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Section 1: 8-K (8-K UBFO EARNINGS 03312016)

8-K


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

April 14, 2016
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))








ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On April 14, 2016, United Security Bancshares issued a press release reporting its financial results for the quarter ended March 31, 2016. A copy of such press release is attached, and incorporated herein by reference as Exhibit 99.1


ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(d)    Exhibits.

EXHIBIT #
99.1 Press release of United Security Bancshares dated April 14, 2016


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:
April 14, 2016
 
By: /s/ Bhavneet Gill
 
 
 
Bhavneet Gill
 
 
 
Senior Vice President & Chief Financial Officer






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Section 2: EX-99.1 (EXHIBIT 99.1 032016 EARNINGS)

Exhibit


United Security Bancshares earns 1st Quarter 2016 profits of $1.8 million

FRESNO, CA - April 14, 2016. United Security Bancshares (Nasdaq: UBFO), today announced its unaudited financial results for the quarter ended March 31, 2016. The Company recognized net income of $1,769,000 for the three months ended March 31, 2016, an improvement of $541,000, or 44.06%, relative to the net income of $1,228,000 recognized for the three months ended March 31, 2015. Basic and diluted earnings per share increased to $0.11 for the three months ended March 31, 2016, as compared to $0.08 for the three months ended March 31, 2015.

“We have begun 2016 on a high note with growth in our loan portfolio and core deposit base, all while decreasing levels of nonperforming assets and maintaining strong capital and liquidity levels. We look forward to continued success in 2016," said Dennis R. Woods, President and Chief Executive Officer of the Company.

First Quarter 2016 Highlights (at or for the period ended March 31, 2016)

Net interest income increased to $6,611,000, compared to $6,224,000 for the quarter ended March 31, 2015, and decreased from $6,745,000 in the preceding quarter.
Net interest margin decreased to 4.12%, when compared to 4.14% in the preceding quarter, and 4.25% for the quarter ended March 31, 2015.
Net recoveries totaled $27,000, compared to net charge-offs of $1,385,000 in the preceding quarter and net recoveries of $60,000 for the quarter ended March 31, 2015.
Total loans increased to $518,289,000, compared to $515,376,000 at December 31, 2015.
Nonperforming assets declined $907,000 to $31,187,000, compared to $32,094,000 at December 31, 2015.
The allowance for credit losses as a percentage of gross loans remained unchanged at 1.88%, compared to December 31, 2015.
Total deposits increased to $637,327,000, compared to $621,805,000 at December 31, 2015.
Tangible book value per share increased to $5.36, compared to $5.30 at December 31, 2015.

Annualized return on average equity (ROAE) for the three months ended March 31, 2016 was 7.82%, compared to 5.94% for the three months ended March 31, 2015. Annualized return on average assets (ROAA) was 0.98% for the three months ended March 31, 2016, compared to 0.74% for the three months ended March 31, 2015. The increases in ROAE and ROAA for the three months ended March 31, 2016 were primarily due to the growth in the loan portfolio during the later half of 2015 and the resulting favorable impact on interest income. Net interest income increased for the three months ended March 31, 2016 compared to the year ended March 31, 2015, but the Company's net interest margin declined from 4.25% for the three months ended March 31, 2015 to 4.12% for the three months ended March 31, 2016. The 13 basis point decrease in net interest margin in the period-to-period comparison resulted primarily from the growth of the investment portfolio, which is a lower yielding asset, compared to loans.

The Board of Directors of United Security Bancshares declared a first quarter 2016 stock dividend of one percent (1%) on March 22, 2016. The stock dividend was payable to shareholders of record on April 4, 2016, and the shares will be issued on April 15, 2016. This marks the 30th consecutive quarterly stock dividend since 2008. The Company's Board of Directors has elected to issue stock dividends in order to preserve capital for future growth opportunities. No assurances can be provided that future dividends, whether payable in stock or cash, will be declared and/or as to the timing of such future dividends, if any.

Total assets were up $16,147,000, or 2.23% for the three months ended March 31, 2016, due to net growth of $13,501,000 in the investment portfolio and $2,913,000 in gross loan balances. Loan volume was favorably impacted by the purchase of $13,527,000 in residential mortgage loans during the first quarter of 2016 in addition to increases in the commercial real estate, agricultural, and student loan portfolios. Total deposits increased $15,522,000 or 2.50% to $637,327,000 during the three months ended March 31, 2016.

Net interest income for the three months ended March 31, 2016 totaled $6,611,000, an increase of $387,000 from the net interest income of $6,224,000 for the three months ended March 31, 2015. The net interest margin was 4.12% for the three months ended March 31, 2016, as compared to 4.25% for the three months ended March 31, 2015. The decline in the net interest margin was primarily due to the decline in the yield on the loan portfolio.






Non-interest income for the three months ended March 31, 2016 totaled $1,561,000, reflecting an increase of $640,000 from $921,000 in non-interest income reported for the three months ended March 31, 2015. Customer service fees continued to provide the majority of the Company's non-interest income, totaling $926,000 and $833,000 for the three months ended March 31, 2016 and 2015, respectively. On a year-over-year comparative basis, non-interest income increased primarily due to the change in fair value option of financial liability. The Company recorded a $358,000 gain on the fair value option of financial liability for the three months ended March 31, 2016, compared to a $125,000 loss for the same period ended March 31, 2015.

For the three months ended March 31, 2016, non-interest expense totaled $5,300,000, an increase of $592,000 compared to $4,708,000 for the three months ended March 31, 2015. On a year-over-year comparative basis, non-interest expense increased due primarily to increases of $157,000 in occupancy expense, $141,000 in professional fees, and $159,000 in salaries and employee benefit expenses, compared to the same period ended March 31, 2015. Professional fees for the three months ended March 31, 2016 includes a one-time $125,000 legal settlement.

The Company recorded a recovery of provision for credit losses of $22,000 for the three months ended March 31, 2016, compared with a provision of $459,000 for the three months ended March 31, 2015. Net loan recoveries totaled $27,000 for the three months ended March 31, 2016, as compared to net recoveries of $60,000 for the three months ended March 31, 2015.

With a modest recovery in the economy and real estate markets within the Bank's service area, the Company has maintained an adequate allowance for loan losses which totaled 1.88% of total loans at March 31, 2016, unchanged compared to 1.88% of total loans at December 31, 2015. Although the allowance for loan loss as a percentage of loans has not changed over the last quarter, it has declined over the last few years due to growth in our loan portfolio and a decrease in our historical loss percentages due to lower levels of loan charge-offs and improved credit quality. In determining the adequacy of the allowance for loan losses, the judgment of the Company's management is a significant factor and management considers the allowance for credit losses at March 31, 2016 to be adequate.

Non-performing assets, comprised of nonaccrual loans, troubled debt restructures (TDR), other real estate owned through foreclosure (OREO), and loans more than 90 days past due and still accruing interest, decreased approximately $907,000 between December 31, 2015 and March 31, 2016 to $31,187,000. Nonperforming assets as a percentage of total assets decreased from 4.42% at December 31, 2015 to 4.20% at March 31, 2016. Nonaccrual loans increased $160,000 between December 31, 2015 and March 31, 2016 to $8,353,000. Impaired loans totaled $23,287,000 at March 31, 2016, an increase of $392,000 from the balance of $23,679,000 at December 31, 2015. OREO totaled $12,207,000 at March 31, 2016, a decrease of $666,000 from the balance of $12,873,000 at December 31, 2015.


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, Consumer Lending, and Financial Services departments. For more information, please visit www.unitedsecuritybank.com.

FORWARD-LOOKING STATEMENTS
This news release contains 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 are based on management’s knowledge and belief as of today and include information concerning the Company’s possible or assumed future financial condition, and its results of operations, business and earnings outlook. These forward-looking statements are subject to risks and uncertainties. A number of factors, some of which are beyond the Company’s ability to control or predict, could cause future results to differ materially from those contemplated by such forward-looking statements. These factors include (1) changes in interest rates, (2) significant changes in banking laws or regulations, (3) increased competition in the company’s market, (4) other-than-expected credit losses, (5) earthquake or other natural disasters impacting the condition of real estate collateral, (6) the effect of acquisitions and integration of acquired businesses, (7) the impact of proposed and/or recently adopted changes in laws, and regulations on the Company and its business; (8) changing bank regulatory conditions, policies, whether arising as new legislation or regulatory initiatives or changes in our regulatory classifications, that could lead to restrictions on activities of banks generally or as to the Bank, including specifically the formal order between the Federal Reserve Bank of San Francisco and the Company and the Bank, (9) failure to comply with the written regulatory agreement under which the Company is subject and (10) unknown economic impacts caused by the State of California’s budget issues, including the effect on Federal spending do to sequestration required by the Budget Control Act of 2011. Management cannot predict at this time the severity or duration of the effects of the recent business slowdown on the Company's specific business activities and profitability. Weaker or a further decline in capital and consumer spending, and related recessionary trends could adversely affect the Company's performance in a number of ways including decreased demand for our products and services and increased credit losses. Likewise, changes in interest rates, among other things, could slow the rate of growth or put pressure on current deposit levels and affect the ability of borrowers to





repay loans. Forward-looking statements speak only as of the date they are made, and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the statements are made, or to update earnings guidance including the factors that influence earnings. 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, 2015, and particularly the section of Management’s Discussion and Analysis. Readers should carefully review all disclosures the Company files from time to time with the Securities and Exchange Commission ("SEC").






United Security Bancshares
 
 
 
Consolidated Balance Sheets (unaudited)
 
 
 
(in thousands)
 
 
 
 
March 31, 2016
 
December 31, 2015
Assets
 
 
 
Cash and non-interest-bearing deposits in other banks
$
24,020

 
$
29,733

Cash and due from Federal Reserve Bank
101,469

 
96,018

Cash and cash equivalents
125,489

 
125,751

Interest-bearing deposits in other banks
1,530

 
1,528

Investment securities available for sale (at fair value)
44,394

 
30,893

Loans and leases, net of unearned fees
518,289

 
515,376

Less: Allowance for credit losses
(9,718
)
 
(9,713
)
Net loans
508,571

 
505,663

Premises and equipment - net
10,666

 
10,800

Other real estate owned
12,207

 
12,873

Goodwill and intangible assets
4,488

 
4,488

Cash surrender value of life insurance
18,468

 
18,337

Deferred income tax asset - net
5,052

 
5,228

Other assets
10,926

 
10,083

Total assets
$
741,791

 
$
725,644

 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
Deposits
 
 
 
Non-interest bearing demand deposits
$
261,827

 
$
262,168

Money market, NOW, and savings
302,380

 
290,478

Time
73,120

 
69,159

Total deposits
637,327

 
621,805

Accrued interest payable
33

 
29

Other liabilities
5,029

 
5,875

Junior subordinated debentures (at fair value)
7,948

 
8,300

Total liabilities
650,337

 
636,009

Shareholders' equity
 
 
 
 
 
 
 
Common stock, no par value 20,000,000 shares authorized, 16,211,898 issued and outstanding at March 31, 2016, and 16,051,406 at December 31, 2015
53,366

 
52,572

Retained earnings
38,248

 
37,265

Accumulated other comprehensive loss
(160)

 
(202)

Total shareholders' equity
91,454

 
89,635

Total liabilities and shareholders' equity
$
741,791

 
$
725,644














United Security Bancshares
 
 
 
Consolidated Statements of Income (unaudited)
 
 
 
(in thousands)
 
 
 
 
Three Months Ended March 31,
 
2016
 
2015
Interest income:
 
 
 
Interest and fees on loans
$
6,631

 
$
6,279

Interest on investment securities
189

 
214

Interest on deposits in FRB
124

 
46

Interest on deposits in other banks
2

 
2

Total interest income
6,946

 
6,541

Interest expense:
 
 
 
Interest on deposits
277

 
259

Interest on other borrowed funds
58

 
58

Total interest expense
335

 
317

Net interest income
6,611

 
6,224

(Recovery of provision) provision for credit losses
(22)

 
459

Net interest income after (recovery of provision) provision for credit losses
6,633

 
5,765

Non-interest income:
 
 
 
Customer service fees
926

 
833

Increase in cash surrender value of bank-owned life insurance
131

 
128

Gain (loss) on Fair Value of Financial Liability
358

 
(125)

Other non-interest income
146

 
85

Total non-interest income
1,561

 
921

Non-interest expense:
 
 
 
Salaries and employee benefits
2,590

 
2,431

Occupancy expense
1,097

 
940

Data processing
59

 
31

Professional fees
489

 
348

Regulatory assessments
256

 
246

Director fees
70

 
56

Correspondent bank service charges
20

 
19

Loss on California tax credit partnership
37

 
30

Net cost on operation and sale of OREO
116

 
68

Other non-interest expense
566

 
539

Total non-interest expense
5,300

 
4,708

 
 
 
 
Income before income tax provision
2,894

 
1,978

Provision for income taxes
1,125

 
750

Net income
$
1,769

 
$
1,228

 
 
 
 
Basic earnings per common share
$
0.11

 
$
0.08

Diluted earnings per common share
$
0.11

 
$
0.08

Weighted average basic shares for EPS
16,211,898

 
16,211,898

Weighted average diluted shares for EPS
16,215,052

 
16,213,839

 
 
 
 







United Security Bancshares
 
 
 
Average Balances and Rates (unaudited)
 
 
 
(in thousands)
Three Months Ended March 31,
 
2016
 
2015
Average Balances:
 
 
 
Loans (1)
$
502,576

 
$
466,781

Investment securities – taxable
38,664

 
47,756

Interest-bearing deposits in other banks
1,529

 
1,522

Interest-bearing deposits in FRB
102,320

 
77,257

Total interest-earning assets
645,089


593,316

Allowance for credit losses
(9,694
)
 
(10,821
)
Cash and due from banks
22,842

 
21,209

Other real estate owned
12,920

 
14,010

Other non-earning assets
50,199

 
55,172

Total average assets
721,356


672,886

 
 
 
 
Interest bearing deposits
365,893

 
351,892

Junior subordinated debentures
8,268

 
10,079

Total interest-bearing liabilities
374,161


361,971

Non-interest-bearing deposits
249,855

 
219,707

Other liabilities
6,651

 
7,331

Total liabilities
630,667


589,009

Total equity
90,689

 
83,877

Total liabilities and equity
$
721,356

 
$
672,886

 
 
 
 
Average Rates:
 
 
 
Loans (1)
5.31
%
 
5.46
%
Investment securities- taxable
1.97
%
 
1.82
%
Interest-bearing deposits in other banks
0.53
%
 
0.53
%
Interest-bearing deposits in FRB
0.49
%
 
0.24
%
Earning assets
4.33
%
 
4.47
%
Interest bearing deposits
0.30
%
 
0.30
%
Junior subordinated debentures
2.82
%
 
2.33
%
Total interest-bearing liabilities
0.36
%
 
0.36
%
Net interest margin
4.12
%
 
4.25
%
 
 
 
 
(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.
















United Security Bancshares
 
 
 
 
 
Credit Quality (unaudited)
 
 
 
 
 
(dollars in thousands)
 
 
 
 
 
 
March 31, 2016
 
December 31, 2015
 
March 31, 2015
Commercial and industrial
$
955

 
$
328

 
$
1,350

Real estate - mortgage
1,613

 
1,635

 
3,866

RE construction & development
4,808

 
5,580

 
5,075

Agricultural

 

 

Installment/other
977

 
650

 
616

Total Nonaccrual Loans
$
8,353


$
8,193


$
10,907

 
 
 
 
 
 
Loans past due 90 days and still accruing

 

 

Restructured Loans
10,627

 
11,028

 
5,792

Total nonperforming loans
$
18,980

 
$
19,221

 
$
16,699

Other real estate owned
12,207

 
12,873

 
14,010

Total nonperforming assets
$
31,187

 
$
32,094

 
$
30,709

 
 
 
 
 
 
Nonperforming assets to total gross loans
6.02
%
 
6.23
%
 
6.23
%
Nonperforming assets to total assets
4.20
%
 
4.42
%
 
4.53
%
Allowance for loan losses to nonperforming loans
51.20
%
 
50.53
%
 
67.61
%






United Security Bancshares
 
 
 
 
Selected Financial Data (unaudited)
 
 
 
 
(dollars in thousands, except per share amounts)
 
 
 
 
Three Months Ended March 31,
 
 
2016
 
2015
 
 
 
 
 
 
Annualized return on average assets
0.98
 %
 
0.74
 %
 
Annualized return on average equity
7.82
 %
 
5.94
 %
 
Annualized net charge-offs (recoveries) to average loans
(0.02
)%
 
(0.05
)%
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2016
 
December 31, 2015
 
Shares outstanding - period end
16,211,898

 
16,051,406

 
Book value per share

$5.64

 

$5.58

 
Tangible book value per share

$5.36

 

$5.30

 
Efficiency ratio
63.44
 %
 
61.49
 %
 
Total impaired loans

$23,287

 

$23,679

 
Loan to deposit ratio
81.32
 %
 
82.88
 %
 
Allowance for credit losses to total loans
1.88
 %
 
1.88
 %
 
Total capital to risk weighted assets
 
 
 
 
Company
16.74
 %
 
16.65
 %
 
Bank
16.80
 %
 
16.69
 %
 
Tier 1 capital to risk-weighted assets
 
 
 
 
Company
15.49
 %
 
15.40
 %
 
Bank
15.54
 %
 
15.43
 %
 
Common equity tier 1 capital to risk-weighted assets
 
 
 
 
Company
14.26
 %
 
14.10
 %
 
Bank
15.54
 %
 
15.43
 %
 
Tier 1 capital to adjusted average assets (leverage)
 
 
 
 
Company
13.19
 %
 
12.95
 %
 
Bank
13.20
 %
 
12.94
 %
 




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