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United Security Bancshares earns 1st Quarter 2016 profits of $1.8 million

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FRESNO, Calif., April 14, 2016 /PRNewswire/ -- United Security Bancshares (Nasdaq: UBFO), today announced its unaudited financial results for the quarter ended March 31, 2016.  The Company recognized net income of $1,769,000 for the three months ended March 31, 2016, an improvement of $541,000, or 44.06%, relative to the net income of $1,228,000 recognized for the three months ended March 31, 2015.  Basic and diluted earnings per share increased to $0.11 for the three months ended March 31, 2016, as compared to $0.08 for the three months ended March 31, 2015.

"We have begun 2016 on a high note with growth in our loan portfolio and core deposit base, all while decreasing levels of nonperforming assets and maintaining strong capital and liquidity levels.  We look forward to continued success in 2016," said Dennis R. Woods, President and Chief Executive Officer of the Company.

First Quarter 2016 Highlights (at or for the period ended March 31, 2016)

  • Net interest income increased to $6,611,000, compared to $6,224,000 for the quarter ended March 31, 2015, and decreased from $6,745,000 in the preceding quarter.
  • Net interest margin decreased to 4.12%, when compared to 4.14% in the preceding quarter, and 4.25% for the quarter ended March 31, 2015.
  • Net recoveries totaled $27,000, compared to net charge-offs of $1,385,000 in the preceding quarter and net recoveries of $60,000 for the quarter ended March 31, 2015.
  • Total loans increased to $518,289,000, compared to $515,376,000 at December 31, 2015.
  • Nonperforming assets declined $907,000 to $31,187,000, compared to $32,094,000 at December 31, 2015.
  • The allowance for credit losses as a percentage of gross loans remained unchanged at 1.88%, compared to December 31, 2015.
  • Total deposits increased to $637,327,000, compared to $621,805,000 at December 31, 2015.
  • Tangible book value per share increased to $5.36, compared to $5.30 at December 31, 2015.

Annualized return on average equity (ROAE) for the three months ended March 31, 2016 was 7.82%, compared to 5.94% for the three months ended March 31, 2015.  Annualized return on average assets (ROAA) was 0.98% for the three months ended March 31, 2016, compared to 0.74% for the three months ended March 31, 2015.  The increases in ROAE and ROAA for the three months ended March 31, 2016 were primarily due to the growth in the loan portfolio during the later half of 2015 and the resulting favorable impact on interest income.  Net interest income increased for the three months ended March 31, 2016 compared to the year ended March 31, 2015, but the Company's net interest margin declined from 4.25% for the three months ended March 31, 2015 to 4.12% for the three months ended March 31, 2016.  The 13 basis point decrease in net interest margin in the period-to-period comparison resulted primarily from the growth of the investment portfolio, which is a lower yielding asset, compared to loans.

The Board of Directors of United Security Bancshares declared a first quarter 2016 stock dividend of one percent (1%) on March 22, 2016. The stock dividend was payable to shareholders of record on April 4, 2016, and the shares will be issued on April 15, 2016. This marks the 30th consecutive quarterly stock dividend since 2008.  The Company's Board of Directors has elected to issue stock dividends in order to preserve capital for future growth opportunities.  No assurances can be provided that future dividends, whether payable in stock or cash, will be declared and/or as to the timing of such future dividends, if any.

Total assets were up $16,147,000, or 2.23% for the three months ended March 31, 2016, due to net growth of $13,501,000 in the investment portfolio and $2,913,000 in gross loan balances.  Loan volume was favorably impacted by the purchase of $13,527,000 in residential mortgage loans during the first quarter of 2016 in addition to increases in the commercial real estate, agricultural, and student loan portfolios.  Total deposits increased $15,522,000 or 2.50% to $637,327,000 during the three months ended March 31, 2016.

Net interest income for the three months ended March 31, 2016 totaled $6,611,000, an increase of $387,000 from the net interest income of $6,224,000 for the three months ended March 31, 2015.  The net interest margin was 4.12% for the three months ended March 31, 2016, as compared to 4.25% for the three months ended March 31, 2015.   The decline in the net interest margin was primarily due to the decline in the yield on the loan portfolio.

Non-interest income for the three months ended March 31, 2016 totaled $1,561,000, reflecting an increase of $640,000 from $921,000 in non-interest income reported for the three months ended March 31, 2015.  Customer service fees continued to provide the majority of the Company's non-interest income, totaling $926,000 and $833,000 for the three months ended March 31, 2016 and 2015, respectively.  On a year-over-year comparative basis, non-interest income increased primarily due to the change in fair value option of financial liability.  The Company recorded a $358,000 gain on the fair value option of financial liability for the three months ended March 31, 2016, compared to a $125,000 loss for the same period ended March 31, 2015.

For the three months ended March 31, 2016, non-interest expense totaled $5,300,000, an increase of $592,000 compared to $4,708,000 for the three months ended March 31, 2015.  On a year-over-year comparative basis, non-interest expense increased due primarily to increases of $157,000 in occupancy expense, $141,000 in professional fees, and $159,000 in salaries and employee benefit expenses, compared to the same period ended March 31, 2015.  Professional fees for the three months ended March 31, 2016 includes a one-time $125,000 legal settlement.

The Company recorded a recovery of provision for credit losses of $22,000 for the three months ended March 31, 2016, compared with a provision of $459,000 for the three months ended March 31, 2015.  Net loan recoveries totaled $27,000 for the three months ended March 31, 2016, as compared to net recoveries of $60,000 for the three months ended March 31, 2015.

With a modest recovery in the economy and real estate markets within the Bank's service area, the Company has maintained an adequate allowance for loan losses which totaled 1.88% of total loans at March 31, 2016, unchanged compared to 1.88% of total loans at December 31, 2015.  Although the allowance for loan loss as a percentage of loans has not changed over the last quarter, it has declined over the last few years due to growth in our loan portfolio and a decrease in our historical loss percentages due to lower levels of loan charge-offs and improved credit quality.  In determining the adequacy of the allowance for loan losses, the judgment of the Company's management is a significant factor and management considers the allowance for credit losses at March 31, 2016 to be adequate.

Non-performing assets, comprised of nonaccrual loans, troubled debt restructures (TDR), other real estate owned through foreclosure (OREO), and loans more than 90 days past due and still accruing interest, decreased approximately $907,000 between December 31, 2015 and March 31, 2016 to $31,187,000.  Nonperforming assets as a percentage of total assets decreased from 4.42% at December 31, 2015 to 4.20% at March 31, 2016.  Nonaccrual loans increased $160,000 between December 31, 2015 and March 31, 2016 to $8,353,000.  Impaired loans totaled $23,287,000 at March 31, 2016, an increase of $392,000 from the balance of $23,679,000 at December 31, 2015. OREO totaled $12,207,000 at March 31, 2016, a decrease of $666,000 from the balance of $12,873,000 at December 31, 2015.

About United Security Bancshares

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

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended and the Company intends such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management's knowledge and belief as of today and include information concerning the Company's possible or assumed future financial condition, and its results of operations, business and earnings outlook. These forward-looking statements are subject to risks and uncertainties. A number of factors, some of which are beyond the Company's ability to control or predict, could cause future results to differ materially from those contemplated by such forward-looking statements. These factors include (1) changes in interest rates, (2) significant changes in banking laws or regulations, (3) increased competition in the company's market, (4) other-than-expected credit losses, (5) earthquake or other natural disasters impacting the condition of real estate collateral, (6) the effect of acquisitions and integration of acquired businesses, (7) the impact of proposed and/or recently adopted changes in laws, and regulations on the Company and its business; (8) changing bank regulatory conditions, policies, whether arising as new legislation or regulatory initiatives or changes in our regulatory classifications, that could lead to restrictions on activities of banks generally or as to the Bank, including specifically the formal order between the Federal Reserve Bank of San Francisco and the Company and the Bank, (9) failure to comply with the written regulatory agreement under which the Company is subject and (10) unknown economic impacts caused by the State of California's budget issues, including the effect on Federal spending do to sequestration required by the Budget Control Act of 2011. Management cannot predict at this time the severity or duration of the effects of the recent business slowdown on the Company's specific business activities and profitability. Weaker or a further decline in capital and consumer spending, and related recessionary trends could adversely affect the Company's performance in a number of ways including decreased demand for our products and services and increased credit losses. Likewise, changes in interest rates, among other things, could slow the rate of growth or put pressure on current deposit levels and affect the ability of borrowers to repay loans. Forward-looking statements speak only as of the date they are made, and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the statements are made, or to update earnings guidance including the factors that influence earnings. For a more complete discussion of these risks and uncertainties, see the Company's Annual Report on Form 10-K for the year ended December 31, 2015, and particularly the section of Management's Discussion and Analysis.  Readers should carefully review all disclosures the Company files from time to time with the Securities and Exchange Commission ("SEC").

 


United Security Bancshares

Consolidated Balance Sheets (unaudited)

(in thousands)


Assets

March 31,
2016


December 31,
2015


Cash and non-interest-bearing deposits in other banks

$

24,020


 

$

29,733


Cash and due from Federal Reserve Bank

101,469


96,018

Cash and cash equivalents

125,489


125,751

Interest-bearing deposits in other banks

1,530


1,528

Investment securities available for sale (at fair value)

44,394


30,893

Loans and leases, net of unearned fees

518,289


515,376

Less: Allowance for credit losses

(9,718


(9,713

Net loans

508,571


505,663

Premises and equipment - net

10,666


10,800

Other real estate owned

12,207


12,873

Goodwill and intangible assets

4,488


4,488

Cash surrender value of life insurance

18,468


18,337

Deferred income tax asset - net

5,052


5,228

Other assets

10,926


10,083

Total assets

$

741,791


$

725,644





Liabilities and Shareholders' Equity



Deposits



Non-interest bearing demand deposits

$

261,827


$

262,168


Money market, NOW, and savings

302,380


290,478

Time

73,120


69,159

Total deposits

637,327


621,805

Accrued interest payable

33


29

Other liabilities

5,029


5,875

Junior subordinated debentures (at fair value)

7,948


8,300

Total liabilities

650,337


636,009

Shareholders' equity






Common stock, no par value 20,000,000 shares authorized, 16,211,898 issued and outstanding at March 31, 2016, and 16,051,406 at December 31, 2015

53,366


52,572

Retained earnings

38,248


37,265

Accumulated other comprehensive loss

(160)


(202)

Total shareholders' equity

91,454

89,635

Total liabilities and shareholders' equity

$

741,791


$

725,644



 

United Security Bancshares

Consolidated Statements of Income (unaudited)

(in thousands)



Three Months Ended March 31,


2016


2015

Interest income:




Interest and fees on loans

$

6,631


$

6,279

Interest on investment securities

189


214

Interest on deposits in FRB

124


46

Interest on deposits in other banks

2


2

Total interest income

6,946


6,541

Interest expense:




Interest on deposits

277


259

Interest on other borrowed funds

58


58

Total interest expense

335


317

Net interest income

6,611


6,224

(Recovery of provision) provision for credit losses

(22)


459

Net interest income after (recovery of provision) provision for credit losses

6,633


5,765

Non-interest income:




Customer service fees

926


833

Increase in cash surrender value of bank-owned life insurance

131


128

Gain (loss) on Fair Value of Financial Liability

358


(125)

Other non-interest income

146


85

Total non-interest income

1,561


921

Non-interest expense:




Salaries and employee benefits

2,590


2,431

Occupancy expense

1,097


940

Data processing

59


31

Professional fees

489


348

Regulatory assessments

256


246

Director fees

70


56

Correspondent bank service charges

20


19

Loss on California tax credit partnership

37


30

Net cost on operation and sale of OREO

116


68

Other non-interest expense

566


539

Total non-interest expense

5,300


4,708





Income before income tax provision

2,894


1,978

Provision for income taxes

1,125


750

Net income

$

1,769


$

1,228





Basic earnings per common share

$

0.11


$

0.08

Diluted earnings per common share

$

0.11


$

0.08

Weighted average basic shares for EPS

16,211,898


16,211,898

Weighted average diluted shares for EPS

16,215,052


16,213,839





 

United Security Bancshares

Average Balances and Rates (unaudited)


(in thousands)

Three Months Ended March 31,


2016


2015

Average Balances:




Loans (1)

$

502,576



$

466,781


Investment securities – taxable

38,664



47,756


Interest-bearing deposits in other banks

1,529



1,522


Interest-bearing deposits in FRB

102,320



77,257


Total interest-earning assets

645,089



593,316


Allowance for credit losses

(9,694)



(10,821)


Cash and due from banks

22,842



21,209


Other real estate owned

12,920



14,010


Other non-earning assets

50,199



55,172


Total average assets

721,356



672,886






Interest bearing deposits

365,893



351,892


Junior subordinated debentures

8,268



10,079


Total interest-bearing liabilities

374,161



361,971


Non-interest-bearing deposits

249,855



219,707


Other liabilities

6,651



7,331


Total liabilities

630,667



589,009


Total equity

90,689



83,877


Total liabilities and equity

$

721,356



$

672,886






Average Rates:




Loans (1)

5.31

%


5.46

%

Investment securities- taxable

1.97

%


1.82

%

Interest-bearing deposits in other banks

0.53

%


0.53

%

Interest-bearing deposits in FRB

0.49

%


0.24

%

Earning assets

4.33

%


4.47

%

Interest bearing deposits

0.30

%


0.30

%

Junior subordinated debentures

2.82

%


2.33

%

Total interest-bearing liabilities

0.36

%


0.36

%

Net interest margin

4.12

%


4.25

%





(1)

Loan amounts include nonaccrual loans, but the related interest income has been included only if collected for the period prior to the loan being placed on a nonaccrual basis.

 

United Security Bancshares

Credit Quality (unaudited)

(dollars in thousands)



March 31,
2016


December 31,
2015


March 31,
2015

Commercial and industrial

$

955



$

328



$

1,350


Real estate - mortgage

1,613



1,635



3,866


RE construction & development

4,808



5,580



5,075


Agricultural






Installment/other

977



650



616


Total Nonaccrual Loans

$

8,353



$

8,193



$

10,907








Loans past due 90 days and still accruing






Restructured Loans

10,627



11,028



5,792


Total nonperforming loans

$

18,980



$

19,221



$

16,699


Other real estate owned

12,207



12,873



14,010


Total nonperforming assets

$

31,187



$

32,094



$

30,709








Nonperforming assets to total gross loans

6.02

%


6.23

%


6.23

%

Nonperforming assets to total assets

4.20

%


4.42

%


4.53

%

Allowance for loan losses to nonperforming loans

51.20

%


50.53

%


67.61

%

 

United Security Bancshares

Selected Financial Data (unaudited)

(dollars in thousands, except per share amounts)



Three Months Ended March 31,



2016


2015







Annualized return on average assets

0.98

%


0.74

%


Annualized return on average equity

7.82

%


5.94

%


Annualized net charge-offs (recoveries) to average loans

(0.02)

%


(0.05)

%













March 31, 2016


December 31, 2015


Shares outstanding - period end

16,211,898



16,051,406



Book value per share

$5.64



$5.58



Tangible book value per share

$5.36



$5.30



Efficiency ratio

63.44

%


61.49

%


Total impaired loans

$23,287



$23,679



Loan to deposit ratio

81.32

%


82.88

%


Allowance for credit losses to total loans

1.88

%


1.88

%


Total capital to risk weighted assets





Company

16.74

%


16.65

%


Bank

16.80

%


16.69

%


Tier 1 capital to risk-weighted assets





Company

15.49

%


15.40

%


Bank

15.54

%


15.43

%


Common equity tier 1 capital to risk-weighted assets





Company

14.26

%


14.10

%


Bank

15.54

%


15.43

%


Tier 1 capital to adjusted average assets (leverage)





Company

13.19

%


12.95

%


Bank

13.20

%


12.94

%


 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/united-security-bancshares-earns-1st-quarter-2016-profits-of-18-million-300251917.html

SOURCE United Security Bancshares

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