EX-99.1 2 ubfo033123earningsrelease.htm EX-99.1 Document

United Security Bancshares Reports 1st Quarter 2023 Financial Results

FRESNO, CA - April 26, 2023. United Security Bancshares (Nasdaq: UBFO) today announced its unaudited financial results for the quarter ended March 31, 2023. The Company recognized net income of $6.1 million, or $0.36 per basic and diluted share, for the quarter ended March 31, 2023, compared to net income of $2.4 million, or $0.14 per basic and diluted share for the quarter ended March 31, 2022.

First Quarter 2023 Highlights (as of or for the quarter ended March 31, 2023, except where noted)
▪Net income for the quarter increased 150.7% to $6.1 million, compared to $2.4 million for the quarter ended March 31, 2022. Loan interest income increased $3.9 million and investment securities income increased $711,000 as a result of growth in loan and investment securities portfolio balances and increases in interest rates, when compared to the first quarter of 2022.
▪The Company had available secured lines of credit of $434.7 million, unsecured lines of credit of $100.0 million, unpledged investment securities of $138.7 million, and cash and cash equivalents of $45.2 million as of March 31, 2023.
▪Total assets decreased 2.9% to $1.26 billion, compared to $1.30 billion at December 31, 2022.
▪Total loans, net of unearned fees, decreased to $942.7 million, compared to $980.2 million at December 31, 2022.
▪Total investments decreased 0.9% to $208.9 million, compared to $210.9 million at December 31, 2022.
▪Total deposits decreased 4.7% to $1.11 billion, compared to $1.17 billion at December 31, 2022.
▪The allowance for credit losses as a percentage of gross loans increased to 1.65%, compared to 1.04% at December 31, 2022. The increase is primarily the result of an accounting adjustment of $6.6 million related to the adoption of a new accounting standard referred to as the Current Expected Credit Loss methodology or “CECL.”
▪Net interest income before the provision for credit losses increased 37.2% to $12.9 million, compared to $9.4 million for the quarter ended March 31, 2022.
▪The Company recorded a reversal of provision for credit losses of $493,000 for the quarter ended March 31, 2023, compared to a provision for credit losses of $5,000 for the quarter ended March 31, 2022.
▪Book value per share increased to $6.61, compared to $6.59 at December 31, 2022.
▪Net interest margin increased to 4.42% for the quarter ended March 31, 2023, compared to 3.10% for the quarter ended March 31, 2022.
▪Annualized average cost of deposits was 0.48% for the quarter ended March 31, 2023, compared to 0.17% for the quarter ended March 31, 2022.
▪Net charge-offs totaled $434,000 for the quarter ended March 31, 2023 , compared to net charge-offs of $338,000 for the quarter ended March 31, 2022.
▪Capital position remains well-capitalized with a 10.89% Tier 1 Leverage Ratio compared to 10.10% as of December 31, 2022.
▪Annualized return on average assets (“ROAA”) increased to 1.95%, compared to 0.74% for the quarter ended March 31, 2022. The increase in ROAA is due to the increase in net income coupled with a decrease in average assets.
▪Annualized return on average equity (“ROAE”) increased to 22.05%, compared to 8.33% for the quarter ended March 31, 2022.

Dennis Woods, President and Chief Executive Officer, stated: “We are very pleased with our all-time record earnings for the full year of 2022 which continues into this first quarter of 2023 with another all-time record earnings quarter. We are working closely with our long-term core customers to provide deposit and lending solutions that meet their business and individual needs. We are also focused on maintaining adequate liquidity, managing credit risk, and responsibly managing growth in our balance sheet.”

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 Trust Preferred Securities (TRUPs). Management believes that financial results are more comparative excluding the impact of such non-core items.

Results of Operations

Net income for the quarter ended March 31, 2023 increased 150.7% to $6.1 million, compared to the quarter ended March 31, 2022. The increase is primarily the result of an increase of $3.9 million in loan interest income and fees, an increase of $711,000 in investment income, and a $1.3 million decrease in the loss on the fair value of junior subordinated debentures, partially offset by a $1.6 million increase in the provision for income taxes. ROAE for the quarter ended March 31, 2023 was
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22.05%, compared to 8.33% for the quarter ended March 31, 2022. ROAA was 1.95% for the quarter ended March 31, 2023, compared to 0.74% for the quarter ended March 31, 2022.

The annualized average cost of deposits was 0.48% for the quarter ended March 31, 2023, compared to 0.17% for the quarter ended March 31, 2022. Average interest-bearing deposits decreased 5.1% between the periods ended March 31, 2022 and 2023 from $727.1 million to $689.7 million respectively.

Net interest income, before the provision for credit losses, for the quarter ended March 31, 2023 totaled $12.9 million, an increase of $3.5 million, or 37.2%, from the $9.4 million reported for the period ended March 31, 2022. The impact of the increase in interest rates over the past year is reflected in the increase in net interest income. The Company’s net interest margin increased from 3.10% for the quarter ended March 31, 2022 to 4.42% for the quarter ended March 31, 2023. The increase in the net interest margin is due to increases in yields on investment securities, yields on loans, and yields on interest-bearing deposits at the Federal Reserve Bank, partially offset by increases in average deposit costs. Loan yields increased from 4.25% to 5.49% between the two periods while the yield on interest-bearing liabilities increased from 0.30% to 0.98% between the two periods.

Noninterest income for the quarter ended March 31, 2023 totaled $1.4 million, an increase of $1.7 million when compared to the $206,000 loss reported for the quarter ended March 31, 2022. For the quarter ended March 31, 2023, a gain on the fair value of TRUPs of $333,000 was recorded, compared to a loss of $999,000 for the same period in 2022. The change in the fair value of TRUPs reflected in noninterest income was caused by fluctuations in the LIBOR yield curve. Customer service fees totaled $734,000 for the quarter ended March 31, 2023 and $654,000 for the quarter ended March 31, 2022.

For the quarter ended March 31, 2023, noninterest expense totaled $6.2 million, an increase of $424,000 compared to $5.8 million for the quarter ended March 31, 2022. On a year-over-year comparative basis, noninterest expense increased due to increases of $211,000 in salaries and employee benefits and $183,000 in occupancy expense, partially offset by decreases of $67,000 in professional fees and $39,000 in regulatory assessments.

The efficiency ratio for the quarter ended March 31, 2023 decreased to 43.5%, compared to 62.0% for the quarter ended March 31, 2022. This decrease is due to increases in both non-interest and interest income.

The Company recorded an income tax provision of $2.5 million for the quarter ended March 31, 2023, compared to $1.0 million for the same period in 2022. The effective tax rate for the quarter ended March 31, 2023 was 29.16%, compared to 28.38% for the quarter ended March 31, 2022.

Balance Sheet Review

Total assets decreased $38.0 million, or 2.9%, between December 31, 2022 and March 31, 2023. Gross loan balances decreased $37.6 million, overnight balances held at the Federal Reserve Bank decreased $3.7 million, and investment securities decreased $1.9 million. Decreases in gross loans included decreases of $14.3 million in real estate construction and development loans, $9.4 million in commercial and industrial loans, $7.1 million in agricultural loans, and $5.9 million in residential mortgage loans. Declines in the investment portfolio were the result of $3.3 million in paydowns offset by a decrease in unrealized losses totaling $933,000 between the two periods. Total cash and cash equivalents increased $6.6 million between December 31, 2022 and March 31, 2023. Unfunded loan commitments increased from $190.2 million at December 31, 2022 to $214.7 million at March 31, 2023. OREO balances totaled $4.6 million at December 31, 2022 and March 31, 2023.

Total deposits decreased $54.4 million, or 4.7%, to $1.1 billion during the quarter ended March 31, 2023. This was due to decreases of $86.9 million in noninterest-bearing deposits offset by increases of $32.5 million in interest bearing deposits. NOW and money market accounts increased $28.4 million, time deposits increased $11.6 million, and savings accounts decreased $7.4 million. In total, NOW, money market and savings accounts increased 3.4% to $646.8 million at March 31, 2023, compared to $625.8 million at December 31, 2022. Noninterest bearing deposits decreased 18.0% to $394.7 million at March 31, 2023, compared to $481.6 million at December 31, 2022. 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, decreased $56.0 million.

Shareholders’ equity at March 31, 2023 totaled $112.9 million, an increase of $445,000 from $112.5 million at December 31, 2022. This increase in equity was the result of net income of $6.1 million and a decrease in accumulated other comprehensive loss of $639,000, partially offset by a $4.7 million, net of tax accounting adjustment to retained earnings related to the adoption of CECL. At March 31, 2023, the accumulated other comprehensive loss totaled $16.9 million, compared to $17.5 million at
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December 31, 2022. The decrease in the loss was primarily the result of a decrease in net unrealized losses on investment securities of $933,000 as well as a decrease of $310,000 in the gain on junior subordinated debentures (TRUPs) caused by a change in market credit spreads during the quarter ended March 31, 2023. The change in unrealized loss on the investment portfolio is attributed to changes in interest rates, and not credit quality. The Company does not intend to sell and it is more likely than not that it will not be required to sell any securities that have an unrealized loss.

The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on March 28, 2023. The dividend was paid on April 21, 2023, to shareholders of record as of April 7, 2023. No assurances can be provided as to the amount and/or declaration and payment of future dividends, if any. The Company continues to be well-capitalized and expects to maintain adequate capital levels.

Credit Quality

On January 1, 2023, the Company adopted the Current Expected Credit Loss (CECL) methodology and recognized a $6,641,000 increase to the allowance for credit losses, and a related $4,678,000 reduction to retained earnings, net of tax. This increase utilizes economic forecasts to estimate credit losses over the life of the loan portfolio. Utilizing CECL may have an impact on our allowance for credit losses going forward and may result in a lack of comparability between 2022 and 2023 quarterly periods. The Company recorded a reversal of provision for credit losses of $493,000 for the quarter ended March 31, 2023, compared to $5,000 provision for the quarter ended March 31, 2022. The reversal of provision recorded during 2023 is primarily driven by the decrease in loan balances during the quarter. Net loan charge-offs totaled $434,000 for the quarter ended March 31, 2023, compared to $338,000 for the quarter ended March 31, 2022 and were primarily due to losses in the student loan portfolio.

The Company’s allowance for credit losses totaled 1.65% of the loan portfolio at March 31, 2023, compared to 1.04% at December 31, 2022. The increase in the allowance for credit losses as a percentage of gross loans is primarily the result of additions to the reserve as a result of the adoption of CECL. Management considers the allowance for credit losses at March 31, 2023 to be adequate.

Non-performing assets, comprised of nonaccrual loans, loan modifications, other real estate owned through foreclosure, and loans more than 90 days past due and still accruing interest, decreased $1,360,000 between December 31, 2022 and March 31, 2023 to $18.2 million. Nonperforming assets as a percentage of total assets decreased from 1.50% at December 31, 2022 to 1.44% at March 31, 2023. The decrease in nonperforming assets is attributed to decreases of $1,349,000 in nonaccrual loans and $130,000 in loans past due more than 90 days. OREO balances remained at $4.6 million at December 31, 2022 and March 31, 2023.

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.

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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 table, 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 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) adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, inflationary pressures and labor shortages, global conflict and unrest, (2) the COVID-19 global pandemic, including the effects of the steps being taken to address the pandemic and its impact on the Company’s markets, customers, and employees, (3) changes in general economic and financial market conditions, either nationally or locally, (4) interest rate policies of the Board of Governors of the Federal Reserve System, (5) changes in banking laws or regulations, (6) increased competition in the Company’s markets, impacting the ability to execute its business plans, (7) loss of key personnel, (8) unanticipated credit losses, (9) drought, earthquakes, floods or other natural disasters impacting the local economy and/or the condition of real estate collateral, (10) the impact of technological changes and the ability to develop and maintain secure and reliable electronic systems, (11) uncertainty regarding the replacement of LIBOR, and (12) 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, 2022, 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.
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United Security Bancshares
Consolidated Balance Sheets (unaudited)
(in thousands-except share data)March 31, 2023December 31, 2022
Assets
Cash and non-interest-bearing deposits in other banks$41,949 $31,650 
Due from Federal Reserve Bank (“FRB”)3,204 6,945 
Cash and cash equivalents45,153 38,595 
Investment securities (at fair value)
Available-for-sale (“AFS”) securities205,556 207,545 
Marketable equity securities3,358 3,315 
Total investment securities208,914 210,860 
Loans 944,191 981,772 
Unearned fees and unamortized loan origination costs - net(1,464)(1,594)
Allowance for credit losses(15,622)(10,182)
Net loans927,105 969,996 
Premises and equipment - net9,486 9,770 
Accrued interest receivable7,829 8,489 
Other real estate owned (“OREO”)4,582 4,582 
Goodwill4,488 4,488 
Deferred tax assets - net14,422 12,825 
Cash surrender value of life insurance, net23,025 22,893 
Operating lease right-of-use assets1,808 1,984 
Other assets14,382 14,711 
Total assets$1,261,194 $1,299,193 
Liabilities and Shareholders’ Equity
Deposits  
Noninterest-bearing$394,745 $481,629 
Interest-bearing716,387 683,855 
Total deposits1,111,132 1,165,484 
Fed funds purchased 13,200 — 
Operating lease liabilities1,915 2,093 
Other liabilities11,022 8,270 
Junior subordinated debentures (at fair value)11,017 10,883 
Total liabilities1,148,286 1,186,730 
Shareholders’ Equity
Common stock, no par value; 20,000,000 shares authorized; issued and outstanding: 17,094,298 at March 31, 2023 and 17,067,253 at December 31, 2022
60,269 60,030 
Retained earnings69,495 69,928 
Accumulated other comprehensive loss, net of tax(16,856)(17,495)
Total shareholders’ equity112,908112,463
Total liabilities and shareholders’ equity$1,261,194 $1,299,193 




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United Security Bancshares
Consolidated Statements of Income (unaudited)Three Months Ended
(in thousands - except share data)March 31, 2023March 31, 2022
Interest Income:
Interest and fees on loans$13,000 $9,119 
Interest on investment securities1,501790
Interest on deposits in FRB5882
Total interest income14,559 9,991 
Interest Expense:
Interest on deposits1,343508
Interest on other borrowed funds27145
Total interest expense1,614553
Net Interest Income 12,9459,438
(Reversal) Provision for Credit Losses(493)5
Net Interest Income after (Reversal) Provision for Credit Losses13,4389,433
Noninterest Income:
Customer service fees734654
Increase in cash surrender value of bank-owned life insurance132 139 
Unrealized gain (loss) on fair value of marketable equity securities43(182)
Gain (Loss) on fair value of junior subordinated debentures333(999)
Gain on sale of investment securities— 30 
Other206152
Total noninterest income (loss)1,448(206)
Noninterest Expense:
Salaries and employee benefits3,2603,049
Occupancy expense963780
Data processing174115
Professional fees882949
Regulatory assessments192231
Director fees109118
Correspondent bank service charges1925
Net cost of operation of OREO37(8)
Other604557
Total noninterest expense6,2405,816
Income Before Provision for Taxes8,6463,411
Provision for Taxes on Income2,521968
Net Income$6,125$2,443
Basic earnings per common share$0.36 $0.14 
Diluted earnings per common share$0.36 $0.14 
Weighted average basic shares for EPS17,076,51017,030,409
Weighted average diluted shares for EPS17,092,46017,051,819
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United Security Bancshares
Average Balances and Rates (unaudited)Three Months Ended
(in thousands)March 31, 2023March 31, 2022
Average Balances:
Loans (1)$960,648 $870,851 
Investment securities 211,523 187,761 
Interest-bearing deposits in FRB5,493 177,243 
Total interest-earning assets1,177,664 1,235,855 
Allowance for credit losses(16,323)(9,514)
Cash and due from banks36,008 37,288 
Other real estate owned4,582 4,582 
Other non-earning assets78,550 65,384 
Total average assets$1,280,481 $1,333,595 
Interest-bearing deposits$697,198 $727,132 
Junior subordinated debentures10,801 11,156 
Total interest-bearing liabilities707,999 738,288 
Noninterest-bearing deposits445,502 466,062 
Other liabilities14,014 9,970 
Total liabilities1,167,515 1,214,320 
Total equity112,966 119,275 
Total liabilities and equity$1,280,481 $1,333,595 
Average Rates:
Loans (1)5.49 %4.25 %
Investment securities2.88 %1.71 %
Interest-bearing deposits in FRB4.28 %0.19 %
Earning assets5.01 %3.28 %
Interest bearing deposits0.78 %0.28 %
Total deposits0.48 %0.17 %
Junior subordinated debentures10.18 %1.64 %
Total interest-bearing liabilities0.98 %0.30 %
Net interest margin (2)4.42 %3.10 %
(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.











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United Security Bancshares
Condensed - Consolidated Balance Sheets (unaudited)
(in thousands)March 31, 2023December 31, 2022September 30, 2022June 30, 2022March 31, 2022
Cash and cash equivalents$45,153 $38,595 $126,032 $107,246 $224,934 
Investment securities208,914 210,860 211,847 215,774 183,527 
Loans net of unearned fees and unamortized loan origination costs942,727 980,178 962,166 949,991 879,379 
Allowance for credit losses(15,622)(10,063)(10,182)(10,063)(9,907)(9,276)
Net loans927,105 969,996 952,103 940,084 870,103 
Other assets80,022 79,742 79,270 76,413 71,238 
Total assets$1,261,194 $1,299,193 $1,369,252 $1,339,517 $1,349,802 
Non-interest-bearing deposits$394,745 $481,629 $517,230 $473,013 $465,043 
Interest-bearing deposits716,387 683,855 723,588 735,181 749,289 
Total deposits1,111,132 1,165,484 1,240,818 1,208,194 1,214,332 
Other liabilities37,154 21,246 21,355 21,322 21,896 
Total liabilities1,148,286 1,186,730 1,262,173 1,229,516 1,236,228 
Total shareholders’ equity112,908 112,463 107,079 110,001 113,574 
Total liabilities and shareholder’s equity$1,261,194 $1,299,193 $1,369,252 $1,339,517 $1,349,802 

United Security Bancshares
Condensed - Consolidated Statements of Income (unaudited)
For the Quarters Ended:
(in thousands)March 31, 2023December 31, 2022September 30, 2022June 30, 2022March 31, 2022
Total interest income$14,559 $14,754 $13,519 $10,993 $9,991 
Total interest expense1,614 1,269 789 584 553 
Net interest income12,945 13,485 12,730 10,409 9,438 
(Reversal) provision for credit losses(493)585 607 606 5 
Net interest income after (reversal) provision for credit losses13,438 12,900 12,123 9,803 9,433 
Total non-interest income (loss) 1,448 1,049 392 602 (206)
Total non-interest expense6,240 6,432 6,211 5,576 5,816 
Income before provision for taxes8,646 7,517 6,304 4,829 3,411 
Provision for taxes on income2,521 2,175 1,837 1,394 968 
Net income$6,125 $5,342 $4,467 $3,435 $2,443 





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United Security Bancshares
Nonperforming Assets (unaudited)
(dollars in thousands)March 31, 2023December 31, 2022
Real estate - construction and development$13,109 $14,436 
Agricultural86 108 
Total nonaccrual loans13,195 14,544 
Loans past due 90 days and still accruing382 252 
Total nonperforming loans13,577 14,796 
Other real estate owned4,582 4,582 
Total nonperforming assets$18,159 $19,378 
Nonperforming loans to total gross loans1.44 %1.52 %
Nonperforming assets to total assets1.44 %1.50 %
Allowance for credit losses to nonperforming loans115.06 %68.17 %


United Security Bancshares
Selected Financial Data (unaudited)
Three months ended March 31,
(dollars in thousands, except per share amounts)20232022
Return on average assets1.95 %0.74 %
Return on average equity22.05 %8.33 %
Efficiency ratio (1)43.48 %61.98 %
Annualized net charge-offs to average loans0.18 %0.16 %
March 31, 2023December 31, 2022
Shares outstanding - period end17,094,298 17,067,253 
Book value per share$6.61 $6.59 
Tangible book value per share$6.34 $6.33 
Total impaired loans$14,059 $15,629 
Net loan-to-deposit ratio83.44 %83.23 %
Allowance for credit losses to total loans1.65 %1.04 %
Tier 1 capital to adjusted average assets (leverage)
Company10.89 %10.10 %
Bank10.88 %9.64 %
(1) Efficiency ratio is defined as total noninterest expense divided by net interest income before provision for credit losses plus total noninterest income.
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United Security Bancshares
Net Income before Non-Core Reconciliation
Non-GAAP Information (unaudited)
Three months ended March 31,
(dollars in thousands)20232022Change $Change %
Net income$6,125 $2,443 $3,682 150.7 %
Junior subordinated debenture (1) fair value adjustment333 (999)
Income tax effect(97)290 
Non-core items net of taxes236 (709)
Non-GAAP core net income$5,889 $3,152 $2,737 86.8 %

(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.



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