Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries United Security Bancshares reports 1st quarter net income of $1.4 million By: United Security Bancshares via Business Wire April 21, 2021 at 17:45 PM EDT United Security Bancshares (Nasdaq: UBFO) today announced its unaudited financial results for the quarter ended March 31, 2021. The Company recognized net income of $1,411,000, or $0.08 per basic and diluted share for the quarter ended March 31, 2021, compared to net income of $2,754,000, or $0.16 per basic and diluted share for the quarter ended March 31, 2020. First Quarter 2021 Highlights (at or for the quarter ended March 31, 2021, except where noted) Net income for the quarter was $1.41 million, representing a $1.34 million or 48.77% decrease from $2.75 million for the quarter ended March 31, 2020. The decrease is primarily the result of the change in LIBOR rates between periods, causing a $1.03 million loss for the quarter ended March 31, 2021 on the fair value of junior subordinated debentures, compared to a $1.50 million gain for the quarter ended March 31, 2020. Total assets increased 8.63% to $1.19 billion, compared to $1.09 billion at December 31, 2020. Total loans, net of unearned fees, increased 3.08% to $674.49 million, compared to $654.35 million at December 31, 2020. Total deposits increased 9.99% to $1.05 billion, compared to $952.65 million at December 31, 2020. The allowance for credit losses as a percentage of gross loans decreased to 1.27%, compared to 1.30% at December 31, 2020. The provision for credit losses totaled $375,000 for the quarter, compared to $1,707,000 for the quarter ended March 31, 2020. Net interest income after the provision for credit losses was $7,672,000 for the quarter ended March 31, 2021, compared to $7,026,000 for the quarter ended March 31, 2020. Book value per share decreased to $6.90, compared to $6.93 at December 31, 2020. Net interest margin decreased to 3.16% from 4.00% for the quarter ended March 31, 2020. Annualized average cost of deposits decreased to 0.17% from 0.33% for the quarter ended March 31, 2020. Net charge-offs totaled $348,000, compared to net charge-offs of $495,000 for the quarter ended March 31, 2020. Capital positions remain well-capitalized with a 11.02% Tier 1 Leverage Ratio compared to 11.37% as of December 31, 2020. Annualized return on average assets ("ROAA") was 0.51%, compared to 1.16% for the quarter ended March 31, 2020. Annualized return on average equity ("ROAE") was 4.82%, compared to 9.37% for the quarter ended March 31, 2020. "Over the last year, as our customers and communities struggled with the global COVID-19 pandemic, the Company maintained a large cash reserve to support unanticipated business impacts, credit challenges, and to fund SBA PPP loans. As we are now seeing increases in vaccine availability, along with an improving employment and business environment, we have begun to execute on our 2021 strategy. The plan includes deploying $200 million of excess cash balances into the loan and investment portfolios. We anticipate the $200 million rebalancing will be completed by the end of the second quarter," stated Dennis Woods, President and CEO of United Security Bancshares and United Security Bank. Woods added, "We recognized $1.4 million in net income during the first quarter of 2021, compared to $2.8 million during the same period in 2020. The decrease is largely driven by the change in fair value on our junior subordinated debt. Our core net income, a non-GAAP measure, which excludes the fair value adjustment on junior subordinated debt and gain/loss on OREO, increased 21% to $2.1 million between the first quarter 2020 and 2021." 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 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 quarter ended March 31, 2021 decreased $1,343,000 when compared to the quarter ended March 31, 2020. The decrease is the result of the change in the fair value of junior subordinated debentures caused by a change in LIBOR rates. ROAE for the quarter ended March 31, 2021 was 4.82%, compared to 9.37% for the quarter ended March 31, 2020. ROAA was 0.51% for the quarter ended March 31, 2021, compared to 1.16% for the quarter ended March 31, 2020. The annualized average cost of deposits was 0.17% for the quarter ended March 31, 2021, a decrease from 0.33% for the quarter ended March 31, 2020. The decrease in the cost of deposits is primarily attributed to reductions on deposit rates made in 2020. Average interest-bearing deposits increased 15.47% between the periods ended March 31, 2020 and 2021 from $501,026,000 to $578,513,000. Net interest income before the provision for credit losses was $8,047,000 for the quarter ended March 31, 2021, representing a $686,000 or 7.86% decrease compared to the same period ended March 31, 2020. The Company's net interest margin decreased from 4.00% to 3.16% between the quarters ended March 31, 2020 and March 31, 2021. The reduction in net interest margin is driven by the reduction in yields on all interest earning assets, partially offset by a decrease in interest expense on deposits. Noninterest income for the quarter ended March 31, 2021 totaled a $159,000 loss, reflecting a decrease of $2,739,000 from the $2,580,000 in non-interest income reported for the quarter ended March 31, 2020. The decrease is attributed to a $2,531,000 decrease in the fair value of TRUPs, resulting in a $1,033,000 loss recorded for the quarter ended March 31, 2021 compared to a $1,498,000 gain recorded for the quarter ended March 31, 2020. The change in the fair value of TRUPs reflected in noninterest income was caused by an increase in the LIBOR yield curve. Noninterest expense for the quarter ended March 31, 2021 totaled $5,565,000, a decrease of $179,000 as compared to $5,744,000 reported for the quarter ended March 31, 2020. On a quarter-over-quarter comparative basis, non-interest expense decreased due to a $128,000 decrease in OREO cost and a $113,000 decrease in other expense, partially offset by an increase of $81,000 in regulatory assessments. The decrease in other expense is related to decreases in armored card services and donations. The efficiency ratio for the quarter ended March 31, 2021 increased to 70.55%, compared to 50.77% for the quarter ended March 31, 2020. The increase is attributed to the decrease in total noninterest income. The Company recorded an income tax provision of $537,000 for the quarter ended March 31, 2021, compared to $1,108,000 for the same period in 2020. The effective tax rate for the quarter ended March 31, 2021 was 27.57%, compared to 28.69% for the quarter ended March 31, 2020. Balance Sheet Review Total assets increased $94,282,000, or 8.63%, between March 31, 2021 and December 31, 2020, due primarily to increases of $20,283,000 in gross loan balances and $61,148,000 in investment securities. Total cash and cash equivalents increased $13,840,000 between December 31, 2020 and March 31, 2021. Unfunded loan commitments increased from $216,799,000 at December 31, 2020 to $222,343,000 at March 31, 2021. OREO balances decreased from $5,004,000 at December 31, 2020 to $4,841,000 at March 31, 2021. The reduction is attributed to the receipt of partial proceeds on the sale of one OREO property during the quarter. Total deposits increased $95,130,000, or 9.99%, to $1,047,781,000 during the quarter ended March 31, 2021. This increase was due to increases of $37,108,000 in noninterest bearing deposits, $49,261,000 in NOW and money market accounts, $7,409,000 in savings accounts, and an increase of $1,352,000 in time deposits. In total, NOW, money market and savings accounts increased 11.35% to $555,905,000 at March 31, 2021, compared to $499,235,000 at December 31, 2020. Noninterest bearing deposits increased 9.47% to $429,005,000 at March 31, 2021, compared to $391,897,000 at December 31, 2020. 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 $95,100,000. Shareholders’ equity at March 31, 2021 was $117,333,000, a decrease of $474,000 from shareholders’ equity of $117,807,000 at December 31, 2020. This decrease in equity was the result of cash dividends, and the change in accumulated other comprehensive loss for the quarter. At March 31, 2021 there was an accumulated other comprehensive loss of $783,000, as compared to an accumulated other comprehensive loss of $728,000 at December 31, 2020. The change from December 31, 2020 to March 31, 2021 was the result of unrealized loss on available for sale securities, partially offset by gains on junior subordinated debentures (TRUPs) caused by a change in market credit spreads during the period. The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on March 23, 2021. The dividend was payable on April 16, 2021, to shareholders of record as of April 6, 2021. 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 recorded a provision for credit losses of $375,000 for the quarter ended March 31, 2021, compared to a provision of $1,707,000 for the quarter ended March 31, 2020. Net loan charge-offs totaled $348,000 for the quarter ended March 31, 2021, as compared to net loan charge-offs of $495,000 for the quarter ended March 31, 2020. The provision recorded during the year is attributed to growth of the loan portfolio and charge-offs related to the student loan portfolio, partially offset by an adjustment related to improved economic conditions. For the quarter ended March 31, 2020 the provision recorded was attributed to growth of the loan portfolio, net charge-offs, and uncertainty related to COVID-19. In 2020, the Company had executed 23 payment deferrals or modifications on outstanding loan balances of $69,814,000 in connection with the COVID-19 relief provided by the CARES Act and interagency guidance issued in March 2020. The Company has not recognized any losses on the loan modifications and as of March 31, 2021, there were no modifications outstanding. The Company's allowance for loan loss totaled 1.27% of the loan portfolio at March 31, 2021, compared to 1.30% at December 31, 2020. Excluding the SBA PPP loans, which are fully government guaranteed, the allowance for loan loss totaled 1.29% of the loan portfolio at March 31, 2021. Non-performing assets, comprised of nonaccrual loans, troubled debt restructures (TDRs), other real estate owned through foreclosure (OREO), and loans more than 90 days past due and still accruing interest, decreased $658,000 between December 31, 2020 and March 31, 2021 to $16,890,000. Nonperforming assets as a percentage of total assets decreased from 1.61% at December 31, 2020 to 1.42% at March 31, 2021. The decrease in nonperforming assets is primarily attributed to the reduction in past due loans more than 90 days and still accruing interest from $513,000 at December 31, 2020 to $234,000 at March 31, 2021. Additionally, restructured loans decreased $215,000 between December 31, 2020 and March 31, 2021, and nonaccrual loans decreased $108,000 between December 31, 2020 and March 31, 2021 to $11,388,000. OREO balances decreased from $5,004,000 at December 31, 2020 to $4,841,000 at March 31, 2021. 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 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 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) the effects of the COVID-19 pandemic, or other similar outbreaks, including the effects of the steps being taken to address the pandemic and their impact on the Company’s markets, customers and employees, (2) changes in general economic and financial market conditions, either nationally or locally, (3) changes in interest rates, (4) changes in banking laws or regulations, (5) increased competition in the Company's markets, impacting the ability to execute its business plans, (6) loss of key personnel, (7) unanticipated credit losses, (8) drought, earthquakes or other natural disasters impacting the local economy and/or the condition of real estate collateral, (9) the impact of technological changes and the ability to develop and maintain secure and reliable electronic systems, (10) uncertainty regarding the replacement of LIBOR, and (11) 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, 2020, 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) March 31, 2021 December 31, 2020 Assets Cash and non-interest-bearing deposits in other banks $ 34,257 $ 29,490 Due from Federal Reserve Bank ("FRB") 273,652 264,579 Cash and cash equivalents 307,909 294,069 Investment securities (at fair value) Available-for-sale ("AFS") securities 143,549 82,341 Marketable equity securities 3,791 3,851 Total investment securities 147,340 86,192 Loans 675,694 655,411 Unearned fees and unamortized loan origination costs - net (1,205 ) (1,064 ) Allowance for credit losses (8,549 ) (8,522 ) Net loans 665,940 645,825 Premises and equipment - net 8,895 9,110 Accrued interest receivable 8,582 8,164 Other real estate owned 4,841 5,004 Goodwill 4,488 4,488 Deferred tax assets - net 3,235 2,907 Cash surrender value of life insurance 21,766 20,715 Operating lease right-of-use assets 2,733 2,864 Other assets 11,207 13,316 Total assets $ 1,186,936 $ 1,092,654 Liabilities and Shareholders' Equity Deposits Non-interest-bearing $ 429,005 $ 391,897 Interest-bearing 618,776 560,754 Total deposits 1,047,781 952,651 Operating lease liabilities 2,838 2,967 Other liabilities 8,001 8,305 Junior subordinated debentures (at fair value) 10,983 10,924 Total liabilities 1,069,603 974,847 Shareholders' Equity Common stock, no par value; 20,000,000 shares authorized; issued and outstanding: 17,010,288 at March 31, 2021 and 17,009,883 at December 31, 2020 59,443 59,397 Retained earnings 58,673 59,138 Accumulated other comprehensive loss (783 ) (728 ) Total shareholders' equity 117,333 117,807 Total liabilities and shareholders' equity $ 1,186,936 $ 1,092,654 United Security Bancshares Consolidated Statements of Income (unaudited) (in thousands) Three Months Ended March 31, 2021 2020 Interest Income: Interest and fees on loans $ 8,071 $ 8,499 Interest on investment securities 387 428 Interest on deposits in FRB 62 567 Total interest income 8,520 9,494 Interest Expense: Interest on deposits 427 664 Interest on other borrowed funds 46 97 Total interest expense 473 761 Net Interest Income 8,047 8,733 Provision for Credit Losses 375 1,707 Net Interest Income after Provision for Credit Losses 7,672 7,026 Noninterest Income: Customer service fees 656 728 Increase in cash surrender value of bank-owned life insurance 132 131 Unrealized (loss) gain on fair value of marketable equity securities (60) 15 (Loss) gain on fair value of junior subordinated debentures (1,033) 1,498 Gain on sale of assets 13 — Other 133 208 Total noninterest (loss) income (159) 2,580 Noninterest Expense: Salaries and employee benefits 3,024 2,995 Occupancy expense 856 853 Data processing 87 112 Professional fees 827 855 Regulatory assessments 166 85 Director fees 92 94 Correspondent bank service charges 19 15 Net cost on operation and sale of OREO 25 153 Other 469 582 Total noninterest expense 5,565 5,744 Income Before Provision for Taxes 1,948 3,862 Provision for Taxes on Income 537 1,108 Net Income $ 1,411 $ 2,754 Basic earnings per common share $ 0.08 $ 0.16 Diluted earnings per common share $ 0.08 $ 0.16 Weighted average basic shares for EPS 17,010,131 16,974,100 Weighted average diluted shares for EPS 17,026,752 16,994,727 United Security Bancshares Average Balances and Rates (unaudited) (in thousands) Three Months Ended March 31, 2021 2020 Average Balances: Loans (1) $ 669,723 $ 603,060 Investment securities 103,236 82,101 Interest-bearing deposits in FRB 258,918 178,748 Total interest-earning assets 1,031,877 863,909 Allowance for credit losses (8,507) (7,905) Cash and due from banks 41,650 29,282 Other real estate owned 5,074 6,628 Other non-earning assets 60,641 61,810 Total average assets $ 1,130,735 $ 953,724 Interest-bearing deposits $ 578,513 $ 501,026 Junior subordinated debentures 10,896 10,714 Total interest-bearing liabilities 589,409 511,740 Non-interest-bearing deposits 412,455 314,389 Other liabilities 9,914 9,679 Total liabilities 1,011,778 835,808 Total equity 118,957 117,916 Total liabilities and equity $ 1,130,735 $ 953,724 Average Rates: Loans (1) 4.89 % 5.57 % Investment securities 1.52 % 2.10 % Interest-bearing deposits in FRB 0.10 % 1.28 % Earning assets 3.35 % 4.35 % Interest bearing deposits 0.30 % 0.53 % Total deposits 0.17 % 0.33 % Junior subordinated debentures 1.71 % 3.64 % Total interest-bearing liabilities 0.33 % 0.60 % Net interest margin (2) 3.16 % 4.00 % (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) March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 Cash and cash equivalents $ 307,909 $ 294,069 $ 323,332 $ 229,541 $ 199,853 Investment securities 147,340 86,192 91,782 96,739 97,486 Loans 674,489 654,347 660,444 648,650 623,686 Allowance for credit losses (8,549) (8,522) (8,708) (8,862) (9,120) Net loans 665,940 645,825 651,736 639,788 614,566 Other assets 65,747 66,568 67,097 65,305 65,341 Total assets $ 1,186,936 $ 1,092,654 $ 1,133,947 $ 1,031,373 $ 977,246 Non-interest-bearing $ 429,005 $ 391,897 $ 430,028 $ 362,010 $ 324,167 Interest-bearing 618,776 560,754 564,755 531,102 516,270 Total deposits 1,047,781 952,651 994,783 893,112 840,437 Other liabilities 21,822 22,196 21,111 20,801 19,399 Total liabilities 1,069,603 974,847 1,015,894 913,913 859,836 Total shareholders' equity 117,333 117,807 118,053 117,460 117,410 Total liabilities and shareholder's equity $ 1,186,936 $ 1,092,654 $ 1,133,947 $ 1,031,373 $ 977,246 United Security Bancshares Condensed - Consolidated Statements of Income (unaudited) (in thousands) For the Quarters Ended: March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 Total interest income $ 8,520 $ 8,496 $ 7,968 $ 8,107 $ 9,341 Total interest expense 473 499 500 530 761 Net interest income 8,047 7,997 7,468 7,577 8,580 Provision for credit losses 375 631 4 428 1,707 Net interest income after provision for credit losses 7,672 7,366 7,464 7,149 6,873 Total non-interest (loss) income (159) 467 911 1,214 2,580 Total non-interest expense 5,565 5,260 5,210 5,553 5,591 Income before provision for taxes 1,948 2,573 3,165 2,810 3,862 Provision for taxes on income 537 651 894 798 1,108 Net income $ 1,411 $ 1,922 $ 2,271 $ 2,012 $ 2,754 United Security Bancshares Nonperforming Assets (unaudited) (dollars in thousands) March 31, 2021 December 31, 2020 RE construction & development 11,006 11,057 Agricultural 382 439 Total nonaccrual loans $ 11,388 $ 11,496 Loans past due 90 days and still accruing 234 513 Restructured loans 427 535 Total nonperforming loans $ 12,049 $ 12,544 Other real estate owned 4,841 5,004 Total nonperforming assets $ 16,890 $ 17,548 Nonperforming loans to total gross loans 1.78 % 1.91 % Nonperforming assets to total assets 1.42 % 1.61 % Allowance for credit losses to nonperforming loans 70.95 % 67.94 % United Security Bancshares Selected Financial Data (unaudited) (dollars in thousands, except per share amounts) Three Months Ended March 31, 2021 2020 Return on average assets 0.51 % 1.16 % Return on average equity 4.82 % 9.37 % Net charge-off to average loans 0.21 % 0.33 % March 31, 2021 December 31, 2020 Shares outstanding - period end 17,010,288 17,009,883 Book value per share $6.90 $6.93 Efficiency ratio (1) 70.55 % 58.74 % Total impaired loans $13,071 $13,376 Net loan to deposit ratio 63.56 % 67.79 % Allowance for credit losses to total loans 1.27 % 1.30 % Tier 1 capital to adjusted average assets (leverage) Company 11.02 % 11.37 % Bank 10.88 % 11.17 % (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) Three Months Ended March 31, 2021 2020 Change $ Change % Net income $ 1,411 $ 2,754 $ (1,343) (48.77) % Junior subordinated debenture (1) fair value adjustment (1,033) 1,498 Loss on sale of OREO (2) — (113) (1,033) 1,385 Income tax effect 300 (402) Non-core items net of taxes (733) 983 Non-GAAP core net income $ 2,144 $ 1,771 $ 373 21.06 % (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 and loss on sale of OREO are considered one-time events and therefore are not part of Core Income. View source version on businesswire.com: https://www.businesswire.com/news/home/20210421006070/en/Contacts Dennis Woods, President and CEO 559-248-4928 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
United Security Bancshares reports 1st quarter net income of $1.4 million By: United Security Bancshares via Business Wire April 21, 2021 at 17:45 PM EDT United Security Bancshares (Nasdaq: UBFO) today announced its unaudited financial results for the quarter ended March 31, 2021. The Company recognized net income of $1,411,000, or $0.08 per basic and diluted share for the quarter ended March 31, 2021, compared to net income of $2,754,000, or $0.16 per basic and diluted share for the quarter ended March 31, 2020. First Quarter 2021 Highlights (at or for the quarter ended March 31, 2021, except where noted) Net income for the quarter was $1.41 million, representing a $1.34 million or 48.77% decrease from $2.75 million for the quarter ended March 31, 2020. The decrease is primarily the result of the change in LIBOR rates between periods, causing a $1.03 million loss for the quarter ended March 31, 2021 on the fair value of junior subordinated debentures, compared to a $1.50 million gain for the quarter ended March 31, 2020. Total assets increased 8.63% to $1.19 billion, compared to $1.09 billion at December 31, 2020. Total loans, net of unearned fees, increased 3.08% to $674.49 million, compared to $654.35 million at December 31, 2020. Total deposits increased 9.99% to $1.05 billion, compared to $952.65 million at December 31, 2020. The allowance for credit losses as a percentage of gross loans decreased to 1.27%, compared to 1.30% at December 31, 2020. The provision for credit losses totaled $375,000 for the quarter, compared to $1,707,000 for the quarter ended March 31, 2020. Net interest income after the provision for credit losses was $7,672,000 for the quarter ended March 31, 2021, compared to $7,026,000 for the quarter ended March 31, 2020. Book value per share decreased to $6.90, compared to $6.93 at December 31, 2020. Net interest margin decreased to 3.16% from 4.00% for the quarter ended March 31, 2020. Annualized average cost of deposits decreased to 0.17% from 0.33% for the quarter ended March 31, 2020. Net charge-offs totaled $348,000, compared to net charge-offs of $495,000 for the quarter ended March 31, 2020. Capital positions remain well-capitalized with a 11.02% Tier 1 Leverage Ratio compared to 11.37% as of December 31, 2020. Annualized return on average assets ("ROAA") was 0.51%, compared to 1.16% for the quarter ended March 31, 2020. Annualized return on average equity ("ROAE") was 4.82%, compared to 9.37% for the quarter ended March 31, 2020. "Over the last year, as our customers and communities struggled with the global COVID-19 pandemic, the Company maintained a large cash reserve to support unanticipated business impacts, credit challenges, and to fund SBA PPP loans. As we are now seeing increases in vaccine availability, along with an improving employment and business environment, we have begun to execute on our 2021 strategy. The plan includes deploying $200 million of excess cash balances into the loan and investment portfolios. We anticipate the $200 million rebalancing will be completed by the end of the second quarter," stated Dennis Woods, President and CEO of United Security Bancshares and United Security Bank. Woods added, "We recognized $1.4 million in net income during the first quarter of 2021, compared to $2.8 million during the same period in 2020. The decrease is largely driven by the change in fair value on our junior subordinated debt. Our core net income, a non-GAAP measure, which excludes the fair value adjustment on junior subordinated debt and gain/loss on OREO, increased 21% to $2.1 million between the first quarter 2020 and 2021." 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 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 quarter ended March 31, 2021 decreased $1,343,000 when compared to the quarter ended March 31, 2020. The decrease is the result of the change in the fair value of junior subordinated debentures caused by a change in LIBOR rates. ROAE for the quarter ended March 31, 2021 was 4.82%, compared to 9.37% for the quarter ended March 31, 2020. ROAA was 0.51% for the quarter ended March 31, 2021, compared to 1.16% for the quarter ended March 31, 2020. The annualized average cost of deposits was 0.17% for the quarter ended March 31, 2021, a decrease from 0.33% for the quarter ended March 31, 2020. The decrease in the cost of deposits is primarily attributed to reductions on deposit rates made in 2020. Average interest-bearing deposits increased 15.47% between the periods ended March 31, 2020 and 2021 from $501,026,000 to $578,513,000. Net interest income before the provision for credit losses was $8,047,000 for the quarter ended March 31, 2021, representing a $686,000 or 7.86% decrease compared to the same period ended March 31, 2020. The Company's net interest margin decreased from 4.00% to 3.16% between the quarters ended March 31, 2020 and March 31, 2021. The reduction in net interest margin is driven by the reduction in yields on all interest earning assets, partially offset by a decrease in interest expense on deposits. Noninterest income for the quarter ended March 31, 2021 totaled a $159,000 loss, reflecting a decrease of $2,739,000 from the $2,580,000 in non-interest income reported for the quarter ended March 31, 2020. The decrease is attributed to a $2,531,000 decrease in the fair value of TRUPs, resulting in a $1,033,000 loss recorded for the quarter ended March 31, 2021 compared to a $1,498,000 gain recorded for the quarter ended March 31, 2020. The change in the fair value of TRUPs reflected in noninterest income was caused by an increase in the LIBOR yield curve. Noninterest expense for the quarter ended March 31, 2021 totaled $5,565,000, a decrease of $179,000 as compared to $5,744,000 reported for the quarter ended March 31, 2020. On a quarter-over-quarter comparative basis, non-interest expense decreased due to a $128,000 decrease in OREO cost and a $113,000 decrease in other expense, partially offset by an increase of $81,000 in regulatory assessments. The decrease in other expense is related to decreases in armored card services and donations. The efficiency ratio for the quarter ended March 31, 2021 increased to 70.55%, compared to 50.77% for the quarter ended March 31, 2020. The increase is attributed to the decrease in total noninterest income. The Company recorded an income tax provision of $537,000 for the quarter ended March 31, 2021, compared to $1,108,000 for the same period in 2020. The effective tax rate for the quarter ended March 31, 2021 was 27.57%, compared to 28.69% for the quarter ended March 31, 2020. Balance Sheet Review Total assets increased $94,282,000, or 8.63%, between March 31, 2021 and December 31, 2020, due primarily to increases of $20,283,000 in gross loan balances and $61,148,000 in investment securities. Total cash and cash equivalents increased $13,840,000 between December 31, 2020 and March 31, 2021. Unfunded loan commitments increased from $216,799,000 at December 31, 2020 to $222,343,000 at March 31, 2021. OREO balances decreased from $5,004,000 at December 31, 2020 to $4,841,000 at March 31, 2021. The reduction is attributed to the receipt of partial proceeds on the sale of one OREO property during the quarter. Total deposits increased $95,130,000, or 9.99%, to $1,047,781,000 during the quarter ended March 31, 2021. This increase was due to increases of $37,108,000 in noninterest bearing deposits, $49,261,000 in NOW and money market accounts, $7,409,000 in savings accounts, and an increase of $1,352,000 in time deposits. In total, NOW, money market and savings accounts increased 11.35% to $555,905,000 at March 31, 2021, compared to $499,235,000 at December 31, 2020. Noninterest bearing deposits increased 9.47% to $429,005,000 at March 31, 2021, compared to $391,897,000 at December 31, 2020. 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 $95,100,000. Shareholders’ equity at March 31, 2021 was $117,333,000, a decrease of $474,000 from shareholders’ equity of $117,807,000 at December 31, 2020. This decrease in equity was the result of cash dividends, and the change in accumulated other comprehensive loss for the quarter. At March 31, 2021 there was an accumulated other comprehensive loss of $783,000, as compared to an accumulated other comprehensive loss of $728,000 at December 31, 2020. The change from December 31, 2020 to March 31, 2021 was the result of unrealized loss on available for sale securities, partially offset by gains on junior subordinated debentures (TRUPs) caused by a change in market credit spreads during the period. The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on March 23, 2021. The dividend was payable on April 16, 2021, to shareholders of record as of April 6, 2021. 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 recorded a provision for credit losses of $375,000 for the quarter ended March 31, 2021, compared to a provision of $1,707,000 for the quarter ended March 31, 2020. Net loan charge-offs totaled $348,000 for the quarter ended March 31, 2021, as compared to net loan charge-offs of $495,000 for the quarter ended March 31, 2020. The provision recorded during the year is attributed to growth of the loan portfolio and charge-offs related to the student loan portfolio, partially offset by an adjustment related to improved economic conditions. For the quarter ended March 31, 2020 the provision recorded was attributed to growth of the loan portfolio, net charge-offs, and uncertainty related to COVID-19. In 2020, the Company had executed 23 payment deferrals or modifications on outstanding loan balances of $69,814,000 in connection with the COVID-19 relief provided by the CARES Act and interagency guidance issued in March 2020. The Company has not recognized any losses on the loan modifications and as of March 31, 2021, there were no modifications outstanding. The Company's allowance for loan loss totaled 1.27% of the loan portfolio at March 31, 2021, compared to 1.30% at December 31, 2020. Excluding the SBA PPP loans, which are fully government guaranteed, the allowance for loan loss totaled 1.29% of the loan portfolio at March 31, 2021. Non-performing assets, comprised of nonaccrual loans, troubled debt restructures (TDRs), other real estate owned through foreclosure (OREO), and loans more than 90 days past due and still accruing interest, decreased $658,000 between December 31, 2020 and March 31, 2021 to $16,890,000. Nonperforming assets as a percentage of total assets decreased from 1.61% at December 31, 2020 to 1.42% at March 31, 2021. The decrease in nonperforming assets is primarily attributed to the reduction in past due loans more than 90 days and still accruing interest from $513,000 at December 31, 2020 to $234,000 at March 31, 2021. Additionally, restructured loans decreased $215,000 between December 31, 2020 and March 31, 2021, and nonaccrual loans decreased $108,000 between December 31, 2020 and March 31, 2021 to $11,388,000. OREO balances decreased from $5,004,000 at December 31, 2020 to $4,841,000 at March 31, 2021. 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 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 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) the effects of the COVID-19 pandemic, or other similar outbreaks, including the effects of the steps being taken to address the pandemic and their impact on the Company’s markets, customers and employees, (2) changes in general economic and financial market conditions, either nationally or locally, (3) changes in interest rates, (4) changes in banking laws or regulations, (5) increased competition in the Company's markets, impacting the ability to execute its business plans, (6) loss of key personnel, (7) unanticipated credit losses, (8) drought, earthquakes or other natural disasters impacting the local economy and/or the condition of real estate collateral, (9) the impact of technological changes and the ability to develop and maintain secure and reliable electronic systems, (10) uncertainty regarding the replacement of LIBOR, and (11) 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, 2020, 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) March 31, 2021 December 31, 2020 Assets Cash and non-interest-bearing deposits in other banks $ 34,257 $ 29,490 Due from Federal Reserve Bank ("FRB") 273,652 264,579 Cash and cash equivalents 307,909 294,069 Investment securities (at fair value) Available-for-sale ("AFS") securities 143,549 82,341 Marketable equity securities 3,791 3,851 Total investment securities 147,340 86,192 Loans 675,694 655,411 Unearned fees and unamortized loan origination costs - net (1,205 ) (1,064 ) Allowance for credit losses (8,549 ) (8,522 ) Net loans 665,940 645,825 Premises and equipment - net 8,895 9,110 Accrued interest receivable 8,582 8,164 Other real estate owned 4,841 5,004 Goodwill 4,488 4,488 Deferred tax assets - net 3,235 2,907 Cash surrender value of life insurance 21,766 20,715 Operating lease right-of-use assets 2,733 2,864 Other assets 11,207 13,316 Total assets $ 1,186,936 $ 1,092,654 Liabilities and Shareholders' Equity Deposits Non-interest-bearing $ 429,005 $ 391,897 Interest-bearing 618,776 560,754 Total deposits 1,047,781 952,651 Operating lease liabilities 2,838 2,967 Other liabilities 8,001 8,305 Junior subordinated debentures (at fair value) 10,983 10,924 Total liabilities 1,069,603 974,847 Shareholders' Equity Common stock, no par value; 20,000,000 shares authorized; issued and outstanding: 17,010,288 at March 31, 2021 and 17,009,883 at December 31, 2020 59,443 59,397 Retained earnings 58,673 59,138 Accumulated other comprehensive loss (783 ) (728 ) Total shareholders' equity 117,333 117,807 Total liabilities and shareholders' equity $ 1,186,936 $ 1,092,654 United Security Bancshares Consolidated Statements of Income (unaudited) (in thousands) Three Months Ended March 31, 2021 2020 Interest Income: Interest and fees on loans $ 8,071 $ 8,499 Interest on investment securities 387 428 Interest on deposits in FRB 62 567 Total interest income 8,520 9,494 Interest Expense: Interest on deposits 427 664 Interest on other borrowed funds 46 97 Total interest expense 473 761 Net Interest Income 8,047 8,733 Provision for Credit Losses 375 1,707 Net Interest Income after Provision for Credit Losses 7,672 7,026 Noninterest Income: Customer service fees 656 728 Increase in cash surrender value of bank-owned life insurance 132 131 Unrealized (loss) gain on fair value of marketable equity securities (60) 15 (Loss) gain on fair value of junior subordinated debentures (1,033) 1,498 Gain on sale of assets 13 — Other 133 208 Total noninterest (loss) income (159) 2,580 Noninterest Expense: Salaries and employee benefits 3,024 2,995 Occupancy expense 856 853 Data processing 87 112 Professional fees 827 855 Regulatory assessments 166 85 Director fees 92 94 Correspondent bank service charges 19 15 Net cost on operation and sale of OREO 25 153 Other 469 582 Total noninterest expense 5,565 5,744 Income Before Provision for Taxes 1,948 3,862 Provision for Taxes on Income 537 1,108 Net Income $ 1,411 $ 2,754 Basic earnings per common share $ 0.08 $ 0.16 Diluted earnings per common share $ 0.08 $ 0.16 Weighted average basic shares for EPS 17,010,131 16,974,100 Weighted average diluted shares for EPS 17,026,752 16,994,727 United Security Bancshares Average Balances and Rates (unaudited) (in thousands) Three Months Ended March 31, 2021 2020 Average Balances: Loans (1) $ 669,723 $ 603,060 Investment securities 103,236 82,101 Interest-bearing deposits in FRB 258,918 178,748 Total interest-earning assets 1,031,877 863,909 Allowance for credit losses (8,507) (7,905) Cash and due from banks 41,650 29,282 Other real estate owned 5,074 6,628 Other non-earning assets 60,641 61,810 Total average assets $ 1,130,735 $ 953,724 Interest-bearing deposits $ 578,513 $ 501,026 Junior subordinated debentures 10,896 10,714 Total interest-bearing liabilities 589,409 511,740 Non-interest-bearing deposits 412,455 314,389 Other liabilities 9,914 9,679 Total liabilities 1,011,778 835,808 Total equity 118,957 117,916 Total liabilities and equity $ 1,130,735 $ 953,724 Average Rates: Loans (1) 4.89 % 5.57 % Investment securities 1.52 % 2.10 % Interest-bearing deposits in FRB 0.10 % 1.28 % Earning assets 3.35 % 4.35 % Interest bearing deposits 0.30 % 0.53 % Total deposits 0.17 % 0.33 % Junior subordinated debentures 1.71 % 3.64 % Total interest-bearing liabilities 0.33 % 0.60 % Net interest margin (2) 3.16 % 4.00 % (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) March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 Cash and cash equivalents $ 307,909 $ 294,069 $ 323,332 $ 229,541 $ 199,853 Investment securities 147,340 86,192 91,782 96,739 97,486 Loans 674,489 654,347 660,444 648,650 623,686 Allowance for credit losses (8,549) (8,522) (8,708) (8,862) (9,120) Net loans 665,940 645,825 651,736 639,788 614,566 Other assets 65,747 66,568 67,097 65,305 65,341 Total assets $ 1,186,936 $ 1,092,654 $ 1,133,947 $ 1,031,373 $ 977,246 Non-interest-bearing $ 429,005 $ 391,897 $ 430,028 $ 362,010 $ 324,167 Interest-bearing 618,776 560,754 564,755 531,102 516,270 Total deposits 1,047,781 952,651 994,783 893,112 840,437 Other liabilities 21,822 22,196 21,111 20,801 19,399 Total liabilities 1,069,603 974,847 1,015,894 913,913 859,836 Total shareholders' equity 117,333 117,807 118,053 117,460 117,410 Total liabilities and shareholder's equity $ 1,186,936 $ 1,092,654 $ 1,133,947 $ 1,031,373 $ 977,246 United Security Bancshares Condensed - Consolidated Statements of Income (unaudited) (in thousands) For the Quarters Ended: March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 Total interest income $ 8,520 $ 8,496 $ 7,968 $ 8,107 $ 9,341 Total interest expense 473 499 500 530 761 Net interest income 8,047 7,997 7,468 7,577 8,580 Provision for credit losses 375 631 4 428 1,707 Net interest income after provision for credit losses 7,672 7,366 7,464 7,149 6,873 Total non-interest (loss) income (159) 467 911 1,214 2,580 Total non-interest expense 5,565 5,260 5,210 5,553 5,591 Income before provision for taxes 1,948 2,573 3,165 2,810 3,862 Provision for taxes on income 537 651 894 798 1,108 Net income $ 1,411 $ 1,922 $ 2,271 $ 2,012 $ 2,754 United Security Bancshares Nonperforming Assets (unaudited) (dollars in thousands) March 31, 2021 December 31, 2020 RE construction & development 11,006 11,057 Agricultural 382 439 Total nonaccrual loans $ 11,388 $ 11,496 Loans past due 90 days and still accruing 234 513 Restructured loans 427 535 Total nonperforming loans $ 12,049 $ 12,544 Other real estate owned 4,841 5,004 Total nonperforming assets $ 16,890 $ 17,548 Nonperforming loans to total gross loans 1.78 % 1.91 % Nonperforming assets to total assets 1.42 % 1.61 % Allowance for credit losses to nonperforming loans 70.95 % 67.94 % United Security Bancshares Selected Financial Data (unaudited) (dollars in thousands, except per share amounts) Three Months Ended March 31, 2021 2020 Return on average assets 0.51 % 1.16 % Return on average equity 4.82 % 9.37 % Net charge-off to average loans 0.21 % 0.33 % March 31, 2021 December 31, 2020 Shares outstanding - period end 17,010,288 17,009,883 Book value per share $6.90 $6.93 Efficiency ratio (1) 70.55 % 58.74 % Total impaired loans $13,071 $13,376 Net loan to deposit ratio 63.56 % 67.79 % Allowance for credit losses to total loans 1.27 % 1.30 % Tier 1 capital to adjusted average assets (leverage) Company 11.02 % 11.37 % Bank 10.88 % 11.17 % (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) Three Months Ended March 31, 2021 2020 Change $ Change % Net income $ 1,411 $ 2,754 $ (1,343) (48.77) % Junior subordinated debenture (1) fair value adjustment (1,033) 1,498 Loss on sale of OREO (2) — (113) (1,033) 1,385 Income tax effect 300 (402) Non-core items net of taxes (733) 983 Non-GAAP core net income $ 2,144 $ 1,771 $ 373 21.06 % (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 and loss on sale of OREO are considered one-time events and therefore are not part of Core Income. View source version on businesswire.com: https://www.businesswire.com/news/home/20210421006070/en/Contacts Dennis Woods, President and CEO 559-248-4928
United Security Bancshares (Nasdaq: UBFO) today announced its unaudited financial results for the quarter ended March 31, 2021. The Company recognized net income of $1,411,000, or $0.08 per basic and diluted share for the quarter ended March 31, 2021, compared to net income of $2,754,000, or $0.16 per basic and diluted share for the quarter ended March 31, 2020. First Quarter 2021 Highlights (at or for the quarter ended March 31, 2021, except where noted) Net income for the quarter was $1.41 million, representing a $1.34 million or 48.77% decrease from $2.75 million for the quarter ended March 31, 2020. The decrease is primarily the result of the change in LIBOR rates between periods, causing a $1.03 million loss for the quarter ended March 31, 2021 on the fair value of junior subordinated debentures, compared to a $1.50 million gain for the quarter ended March 31, 2020. Total assets increased 8.63% to $1.19 billion, compared to $1.09 billion at December 31, 2020. Total loans, net of unearned fees, increased 3.08% to $674.49 million, compared to $654.35 million at December 31, 2020. Total deposits increased 9.99% to $1.05 billion, compared to $952.65 million at December 31, 2020. The allowance for credit losses as a percentage of gross loans decreased to 1.27%, compared to 1.30% at December 31, 2020. The provision for credit losses totaled $375,000 for the quarter, compared to $1,707,000 for the quarter ended March 31, 2020. Net interest income after the provision for credit losses was $7,672,000 for the quarter ended March 31, 2021, compared to $7,026,000 for the quarter ended March 31, 2020. Book value per share decreased to $6.90, compared to $6.93 at December 31, 2020. Net interest margin decreased to 3.16% from 4.00% for the quarter ended March 31, 2020. Annualized average cost of deposits decreased to 0.17% from 0.33% for the quarter ended March 31, 2020. Net charge-offs totaled $348,000, compared to net charge-offs of $495,000 for the quarter ended March 31, 2020. Capital positions remain well-capitalized with a 11.02% Tier 1 Leverage Ratio compared to 11.37% as of December 31, 2020. Annualized return on average assets ("ROAA") was 0.51%, compared to 1.16% for the quarter ended March 31, 2020. Annualized return on average equity ("ROAE") was 4.82%, compared to 9.37% for the quarter ended March 31, 2020. "Over the last year, as our customers and communities struggled with the global COVID-19 pandemic, the Company maintained a large cash reserve to support unanticipated business impacts, credit challenges, and to fund SBA PPP loans. As we are now seeing increases in vaccine availability, along with an improving employment and business environment, we have begun to execute on our 2021 strategy. The plan includes deploying $200 million of excess cash balances into the loan and investment portfolios. We anticipate the $200 million rebalancing will be completed by the end of the second quarter," stated Dennis Woods, President and CEO of United Security Bancshares and United Security Bank. Woods added, "We recognized $1.4 million in net income during the first quarter of 2021, compared to $2.8 million during the same period in 2020. The decrease is largely driven by the change in fair value on our junior subordinated debt. Our core net income, a non-GAAP measure, which excludes the fair value adjustment on junior subordinated debt and gain/loss on OREO, increased 21% to $2.1 million between the first quarter 2020 and 2021." 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 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 quarter ended March 31, 2021 decreased $1,343,000 when compared to the quarter ended March 31, 2020. The decrease is the result of the change in the fair value of junior subordinated debentures caused by a change in LIBOR rates. ROAE for the quarter ended March 31, 2021 was 4.82%, compared to 9.37% for the quarter ended March 31, 2020. ROAA was 0.51% for the quarter ended March 31, 2021, compared to 1.16% for the quarter ended March 31, 2020. The annualized average cost of deposits was 0.17% for the quarter ended March 31, 2021, a decrease from 0.33% for the quarter ended March 31, 2020. The decrease in the cost of deposits is primarily attributed to reductions on deposit rates made in 2020. Average interest-bearing deposits increased 15.47% between the periods ended March 31, 2020 and 2021 from $501,026,000 to $578,513,000. Net interest income before the provision for credit losses was $8,047,000 for the quarter ended March 31, 2021, representing a $686,000 or 7.86% decrease compared to the same period ended March 31, 2020. The Company's net interest margin decreased from 4.00% to 3.16% between the quarters ended March 31, 2020 and March 31, 2021. The reduction in net interest margin is driven by the reduction in yields on all interest earning assets, partially offset by a decrease in interest expense on deposits. Noninterest income for the quarter ended March 31, 2021 totaled a $159,000 loss, reflecting a decrease of $2,739,000 from the $2,580,000 in non-interest income reported for the quarter ended March 31, 2020. The decrease is attributed to a $2,531,000 decrease in the fair value of TRUPs, resulting in a $1,033,000 loss recorded for the quarter ended March 31, 2021 compared to a $1,498,000 gain recorded for the quarter ended March 31, 2020. The change in the fair value of TRUPs reflected in noninterest income was caused by an increase in the LIBOR yield curve. Noninterest expense for the quarter ended March 31, 2021 totaled $5,565,000, a decrease of $179,000 as compared to $5,744,000 reported for the quarter ended March 31, 2020. On a quarter-over-quarter comparative basis, non-interest expense decreased due to a $128,000 decrease in OREO cost and a $113,000 decrease in other expense, partially offset by an increase of $81,000 in regulatory assessments. The decrease in other expense is related to decreases in armored card services and donations. The efficiency ratio for the quarter ended March 31, 2021 increased to 70.55%, compared to 50.77% for the quarter ended March 31, 2020. The increase is attributed to the decrease in total noninterest income. The Company recorded an income tax provision of $537,000 for the quarter ended March 31, 2021, compared to $1,108,000 for the same period in 2020. The effective tax rate for the quarter ended March 31, 2021 was 27.57%, compared to 28.69% for the quarter ended March 31, 2020. Balance Sheet Review Total assets increased $94,282,000, or 8.63%, between March 31, 2021 and December 31, 2020, due primarily to increases of $20,283,000 in gross loan balances and $61,148,000 in investment securities. Total cash and cash equivalents increased $13,840,000 between December 31, 2020 and March 31, 2021. Unfunded loan commitments increased from $216,799,000 at December 31, 2020 to $222,343,000 at March 31, 2021. OREO balances decreased from $5,004,000 at December 31, 2020 to $4,841,000 at March 31, 2021. The reduction is attributed to the receipt of partial proceeds on the sale of one OREO property during the quarter. Total deposits increased $95,130,000, or 9.99%, to $1,047,781,000 during the quarter ended March 31, 2021. This increase was due to increases of $37,108,000 in noninterest bearing deposits, $49,261,000 in NOW and money market accounts, $7,409,000 in savings accounts, and an increase of $1,352,000 in time deposits. In total, NOW, money market and savings accounts increased 11.35% to $555,905,000 at March 31, 2021, compared to $499,235,000 at December 31, 2020. Noninterest bearing deposits increased 9.47% to $429,005,000 at March 31, 2021, compared to $391,897,000 at December 31, 2020. 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 $95,100,000. Shareholders’ equity at March 31, 2021 was $117,333,000, a decrease of $474,000 from shareholders’ equity of $117,807,000 at December 31, 2020. This decrease in equity was the result of cash dividends, and the change in accumulated other comprehensive loss for the quarter. At March 31, 2021 there was an accumulated other comprehensive loss of $783,000, as compared to an accumulated other comprehensive loss of $728,000 at December 31, 2020. The change from December 31, 2020 to March 31, 2021 was the result of unrealized loss on available for sale securities, partially offset by gains on junior subordinated debentures (TRUPs) caused by a change in market credit spreads during the period. The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on March 23, 2021. The dividend was payable on April 16, 2021, to shareholders of record as of April 6, 2021. 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 recorded a provision for credit losses of $375,000 for the quarter ended March 31, 2021, compared to a provision of $1,707,000 for the quarter ended March 31, 2020. Net loan charge-offs totaled $348,000 for the quarter ended March 31, 2021, as compared to net loan charge-offs of $495,000 for the quarter ended March 31, 2020. The provision recorded during the year is attributed to growth of the loan portfolio and charge-offs related to the student loan portfolio, partially offset by an adjustment related to improved economic conditions. For the quarter ended March 31, 2020 the provision recorded was attributed to growth of the loan portfolio, net charge-offs, and uncertainty related to COVID-19. In 2020, the Company had executed 23 payment deferrals or modifications on outstanding loan balances of $69,814,000 in connection with the COVID-19 relief provided by the CARES Act and interagency guidance issued in March 2020. The Company has not recognized any losses on the loan modifications and as of March 31, 2021, there were no modifications outstanding. The Company's allowance for loan loss totaled 1.27% of the loan portfolio at March 31, 2021, compared to 1.30% at December 31, 2020. Excluding the SBA PPP loans, which are fully government guaranteed, the allowance for loan loss totaled 1.29% of the loan portfolio at March 31, 2021. Non-performing assets, comprised of nonaccrual loans, troubled debt restructures (TDRs), other real estate owned through foreclosure (OREO), and loans more than 90 days past due and still accruing interest, decreased $658,000 between December 31, 2020 and March 31, 2021 to $16,890,000. Nonperforming assets as a percentage of total assets decreased from 1.61% at December 31, 2020 to 1.42% at March 31, 2021. The decrease in nonperforming assets is primarily attributed to the reduction in past due loans more than 90 days and still accruing interest from $513,000 at December 31, 2020 to $234,000 at March 31, 2021. Additionally, restructured loans decreased $215,000 between December 31, 2020 and March 31, 2021, and nonaccrual loans decreased $108,000 between December 31, 2020 and March 31, 2021 to $11,388,000. OREO balances decreased from $5,004,000 at December 31, 2020 to $4,841,000 at March 31, 2021. 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 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 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) the effects of the COVID-19 pandemic, or other similar outbreaks, including the effects of the steps being taken to address the pandemic and their impact on the Company’s markets, customers and employees, (2) changes in general economic and financial market conditions, either nationally or locally, (3) changes in interest rates, (4) changes in banking laws or regulations, (5) increased competition in the Company's markets, impacting the ability to execute its business plans, (6) loss of key personnel, (7) unanticipated credit losses, (8) drought, earthquakes or other natural disasters impacting the local economy and/or the condition of real estate collateral, (9) the impact of technological changes and the ability to develop and maintain secure and reliable electronic systems, (10) uncertainty regarding the replacement of LIBOR, and (11) 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, 2020, 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) March 31, 2021 December 31, 2020 Assets Cash and non-interest-bearing deposits in other banks $ 34,257 $ 29,490 Due from Federal Reserve Bank ("FRB") 273,652 264,579 Cash and cash equivalents 307,909 294,069 Investment securities (at fair value) Available-for-sale ("AFS") securities 143,549 82,341 Marketable equity securities 3,791 3,851 Total investment securities 147,340 86,192 Loans 675,694 655,411 Unearned fees and unamortized loan origination costs - net (1,205 ) (1,064 ) Allowance for credit losses (8,549 ) (8,522 ) Net loans 665,940 645,825 Premises and equipment - net 8,895 9,110 Accrued interest receivable 8,582 8,164 Other real estate owned 4,841 5,004 Goodwill 4,488 4,488 Deferred tax assets - net 3,235 2,907 Cash surrender value of life insurance 21,766 20,715 Operating lease right-of-use assets 2,733 2,864 Other assets 11,207 13,316 Total assets $ 1,186,936 $ 1,092,654 Liabilities and Shareholders' Equity Deposits Non-interest-bearing $ 429,005 $ 391,897 Interest-bearing 618,776 560,754 Total deposits 1,047,781 952,651 Operating lease liabilities 2,838 2,967 Other liabilities 8,001 8,305 Junior subordinated debentures (at fair value) 10,983 10,924 Total liabilities 1,069,603 974,847 Shareholders' Equity Common stock, no par value; 20,000,000 shares authorized; issued and outstanding: 17,010,288 at March 31, 2021 and 17,009,883 at December 31, 2020 59,443 59,397 Retained earnings 58,673 59,138 Accumulated other comprehensive loss (783 ) (728 ) Total shareholders' equity 117,333 117,807 Total liabilities and shareholders' equity $ 1,186,936 $ 1,092,654 United Security Bancshares Consolidated Statements of Income (unaudited) (in thousands) Three Months Ended March 31, 2021 2020 Interest Income: Interest and fees on loans $ 8,071 $ 8,499 Interest on investment securities 387 428 Interest on deposits in FRB 62 567 Total interest income 8,520 9,494 Interest Expense: Interest on deposits 427 664 Interest on other borrowed funds 46 97 Total interest expense 473 761 Net Interest Income 8,047 8,733 Provision for Credit Losses 375 1,707 Net Interest Income after Provision for Credit Losses 7,672 7,026 Noninterest Income: Customer service fees 656 728 Increase in cash surrender value of bank-owned life insurance 132 131 Unrealized (loss) gain on fair value of marketable equity securities (60) 15 (Loss) gain on fair value of junior subordinated debentures (1,033) 1,498 Gain on sale of assets 13 — Other 133 208 Total noninterest (loss) income (159) 2,580 Noninterest Expense: Salaries and employee benefits 3,024 2,995 Occupancy expense 856 853 Data processing 87 112 Professional fees 827 855 Regulatory assessments 166 85 Director fees 92 94 Correspondent bank service charges 19 15 Net cost on operation and sale of OREO 25 153 Other 469 582 Total noninterest expense 5,565 5,744 Income Before Provision for Taxes 1,948 3,862 Provision for Taxes on Income 537 1,108 Net Income $ 1,411 $ 2,754 Basic earnings per common share $ 0.08 $ 0.16 Diluted earnings per common share $ 0.08 $ 0.16 Weighted average basic shares for EPS 17,010,131 16,974,100 Weighted average diluted shares for EPS 17,026,752 16,994,727 United Security Bancshares Average Balances and Rates (unaudited) (in thousands) Three Months Ended March 31, 2021 2020 Average Balances: Loans (1) $ 669,723 $ 603,060 Investment securities 103,236 82,101 Interest-bearing deposits in FRB 258,918 178,748 Total interest-earning assets 1,031,877 863,909 Allowance for credit losses (8,507) (7,905) Cash and due from banks 41,650 29,282 Other real estate owned 5,074 6,628 Other non-earning assets 60,641 61,810 Total average assets $ 1,130,735 $ 953,724 Interest-bearing deposits $ 578,513 $ 501,026 Junior subordinated debentures 10,896 10,714 Total interest-bearing liabilities 589,409 511,740 Non-interest-bearing deposits 412,455 314,389 Other liabilities 9,914 9,679 Total liabilities 1,011,778 835,808 Total equity 118,957 117,916 Total liabilities and equity $ 1,130,735 $ 953,724 Average Rates: Loans (1) 4.89 % 5.57 % Investment securities 1.52 % 2.10 % Interest-bearing deposits in FRB 0.10 % 1.28 % Earning assets 3.35 % 4.35 % Interest bearing deposits 0.30 % 0.53 % Total deposits 0.17 % 0.33 % Junior subordinated debentures 1.71 % 3.64 % Total interest-bearing liabilities 0.33 % 0.60 % Net interest margin (2) 3.16 % 4.00 % (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) March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 Cash and cash equivalents $ 307,909 $ 294,069 $ 323,332 $ 229,541 $ 199,853 Investment securities 147,340 86,192 91,782 96,739 97,486 Loans 674,489 654,347 660,444 648,650 623,686 Allowance for credit losses (8,549) (8,522) (8,708) (8,862) (9,120) Net loans 665,940 645,825 651,736 639,788 614,566 Other assets 65,747 66,568 67,097 65,305 65,341 Total assets $ 1,186,936 $ 1,092,654 $ 1,133,947 $ 1,031,373 $ 977,246 Non-interest-bearing $ 429,005 $ 391,897 $ 430,028 $ 362,010 $ 324,167 Interest-bearing 618,776 560,754 564,755 531,102 516,270 Total deposits 1,047,781 952,651 994,783 893,112 840,437 Other liabilities 21,822 22,196 21,111 20,801 19,399 Total liabilities 1,069,603 974,847 1,015,894 913,913 859,836 Total shareholders' equity 117,333 117,807 118,053 117,460 117,410 Total liabilities and shareholder's equity $ 1,186,936 $ 1,092,654 $ 1,133,947 $ 1,031,373 $ 977,246 United Security Bancshares Condensed - Consolidated Statements of Income (unaudited) (in thousands) For the Quarters Ended: March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 Total interest income $ 8,520 $ 8,496 $ 7,968 $ 8,107 $ 9,341 Total interest expense 473 499 500 530 761 Net interest income 8,047 7,997 7,468 7,577 8,580 Provision for credit losses 375 631 4 428 1,707 Net interest income after provision for credit losses 7,672 7,366 7,464 7,149 6,873 Total non-interest (loss) income (159) 467 911 1,214 2,580 Total non-interest expense 5,565 5,260 5,210 5,553 5,591 Income before provision for taxes 1,948 2,573 3,165 2,810 3,862 Provision for taxes on income 537 651 894 798 1,108 Net income $ 1,411 $ 1,922 $ 2,271 $ 2,012 $ 2,754 United Security Bancshares Nonperforming Assets (unaudited) (dollars in thousands) March 31, 2021 December 31, 2020 RE construction & development 11,006 11,057 Agricultural 382 439 Total nonaccrual loans $ 11,388 $ 11,496 Loans past due 90 days and still accruing 234 513 Restructured loans 427 535 Total nonperforming loans $ 12,049 $ 12,544 Other real estate owned 4,841 5,004 Total nonperforming assets $ 16,890 $ 17,548 Nonperforming loans to total gross loans 1.78 % 1.91 % Nonperforming assets to total assets 1.42 % 1.61 % Allowance for credit losses to nonperforming loans 70.95 % 67.94 % United Security Bancshares Selected Financial Data (unaudited) (dollars in thousands, except per share amounts) Three Months Ended March 31, 2021 2020 Return on average assets 0.51 % 1.16 % Return on average equity 4.82 % 9.37 % Net charge-off to average loans 0.21 % 0.33 % March 31, 2021 December 31, 2020 Shares outstanding - period end 17,010,288 17,009,883 Book value per share $6.90 $6.93 Efficiency ratio (1) 70.55 % 58.74 % Total impaired loans $13,071 $13,376 Net loan to deposit ratio 63.56 % 67.79 % Allowance for credit losses to total loans 1.27 % 1.30 % Tier 1 capital to adjusted average assets (leverage) Company 11.02 % 11.37 % Bank 10.88 % 11.17 % (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) Three Months Ended March 31, 2021 2020 Change $ Change % Net income $ 1,411 $ 2,754 $ (1,343) (48.77) % Junior subordinated debenture (1) fair value adjustment (1,033) 1,498 Loss on sale of OREO (2) — (113) (1,033) 1,385 Income tax effect 300 (402) Non-core items net of taxes (733) 983 Non-GAAP core net income $ 2,144 $ 1,771 $ 373 21.06 % (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 and loss on sale of OREO are considered one-time events and therefore are not part of Core Income. View source version on businesswire.com: https://www.businesswire.com/news/home/20210421006070/en/