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CST: 18/10/2019 19:09:39   

First US Bancshares, Inc. Reports Second Quarter 2019 Results

81 Days ago

Reports Quarterly Loan Growth and Year-Over-Year Earnings Improvement

BIRMINGHAM, Ala., July 29, 2019 (GLOBE NEWSWIRE) -- First US Bancshares, Inc. (Nasdaq: FUSB) (the “Company”), the parent company of First US Bank (the “Bank”), today reported net income of $1.0 million, or $0.15 per diluted share, for the quarter ended June 30, 2019, compared to $0.4 million, or $0.06 per diluted share, for the quarter ended June 30, 2018, an increase of 179.9%.  The improvement in earnings compared to the 2018 period resulted primarily from additional earning assets and efficiencies of scale obtained through the previously-announced acquisition of The Peoples Bank (“TPB”). TPB was acquired by the Company and merged with the Bank on August 31, 2018.  Compared to the first quarter of 2019, earnings in the second quarter of 2019 decreased by $0.2 million, primarily resulting from an increase in the provision for loan and lease losses due to increased loan volume during the second quarter.  Net loans increased $8.8 million, or 7.0% on an annualized basis, during the second quarter of 2019.  This growth included $3.7 million attributable to the Bank’s commercial lending efforts, along with $5.1 million in growth at the Bank’s wholly-owned subsidiary, Acceptance Loan Company (“ALC”).  ALC’s growth was most pronounced in its indirect sales portfolio, which has been an area of focus for management over the past several years.

For the six months ended June 30, 2019, the Company’s net income totaled $2.2 million, or $0.33 per diluted share, compared to $0.8 million, or $0.12 per diluted share, for the six months ended June 30, 2018.  Net loans as of June 30, 2019 totaled $511.5 million, compared to $514.9 million as of December 31, 2018, a decrease of $3.4 million, or 0.7%.   The decrease in net loans over the six-month period was attributable to the first quarter of 2019 and resulted primarily from the pay-off of a significant loan relationship at the Bank, coupled with seasonal trends in ALC’s portfolio, during the first quarter.

“We are pleased to report a quarter of solid loan growth,” stated James F. House, President and CEO of the Company.  “The loan growth that we experienced during the second quarter offset the majority of reductions from the first quarter. In addition, we continue to enjoy significant improvement in earnings since the acquisition of The Peoples Bank in 2018. Our team remains focused on generating quality loan growth at both the Bank and ALC,” continued Mr. House.

Other Highlights

Expansion into New Markets – During the second quarter of 2019, the Bank received regulatory approval to open a loan production office in the Chattanooga, Tennessee area.  Expansion of the Bank’s presence into the Chattanooga area is consistent with the Company’s strategy to gain a foothold in or near larger metropolitan markets that management believes have strong potential for future growth.  The opening of the Chattanooga-area office followed the opening of a loan production office in Mobile, Alabama during the first quarter of 2019.  

Balance Sheet Management and Reduction in Wholesale Funding – In an effort to improve the efficiency of the Company’s balance sheet and reduce interest expense, during the first six months of 2019, management reduced wholesale deposit funding sources by allowing $28.3 million in brokered deposits to mature without renewal.  The reduction in wholesale deposits was partially offset by organic growth in deposits at the Bank of approximately $6.4 million.  As of June 30, 2019, the Company’s brokered deposits balances totaled $5.0 million.

Improvement in Asset Quality – The Company continued to experience improvement in asset quality during the second quarter of 2019. Non-performing assets, including loans in non-accrual status and other real estate owned (OREO), decreased to $2.7 million as of June 30, 2019, compared to $3.1 million as of March 31, 2019 and $3.9 million as of June 30, 2018. As a percentage of total assets, non-performing assets totaled 0.35% as of June 30, 2019, compared to 0.39% as of March 31, 2019 and 0.61% as of June 30, 2018. 

Growth in Net Interest Income – Net interest income increased by $0.1 million, or 0.7%, in the second quarter of 2019 compared to the first quarter of 2019.  Compared to the second quarter of 2018, net interest income increased by $1.7 million, or 23.1%.

Net Interest Margin – Net interest margin was 5.21% for the second quarter of 2019, compared to 5.17% for the first quarter of 2019 and 5.31% for the second quarter of 2018.  For the six months ended June 30, 2019, net interest margin was 5.19%, compared to 5.28% for the six months ended June 30, 2018.  The margin reductions comparing the 2019 periods to the 2018 periods are consistent with the rising interest rate environment, which has increased the Company’s funding costs.  During 2019, management has focused on ways to reduce interest expense through reductions of wholesale funding sources and judicious management of rates paid on core deposits.  These efforts, coupled with continued improvement in loan yields, resulted in the improvement of net interest margin comparing the second quarter of 2019 to the first quarter of 2019.

Provision for Loan and Lease Losses The provision for loan and lease losses was $0.7 million during the second quarter of 2019, compared to $0.4 million during the first quarter of 2019 and $0.7 million during the second quarter of 2018. Compared to the first quarter of 2019, provisioning increased primarily due to increases in loan volume at both the Bank and ALC. The Bank experienced loan growth of $11.4 million during the second quarter of 2019, which was partially offset by a decline in the purchased loan portfolio of $7.7 million. Additionally, gross consumer and branch retail loans at ALC increased by $2.7 million during the second quarter of 2019, compared to a decrease in these portfolios of $3.1 million during the first quarter of 2019.

Non-interest Income – Non-interest income totaled $1.3 million during the second quarter of 2019, compared to $1.1 million during the second quarter of 2018. The increase comparing the two quarters was mostly attributable to lease income in the second quarter of 2019 associated with the lease-up of previously unused office space at the Company’s headquarters location in Birmingham, Alabama.  Lease-up of the space occurred at the end of the fourth quarter of 2018.

Non-interest Expense – Non-interest expense totaled $8.5 million during the second quarter of 2019, compared to $7.5 million during the second quarter of 2018. The increase comparing the two quarters was attributable primarily to additional salaries and benefits, occupancy and other expenses associated with the addition of employees, facilities and other services in connection with the acquisition of TPB.

Provision for Income Taxes – The provision for income taxes totaled $0.3 million during the second quarter of 2019, compared to $0.4 million during the first quarter of 2019, representing an effective tax rate of 23.0% for the second quarter of 2019, compared to an effective tax rate of 22.1% for the first quarter of 2019.

Cash Dividend – The Company declared a cash dividend of $0.02 per share on its common stock in the second quarter of 2019. This amount is consistent with the Company’s quarterly dividend declarations in the first quarter of 2019 and each quarter of 2018 and 2017.

Regulatory Capital – During the second quarter of 2019, the Bank continued to maintain capital ratios at higher levels than the ratios required to be considered a “well-capitalized” institution under applicable banking regulations. As of June 30, 2019, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 12.86%. Its total capital ratio was 13.76%, and its Tier 1 leverage ratio was 9.43%.

About First US Bancshares, Inc.

First US Bancshares, Inc. is a bank holding company that operates banking offices in Alabama, Tennessee and Virginia through First US Bank.  In addition, the Company’s operations include Acceptance Loan Company, Inc., a consumer loan company, and FUSB Reinsurance, Inc., an underwriter of credit life and credit accident and health insurance policies sold to the Bank’s and ALC’s consumer loan customers. 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 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. Specifically, with respect to statements relating to the sufficiency of the allowance for loan and lease losses, loan demand, cash flows, growth and earnings potential and expansion, these factors include, but are not limited to, the rate of growth (or lack thereof) in the economy generally and in the Bank’s and ALC’s service areas, market conditions and investment returns, the availability of quality loans in the Bank’s and ALC’s service areas, the relative strength and weakness in the consumer and commercial credit sectors and in the real estate markets and collateral values. With respect to statements relating to the Company’s acquisition of TPB, these factors include, but are not limited to, difficulties, delays and unanticipated costs in integrating the organizations’ businesses or realized expected cost savings and other benefits; business disruptions as a result of the integration of the organizations, including possible loss of customers; diversion of management time to address acquisition-related issues; and changes in asset quality and credit risk as a result of the acquisition. There can be no assurance that such factors or other factors will not affect the accuracy of such forward-looking statements.

                                           
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA – LINKED QUARTERS
(Dollars in Thousands, Except Per Share Data)
                                           
  Quarter Ended
  Six Months Ended
  2019
   2018
  2019   2018  
  June
30,
  March
31,
  December
31,
  September
30,
  June
30,
  June
30,
  June
30,
 
             
    (Unaudited)
    (Unaudited)
 
Results of Operations:                                          
Interest income $ 10,923   $ 10,813   $ 11,177   $ 9,452   $ 8,390   $ 21,736   $ 16,509  
Interest expense   1,690     1,640     1,533     1,124     888     3,330     1,693  
                                           
Net interest income   9,233     9,173     9,644     8,328     7,502     18,406     14,816  
Provision for loan and lease losses   715     400     473     789     702     1,115     1,360  
                                           
Net interest income after provision for loan and lease losses   8,518     8,773     9,171     7,539     6,800     17,291     13,456  
Non-interest income   1,291     1,265     1,158     2,112     1,132     2,556     2,272  
Non-interest expense   8,504     8,453     8,382     9,142     7,492     16,957     14,793  
                                           
Income before income taxes   1,305     1,585     1,947     509     440     2,890     935  
Provision for income taxes   300     351     470     269     81     651     162  
                                           
Net income $ 1,005   $ 1,234   $ 1,477   $ 240   $ 359   $ 2,239   $ 773  
                                           
Per Share Data:                                          
Basic net income per share $ 0.16   $ 0.19   $ 0.23   $ 0.04   $ 0.06   $ 0.35   $ 0.13  
                                           
Diluted net income per share $ 0.15   $ 0.18   $ 0.22   $ 0.03   $ 0.06   $ 0.33   $ 0.12  
                                           
Dividends declared $ 0.02   $ 0.02   $ 0.02   $ 0.02   $ 0.02   $ 0.04   $ 0.04  
                                           
Key Measures (Period End):                                          
Total assets $ 777,171   $ 795,334   $ 791,939   $ 802,595   $ 634,036              
Tangible assets(1)   768,115     786,150     782,627     793,038     634,036              
Loans, net of allowance for loan losses   511,515     502,760     514,867     519,822     355,529              
Allowance for loan and lease losses   5,087     4,924     5,055     5,116     4,952              
Investment securities, net   136,649     148,025     153,949     159,496     165,740              
Total deposits   682,806     703,361     704,725     715,761     531,428              
Short-term borrowings   73         527     192     10,366              
Long-term debt                   10,000              
Total shareholders’ equity   83,748     81,573     79,437     77,470     75,634              
Tangible common equity(1)   74,692     72,389     70,125     67,913     75,634              
Book value per common share   13.28     12.94     12.61     12.30     12.41              
Tangible book value per common share(1)   11.84     11.48     11.13     10.79     12.41              
Key Ratios:                                          
Return on average assets (annualized)   0.51 %   0.63 %   0.74 %   0.14 %   0.23 %   0.57 %   0.25 %
Return on average common equity (annualized)   4.89 %   6.21 %   7.49 %   1.25 %   1.91 %   5.54 %   2.06 %
Return on average tangible common equity (annualized) (1)   5.50 %   7.01 %   8.52 %   1.30 %   1.91 %   6.25 %   2.06 %
Net interest margin   5.21 %   5.17 %   5.27 %   5.25 %   5.31 %   5.19 %   5.28 %
Efficiency ratio(2)   80.8 %   81.0 %   77.6 %   87.6 %   86.8 %   80.9 %   86.6 %
Net loans to deposits   74.9 %   71.5 %   73.1 %   72.6 %   66.9 %            
Net loans to assets   65.8 %   63.2 %   65.0 %   64.8 %   56.1 %            
Tangible common equity to tangible assets(1)   9.72 %   9.21 %   8.96 %   8.56 %   11.93 %            
Allowance for loan losses as % of loans   0.98 %   0.97 %   0.97 %   0.97 %   1.37 %            
Nonperforming assets as % of total assets   0.35 %   0.39 %   0.54 %   0.66 %   0.61 %            
(1) Refer to Non-GAAP reconciliation of tangible balances and measures on page 11  
(2) Efficiency ratio = non-interest expense / (net interest income + non-interest income)  


 
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
THREE MONTHS ENDED JUNE 30, 2019 AND 2018
(Dollars in Thousands)
(Unaudited)
 
  Three Months Ended     Three Months Ended
  June 30, 2019     June 30, 2018
  Average
Balance
  Interest
  Annualized
Yield/

Rate %
    Average
Balance
  Interest
  Annualized
Yield/

Rate %
ASSETS                                  
Interest-earning assets:                                  
Loans – Bank $ 410,609   $ 5,386   5.26 %   $ 258,956   $ 2,923   4.53 %
Loans – ALC   102,675     4,447   17.37 %     99,080     4,408   17.84 %
Taxable investment securities   141,429     747   2.12 %     171,752     869   2.03 %
Tax-exempt investment securities   2,197     15   2.74 %     4,992     44   3.54 %
Federal funds sold   15,080     98   2.61 %     4,121     22   2.14 %
Interest-bearing deposits in banks   39,492     230   2.34 %     27,682     124   1.80 %
Total interest-earning assets   711,482     10,923   6.16 %     566,583     8,390   5.94 %
Non-interest-earning assets:                                  
Other assets   73,189                 58,053            
Total $ 784,671               $ 624,636            
                                   
                                   
LIABILITIES AND
SHAREHOLDERS’ EQUITY
                                 
Interest-bearing liabilities:                                  
Demand deposits $ 169,745   $ 215   0.51 %   $ 157,335   $ 169   0.43 %
Savings deposits   165,318     460   1.12 %     102,627     140   0.55 %
Time deposits   244,984     1,015   1.66 %     180,505     489   1.09 %
Borrowings   98       %     20,341     90   1.77 %
Total interest-bearing liabilities   580,145     1,690   1.17 %     460,808     888   0.77 %
Non-interest-bearing liabilities:                                  
Demand deposits   111,929                 82,200            
Other liabilities   10,262                 6,181            
Shareholders’ equity   82,335                 75,447            
Total $ 784,671               $ 624,636            
                                   
Net interest income       $ 9,233               $ 7,502      
Net interest margin             5.21 %               5.31 %
                                   
                                   


 
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(Dollars in Thousands)
(Unaudited)
                                   
  Six Months Ended
  Six Months Ended
  June 30, 2019
  June 30, 2018
  Average
Balance
  Interest
  Annualized
Yield/

Rate %
  Average
Balance
  Interest
  Annualized
Yield/

Rate %
ASSETS                                  
Interest-earning assets:                                  
Loans – Bank $ 410,264   $ 10,740   5.28 %   $ 259,099   $ 5,731   4.46 %
Loans – ALC   102,405     8,766   17.26 %     96,566     8,689   18.15 %
Taxable investment securities   145,211     1,552   2.16 %     175,313     1,734   1.99 %
Tax-exempt investment securities   2,199     30   2.75 %     5,549     100   3.63 %
Federal funds sold   11,129     142   2.57 %     7,182     65   1.83 %
Interest-bearing deposits in banks   43,989     506   2.32 %     22,454     190   1.71 %
Total interest-earning assets   715,197     21,736   6.13 %     566,163     16,509   5.88 %
Non-interest-earning assets:                                  
Other assets   71,539                 58,308            
Total $ 786,736               $ 624,471            
                                   
                                   
LIABILITIES AND
SHAREHOLDERS’ EQUITY
                                 
Interest-bearing liabilities:                                  
Demand deposits $ 169,507   $ 421   0.50 %   $ 162,122   $ 340   0.42 %
Savings deposits   167,111     921   1.11 %     93,705     210   0.45 %
Time deposits   249,771     1,988   1.61 %     180,387     949   1.06 %
Borrowings   223           22,496     194   1.74 %
Total interest-bearing liabilities   586,612     3,330   1.14 %     458,710     1,693   0.74 %
Non-interest-bearing liabilities:                                  
Demand deposits   109,501                 83,311            
Other liabilities   9,151                 6,815            
Shareholders’ equity   81,472                 75,635            
Total $ 786,736               $ 624,471            
                                   
Net interest income       $ 18,406               $ 14,816      
Net interest margin             5.19 %               5.28 %
                                   



       
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
       
  June
30,
  December
31,
  2019   2018
  (Unaudited)

       
ASSETS              
Cash and due from banks $ 10,895     $ 9,796  
Interest-bearing deposits in banks   33,964       39,803  
Total cash and cash equivalents   44,859       49,599  
Federal funds sold   15,081       8,354  
Investment securities available-for-sale, at fair value   117,961       132,487  
Investment securities held-to-maturity, at amortized cost   18,688       21,462  
Federal Home Loan Bank stock, at cost   713       703  
Loans and leases, net of allowance for loan and lease losses of $5,087 and $5,055, respectively   511,515       514,867  
Premises and equipment, net   29,491       27,643  
Cash surrender value of bank-owned life insurance   15,391       15,237  
Accrued interest receivable   2,476       2,816  
Goodwill and core deposit intangible, net   9,056       9,312  
Other real estate owned   1,258       1,505  
Other assets   10,682       7,954  
Total assets $ 777,171     $ 791,939  
               
LIABILITIES AND SHAREHOLDERS’ EQUITY              
Deposits $ 682,806     $ 704,725  
Accrued interest expense   526       424  
Other liabilities   10,018       6,826  
Short-term borrowings   73       527  
Total liabilities   693,432       712,502  
               
Shareholders’ equity:              
Common stock, par value $0.01 per share, 10,000,000 shares authorized;              
7,567,784 and 7,562,264 shares issued, respectively; 6,306,161 and 6,298,062
  shares outstanding, respectively
  75       75  
Surplus   13,646       13,496  
Accumulated other comprehensive loss, net of tax   (338 )     (2,377 )
Retained earnings   90,737       88,668  
Less treasury stock: 1,261,623 and 1,264,202 shares at cost, respectively   (20,372 )     (20,414 )
Noncontrolling interest         (11 )
Total shareholders’ equity   83,748       79,437  
               
Total liabilities and shareholders’ equity $ 777,171     $ 791,939  
               


       
FIRST US BANCSHARES, INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
                       
  Three Months Ended
  Six Months Ended
  June 30,
  June 30,
  2019   2018   2019   2018
       
  (Unaudited)    (Unaudited) 
Interest income:                      
Interest and fees on loans $   9,833   $   7,331   $   19,506   $   14,420
Interest on investment securities   1,090     1,059     2,230     2,089
Total interest income   10,923     8,390     21,736     16,509
                       
Interest expense:                      
Interest on deposits   1,690     798     3,330     1,499
Interest on borrowings       90         194
Total interest expense   1,690     888     3,330     1,693
                       
Net interest income   9,233     7,502     18,406     14,816
                       
Provision for loan and lease losses   715     702     1,115     1,360
                       
Net interest income after provision for loan and lease losses   8,518     6,800     17,291     13,456
                       
Non-interest income:                      
Service and other charges on deposit accounts   443     444     903     911
Credit insurance income   108     100     251     318
Mortgage fees from secondary market   186     144     289     261
Other income, net   554     444     1,113     782
Total non-interest income   1,291     1,132     2,556     2,272
                       
Non-interest expense:                      
Salaries and employee benefits   5,195     4,533     10,183     9,100
Net occupancy and equipment   1,046     873     2,135     1,762
Computer services   333     317     684     609
Fees for professional services   321     266     563     539
Other expense   1,609     1,503     3,392     2,783
Total non-interest expense   8,504     7,492     16,957     14,793
                       
Income before income taxes   1,305     440     2,890     935
Provision for income taxes   300     81     651     162
Net income $   1,005   $   359   $   2,239   $   773
Basic net income per share $   0.16   $   0.06   $   0.35   $   0.13
Diluted net income per share $   0.15   $   0.06   $   0.33   $   0.12
Dividends per share $   0.02   $   0.02   $   0.04   $   0.04
                       

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 a substitute for the GAAP-based results. 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 operating income, 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 each relevant non-GAAP measure to GAAP-based measures included in the financial statements previously presented in the press release.

Operating Income
Operating income is a non-GAAP financial measure that adjusts net income for the following non-operating items:

  • Provision for (benefit from) income taxes
  • Accretion of discount on purchased loans
  • Accretion of premium on purchased time deposits
  • Gains (losses) on sales and prepayments of investment securities
  • Gains (losses) on settlements of derivative contracts
  • Gains (losses) on sales of foreclosed real estate
  • Provision for loan and lease losses
  • Amortization of core deposit intangible asset
  • Acquisition expenses

A reconciliation of the Company’s net income to its operating income for each of the most recent five quarters as of June 30, 2019 is set forth below.  A limitation of the non-GAAP financial measures presented below is that the adjustments include gains, losses or expenses that the Company does not expect to continue to recognize at a consistent level in the future; the adjustments of these items should not be construed as an inference that these gains, losses or expenses are unusual, infrequent or nonrecurring.


                                         
    Quarter Ended
    2019
  2018
    June
30,
    March
31,
    December
31,
    September
30,
    June
30,
 
                                         
    (Unaudited Reconciliation)
                                         
Net income   $ 1,005     $ 1,234     $ 1,477     $ 240     $ 359  
Add back:                                        
Provision for income taxes     300       351       470       269       81  
                                         
Income before income taxes     1,305       1,585       1,947       509       440  
Add back (subtract) adjustments to net interest income:                                        
Accretion of discount on purchased loans     (172 )     (234 )     (249 )     (77 )      
Accretion of premium on purchased time deposits     (35 )     (64 )     (129 )     (59 )      
                                         
Net adjustments to net interest income     (207 )     (298 )     (378 )     (136 )      
Add back (subtract) non-interest adjustments:                                        
Net gain on sales and prepayments of investment securities     (9 )     (13 )     (13 )           (102 )
Net gain on settlement of derivative contracts                       (981 )      
Net loss (gain) on sales of foreclosed real estate     (3 )     30       65       (79 )     152  
Provision for loan and lease losses     715       400       473       789       702  
Amortization of core deposit intangible     128       128       128       43        
Acquisition expenses                 149       1,492        
Net non-interest adjustments     831       545       802       1,264       752  
Operating income   $ 1,929     $ 1,832     $ 2,371     $ 1,637     $ 1,192  
                                         

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 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
  Six Months Ended
    2019
  2018
  2019   2018  
    June
30
    March
31,
    December
31,
    September
30,
    June
30,
    June
30,
    June
30,
 
     
    (Dollars in Thousands, Except Per Share Data)
    (Unaudited Reconciliation)
                                                         
TANGIBLE BALANCES                                                        
Total assets   $ 777,171     $ 795,334     $ 791,939     $ 802,595     $ 634,036                  
Less: Goodwill     7,435       7,435       7,435       7,552                        
Less: Core deposit intangible     1,621       1,749       1,877       2,005                        
                                                         
Tangible assets (a) $ 768,115     $ 786,150     $ 782,627     $ 793,038     $ 634,036                  
                                                         
Total shareholders’ equity   $ 83,748     $ 81,573     $ 79,437     $ 77,470     $ 75,634                  
Less: Goodwill     7,435       7,435       7,435       7,552                        
Less: Core deposit intangible     1,621       1,749       1,877       2,005                        
                                                         
Tangible common equity (b) $ 74,692     $ 72,389     $ 70,125     $ 67,913     $ 75,634                  
                                                         
Average shareholders’ equity   $ 82,335     $ 80,600     $ 78,275     $ 76,303     $ 75,447     $ 81,472     $ 75,634  
Less: Average goodwill     7,435       7,435       7,551       2,517             7,435        
Less: Average core deposit intangible     1,683       1,818       1,960       676             1,750        
                                                         
Average tangible shareholders’ equity (c) $ 73,217     $ 71,347     $ 68,764     $ 73,110     $ 75,447     $ 72,287     $ 75,634  
                                                         
Net income (d) $ 1,005     $ 1,234     $ 1,477     $ 240     $ 359     $ 2,239     $ 773  
Common shares outstanding (e)   6,306       6,304       6,298       6,297       6,092                  
                                                         
TANGIBLE MEASURES                                                        
Tangible book value per common share (b)/(e) $ 11.84     $ 11.48     $ 11.13     $ 10.79     $ 12.41                  
                                                         
Tangible common equity to tangible assets (b)/(a)   9.72 %     9.21 %     8.96 %     8.56 %     11.93 %                
                                                         
Return on average tangible common equity (annualized) (1)   5.50 %     7.01 %     8.52 %     1.30 %     1.91 %     6.25 %     2.06 %
                                                         
  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)

Contact:
Thomas S. Elley
205-582-1200 

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