First US Bancshares, Inc. Announces Third Quarter 2020 Results

Rhea-AI Summary

First US Bancshares reported a net income of $0.4 million for 3Q2020, unchanged from 2Q2020 but down from $1.1 million in 3Q2019. Year-to-date net income decreased to $1.7 million from $3.4 million in 2019. Total loans grew by 9.3% to $609.6 million, mainly due to indirect sales and commercial real estate lending. Despite a modest net interest income increase to $9.0 million, the net interest margin declined to 4.56%. The provision for loan losses rose to $1.0 million amid economic uncertainty, while non-performing assets decreased. The company declared a cash dividend of $0.03 per share.

Positive

• Total loans increased by 9.3%, reaching $609.6 million, driven by strong demand in indirect sales and commercial real estate lending.
• Net interest income rose to $9.0 million, indicating stable loan growth and asset management.
• Non-performing assets decreased to $4.0 million, improving asset quality.

Negative

• Net income for 3Q2020 remained flat compared to 2Q2020 and decreased significantly from 3Q2019.
• Provision for loan losses increased to $1.0 million due to economic uncertainties despite improving loan quality.
• Net interest margin fell to 4.56%, reflecting pressures from the interest rate environment.

BIRMINGHAM, Ala., Oct. 30, 2020 (GLOBE NEWSWIRE) -- First US Bancshares, Inc. (Nasdaq: FUSB) (the “Company”), the parent company of First US Bank (the “Bank”), today reported net income of $0.4 million, or $0.06 per diluted share, for the quarter ended September 30, 2020 (“3Q2020”), compared to $0.4 million, or $0.06 per diluted share, for the quarter ended June 30, 2020 (“2Q2020”) and $1.1 million, or $0.16 per diluted share, for the quarter ended September 30, 2019 (“3Q2019”). For the nine months ended September 30, 2020, the Company’s net income totaled $1.7 million, or $0.25 per diluted share, compared to $3.4 million, or $0.49 per diluted share, for the nine months ended September 30, 2019.

Net interest income improved to $9.0 million in 3Q2020, compared to $8.6 million in the previous quarter. The increase in net interest income was driven by significant loan growth during the quarter. Total loans averaged $609.6 million during 3Q2020, compared to $557.5 million during 2Q2020, an increase of $52.1 million, or 9.3%. The linked quarter growth in net interest income was partially offset by an increase in the provision for loan and lease losses in response to loan growth, as well as a modest reserve build in light of the current economic environment.

James F. House, President and CEO of the Company, stated, “We are pleased with the third quarter results, particularly in light of the challenging operating environment that we have experienced in 2020. The strong credit quality of our loan portfolio that has been built over the past several years has provided a solid footing that enables us to move forward in pursuing our loan growth initiatives. Our COVID-19-related payment deferments decreased to $18.4 million, or 2.9% of the loan portfolio, as of September 30, 2020, compared to $95.2 million, or 16.5% of the loan portfolio, as of June 30, 2020. In addition, we continue to gain insight as to the impact of the pandemic on our portfolio. As a result of the improving clarity and outlook, we were able to focus considerable effort during the quarter on loan growth, as well as our initiatives to reduce deposit costs, both of which should enhance earnings over time.”

Third Quarter 2020 Highlights

Loan Growth – Total loans increased by $61.1 million as of September 30, 2020 compared to June 30, 2020. The increase was most pronounced in indirect sales lending and commercial real estate lending, which grew by $35.4 million and $27.6 million, respectively, in 3Q2020, and the residential 1-4 family real estate portfolio also grew by $2.1 million in 3Q2020. The Company’s indirect sales portfolio is comprised of loans secured by collateral that generally includes recreational vehicles, campers, boats and horse trailers. Effective January 1, 2020, the portfolio was transferred to the Bank from Acceptance Loan Company, the Bank’s wholly owned subsidiary (“ALC”). During the COVID-19 pandemic, demand for this financing has grown substantially as consumers seek alternatives to more traditional travel and leisure activities. The growth in commercial real estate lending was focused on borrowers that management determined to be of appropriate credit quality and structure in the current environment under the Bank’s established underwriting criteria. Growth in indirect lending and commercial real estate lending was partially offset by decreases in the Bank’s commercial and industrial portfolio totaling $0.9 million, as well as a reduction in direct consumer lending, primarily through ALC’s branch system, that totaled $3.1 million during the quarter.

Net Interest Income – 3Q2020 net interest income increased by $0.3 million as a result of loan growth and the resulting shift of a portion of excess cash balances to higher-yielding assets. Net interest margin decreased nine basis points to 4.56% for 3Q2020, compared to 4.65% for 2Q2020. However, as a result of earning asset mix changes, combined with continued efforts to reduce deposit costs, reductions in net interest margin slowed in 3Q2020 compared to the previous quarter.

The interest rate environment precipitated by the pandemic has put significant pressure on our net interest margin, particularly in 2Q2020, as yields on interest-earning assets generally shifted downward more rapidly than rates on interest-bearing liabilities. During 3Q2020, management continued efforts to reprice deposit products in a manner consistent with the current environment. As a result of these efforts, the weighted average annualized rate paid for interest-bearing liabilities decreased to 0.68% for 3Q2020, compared to 0.80% for 2Q2020 and 1.16% for 3Q2019. Annualized total funding costs (including both interest-bearing and non-interest-bearing deposits and borrowings) decreased 10 basis points to 0.54% for 3Q2020, compared to 0.64% for 2Q2020 and 0.97% for 3Q2019. If the current interest rate environment continues, management expects to further reduce interest costs as interest-bearing liabilities continue to reprice.

Balance Sheet Growth – Total assets as of September 30, 2020 increased by $7.2 million, or 0.9%, compared to June 30, 2020. Liabilities experienced continued growth in 3Q2020 primarily due to deposit growth. Deposit growth during 2020 has reflected the impact of the pandemic on both business and consumer deposit holders, including preferences for liquidity, loan payment deferments, tax payment deferments, stimulus checks and lower consumer spending. Total deposits as of September 30, 2020 were $7.0 million, or 1.0%, higher than deposit balances as of June 30, 2020 and were $61.7 million, or 9.0%, higher than deposit balances as of December 31, 2019. Of the total year-to-date increase in deposits as of September 30, 2020, $40.2 million represented non-interest-bearing deposits, while $21.5 million were interest-bearing.

Loan Loss Provision – The ratio of net charge-offs to average loans was 0.19% annualized for 3Q2020, compared to 0.27% annualized for 2Q2020 and 0.28% annualized for 3Q2019. Although net charge-off experience improved, the Company’s provision for loan losses increased to $1.0 million in 3Q2020, compared to $0.9 million in both 2Q2020 and 3Q2019. The provision increase in 3Q2020 occurred primarily to reserve for the significant loan growth during the quarter, as well as a modest reserve build in light of the economic uncertainty that continues to exist related to the pandemic. Excluding loans originated under the Paycheck Protection Program (“PPP Loans”), which are guaranteed by the Small Business Administration (the “SBA”), the allowance as a percentage of total loans was 1.16% as of September 30, 2020, compared to 1.15% as of June 30, 2020 and 1.02% as of September 30, 2019.

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

Asset Quality – Non-performing assets, including loans in non-accrual status and other real estate owned (OREO), were $4.0 million as of September 30, 2020, compared to $4.8 million as of December 31, 2019. As a percentage of total assets, non-performing assets totaled 0.47% as of September 30, 2020, compared to 0.61% as of December 31, 2019.

Non-interest Income – Non-interest income totaled $1.4 million in 3Q2020, compared to $1.3 million in 2Q2020 and $1.4 million in 3Q2019. For both of the nine-month periods ended September 30, 2020 and 2019, non-interest income totaled $4.0 million.

Non-interest Expense – Non-interest expense totaled $8.7 million during 3Q2020, compared to $8.6 million during 2Q2020 and $8.5 million during 3Q2019. Non-interest expense totaled $25.8 million for the nine-month period ended September 30, 2020, compared to $25.5 million for the nine-month period ended September 30, 2019.

Cash Dividend – The Company declared a cash dividend of $0.03 per share on its common stock in each quarter of 2020, resulting in a dividend of $0.09 per share for the nine months ended September 30, 2020, compared to $0.06 per share for the nine months ended September 30, 2019.

Regulatory Capital – During 3Q2020, 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 September 30, 2020, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 11.71%. Its total capital ratio was 12.81%, and its Tier 1 leverage ratio was 9.08%.

Liquidity – As of September 30, 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.

COVID-19 Borrower Support Actions – Following the declaration of COVID-19 as a global pandemic in March 2020, the Company participated in a number of actions to support borrowers, including the origination of PPP Loans to deliver funding to small business owners, as well as processing loan payment deferments for consumer and business borrowers.

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, interest costs, growth and earnings potential, expansion and the Company’s positioning to handle the challenges presented by COVID-19, these factors include, but are not limited to, the rate of growth (or lack thereof) in the economy generally and in the Bank’s and ALC’s service areas; market conditions and investment returns; changes in interest rates; the impact of the current COVID-19 pandemic on the Company’s business, the Company’s customers, the communities that the Company serves and the United States economy, including the impact of actions taken by governmental authorities to try to contain the virus or address the impact of the virus on the United States economy (including, without limitation, the Coronavirus Aid, Relief and Economic Security (CARES) Act and subsequent federal legislation) and the resulting effect on the Company’s operations, liquidity and capital position and on the financial condition of the Company’s borrowers and other customers; the pending discontinuation of LIBOR as an interest rate benchmark; the availability of quality loans in the 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.

 

Contact:	Thomas S. Elley
	205-582-1200

 

FIRST US BANCSHARES, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA – LINKED QUARTERS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
	Quarter Ended																				Nine Months Ended
	2020												2019								2020				2019
	September 30,				June 30,				March 31,				December 31,				September 30,				September 30,				September 30,
Results of Operations:
Interest income	$	9,996			$	9,780			$	10,397			$	10,825			$	11,027			$	30,173			$	32,763
Interest expense		1,031				1,157				1,511				1,636				1,680				3,699				5,010
Net interest income		8,965				8,623				8,886				9,189				9,347				26,474				27,753
Provision for loan and lease losses		1,046				850				580				716				883				2,476				1,998
Net interest income after provision for loan and lease losses		7,919				7,773				8,306				8,473				8,464				23,998				25,755
Non-interest income		1,375				1,330				1,297				1,396				1,414				4,002				3,970
Non-interest expense		8,747				8,581				8,494				8,279				8,546				25,822				25,503
Income before income taxes		547				522				1,109				1,590				1,332				2,178				4,222
Provision for income taxes		136				118				262				381				214				516				865
Net income	$	411			$	404			$	847			$	1,209			$	1,118			$	1,662			$	3,357
Per Share Data:
Basic net income per share	$	0.07			$	0.07			$	0.13			$	0.19			$	0.17			$	0.27			$	0.52
Diluted net income per share	$	0.06			$	0.06			$	0.13			$	0.18			$	0.16			$	0.25			$	0.49
Dividends declared	$	0.03			$	0.03			$	0.03			$	0.03			$	0.02			$	0.09			$	0.06
Key Measures (Period End):
Total assets	$	852,941			$	845,747			$	788,565			$	788,738			$	771,930
Tangible assets (1)		844,439				837,142				779,850				779,913				762,996
Loans, net of allowance for loan losses		627,605				566,062				539,685				545,243				544,519
Allowance for loan and lease losses		7,185				6,423				5,954				5,762				5,585
Investment securities, net		93,405				103,964				110,079				108,356				114,309
Total deposits		745,336				738,290				682,595				683,662				677,640
Short-term borrowings		10,045				10,334				10,152				10,025				221
Total shareholders’ equity		85,658				85,281				84,332				84,748				83,790
Tangible common equity (1)		77,156				76,676				75,617				75,923				74,856
Book value per common share		13.87				13.81				13.73				13.76				13.47
Tangible book value per common share (1)		12.49				12.41				12.31				12.33				12.03
Key Ratios:
Return on average assets (annualized)		0.19	%			0.20	%			0.43	%			0.61	%			0.57	%			0.27	%			0.57	%
Return on average common equity (annualized)		1.91	%			1.91	%			4.02	%			5.68	%			5.28	%			2.61	%			5.45	%
Return on average tangible common equity (annualized) (1)		2.12	%			2.13	%			4.49	%			6.35	%			5.92	%			2.90	%			6.13	%
Net interest margin		4.56	%			4.65	%			4.97	%			5.12	%			5.23	%			4.72	%			5.20	%
Efficiency ratio (2)		84.6	%			86.2	%			83.4	%			78.2	%			79.4	%			84.7	%			80.4	%
Net loans to deposits		84.2	%			76.7	%			79.1	%			79.8	%			80.4	%
Net loans to assets		73.6	%			66.9	%			68.4	%			69.1	%			70.5	%
Tangible common equity to tangible assets (1)		9.14	%			9.16	%			9.70	%			9.73	%			9.81	%
Tier 1 leverage ratio (3)		9.08	%			9.36	%			9.46	%			9.61	%			9.55	%
Allowance for loan losses as % of loans (4)		1.13	%			1.12	%			1.09	%			1.05	%			1.02	%
Nonperforming assets as % of total assets		0.47	%			0.52	%			0.60	%			0.61	%			0.35	%

(1)  Refer to Non-GAAP reconciliation of tangible balances and measures beginning on page 11

(2)  Efficiency ratio = non-interest expense / (net interest income + non-interest income)

(3)  First US Bank Tier 1 leverage ratio

(4)  The allowance for loan losses as a % of loans excluding PPP Loans, which are guaranteed by the SBA, was 1.16% as of September 30, 2020

FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
THREE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Dollars in Thousands)
(Unaudited)
	Three Months Ended												Three Months Ended
	September 30, 2020												September 30, 2019
	Average Balance				Interest				Annualized Yield/ Rate %				Average Balance				Interest				Annualized Yield/ Rate %
ASSETS
Interest-earning assets:
Total Loans	$	609,609			$	9,557				6.24	%		$	538,294			$	10,114				7.45	%
Taxable investment securities		95,402				393				1.64	%			124,592				626				1.99	%
Tax-exempt investment securities		3,530				16				1.80	%			1,981				14				2.80	%
Federal Home Loan Bank stock		1,135				11				3.86	%			1,138				22				7.67	%
Federal funds sold		80				—				—				14,442				85				2.34	%
Interest-bearing deposits in banks		72,288				19				0.10	%			28,858				166				2.28	%
Total interest-earning assets		782,044				9,996				5.08	%			709,305				11,027				6.17	%
Non-interest-earning assets:
Other assets		68,424												72,414
Total	$	850,468											$	781,719
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Demand deposits	$	203,842			$	130				0.25	%		$	165,877			$	217				0.52	%
Savings deposits		161,699				147				0.36	%			157,822				389				0.98	%
Time deposits		226,269				717				1.26	%			241,433				1,016				1.67	%
Total interest-bearing deposits		591,810				994				0.67	%			565,132				1,622				1.14	%
Borrowings		10,252				37				1.44	%			10,166				58				2.26	%
Total interest-bearing liabilities (1)		602,062				1,031				0.68	%			575,298				1,680				1.16	%
Non-interest-bearing liabilities:
Demand deposits		153,112												111,845
Other liabilities		9,638												10,585
Shareholders’ equity		85,656												83,991
Total	$	850,468											$	781,719
Net interest income					$	8,965											$	9,347
Net interest margin										4.56	%											5.23	%

(1)   The annualized rate on total average funding costs, including total average interest-bearing liabilities and average non-interest-bearing demand deposits, was 0.54% and 0.97% for the three-month periods ended September 30, 2020 and 2019, respectively

FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Dollars in Thousands)
(Unaudited)
	Nine Months Ended												Nine Months Ended
	September 30, 2020												September 30, 2019
	Average Balance				Interest				Annualized Yield/ Rate %				Average Balance				Interest				Annualized Yield/ Rate %
ASSETS
Interest-earning assets:
Total Loans	$	571,881			$	28,433				6.64	%		$	521,304			$	29,620				7.60	%
Taxable investment securities		101,303				1,417				1.87	%			137,793				2,156				2.09	%
Tax-exempt investment securities		2,158				39				2.41	%			2,125				43				2.71	%
Federal Home Loan Bank stock		1,136				41				4.82	%			853				45				7.05	%
Federal funds sold		6,302				45				0.95	%			12,246				227				2.48	%
Interest-bearing deposits in banks		66,325				198				0.40	%			38,890				672				2.31	%
Total interest-earning assets		749,105				30,173				5.38	%			713,211				32,763				6.14	%
Non-interest-earning assets:
Other assets		71,594												71,834
Total	$	820,699											$	785,045
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Demand deposits	$	185,667			$	442				0.32	%		$	168,284			$	639				0.51	%
Savings deposits		161,026				605				0.50	%			163,981				1,309				1.07	%
Time deposits		232,824				2,553				1.46	%			246,961				3,004				1.63	%
Total interest-bearing deposits		579,517				3,600				0.83	%			579,226				4,952				1.14	%
Borrowings		10,201				99				1.30	%			3,574				58				2.17	%
Total interest-bearing liabilities (1)		589,718				3,699				0.84	%			582,800				5,010				1.15	%
Non-interest-bearing liabilities:
Demand deposits		136,052												110,291
Other liabilities		9,816

FAQ

What was First US Bancshares' net income for 3Q2020?

First US Bancshares reported a net income of $0.4 million for the third quarter of 2020.

How much did total loans increase in 3Q2020 for FUSB?

Total loans increased by 9.3% to $609.6 million in 3Q2020.

What was the net interest margin for FUSB in 3Q2020?

The net interest margin for FUSB decreased to 4.56% in 3Q2020.

What is the provision for loan losses reported by FUSB for 3Q2020?

The provision for loan losses increased to $1.0 million in 3Q2020.

What cash dividend did First US Bancshares declare in 2020?

First US Bancshares declared a cash dividend of $0.03 per share for each quarter of 2020.