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United Security Bancshares Reports 3rd Quarter 2022 Financial Results

United Security Bancshares (Nasdaq: UBFO) today announced its unaudited financial results for the nine months ended September 30, 2022. The Company recognized net income of $10.3 million, or $0.61 per basic and diluted share, for the nine months ended September 30, 2022, compared to net income of $6.7 million, or $0.40 per basic and diluted share for the nine months ended September 30, 2021.

Third Quarter 2022 Highlights (at or for the quarter ended September 30, 2022, except where noted)

  • Net income for the quarter increased 71.1% to $4.5 million, compared to $2.6 million for the quarter ended September 30, 2021, and increased 30.0% from $3.4 million for the trailing quarter ended June 30, 2022. Loan interest income increased $2.4 million and investment securities income increased $672,000 as a result of growth in loan and investment securities portfolio balances and increases in interest rates, when compared to the third quarter of 2021.
  • Total assets increased 2.9% to $1.37 billion, compared to $1.33 billion at December 31, 2021.
  • Total loans, net of unearned fees, increased to $962.2 million, compared to $871.5 million at December 31, 2021 and $950.0 million at June 30, 2022. Loan growth during the quarter is a result of organic growth in the commercial real estate segment.
  • Total investments increased 16.0% to $211.8 million, compared to $182.6 million at December 31, 2021.
  • Total deposits increased 4.4% to $1.24 billion, compared to $1.19 billion at December 31, 2021.
  • The allowance for credit losses as a percentage of gross loans decreased to 1.05%, compared to 1.07% at December 31, 2021. The decrease in the allowance for credit losses as a percentage of gross loans is primarily the result of a change in loan mix resulting from purchases of residential mortgage loans during the first quarter.
  • Net interest income before the provision for credit losses increased 36.3% to $12.7 million, compared to $9.3 million for the quarter ended September 30, 2021. For the trailing quarter ended June 30, 2022, net interest income before the provision for credit losses was $10.4 million.
  • The Company recorded a provision for credit losses of $0.6 million for the quarter ended September 30, 2022, compared to a provision of $0.5 million for the quarter ended September 30, 2021.
  • Book value per share decreased to $6.28, compared to $7.06 at December 31, 2021 primarily as a result of an increase in accumulated other comprehensive loss related to unrealized losses within the investment portfolio.
  • Net interest margin increased to 3.95% for the quarter ended September 30, 2022, compared to 3.17% and 3.38% for the quarters ended September 30, 2021 and June 30, 2022.
  • Annualized average cost of deposits was 0.22% for the quarter ended September 30, 2022, and 0.17% for the quarters ended September 30, 2021 and June 30, 2022.
  • Net charge-offs totaled $451,000 for the quarter ended September 30, 2022 , compared to net charge-offs of $509,000 for the quarter ended September 30, 2021 and net recoveries of $25,000 for the quarter ended June 30, 2022.
  • Capital position remains well-capitalized with a 9.56% Tier 1 Leverage Ratio compared to 9.79% as of December 31, 2021.
  • Annualized return on average assets ("ROAA") increased to 1.28%, compared to 0.82% and 1.03% for the quarters ended September 30, 2021 and June 30, 2022. The increase in ROAA is due to increase in net income outpacing the increase in average assets.
  • Annualized return on average equity ("ROAE") increased to 15.61%, compared to 8.62% and 12.12% for the quarters ended September 30, 2021 and June 30, 2022.

Dennis Woods, President and Chief Executive Officer, stated: "We continued our positive earnings momentum in the third quarter as we again posted increased earnings when compared to prior quarter and third quarter 2021 results. Core net income for the nine months ended September 30, 2022, which is a non-GAAP measure, grew 68% over the prior year as a result of the successful execution of our 2021 and 2022 cash deployment strategies. Our credit quality, capital, and liquidity levels remain strong and position us well for potential economic headwinds over the coming quarters."

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 Trust Preferred Securities (TRUPs) and gain or loss on sale of other real estate owned (OREO). Management believes that financial results are more comparative excluding the impact of such non-core items.

Results of Operations

Net income for the nine months ended September 30, 2022 increased 53.8% to $10.3 million, compared to the nine months ended September 30, 2021. The increase is the result of increases of $4.4 million in loan interest income and fees, $1.4 million in investment income, and a $437,000 decrease in the provision for credit losses and was partially offset by a $1.8 million increase in loss on fair value of junior subordinated debentures and increase of $1,546,000 in provision for income taxes.. ROAE for the nine months ended September 30, 2022 was 11.99%, compared to 7.55% for the nine months ended September 30, 2021. ROAA was 1.03% for the nine months ended September 30, 2022, compared to 0.75% for the nine months ended September 30, 2021.

The annualized average cost of deposits was 0.19% for the nine months ended September 30, 2022 and 0.17% for the nine months ended September 30, 2021. Average interest-bearing deposits increased 15.5% between the periods ended September 30, 2021 and 2022 from $630.8 million to $728.3 million.

Net interest income, before the provision for credit losses, for the nine months ended September 30, 2022 totaled $32.6 million, an increase of $6.3 million, or 24.0%, from the $26.3 million reported for the same period ended September 30, 2021. The impact of the Company's 2021 and 2022 cash deployment strategies, which included over $350 million in investment and mortgage loan purchases, are reflected in the increase in net interest income. The Company's net interest margin increased from 3.18% for the nine months ended September 30, 2021 to 3.48% for the nine months ended September 30, 2022. The increase in the net interest margin is due to increases in yields on investment securities, and yields on interest-bearing deposits at the Federal Reserve Bank, partially offset by increases in average deposit balances and decreases in loan yields. Loan yields decreased from 4.60% to 4.46% between the two periods. The yield on interest-bearing liabilities increased from 0.32% to 0.35% between the two periods. Included in interest income for the nine months ended September 30, 2022 were $128,000 in fees related to Small Business Administration Paycheck Protection Program loans, compared to $778,000 for the same period ended September 30, 2021.

Noninterest income for the nine months ended September 30, 2022 totaled $789,000, a decrease of $1.3 million when compared to the $2.1 million reported for the nine months ended September 30, 2021. For the nine months ended September 30, 2022, a loss on the fair value of TRUPs of $2.5 million was recorded, compared to a loss of $691,000 for the same period in 2021. The change in the fair value of TRUPs reflected in noninterest income was caused by fluctuations in the LIBOR yield curve. Generally, an increase in the three month LIBOR yield curve will result in negative fair value adjustments. Conversely, a decrease in the three month LIBOR yield curve will result in positive fair value adjustments. Customer service fees totaled $2.3 million for the nine months ended September 30, 2022 and $2.1 million for the nine months ended September 30, 2021. Also included in noninterest income for the nine months ended September 30, 2022 was $566,000 in nonrecurring income received from The Central Valley Fund II (SBIC), Limited Partnership.

For the nine months ended September 30, 2022, noninterest expense totaled $17.6 million, an increase of $272,000 compared to $17.3 million for the nine months ended September 30, 2021. On a year-over-year comparative basis, noninterest expense increased due to increases in professional fees of $433,000 and regulatory assessments of $83,000 and was partially offset by a decrease of $228,000 in the provision for unfunded loans included in other non interest expense and a decrease of $154,000 in occupancy expense.

The efficiency ratio for the nine months ended September 30, 2022 decreased to 52.1%, compared to 60.9% for the nine months ended September 30, 2021. This decrease is attributed to revenue growth, as well as the $566,000 in noninterest income from the investment in the limited partnership received during 2022.

The Company recorded an income tax provision of $4.2 million for the nine months ended September 30, 2022, compared to $2.7 million for the same period in 2021. The effective tax rate for the nine months ended September 30, 2022 was 28.87%, compared to 28.28% for the nine months ended September 30, 2021.

Quarter Ended September 30, 2022:

For the quarter ended September 30, 2022, the Company reported net income of $4.5 million and earnings per basic and diluted share of $0.26, compared to net income of $2.6 million and $0.15 per basic and diluted share for the same period ended September 30, 2021. Net income for the quarter ended June 30, 2022 was $3.4 million and $0.20 per basic and diluted share.

Net interest income, before the provision for credit losses was $12.7 million for the quarter ended September 30, 2022, representing a $3.4 million, or 36.3%, increase from the $9.3 million reported at September 30, 2021. The increase in net interest income was driven by growth in the loan and investment portfolios. The Company's net interest margin increased from 3.17% to 3.95% between the quarters ended September 30, 2021 and September 30, 2022, respectively. The increase in the net interest margin was due to increases in loan and investment balances, yields on investment securities, and yields on interest-bearing deposits at FRB, partially offset by increases in average deposit balances and decreases in loan yields. Net interest income during the quarter ended September 30, 2022 increased to $12.1 million, or 36.5%, from the $8.9 million reported during the quarter ended September 30, 2021.

Noninterest income for the quarter ended September 30, 2022 totaled $392,000, a decrease of $538,000 from the $930,000 in non-interest income reported for the quarter ended September 30, 2021. The decrease is primarily attributed to a loss of $600,000 recorded on the fair value of junior subordinated debentures for the quarter ended September 30, 2022 compared to a loss of $35,000 recorded for the quarter ended September 30, 2021. The unrealized loss on equity securities increased $135,000 between the two periods. Customer service fees increased from $745,000 for the quarter ended September 30, 2021 to $899,000 for the quarter ended September 30, 2022. Noninterest income decreased $210,000 for the quarter ended September 30, 2022 from the $602,000 reported for the quarter ended June 30, 2022. This was primarily due to the $566,000 in income received from the limited partnership during the second quarter and was partially offset by a decrease in the loss on the fair value of junior subordinated debentures of $269,000 between the two quarters.

Noninterest expense for the quarter ended September 30, 2022 totaled $6.21 million, reflecting a $47,000 increase from the $6.2 million reported for the quarter ended September 30, 2021, and a $635,000 increase from the $5.6 million reported from the quarter ended June 30, 2022. The increase between the quarters ended September 30, 2022 and 2021 resulted in part due to increases of $256,000 in professional fees and $77,000 in salaries and employee benefits, and was partially offset by a decrease of $90,000 in occupancy expense and $46,000 in regulatory assessments. The increase between the quarters ended September 30, 2022 and June 30, 2022 was primarily the result of increases of $188,000 in salaries and employee benefits and $170,000 in professional fees.

The Company recorded an income tax provision of $1.8 million for the quarter ended September 30, 2022, compared to $1.0 million for the quarter ended September 30, 2021, and $1.4 million for the quarter ended June 30, 2022. The effective tax rate for the quarter ended September 30, 2022 was 29.1%, compared to 28.5% and 28.9% for the quarters ended September 30, 2021 and June 30, 2022, respectively.

Balance Sheet Review

Total assets increased $38.3 million, or 2.9%, between December 31, 2021 and September 30, 2022. Gross loan balances grew $91.2 million and investment securities increased $29.2 million. Included in the loan growth during the year were purchases of $35.6 million in residential mortgage loans during the first quarter and organic growth in the commercial real estate, commercial and industrial, and real estate construction segments of the portfolio, partly offset by reductions in the agricultural and student loan portfolios and SBA PPP balances. Investment portfolio growth included purchases of $91.4 million in investment securities, partially offset by $44.9 million in sales of securities and $29.6 million in unrealized losses. In part, as a result of the loan and investment activity, total cash and cash equivalents decreased $93.2 million between December 31, 2021 and September 30, 2022. Unfunded loan commitments decreased from $239.1 million at December 31, 2021 to $164.0 million at September 30, 2022. OREO balances totaled $4.6 million at December 31, 2021 and September 30, 2022.

Total deposits increased $52.7 million, or 4.4%, to $1.2 billion during the nine months ended September 30, 2022. This increase was due to increases of $40.5 million in noninterest bearing deposits, $16.9 million in savings accounts, and $7.4 million in time deposits, offset by decreases of $12.0 million in NOW and money market accounts. In total, NOW, money market and savings accounts increased 0.8% to $648.6 million at September 30, 2022, compared to $643.8 million at December 31, 2021. Noninterest bearing deposits increased 8.5% to $517.2 million at September 30, 2022, compared to $476.7 million at December 31, 2021. Core deposits, which are made up of the balance of noninterest bearing deposits, NOW, money market, savings, and time deposits accounts less than $250,000, increased $52.2 million.

Shareholders’ equity at September 30, 2022 totaled $107.1 million, a decrease of $13.1 million from shareholders’ equity of $120.2 million at December 31, 2021. This decrease in equity was primarily attributed to an increase in accumulated other comprehensive loss of $18.1 million and $5.6 million in dividends paid, partially offset by $10.3 million in net income. At September 30, 2022, the accumulated other comprehensive loss totaled $19.3 million, compared to $1.2 million at December 31, 2021. The increase in the loss was primarily the result of net unrealized losses on investment securities of $20.8 million and was partially offset by a $2.1 million gain on junior subordinated debentures (TRUPs) caused by a change in market credit spreads during the nine months ended September 30, 2022. The change in unrealized loss on the investment portfolio is attributed to changes in interest rates, and not credit quality. The Company does not intend to sell and it is more likely than not that it will not be required to sell any securities that have an unrealized loss.

The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on September 27, 2022. The dividend is payable on October 25, 2022, to shareholders of record as of October 11, 2022. No assurances can be provided as to the amount and/or declaration and payment of future dividends, if any. The Company continues to be well capitalized and expects to maintain adequate capital levels.

Credit Quality

The Company recorded a provision for credit losses of $1.2 million for the nine months ended September 30, 2022, compared to a provision of $1.7 million for the nine months ended September 30, 2021. Net loan charge-offs totaled $488,000 for the nine months ended September 30, 2022, as compared to net loan charge-offs of $1,032,000 for the nine months ended September 30, 2021. The reduced provision recorded during the year is attributed to lower net charge-offs on the student loan portfolio, decreases in nonperforming assets and change in portfolio mix, partially offset by a qualitative adjustment for economic uncertainty resulting in an increase in reserves. The qualitative adjustment is attributed to higher inflation, anticipated magnitude and impact of interest rate hikes in 2022 and uncertain business conditions. For the nine months ended September 30, 2021, the provision recorded was attributed to growth of the loan portfolio, agricultural loan downgrades, and net charge-offs recognized in the student loan portfolio.

The Company's allowance for loan loss totaled 1.05% of the loan portfolio at September 30, 2022, compared to 1.07% at December 31, 2021. The decrease in the allowance for credit losses as a percentage of gross loans is primarily the result of a change in loan mix resulting from purchases of residential mortgage loans during the first quarter. The reserve required on the residential mortgage loan segment is lower than reserves required for other loan segments due to lower historical loss rates. Management considers the allowance for credit losses at September 30, 2022 to be adequate.

Non-performing assets, comprised of nonaccrual loans, troubled debt restructures (TDRs), other real estate owned through foreclosure, and loans more than 90 days past due and still accruing interest, decreased $780,000 between December 31, 2021 and September 30, 2022 to $15.9 million. Nonperforming assets as a percentage of total assets decreased from 1.25% at December 31, 2021 to 1.16% at September 30, 2022. The decrease in nonperforming assets is attributed to decreases of $453,000 in loans past due more than 90 days and $293,000 in nonaccrual loans between December 31, 2021 and September 30, 2022. OREO balances remained at $4.6 million at December 31, 2021 and September 30, 2022.

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 12 full-service branch offices in Fresno, Bakersfield, Campbell, Caruthers, Coalinga, Firebaugh, Mendota, Oakhurst, San Joaquin, and Taft, California. 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 table, 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 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 press 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) adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, inflationary pressures and labor shortages, global conflict and unrest, (2) the COVID-19 global pandemic, including the effects of the steps being taken to address the pandemic and its impact on the Company’s markets, customers and employees, (3) changes in general economic and financial market conditions, either nationally or locally, (4) interest rate policies of the Board of Governors of the Federal Reserve System, (5) changes in banking laws or regulations, (6) increased competition in the Company's markets, impacting the ability to execute its business plans, (7) loss of key personnel, (8) unanticipated credit losses, (9) drought, earthquakes or other natural disasters impacting the local economy and/or the condition of real estate collateral, (10) the impact of technological changes and the ability to develop and maintain secure and reliable electronic systems, (11) uncertainty regarding the replacement of LIBOR, and (12) 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, 2021, 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- except share data)

 

 

 

 

 

 

September 30, 2022

 

December 31, 2021

 

September 30, 2021

Assets

 

 

 

 

 

Cash and non-interest-bearing deposits in other banks

$

37,972

 

 

$

31,057

 

 

$

42,172

 

Due from Federal Reserve Bank ("FRB")

 

88,060

 

 

 

188,162

 

 

 

217,256

 

Cash and cash equivalents

 

126,032

 

 

 

219,219

 

 

 

259,428

 

Investment securities (at fair value)

 

 

 

 

 

Available-for-sale ("AFS") securities

 

208,560

 

 

 

178,902

 

 

 

161,732

 

Marketable equity securities

 

3,287

 

 

 

3,744

 

 

 

3,776

 

Total investment securities

 

211,847

 

 

 

182,646

 

 

 

165,508

 

Loans

 

960,549

 

 

 

869,314

 

 

 

807,937

 

Unearned fees and unamortized loan origination costs - net

 

1,617

 

 

 

2,219

 

 

 

1,177

 

Allowance for credit losses

 

(10,063

)

 

 

(9,333

)

 

 

(9,144

)

Net loans

 

952,103

 

 

 

862,200

 

 

 

799,970

 

 

 

 

 

 

 

Premises and equipment - net

 

8,466

 

 

 

8,950

 

 

 

9,113

 

Accrued interest receivable

 

9,485

 

 

 

7,530

 

 

 

8,246

 

Other real estate owned ("OREO")

 

4,582

 

 

 

4,582

 

 

 

4,582

 

Goodwill

 

4,488

 

 

 

4,488

 

 

 

4,488

 

Deferred tax assets - net

 

11,956

 

 

 

3,615

 

 

 

3,086

 

Cash surrender value of life insurance

 

22,680

 

 

 

22,338

 

 

 

22,043

 

Operating lease right-of-use assets

 

2,135

 

 

 

2,594

 

 

 

2,743

 

Other assets

 

15,478

 

 

 

12,782

 

 

 

13,574

 

Total assets

$

1,369,252

 

 

$

1,330,944

 

 

$

1,292,781

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

Deposits

 

 

 

 

 

Noninterest-bearing

$

517,230

 

 

$

476,749

 

 

$

455,584

 

Interest-bearing

 

723,588

 

 

 

711,357

 

 

 

695,131

 

Total deposits

 

1,240,818

 

 

 

1,188,106

 

 

 

1,150,715

 

 

 

 

 

 

 

Operating lease liabilities

 

2,245

 

 

 

2,705

 

 

 

2,852

 

Other liabilities

 

8,805

 

 

 

8,737

 

 

 

8,791

 

Junior subordinated debentures (at fair value)

 

10,305

 

 

 

11,189

 

 

 

11,295

 

Total liabilities

 

1,262,173

 

 

 

1,210,737

 

 

 

1,173,653

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

Common stock, no par value; 20,000,000 shares authorized; issued and outstanding: 17,046,676 at September 30, 2022, 17,028,239 at December 31, 2021, and 17,010,288 at September 30, 2021.

 

59,924

 

 

 

59,636

 

 

 

59,549

 

Retained earnings

 

66,465

 

 

 

61,745

 

 

 

60,247

 

Accumulated other comprehensive loss

 

(19,310

)

 

 

(1,174

)

 

 

(668

)

Total shareholders' equity

 

107,079

 

 

 

120,207

 

 

 

119,128

 

Total liabilities and shareholders' equity

$

1,369,252

 

 

$

1,330,944

 

 

$

1,292,781

 

United Security Bancshares

 

 

 

 

 

 

 

Consolidated Statements of Income (unaudited)

 

 

 

 

 

 

 

(in thousands - except share data)

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30, 2022

June 30, 2022

September 30, 2021

 

September 30, 2022

 

September 30, 2021

Interest Income:

 

 

 

 

 

 

 

Interest and fees on loans

$

11,514

 

$

9,731

 

$

9,163

 

 

$

30,363

 

 

$

25,942

 

Interest on investment securities

 

1,322

 

 

1,004

 

 

650

 

 

 

3,117

 

 

 

1,691

 

Interest on deposits in FRB

 

683

 

 

258

 

 

64

 

 

 

1,023

 

 

 

168

 

Total interest income

 

13,519

 

 

10,993

 

 

9,877

 

 

 

34,503

 

 

 

27,801

 

 

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

 

 

Interest on deposits

 

679

 

 

515

 

 

496

 

 

 

1,702

 

 

 

1,391

 

Interest on other borrowed funds

 

110

 

 

69

 

 

44

 

 

 

224

 

 

 

136

 

Total interest expense

 

789

 

 

584

 

 

540

 

 

 

1,926

 

 

 

1,527

 

Net Interest Income

 

12,730

 

 

10,409

 

 

9,337

 

 

 

32,577

 

 

 

26,274

 

Provision for Credit Losses

 

607

 

 

606

 

 

453

 

 

 

1,217

 

 

 

1,654

 

Net Interest Income after Provision for Credit Losses

 

12,123

 

 

9,803

 

 

8,884

 

 

 

31,360

 

 

 

24,620

 

 

 

 

 

 

 

 

 

Noninterest Income:

 

 

 

 

 

 

 

Customer service fees

 

899

 

 

776

 

 

745

 

 

 

2,328

 

 

 

2,094

 

Increase in cash surrender value of bank-owned life insurance

 

89

 

 

114

 

 

139

 

 

 

343

 

 

 

408

 

Unrealized loss on fair value of marketable equity securities

 

(149

)

 

(127

)

 

(14

)

 

 

(458

)

 

 

(75

)

Loss on fair value of junior subordinated debentures

 

(600

)

 

(869

)

 

(35

)

 

 

(2,469

)

 

 

(691

)

Gain on sale of investment securities

 

 

 

 

 

 

 

 

30

 

 

 

 

(Loss) gain on sale of assets

 

 

 

 

 

(5

)

 

 

 

 

 

8

 

Other

 

153

 

 

708

 

 

100

 

 

 

1,015

 

 

 

349

 

Total noninterest income

 

392

 

 

602

 

 

930

 

 

 

789

 

 

 

2,093

 

 

 

 

 

 

 

 

 

Noninterest Expense:

 

 

 

 

 

 

 

Salaries and employee benefits

 

2,965

 

 

2,777

 

 

2,888

 

 

 

8,791

 

 

 

8,804

 

Occupancy expense

 

923

 

 

849

 

 

1,013

 

 

 

2,551

 

 

 

2,705

 

Data processing

 

215

 

 

145

 

 

147

 

 

 

475

 

 

 

382

 

Professional fees

 

1,089

 

 

919

 

 

833

 

 

 

2,957

 

 

 

2,524

 

Regulatory assessments

 

212

 

 

187

 

 

258

 

 

 

630

 

 

 

547

 

Director fees

 

110

 

 

116

 

 

91

 

 

 

345

 

 

 

275

 

Correspondent bank service charges

 

23

 

 

24

 

 

22

 

 

 

74

 

 

 

65

 

Net cost on operation and sale of OREO

 

33

 

 

2

 

 

24

 

 

 

27

 

 

 

67

 

Other

 

641

 

 

557

 

 

888

 

 

 

1,755

 

 

 

1,964

 

Total noninterest expense

 

6,211

 

 

5,576

 

 

6,164

 

 

 

17,605

 

 

 

17,333

 

 

 

 

 

 

 

 

 

Income Before Provision for Taxes

 

6,304

 

 

4,829

 

 

3,650

 

 

 

14,544

 

 

 

9,380

 

Provision for Taxes on Income

 

1,837

 

 

1,394

 

 

1,039

 

 

 

4,199

 

 

 

2,653

 

Net Income

 

4,467

 

 

3,435

 

 

2,611

 

 

$

10,345

 

 

$

6,727

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$

0.26

 

$

0.20

 

$

0.15

 

 

$

0.61

 

 

$

0.40

 

Diluted earnings per common share

$

0.26

 

$

0.20

 

$

0.15

 

 

$

0.61

 

 

$

0.40

 

Weighted average basic shares for EPS

 

17,042,479

 

 

17,036,364

 

 

17,010,288

 

 

 

17,036,460

 

 

 

17,010,236

 

Weighted average diluted shares for EPS

 

17,063,947

 

 

17,057,755

 

 

17,035,533

 

 

 

17,057,638

 

 

 

17,027,671

 

 

 

 

 

 

 

 

 

United Security Bancshares

 

 

 

 

 

 

 

 

 

Average Balances and Rates (unaudited)

 

 

 

 

 

 

 

 

 

(in thousands)

Three Months Ended

 

Nine Months Ended

 

September 30, 2022

 

June 30, 2022

 

September 30, 2021

 

September 30, 2022

 

September 30, 2021

Average Balances:

 

 

 

 

 

 

 

 

 

Loans (1)

$

952,518

 

 

$

906,396

 

 

$

826,754

 

 

$

910,221

 

 

$

753,424

 

Investment securities

 

215,416

 

 

 

192,494

 

 

 

170,408

 

 

 

198,658

 

 

 

146,434

 

Interest-bearing deposits in FRB

 

111,704

 

 

 

136,898

 

 

 

172,073

 

 

 

141,708

 

 

 

203,366

 

Total interest-earning assets

 

1,279,638

 

 

 

1,235,788

 

 

 

1,169,235

 

 

 

1,250,587

 

 

 

1,103,224

 

Allowance for credit losses

 

(9,902

)

 

 

(9,302

)

 

 

(9,203

)

 

 

(9,577

)

 

 

(8,762

)

Cash and due from banks

 

37,547

 

 

 

34,904

 

 

 

44,804

 

 

 

36,581

 

 

 

44,968

 

Other real estate owned

 

4,583

 

 

 

4,579

 

 

 

4,716

 

 

 

4,582

 

 

 

4,917

 

Other non-earning assets

 

71,291

 

 

 

71,529

 

 

 

60,771

 

 

 

69,506

 

 

 

64,235

 

Total average assets

$

1,383,157

 

 

$

1,337,498

 

 

$

1,270,323

 

 

$

1,351,679

 

 

$

1,208,582

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

$

720,783

 

 

$

737,149

 

 

$

675,419

 

 

$

728,331

 

 

$

630,823

 

Junior subordinated debentures

 

10,459

 

 

 

10,863

 

 

 

11,225

 

 

 

10,824

 

 

 

11,029

 

Total interest-bearing liabilities

 

731,242

 

 

 

748,012

 

 

 

686,644

 

 

 

739,155

 

 

 

641,852

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

528,033

 

 

 

465,926

 

 

 

453,159

 

 

 

486,983

 

 

 

437,482

 

Other liabilities

 

10,054

 

 

 

9,583

 

 

 

9,968

 

 

 

9,868

 

 

 

9,789

 

Total liabilities

 

1,269,329

 

 

 

1,223,521

 

 

 

1,149,771

 

 

 

1,236,006

 

 

 

1,089,123

 

Total equity

 

113,828

 

 

 

113,977

 

 

 

120,552

 

 

 

115,673

 

 

 

119,459

 

Total liabilities and equity

$

1,383,157

 

 

$

1,337,498

 

 

$

1,270,323

 

 

$

1,351,679

 

 

$

1,208,582

 

 

 

 

 

 

 

 

 

 

 

Average Rates:

 

 

 

 

 

 

 

 

 

Loans (1)

 

4.80

%

 

 

4.31

%

 

 

4.40

%

 

 

4.46

%

 

 

4.60

%

Investment securities

 

2.43

%

 

 

2.09

%

 

 

1.51

%

 

 

2.10

%

 

 

1.54

%

Interest-bearing deposits in FRB

 

2.43

%

 

 

0.76

%

 

 

0.15

%

 

 

0.97

%

 

 

0.11

%

Earning assets

 

4.19

%

 

 

3.57

%

 

 

3.35

%

 

 

3.69

%

 

 

3.37

%

Interest bearing deposits

 

0.37

%

 

 

0.28

%

 

 

0.29

%

 

 

0.31

%

 

 

0.29

%

Total deposits

 

0.22

%

 

 

0.17

%

 

 

0.17

%

 

 

0.19

%

 

 

0.17

%

Junior subordinated debentures

 

4.17

%

 

 

2.55

%

 

 

1.56

%

 

 

2.77

%

 

 

1.65

%

Total interest-bearing liabilities

 

0.43

%

 

 

0.31

%

 

 

0.31

%

 

 

0.35

%

 

 

0.32

%

Net interest margin (2)

 

3.95

%

 

 

3.38

%

 

 

3.17

%

 

 

3.48

%

 

 

3.18

%

(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)

 

 

September 30, 2022

 

June 30, 2022

 

March 31, 2022

 

December 31, 2021

 

September 30, 2021

Cash and cash equivalents

$

126,032

 

 

$

107,246

 

 

$

224,934

 

 

$

219,219

 

 

$

259,428

 

Investment securities

 

211,847

 

 

 

215,774

 

 

 

183,527

 

 

 

182,646

 

 

 

165,508

 

Loans

 

962,166

 

 

 

949,991

 

 

 

879,379

 

 

 

871,533

 

 

 

809,114

 

Allowance for credit losses

 

(10,063

)

 

 

(9,907

)

 

 

(9,276

)

 

 

(9,333

)

 

 

(9,144

)

Net loans

 

952,103

 

 

 

940,084

 

 

 

870,103

 

 

 

862,200

 

 

 

799,970

 

Other assets

 

79,270

 

 

 

76,413

 

 

 

71,238

 

 

 

66,879

 

 

 

67,875

 

Total assets

$

1,369,252

 

 

$

1,339,517

 

 

$

1,349,802

 

 

$

1,330,944

 

 

$

1,292,781

 

 

 

 

 

 

 

 

 

 

 

Non-interest-bearing

$

517,230

 

 

$

473,013

 

 

$

465,043

 

 

$

476,749

 

 

$

455,584

 

Interest-bearing

 

723,588

 

 

 

735,181

 

 

 

749,289

 

 

 

711,357

 

 

 

695,131

 

Total deposits

 

1,240,818

 

 

 

1,208,194

 

 

 

1,214,332

 

 

 

1,188,106

 

 

 

1,150,715

 

Other liabilities

 

21,355

 

 

 

21,322

 

 

 

21,896

 

 

 

22,631

 

 

 

22,938

 

Total liabilities

 

1,262,173

 

 

 

1,229,516

 

 

 

1,236,228

 

 

 

1,210,737

 

 

 

1,173,653

 

Total shareholders' equity

 

107,079

 

 

 

110,001

 

 

 

113,574

 

 

 

120,207

 

 

 

119,128

 

Total liabilities and shareholder's equity

$

1,369,252

 

 

$

1,339,517

 

 

$

1,349,802

 

 

$

1,330,944

 

 

$

1,292,781

 

United Security Bancshares

 

 

 

 

 

 

 

 

Condensed - Consolidated Statements of Income (unaudited)

 

 

 

 

(in thousands)

For the Quarters Ended:

 

September 30, 2022

 

June 30, 2022

 

March 31, 2022

 

December 31, 2021

 

September 30, 2021

Total interest income

$

13,519

 

$

10,993

 

$

9,991

 

 

$

9,930

 

$

9,877

Total interest expense

 

789

 

 

584

 

 

553

 

 

 

552

 

 

540

Net interest income

 

12,730

 

 

10,409

 

 

9,438

 

 

 

9,378

 

 

9,337

Provision for credit losses

 

607

 

 

606

 

 

5

 

 

 

453

 

 

453

Net interest income after provision for credit losses

 

12,123

 

 

9,803

 

 

9,433

 

 

 

8,925

 

 

8,884

 

 

 

 

 

 

 

 

 

 

Total non-interest income (loss)

 

392

 

 

602

 

 

(206

)

 

 

1,291

 

 

930

Total non-interest expense

 

6,211

 

 

5,576

 

 

5,816

 

 

 

6,282

 

 

6,164

Income before provision for taxes

 

6,304

 

 

4,829

 

 

3,411

 

 

 

3,934

 

 

3,650

Provision for taxes on income

 

1,837

 

 

1,394

 

 

968

 

 

 

564

 

 

1,039

Net income

$

4,467

 

$

3,435

 

$

2,443

 

 

$

3,370

 

$

2,611

United Security Bancshares

 

 

 

 

 

Nonperforming Assets (unaudited)

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

September 30, 2022

 

December 31, 2021

 

September 30, 2021

Real estate - construction & development

$

11,015

 

 

$

11,226

 

 

 

11,273

 

Agricultural

 

130

 

 

 

212

 

 

 

278

 

Total nonaccrual loans

$

11,145

 

 

$

11,438

 

 

$

11,551

 

 

 

 

 

 

 

Loans past due 90 days and still accruing

 

 

 

 

453

 

 

 

318

 

Restructured loans

 

142

 

 

 

176

 

 

 

198

 

Total nonperforming loans

$

11,287

 

 

$

12,067

 

 

$

12,067

 

Other real estate owned

 

4,582

 

 

 

4,582

 

 

 

4,582

 

Total nonperforming assets

$

15,869

 

 

$

16,649

 

 

$

16,649

 

 

 

 

 

 

 

Nonperforming loans to total gross loans

 

1.18

%

 

 

1.39

%

 

 

1.49

%

Nonperforming assets to total assets

 

1.16

%

 

 

1.25

%

 

 

1.29

%

Allowance for credit losses to nonperforming loans

 

89.16

%

 

 

77.34

%

 

 

75.78

%

United Security Bancshares

 

 

 

 

 

 

 

Selected Financial Data (unaudited)

 

 

 

 

 

 

 

(dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine months ended September 30,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

Return on average assets

 

1.28

%

 

 

0.82

%

 

1.03

%

 

0.75

%

Return on average equity

 

15.61

%

 

 

8.62

%

 

11.99

%

 

7.55

%

Annualized net charge-off (recoveries) to average loans

 

0.19

%

 

 

0.24

%

 

0.07

%

 

0.18

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2022

 

December 31, 2021

 

 

 

 

Shares outstanding - period end

 

17,046,676

 

 

 

17,028,239

 

 

 

 

 

Book value per share

$

6.28

 

 

$

7.06

 

 

 

 

 

Efficiency ratio (1)

 

52.10

%

 

 

58.89

%

 

 

 

 

Total impaired loans

$

11,829

 

 

$

12,034

 

 

 

 

 

Net loan to deposit ratio

 

76.73

%

 

 

72.57

%

 

 

 

 

Allowance for credit losses to total loans

 

1.05

%

 

 

1.07

%

 

 

 

 

Tier 1 capital to adjusted average assets (leverage)

 

 

 

 

 

 

 

Company

 

9.56

%

 

 

9.79

%

 

 

 

 

Bank

 

9.60

%

 

 

9.64

%

 

 

 

 

(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)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

2022

 

2021

 

Change $

 

Change %

Net income

 

$

10,345

 

 

$

6,727

 

 

$

3,618

 

53.8

%

 

 

 

 

 

 

 

 

 

Junior subordinated debenture (1) fair value adjustment

 

 

(2,469

)

 

 

(691

)

 

 

 

 

Loss on sale of OREO (2)

 

 

 

 

 

(1

)

 

 

 

 

Total non-core items

 

 

(2,469

)

 

 

(692

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax effect

 

 

716

 

 

 

201

 

 

 

 

 

Non-core items net of taxes

 

 

(1,753

)

 

 

(491

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP core net income

 

$

12,098

 

 

$

7,218

 

 

$

4,880

 

67.6

%

(1)

Junior subordinated debenture 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)

Write down or loss on sale of OREO is considered a one-time event and therefore is not part of core income.

 

Contacts

Dennis Woods, President and CEO

559-248-4928

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