017, compared to $7.1 million in the prior quarter and $6.7 million in the first quarter of 2016. Net yield on interest-earning assets was 5.05% for the first quarter, compared to 5.17% for the prior quarter, and 5.10% during the first quarter of 2016. The reduction in net yield in the first quarter of 2017 resulted primarily from a mix-shift in loan composition at ALC away from traditional consumer loans to point-of-sale retail lending, which provides higher credit quality, but at reduced yield. This change in mix is generally more pronounced during the first quarter when ALC’s traditional consumer lending is typically lower than other quarters of the year. Yield on ALC’s loans was 19.11% during the first quarter of 2017, compared to 19.94% and 19.60% for the fourth and first quarters of 2016, respectively. At the Bank, yield on loans totaled 4.06% during the first quarter of 2017, compared to 4.02% and 4.47% during the fourth and first quarters of 2016, respectively. The decrease in the Bank’s yield compared to the first quarter of 2016 resulted primarily from continued efforts by management to adhere to lending practices designed to improve the credit quality of the Bank’s portfolio. The Company’s average cost of funds on deposits and borrowings was 0.54% during the first quarter of 2017, compared to 0.54% and 0.52% during the fourth and first quarters of 2016, respectively.

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The provision for loan losses was $0.5 million for the first quarter of 2017, compared to $1.8 million and $0.2 million for the fourth and first quarters of 2016, respectively. The allowance for loan losses as a percentage of loans was 1.51% as of March 31, 2017, compared to 1.48% as of December 31, 2016, and 1.26% as of March 31, 2016. Loan growth at the Bank was the primary driver in increasing the allowance for loan losses during 2016.

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Non-interest income totaled $1.2 million in both the first quarter of 2017 and the fourth quarter of 2016, compared to $1.0 million during the first quarter of 2016. The increase in the more recent quarters was the result of increases in credit insurance income on loans at ALC, as well as increased service charge income on deposit accounts at the Bank.

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Non-interest expense totaled $7.0 million in the first quarter of 2017, compared to $6.8 million and $7.1 million in the fourth and first quarters of 2016, respectively.

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Net loans totaled $317.7 million as of March 31, 2017, compared to $322.8 million as of December 31, 2016. The decrease included reductions of $4.3 million and $0.8 million at the Bank and ALC, respectively. The majority of the Bank’s reduction occurred in the non-farm, non-residential real estate portfolio and was due primarily to scheduled maturity of loans. The reduction in this category was partially offset by growth in the Bank’s real estate construction loan category.  ALC’s reduction occurred in its consumer and real estate portfolios.  A decrease in consumer loans at ALC is generally expected during the first quarter due to the seasonal nature of traditional consumer finance lending.  Real estate lending was previously discontinued at ALC as part of management’s efforts to improve credit quality.  Accordingly, ALC’s real estate portfolio is expected to decrease each quarter.  The reductions in these portfolio categories were partially offset by increases in ALC’s indirect sales portfolio during the quarter.

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As a result of the decrease in loan volume, excess funds were redeployed into the investment securities portfolio.  Investment securities totaled $213.5 million as of March 31, 2017, compared to $207.8 million as of December 31, 2016.  Investment securities serve to both enhance interest income and provide an additional source of liquidity available to fund loan growth and capital expenditures.  Management has structured the investment portfolio to provide cash flows through interest earned and the maturity or payoff of securities in the portfolio on a monthly basis.  In the current environment, it is expected that cash flows from the investment portfolio will continue to serve as a significant source of liquidity available for the funding of future loan growth.

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Liabilities increased to $542.5 million as of March 31, 2017, compared to $530.7 million as of December 31, 2016. The increase resulted from an increase in deposits of $11.5 million and an increase in short-term borrowings of $0.6 million. These increases were partially offset by a decrease in other liabilities of approximately $0.3 million. Deposits generated through the Bank’s branch system are considered the Company’s primary funding source to meet short- and long-term liquidity needs. Deposit levels fluctuate throughout the year based on seasonality, as well as specific circumstances impacting deposit customers. In addition to deposits, significant external sources of liquidity are available to the Bank, including access to funding through federal funds lines, Federal Home Loan Bank advances and brokered deposits.

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Shareholders’ equity increased to $77.3 million, or $12.77 per outstanding common share, as of March 31, 2017, compared to $76.2 million, or $12.62 per outstanding common share, as of December 31, 2016. The increase in shareholders’ equity resulted primarily from continued growth in retained earnings and increases in other comprehensive income resulting from changes in the fair value of investment securities available-for-sale.

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The Company declared a cash dividend of $0.02 per share on its common stock in the first quarter of 2017. This amount is consistent with the Company’s quarterly dividend declarations for each quarter of 2016.

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During the first quarter, the Bank continued to maintain capital ratios at higher levels than the ratios required to be considered a “well-capitalized” institution under applicable banking regulations. As of March 31, 2017, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 18.98%. Its total capital ratio was 20.23%, and its Tier 1 leverage ratio was 12.15%.