First US Bancshares, Inc. Reports Third Quarter 2021 Results

10/27, 10:30 PM (Source: GlobeNewswire)

BIRMINGHAM, Ala., Oct. 27, 2021 (GLOBE NEWSWIRE) -- First US Bancshares, Inc. (Nasdaq: FUSB) (the “Company”), the parent company of First US Bank (the “Bank”), today reported net income of $837 thousand, or $0.13 per diluted share, for the quarter ended September 30, 2021 (“3Q2021”), compared to $953 thousand, or $0.14 per diluted share, for the quarter ended June 30, 2021 (“2Q2021”) and $411 thousand, or $0.06 per diluted share, for the quarter ended September 30, 2020 (“3Q2020”). For the nine months ended September 30, 2021, the Company’s net income totaled $2.7 million, or $0.41 per diluted share, compared to $1.7 million, or $0.25 per diluted share, for the nine months ended September 30, 2020. Loan growth during 3Q2021 totaled $19.3 million, bringing year-to-date loan growth to $58.8 million, or 9.0%, for the nine months ended September 30, 2021.

Advancement of Strategic Initiatives

During 3Q2021, the Company made progress on strategic initiatives aimed at improving operating efficiency, focusing the Company’s loan growth activities, and fortifying asset quality. On September 3, 2021, the Bank’s wholly-owned subsidiary, Acceptance Loan Company, Inc. (“ALC”), ceased new business development and permanently closed its 20 branch lending locations in Alabama and Mississippi to the public. This initiative is expected to result in expense reduction beginning in the fourth quarter of 2021 (“4Q2021”), while at the same time focusing management’s efforts on growth in the Bank’s other loan portfolios.

In connection with the ALC branch closures, the Company recorded pre-tax charges of approximately $550 thousand during 3Q2021. These one-time expenses included severance and related personnel costs, lease termination costs, fixed asset valuation adjustments, termination of technology contracts, and other costs to administer the branch closures. The Company expects to incur approximately $500 thousand in additional expenses in the coming months primarily related to personnel expenses associated with one-time payments to ALC personnel that continue to manage the remaining loan portfolio, as well as expenses associated with the ultimate termination of ALC’s remaining branch leases. It is expected that the majority of the remaining one-time expenses will be incurred during 4Q2021 and the first quarter of 2022 and will be fully offset by ongoing cost savings that result from the closures.

In addition to the ALC branch closures, on September 3, 2021, four of the Bank’s previously existing banking offices were closed. The decision to close these banking offices was based on analysis of banking center activity, profitability and Community Reinvestment Act assessment. The closures included banking centers located in Bucksville, Columbiana and south Tuscaloosa, Alabama, as well as Ewing, Virginia.

“We are pleased that we have completed these major strategic initiatives, while at the same time posting loan growth and substantially improved year-over-year earnings,” stated James F. House, President and CEO of the Company. “We are continuing to transform our Company to an organization that can operate more efficiently with a focus on those lending areas that we believe will sustain our growth for many years to come,” continued Mr. House.

Other Third Quarter Financial Highlights

Loan Growth – The table below summarizes loan balances by portfolio category at the end of each of the most recent five quarters as of September 30, 2021.

  Quarter Ended 
  2021  2020 
  September
30,
  June
30,
  March
31,
  December
31,
  September
30,
 
    
  (Dollars in Thousands) 
  (Unaudited)  (Unaudited)  (Unaudited)      (Unaudited) 
Real estate loans:                    
Construction, land development and other land loans $58,175  $53,425  $48,491  $37,282  $35,472 
Secured by 1-4 family residential properties  73,112   78,815   82,349   88,856   95,147 
Secured by multi-family residential properties  51,420   53,811   54,180   54,326   49,197 
Secured by non-farm, non-residential properties  198,745   191,398   193,626   184,528   183,754 
Commercial and industrial loans  73,777   65,772   65,043   69,808   72,948 
Paycheck Protection Program ("PPP") loans  3,902   11,587   14,795   11,927   13,950 
Consumer loans:                    
Direct consumer  25,845   26,937   26,998   29,788   30,048 
Branch retail  29,764   31,688   31,075   32,094   33,145 
Indirect sales  194,154   176,116   153,940   141,514   125,369 
Total loans $708,894  $689,549  $670,497  $650,123  $639,030 
Less unearned interest, fees and deferred costs  3,729   4,067   3,792   4,279   4,240 
Allowance for loan and lease losses  8,193   7,726   7,475   7,470   7,185 
Net loans $696,972  $677,756  $659,230  $638,374  $627,605 
                     

Loan growth during 3Q2021 totaled $19.3 million, or an increase of 2.8%, compared to June 30, 2021. For the nine months ended September 30, 2021, total loan growth was $58.8 million, or 9.0%. Loan growth during 3Q2021 was distributed between indirect lending, real estate lending and commercial and industrial (“C&I”) lending, which totaled net growth of $18.0 million, $4.0 million and $8.0 million, respectively. For the nine months ended September 30, 2021, net loan growth in these same portfolios totaled $52.6 million, $16.4 million and $4.0 million, respectively. The indirect portfolio is focused on consumer loans secured by collateral that includes recreational vehicles, campers, boats, horse trailers and cargo trailers. Since the onset of the COVID-19 pandemic, the Bank has experienced substantial growth in indirect lending as consumers sought alternatives to more traditional travel and leisure activities. The Bank now operates indirect lending in a 12-state footprint primarily in the southeastern United States. The growth in the Bank’s real estate and C&I lending was indicative of continued growth in economic activity in larger metropolitan markets, primarily in the southeast, served by the Bank.

Consumer loans (excluding the indirect portfolio) include the direct consumer and branch retail categories, which consist primarily of loans at ALC. These portfolios will continue to decrease over time as loans held by ALC mature and are paid off. Direct consumer and branch retail loans decreased by $1.1 million and $1.9 million, respectively, during 3Q2021. Additionally, the Bank’s total loan balance in the Paycheck Protection Program (“PPP”) administered by the Small Business Administration (“SBA”) declined by $7.7 million during 3Q2021 as PPP loans continued to be forgiven by the SBA.

Net Interest Income and Margin – Due to earning asset growth, combined with continued reductions in interest expense, net interest income continued to improve during 3Q2021. Pre-provision net interest income increased by $23 thousand, or 0.2%, comparing 3Q2021 to 2Q2021, and by $370 thousand, or 4.1%, comparing 3Q2021 to 3Q2020. Year-to-date pre-provision net interest income as of September 30, 2021 exceeded the same period of 2020 by $1.2 million, or 4.7%. Margin compression remained a challenge for the Company during 3Q2021 due in part to the interest rate environment that has persisted since the onset of the COVID-19 pandemic. Net interest margin totaled 4.17% for 3Q2021, compared to 4.31% for 2Q2021 and 4.56% for 3Q2020. In addition to the prevailing interest rate environment, loan portfolio reductions in the higher-yielding direct consumer portfolio, coupled with significant influxes of investable cash through deposit growth, have also contributed to margin compression. Given this environment, management has continued to reprice deposit liabilities at lower rates upon maturity. Due to these repricing efforts, annualized average total funding costs decreased to 0.32% in 3Q2021, compared to 0.36% in 2Q2021 and 0.54% in 3Q2020.

Deposit Growth and Deployment of Funds – The Bank continued to experience growth in deposit balances during 3Q2021, a trend that has persisted since the onset of the pandemic. Total deposits increased by $9.0 million, or 1.1%, during 3Q2021. For the nine months ended September 30, 2021, total deposits increased by $64.6 million, or 8.3%. The deposit growth is consistent with general trends in commercial banking and reflects deposit-holder receipt of stimulus payments and preferences for liquidity. In the current interest rate environment, the increased deposit levels put additional pressure on net interest margin as excess funds are deployed into lower earning assets. Management remains focused on deploying investable cash balances into earning assets that meet the Company’s established credit standards, while maintaining appropriate levels of liquidity.

Loan Loss Provision – Loan loss provisioning during 3Q2021 increased by $0.1 million compared to 2Q2021 and decreased by $0.4 million compared to 3Q2020. The increase in provisioning compared to 2Q2021 was due to the increase in loan volume during 3Q2021, along with additional provisioning for ALC’s loan portfolios to account for the inherent uncertainty that may result from ALC’s branch closures. The decrease in provisioning compared to 3Q2020 was due primarily to overall improvement in the general economic outlook and reduction of uncertainty related to loans that could be impacted by the COVID-19 pandemic as compared to the previous year. During 2020, over 1,900 of the Company’s borrowers requested and were granted COVID-19 pandemic-related payment deferments. As of September 30, 2021, loans that continued to be in pandemic-related deferment totaled only $0.7 million, compared to $95.2 million as of June 30, 2020 in the early stages of the pandemic. The decrease in deferred loans over the past five quarters, combined with reductions in nonaccrual assets, is indicative of the strength of the credit quality within the portfolio. Although pandemic-related economic uncertainty continues to exist, management believes that the allowance for loan losses, 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 September 30, 2021. The Company will continue to closely monitor the impact of changing economic circumstances on the Company’s loan portfolio. Due to its classification as a smaller reporting company by the Securities and Exchange Commission, the Company is not required to adopt the Current Expected Credit Loss (CECL) model to account for credit losses until January 1, 2023. Management continues to evaluate the impact that the adoption of CECL will have on the Company’s financial statements.

Non-interest Income – Non-interest income was $0.9 million for 3Q2021, compared to $0.8 million for 2Q2021 and $1.4 million for 3Q2020. Comparing 3Q2021 to 3Q2020, approximately $0.2 million of the decrease resulted from reductions in secondary market mortgage revenues, while the remaining $0.3 million of the decrease resulted from gains on the sale of premises and equipment that occurred during 3Q2020 and were not repeated in 3Q2021. The reduction in secondary market mortgage fees resulted from the discontinuance of the Bank’s mortgage division that became effective in 4Q2020. Although the discontinuance resulted in a reduction in non-interest income, non-interest expense, primarily salaries and benefits, was reduced commensurately.

Non-interest Expense – Non-interest expense was $8.5 million for 3Q2021, compared to $8.4 million for 2Q2021 and $8.7 million for 3Q2020. The decreases in both latter quarters compared to 3Q2020 resulted primarily from reductions in salaries and employee benefits. The increase comparing 3Q2021 to 2Q2021 resulted primarily from the expenses associated with the ALC branch closures. Management remains focused on expense containment in the current environment.

Balance Sheet Growth – Total assets as of September 30, 2021 increased by $9.8 million, or 1.0%, compared to June 30, 2021, and increased by $103.8 million, or 12.2%, compared to September 30, 2020. Growth in deposits totaled $9.0 million, or 1.1%, in 3Q2021 from 2Q2021, and $101.5 million, or 13.6%, comparing 3Q2021 to 3Q2020. The deposit growth reflected the impact of the pandemic on both business and consumer deposit holders, including preferences for liquidity, loan payment deferments, tax payment deferments, government stimulus receipts and generally lower consumer spending. Of the total increase in deposits during 3Q2021, $0.7 million represented non-interest-bearing deposits, while $8.3 million were interest-bearing. The growth comparing September 30, 2021 to September 30, 2020 included $32.0 million in wholesale deposits that were acquired by the Bank at a weighted average total cost of 0.40% and had an initial weighted average term of 48 months. Along with interest rate swaps that the Company had previously put in place, the wholesale deposits serve to mitigate a portion of risk associated with rising interest rates. Wholesale funding also provides the Company with additional liquidity that enables management to continue its focus on reducing interest expense on core deposits.

Asset Quality – The Company’s non-performing assets, including loans in non-accrual status and other real estate owned (OREO), totaled $3.3 million as of September 30, 2021, compared to $2.1 million as of June 30, 2021 and $4.0 million as of September 30, 2020. The increase in 3Q2021 from 2Q2021 resulted primarily from banking centers that were closed during the quarter and reclassified into OREO. As a percentage of total assets, non-performing assets were 0.35% as of September 30, 2021, compared to 0.22% as of June 30, 2021 and 0.47% as of September 30, 2020.    

Cash Dividend – The Company declared a cash dividend of $0.03 per share on its common stock in the third quarter of 2021, which is consistent with the Company’s dividend declaration for the first and second quarters of 2021 and each quarter of 2020.

Regulatory Capital – During 3Q2021, the Bank continued to maintain capital ratios at higher levels than required to be considered a “well-capitalized” institution under applicable banking regulations. As of September 30, 2021, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 10.69%. Its total capital ratio was 11.78%, and its Tier 1 leverage ratio was 8.51%.

Liquidity – As of September 30, 2021, 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.

Subordinated Debt Issuance – Subsequent to 3Q2021, on October 1, 2021, the Company announced the completion of a private placement of $11.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes that will mature on October 1, 2031 (the “Notes”). The Notes will bear interest at a rate of 3.50% per annum for the first five years, then the interest rate will be reset quarterly to a benchmark interest rate per annum which, subject to certain conditions provided in the Notes, will be equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”) plus 275 basis points. The Company expects to use the remaining net proceeds for general corporate purposes, which may include the repurchase of the Company’s common stock, and to support organic growth plans, including the maintenance of capital ratios. Following receipt of the net proceeds of the Notes, the Company invested $5 million into capital surplus of the Bank.

About First US Bancshares, Inc.

First US Bancshares, Inc. (the “Company”) is a bank holding company that operates banking offices in Alabama, Tennessee and Virginia through First US Bank (the “Bank”). In addition, the Company’s operations include Acceptance Loan Company, Inc. (“ALC”), 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 Company’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 and protect against it, through vaccinations and otherwise, 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 Company’s service areas; the relative strength and weakness in the consumer and commercial credit sectors and in the real estate markets; collateral values; cybersecurity threats; and risks related to the Paycheck Protection Program. 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  Nine Months Ended 
  2021  2020  2021  2020 
  September
30,
  June
30,
  March
31,
  December
31,
  September
30,
  September
30,
  September
30,
 
Results of Operations:                            
Interest income $10,030  $10,059  $9,845  $10,204  $9,996  $29,934  $30,173 
Interest expense  695   747   781   912   1,031   2,223   3,699 
Net interest income  9,335   9,312   9,064   9,292   8,965   27,711   26,474 
Provision for loan and lease losses  618   498   401   469   1,046   1,517   2,476 
Net interest income after provision for loan
and lease losses
  8,717   8,814   8,663   8,823   7,919   26,194   23,998 
Non-interest income  896   809   951   1,008   1,375   2,656   4,002 
Non-interest expense  8,547   8,399   8,396   8,477   8,747   25,342   25,822 
Income before income taxes  1,066   1,224   1,218   1,354   547   3,508   2,178 
Provision for income taxes  229   271   268   309   136   768   516 
Net income $837  $953  $950  $1,045  $411  $2,740  $1,662 
Per Share Data:                            
Basic net income per share $0.13  $0.15  $0.15  $0.16  $0.07  $0.43  $0.27 
Diluted net income per share $0.13  $0.14  $0.14  $0.15  $0.06  $0.41  $0.25 
Dividends declared $0.03  $0.03  $0.03  $0.03  $0.03  $0.09  $0.09 
Key Measures (Period End):                            
Total assets $956,734  $946,946  $926,535  $890,511  $852,941         
Tangible assets (1)  948,592   938,719   918,216   882,101   844,439         
Loans, net of allowance for loan losses  696,972   677,756   659,230   638,374   627,605         
Allowance for loan and lease losses  8,193   7,726   7,475   7,470   7,185         
Investment securities, net  121,467   123,583   75,783   91,422   93,405         
Total deposits  846,842   837,885   818,043   782,212   745,336         
Short-term borrowings  10,037   10,017   10,017   10,017   10,045         
Total shareholders’ equity  89,597   88,778   87,917   86,678   85,658         
Tangible common equity (1)  81,455   80,551   79,598   78,268   77,156         
Book value per common share  14.41   14.28   14.15   14.03   13.87         
Tangible book value per common share (1)  13.10   12.96   12.81   12.67   12.49         
Key Ratios:                            
Return on average assets (annualized)  0.35%  0.41%  0.43%  0.48%  0.19%  0.39%  0.27%
Return on average common equity
(annualized)
  3.71%  4.32%  4.41%  4.82%  1.91%  4.14%  2.61%
Return on average tangible common equity
(annualized) (1)
  4.08%  4.76%  4.87%  5.34%  2.12%  4.57%  2.90%
Net interest margin  4.17%  4.31%  4.40%  4.59%  4.56%  4.29%  4.72%
Efficiency ratio (2)  83.5%  83.0%  83.8%  82.3%  84.6%  83.5%  84.7%
Net loans to deposits  82.3%  80.9%  80.6%  81.6%  84.2%        
Net loans to assets  72.8%  71.6%  71.2%  71.7%  73.6%        
Tangible common equity to tangible
assets (1)
  8.59%  8.58%  8.67%  8.87%  9.14%        
Tier 1 leverage ratio (3)  8.51%  8.60%  8.73%  8.98%  9.08%        
Allowance for loan losses as % of loans (4)  1.16%  1.13%  1.12%  1.16%  1.13%        
Nonperforming assets as % of total assets  0.35%  0.22%  0.37%  0.45%  0.47%        
Net charge-offs as a percentage of average loans  0.09%  0.15%  0.25%  0.11%  0.19%  0.16%  0.25%


(1)  Refer to Non-GAAP reconciliation of 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
(4)  The allowance for loan losses as a % of loans excluding PPP loans, which are guaranteed by the SBA, was 1.17% as of September 30, 2021.
 
 

FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Dollars in Thousands)
(Unaudited)

  Three Months Ended  Three Months Ended 
  September 30, 2021  September 30, 2020 
  Average
Balance
  Interest  Annualized
Yield/
Rate %
  Average
Balance
  Interest  Annualized
Yield/
Rate %
 
ASSETS                        
Interest-earning assets:                        
Total loans $691,435  $9,568   5.49% $609,609  $9,557   6.24%
Taxable investment securities  119,943   409   1.35%  95,402   393   1.64%
Tax-exempt investment securities  3,367   15   1.77%  3,530   16   1.80%
Federal Home Loan Bank stock  870   8   3.65%  1,135   11   3.86%
Federal funds sold  86         80       
Interest-bearing deposits in banks  73,490   30   0.16%  72,288   19   0.10%
Total interest-earning assets  889,191   10,030   4.48%  782,044   9,996   5.08%
Non-interest-earning assets:                        
Other assets  67,067           68,424         
Total $956,258          $850,468         
                         
LIABILITIES AND SHAREHOLDERS’ EQUITY                        
Interest-bearing liabilities:                        
Demand deposits $239,188  $141   0.23% $203,842  $130   0.25%
Savings deposits  208,187   160   0.30%  161,699   147   0.36%
Time deposits  223,988   351   0.62%  226,269   717   1.26%
Total interest-bearing deposits  671,363   652   0.39%  591,810   994   0.67%
Borrowings  10,032   43   1.70%  10,252   37   1.44%
Total interest-bearing liabilities (1)  681,395   695   0.40%  602,062   1,031   0.68%
Non-interest-bearing liabilities:                        
Demand deposits  176,102           153,112         
Other liabilities  9,158           9,638         
Shareholders’ equity  89,603           85,656         
Total $956,258          $850,468         
                         
Net interest income     $9,335          $8,965     
Net interest margin          4.17%          4.56%
                         


(1)   The annualized rate on total average funding costs, including total average interest-bearing liabilities and average non-interest-bearing demand deposits, was 0.32% and 0.54% for the three-month periods ended September 30, 2021 and 2020, respectively.
 
 

FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Dollars in Thousands)
(Unaudited)

  Nine Months Ended  Nine Months Ended 
  September 30, 2021  September 30, 2020 
  Average
Balance
  Interest  Annualized
Yield/

Rate %
  Average
Balance
  Interest  Annualized
Yield/

Rate %
 
ASSETS                        
Interest-earning assets:                        
Total loans $672,807  $28,726   5.71% $571,881  $28,433   6.64%
Taxable investment securities  100,245   1,059   1.41%  101,303   1,417   1.87%
Tax-exempt investment securities  3,464   47   1.81%  2,158   39   2.41%
Federal Home Loan Bank stock  948   25   3.53%  1,136   41   4.82%
Federal funds sold  84         6,302   45   0.95%
Interest-bearing deposits in banks  86,632   77   0.12%  66,325   198   0.40%
Total interest-earning assets  864,180   29,934   4.63%  749,105   30,173   5.38%
Non-interest-earning assets:                        
Other assets  68,041           71,594         
Total $932,221          $820,699         
                         
LIABILITIES AND SHAREHOLDERS’ EQUITY                        
Interest-bearing liabilities:                        
Demand deposits $233,329  $425   0.24% $185,667  $442   0.32%
Savings deposits  190,296   453   0.32%  161,026   605   0.50%
Time deposits  230,986   1,222   0.71%  232,824   2,553   1.46%
Total interest-bearing deposits  654,611   2,100   0.43%  579,517   3,600   0.83%
Borrowings  10,022   123   1.64%  10,201   99   1.30%
Total interest-bearing liabilities (1)  664,633   2,223   0.45%  589,718   3,699   0.84%
Non-interest-bearing liabilities:                        
Demand deposits  169,780           136,052         
Other liabilities  9,288           9,816         
Shareholders’ equity  88,520           85,113         
Total $932,221          $820,699         
                         
Net interest income     $27,711          $26,474     
Net interest margin          4.29%          4.72%
                         

(1)   The annualized rate on total average funding costs, including total average interest-bearing liabilities and average non-interest-bearing demand deposits, was 0.36% and 0.68% for the nine-month periods ended September 30, 2021 and 2020, respectively.

FIRST US BANCSHARES, INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)

  September 30,  December 31, 
  2021  2020 
  (Unaudited)     
ASSETS        
Cash and due from banks $15,219  $12,235 
Interest-bearing deposits in banks  60,041   82,180 
Total cash and cash equivalents  75,260   94,415 
Federal funds sold  82   85 
Investment securities available-for-sale, at fair value  117,560   84,993 
Investment securities held-to-maturity, at amortized cost  3,907   6,429 
Federal Home Loan Bank stock, at cost  870   1,135 
Loans and leases, net of allowance for loan and lease losses of $8,193 and
$7,470, respectively
  696,972   638,374 
Premises and equipment, net of accumulated depreciation of $22,276
and $23,774, respectively
  25,445   28,206 
Cash surrender value of bank-owned life insurance  16,066   15,846 
Accrued interest receivable  2,592   2,807 
Goodwill and core deposit intangible, net  8,142   8,410 
Other real estate owned  2,373   949 
Other assets  7,465   8,862 
Total assets $956,734  $890,511 
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Deposits:        
Non-interest-bearing $175,386  $151,935 
Interest-bearing  671,456   630,277 
Total deposits  846,842   782,212 
Accrued interest expense  183   292 
Other liabilities  10,075   11,312 
Short-term borrowings  10,037   10,017 
Total liabilities  867,137   803,833 
         
Shareholders’ equity:        
Common stock, par value $0.01 per share, 10,000,000 shares authorized;
7,634,918 and 7,596,351 shares issued, respectively; 6,218,126 and 6,176,556
shares outstanding, respectively
  75   75 
Additional paid-in capital  14,051   13,786 
Accumulated other comprehensive income (loss), net of tax  369   (52)
Retained earnings  96,903   94,722 
Less treasury stock: 1,416,792 and 1,419,795 shares at cost, respectively  (21,801)  (21,853)
Total shareholders’ equity  89,597   86,678 
         
Total liabilities and shareholders’ equity $956,734  $890,511 
         

FIRST US BANCSHARES, INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)

  Three Months Ended  Nine Months Ended 
  September 30,  September 30, 
  2021  2020  2021  2020 
                 
Interest income:                
Interest and fees on loans $9,568  $9,557  $28,726  $28,433 
Interest on investment securities  462   439   1,208   1,740 
Total interest income  10,030   9,996   29,934   30,173 
                 
Interest expense:                
Interest on deposits  652   994   2,100   3,600 
Interest on borrowings  43   37   123   99 
Total interest expense  695   1,031   2,223   3,699 
                 
Net interest income  9,335   8,965   27,711   26,474 
                 
Provision for loan and lease losses  618   1,046   1,517   2,476 
                 
Net interest income after provision for loan and lease losses  8,717   7,919   26,194   23,998 
                 
Non-interest income:                
Service and other charges on deposit accounts  271   298   777   995 
Net gain on sales and prepayments of investment securities        22   326 
Mortgage fees from secondary market     196   23   499 
Lease income  208   206   619   630 
Other income, net  417   675   1,215   1,552 
Total non-interest income  896   1,375   2,656   4,002 
                 
Non-interest expense:                
Salaries and employee benefits  5,045   5,138   14,951   15,467 
Net occupancy and equipment  1,259   1,078   3,318   3,074 
Computer services  461   470   1,411   1,311 
Fees for professional services  292   325   1,003   1,004 
Other expense  1,490   1,736   4,659   4,966 
Total non-interest expense  8,547   8,747   25,342   25,822 
                 
Income before income taxes  1,066   547   3,508   2,178 
Provision for income taxes  229   136   768   516 
Net income $837  $411  $2,740  $1,662 
Basic net income per share $0.13  $0.07  $0.43  $0.27 
Diluted net income per share $0.13  $0.06  $0.41  $0.25 
Dividends per share $0.03  $0.03  $0.09  $0.09 
                 

Non-GAAP Financial Measures

In addition to the financial results presented in this press release that have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company’s management believes that certain non-GAAP financial measures and ratios are beneficial to the reader. These non-GAAP measures have been provided to enhance overall understanding of the Company’s current financial performance and position. Management believes that these presentations provide meaningful comparisons of financial performance and position in various periods and can be used as a supplement to the GAAP-based measures presented in this press release. The non-GAAP financial results presented should not be considered a substitute for the GAAP-based results. Management believes that both GAAP measures of the Company’s financial performance and the respective non-GAAP measures should be considered together.

The non-GAAP measures and ratios that have been provided in this press release include measures of tangible assets and equity and certain ratios that include tangible assets and equity. Discussion of these measures and ratios is included below, along with reconciliations of such non-GAAP measures to GAAP amounts included in the financial statements previously presented in this press release.

Tangible Balances and Measures

In addition to capital ratios defined by GAAP and banking regulators, the Company utilizes various tangible common equity measures when evaluating capital utilization and adequacy. These measures, which are presented in the financial tables in this press release, may also include calculations of tangible assets. As defined by the Company, tangible common equity represents shareholders’ equity less goodwill and identifiable intangible assets, while tangible assets represent total assets less goodwill and identifiable intangible assets.

Management believes that the measures of tangible equity are important because they reflect the level of capital available to withstand unexpected market conditions. In addition, presentation of these measures allows readers to compare certain aspects of the Company’s capitalization to other organizations. In management’s experience, many stock analysts use tangible common equity measures in conjunction with more traditional bank capital ratios to compare capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets that typically result from the use of the purchase accounting method in accounting for mergers and acquisitions.

These calculations are intended to complement the capital ratios defined by GAAP and banking regulators. Because GAAP does not include these measures, management believes that there are no comparable GAAP financial measures to the tangible common equity ratios that the Company utilizes. Despite the importance of these measures to the Company, there are no standardized definitions for the measures, and, therefore, the Company’s calculations may not be comparable with those of other organizations. In addition, there may be limits to the usefulness of these measures to investors. Accordingly, management encourages readers to consider the Company’s consolidated financial statements in their entirety and not to rely on any single financial measure. The table below reconciles the Company’s calculations of these measures to amounts reported in accordance with GAAP.

     Quarter Ended  Nine Months Ended 
    2021  2020  2021  2020 
    September
30,
  June
30,
  March
31,
  December
31,
  September
30,
  September
30,
  September
30,
 
      
    (Dollars in Thousands, Except Per Share Data) 
    (Unaudited Reconciliation) 
TANGIBLE BALANCES                              
Total assets   $956,734  $946,946  $926,535  $890,511  $852,941         
Less: Goodwill    7,435   7,435   7,435   7,435   7,435         
Less: Core deposit intangible    707   792   884   975   1,067         
Tangible assets (a) $948,592  $938,719  $918,216  $882,101  $844,439         
                               
Total shareholders’ equity   $89,597  $88,778  $87,917  $86,678  $85,658         
Less: Goodwill    7,435   7,435   7,435   7,435   7,435         
Less: Core deposit intangible    707   792   884   975   1,067         
Tangible common equity (b) $81,455  $80,551  $79,598  $78,268  $77,156         
                               
Average shareholders’ equity   $89,603  $88,477  $87,456  $86,337  $85,656  $88,520  $85,112 
Less: Average goodwill    7,435   7,435   7,435   7,435   7,435   7,435   7,435 
Less: Average core deposit intangible    746   836   927   1,019   1,115   836   1,223 
Average tangible shareholders’ equity (c) $81,422  $80,206  $79,094  $77,883  $77,106  $80,249  $76,454 
                               
Net income (d) $837  $953  $950  $1,045  $411  $2,740  $1,662 
Common shares outstanding (in thousands) (e)  6,218   6,215   6,214   6,177   6,177         
                               
TANGIBLE MEASURES                              
Tangible book value per common share (b)/(e) $13.10  $12.96  $12.81  $12.67  $12.49         
                               
Tangible common equity to tangible assets (b)/(a)  8.59%  8.58%  8.67%  8.87%  9.14%        
                               
Return on average tangible common equity (annualized) (1  4.08%  4.76%  4.87%  5.34%  2.12%  4.57%  2.90%

(1)   Calculation of Return on average tangible common equity (annualized) = ((net income (d) / number of days in period) * number of days in year) / average tangible shareholders’ equity (c)

Contact:Thomas S. Elley
 205-582-1200

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