First US Bancshares Inc.
05/07/2026 | Press release | Distributed by Public on 05/07/2026 10:47
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DESCRIPTION OF THE BUSINESS
First US Bancshares, Inc., a Delaware corporation ("Bancshares" and, together with its subsidiary, the "Company"), is a bank holding company formed in 1983 registered under the Bank Holding Company Act of 1956, as amended (the "BHCA"). Bancshares operates one wholly owned banking subsidiary, First US Bank, an Alabama banking corporation (the "Bank"). Bancshares and the Bank are headquartered in Birmingham, Alabama.
The Bank conducts a general commercial banking business and offers banking services such as demand, savings, individual retirement account and time deposits, personal and commercial loans, safe deposit box services and remote deposit capture. The Bank operates and serves its customers through 15 full-service banking offices located in Birmingham, Butler, Calera, Centreville, Gilbertown, Grove Hill, Harpersville, Jackson, Thomasville, Tuscaloosa and Woodstock, Alabama; Knoxville and Powell, Tennessee; and Rose Hill, Virginia; as well as loan production offices in Mobile, Alabama and the Chattanooga, Tennessee area. The Bank provides a wide range of commercial banking services to small- and medium-sized businesses, property managers, business executives, professionals and other individuals. The Bank also performs indirect lending through third-party retailers and currently conducts this lending in 17 states, including Alabama, Arkansas, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia. The Bank is the Company's only reportable operating segment upon which management makes decisions regarding how to allocate resources and assess performance.
Delivery of the best possible financial services to customers remains an overall operational focus of the Company. The Company recognizes that attention to detail and responsiveness to customers' desires are critical to customer satisfaction. The Company continues to upgrade technology, both in its financial services and in the training of its 153 full-time equivalent employees (as of March 31, 2026), to ensure customer satisfaction and convenience.
The preparation of the Company's consolidated financial statements requires management to make subjective judgments associated with critical accounting estimates. These estimates are necessary to comply with accounting principles generally accepted in the United States of America ("U.S. GAAP") and general banking practices. A description of the Company's critical accounting estimates, which significantly affect the determination of the Company's consolidated financial position, results of operations and cash flows, is set forth in Part II, Item 7 - Critical Accounting Estimates in the Company's 2025 Form 10-K.
The emphasis of this discussion is a comparison of assets, liabilities and shareholders' equity as of March 31, 2026 to December 31, 2025, while comparing income and expense for the three months ended March 31, 2026 and 2025. All yields and ratios presented and discussed herein are recorded and presented on the accrual basis and not on the tax-equivalent basis, unless otherwise indicated.
This information should be read in conjunction with the Company's unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this report and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the Company's 2025 Form 10-K. As used in the following discussion, the words "we," "us," "our" and the "Company" refer to Bancshares and its consolidated subsidiaries, unless the context indicates otherwise.
RECENT MARKET CONDITIONS
During the three months ended March 31, 2026, the banking industry continued to operate in an environment characterized by economic uncertainty, influenced by moderating, but still resilient, U.S. economic growth, inflation levels remaining above the Federal Reserve's long-term objective, and a labor market that has shown signs of gradual softening. While U.S. gross domestic product ("GDP") growth moderated from levels experienced during the middle of 2025, economic activity remained positive entering 2026, supported by consumer spending and business investment, though at a slower pace.
During the first quarter of 2026, financial markets were significantly impacted by the onset of military conflict involving Iran beginning in late February 2026. The conflict, including disruptions to energy markets and shipping routes in the Strait of Hormuz, contributed to increased volatility across global financial markets and renewed upward pressure on inflation expectations. Oil prices increased sharply during the quarter, and global supply chain disruptions intensified, contributing to heightened economic uncertainty and raising concerns regarding the potential for slower economic growth or recessionary conditions should the conflict persist.
Market interest rates, including U.S. Treasury yields, exhibited increased volatility during the first quarter of 2026 compared to the fourth quarter of 2025. While Treasury yields generally declined during the latter part of 2025 as markets anticipated monetary policy easing, yields moved higher during portions of the first quarter of 2026 in response to rising inflation expectations and geopolitical uncertainty associated with the Iran conflict. For example, the 10-year U.S. Treasury yield increased meaningfully following the onset of the conflict, reaching levels above those observed at year-end 2025, before experiencing periods of fluctuation as market sentiment shifted. The combination of moderating economic growth, inflation above target levels, geopolitical instability, and evolving expectations for monetary policy continues to create a challenging environment in which to predict future interest rate movements.
Uncertainty remains elevated with respect to U.S. fiscal and trade policy, including the ongoing and potential impacts of tariffs implemented by the Trump administration and the possibility of additional policy changes. Geopolitical risks, including the ongoing conflict involving Iran as well as continued unrest in the Middle East and Ukraine, persist and contribute to broader global economic uncertainty. These factors may continue to impact business sentiment, energy markets, supply chains, and overall economic activity.
In the Company's local markets, competitive pressures for both loans and deposits have remained elevated during the first quarter of 2026. Competition for deposits continues to constrain the Company's ability to significantly reduce funding costs despite the decline in market interest rates relative to peak levels in 2025. Commercial lending activity has remained measured as business customers continue to evaluate the potential impact of interest rate movements, geopolitical developments, and broader economic uncertainty on their operations. Consumer spending trends have remained mixed on a macroeconomic basis; however, the Company has continued to experience growth in consumer indirect lending, primarily within higher credit quality segments.
The competitive environment, combined with ongoing economic, geopolitical, and policy uncertainty, continues to present a challenging operating environment for maintaining and improving the Company's net interest margin. Management continues to closely monitor these conditions and believes the Company remains well positioned to respond to a range of economic outcomes; however, adverse changes in economic conditions, credit quality, competitive dynamics, geopolitical developments, or interest rate movements could negatively impact the Company's financial condition and results of operations.
EXECUTIVE OVERVIEW
The Company earned net income of $1.9 million, or $0.33 per diluted common share, during the three months ended March 31, 2026, compared to $1.8 million, or $0.29 per diluted common share, for the three months ended March 31, 2025. Comparing the two periods, the increase in net income resulted primarily from increased interest income associated with growth in earning assets, as well as from a decrease in the Company's provision for credit losses on loans and leases.
Summarized condensed consolidated statements of operations are included below for the three months ended March 31, 2026 and 2025.
|
Three Months Ended |
||||||||
|
March 31, |
March 31, |
|||||||
|
2026 |
2025 |
|||||||
|
(Dollars in Thousands, Except Per Share Data) |
||||||||
|
Interest income |
$ |
14,940 |
$ |
14,018 |
||||
|
Interest expense |
5,725 |
5,121 |
||||||
|
Net interest income |
9,215 |
8,897 |
||||||
|
Provision for credit losses |
254 |
528 |
||||||
|
Net interest income after provision for credit losses |
8,961 |
8,369 |
||||||
|
Non-interest income |
840 |
875 |
||||||
|
Non-interest expense |
7,341 |
6,918 |
||||||
|
Income before income taxes |
2,460 |
2,326 |
||||||
|
Provision for income taxes |
515 |
554 |
||||||
|
Net income |
$ |
1,945 |
$ |
1,772 |
||||
|
Basic net income per share |
$ |
0.34 |
$ |
0.30 |
||||
|
Diluted net income per share |
$ |
0.33 |
$ |
0.29 |
||||
|
Dividends per share |
$ |
0.07 |
$ |
0.07 |
||||
The discussion that follows summarizes the most significant activity that drove changes in the Company's operating results during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.
Net Interest Income and Margin
Net interest income increased by $0.3 million, or 3.6%, comparing the three months ended March 31, 2026 to the three months ended March 31, 2025. The increase resulted from growth in average interest-earning asset balances comparing the two periods. Average interest-earning assets increased by $86.3 million, or 8.4%, comparing the three months ended March 31, 2026 to the corresponding period of 2025. Earning asset growth was reflected in total loans, investment securities, federal funds sold and interest-bearing deposits with other financial institutions. The increase in interest income was partially offset by both volume and rate-related increases in interest expense associated with interest-bearing liabilities. While the increase in earning assets was favorable to the Company's net interest income, net interest margin decreased as the average yield on interest-earnings assets declined at a faster pace than the average rate on interest-bearing liabilities. Net interest margin was 3.37% for the three months ended March 31, 2026, compared to 3.53% for the three months ended March 31, 2025.
Provision for Credit Losses
For the three months ended March 31, 2026, the Company recorded a provision for credit losses of $0.3 million, compared to $0.5 million for the three months ended March 31, 2025. The decrease in provisioning comparing the two periods was primarily associated with a reduction in loan growth during the first quarter of 2026 compared to the first quarter of 2025, including the impact of the Company's reserve for unfunded lending commitments. As of both March 31, 2026 and December 31, 2025, the Company's allowance for credit losses ("ACL") on loans and leases as a percentage of total loans was 1.25%.
Non-interest Income
Non-interest income remained relatively consistent, totaling $0.8 million for the three months ended March 31, 2026, compared to $0.9 million for the three months ended March 31, 2025.
Non-interest Expense
Non-interest expense increased to $7.3 million for the three months ended March 31, 2026, compared to $6.9 million for the three months ended March 31, 2025. The increase comparing the 2026 period to the 2025 period resulted from increases in a number of expense categories, primarily fees for professional services, occupancy, and salaries and benefits expense.
Total Assets
As of March 31, 2026, the Company's assets totaled $1,165.2 million, compared to $1,154.8 million as of December 31, 2025, an increase of 0.9%.
Loans
Total loans decreased by $9.3 million, or 1.1%, as of March 31, 2026, compared to December 31, 2025, as growth in the multi-family residential real estate and indirect categories was offset by decreases primarily in the construction, non-residential commercial real estate and commercial and industrial ("C&I") categories. The decrease in construction is consistent with the ebb and flow of projects in the Company's service territories. Construction loans are generally short-to-medium term loans that are expected to pay off or transfer to another loan category upon project completion. The decrease in non-residential commercial real estate was related to completed construction projects that moved into a permanent category, but were subsequently refinanced into the permanent market. The growth in the indirect category accelerated in the latter part of the first quarter of 2026, consistent with typical seasonal trends. The indirect lending platform focuses on consumer lending at the higher end of the credit spectrum. Collateral financed in the indirect portfolio primarily includes boats, recreational vehicles, campers, horse trailers and cargo trailers. The weighted average credit score of new indirect loans financed during the three months ended March 31, 2026 was 797, while the weighted average credit score for the entire portfolio was 783. While total loans decreased during the first quarter of 2026, average loan balances remained higher comparing the three months ended March 31, 2026 to the three months ended March 31, 2025, increasing by $26.7 million, or 3.2%.
Asset Quality
Nonperforming assets, including loans in non-accrual status and other real estate owned, totaled $1.8 million as of March 31, 2026, an increase from $1.6 million as of December 31, 2025. As a percentage of total assets, nonperforming assets increased to 0.16% as of March 31, 2026, compared to 0.14% as of December 31, 2025. Net charge-offs as a percentage of average loans totaled 0.23% during the three months ended March 31, 2026, compared to 0.13% during the three months ended March 31, 2025. The increase in net charge-offs comparing the two periods was due primarily to an increase in charge-offs associated with the indirect consumer portfolio.
Deposits
Total deposits increased by $10.9 million, or 1.1%, during the three months ended March 31, 2026, due primarily to an increase in interest-bearing demand deposits of $28.4 million, partially offset by a $4.7 million decrease in noninterest-bearing deposits and a $12.8 million decrease in time deposits. Core deposits, which exclude time deposits of $250 thousand or more and all wholesale brokered deposits, totaled $853.8 million, or 82.2% of total deposits, as of March 31, 2026, compared to $838.3 million, or 81.6% of total deposits, as of December 31, 2025. The average rate on deposits totaled 2.18% during the three months ended March 31, 2026, compared to 2.07% during the three months ended March 31, 2025. In the current environment, significant competitive pressure remains to acquire and maintain deposit balances.
Cash and Investment Securities
As of March 31, 2026, the Company held cash, federal funds sold and securities purchased under reverse repurchase agreements totaling $85.4 million, or 7.3% of total assets, compared to $78.4 million, or 6.8% of total assets, as of December 31, 2025. Investment securities, including both the available-for-sale and held-to-maturity portfolios, totaled $181.5 million as of March 31, 2026, compared to $168.5 million as of December 31, 2025. During the three months ended March 31, 2026, the Company purchased $20.5 million of investment securities at market rates in existence at the time of purchase. These purchases, combined with the maturity and paydown of investment securities at lower rates, led to continued improvement in yield on the portfolio. The yield on investment securities, including both available-for-sale and held to maturity securities, totaled 3.89% during the three months ended March 31, 2026, compared to 3.44% during the three months ended March 31, 2025. As of March 31, 2026, the expected average life of securities in the investment portfolio was 3.8 years compared to 3.7 years as of December 31, 2025.
Shareholders' Equity
As of March 31, 2026, shareholders' equity totaled $104.6 million, or 9.0% of total assets, compared to $105.6 million, or 9.1% of total assets, as of December 31, 2025. While earnings, net of dividends paid, increased shareholders' equity during the three months ended March 31, 2026, the increase was fully offset by share repurchases, combined with an increase in the Company's accumulated other comprehensive loss resulting from the increasing interest rate environment during the period.
Cash Dividends
During both the three months ended March 31, 2026 and 2025, the Company declared cash dividends totaling $0.07 per share on its common stock.
Share Repurchases
During the three months ended March 31, 2026, the Company completed the repurchase of 146,500 shares of its common stock at a weighted average price of $15.03 per share. The repurchases were completed under the Company's previously announced share repurchase program, which was expanded during the fourth quarter of 2025. As of March 31, 2026, 1,638,313 shares remained available for repurchase under the program.
Regulatory Capital
During the three months ended March 31, 2026, 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 March 31, 2026, the Bank's common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 10.85%. Its total capital ratio was 11.99%, and its Tier 1 leverage ratio was 8.85%.
Liquidity
As of March 31, 2026, 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, FHLB advances, the FRB's discount window, and brokered deposits.
Banking Center Growth
During the three months ended March 31, 2026, the Company neared completion on renovation of a banking center office in Daphne, Alabama that was purchased from another financial institution. This location will serve as the Bank's initial deposit gathering facility in the Daphne/Mobile area, and is expected to open to the public during the second quarter of 2026.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income is calculated as the difference between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest-bearing liabilities, can materially impact net interest income. The Company's earning assets consist of loans, investment securities, Federal Home Loan Bank stock, federal funds sold by the Bank, securities purchased under reverse repurchase agreements and interest-bearing deposits in banks. Interest-bearing liabilities consist of interest-bearing demand deposits and savings and time deposits, as well as short- and long-term borrowings.
The following tables show the average balances of each principal category of assets, liabilities and shareholders' equity for the three months ended March 31, 2026 and 2025. Additionally, the tables provide an analysis of interest revenue or expense associated with each category, along with the accompanying yield or rate percentage. Net interest margin is calculated for each period presented as net interest income divided by average total interest-earning assets.
|
Three Months Ended |
Three Months Ended |
|||||||||||||||||||||||
|
March 31, 2026 |
March 31, 2025 |
|||||||||||||||||||||||
|
Average |
Interest |
Annualized |
Average |
Interest |
Annualized |
|||||||||||||||||||
|
ASSETS |
||||||||||||||||||||||||
|
Interest-earning assets: |
||||||||||||||||||||||||
|
Loans (1) |
$ |
851,224 |
$ |
12,491 |
5.95 |
% |
$ |
824,531 |
$ |
12,241 |
6.02 |
% |
||||||||||||
|
Investment securities |
175,707 |
1,687 |
3.89 |
% |
166,241 |
1,412 |
3.44 |
% |
||||||||||||||||
|
Federal Home Loan Bank stock |
794 |
12 |
6.13 |
% |
1,341 |
24 |
7.26 |
% |
||||||||||||||||
|
Federal funds sold and securities purchased under reverse repurchase agreements |
15,706 |
152 |
3.92 |
% |
4,850 |
53 |
4.43 |
% |
||||||||||||||||
|
Interest-bearing deposits in banks |
66,066 |
598 |
3.67 |
% |
26,220 |
288 |
4.45 |
% |
||||||||||||||||
|
Total interest-earning assets |
1,109,497 |
14,940 |
5.46 |
% |
1,023,183 |
14,018 |
5.56 |
% |
||||||||||||||||
|
Noninterest-earning assets |
63,893 |
64,155 |
||||||||||||||||||||||
|
Total assets |
$ |
1,173,390 |
$ |
1,087,338 |
||||||||||||||||||||
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||||||||||||||||||
|
Interest-bearing deposits: |
||||||||||||||||||||||||
|
Demand deposits |
$ |
210,675 |
$ |
399 |
0.77 |
% |
$ |
212,130 |
$ |
493 |
0.94 |
% |
||||||||||||
|
Money market/savings deposits |
330,507 |
2,128 |
2.61 |
% |
257,046 |
1,544 |
2.44 |
% |
||||||||||||||||
|
Time deposits |
353,705 |
3,083 |
3.53 |
% |
330,241 |
2,832 |
3.48 |
% |
||||||||||||||||
|
Total interest-bearing deposits |
894,887 |
5,610 |
2.54 |
% |
799,417 |
4,869 |
2.47 |
% |
||||||||||||||||
|
Noninterest-bearing demand deposits |
150,438 |
- |
- |
155,294 |
- |
- |
||||||||||||||||||
|
Total deposits |
1,045,325 |
5,610 |
2.18 |
% |
954,711 |
4,869 |
2.07 |
% |
||||||||||||||||
|
Borrowings |
10,955 |
115 |
4.26 |
% |
23,404 |
252 |
4.37 |
% |
||||||||||||||||
|
Total funding liabilities |
1,056,280 |
5,725 |
2.20 |
% |
978,115 |
5,121 |
2.12 |
% |
||||||||||||||||
|
Other noninterest-bearing liabilities |
11,320 |
9,489 |
||||||||||||||||||||||
|
Shareholders' equity |
105,790 |
99,734 |
||||||||||||||||||||||
|
Total liabilities and shareholders' equity |
$ |
1,173,390 |
$ |
1,087,338 |
||||||||||||||||||||
|
Net interest income (2) |
$ |
9,215 |
$ |
8,897 |
||||||||||||||||||||
|
Net interest margin |
3.37 |
% |
3.53 |
% |
||||||||||||||||||||
|
(1) |
For the purpose of these computations, non-accruing loans are included in the average loan amounts outstanding. These loans averaged $1.4 million and $4.0 million for the three months ended March 31, 2026 and 2025, respectively. |
|
(2) |
Loan fees are included in interest amounts presented. Loan fees totaled $0.3 million and $0.2 million for the three months ended March 31, 2026 and 2025, respectively. |
The following tables summarize the impact of variances in volume and rate of interest-earning assets and interest-bearing liabilities on components of net interest income.
|
Three Months Ended March 31, 2026 |
Three Months Ended March 31, 2025 |
|||||||||||||||||||||||
|
Compared to |
Compared to |
|||||||||||||||||||||||
|
Three Months Ended March 31, 2025 |
Three Months Ended March 31, 2024 |
|||||||||||||||||||||||
|
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||
|
Due to Change In: |
Due to Change In: |
|||||||||||||||||||||||
|
Volume |
Average |
Net |
Volume |
Average |
Net |
|||||||||||||||||||
|
(Dollars in Thousands) |
||||||||||||||||||||||||
|
Interest earned on: |
||||||||||||||||||||||||
|
Total loans |
$ |
396 |
$ |
(146 |
) |
$ |
250 |
$ |
40 |
$ |
(652 |
) |
$ |
(612 |
) |
|||||||||
|
Investment securities |
80 |
195 |
275 |
202 |
345 |
547 |
||||||||||||||||||
|
Federal Home Loan Bank stock |
(10 |
) |
(2 |
) |
(12 |
) |
8 |
(2 |
) |
6 |
||||||||||||||
|
Federal funds sold and securities purchased under reverse repurchase agreements |
119 |
(20 |
) |
99 |
(24 |
) |
(12 |
) |
(36 |
) |
||||||||||||||
|
Interest-bearing deposits in banks |
438 |
(128 |
) |
310 |
(93 |
) |
(71 |
) |
(164 |
) |
||||||||||||||
|
Total interest-earning assets |
1,023 |
(101 |
) |
922 |
133 |
(392 |
) |
(259 |
) |
|||||||||||||||
|
Interest expense on: |
||||||||||||||||||||||||
|
Demand deposits |
(3 |
) |
(91 |
) |
(94 |
) |
14 |
227 |
241 |
|||||||||||||||
|
Money market/savings deposits |
441 |
143 |
584 |
(24 |
) |
(316 |
) |
(340 |
) |
|||||||||||||||
|
Time deposits |
201 |
50 |
251 |
(58 |
) |
(73 |
) |
(131 |
) |
|||||||||||||||
|
Borrowings |
(134 |
) |
(3 |
) |
(137 |
) |
84 |
30 |
114 |
|||||||||||||||
|
Total interest-bearing liabilities |
505 |
99 |
604 |
16 |
(132 |
) |
(116 |
) |
||||||||||||||||
|
Increase (decrease) in net interest income |
$ |
518 |
$ |
(200 |
) |
$ |
318 |
$ |
117 |
$ |
(260 |
) |
$ |
(143 |
) |
|||||||||
Interest income increased by $0.9 million, comparing the three months ended March 31, 2026 to the three months ended March 31, 2025. The increase in interest income resulted from a $1.0 increase attributable to growth in average interest-earning assets, partially offset by a $0.1 million decrease attributable to lower average yields on interest-earning assets. With the exception of investment securities, yields in all earning asset categories declined comparing the three months ended March 31, 2026 to the three months ended March 31, 2025 as short-term interest rates generally declined comparing the two periods.
Interest expense increased by $0.6 million, comparing the three months ended March 31, 2026 to the three months ended March 31, 2025. The increase resulted primarily from increases in both the average balance and rates paid on money market and time deposits. These increases were partially offset by reductions in both average balances and rates associated with demand deposits and borrowings.
The Company's net interest income and net interest margin during the three months ended March 31, 2026 continued to be impacted by variability in the interest rate environment. Notably, between September and December 2025, the federal funds rate was reduced by 75 basis points, and generally, the Company's interest-earning assets have repriced downward more quickly than interest-bearing liabilities, reducing the Company's net interest margin to 3.37% during the three months ended March 31 2026, compared to 3.53% during the three months ended March 31, 2025. While management is continuing efforts to improve net interest margin, the results of these efforts cannot be fully predicted. Should market interest rates increase or decrease at significant levels, particularly over a short period of time, the Company's net interest margin and net interest income could be negatively impacted.
Provision for Credit Losses
For the three months ended March 31, 2026, the Company recorded a provision for credit losses of $0.3 million, compared to $0.5 million for the three months ended March 31, 2025. The decrease in provisioning comparing the two periods was primarily associated with a reduction in loan growth during the first quarter of 2026 compared to the first quarter of 2025, including the impact of the Company's reserve for unfunded lending commitments. Net charge-offs totaled $0.5 million and $0.3 million for the three months ended March 31, 2026 and 2025, respectively.
As of both March 31, 2026 and December 31, 2025, the Company's ACL as a percentage of total loans and leases was 1.25%. While we believe that the methodologies and calculations that have been used in the determination of the ACL are adequate, the determination of the appropriateness of the ACL is complex and requires judgment by management about the effects of matters that are inherently uncertain. Factors beyond our control, such as changes in economic forecasts related to the national economy, changes in consumer behavior, or economic deterioration in service areas in which the Company operates, may negatively and materially affect asset quality and the adequacy of the ACL, as well as the resulting provision for credit losses.
Non-Interest Income
Non-interest income represents fees and income derived from sources other than interest-earning assets. The following table presents the major components of non-interest income for the periods indicated:
|
Three Months Ended March 31, |
||||||||||||||||
|
2026 |
2025 |
$ Change |
% Change |
|||||||||||||
|
(Dollars in Thousands) |
||||||||||||||||
|
Service charges and other fees on deposit accounts |
$ |
283 |
$ |
288 |
$ |
(5 |
) |
(1.7 |
)% |
|||||||
|
Bank-owned life insurance |
141 |
137 |
4 |
2.9 |
% |
|||||||||||
|
Lease income |
269 |
284 |
(15 |
) |
(5.3 |
)% |
||||||||||
|
ATM fee income |
64 |
84 |
(20 |
) |
(23.8 |
)% |
||||||||||
|
Other income |
83 |
82 |
1 |
1.2 |
% |
|||||||||||
|
Total non-interest income |
$ |
840 |
$ |
875 |
$ |
(35 |
) |
(4.0 |
)% |
|||||||
The Company's non-interest income remained relatively consistent, totaling $0.8 million for the three months ended March 31, 2026, compared to $0.9 million for the three months ended March 31, 2025. Management continues to evaluate opportunities to add non-interest revenue streams and grow existing streams; however, significant variation in non-interest income is not expected in the near term.
Non-Interest Expense
Non-interest expense represents expenses incurred from sources other than interest-bearing liabilities. The following table presents the major components of non-interest expense for the periods indicated:
|
Three Months Ended March 31, |
||||||||||||||||
|
2026 |
2025 |
$ Change |
% Change |
|||||||||||||
|
(Dollars in Thousands) |
||||||||||||||||
|
Salaries and employee benefits |
$ |
3,814 |
$ |
3,736 |
$ |
78 |
2.1 |
% |
||||||||
|
Net occupancy and equipment |
971 |
875 |
96 |
11.0 |
% |
|||||||||||
|
Computer services |
337 |
412 |
(75 |
) |
(18.2 |
)% |
||||||||||
|
Insurance expense and assessments |
415 |
384 |
31 |
8.1 |
% |
|||||||||||
|
Fees for professional services |
328 |
215 |
113 |
52.6 |
% |
|||||||||||
|
Postage, stationery and supplies |
141 |
149 |
(8 |
) |
(5.4 |
)% |
||||||||||
|
Telephone/data communications |
249 |
199 |
50 |
25.1 |
% |
|||||||||||
|
Collection and recoveries |
79 |
70 |
9 |
12.9 |
% |
|||||||||||
|
Directors fees |
120 |
93 |
27 |
29.0 |
% |
|||||||||||
|
Software amortization |
146 |
108 |
38 |
35.2 |
% |
|||||||||||
|
Other real estate/foreclosure expense, net |
51 |
20 |
31 |
155.0 |
% |
|||||||||||
|
Other expense |
690 |
657 |
33 |
5.0 |
% |
|||||||||||
|
Total non-interest expense |
$ |
7,341 |
$ |
6,918 |
$ |
423 |
6.1 |
% |
||||||||
Non-interest expense totaled $7.3 million during the three months ended March 31, 2026, compared to $6.9 million during the three months ended March 31, 2025. The increase comparing the 2026 period to the 2025 period resulted from increases in a number of expense categories, primarily fees for professional services, occupancy, and salaries and benefits expense.
Provision for Income Taxes
The provision for income taxes was $0.5 million and $0.6 million for the three months ended March 31, 2026 and 2025, respectively. The Company's effective tax rate was 20.9% and 23.8%, respectively, for the same periods.
The effective tax rate is impacted by recurring items, such as changes in tax-exempt interest income earned from bank-qualified municipal bonds and loans and the cash surrender value of bank-owned life insurance. Management makes decisions about whether to invest in tax-exempt instruments on a case-by-case basis after considering a number of factors, including investment return, credit quality and the consistency of such investments with the Company's overall strategy. The Company's effective tax rate is expected to fluctuate commensurate with the level of these investments as compared to total pre-tax income.
BALANCE SHEET ANALYSIS
Investment Securities
The investment securities portfolio is used by management to provide liquidity, to generate interest income and for use as collateral for public deposits and wholesale funding. Risk and return can be adjusted by altering the duration, composition and/or balance of the portfolio. The expected average life of securities in the investment portfolio was 3.8 years and 3.7 years as of March 31, 2026 and December 31, 2025, respectively.
Available-for-sale securities are recorded at estimated fair value, with unrealized gains or losses recognized, net of taxes, in accumulated other comprehensive loss, a separate component of shareholders' equity. As of March 31, 2026, available-for-sale securities totaled $181.1 million, or 99.8% of the total investment portfolio, compared to $168.1 million, or 99.7% of the total investment portfolio, as of December 31, 2025. Available-for-sale securities consisted of residential and commercial mortgage-backed securities, U.S. Treasury securities, corporate bonds, obligations of U.S. government-sponsored agencies, and obligations of state and political subdivisions.
Held-to-maturity securities are recorded at amortized cost and represent securities that the Company both intends and has the ability to hold to maturity. As of March 31, 2026, held-to-maturity securities totaled $0.4 million, or 0.2% of the total investment portfolio, compared to $0.5 million, or 0.3% of the total investment portfolio, as of December 31, 2025. Held-to-maturity securities consisted of commercial mortgage-backed securities, obligations of U.S. government-sponsored agencies, and obligations of state and political subdivisions.
Net unrealized losses in the available-for-sale portfolio totaled $2.1 million as of March 31, 2026, compared to $1.0 million as of December 31, 2025. The increase in unrealized losses in the portfolio resulted from changes in the interest rate environment, in particular, increases in market rates, particularly in the mid- to long-term part of the Treasury curve between December 31, 2025 and March 31, 2026. Net unrealized losses within the available-for-sale portfolio were recognized, net of tax, in accumulated other comprehensive loss.
As of March 31, 2026, the Company evaluated both the available-for-sale and held-to-maturity portfolios for credit losses and concluded that no credit losses were included in either portfolio and that the unrealized losses in both portfolios resulted from the prevailing interest rate environment.
Loans and Leases
The Company's total loan portfolio decreased by $9.3 million, or 1.1%, as of March 31, 2026, compared to December 31, 2025. The tables below summarize loan balances by portfolio category, as well as the ACL, as of the end of each of the most recent five quarters as of March 31, 2026:
|
Quarter Ended |
||||||||||||||||||||
|
2026 |
2025 |
|||||||||||||||||||
|
March |
December |
September |
June |
March |
||||||||||||||||
|
(Dollars in Thousands) |
||||||||||||||||||||
|
Real estate loans: |
||||||||||||||||||||
|
Construction, land development and other land loans |
$ |
27,236 |
$ |
32,618 |
$ |
38,560 |
$ |
48,101 |
$ |
58,572 |
||||||||||
|
Secured by 1-4 family residential properties |
65,460 |
66,996 |
67,620 |
67,587 |
68,523 |
|||||||||||||||
|
Secured by multi-family residential properties |
124,826 |
117,769 |
112,763 |
118,807 |
106,374 |
|||||||||||||||
|
Secured by non-residential commercial real estate |
189,408 |
200,699 |
211,400 |
215,035 |
214,065 |
|||||||||||||||
|
Commercial and industrial loans |
46,665 |
48,360 |
46,562 |
40,986 |
45,166 |
|||||||||||||||
|
Consumer loans: |
||||||||||||||||||||
|
Direct |
4,362 |
4,844 |
4,999 |
4,836 |
4,610 |
|||||||||||||||
|
Indirect |
385,740 |
381,732 |
385,616 |
376,079 |
351,025 |
|||||||||||||||
|
Total loans |
843,697 |
$ |
853,018 |
867,520 |
871,431 |
848,335 |
||||||||||||||
|
Allowance for credit losses on loans and leases |
10,536 |
10,704 |
10,700 |
11,388 |
10,405 |
|||||||||||||||
|
Net loans |
$ |
833,161 |
$ |
842,314 |
$ |
856,820 |
$ |
860,043 |
$ |
837,930 |
||||||||||
As of March 31, 2026 and December 31, 2025, the composition of the non-residential commercial real estate loan portfolio was as follows:
|
March 31, 2026 |
December 31, 2025 |
||||||||||||||||||
|
Owner Occupied |
Non-Owner Occupied |
Total |
Owner Occupied |
Non-Owner Occupied |
Total |
||||||||||||||
|
(Dollars in Thousands) |
|||||||||||||||||||
|
Office |
$ |
7,037 |
$ |
34,133 |
$ |
41,170 |
$ |
7,141 |
$ |
33,170 |
$ |
40,311 |
|||||||
|
Retail single credit tenant |
598 |
38,558 |
39,156 |
603 |
39,028 |
39,631 |
|||||||||||||
|
Industrial |
5,231 |
42,325 |
47,556 |
5,194 |
42,522 |
47,716 |
|||||||||||||
|
Storage |
713 |
4,723 |
5,436 |
727 |
15,645 |
16,372 |
|||||||||||||
|
Retail services |
14,168 |
- |
14,168 |
14,381 |
- |
14,381 |
|||||||||||||
|
Retail with anchor |
2,584 |
3,443 |
6,027 |
2,619 |
3,486 |
6,105 |
|||||||||||||
|
Senior housing / Assisted living |
17,966 |
- |
17,966 |
17,965 |
- |
17,965 |
|||||||||||||
|
Other |
10,090 |
7,839 |
17,929 |
10,222 |
7,996 |
18,218 |
|||||||||||||
|
Total loans |
$ |
58,387 |
$ |
131,021 |
$ |
189,408 |
$ |
58,852 |
$ |
141,847 |
$ |
200,699 |
|||||||
As of March 31, 2026 and December 31, 2025, the composition of the construction, land development, and other land loans loan portfolio was as follows:
|
March 31, 2026 |
December 31, 2025 |
||||||||||||||||||
|
Owner Occupied |
Non-Owner Occupied |
Total |
Owner Occupied |
Non-Owner Occupied |
Total |
||||||||||||||
|
(Dollars in Thousands) |
|||||||||||||||||||
|
Apartments |
$ |
- |
$ |
23,441 |
$ |
23,441 |
$ |
- |
$ |
22,722 |
$ |
22,722 |
|||||||
|
Farmland |
2,257 |
- |
2,257 |
2,322 |
- |
2,322 |
|||||||||||||
|
Retail |
- |
1,430 |
1,430 |
- |
7,445 |
7,445 |
|||||||||||||
|
Other |
- |
108 |
108 |
- |
129 |
129 |
|||||||||||||
|
Total loans |
$ |
2,257 |
$ |
24,979 |
$ |
27,236 |
$ |
2,322 |
$ |
30,296 |
$ |
32,618 |
|||||||
The following table classifies the Company's fixed and variable rate loans as of March 31, 2026 according to contractual maturities of: (1) one year or less, (2) after one year through five years, (3) after five years through fifteen years, and (4) after fifteen years:
|
March 31, 2026 |
||||||||||||||||||||
|
One Year or Less |
After One Year Through Five Years |
After Five Years Through Fifteen Years |
After Fifteen Years |
Total |
||||||||||||||||
|
(Dollars in Thousands) |
||||||||||||||||||||
|
Total loans: |
||||||||||||||||||||
|
Real estate loans: |
||||||||||||||||||||
|
Construction, land development and other land loans |
$ |
1 |
$ |
27,235 |
$ |
- |
$ |
- |
$ |
27,236 |
||||||||||
|
Secured by 1-4 family residential properties |
2,752 |
12,013 |
24,460 |
26,235 |
65,460 |
|||||||||||||||
|
Secured by multi-family residential properties |
67,493 |
55,069 |
422 |
1,842 |
124,826 |
|||||||||||||||
|
Secured by non-residential commercial real estate |
46,794 |
96,079 |
46,535 |
- |
189,408 |
|||||||||||||||
|
Commercial and industrial loans |
8,481 |
32,858 |
5,326 |
- |
46,665 |
|||||||||||||||
|
Consumer loans: |
||||||||||||||||||||
|
Direct |
1,491 |
2,814 |
57 |
- |
4,362 |
|||||||||||||||
|
Indirect |
17,755 |
16,569 |
351,416 |
- |
385,740 |
|||||||||||||||
|
Total loans |
$ |
144,767 |
$ |
242,637 |
$ |
428,216 |
$ |
28,077 |
$ |
843,697 |
||||||||||
|
Loans with fixed interest rates: |
||||||||||||||||||||
|
Real estate loans: |
||||||||||||||||||||
|
Construction, land development and other land loans |
$ |
1 |
$ |
2,364 |
$ |
- |
$ |
- |
$ |
2,365 |
||||||||||
|
Secured by 1-4 family residential properties |
2,078 |
4,101 |
3,952 |
13,306 |
23,437 |
|||||||||||||||
|
Secured by multi-family residential properties |
14,002 |
20,396 |
422 |
766 |
35,586 |
|||||||||||||||
|
Secured by non-residential commercial real estate |
16,201 |
69,745 |
29,201 |
- |
115,147 |
|||||||||||||||
|
Commercial and industrial loans |
3,435 |
16,124 |
5,281 |
- |
24,840 |
|||||||||||||||
|
Consumer loans: |
||||||||||||||||||||
|
Direct |
1,477 |
2,814 |
57 |
- |
4,348 |
|||||||||||||||
|
Indirect |
17,755 |
16,569 |
351,416 |
- |
385,740 |
|||||||||||||||
|
Total loans with fixed interest rates |
$ |
54,949 |
$ |
132,113 |
$ |
390,329 |
$ |
14,072 |
$ |
591,463 |
||||||||||
|
Loans with variable interest rates: |
||||||||||||||||||||
|
Real estate loans: |
||||||||||||||||||||
|
Construction, land development and other land loans |
$ |
- |
$ |
24,871 |
$ |
- |
$ |
- |
$ |
24,871 |
||||||||||
|
Secured by 1-4 family residential properties |
674 |
7,912 |
20,508 |
12,929 |
42,023 |
|||||||||||||||
|
Secured by multi-family residential properties |
53,491 |
34,673 |
- |
1,076 |
89,240 |
|||||||||||||||
|
Secured by non-residential commercial real estate |
30,593 |
26,334 |
17,334 |
- |
74,261 |
|||||||||||||||
|
Commercial and industrial loans |
5,046 |
16,734 |
45 |
- |
21,825 |
|||||||||||||||
|
Consumer loans: |
||||||||||||||||||||
|
Direct |
14 |
- |
- |
- |
14 |
|||||||||||||||
|
Indirect |
- |
- |
- |
- |
- |
|||||||||||||||
|
Total loans with variable interest rates |
$ |
89,818 |
$ |
110,524 |
$ |
37,887 |
$ |
14,005 |
$ |
252,234 |
||||||||||
Allowance for Credit Losses on Loans and Leases
The tables below summarize changes in the ACL on loans and leases for each of the most recent five quarters as of March 31, 2026:
|
Quarter Ended |
||||||||||||||||||||
|
2026 |
2025 |
|||||||||||||||||||
|
March |
December |
September |
June |
March |
||||||||||||||||
|
(Dollars in Thousands) |
||||||||||||||||||||
|
Balance at beginning of period |
$ |
10,704 |
$ |
10,700 |
$ |
11,388 |
$ |
10,405 |
$ |
10,184 |
||||||||||
|
Charge-offs: |
||||||||||||||||||||
|
Real estate loans: |
||||||||||||||||||||
|
Construction, land development and other land loans |
- |
- |
- |
- |
- |
|||||||||||||||
|
Secured by 1-4 family residential properties |
- |
- |
- |
- |
- |
|||||||||||||||
|
Secured by multi-family residential properties |
- |
- |
- |
- |
- |
|||||||||||||||
|
Secured by non-residential commercial real estate |
(48 |
) |
- |
- |
- |
- |
||||||||||||||
|
Commercial and industrial loans |
- |
- |
(1,024 |
) |
(1,191 |
) |
- |
|||||||||||||
|
Consumer loans: |
||||||||||||||||||||
|
Direct |
(1 |
) |
(4 |
) |
- |
(5 |
) |
- |
||||||||||||
|
Indirect |
(590 |
) |
(464 |
) |
(411 |
) |
(595 |
) |
(422 |
) |
||||||||||
|
Total charge-offs |
(639 |
) |
(468 |
) |
(1,435 |
) |
(1,791 |
) |
(422 |
) |
||||||||||
|
Recoveries: |
||||||||||||||||||||
|
Real estate loans: |
||||||||||||||||||||
|
Construction, land development and other land loans |
- |
- |
- |
- |
- |
|||||||||||||||
|
Secured by 1-4 family residential properties |
5 |
9 |
10 |
5 |
6 |
|||||||||||||||
|
Secured by multi-family residential properties |
- |
- |
- |
- |
- |
|||||||||||||||
|
Secured by non-residential commercial real estate |
- |
49 |
- |
- |
- |
|||||||||||||||
|
Commercial and industrial loans |
10 |
149 |
- |
- |
16 |
|||||||||||||||
|
Consumer loans: |
||||||||||||||||||||
|
Direct |
32 |
42 |
42 |
50 |
57 |
|||||||||||||||
|
Indirect |
99 |
36 |
45 |
44 |
74 |
|||||||||||||||
|
Total recoveries |
146 |
285 |
97 |
99 |
153 |
|||||||||||||||
|
Net charge-offs |
(493 |
) |
(183 |
) |
(1,338 |
) |
(1,692 |
) |
(269 |
) |
||||||||||
|
Provision for credit losses on loans and leases |
325 |
187 |
650 |
2,675 |
490 |
|||||||||||||||
|
Ending balance |
$ |
10,536 |
$ |
10,704 |
$ |
10,700 |
$ |
11,388 |
$ |
10,405 |
||||||||||
|
Ending balance as a percentage of loans |
1.25 |
% |
1.25 |
% |
1.23 |
% |
1.31 |
% |
1.23 |
% |
||||||||||
|
Net charge-offs as a percentage of average loans |
0.23 |
% |
0.08 |
% |
0.61 |
% |
0.79 |
% |
0.13 |
% |
||||||||||
Allowance for Credit Losses on Unfunded Lending Commitments
The Company records an ACL on unfunded lending commitments in which the Company is exposed to credit risk via a present contractual obligation to extend credit unless the obligation is unconditionally cancellable. Unconditional lending commitments generally include unfunded term loan agreements, home equity lines of credit, lines of credit, and demand deposit account overdraft protection. As of March 31, 2026, the Company's reserve for unfunded commitments, which is recorded in other liabilities in the Company's consolidated balance sheets, totaled $0.3 million, compared to $0.4 million as of December 31, 2025.
Nonperforming Assets
Nonperforming assets at the end of the five most recent quarters as of March 31, 2026 were as follows:
|
Quarter Ended |
||||||||||||||||||||
|
2026 |
2025 |
|||||||||||||||||||
|
March |
December |
September |
June |
March |
||||||||||||||||
|
(Dollars in Thousands) |
||||||||||||||||||||
|
Non-accrual loans |
$ |
1,629 |
$ |
1,373 |
$ |
1,066 |
$ |
2,447 |
$ |
3,668 |
||||||||||
|
Other real estate owned |
215 |
256 |
1,158 |
1,298 |
1,328 |
|||||||||||||||
|
Total |
$ |
1,844 |
$ |
1,629 |
$ |
2,224 |
$ |
3,745 |
$ |
4,996 |
||||||||||
|
Nonperforming assets as a percentage of total loans and other real estate |
0.22 |
% |
0.19 |
% |
0.26 |
% |
0.43 |
% |
0.59 |
% |
||||||||||
|
Nonperforming assets as a percentage of total assets |
0.16 |
% |
0.14 |
% |
0.19 |
% |
0.33 |
% |
0.44 |
% |
||||||||||
|
Non-accrual loans as a percentage of total loans |
0.19 |
% |
0.16 |
% |
0.12 |
% |
0.28 |
% |
0.43 |
% |
||||||||||
|
ACL as a percentage of non-accrual loans |
646.78 |
% |
779.61 |
% |
1003.75 |
% |
465.39 |
% |
283.67 |
% |
||||||||||
Allocation of Allowance for Credit Losses on Loans and Leases
While no portion of the ACL is in any way restricted to any individual loan or group of loans and the entire allowance is available to absorb losses from any and all loans, the following table shows an allocation of the ACL for the periods indicated:
|
As of and for the Three Months Ended |
As of and for the Year Ended |
|||||||||||||||||||||||
|
March 31, 2026 |
December 31, 2025 |
|||||||||||||||||||||||
|
Allowance Allocation |
Allowance as Percentage of Total Loans |
Net Charge-offs as a Percentage of Average Loans |
Allowance Allocation |
Allowance as Percentage of Total Loans |
Net Charge-offs as a Percentage of Average Loans |
|||||||||||||||||||
|
(Dollars in Thousands) |
||||||||||||||||||||||||
|
Real estate loans: |
||||||||||||||||||||||||
|
Construction, land development and other land loans |
$ |
133 |
0.49 |
% |
- |
$ |
222 |
0.68 |
% |
- |
||||||||||||||
|
Secured by 1-4 family residential properties |
345 |
0.53 |
% |
-0.03 |
% |
371 |
0.55 |
% |
-0.04 |
% |
||||||||||||||
|
Secured by multi-family residential properties |
659 |
0.53 |
% |
0.00 |
% |
666 |
0.57 |
% |
- |
|||||||||||||||
|
Secured by non-residential commercial real estate |
1,306 |
0.69 |
% |
0.09 |
% |
1,420 |
0.71 |
% |
-0.02 |
% |
||||||||||||||
|
Commercial and industrial loans |
344 |
0.74 |
% |
-0.09 |
% |
399 |
0.83 |
% |
4.55 |
% |
||||||||||||||
|
Consumer loans: |
||||||||||||||||||||||||
|
Direct |
21 |
0.48 |
% |
-2.69 |
% |
50 |
1.03 |
% |
-3.78 |
% |
||||||||||||||
|
Indirect |
7,728 |
2.00 |
% |
0.53 |
% |
7,576 |
1.98 |
% |
0.50 |
% |
||||||||||||||
|
Total |
$ |
10,536 |
1.25 |
% |
0.23 |
% |
$ |
10,704 |
1.25 |
% |
0.41 |
% |
||||||||||||
Net charge-offs as a percentage of average loans in the three prior full years were as follows: 0.14% (2024), 0.14% (2023), 0.16% (2022).
Deposits
Total deposits increased to $1,038.8 million as of March 31, 2026, from $1,028.0 million as of December 31, 2025, an increase of 1.1%. The increase was due primarily to an increase in interest-bearing demand deposits of $28.4 million, partially offset by a $4.7 million decrease in noninterest-bearing deposits and a $12.8 million decrease in time deposits. Core deposits, which exclude time deposits of $250 thousand or more and all brokered deposits, provide a relatively stable funding source that supports earning assets. Core deposits totaled $853.8 million, or 82.2% of total deposits, as of March 31, 2026, compared to $838.3 million, or 81.6% of total deposits, as of December 31, 2025.
Core deposits have historically been the Company's primary source of funding and have enabled the Company to successfully meet both short-term and long-term liquidity needs. Management anticipates that core deposits will continue to be the Company's primary source of funding in the future. Management will continue to monitor deposit levels closely to help ensure an adequate level of funding for the Company's activities. However, various economic and competitive factors could affect this funding source in the future, including increased competition from other financial institutions in deposit gathering, national and local economic conditions and interest rate policies adopted by the FRB and other central banks.
The following tables present details on the composition of the Company's deposits for the periods indicated:
|
As of and for the Three Months Ended |
||||||||||||||||
|
March 31, 2026 |
||||||||||||||||
|
Number of Accounts |
Average Balance Per Account |
Dollars |
Percentage of Total Deposits |
|||||||||||||
|
(Dollars in Thousands) |
||||||||||||||||
|
Non-interest-bearing demand deposits |
8,746 |
$ |
17 |
$ |
149,079 |
14.4 |
% |
|||||||||
|
Interest-bearing demand deposits |
6,099 |
35 |
210,495 |
20.2 |
% |
|||||||||||
|
Money market and savings |
8,262 |
40 |
331,863 |
31.9 |
% |
|||||||||||
|
Certificates of deposits >$250 thousand |
97 |
485 |
47,063 |
4.5 |
% |
|||||||||||
|
Certificates of deposits $100-$250 thousand |
510 |
142 |
72,495 |
7.0 |
% |
|||||||||||
|
Certificates of deposits <$100 thousand |
3,736 |
24 |
89,910 |
8.7 |
% |
|||||||||||
|
Total (excluding brokered certificates of deposit) |
27,450 |
$ |
33 |
900,905 |
86.7 |
% |
||||||||||
|
Brokered deposits |
137,944 |
13.3 |
% |
|||||||||||||
|
Total |
$ |
1,038,849 |
100.0 |
% |
||||||||||||
|
As of and for the Year Ended |
||||||||||||||||
|
December 31, 2025 |
||||||||||||||||
|
Number of Accounts |
Average Balance Per Account |
Dollars |
Percentage of Total Deposits |
|||||||||||||
|
(Dollars in Thousands) |
||||||||||||||||
|
Non-interest-bearing demand deposits |
8,822 |
$ |
17 |
$ |
153,809 |
15.0 |
% |
|||||||||
|
Interest-bearing demand deposits |
6,124 |
34 |
206,985 |
20.1 |
% |
|||||||||||
|
Money market and savings |
8,332 |
37 |
307,007 |
29.9 |
% |
|||||||||||
|
Certificates of deposits >$250 thousand |
110 |
470 |
51,699 |
5.0 |
% |
|||||||||||
|
Certificates of deposits $100-$250 thousand |
537 |
142 |
76,475 |
7.4 |
% |
|||||||||||
|
Certificates of deposits <$100 thousand |
3,900 |
24 |
94,043 |
9.2 |
% |
|||||||||||
|
Total (excluding brokered certificates of deposit) |
27,825 |
$ |
32 |
890,018 |
86.6 |
% |
||||||||||
|
Brokered deposits |
137,944 |
13.4 |
% |
|||||||||||||
|
Total |
$ |
1,027,962 |
100.0 |
% |
||||||||||||
Other Interest-Bearing Liabilities
Other interest-bearing liabilities that are used by the Company as an alternative source of funds consist of federal funds purchased, securities sold under agreements to repurchase, FHLB advances, and subordinated debt. As of March 31, 2026, other interest-bearing liabilities totaled 3.5% of total interest-bearing liabilities, compared to 2.5% as of December 31, 2025.
Shareholders' Equity
As of March 31, 2026, shareholders' equity totaled $104.6 million, or 9.0% of total assets, compared to $105.6 million, or 9.1% of total assets, as of December 31, 2025. While earnings, net of dividends paid, increased shareholders' equity during the three months ended March 31, 2026, the increase was fully offset by share repurchases, combined with an increase in the Company's accumulated other comprehensive loss resulting from the increasing interest rate environment during the period. During both the three months ended March 31, 2026 and 2025, the Company declared cash dividends totaling $0.07 per share on its common stock.
In addition, during the three months ended March 31, 2026, the Company completed the repurchase of 146,500 shares of its common stock at a weighted average price of $15.03 per share. The repurchases were completed under the Company's previously announced share repurchase program. As of March 31, 2026, 1,638,313 shares remained available for repurchase under the program. During the three months ended March 31, 2025, the Company repurchased 40,000 shares of its common stock at a weighted average price of $13.38 per share.
LIQUIDITY AND CAPITAL RESOURCES
The asset portion of the balance sheet provides liquidity primarily from the following sources: (1) excess cash and interest-bearing deposits in banks, (2) federal funds sold and securities purchased under reverse repurchase agreements, (3) principal payments and maturities of loans and (4) principal payments and maturities from the investment portfolio. Loans maturing or repricing in one year or less amounted to $277.6 million as of March 31, 2026 and $274.7 million as of December 31, 2025. Investment securities forecasted to mature or reprice in one year or less were estimated to be $28.5 million and $27.5 million as of March 31, 2026 and December 31, 2025, respectively.
Although some securities in the investment portfolio have final maturities exceeding 10 years, a substantial percentage of the portfolio provides monthly principal and interest payments and consists of securities that are readily marketable and easily convertible into cash on short notice. The investment securities portfolio had an estimated average life of 3.8 years and 3.7 years as of March 31, 2026 and December 31, 2025, respectively. However, management does not rely solely upon the investment portfolio to generate cash flows to fund loans, capital expenditures, dividends, debt repayment and other cash requirements. These activities are also funded by cash flows from loan payments, as well as increases in deposits and short-term borrowings.
The liability portion of the balance sheet provides liquidity through interest-bearing and non-interest-bearing deposit accounts, which represent the Company's primary sources of funds. In addition, federal funds purchased, FHLB advances, securities sold under agreements to repurchase and short-term and long-term borrowings are additional sources of available liquidity. Liquidity management involves the continual monitoring of the sources and uses of funds to maintain an acceptable cash position. Long-term liquidity management focuses on considerations related to the total balance sheet structure. The Bank manages the pricing of its deposits to maintain a desired deposit balance.
The Company had no outstanding borrowings under FHLB advances as of both March 31, 2026 and December 31, 2025. The Company's use of FHLB advances varies depending on fluctuations in deposits and other funding sources, as well as their use in interest rate hedging strategies. The Company had up to $326.5 million and $324.1 million in remaining unused credit from the FHLB (subject to available collateral, which may include eligible investment securities and loans) as of March 31, 2026 and December 31, 2025, respectively.
The Company also has access to the FRB's discount window. The discount window allows borrowing on pledged collateral that includes eligible investment securities and loans. The Company maintains pledges of its consumer indirect loan portfolio and selected investment securities with the FRB as collateral to provide immediate access to funding through the discount window. As of March 31, 2026 and December 31, 2025 the Company had $212.1 and $210.9 million, respectively, in unused borrowing capacity with the FRB's discount window. As of both March 31, 2026 and December 31, 2025, the Bank had no outstanding federal funds purchased from the FRB's discount window.
In addition to collateralized funding sources through the FHLB and FRB, the Company had $48.0 million in unused established unsecured lines of credit with banks as of both March 31, 2026 and December 31, 2025.
On October 1, 2021, the Company completed a private placement of $11.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes that will mature on October 1, 2031. Net of unamortized debt issuance costs, the subordinated notes were recorded as long-term borrowings totaling $11.0 million and $10.9 million as of March 31, 2026 and December 31, 2025, respectively.
The table below provides information on the Company's on-balance sheet liquidity, as well as readily available off-balance sheet sources of liquidity, as of both March 31, 2026 and December 31, 2025.
|
March 31, |
December 31, |
||||||
|
(Dollars in Thousands) |
|||||||
|
(Unaudited) |
(Unaudited) |
||||||
|
Liquidity from cash, federal funds sold and securities purchased under reverse repurchase agreements: |
|||||||
|
Cash and cash equivalents |
$ |
66,586 |
$ |
73,547 |
|||
|
Federal funds sold and securities purchased under reverse repurchase agreements |
18,850 |
4,850 |
|||||
|
Total liquidity from cash, federal funds sold and securities purchased under reverse repurchase agreements |
85,436 |
78,397 |
|||||
|
Liquidity from pledgable investment securities: |
|||||||
|
Investment securities available-for sale, at fair value |
181,109 |
168,075 |
|||||
|
Investment securities held-to-maturity, at amortized cost |
436 |
465 |
|||||
|
Less: securities pledged |
(66,105 |
) |
(58,497 |
) |
|||
|
Less: estimated collateral value discounts |
(10,652 |
) |
(10,671 |
) |
|||
|
Liquidity from pledgable investment securities |
104,788 |
99,372 |
|||||
|
Liquidity from unused lendable collateral (loans) at FHLB |
30,183 |
30,504 |
|||||
|
Liquidity from unused lendable collateral (loans and securities) at FRB |
212,113 |
210,921 |
|||||
|
Unsecured lines of credit with banks |
48,000 |
48,000 |
|||||
|
Total readily available liquidity |
$ |
480,520 |
$ |
467,194 |
|||
The table 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.
Excluding wholesale brokered deposits, as of March 31, 2026, the Company had approximately 27 thousand deposit accounts with an average balance of approximately $33 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 $231.0 million, or 22.1% of total deposits, as of March 31, 2026. As of December 31, 2025, estimated uninsured deposits totaled $216.8 million, or 22.2% of total deposits. Management believes the Company's on-balance sheet and other readily available liquidity sources as presented in the table above provide strong indicators of the Company's ability to fund obligations in a stressed liquidity environment, particularly when considered relative to the Company' uninsured deposit levels. Furthermore, in addition to the liquidity sources noted in the table above, the Company has access to additional sources of liquidity that generally could be obtained over a period of time. For example, the Company has access to unsecured brokered deposits through the wholesale funding markets.
Management believes that the Company has adequate sources of liquidity to cover its contractual obligations and commitments over the next twelve months.
First US Bancshares Inc. published this content on May 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 07, 2026 at 16:47 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]