BIRMINGHAM, Ala., Oct. 24, 2024 /PRNewswire/ -- Third Quarter Highlights:
Net Income
Diluted Earnings per share
Return on average assets (annualized)
Return on average common equity (annualized)
Return on average tangible common equity (annualized) (1)
Loans to deposits
$2.2 million
$0.36
0.82 %
9.21 %
9.99 %
81.9 %
First US Bancshares, Inc. (Nasdaq: FUSB) (the "Company"), the parent company of First US Bank (the "Bank"), today reported net income of $2.2 million, or $0.36 per diluted share, for the quarter ended September 30, 2024 ("3Q2024"), compared to $2.1 million, or $0.34 per diluted share, for the quarter ended June 30, 2024 ("2Q2024") and $2.1 million, or $0.33 per diluted share, for the quarter ended September 30, 2023 ("3Q2023"). For the nine months ended September 30, 2024, net income totaled $6.5 million, or $1.04 per diluted share, compared to $6.2 million, or $0.97 per diluted share for the nine months ended September 30, 2023.
The table below summarizes selected financial data for each of the periods presented.
Quarter Ended
Nine Months Ended
2024
2023
2024
2023
September 30,
June 30,
March 31,
December 31,
September 30,
September 30,
September 30,
Results of Operations:
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Interest income
$
15,017
$
14,546
$
14,277
$
13,945
$
13,902
$
43,840
$
38,861
Interest expense
5,832
5,370
5,237
4,835
4,419
16,439
10,621
Net interest income
9,185
9,176
9,040
9,110
9,483
27,401
28,240
Provision for (recovery of) credit losses
152
-
-
(434)
184
152
753
Net interest income after provision for (recovery of) credit losses
9,033
9,176
9,040
9,544
9,299
27,249
27,487
Non-interest income
901
835
865
916
837
2,601
2,465
Non-interest expense
6,990
7,272
7,147
7,401
7,319
21,409
21,740
Income before income taxes
2,944
2,739
2,758
3,059
2,817
8,441
8,212
Provision for income taxes
722
612
651
782
704
1,985
2,004
Net income
$
2,222
$
2,127
$
2,107
$
2,277
$
2,113
$
6,456
$
6,208
Per Share Data:
Basic net income per share
$
0.38
$
0.36
$
0.36
$
0.38
$
0.35
$
1.10
$
1.04
Diluted net income per share
$
0.36
$
0.34
$
0.34
$
0.36
$
0.33
$
1.04
$
0.97
Dividends declared
$
0.05
$
0.05
$
0.05
$
0.05
$
0.05
$
0.15
$
0.15
Key Measures (Period End):
Total assets
$
1,100,235
$
1,083,313
$
1,070,541
$
1,072,940
$
1,065,239
Tangible assets (1)
1,092,733
1,075,781
1,062,972
1,065,334
1,057,597
Total loans
803,308
819,126
822,941
821,791
815,300
Allowance for credit losses ("ACL") on loans and leases
10,116
10,227
10,436
10,507
11,380
Investment securities, net
145,044
144,876
126,363
136,669
127,823
Total deposits
981,149
954,455
943,268
950,191
927,038
Short-term borrowings
-
15,000
15,000
10,000
30,000
Long-term borrowings
10,854
10,836
10,817
10,799
10,781
Total shareholders' equity
98,491
93,836
92,326
90,593
87,408
Tangible common equity (1)
90,989
86,304
84,757
82,987
79,766
Book value per common share
17.23
16.34
15.95
15.80
14.88
Tangible book value per common share (1)
15.92
15.03
14.65
14.47
13.58
Key Ratios:
Return on average assets (annualized)
0.82
%
0.80
%
0.80
%
0.86
%
0.80
%
0.81
%
0.81
%
Return on average common equity (annualized)
9.21
%
9.23
%
9.25
%
10.31
%
9.65
%
9.23
%
9.71
%
Return on average tangible common equity (annualized) (1)
9.99
%
10.05
%
10.08
%
11.29
%
10.58
%
10.04
%
10.67
%
Net interest margin
3.60
%
3.69
%
3.65
%
3.67
%
3.79
%
3.65
%
3.93
%
Efficiency ratio (2)
69.3
%
72.6
%
72.2
%
73.8
%
70.9
%
71.4
%
70.8
%
Total loans to deposits
81.9
%
85.8
%
87.2
%
86.5
%
87.9
%
Total loans to assets
73.0
%
75.6
%
76.9
%
76.6
%
76.5
%
Common equity to total assets
8.95
%
8.66
%
8.62
%
8.44
%
8.21
%
Tangible common equity to tangible assets (1)
8.33
%
8.02
%
7.97
%
7.79
%
7.54
%
Tier 1 leverage ratio (3)
9.49
%
9.46
...
%
9.37
%
9.36
%
9.09
%
ACL on loans and leases as % of total loans
1.26
%
1.25
%
1.27
%
1.28
%
1.40
%
Nonperforming assets as % of total assets
0.60
%
0.27
%
0.28
%
0.28
%
0.29
%
Net charge-offs as a percentage of average loans
0.12
%
0.10
%
0.09
%
0.19
%
0.10
%
0.10
%
0.12
%
(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
CEO Commentary
"We are pleased to report continued improvement in earnings per share, as well as a balance sheet poised for growth," stated James F. House, President and CEO of the Company. "Although loan growth has not developed this year, market volatility has provided opportunities to strengthen the Company's balance sheet, and we have capitalized on those opportunities. This includes both the deployment of funds into favorably yielding investment securities, as well as strategies aimed at reducing interest expense over time. Our team remains focused on sound and prudent growth that will further enhance our balance sheet positioning and lead to even stronger profitability," continued Mr. House.
Financial Results
Loans and Leases – The table below summarizes loan balances by portfolio category as of the end of each of the most recent five quarters.
Quarter Ended
2024
2023
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
$53,098
$72,183
$102,282
$88,140
$90,051
Secured by 1-4 family residential properties
70,067
70,272
74,361
76,200
83,876
Secured by multi-family residential properties
100,627
97,527
62,145
62,397
56,506
Secured by non-farm, non-residential properties
224,611
218,386
212,465
213,586
199,116
Commercial and industrial loans
44,872
46,249
57,112
60,515
59,369
Consumer loans:
Direct
5,018
5,272
5,590
5,938
6,544
Branch retail
6,233
6,879
7,794
8,670
9,648
Indirect
298,782
302,358
301,192
306,345
310,190
Total loans and leases held for investment
$803,308
$819,126
$822,941
$821,791
$815,300
Allowance for credit losses on loans and leases
10,116
10,227
10,436
10,507
11,380
Net loans and leases held for investment
$793,192
$808,899
$812,505
$811,284
$803,920
Total loan volume decreased by $15.8 million, or 1.9%, in 3Q2024, driven primarily by payoffs of construction loans, and to a lesser extent, reductions in the consumer indirect and commercial and industrial ("C&I") loan categories. These reductions were partially offset by growth in commercial real estate (non-farm, non-residential) and multi-family residential loans. During the nine months ended September 30, 2024, total loans decreased by $18.5 million, or 2.2%. While the Company experienced a reduction in loan volume during the first nine months of 2024, average loan balances remained higher than average loan balances during the corresponding period of 2023. For the nine months ended September 30, 2024, average total loans were $821.0 million, compared to $795.0 million during the nine months ended September 30, 2023.
Net Interest Income and Margin – Net interest income remained consistent comparing 3Q2024 to 2Q2024, and decreased $0.3 million, or 3.1%, comparing 3Q2024 to 3Q2023. Net interest margin totaled 3.60% for 3Q2024, compared to 3.69% in 2Q2024 and 3.79% in 3Q2023. In general, net interest margin has declined amid the higher interest rate environment that has persisted since 2022 as interest-bearing liabilities repriced at faster rates than interest-bearing assets. The decrease in net interest margin in 3Q2024 compared to 2Q2024 was primarily attributable to reductions of gain accretion in 3Q2024 on previously terminated interest rate swaps, as well as accelerated interest expense associated with fees on brokered deposits that were called during the latter part of 3Q2024. In light of general market interest rate reductions that occurred during 3Q2024, the Company moved to replace callable brokered deposits with lower-rate deposits in an effort to reduce interest expense over time. For the nine months ended September 30, 2024, net interest income totaled $27.4 million, compared to $28.2 million during the nine months ended September 30, 2023. Net interest margin totaled 3.65% for the nine months ended September 30, 2024, compared to 3.93% for the nine months ended September 30, 2023.
Deposit Growth – Total deposits increased by $26.7 million, or 2.8%, during 3Q2024, due primarily to growth in interest-bearing demand deposits, and to a lesser extent, growth in interest-bearing time deposits and non-interest-bearing demand deposits. The growth in interest-bearing time deposits was driven primarily by growth of $10.0 million in wholesale brokered time deposits. Core deposits, which exclude time deposits of $250 thousand or more and all wholesale brokered deposits, totaled $833.5 million, or 85.0% of total deposits, as of September 30, 2024, compared to $819.5 million, or 86.2% of total deposits, as of December 31, 2023.
Deployment of Funds – As of September 30, 2024, the Company held cash, federal funds sold and securities purchased under reverse repurchase agreements totaling $97.8 million, or 8.9% of total assets, compared to $59.8 million, or 5.6% of total assets, as of December 31, 2023. Investment securities, including both the available-for-sale and held-to-maturity portfolios, totaled $145.0 million as of September 30, 2024, compared to $136.7 million as of December 31, 2023. During the nine months ended September 30, 2024, $27.5 million was invested in taxable U.S. agency-sponsored bonds, resulting in improved yields in the investment portfolio. As of September 30, 2024, the expected average life of securities in the investment portfolio was 4.1 years, compared to 3.9 years as of December 31, 2023.
Provision for Credit Losses – During both 3Q2024 and 3Q2023, the Company recorded a provision for credit losses of $0.2 million. No provision for credit losses was recorded during 2Q2024. For the nine months ended September 30, 2024, the provision for credit losses totaled $0.2 million, compared to $0.8 million for the nine months ended September 30, 2023. The decrease in the provision for credit losses comparing the first nine months of 2024 to the corresponding period of 2023 was due primarily to decreases in loan volume, as well as adjustments in economic forecasts that impact the calculation of the allowance for credit losses ("ACL") on loans and leases. As of September 30, 2024, the Company's ACL on loans and leases as a percentage of total loans was 1.26%, compared to 1.28% as of December 31, 2023.
Asset Quality – Nonperforming assets, including loans in non-accrual status and OREO, totaled $6.6 million as of September 30, 2024, compared to $3.0 million as of December 31, 2023. The increase in nonperforming assets comparing September 30, 2024 to December 31, 2023 resulted from two loans (from the C&I and 1-4 family residential categories) that moved into non-accrual status during 3Q2024. As a percentage of total assets, nonperforming assets totaled 0.60% as of September 30, 2024, compared to 0.28% as of December 31, 2023. Annualized net charge-offs as a percentage of average loans during 3Q2024 totaled 0.12%, compared to 0.10% during both 2Q2024 and 3Q2023.
Non-interest Income – Non-interest income totaled $0.9 million in 3Q2024, compared to $0.8 million in both 2Q2024 and 3Q2023. For the nine months ended September 30, 2024, non-interest income totaled $2.6 million, compared to $2.5 million for the nine months ended September 30, 2023.
Non-interest Expense – Non-interest expense totaled $7.0 million in 3Q2024, compared to $7.3 million in both 2Q2024 and 3Q2023. For the nine months ended September 30, 2024, non-interest expense totaled $21.4 million, compared to $21.7 million for the nine months ended September 30, 2023. Salaries and benefits expense decreased during the first nine months of 2024, compared to the corresponding period of 2023, primarily due to lower staff levels resulting from strategic initiatives implemented by the Company in prior years. In addition, other expenses were lower during the nine months ended September 30, 2024, compared to the corresponding period of 2023, due primarily to the recovery of check fraud losses and reduced collection expenses. These reductions in non-interest expense during the first nine months of 2024 were partially offset by increases associated with occupancy and professional services expenses, as well as increases in legal, accounting and auditing fees.
Shareholders' Equity – As of September 30, 2024, shareholders' equity totaled $98.5 million, or 8.95% of total assets, compared to $90.6 million, or 8.44% of total assets, as of December 31, 2023. The increase in shareholders' equity during the nine months ended September 30, 2024 resulted primarily from earnings, net of dividends paid and repurchases of shares of the Company's common stock. In addition, shareholders' equity was positively impacted during the nine months ended September 30, 2024 by reductions in the Company's accumulated other comprehensive loss resulting from changes in market interest rates, as well as the maturity of lower yielding investment securities. The Company's ratio of tangible common equity to tangible assets was 8.33% as of September 30, 2024, compared to 7.79% as of December 31, 2023.
Cash Dividend – The Company declared a cash dividend of $0.05 per share on its common stock in 3Q2024, consistent with previous quarters in both 2024 and 2023.
Share Repurchases – During 3Q2024, the Company completed the repurchase of 29,500 shares of its common stock at a weighted average price of $10.83 per share. The repurchases were completed under the Company's previously announced share repurchase program. As of September 30, 2024, 352,813 shares remained available for repurchase under the program.
Regulatory Capital – During 3Q2024, 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, 2024, the Bank's common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 11.46%, its total capital ratio was 12.64%, and its Tier 1 leverage ratio was 9.49%.
Liquidity – As of September 30, 2024, the Company continued to maintain 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 with other banking institutions, Federal Home Loan Bank (FHLB) advances, the discount window of the Federal Reserve Bank (FRB), and brokered deposits.
Banking Center Growth – As part of the Company's overall growth strategy, during the nine months ended September 30, 2024, the Company opened a new banking center in the Bearden area of Knoxville, Tennessee that replaced the Bank's previously existing Knoxville-Bearden location. In addition, the Company commenced renovation of a banking center office in Daphne, Alabama that was purchased from another financial institution. This location is expected to serve as the Bank's initial deposit gathering facility in the Daphne/Mobile area, and it is anticipated that the location will open to the public in early 2025.
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"). 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 and cause actual results to differ materially from those projected in 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. Such factors may include risk related to the Company's credit, including that if loan losses are greater than anticipated; the increased lending risks associated with commercial real estate lending; liquidity risks; the impact of national and local market conditions on the Company's business and operations; the rate of growth (or lack thereof) in the economy generally and in the Company's service areas; strong competition in the banking industry; the impact of changes in interest rates and monetary policy on the Company's performance and financial condition; the impact of technological changes in the banking and financial service industries and potential information system failures; cybersecurity and data privacy threats; the costs of complying with extensive governmental regulation; the impact of changing accounting standards and tax laws on the Company's allowance for credit losses and financial results; the possibility that acquisitions may not produce anticipated results and result in unforeseen integration difficulties; and other risk factors described from time to time in the Company's public filings, including, but not limited to, the Company's most recent Annual Report on Form 10-K. Relative to the Company's dividend policy, the payment of cash dividends is subject to the discretion of the Board of Directors and will be determined in light of then-current conditions, including the Company's earnings, leverage, operations, financial conditions, capital requirements and other factors deemed relevant by the Board of Directors. In the future, the Board of Directors may change the Company's dividend policy, including the frequency or amount of any dividend, in light of then-existing conditions.
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NETINTEREST MARGIN
THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(Dollars in Thousands)
(Unaudited)
Three Months Ended
Three Months Ended
September 30, 2024
September 30, 2023
Average Balance
Interest
Annualized Yield/ Rate %
Average Balance
Interest
Annualized Yield/ Rate %
ASSETS
Interest-earning assets:
Total loans
$
821,444
$
13,206
6.40
%
$
821,294
$
12,584
6.08
%
Taxable investment securities
143,802
1,117
3.09
%
123,290
682
2.19
%
Tax-exempt investment securities
1,019
4
1.56
%
1,037
3
1.15
%
Federal Home Loan Bank stock
825
16
7.72
%
1,001
21
8.32
%
Federal funds sold and securities purchased under reverse repurchase agreements
5,285
71
5.34
%
1,069
14
5.20
%
Interest-bearing deposits in banks
43,191
603
5.55
%
44,379
598
5.35
%
Total interest-earning assets
1,015,566
15,017
5.88
%
992,070
13,902
5.56
%
Noninterest-earning assets
64,632
61,235
Total
$
1,080,198
$
1,053,305
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits:
Demand deposits
$
209,322
566
1.08
%
$
206,540
176
0.34
%
Savings deposits
244,022
1,650
2.69
%
244,932
1,570
2.54
%
Time deposits
355,819
3,493
3.91
%
323,824
2,476
3.03
%
Total interest-bearing deposits
809,163
5,709
2.81
%
775,296
4,222
2.16
%
Noninterest-bearing demand deposits
153,171
—
—
161,381
—
—
Total deposits
962,334
5,709
2.36
%
936,677
4,222
1.79
%
Borrowings
11,769
123
4.16
%
19,468
197
4.01
%
Total funding costs
974,103
5,832
2.38
%
956,145
4,419
1.83
%
Other noninterest-bearing liabilities
10,095
10,263
Shareholders' equity
96,000
86,897
Total
$
1,080,198
$
1,053,305
Net interest income
$
9,185
$
9,483
Net interest margin
3.60
%
3.79
%
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NETINTEREST MARGIN
NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
Nine Months Ended
September 30, 2024
September 30, 2023
Average Balance
Interest
Annualized Yield/ Rate %
Average Balance
Interest
Annualized Yield/ Rate %
ASSETS
Interest-earning assets:
Total loans
$
821,008
$
38,989
6.34
%
$
795,033
$
35,330
5.94
%
Taxable investment securities
139,876
3,084
2.95
%
126,341
2,033
2.15
%
Tax-exempt investment securities
1,022
10
1.31
%
1,048
10
1.28
%
Federal Home Loan Bank stock
902
53
7.85
%
1,347
75
7.44
%
Federal funds sold and securities purchased under reverse repurchase agreements
5,580
226
5.41
%
1,415
51
4.82
%
Interest-bearing deposits in banks
35,748
1,478
5.52
%
35,437
1,362
5.14
%
Total interest-earning assets
1,004,136
43,840
5.83
%
960,621
38,861
5.41
%
Noninterest-earning assets
66,076
61,484
Total
$
1,070,212
$
1,022,105
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits:
Demand deposits
$
204,805
1,242
0.81
%
$
216,445
557
0.34
%
Savings deposits
250,528
5,161
2.75
%
221,293
3,279
1.98
%
Time deposits
346,584
9,615
3.71
%
297,708
5,845
2.62
%
Total interest-bearing deposits
801,917
16,018
2.67
%
735,446
9,681
1.76
%
Noninterest-bearing demand deposits
151,317
—
—
162,084
—
—
Total deposits
953,234
16,018
2.24
%
897,530
9,681
1.44
%
Borrowings
13,710
421
4.10
%
29,375
940
4.28
%
Total funding costs
966,944
16,439
2.27
%
926,905
10,621
1.53
%
Other noninterest-bearing liabilities
9,816
9,722
Shareholders' equity
93,452
85,478
Total
$
1,070,212
$
1,022,105
Net interest income
$
27,401
$
28,240
Net interest margin
3.65
%
3.93
%
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
September 30,
December 31,
2024
2023
(Unaudited)
ASSETS
Cash and due from banks
$
10,867
$
12,987
Interest-bearing deposits in banks
71,442
37,292
Total cash and cash equivalents
82,309
50,279
Federal funds sold and securities purchased under reverse repurchase agreements
15,524
9,475
Investment securities available-for-sale, at fair value
144,275
135,565
Investment securities held-to-maturity, at amortized cost
769
1,104
Federal Home Loan Bank stock, at cost
781
1,201
Loans and leases held for investment
803,308
821,791
Less allowance for credit losses on loans and leases
10,116
10,507
Net loans and leases held for investment
793,192
811,284
Premises and equipment, net of accumulated depreciation
25,042
24,398
Cash surrender value of bank-owned life insurance
16,966
16,702
Accrued interest receivable
3,668
3,976
Goodwill and core deposit intangible, net
7,502
7,606
Other real estate owned
538
602
Other assets
9,669
10,748
Total assets
$
1,100,235
$
1,072,940
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing
$
155,024
$
153,591
Interest-bearing
826,125
796,600
Total deposits
981,149
950,191
Accrued interest expense
2,030
2,030
Other liabilities
7,711
9,327
Short-term borrowings
-
10,000
Long-term borrowings
10,854
10,799
Total liabilities
1,001,744
982,347
Shareholders' equity:
Common stock, par value $0.01 per share, 10,000,000 shares authorized; 7,819,565 and 7,738,201 shares issued, respectively; 5,715,388 and 5,735,075 shares outstanding, respectively
78
75
Additional paid-in capital
15,349
14,972
Accumulated other comprehensive loss, net of tax
(3,479)
(6,431)
Retained earnings
115,551
109,959
Less treasury stock: 2,104,177 and 2,003,126 shares at cost, respectively
(29,008)
(27,982)
Total shareholders' equity
98,491
90,593
Total liabilities and shareholders' equity
$
1,100,235
$
1,072,940
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Interest income:
Interest and fees on loans
$
13,206
$
12,584
$
38,989
$
35,330
Interest on investment securities
1,121
685
3,094
2,043
Interest on deposits in banks
603
598
1,478
1,362
Other
87
35
279
126
Total interest income
15,017
13,902
43,840
38,861
Interest expense:
Interest on deposits
5,709
4,222
16,018
9,681
Interest on borrowings
123
197
421
940
Total interest expense
5,832
4,419
16,439
10,621
Net interest income
9,185
9,483
27,401
28,240
Provision for credit losses
152
184
152
753
Net interest income after provision for credit losses
9,033
9,299
27,249
27,487
Non-interest income:
Service and other charges on deposit accounts
312
302
909
869
Lease income
260
241
770
707
Other income, net
329
294
922
889
Total non-interest income
901
837
2,601
2,465
Non-interest expense:
Salaries and employee benefits
3,837
4,120
11,815
12,310
Net occupancy and equipment
958
897
2,806
2,625
Computer services
449
464
1,336
1,315
Insurance expense and assessments
348
423
1,153
1,156
Fees for professional services
299
331
1,004
735
Other expense
1,099
1,084
3,295
3,599
Total non-interest expense
6,990
7,319
21,409
21,740
Income before income taxes
2,944
2,817
8,441
8,212
Provision for income taxes
722
704
1,985
2,004
Net income
$
2,222
$
2,113
$
6,456
$
6,208
Basic net income per share
$
0.38
$
0.35
$
1.10
$
1.04
Diluted net income per share
$
0.36
$
0.33
$
1.04
$
0.97
Dividends per share
$
0.05
$
0.05
$
0.15
$
0.15
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 in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. 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 liquidity, 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 consolidated financial statements previously presented in this press release.
Liquidity Measures
The table below provides information combining the Company's on-balance sheet liquidity with readily available off-balance sheet sources of liquidity as of both September 30, 2024 and December 31, 2023.
September 30, 2024
December 31, 2023
(Dollars in Thousands)
(Unaudited)
(Unaudited)
Liquidity from cash, federal funds sold and securities purchased under reverse repurchase agreements:
Cash and cash equivalents
$
82,309
$
50,279
Federal funds sold and securities purchased under reverse repurchase agreements
15,524
9,475
Total liquidity from cash, federal funds sold and securities purchased under reverse repurchase agreements
97,833
59,754
Liquidity from pledgable investment securities:
Investment securities available-for sale, at fair value
144,275
135,565
Investment securities held-to-maturity, at amortized cost
769
1,104
Less: securities pledged
(39,585)
(41,375)
Less: estimated collateral value discounts
(9,930)
(11,129)
Total liquidity from pledgable investment securities
95,529
84,165
Liquidity from unused lendable collateral (loans) at FHLB
24,771
21,696
Liquidity from unused lendable collateral (loans and securities) at FRB
165,157
161,729
Unsecured lines of credit with banks
48,000
48,000
Total readily available liquidity
$
431,290
$
375,344
The table above calculates readily available liquidity by combining cash and cash equivalents, federal funds sold, securities purchased under reverse repurchase agreements and unencumbered investment security values on the Company's consolidated balance sheet with off-balance sheet liquidity that is readily available through unused collateral pledged to the FHLB and FRB, as well as unsecured lines of credit with other banks. Liquidity from pledgable investment securities and total readily available liquidity are non-GAAP measures used by management and regulators to analyze a portion of the Company's liquidity. Management uses these measures to evaluate the Company's liquidity position.
Pledgable investment securities are considered by management as a readily available source of liquidity since the Company has the ability to pledge the securities with the FHLB or FRB to obtain immediate funding. Both available-for-sale and held-for-maturity securities may be pledged at fair value with the FHLB and through the FRB discount window. The amounts shown as liquidity from pledgable investment securities represent total investment securities as recorded on the consolidated balance sheet, less reductions for securities already pledged and discounts expected to be taken by the lender to determine collateral value.
The unused lendable collateral value at the FHLB presented in the table represents only the amount immediately available to the Company from loans already pledged by the Company to the FHLB as of each consolidated balance sheet date presented. As of September 30, 2024 and December 31, 2023, the Company's total remaining credit availability with the FHLB was $294.8 million and $279.4 million, respectively, subject to the pledging of additional collateral which may include eligible investment securities and loans. In addition, the Company has access to additional sources of liquidity that generally could be obtained over a period of time, including access to unsecured brokered deposits through the wholesale funding markets. Management believes the Company's on-balance sheet and other readily available liquidity provide strong indicators of the Company's ability to fund obligations in a stressed liquidity environment.
Excluding wholesale brokered deposits, as of September 30, 2024, the Company had approximately 30 thousand deposit accounts with an average balance of approximately $30.4 thousand per account. Estimated uninsured deposits (calculated as deposit amounts per deposit holder in excess of $250 thousand, the maximum amount of federal deposit insurance, and excluding deposits secured by pledged assets) totaled $233.4 million, or 23.8% of total deposits, as of September 30, 2024. As of December 31, 2023, estimated uninsured deposits totaled $200.3 million, or 21.1% of total deposits.
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
2024
2023
2024
2023
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
$1,100,235
$1,083,313
$1,070,541
$1,072,940
$1,065,239
Less: Goodwill
7,435
7,435
7,435
7,435
7,435
Less: Core deposit intangible
67
97
134
171
207
Tangible assets
(a)
$1,092,733
$1,075,781
$1,062,972
$1,065,334
$1,057,597
Total shareholders' equity
$98,491
$93,836
$92,326
$90,593
$87,408
Less: Goodwill
7,435
7,435
7,435
7,435
7,435
Less: Core deposit intangible
67
97
134
171
207
Tangible common equity
(b)
$90,989
$86,304
$84,757
$82,987
$79,766
Average shareholders' equity
$96,000
$92,682
$91,645
$87,615
$86,897
$93,452
$85,478
Less: Average goodwill
7,435
7,435
7,435
7,435
7,435
7,435
7,435
Less: Average core deposit intangible
80
115
151
188
229
115
282
Average tangible shareholders' equity
(c)
$88,485
$85,132
$84,059
$79,992
$79,233
$85,902
$77,761
Net income
(d)
$2,222
$2,127
$2,107
$2,277
$2,113
$6,456
$6,208
Common shares outstanding (in thousands)
(e)
5,715
5,744
5,787
5,735
5,875
TANGIBLE MEASURES
Tangible book value per common share
(b)/(e)
$15.92
$15.03
$14.65
$14.47
$13.58
Tangible common equity to tangible assets
(b)/(a)
8.33 %
8.02 %
7.97 %
7.79 %
7.54 %
Return on average tangible common equity (annualized)
(1)
9.99 %
10.05 %
10.08 %
11.29 %
10.58 %
10.04 %
10.67 %
(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)
