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Section 1: 8-K (8-K 062019 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 17, 2019
Date of Report (Date of earliest event reported)

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

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

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

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

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

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

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

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

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

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








ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On April 17, 2019, the Company issued a press release announcing results for the quarter ended June 30, 2019 (the "Press Release"). A copy of the Press Release is furnished as Exhibit 99.1 and incorporated herein by reference. The Press Release contains the non-GAAP measure Core Net Income. The Company believes that the presentation of that non-GAAP measure provides useful information for the understanding of its ongoing operations and, thereby, enhances an investor’s overall understanding of the Company's current financial performance relative to past performance and provides, along with the nearest GAAP measures, a baseline for modeling future expectations. The non-GAAP measure is reconciled to the comparable GAAP financial measure in the financial tables within the Press Release. The Company cautions that the non-GAAP measure should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results. Additionally, the Company notes that there can be no assurance that the above referenced non-GAAP financial measure is comparable to similarly titled financial measures used by other companies.

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


ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(d)    Exhibits.

EXHIBIT #
99.1 Press release of United Security Bancshares dated July 17, 2019


SIGNATURES

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

 
 
 
United Security Bancshares
 
 
 
 
Date:
July 17, 2019
 
By: /s/ Bhavneet Gill
 
 
 
Bhavneet Gill
 
 
 
Senior Vice President & Chief Financial Officer






(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1 062019 EARNINGS)

Exhibit


United Security Bancshares reports 2nd quarter net income of $4.1 million

FRESNO, CA - July 17, 2019. United Security Bancshares (Nasdaq: UBFO) today announced its unaudited financial results for the three and six months ended June 30, 2019. The Company reported consolidated net income of $4,097,000, or $0.24 per basic and diluted common share, for the quarter ended June 30, 2019, as compared to $3,392,000, or $0.20 per basic and diluted common share, for the quarter ended June 30, 2018. The Company recognized net income of $8,104,000 for the six months ended June 30, 2019, an increase of 24% compared to the net income of $6,549,000 recognized for the six months ended June 30, 2018. Basic and diluted earnings per share increased to $0.48 for the six months ended June 30, 2019, as compared to basic and diluted earnings per share of $0.39 for the six months ended June 30, 2018.

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

Net interest income after provision for credit losses increased to $9,299,000, compared to $8,914,000 for the quarter ended June 30, 2018, and decreased from $9,454,000 in the preceding quarter.
Net interest margin increased to 4.28% from 4.03% for the quarter ended June 30, 2018, and decreased from 4.45% in the preceding quarter.
Net recoveries totaled $31,000, compared to net recoveries of $445,000 for the quarter ended June 30, 2018, and $16,000 in the preceding quarter.
Capital positions remain strong with a 12.43% Tier 1 Leverage Ratio, a 15.47% Common Equity Tier 1 Ratio; a 16.90% Tier 1 Risk-Based Capital Ratio; and a 18.15% Total Risk-Based Capital Ratio.
Annualized return on average assets ("ROAA") was 1.71%, compared to 1.58% for the quarter ended June 30, 2018, and 1.74% in the preceding quarter.
Annualized return on average equity ("ROAE") was 14.53%, compared to 12.95% for the quarter ended June 30, 2018, and 14.80% in the preceding quarter.
Total loans, net of unearned fees, decreased to $572,810,000, compared to $587,814,000 at December 31, 2018.
Other real estate owned balances remained at $5,745,000 at June 30, 2019 when compared to $5,745,000 at December 31, 2018.
The allowance for credit losses as a percentage of gross loans increased to 1.48%, compared to 1.43% at December 31, 2018.
Total deposits increased to $870,915,000, compared to $805,643,000 at December 31, 2018.
Book value per share increased to $6.69, compared to $6.45 at December 31, 2018.

Dennis Woods, President and Chief Executive Officer, stated: "Throughout the second quarter of 2019 the Company continued to build upon the successes of our recent history. For the first time in our Company's history we are reporting total assets in excess of $1 billion. During the second quarter, deposits increased $39.3 million, and the resulting increases in interest income helped our book value per share grow from $6.58 to $6.69. We expect to capitalize on our historic growth and look forward to a very exciting rest of 2019.

Results of Operations

ROAE for the six months ended June 30, 2019 was 14.57%, compared to 12.69% for the six months ended June 30, 2018. ROAA was 1.71% for the six months ended June 30, 2019, compared to 1.57% for the six months ended June 30, 2018. Annualized ROAE for the quarter ended June 30, 2019 was 14.53% compared to 12.95% for the same period in 2018. Annualized ROAA was 1.71% for the quarter ended June 30, 2019, compared to 1.58% for the same period in 2018.
The annualized average cost of deposits was 0.43% for the quarter ended June 30, 2019 and 0.30% for the quarter ended June 30, 2018. The increase in the cost of deposits is attributed to increases in average balances and rates paid on time deposits and money market accounts. Interest-bearing deposits increased 23.78% between June 30, 2018 and 2019 to an average balance of $522,382,000.

Net interest income after the provision for credit losses for the six months ended June 30, 2019 totaled $18,753,000, an increase of $1,325,000, or 7.60%, from $17,428,000 for the same period ended June 30, 2018. The Company's net interest margin increased from 4.26% for the six months ended June 30, 2018 to 4.36% for the six months ended June 30, 2019. The increase was the result of increases in loan yields, investment yields, and yields on overnight funds, partially offset by the increasing costs of deposits. The yield on loans increased from 5.36% for the six months ended June 30, 2018 to 6.01% for the six months ended June 30, 2019. The yield on loans for the six months ended June 30, 2018 includes $550,000 in writedowns of





unamortized insurance premiums on the student loan portfolio, which was a result of the dissolution of the insurance carrier. The increase in net interest income on a year-over-year comparison is the result of higher interest rates on loans and an increase in overnight funds and investment securities, partially offset by increasing costs of deposits and a decline in loan balances. Net interest income after the provision for credit losses for the quarter ended June 30, 2019 totaled $9,299,000, an increase of $385,000 or 4.32% from the net interest income of $8,914,000 for the same period ended June 30, 2018.

Non-interest income for the six months ended June 30, 2019 totaled $3,252,000, reflecting an increase of $1,160,000 from the $2,092,000 in non-interest income reported for the six months ended June 30, 2018. Customer service fees, which represent the largest portion of the Company's non-interest income, totaled $1,639,000 and $1,971,000 for the six months ended June 30, 2019 and 2018, respectively. The decrease in customer service fees is attributed to the closure of the Financial Services department during the third quarter of 2018. On a year-over-year comparative basis, non-interest income increased primarily due to a $911,000 gain on the fair value of junior subordinated debentures (TRUPs) for the six months ended June 30, 2019, compared to a $661,000 loss for the same period ended June 30, 2018. The change in the fair value of TRUPs reflected in non-interest income was caused by fluctuations in the LIBOR yield curve. Non-interest income for the six months ended June 30, 2019 also 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, 2018 includes a $171,000 gain recorded on the death benefit proceeds of bank-owned life insurance.
 
Non-interest income for the quarter ended June 30, 2019 totaled $1,729,000, reflecting an increase of $560,000 from the $1,169,000 in non-interest income reported for the quarter ended June 30, 2018. The increase during the period was primarily due to the recording of a $497,000 gain on the fair value of TRUPs for the quarter ended June 30, 2019, as compared to a $192,000 loss for the quarter ended June 30, 2018. The change in the fair value of junior subordinated debentures (TRUPs) reflected in non-interest income was primarily caused by fluctuations in the LIBOR yield curve. Customer service fees totaled $830,000 for the quarter ended June 30, 2019, as compared to $1,020,000 for the quarter ended June 30, 2018. The decrease is partially attributed to the closing of the Financial Services department.

For the six months ended June 30, 2019, non-interest expense totaled $10,609,000, an increase of $291,000 compared to $10,318,000 for the six months ended June 30, 2018. On a year-over-year comparative basis, non-interest expense increased primarily due to increases of $417,000 in professional fees, $40,000 in data processing, and $175,000 in other expense, partially offset by a decrease of $439,000 in salaries and employee benefits. The increase in professional fees is mainly attributed to an increase in legal fees, the increase in data processing is primarily due to additional service fees, and the increase in other expenses was attributed to workman's compensation insurance expense. The decrease in salary and employee benefits is attributed to lower equity award expense. Non-interest expense for the six months ended June 30, 2018 includes a $121,000 recovery of workman's compensation insurance expense.

Non-interest expense totaled $5,262,000 for the quarter ended June 30, 2019, an decrease of $56,000 as compared to $5,318,000 reported for the quarter ended June 30, 2018. On a quarter-over-quarter comparative basis, non-interest expense decreased primarily due to decreases in salary and employee benefits as a result of lower equity award expenses, partially offset by increases in data processing expenses and professional fees.

The Company recorded an income tax provision of $3,292,000 for the six months ended June 30, 2019, compared to $2,653,000 for the same period in 2018. The effective tax rate for the six months ended June 30, 2019 was 28.89%, compared to 28.83% for the six months ended June 30, 2018. For the quarter ended June 30, 2019, the Company recorded a tax provision of $1,669,000, compared to a provision of $1,373,000 for the same period in 2018.

Provided at the end of this Press Release is a reconciliation of Core Net Income, as a non-GAAP measure, to Net Income. This reconciliation excludes Non-Core items such as the Fair Value Adjustment for TRUPs, recovery of provision for credit losses, and gain on sale of other real estate owned (OREO). As such, Core Net Income would have been $7,457,000 for the six months ended June 30, 2019, an increase of approximately 23% compared to net income of $6,085,000 for the same period in 2018. Management believes that financial results are more comparative excluding the impact of such non-core items.

Balance Sheet Review

Total assets increased $73,435,000, or 7.87%, for the six months ended June 30, 2019, due primarily to increases of $87,998,000 in overnight funds held at the Federal Reserve. This increase is partially reflective of the increase of $65,272,000 in deposits during the first six months of 2019. Loan balances decreased by $14,512,000 for the six months ended June 30, 2019 and investment securities decreased by $6,453,000. Unfunded loan commitments increased $32,191,000 to $208,544,000 during the first six months of 2019. With the adoption of ASU 2016-02, effective January 1, 2019, the Company began to





recognize an operating lease right-of-use asset and operating lease liability. At June 30, 2019, the operating lease right-of-use was $3,836,000 and the operating lease liability was $3,938,000.

Total deposits increased $65,272,000, or 8.10%, to $870,915,000 during the six months ended June 30, 2019. This increase was due to an increase of $66,199,000 in NOW, money market, and savings accounts and an increase of $11,452,000 in noninterest bearing deposits, partially offset by a a decrease of $12,379,000 in time deposits. Total money market and savings accounts increased 15.38% to $496,690,000 at June 30, 2019, compared to $430,491,000 at December 31, 2018. Noninterest bearing deposits increased 3.91% to $304,172,000 at June 30, 2019, compared to $292,720,000 at December 31, 2018. As a result of the net increase, core deposits, which is made up of the balance of noninterest bearing deposits, NOW, money market, savings, and time deposits accounts less than $250,000, increased $77,651,000.

Shareholders’ equity at June 30, 2019 was $113,338,000, up $4,098,000 from shareholders’ equity of $109,240,000 at December 31, 2018. The increase in equity was a result of net earnings for the period, partially offset by cash dividends.

The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on June 25, 2019. The dividend will be payable on July 18, 2019, to shareholders of record as of July 8, 2019. The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on March 26, 2019. The dividend was payable on April 17, 2019, to shareholders of record as of April 8, 2019. No assurances can be provided that future dividends will be declared and/or as to the timing of such future dividends, if any.

Credit Quality

The Company has recorded a provision for credit losses of $10,000 for the six months ended June 30, 2019, compared to a recovery of provision of $1,325,000 for the six months ended June 30, 2018. Net loan recoveries totaled $47,000 for the six months ended June 30, 2019, as compared to net recoveries of $483,000 for the six months ended June 30, 2018. The Company recorded a provision for credit loss of $4,000 for the quarter ended June 30, 2019, compared to a recovery of provision for credit losses of $1,136,000 for the quarter ended June 30, 2018. Net loan recoveries totaled $31,000 for the quarter ended June 30, 2019, as compared to net loan recoveries of $445,000 for the quarter ended June 30, 2018.

The Company's allowance for loan loss totaled 1.48% of the loan portfolio at June 30, 2019, compared to 1.43% at December 31, 2018. In determining the adequacy of the allowance for loan losses, the judgment of the Company's management is a significant factor. Management considers the allowance for credit losses at June 30, 2019 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 $461,000 between December 31, 2018 and June 30, 2019 to $21,168,000. Nonperforming assets as a percentage of total assets decreased from 2.32% at December 31, 2018 to 2.10% at June 30, 2019. The decrease in nonperforming assets is mainly attributed to decreases in nonaccrual loans and restructured loans. Nonaccrual loans decreased $415,000 between December 31, 2018 and June 30, 2019 to $11,637,000. Restructured loans decreased $876,000 between December 31, 2018 and June 30, 2019. OREO totaled $5,745,000 at June 30, 2019 and December 31, 2018.

About United Security Bancshares

United Security Bancshares (NASDAQ: UBFO) is the holding company for United Security Bank, which was founded in 1987. United Security Bank is headquartered in Fresno and operates 11 full-service branch offices in Fresno, Bakersfield, Campbell, Caruthers, Coalinga, Firebaugh, Oakhurst, San Joaquin, and Taft. Additionally, United Security Bank operates Commercial Real Estate Construction, Commercial Lending, and Consumer Lending departments. For more information, please visit www.unitedsecuritybank.com.






Non-GAAP Financial Measures

This press release and the accompanying financial tables contain a non-GAAP financial measure (Net Income before Non-Core) within the meaning of the Securities and Exchange Commission’s Regulation G. In the accompanying financial tables, the Company has provided a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure. The Company’s management believes that this non-GAAP financial measure provides useful information about the Company’s results of operations and/or financial position to both investors and management. The Company provides this non-GAAP financial measure to investors to assist them in performing their analysis of its historical operating results. The non-GAAP financial measure shows the Company's operating results before consideration of certain adjustments and, consequently, this non-GAAP financial measure should not be construed as an alternative to net income (loss) as an indicator of the Company's operating performance, as determined in accordance with GAAP. The Company may calculate this non-GAAP financial measure differently than other companies.

Forward-Looking Statements

This news release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Company intends such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are based on management’s knowledge and belief as of today and are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date. Forward-looking statements are subject to risks and uncertainties and actual results may differ materially from those presented.   Factors that might cause such differences, some of which are beyond the Company’s ability to control or predict, include, but are not limited to: (1) changes in general economic and financial market conditions, either nationally or locally, (2) changes in interest rates, (3) changes in banking laws or regulations, (4) increased competition in the Company’s market, impacting the ability to execute its business plans, (5) loss of key personnel, (6) unanticipated credit losses, (7) earthquakes or other natural disasters impacting the local economy and/or the condition of real estate collateral, (8) the impact of technological changes and the ability to develop and maintain secure and reliable electronic systems, and (9) changes in accounting policies or procedures. 

The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.  For a more complete discussion of these risks and uncertainties, see the Company’s Annual Report on Form 10-K, for the year ended December 31, 2018, and particularly the section entitled "Management’s Discussion and Analysis of Financial Condition and Results of Operations."  Readers should carefully review all disclosures the Company files from time to time with the Securities and Exchange Commission.






United Security Bancshares
 
 
 
Consolidated Balance Sheets (unaudited)
 
 
 
(in thousands)
 
 
 
 
June 30, 2019
 
December 31, 2018
Assets
 
 
 
Cash and non-interest-bearing deposits in other banks
$
30,074

 
$
28,949

Due from Federal Reserve Bank ("FRB")
279,386

 
191,388

Cash and cash equivalents
309,460

 
220,337

Investment securities (at fair value)
 
 
 
Available for sale ("AFS") securities
59,863

 
66,426

Marketable equity securities
3,769

 
3,659

Total investment securities
63,632

 
70,085

Loans
573,421

 
587,933

Unearned fees and unamortized loan origination costs - net
(611
)
 
(119
)
Allowance for credit losses
(8,452
)
 
(8,395
)
Net loans
564,358

 
579,419

Premises and equipment - net
9,529

 
9,837

Accrued interest receivable
10,314

 
8,341

Other real estate owned
5,745

 
5,745

Goodwill
4,488

 
4,488

Deferred tax assets - net
3,095

 
3,174

Cash surrender value of life insurance
20,535

 
20,244

Operating lease right-of-use assets
3,836

 

Other assets
11,501

 
11,388

Total assets
$
1,006,493

 
$
933,058

 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
Deposits
 

 
 

Non-interest-bearing
$
304,172

 
$
292,720

Interest-bearing
566,743

 
512,923

Total deposits
870,915

 
805,643

 
 
 
 
Accrued interest payable
77

 
57

Operating lease liabilities
3,938

 

Other liabilities
7,729

 
7,963

Junior subordinated debentures (at fair value)
10,496

 
10,155

Total liabilities
893,155

 
823,818

 
 
 
 
Shareholders' Equity
 
 
 
Common stock, no par value; 20,000,000 shares authorized; issued and outstanding: 16,953,744 at June 30, 2019 and 16,946,622 at December 31, 2018
58,818

 
58,624

Retained earnings
54,312

 
49,942

Accumulated other comprehensive income
208

 
674

Total shareholders' equity
113,338

 
109,240

Total liabilities and shareholders' equity
$
1,006,493

 
$
933,058















United Security Bancshares
 
 
 
 
 
 
 
Consolidated Statements of Income (unaudited)
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Interest Income:
 
 
 
 
 
 
 
Interest and fees on loans
$
8,443

 
$
7,491

 
$
17,085

 
$
15,717

Interest on investment securities
444

 
265

 
921

 
457

Interest on deposits in FRB
1,424

 
681

 
2,722

 
1,065

Total interest income
10,311

 
8,437

 
20,728

 
17,239

 
 
 
 
 
 
 
 
Interest Expense:
 
 
 
 
 
 
 
Interest on deposits
890

 
550

 
1,724

 
937

Interest on other borrowed funds
118

 
109

 
241

 
199

Total interest expense
1,008

 
659

 
1,965

 
1,136

Net Interest Income
9,303

 
7,778

 
18,763

 
16,103

Provision (Recovery of Provision) for Credit Losses
4

 
(1,136)

 
10

 
(1,325)

Net Interest Income after Provision (Recovery of Provision) for Credit Losses
9,299

 
8,914

 
18,753

 
17,428

 
 
 
 
 
 
 
 
Noninterest Income:
 
 
 
 
 
 
 
Customer service fees
830

 
1,020

 
1,639

 
1,971

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

 
132

 
292

 
257

Gain (loss) on fair value of marketable equity securities
53

 
(18)

 
110

 
(78)

Gain on proceeds from bank-owned life insurance

 

 

 
171

Gain (loss) on fair value of junior subordinated debentures
497

 
(192)

 
911

 
(661)

Loss on dissolution of real estate investment trust
(5)

 

 
(114)

 

Gain on sale of assets
6

 
29

 
6

 
29

Other
201

 
198

 
408

 
403

Total noninterest income
1,729

 
1,169

 
3,252

 
2,092

 
 
 
 
 
 
 
 
Noninterest Expense:
 
 
 
 
 
 
 
Salaries and employee benefits
2,760

 
3,010

 
5,532

 
5,971

Occupancy expense
808

 
834

 
1,621

 
1,599

Data processing
144

 
99

 
251

 
211

Professional fees
746

 
614

 
1,559

 
1,142

Regulatory assessments
83

 
78

 
176

 
161

Director fees
95

 
81

 
186

 
162

Correspondent bank service charges
14

 
17

 
28

 
34

Loss on California tax credit partnership

 
5

 

 
9

Net cost on operation and sale of OREO
87

 
49

 
152

 
100

Other
525

 
531

 
1,104

 
929

Total noninterest expense
5,262

 
5,318

 
10,609

 
10,318

 
 
 
 
 
 
 
 
Income Before Provision for Taxes
5,766

 
4,765

 
11,396

 
9,202

Provision for Taxes on Income
1,669

 
1,373

 
3,292

 
2,653

Net Income
$
4,097

 
$
3,392

 
$
8,104

 
$
6,549

 
 
 
 
 
 
 
 
Basic earnings per common share
$
0.24

 
$
0.20

 
$
0.48

 
$
0.39

Diluted earnings per common share
$
0.24

 
$
0.20

 
$
0.48

 
$
0.39

Weighted average basic shares for EPS
16,950,564

 
16,899,968

 
16,948,810

 
16,895,135

Weighted average diluted shares for EPS
16,981,705

 
16,957,282

 
16,977,224

 
16,935,911






United Security Bancshares
 
 
 
 
 
 
 
Average Balances and Rates (unaudited)
 
 
 
 
 
 
 
(in thousands)
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Average Balances:
 
 
 
 
 
 
 
Loans (1)
$
568,600

 
$
576,670

 
$
573,436

 
$
590,905

Investment securities – taxable
65,268

 
49,752

 
66,772

 
47,381

Interest-bearing deposits in FRB
238,898

 
148,441

 
227,335

 
124,215

Total interest-earning assets
872,766


774,863


867,543


762,501

Allowance for credit losses
(8,442
)
 
(9,291
)
 
(8,449
)
 
(9,364
)
Cash and due from banks
29,232

 
27,067

 
28,793

 
26,906

Other real estate owned
5,745

 
5,683

 
5,745

 
5,745

Other non-earning assets
61,174

 
53,944

 
60,434

 
53,855

Total average assets
$
960,475


$
852,266


$
954,066


$
839,643

 
 
 
 
 
 
 
 
Interest-bearing deposits
$
522,308

 
$
442,797

 
$
522,382

 
$
422,008

Junior subordinated debentures
10,378

 
9,493

 
10,235

 
9,641

Total interest-bearing liabilities
532,686

 
452,290

 
532,617


431,649

Non-interest-bearing deposits
305,211

 
290,490

 
300,035

 
297,712

Other liabilities
9,495

 
5,485

 
9,262

 
6,199

Total liabilities
847,392


748,265


841,914


735,560

Total equity
113,083

 
104,001

 
112,152

 
104,083

Total liabilities and equity
$
960,475

 
$
852,266

 
$
954,066

 
$
839,643

 
 
 
 
 
 
 
 
Average Rates:
 
 
 
 
 
 
 
Loans (1)
5.96
%
 
5.21
%
 
6.01
%
 
5.36
%
Investment securities- taxable
2.73
%
 
2.14
%
 
2.78
%
 
1.95
%
Interest-bearing deposits in FRB
2.39
%
 
1.84
%
 
2.41
%
 
1.73
%
Earning assets
4.74
%
 
4.37
%
 
4.82
%
 
4.56
%
Interest bearing deposits
0.68
%
 
0.50
%
 
0.67
%
 
0.45
%
Total deposits
0.43
%
 
0.30
%
 
0.42
%
 
0.26
%
Junior subordinated debentures
4.56
%
 
4.61
%
 
4.75
%
 
4.16
%
Total interest-bearing liabilities
0.76
%
 
0.58
%
 
0.74
%
 
0.53
%
Net interest margin (2)
4.28
%
 
4.03
%
 
4.36
%
 
4.26
%

(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, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
Cash and cash equivalents
$
309,460

 
$
260,701

 
$
220,337

 
$
207,300

 
$
191,128

Investment securities
63,632

 
66,604

 
70,085

 
65,727

 
60,383

Loans
572,810

 
579,617

 
587,814

 
577,598

 
574,351

Allowance for credit losses
(8,452
)
 
(8,417
)
 
(8,395
)
 
(8,798
)
 
(8,425
)
Net loans
564,358

 
571,200

 
579,419

 
568,800

 
565,926

Other assets
69,043

 
65,535

 
63,217

 
62,201

 
62,031

Total assets
$
1,006,493

 
$
964,040

 
$
933,058

 
$
904,028

 
$
879,468

 
 
 
 
 
 
 
 
 
 
Non-interest-bearing
$
304,172

 
$
300,476

 
$
292,720

 
$
315,213

 
$
281,686

Interest-bearing
566,743

 
531,101

 
512,923

 
463,670

 
475,277

Total deposits
870,915

 
831,577

 
805,643

 
778,883

 
756,963

Other liabilities
22,240

 
21,270

 
18,175

 
18,099

 
17,289

Total liabilities
893,155

 
852,847

 
823,818

 
796,982

 
774,252

Total shareholders' equity
113,338

 
111,193

 
109,240

 
107,046

 
105,216

Total liabilities and shareholder's equity
$
1,006,493

 
$
964,040

 
$
933,058

 
$
904,028

 
$
879,468


United Security Bancshares
 
 
 
 
 
 
 
 
Condensed - Consolidated Statements of Income (unaudited)
 
 
 
 
(in thousands)
For the Quarters Ended:
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
Total interest income
$
10,311

 
$
10,417

 
$
9,821

 
$
9,554

 
$
8,437

Total interest expense
1,008

 
957

 
876

 
691

 
659

Net interest income
9,303

 
9,460

 
8,945

 
8,863

 
7,778

Provision (recovery of provision) for credit losses
4

 
6

 
(65
)
 
(373
)
 
(1,136
)
Net interest income after provision (recovery of provision) for credit losses
9,299

 
9,454

 
9,010

 
9,236

 
8,914

 
 
 
 
 
 
 
 
 
 
Total non-interest income
1,729

 
1,523

 
1,665

 
849

 
1,169

Total non-interest expense
5,262

 
5,347

 
5,473

 
5,143

 
5,318

Income before provision for taxes
5,766

 
5,630

 
5,202

 
4,942

 
4,765

Provision for taxes on income
1,669

 
1,623

 
1,254

 
1,424

 
1,373

Net income
$
4,097

 
$
4,007

 
$
3,948

 
$
3,518

 
$
3,392













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

 
$

Real estate - mortgage

 
389

RE construction & development
11,562

 
11,663

Total nonaccrual loans
$
11,637


$
12,052

 
 
 
 
Loans past due 90 days and still accruing
341

 

Restructured loans
3,445

 
3,832

Total nonperforming loans
$
15,423

 
$
15,884

Other real estate owned
5,745

 
5,745

Total nonperforming assets
$
21,168

 
$
21,629

 
 
 
 
Nonperforming assets to total gross loans
2.69
%
 
2.70
%
Nonperforming assets to total assets
2.10
%
 
2.32
%
Allowance for credit losses to nonperforming loans
54.80
%
 
52.85
%

United Security Bancshares
 
 
 
 
 
 
 
Selected Financial Data (unaudited)
 
 
 
 
 
 
 
(dollars in thousands, except per share amounts)
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Return on average assets
1.71
 %
 
1.58
 %
 
1.71%
 
1.57%
Return on average equity
14.53
 %
 
12.95
 %
 
14.57%
 
12.69%
Net recoveries to average loans
(0.02
)%
 
(0.31
)%
 
(0.02)%
 
(0.16)%
 
 
 
 
 
 
 
 
 
June 30, 2019
 
December 31, 2018
 
 
 
 
Shares outstanding - period end
16,953,744

 
16,946,622

 
 
 
 
Book value per share

$6.69

 

$6.45

 
 
 
 
Efficiency ratio (1)
48.19
 %
 
54.34
 %
 
 
 
 
Total impaired loans

$18,054

 

$18,683

 
 
 
 
Net loan to deposit ratio
64.80
 %
 
71.92
 %
 
 
 
 
Allowance for credit losses to total loans
1.48
 %
 
1.43
 %
 
 
 
 
Total capital to risk weighted assets
 
 
 
 
 
 
 
Company
18.15
 %
 
17.80
 %
 
 
 
 
Bank
18.04
 %
 
17.70
 %
 
 
 
 
Tier 1 capital to risk-weighted assets
 
 
 
 
 
 
 
Company
16.90
 %
 
16.55
 %
 
 
 
 
Bank
16.79
 %
 
16.45
 %
 
 
 
 
Common equity tier 1 capital to risk-weighted assets
 
 
 
 
 
 
 
Company
15.47
 %
 
15.15
 %
 
 
 
 
Bank
16.79
 %
 
16.45
 %
 
 
 
 
Tier 1 capital to adjusted average assets (leverage)
 
 
 
 
 
 
 
Company
12.43
 %
 
12.15
 %
 
 
 
 
Bank
12.33
 %
 
12.16
 %
 
 
 
 
(1) Efficiency ratio is defined as total noninterest expense divided by net interest income before provision for credit losses plus total noninterest income.





United Security Bancshares
 
 
 
 
 
 
 
 
Net Income before Non-Core Reconciliation
 
 
 
 
 
 
 
 
Non-GAAP Information (dollars in thousands)
 
 
 
 
 
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
 
 
 
 
2019
 
2018
 
Change $
 
Change %
Net income
 
$
8,104

 
$
6,549

 
$
1,555

 
23.74
%
 
 
 
 
 
 
 
 
 
TRUPs (1) fair value adjustment gain (loss)
 
911

 
(661
)
 
 
 
 
Reversal of provision for credit losses (2)
 

 
1,315

 
 
 
 
 
 
911

 
654

 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax effect
 
264

 
190

 
 
 
 
Non-core items net of taxes
 
647

 
464

 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP core net income
 
$
7,457

 
$
6,085

 
$
1,372

 
22.55
%

(1)
TRUPs Fair Value Adjustment is not part of Core Income and depending upon market rates, can “add to” or “subtract from” Core Income and mask Non-GAAP Core Income change.

(2)
A reversal of provision for credit losses is not part of Non-GAAP Core Income. This reversal from the allowance for credit losses was in excess of the calculated reserve for the period. The recovery of provision for credit losses of $1,325,000 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 of $10,000. For the six months ended June 30, 2019, there was no reversal from the allowance for credit losses in excess of the calculated reserve for the period. The provision for credit losses of $10,000, as reported within the Consolidated Statements of Income, represents the provision for overdrafts.




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