Business Wire | Jul 15, 2020 04:54PM EDT

United Security Bancshares Reports 2nd Quarter Net Income of $2.0 Million

Jul. 15, 2020

FRESNO, Calif.--(BUSINESS WIRE)--Jul. 15, 2020--United Security Bancshares (Nasdaq: UBFO) today announced its unaudited financial results for the six months ended June 30, 2020. The Company recognized net income of $4,768,000 for the six months ended June 30, 2020, a decrease of 41.2% compared to the net income of $8,104,000 recognized for the six months ended June 30, 2019. Basic and diluted earnings per share decreased to $0.28 for the six months ended June 30, 2020, as compared to basic and diluted earnings per share of $0.48 for the six months ended June 30, 2019.

Second Quarter 2020 Highlights (at or for the quarter ended June 30, 2020, except where noted)

* Net income for the quarter was $2,012,000, representing a $2,085,000 or 50.89% decrease from $4,097,000 for the quarter ended June 30, 2019. The decrease is a result of a reduction in interest income related to a lower rate environment, a provision for loan losses, and a write-down on OREO. * The allowance for credit losses as a percentage of gross loans increased to 1.37%, compared to 1.33% at December 31, 2019. The provision for credit losses totaled $428,000 for the quarter, compared to $4,000 for the quarter ended June 30, 2019. The increase in provision is attributed to net charge-offs realized during the quarter.. * A loss on the fair value of junior subordinated debt of $30,000 was recorded for the quarter, as compared to a $497,000 gain for the quarter ended June 30, 2019. * Total loans, net of unearned fees, increased 8.73% to $648,650,000, compared to $596,554,000 at December 31, 2019. Included in the increase are $26,035,000 in Paycheck Protection Program (PPP) loans. * Total deposits increased 9.13% to $893,112,000, compared to $818,362,000 atDecember 31, 2019. * Book value per share increased to $6.92, compared to $6.83 at December 31, 2019. * Net interest margin decreased to 3.33% from 4.28% for the quarter ended June 30, 2019. * Annualized average cost of deposits decreased to 0.21% from 0.42% for the quarter ended June 30, 2019. * Net charge-offs totaled $686,000, compared to net recoveries of $31,000 for the quarter ended June 30, 2019. * Capital positions remain strong with a 12.25% Tier 1 Leverage Ratio, a 14.71% Common Equity Tier 1 Ratio; a 15.92% Tier 1 Risk-Based Capital Ratio; and a 17.16% Total Risk-Based Capital Ratio. * Annualized return on average assets ("ROAA") was 0.80%, compared to 1.71% for the quarter ended June 30, 2019. * Annualized return on average equity ("ROAE") was 6.80%, compared to 14.53% for the quarter ended June 30, 2019.

Dennis Woods, President and Chief Executive Officer, stated: "Although our institution continues to be impacted by negative industry-wide effects of the COVID-19 pandemic, we continue to see strong growth as we have reached record highs in loan and deposit balances. We funded over 200 SBA PPP loans for our borrowers over the last quarter, resulting in $26,035,000 in balances and $1,028,000 in unearned fees to be recognized over the life of the loans. We believe our strong credit quality, ample liquidity, and capital level provide a solid foundation as we continue to navigate through these challenging times."

Results of Operations

ROAE for the six months ended June 30, 2020 was 8.09%, compared to 14.57% for the six months ended June 30, 2019. ROAA was 0.98% for the six months ended June 30, 2020, compared to 1.71% for the six months ended June 30, 2019.

The annualized average cost of deposits was 0.21% for the quarter ended June 30, 2020, a decrease from 0.42% for quarter ended June 30, 2019. The decrease in the cost of deposits is primarily attributed to reductions on deposit rates made in the fourth quarter of 2019 and first quarter of 2020. Average interest-bearing deposits decreased 1.16% between the quarters ended June 30, 2019 and 2020 to $516,271,000.

Net interest income after the provision for credit losses for the six months ended June 30, 2020 totaled $14,023,000, a decrease of $4,730,000, or 25.22%, from $18,753,000 for the same period ended June 30, 2019. Net interest income after the provision for credit losses includes a provision for credit losses of $2,134,000 for the six months ended June 30, 2020, compared to a provision of $10,000 for the six months ended June 30, 2019. During the first quarter of 2020, the Federal Reserve cut its benchmark rate by 1.50%. As a result, the Prime rate decreased from 4.75% to 3.25%. A majority of the Company's floating rate loans and investments are indexed to the Prime rate. The Company's net interest margin decreased from 4.36% for the six months ended June 30, 2019 to 3.65% for the six months ended June 30, 2020. The decrease was the result of decreases in yields on overnight fed funds, loans, and investment securities, partially offset by a decrease in interest expense. The yield on loans decreased from 6.01% for the six months ended June 30, 2019 to 5.21% for the six months ended June 30, 2020. The yield on interest bearing liabilities decreased from 0.74% for the six months ended June 30, 2019 to 0.50% for the six months ended June 30, 2020.

Net interest income after the provision for credit losses was $7,149,000 for the quarter ended June 30, 2020, representing a $2,150,000 or 23.1% decrease compared to the same period ended June 30, 2019. The Company's net interest margin decreased from 4.28% to 3.33% between the quarters ended June 30, 2019 and June 30, 2020. The reduction in net interest margin is driven by the reduction in yields on all interest earnings assets, partially offset by a decrease in interest expense on deposits.

Non-interest income for the six months ended June 30, 2020 totaled $3,796,000, reflecting an increase of $544,000 from the $3,252,000 in non-interest income reported for the six months ended June 30, 2019. Customer service fees totaled $1,346,000 and $1,639,000 for the six months ended June 30, 2020 and 2019, respectively. The decrease in customer service fees is attributed to lower fees and surcharges related to insufficient funds and electronic transfers recognized during the year. On a year-over-year comparative basis, non-interest income increased primarily due to a $1,469,000 gain on the fair value of junior subordinated debentures (TRUPs) for the six months ended June 30, 2020, compared to a $911,000 gain for the same period ended June 30, 2019. The change in the fair value of TRUPs reflected in non-interest income was caused by fluctuations in the LIBOR yield curve. Non-interest income for the six months ended June 30, 2019 includes a $114,000 loss resulting from the dissolution of the USB Real Estate Investment Trust (REIT) which was completed in February 2019. Non-interest income for the six months ended June 30, 2020 includes a $310,000 gain in proceeds from bank-owned life insurance.

Noninterest income for the quarter ended June 30, 2020 totaled $1,214,000, reflecting a decrease of $515,000 from the $1,729,000 in non-interest income reported for the quarter ended June 30, 2019. The decrease is attributed to a $212,000 reduction in customer service fees and a $527,000 decrease in gain on fair value of TRUPS, partially offset by a $310,000 gain in proceeds from bank-owned life insurance.

For the six months ended June 30, 2020, non-interest expense totaled $11,145,000, an increase of $536,000 compared to $10,609,000 for the six months ended June 30, 2019. On a year-over-year comparative basis, non-interest expense increased primarily due to a $781,000 increase in expenses related to other real estate owned, which included a write-down of $727,000 on one property. This was partially offset by decreases of $302,000 in professional fees and decreases of $123,000 in salaries and employee benefits. Salary and employee benefits expense for the six months ended June 30, 2019 includes a $231,000 reduction in bonus expense. Also included in net cost on operation and sale of OREO for the six months ended June 30, 2020 is a $113,000 loss on sale. The decrease in professional fees is attributed to a reduction in legal expense.

Noninterest expense for the quarter ended June 30, 2020 totaled $5,553,000, an increase of $291,000 as compared to $5,262,000 reported for the quarter ended June 30, 2019. On a quarter-over-quarter comparative basis, non-interest expense increased due to a $727,000 write-down on OREO, partially offset by a $346,000 decrease in salaries and employee benefits expense and a $191,000 decrease in professional fees.

The efficiency ratio for the six months ended June 30, 2020 declined to 55.86%, compared to 48.19% for the six months ended June 30, 2019. The decline is attributed to a reduction in net interest income as a result of the balance sheet repricing in to a lower rate environment, partially offset by an increase in gain on the fair value of TRUPs.

The Company recorded an income tax provision of $1,906,000 for the six months ended June 30, 2020, compared to $3,292,000 for the same period in 2019. The effective tax rate for the six months ended June 30, 2020 was 28.56%, compared to 28.89% for the six months ended June 30, 2019. The Company recorded an income tax provision of $798,000 for the quarter ended June 30, 2020, compared to $1,669,000 for the same period in 2019. The effective tax rate for the quarter ended June 30, 2020 was 28.40%, compared to 28.95% for the same period ended June 30, 2019.

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.

Balance Sheet Review

Total assets increased $74,454,000, or 7.78%, for the six months ended June 30, 2020, due primarily to increases of $52,280,000 in gross loan balances and $16,651,000 in investment securities. Unfunded loan commitments increased from $197,559,000 at December 31, 2019 to $231,275,000 at June 30, 2020. OREO balances decreased from $6,753,000 at December 31, 2019 to $5,018,000 at June 30, 2020. The reduction is attributed to the sale of one OREO property during the first quarter and a $727,000 write down on OREO in the current quarter.

Total deposits increased $74,750,000, or 9.13%, to $893,112,000 during the six months ended June 30, 2020. This increase was due to an increase of $50,060,000 in noninterest bearing deposits, $17,340,000 in NOW and money market accounts, and $9,075,000 in savings accounts, partially offset by a decrease of $1,725,000 in time deposits. In total, NOW, money market and savings accounts increased 5.99% to $467,427,000 at June 30, 2020, compared to $441,012,000 at December 31, 2019. Noninterest bearing deposits increased 16.05% to $362,010,000 at June 30, 2020, compared to $311,950,000 at December 31, 2019. As a result of the net increase, core deposits, which is made up of the balance of noninterest bearing deposits, NOW, money market, savings, and time deposits accounts less than $250,000, increased $72,823,000.

Shareholders' equity at June 30, 2020 was $117,460,000, an increase of $1,472,000 from shareholders' equity of $115,988,000 at December 31, 2019. The increase in equity was the result of net earnings for the period, partially offset by cash dividends. At June 30, 2020 there was an accumulated other comprehensive loss of $401,000, as compared to an accumulated other comprehensive loss of $632,000 at December 31, 2019. The change from December 31, 2019 to June 30, 2020 was the result of unrealized gains on available for sale securities, partially offset by losses on junior subordinated debentures (TRUPs) caused by a change in yields during the period.

The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on June 23, 2020. The dividend was payable on July 15, 2020, to shareholders of record as of July 6, 2020. No assurances can be provided that future dividends will be declared and/or as to the timing of such future dividends, if any.

Credit Quality

The Company has recorded a provision for credit losses of $2,134,000 for the six months ended June 30, 2020, compared to a provision of $10,000 for the six months ended June 30, 2019. Net loan charge-offs totaled $1,180,000 for the six months ended June 30, 2020, as compared to net recoveries of $47,000 for the six months ended June 30, 2019. The provision recorded during the year is attributed to growth of the loan portfolio, net charge-offs, and uncertainty related to the economic effects of COVID-19. COVID-19 has resulted in an economic slowdown and increased unemployment rates. As of June 30, 2020, the Company had executed 25 payment deferrals or modifications on outstanding loan balances of $69,997,000 in connection with the COVID-19 relief provided by the CARES Act. These deferrals were generally no more than six months in duration and were not considered troubled debt restructurings based on interagency guidance issued in March 2020. The Company recorded a provision for credit loss of $428,000 for the quarter ended June 30, 2020, compared to a provision of $4,000 for the quarter ended June 30, 2019. The provision for the quarter ended June 30, 2020 was driven by net charge-offs on the student loan portfolio and one construction and land development loan.

The Company's allowance for loan loss totaled 1.37% of the loan portfolio at June 30, 2020, compared to 1.33% at December 31, 2019. Excluding the SBA PPP loans, which are fully government guaranteed, the allowance for loan loss totaled 1.42% of the loan portfolio at June 30, 2020. In determining the adequacy of the allowance for loan losses, the judgment of the Company's management is a significant factor. Management considers the allowance for credit losses at June 30, 2020 to be adequate.

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 $2,210,000 between December 31, 2019 and June 30, 2020 to $19,015,000. Nonperforming assets as a percentage of total assets decreased from 2.22% at December 31, 2019 to 1.84% at June 30, 2020. The decrease in nonperforming assets is primarily attributed to the reduction in OREO that occurred during the period, partially offset by restructured loans which decreased $31,000 between December 31, 2019 and June 30, 2020. Nonaccrual loans decreased $74,000 between December 31, 2019 and June 30, 2020 to $11,623,000. OREO balances decreased from $6,753,000 at December 31, 2019 to $5,018,000 at June 30, 2020.

About United Security Bancshares

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

Non-GAAP Financial Measures

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

Forward-Looking Statements

This news release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Company intends such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are based on management's knowledge and belief as of today and are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date. Forward-looking statements are subject to risks and uncertainties and actual results may differ materially from those presented. Factors that might cause such differences, some of which are beyond the Company's ability to control or predict, include, but are not limited to: (1) the effects of the COVID-19 pandemic, including the effects of the steps being taken to address the pandemic and their impact on the Company's market 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 market, impacting the ability to execute its business plans, (6) loss of key personnel, (7) unanticipated credit losses, (8) 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, and (10) 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, 2019, and particularly the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." Readers should carefully review all disclosures the Company files from time to time with the Securities and Exchange Commission.

United Security Bancshares

Consolidated Balance Sheets (unaudited)

(in thousands)

June 30, 2020 December 31, 2019

Assets

Cash and non-interest-bearing deposits in other $ 34,985 $ 27,291 banks

Due from Federal Reserve Bank ("FRB") 194,556 191,704

Cash and cash equivalents 229,541 218,995



Investment securities (at fair value)

Available-for-sale ("AFS") securities 92,877 76,312

Marketable equity securities 3,862 3,776

Total investment securities 96,739 80,088

Loans 649,654 597,374

Unearned fees and unamortized loan origination (1,004) (820) costs - net

Allowance for credit losses (8,862) (7,908)

Net loans 639,788 588,646



Premises and equipment - net 9,441 9,380

Accrued interest receivable 9,146 8,208

Other real estate owned ("OREO") 5,018 6,753

Goodwill 4,488 4,488

Deferred tax assets - net 2,574 3,191

Cash surrender value of life insurance 20,279 20,955

Operating lease right-of-use assets 3,065 3,360

Other assets 11,294 12,855

Total assets $ 1,031,373 $ 956,919



Liabilities and Shareholders' Equity

Deposits

Non-interest-bearing $ 362,010 $ 311,950

Interest-bearing 531,102 506,412

Total deposits 893,112 818,362



Accrued interest payable 36 59

Operating lease liabilities 3,168 3,463

Other liabilities 7,826 8,239

Junior subordinated debentures (at fair value) 9,771 10,808

Total liabilities 913,913 840,931



Shareholders' Equity

Common stock, no par value; 20,000,000 sharesauthorized; issued and outstanding: 16,977,239 at 59,181 58,973 June 30, 2020 and 16,973,885 at December 31, 2019

Retained earnings 58,680 57,647

Accumulated other comprehensive loss (401) (632)

Total shareholders' equity 117,460 115,988

Total liabilities and shareholders' equity $ 1,031,373 $ 956,919

United Security Bancshares

Consolidated Statements of Income (unaudited)

(in thousands)

Three Months Ended June Six Months Ended June 30, 30,

2020 2019 2020 2019

Interest Income:

Interest and fees on loans $ 7,713 $ 8,443 $ 16,059 $ 17,085

Interest on investment 356 444 784 921securities

Interest on deposits in FRB 38 1,424 605 2,722

Total interest income 8,107 10,311 17,448 20,728



Interest Expense:

Interest on deposits 447 890 1,111 1,724

Interest on other borrowed 83 118 180 241funds

Total interest expense 530 1,008 1,291 1,965

Net Interest Income 7,577 9,303 16,157 18,763

Provision for Credit Losses 428 4 2,134 10

Net Interest Income after 7,149 9,299 14,023 18,753Provision for Credit Losses



Noninterest Income:

Customer service fees 618 830 1,346 1,639

Increase in cash surrendervalue of bank-owned life 127 147 258 292insurance

Gain on fair value of 71 53 85 110marketable equity securities

Gain on proceeds from 310 - 310 -bank-owned life insurance

(Loss) gain on fair value ofjunior subordinated (30) 497 1,469 911debentures

Loss on dissolution of real - (5) - (114) estate investment trust

Gain on sale of assets - 6 - 6

Other 118 201 328 408

Total noninterest income 1,214 1,729 3,796 3,252



Noninterest Expense:

Salaries and employee 2,414 2,760 5,409 5,532benefits

Occupancy expense 869 808 1,723 1,621

Data processing 135 144 247 251

Professional fees 555 746 1,257 1,559

Regulatory assessments 77 83 162 176

Director fees 94 95 188 186

Correspondent bank service 17 14 33 28charges

Net cost on operation and 780 87 933 152sale of OREO

Other 612 525 1,193 1,104

Total noninterest expense 5,553 5,262 11,145 10,609



Income Before Provision for 2,810 5,766 6,674 11,396Taxes

Provision for Taxes on 798 1,669 1,906 3,292Income

Net Income $ 2,012 $ 4,097 $ 4,768 $ 8,104



Basic earnings per common $ 0.12 $ 0.24 $ 0.28 $ 0.48 share

Diluted earnings per common $ 0.12 $ 0.24 $ 0.28 $ 0.48 share

Weighted average basic 16,975,588 16,950,564 16,974,845 16,948,810shares for EPS

Weighted average diluted 16,988,778 16,981,705 16,992,223 16,977,224shares for EPS

United Security Bancshares

Average Balances and Rates (unaudited)

(in thousands) Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

Average Balances:

Loans (1) $ 636,840 $ 568,600 $ 619,950 $ 573,436

Investment securities - 97,209 65,268 89,655 66,772 taxable

Interest-bearing deposits 182,755 238,898 180,751 227,335 in FRB

Total interest-earning 916,804 872,766 890,356 867,543 assets

Allowance for credit (9,124) (8,442) (8,515) (8,449) losses

Cash and due from banks 28,432 29,232 28,857 28,793

Other real estate owned 5,969 5,745 6,452 5,745

Other non-earning assets 64,224 61,174 62,845 60,434

Total average assets $ 1,006,305 $ 960,475 $ 979,995 $ 954,066



Interest-bearing deposits $ 516,271 $ 522,308 $ 508,648 $ 522,382

Junior subordinated 8,494 10,378 9,605 10,235 debentures

Total interest-bearing 524,765 532,686 518,253 532,617 liabilities



Non-interest-bearing 352,309 305,211 333,330 300,035 deposits

Other liabilities 10,120 9,495 9,899 9,262

Total liabilities 887,194 847,392 861,482 841,914

Total equity 119,111 113,083 118,513 112,152

Total liabilities and $ 1,006,305 $ 960,475 $ 979,995 $ 954,066 equity



Average Rates:

Loans (1) 4.87 % 5.96 % 5.21 % 6.01 %

Investment securities- 1.47 % 2.73 % 1.76 % 2.78 %taxable

Interest-bearing deposits 0.08 % 2.39 % 0.67 % 2.41 %in FRB

Earning assets 3.56 % 4.74 % 3.94 % 4.82 %

Interest bearing deposits 0.35 % 0.68 % 0.44 % 0.67 %

Total deposits 0.21 % 0.43 % 0.27 % 0.42 %

Junior subordinated 3.93 % 4.56 % 3.77 % 4.75 %debentures

Total interest-bearing 0.41 % 0.76 % 0.50 % 0.74 %liabilities

Net interest margin (2) 3.33 % 4.28 % 3.65 % 4.36 %

(1) Loan amounts include nonaccrual loans, but the related interest income hasbeen included only if collected for the period prior to the loan being placedon a nonaccrual basis.

(2) Net interest margin is computed by dividing annualized net interest incomeby average interest-earning assets.

United Security Bancshares

Condensed - Consolidated Balance Sheets (unaudited)

(in thousands)

June 30, 2020 March 31, December September June 30, 2019 2020 31, 2019 30, 2019

Cash and cash $ 229,541 $ 199,853 $ 218,995 $ 245,943 $ 309,460 equivalents

Investment 96,739 97,486 80,088 81,651 63,632 securities

Loans 648,650 623,686 596,554 569,500 572,810

Allowance for credit (8,862) (9,120) (7,908) (8,230) (8,452) losses

Net loans 639,788 614,566 588,646 561,270 564,358

Other assets 65,305 65,341 69,190 68,534 69,043

Total assets $ 1,031,373 $ 977,246 $ 956,919 $ 957,398 $ 1,006,493



Non-interest-bearing $ 362,010 $ 324,167 $ 311,950 $ 333,156 $ 304,172

Interest-bearing 531,102 516,270 506,412 487,067 566,743

Total deposits 893,112 840,437 818,362 820,223 870,915

Other liabilities 20,801 19,399 22,569 21,965 22,240

Total liabilities 913,913 859,836 840,931 842,188 893,155

Total shareholders' 117,460 117,410 115,988 115,210 113,338 equity

Total liabilitiesand shareholder's $ 1,031,373 $ 977,246 $ 956,919 $ 957,398 $ 1,006,493 equity

United Security Bancshares

Condensed - Consolidated Statements of Income (unaudited)

(in thousands) For the Quarters Ended:

June 30, March 31, December September June 30, 2020 2020 31, 2019 30, 2019 2019

Total interest $ 8,107 $ 9,341 $ 9,558 $ 10,417 $ 10,311 income

Total interest 530 761 862 1,061 1,008 expense

Net interest income 7,577 8,580 8,696 9,356 9,303

Provision for 428 1,707 5 5 4 credit losses

Net interest incomeafter provision for 7,149 6,873 8,691 9,351 9,299 credit losses



Total non-interest 1,214 2,580 647 1,853 1,729 income

Total non-interest 5,553 5,591 5,335 5,335 5,262 expense

Income before 2,810 3,862 4,003 5,869 5,766 provision for taxes

Provision for taxes 798 1,108 1,108 1,696 1,669 on income

Net income $ 2,012 $ 2,754 $ 2,895 $ 4,173 $ 4,097

United Security Bancshares

Nonperforming Assets (unaudited)

(dollars in thousands)

June 30, December 31, 2020 2019

Commercial and industrial $ - $ 75

RE construction & development 11,109 11,478

Agricultural 514 144

Total nonaccrual loans $ 11,623 $ 11,697



Loans past due 90 days and still accruing 269 386

Restructured loans 2,105 2,389

Total nonperforming loans $ 13,997 $ 14,472

Other real estate owned 5,018 6,753

Total nonperforming assets $ 19,015 $ 21,225



Nonperforming loans to total gross loans 2.15 % 2.42 %

Nonperforming assets to total assets 1.84 % 2.22 %

Allowance for credit losses to nonperforming 63.31 % 54.64 %loans

United Security Bancshares

Selected Financial Data (unaudited)

(dollars in thousands, except per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019



Return on average assets 0.80 % 1.71 % 0.98% 1.71%

Return on average equity 6.80 % 14.53 % 8.09% 14.57%

Net charge-off (recoveries) to 0.43 % (0.02) % 0.38% (0.02)average loans %





June 30, December 31, 2020 2019

Shares outstanding - period end 16,977,239 16,973,885

Book value per share $6.92 $6.83

Efficiency ratio (1) 55.86 % 49.99 %

Total impaired loans $15,453 $17,072

Net loan to deposit ratio 71.64 % 71.93 %

Allowance for credit losses to 1.37 % 1.33 % total loans

Total capital to risk weighted assets

Company 17.16 % 17.98 %

Bank 16.97 % 17.78 %

Tier 1 capital to risk-weighted assets

Company 15.92 % 16.81 %

Bank 15.74 % 16.61 %

Common equity tier 1 capital to risk-weighted assets

Company 14.71 % 15.39 %

Bank 15.74 % 16.61 %

Tier 1 capital to adjusted average assets (leverage)

Company 12.25 % 12.82 %

Bank 12.10 % 12.83 %

(1) Efficiency ratio is defined as total noninterest expense divided by netinterest income before provision for credit losses plus total noninterestincome.

United Security Bancshares

Net Income before Non-Core Reconciliation

Non-GAAP Information (dollars in thousands)

(unaudited)

Six Months Ended June 30,

2020 2019 Change $ Change %

Net income $ 4,768 $ 8,104 $ (3,336) (41.16) %



TRUPs (1) fair value adjustment 1,469 911 gain

Write down on OREO (727)

Loss on sale of OREO (113) -

629 911



Income tax effect 182 264

Non-core items net of taxes 447 647



Non-GAAP core net income $ 4,321 $ 7,457 $ (3,136) (42.05) %

(1) TRUPs Fair Value Adjustment is not part of Core Income and depending uponmarket rates, can "add to" or "subtract from" Core Income and mask Non-GAAPCore Income change.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200715005924/en/

CONTACT: Dennis Woods, President and CEO (559) 248-4928