First US Bancshares(FUSB) - 2023 Q4 - Annual Report

Financial Performance - Interest income for 2023 increased to $52,806,000 from $41,197,000 in 2022, representing a growth of 28.5%[152]. - Net interest income remained stable at $37,350,000 in 2023 compared to $36,941,000 in 2022, showing a slight increase of 1.1%[152]. - Net income rose to $8,485,000 in 2023, up from $6,864,000 in 2022, reflecting a growth of 23.6%[152]. - Basic net income per share increased to $1.42 in 2023 from $1.13 in 2022, a rise of 25.7%[152]. - Total assets grew to $1,072,940,000 in 2023, compared to $994,667,000 in 2022, marking an increase of 7.9%[152]. - Total loans increased to $821,791,000 in 2023 from $773,873,000 in 2022, a growth of 6.2%[152]. - Total deposits rose to $950,191,000 in 2023, up from $870,025,000 in 2022, indicating a growth of 9.2%[152]. - The allowance for credit losses on loans increased to $10,507,000 in 2023 from $9,422,000 in 2022, reflecting a rise of 11.5%[152]. - The net interest margin decreased to 3.87% in 2023 from 4.07% in 2022, a decline of 4.9%[152]. - Non-interest income slightly decreased to $3.4 million in 2023 from $3.5 million in 2022, primarily due to the absence of gains on the sale of premises and equipment[186]. - Non-interest expense rose to $29.1 million in 2023 from $28.1 million in 2022, with increases attributed to regulatory assessments and check fraud[187]. Regulatory Environment - Bancshares is subject to extensive regulation by the Federal Reserve, ASBD, and FDIC, impacting its operations and profitability[29]. - The Federal Reserve requires bank holding companies to serve as a source of financial strength to their subsidiary depository institutions[32]. - The Dodd-Frank Act imposes restrictions on incentive compensation arrangements to mitigate inappropriate risks within financial institutions[37]. - The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 allows community banks with total assets of less than $10 billion to access a simpler capital regime focused on Tier 1 leverage capital levels[51]. - The proposed revisions to the Basel III Capital Rules introduced in July 2023 would not apply to the Company or the Bank due to their total consolidated assets being less than $100 billion[54]. - The Bank must maintain a specified capital conservation buffer to avoid limitations on paying dividends and engaging in share repurchases[48]. - The Anti-Money Laundering Act of 2020 aims to modernize U.S. bank secrecy and anti-money laundering laws, requiring financial institutions to establish comprehensive programs[60]. - The SEC adopted amendments in July 2023 requiring public companies to enhance disclosures regarding cybersecurity risk management and incident reporting[68]. - The Consumer Financial Protection Bureau proposed a rule on October 19, 2023, promoting "open banking" which would require financial institutions to provide consumers with access to their transaction and account information[71]. - The federal banking regulators are expected to adopt a formal climate risk management framework for larger banking organizations in the coming months, focusing on the impact of climate-related risks on financial stability[76]. Operational Highlights - The Bank operates 15 full-service banking offices across Alabama, Tennessee, and Virginia, and conducts indirect lending in 17 states[17]. - Bancshares aims to grow loan production offices to support limited branching and expand its customer base through digital banking offerings[20]. - As of December 31, 2023, the Bank had 153 full-time equivalent employees, with 79% of the workforce being female and 19% racially or ethnically diverse[21][26]. - The Company emphasizes a competitive total rewards program, including bonus opportunities and a Company matched 401(k) Plan, to attract and retain talent[23]. - The Bank received a "satisfactory" rating in its most recent Community Reinvestment Act evaluation[57]. Market and Economic Conditions - The financial services industry is expected to become more competitive due to technological advances, which may diminish the importance of traditional depository institutions[28]. - Economic conditions in the U.S. and local markets, characterized by high inflation and interest rates, could adversely affect growth and profitability[84]. - The banking industry is highly competitive, with significant competition from various financial institutions, which may affect market share[87]. - Changes in interest rates can significantly impact net interest income and the valuation of assets and liabilities[88]. - Federal budget deficit concerns and potential political conflicts may negatively impact financial markets and the company's financial position[91]. Cybersecurity and Compliance - The company relies on third-party vendors for processing and handling records, exposing it to additional risks for cybersecurity breaches[97]. - The company is subject to extensive governmental regulation, which could adversely impact operations and financial results if compliance is not maintained[100]. - The company faces risks related to privacy and data protection laws, which could lead to increased costs and potential litigation if violations occur[101]. - The company must notify the Federal Reserve or FDIC within 36 hours of significant computer security incidents that disrupt its operations[67]. - The company has implemented several cybersecurity processes and controls to manage risks associated with cybersecurity threats[125]. - The Information Technology Steering Committee of the Board of Directors oversees the company's cybersecurity risk management process, meeting at least quarterly[135]. - Bancshares' management team has over 90 years of collective experience in managing information security and developing cybersecurity strategies[137]. Shareholder Returns and Capital Management - Bancshares declared total dividends of $0.20 per common share for the year ended December 31, 2023, compared to $0.14 per common share in 2022[144]. - During the fourth quarter of 2023, Bancshares repurchased a total of 138,729 shares at an average price of $10.33 per share[146]. - As of December 31, 2023, Bancshares was authorized to repurchase up to 459,313 shares under its share repurchase program[147]. - The Company intends to engage in acquisitions, which may not yield anticipated revenue or cost savings and could result in integration difficulties[110]. - Regulatory restrictions may limit the ability of the company to pay dividends, impacting shareholder returns[116]. - The Company declared cash dividends of $0.20 per share in 2023, up from $0.14 per share in 2022[194]. - The Company completed share repurchases totaling 137,500 shares at a weighted average price of $10.34 per share during 2023[195].