First US Bancshares, Inc. (FUSB) is a bank holding company that operates through its wholly-owned subsidiary, First US Bank, providing a range of commercial banking services to small- and medium-sized businesses, property managers, business executives, professionals, and other individuals primarily in the southeastern United States. The company has strategically grown its footprint while maintaining a disciplined approach to credit and risk management, positioning it to weather economic headwinds.
Business Overview and History
First US Bancshares was formed in 1983 as a bank holding company registered under the Bank Holding Company Act of 1956. The company's sole operating subsidiary, First US Bank, is an Alabama-based commercial bank that has been serving customers since its inception. Over the years, the bank has expanded its physical presence, opening 15 full-service banking offices across Alabama, Tennessee, and Virginia, as well as maintaining loan production offices in Mobile, Alabama, and the Chattanooga, Tennessee area.
In the early years, First US Bancshares faced the challenge of establishing itself in a competitive banking market. However, through prudent management and a focus on serving its local communities, the company was able to grow its asset base and expand its branch network over time. A key milestone in the company's growth was the 2018 acquisition of The Peoples Bank, which expanded its presence in Tennessee.
Throughout its history, First US Bancshares has navigated various economic conditions, including the financial crisis of 2008-2009. During this challenging period, the company faced increased loan losses and needed to bolster its capital position. The management team worked diligently to manage credit risk, reduce expenses, and raise additional capital to ensure the bank's stability and continued operations.
In 2023, the company underwent a strategic reorganization, dissolving two of its wholly-owned subsidiaries, Acceptance Loan Company and FUSB Reinsurance, Inc., and transferring their remaining assets and liabilities to the Bank. This streamlining initiative has allowed First US Bancshares to focus on its core commercial banking operations through the Bank.
The Bank provides a wide range of services, including deposit accounts, personal and commercial loans, safe deposit boxes, and remote deposit capture. A significant portion of the Bank's loan portfolio is comprised of indirect lending, which the company conducts in 17 states, including Alabama, Arkansas, Florida, Georgia, and others. As of December 31, 2024, the Bank's total loan portfolio stood at $823.04 million, representing a 0.2% increase from the prior year.
Financials
Financial Performance and Ratios
For the full year 2024, First US Bancshares reported revenue of $58.26 million and net income of $8.17 million, or $1.33 per diluted share, compared to $8.48 million, or $1.33 per diluted share, in 2023. The company's return on average assets (ROAA) was 0.76% in 2024, compared to 0.82% in 2023, while its return on average equity (ROAE) was 8.62% and 9.88%, respectively.
The company's net interest margin (NIM) decreased from 3.87% in 2023 to 3.59% in 2024, primarily due to the rising interest rate environment and increased funding costs. The Bank's allowance for credit losses as a percentage of total loans was 1.24% at the end of 2024, down from 1.28% in the prior year.
First US Bancshares' capital ratios remained strong, with a common equity Tier 1 capital ratio of 11.31% and a total risk-based capital ratio of 12.47% as of December 31, 2024, well above the regulatory requirements for a well-capitalized institution.
In the most recent quarter (Q4 2024), the company reported revenue of $10.09 million and net income of $1.71 million. This represents a 25% decrease in net income compared to Q4 2023, when the company reported net income of $2.28 million.
Liquidity
The company's liquidity position remained robust, with cash and cash equivalents totaling $47.22 million as of December 31, 2024. Additionally, the Bank had $319.90 million in remaining unused credit from the Federal Home Loan Bank, $48.00 million in unused established federal funds lines, and $165.10 million in borrowing capacity with the Federal Reserve Bank, subject to collateral availability.
First US Bancshares' debt-to-equity ratio stood at 0.11 as of December 31, 2024, indicating a conservative approach to leverage. The company's current ratio and quick ratio were both 1.01, suggesting adequate short-term liquidity.
Navigating Challenges and Positioning for the Future
First US Bancshares has navigated various challenges in recent years, including the COVID-19 pandemic, rising interest rates, and increased competition in its markets. The company's disciplined approach to risk management and its focus on core commercial banking operations have enabled it to weather these storms and continue to grow in a sustainable manner.
In 2023, the company completed the legal dissolution of its two subsidiaries, Acceptance Loan Company and FUSB Reinsurance, Inc., streamlining its operations and allowing the Bank to focus on its primary commercial banking activities. This strategic move has simplified the company's structure and improved its overall efficiency.
Additionally, First US Bancshares has continued to invest in technology and digital banking capabilities to enhance the customer experience and improve operational efficiency. The company's emphasis on providing personalized service and building strong relationships with its business clients has been a key differentiator in its markets.
Looking ahead, First US Bancshares is well-positioned to navigate the evolving banking landscape. The company's strong capital position, ample liquidity, and disciplined approach to growth and risk management provide a solid foundation for future success. As the economic environment continues to present both challenges and opportunities, First US Bancshares remains committed to maintaining its focus on prudent lending, diversifying its revenue streams, and delivering value to its shareholders.
Risks and Challenges
While First US Bancshares has demonstrated its ability to navigate challenging conditions, the company does face several risks and potential headwinds:
1. Interest Rate Risk: The company's net interest margin is susceptible to fluctuations in market interest rates, which can impact its profitability. The continued rising interest rate environment may put pressure on the Bank's funding costs and loan yields.
2. Concentration Risk: A significant portion of the Bank's loan portfolio is concentrated in commercial real estate (CRE) and indirect lending, which could expose the company to heightened risk if economic conditions in these sectors deteriorate.
3. Competitive Landscape: The banking industry is highly competitive, and First US Bancshares faces intense competition from both traditional and non-traditional financial institutions in its markets. The company's ability to maintain market share and attract new customers will be crucial to its long-term success.
4. Regulatory Environment: As a financial institution, First US Bancshares is subject to extensive regulation and supervision by various federal and state agencies. Changes in laws, regulations, or regulatory policies could have a material impact on the company's operations and profitability.
5. Cybersecurity Threats: The company's reliance on technology and digital banking services exposes it to the risk of cyber attacks and data breaches, which could result in financial losses, reputational damage, and regulatory penalties.
Despite these challenges, First US Bancshares has demonstrated its resilience and adaptability, and the company remains focused on maintaining a disciplined approach to growth and risk management to navigate the evolving banking landscape.
Human Capital Resources
As of December 31, 2024, First US Bank had 151 full-time equivalent employees. The company strives to create an inclusive, safe, and healthy workplace, offering opportunities for employees to grow and develop in their careers. First US Bancshares supports its workforce with strong compensation, benefits, health, and welfare programs.
The company's approach to human capital management includes:
- Talent acquisition strategies to recruit skilled workers
- Competitive total rewards programs, including bonus opportunities, 401(k) plans, and healthcare benefits
- A commitment to employee health, safety, and wellness
While specific metrics such as employee turnover rate, satisfaction scores, and diversity figures are not provided, the company's focus on creating a supportive work environment suggests a recognition of the importance of human capital in driving business success.
First US Bancshares could enhance its human capital disclosures by providing more detailed metrics and insights, aligning with evolving reporting frameworks and investor expectations in this area. This would allow for a more comprehensive assessment of the company's human capital practices and their impact on financial performance.
Conclusion
First US Bancshares, Inc. (FUSB) is a regional bank that has navigated various challenges in recent years, including the COVID-19 pandemic, rising interest rates, and increased competition, while continuing to grow its commercial banking operations in a sustainable manner. The company's strong capital position, ample liquidity, and disciplined approach to risk management have positioned it well to weather future economic headwinds and capitalize on opportunities in its markets.
As First US Bancshares looks to the future, it will need to remain vigilant in managing its exposure to interest rate risk, concentration risk, and competitive pressures, while also addressing the growing threat of cybersecurity risks. However, the company's commitment to providing personalized service, investing in digital capabilities, and maintaining a prudent growth strategy suggests that it is well-equipped to continue delivering value to its shareholders in the years to come.
The company's focus on human capital management and its efforts to create a supportive work environment for its employees further underscore its long-term approach to sustainable growth. By continuing to invest in its workforce and potentially expanding its disclosures in this area, First US Bancshares can strengthen its position as an attractive employer and a responsible corporate citizen in the communities it serves.