An Alabama bank shutters is consumer lending unit

A Birmingham, Alabama-based community bank has closed its consumer lending subsidiary in a move designed to strengthen asset quality and concentrate its efforts on commercial and indirect lending.

In an 8-K report filed late Friday with the Securities and Exchange Commission, First US Bancshares said it would take a $1.2 million third-quarter charge to close its Acceptance Loan Co. unit. Acceptance’s 20 branches in Alabama and Mississippi ceased accepting new loan applications Friday, while the 56-person staff focuses on servicing the existing $55.1 million portfolio.

The announcement came three months after the $947 million-asset First US said it planned to close four of its 19 branches — three in Alabama and one in Virginia.

Acceptance offered personal loans, as well as secured and unsecured loans on automobiles, all-terrain vehicles, smaller equipment and household appliances.

According to First US, the holding company for the 69-year-old First US Bank, Acceptance generated net income of $1.53 million in 2019 but profit fell to $294,000 in 2020 and of $357,000 through the first six months of 2021. Acceptance’s loan portfolio has shrunk by more than 50% since the end of 2019.

At the same time, Acceptance accounted for the lion’s share of First United’s chargeoff activity — $2 million out of a total of $2.2 million in 2020, and $2.4 million of $2.8 million in 2019.

While its commercial loan growth was sluggish during the quarter ending June 30, First US’ indirect business fared much better, with that portfolio growing 14.4% during the second quarter, to $176.1 million.

First US focuses its indirect lending on boats, recreational vehicles and horse and cargo trailers. In an indication of just how strong the indirect business is currently, First United said it expects the $1.2 million it’s paying to close Acceptance will be fully offset by the end of 2021.

A First US spokesman had not returned a call by deadline. The company reported net income of $1.9 million through the first six months of 2021.

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