UNITED SECURITY BANCSHARES FRESNO, Calif., Jan. 25, 2017 /PRNewswire/ --United Security Bancshares (Nasdaq: UBFO), today announced its unaudited financial results for the quarter ended December 31, 2016. The Company reported consolidated net income of $1,555,000, or $0.09 per basic and diluted common share, for the quarter ended December 31, 2016, as compared to $1,634,000, or $0.10 per basic and diluted common share, for the quarter ended December 31, 2015. The Company recognized net income of $7,385,000 for the year ended December 31, 2016, an improvement of $575,000, or 8.44%, relative to the net income of $6,810,000 recognized for the year ended December 31, 2015. Basic and diluted earnings per share increased to $0.44 for the year ended December 31, 2016, as compared to $0.41 for the year ended December 31, 2015.
"We have consistently exceeded our goals of loan growth and core earnings growth for the last three years, while maintaining strong liquidity and capital levels. Core earnings grew 10% in 2016 and our credit quality metrics continue to improve while our reserve levels remain strong. We plan to continue this momentum into 2017," said Dennis R. Woods, President and Chief Executive Officer of the Company. The Company defines core earnings as pretax income less gain or loss on sales, OREO expenses, provision or recovery of provision for loan loss, bonus expense, and gain or loss on fair value of financial liability.
Fourth Quarter 2016 Highlights (at or for the quarter ended December 31, 2016)
-- Net interest income increased to $7,384,000, compared to $6,745,000 for
the quarter ended December 31, 2015, and decreased from $7,404,000 in
the preceding quarter.
-- Annualized net interest margin increased to 4.15% from 4.14% for the
quarter ended December 31, 2015.
-- Net charge-offs totaled $2,000, compared to net recoveries of $6,000 in
the preceding quarter and net charge-offs of $1,385,000 for the quarter
ended December 31, 2015.
-- Total loans increased to $570,834,000, compared to $515,376,000 at
December 31, 2015.
-- Nonperforming assets as a percentage of total assets decreased to 2.40%,
compared to 4.42% at December 31, 2015.
-- Nonperforming assets decreased approximately $13,213,000 between
December 31, 2015 and December 31, 2016.
-- Other real estate owned declined to $6,471,000, compared to $12,873,000
at December 31, 2015.
-- The allowance for credit losses as a percentage of gross loans declined
to 1.56%, compared to 1.88% at December 31, 2015.
-- Total deposits increased to $676,629,000, compared to $621,805,000 at
December 31, 2015.
-- Tangible book value per share increased to $5.50, compared to $5.30 at
December 31, 2015.
Return on average equity (ROAE) for the year ended December 31, 2016 was 7.86%, compared to 7.88% for the year ended December 31, 2015. Return on average assets (ROAA) was 0.98% for both the year ended December 31, 2016, and the year ended December 31, 2015. Annualized ROAE for the quarter ended December 31, 2016 was 6.38% compared to 7.27% for the same period in 2015. Annualized ROAA was 0.79% for the quarter ended December 31, 2016, compared to 0.90% for the same period in 2015. The annualized average cost of deposits was 0.20% for the quarter ended December 31, 2016, and 0.18% for the quarter ended December 31, 2015. Shareholders' equity at December 31, 2016 was $96,359,000, up $6,724,000 from shareholders' equity of $89,635,000 at December 31, 2015.
Total assets were up $62,033,000, or 8.55% for the year ended December 31, 2016, due to net growth of $26,598,000 in the investment portfolio and $55,458,000 in gross loan balances. Loan volume was favorably impacted by the purchase of residential mortgage loans during 2016 in addition to growth in the commercial real estate and student loan portfolios.
Total deposits increased $54,824,000, or 8.82%, to $676,629,000 during the year ended December 31, 2016. Interest bearing transaction and savings accounts increased 7.04% to $310,941,000 at December 31, 2016, compared to $290,478,000 at December 31, 2015. Time deposits increased 48.92% to $102,991,000 at December 31, 2016, compared to $69,159,000 at December 31, 2015. The growth in time deposits is due to the increase in brokered and non-relationship deposits in 2016.
The Board of Directors of United Security Bancshares declared a fourth quarter 2016 stock dividend of one percent (1%) on December 20, 2016. The stock dividend was payable to shareholders of record on January 3, 2017, and the shares will be issued on January 13, 2017. This marks the 33rd consecutive quarterly stock dividend since 2008. The Company's Board of Directors has elected to issue stock dividends in order to preserve capital for future growth opportunities. No assurances can be provided that future dividends, whether payable in stock or cash, will be declared and/or as to the timing of such future dividends, if any.
Net interest income after the recovery of provision for credit losses for the year ended December 31, 2016 totaled $28,085,000, an increase of $1,915,000 or 7.32% from the net interest income of $26,170,000 for the same period ended December 31, 2015. Although net interest income increased, the Company's net interest margin declined from 4.22% for the year ended December 31, 2015 to 4.11% for the year ended December 31, 2016. The 11 basis point decrease in net interest margin in the period-to-period comparison resulted primarily from declining yields on the loan and investment portfolios. The yield on loans declined from 5.36% for the year ended December 31, 2015 to 5.21% for the year ended December 31, 2016. The 15 basis point decrease in loan yields is the result of strong loan growth in lower-yielding mortgage loans and competitive pressures on loan yields. Net interest income after the recovery of provision for credit losses for the quarter ended December 31, 2016 totaled $7,398,000, an increase of $178,000 from the net interest income of $7,220,000 for the same period ended December 31, 2015. The increase in net interest income on a quarterly and year-over-year comparison is the result of strong loan growth during 2016, partially offset by increases in interest expense.
Non-interest income for the year ended December 31, 2016 totaled $4,514,000, reflecting a decrease of $221,000 from $4,735,000 in non-interest income reported for the year ended December 31, 2015. Customer service fees, which represent the largest portion of the Company's non-interest income, totaled $3,792,000 and $3,620,000 for the year ended December 31, 2016 and 2015, respectively. On a year-over-year comparative basis, non-interest income decreased primarily due to the change in fair value option of financial liability. The Company recorded a $518,000 loss on the fair value option of financial liability for the year ended December 31, 2016, compared to a $73,000 loss for the same period ended December 31, 2015.
Non-interest income for the quarter ended December 31, 2016 totaled $741,000, reflecting a decrease of $81,000 from $822,000 in non-interest income reported for the quarter ended December 31, 2015. This decrease was primarily due to a $566,000 loss recorded on the fair value option of financial liability for the quarter ended December 31, 2016, compared to a $417,000 loss for the same period ended 2015. The change in the fair value of financial liability was primarily caused by fluctuations in the LIBOR yield curve. Customer service fees totaled $925,000 for the quarter ended December 31, 2016, as compared to $960,000 for the quarter ended December 31, 2015.
For the year ended December 31, 2016, non-interest expense totaled $20,345,000, an increase of $747,000 compared to $19,598,000 for the year ended December 31, 2015. On a year-over-year comparative basis, non-interest expense increased due primarily to increases of $707,000 in salaries and employee benefit expenses, $356,000 in professional fees, and $180,000 in occupancy expenses, partially offset by a $356,000 decrease in OREO expense. Professional fees for the year ended December 31, 2016 include a $125,000 legal settlement. Salaries and employee benefit expenses for the year ended December 31, 2016 reflect increases in salaries, higher group insurance expenses, and increases in incentives and bonuses.
Non-interest expense totaled $5,358,000 for the quarter ended December 31, 2016, an increase of $163,000 as compared to $5,195,000 reported for the quarter ended December 31, 2015. On a quarter-over-quarter comparative basis, non-interest expense increased primarily due to increases in salaries and benefits expenses and professional fees. The increase in professional fees in primarily attributed to higher audit expenses.
The Company recorded a recovery of provision for credit losses of $21,000 for the year ended December 31, 2016, compared to a recovery provision of $41,000 for the year ended December 31, 2015. Net loan charge-offs totaled $790,000 for the year ended December 31, 2016, as compared to net charge-offs of $1,017,000 for the year ended December 31, 2015. Included in net loan charge-offs during 2016 are $641,000 in charge-offs that the Company had fully reserved for in prior periods. The Company had a recovery of provision for credit loss of $14,000 for the quarter ended December 31, 2016, compared to a recovery of provision for credit losses of $475,000 for the quarter ended December 31, 2015. Net loan charge-offs totaled $2,000 for the quarter ended December 31, 2016, as compared to net loan charge-offs of $1,385,000 for the quarter ended December 31, 2015.
With a modest recovery in the economy and real estate markets within the Company's service area, the Company has maintained an adequate allowance for loan losses, which totaled 1.56% of total loans at December 31, 2016, compared to 1.88% of total loans at December 31, 2015. The allowance for loan loss as a percentage of loans has declined over the last few years due to growth in our loan portfolio, improved credit quality, and improved economic conditions. In determining the adequacy of the allowance for loan losses, the judgment of the Company's management is a significant factor and management considers the allowance for credit losses at December 31, 2016 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 $13,213,000 between December 31, 2015 and December 31, 2016 to $18,881,000. Nonperforming assets as a percentage of total assets decreased from 4.42% at December 31, 2015 to 2.40% at December 31, 2016. The reduction in nonperforming assets is mostly attributed to partial sales on two OREO properties and paydowns on TDR balances. Nonaccrual loans decreased $929,000 between December 31, 2015 and December 31, 2016 to $7,264,000. Impaired loans totaled $16,179,000 at December 31, 2016, a decrease of $7,500,000 from the balance of $23,679,000 at December 31, 2015. OREO totaled $6,471,000 at December 31, 2016, a decrease of $6,402,000 from the balance of $12,873,000 at December 31, 2015.
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, Consumer Lending, and Financial Services departments. For more information, please visit www.unitedsecuritybank.com.
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 the Company's specific business activities and profitability. Weaker or a further decline in capital and consumer spending, and related recessionary trends could adversely affect the Company's 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, 2015, and particularly the section of Management's Discussion and Analysis. Readers should carefully review all disclosures the Company files from time to time with the Securities and Exchange Commission ("SEC").
United
Security
Bancshares
Consolidated
Balance
Sheets
(unaudited)
(in
thousands)
December 31, 2016 December 31, 2015
----------------- -----------------
Assets
Cash and
non-
interest-
bearing
deposits
in other
banks $25,781 $29,733
Cash and
due from
Federal
Reserve
Bank 87,251 96,018
------
Cash and
cash
equivalents 113,032 125,751
Interest-
bearing
deposits
in other
banks 650 1,528
Investment
securities
available
for sale
(at fair
value) 57,491 30,893
Loans and
leases,
net of
unearned
fees 570,834 515,376
Less:
Allowance
for
credit
losses (8,902) (9,713)
------ ------
Net loans 561,932 505,663
Premises
and
equipment
-net 10,445 10,800
Other
real
estate
owned 6,471 12,873
Goodwill
and
intangible
assets 4,488 4,488
Cash
surrender
value of
life
insurance 19,047 18,337
Deferred
income
tax
asset -
net 3,003 5,228
Other
assets 11,118 10,083
------ ------
Total
assets $787,677 $725,644
======== ========
Liabilities
and
Shareholders'
Equity
Deposits
Non-
interest
bearing
demand
deposits $262,697 $262,168
Money
market,
NOW, and
savings 310,941 290,478
Time 102,991 69,159
------- ------
Total
deposits 676,629 621,805
Accrued
interest
payable 76 29
Other
liabilities 5,781 5,875
Junior
subordinated
debentures
(at fair
value) 8,832 8,300
----- -----
Total
liabilities 691,318 636,009
Shareholders'
equity
Common
stock, at
no par December
value 31,
20,000,000 2016,
shares and
authorized, 16,051,406
16,705,294 at
issued December
and 31, 2015
outstanding 56,557 52,572
Retained
earnings 40,701 37,265
Accumulated
other
comprehensive
loss (899) (202)
---- ----
Total
shareholders'
equity 96,359 89,635
------ ------
Total
liabilities
and
shareholders'
equity $787,677 $725,644
======== ========
United Security Bancshares
Consolidated Statements of Income (unaudited)
(in thousands)
Three Months Ended December 31, Year ended December 31,
2016 2015 2016 2015
---- ---- ---- ----
Interest income:
Interest and fees on
loans $7,460 $6,828 $28,182 $26,469
Interest on
investment
securities 207 167 825 722
Interest on deposits
in FRB 110 75 458 213
Interest on deposits
in other banks 2 1 8 6
--- --- --- ---
Total interest income 7,779 7,071 29,473 27,410
Interest expense:
-----------------
Interest on deposits 329 277 1,167 1,056
Interest on other
borrowed funds 66 49 242 225
--- --- --- ---
Total interest
expense 395 326 1,409 1,281
--- --- ----- -----
Net interest income 7,384 6,745 28,064 26,129
Recovery of Provision
for Credit Losses (14) (475) (21) (41)
--- ---- --- ---
Net interest income
after recovery of
provision for credit
losses 7,398 7,220 28,085 26,170
Non-interest income:
--------------------
Customer service fees 925 960 3,792 3,620
Increase in cash
surrender value of
bank-owned life
insurance 136 130 530 519
Loss on Fair Value of
Financial Liability (566) (417) (518) (73)
Gain on redemption of
JR subordinated
debentures - - - 78
Loss on sale of other
investment - - - (23)
Gain on sale of fixed
assets - 10 - 10
Other non-interest
income 246 139 710 604
--- --- --- ---
Total non-interest
income 741 822 4,514 4,735
Non-interest expense:
---------------------
Salaries and employee
benefits 3,036 2,877 10,628 9,921
Occupancy expense 1,010 1,021 4,222 4,042
Data processing 40 36 148 126
Professional fees 377 260 1,493 1,137
Regulatory
assessments 134 254 767 959
Director fees 66 75 284 277
Correspondent bank
service charges 19 19 77 75
Loss on California
tax credit
partnership 36 13 158 73
Net cost on operation
and sale of OREO 47 25 263 619
Other non-interest
expense 593 615 2,305 2,369
--- --- ----- -----
Total non-interest
expense 5,358 5,195 20,345 19,598
----- ----- ------ ------
Income before income
tax provision 2,781 2,847 12,254 11,307
Provision for income
taxes 1,226 1,213 4,869 4,497
----- ----- ----- -----
Net income $1,555 $1,634 $7,385 $6,810
====== ====== ====== ======
Basic earnings per
common share $0.09 $0.10 $0.44 $0.41
Diluted earnings per
common share $0.09 $0.10 $0.44 $0.41
Weighted average
basic shares for EPS 16,705,294 16,702,781 16,703,672 16,702,781
Weighted average
diluted shares for
EPS 16,716,837 16,705,695 16,710,808 16,704,937
United Security Bancshares
Average Balances and Rates (unaudited)
(in thousands) Three Months Ended December 31, Year ended December 31,
2016 2015 2016 2015
---- ---- ---- ----
Average Balances:
Loans (1) $566,521 $506,699 $540,777 $493,375
Investment securities -
taxable 59,226 32,429 49,612 40,616
Interest-bearing
deposits in other banks 1,475 1,528 1,517 1,525
Interest-bearing
deposits in FRB 81,720 105,033 90,393 83,709
------ ------- ------ ------
Total interest-earning
assets 708,942 645,689 682,299 619,225
Allowance for credit
losses (8,930) (11,603) (9,311) (11,357)
Cash and due from banks 21,171 23,733 21,886 22,279
Other real estate owned 7,024 12,697 9,100 13,466
Other non-earning assets 50,532 52,650 49,723 52,861
------ ------ ------ ------
Total average assets 778,739 723,166 753,697 696,474
======= ======= ======= =======
Interest bearing deposits 396,606 366,321 375,538 355,553
Junior subordinated
debentures 8,246 7,858 8,058 9,410
----- ----- ----- -----
Total interest-bearing
liabilities 404,852 374,179 383,596 364,963
Non-interest-bearing
deposits 268,390 251,610 268,712 237,034
Other liabilities 8,808 8,242 7,673 8,078
----- ----- ----- -----
Total liabilities 682,050 634,031 659,981 610,075
------- ------- ------- -------
Total equity 96,689 89,135 93,716 86,399
------ ------ ------ ------
Total liabilities and
equity $778,739 $723,166 $753,697 $696,474
======== ======== ======== ========
Average Rates
(annualized):
Loans (1) 5.24% 5.35% 5.21% 5.36%
Investment securities-
taxable 1.39% 2.04% 1.66% 1.78%
Interest-bearing
deposits in other banks 0.54% 0.26% 0.53% 0.39%
Interest-bearing
deposits in FRB 0.54% 0.28% 0.51% 0.25%
Earning assets 4.37% 4.34% 4.32% 4.43%
Interest bearing deposits 0.33% 0.30% 0.31% 0.30%
Junior subordinated
debentures 3.18% 2.47% 3.00% 2.39%
Total interest-bearing
liabilities 0.39% 0.35% 0.37% 0.35%
Net interest margin 4.15% 4.14% 4.11% 4.22%
(1) Loan amounts include
nonaccrual loans, but the
related interest income has
been included only if
collected for the period
prior to the loan being
placed on a nonaccrual
basis.
United Security
Bancshares
Credit Quality
(unaudited)
(dollars in
thousands)
December 31, December 31,
2016 2015
------------- -------------
Commercial and
industrial $565 $328
Real estate -
mortgage 1,126 1,635
RE construction &
development 4,608 5,580
Installment/other 965 650
--- ---
Total Nonaccrual
Loans $7,264 $8,193
Loans past due 90
days and still
accruing - -
Restructured Loans 5,146 11,028
----- ------
Total nonperforming
loans $12,410 $19,221
Other real estate
owned 6,471 12,873
----- ------
Total nonperforming
assets $18,881 $32,094
------- -------
Nonperforming assets
to total gross
loans 3.31% 6.23%
Nonperforming assets
to total assets 2.40% 4.42%
Allowance for loan
losses to
nonperforming loans 71.73% 50.53%
United Security Bancshares
Selected Financial Data (unaudited)
(dollars in thousands, except per share amounts)
Three Months Ended December 31, Year ended December 31,
2016 2015 2016 2015
---- ---- ---- ----
Annualized return
on average
assets 0.79% 0.90% 0.98% 0.98%
Annualized return
on average
equity 6.38% 7.27% 7.86% 7.88%
Annualized net
charge-offs to
average loans 0.00% 1.08% 0.15% 0.21%
December 31, 2016 December 31, 2015
----------------- -----------------
Shares
outstanding -
period end 16,705,294 16,051,406
Book value per
share $5.77 $5.58
Tangible book
value per share $5.50 $5.30
Efficiency ratio 60.68% 61.49%
Total impaired
loans $16,179 $23,679
Loan to deposit
ratio 84.21% 82.87%
Allowance for
credit losses to
total loans 1.56% 1.88%
Total capital to risk weighted assets
Company 17.26% 16.65%
Bank 17.19% 16.69%
Tier 1 capital to risk-weighted
assets
Company 16.01% 15.40%
Bank 15.94% 15.43%
Common equity tier 1 capital to risk-
weighted assets
Company 14.68% 14.10%
Bank 15.94% 15.43%
Tier 1 capital to adjusted average
assets (leverage)
Company 12.97% 12.95%
Bank 12.99% 12.94%
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SOURCE United Security Bancshares
