Press Release

United Security Bancshares Reports 2nd Quarter Net Income of $2.0 Million

Company Release - 7/15/2020 4:54 PM ET

FRESNO, Calif.--(BUSINESS WIRE)-- United Security Bancshares (Nasdaq: UBFO) today announced its unaudited financial results for the six months ended June 30, 2020. The Company recognized net income of $4,768,000 for the six months ended June 30, 2020, a decrease of 41.2% compared to the net income of $8,104,000 recognized for the six months ended June 30, 2019. Basic and diluted earnings per share decreased to $0.28 for the six months ended June 30, 2020, as compared to basic and diluted earnings per share of $0.48 for the six months ended June 30, 2019.

Second Quarter 2020 Highlights (at or for the quarter ended June 30, 2020, except where noted)

  • Net income for the quarter was $2,012,000, representing a $2,085,000 or 50.89% decrease from $4,097,000 for the quarter ended June 30, 2019. The decrease is a result of a reduction in interest income related to a lower rate environment, a provision for loan losses, and a write-down on OREO.
  • The allowance for credit losses as a percentage of gross loans increased to 1.37%, compared to 1.33% at December 31, 2019. The provision for credit losses totaled $428,000 for the quarter, compared to $4,000 for the quarter ended June 30, 2019. The increase in provision is attributed to net charge-offs realized during the quarter..
  • A loss on the fair value of junior subordinated debt of $30,000 was recorded for the quarter, as compared to a $497,000 gain for the quarter ended June 30, 2019.
  • Total loans, net of unearned fees, increased 8.73% to $648,650,000, compared to $596,554,000 at December 31, 2019. Included in the increase are $26,035,000 in Paycheck Protection Program (PPP) loans.
  • Total deposits increased 9.13% to $893,112,000, compared to $818,362,000 atDecember 31, 2019.
  • Book value per share increased to $6.92, compared to $6.83 at December 31, 2019.
  • Net interest margin decreased to 3.33% from 4.28% for the quarter ended June 30, 2019.
  • Annualized average cost of deposits decreased to 0.21% from 0.42% for the quarter ended June 30, 2019.
  • Net charge-offs totaled $686,000, compared to net recoveries of $31,000 for the quarter ended June 30, 2019.
  • Capital positions remain strong with a 12.25% Tier 1 Leverage Ratio, a 14.71% Common Equity Tier 1 Ratio; a 15.92% Tier 1 Risk-Based Capital Ratio; and a 17.16% Total Risk-Based Capital Ratio.
  • Annualized return on average assets ("ROAA") was 0.80%, compared to 1.71% for the quarter ended June 30, 2019.
  • Annualized return on average equity ("ROAE") was 6.80%, compared to 14.53% for the quarter ended June 30, 2019.

Dennis Woods, President and Chief Executive Officer, stated: "Although our institution continues to be impacted by negative industry-wide effects of the COVID-19 pandemic, we continue to see strong growth as we have reached record highs in loan and deposit balances. We funded over 200 SBA PPP loans for our borrowers over the last quarter, resulting in $26,035,000 in balances and $1,028,000 in unearned fees to be recognized over the life of the loans. We believe our strong credit quality, ample liquidity, and capital level provide a solid foundation as we continue to navigate through these challenging times."

Results of Operations

ROAE for the six months ended June 30, 2020 was 8.09%, compared to 14.57% for the six months ended June 30, 2019. ROAA was 0.98% for the six months ended June 30, 2020, compared to 1.71% for the six months ended June 30, 2019.

The annualized average cost of deposits was 0.21% for the quarter ended June 30, 2020, a decrease from 0.42% for quarter ended June 30, 2019. The decrease in the cost of deposits is primarily attributed to reductions on deposit rates made in the fourth quarter of 2019 and first quarter of 2020. Average interest-bearing deposits decreased 1.16% between the quarters ended June 30, 2019 and 2020 to $516,271,000.

Net interest income after the provision for credit losses for the six months ended June 30, 2020 totaled $14,023,000, a decrease of $4,730,000, or 25.22%, from $18,753,000 for the same period ended June 30, 2019. Net interest income after the provision for credit losses includes a provision for credit losses of $2,134,000 for the six months ended June 30, 2020, compared to a provision of $10,000 for the six months ended June 30, 2019. During the first quarter of 2020, the Federal Reserve cut its benchmark rate by 1.50%. As a result, the Prime rate decreased from 4.75% to 3.25%. A majority of the Company's floating rate loans and investments are indexed to the Prime rate. The Company's net interest margin decreased from 4.36% for the six months ended June 30, 2019 to 3.65% for the six months ended June 30, 2020. The decrease was the result of decreases in yields on overnight fed funds, loans, and investment securities, partially offset by a decrease in interest expense. The yield on loans decreased from 6.01% for the six months ended June 30, 2019 to 5.21% for the six months ended June 30, 2020. The yield on interest bearing liabilities decreased from 0.74% for the six months ended June 30, 2019 to 0.50% for the six months ended June 30, 2020.

Net interest income after the provision for credit losses was $7,149,000 for the quarter ended June 30, 2020, representing a $2,150,000 or 23.1% decrease compared to the same period ended June 30, 2019. The Company's net interest margin decreased from 4.28% to 3.33% between the quarters ended June 30, 2019 and June 30, 2020. The reduction in net interest margin is driven by the reduction in yields on all interest earnings assets, partially offset by a decrease in interest expense on deposits.

Non-interest income for the six months ended June 30, 2020 totaled $3,796,000, reflecting an increase of $544,000 from the $3,252,000 in non-interest income reported for the six months ended June 30, 2019. Customer service fees totaled $1,346,000 and $1,639,000 for the six months ended June 30, 2020 and 2019, respectively. The decrease in customer service fees is attributed to lower fees and surcharges related to insufficient funds and electronic transfers recognized during the year. On a year-over-year comparative basis, non-interest income increased primarily due to a $1,469,000 gain on the fair value of junior subordinated debentures (TRUPs) for the six months ended June 30, 2020, compared to a $911,000 gain for the same period ended June 30, 2019. The change in the fair value of TRUPs reflected in non-interest income was caused by fluctuations in the LIBOR yield curve. Non-interest income for the six months ended June 30, 2019 includes a $114,000 loss resulting from the dissolution of the USB Real Estate Investment Trust (REIT) which was completed in February 2019. Non-interest income for the six months ended June 30, 2020 includes a $310,000 gain in proceeds from bank-owned life insurance.

Noninterest income for the quarter ended June 30, 2020 totaled $1,214,000, reflecting a decrease of $515,000 from the $1,729,000 in non-interest income reported for the quarter ended June 30, 2019. The decrease is attributed to a $212,000 reduction in customer service fees and a $527,000 decrease in gain on fair value of TRUPS, partially offset by a $310,000 gain in proceeds from bank-owned life insurance.

For the six months ended June 30, 2020, non-interest expense totaled $11,145,000, an increase of $536,000 compared to $10,609,000 for the six months ended June 30, 2019. On a year-over-year comparative basis, non-interest expense increased primarily due to a $781,000 increase in expenses related to other real estate owned, which included a write-down of $727,000 on one property. This was partially offset by decreases of $302,000 in professional fees and decreases of $123,000 in salaries and employee benefits. Salary and employee benefits expense for the six months ended June 30, 2019 includes a $231,000 reduction in bonus expense. Also included in net cost on operation and sale of OREO for the six months ended June 30, 2020 is a $113,000 loss on sale. The decrease in professional fees is attributed to a reduction in legal expense.

Noninterest expense for the quarter ended June 30, 2020 totaled $5,553,000, an increase of $291,000 as compared to $5,262,000 reported for the quarter ended June 30, 2019. On a quarter-over-quarter comparative basis, non-interest expense increased due to a $727,000 write-down on OREO, partially offset by a $346,000 decrease in salaries and employee benefits expense and a $191,000 decrease in professional fees.

The efficiency ratio for the six months ended June 30, 2020 declined to 55.86%, compared to 48.19% for the six months ended June 30, 2019. The decline is attributed to a reduction in net interest income as a result of the balance sheet repricing in to a lower rate environment, partially offset by an increase in gain on the fair value of TRUPs.

The Company recorded an income tax provision of $1,906,000 for the six months ended June 30, 2020, compared to $3,292,000 for the same period in 2019. The effective tax rate for the six months ended June 30, 2020 was 28.56%, compared to 28.89% for the six months ended June 30, 2019. The Company recorded an income tax provision of $798,000 for the quarter ended June 30, 2020, compared to $1,669,000 for the same period in 2019. The effective tax rate for the quarter ended June 30, 2020 was 28.40%, compared to 28.95% for the same period ended June 30, 2019.

Provided at the end of this Press Release is a reconciliation of Core Net Income, as a non-GAAP measure, to Net Income. This reconciliation excludes Non-Core items such as the Fair Value Adjustment for TRUPs and gain or loss on sale of other real estate owned (OREO). Management believes that financial results are more comparative excluding the impact of such non-core items.

Balance Sheet Review

Total assets increased $74,454,000, or 7.78%, for the six months ended June 30, 2020, due primarily to increases of $52,280,000 in gross loan balances and $16,651,000 in investment securities. Unfunded loan commitments increased from $197,559,000 at December 31, 2019 to $231,275,000 at June 30, 2020. OREO balances decreased from $6,753,000 at December 31, 2019 to $5,018,000 at June 30, 2020. The reduction is attributed to the sale of one OREO property during the first quarter and a $727,000 write down on OREO in the current quarter.

Total deposits increased $74,750,000, or 9.13%, to $893,112,000 during the six months ended June 30, 2020. This increase was due to an increase of $50,060,000 in noninterest bearing deposits, $17,340,000 in NOW and money market accounts, and $9,075,000 in savings accounts, partially offset by a decrease of $1,725,000 in time deposits. In total, NOW, money market and savings accounts increased 5.99% to $467,427,000 at June 30, 2020, compared to $441,012,000 at December 31, 2019. Noninterest bearing deposits increased 16.05% to $362,010,000 at June 30, 2020, compared to $311,950,000 at December 31, 2019. As a result of the net increase, core deposits, which is made up of the balance of noninterest bearing deposits, NOW, money market, savings, and time deposits accounts less than $250,000, increased $72,823,000.

Shareholders’ equity at June 30, 2020 was $117,460,000, an increase of $1,472,000 from shareholders’ equity of $115,988,000 at December 31, 2019. The increase in equity was the result of net earnings for the period, partially offset by cash dividends. At June 30, 2020 there was an accumulated other comprehensive loss of $401,000, as compared to an accumulated other comprehensive loss of $632,000 at December 31, 2019. The change from December 31, 2019 to June 30, 2020 was the result of unrealized gains on available for sale securities, partially offset by losses on junior subordinated debentures (TRUPs) caused by a change in yields during the period.

The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on June 23, 2020. The dividend was payable on July 15, 2020, to shareholders of record as of July 6, 2020. No assurances can be provided that future dividends will be declared and/or as to the timing of such future dividends, if any.

Credit Quality

The Company has recorded a provision for credit losses of $2,134,000 for the six months ended June 30, 2020, compared to a provision of $10,000 for the six months ended June 30, 2019. Net loan charge-offs totaled $1,180,000 for the six months ended June 30, 2020, as compared to net recoveries of $47,000 for the six months ended June 30, 2019. The provision recorded during the year is attributed to growth of the loan portfolio, net charge-offs, and uncertainty related to the economic effects of COVID-19. COVID-19 has resulted in an economic slowdown and increased unemployment rates. As of June 30, 2020, the Company had executed 25 payment deferrals or modifications on outstanding loan balances of $69,997,000 in connection with the COVID-19 relief provided by the CARES Act. These deferrals were generally no more than six months in duration and were not considered troubled debt restructurings based on interagency guidance issued in March 2020. The Company recorded a provision for credit loss of $428,000 for the quarter ended June 30, 2020, compared to a provision of $4,000 for the quarter ended June 30, 2019. The provision for the quarter ended June 30, 2020 was driven by net charge-offs on the student loan portfolio and one construction and land development loan.

The Company's allowance for loan loss totaled 1.37% of the loan portfolio at June 30, 2020, compared to 1.33% at December 31, 2019. Excluding the SBA PPP loans, which are fully government guaranteed, the allowance for loan loss totaled 1.42% of the loan portfolio at June 30, 2020. In determining the adequacy of the allowance for loan losses, the judgment of the Company's management is a significant factor. Management considers the allowance for credit losses at June 30, 2020 to be adequate.

Non-performing assets, comprised of nonaccrual loans, troubled debt restructures (TDRs), other real estate owned through foreclosure (OREO), and loans more than 90 days past due and still accruing interest, decreased $2,210,000 between December 31, 2019 and June 30, 2020 to $19,015,000. Nonperforming assets as a percentage of total assets decreased from 2.22% at December 31, 2019 to 1.84% at June 30, 2020. The decrease in nonperforming assets is primarily attributed to the reduction in OREO that occurred during the period, partially offset by restructured loans which decreased $31,000 between December 31, 2019 and June 30, 2020. Nonaccrual loans decreased $74,000 between December 31, 2019 and June 30, 2020 to $11,623,000. OREO balances decreased from $6,753,000 at December 31, 2019 to $5,018,000 at June 30, 2020.

About United Security Bancshares

United Security Bancshares (NASDAQ: UBFO) is the holding company for United Security Bank, which was founded in 1987. United Security Bank is headquartered in Fresno and operates 11 full-service branch offices in Fresno, Bakersfield, Campbell, Caruthers, Coalinga, Firebaugh, Oakhurst, San Joaquin, and Taft. Additionally, United Security Bank operates Commercial Real Estate Construction, Commercial Lending, and Consumer Lending departments. For more information, please visit www.unitedsecuritybank.com.

Non-GAAP Financial Measures

This press release and the accompanying financial tables contain a non-GAAP financial measure (Net Income before Non-Core) within the meaning of the Securities and Exchange Commission’s Regulation G. In the accompanying financial tables, the Company has provided a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure. The Company’s management believes that this non-GAAP financial measure provides useful information about the Company’s results of operations and/or financial position to both investors and management. The Company provides this non-GAAP financial measure to investors to assist them in performing their analysis of its historical operating results. The non-GAAP financial measure shows the Company's operating results before consideration of certain adjustments and, consequently, this non-GAAP financial measure should not be construed as an alternative to net income (loss) as an indicator of the Company's operating performance, as determined in accordance with GAAP. The Company may calculate this non-GAAP financial measure differently than other companies.

Forward-Looking Statements

This news release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Company intends such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are based on management’s knowledge and belief as of today and are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date. Forward-looking statements are subject to risks and uncertainties and actual results may differ materially from those presented. Factors that might cause such differences, some of which are beyond the Company’s ability to control or predict, include, but are not limited to: (1) the effects of the COVID-19 pandemic, including the effects of the steps being taken to address the pandemic and their impact on the Company’s market and employees, (2) changes in general economic and financial market conditions, either nationally or locally, (3) changes in interest rates, (4) changes in banking laws or regulations, (5) increased competition in the Company's market, impacting the ability to execute its business plans, (6) loss of key personnel, (7) unanticipated credit losses, (8) earthquakes or other natural disasters impacting the local economy and/or the condition of real estate collateral, (9) the impact of technological changes and the ability to develop and maintain secure and reliable electronic systems, and (10) changes in accounting policies or procedures.

The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. For a more complete discussion of these risks and uncertainties, see the Company’s Annual Report on Form 10-K, for the year ended December 31, 2019, and particularly the section entitled "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Readers should carefully review all disclosures the Company files from time to time with the Securities and Exchange Commission.

United Security Bancshares

Consolidated Balance Sheets (unaudited)

(in thousands)

 

June 30, 2020

 

December 31, 2019

Assets

 

 

 

Cash and non-interest-bearing deposits in other banks

$

34,985

 

 

$

27,291

 

Due from Federal Reserve Bank ("FRB")

194,556

 

 

191,704

 

Cash and cash equivalents

229,541

 

 

218,995

 

 

 

 

 

Investment securities (at fair value)

 

 

 

Available-for-sale ("AFS") securities

92,877

 

 

76,312

 

Marketable equity securities

3,862

 

 

3,776

 

Total investment securities

96,739

 

 

80,088

 

Loans

649,654

 

 

597,374

 

Unearned fees and unamortized loan origination costs - net

(1,004)

 

 

(820)

 

Allowance for credit losses

(8,862)

 

 

(7,908)

 

Net loans

639,788

 

 

588,646

 

 

 

 

 

Premises and equipment - net

9,441

 

 

9,380

 

Accrued interest receivable

9,146

 

 

8,208

 

Other real estate owned ("OREO")

5,018

 

 

6,753

 

Goodwill

4,488

 

 

4,488

 

Deferred tax assets - net

2,574

 

 

3,191

 

Cash surrender value of life insurance

20,279

 

 

20,955

 

Operating lease right-of-use assets

3,065

 

 

3,360

 

Other assets

11,294

 

 

12,855

 

Total assets

$

1,031,373

 

 

$

956,919

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

Deposits

 

 

 

Non-interest-bearing

$

362,010

 

 

$

311,950

 

Interest-bearing

531,102

 

 

506,412

 

Total deposits

893,112

 

 

818,362

 

 

 

 

 

Accrued interest payable

36

 

 

59

 

Operating lease liabilities

3,168

 

 

3,463

 

Other liabilities

7,826

 

 

8,239

 

Junior subordinated debentures (at fair value)

9,771

 

 

10,808

 

Total liabilities

913,913

 

 

840,931

 

 

 

 

 

Shareholders' Equity

 

 

 

Common stock, no par value; 20,000,000 shares authorized; issued and outstanding: 16,977,239 at June 30, 2020 and 16,973,885 at December 31, 2019

59,181

 

 

58,973

 

Retained earnings

58,680

 

 

57,647

 

Accumulated other comprehensive loss

(401)

 

(632)

Total shareholders' equity

117,460

 

115,988

Total liabilities and shareholders' equity

$

1,031,373

 

 

$

956,919

 

United Security Bancshares

Consolidated Statements of Income (unaudited)

(in thousands)

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

Interest Income:

 

 

 

 

 

 

 

Interest and fees on loans

$

7,713

 

 

$

8,443

 

 

$

16,059

 

 

$

17,085

 

Interest on investment securities

356

 

444

 

784

 

921

Interest on deposits in FRB

38

 

1,424

 

605

 

2,722

Total interest income

8,107

 

10,311

 

 

17,448

 

 

20,728

 

 

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

 

 

Interest on deposits

447

 

890

 

1,111

 

1,724

Interest on other borrowed funds

83

 

118

 

180

 

241

Total interest expense

530

 

1,008

 

1,291

 

1,965

Net Interest Income

7,577

 

9,303

 

16,157

 

18,763

Provision for Credit Losses

428

 

4

 

2,134

 

10

Net Interest Income after Provision for Credit Losses

7,149

 

9,299

 

14,023

 

18,753

 

 

 

 

 

 

 

 

Noninterest Income:

 

 

 

 

 

 

 

Customer service fees

618

 

830

 

1,346

 

1,639

Increase in cash surrender value of bank-owned life insurance

127

 

147

 

258

 

 

292

Gain on fair value of marketable equity securities

71

 

53

 

85

 

110

Gain on proceeds from bank-owned life insurance

310

 

 

 

 

310

 

 

(Loss) gain on fair value of junior subordinated debentures

(30)

 

497

 

1,469

 

911

Loss on dissolution of real estate investment trust

 

 

(5)

 

 

 

 

(114)

 

Gain on sale of assets

 

 

6

 

 

 

 

6

 

Other

118

 

201

 

328

 

408

Total noninterest income

1,214

 

1,729

 

3,796

 

3,252

 

 

 

 

 

 

 

 

Noninterest Expense:

 

 

 

 

 

 

 

Salaries and employee benefits

2,414

 

2,760

 

5,409

 

5,532

Occupancy expense

869

 

808

 

1,723

 

1,621

Data processing

135

 

144

 

247

 

251

Professional fees

555

 

746

 

1,257

 

1,559

Regulatory assessments

77

 

83

 

162

 

176

Director fees

94

 

95

 

188

 

186

Correspondent bank service charges

17

 

14

 

33

 

28

Net cost on operation and sale of OREO

780

 

87

 

933

 

152

Other

612

 

525

 

1,193

 

1,104

Total noninterest expense

5,553

 

5,262

 

11,145

 

10,609

 

 

 

 

 

 

 

 

Income Before Provision for Taxes

2,810

 

5,766

 

6,674

 

11,396

Provision for Taxes on Income

798

 

1,669

 

1,906

 

3,292

Net Income

$

2,012

 

 

$

4,097

 

 

$

4,768

 

 

$

8,104

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$

0.12

 

 

$

0.24

 

 

$

0.28

 

 

$

0.48

 

Diluted earnings per common share

$

0.12

 

 

$

0.24

 

 

$

0.28

 

 

$

0.48

 

Weighted average basic shares for EPS

16,975,588

 

16,950,564

 

16,974,845

 

16,948,810

Weighted average diluted shares for EPS

16,988,778

 

16,981,705

 

16,992,223

 

16,977,224

 

United Security Bancshares

Average Balances and Rates (unaudited)

(in thousands)

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

Average Balances:

 

 

 

 

 

 

 

Loans (1)

$

636,840

 

 

$

568,600

 

 

$

619,950

 

 

$

573,436

 

Investment securities – taxable

97,209

 

 

65,268

 

 

89,655

 

 

66,772

 

Interest-bearing deposits in FRB

182,755

 

 

238,898

 

 

180,751

 

 

227,335

 

Total interest-earning assets

916,804

 

 

872,766

 

 

890,356

 

 

867,543

 

Allowance for credit losses

(9,124)

 

 

(8,442)

 

 

(8,515)

 

 

(8,449)

 

Cash and due from banks

28,432

 

 

29,232

 

 

28,857

 

 

28,793

 

Other real estate owned

5,969

 

 

5,745

 

 

6,452

 

 

5,745

 

Other non-earning assets

64,224

 

 

61,174

 

 

62,845

 

 

60,434

 

Total average assets

$

1,006,305

 

 

$

960,475

 

 

$

979,995

 

 

$

954,066

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

$

516,271

 

 

$

522,308

 

 

$

508,648

 

 

$

522,382

 

Junior subordinated debentures

8,494

 

 

10,378

 

 

9,605

 

 

10,235

 

Total interest-bearing liabilities

524,765

 

 

532,686

 

 

518,253

 

 

532,617

 

 

 

 

 

 

 

 

 

Non-interest-bearing deposits

352,309

 

 

305,211

 

 

333,330

 

 

300,035

 

Other liabilities

10,120

 

 

9,495

 

 

9,899

 

 

9,262

 

Total liabilities

887,194

 

 

847,392

 

 

861,482

 

 

841,914

 

Total equity

119,111

 

 

113,083

 

 

118,513

 

 

112,152

 

Total liabilities and equity

$

1,006,305

 

 

$

960,475

 

 

$

979,995

 

 

$

954,066

 

 

 

 

 

 

 

 

 

Average Rates:

 

 

 

 

 

 

 

Loans (1)

4.87

%

 

5.96

%

 

5.21

%

 

6.01

%

Investment securities- taxable

1.47

%

 

2.73

%

 

1.76

%

 

2.78

%

Interest-bearing deposits in FRB

0.08

%

 

2.39

%

 

0.67

%

 

2.41

%

Earning assets

3.56

%

 

4.74

%

 

3.94

%

 

4.82

%

Interest bearing deposits

0.35

%

 

0.68

%

 

0.44

%

 

0.67

%

Total deposits

0.21

%

 

0.43

%

 

0.27

%

 

0.42

%

Junior subordinated debentures

3.93

%

 

4.56

%

 

3.77

%

 

4.75

%

Total interest-bearing liabilities

0.41

%

 

0.76

%

 

0.50

%

 

0.74

%

Net interest margin (2)

3.33

%

 

4.28

%

 

3.65

%

 

4.36

%

 

(1) Loan amounts include nonaccrual loans, but the related interest income has been included only if collected for the period prior to the loan being placed on a nonaccrual basis.

(2) Net interest margin is computed by dividing annualized net interest income by average interest-earning assets.

United Security Bancshares

Condensed - Consolidated Balance Sheets (unaudited)

(in thousands)

 

June 30, 2020

 

March 31, 2020

 

December 31, 2019

 

September 30, 2019

 

June 30, 2019

Cash and cash equivalents

$

229,541

 

 

$

199,853

 

 

$

218,995

 

 

$

245,943

 

 

$

309,460

 

Investment securities

96,739

 

 

97,486

 

 

80,088

 

 

81,651

 

 

63,632

 

Loans

648,650

 

 

623,686

 

 

596,554

 

 

569,500

 

 

572,810

 

Allowance for credit losses

(8,862)

 

 

(9,120)

 

 

(7,908)

 

 

(8,230)

 

 

(8,452)

 

Net loans

639,788

 

 

614,566

 

 

588,646

 

 

561,270

 

 

564,358

 

Other assets

65,305

 

 

65,341

 

 

69,190

 

 

68,534

 

 

69,043

 

Total assets

$

1,031,373

 

 

$

977,246

 

 

$

956,919

 

 

$

957,398

 

 

$

1,006,493

 

 

 

 

 

 

 

 

 

 

 

Non-interest-bearing

$

362,010

 

 

$

324,167

 

 

$

311,950

 

 

$

333,156

 

 

$

304,172

 

Interest-bearing

531,102

 

 

516,270

 

 

506,412

 

 

487,067

 

 

566,743

 

Total deposits

893,112

 

 

840,437

 

 

818,362

 

 

820,223

 

 

870,915

 

Other liabilities

20,801

 

 

19,399

 

 

22,569

 

 

21,965

 

 

22,240

 

Total liabilities

913,913

 

 

859,836

 

 

840,931

 

 

842,188

 

 

893,155

 

Total shareholders' equity

117,460

 

 

117,410

 

 

115,988

 

 

115,210

 

 

113,338

 

Total liabilities and shareholder's equity

$

1,031,373

 

 

$

977,246

 

 

$

956,919

 

 

$

957,398

 

 

$

1,006,493

 

United Security Bancshares

Condensed - Consolidated Statements of Income (unaudited)

(in thousands)

For the Quarters Ended:

 

June 30, 2020

 

March 31, 2020

 

December 31, 2019

 

September 30, 2019

 

June 30, 2019

Total interest income

$

8,107

 

 

$

9,341

 

 

$

9,558

 

 

$

10,417

 

 

$

10,311

 

Total interest expense

530

 

 

761

 

 

862

 

 

1,061

 

 

1,008

 

Net interest income

7,577

 

 

8,580

 

 

8,696

 

 

9,356

 

 

9,303

 

Provision for credit losses

428

 

 

1,707

 

 

5

 

 

5

 

 

4

 

Net interest income after provision for credit losses

7,149

 

 

6,873

 

 

8,691

 

 

9,351

 

 

9,299

 

 

 

 

 

 

 

 

 

 

 

Total non-interest income

1,214

 

 

2,580

 

 

647

 

 

1,853

 

 

1,729

 

Total non-interest expense

5,553

 

 

5,591

 

 

5,335

 

 

5,335

 

 

5,262

 

Income before provision for taxes

2,810

 

 

3,862

 

 

4,003

 

 

5,869

 

 

5,766

 

Provision for taxes on income

798

 

 

1,108

 

 

1,108

 

 

1,696

 

 

1,669

 

Net income

$

2,012

 

 

$

2,754

 

 

$

2,895

 

 

$

4,173

 

 

$

4,097

 

United Security Bancshares

Nonperforming Assets (unaudited)

(dollars in thousands)

 

June 30, 2020

 

December 31, 2019

Commercial and industrial

$

 

 

$

75

 

RE construction & development

11,109

 

 

11,478

 

Agricultural

514

 

 

144

 

Total nonaccrual loans

$

11,623

 

 

$

11,697

 

 

 

 

 

Loans past due 90 days and still accruing

269

 

 

386

 

Restructured loans

2,105

 

 

2,389

 

Total nonperforming loans

$

13,997

 

 

$

14,472

 

Other real estate owned

5,018

 

 

6,753

 

Total nonperforming assets

$

19,015

 

 

$

21,225

 

 

 

 

 

Nonperforming loans to total gross loans

2.15

%

 

2.42

%

Nonperforming assets to total assets

1.84

%

 

2.22

%

Allowance for credit losses to nonperforming loans

63.31

%

 

54.64

%

United Security Bancshares

Selected Financial Data (unaudited)

(dollars in thousands, except per share amounts)

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

Return on average assets

0.80

%

 

1.71

%

 

0.98%

 

1.71%

Return on average equity

6.80

%

 

14.53

%

 

8.09%

 

14.57%

Net charge-off (recoveries) to average loans

0.43

%

 

(0.02)

%

 

0.38%

 

(0.02)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2020

 

December 31, 2019

 

 

 

 

Shares outstanding - period end

16,977,239

 

 

16,973,885

 

 

 

 

 

Book value per share

$6.92

 

 

$6.83

 

 

 

 

 

Efficiency ratio (1)

55.86

%

 

49.99

%

 

 

 

 

Total impaired loans

$15,453

 

 

$17,072

 

 

 

 

 

Net loan to deposit ratio

71.64

%

 

71.93

%

 

 

 

 

Allowance for credit losses to total loans

1.37

%

 

1.33

%

 

 

 

 

Total capital to risk weighted assets

 

 

 

 

 

 

 

Company

17.16

%

 

17.98

%

 

 

 

 

Bank

16.97

%

 

17.78

%

 

 

 

 

Tier 1 capital to risk-weighted assets

 

 

 

 

 

 

 

Company

15.92

%

 

16.81

%

 

 

 

 

Bank

15.74

%

 

16.61

%

 

 

 

 

Common equity tier 1 capital to risk-weighted assets

 

 

 

 

 

 

 

Company

14.71

%

 

15.39

%

 

 

 

 

Bank

15.74

%

 

16.61

%

 

 

 

 

Tier 1 capital to adjusted average assets (leverage)

 

 

 

 

 

 

 

Company

12.25

%

 

12.82

%

 

 

 

 

Bank

12.10

%

 

12.83

%

 

 

 

 

 

(1) Efficiency ratio is defined as total noninterest expense divided by net interest income before provision for credit losses plus total noninterest income.

United Security Bancshares

Net Income before Non-Core Reconciliation

Non-GAAP Information (dollars in thousands)

(unaudited)

 

 

Six Months Ended June 30,

 

 

 

 

 

 

2020

 

2019

 

Change $

 

Change %

Net income

 

$

4,768

 

 

$

8,104

 

 

$

(3,336)

 

 

(41.16)

%

 

 

 

 

 

 

 

 

 

TRUPs (1) fair value adjustment gain

 

1,469

 

 

911

 

 

 

 

 

Write down on OREO

 

(727)

 

 

 

 

 

 

 

Loss on sale of OREO

 

(113)

 

 

 

 

 

 

 

 

 

629

 

 

911

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax effect

 

182

 

 

264

 

 

 

 

 

Non-core items net of taxes

 

447

 

 

647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP core net income

 

$

4,321

 

 

$

7,457

 

 

$

(3,136)

 

 

(42.05)

%

 

(1) TRUPs Fair Value Adjustment is not part of Core Income and depending upon market rates, can “add to” or “subtract from” Core Income and mask Non-GAAP Core Income change.

 

Dennis Woods, President and CEO
(559) 248-4928

Source: United Security Bancshares