First US Bancshares(FUSB) - 2020 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited interim condensed consolidated financial statements for First US Bancshares, Inc. as of September 30, 2020, and for the three and nine months then ended Interim Condensed Consolidated Balance Sheets Total assets grew to $852.9 million at September 30, 2020, from $788.7 million at December 31, 2019, primarily driven by an increase in net loans from $545.2 million to $627.6 million, funded by a significant increase in total deposits to $745.3 million, with total shareholders' equity remaining stable at $85.7 million Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2020 (Unaudited) | Dec 31, 2019 | | :--- | :--- | :--- | | Total Assets | $852,941 | $788,738 | | Cash and cash equivalents | $65,643 | $57,030 | | Loans, net | $627,605 | $545,243 | | Total Liabilities | $767,283 | $703,990 | | Total deposits | $745,336 | $683,662 | | Non-interest-bearing deposits | $152,942 | $112,729 | | Total Shareholders' Equity | $85,658 | $84,748 | Interim Condensed Consolidated Statements of Operations Net income for the nine months ended September 30, 2020, significantly decreased to $1.7 million from $3.4 million in 2019, primarily due to lower net interest income and higher provision for loan and lease losses, resulting in diluted EPS dropping to $0.25 from $0.49 Key Performance Indicators (in thousands, except per share data) | Metric | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net Interest Income | $26,474 | $27,753 | | Provision for loan and lease losses | $2,476 | $1,998 | | Net Income | $1,662 | $3,357 | | Diluted net income per share | $0.25 | $0.49 | | Dividends per share | $0.09 | $0.06 | Notes to Interim Condensed Consolidated Financial Statements The notes detail the financial statements, emphasizing the COVID-19 pandemic's impact on economic outlook and operations, including loan deferment programs and Paycheck Protection Program participation - The COVID-19 pandemic has had a destabilizing effect on financial markets and economic activity, impacting the company's net interest income, provisions for loan losses, and noninterest income, with the ultimate financial impact remaining uncertain[28][30] - The company has two reportable operating segments: First US Bank (the "Bank") and its finance company subsidiary, Acceptance Loan Company, Inc. ("ALC")[26] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses significant factors affecting financial condition and operations, focusing on COVID-19 impacts, including declining net income due to net interest margin compression and increased loan loss provisions, alongside loan portfolio growth and deposit increases - Net income for the nine months ended September 30, 2020, was $1.7 million, down from $3.4 million in the prior year, primarily due to a $1.3 million decrease in net interest income and a $0.5 million increase in the provision for loan and lease losses[190][192][193] - In response to COVID-19, the company granted payment deferments to over 1,800 borrowers, with active deferments totaling $18.4 million as of September 30, 2020[182] - The company originated 167 Paycheck Protection Program (PPP) loans with an aggregate principal balance of $14.0 million, which are 100% guaranteed by the SBA[188] - Total assets increased to $852.9 million as of September 30, 2020, from $788.7 million at year-end 2019, driven by an $83.0 million increase in total loans and a $61.6 million increase in deposits[201][202][206] Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk using financial simulation models, showing moderate asset-sensitivity to rising rates long-term and projected increases in market value of equity in both rising and falling rate scenarios Cumulative Change in Net Interest Income Forecast (in thousands) | Rate Change | 6 Months | 1 Year | 2 Years | 5 Years | | :--- | :--- | :--- | :--- | :--- | | +2% | $40 | $38 | $898 | $11,861 | | +1% | $137 | $272 | $1,013 | $7,458 | | -1% | $19 | $(80) | $(719) | $(4,718) | | -2% | $(147) | $(550) | $(2,038) | $(8,980) | Net Change in Market Value of Equity (in thousands) | Rate Change | Net Change in MVE | | :--- | :--- | | +2% | $1,296 | | +1% | $3,386 | | -1% | $1,576 | | -2% | $4,421 | Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2020, with no material changes in internal control over financial reporting during the quarter - Management concluded that as of September 30, 2020, the company's disclosure controls and procedures were effective at the reasonable assurance level[263] - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2020, that have materially affected, or are reasonably likely to materially affect, the company's internal controls[264] PART II. OTHER INFORMATION Legal Proceedings The company is involved in ordinary course litigation, which management believes will not have a material adverse effect on its consolidated financial statements or results of operations - The company is party to ordinary course litigation which is not expected to have a material adverse effect on its financial condition or operations[267] Risk Factors This section highlights material risks, primarily the adverse impacts of the COVID-19 pandemic on financial markets, interest rates, credit quality, business operations, and cybersecurity, alongside risks from PPP participation - The COVID-19 pandemic is identified as a primary risk factor, with potential adverse impacts on financial markets, interest rates, loan quality, customer financial condition, business operations, and security[269][270] - Participation in the SBA Paycheck Protection Program (PPP) exposes the company to litigation risk regarding its loan processing and credit risk if the SBA denies guarantees due to origination or servicing deficiencies[275][277] Issuer Purchases of Equity Securities During Q3 2020, 1,833 shares of common stock were purchased at an average price of $6.54 per share by an independent trustee for the 401(k) Plan, with 54,961 shares remaining available for repurchase Issuer Purchases of Equity Securities (Q3 2020) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2020 | — | $— | | August 2020 | — | $— | | September 2020 | 1,833 | $6.54 | | Total | 1,833 | $6.54 | - As of September 30, 2020, the company was authorized to repurchase up to 54,961 additional shares of common stock under its existing program before its expiration on December 31, 2020[279] Exhibits This section lists the exhibits filed with the Form 10-Q, including the company's articles of incorporation and bylaws, CEO and CFO certifications, and Interactive Data Files (XBRL) - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act rules and Interactive Data Files[280]