United Security Bancshares - Third Quarter Profits: $1.9 million

FRESNO, Calif., Oct. 17, 2013 /PRNewswire/ -- United Security Bancshares (http://www.unitedsecuritybank.com/) (Nasdaq Global Select: UBFO) reported today unaudited consolidated net income of $1,852,000 or $0.13 per basic and diluted common share for the quarter ended September 30, 2013 and $4,323,000 or $0.30 per basic and diluted common share for the nine months ended September 30, 2013, as compared to $1,366,000 or $0.09 per basic and diluted common shares for the quarter ended September 30, 2012 and $4,591,000 or $0.32 per basic and diluted shares for the nine months ended September 30, 2012.

Annualized return on average equity (ROAE) for the quarter ended September 30, 2013 was 10.14%, compared to 8.25% for the same period in 2012, and was 8.10% for the nine months ended September 30, 2013, compared to 9.43% for the nine months ended September 30, 2012. Annualized return on average assets (ROAA) was 1.14% for the three months ended September 30, 2013, compared to 0.87% for the same period in 2012, and was 0.90% for the nine months ended September 30, 2013 compared to 0.99% for the nine months ended September 30, 2012.

Change in net income on a quarter-to-quarter comparative basis between the third quarters of 2013 and 2012 is largely the result of a negative provision for credit losses of $1,150,000 during the quarter ended September 30, 2013, compared to a $4,000 provision during the same period ended September 30, 2012.  Partially offsetting the negative provision during the quarter ended September 30, 2013, compared to the same period ended September 30, 2012, was a decrease of $339,000 in interest income and an increase of $507,000 in non-interest expense.  On a nine month comparative basis, changes in income were the result of a $2,130,000 decrease in provision for credit losses and a $1,274,000 decrease in net cost of operation on OREO, offset by a decrease of $1,807,000 on gains realized on the sale of other investments and a $1,943,000 decrease in total interest income.

The Board of Directors of United Security Bancshares declared a third quarter 2013 stock dividend of one percent (1%) on September 24, 2013. The stock dividend was payable to shareholders of record on October 11, 2013, and the shares will be issued on October 23, 2013.

Dennis R. Woods, President and Chief Executive Officer of the Company, states, "We are continuing to see reductions in problem assets, increases in capital, and positive net earnings.  We continue to see improvements in both the local and the national economy and look forward to continued success during the fourth quarter of 2013."  Shareholders' equity at September 30, 2013 was $73,499,000, up $4,058,000 from shareholders' equity of $69,441,000 at December 31, 2012. 

Net interest income before provision for credit losses for the quarter ended September 30, 2013 totaled $5,427,000 and $16,029,000 for the nine months ended September 30, 2013, a decrease of $195,000 from $5,622,000 reported for the quarter ended September 30, 2012 and a decrease of $1,640,000 from the $17,669,000 reported for the nine months ended September 30, 2012, respectively. The net interest margin was 3.83% for the quarter ended September 30, 2013, and 3.90% for the nine months ended September 30, 2013, as compared to 4.25% for the quarter ended September 30, 2012 and 4.53% for the nine months ended September 30, 2012. The Company continues to experience a decline in net interest margin due to decreases in loan and investment income.

Noninterest income for the quarter ended September 30, 2013 totaled $1,413,000, reflecting an increase of $440,000 from $973,000 in noninterest income reported for the quarter ended September 30, 2012. Noninterest income for the nine months ended September 30, 2013 totaled $3,038,000, reflecting a decrease of $1,917,000 from $4,955,000 in noninterest income reported for the nine months ended September 30, 2012. Customer service fees continue to provide the majority of the Company's noninterest income, totaling $873,000 for the quarter ended September 30, 2013, as compared to $902,000 for the quarter ended September 30, 2012, and $2,554,000 and $2,700,000 for the nine months ended September 30, 2013 and 2012, respectively. Changes in noninterest income on a quarter-to-quarter comparative basis between the third quarters of 2013 and 2012 are largely the result of an increase of $312,000 on gains on fair value option of financial assets during the quarter ended September 30, 2013. The Company recorded a $113,000 impairment loss on investments during the quarter ended September 30, 2012, compared to no loss for the same period ended September 30, 2013.   On a nine-month comparative basis, non-interest income decreased primarily due to a $1,807,000 gain on sale of investment during the nine months ended September 30, 2012, compared to no gain for the same period ended September 30, 2013.

Noninterest expense totaled $4,954,000 for the quarter ended September 30, 2013, an increase of $507,000 as compared to $4,447,000 reported for the quarter ended September 30, 2012. For the nine months ended September 30, 2013, noninterest expense totaled $13,181,000, a decrease of $1,152,000 as compared to $14,333,000 for the nine months ended September 30, 2012. Between the third quarters of 2013 and 2012, net operating cost on other real estate owned and salaries expenses increased $273,000 and $132,000, respectively, partially offset by decreases in occupancy expenses and professional fees.  On a nine month comparative basis, noninterest expense decreased primarily due to a $1,036,000 net gain on OREO during the nine months ended September 30, 2013, compared to a net cost on OREO of $238,000 for the same period ended September 30, 2012.

The Company had a negative provision for loan loss of $1,150,000 for the quarter ended September 30, 2013 and $1,120,000 for the nine months ended September 30, 2013, compared to a provision of $4,000 for the quarter ended September 30, 2012 and $1,010,000 for the nine months ended September 30, 2012. Net loan recoveries totaled $545,000 for the quarter ended September 30, 2013 and net loan charge-offs totaled $112,000 for the nine months ended September 30, 2013 as compared to net charge-offs of $453,000 for the quarter ended September 30, 2012, and $3,498,000 for the nine months ended September 30, 2012. With a modest recovery in the economy and real estate markets within our service area, we have maintained an adequate allowance for loan losses which totaled 2.75% of total loans at September 30, 2013 compared to 2.95% of total loans at December 31, 2012 and 2.97% at September 30, 2012. In determining the adequacy of the allowance for loan losses, Management's judgment is the primary determining factor for establishing the amount of the provision for loan losses and management considers the allowance for loan and lease losses at September 30, 2013 to be adequate.

Non-performing assets, comprised of nonaccrual loans, troubled debt restructures (TDR), other real estate owned through foreclosure (OREO), and loans more than 90 days past due and still accruing interest, decreased approximately $8,344,000 between December 31, 2012 and September 30, 2013. Additionally, nonperforming assets as a percentage of total assets decreased from 7.25% at December 31, 2012 to 5.85% at September 30, 2013. Nonaccrual loans decreased $1,500,000 between December 31, 2012 and September 30, 2013, while OREO, decreased $6,807,000 during the same period. Impaired loans totaled $21,698,000 at September 30, 2013, a decrease of $233,000 from the balance of $21,931,000 at December 31, 2012.

United Security Bancshares is a $650+ million bank holding company headquartered in Fresno, California. United Security Bank, its principal subsidiary is a California state chartered bank with 11 branches serving the Central Valley and Campbell, and is a member of the Federal Reserve Bank of San Francisco.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended and the Company intends such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management's knowledge and belief as of today and include information concerning the Company's possible or assumed future financial condition, and its results of operations, business and earnings outlook. These forward-looking statements are subject to risks and uncertainties. A number of factors, some of which are beyond the Company's ability to control or predict, could cause future results to differ materially from those contemplated by such forward-looking statements. These factors include (1) changes in interest rates, (2) significant changes in banking laws or regulations, (3) increased competition in the company's market, (4) other-than-expected credit losses, (5) earthquake or other natural disasters impacting the condition of real estate collateral, (6) the effect of acquisitions and integration of acquired businesses, (7) the impact of proposed and/or recently adopted changes in laws, and regulations on the Company and its business; (8) changing bank regulatory conditions, policies, whether arising as new legislation or regulatory initiatives or changes in our regulatory classifications, that could lead to restrictions on activities of banks generally or as to the Bank, including specifically the formal order between the Federal Reserve Bank of San Francisco and the Company and the Bank, (9) failure to comply with the written regulatory agreement under which the Company is subject and (10) unknown economic impacts caused by the State of California's budget issues, including the effect on Federal spending do to sequestration required by the Budget Control Act of 2011. Management cannot predict at this time the severity or duration of the effects of the recent business slowdown on our specific business activities and profitability. Weaker or a further decline in capital and consumer spending, and related recessionary trends could adversely affect our performance in a number of ways including decreased demand for our products and services and increased credit losses. Likewise, changes in interest rates, among other things, could slow the rate of growth or put pressure on current deposit levels and affect the ability of borrowers to repay loans. Forward-looking statements speak only as of the date they are made, and the company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the statements are made, or to update earnings guidance including the factors that influence earnings. For a more complete discussion of these risks and uncertainties, see the Company's Annual Report on Form 10-K for the year ended December 31, 2012, and particularly the section of Management's Discussion and Analysis.  Readers should carefully review all disclosures we file from time to time with the Securities and Exchange Commission ("SEC").

 


United Security Bancshares

Consolidated Balance Sheets (unaudited)

(in thousands)


September 30, 2013


December 31, 2012

Assets




Cash and noninterest-bearing deposits in other banks

28,552


27,481

Cash and due from Federal Reserve Bank

153,290


114,146

Cash and cash equivalents

181,842


141,627

Interest-bearing deposits in other banks

1,513


1,507

Investment securities (AFS at market value)

32,577


31,844

Loans and leases, net of unearned fees

383,992


400,033

Less: Allowance for credit losses

(10,552)


(11,784)

Net loans

373,440


388,249

Premises and equipment - net

12,088


12,262

Other real estate owned

17,125


23,932

Goodwill and intangible assets

4,597


4,737

Cash surrender value of life insurance

17,072


16,681

Deferred income taxes

10,130


9,724

Other assets

11,431


18,314

Total assets

661,815


648,877

Deposits:






Noninterest bearing demand deposits

236,112


217,014

Money market, NOW, and savings

244,162


246,888

Time

91,202


99,385

Total deposits

571,476


563,287

Accrued interest payable

57


71

Other liabilities

5,979


6,010

Junior subordinated debentures (at fair value)

10,804


10,068

Total liabilities

588,316


579,436

Shareholders' equity:












Common stock, no par value 20,000,000 shares authorized, 14,653,358 issued and outstanding at September 30, 2013, and 14,217,303 at December 31, 2012

45,038


43,173

Retained earnings

28,662


26,179

Accumulated other comprehensive income

(201)


89

Total shareholders' equity

73,499


69,441

Total liabilities and shareholders' equity

$

661,815


$

648,877





United Security Bancshares

Consolidated Statements of Income (unaudited)

(in thousands, except per share amounts)



Three Months Ended

 September 30,


Nine Months Ended

 September 30,


2013


2012


2013


2012

Interest income:












Interest and fees on loans

$

5,545


$

5,670


$

16,565


$

17,678

Interest on investment securities

157


397


495


1,375

Interest on deposits in FRB

88


62


223


157

Interest on deposits in other banks

2


2


6


22

Total interest income

5,792


6,131


17,289


19,232

Interest expense:












Interest on deposits

301


441


1,043


1,356

Interest on other borrowed funds

64


68


217


207

Total interest expense

365


509


1,260


1,563

Net interest income before provision for credit losses

5,427


5,622


16,029


17,669

Provision for credit losses

(1,150)


4


(1,120)


1,010

Net interest income

6,577


5,618


17,149


16,659

Non-interest income:












Customer service fees

873


902


2,554


2,700

Increase in cash surrender value of bank owned life insurance

140


147


417


427

Impairment loss on investment securities, other than temporary loss

0


(113)


0


(284)

Gain (loss) on Fair Value Option of Financial Assets

141


(171)


(519)


(284)

Loss on sale of securities

0


(10)


0


(10)

Gain on sale of other investment

0


0


0


1,807

Other non-interest income

259


218


586


599

Total non-interest income

1,413


973


3,038


4,955

Non-interest expense:












Salaries and employee benefits

2,210


2,078


6,684


6,676

Occupancy expense

905


1,004


2,693


2,608

Data processing

33


15


126


53

Professional fees

316


408


1,136


1,092

Regulatory assessments

334


275


1,032


1,058

Director fees

58


61


175


196

Amortization of intangibles

47


79


140


248

Correspondent bank service charges

72


75


229


235

Loss on California tax credit partnership

86


23


151


207

Net cost (gain) on operation of OREO

182


(91)


(1,036)


238

Other non-interest expense

711


520


1,851


1,722

Total non-interest expense

4,954


4,447


13,181


14,333

Income before income tax provision

3,036


2,144


7,006


7,281

Provision for income taxes

1,184


778


2,683


2,690

Net Income

$

1,852


$

1,366


$

4,323


$

4,591





United Security Bancshares

Selected Financial Data (unaudited)

(in thousands, except per share amounts)



Three Months Ended

 September 30,


Nine Months Ended

 September 30,


2013


2012


2013


2012

Basic earnings per share

$0.13


$0.09


$0.30


$0.32

Diluted earnings per share

$0.13


$0.09


$0.30


$0.32

Weighted average basic shares for EPS

14,653,358


14,507,818


14,651,014


14,507,818

Weighted average diluted shares for EPS

14,653,592


14,507,818


14,651,937


14,507,818









Annualized return on:








Average assets

1.14%


0.87%


0.90%


0.99%

Average equity

10.14%


8.25%


8.10%


9.43%

Yield on interest-earning assets

4.10%


4.64%


4.21%


4.93%

Cost of interest-bearing liabilities

0.42%


0.59%


0.49%


0.62%

Net interest margin

3.83%


4.25%


3.90%


4.53%

Annualized net charge-offs (recoveries) to average loans

(0.55)%


0.46%


0.04%


1.19%













September 30, 2013


December 31, 2012





Shares outstanding - period end

14,653,358


14,217,303





Book value per share

$5.02


$4.88





Tangible book value per share

$4.70


$4.55





Efficiency ratio

73.83%


70.47%





Total nonperforming assets

$38,730


$47,074





Nonperforming assets to total assets

5.85%


7.25%





Total Impaired loans

$21,698


$21,931





Total nonaccrual loans

$11,925


$13,425





Allowance for credit losses to total loans

2.75%


2.95%





 

SOURCE United Security Bancshares



RELATED LINKS
http://www.unitedsecuritybank.com

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