FIRST US BANCSHARES, INC. (FUSB) stock intrinsic value fair value estimate & owner earnings analysis

First US Bancshares is the holding company for First US Bank, a community bank with 15 full-service offices in Alabama, Tennessee and Virginia, loan production offices in Mobile and the Chattanooga area, and an indirect consumer-lending business that lends through third-party retailers in 17 states. At the end of 2025 it had $1,154.8 million of assets, $853.0 million of loans and $1,028.0 million of deposits (81.6% core). About $381.7 million of the loans (45%) are indirect consumer loans, up from $309.7 million a year earlier; about $351 million (41%) are multi-family, non-residential commercial real estate and construction loans; one- to four-family mortgages are only about 8%. How we measure earnings. For a bank, borrowing from depositors is the raw material of the business, so we value the cash the bank earns after interest and subtract no debt. We start from operating cash flow and then remove working-capital swings, treat stock awards as a real cost, treat the provision for loan losses as a recurring cost of lending (it is a non-cash charge, but losses are the price of earning the spread), and deduct the spending needed to keep branches and equipment in service. Cash received in 2022 and 2023 from terminating interest-rate hedges is counted in the years the gain is earned (2023 to 2025), not when the cash arrived. On this basis earnings per share were $0.82 (2021), $1.11 (2022), $1.52 (2023), $1.32 (2024) and $0.62 (2025). Earlier years are lower ($0.72 to $0.85 in 2018 to 2020) or negative (2016 and 2017, when purchases of premises and equipment were $7.9 million and $10.4 million), so we judge the business on 2021 to 2025, a window that holds the low-rate year, the rate rise and the 2025 credit setback. Its median, $1.11 per share (about $6.4 million a year), is the normal earnings level we use. Over 2021 to 2025 these figures are close to reported earnings per share (median $1.06). The exception is 2025, at $0.62 against reported $1.00, because capital spending rose to $3.2 million (from $0.8 million in 2021) and non-cash income such as securities accretion and the build in bank-owned life insurance is not treated as cash. Growth-path check. Earnings per share fell 53% in 2025 ($0.62 versus $1.32), while we assume the first forecast year returns to the normal $1.11. The specific reason is that 2025 was depressed by a $4.0 million provision, including a $2.2 million charge-off on one commercial loan that had been partly reserved in 2024. The first half of 2026 shows the provision falling to $1.19 million from $3.25 million a year earlier and net income rising to $3.70 million from $1.93 million, with both quarters ($1.95 million and $1.75 million) running at roughly $0.30 to $0.33 per share. Over the 2021 to 2025 window the provision averaged about $2.1 million a year, and that average includes both the $3.3 million of 2022 and the $4.0 million of 2025. Base case: $18.53 per share. Earnings per share stay at about $1.11 and are valued as lasting, since 15 branches with mostly core deposits and an established indirect lending operation are structural features that persist. We give no credit for growth. Loans grew about 4.8% a year from 2021 to 2025, but the bank earns about six cents of owner earnings per dollar of book equity, so the capital retained to support that growth adds little beyond itself; buybacks (diluted shares fell from 6.74 million in 2021 to 5.76 million in the second quarter of 2026) are likewise not counted, because their price is unknown. Book value per share was $18.53 at the end of 2025 (up from $14.65 in 2022), a coincidence with the base figure rather than a link. Bull case: $23.67 per share. The indirect portfolio seasons cleanly and credit costs stay as low as they were in 2023 and 2024, when earnings were $1.52 and $1.32 per share (average about $1.42). We assume that level persists with no further growth. The bull case leaves out expense leverage and share gains because neither is yet demonstrated. Bear case: $3.62 per share. Earnings stay at the 2025 level of $3.7 million ($0.64 per share) for two years, then a full credit cycle of the kind the company itself lived through in 2007 to 2010 arrives. In those years it booked provisions of $21.2 million, $8.9 million, $9.1 million and $19.1 million (about $58 million in all, on loans of roughly $400 million), net income fell from $14.2 million in 2006 to $0.3 million in 2007 and to a loss of $3.2 million in 2010 (as restated), and after the cycle profits were $2.2 million in 2012 and $3.9 million in 2013. We apply a milder version to today's $900 million book: provisions of 2%, 3%, 3%, 2% and 1% of loans across years 3 to 7 ($18 million, $27 million, $27 million, $18 million and $9 million, or about 11.6% of loans in total, against provisions near 5% of loans in each of 2007 and 2010). With pre-provision profit of roughly $12 million a year, that produces owner-earnings losses of about $7.4 million, $14.5 million, $14.5 million, $7.4 million and $0.3 million, and about $39 million of pre-tax losses. Capital stays above the 7.0% regulatory minimum without issuing shares, falling from a 10.88% common equity ratio to roughly 8.5%, but dividends would stop. Earnings then recover only to 70% of normal ($2.5 million, $3.5 million, then $4.5 million a year), consistent with how slowly the bank rebuilt after 2010. The bear value is far below book value because a bank that earns $4.5 million on roughly $80 million of remaining regulatory capital is worth less than that capital. What could make this wrong. The indirect book grew 23% in 2025 and lost about $1.9 million (about 0.55% of its average balance), but it has not been through a recession at this size. Funding is deposits; brokered deposits rose $65.6 million in 2025, and core deposits fell from 86.1% to 81.6% of the total. Nonperforming assets are low at $1.6 million (0.14% of assets), so a rise there would be the first sign that the bear path is under way. Owner earnings are only about 6% of book value, so even the base case does not compound capital quickly. Our earlier estimates were made on a different basis and are not comparable to these. Margin-of-safety price: $9.50. Our earnings level is moderately certain: five years of figures range from $0.62 to $1.52, and the normal level is a median rather than a recent print. The worst plausible outcome, a repeat of 2007 to 2010 on a book that is now mostly indirect consumer loans and commercial real estate, would take the shares near $3.60, and the capital cushion shows the franchise would survive it, although owners would receive nothing for years. If we are wrong about the earnings level and it is nearer $0.85 (the median of 2019 to 2025), the shares would be worth about $14; if we are wrong about credit costs staying near $2 million a year, the shares are worth far less. The price assumes about a four-year holding period. Over that period the bank pays a $0.28 dividend (about 2.9% at $9.50) and retains the rest, and at $9.50 the normal earnings of $1.11 per share are an 11.7% earnings yield on the price. If the base case holds and the shares reach $18.53 in four years, that implies roughly 18% a year from price plus the dividend, about 21%; if the lower earnings level of $0.85 is the truth, the implied return falls to the low teens. That gap, plus the severity of the bear path, is why the margin-of-safety price is not higher.