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First US Bancshares, Inc. (FUSB)

NasdaqCM - NasdaqCM Real Time Price. Currency in USD
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11.670.00 (0.00%)
At close: 12:26PM EST
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  • S
    Sam
    FUSB is shutting down its ALC consumer lending unit and this could be my last post on FUSB.
    Even after I sold out in 2017, I looked at FUSB from time to time.
    This is one bank I knew for a decade and had some contact for as long.
    The much hoped for transformation did not go smoothly.
    FUSB has gradually migrated from the depressed rural base in the south toward Birmingham market where CEO James House cut his teeth in banking but he failed to penetrate that market. House also overpaid on the acquisition of The Peoples Bank.
    Then on-line consumer lenders finished off the only profitable ALC that kept the bank alive for the past 10 years.

    Perhaps there were factors out of their control but one simply can't explain away the low return on asset. From 2017ROA was 0.06%, 0.42%, 0.70%, 0.45%, and 0.52% for the first half of 2021. Which were less than 1/2 of peer averages.
    James House was coached by his professor Strickland to wiggle in a position that he'll be paid no matter how unprofitable the bank was.
    In all likelihood, the sad results would continue.
    Very sad for shareholders.
  • S
    Sam
    FUSB squandered the good years following the last recession.
    It’s consumer lending unit ALC had a quick turnaround. The community banking took forever to recover. The move to Tuscaloosa and setting new headquarter near Birmingham yield little benefit. FUSB overpaid for The Peoples Bank (Rose Hill VA) and was a flop. The acquired deposit shrank from $137 million to $86 million in two years. For years ALC was the only operation that kept it in black. Covid-19 May begin to cause losses.
    It dropped the ball and did not participate in PPP program.
    James House was amply paid for a terrible job but there seemed no pressure/incentives for him to do better.
    Tangible book value is barely over $10 per share. Shares are traded at $6.43. Cheap but given credit risk from consumer financing (ALC) and the low return—ROA 0.42% & 0.70% in the past two years—its not attractively priced.
  • S
    Sam
    Turning around?
    Revenue side did okay. Pretax, pre-provision in come adjusted for merger related and one-time settlement of derivatives contract was $1.8 million in 3Q18, $2.0 million in 2Q19, and $2.2 million in 3Q19.
    Provision remained stubbornly high at $789K, $715K, and $883K respectively.
    Given that auto loans are widely reported to have trouble would boat and RV loans be far behind?
    Bill Mitchell, the head of ALC unit saved ALC and carried the banking side for the past 10 years, was promoted upstairs, perhaps a way to retire him. Too, CEO James House did not buy any of the company's stock. Doesn't speak well for the bank's future.
    Shares are cheap. I may be a seller once it reaches book value of ~$12 per share.
  • b
    bagel l
    is anybody in this stock?
  • S
    Sam
    FUSB acquisition of The Peoples Bank(TPB), Rose Hill VA 90% cash/10% stocks.took stock and
    TPB is well run for its size. 4Q17 results included some one-time items. Adjusted for them, it would have reported a satisfactory 12% ROE.
    Tracy Thompson, CEO & Chair, along withTyler Thompson the principal shareholders.
    Tracy transformed TPB. He is to continue in the combined operation. I hope he will stay. Both Thompsons are bound by a five year non-compete.
    The last of its four branches was opened 9 years ago in Knoxville which now gathered more than half of its total deposits and headquarter.
    TPB supplies deposits and roughly $152 million loans which FUSB badly need.
    But price tag of 1.62 x book is somewhat high. IMO TPB got a good deal. We'll see how FUSB fare.
    There is also integration risk.
    After the merger FUSB will have its book value reduced to a bit over $11.
  • S
    Sam
    The Bank is barely profitable and is worth no more than its book value of $12.98 (currently $13.45) unless it has a brighter future.
    The rural southern cluster of branches surrounding Thomasville has been in stagnation since WWI. But local banks enjoyed protection from out of State competitions. The Riegle-Neal Act (1994) opened competition and prompted the merger of First Bank & Trust into United Security in 1997. The combination, First United Security Bank, now First US Bank formed the present day southern cluster but also had two branches in Bibb County, south of Birmingham and ALC.
    ALC grew with occasional set backs but became very profitable. (It also caused the most grievance in the great recession.)
    Loan demand back home was weak, making loans through the the two Bib County branches got it in hot water with the regulators. Community Reinvestment Act required the Bank to make the majority of its loans in the community where the deposits are collected. The Bank added branches to the north over time.
    Even the Southern flank of Birmingham and Tuscaloosa did not provide meaningful outlet for loans. The Bank did well primarily on ALC's earnings.
    The Bank made another push in Tuscaloosa and now Birmingham. These are tough markets to break in and may take years. At the mean time, ALC got its credit in line and is making money to support the banking side.
    FUSB is hopeful but far from finishing line.
  • S
    Sam
    Deferred Tax Asset of roughly $7 million should be written down by $2 million, which should reduce per share book value by around $0.3. The bank would no doubt try to book profits on its investments which won't be much.
    My guess is, after operating profit in 4Q17, book value will be lower than the $12.98 reported at end of 3Q17.
    $12.75 perhaps?
  • h
    hot
    Friends may come and go, but enemies accumulate. http://dataunion.tistory.com/19445 Musica est pulchra furva, etiam si non elit.
    X axis : Stocks Price Correlation Coefficient Y axis : Quantity of stocks 1,000 Day Parameter 2,926 NASDAQ Stocks Price Correlation Histogram Type Description 1. Zero Correlation Histogram - T..
    X axis : Stocks Price Correlation Coefficient Y axis : Quantity of stocks 1,000 Day Parameter 2,926 NASDAQ Stocks Price Correlation Histogram Type Description 1. Zero Correlation Histogram - T..
    dataunion.tistory.com
  • A
    Anonymous
    Musica est pulchra furva, etiam si non elit. http://dataunion.tistory.com/19445 Musica est pulchra furva, etiam si non elit.
    X axis : Stocks Price Correlation Coefficient Y axis : Quantity of stocks 1,000 Day Parameter 2,926 NASDAQ Stocks Price Correlation Histogram Type Description 1. Zero Correlation Histogram - T..
    X axis : Stocks Price Correlation Coefficient Y axis : Quantity of stocks 1,000 Day Parameter 2,926 NASDAQ Stocks Price Correlation Histogram Type Description 1. Zero Correlation Histogram - T..
    dataunion.tistory.com
  • S
    Sam
    The truth, just not the whole truth.
    10-K is out.
    The bank explained that this quarterly did not compare well against 3Q16 because 3Q16 benefitted from some one off gains.
    However, 10-K for 3Q16 did not mention such gains. It simply took credit for "improved operation" against 3Q15.
    !0-Q did present the facts. Just that few investors bother to read it.
  • S
    Sam
    The challenges of this bank.
    (I'll call the community banking side, the Bank, the consumer lending arm, ALC, together, the Subsidiaries, and the Parent, FUSB.)
    What's coming in:
    While portfolio loans continues to grow--not quite levered enough yet--loan yield at the Bank continued to drift downward, presumably to buy into the Birmingham market where it set its new headquarter. ALC also continued see it's interest rates drift downwards in exchange for better credit which I applaud. The Bank also charged (internally) a higher rate for providing the capital to ALC than it did before. The segment report on 10-Q unfairly reports lower ALC's bottom line which masked the lack of progress at the Bank.
    That lack of progress could be for a number of good reasons. The Bank is buying into Birmingham market with some discounted rates. (One can only hope that these new relations will stick after "teaser rates" expires.)
    At least a portion of overhead associated with opening a good sized main branch (Aug 01per FDIC) is probably expensed.
    Still I am left disappointed. Why?
    Bank analysts typically use pretax, pre-provision operating income(PTPP OI) as the gage for progress. With that measurement the Subsidiaries earned $1.354 million in 3Q17, $1.495 million in 2Q17, and $1.471 million in 3Q16. The bank continues to expense cost associated with bad asset (paying for past sins). These cost varies from quarter to quarter and are counted against income and distorts earning capacity. The true earning capacity can be better measured without such charge. PTPP OI before such charge would have been $1.583 million, $1.6741 million and 1.6345 million respectively. Once again illustrated the declining revenue stream.
  • S
    Sam
    3Q16 was sort of a disappointment. Banking side (FUSB) continued to making more loans but the increases are mostly municipal and commercial loans which carry low yield.
    Acceptance Loan Company's (ALC) loan yield is very high. I was hoping ALC would grow and earn more interest income but its loan port actually shrank. This was pretty much the result of (intentionally) running off its RE loan portfolio. I am glad ALC's consumer loan growth did not shrink going into the slow season. Growth usually resume in the Spring which is a long wait.
    FUSB is restricted to have no more than 20% to 25% of total loans in consumer lending (ALC). FDIC did not wish the FDIC insured deposit too exposed to financing business (ALC). The silver lining of this low yield loan growth is that with FUSB's overall loan growth ALC would have more capacity to grow.
    Overall T-1 is 12.36% which is not likely to go down, but loan-to-asset is only 52.85%. There is room for the loans to grow 30% from here which can potentially boost interest income by 2% of asset.
    (Overhead can improve. The Bank is shutting down two branches, more expenses can be trimmed. I am not counting on that yet.)
    Loan growth will come later. For now FUSB as a whole will have limited earning growth. My eyes are on the Spring.
  • S
    Sam
    2Q was a disappointment in terms of net. Loans grew substantially but too late in the quarter to make much difference. Too, the surge of loans demands higher provisions which was deducted from operating income. This reduced reported results.
    Loan demand in the Birmingham area continued to be strong so we should see marked improvement on the "banking side", i. e. First US Bank. Tuscaloosa could be flat due to slower auto manufacturing. C&I loan yield may continue to be low.
    ALC, the consumer financing unit, should have a solid quarter due mainly to seasonal factor but also stronger economy. ALC is more in Mobile AL. It, too, experienced a surge of loan production in June which should yield full quarter interest income in 3Q16.
    Looks like 3Q earnings should be $0.15 or better, doubling 2Q results.
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