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United Security Bancshares earns 3rd Quarter 2016 profits of $2.0 million

Dienstag, 18.10.2016 23:30 von

PR Newswire

FRESNO, Calif., Oct. 18, 2016 /PRNewswire/ -- United Security Bancshares (Nasdaq: UBFO), today announced its unaudited financial results for the quarter ended September 30, 2016.  The Company reported consolidated net income of $2,040,000 or $0.12, per basic and diluted common share for the quarter ended September 30, 2016, as compared to $1,886,000 or $0.11 per basic and diluted common share for the quarter ended September 30, 2015.  The Company recognized net income of $5,830,000 for the nine months ended September 30, 2016, an improvement of $653,000, or 12.61%, relative to the net income of $5,177,000 recognized for the nine months ended September 30, 2015.  Basic and diluted earnings per share increased to $0.35 for the nine months ended September 30, 2016, as compared to $0.31 for the nine months ended September 30, 2015.

"We have experienced exceptional growth in our loan portfolio throughout the year while maintaining strong liquidity and capital levels. Our credit quality continues to improve with a 42% reduction in nonperforming assets, relative to year-end 2015, as a result of sales of OREO assets and principal reductions on nonperforming loans. We plan to work hard to continue this momentum through the end of the year." said Dennis R. Woods, President and Chief Executive Officer of the Company.

Third Quarter 2016 Highlights (at or for the quarter ended September 30, 2016)

  • Net interest income increased to $7,404,000, compared to $6,633,000 for the quarter ended September 30, 2015, and increased from $6,666,000 in the preceding quarter.
  • Net interest margin increased to 4.27%, from 3.91% in the preceding quarter, and 4.18% for the quarter ended September 30, 2015.
  • Net recoveries totaled $6,000, compared to net charge-offs of $821,000 in the preceding quarter and net recoveries of $44,000 for the quarter ended September 30, 2015.
  • Total loans increased to $560,651,000, compared to $515,376,000 at December 31, 2015.
  • Nonperforming assets as a percentage of total assets decreased to 2.38%, compared to 4.42% at December 31, 2015.
  • Nonperforming assets decreased approximately $13,456,000 between December 31, 2015 and September 30, 2016.
  • Other real estate owned declined $5,808,000 to $7,065,000, compared to $12,873,000 at December 31, 2015.
  • The allowance for credit losses as a percentage of gross loans declined to 1.59%, compared to 1.88% at December 31, 2015.
  • Total deposits increased to $671,286,000, compared to $621,805,000 at December 31, 2015.
  • Tangible book value per share increased to $5.51, compared to $5.30 at December 31, 2015.

Annualized return on average equity (ROAE) for the nine months ended September 30, 2016 was 8.38%, compared to 8.10% for the nine months ended September 30, 2015.  Annualized return on average assets (ROAA) was 1.04% for the nine months ended September 30, 2016, compared to 1.01% for the nine months ended September 30, 2015.  The increases in ROAE and ROAA for the nine months ended September 30, 2016 were primarily due to the growth in the loan portfolio during the year and the resulting favorable impact on interest income.  ROAE for the quarter ended September 30, 2016 was 8.53% compared to 9.38% for the same period in 2015.  ROAA was 1.07% for the quarter ended September 30, 2016, compared to 1.16% for the same period in 2015. The average cost of deposits was 0.18% for the quarters ended September 30, 2015 and September 30, 2016. Shareholders' equity at September 30, 2016 was $95,585,000, up $5,950,000 from shareholders' equity of $89,635,000 at December 31, 2015. 

Total assets were up $55,948,000, or 7.71% for the nine months ended September 30, 2016, due to net growth of $29,495,000 in the investment portfolio and $45,275,000 in gross loan balances.  Loan volume was favorably impacted by the purchase of residential mortgage loans during 2016 in addition to growth in real estate construction and development loans and student loan portfolios.  Total deposits increased $49,481,000, or 7.96%, to $671,286,000 during the nine months ended September 30, 2016.

The Board of Directors of United Security Bancshares declared a third quarter 2016 stock dividend of one percent (1%) on September 27, 2016. The stock dividend was payable to shareholders of record on October 10, 2016, and the shares will be issued on October 21, 2016. This marks the 32nd 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 for the nine months ended September 30, 2016 totaled $20,681,000, an increase of $1,297,000 or 6.69% from the net interest income of $19,384,000 for the same period ended September 30, 2015. Although net interest income increased, the Company's net interest margin declined from 4.25% for the nine months ended September 30, 2015 to 4.10% for the nine months ended September 30, 2016.  The 15 basis point decrease in net interest margin in the period-to-period comparison resulted primarily from growth in average balances on overnight investments which are a low-yielding asset and declining yields on the loan portfolio.  The 17 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 for the quarter ended September 30, 2016 totaled $7,400,000, an increase of $744,000 from the net interest income of $6,656,000 for the same period ended September 30, 2015. The increase in net interest income on a quarterly and year-over-year comparison is the result of growth in the loan portfolio and increase in the rate on overnight investments in fed funds.

Non-interest income for the nine months ended September 30, 2016 totaled $3,773,000, reflecting a decrease of $141,000 from $3,914,000 in non-interest income reported for the nine months ended September 30, 2015.  Customer service fees, which represent the largest portion of the Company's non-interest income, totaled $2,867,000 and $2,661,000 for the nine months ended September 30, 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 $48,000 gain on the fair value option of financial liability for the nine months ended September 30, 2016, compared to a $346,000 gain for the same period ended September 30, 2015.

Non-interest income for the quarter ended September 30, 2016 totaled $786,000, reflecting a decrease of $663,000 from $1,449,000 in non-interest income reported for the quarter ended September 30, 2015.  This decrease was primarily due to a $423,000 loss recorded on the fair value option of financial liability for the quarter ended September 30, 2016, compared to a $148,000 gain 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 $924,000 for the quarter ended September 30, 2016, as compared to $963,000 for the quarter ended September 30, 2015.

For the nine months ended September 30, 2016, non-interest expense totaled $14,988,000, an increase of $584,000 compared to $14,404,000 for the nine months ended September 30, 2015.  On a year-over-year comparative basis, non-interest expense increased due primarily to increases of $548,000 in salaries and employee benefit expenses, $239,000 in professional fees, and $191,000 in occupancy expenses, partially offset by a decrease in OREO expense.  Professional fees for the nine months ended September 30, 2016 include a $125,000 legal settlement. Salaries and employee benefit expenses for the nine months ended September 30, 2016 reflect higher group insurance expense and salary and incentive expense.

Non-interest expense totaled $4,864,000 for the quarter ended September 30, 2016, a decrease of $150,000 as compared to $5,014,000 reported for the quarter ended September 30, 2015. On a quarter-over-quarter comparative basis, non-interest expense decreased primarily due to decreases in OREO expense, partially offset by an increase in salaries and benefits expense.

The Company recorded a recovery of provision for credit losses of $7,000 for the nine months ended September 30, 2016, compared to a provision of $434,000 for the nine months ended September 30, 2015.  Net loan charge-offs totaled $788,000 for the nine months ended September 30, 2016, as compared to net recoveries of $368,000 for the nine months ended September 30, 2015.  Included in net loan charge-offs are $641,000 in charge-offs that the Company had fully reserved for in prior periods. The Company had a provision for credit loss of $4,000 for the quarter ended September 30, 2016, compared to a recovery of provision for credit losses of $23,000 for the quarter ended September 30, 2015. Net loan recoveries totaled $6,000 for the quarter ended September 30, 2016, as compared to net loan recoveries of $44,000 for the quarter ended September 30, 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 1.59% of total loans at September 30, 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 September 30, 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 $13,456,000 between December 31, 2015 and September 30, 2016 to $18,638,000.  Nonperforming assets as a percentage of total assets decreased from 4.42% at December 31, 2015 to 2.38% at September 30, 2016.  The reduction in nonperforming assets is mostly attributed to partial sales on two OREO properties and paydowns on TDR balances.  Nonaccrual loans decreased $446,000 between December 31, 2015 and September 30, 2016 to $7,747,000.  Impaired loans totaled $15,753,000 at September 30, 2016, a decrease of $7,926,000 from the balance of $23,679,000 at December 31, 2015. OREO totaled $7,065,000 at September 30, 2016, a decrease of $5,808,000 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)




September 30, 2016


December 31, 2015

Assets




Cash and non-interest-bearing deposits in other banks

$

29,156



$

29,733


Cash and due from Federal Reserve Bank

82,591



96,018


Cash and cash equivalents

111,747



125,751


Interest-bearing deposits in other banks

1,534



1,528


Investment securities available for sale (at fair value)

60,388



30,893


Loans and leases, net of unearned fees

560,651



515,376


Less: Allowance for credit losses

(8,918)



(9,713)


Net loans

551,733



505,663


Premises and equipment - net

10,225



10,800


Other real estate owned

7,065



12,873


Goodwill and intangible assets

4,488



4,488


Cash surrender value of life insurance

18,738



18,337


Deferred income tax asset - net

5,146



5,228


Other assets

10,528



10,083


Total assets

$

781,592



$

725,644






Liabilities and Shareholders' Equity




Deposits




Non-interest bearing demand deposits

$

283,462



$

262,168


Money market, NOW, and savings

307,252



290,478


Time

80,572



69,159


Total deposits

671,286



621,805


Accrued interest payable

39



29


Other liabilities

6,420



5,875


Junior subordinated debentures (at fair value)

8,262



8,300


Total liabilities

686,007



636,009


Shareholders' equity








Common stock, no par value 20,000,000 shares authorized, 16,540,185 issued and outstanding at September 30, 2016, and 16,051,406 at December 31, 2015

55,305



52,572


Retained earnings

40,390



37,265


Accumulated other comprehensive loss

(110)



(202)


Total shareholders' equity

95,585



89,635


Total liabilities and shareholders' equity

$

781,592



$

725,644


 

United Security Bancshares




Consolidated Statements of Income (unaudited)




(in thousands)





Three Months Ended
September 30,


Nine Months Ended
September 30,


2016


2015


2016


2015

Interest income:








Interest and fees on loans

$

7,435


$

6,728


$

20,722


$

19,641

Interest on investment securities

244


175


618


555

Interest on deposits in FRB

72


55


348


138

Interest on deposits in other banks

2


1


6


5

Total interest income

7,753


6,959


21,694


20,339

Interest expense:








Interest on deposits

289


268


837


780

Interest on other borrowed funds

60


58


176


175

Total interest expense

349


326


1,013


955

Net interest income

7,404


6,633


20,681


19,384

Provision (Recovery of Provision) for Credit Losses

4


(23)


(7)


434

Net interest income after provision (recovery of provision) for credit losses

7,400


6,656


20,688


18,950

Non-interest income:








Customer service fees

924


963


2,867


2,661

Increase in cash surrender value of bank-owned life insurance

131


130


394


389

(Loss) gain on Fair Value of Financial Liability

(423)


148


48


346

Gain on redemption of JR subordinated debentures


78



78

Loss on sale of other investment


(23)



(23)

Other non-interest income

154


153


464


463

Total non-interest income

786


1,449


3,773


3,914

Non-interest expense:








Salaries and employee benefits

2,533


2,341


7,592


7,044

Occupancy expense

1,097


1,047


3,212


3,021

Data processing

23


29


108


90

Professional fees

327


277


1,116


877

Regulatory assessments

131


234


632


705

Director fees

75


78


218


202

Correspondent bank service charges

20


19


59


56

Loss (gain) on California tax credit partnership

49


(1)


122


60

Net cost on operation and sale of OREO

39


401


216


594

Other non-interest expense

570


589


1,713


1,755

Total non-interest expense

4,864


5,014


14,988


14,404









Income before income tax provision

3,322


3,091


9,473


8,460

Provision for income taxes

1,282


1,205


3,643


3,283

Net income

$

2,040


$

1,886


$

5,830


$

5,177









Basic earnings per common share

$

0.12


$

0.11


$

0.35


$

0.31

Diluted earnings per common share

$

0.12


$

0.11


$

0.35


$

0.31

Weighted average basic shares for EPS

16,538,605


16,537,697


16,538,019


16,537,697

Weighted average diluted shares for EPS

16,547,506


16,539,834


16,543,540


16,539,745









 

United Security Bancshares





Average Balances and Rates (unaudited)





(in thousands)

Three Months Ended September 30,


Nine Months Ended September 30,


2016


2015


2016


2015

Average Balances:








Loans (1)

$

574,885



$

500,522



$

532,133



$

488,885


Investment securities – taxable

56,887



36,513



46,384



43,375


Interest-bearing deposits in other banks

1,533



1,526



1,531



1,524


Interest-bearing deposits in FRB

56,264



90,739



93,305



76,523


Total interest-earning assets

689,569



629,300



673,353



610,307


Allowance for credit losses

(8,913)



(11,583)



(9,439)



(11,274)


Cash and due from banks

21,857



22,340



22,126



21,789


Other real estate owned

7,407



13,156



9,797



13,725


Other non-earning assets

49,846



52,297



49,452



52,932


Total average assets

759,766



705,510



745,289



687,479










Interest bearing deposits

372,909



354,702



368,464



351,924


Junior subordinated debentures

7,805



9,528



7,995



9,933


Total interest-bearing liabilities

380,714



364,230



376,459



361,857


Non-interest-bearing deposits

275,878



245,305



268,820



232,122


Other liabilities

8,267



8,739



7,291



8,023


Total liabilities

664,859



618,274



652,570



602,002


Total equity

94,907



87,236



92,719



85,477


Total liabilities and equity

$

759,766



$

705,510



$

745,289



$

687,479










Average Rates (annualized):








Loans (1)

5.15

%


5.33

%


5.20

%


5.37

%

Investment securities- taxable

1.71

%


1.90

%


1.78

%


1.71

%

Interest-bearing deposits in other banks

0.52

%


0.26

%


0.52

%


0.44

%

Interest-bearing deposits in FRB

0.51

%


0.24

%


0.50

%


0.24

%

Earning assets

4.46

%


4.39

%


4.30

%


4.46

%

Interest bearing deposits

0.31

%


0.30

%


0.30

%


0.30

%

Junior subordinated debentures

3.06

%


2.42

%


2.94

%


2.36

%

Total interest-bearing liabilities

0.36

%


0.36

%


0.36

%


0.35

%

Net interest margin

4.27

%


4.18

%


4.10

%


4.25

%









(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)






September 30, 2016


December 31, 2015


September 30, 2015

Commercial and industrial

$

569



$

328



$

1,310


Real estate - mortgage

1,539



1,635



1,547


RE construction & development

4,674



5,580



4,941


Installment/other

965



650



450


Total Nonaccrual Loans

$

7,747



$

8,193



$

8,248








Loans past due 90 days and still accruing






Restructured Loans

3,826



11,028



5,763


Total nonperforming loans

$

11,573



$

19,221



$

14,011


Other real estate owned

7,065



12,873



12,689


Total nonperforming assets

$

18,638



$

32,094



$

26,700








Nonperforming assets to total gross loans

3.32

%


6.23

%


5.18

%

Nonperforming assets to total assets

2.38

%


4.42

%


3.72

%

Allowance for loan losses to nonperforming loans

77.06

%


50.53

%


82.60

%

 

United Security Bancshares




Selected Financial Data (unaudited)




(dollars in thousands, except per share amounts)








Three Months Ended September 30,


Nine Months Ended September 30,


2016


2015


2016


2015









Annualized return on average assets

1.07

%


1.16

%


1.04

%


1.01

%

Annualized return on average equity

8.53

%


9.38

%


8.38

%


8.10

%

Annualized net charge-offs (recoveries) to average loans

0.00

%


(0.03)

%


0.20

%


(0.10)

%


















September 30, 2016


December 31, 2015





Shares outstanding - period end

16,540,185



16,051,406






Book value per share

$5.78



$5.58






Tangible book value per share

$5.51



$5.30






Efficiency ratio

60.53

%


61.49

%





Total impaired loans

$15,753



$23,679






Loan to deposit ratio

83.36

%


82.87

%





Allowance for credit losses to total loans

1.59

%


1.88

%





Total capital to risk weighted assets








Company

17.32

%


16.65

%





Bank

17.31

%


16.69

%





Tier 1 capital to risk-weighted assets








Company

16.07

%


15.40

%





Bank

16.05

%


15.43

%





Common equity tier 1 capital to risk-weighted assets








Company

14.82

%


14.10

%





Bank

16.05

%


15.43

%





Tier 1 capital to adjusted average assets (leverage)








Company

13.26

%


12.95

%





Bank

13.33

%


12.94

%





 

 

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SOURCE United Security Bancshares