United Security Bancshares Reports 3rd Quarter Net Income of $4.2 Million

United Security Bancshares (Nasdaq: UBFO) today announced its unaudited financial results for the three and nine months ended September 30, 2019. The Company reported consolidated net income of $4,173,000, or $0.25 per basic and diluted common share, for the quarter ended September 30, 2019, as compared to $3,518,000, or $0.21 per basic and diluted common share, for the quarter ended September 30, 2018. The Company recognized net income of $12,276,000 for the nine months ended September 30, 2019, an increase of 22% compared to the net income of $10,068,000 recognized for the nine months ended September 30, 2018. Basic and diluted earnings per share increased to $0.72 for the nine months ended September 30, 2019, as compared to basic earnings per share of $0.60 and diluted earnings per share of $0.59 for the nine months ended September 30, 2018.

Third Quarter 2019 Highlights (at or for the quarter ended September 30, 2019, except where noted)

• Net interest income after provision for credit losses increased to $9,351,000, compared to $9,236,000 for the quarter ended September 30, 2018, and increased from $9,299,000 in the preceding quarter.
• Net interest margin decreased to 4.17% from 4.43% for the quarter ended September 30, 2018, and decreased from 4.28% in the preceding quarter.
• Net charge-offs totaled $226,000, compared to net recoveries of $746,000 for the quarter ended September 30, 2018, and net recoveries of $31,000 in the preceding quarter.
• Capital positions remain strong with a 12.47% Tier 1 Leverage Ratio, a 15.67% Common Equity Tier 1 Ratio; a 17.13% Tier 1 Risk-Based Capital Ratio; and a 18.38% Total Risk-Based Capital Ratio.
• Annualized return on average assets ("ROAA") was 1.69%, compared to 1.59% for the quarter ended September 30, 2018, and 1.71% in the preceding quarter.
• Annualized return on average equity ("ROAE") was 14.36%, compared to 13.04% for the quarter ended September 30, 2018, and 14.53% in the preceding quarter.
• Total loans, net of unearned fees, decreased to $569,500,000, compared to $587,814,000 at December 31, 2018.
• Other real estate owned balances remained at $5,745,000 at September 30, 2019 when compared to $5,745,000 at December 31, 2018.
• The allowance for credit losses as a percentage of gross loans increased to 1.45%, compared to 1.43% at December 31, 2018.
• Total deposits increased to $820,223,000, compared to $805,643,000 at December 31, 2018.
• Book value per share increased to $6.80, compared to $6.45 at December 31, 2018.

Dennis Woods, President and Chief Executive Officer, stated: "During the third quarter, we added Interactive Teller Machines (ITMs) in four of our branches, replacing existing drive-up windows, to provide extended banking hours for our customers. Our third quarter net interest margin reflects the impact of the Federal Reserve rate cut, however, core net income, capital, and liquidity remain strong. We expect to carry this momentum through the fourth quarter of 2019."

Results of Operations

Annualized ROE for the nine months ended September 30, 2019 was 14.50%, compared to 12.81% for the nine months ended September 30, 2018. Annualized ROA was 1.70% for the nine months ended September 30, 2019, compared to 1.58% for the nine months ended September 30, 2018. Annualized ROE for the quarter ended September 30, 2019 was 14.36% compared to 13.04% for the same period in 2018. Annualized ROA was 1.69% for the quarter ended September 30, 2019, compared to 1.59% for the same period in 2018.

The annualized average cost of deposits was 0.45% for the quarter ended September 30, 2019 and 0.31% for the quarter ended September 30, 2018. The increase in the cost of deposits is attributed to increases in average balances of interest-bearing deposits and rates paid on time deposits and money market accounts. Interest-bearing deposits increased 9.81% between the quarters ended September 30, 2018 and 2019 to an average balance of $524,437,000.

Net interest income after the provision for credit losses for the nine months ended September 30, 2019 totaled $28,103,000, an increase of $1,439,000, or 5.40%, from $26,664,000 for the same period ended September 30, 2018. Included within the balance of net interest income after the provision for credit losses for the nine months ended September 30, 2018 was a $1,710,000 recovery of provision. The recovery of provision was due to one-time recoveries on previously charged-off loans. There were no such recoveries recognized during the nine months ended September 30, 2019. The Company's net interest margin decreased from 4.31% for the nine months ended September 30, 2018 to 4.30% for the nine months ended September 30, 2019. The decrease was the result of increases in the cost of deposits, partially offset by increases in loan yields, and investment yields. The yield on loans increased from 5.52% for the nine months ended September 30, 2018 to 5.98% for the nine months ended September 30, 2019. The yield on loans for the nine months ended September 30, 2018 includes $550,000 in write-downs of unamortized insurance premiums on the student loan portfolio, which was a result of the dissolution of the insurance carrier. The increase in net interest income on a year-over-year comparison is the result of higher interest rates on loans and investment securities, partially offset by increasing costs of deposits and a decline in loan balances. Net interest income after the provision for credit losses for the quarter ended September 30, 2019 totaled $9,351,000, an increase of $115,000, or 1.25%, from the net interest income of $9,236,000 for the same period ended September 30, 2018.

Non-interest income for the nine months ended September 30, 2019 totaled $5,105,000, reflecting an increase of $2,165,000 from the $2,940,000 in non-interest income reported for the nine months ended September 30, 2018. Customer service fees, which represent the largest portion of the Company's non-interest income, totaled $2,479,000 and $2,787,000 for the nine months ended September 30, 2019 and 2018, respectively. On a year-over-year comparative basis, non-interest income increased primarily due to a $1,571,000 gain on the fair value of junior subordinated debentures (TRUPs) for the nine months ended September 30, 2019, compared to a $923,000 loss for the same period ended September 30, 2018. The change in the fair value of TRUPs reflected in non-interest income was caused by fluctuations in the LIBOR yield curve. Non-interest income for the nine months ended September 30, 2019 also includes a $115,000 loss resulting from the dissolution of the USB Real Estate Investment Trust (REIT) which was completed in February 2019. Non-interest income for the nine months ended September 30, 2018 includes a $171,000 gain recorded on the death benefit proceeds of bank-owned life insurance.

Non-interest income for the quarter ended September 30, 2019 totaled $1,853,000, reflecting an increase of $1,004,000 from the $849,000 in non-interest income reported for the quarter ended September 30, 2018. The increase during the period was primarily due to the recording of a $660,000 gain on the fair value of TRUPs for the quarter ended September 30, 2019, as compared to a $262,000 loss for the quarter ended September 30, 2018. The change in the fair value of TRUPs reflected in non-interest income was primarily caused by fluctuations in the LIBOR yield curve. Customer service fees totaled $839,000 for the quarter ended September 30, 2019, as compared to $815,000 for the quarter ended September 30, 2018.

For the nine months ended September 30, 2019, non-interest expense totaled $15,943,000, an increase of $484,000 compared to $15,459,000 for the nine months ended September 30, 2018. On a year-over-year comparative basis, non-interest expense increased primarily due to increases of $663,000 in professional fees, $188,000 in other expenses, and $116,000 in data processing, partially offset by a decreases of $491,000 in salaries and employee benefits and $110,000 in regulatory assessments. The increase in professional fees is mainly attributed to an increase in legal fees. The increase in data processing is primarily due to additional service fees, and the increase in other expenses is attributed to workman's compensation insurance expense. The decrease in salary and employee benefits is attributed to lower equity award expense. Non-interest expense for the nine months ended September 30, 2018 includes a $121,000 recovery of workman's compensation insurance expense.

Non-interest expense totaled $5,335,000 for the quarter ended September 30, 2019, an increase of $192,000 as compared to $5,143,000 reported for the quarter ended September 30, 2018. On a quarter-over-quarter comparative basis, non-interest expense increased primarily due to increases in data processing expenses and professional fees, partially offset by decreases in regulatory assessments as well as salary and employee benefits as a result of lower equity award expenses. The decrease in regulatory assessments is attributed to the utilization of FDIC assessment credits.

The Company recorded an income tax provision of $4,989,000 for the nine months ended September 30, 2019, compared to $4,077,000 for the same period in 2018. The effective tax rate for the nine months ended September 30, 2019 was 28.90%, compared to 28.82% for the nine months ended September 30, 2018. For the quarter ended September 30, 2019, the Company recorded a tax provision of $1,696,000, compared to a provision of $1,424,000 for the same period in 2018.

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, recovery of provision for credit losses, and gain 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 $24,340,000, or 2.61%, for the nine months ended September 30, 2019, due primarily to increases of $23,482,000 in overnight funds held at the Federal Reserve. Loan balances decreased by $17,805,000 for the nine months ended September 30, 2019 and investment securities increased by $11,566,000. Unfunded loan commitments increased $35,231,000 to $211,584,000 during the first nine months of 2019. With the adoption of ASU 2016-02, effective January 1, 2019, the Company began to recognize an operating lease right-of-use asset and operating lease liability. At September 30, 2019, the operating lease right-of-use asset was $3,610,000 and the operating lease liability was $3,714,000.

Total deposits increased $14,580,000, or 1.81%, to $820,223,000 during the nine months ended September 30, 2019. This increase was due to an increase of $40,436,000 in noninterest bearing deposits, partially offset by a decrease of $14,279,000 in time deposits and a decrease of $11,577,000 in NOW, money market, and savings accounts. Total money market and savings accounts decreased 2.69% to $418,914,000 at September 30, 2019, compared to $430,491,000 at December 31, 2018. Noninterest bearing deposits increased 13.81% to $333,156,000 at September 30, 2019, compared to $292,720,000 at December 31, 2018. 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 $28,859,000.

Shareholders’ equity at September 30, 2019 was $115,210,000, up $5,970,000 from shareholders’ equity of $109,240,000 at December 31, 2018. The increase in equity was a result of net earnings for the period, partially offset by cash dividends.

The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on September 24, 2019. The dividend will be payable on October 18, 2019, to shareholders of record as of October 8, 2019. The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on June 25, 2019. The dividend was payable on July 18, 2019, to shareholders of record as of July 8, 2019. The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.11 per share on March 26, 2019. The dividend was payable on April 17, 2019, to shareholders of record as of April 8, 2019. 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 $15,000 for the nine months ended September 30, 2019, compared to a recovery of provision of $1,699,000 for the nine months ended September 30, 2018. Net loan charge-offs totaled $180,000 for the nine months ended September 30, 2019, as compared to net recoveries of $1,230,000 for the nine months ended September 30, 2018. The Company recorded a provision for credit loss of $5,000 for the quarter ended September 30, 2019, compared to a recovery of provision for credit losses of $373,000 for the quarter ended September 30, 2018. Net loan charge-offs totaled $226,000 for the quarter ended September 30, 2019, as compared to net loan recoveries of $746,000 for the quarter ended September 30, 2018.

The Company's allowance for loan loss totaled 1.45% of the loan portfolio at September 30, 2019, compared to 1.43% at December 31, 2018. 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 September 30, 2019 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 approximately $354,000 between December 31, 2018 and September 30, 2019 to $21,275,000. Nonperforming assets as a percentage of total assets decreased from 2.32% at December 31, 2018 to 2.22% at September 30, 2019. The decrease in nonperforming assets is mainly attributed to decreases in restructured loans. Nonaccrual loans increased $704,000 between December 31, 2018 and September 30, 2019 to $12,756,000. Restructured loans decreased $1,763,000 between December 31, 2018 and September 30, 2019. OREO totaled $5,745,000 at September 30, 2019 and December 31, 2018.

About United Security Bancshares

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

Non-GAAP Financial Measures

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

Forward-Looking Statements

This news release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Company intends such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are based on management’s knowledge and belief as of today and are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date. Forward-looking statements are subject to risks and uncertainties and actual results may differ materially from those presented. Factors that might cause such differences, some of which are beyond the Company’s ability to control or predict, include, but are not limited to: (1) changes in general economic and financial market conditions, either nationally or locally, (2) changes in interest rates, (3) changes in banking laws or regulations, (4) increased competition in the Company’s market, impacting the ability to execute its business plans, (5) loss of key personnel, (6) unanticipated credit losses, (7) earthquakes or other natural disasters impacting the local economy and/or the condition of real estate collateral, (8) the impact of technological changes and the ability to develop and maintain secure and reliable electronic systems, and (9) 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, 2018, 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)
	September 30, 2019				December 31, 2018
Assets
Cash and non-interest-bearing deposits in other banks	$	31,073			$	28,949
Due from Federal Reserve Bank ("FRB")	214,870				191,388
Cash and cash equivalents	245,943				220,337
Investment securities (at fair value)
Available for sale ("AFS") securities	77,864				66,426
Marketable equity securities	3,787				3,659
Total investment securities	81,651				70,085
Loans	570,128				587,933
Unearned fees and unamortized loan origination costs - net	(628		)		(119		)
Allowance for credit losses	(8,230		)		(8,395		)
Net loans	561,270				579,419
Premises and equipment - net	9,455				9,837
Accrued interest receivable	10,522				8,341
Other real estate owned	5,745				5,745
Goodwill	4,488				4,488
Deferred tax assets - net	3,121				3,174
Cash surrender value of life insurance	20,682				20,244
Operating lease right-of-use assets	3,610				—
Other assets	10,911				11,388
Total assets	$	957,398			$	933,058
Liabilities and Shareholders' Equity
Deposits
Non-interest-bearing	$	333,156			$	292,720
Interest-bearing	487,067				512,923
Total deposits	820,223				805,643
Accrued interest payable	72				57
Operating lease liabilities	3,714				—
Other liabilities	7,849				7,963
Junior subordinated debentures (at fair value)	10,330				10,155
Total liabilities	842,188				823,818
Shareholders' Equity
Common stock, no par value; 20,000,000 shares authorized; issued and outstanding: 16,953,744 at September 30, 2019 and 16,946,622 at December 31, 2018	58,896				58,624
Retained earnings	56,619				49,942
Accumulated other comprehensive (loss) income	(305		)		674
Total shareholders' equity	115,210				109,240
Total liabilities and shareholders' equity	$	957,398			$	933,058

United Security Bancshares
Consolidated Statements of Income (unaudited)
(in thousands)
	Three Months Ended September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
Interest Income:
Interest and fees on loans	$	8,648			$	8,397			$	25,733			$	24,114
Interest on investment securities	439				351				1,360				809
Interest on deposits in FRB	1,330				806				4,052				1,870
Total interest income	10,417				9,554				31,145				26,793
Interest Expense:
Interest on deposits	950				579				2,675				1,517
Interest on other borrowed funds	111				112				352				311
Total interest expense	1,061				691				3,027				1,828
Net Interest Income	9,356				8,863				28,118				24,965
Provision (Recovery of Provision) for Credit Losses	5				(373)				15				(1,699)
Net Interest Income after Provision (Recovery of Provision) for Credit Losses	9,351				9,236				28,103				26,664
Noninterest Income:
Customer service fees	839				815				2,479				2,787
Increase in cash surrender value of bank-owned life insurance	147				132				438				389
Gain (loss) on fair value of marketable equity securities	18				(35)				128				(114)
Gain on proceeds from bank-owned life insurance	—				—				—				171
Gain (loss) on fair value of junior subordinated debentures	660				(262)				1,571				(923)
Loss on dissolution of real estate investment trust	(1)				—				(115)				—
(Loss) gain on sale of assets	(5)				—				1				29
Other	195				199				603				601
Total noninterest income	1,853				849				5,105				2,940
Noninterest Expense:
Salaries and employee benefits	2,775				2,826				8,307				8,798
Occupancy expense	829				848				2,450				2,448
Data processing	151				74				402				286
Professional fees	864				620				2,423				1,760
Regulatory assessments	(37)				87				138				248
Director fees	95				78				281				239
Correspondent bank service charges	14				15				42				48
Loss on California tax credit partnership	—				5				—				14
Net cost on operation and sale of OREO	71				30				223				129
Other	573				560				1,677				1,489
Total noninterest expense	5,335				5,143				15,943				15,459
Income Before Provision for Taxes	5,869				4,942				17,265				14,145
Provision for Taxes on Income	1,696				1,424				4,989				4,077
Net Income	$	4,173			$	3,518			$	12,276			$	10,068
Basic earnings per common share	$	0.25			$	0.21			$	0.72			$	0.60
Diluted earnings per common share	$	0.25			$	0.21			$	0.72			$	0.59
Weighted average basic shares for EPS	16,950,564				16,902,218				16,948,810				16,897,524
Weighted average diluted shares for EPS	16,981,705				16,954,053				16,977,224				16,933,477

United Security Bancshares
Average Balances and Rates (unaudited)
(in thousands)	Three Months Ended September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
Average Balances:
Loans (1)	$	579,035			$	571,673			$	575,323			$	584,424
Investment securities – taxable	71,168				59,571				68,254				51,489
Interest-bearing deposits in FRB	240,605				163,572				231,807				137,478
Total interest-earning assets	890,808				794,816				875,384				773,391
Allowance for credit losses	(8,448		)		(8,934		)		(8,449		)		(9,219		)
Cash and due from banks	29,105				27,514				28,898				27,111
Other real estate owned	5,745				5,745				5,745				5,745
Other non-earning assets	62,752				56,225				61,112				54,653
Total average assets	$	979,962			$	875,366			$	962,690			$	851,681
Interest-bearing deposits	$	524,437			$	449,041			$	523,104			$	431,118
Junior subordinated debentures	10,416				10,062				10,296				9,783
Total interest-bearing liabilities	534,853				459,103				533,400				440,901
Non-interest-bearing deposits	319,547				303,614				306,590				299,701
Other liabilities	10,319				5,645				9,506				6,012
Total liabilities	864,719				768,362				849,496				746,614
Total equity	115,243				107,004				113,194				105,067
Total liabilities and equity	$	979,962			$	875,366			$	962,690			$	851,681
Average Rates:
Loans (1)	5.93		%		5.83		%		5.98		%		5.52		%
Investment securities- taxable	2.45		%		2.34		%		2.66		%		2.10		%
Interest-bearing deposits in FRB	2.19		%		1.95		%		2.34		%		1.82		%
Earning assets	4.64		%		4.77		%		4.76		%		4.63		%
Interest bearing deposits	0.72		%		0.51		%		0.68		%		0.47		%
Total deposits	0.45		%		0.31		%		0.43		%		0.28		%
Junior subordinated debentures	4.23		%		4.42		%		4.57		%		4.25		%
Total interest-bearing liabilities	0.79		%		0.60		%		0.76		%		0.55		%
Net interest margin (2)	4.17		%		4.43		%		4.30		%		4.31		%

(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)
	September 30, 2019				June 30, 2019				March 31, 2019				December 31, 2018				September 30, 2018
Cash and cash equivalents	$	245,943			$	309,460			$	260,701			$	220,337			$	207,300
Investment securities	81,651				63,632				66,604				70,085				65,727
Loans	569,500				572,810				579,617				587,814				577,598
Allowance for credit losses	(8,230		)		(8,452		)		(8,417		)		(8,395		)		(8,798		)
Net loans	561,270				564,358				571,200				579,419				568,800
Other assets	68,534				69,043				65,535				63,217				62,201
Total assets	$	957,398			$	1,006,493			$	964,040			$	933,058			$	904,028
Non-interest-bearing	$	333,156			$	304,172			$	300,476			$	292,720			$	315,213
Interest-bearing	487,067				566,743				531,101				512,923				463,670
Total deposits	820,223				870,915				831,577				805,643				778,883
Other liabilities	21,965				22,240				21,270				18,175				18,099
Total liabilities	842,188				893,155				852,847				823,818				796,982
Total shareholders' equity	115,210				113,338				111,193				109,240				107,046
Total liabilities and shareholder's equity	$	957,398			$	1,006,493			$	964,040			$	933,058			$	904,028

United Security Bancshares
Condensed - Consolidated Statements of Income (unaudited)
(in thousands)	For the Quarters Ended:
	September 30, 2019				June 30, 2019				March 31, 2019				December 31, 2018				September 30, 2018
Total interest income	$	10,417			$	10,311			$	10,417			$	9,821			$	9,554
Total interest expense	1,061				1,008				957				876				691
Net interest income	9,356				9,303				9,460				8,945				8,863
Provision (recovery of provision) for credit losses	5				4				6				(65		)		(373		)
Net interest income after provision (recovery of provision) for credit losses	9,351				9,299				9,454				9,010				9,236
Total non-interest income	1,853				1,729				1,523				1,665				849
Total non-interest expense	5,335				5,262				5,347				5,473				5,143
Income before provision for taxes	5,869				5,766				5,630				5,202				4,942
Provision for taxes on income	1,696				1,669				1,623				1,254				1,424
Net income	$	4,173			$	4,097			$	4,007			$	3,948			$	3,518

United Security Bancshares
Nonperforming Assets (unaudited)
(dollars in thousands)
	September 30, 2019				December 31, 2018
Commercial and industrial	$	75			$	—
Real estate - mortgage	1,008				389
RE construction & development	11,529				11,663
Agricultural	144				—
Total nonaccrual loans	$	12,756			$	12,052
Loans past due 90 days and still accruing	326				—
Restructured loans	2,448				3,832
Total nonperforming loans	$	15,530			$	15,884
Other real estate owned	5,745				5,745
Total nonperforming assets	$	21,275			$	21,629
Nonperforming assets to total gross loans	2.72		%		2.70		%
Nonperforming assets to total assets	2.22		%		2.32		%
Allowance for credit losses to nonperforming loans	52.99		%		52.85		%

United Security Bancshares
Selected Financial Data (unaudited)
(dollars in thousands, except per share amounts)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019		2018
Return on average assets	1.69	%		1.59	%		1.70%		1.58%
Return on average equity	14.36	%		13.04	%		14.50%		12.81%
Net charge-off (recoveries) to average loans	0.15	%		(0.52	)%		0.04%		(0.28)%
	September 30, 2019			December 31, 2018
Shares outstanding - period end	16,953,744			16,946,622
Book value per share	$6.80			$6.45
Efficiency ratio (1)	47.99	%		53.66	%
Total impaired loans	$18,362			$18,683
Net loan to deposit ratio	68.43	%		71.92	%
Allowance for credit losses to total loans	1.45	%		1.43	%
Total capital to risk weighted assets
Company	18.38	%		17.80	%
Bank	18.18	%		17.70	%
Tier 1 capital to risk-weighted assets
Company	17.13	%		16.55	%
Bank	16.93	%		16.45	%
Common equity tier 1 capital to risk-weighted assets
Company	15.67	%		15.15	%
Bank	16.93	%		16.45	%
Tier 1 capital to adjusted average assets (leverage)
Company	12.47	%		12.15	%
Bank	12.29	%		12.16	%

(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)
		Nine Months Ended September 30,
		2019				2018				Change $				Change %
Net income		$	12,276			$	10,068			$	2,208			21.93	%
TRUPs (1) fair value adjustment gain (loss)		1,571				(923		)
Reversal of provision for credit losses (2)		—				1,710
		1,571				787
Income tax effect		456				228
Non-core items net of taxes		1,115				559
Non-GAAP core net income		$	11,161			$	9,509			$	1,652			17.37	%

(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)	A reversal of provision for credit losses is not part of Non-GAAP Core Income. This reversal from the allowance for credit losses was in excess of the calculated reserve for the period. The recovery of provision for credit losses of $1,699,000 for the nine months ended September 30, 2018, within the Consolidated Statements of Income, includes this reversal of provision for credit losses of $1,710,000 and a provision for overdrafts of $11,000. For the nine months ended September 30, 2019, there was no reversal from the allowance for credit losses in excess of the calculated reserve for the period. The provision for credit losses of $15,000, as reported within the Consolidated Statements of Income, represents the provision for overdrafts.

 

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