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Section 1: 8-K (8-K UBFO 12312017 EARNINGS)

Document


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

January 29, 2018
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 January 29, 2018, the Company issued a press release announcing results for the quarter ended December 31, 2017 (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 January 29, 2018


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:
January 29, 2018
 
By: /s/ Bhavneet Gill
 
 
 
Bhavneet Gill
 
 
 
Senior Vice President & Chief Financial Officer






(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1 UBFO 12312017 EARNINGS)

Exhibit


United Security Bancshares reports 2017 net income of $8.6 million

FRESNO, CA - January 29, 2018. United Security Bancshares (Nasdaq: UBFO), today announced its unaudited financial results for the quarter ended December 31, 2017. The Company reported consolidated net income of $1,637,000, or $0.10 per basic and diluted common share, for the quarter ended December 31, 2017, as compared to $1,555,000, or $0.09 per basic and diluted common share, for the quarter ended December 31, 2016. The Company recognized net income of $8,640,000 for the year ended December 31, 2017, an increase of 17% compared to the net income of $7,385,000 recognized for the year ended December 31, 2016. Basic and diluted earnings per share increased to $0.51 for the year ended December 31, 2017, as compared to $0.44 for the year ended December 31, 2016.

Fourth Quarter 2017 Highlights (at or for the quarter ended December 31, 2017, except where noted)

Net interest income after provision for credit losses increased to $8,096,000 compared to $7,398,000 for the quarter ended December 31, 2016, and decreased from $8,150,000 in the preceding quarter.
Net interest margin increased to 4.38% from 4.15% for the quarter ended December 31, 2016.
Net recoveries totaled $61,000, compared to net recoveries of $145,000 in the preceding quarter and net recoveries of $2,000 for the quarter ended December 31, 2016.
Total loans increased to $602,390,000, compared to $570,834,000 at December 31, 2016.
Nonperforming assets as a percentage of total assets decreased to 2.17%, compared to 2.40% at December 31, 2016.
Nonperforming assets decreased approximately $1,396,000 between December 31, 2016 and December 31, 2017.
Other real estate owned balances decreased to $5,745,000 at December 31, 2017 when compared to $6,471,000, at December 31, 2016.
The allowance for credit losses as a percentage of gross loans decreased to 1.54%, compared to 1.56% at December 31, 2016.
Total deposits increased to $687,693,000, compared to $676,629,000 at December 31, 2016.
Book value per share increased to $6.00, compared to $5.79 at December 31, 2016.

Dennis Woods, President and Chief Executive Officer, stated: "We are pleased to report an accumulation of earnings, which has resulted in a successful 2017. Excluding Non-Core items such as the Fair Value Adjustment for Trust Preferred Securities (“TRUPS”), the gain on sale of Other Real Estate Owned (OREO), and a write-down of deferred tax assets ("DTA") due to the Tax Cuts and Jobs Act of 2017, net income would be $9,954,000 for the year ended December 31, 2017, an increase of approximately 29.71% compared to net income of $7,674,000 for the same period in 2016. None of these items are part of Core Income and specifically the TRUPS Fair Value Adjustment is dependent upon market rates, which can ‘add to’ or ‘subtract from’ Core Income and mask Core Income change.” Management believes that our financial results are more comparative excluding the impact of the fair value adjustment for TRUPS, the gain on sale of OREO and the write-down of the DTA related to the Tax Cuts and Jobs Act of 2017.

A reconciliation of Core Income, as a non-GAAP measure, to Net Income appears at the end of this Press Release.

Results of Operations

Annualized return on average equity (ROAE) for the year ended December 31, 2017 was 8.63%, compared to 7.86% for the year ended December 31, 2016. Annualized return on average assets (ROAA) was 1.07% for the year ended December 31, 2017, compared to 0.98% for the year ended December 31, 2016. ROAE for the quarter ended December 31, 2017 was 6.34% compared to 6.38% for the same period in 2016. ROAA was 0.79% for the quarter ended December 31, 2017, compared to 0.79% for the same period in 2016. The average cost of deposits was 0.21% for the quarter ended December 31, 2017, up from 0.20% for the quarter ended December 31, 2016.

Net interest income after the provision for credit losses for the year ended December 31, 2017 totaled $31,176,000, an increase of $3,091,000, or 11.01%, from the net interest income of $28,085,000 for the same period ended December 31, 2016. The Company's net interest margin increased from 4.11% for the year ended December 31, 2016 to 4.27% for the year ended December 31, 2017. The 16 basis point increase in net interest margin in the period-to-period comparison was the result of higher yields on both the loan portfolio and overnight deposits, partially offset by increasing cost of deposits. The yield on loans increased from 5.21% for the year ended December 31, 2016 to 5.42% for the year ended December 31, 2017. The 21 basis point increase in loan yields is primarily the result of growth of the higher-yielding student loan portfolio and increases on





rates throughout the loan portfolio reflecting the increase in the prime rate. The increase in net interest income on a year-over-year comparison is the result of loan growth. Net interest income after the provision for credit losses for the quarter ended December 31, 2017 totaled $8,096,000, an increase of $698,000 from the net interest income of $7,398,000 for the same period ended December 31, 2016.

Non-interest income for the year ended December 31, 2017 totaled $4,306,000, reflecting a decrease of $208,000 from $4,514,000 in non-interest income reported for the year ended December 31, 2016. Customer service fees, which represent the largest portion of the Company's non-interest income, totaled $3,851,000 and $3,792,000 for the years ended December 31, 2017 and 2016, respectively. On a year-over-year comparative basis, non-interest income decreased primarily due to the change in fair value option of financial liability caused by fluctuations in the LIBOR yield curve. The Company recorded a $882,000 loss on the fair value option of financial liability for the year ended December 31, 2017, compared to a $518,000 loss for the same period ended December 31, 2016.

Non-interest income for the quarter ended December 31, 2017 totaled $1,155,000, reflecting an increase of $414,000 from $741,000 in non-interest income reported for the quarter ended December 31, 2016. This increase was primarily due to a $194,000 loss recorded on the fair value option of financial liability for the quarter ended December 31, 2017, compared to a $566,000 loss for the same period ended 2016. The change in the fair value of financial liability was primarily caused by fluctuations in the LIBOR yield curve. Customer service fees totaled $954,000 for the quarter ended December 31, 2017, as compared to $925,000 for the quarter ended December 31, 2016.

For the year ended December 31, 2017, non-interest expense totaled $19,803,000, a decrease of $542,000 compared to $20,345,000 for the year ended December 31, 2016. On a year-over-year comparative basis, non-interest expense decreased primarily due to decreases of $413,000 in the net cost on operation and sale of OREO, $376,000 in regulatory assessments, and $60,000 in professional fees, partially offset by an increase of $193,000 in salaries and employee benefit expenses. Professional fees for the year ended December 31, 2016, included a $125,000 legal settlement. Salaries and employee benefit expenses for the year ended December 31, 2017, reflect increases in salaries, higher group insurance expenses, and increases in incentives and bonuses.

Non-interest expense totaled $5,260,000 for the quarter ended December 31, 2017, a decrease of $98,000 as compared to $5,358,000 reported for the quarter ended December 31, 2016. On a quarter-over-quarter comparative basis, non-interest expense decreased primarily due to decreases in salary and employee benefits and regulatory assessments, partially offset by increases in professional fees, occupancy expenses, and net cost on operation and sale of OREO. The decrease is salary and employee benefits was primarily due to a $385,000 accrual in 2016 for bonuses as compared to an accrual of $79,000 in the quarter ended December 31, 2017. The increase in professional fees was a result of $156,000 consulting fees paid for the generation of tax credits.

Balance Sheet Review

Total assets increased $17,864,000, or 2.27%, for the year ended December 31, 2017, due primarily to increases of $31,556,000 in gross loan balances. The increase in loan balances was reflected as increases in the commercial real estate loan portfolio of $21,000,000 and increases in the student loan portfolio of $22,000,000. These increases were offset by decreases of $8,400,000 in the real estate construction and development portfolio, and decreases of $2,600,000 in the residential mortgages portfolio.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017, was signed into law, reducing the federal corporate tax rate to 21% from the existing maximum rate of 35%, effective January 1, 2018. As a result, The Company’s net deferred tax asset was revalued at the new lower tax rate as of December 31, 2017. The revaluation resulted in a write-down of $986,000. The impact to earnings for the fourth quarter 2017 is $0.06 per share. The subsequent expense due to this write-down is expected to be recovered within two quarters through the savings attributed to the change in the noted tax rate.

Total deposits increased $11,064,000, or 1.64%, to $687,693,000 during the year ended December 31, 2017. The overall increase was led by an increase of $44,602,000 in noninterest bearing deposits and an increase of $4,621,000 in NOW, money market, and savings accounts. These increases were offset by a decrease of $38,159,000 in time deposits. Time deposits as of December 31, 2016 included $17,185,000 in brokered CDs and $18,482,000 in out of market CDs. The increase in core deposits such as noninterest bearing, NOW, money market, and savings accounts allowed the Company to run off expensive non-core deposits such as brokered and out of market CDs in 2017. Interest bearing deposits and savings accounts increased 1.49% to $315,562,000 at December 31, 2017, compared to $310,941,000 at December 31, 2016. Noninterest bearing deposits increased 16.98% to $307,299,000 at December 31, 2017, compared to $262,697,000 at December 31, 2016. As a result of the increases in demand deposits, NOW, money market, and saving accounts, net core deposits increased $49,223,000.






Shareholders’ equity at December 31, 2017 was $101,352,000, up $4,698,000 from shareholders’ equity of $96,654,000 at December 31, 2016. The increase in equity was a result of net earnings for the period.

The Board of Directors of United Security Bancshares declared cash dividends on common stock on April 25, 2017, and June 27, 2017, for $0.05 per share, and on September 26, 2017, and December 19, 2017, for $0.07 per share. The dividends were payable on May 17, 2017, to shareholders of record as of May 8, 2017, on July 21, 2017, to shareholders of record as of July 7, 2017, on October 19, 2017, to shareholders of record as of October 10, 2017, and on January 16, 2018, to shareholder of record as of January 4, 2018. 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.

Credit Quality

The Company recorded a provision for credit losses of $24,000 for the year ended December 31, 2017, compared to a recovery of provision of $21,000 for the year ended December 31, 2016. Net loan recoveries totaled $341,000 for the year ended December 31, 2017, as compared to net loan losses of $790,000 for the year ended December 31, 2016. The Company recorded a provision for credit loss of $48,000 for the quarter ended December 31, 2017, compared to a recovery of provision for credit losses of $14,000 for the quarter ended December 31, 2016. Net loan recoveries totaled $61,000 for the quarter ended December 31, 2017, as compared to net loan charge-offs of $2,000 for the quarter ended December 31, 2016.

The Company's allowance for loan loss totaled 1.54% of the loan portfolio at December 31, 2017, compared to 1.56% at December 31, 2016. 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 December 31, 2017 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 $1,396,000 between December 31, 2016 and December 31, 2017 to $17,485,000. Nonperforming assets as a percentage of total assets decreased from 2.40% at December 31, 2016 to 2.17% at December 31, 2017. The decrease in nonperforming assets is mainly attributed to decreases in nonaccrual loans, impaired loans and OREO. Nonaccrual loans decreased $1,968,000 between December 31, 2016 and December 31, 2017 to $5,296,000. Impaired loans totaled $14,790,000 at December 31, 2017, a decrease of $1,389,000 from the balance of $16,179,000 at December 31, 2016. OREO totaled $5,745,000 at December 31, 2017 as compared to $6,471,000 at December 31, 2016.

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.

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 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 due 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, 2016, 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 ("SEC").






United Security Bancshares
 
 
 
Consolidated Balance Sheets (unaudited)
 
 
 
(in thousands)
 
 
 
 
December 31, 2017
 
December 31, 2016
Assets
 
 
 
Cash and non-interest-bearing deposits in other banks
$
35,237

 
$
25,781

Cash and due from Federal Reserve Bank
72,697

 
87,251

Cash and cash equivalents
107,934

 
113,032

Interest-bearing deposits in other banks
0

 
650

Investment securities available for sale (at fair value)
45,722

 
57,491

Loans and leases, net of unearned fees
602,390

 
570,834

Less: Allowance for credit losses
(9,267
)
 
(8,902
)
Net loans
593,123

 
561,932

Premises and equipment - net
10,165

 
10,445

Other real estate owned
5,745

 
6,471

Goodwill and intangible assets
4,488

 
4,488

Cash surrender value of life insurance
19,752

 
19,047

Deferred income tax asset - net
2,389

 
3,298

Accrued interest receivable
6,526

 
3,895

Other assets
9,992

 
7,223

Total assets
$
805,836

 
$
787,972

 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
Deposits
 
 
 
Non-interest bearing demand deposits
$
307,299

 
$
262,697

Money market, NOW, and savings
315,562

 
310,941

Time
64,832

 
102,991

Total deposits
687,693

 
676,629

Accrued interest payable
44

 
76

Other liabilities
7,017

 
5,781

Junior subordinated debentures (at fair value)
9,730

 
8,832

Total liabilities
704,484

 
691,318

 
 
 
 
Total shareholders' equity
101,352

 
96,654

Total liabilities and shareholders' equity
$
805,836

 
$
787,972














United Security Bancshares
 
 
 
 
 
 
 
Consolidated Statements of Income (unaudited)
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Year ended December 31,
 
2017
 
2016
 
2017
 
2016
Interest income:
 
 
 
 
 
 
 
Interest and fees on loans
$
8,035

 
$
7,460

 
$
30,817

 
$
28,182

Interest on investment securities
210

 
207

 
901

 
825

Interest on deposits in FRB
349

 
110

 
1,207

 
458

Interest on deposits in other banks
1

 
2

 
5

 
8

Total interest income
8,595

 
7,779

 
32,930

 
29,473

Interest expense:
 
 
 
 
 
 
 
Interest on deposits
370

 
329

 
1,426

 
1,167

Interest on other borrowed funds
81

 
66

 
304

 
242

Total interest expense
451

 
395

 
1,730

 
1,409

Net interest income
8,144

 
7,384

 
31,200

 
28,064

Provision (recovery) for Credit Losses
48

 
(14)

 
24

 
(21)

Net interest income after provision (recovery) for credit losses
8,096

 
7,398

 
31,176

 
28,085

Non-interest income:
 
 
 
 
 
 
 
Customer service fees
954

 
925

 
3,851

 
3,792

Increase in cash surrender value of bank-owned life insurance
133

 
136

 
534

 
530

Loss on Fair Value of Financial Liability
(194)

 
(566)

 
(882)

 
(518)

Loss on sale of other investment

 

 
3

 

Gain on sale of fixed assets
74

 

 
73

 

Other non-interest income
188

 
246

 
727

 
710

Total non-interest income
1,155

 
741

 
4,306

 
4,514

Non-interest expense:
 
 
 
 
 
 
 
Salaries and employee benefits
2,672

 
3,036

 
10,821

 
10,628

Occupancy expense
1,110

 
1,010

 
4,254

 
4,222

Data processing
38

 
40

 
119

 
148

Professional fees
521

 
377

 
1,433

 
1,493

Regulatory assessments
78

 
134

 
391

 
767

Director fees
74

 
66

 
289

 
284

Correspondent bank service charges
16

 
19

 
71

 
77

(Gain) loss on California tax credit partnership
(9)

 
36

 
109

 
158

Net loss (gain) on operation and sale of OREO
107

 
47

 
(150)

 
263

Other non-interest expense
653

 
593

 
2,466

 
2,305

Total non-interest expense
5,260

 
5,358

 
19,803

 
20,345

 
 
 
 
 
 
 
 
Income before income tax provision
3,991

 
2,781

 
15,679

 
12,254

Provision for income taxes
2,354

 
1,226

 
7,039

 
4,869

Net income
$
1,637

 
$
1,555

 
$
8,640

 
$
7,385

 
 
 
 
 
 
 
 
Basic earnings per common share
$
0.10

 
$
0.09

 
$
0.51

 
$
0.44

Diluted earnings per common share
$
0.10

 
$
0.09

 
$
0.51

 
$
0.44

Weighted average basic shares for EPS
16,885,615

 
16,883,001

 
16,885,578
 
16,881,379
Weighted average diluted shares for EPS
16,906,665

 
16,893,863

 
16,904,063
 
16,889,027
 
 
 
 
 
 
 
 







United Security Bancshares
 
 
 
 
 
 
 
Average Balances and Rates (unaudited)
 
 
 
 
 
 
 
(in thousands)
Three Months Ended December 31,
 
Year ended December 31,
 
2017
 
2016
 
2017
 
2016
Average Balances:
 
 
 
 
 
 
 
Loans (1)
$
580,981

 
$
566,521

 
$
569,079

 
$
540,777

Investment securities – taxable
47,258

 
59,226

 
52,513

 
49,612

Interest-bearing deposits in other banks
620

 
1,475

 
644

 
1,517

Interest-bearing deposits in FRB
109,099

 
81,720

 
108,218

 
90,393

Total interest-earning assets
737,958


708,942


730,454


682,299

Allowance for credit losses
(9,215
)
 
(8,930
)
 
(9,067
)
 
(9,311
)
Cash and due from banks
24,694

 
21,171

 
22,225

 
21,886

Other real estate owned
5,746

 
7,024

 
5,998

 
9,100

Other non-earning assets
62,927

 
50,532

 
54,520

 
49,723

Total average assets
822,110


778,739


804,130


753,697

 
 
 
 
 
 
 
 
Interest bearing deposits
397,340

 
396,606

 
398,554

 
375,538

Junior subordinated debentures
9,499

 
8,246

 
9,211

 
8,058

Total interest-bearing liabilities
406,839

 
404,852

 
407,765


383,596

Non-interest-bearing deposits
305,806

 
268,390

 
289,334

 
268,712

Other liabilities
7,028

 
8,808

 
6,871

 
7,673

Total liabilities
719,673


682,050


703,970


659,981

Total equity
102,437

 
96,689

 
100,160

 
93,716

Total liabilities and equity
$
822,110

 
$
778,739

 
$
804,130

 
$
753,697

 
 
 
 
 
 
 
 
Average Rates:
 
 
 
 
 
 
 
Loans (1)
5.49
%
 
5.24
%
 
5.42
%
 
5.21
%
Investment securities- taxable
1.76
%
 
1.39
%
 
1.72
%
 
1.66
%
Interest-bearing deposits in other banks
0.64
%
 
0.54
%
 
0.78
%
 
0.53
%
Interest-bearing deposits in FRB
1.27
%
 
0.54
%
 
1.12
%
 
0.51
%
Earning assets
4.62
%
 
4.37
%
 
4.51
%
 
4.32
%
Interest bearing deposits
0.37
%
 
0.33
%
 
0.36
%
 
0.31
%
Junior subordinated debentures
3.38
%
 
3.18
%
 
3.30
%
 
3.00
%
Total interest-bearing liabilities
0.44
%
 
0.39
%
 
0.42
%
 
0.37
%
Net interest margin
4.38
%
 
4.15
%
 
4.27
%
 
4.11
%
 
 
 
 
 
 
 
 
(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)
 
 
 
 
December 31, 2017
 
December 31, 2016
Commercial and industrial
$
212

 
$
565

Real estate - mortgage
742

 
1,126

RE construction & development
4,342

 
4,608

Installment/other

 
965

Total Nonaccrual Loans
$
5,296


$
7,264

 
 
 
 
Loans past due 90 days and still accruing
360

 

Restructured Loans
6,084

 
5,146

Total nonperforming loans
$
11,740

 
$
12,410

Other real estate owned
5,745

 
6,471

Total nonperforming assets
$
17,485

 
$
18,881

 
 
 
 
Nonperforming assets to total gross loans
2.90
%
 
3.31
%
Nonperforming assets to total assets
2.17
%
 
2.40
%
Allowance for loan losses to nonperforming loans
78.94
%
 
71.73
%






United Security Bancshares
 
 
 
 
 
 
 
Selected Financial Data (unaudited)
 
 
 
 
 
 
 
(dollars in thousands, except per share amounts)
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Year ended December 31,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Return on average assets
0.79
 %
 
0.79
%
 
1.07%
 
0.98%
Return on average equity
6.34
 %
 
6.38
%
 
8.63%
 
7.86%
Net (recoveries) charge-offs to average loans
(0.04
)%
 
0.00
%
 
(0.06)%
 
(0.15)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
December 31, 2016
 
 
 
 
Shares outstanding - period end
16,885,615

 
16,705,594

 
 
 
 
Book value per share

$6.00

 

$5.79

 
 
 
 
Efficiency ratio (1)
54.83
 %
 
60.68
%
 
 
 
 
Total impaired loans

$14,790

 

$16,179

 
 
 
 
Net Loan to deposit ratio
86.25
 %
 
83.05
%
 
 
 
 
Allowance for credit losses to total loans
1.54
 %
 
1.56
%
 
 
 
 
Total capital to risk weighted assets
 
 
 
 
 
 
 
Company
17.54
 %
 
17.26
%
 
 
 
 
Bank
17.31
 %
 
17.19
%
 
 
 
 
Tier 1 capital to risk-weighted assets
 
 
 
 
 
 
 
Company
16.29
 %
 
16.01
%
 
 
 
 
Bank
16.06
 %
 
15.94
%
 
 
 
 
Common equity tier 1 capital to risk-weighted assets
 
 
 
 
 
 
 
Company
14.81
 %
 
14.68
%
 
 
 
 
Bank
16.06
 %
 
15.94
%
 
 
 
 
Tier 1 capital to adjusted average assets (leverage)
 
 
 
 
 
 
 
Company
13.01
 %
 
12.97
%
 
 
 
 
Bank
12.90
 %
 
12.99
%
 
 
 
 

(1) Efficiency ratio is defined as total noninterest expense minus net cost on operation of OREO divided by net interest income before provision for credit losses plus total noninterest income minus loss on fair value of financial liability.











United Security Bancshares
 
 
 
 
 
 
 
 
Net Income before Non-Core Reconciliation
 
 
 
 
 
 
 
 
Non-GAAP Information (dollars in thousands)
 
 
 
 
 
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
 
 
Years Ended December 31
 
 
 
 
 
 
2017
 
2016
 
Change $
 
Change %
Net Income
 
$
8,640

 
$
7,385

 
$
1,689

 
22.87
%
 
 
 
 
 
 
 
 
 
TRUPs (1) Fair Value Adjustment (Loss) Gain Pretax
 
(882
)
 
(518
)
 
 
 
 
Gain on sale of Other Real Estate Owned (OREO) (2)
 
336

 
37

 
 
 
 
Total balance of Non-Core items
 
(546
)
 
(481
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Income Tax Effect (40%)
 
(218
)
 
(192
)
 
 
 
 
Non-Core Items Net of Taxes
 
(328
)
 
(289
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Effect of DTA Revaluation (3)
 
986

 

 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Core Net Income
 
$
9,954

 
$
7,674

 
$
2,280

 
29.71
%

(1)
Trust Preferred Securities (“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 Core Income change.
(2) Gain on sale of Other Real Estate Owned (OREO) is not part of Core Income.
(3) This write-down is the result of the change in the corporate tax rate effective December 31, 2017 and is not part of Core
Income.


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