Business Wire | Jan 27, 2021 04:30PM EST

United Security Bancshares reports 2020 net income of $9.0 million

Jan. 27, 2021

FRESNO, Calif.--(BUSINESS WIRE)--Jan. 27, 2021--United Security Bancshares (Nasdaq: UBFO) today announced its unaudited financial results for the year ended December 31, 2020. The Company recognized net income of $8,961,000, or $0.53 per basic and diluted shares for the year ended December 31, 2020, compared to net income of $15,172,000, or $0.90 per basic and $0.89 per diluted shares for the year ended December 31, 2019.

Fourth Quarter 2020 Highlights (at or for the quarter ended December 31, 2020, except where noted)

* Net income for the quarter was $1.922 million, or $0.11 per basic and diluted shares, representing a $973 thousand or 33.61% decrease from $2.895 million, or $0.17 per basic and diluted shares, for the quarter ended December 31, 2019. The decrease is primarily the result of a reduction in interest income related to a lower interest rate environment and higher provision expense for the fourth quarter 2020. * Total assets increased $135.7 million to $1.1 billion, compared to $956.9 million at December 31, 2019 with increases of $58.0 million in gross loan balances, $75.1 million in cash equivalents, and $6.1 million in investment securities. * Total loans, net of unearned fees, increased $57.8 million to $654.3 million, compared to $596.6 million at December 31, 2019. Included in the increase are $9.5 million in Paycheck Protection Program (PPP) loans. At December 31, 2020 there were $515 thousand outstanding in PPP unearned fees. * Total deposits increased $134.3 million to $952.7 million, compared to $818.4 million at December 31, 2019. * The allowance for credit losses as a percentage of gross loans decreased to 1.30%, compared to 1.33% at December 31, 2019. The provision for credit losses totaled $631 thousand for the quarter, compared to $5 thousand for the quarter ended December 31, 2019. The increase in the provision for credit losses during the quarter ended December 31, 2020 was primarily the result of $826 thousand in charge-offs recognized in the student loan portfolio. * Net interest income after the provision for credit losses was $7.4 million for the quarter ended December 31, 2020, compared to $8.7 million for the quarter ended December 31, 2019. * A loss on the fair value of junior subordinated debt of $481 thousand was recorded for the quarter, as compared to a loss of $407 thousand for the quarter ended December 31, 2019. * Book value per share increased to $6.93, compared to $6.83 at December 31, 2019. * Net interest margin decreased to 3.15% from 4.02% for the quarter ended December 31, 2019. * Annualized average cost of deposits decreased to 0.19% from 0.37% for the quarter ended December 31, 2019. * Net charge-offs totaled $817 thousand, compared to net charge-offs of $328 thousand for the quarter ended December 31, 2019. * Capital positions remain well-capitalized with a 11.37% Tier 1 Leverage Ratio compared to 12.82% as of December 31, 2019. * Annualized return on average assets ("ROAA") was 0.70%, compared to 1.21% for the quarter ended December 31, 2019. * Annualized return on average equity ("ROAE") was 6.41%, compared to 9.85% for the quarter ended December 31, 2019.

Dennis Woods, President and Chief Executive Officer, stated: "Our 2020 operating results were significantly impacted by the economic impact of the COVID-19 pandemic. These factors resulted in elevated credit loss provisions, deterioration in net interest margin due to a lower interest rate environment, and a reduction in customer service fee income as we waived many overdraft and ATM fees to provide relief to our customers. Despite the negative impacts of the pandemic, we achieved strong balance sheet growth in our loan portfolio, reduced nonperforming assets, opened a new branch, and grew deposit balances. Our unfunded loan commitments grew $27.4 million during 2020, providing a solid foundation heading into 2021 as we navigate through the pandemic and into economic recovery. In 2021, we will continue to focus on the safety of our employees amid the pandemic, and delivering high quality products and services to our customers, while strategically managing our business to optimize profitability in this challenging environment. Our 2021 plan is centered on repositioning our balance sheet for the current environment, while maintaining strong liquidity and capital levels."

Results of Operations

Net income for the year ended December 31, 2020 decreased $6,211,000 when compared to the year ended December 31, 2019. This decrease was due to a reduction in interest income, a result of a decrease in yields, and the increased provision for credit losses recorded during the current year. ROAE for the year ended December 31, 2020 was 7.55%, compared to 13.30% for the year ended December 31, 2019. ROAA was 0.86% for the year ended December 31, 2020, compared to 1.58% for the year ended December 31, 2019.

The annualized average cost of deposits was 0.22% for the year ended December 31, 2020, a decrease from 0.42% for the year ended December 31, 2019. The decrease in the cost of deposits is primarily attributed to reductions on deposit rates made in the first quarter of 2020. Average interest-bearing deposits increased 3.70% between the years ended December 31, 2019 and 2020 from $516,698,000 to $535,818,000.

Net interest income after the provision for credit losses for the year ended December 31, 2020 totaled $28,853,000, a decrease of $7,941,000, or 21.58%, from $36,794,000 for the same period ended December 31, 2019. Net interest income after the provision for credit losses includes a provision for credit losses of $2,769,000 for the year ended December 31, 2020, compared to a provision of $20,000 for the year ended December 31, 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 4.22% for the year ended December 31, 2019 to 3.34% for the year ended December 31, 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 5.91% for the year ended December 31, 2019 to 4.96% for the year ended December 31, 2020. The yield on interest bearing liabilities decreased from 0.74% for the year ended December 31, 2019 to 0.42% for the year ended December 31, 2020.

Net interest income after the provision for credit losses was $7,366,000 for the quarter ended December 31, 2020, representing a $1,325,000, or 15.25%, decrease compared to the same period ended December 31, 2019. The Company's net interest margin decreased from 4.02% to 3.15% between the quarters ended December 31, 2019 and December 31, 2020. 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. Included in interest income for the quarter ended December 31, 2020 is $517,000 in loan fee income related to SBA PPP loans.

Noninterest income for the year ended December 31, 2020 totaled $5,174,000, reflecting a decrease of $580,000 from the $5,754,000 in non-interest income reported for the year ended December 31, 2019. Customer service fees totaled $2,663,000 and $3,257,000 for the year ended December 31, 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 recorded a decrease of $195,000 in the loss on the fair value of junior subordinated debentures (TRUPs). A gain of $970,000 was realized for the year ended December 31, 2020, compared to a gain of $1,165,000 for the same period ended December 31, 2019. The change in the fair value of TRUPs reflected in noninterest income was caused by fluctuations in the LIBOR yield curve. Noninterest income for the year ended December 31, 2020 includes a $310,000 gain in proceeds from bank-owned life insurance.

Noninterest income for the quarter ended December 31, 2020 totaled $467,000, reflecting a decrease of $180,000 from the $647,000 in non-interest income reported for the quarter ended December 31, 2019. The decrease is attributed to a $130,000 decrease in customer service fees and a $74,000 increase in the loss on fair value of TRUPs. The change in the fair value of TRUPs reflected in noninterest income was caused by fluctuations in the LIBOR yield curve. The decrease in customer service fees is primarily the result of lower fees and surcharges related to insufficient funds and electronic transfers.

For the year ended December 31, 2020, noninterest expense totaled $21,615,000, an increase of $336,000 compared to $21,279,000 for the year ended December 31, 2019. On a year-over-year comparative basis, non-interest expense increased primarily due to a $728,000 increase in expenses related to other real estate owned. The increase in OREO expense was partially due to a write-down of $727,000 on one property and a $113,000 loss on sale of another property. This was partially offset by decreases of $508,000 in professional fees and decreases of $284,000 in salaries and employee benefits. The decrease in professional fees is attributed to a reduction in legal and consulting expense.

Noninterest expense for the quarter ended December 31, 2020 totaled $5,260,000, a decrease of $75,000 as compared to $5,335,000 reported for the quarter ended December 31, 2019. On a quarter-over-quarter comparative basis, non-interest expense decreased due to a $107,000 decrease in salaries and employee benefits expense, a $74,000 decrease in data processing expenses, and a $66,000 decrease in professional fees, partially offset by an increase of $150,000 in regulatory assessments. The increase in regulatory assessments during the 4th quarter 2020 was due an increase in the FDIC assessment rate.

The efficiency ratio for the year ended December 31, 2020 increased to 58.74%, compared to 49.99% for the year ended December 31, 2019. The increase is mainly attributed to a reduction in net interest income as a result of the balance sheet repricing in a lower rate environment, a decrease in customer service fees, and an increase in OREO expense.

The Company recorded an income tax provision of $3,451,000 for the year ended December 31, 2020, compared to $6,097,000 for the same period in 2019. The effective tax rate for the year ended December 31, 2020 was 27.80%, compared to 28.67% for the year ended December 31, 2019. The Company recorded an income tax provision of $651,000 for the quarter ended December 31, 2020, compared to $1,108,000 for the same period in 2019. The effective tax rate for the quarter ended December 31, 2020 was 25.30%, compared to 27.68% for the same period ended December 31, 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 $135,735,000, or 14.18%, between December 31, 2020 and December 31, 2019, due partially to increases of $58,037,000 in gross loan balances and $6,104,000 in investment securities. Total cash and cash equivalents increased $75,074,000 between December 31, 2019 and December 31, 2020. Unfunded loan commitments increased from $197,559,000 at December 31, 2019 to $224,972,000 at December 31, 2020. OREO balances decreased from $6,753,000 at December 31, 2019 to $5,004,000 at December 31, 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 second quarter.

Total deposits increased $134,289,000, or 16.41%, to $952,651,000 during the year ended December 31, 2020. This increase was due to an increase of $79,947,000 in noninterest bearing deposits, $41,631,000 in NOW and money market accounts, and $16,591,000 in savings accounts, partially offset by a decrease of $3,880,000 in time deposits. In total, NOW, money market and savings accounts increased 13.20% to $499,234,000 at December 31, 2020, compared to $441,012,000 at December 31, 2019. Noninterest bearing deposits increased 25.63% to $391,897,000 at December 31, 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 $133,545,000.

Shareholders' equity at December 31, 2020 was $117,807,000, an increase of $1,819,000 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 December 31, 2020 there was an accumulated other comprehensive loss of $728,000, as compared to an accumulated other comprehensive loss of $632,000 at December 31, 2019. The change from December 31, 2019 to December 31, 2020 was the result of losses on junior subordinated debentures (TRUPs) caused by a change in non-LIBOR yields during the period and unrealized loss on unrecognized post retirement costs, partially offset by unrealized gains on available for sale securities.

The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on December 15, 2020. The dividend was payable on January 19, 2021, to shareholders of record as of January 4, 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 has recorded a provision for credit losses of $2,769,000 for the year ended December 31, 2020, compared to a provision of $20,000 for the year ended December 31, 2019. Net loan charge-offs totaled $2,155,000 for the year ended December 31, 2020, as compared to net loan charge-offs of $507,000 for the year ended December 31, 2019. The provision recorded during the year is attributed to growth of the loan portfolio, increases in net charge-offs, and adjustment in qualitative factors related to the economic uncertainties caused by COVID-19. As of December 31, 2020, the Company had 1 remaining payment modification of $12,500,000 in connection with the COVID-19 relief provided by the CARES Act and interagency guidance issued in March 2020. The original deferrals of $69.8 million were generally no more than six months in duration and were not considered troubled debt restructurings. The Company recorded a provision for credit loss of $631,000 for the quarter ended December 31, 2020, compared to a provision of $5,000 for the quarter ended December 31, 2019.

The Company's allowance for loan loss totaled 1.30% of the loan portfolio at December 31, 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 1.32% of the loan portfolio at December 31, 2020.

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 $3,769,000 or 17.76% between December 31, 2019 and December 31, 2020 to $17,456,000. Nonperforming assets as a percentage of total assets decreased from 2.22% at December 31, 2019 to 1.60% at December 31, 2020. The decrease in nonperforming assets is primarily attributed to the reduction in OREO, nonaccrual loans, and accruing TDR balances. Restructured loans decreased $1,761,000 between December 31, 2019 and December 31, 2020, and nonaccrual loans decreased $201,000 between December 31, 2019 and December 31, 2020 to $11,496,000. OREO balances decreased from $6,753,000 at December 31, 2019 to $5,004,000 at December 31, 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 12 full-service branch offices in Fresno, Bakersfield, Campbell, Caruthers, Coalinga, Firebaugh, Mendota, 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, 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 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 or value 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, in particular 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)

December December 31, 2020 31, 2019

Assets

Cash and non-interest-bearing deposits in other $ 29,490 $ 27,291 banks

Due from Federal Reserve Bank ("FRB") 264,579 191,704

Cash and cash equivalents 294,069 218,995



Investment securities (at fair value)

Available-for-sale ("AFS") securities 82,341 76,312

Marketable equity securities 3,851 3,776

Total investment securities 86,192 80,088

Loans 655,411 597,374

Unearned fees and unamortized loan origination (1,064) (820) costs - net

Allowance for credit losses (8,522) (7,908)

Net loans 645,825 588,646



Premises and equipment - net 8,164 9,380

Accrued interest receivable 9,110 8,208

Other real estate owned ("OREO") 5,004 6,753

Goodwill 4,488 4,488

Deferred tax assets - net 2,907 3,191

Cash surrender value of life insurance 20,715 20,955

Operating lease right-of-use assets 2,864 3,360

Other assets 13,316 12,855

Total assets $ 1,092,654 $ 956,919



Liabilities and Shareholders' Equity

Deposits

Non-interest-bearing $ 391,897 $ 311,950

Interest-bearing 560,754 506,412

Total deposits 952,651 818,362



Accrued interest payable 33 59

Operating lease liabilities 2,966 3,463

Other liabilities 8,273 8,239

Junior subordinated debentures (at fair value) 10,924 10,808

Total liabilities 974,847 840,931



Shareholders' Equity

Common stock, no par value; 20,000,000 sharesauthorized; issued and outstanding: 17,009,883 at 59,397 58,973 December 31, 2020 and 16,973,885 at December 31,2019

Retained earnings 59,138 57,647

Accumulated other comprehensive loss (728) (632)

Total shareholders' equity 117,807 115,988

Total liabilities and shareholders' equity $ 1,092,654 $ 956,919

United Security Bancshares

Consolidated Statements of Income (unaudited)

(in thousands)

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

Interest Income:

Interest and fees on loans

$

8,127

$

8,292

$

31,749

$

34,025

Interest on investment securities

306

437

1,433

1,797

Interest on deposits in FRB

63

829

730

4,880

Total interest income

8,496

9,558

33,912

40,702

Interest Expense:

Interest on deposits

452

758

2,014

3,432

Interest on other borrowed funds

47

104

276

456

Total interest expense

499

862

2,290

3,888

Net Interest Income

7,997

8,696

31,622

36,814

Provision for Credit Losses

631

5

2,769

20

Net Interest Income after Provision for Credit Losses

7,366

8,691

28,853

36,794

Noninterest Income:

Customer service fees

648

778

2,663

3,257

Increase in cash surrender value of bank-owned life insurance

122

89

504

528

(Loss) gain on fair value of marketable equity securities

(14)

(11)

74

117

Gain on proceeds from bank-owned life insurance

-

-

310

-

(Loss) gain on fair value of junior subordinated debentures

(481)

(407)

970

1,165

Recovery on investment

64

-

64

-

Loss on dissolution of real estate investment trust

-

-

-

(115)

(Loss) gain on sale of assets

-

-

-

1

Other

128

198

589

801

Total noninterest income

467

647

5,174

5,754

Noninterest Expense:

Salaries and employee benefits

2,694

2,801

10,825

11,109

Occupancy expense

865

882

3,475

3,332

Data processing

107

181

493

583

Professional fees

691

757

2,672

3,180

Regulatory assessments

176

26

459

164

Director fees

94

91

376

373

Correspondent bank service charges

19

15

71

57

Net cost on operation and sale of OREO

4

22

972

244

Other

610

560

2,272

2,237

Total noninterest expense

5,260

5,335

21,615

21,279

Income Before Provision for Taxes

2,573

4,003

12,412

21,269

Provision for Taxes on Income

651

1,108

3,451

6,097

Net Income

$

1,922

$

2,895

$

8,961

$

15,172

Basic earnings per common share

$

0.11

$

0.17

$

0.53

$

0.90

Diluted earnings per common share

$

0.11

$

0.17

$

0.53

$

0.89

Weighted average basic shares for EPS

16,979,845

16,956,350

16,976,704

16,951,955

Weighted average diluted shares for EPS

17,017,265

16,994,260

16,998,584

16,984,796

United Security Bancshares

Consolidated Statements of Income (unaudited)

(in thousands)

Three Months Ended Year Ended December 31, December 31,

2020 2019 2020 2019

Interest Income:

Interest and fees on $ 8,127 $ 8,292 $ 31,749 $ 34,025 loans

Interest on investment 306 437 1,433 1,797securities

Interest on deposits in 63 829 730 4,880FRB

Total interest income 8,496 9,558 33,912 40,702



Interest Expense:

Interest on deposits 452 758 2,014 3,432

Interest on other 47 104 276 456borrowed funds

Total interest expense 499 862 2,290 3,888

Net Interest Income 7,997 8,696 31,622 36,814

Provision for Credit 631 5 2,769 20Losses

Net Interest Incomeafter Provision for 7,366 8,691 28,853 36,794Credit Losses



Noninterest Income:

Customer service fees 648 778 2,663 3,257

Increase in cashsurrender value of 122 89 504 528bank-owned lifeinsurance

(Loss) gain on fairvalue of marketable (14) (11) 74 117equity securities

Gain on proceeds frombank-owned life - - 310 - insurance

(Loss) gain on fairvalue of junior (481) (407) 970 1,165subordinated debentures

Recovery on investment 64 - 64 -

Loss on dissolution ofreal estate investment - - - (115) trust

(Loss) gain on sale of - - - 1 assets

Other 128 198 589 801

Total noninterest 467 647 5,174 5,754income



Noninterest Expense:

Salaries and employee 2,694 2,801 10,825 11,109benefits

Occupancy expense 865 882 3,475 3,332

Data processing 107 181 493 583

Professional fees 691 757 2,672 3,180

Regulatory assessments 176 26 459 164

Director fees 94 91 376 373

Correspondent bank 19 15 71 57service charges

Net cost on operation 4 22 972 244and sale of OREO

Other 610 560 2,272 2,237

Total noninterest 5,260 5,335 21,615 21,279expense



Income Before Provision 2,573 4,003 12,412 21,269for Taxes

Provision for Taxes on 651 1,108 3,451 6,097Income

Net Income $ 1,922 $ 2,895 $ 8,961 $ 15,172



Basic earnings per $ 0.11 $ 0.17 $ 0.53 $ 0.90 common share

Diluted earnings per $ 0.11 $ 0.17 $ 0.53 $ 0.89 common share

Weighted average basic 16,979,845 16,956,350 16,976,704 16,951,955shares for EPS

Weighted average 17,017,265 16,994,260 16,998,584 16,984,796diluted shares for EPS

United Security Bancshares

Average Balances and Rates (unaudited)

(in thousands)

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

Average Balances:

Loans (1)

$

662,445

$

578,082

$

639,815

$

576,015

Investment securities - taxable

89,331

80,958

90,685

71,456

Interest-bearing deposits in FRB

258,071

198,803

217,273

223,488

Total interest-earning assets

1,009,847

857,843

947,773

870,960

Allowance for credit losses

(8,687)

(8,199)

(8,661)

(8,386)

Cash and due from banks

31,348

29,979

30,300

29,169

Other real estate owned

5,165

6,446

5,815

5,922

Other non-earning assets

61,525

62,937

61,742

61,572

Total average assets

$

1,099,198

$

949,006

$

1,036,969

$

959,237

Interest-bearing deposits

$

573,558

$

497,675

$

535,818

$

516,698

Junior subordinated debentures

10,061

10,266

9,746

10,289

Total interest-bearing liabilities

583,619

507,941

545,564

526,987

Non-interest-bearing deposits

386,534

314,245

363,004

308,518

Other liabilities

9,861

10,230

9,674

9,683

Total liabilities

980,014

832,416

918,242

845,188

Total equity

119,184

116,590

118,727

114,049

Total liabilities and equity

$

1,099,198

$

949,006

$

1,036,969

$

959,237

Average Rates:

Loans (1)

4.88

%

5.69

%

4.96

%

5.91

%

Investment securities

1.36

%

2.14

%

1.58

%

2.51

%

Interest-bearing deposits in FRB

0.10

%

1.65

%

0.34

%

2.18

%

Earning assets

3.35

%

4.42

%

3.58

%

4.67

%

Interest bearing deposits

0.31

%

0.60

%

0.38

%

0.66

%

Total deposits

0.19

%

0.37

%

0.22

%

0.42

%

Junior subordinated debentures

1.86

%

4.02

%

2.83

%

4.43

%

Total interest-bearing liabilities

0.34

%

0.67

%

0.42

%

0.74

%

Net interest margin (2)

3.15

%

4.02

%

3.34

%

4.22

%

(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

Average Balances and Rates (unaudited)

(in thousands) Three Months Ended December Year Ended December 31, 31,

2020 2019 2020 2019

Average Balances:

Loans (1) $ 662,445 $ 578,082 $ 639,815 $ 576,015

Investment securities - 89,331 80,958 90,685 71,456 taxable

Interest-bearing deposits 258,071 198,803 217,273 223,488 in FRB

Total interest-earning 1,009,847 857,843 947,773 870,960 assets

Allowance for credit (8,687) (8,199) (8,661) (8,386) losses

Cash and due from banks 31,348 29,979 30,300 29,169

Other real estate owned 5,165 6,446 5,815 5,922

Other non-earning assets 61,525 62,937 61,742 61,572

Total average assets $ 1,099,198 $ 949,006 $ 1,036,969 $ 959,237



Interest-bearing deposits $ 573,558 $ 497,675 $ 535,818 $ 516,698

Junior subordinated 10,061 10,266 9,746 10,289 debentures

Total interest-bearing 583,619 507,941 545,564 526,987 liabilities



Non-interest-bearing 386,534 314,245 363,004 308,518 deposits

Other liabilities 9,861 10,230 9,674 9,683

Total liabilities 980,014 832,416 918,242 845,188

Total equity 119,184 116,590 118,727 114,049

Total liabilities and $ 1,099,198 $ 949,006 $ 1,036,969 $ 959,237 equity



Average Rates:

Loans (1) 4.88 % 5.69 % 4.96 % 5.91 %

Investment securities 1.36 % 2.14 % 1.58 % 2.51 %

Interest-bearing deposits 0.10 % 1.65 % 0.34 % 2.18 %in FRB

Earning assets 3.35 % 4.42 % 3.58 % 4.67 %

Interest bearing deposits 0.31 % 0.60 % 0.38 % 0.66 %

Total deposits 0.19 % 0.37 % 0.22 % 0.42 %

Junior subordinated 1.86 % 4.02 % 2.83 % 4.43 %debentures

Total interest-bearing 0.34 % 0.67 % 0.42 % 0.74 %liabilities

Net interest margin (2) 3.15 % 4.02 % 3.34 % 4.22 %

(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)

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

Cash and cash $ 294,069 $ 323,332 $ 229,541 $ 199,853 $ 218,995 equivalents

Investment 86,192 91,782 96,739 97,486 80,088 securities

Loans 654,347 660,444 648,650 623,686 596,554

Allowance for credit (8,522) (8,708) (8,862) (9,120) (7,908) losses

Net loans 645,825 651,736 639,788 614,566 588,646

Other assets 66,568 67,097 65,305 65,341 69,190

Total assets $ 1,092,654 $ 1,133,947 $ 1,031,373 $ 977,246 $ 956,919



Non-interest-bearing $ 391,897 $ 430,028 $ 362,010 $ 324,167 $ 311,950

Interest-bearing 560,754 564,755 531,102 516,270 506,412

Total deposits 952,651 994,783 893,112 840,437 818,362

Other liabilities 22,196 21,111 20,801 19,399 22,569

Total liabilities 974,847 1,015,894 913,913 859,836 840,931

Total shareholders' 117,807 118,053 117,460 117,410 115,988 equity

Total liabilitiesand shareholder's $ 1,092,654 $ 1,133,947 $ 1,031,373 $ 977,246 $ 956,919 equity

United Security Bancshares

Condensed - Consolidated Statements of Income (unaudited)

(in thousands)

For the Quarters Ended:

December 31, 2020

September 30, 2020

June 30, 2020

March 31, 2020

December 31, 2019

Total interest income

$

8,496

$

7,968

$

8,107

$

9,341

$

9,558

Total interest expense

499

500

530

761

862

Net interest income

7,997

7,468

7,577

8,580

8,696

Provision for credit losses

631

4

428

1,707

5

Net interest income after provision for credit losses

7,366

7,464

7,149

6,873

8,691

Total non-interest income

467

911

1,214

2,580

647

Total non-interest expense

5,260

5,210

5,553

5,591

5,335

Income before provision for taxes

2,573

3,165

2,810

3,862

4,003

Provision for taxes on income

651

894

798

1,108

1,108

Net income

$

1,922

$

2,271

$

2,012

$

2,754

$

2,895

United Security Bancshares

Condensed - Consolidated Statements of Income (unaudited)

(in thousands) For the Quarters Ended:

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

Total interest income $ 8,496 $ 7,968 $ 8,107 $ 9,341 $ 9,558

Total interest expense 499 500 530 761 862

Net interest income 7,997 7,468 7,577 8,580 8,696

Provision for credit 631 4 428 1,707 5 losses

Net interest incomeafter provision for 7,366 7,464 7,149 6,873 8,691 credit losses



Total non-interest 467 911 1,214 2,580 647 income

Total non-interest 5,260 5,210 5,553 5,591 5,335 expense

Income before 2,573 3,165 2,810 3,862 4,003 provision for taxes

Provision for taxes on 651 894 798 1,108 1,108 income

Net income $ 1,922 $ 2,271 $ 2,012 $ 2,754 $ 2,895

United Security Bancshares

Nonperforming Assets (unaudited)

(dollars in thousands)

December 31, 2020

December 31, 2019

Commercial and industrial

$

-

$

75

RE construction & development

11,057

11,478

Agricultural

439

144

Total nonaccrual loans

$

11,496

$

11,697

Loans past due 90 days and still accruing

513

386

Restructured loans

535

2,389

Total nonperforming loans

$

12,544

$

14,472

Other real estate owned

5,004

6,753

Total nonperforming assets

$

17,548

$

21,225

Nonperforming loans to total gross loans

1.90

%

2.42

%

Nonperforming assets to total assets

1.60

%

2.22

%

Allowance for credit losses to nonperforming loans

68.44

%

54.64

%

United Security Bancshares

Nonperforming Assets (unaudited)

(dollars in thousands)

December 31, December 31, 2020 2019

Commercial and industrial $ - $ 75

RE construction & development 11,057 11,478

Agricultural 439 144

Total nonaccrual loans $ 11,496 $ 11,697



Loans past due 90 days and still accruing 513 386

Restructured loans 535 2,389

Total nonperforming loans $ 12,544 $ 14,472

Other real estate owned 5,004 6,753

Total nonperforming assets $ 17,548 $ 21,225



Nonperforming loans to total gross loans 1.90 % 2.42 %

Nonperforming assets to total assets 1.60 % 2.22 %

Allowance for credit losses to nonperforming 68.44 % 54.64 %loans

United Security Bancshares

Selected Financial Data (unaudited)

(dollars in thousands, except per share amounts)

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

Return on average assets

0.70

%

1.21

%

0.86%

1.58%

Return on average equity

6.41

%

9.85

%

7.55%

13.30%

Net charge-off to average loans

0.49

%

0.23

%

0.34%

0.09%

December 31, 2020

December 31, 2019

Shares outstanding - period end

17,009,883

16,973,885

Book value per share

$6.93

$6.83

Efficiency ratio (1)

58.74

%

49.99

%

Total impaired loans

$13,376

$17,072

Net loan to deposit ratio

67.79

%

71.93

%

Allowance for credit losses to total loans

1.30

%

1.33

%

Tier 1 capital to adjusted average assets (leverage)

Company

11.37

%

12.82

%

Bank

11.17

%

12.83

%

(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

Selected Financial Data (unaudited)

(dollars in thousands, except per share amounts)

Three Months Ended December Year Ended 31, December 31,

2020 2019 2020 2019



Return on average assets 0.70 % 1.21 % 0.86% 1.58%

Return on average equity 6.41 % 9.85 % 7.55% 13.30%

Net charge-off to average loans 0.49 % 0.23 % 0.34% 0.09%





December 31, December 31, 2020 2019

Shares outstanding - period end 17,009,883 16,973,885

Book value per share $6.93 $6.83

Efficiency ratio (1) 58.74 % 49.99 %

Total impaired loans $13,376 $17,072

Net loan to deposit ratio 67.79 % 71.93 %

Allowance for credit losses to 1.30 % 1.33 % total loans

Tier 1 capital to adjusted average assets (leverage)

Company 11.37 % 12.82 %

Bank 11.17 % 12.83 %

(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)

Year Ended December 31,

2020 2019 Change $ Change %

Net income $ 8,961 $ 15,172 $ (6,211) (40.94) %



TRUPs (1) fair value 970 1,165 adjustment gain

Write down on OREO (2) (727) -

Loss on sale of OREO (2) (113) -

130 1,165



Income tax effect 38 338

Non-core items net of taxes 92 827



Non-GAAP core net income $ 8,869 $ 14,345 $ (5,476) (38.17) %



Core net income basic 0.52 0.85 earnings per share (EPS)

Core net income diluted 0.52 0.84 earnings per share (EPS)

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

(2) 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/20210127005956/en/

CONTACT: Dennis Woods, President & CEO 559-248-4928