SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

October 16, 2019
Date of Report (Date of earliest event reported)

UNITED SECURITY BANCSHARES
(Exact Name of Registrant as Specified in its Charter)

California
(State or Other Jurisdiction of Incorporation)
000-32987
 
91-2112732
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
 
 
2126 Inyo Street, Fresno, California
 
93721
(Address of principal executive offices)
 
(Zip Code)

559-248-4943
(Registrant's Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company o 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o 








ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On October 16, 2019, the Company issued a press release announcing results for the quarter ended September 30, 2019 (the "Press Release"). A copy of the Press Release is furnished as Exhibit 99.1 and incorporated herein by reference. The Press Release contains the non-GAAP measure Core Net Income. The Company believes that the presentation of that non-GAAP measure provides useful information for the understanding of its ongoing operations and, thereby, enhances an investor’s overall understanding of the Company's current financial performance relative to past performance and provides, along with the nearest GAAP measures, a baseline for modeling future expectations. The non-GAAP measure is reconciled to the comparable GAAP financial measure in the financial tables within the Press Release. The Company cautions that the non-GAAP measure should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results. Additionally, the Company notes that there can be no assurance that the above referenced non-GAAP financial measure is comparable to similarly titled financial measures used by other companies.

The information in Item 2.02 of this Current Report on Form 8-K and the Press Release attached hereto as Exhibit 99.1 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.


ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(d)    Exhibits.

EXHIBIT #
99.1 Press release of United Security Bancshares dated October 16, 2019


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
United Security Bancshares
 
 
 
 
Date:
October 16, 2019
 
By: /s/ Bhavneet Gill
 
 
 
Bhavneet Gill
 
 
 
Senior Vice President & Chief Financial Officer






Exhibit


United Security Bancshares reports 3rd quarter net income of $4.2 million

FRESNO, CA - October 16, 2019. United Security Bancshares (Nasdaq: UBFO) today announced its unaudited financial results for the three and nine months ended September 30, 2019. The Company reported consolidated net income of $4,173,000, or $0.25 per basic and diluted common share, for the quarter ended September 30, 2019, as compared to $3,518,000, or $0.21 per basic and diluted common share, for the quarter ended September 30, 2018. The Company recognized net income of $12,276,000 for the nine months ended September 30, 2019, an increase of 22% compared to the net income of $10,068,000 recognized for the nine months ended September 30, 2018. Basic and diluted earnings per share increased to $0.72 for the nine months ended September 30, 2019, as compared to basic earnings per share of $0.60 and diluted earnings per share of $0.59 for the nine months ended September 30, 2018.

Third Quarter 2019 Highlights (at or for the quarter ended September 30, 2019, except where noted)

Net interest income after provision for credit losses increased to $9,351,000, compared to $9,236,000 for the quarter ended September 30, 2018, and increased from $9,299,000 in the preceding quarter.
Net interest margin decreased to 4.17% from 4.43% for the quarter ended September 30, 2018, and decreased from 4.28% in the preceding quarter.
Net charge-offs totaled $226,000, compared to net recoveries of $746,000 for the quarter ended September 30, 2018, and net recoveries of $31,000 in the preceding quarter.
Capital positions remain strong with a 12.47% Tier 1 Leverage Ratio, a 15.67% Common Equity Tier 1 Ratio; a 17.13% Tier 1 Risk-Based Capital Ratio; and a 18.38% Total Risk-Based Capital Ratio.
Annualized return on average assets ("ROAA") was 1.69%, compared to 1.59% for the quarter ended September 30, 2018, and 1.71% in the preceding quarter.
Annualized return on average equity ("ROAE") was 14.36%, compared to 13.04% for the quarter ended September 30, 2018, and 14.53% in the preceding quarter.
Total loans, net of unearned fees, decreased to $569,500,000, compared to $587,814,000 at December 31, 2018.
Other real estate owned balances remained at $5,745,000 at September 30, 2019 when compared to $5,745,000 at December 31, 2018.
The allowance for credit losses as a percentage of gross loans increased to 1.45%, compared to 1.43% at December 31, 2018.
Total deposits increased to $820,223,000, compared to $805,643,000 at December 31, 2018.
Book value per share increased to $6.80, compared to $6.45 at December 31, 2018.

Dennis Woods, President and Chief Executive Officer, stated: "During the third quarter, we added Interactive Teller Machines (ITMs) in four of our branches, replacing existing drive-up windows, to provide extended banking hours for our customers. Our third quarter net interest margin reflects the impact of the Federal Reserve rate cut, however, core net income, capital, and liquidity remain strong. We expect to carry this momentum through the fourth quarter of 2019."

Results of Operations

Annualized ROE for the nine months ended September 30, 2019 was 14.50%, compared to 12.81% for the nine months ended September 30, 2018. Annualized ROA was 1.70% for the nine months ended September 30, 2019, compared to 1.58% for the nine months ended September 30, 2018. Annualized ROE for the quarter ended September 30, 2019 was 14.36% compared to 13.04% for the same period in 2018. Annualized ROA was 1.69% for the quarter ended September 30, 2019, compared to 1.59% for the same period in 2018.

The annualized average cost of deposits was 0.45% for the quarter ended September 30, 2019 and 0.31% for the quarter ended September 30, 2018. The increase in the cost of deposits is attributed to increases in average balances of interest-bearing deposits and rates paid on time deposits and money market accounts. Interest-bearing deposits increased 9.81% between the quarters ended September 30, 2018 and 2019 to an average balance of $524,437,000.

Net interest income after the provision for credit losses for the nine months ended September 30, 2019 totaled $28,103,000, an increase of $1,439,000, or 5.40%, from $26,664,000 for the same period ended September 30, 2018. Included within the balance of net interest income after the provision for credit losses for the nine months ended September 30, 2018 was a $1,710,000 recovery of provision. The recovery of provision was due to one-time recoveries on previously charged-off loans.





There were no such recoveries recognized during the nine months ended September 30, 2019. The Company's net interest margin decreased from 4.31% for the nine months ended September 30, 2018 to 4.30% for the nine months ended September 30, 2019. The decrease was the result of increases in the cost of deposits, partially offset by increases in loan yields, and investment yields. The yield on loans increased from 5.52% for the nine months ended September 30, 2018 to 5.98% for the nine months ended September 30, 2019. The yield on loans for the nine months ended September 30, 2018 includes $550,000 in write-downs of unamortized insurance premiums on the student loan portfolio, which was a result of the dissolution of the insurance carrier. The increase in net interest income on a year-over-year comparison is the result of higher interest rates on loans and investment securities, partially offset by increasing costs of deposits and a decline in loan balances. Net interest income after the provision for credit losses for the quarter ended September 30, 2019 totaled $9,351,000, an increase of $115,000, or 1.25%, from the net interest income of $9,236,000 for the same period ended September 30, 2018.

Non-interest income for the nine months ended September 30, 2019 totaled $5,105,000, reflecting an increase of $2,165,000 from the $2,940,000 in non-interest income reported for the nine months ended September 30, 2018. Customer service fees, which represent the largest portion of the Company's non-interest income, totaled $2,479,000 and $2,787,000 for the nine months ended September 30, 2019 and 2018, respectively. On a year-over-year comparative basis, non-interest income increased primarily due to a $1,571,000 gain on the fair value of junior subordinated debentures (TRUPs) for the nine months ended September 30, 2019, compared to a $923,000 loss for the same period ended September 30, 2018. 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 nine months ended September 30, 2019 also includes a $115,000 loss resulting from the dissolution of the USB Real Estate Investment Trust (REIT) which was completed in February 2019. Non-interest income for the nine months ended September 30, 2018 includes a $171,000 gain recorded on the death benefit proceeds of bank-owned life insurance.
 
Non-interest income for the quarter ended September 30, 2019 totaled $1,853,000, reflecting an increase of $1,004,000 from the $849,000 in non-interest income reported for the quarter ended September 30, 2018. The increase during the period was primarily due to the recording of a $660,000 gain on the fair value of TRUPs for the quarter ended September 30, 2019, as compared to a $262,000 loss for the quarter ended September 30, 2018. The change in the fair value of TRUPs reflected in non-interest income was primarily caused by fluctuations in the LIBOR yield curve. Customer service fees totaled $839,000 for the quarter ended September 30, 2019, as compared to $815,000 for the quarter ended September 30, 2018.

For the nine months ended September 30, 2019, non-interest expense totaled $15,943,000, an increase of $484,000 compared to $15,459,000 for the nine months ended September 30, 2018. On a year-over-year comparative basis, non-interest expense increased primarily due to increases of $663,000 in professional fees, $188,000 in other expenses, and $116,000 in data processing, partially offset by a decreases of $491,000 in salaries and employee benefits and $110,000 in regulatory assessments. The increase in professional fees is mainly attributed to an increase in legal fees. The increase in data processing is primarily due to additional service fees, and the increase in other expenses is attributed to workman's compensation insurance expense. The decrease in salary and employee benefits is attributed to lower equity award expense. Non-interest expense for the nine months ended September 30, 2018 includes a $121,000 recovery of workman's compensation insurance expense.

Non-interest expense totaled $5,335,000 for the quarter ended September 30, 2019, an increase of $192,000 as compared to $5,143,000 reported for the quarter ended September 30, 2018. On a quarter-over-quarter comparative basis, non-interest expense increased primarily due to increases in data processing expenses and professional fees, partially offset by decreases in regulatory assessments as well as salary and employee benefits as a result of lower equity award expenses. The decrease in regulatory assessments is attributed to the utilization of FDIC assessment credits.

The Company recorded an income tax provision of $4,989,000 for the nine months ended September 30, 2019, compared to $4,077,000 for the same period in 2018. The effective tax rate for the nine months ended September 30, 2019 was 28.90%, compared to 28.82% for the nine months ended September 30, 2018. For the quarter ended September 30, 2019, the Company recorded a tax provision of $1,696,000, compared to a provision of $1,424,000 for the same period in 2018.

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, recovery of provision for credit losses, and gain 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 $24,340,000, or 2.61%, for the nine months ended September 30, 2019, due primarily to increases of $23,482,000 in overnight funds held at the Federal Reserve. Loan balances decreased by $17,805,000 for the nine months ended September 30, 2019 and investment securities increased by $11,566,000. Unfunded loan commitments increased $35,231,000 to $211,584,000 during the first nine months of 2019. With the adoption of ASU 2016-02, effective January 1, 2019, the Company began to recognize an operating lease right-of-use asset and operating lease liability. At September 30, 2019, the operating lease right-of-use asset was $3,610,000 and the operating lease liability was $3,714,000.

Total deposits increased $14,580,000, or 1.81%, to $820,223,000 during the nine months ended September 30, 2019. This increase was due to an increase of $40,436,000 in noninterest bearing deposits, partially offset by a decrease of $14,279,000 in time deposits and a decrease of $11,577,000 in NOW, money market, and savings accounts. Total money market and savings accounts decreased 2.69% to $418,914,000 at September 30, 2019, compared to $430,491,000 at December 31, 2018. Noninterest bearing deposits increased 13.81% to $333,156,000 at September 30, 2019, compared to $292,720,000 at December 31, 2018. 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 $28,859,000.

Shareholders’ equity at September 30, 2019 was $115,210,000, up $5,970,000 from shareholders’ equity of $109,240,000 at December 31, 2018. The increase in equity was a result of net earnings for the period, partially offset by cash dividends.

The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on September 24, 2019. The dividend will be payable on October 18, 2019, to shareholders of record as of October 8, 2019. The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on June 25, 2019. The dividend was payable on July 18, 2019, to shareholders of record as of July 8, 2019. The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on March 26, 2019. The dividend was payable on April 17, 2019, to shareholders of record as of April 8, 2019. 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 $15,000 for the nine months ended September 30, 2019, compared to a recovery of provision of $1,699,000 for the nine months ended September 30, 2018. Net loan charge-offs totaled $180,000 for the nine months ended September 30, 2019, as compared to net recoveries of $1,230,000 for the nine months ended September 30, 2018. The Company recorded a provision for credit loss of $5,000 for the quarter ended September 30, 2019, compared to a recovery of provision for credit losses of $373,000 for the quarter ended September 30, 2018. Net loan charge-offs totaled $226,000 for the quarter ended September 30, 2019, as compared to net loan recoveries of $746,000 for the quarter ended September 30, 2018.

The Company's allowance for loan loss totaled 1.45% of the loan portfolio at September 30, 2019, compared to 1.43% at December 31, 2018. 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 September 30, 2019 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 approximately $354,000 between December 31, 2018 and September 30, 2019 to $21,275,000. Nonperforming assets as a percentage of total assets decreased from 2.32% at December 31, 2018 to 2.22% at September 30, 2019. The decrease in nonperforming assets is mainly attributed to decreases in restructured loans. Nonaccrual loans increased $704,000 between December 31, 2018 and September 30, 2019 to $12,756,000. Restructured loans decreased $1,763,000 between December 31, 2018 and September 30, 2019. OREO totaled $5,745,000 at September 30, 2019 and December 31, 2018.

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) changes in general economic and financial market conditions, either nationally or locally, (2) changes in interest rates, (3) changes in banking laws or regulations, (4) increased competition in the Company’s market, impacting the ability to execute its business plans, (5) loss of key personnel, (6) unanticipated credit losses, (7) earthquakes or other natural disasters impacting the local economy and/or the condition of real estate collateral, (8) the impact of technological changes and the ability to develop and maintain secure and reliable electronic systems, and (9) 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, 2018, 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)
 
 
 
 
September 30, 2019
 
December 31, 2018
Assets
 
 
 
Cash and non-interest-bearing deposits in other banks
$
31,073

 
$
28,949

Due from Federal Reserve Bank ("FRB")
214,870

 
191,388

Cash and cash equivalents
245,943

 
220,337

Investment securities (at fair value)
 
 
 
Available for sale ("AFS") securities
77,864

 
66,426

Marketable equity securities
3,787

 
3,659

Total investment securities
81,651

 
70,085

Loans
570,128

 
587,933

Unearned fees and unamortized loan origination costs - net
(628
)
 
(119
)
Allowance for credit losses
(8,230
)
 
(8,395
)
Net loans
561,270

 
579,419

Premises and equipment - net
9,455

 
9,837

Accrued interest receivable
10,522

 
8,341

Other real estate owned
5,745

 
5,745

Goodwill
4,488

 
4,488

Deferred tax assets - net
3,121

 
3,174

Cash surrender value of life insurance
20,682

 
20,244

Operating lease right-of-use assets
3,610

 

Other assets
10,911

 
11,388

Total assets
$
957,398

 
$
933,058

 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
Deposits
 

 
 

Non-interest-bearing
$
333,156

 
$
292,720

Interest-bearing
487,067

 
512,923

Total deposits
820,223

 
805,643

 
 
 
 
Accrued interest payable
72

 
57

Operating lease liabilities
3,714

 

Other liabilities
7,849

 
7,963

Junior subordinated debentures (at fair value)
10,330

 
10,155

Total liabilities
842,188

 
823,818

 
 
 
 
Shareholders' Equity
 
 
 
Common stock, no par value; 20,000,000 shares authorized; issued and outstanding: 16,953,744 at September 30, 2019 and 16,946,622 at December 31, 2018
58,896

 
58,624

Retained earnings
56,619

 
49,942

Accumulated other comprehensive (loss) income
(305)

 
674

Total shareholders' equity
115,210

 
109,240

Total liabilities and shareholders' equity
$
957,398

 
$
933,058















United Security Bancshares
 
 
 
 
 
 
 
Consolidated Statements of Income (unaudited)
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Interest Income:
 
 
 
 
 
 
 
Interest and fees on loans
$
8,648

 
$
8,397

 
$
25,733

 
$
24,114

Interest on investment securities
439

 
351

 
1,360

 
809

Interest on deposits in FRB
1,330

 
806

 
4,052

 
1,870

Total interest income
10,417

 
9,554

 
31,145

 
26,793

 
 
 
 
 
 
 
 
Interest Expense:
 
 
 
 
 
 
 
Interest on deposits
950

 
579

 
2,675

 
1,517

Interest on other borrowed funds
111

 
112

 
352

 
311

Total interest expense
1,061

 
691

 
3,027

 
1,828

Net Interest Income
9,356

 
8,863

 
28,118

 
24,965

Provision (Recovery of Provision) for Credit Losses
5

 
(373)

 
15

 
(1,699)

Net Interest Income after Provision (Recovery of Provision) for Credit Losses
9,351

 
9,236

 
28,103

 
26,664

 
 
 
 
 
 
 
 
Noninterest Income:
 
 
 
 
 
 
 
Customer service fees
839

 
815

 
2,479

 
2,787

Increase in cash surrender value of bank-owned life insurance
147

 
132

 
438

 
389

Gain (loss) on fair value of marketable equity securities
18

 
(35)

 
128

 
(114)

Gain on proceeds from bank-owned life insurance

 

 

 
171

Gain (loss) on fair value of junior subordinated debentures
660

 
(262)

 
1,571

 
(923)

Loss on dissolution of real estate investment trust
(1)

 

 
(115)

 

(Loss) gain on sale of assets
(5)

 

 
1

 
29

Other
195

 
199

 
603

 
601

Total noninterest income
1,853

 
849

 
5,105

 
2,940

 
 
 
 
 
 
 
 
Noninterest Expense:
 
 
 
 
 
 
 
Salaries and employee benefits
2,775

 
2,826

 
8,307

 
8,798

Occupancy expense
829

 
848

 
2,450

 
2,448

Data processing
151

 
74

 
402

 
286

Professional fees
864

 
620

 
2,423

 
1,760

Regulatory assessments
(37)

 
87

 
138

 
248

Director fees
95

 
78

 
281

 
239

Correspondent bank service charges
14

 
15

 
42

 
48

Loss on California tax credit partnership

 
5

 

 
14

Net cost on operation and sale of OREO
71

 
30

 
223

 
129

Other
573

 
560

 
1,677

 
1,489

Total noninterest expense
5,335

 
5,143

 
15,943

 
15,459

 
 
 
 
 
 
 
 
Income Before Provision for Taxes
5,869

 
4,942

 
17,265

 
14,145

Provision for Taxes on Income
1,696

 
1,424

 
4,989

 
4,077

Net Income
$
4,173

 
$
3,518

 
$
12,276

 
$
10,068

 
 
 
 
 
 
 
 
Basic earnings per common share
$
0.25

 
$
0.21

 
$
0.72

 
$
0.60

Diluted earnings per common share
$
0.25

 
$
0.21

 
$
0.72

 
$
0.59

Weighted average basic shares for EPS
16,950,564

 
16,902,218

 
16,948,810

 
16,897,524

Weighted average diluted shares for EPS
16,981,705

 
16,954,053

 
16,977,224

 
16,933,477






United Security Bancshares
 
 
 
 
 
 
 
Average Balances and Rates (unaudited)
 
 
 
 
 
 
 
(in thousands)
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Average Balances:
 
 
 
 
 
 
 
Loans (1)
$
579,035

 
$
571,673

 
$
575,323

 
$
584,424

Investment securities – taxable
71,168

 
59,571

 
68,254

 
51,489

Interest-bearing deposits in FRB
240,605

 
163,572

 
231,807

 
137,478

Total interest-earning assets
890,808


794,816


875,384


773,391

Allowance for credit losses
(8,448
)
 
(8,934
)
 
(8,449
)
 
(9,219
)
Cash and due from banks
29,105

 
27,514

 
28,898

 
27,111

Other real estate owned
5,745

 
5,745

 
5,745

 
5,745

Other non-earning assets
62,752

 
56,225

 
61,112

 
54,653

Total average assets
$
979,962


$
875,366


$
962,690


$
851,681

 
 
 
 
 
 
 
 
Interest-bearing deposits
$
524,437

 
$
449,041

 
$
523,104

 
$
431,118

Junior subordinated debentures
10,416

 
10,062

 
10,296

 
9,783

Total interest-bearing liabilities
534,853

 
459,103

 
533,400


440,901

Non-interest-bearing deposits
319,547

 
303,614

 
306,590

 
299,701

Other liabilities
10,319

 
5,645

 
9,506

 
6,012

Total liabilities
864,719


768,362


849,496


746,614

Total equity
115,243

 
107,004

 
113,194

 
105,067

Total liabilities and equity
$
979,962

 
$
875,366

 
$
962,690

 
$
851,681

 
 
 
 
 
 
 
 
Average Rates:
 
 
 
 
 
 
 
Loans (1)
5.93
%
 
5.83
%
 
5.98
%
 
5.52
%
Investment securities- taxable
2.45
%
 
2.34
%
 
2.66
%
 
2.10
%
Interest-bearing deposits in FRB
2.19
%
 
1.95
%
 
2.34
%
 
1.82
%
Earning assets
4.64
%
 
4.77
%
 
4.76
%
 
4.63
%
Interest bearing deposits
0.72
%
 
0.51
%
 
0.68
%
 
0.47
%
Total deposits
0.45
%
 
0.31
%
 
0.43
%
 
0.28
%
Junior subordinated debentures
4.23
%
 
4.42
%
 
4.57
%
 
4.25
%
Total interest-bearing liabilities
0.79
%
 
0.60
%
 
0.76
%
 
0.55
%
Net interest margin (2)
4.17
%
 
4.43
%
 
4.30
%
 
4.31
%

(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)
 
 
September 30, 2019
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
Cash and cash equivalents
$
245,943

 
$
309,460

 
$
260,701

 
$
220,337

 
$
207,300

Investment securities
81,651

 
63,632

 
66,604

 
70,085

 
65,727

Loans
569,500

 
572,810

 
579,617

 
587,814

 
577,598

Allowance for credit losses
(8,230
)
 
(8,452
)
 
(8,417
)
 
(8,395
)
 
(8,798
)
Net loans
561,270

 
564,358

 
571,200

 
579,419

 
568,800

Other assets
68,534

 
69,043

 
65,535

 
63,217

 
62,201

Total assets
$
957,398

 
$
1,006,493

 
$
964,040

 
$
933,058

 
$
904,028

 
 
 
 
 
 
 
 
 
 
Non-interest-bearing
$
333,156

 
$
304,172

 
$
300,476

 
$
292,720

 
$
315,213

Interest-bearing
487,067

 
566,743

 
531,101

 
512,923

 
463,670

Total deposits
820,223

 
870,915

 
831,577

 
805,643

 
778,883

Other liabilities
21,965

 
22,240

 
21,270

 
18,175

 
18,099

Total liabilities
842,188

 
893,155

 
852,847

 
823,818

 
796,982

Total shareholders' equity
115,210

 
113,338

 
111,193

 
109,240

 
107,046

Total liabilities and shareholder's equity
$
957,398

 
$
1,006,493

 
$
964,040

 
$
933,058

 
$
904,028


United Security Bancshares
 
 
 
 
 
 
 
 
Condensed - Consolidated Statements of Income (unaudited)
 
 
 
 
(in thousands)
For the Quarters Ended:
 
September 30, 2019
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
Total interest income
$
10,417

 
$
10,311

 
$
10,417

 
$
9,821

 
$
9,554

Total interest expense
1,061

 
1,008

 
957

 
876

 
691

Net interest income
9,356

 
9,303

 
9,460

 
8,945

 
8,863

Provision (recovery of provision) for credit losses
5

 
4

 
6

 
(65
)
 
(373
)
Net interest income after provision (recovery of provision) for credit losses
9,351

 
9,299

 
9,454

 
9,010

 
9,236

 
 
 
 
 
 
 
 
 
 
Total non-interest income
1,853

 
1,729

 
1,523

 
1,665

 
849

Total non-interest expense
5,335

 
5,262

 
5,347

 
5,473

 
5,143

Income before provision for taxes
5,869

 
5,766

 
5,630

 
5,202

 
4,942

Provision for taxes on income
1,696

 
1,669

 
1,623

 
1,254

 
1,424

Net income
$
4,173

 
$
4,097

 
$
4,007

 
$
3,948

 
$
3,518













United Security Bancshares
 
 
 
Nonperforming Assets (unaudited)
 
 
 
(dollars in thousands)
 
 
 
 
September 30, 2019
 
December 31, 2018
Commercial and industrial
$
75

 
$

Real estate - mortgage
1,008

 
389

RE construction & development
11,529

 
11,663

Agricultural
144

 

Total nonaccrual loans
$
12,756


$
12,052

 
 
 
 
Loans past due 90 days and still accruing
326

 

Restructured loans
2,448

 
3,832

Total nonperforming loans
$
15,530

 
$
15,884

Other real estate owned
5,745

 
5,745

Total nonperforming assets
$
21,275

 
$
21,629

 
 
 
 
Nonperforming assets to total gross loans
2.72
%
 
2.70
%
Nonperforming assets to total assets
2.22
%
 
2.32
%
Allowance for credit losses to nonperforming loans
52.99
%
 
52.85
%
United Security Bancshares
 
 
 
 
 
 
 
Selected Financial Data (unaudited)
 
 
 
 
 
 
 
(dollars in thousands, except per share amounts)
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Return on average assets
1.69
%
 
1.59
 %
 
1.70%
 
1.58%
Return on average equity
14.36
%
 
13.04
 %
 
14.50%
 
12.81%
Net charge-off (recoveries) to average loans
0.15
%
 
(0.52
)%
 
0.04%
 
(0.28)%
 
 
 
 
 
 
 
 
 
September 30, 2019
 
December 31, 2018
 
 
 
 
Shares outstanding - period end
16,953,744

 
16,946,622

 
 
 
 
Book value per share

$6.80

 

$6.45

 
 
 
 
Efficiency ratio (1)
47.99
%
 
53.66
 %
 
 
 
 
Total impaired loans

$18,362

 

$18,683

 
 
 
 
Net loan to deposit ratio
68.43
%
 
71.92
 %
 
 
 
 
Allowance for credit losses to total loans
1.45
%
 
1.43
 %
 
 
 
 
Total capital to risk weighted assets
 
 
 
 
 
 
 
Company
18.38
%
 
17.80
 %
 
 
 
 
Bank
18.18
%
 
17.70
 %
 
 
 
 
Tier 1 capital to risk-weighted assets
 
 
 
 
 
 
 
Company
17.13
%
 
16.55
 %
 
 
 
 
Bank
16.93
%
 
16.45
 %
 
 
 
 
Common equity tier 1 capital to risk-weighted assets
 
 
 
 
 
 
 
Company
15.67
%
 
15.15
 %
 
 
 
 
Bank
16.93
%
 
16.45
 %
 
 
 
 
Tier 1 capital to adjusted average assets (leverage)
 
 
 
 
 
 
 
Company
12.47
%
 
12.15
 %
 
 
 
 
Bank
12.29
%
 
12.16
 %
 
 
 
 
(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)
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30,
 
 
 
 
 
 
2019
 
2018
 
Change $
 
Change %
Net income
 
$
12,276

 
$
10,068

 
$
2,208

 
21.93
%
 
 
 
 
 
 
 
 
 
TRUPs (1) fair value adjustment gain (loss)
 
1,571

 
(923
)
 
 
 
 
Reversal of provision for credit losses (2)
 

 
1,710

 
 
 
 
 
 
1,571

 
787

 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax effect
 
456

 
228

 
 
 
 
Non-core items net of taxes
 
1,115

 
559

 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP core net income
 
$
11,161

 
$
9,509

 
$
1,652

 
17.37
%

(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.

(2)
A reversal of provision for credit losses is not part of Non-GAAP Core Income. This reversal from the allowance for credit losses was in excess of the calculated reserve for the period. The recovery of provision for credit losses of $1,699,000 for the nine months ended September 30, 2018, within the Consolidated Statements of Income, includes this reversal of provision for credit losses of $1,710,000 and a provision for overdrafts of $11,000. For the nine months ended September 30, 2019, there was no reversal from the allowance for credit losses in excess of the calculated reserve for the period. The provision for credit losses of $15,000, as reported within the Consolidated Statements of Income, represents the provision for overdrafts.