Assessing First US Bancshares, Inc.'s Dividend Strategy: A Balancing Act of Shareholder Returns and Financial Prudence

First US Bancshares, Inc. (FUSB) has long positioned itself as a disciplined player in the regional banking sector, with a consistent focus on shareholder returns through dividends and share repurchases. On November 19, 2025, the company declared its 46th consecutive quarterly dividend of $0.07 per share, payable on January 2, 2026, to shareholders of record as of December 12, 2025. This action, while reaffirming the company's commitment to rewarding shareholders, raises critical questions about the long-term sustainability of its dividend strategy in light of its 2025 financial performance and capital allocation priorities.

Dividend Consistency Amidst Earnings Volatility

First US Bancshares' ability to maintain a steady dividend rate despite a challenging macroeconomic environment is commendable. For the third quarter of 2025, the company reported net income of $1.9 million, or $0.32 per diluted share, a modest improvement from the previous quarter but a decline compared to $2.2 million in the same period in 2024. Over the first nine months of 2025, net income totaled $3.9 million, down from $6.5 million in the prior-year period. While the reduction in the provision for credit losses-from $2.7 million in Q2 2025 to $0.6 million in Q3-signals improved credit quality, the overall earnings trajectory remains uneven.

The dividend payout ratio, a key metric for assessing sustainability, cannot be precisely calculated due to the absence of shares outstanding data as of December 12, 2025. However, using the company's Q3 2025 net income of $1.9 million and the $0.07 per share dividend rate, a rough estimate suggests the payout ratio could exceed 100% if annualized. This would indicate that the dividend is not fully supported by current earnings, a red flag for long-term sustainability.

Capital Allocation: Dividends vs. Share Repurchases

To mitigate this risk, First US Bancshares has expanded its share repurchase program, authorizing an additional 1,000,000 shares for repurchase, extending the program's expiration to December 31, 2026. As of November 19, 2025, the company had already repurchased 1,389,972 shares under the program. This dual approach-maintaining dividends while repurchasing shares-reflects a strategic effort to return capital to shareholders while preserving flexibility. Share repurchases can enhance earnings per share (EPS) by reducing the share count, potentially offsetting earnings declines. For instance, the company's EPS of $0.32 in Q3 2025 could be bolstered by the ongoing buybacks, which may improve the dividend's affordability over time.

Financial Resilience and Risk Management

The company's financial position provides some reassurance. Shareholders' equity rose to $104.2 million as of September 30, 2025, and total deposits increased by $15.6 million during the quarter, indicating stable funding sources. A net interest margin of 3.60% also suggests the company is effectively leveraging its balance sheet to generate income. However, the decline in net income year-to-date underscores the need for continued operational efficiency and risk management.

Long-Term Implications and Investor Considerations

While First US Bancshares' dividend history is a positive for income-focused investors, the lack of transparency around the payout ratio and shares outstanding introduces uncertainty. The company's leadership has emphasized a commitment to balancing dividends with capital preservation, but future decisions will depend on earnings trends, leverage ratios, and broader economic conditions. Investors should monitor the company's full-year 2025 results and its ability to sustain net interest income growth, particularly as interest rates stabilize.

For now, the dividend appears to be a calculated bet on the company's ability to navigate near-term challenges while maintaining its reputation as a reliable shareholder return vehicle. However, without clearer visibility into the payout ratio and capital adequacy metrics, prudence is warranted.