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First US Bancshares, Inc. Announces First Quarter 2020 Results

First US Bancshares, Inc. Announces First Quarter 2020 Results

BIRMINGHAM, Ala., May 04, 2020 (GLOBE NEWSWIRE) -- First US Bancshares, Inc. (FUSB) (the “Company”), the parent company of First US Bank (the “Bank”), today reported net income of $0.8 million, or $0.13 per diluted share, for the quarter ended March 31, 2020, compared to $1.2 million, or $0.18 per diluted share, for both of the quarters ended December 31, 2019 and March 31, 2019.

“Our management team and employees are very focused right now on serving our customers during the global pandemic,” stated James F. House, President and CEO of the Company. “I am proud of their tireless efforts.  Due to the resiliency of our people, as well as the strength and stability of our balance sheet, I believe that we are well positioned to handle the challenges that we see ahead,” continued Mr. House.

First Quarter 2020 Highlights

Transfer of Indirect Loans – Effective January 1, 2020, the Company transferred a total of $45.5 million of its indirect loan portfolio from the Bank’s wholly-owned subsidiary, Acceptance Loan Company (“ALC”), to the Bank. The loans transferred include indirect sales lending relationships originated through prominent national or regional retailers that are managed by the Company on a centralized basis. The Company currently operates this lending in 11 states located in the southeastern United States. Management believes that the movement of this portfolio under the Bank’s brand will afford greater opportunity for growth and diversification of the portfolio over time.    

Net Interest Margin – Net interest margin was 4.97% for the first quarter of 2020, compared to 5.12% for the fourth quarter of 2019 and 5.17% for the first quarter of 2019. The reduction in net interest margin during the first quarter of 2020 resulted from the prevailing interest rate environment during the quarter, including the 150-basis point reduction in the federal funds rate in March that had an immediate impact on interest earned on the Company’s interest-bearing cash holdings. In response to the changing environment, during the quarter, management reduced rates paid on the majority of its deposit products. These efforts reduced total costs on interest-bearing liabilities during the quarter; however, interest-bearing assets repriced faster than interest-bearing liabilities. Should the interest rate environment hold in the near term, the Company expects to further reduce interest costs as interest-bearing liabilities continue to reprice.  

Asset Quality – Non-performing assets, including loans in non-accrual status and other real estate owned (OREO), were $4.7 million as of March 31, 2020 and $4.8 million as of December 31, 2019. As a percentage of total assets, non-performing assets totaled 0.60% as of March 31, 2020, compared to 0.61% as of December 31, 2019. 

Loan Loss Reserves and Provisioning The provision for loan and lease losses was $0.6 million during the first quarter of 2020, compared to $0.7 million during the fourth quarter of 2019 and $0.4 million during the first quarter of 2019.  Due to changing economic conditions as a result of the COVID-19 pandemic, the Company increased qualitative factors associated with macroeconomic conditions in its calculation of the allowance for loan and lease losses as of March 31, 2020.  The allowance as a percentage of total loans was 1.09% as of March 31, 2020, compared to 1.05% as of December 31, 2019 and 0.97% as of March 31, 2019.  Excluding acquired loans, which continue to be recorded net of  purchase discounts that management believes are adequate to absorb losses inherent in the portfolio, the allowance as a percentage of total loans was 1.31% as of March 31, 2020, compared to 1.29% as of December 31, 2019 and 1.34% as of March 31, 2019. Due to its classification as a smaller reporting company, the Company was not required to and did not adopt the Current Expected Credit Loss (CECL) model during the first quarter of 2020. Management believes that the allowance for loan and lease losses as of March 31, 2020, which was calculated under an incurred loss model, was sufficient to absorb losses in the Company’s loan portfolio based on circumstances existing as of the balance sheet date. However, the economic environment as a result of the COVID-19 pandemic continues to contain a significant level of uncertainty, and accordingly, management will continue to closely monitor the impact of changing economic circumstances on the Company’s loan portfolio.

Non-interest Income – Non-interest income totaled $1.3 million during the first quarter of 2020, compared to $1.4 million during the fourth quarter of 2019 and $1.3 million during the first quarter of 2019.

Non-interest Expense – Non-interest expense totaled $8.5 million during the first quarter of 2020, compared to $8.3 million during the fourth quarter of 2019 and $8.5 million during the first quarter of 2019.

Provision for Income Taxes – The Company recorded $0.3 million in income tax expense for the first quarter of 2020, compared to $0.4 million in both the fourth quarter of 2019 and the first quarter of 2019. For the quarter ended March 31, 2020, the Company’s effective tax rate was 23.6%, compared to 24.0% for the quarter ended December 31, 2019 and 22.1% for the quarter ended March 31, 2019.

Cash Dividend – The Company declared a cash dividend of $0.03 per share on its common stock in the first quarter of 2020, which is consistent with the Company’s quarterly dividend declaration for the fourth quarter of 2019. These quarters represented an increase over the Company’s quarterly dividend declarations of $0.02 in the first three quarters of 2019 and each quarter of 2018.

Share Repurchases – During the first quarter of 2020, the Company completed share repurchases totaling 38,604 shares of its $0.01 par value common stock at a weighted average price of $11.70 per share.  The shares were repurchased under the Company’s existing share repurchase program, which was originally approved by the Company’s Board of Directors in 2006. As of March 31, 2020, a total of 54,961 shares remained available for repurchase under the program.

Regulatory Capital – During the first quarter of 2020, the Bank continued to maintain capital ratios at higher levels than the ratios required to be considered a “well-capitalized” institution under applicable banking regulations. As of March 31, 2020, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 12.79%. Its total capital ratio was 13.81%, and its Tier 1 leverage ratio was 9.46%.

Liquidity – As of March 31, 2020, the Company continued to maintain excess funding capacity sufficient to provide adequate liquidity for loan growth, capital expenditures and ongoing operations. The Company benefits from a strong core deposit base, a liquid investment securities portfolio, and access to funding from a variety of sources, including federal funds lines, Federal Home Loan Bank advances and brokered deposits.

Impact of COVID-19 Pandemic and CARES Act

As a result of the COVID-19 pandemic, in March 2020, management implemented the Company’s Pandemic Contingency Plan (the “Plan”). The Plan includes activities designed to promote the safety and well-being of employees and customers, and to monitor the Company’s financial and business risks as a result of the pandemic.  The procedures implemented under the Plan include, but are not limited to:

  • Daily briefings with management and stakeholders to stay current on developments;
  • Increased monitoring and communications with loan and deposit customers;
  • Increased monitoring of the Company’s capital and liquidity positions;
  • Increased cleaning and sanitation of our facilities;
  • Additional communication to ensure that our robust suite of digital offerings are understood by customers;
  • Suspension of non-essential travel for our employees;
  • Implementation of social distancing protocols, including drive-thru only bank branch operations, and limitation of in-person meetings; and
  • Increased risk monitoring to ensure prudence in all of our management actions.

In accordance with the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020, the Company has implemented initiatives to provide opportunities to borrowers for short-term payment deferments.  In addition, subsequent to March 31, 2020, the Company has participated in funding loans under the Paycheck Protection Program administered by the Small Business Administration. 

About First US Bancshares, Inc.

First US Bancshares, Inc. is a bank holding company that operates banking offices in Alabama, Tennessee and Virginia through First US Bank. In addition, the Company’s operations include Acceptance Loan Company, Inc., a consumer loan company, and FUSB Reinsurance, Inc., an underwriter of credit life and credit accident and health insurance policies sold to the Bank’s and ALC’s consumer loan customers. The Company files periodic reports with the U.S. Securities and Exchange Commission (the “SEC”). Copies of its filings may be obtained through the SEC’s website at www.sec.gov or at www.firstusbank.com. More information about the Company and the Bank may be obtained at www.firstusbank.com. The Company’s stock is traded on the Nasdaq Capital Market under the symbol “FUSB.”

Forward-Looking Statements

This press release contains forward-looking statements, as defined by federal securities laws. Statements contained in this press release that are not historical facts are forward-looking statements. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. The Company undertakes no obligation to update these statements following the date of this press release, except as required by law. In addition, the Company, through its senior management, may make from time to time forward-looking public statements concerning the matters described herein. Such forward-looking statements are necessarily estimates reflecting the best judgment of the Company’s senior management based upon current information and involve a number of risks and uncertainties. Certain factors that could affect the accuracy of such forward-looking statements are identified in the public filings made by the Company with the SEC, and forward-looking statements contained in this press release or in other public statements of the Company or its senior management should be considered in light of those factors. Specifically, with respect to statements relating to the sufficiency of the allowance for loan and lease losses, loan demand, cash flows, growth and earnings potential, expansion and the Company’s positioning to handle the challenges presented by the novel coronavirus (COVID-19), these factors include, but are not limited to, the rate of growth (or lack thereof) in the economy generally and in the Bank’s and ALC’s service areas; market conditions and investment returns; changes in interest rates; the impact of the current COVID-19 pandemic on our business, our customers, the communities that we serve and the United States economy, including the impact of actions taken by governmental authorities to try to contain the virus or address the impact of the virus on the United States economy (including, without limitation, the CARES Act) and the resulting effect on our operations, liquidity and capital position and on the financial condition of our borrowers and other customers; the pending discontinuation of LIBOR as an interest rate benchmark; the availability of quality loans in the Bank’s and ALC’s service areas; the relative strength and weakness in the consumer and commercial credit sectors and in the real estate markets; collateral values; and cybersecurity threats. There can be no assurance that such factors or other factors will not affect the accuracy of such forward-looking statements.


FIRST US BANCSHARES, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA – LINKED QUARTERS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)

    Quarter Ended  
    2020     2019  
    March     December     September     June     March  
31, 31, 30, 30, 31,
Results of Operations:                                        
Interest income   $ 10,397     $ 10,825     $ 11,027     $ 10,923     $ 10,813  
Interest expense     1,511       1,636       1,680       1,690       1,640  
Net interest income     8,886       9,189       9,347       9,233       9,173  
Provision for loan and lease losses     580       716       883       715       400  
Net interest income after provision for loan     8,306       8,473       8,464       8,518       8,773  
  and lease losses
Non-interest income     1,297       1,396       1,414       1,291       1,265  
Non-interest expense     8,494       8,279       8,546       8,504       8,453  
Income before income taxes     1,109       1,590       1,332       1,305       1,585  
Provision for income taxes     262       381       214       300       351  
Net income   $ 847     $ 1,209     $ 1,118     $ 1,005     $ 1,234  
Per Share Data:                                        
Basic net income per share   $ 0.13     $ 0.19     $ 0.17     $ 0.16     $ 0.19  
Diluted net income per share   $ 0.13     $ 0.18     $ 0.16     $ 0.15     $ 0.18  
Dividends declared   $ 0.03     $ 0.03     $ 0.02     $ 0.02     $ 0.02  
Key Measures (Period End):                                        
Total assets   $ 788,565     $ 788,738     $ 771,930     $ 777,171     $ 795,334  
Tangible assets (1)     779,850       779,913       762,996       768,115       786,150  
Loans, net of allowance for loan losses     539,685       545,243       544,519       511,515       502,760  
Allowance for loan and lease losses     5,954       5,762       5,585       5,087       4,924  
Investment securities, net     110,079       108,356       114,309       136,649       148,025  
Total deposits     682,595       683,662       677,640       682,806       703,361  
Short-term borrowings     10,152       10,025       221       73        
Total shareholders’ equity     84,332       84,748       83,790       83,748       81,573  
Tangible common equity (1)     75,617       75,923       74,856       74,692       72,389  
Book value per common share     13.73       13.76       13.47       13.28       12.94  
Tangible book value per common share (1)     12.31       12.33       12.03       11.84       11.48  
Key Ratios:                                        
Return on average assets (annualized)     0.43 %     0.61 %     0.57 %     0.51 %     0.63 %
Return on average common equity     4.02 %     5.68 %     5.28 %     4.89 %     6.21 %
  (annualized)
Return on average tangible common equity     4.49 %     6.35 %     5.92 %     5.5 %     7.01 %
(annualized) (1)
Net interest margin     4.97 %     5.12 %     5.23 %     5.21 %     5.17 %
Efficiency ratio (2)     83.4 %     78.2 %     79.4 %     80.8 %     81 %
Net loans to deposits     79.1 %     79.8 %     80.4 %     74.9 %     71.5 %
Net loans to assets     68.4 %     69.1 %     70.5 %     65.8 %     63.2 %
Tangible common equity to tangible     9.7 %     9.73 %     9.81 %     9.72 %     9.21 %
assets (1)
Tier 1 leverage ratio (3)     9.46 %     9.61 %     9.55 %     9.43 %     9.22 %
Allowance for loan losses as % of loans     1.09 %     1.05 %     1.02 %     0.98 %     0.97 %
Nonperforming assets as % of total assets     0.6 %     0.61 %     0.35 %     0.35 %     0.39 %


(1)   Refer to Non-GAAP Financial Measures – Tangible Balances and Measures beginning on page 10
(2)   Efficiency ratio = non-interest expense / (net interest income + non-interest income)
(3)   First US Bank Tier 1 leverage ratio
 


FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Dollars in Thousands)
(Unaudited)

    Three Months Ended     Three Months Ended  
    March 31, 2020     March 31, 2019  
          Interest     Annualized           Interest     Annualized  
Average Yield/ Average Yield/
Balance  Rate % Balance  Rate %
ASSETS                                                
Interest-earning assets:                                                
Total Loans   $ 548,107     $ 9,639       7.07 %   $ 512,047     $ 9,673       7.66 %
Taxable investment securities     104,123       531       2.05 %     148,333       794       2.17 %
Tax-exempt investment securities     1,191       10       3.38 %     2,201       15       2.76 %
Federal Home Loan Bank stock     1,137       14       4.95 %     703       11       6.35 %
Federal funds sold     12,663       42       1.33 %     7,134       44       2.5 %
Interest-bearing deposits in banks     52,026       161       1.24 %     48,535       276       2.31 %
Total interest-earning assets     719,247       10,397       5.81 %     718,953       10,813       6.1 %
Non-interest-earning assets:                                                
Other assets     73,405                       69,871                  
Total   $ 792,652                     $ 788,824                  
                                                 
LIABILITIES AND SHAREHOLDERS EQUITY                                                
Interest-bearing liabilities:                                                
Demand deposits   $ 169,424     $ 175       0.42 %   $ 169,268     $ 206       0.49 %
Savings deposits     165,419       313       0.76 %     168,925       461       1.11 %
Time deposits     238,234       987       1.67 %     254,610       973       1.55 %
Total interest-bearing deposits     573,077       1,475       1.04 %     592,803       1,640       1.12 %
Borrowings     10,121       36       1.43 %     349              
Total interest-bearing liabilities     583,198       1,511       1.04 %     593,152       1,640       1.12 %
Non-interest-bearing liabilities:                                                
Demand deposits     114,239                       107,045                  
Other liabilities     10,494                       8,027                  
Shareholders’ equity     84,721                       80,600                  
Total   $ 792,652                     $ 788,824                  
                                                 
Net interest income           $ 8,886                     $ 9,173          
Net interest margin                     4.97 %                     5.17 %
                                                 


FIRST US BANCSHARES, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)

null
    March 31,     December 31,  
    2020     2019  
    (Unaudited)          
ASSETS                
Cash and due from banks   $ 13,219     $ 11,939  
Interest-bearing deposits in banks     42,902       45,091  
Total cash and cash equivalents     56,121       57,030  
Federal funds sold     15,080       10,080  
Investment securities available-for-sale, at fair value     96,541