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

July 15, 2020
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:

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

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

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

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  

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.  






ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On July 15, 2020, the Company issued a press release announcing results for the quarter ended June 30, 2020 (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 July 15, 2020

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:July 15, 2020By: /s/ Bhavneet Gill
Bhavneet Gill
Senior Vice President & Chief Financial Officer




Document

United Security Bancshares reports 2nd quarter net income of $2.0 million

FRESNO, CA - July 15, 2020. 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 at December 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, 2020December 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 equivalents229,541  218,995  
Investment securities (at fair value)
Available-for-sale ("AFS") securities92,877  76,312  
Marketable equity securities3,862  3,776  
Total investment securities96,739  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 loans639,788  588,646  
Premises and equipment - net9,441  9,380  
Accrued interest receivable9,146  8,208  
Other real estate owned ("OREO")5,018  6,753  
Goodwill4,488  4,488  
Deferred tax assets - net2,574  3,191  
Cash surrender value of life insurance20,279  20,955  
Operating lease right-of-use assets3,065  3,360  
Other assets11,294  12,855  
Total assets$1,031,373  $956,919  
Liabilities and Shareholders' Equity
Deposits  
Non-interest-bearing$362,010  $311,950  
Interest-bearing531,102  506,412  
Total deposits893,112  818,362  
Accrued interest payable36  59  
Operating lease liabilities3,168  3,463  
Other liabilities7,826  8,239  
Junior subordinated debentures (at fair value)9,771  10,808  
Total liabilities913,913  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 earnings58,680  57,647  
Accumulated other comprehensive loss(401)(632)
Total shareholders' equity117,460115,988
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,
2020201920202019
Interest Income:
Interest and fees on loans$7,713  $8,443  $16,059  $17,085  
Interest on investment securities356444784921
Interest on deposits in FRB381,4246052,722
Total interest income8,10710,311  17,448  20,728  
Interest Expense:
Interest on deposits4478901,1111,724
Interest on other borrowed funds83118180241
Total interest expense5301,0081,2911,965
Net Interest Income 7,5779,30316,15718,763
Provision for Credit Losses42842,13410
Net Interest Income after Provision for Credit Losses7,1499,29914,02318,753
Noninterest Income:
Customer service fees6188301,3461,639
Increase in cash surrender value of bank-owned life insurance127147258  292
Gain on fair value of marketable equity securities715385110
Gain on proceeds from bank-owned life insurance310  —  310  
(Loss) gain on fair value of junior subordinated debentures(30)4971,469911
Loss on dissolution of real estate investment trust—  (5) —  (114) 
Gain on sale of assets—   —   
Other118201328408
Total noninterest income1,2141,7293,7963,252
Noninterest Expense:
Salaries and employee benefits2,4142,7605,4095,532
Occupancy expense8698081,7231,621
Data processing135144247251
Professional fees5557461,2571,559
Regulatory assessments7783162176
Director fees9495188186
Correspondent bank service charges17143328
Net cost on operation and sale of OREO78087933152
Other6125251,1931,104
Total noninterest expense5,5535,26211,14510,609
Income Before Provision for Taxes2,8105,7666,67411,396
Provision for Taxes on Income7981,6691,9063,292
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 EPS16,975,58816,950,56416,974,84516,948,810
Weighted average diluted shares for EPS16,988,77816,981,70516,992,22316,977,224



United Security Bancshares
Average Balances and Rates (unaudited)
(in thousands)Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Average Balances:
Loans (1)$636,840  $568,600  $619,950  $573,436  
Investment securities – taxable97,209  65,268  89,655  66,772  
Interest-bearing deposits in FRB182,755  238,898  180,751  227,335  
Total interest-earning assets916,804  872,766  890,356  867,543  
Allowance for credit losses(9,124) (8,442) (8,515) (8,449) 
Cash and due from banks28,432  29,232  28,857  28,793  
Other real estate owned5,969  5,745  6,452  5,745  
Other non-earning assets64,224  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 debentures8,494  10,378  9,605  10,235  
Total interest-bearing liabilities524,765  532,686  518,253  532,617  
Non-interest-bearing deposits352,309  305,211  333,330  300,035  
Other liabilities10,120  9,495  9,899  9,262  
Total liabilities887,194  847,392  861,482  841,914  
Total equity119,111  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- taxable1.47 %2.73 %1.76 %2.78 %
Interest-bearing deposits in FRB0.08 %2.39 %0.67 %2.41 %
Earning assets3.56 %4.74 %3.94 %4.82 %
Interest bearing deposits0.35 %0.68 %0.44 %0.67 %
Total deposits0.21 %0.43 %0.27 %0.42 %
Junior subordinated debentures3.93 %4.56 %3.77 %4.75 %
Total interest-bearing liabilities0.41 %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, 2020March 31, 2020December 31, 2019September 30, 2019June 30, 2019
Cash and cash equivalents$229,541  $199,853  $218,995  $245,943  $309,460  
Investment securities96,739  97,486  80,088  81,651  63,632  
Loans648,650  623,686  596,554  569,500  572,810  
Allowance for credit losses(8,862) (9,120) (7,908) (8,230) (8,452) 
Net loans639,788  614,566  588,646  561,270  564,358  
Other assets65,305  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-bearing531,102  516,270  506,412  487,067  566,743  
Total deposits893,112  840,437  818,362  820,223  870,915  
Other liabilities20,801  19,399  22,569  21,965  22,240  
Total liabilities913,913  859,836  840,931  842,188  893,155  
Total shareholders' equity117,460  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, 2020March 31, 2020December 31, 2019September 30, 2019June 30, 2019
Total interest income$8,107  $9,341  $9,558  $10,417  $10,311  
Total interest expense530  761  862  1,061  1,008  
Net interest income7,577  8,580  8,696  9,356  9,303  
Provision for credit losses428  1,707     
Net interest income after provision for credit losses7,149  6,873  8,691  9,351  9,299  
Total non-interest income1,214  2,580  647  1,853  1,729  
Total non-interest expense5,553  5,591  5,335  5,335  5,262  
Income before provision for taxes2,810  3,862  4,003  5,869  5,766  
Provision for taxes on income798  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, 2020December 31, 2019
Commercial and industrial$—  $75  
RE construction & development11,109  11,478  
Agricultural514  144  
Total nonaccrual loans$11,623  $11,697  
Loans past due 90 days and still accruing269  386  
Restructured loans2,105  2,389  
Total nonperforming loans$13,997  $14,472  
Other real estate owned5,018  6,753  
Total nonperforming assets$19,015  $21,225  
Nonperforming loans to total gross loans2.15 %2.42 %
Nonperforming assets to total assets1.84 %2.22 %
Allowance for credit losses to nonperforming loans63.31 %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,
2020201920202019
Return on average assets0.80 %1.71 %0.98%1.71%
Return on average equity6.80 %14.53 %8.09%14.57%
Net charge-off (recoveries) to average loans0.43 %(0.02)%0.38%(0.02)%
June 30, 2020December 31, 2019
Shares outstanding - period end16,977,239  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 ratio71.64 %71.93 %
Allowance for credit losses to total loans1.37 %1.33 %
Total capital to risk weighted assets
Company17.16 %17.98 %
Bank16.97 %17.78 %
Tier 1 capital to risk-weighted assets
Company15.92 %16.81 %
Bank15.74 %16.61 %
Common equity tier 1 capital to risk-weighted assets
Company14.71 %15.39 %
Bank15.74 %16.61 %
Tier 1 capital to adjusted average assets (leverage)
Company12.25 %12.82 %
Bank12.10 %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,
20202019Change $Change %
Net income$4,768  $8,104  $(3,336) (41.16)%
TRUPs (1) fair value adjustment gain1,469  911  
Write down on OREO(727) 
Loss on sale of OREO(113) —  
629  911  
Income tax effect182  264  
Non-core items net of taxes447  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.