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First US Bancshares, Inc. Reports Second Quarter Results

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BIRMINGHAM, Ala., July 30, 2018 (GLOBE NEWSWIRE) -- First US Bancshares, Inc. (NASDAQ:FUSB) (the "Company") today reported net income of $359,000, or $0.06 per diluted share, for the quarter ended June 30, 2018 and $773,000, or $0.12 per diluted share, for the six months ended June 30, 2018.

Highlights

  • Loan Growth – Net loans increased $1.7 million during the second quarter of 2018, or 2.0% on an annualized basis, and $9.4 million during the six months ended June 30, 2018, or 5.5% on an annualized basis.  Loan growth in the Company's banking subsidiary, First US Bank (the "Bank"), was relatively flat during the six months ended June 30, 2018, while the Company's finance company subsidiary, Acceptance Loan Company, Inc. ("ALC"), grew its loan portfolio by $9.3 million during the same period.
     
  • Growth in Net Interest Income – Pre-provision net interest income increased by $188,000 in the second quarter of 2018 compared to the first quarter of 2018, and by $445,000 compared to the second quarter of 2017.  For the six months ended June 30, 2018, pre-provision net interest income exceeded the corresponding period of 2017 by $840,000. 
     
  • Asset Quality Improvement – Non-performing assets, including loans in non-accrual status and other real estate owned (OREO), decreased to 0.61% of total assets as of June 30, 2018, compared to 0.86% as of March 31, 2018 and 0.96% as of December 31, 2017.   
     
  • Pending Acquisition – On April 16, 2018, the Company signed a definitive agreement to acquire The Peoples Bank ("TPB"), headquartered in Rose Hill, Virginia. TPB serves communities in the Knoxville, Tennessee and southwest Virginia areas. Under the terms of the agreement, the Company will acquire all of the outstanding capital stock of TPB and then merge TPB with and into the Bank. The transaction, which is expected to result in a combined institution approaching $800 million in assets, remains subject to the satisfaction of customary closing conditions, including receipt of certain regulatory approvals.

"We are gratified with the progress that we have made in advancing toward our pending acquisition of TPB," said James F. House, President and Chief Executive Officer of the Company.  "As the second quarter progressed, we continued to strengthen our relationships with the management and employees of TPB, and we have begun significant planning efforts in preparation for the consummation of the transaction.  While engaged in these planning efforts, we have been able to maintain solid financial footing at the Company with another quarter of loan growth and asset quality improvement.  We remain optimistic that we will be able to complete the acquisition of TPB before the end of 2018," continued Mr. House.

Results of Operations

  • Pre-provision net interest income totaled $7.5 million for the second quarter of 2018, compared to $7.1 million for the second quarter of 2017.  The increase in net interest income resulted from both loan growth and improvement in yield. Average loans totaled $358.0 million for the second quarter of 2018, compared to $325.7 million for the second quarter of 2017.  Net yield on interest-earning assets was 5.31% for the second quarter of 2018, compared to 5.09% for the second quarter of the previous year. For the six months ended June 30, 2018, pre-provision net interest income totaled $14.8 million, compared to $14.0 million for the same period of the previous year.  Average loans totaled $355.7 million and $325.4 million for the six months ended June 30, 2018 and 2017, respectively.  Net yield on interest earning assets was 5.28% for the first six months of 2018, compared to 5.07% for the first six months of 2017.
     
  • The provision for loan losses was $702,000 for the second quarter of 2018, compared to $576,000 for the second quarter of 2017.  For the six months ended June 30, 2018, the provision for loan losses totaled $1.4 million, compared to $1.1 million for the six months ended June 30, 2017.  The increase in provision expense in 2018 compared to 2017 was due to more substantial loan growth in ALC's retail consumer lending portfolio during the first half of 2018 compared to the first half of 2017.  In general, ALC's consumer loans require a higher level of loss provisioning than commercial lending at the Bank.  Growth in net loans totaled $9.4 million during the first half of 2018, compared to $7.8 million during the first half of 2017. Loan growth at the Bank continues to be focused in the Bank's larger metropolitan markets of Birmingham and Tuscaloosa, Alabama, while loan growth at ALC continues to be focused in ALC's indirect retail lending efforts. The Company's allowance for loan losses as a percentage of loans was 1.37% as of June 30, 2018, compared to 1.36% as of December 31, 2017 and 1.46% as of June 30, 2017.
     
  • Non-interest income totaled $1.1 million for the second quarter of 2018, compared to $930,000 for the second quarter of 2017.  For the six months ended June 30, 2018, non-interest income totaled $2.3 million, compared to $2.1 million for the first six months of the previous year.  The increase in non-interest income for both the three- and six-month periods of 2018 resulted primarily from fees earned from secondary market mortgage closings at the Bank. The Bank's mortgage division became operational during the second quarter of 2017.  Fees generated from secondary market closings totaled $144,000 and $261,000 for the three- and six-month periods ended June 30, 2018, compared to $58,000 for both corresponding periods of 2017.  In addition, during the second quarter of 2018, the Bank generated $102,000 in gains on sale of investment securities that were not generated during the second quarter of 2017.
     
  • Non-interest expense totaled $7.5 million for the second quarter of 2018, compared to $6.9 million for the second quarter of 2017.  For the six months ended June 30, 2018 and 2017, non-interest expense totaled $14.8 million and $13.9 million, respectively. The increase in non-interest expense for the three and six months ended June 30, 2018 compared to the same periods in 2017 resulted primarily from increased expenses associated with the Bank's office complex (known as Pump House Plaza) in Birmingham, Alabama, which became operational during the third quarter of 2017.  Salaries and benefits expense increased due to the addition of retail and commercial lending staff at the new location.  In addition, occupancy and equipment expense increased as a result of depreciation and operating expenses associated with the location, which now serves as the headquarters of both the Bank and the Company.  Subsequent to June 30, 2018, the Bank entered into an agreement to lease all unused remaining leasable space in Pump House Plaza.  The lease, which is scheduled to commence during the fourth quarter of 2018, is expected to generate in excess of $750,000 of lease revenue annually and is expected to offset a significant portion of the expense associated with the location.
     
  • The Company's effective tax rate was 17.3% for the first half of 2018, compared to 24.2% for the first half of 2017.  The reduced effective tax rate resulted from the reduction in the Company's statutory federal tax rate under the Tax Cuts and Jobs Act of 2017.

Balance Sheet Management

  • Net loans totaled $355.5 million as of June 30, 2018, compared to $346.1 million as of December 31, 2017. The increase in net loans resulted primarily from growth in ALC's indirect retail lending portfolio and was funded primarily through cash flows generated from deposit growth. 
     
  • Investment securities totaled $165.7 million as of June 30, 2018, compared to $180.2 million as of December 31, 2017. 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. During the second quarter of 2018, management retained cash flows generated from the investment portfolio primarily to prepare for the Company's pending acquisition of TPB.  Accordingly, the Company's cash balances increased to $41.8 million as of June 30, 2018, compared to $27.1 million as of December 31, 2017.  The cash required in the pending acquisition transaction is expected to be approximately $23 million.  In the current environment, the Company expects cash flows from the investment portfolio to continue to serve as a significant source of liquidity available to fund future loan growth, as well as the Company's future acquisition activities.
     
  • Liabilities increased to $558.4 million as of June 30, 2018, compared to $549.4 million as of December 31, 2017. The increase resulted from an increase in deposits of $14.3 million that was partially offset by a decrease in short-term borrowings of $5.2 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.
     
  • Shareholders' equity was $75.6 million, or $12.41 per outstanding common share, as of June 30, 2018, compared to $76.2 million, or $12.53 per outstanding common share, as of December 31, 2017. The decrease in shareholders' equity resulted from an increase in accumulated other comprehensive loss associated with unrealized losses in the fair value of available-for-sale securities of $1.3 million during the first half of 2018, partially offset by growth in retained earnings of $0.5 million. The unrealized losses in the fair value of available-for-sale securities were considered by management to be the direct result of the effect that the prevailing interest rate environment had on the value of debt securities and were not related to the creditworthiness of the issuers.
     
  • The Company declared a cash dividend of $0.02 per share on its common stock in the second quarter of 2018. This amount is consistent with the Company's quarterly dividend declarations for the first quarter of 2018 and each quarter of 2017.
     
  • During the second 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 June 30, 2018, the Bank's common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 18.48%. Its total capital ratio was 19.70%, and its Tier 1 leverage ratio was 11.97%.

About First US Bancshares, Inc.

First US Bancshares, Inc. is a bank holding company that operates banking offices in Alabama 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'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 Securities and Exchange Commission, 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 loan demand, cash flows, growth and earnings potential and expansion, 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, 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 and collateral values. With respect to statements relating to the proposed acquisition of The Peoples Bank, these factors include, but are not limited to, the possibility that regulatory and other approvals and conditions to the proposed transaction are not received or satisfied on a timely basis or at all, or contain unanticipated terms and conditions; the possibility that modifications to the terms of the transaction may be required in order to obtain or satisfy such approvals or conditions; delays in closing the transaction; difficulties, delays and unanticipated costs in integrating the organizations' businesses or realized expected cost savings and other benefits; business disruptions as a result of the integration of the organizations, including possible loss of customers; diversion of management time to address transaction-related issues; and changes in asset quality and credit risk as a result of the transaction. With respect to statements related to the lease of the unused remaining leasable space in Pump House Plaza, these factors include, but are not limited to, the adherence of the leasing counterparty to the terms and conditions of the lease agreement and commercial real estate conditions in the Birmingham, Alabama market in general. 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) 
           
  Quarter Ended 
  (Unaudited)
           
   2018
   2017
                   
  June
  March
  December   September   June
   30,    31,    31,    30,    30,
                             
                             
Results of Operations:                            
Interest income $ 8,390   $ 8,119   $ 8,087   $ 7,820   $ 7,683
Interest expense   888     805     804     685     626
                             
Net interest income   7,502     7,314     7,283     7,135     7,057
Provision for loan losses   702     658     523     373     576
                             
Net interest income after provision for loan losses   6,800     6,656     6,760     6,762     6,481
Non-interest income   1,132     1,140     1,333     1,236     930
Non-interest expense   7,492     7,301     7,359     7,190     6,863
                             
Income (loss) before income taxes   440     495     734     808     548
Provision for (benefit from) income taxes   81     81     2,600     173     132
                             
Net income (loss) $ 359   $ 414   $   (1,866)   $ 635   $ 416
                             
Per Share Data:                            
Basic net income (loss) per share $ 0.06   $ 0.07   $   (0.30)   $ 0.10   $ 0.07
                             
Diluted net income (loss) per share $ 0.06   $ 0.06   $   (0.29)   $ 0.10   $ 0.06
                             
Dividends declared $ 0.02   $ 0.02   $ 0.02   $ 0.02   $ 0.02
                             
                             
Period-End Balance Sheet:                            
Total assets $ 634,036   $ 627,319   $ 625,581   $ 614,599   $ 616,218
Loans, net of allowance for loan losses   355,529     353,805     346,121     338,026     330,526
Allowance for loan losses   4,952     4,829     4,774     4,808     4,905
Investment securities, net   165,740     181,942     180,150     185,802     200,831
Total deposits   531,428     525,273     517,079     508,385     509,245
Short-term borrowings   10,366     10,298     15,594     10,635     10,692
Long-term debt   10,000     10,000     10,000     10,000     10,000
Total shareholders' equity   75,634     75,525     76,208     78,854     78,373
           
           
Key Ratios:          
Return on average assets (annualized)   0.23%     0.27%     (1.18%)     0.41%     0.27%
Return on average equity (annualized)   1.91%     2.21%     (9.38%)     3.21%     2.14%
Loans to deposits   66.9%     67.4%     66.9%     66.5%     64.9%
Allowance for loan losses as % of loans   1.37%     1.35%     1.36%     1.40%     1.46%
Nonperforming assets as % of total assets   0.61%     0.86%     0.96%     0.94%     1.01%
           


 

FIRST US BANCSHARES, INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
  June
30,
  December
31,
    2018       2017  
  (Unaudited)    
ASSETS
Cash and due from banks $   8,536     $   7,577  
Interest-bearing deposits in banks   33,262       19,547  
  Total cash and cash equivalents   41,798       27,124  
Federal funds sold   15,000       15,000  
Investment securities available-for-sale, at fair value   141,421       153,871  
Investment securities held-to-maturity, at amortized cost   24,319       26,279  
Federal Home Loan Bank stock, at cost   1,413       1,609  
Loans, net of allowance for loan losses of $4,952 and $4,774, respectively   355,529       346,121  
Premises and equipment, net   26,336       26,433  
Cash surrender value of bank-owned life insurance   15,079       14,923  
Accrued interest receivable   1,959       2,057  
Other real estate owned   2,181       3,792  
Other assets   9,001       8,372  
  Total assets $   634,036     $   625,581  
       
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $   531,428     $   517,079  
Accrued interest expense   444       381  
Other liabilities   6,164       6,319  
Short-term borrowings   10,366       15,594  
Long-term debt   10,000       10,000  
  Total liabilities   558,402       549,373  
       
Shareholders' equity:      
Common stock, par value $0.01 per share, 10,000,000 shares authorized;      
 7,356,466 and 7,345,946 shares issued, respectively; 6,092,264 and 6,081,744
  shares outstanding, respectively
  73        

73
 
Surplus   10,970       10,755  
Accumulated other comprehensive income (loss), net of tax   (2,187 )     (868 )
Retained earnings   87,203       86,673  
Less treasury stock: 1,264,202 shares at cost   (20,414 )     (20,414 )
Noncontrolling interest   (11 )     (11 )
  Total shareholders' equity   75,634       76,208  
       
  Total liabilities and shareholders' equity $   634,036     $   625,581  
       


FIRST US BANCSHARES, INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
 
  Three Months Ended   Six Months Ended
  June 30,   June 30,
    2018       2017       2018       2017  
                               
  (Unaudited)
Interest income:              
Interest and fees on loans $   7,331     $   6,630     $   14,420     $   13,126  
Interest on investment securities   1,059       1,053       2,089       2,067  
Total interest income   8,390       7,683       16,509       15,193  
               
Interest expense:              
Interest on deposits   798       568       1,499       1,096  
Interest on borrowings   90       58       194       121  
Total interest expense   888       626       1,693       1,217  
               
Net interest income   7,502       7,057       14,816       13,976  
               
Provision for loan losses   702       576       1,360       1,091  
               
Net interest income after provision for loan losses   6,800       6,481       13,456       12,885  
               
Non-interest income:              
Service and other charges on deposit accounts   444       461       911       925  
Credit insurance income   100       43       318       299  
Net gain on sales and prepayments of investment securities   102       1       105       50  
Mortgage fees from secondary market   144       58       261       58  
Other income, net   342       367       677       765  
Total non-interest income   1,132       930       2,272       2,097  
               
Non-interest expense:              
Salaries and employee benefits   4,533       4,280       9,100       8,678  
Net occupancy and equipment   873       693       1,762       1,470  
Computer services   317       312       609       699  
Fees for professional services   266       230       539       463  
Other expense   1,503       1,348       2,783       2,590  
Total non-interest expense   7,492       6,863       14,793       13,900  
               
Income before income taxes   440       548       935       1,082  
Provision for income taxes   81       132       162       262  
Net income $   359     $   416     $   773     $   820  
Basic net income per share $   0.06     $   0.07     $   0.13     $   0.13  
Diluted net income per share $   0.06     $   0.06     $   0.12     $   0.13  
Dividends per share $   0.02     $   0.02     $   0.04     $   0.04  
               
Key Ratios:              
Return on average assets (annualized)   0.23 %     0.27 %     0.25 %     0.27 %
Return on average equity (annualized)   1.91 %     2.14 %     2.06 %     2.13 %
               

 

Contact:
Thomas S. Elley
205-582-1200

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