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Section 1: 8-K (8-K UBFO 06302018 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

July 18, 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 July 18, 2018, the Company issued a press release announcing results for the quarter ended June 30, 2018 (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 18, 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:
July 18, 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 063018 EARNINGS)

Exhibit


United Security Bancshares reports 2nd quarter profits of $3.4 million

FRESNO, CA - July 18, 2018. United Security Bancshares (Nasdaq: UBFO), today announced its unaudited financial results for the quarter ended June 30, 2018. The Company reported consolidated net income of $3,392,000, or $0.20 per basic and diluted common share, for the quarter ended June 30, 2018, as compared to $2,492,000, or $0.15 per basic and diluted common share, for the quarter ended June 30, 2017. The Company recognized net income of $6,549,000 for the six months ended June 30, 2018, an increase of 54% compared to the net income of $4,263,000 recognized for the six months ended June 30, 2017. Basic and diluted earnings per share increased to $0.39 for the six months ended June 30, 2018, as compared to $0.25 for the six months ended June 30, 2017.

Second Quarter 2018 Highlights (at or for the quarter ended June 30, 2018, except where noted)

Net interest income after provision for credit losses increased to $8,913,000 compared to $7,724,000 for the quarter ended June 30, 2017, and increased from $8,515,000 in the preceding quarter.
Net interest margin decreased to 4.03% from 4.25% for the quarter ended June 30, 2017.
Net recoveries totaled $445,000, compared to net recoveries of $110,000 for the quarter ended June 30, 2017.
Capital positions remain strong with a 13.04% Tier 1 Leverage Ratio, a 15.68% Common Equity Tier 1 Ratio; a 17.18% Tier 1 Risk-Based Capital Ratio; and a 18.42% Total Risk-Based Capital Ratio.
Annualized return on average assets ("ROAA") was 1.58%, compared to 1.26% for the quarter ended June 30, 2017.
Annualized return on average equity ("ROAE") was 12.95%, compared to 10.06% for the quarter ended June 30, 2017.
Total loans decreased to $574,351,000, compared to $602,390,000 at December 31, 2017.
Other real estate owned balances remained at $5,745,000 at June 30, 2018 when compared to $5,745,000, at December 31, 2017.
The allowance for credit losses as a percentage of gross loans decreased to 1.47%, compared to 1.54% at December 31, 2017.
Total deposits increased to $756,963,000, compared to $687,693,000 at December 31, 2017.
Book value per share increased to $6.23, compared to $6.00 at December 31, 2017.

Dennis Woods, President and Chief Executive Officer, stated: "We are once again pleased to report strong earnings this quarter. While there was a loss on fair value of our trust preferred securities, included in the Company's earnings is a recovery of provision for credit loss due to reductions in required reserves for impaired credits and recoveries of previously charged-off credits. We continue to expect growth in core earnings as we continue to see a benefit from the lower tax rate, and increases in interest income. The Company realized $1,031,000 in savings on tax expense for the six months ended June 30, 2018 as a result of the lower tax rate. We fully expect this success will continue to be reflected in our results throughout 2018."

In an attempt to remain consistent with prior periods, provided at the end of this Press Release is a reconciliation of Core Income, as a non-GAAP measure to Net Income. This reconciliation continues to exclude Non-Core items such as the Fair Value Adjustment for Trust Preferred Securities (“TRUPS”), recovery of provision for credit loss, and gain on sale of other real estate owned ("OREO"). As such net income would have been $6,085,000 for the six months ended June 30, 2018, an increase of approximately 37% compared to net income of $4,451,000 for the same period in 2017. Management believes that our financial results are more comparative excluding the impact of such non-core items.

Results of Operations

Annualized ROAE for the six months ended June 30, 2018 was 12.69%, compared to 8.72% for the six months ended June 30, 2017. ROAA was 1.57% for the six months ended June 30, 2018, compared to 1.09% for the six months ended June 30, 2017. ROAE for the quarter ended June 30, 2018 was 12.95% compared to 10.06% for the same period in 2017. ROAA was 1.58% for the quarter ended June 30, 2018, compared to 1.26% for the same period in 2017. The average cost of deposits was 0.30% for the quarter ended June 30, 2018, and 0.22% for the quarter ended June 30, 2017. The increase in the cost of deposits is attributed to increases in rates paid on time deposits and money market accounts.

Net interest income after the provision for credit losses for the six months ended June 30, 2018 totaled $17,428,000, an increase of $2,497,000, or 16.72%, from $14,931,000 for the same period ended June 30, 2017. The Company's net interest margin increased from 4.17% for the six months ended June 30, 2017 to 4.26% for the six months ended June 30, 2018. The 9 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 5.33% for the six months ended June 30, 2017 to 5.36% for the six months ended June 30, 2018. The increase in net interest income on a year-over-year comparison is the result of higher interest rates and growth of the loan portfolio. Net interest income after the provision for credit losses for the quarter ended June 30, 2018 totaled $8,913,000, an increase of $1,189,000 or 15.39% from the net interest income of $7,724,000 for the same period ended June 30, 2017.

Non-interest income for the six months ended June 30, 2018 totaled $2,092,000, reflecting an increase of $117,000 from $1,975,000 in non-interest income reported for the six months ended June 30, 2017. Customer service fees, which represent the largest portion of the Company's non-interest income, totaled $1,971,000 and $1,938,000 for the years ended June 30, 2018 and 2017, respectively. On a year-over-year comparative basis, non-interest income increased primarily due to gains on the death benefit proceeds of bank-owned life insurance of $171,000 which was offset by the change in the fair value of financial liability caused by fluctuations in the LIBOR yield curve. The Company recorded a $661,000 loss on the fair value of financial liability for the six months ended June 30, 2018, compared to a $601,000 loss for the same period ended June 30, 2017.

On January 1, 2018, the Company adopted ASU 2016-01, requiring the Company to present separately in other comprehensive income the portion of change in fair value of the financial liability resulting from a change in the instrument-specific credit risk. As of June 30, 2018, the Company has recognized a change of $367,000 on the fair value of this financial liability, of which a $661,000 loss was attributed to fluctuations in the LIBOR yield curve, and recorded in earnings, and a $294,000 gain was attributed to changes in credit risk and presented in other comprehensive income.

Non-interest income for the quarter ended June 30, 2018 totaled $1,169,000, reflecting an increase of $103,000 from the $1,066,000 in non-interest income reported for the quarter ended June 30, 2017. The additional income in the period was primarily due to recording only a $192,000 loss on the fair value option of financial liability for the quarter ended June 30, 2018, as compared to a $264,000 loss for the same period ended 2017. The change in the fair value of financial liability was primarily caused by fluctuations in the LIBOR yield curve. Customer service fees totaled $1,020,000 for the quarter ended June 30, 2018, as compared to $997,000 for the quarter ended June 30, 2017.

For the six months ended June 30, 2018, non-interest expense totaled $10,318,000, a increase of $520,000 compared to $9,798,000 for the six months ended June 30, 2017. On a year-over-year comparative basis, non-interest expense increased primarily due to increases of $400,000 in salary and employee benefits, $377,000 in OREO expenses, and $127,000 in professional fees, partially offset by a decrease of $108,000 in regulatory fees and a decrease of $110,000 on tax credit partnership expense. The change in other non-interest expenses of $297,000 reflects a $121,000 decrease in the cost of workman's compensation insurance expense.

Non-interest expense totaled $5,317,000 for the quarter ended June 30, 2018, an increase of $710,000 as compared to $4,607,000 reported for the quarter ended June 30, 2017. On a quarter-over-quarter comparative basis, non-interest expense increased primarily due to increases in salary and employee benefits, occupancy expense, and net cost on operation of OREO, partially offset by decreases in regulatory assessments. Non-interest expense for the quarter ended June 30, 2017 includes a $336,000 gain on sale of OREO. The increase in salary and employee benefits was primarily due to the increased employee salary expense and compensation expense related to equity awards.

Balance Sheet Review

Total assets increased $73,632,000, or 9.14%, for the six months ended June 30, 2018 due primarily to increases of $88,492,000 in overnight funds held at the Federal Reserve. This increase is partially the reflection of an increase of $69,270,000 in deposits. Loan balances decreased by $27,355,000 during 2018 and investment securities increased by $14,661,000. The reduction in loan balances is primarily attributed to the payoff of a large relationship. The Company continues to review multiple loan purchase opportunities, on a flow basis, and recently executed a $30,000,000 letter of intent to purchase SBA loans.

Total deposits increased $69,270,000, or 10.07%, to $756,963,000 during the six months ended June 30, 2018. This increase was due to increases of $92,913,000 in NOW, money market, and savings accounts, and $1,970,000 in time deposits, offset by a decrease of $25,613,000 in noninterest bearing deposits. Interest bearing deposits and savings accounts increased 29.44% to $408,475,000 at June 30, 2018, compared to $315,562,000 at December 31, 2017. Noninterest bearing deposits decreased 8.33% to $281,686,000 at June 30, 2018, compared to $307,299,000 at December 31, 2017. As a result of the large increase in NOW, money market, and saving accounts, net core deposits increased $67,300,000.






Shareholders’ equity at June 30, 2018 was $105,216,000, up $3,864,000 from shareholders’ equity of $101,352,000 at December 31, 2017. 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 $0.09 per share on June 26, 2018. The dividend is payable on July 19, 2018, to shareholders of record as of July 9, 2018. The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.09 per share on March 27, 2018. The dividend was payable on April 19, 2018, to shareholders of record as of April 9, 2018 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 recovery of provision for credit losses of $1,325,000 for the six months ended June 30, 2018, compared to a recovery of provision of $31,000 for the six months ended June 30, 2017. Net loan recoveries totaled $483,000 for the six months ended June 30, 2018, as compared to net recoveries of $136,000 for the six months ended June 30, 2017. The Company recorded a recovery of provision for credit loss of $1,136,000 for the quarter ended June 30, 2018, compared to a recovery of provision for credit losses of $52,000 for the quarter ended June 30, 2017. The recovery of provision for the quarter ended June 30, 2018 is the result of loan recoveries, a decline in loan balances, and improvement in historical loss factors. Net loan recoveries totaled $445,000 for the quarter ended June 30, 2018, as compared to net loan recoveries of $110,000 for the quarter ended June 30, 2017.

The Company's allowance for loan loss totaled 1.47% of the loan portfolio at June 30, 2018, compared to 1.54% at December 31, 2017. 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, 2018 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, increased approximately $4,667,000 between December 31, 2017 and June 30, 2018 to $22,277,000. Nonperforming assets as a percentage of total assets increased from 2.19% at December 31, 2017 to 2.53% at June 30, 2018. The increase in nonperforming assets is mainly attributed to increases in nonaccrual loans. Nonaccrual loans increased $6,906,000 between December 31, 2017 and June 30, 2018 to $12,202,000. The increase in nonaccrual loans is isolated to one borrower, which is well-secured by real estate collateral. OREO totaled $5,745,000 at June 30, 2018 and December 31, 2017. Additionally there has been an increase in impaired loans which totaled $19,696,000 at June 30, 2018 and $14,790,000 at December 31, 2017, an increase of $4,906,000.

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, 2017, 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)
 
 
 
 
June 30, 2018
 
December 31, 2017
Assets
 
 
 
Cash and non-interest-bearing deposits in other banks
$
29,939

 
$
35,237

Cash and due from Federal Reserve Bank
161,189

 
72,697

Cash and cash equivalents
191,128

 
107,934

Investment securities available for sale (at fair value)
56,724

 
41,985

Marketable equity
3,659

 
3,737

    Investment securities
60,383

 
45,722

Loans and leases, net of unearned fees
574,351

 
602,390

Less: Allowance for credit losses
(8,425
)
 
(9,267
)
Net loans
565,926

 
593,123

Premises and equipment - net
10,041

 
10,165

Other real estate owned
5,745

 
5,745

Goodwill and intangible assets
4,488

 
4,488

Cash surrender value of life insurance
19,803

 
19,752

Deferred income tax asset - net
2,616

 
2,389

Accrued interest receivable
8,392

 
6,526

Investment in limited partnerships
1,592

 
1,601

Other assets
9,354

 
8,391

Total assets
$
879,468

 
$
805,836

 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
Deposits
 
 
 
Non-interest bearing demand deposits
$
281,686

 
$
307,299

Money market, NOW, and savings
408,475

 
315,562

Time
66,802

 
64,832

Total deposits
756,963

 
687,693

Accrued interest payable
43

 
44

Other liabilities
7,121

 
7,017

Junior subordinated debentures (at fair value)
10,125

 
9,730

Total liabilities
774,252

 
704,484

 
 
 
 
Shareholders' equity
 
 
 
Common stock, no par value 20,000,000 shares authorized, 16,901,618 issued and outstanding at June 30, 2018, and 16,885,615 at December 31, 2017
58,309

 
57,880

Retained earnings
46,025

 
44,182

Accumulated other comprehensive income (loss)
882

 
(710)

Total shareholders' equity
105,216

 
101,352

Total liabilities and shareholders' equity
$
879,468

 
$
805,836















United Security Bancshares
 
 
 
 
 
 
 
Consolidated Statements of Income (unaudited)
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Interest income:
 
 
 
 
 
 
 
Interest and fees on loans
$
7,491

 
$
7,579

 
$
15,717

 
$
14,804

Interest on investment securities
265

 
229

 
457

 
453

Interest on deposits in FRB
680

 
301

 
1,065

 
484

Interest on deposits in other banks

 
1

 

 
2

Total interest income
8,436

 
8,110

 
17,239

 
15,743

 
 
 
 
 
 
 
 
Interest expense:
 
 
 
 
 
 
 
Interest on deposits
550

 
364

 
937

 
700

Interest on other borrowed funds
109

 
74

 
199

 
143

Total interest expense
659

 
438

 
1,136

 
843

Net interest income
7,777

 
7,672

 
16,103

 
14,900

Recovery of provision for Credit Losses
(1,136)

 
(52)

 
(1,325)

 
(31)

Net interest income after recovery of provision for credit losses
8,913

 
7,724

 
17,428

 
14,931

 
 
 
 
 
 
 
 
Non-interest income:
 
 
 
 
 
 
 
Customer service fees
1,020

 
997

 
1,971

 
1,938

Increase in cash surrender value of bank-owned life insurance
132

 
134

 
257

 
266

Loss on marketable equity securities
(18)

 

 
(78)

 

Loss on fair value of financial liability
(192)

 
(264)

 
(661)

 
(601)

Gain on death benefit proceeds from bank-owned life insurance

 

 
171

 

Other non-interest income
198

 
199

 
403

 
372

Total non-interest income
1,169

 
1,066

 
2,092

 
1,975

 
 
 
 
 
 
 
 
Non-interest expense:
 
 
 
 
 
 
 
Salaries and employee benefits
3,010

 
2,586

 
5,971

 
5,571

Occupancy expense
1,117

 
1,043

 
2,135

 
2,058

Data processing
38

 
25

 
90

 
52

Professional fees
391

 
345

 
727

 
600

Regulatory assessments
78

 
133

 
161

 
269

Director fees
81

 
75

 
162

 
143

Correspondent bank service charges
17

 
19

 
34

 
37

Loss on California tax credit partnership
5

 
10

 
9

 
119

Net cost (gain) on operation and sale of OREO
49

 
(309)

 
100

 
(277)

Other non-interest expense
531

 
680

 
929

 
1,226

Total non-interest expense
5,317

 
4,607

 
10,318

 
9,798

 
 
 
 
 
 
 
 
Income before income tax provision
4,765

 
4,183

 
9,202

 
7,108

Provision for income taxes
1,373

 
1,691

 
2,653

 
2,845

Net income
$
3,392

 
$
2,492

 
$
6,549

 
$
4,263

 
 
 
 
 
 
 
 
Basic earnings per common share
$
0.20

 
$
0.15

 
$
0.39

 
$
0.25

Diluted earnings per common share
$
0.20

 
$
0.15

 
$
0.39

 
$
0.25

Weighted average basic shares for EPS
16,901,618

 
16,875,190

 
16,901,618

 
16,875,134

Weighted average diluted shares for EPS
16,958,932

 
16,894,227

 
16,942,394

 
16,891,784






United Security Bancshares
 
 
 
 
 
 
 
Average Balances and Rates (unaudited)
 
 
 
 
 
 
 
(in thousands)
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Average Balances:
 
 
 
 
 
 
 
Loans (1)
$
576,670

 
$
554,553

 
$
590,905

 
$
560,282

Investment securities – taxable
49,752

 
54,505

 
47,381

 
55,541

Interest-bearing deposits in other banks

 
651

 

 
651

Interest-bearing deposits in FRB
148,441

 
113,981

 
124,215

 
102,898

Total interest-earning assets
774,863


723,690


762,501


719,372

Allowance for credit losses
(9,291
)
 
(9,021
)
 
(9,364
)
 
(8,973
)
Cash and due from banks
27,067

 
20,872

 
26,906

 
20,894

Other real estate owned
5,683

 
6,041

 
5,745

 
6,255

Other non-earning assets
53,944

 
51,925

 
53,855

 
51,093

Total average assets
852,266


793,507


839,643


788,641

 
 
 
 
 
 
 
 
Interest bearing deposits
442,797

 
400,245

 
422,008

 
402,831

Junior subordinated debentures
9,493

 
9,139

 
9,641

 
8,969

Total interest-bearing liabilities
452,290

 
409,384

 
431,649


411,800

Non-interest-bearing deposits
290,490

 
278,457

 
297,712

 
271,230

Other liabilities
5,485

 
6,317

 
6,199

 
7,035

Total liabilities
748,265


694,158


735,560


690,065

Total equity
104,001

 
99,349

 
104,083

 
98,576

Total liabilities and equity
$
852,266

 
$
793,507

 
$
839,643

 
$
788,641

 
 
 
 
 
 
 
 
Average Rates:
 
 
 
 
 
 
 
Loans (1)
5.21
%
 
5.48
%
 
5.36
%
 
5.33
%
Investment securities- taxable
2.14
%
 
1.69
%
 
1.95
%
 
1.64
%
Interest-bearing deposits in other banks
%
 
0.62
%
 
%
 
0.62
%
Interest-bearing deposits in FRB
1.84
%
 
1.06
%
 
1.73
%
 
0.95
%
Earning assets
4.37
%
 
4.49
%
 
4.56
%
 
4.41
%
Interest bearing deposits
0.50
%
 
0.36
%
 
0.45
%
 
0.35
%
Junior subordinated debentures
4.61
%
 
3.25
%
 
4.16
%
 
3.22
%
Total interest-bearing liabilities
0.58
%
 
0.43
%
 
0.53
%
 
0.41
%
Net interest margin
4.03
%
 
4.25
%
 
4.26
%
 
4.17
%

(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
 
 
 
 
 
Nonperforming Assets (unaudited)
 
 
 
 
 
(dollars in thousands)
 
 
 
 
 
 
June 30, 2018
 
December 31, 2017
 
June 30, 2017
Commercial and industrial
$

 
$
212

 
$
561

Real estate - mortgage
438

 
742

 
473

RE construction & development
11,764

 
4,342

 
4,474

Installment/other

 

 

Total nonaccrual loans
$
12,202


$
5,296


$
5,508

 
 
 
 
 
 
Loans past due 90 days and still accruing
67

 
485

 
87

Restructured loans
4,263

 
6,084

 
6,471

Total nonperforming loans
$
16,532

 
$
11,865

 
$
12,066

Other real estate owned
5,745

 
5,745

 
5,745

Total nonperforming assets
$
22,277

 
$
17,610

 
$
17,811

 
 
 
 
 
 
Nonperforming assets to total gross loans
3.88
%
 
2.92
%
 
3.13
%
Nonperforming assets to total assets
2.53
%
 
2.19
%
 
2.28
%
Allowance for loan losses to nonperforming loans
50.96
%
 
78.10
%
 
74.65
%






United Security Bancshares
 
 
 
 
 
 
 
Selected Financial Data (unaudited)
 
 
 
 
 
 
 
(dollars in thousands, except per share amounts)
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Return on average assets
1.58
 %
 
1.26
 %
 
1.57%
 
1.09%
Return on average equity
12.95
 %
 
10.06
 %
 
12.69%
 
8.72%
Net recoveries to average loans
(0.31
)%
 
(0.08
)%
 
(0.16)%
 
(0.05)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2018
 
December 31, 2017
 
 
 
 
Shares outstanding - period end
16,901,618

 
16,885,615

 
 
 
 
Book value per share

$6.23

 

$6.00

 
 
 
 
Efficiency ratio (1)
54.77
 %
 
54.83
 %
 
 
 
 
Total impaired loans

$19,696

 

$14,790

 
 
 
 
Net loan to deposit ratio
74.76
 %
 
86.25
 %
 
 
 
 
Allowance for credit losses to total loans
1.47
 %
 
1.54
 %
 
 
 
 
Total capital to risk weighted assets
 
 
 
 
 
 
 
Company
18.42
 %
 
17.54
 %
 
 
 
 
Bank
18.32
 %
 
17.31
 %
 
 
 
 
Tier 1 capital to risk-weighted assets
 
 
 
 
 
 
 
Company
17.18
 %
 
16.29
 %
 
 
 
 
Bank
17.07
 %
 
16.06
 %
 
 
 
 
Common equity tier 1 capital to risk-weighted assets
 
 
 
 
 
 
 
Company
15.68
 %
 
14.81
 %
 
 
 
 
Bank
17.07
 %
 
16.06
 %
 
 
 
 
Tier 1 capital to adjusted average assets (leverage)
 
 
 
 
 
 
 
Company
13.04
 %
 
13.01
 %
 
 
 
 
Bank
12.99
 %
 
12.90
 %
 
 
 
 

(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)
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
 
 
 
 
2018
 
2017
 
Change $
 
Change %
Net income
 
$
6,549

 
$
4,263

 
$
2,286

 
53.62
%
 
 
 
 
 
 
 
 
 
TRUPs (1) fair value adjustment loss pretax
 
(661
)
 
(601
)
 
 
 
 
Reversal of provision for credit losses (2)
 
1,315

 

 
 
 
 
Gain on sale of Other Real Estate Owned (OREO) (3)
 

 
336

 
 
 
 
 
 
654

 
(265
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax effect (29%)
 
190

 
(77
)
 
 
 
 
Non-core items net of taxes
 
464

 
(188
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP core net income
 
$
6,085

 
$
4,451

 
$
1,634

 
36.71
%

(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 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 required reserve. The recovery of provision for credit losses for $1,325,000 for the six months ended June 30, 2018, within the Consolidated Statements of Income, includes this reversal of provision for credit losses of $1,315,000 and a provision for overdrafts and unfunded loan commitments of $10,000.

(3)
Gain on sale of Other Real Estate Owned (OREO) is not part of Core Income.



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