Business Wire | Jul 21, 2021 05:18PM EDT

United Security Bancshares Reports 2nd Quarter Net Income of $2.7 Million

Jul. 21, 2021

FRESNO, Calif.--(BUSINESS WIRE)--Jul. 21, 2021--United Security Bancshares (Nasdaq: UBFO) today announced its unaudited financial results for the three and six months ended June 30, 2021. The Company recognized net income of $4.1 million, or $0.24 per basic and diluted share for the six months ended June 30, 2021, compared to net income of $4.8 million, or $0.28 per basic and diluted share for the six months ended June 30, 2020.

Second Quarter 2021 Highlights (at or for the quarter ended June 30, 2021, except where noted)

* Net income for the quarter increased 34.44% to $2.7 million, compared to $2.0 million for the quarter ended June 30, 2020. The increase is primarily the result of an increase of $859,000 in loan interest income and fees, and decrease in OREO expense of $890,000. * Total assets increased 12.67% to $1.23 billion, compared to $1.09 billion at December 31, 2020. * Total loans, net of unearned fees, increased 28.69% to $842.0 million, compared to $654.3 million at December 31, 2020. * Total investments increased 98.12%, or $84.6 million, to $170.8 million, compared to $86.2 million at December 31, 2020. * Total deposits increased 14.46% to $1.09 billion, compared to $952.7 million at December 31, 2020. * The allowance for credit losses as a percentage of gross loans decreased to 1.09%, compared to 1.30% at December 31, 2020. The decrease in the allowance for credit losses as a percentage of gross loans is from improved credit quality resulting from an increase in residential mortgage loans purchased during the quarter. * Net interest income after the provision for credit losses was $8.1 million for the quarter ended June 30, 2021, compared to $7.3 million for the quarter ended June 30, 2020. * Book value per share increased to $6.96, compared to $6.93 at December 31, 2020. * Net interest margin decreased to 3.22% from 3.39% for the quarter ended June 30, 2020. * Annualized average cost of deposits decreased to 0.17% from 0.21% for the quarter ended June 30, 2020. * Net charge-offs totaled $174,000, compared to net charge-offs of $686,000 for the quarter ended June 30, 2020. * Capital position remains well-capitalized with a 10.28% Tier 1 Leverage Ratio compared to 11.37% as of December 31, 2020. * Annualized return on average assets ("ROAA") was 0.89%, compared to 0.80% for the quarter ended June 30, 2020. * Annualized return on average equity ("ROAE") was 9.15%, compared to 6.80% for the quarter ended June 30, 2020.

Dennis Woods, President and Chief Executive Officer, stated: "We successfully executed the first phase of our 2021 Strategy to deploy excess cash during the second quarter, and although this improved our results for the second quarter, we will see the full impact reflected in our earnings during the third quarter and beyond. We grew our loan and investment portfolios by $189 million during the second quarter and also grew deposits by $43 million. Our outlook on growth and profitability for the second half of 2021 remains upbeat."

Results of Operations

Six Months Ended June 30, 2021:

Net income for the six months ended June 30, 2021 decreased $653,000 when compared to the six months ended June 30, 2020. The decrease is the result of the change in the fair value of junior subordinated debentures, partially offset by lower provision for credit losses. The change in fair value of junior subordinated debentures, which is caused by changes in LIBOR rates, reflected as a $1.5 million gain for the six months ended June 30, 2020, compared to a $656,000 loss for the six months ended June 30, 2021. The provision for credit losses was $1.2 million for the six months ended June 30, 2021, compared to $2.1 million for the six months ended June 30, 2020. ROAE for the six months ended June 30, 2021 was 7.00%, compared to 8.09% for the six months ended June 30, 2020. ROAA was 0.71% for the six months ended June 30, 2021, compared to 0.98% for the six months ended June 30, 2020.

The annualized average cost of deposits was 0.17% for the six months ended June 30, 2021, a decrease from 0.27% for the six months ended June 30, 2020. The decrease in the cost of deposits is primarily attributed to decreases in deposit rates made during 2020 and being fully reflected in 2021. Average interest-bearing deposits increased 19.56% between the periods ended June 30, 2020 and 2021 from $508.6 million to $608.1 million, respectively.

Net interest income for the six months ended June 30, 2021 totaled $16.9 million, an increase of $491,000, or 2.99%, from $16.4 million for the same period ended June 30, 2020. The Company's net interest margin contracted from 3.72% for the six months ended June 30, 2020 to 3.19% for the six months ended June 30, 2021. The decrease was the result of decreases in yields on loans, investment securities, and interest-bearing deposits held at the federal reserve resulting from the low interest rate environment. This decrease is partially offset by a decrease in the yield on interest-bearing liabilities. Loan yields decreased from 5.30% to 4.72% between the two periods. The yield on interest-bearing liabilities decreased from 0.50% to 0.32% between the two periods. Included in interest income for six months ended June 30, 2021 were $544,000 in fees related to SBA PPP loans.

Noninterest income for the six months ended June 30, 2021 totaled $1.2 million, a decrease of $2.6 million when compared to the $3.8 million reported for the six months ended June 30, 2020. Customer service fees totaled $1.3 million for both the six months ended June 30, 2021 and June 30, 2020. On a year-over-year comparative basis, noninterest income decreased primarily due to a loss on the fair value of junior subordinated debentures (TRUPs) of $656,000 for the six months ended June 30, 2021, compared to a gain of $1.5 million for the same period in 2020. 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 six month ended June 30, 2020, includes a $310,000 gain in proceeds from bank-owned life insurance.

For the six months ended June 30, 2021, noninterest expense totaled $11.2 million, a decrease of $264,000 compared to $11.4 million for the six months ended June 30, 2020. On a year-over-year comparative basis, noninterest expense decreased primarily due to a decrease in OREO expense of $890,000 which included the write-down of $727,000 on a property during 2020. Offsetting that decrease were increases in salaries and employee benefits and professional fees of $508,000 and $144,000, respectively.

The efficiency ratio for the six months ended June 30, 2021 increased to 61.72%, compared to 56.49% for the six months ended June 30, 2020. The increase is attributed to the decrease in total interest and noninterest income.

The Company recorded an income tax provision of $1.6 million for the six months ended June 30, 2021, compared to $1.9 million for the same period in 2020. The effective tax rate for the six months ended June 30, 2021 was 28.16%, compared to 28.56% for the six months ended June 30, 2020.

Quarter Ended June 30, 2021:

For the quarter ended June 30, 2021, the Company reported net income of $2.7 million and earnings per diluted share of $0.16, compared to net income of $2.0 million and $0.12 per diluted share for the same period ended June 30, 2020. Net income for the immediately trailing quarter ended March 31, 2021 was $1.4 million and $0.08 per diluted share.

Net interest income was $8.9 million for the quarter ended June 30, 2021, representing a $1.2 million, or 15.27%, increase compared to the same period ended June 30, 2020. The increase in net interest income is driven by additional income generated by loan and investment portfolio growth. The Company's net interest margin decreased from 3.39% to 3.22% between the quarters ended June 30, 2020 and June 30, 2021, respectively. The reduction in net interest margin is driven by the reduction in yields on all interest earning assets, partially offset by a decrease in average rate paid on deposits. Net interest income during the quarter ended June 30, 2021 increased 10.5% from the $8.0 million reported during the quarter ended March 31, 2021. Included in net interest income for the quarter ended June 30, 2021 is the partial impact of the loan and investment purchases made during the second quarter.

Noninterest income for the quarter ended June 30, 2021 totaled $1.3 million, an increase of $108,000 from the $1.2 million in non-interest income reported for the quarter ended June 30, 2020. The increase is attributed to a $407,000 increase in the fair value of TRUPs, recorded as a $377,000 gain for the quarter ended June 30, 2021 compared to a $30,000 loss for the quarter ended June 30, 2020. The change in the fair value of TRUPs reflected in noninterest income was caused by a decrease in the LIBOR yield curve. Noninterest income for the quarter ended June 30, 2020, includes a $310,000 non-recurring gain in proceeds from bank-owned life insurance. Noninterest income increased $1.5 million between the quarters ended March 31, 2021 and June 30, 2021. The increase is attributed to the change in the fair value of junior subordinated debentures, which was reported as a $1.0 million loss during the quarter ended March 31, 2021.

Noninterest expense for the quarter ended June 30, 2021 totaled $5.6 million, reflecting a $84,000 decrease over $5.7 million reported for the quarter ended June 30, 2020, and a $40,000 increase from the quarter ended March 31, 2021 . Noninterest expense for the quarter ended June 30, 2020 includes a $726,000 write down on OREO and lower employee salary expense due to reduced work hours as a result of COVID-19.

The Company recorded an income tax provision of $1.1 million for the quarter ended June 30, 2021, compared to $798,000 for the quarter ended June 30, 2020, and $537,000 for the quarter ended March 31, 2021. The effective tax rate for the quarter ended June 30, 2021 was 28.48%, compared to 28.40% and 27.6% for the quarters ended June 30, 2020 and March 31, 2021, respectively.

Balance Sheet Review

Total assets increased $138.4 million, or 12.67%, between June 30, 2021 and December 31, 2020. Gross loan balances increased $185.7 million and $84.6 million in investment securities. As a result of growth in the loan and investment portfolios, total cash and cash equivalents decreased $133.2 million between December 31, 2020 and June 30, 2021. Unfunded loan commitments decreased from $216.8 million at December 31, 2020 to $192.5 million at June 30, 2021. OREO balances decreased from $5.0 million at December 31, 2020 to $4.8 million at June 30, 2021. The reduction is attributed to the receipt of partial proceeds on the sale of one OREO property during the quarter.

Total deposits increased $137.8 million, or 14.46%, to $1.09 billion during the six months ended June 30, 2021. This increase was due to increases of $50.2 million in noninterest bearing deposits, $76.8 million in NOW and money market accounts, $9.1 million in savings accounts, and an increase of $1.6 million in time deposits. In total, NOW, money market and savings accounts increased 17.22% to $585.2 million at June 30, 2021, compared to $499.2 million at December 31, 2020. Noninterest bearing deposits increased 12.82% to $442.1 million at June 30, 2021, compared to $391.9 million at December 31, 2020. Core deposits, which are made up of the balance of noninterest bearing deposits, NOW, money market, savings, and time deposits accounts less than $250,000, increased $137.0 million.

Shareholders' equity at June 30, 2021 was $118.4 million, an increase of $558,000 from shareholders' equity of $117.8 million at December 31, 2020. This increase in equity was the result of net retained earnings and the decrease in accumulated other comprehensive loss. At June 30, 2021 there was an accumulated other comprehensive loss of $638,000, as compared to an accumulated other comprehensive loss of $728,000 at December 31, 2020. The change from December 31, 2020 to June 30, 2021 was the result of a gain on junior subordinated debentures (TRUPs) caused by a change in market credit spreads during the six month period ended.

The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on June 22, 2021. The dividend was payable on July 16, 2021, to shareholders of record as of July 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. The Company continues to be well capitalized and expects to maintain adequate capital levels.

Credit Quality

The Company recorded a provision for credit losses of $1.2 million for the six months ended June 30, 2021, compared to a provision of $2.1 million for the six months ended June 30, 2020. Net loan charge-offs totaled $523,000 for the six months ended June 30, 2021, as compared to net loan charge-offs of $1.2 million for the six months ended June 30, 2020. Net charge-offs totaled $174,000 for the quarter ended June 30, 2021, compared to $686,000 and $348,000 for the quarters ended June 30, 2020 and March 31, 2021, respectively. The provision recorded during the year is attributed to loan portfolio growth, agricultural loan downgrades, student loan charge-offs, partially offset by the continuation of the positive trend in non-consumer loss factor adjustments. For the six months ended June 30, 2020 the provision recorded was attributed to growth of the loan portfolio, net charge-offs, and economic uncertainty resulting from COVID-19. In 2020, the Company had executed a total of 28 payment deferrals or modifications on outstanding loan balances of $70.0 million 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 June 30, 2021, there were no modifications outstanding.

The Company's allowance for loan loss totaled 1.09% of the loan portfolio at June 30, 2021, compared to 1.30% at December 31, 2020. The decrease in the allowance for credit losses as a percentage of gross loans is from improved credit quality resulting from an increase in residential mortgage loans purchased during the quarter. The reserve required on the residential mortgage loan segment is lower than reserves required for other loan segments due to lower historical loss rates. 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, 2021 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 $962,000 between December 31, 2020 and June 30, 2021 to $16.6 million. Nonperforming assets as a percentage of total assets decreased from 1.61% at December 31, 2020 to 1.35% at June 30, 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 $156,000 at June 30, 2021. Additionally, total restructured loans decreased $353,000 between December 31, 2020 and June 30, 2021, and nonaccrual loans decreased $231,000 between December 31, 2020 and June 30, 2021 to $11.3 million. OREO balances decreased from $5.0 million at December 31, 2020 to $4.8 million at June 30, 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.

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)

June 30, December June 30, 2021 31, 2020 2020

Assets

Cash andnon-interest-bearing $ 43,240 $ 29,490 $ 34,985 deposits in other banks

Due from Federal Reserve 117,668 264,579 194,556 Bank ("FRB")

Cash and cash equivalents 160,908 294,069 229,541



Investment securities (at fair value)

Available-for-sale 166,976 82,341 92,877 ("AFS") securities

Marketable equity 3,791 3,851 3,862 securities

Total investment 170,767 86,192 96,739 securities

Loans 841,103 655,411 649,654

Unearned fees andunamortized loan 946 (1,064 ) (1,004 ) origination costs - net

Allowance for credit (9,200 ) (8,522 ) (8,862 ) losses

Net loans 832,849 645,825 639,788



Premises and equipment - 8,877 9,110 9,441 net

Accrued interest 8,600 8,164 9,146 receivable

Other real estate owned 4,753 5,004 5,018

Goodwill 4,488 4,488 4,488

Deferred tax assets - net 3,063 2,907 2,574

Cash surrender value of 21,904 20,715 20,279 life insurance

Operating lease 2,600 2,864 3,065 right-of-use assets

Other assets 12,246 13,316 11,294

Total assets $ 1,231,055 $ 1,092,654 $ 1,031,373



Liabilities and Shareholders' Equity

Deposits

Non-interest-bearing $ 442,140 $ 391,897 $ 362,010

Interest-bearing 648,302 560,754 531,102

Total deposits 1,090,442 952,651 893,112



Operating lease 2,707 2,967 3,168 liabilities

Other liabilities 8,288 8,305 7,862

Junior subordinateddebentures (at fair 11,253 10,924 9,771 value)

Total liabilities 1,112,690 974,847 913,913



Shareholders' Equity

Common stock, no parvalue; 20,000,000 sharesauthorized; issued andoutstanding: 17,010,288 59,496 59,397 59,181 at June 30, 2021,17,009,883 at December31, 2020, and 16,977,239at June 30, 2020.

Retained earnings 59,507 59,138 58,680

Accumulated other (638 (728 (401 comprehensive loss ) ) )

Total shareholders' 118,365 117,807 117,460 equity

Total liabilities and $ 1,231,055 $ 1,092,654 $ 1,031,373 shareholders' equity

United Security Bancshares

Consolidated Statements of Income (unaudited)

(in thousands)

Three Months Ended

Six Months Ended June 30,

June 30, 2021

March 31, 2021

June 30, 2020

2021

2020

Interest Income:

Interest and fees on loans

$

8,708

$

8,071

$

7,849

$

16,779

$

16,348

Interest on investment securities

654

387

356

1,041

784

Interest on deposits in FRB

42

62

38

104

605

Total interest income

9,404

8,520

8,243

17,924

17,737

Interest Expense:

Interest on deposits

468

427

447

895

1,111

Interest on other borrowed funds

45

46

83

92

180

Total interest expense

513

473

530

987

1,291

Net Interest Income

8,891

8,047

7,713

16,937

16,446

Provision for Credit Losses

826

375

428

1,201

2,134

Net Interest Income after Provision for Credit Losses

8,065

7,672

7,285

15,736

14,312

Noninterest Income:

Customer service fees

692

656

618

1,348

1,346

Increase in cash surrender value of bank-owned life insurance

138

132

127

269

258

Unrealized gain (loss) on fair value of marketable equity securities

-

(60

)

71

(60

)

85

Gain on proceeds from bank-owned life insurance

-

-

310

-

310

Gain (loss) on fair value of junior subordinated debentures

377

(1,033

)

(30

)

(656

)

1,469

Gain on sale of assets

-

-

-

13

-

Other

115

133

118

248

328

Total noninterest income

1,322

(172

)

1,214

1,162

3,796

Noninterest Expense:

Salaries and employee benefits

2,893

3,024

2,414

5,917

5,409

Occupancy expense

837

856

869

1,693

1,723

Data processing

148

87

135

235

247

Professional fees

865

827

691

1,690

1,546

Regulatory assessments

123

166

77

289

162

Director fees

92

92

94

184

188

Correspondent bank service charges

23

19

17

42

33

Net cost on operation and sale of OREO

18

25

780

43

933

Other

606

469

612

1,077

1,193

Total noninterest expense

5,605

5,565

5,689

11,170

11,434

Income Before Provision for Taxes

3,782

1,935

2,810

5,728

6,674

Provision for Taxes on Income

1,077

537

798

1,613

1,906

Net Income

2,705

1,398

2,012

$

4,115

$

4,768

Basic earnings per common share

$

0.16

$

0.08

$

0.12

$

0.24

$

0.28

Diluted earnings per common share

$

0.16

$

0.08

$

0.12

$

0.24

$

0.28

Weighted average basic shares for EPS

17,010,288

17,010,131

16,975,588

17,010,210

16,974,845

Weighted average diluted shares for EPS

17,032,878

17,026,752

16,988,778

17,027,477

16,992,223

UnitedSecurity Bancshares

ConsolidatedStatements of Income(unaudited)

(in thousands)

Three Months Ended Six Months Ended June 30,

June 30, March 31, June 30, 2021 2020 2021 2021 2020

Interest Income:

Interest and $ 8,708 $ 8,071 $ 7,849 $ 16,779 $ 16,348fees on loans

Interest oninvestment 654 387 356 1,041 784securities

Interest ondeposits in 42 62 38 104 605FRB

Totalinterest 9,404 8,520 8,243 17,924 17,737income



Interest Expense:

Interest on 468 427 447 895 1,111deposits

Interest onother 45 46 83 92 180borrowedfunds

Totalinterest 513 473 530 987 1,291expense

Net Interest 8,891 8,047 7,713 16,937 16,446Income

Provision for 826 375 428 1,201 2,134Credit Losses

Net InterestIncome after 8,065 7,672 7,285 15,736 14,312Provision forCredit Losses



Noninterest Income:

Customer 692 656 618 1,348 1,346service fees

Increase incashsurrendervalue of 138 132 127 269 258bank-ownedlifeinsurance

Unrealizedgain (loss)on fair value - (60 ) 71 (60 ) 85of marketableequitysecurities

Gain onproceeds frombank-owned - - 310 - 310lifeinsurance

Gain (loss)on fair valueof junior 377 (1,033 ) (30 ) (656 ) 1,469subordinateddebentures

Gain on sale - - - 13 -of assets

Other 115 133 118 248 328

Totalnoninterest 1,322 (172 ) 1,214 1,162 3,796income



Noninterest Expense:

Salaries andemployee 2,893 3,024 2,414 5,917 5,409benefits

Occupancy 837 856 869 1,693 1,723expense

Data 148 87 135 235 247processing

Professional 865 827 691 1,690 1,546fees

Regulatory 123 166 77 289 162assessments

Director fees 92 92 94 184 188

Correspondentbank service 23 19 17 42 33charges

Net cost onoperation and 18 25 780 43 933sale of OREO

Other 606 469 612 1,077 1,193

Totalnoninterest 5,605 5,565 5,689 11,170 11,434expense



Income BeforeProvision for 3,782 1,935 2,810 5,728 6,674Taxes

Provision forTaxes on 1,077 537 798 1,613 1,906Income

Net Income 2,705 1,398 2,012 $ 4,115 $ 4,768



Basicearnings per $ 0.16 $ 0.08 $ 0.12 $ 0.24 $ 0.28common share

Dilutedearnings per $ 0.16 $ 0.08 $ 0.12 $ 0.24 $ 0.28common share

Weightedaverage basic 17,010,288 17,010,131 16,975,588 17,010,210 16,974,845shares forEPS

Weightedaveragediluted 17,032,878 17,026,752 16,988,778 17,027,477 16,992,223shares forEPS

United Security Bancshares

Average Balances and Rates (unaudited)

(in thousands)

Three Months Ended

Six Months Ended June 30,

June 30, 2021

March 31, 2021

June 30, 2020

2021

2020

Average Balances:

Loans (1)

$

762,090

$

669,723

$

636,840

$

716,162

$

619,950

Investment securities

164,908

103,236

97,209

134,243

89,655

Interest-bearing deposits in FRB

180,061

258,918

182,755

219,272

180,751

Total interest-earning assets

1,107,059

1,031,877

916,804

1,069,677

890,356

Allowance for credit losses

(8,552

)

(8,507

)

(9,124

)

(8,535

)

(8,515

)

Cash and due from banks

48,415

41,650

28,432

45,051

28,857

Other real estate owned

4,965

5,074

5,969

5,019

6,452

Other non-earning assets

71,387

60,641

64,224

66,048

62,845

Total average assets

$

1,223,274

$

1,130,735

$

1,006,305

$

1,177,260

$

979,995

Interest-bearing deposits

$

637,444

$

578,513

$

516,271

$

608,141

$

508,648

Junior subordinated debentures

10,961

10,896

8,494

10,929

9,605

Total interest-bearing liabilities

648,405

589,409

524,765

619,070

518,253

Non-interest-bearing deposits

446,352

412,455

352,309

429,513

333,330

Other liabilities

9,657

9,914

10,120

9,773

9,899

Total liabilities

1,104,414

1,011,778

887,194

1,058,356

861,482

Total equity

118,860

118,957

119,111

118,904

118,513

Total liabilities and equity

$

1,223,274

$

1,130,735

$

1,006,305

$

1,177,260

$

979,995

Average Rates:

Loans (1)

4.58

%

4.89

%

4.96

%

4.72

%

5.30

%

Investment securities

1.59

%

1.52

%

1.47

%

1.56

%

1.76

%

Interest-bearing deposits in FRB

0.09

%

0.10

%

0.08

%

0.10

%

0.67

%

Earning assets

3.41

%

3.35

%

3.62

%

3.38

%

4.01

%

Interest bearing deposits

0.29

%

0.30

%

0.35

%

0.30

%

0.44

%

Total deposits

0.17

%

0.17

%

0.21

%

0.17

%

0.27

%

Junior subordinated debentures

1.65

%

1.71

%

3.93

%

1.70

%

3.77

%

Total interest-bearing liabilities

0.32

%

0.33

%

0.41

%

0.32

%

0.50

%

Net interest margin (2)

3.22

%

3.16

%

3.39

%

3.19

%

3.72

%

(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 Six Months Ended June 30,

June 30, 2021 March 31, June 30, 2020 2021 2020 2021

Average Balances:

Loans (1) $ 762,090 $ 669,723 $ 636,840 $ 716,162 $ 619,950

Investment 164,908 103,236 97,209 134,243 89,655 securities

Interest-bearing 180,061 258,918 182,755 219,272 180,751 deposits in FRB

Totalinterest-earning 1,107,059 1,031,877 916,804 1,069,677 890,356 assets

Allowance for credit (8,552 ) (8,507 ) (9,124 ) (8,535 ) (8,515 )losses

Cash and due from 48,415 41,650 28,432 45,051 28,857 banks

Other real estate 4,965 5,074 5,969 5,019 6,452 owned

Other non-earning 71,387 60,641 64,224 66,048 62,845 assets

Total average assets $ 1,223,274 $ 1,130,735 $ 1,006,305 $ 1,177,260 $ 979,995



Interest-bearing $ 637,444 $ 578,513 $ 516,271 $ 608,141 $ 508,648 deposits

Junior subordinated 10,961 10,896 8,494 10,929 9,605 debentures

Totalinterest-bearing 648,405 589,409 524,765 619,070 518,253 liabilities



Non-interest-bearing 446,352 412,455 352,309 429,513 333,330 deposits

Other liabilities 9,657 9,914 10,120 9,773 9,899

Total liabilities 1,104,414 1,011,778 887,194 1,058,356 861,482

Total equity 118,860 118,957 119,111 118,904 118,513

Total liabilities $ 1,223,274 $ 1,130,735 $ 1,006,305 $ 1,177,260 $ 979,995 and equity



Average Rates:

Loans (1) 4.58 % 4.89 % 4.96 % 4.72 % 5.30 %

Investment 1.59 % 1.52 % 1.47 % 1.56 % 1.76 %securities

Interest-bearing 0.09 % 0.10 % 0.08 % 0.10 % 0.67 %deposits in FRB

Earning assets 3.41 % 3.35 % 3.62 % 3.38 % 4.01 %

Interest bearing 0.29 % 0.30 % 0.35 % 0.30 % 0.44 %deposits

Total deposits 0.17 % 0.17 % 0.21 % 0.17 % 0.27 %

Junior subordinated 1.65 % 1.71 % 3.93 % 1.70 % 3.77 %debentures

Totalinterest-bearing 0.32 % 0.33 % 0.41 % 0.32 % 0.50 %liabilities

Net interest margin 3.22 % 3.16 % 3.39 % 3.19 % 3.72 %(2)

(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, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

Cash and cash equivalents

$

160,908

$

307,909

$

294,069

$

323,332

$

229,541

Investment securities

170,767

147,340

86,192

91,782

96,739

Loans

842,049

674,489

654,347

660,444

648,650

Allowance for credit losses

(9,200

)

(8,549

)

(8,522

)

(8,708

)

(8,862

)

Net loans

832,849

665,940

645,825

651,736

639,788

Other assets

66,531

65,747

66,568

67,097

65,305

Total assets

$

1,231,055

$

1,186,936

$

1,092,654

$

1,133,947

$

1,031,373

Non-interest-bearing

$

442,140

$

429,005

$

391,897

$

430,028

$

362,010

Interest-bearing

648,302

618,776

560,754

564,755

531,102

Total deposits

1,090,442

1,047,781

952,651

994,783

893,112

Other liabilities

22,248

21,822

22,196

21,111

20,801

Total liabilities

1,112,690

1,069,603

974,847

1,015,894

913,913

Total shareholders' equity

118,365

117,333

117,807

118,053

117,460

Total liabilities and shareholder's equity

$

1,231,055

$

1,186,936

$

1,092,654

$

1,133,947

$

1,031,373

United Security Bancshares

Condensed - Consolidated Balance Sheets (unaudited)

(in thousands)

June 30, 2021 March 31, 2021 December 31, September 30, June 30, 2020 2020 2020

Cash and cash $ 160,908 $ 307,909 $ 294,069 $ 323,332 $ 229,541 equivalents

Investment 170,767 147,340 86,192 91,782 96,739 securities

Loans 842,049 674,489 654,347 660,444 648,650

Allowance for credit (9,200 ) (8,549 ) (8,522 ) (8,708 ) (8,862 ) losses

Net loans 832,849 665,940 645,825 651,736 639,788

Other assets 66,531 65,747 66,568 67,097 65,305

Total assets $ 1,231,055 $ 1,186,936 $ 1,092,654 $ 1,133,947 $ 1,031,373



Non-interest-bearing $ 442,140 $ 429,005 $ 391,897 $ 430,028 $ 362,010

Interest-bearing 648,302 618,776 560,754 564,755 531,102

Total deposits 1,090,442 1,047,781 952,651 994,783 893,112

Other liabilities 22,248 21,822 22,196 21,111 20,801

Total liabilities 1,112,690 1,069,603 974,847 1,015,894 913,913

Total shareholders' 118,365 117,333 117,807 118,053 117,460 equity

Total liabilitiesand shareholder's $ 1,231,055 $ 1,186,936 $ 1,092,654 $ 1,133,947 $ 1,031,373 equity

United Security Bancshares

Condensed - Consolidated Statements of Income (unaudited)

(in thousands)

For the Quarters Ended:

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

Total interest income

$

9,404

$

8,520

$

8,496

$

7,968

$

8,107

Total interest expense

513

473

499

500

530

Net interest income

8,891

8,047

7,997

7,468

7,577

Provision for credit losses

826

375

631

4

428

Net interest income after provision for credit losses

8,065

7,672

7,366

7,464

7,149

Total non-interest (loss) income

1,322

(159

)

467

911

1,214

Total non-interest expense

5,605

5,565

5,260

5,210

5,553

Income before provision for taxes

3,782

1,948

2,573

3,165

2,810

Provision for taxes on income

1,077

537

651

894

798

Net income

$

2,705

$

1,411

$

1,922

$

2,271

$

2,012

United Security Bancshares

Condensed - Consolidated Statements of Income (unaudited)

(in thousands) For the Quarters Ended:

June 30, March 31, December September June 30, 2021 2021 31, 2020 30, 2020 2020

Total interest $ 9,404 $ 8,520 $ 8,496 $ 7,968 $ 8,107 income

Total interest 513 473 499 500 530 expense

Net interest income 8,891 8,047 7,997 7,468 7,577

Provision for 826 375 631 4 428 credit losses

Net interest incomeafter provision for 8,065 7,672 7,366 7,464 7,149 credit losses



Total non-interest 1,322 (159 ) 467 911 1,214 (loss) income

Total non-interest 5,605 5,565 5,260 5,210 5,553 expense

Income before 3,782 1,948 2,573 3,165 2,810 provision for taxes

Provision for taxes 1,077 537 651 894 798 on income

Net income $ 2,705 $ 1,411 $ 1,922 $ 2,271 $ 2,012

United Security Bancshares

Nonperforming Assets (unaudited)

(dollars in thousands)

June 30, 2021

December 31, 2020

June 30, 2020

RE construction & development

10,940

11,057

11,109

Agricultural

325

439

514

Total nonaccrual loans

$

11,265

$

11,496

$

11,623

Loans past due 90 days and still accruing

156

513

269

Restructured loans

412

535

2,105

Total nonperforming loans

$

11,833

$

12,544

$

13,997

Other real estate owned

4,753

5,004

5,018

Total nonperforming assets

$

16,586

$

17,548

$

19,015

Nonperforming loans to total gross loans

1.41

%

1.91

%

2.15

%

Nonperforming assets to total assets

1.35

%

1.61

%

1.84

%

Allowance for credit losses to nonperforming loans

77.75

%

67.94

%

63.31

%

United Security Bancshares

Nonperforming Assets (unaudited)

(dollars in thousands)

June 30, December 31, June 30, 2021 2020 2020

RE construction & development 10,940 11,057 11,109

Agricultural 325 439 514

Total nonaccrual loans $ 11,265 $ 11,496 $ 11,623



Loans past due 90 days and still 156 513 269 accruing

Restructured loans 412 535 2,105

Total nonperforming loans $ 11,833 $ 12,544 $ 13,997

Other real estate owned 4,753 5,004 5,018

Total nonperforming assets $ 16,586 $ 17,548 $ 19,015



Nonperforming loans to total gross 1.41 % 1.91 % 2.15 %loans

Nonperforming assets to total assets 1.35 % 1.61 % 1.84 %

Allowance for credit losses to 77.75 % 67.94 % 63.31 %nonperforming 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,

2021

2020

2021

2020

Return on average assets

0.89

%

0.80

%

0.71%

0.98%

Return on average equity

9.15

%

6.80

%

7.00%

8.09%

Net charge-off to average loans

0.09

%

0.43

%

0.15%

0.38%

June 30, 2021

December 31, 2020

Shares outstanding - period end

17,010,288

17,009,883

Book value per share

$6.96

$6.93

Efficiency ratio (1)

61.72

%

58.74

%

Total impaired loans

$11,834

$13,376

Net loan to deposit ratio

76.38

%

67.79

%

Allowance for credit losses to total loans

1.09

%

1.30

%

Tier 1 capital to adjusted average assets (leverage)

Company

10.28

%

11.37

%

Bank

10.11

%

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

Selected Financial Data (unaudited)

(dollars in thousands, except per share amounts)

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

2021 2020 2021 2020



Return on average assets 0.89 % 0.80 % 0.71% 0.98%

Return on average equity 9.15 % 6.80 % 7.00% 8.09%

Net charge-off to average loans 0.09 % 0.43 % 0.15% 0.38%





June 30, December 31, 2021 2020

Shares outstanding - period end 17,010,288 17,009,883

Book value per share $6.96 $6.93

Efficiency ratio (1) 61.72 % 58.74 %

Total impaired loans $11,834 $13,376

Net loan to deposit ratio 76.38 % 67.79 %

Allowance for credit losses to 1.09 % 1.30 % total loans

Tier 1 capital to adjusted average assets (leverage)

Company 10.28 % 11.37 %

Bank 10.11 % 11.17 %

(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,

2021

2020

Change $

Change %

Net income

$

4,115

$

4,768

$

(653

)

(13.70

)%

Junior subordinated debenture (1) fair value adjustment

(656

)

1,469

Write down on OREO (2)

-

(727

)

Loss on sale of OREO (2)

-

(113

)

Total non-core items

(656

)

629

Income tax effect

190

(182

)

Non-core items net of taxes

(466

)

447

Non-GAAP core net income

$

4,581

$

4,321

$

260

6.02

%

(1) Junior subordinated debenture fair value adjustment is not part of Core Income and depending upon market rates, can "add to" or "subtract from" Core Income and mask Non-GAAP Core Income change.

(2) Write down or Loss on sale of OREO is considered a one-time event and therefore is not part of Core Income.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210721005953/en/

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