FUSB's Dividend Sustainability and Growth Potential: Assessing Resilience Amid Earnings Volatility

First US Bancshares, Inc. (FUSB) has long been a staple for income-focused investors, offering a history of consistent dividend growth. However, the company’s second-quarter 2025 earnings report—showing a precipitous drop in earnings per share (EPS) to $0.03 from $0.36 in the same period in 2024—has raised critical questions about the sustainability of its $0.07-per-share quarterly payout [2]. This analysis evaluates FUSB’s dividend resilience by reconciling conflicting data on its payout ratio, examining its financial performance, and assessing its long-term growth potential.

The Payout Ratio Conundrum: Trailing vs. Forward-Looking Metrics

The company’s stated 2025 payout ratio of 25.7% [1] appears at odds with its Q2 2025 results, where net income of $0.2 million (or $0.03 per diluted share) would imply a payout ratio exceeding 200% if the $0.07-per-share dividend were calculated against trailing twelve-month (TTM) earnings. This contradiction arises from differing methodologies: the 25.7% figure likely reflects a forward-looking or normalized earnings model, while the Q2 decline—driven by a 78% year-over-year drop in net income—skews trailing metrics [4].

Using TTM data provides a clearer picture. FUSB’s TTM EPS stands at $0.97 [2], and its annualized dividend of $0.28 per share yields a payout ratio of approximately 28.87% ($0.28 ÷ $0.97). This aligns with the company’s historical trend of maintaining a “modest” payout ratio (as noted in reports [1]) and suggests the dividend is not currently at risk, despite the Q2 earnings slump. However, the sharp decline in Q1-Q2 2025 earnings—from $0.29 in Q1 2024 to $0.03 in Q2 2025—underscores the fragility of this metric if the earnings contraction persists [4].

Financial Performance: A Tale of Two Quarters

FUSB’s Q2 2025 results were marred by a 90% year-over-year decline in net income, attributed to elevated provisions for credit losses on loans and leases [4]. This contrasts sharply with its Q1 2025 performance, where it reported $0.03 EPS, and its broader five-year EPS growth of 7.3% annually [2]. The volatility highlights operational risks, particularly in a low-interest-rate environment where net interest margins are compressed.

Meanwhile, U.S. Bancorp (USB), a larger peer, reported robust Q2 2025 results, with a 13% year-over-year EPS increase to $1.11 and a 4.6% rise in fee income [2]. This divergence underscores FUSB’s smaller scale and vulnerability to macroeconomic shifts, though its consistent dividend policy—now spanning 45 consecutive quarters—demonstrates a commitment to shareholder returns [5].

Dividend Sustainability: Room for Caution

While FUSB’s current payout ratio of ~28.87% is below the Financial Services sector average, the recent earnings decline necessitates caution. A sustained drop in EPS could force the company to either reduce dividends or absorb losses through retained earnings, both of which would signal a shift in its dividend policy. The board’s Form 8-K filing explicitly states that future dividends depend on “earnings, financial conditions, and capital requirements,” leaving room for adjustments [4].

Investors should also note the upcoming ex-dividend date of September 12, 2025, with the October 1, 2025, payment contingent on the board’s reassessment of Q2 results [3]. The absence of forward-looking guidance from FUSB, unlike USB’s 4.50% projected forward dividend yield [2], adds uncertainty.

Growth Potential: Balancing Historical Trends and Risks

FUSB’s 13% annual dividend growth over the past decade [2] is impressive, but this trajectory now faces headwinds. The company’s 2.16% dividend yield in 2025 [1]—while slightly above its five-year average—is modest compared to peers like USB, which offers a 4.27% yield [1]. For FUSB to maintain its growth narrative, it must navigate credit risk, interest rate volatility, and competitive pressures from larger banks.

A critical factor will be its ability to reverse the Q2 earnings trend. If FUSB can stabilize its provision for credit losses and leverage its cost structure—similar to USB’s 59.2% efficiency ratio [2]—it may regain momentum. However, without a clear path to earnings recovery, even a “sustainable” payout ratio could become untenable.

Conclusion: A Dividend to Monitor Closely

First US Bancshares’ dividend remains resilient for now, supported by a historically low payout ratio and a track record of growth. Yet the Q2 2025 earnings collapse and lack of forward guidance introduce significant risks. Investors should view FUSB as a moderate-income play with upside potential if earnings stabilize, but they must remain vigilant for signs of strain. As the October 1, 2025, payout approaches, the board’s decision will serve as a litmus test for the company’s long-term dividend viability.

Source:
[1] FUSB First Us Bancshares dividend history, payout ratio & dates [https://fullratio.com/stocks/nasdaq-fusb/dividend]
[2] Be Sure To Check Out First US Bancshares, Inc. (NASDAQ [https://ca.finance.yahoo.com/news/sure-check-first-us-bancshares-104108765.html]
[3] First US Bancshares (Nasdaq:FUSB) - Stock Analysis [https://simplywall.st/stocks/us/banks/nasdaq-fusb/first-us-bancshares]
[4] 10-Q Quarterly Report August 2025 - SEC Filings [https://last10k.com/sec-filings/fusb/0000950170-25-104822.htm]
[5] FIRST US BANCSHARES, INC. DECLARES CASH DIVIDEND [https://investors.fusb.com/2025-08-27-FIRST-US-BANCSHARES,-INC-DECLARES-CASH-DIVIDEND]