false000113754700011375472023-10-302023-10-30

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

July 18, 2024
Date of Report (Date of earliest event reported)

UNITED SECURITY BANCSHARES
(Exact Name of Registrant as Specified in its Charter)

California
(State or Other Jurisdiction of Incorporation)
000-32987 91-2112732
(Commission File Number) (I.R.S. Employer Identification No.)
   
2126 Inyo Street, Fresno, California
 93721
(Address of principal executive offices) (Zip Code)
559-490-6261
(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, no par value
UBFO
NASDAQ
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐ 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 





ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On July 18, 2024, the Company issued a press release announcing results for the quarter and six months ended June 30, 2024 (the “Press Release”). A copy of the Press Release is furnished as Exhibit 99.1 and incorporated herein by reference. The Press Release contains the non-GAAP measure Core Net Income. The Company believes that the presentation of that non-GAAP measure provides useful information for the understanding of its ongoing operations and, thereby, enhances an investor’s overall understanding of the Company’s current financial performance relative to past performance and provides, along with the nearest GAAP measures, a baseline for modeling future expectations. The non-GAAP measure is reconciled to the comparable GAAP financial measure in the financial tables within the Press Release. The Company cautions that the non-GAAP measure should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results. Additionally, the Company notes that there can be no assurance that the above referenced non-GAAP financial measure is comparable to similarly titled financial measures used by other companies.

The information in Item 2.02 of this Current Report on Form 8-K and the Press Release attached hereto as Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.


ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(d)    Exhibits.

EXHIBIT #

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
United Security Bancshares
Date:July 18, 2024By: /s/ David A. Kinross
David A. Kinross
Senior Vice President and Chief Financial Officer





United Security Bancshares Reports 2nd Quarter Financial Results

FRESNO, CA - July 18, 2024. United Security Bancshares (Nasdaq: UBFO) today announced its unaudited financial results for the quarter and six months ended June 30, 2024. The Company reported net income of $4.3 million, or $0.25 per basic and diluted share, for the quarter ended June 30, 2024, compared to $4.4 million, or $0.26 per basic and diluted share, for the quarter ended June 30, 2023.

Second Quarter 2024 Highlights (as of, or for, the quarter ended June 30, 2024, except where noted):
▪Net interest margin decreased to 4.28% for the quarter ended June 30, 2024, compared to 4.35% for the quarter ended June 30, 2023.
▪Annualized average cost of funds, including short-term borrowings, was 1.24% for the quarter ended June 30, 2024, compared to 0.85% for the quarter ended June 30, 2023.
▪Net income for the quarter decreased 2.72% to $4.3 million, compared to $4.4 million for the quarter ended June 30, 2023.
▪Interest and fees on loans increased 0.35% to $13.6 million, as a result of increases in interest rates despite a decrease in average loan balances, compared to $13.5 million for the second quarter of 2023.
▪Interest expense increased 33.6% to $3.5 million, as a result of increases in short-term borrowing costs, compared to $2.6 million for the second quarter of 2023.
▪The total fair value of the junior subordinated debentures (TRUPs) changed by $104,000 during the quarter ended June 30, 2024. A loss of $225,000 was recorded through the income statement and a gain of $121,000 was recorded through accumulated other comprehensive income. For the quarter ended June 30, 2023, the net $312,000 fair value gain was separately presented as a $75,000 loss recorded through the income statement and a $387,000 gain recorded through accumulated other comprehensive income.
▪The Company recorded a provision for credit losses of $19,000 for the quarter ended June 30, 2024, compared to $1.1 million for the quarter ended June 30, 2023.
▪Net interest income before the provision for credit losses decreased 7.85% to $11.5 million, compared to $12.5 million for the quarter ended June 30, 2023.
▪Annualized return on average assets (ROAA) increased to 1.45%, compared to 1.40% for the quarter ended June 30, 2023.
▪Annualized return on average equity (ROAE) decreased to 13.79%, compared to 16.49% for the quarter ended June 30, 2023.
▪The Company had remaining available secured lines of credit of $592.6 million, available unsecured lines of credit of $67.0 million, unpledged investment securities of $80.9 million, and cash and cash equivalents of $38.8 million as of June 30, 2024. Short-term borrowings totaled $63.0 million at June 30, 2024, compared to $62.0 million at December 31, 2023.
▪Total loans, net of unearned fees, increased 3.19% to $949.4 million, compared to $920.0 million at December 31, 2023.
▪Total investments decreased 9.91% to $166.3 million, compared to $184.6 million at December 31, 2023.
▪Total deposits increased 0.2% to $1.01 billion, compared to $1.00 billion at December 31, 2023.
▪Net charge-offs totaled $352,000 for the quarter ended June 30, 2024, compared to $469,000 for the quarter ended June 30, 2023.
▪The allowance for credit losses as a percentage of gross loans decreased to 1.61%, compared to 1.70% at December 31, 2023.
▪Book value per share increased to $7.35, compared to $7.14 at December 31, 2023.
▪Capital position remains well-capitalized with a 12.71% Tier 1 Leverage Ratio compared to 11.82% as of December 31, 2023.

Dennis Woods, President and Chief Executive Officer, stated, “We have largely completed the migration of all of our computers and servers to offsite data warehouses to provide 24/7 security from hackers and power interruptions. Also, during these moves, we have significantly increased our IT capacity which will provide for continued new growth. We are very pleased with the new pickup in loan growth, while at the same time being able to maintain our 4.28% net interest margin. Now we are just waiting on the Fed to lower interest rates to give consumers and small businesses some much-needed relief in their costs.”

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. Management believes that
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financial results are more comparative excluding the impact of such non-core items.

Results of Operations

Quarter Ended June 30, 2024:

For the quarter ended June 30, 2024, the Company reported net income of $4.3 million and earnings per basic and diluted share of $0.25, compared to net income of $4.4 million and $0.26 per basic and diluted share for the quarter ended June 30, 2023. Net income for the quarter ended March 31, 2024, was $4.2 million and $0.24 per basic and diluted share. Net income for the quarter ended June 30, 2024, decreased 2.7% when compared to the quarter ended June 30, 2023. The decrease is primarily the result of an increase of $955,000 in interest expense on short-term borrowings and an increase of $601,000 in professional fees, partially offset by a $1.1 million decrease in the provision for credit losses and a $573,000 gain on proceeds from life insurance. ROAE for the quarter ended June 30, 2024 was 13.79%, compared to 16.49% for the quarter ended June 30, 2023. ROAA was 1.45% for the quarter ended June 30, 2024, compared to 1.40% for the quarter ended June 30, 2023. Both ratios were impacted by the decrease in net income in the second quarter of 2024 compared to the second quarter of 2023.
The annualized average cost of deposits was 0.79% for the quarter ended June 30, 2024, compared to 0.71% for the quarter ended June 30, 2023. Average interest-bearing deposits decreased 15.7% between the periods ended June 30, 2023 and 2024, from $704.7 million to $594.1 million, respectively. The annualized average cost of funds was 1.24% for the quarter ended June 30, 2024, compared to 0.85% for the quarter ended June 30, 2023. The increase was due to increases in rates paid on deposits.

Net interest income, before the provision for credit losses, was $11.5 million for the quarter ended June 30, 2024, representing a $982,000, or 7.9%, decrease from the $12.5 million reported at June 30, 2023. The decrease in net interest income was driven by increases in interest expense on short-term borrowings, offset by increases in loan-interest income and decreases in interest expense on deposits. The Company’s net interest margin of 4.28% for the quarter ended June 30, 2024, decreased from 4.35% for the quarter ended June 30, 2023. The decrease in the net interest margin is due to increases in average rates paid on deposits and increases in short-term borrowings, partially offset by increases in yields on loans and investment securities. Net interest income for the quarter ended June 30, 2024, before the provision for credit losses, decreased $192,000 from the $11.7 million reported during the quarter ended March 31, 2024. This was primarily due to increases in deposit and short-term borrowing expenses.

Noninterest income for the quarter ended June 30, 2024, totaled $1.5 million, an increase of $506,000 from the $1.0 million in non-interest income reported for the quarter ended June 30, 2023. The increase is primarily attributed to a $573,000 gain on proceeds from life insurance. Noninterest income increased $464,000 from the $1.1 million reported for the quarter ended March 31, 2024. This was primarily due to the gain on proceeds from life insurance.

Noninterest expense for the quarter ended June 30, 2024, totaled $7.0 million, reflecting a $766,000 increase over the $6.2 million reported for the quarter ended June 30, 2023, and a $235,000 increase from the $6.7 million reported from the quarter ended March 31, 2024. The increase between the quarters ended June 30, 2024 and 2023 resulted partially from increases of $601,000 in professional fees. The increase in professional fees was due to increases in service contracts and consulting services.

The efficiency ratio for the quarter ended June 30, 2024, increased to 53.49%, compared to 45.76% for the quarter ended June 30, 2023. This deterioration was due to a combination of a decrease in net interest income resulting from increased short-term borrowing expenses and an increase in noninterest expense.

The Company recorded an income tax provision of $1.75 million for the quarter ended June 30, 2024, compared to $1.80 million for the quarter ended June 30, 2023, and $1.70 million for the quarter ended March 31, 2024. The effective tax rate for the quarter ended June 30, 2024, was 28.94%, compared to 29.0% and 28.9% for the quarters ended June 30, 2023, and March 31, 2024, respectively.

Six months ended June 30, 2024:

Net income for the six months ended June 30, 2024, decreased 19.8% to $8.5 million, compared to net income of $10.5 million for the six months ended June 30, 2023. The decrease is primarily the result of a $2.1 million increase in interest expense on short-term borrowings and a $294,000 increase in interest expense on deposits, partially offset by an increase of $527,000 in loan interest income and fees, an $875,000 decrease in the provision for income taxes, and a gain of $573,000 recorded on proceeds from life insurance. ROAE for the six months ended June 30, 2024 was 13.64%, compared to 19.32% for the six months ended June 30, 2023. ROAA was 1.42% for the six months ended June 30, 2024, compared to 1.68% for the six months ended June 30, 2023. Both ratios were impacted by the decrease in net income in 2024 compared to 2023.

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The annualized average cost of deposits was 0.75% for the six months ended June 30, 2024, compared to 0.58% for the six months ended June 30, 2023. Average interest-bearing deposits decreased 14.3% between the periods ended June 30, 2023, and 2024, from $697.3 million to $597.6 million, respectively. The annualized average cost of funds was 1.19% for the six months ended June 30, 2024, compared to 0.68% for the six months ended June 30, 2023. The increase was primarily due to increases in rates paid on deposits and short-term borrowings.

Net interest income before the provision for credit losses for the six months ended June 30, 2024, totaled $23.2 million, a decrease of $2.2 million, or 7.85%, from the $25.4 million reported for the same period ended June 30, 2023. The Company’s net interest margin of 4.31% for the six months ended June 30, 2024, decreased from 4.43% for the six months ended June 30, 2023. The decrease in the net interest margin is due to increases in average deposit costs and short-term borrowing costs and was partially offset by increases in yields on investment securities and loans. Loan yields increased from 5.67% to 5.99% between the two periods while the cost of interest-bearing liabilities increased from 1.16% to 1.89% between the two periods.

Noninterest income for the six months ended June 30, 2024, totaled $2.6 million, an increase of $111,000 when compared to the $2.5 million reported for the six months ended June 30, 2023. This increase resulted primarily from a gain of $573,000 recorded on proceeds from life insurance, offset by a $778,000 change in the fair value of TRUPs. For the six months ended June 30, 2024, a loss on the fair value of TRUPs of $520,000 was recorded, compared to a gain of $258,000 for the same period in 2023. The change in the fair value of TRUPs reflected in noninterest income was caused by fluctuations in the Secured Overnight Financing Rate (SOFR) yield curve. Other noninterest income increased $365,000 between the two periods.

For the six months ended June 30, 2024, noninterest expense totaled $13.7 million, an increase of $1.3 million compared to $12.4 million for the six months ended June 30, 2023. On a year-over-year comparative basis, noninterest expense increased due to increases of $943,000 in professional fees and $327,000 in salaries and employee benefits. Professional fees increased primarily due to increases in service contract expense related to information technology services. Salaries and employee benefits expense increased due to increases in salaries, 401(k) expenses, and stock compensation expense.

The efficiency ratio for the six months ended June 30, 2024, increased to 53.22%, compared to 44.59% for the six months ended June 30, 2023. This deterioration was due to a combination of a decrease in net interest income resulting from increased short-term borrowing and deposit expenses and an increase in noninterest expense.

The Company recorded an income tax provision of $3.4 million for the six months ended June 30, 2024, compared to $4.3 million for the same period in 2023. The effective tax rate for the six months ended June 30, 2024, was 28.9%, compared to 29.1% for the six months ended June 30, 2023.

Balance Sheet Review

Total assets increased $8.8 million, or 0.7%, between December 31, 2023, and June 30, 2024. Gross loan balances increased $29.6 million, investment securities decreased $18.3 million, and overnight balances held at the Federal Reserve Bank increased $2.5 million. Increases in gross loans included increases of $47.6 million in real estate mortgage loans, $5.6 million in commercial and industrial loans, and $3.8 million in agricultural loans, and was offset by decreases of $25.6 million in real estate construction and development loans and $2.1 million in installment loans. Declines in the investment portfolio were partially the result of the maturity of $12.5 million in treasury securities and $5.6 million in paydowns. Total cash and cash equivalents decreased $2.0 million between December 31, 2023, and June 30, 2024. Unfunded loan commitments decreased from $183.5 million at December 31, 2023, to $165.7 million at June 30, 2024. OREO balances totaled $4.6 million at December 31, 2023, and June 30, 2024.

Total deposits increased $2.1 million, or 0.2%, to $1.0 billion during the six months ended June 30, 2024. This was due to increases of $32.5 million in interest-bearing deposits, offset by decreases of $30.3 million in noninterest-bearing deposits. Included in the increase in interest-bearing deposits are $50.0 million in brokered DDA accounts purchased during the second quarter of 2024. NOW and money market accounts increased $36.5 million, time deposits increased $2.5 million, and savings accounts decreased $6.5 million. In total, NOW, money market and savings accounts increased 5.7% to $559.4 million at June 30, 2024, compared to $529.4 million at December 31, 2023. Noninterest-bearing deposits decreased 7.5% to $372.9 million at June 30, 2024, compared to $403.2 million at December 31, 2023. Core deposits, which are comprised of noninterest-bearing deposits, NOW, money market, savings accounts, and time deposits less than $250,000, decreased $2.8 million.

Shareholders’ equity at June 30, 2024, totaled $127.4 million, an increase of $4.8 million from the $122.5 million reported at December 31, 2023. The increase in equity was the result of $8.5 million in net income and a decrease of $165,000 in accumulated other comprehensive loss, partially offset by $4.2 million in dividend payments. At June 30, 2024, accumulated
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other comprehensive loss totaled $14.9 million, compared to $15.0 million at December 31, 2023. The decrease in accumulated other comprehensive loss was primarily the result of an increase of $194,000 in the fair value of TRUPs, net of tax, partially offset by an increase of $43,000 in net unrealized losses on investment securities. The increase in the fair value of TRUPs was caused by changes in market credit spreads during the six months ended June 30, 2024. Changes in unrealized losses on the investment portfolio are attributed to changes in interest rates, not credit quality. The Company does not intend to sell, and it is more likely than not that it will not be required to sell, any securities held at an unrealized loss.

The Board of Directors of United Security Bancshares declared a cash dividend on common stock of $0.12 per share on June 25, 2024. The dividend is payable on July 23, 2024, to shareholders of record as of July 8, 2024, and is included in other liabilities as of June 30, 2024. No assurances can be provided as to the amount and/or declaration and payment of future dividends, if any. The Company continues to be well-capitalized and expects to maintain adequate capital levels.

Credit Quality

The Company recorded a provision for credit losses of $192,000 for the six months ended June 30, 2024, compared to a provision of $598,000 for the six months ended June 30, 2023. The provision recorded during 2024 was primarily driven by charge-offs within the student loan portfolio. Net loan charge-offs totaled $641,000 for the six months ended June 30, 2024, compared to $902,000 for the six months ended June 30, 2023, and related primarily to student loans for both periods.

The Company’s allowance for credit losses totaled 1.61% of the loan portfolio at June 30, 2024, compared to 1.70% at December 31, 2023. Management considers the allowance for credit losses at June 30, 2024 to be adequate.

Non-performing assets, comprised of nonaccrual loans, loan modifications, other real estate owned through foreclosure (OREO), and loans more than 90 days past due and still accruing interest, increased $844,000 between December 31, 2023, and June 30, 2024, to $17.3 million. As a percentage of total assets, non-performing assets increased from 1.36% at December 31, 2023, to 1.42% at June 30, 2024. The increase in non-performing assets is primarily attributed to an increase of $652,000 in nonaccrual loans, an increase of $100,000 in loans past due more than 90 days and still accruing, and the addition of one loan modification with a balance of $92,000. OREO balances remained at $4.6 million at June 30, 2024, and December 31, 2023.

About United Security Bancshares

United Security Bancshares (NASDAQ: UBFO) is the holding company for United Security Bank, which was founded in 1987. United Security Bank is headquartered in Fresno and operates 13 full-service branch offices in Fresno, Bakersfield, Campbell, Caruthers, Coalinga, Firebaugh, Fowler, Mendota, Oakhurst, San Joaquin, and Taft, California. Additionally, United Security Bank operates Commercial Real Estate Construction, Commercial Lending, and Consumer Lending departments. For more information, please visit www.unitedsecuritybank.com.

Non-GAAP Financial Measures

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

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Company intends such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and often include the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” Forward-looking statements are based on management’s knowledge and belief as of today and are not guarantees of future performance, nor should they be relied upon
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as representing management’s views as of any subsequent date. Forward-looking statements are subject to risks and uncertainties and actual results may differ materially from those presented. Factors that might cause such differences, some of which are beyond the Company’s ability to control or predict, include, but are not limited to: (1) adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, inflationary pressures, labor shortages, and global conflict and unrest; (2) the impact of natural disasters, droughts, earthquakes, floods, wildfires, terrorist attacks, health epidemics, and threats of war or actual war, including current military actions involving the Russian Federation and Ukraine and the conflict in the Middle East, which may impact the local economy and/or the condition of real estate collateral; (3) changes in general economic and financial market conditions, either nationally or locally; (4) fiscal policies of the U.S. government, including interest rate policies of the Board of Governors of the Federal Reserve System and the resulting impact on the Company’s interest-rate sensitive assets and liabilities; (5) changes in banking laws or regulations and government policies that could lead to a tightening of credit and/or a requirement that the Company raise additional capital; (6) increased competition in the Company’s markets, impacting the ability to execute its business plans; (7) loss of, or inability to attract, key personnel; (8) unanticipated deterioration in the loan portfolio, credit losses, and the sufficiency of our allowance for credit losses; (9) the ability to grow our loan portfolio due to constraints on concentrations of credit; (10) the impact of technological changes and the ability to develop and maintain secure and reliable electronic systems including failures in or breaches of the Company’s operational and/or security systems or infrastructure; (11) the failure to maintain effective controls over financial reporting; (12) risks related to the sufficiency of liquidity, including the quality and quantity of the Company’s deposits and the ability to attract and retain deposits and other sources of funding and liquidity; (13) adverse developments in the financial services industry generally, such as the bank failures in 2023 and 2024 and any related impact on depositor behavior or investor sentiment; (14) the possibility that the recorded goodwill could become impaired which may have an adverse impact on earnings and capital; (15) asset/liability matching risks; and (16) changes in accounting policies or procedures.

The Company does not undertake (and expressly disclaims) any obligation to publicly revise or update these forward-looking statements to reflect subsequent events or circumstances except as may be required by law. 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, 2023, and particularly the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Readers should carefully review all disclosures the Company files from time to time with the Securities and Exchange Commission.
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United Security Bancshares
Consolidated Balance Sheets (unaudited)
(In thousands, except share data)June 30, 2024December 31, 2023
Assets
Cash and non-interest-bearing deposits in other banks$36,002 $40,577 
Deposits in Federal Reserve Bank (FRB)2,755 207 
Cash and cash equivalents38,757 40,784 
Investment securities (at fair value)
Available-for-sale (AFS) debt securities net of allowance for credit losses of $0 (amortized cost of $186,101 and $204,389, respectively)
162,916 181,266 
Marketable equity securities3,400 3,354 
Total investment securities166,316 184,620 
Loans 950,970 921,341 
Unearned fees and unamortized loan origination costs - net(1,557)(1,299)
Allowance for credit losses(15,323)(15,658)
Net loans934,090 904,384 
Premises and equipment - net9,126 9,098 
Accrued interest receivable8,036 7,928 
Other real estate owned (OREO)4,582 4,582 
Goodwill4,488 4,488 
Deferred tax assets - net14,139 14,055 
Cash surrender value of life insurance - net20,409 21,954 
Investment in limited partnerships3,400 3,200 
Operating lease right-of-use assets3,325 1,338 
Other assets13,154 14,614 
Total assets$1,219,822 $1,211,045 
Liabilities and Shareholders’ Equity
Deposits  
Noninterest-bearing$372,886 $403,225 
Interest-bearing633,728 601,252 
Total deposits1,006,614 1,004,477 
Short-term borrowings63,000 62,000 
Operating lease liabilities3,417 1,437 
Other liabilities7,987 9,376 
Junior subordinated debentures (at fair value)11,454 11,213 
Total liabilities1,092,472 1,088,503 
Shareholders’ Equity
Common stock, no par value; 20,000,000 shares authorized; issued and outstanding: 17,322,758 at June 30, 2024 and 17,167,895 at December 31, 2023
60,938 60,585 
Retained earnings81,285 76,995 
Accumulated other comprehensive loss, net of tax(14,873)(15,038)
Total shareholders’ equity127,350122,542
Total liabilities and shareholders’ equity$1,219,822 $1,211,045 

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United Security Bancshares
Consolidated Statements of Income (unaudited)Three Months EndedSix Months Ended
(In thousands, except share and per-share data)June 30, 2024March 31, 2024June 30, 2023June 30, 2024June 30, 2023
Interest Income:
Interest and fees on loans$13,576 $13,481 $13,529 $27,056 $26,529 
Interest on investment securities1,303 1,3541,501 2,6573,002
Interest on deposits in FRB93 4456 137114
Total interest income14,972 14,879 15,086 29,850 29,645 
Interest Expense:
Interest on deposits1,857 1,7231,944 3,5813,287
Interest on other borrowed funds1,593 1,442638 3,036909
Total interest expense3,450 3,165 2,582 6,6174,196
Net Interest Income 11,522 11,71412,504 23,23325,449
Provision for Credit Losses19 173 1,091 192598
Net Interest Income after Provision for Credit Losses11,503 11,54111,413 23,04124,851
Noninterest Income:
Customer service fees718 706 767 1,4241,501
Increase in cash surrender value of bank-owned life insurance130 137 171 267 303
Unrealized gain (loss) on fair value of marketable equity securities4 43 (50)46(7)
Gain on proceeds from bank-owned life insurance573 — — 573 — 
(Loss) gain on fair value of junior subordinated debentures(225)(294)(75)(520)258
Gain on sale of assets— 11 — 11 — 
Other317 450 198 770405
Total noninterest income1,517 1,053 1,011 2,5712,460
Noninterest Expense:
Salaries and employee benefits3,3903,4983,3016,8886,561
Occupancy expense8848588581,7411,820
Data processing198111205309379
Professional fees1,5111,2259102,7351,792
Regulatory assessments162173193335385
Director fees103128106232216
Correspondent bank service charges1112192338
Net cost (gain) of operation of OREO64(12)585296
Other6507455571,3931,161
Total noninterest expense6,9736,7386,20713,70812,448
Income Before Provision for Taxes6,0475,8566,21711,90414,863
Provision for Taxes on Income1,7501,6951,8003,4464,321
Net Income$4,297$4,161$4,417$8,458 $10,542 
Net income per common share
Basic$0.25 $0.24 $0.26 $0.49 $0.62 
Diluted$0.25 $0.24 $0.26 $0.49 $0.62 
Weighted average common shares outstanding
Basic17,186,266 17,170,90717,102,740 17,178,56617,089,693
Diluted17,187,266 17,171,64217,114,740 17,179,30117,103,601
7

United Security Bancshares
Average Balances and Rates (unaudited)Three Months EndedSix Months Ended
(In thousands)June 30, 2024March 31, 2024June 30, 2023June 30, 2024June 30, 2023
Average Balances:
Loans (1)$910,404 $904,392 $941,470 $907,649 $944,262 
Investment securities 165,550 177,276 207,639 171,413 209,571 
Interest-bearing deposits in other banks6,795 3,218 3,674 5,007 4,578 
Total interest-earning assets1,082,749 1,084,886 1,152,783 1,084,069 1,158,411 
Allowance for credit losses(15,454)(15,671)(15,644)(15,563)(15,984)
Nonaccrual loans11,938 12,083 13,164 11,759 13,358 
Cash and non-interest-bearing deposits in other banks33,732 31,564 36,883 32,648 36,448 
Other real estate owned4,582 4,582 4,582 4,582 4,582 
Other non-earning assets77,364 75,864 78,381 76,614 75,396 
Total average assets$1,194,911 $1,193,308 $1,270,149 $1,194,109 $1,272,211 
Interest-bearing deposits$594,138 $601,036 $704,747 $597,587 $697,268 
Junior subordinated debentures12,464 12,464 12,464 12,464 12,464 
Short-term borrowings102,469 85,436 33,602 93,953 20,619 
Total interest-bearing liabilities709,071 698,936 750,813 704,004 730,351 
Noninterest-bearing deposits350,911 361,671 390,953 356,364 418,092 
Other liabilities9,570 8,773 20,653 9,098 13,431 
Total liabilities1,069,552 1,069,380 1,162,419 1,069,466 1,161,874 
Total equity125,359 123,928 107,730 124,643 110,337 
Total liabilities and equity$1,194,911 $1,193,308 $1,270,149 $1,194,109 $1,272,211 
Average Rates:
Loans (1)6.00 %6.00 %5.76 %5.99 %5.67 %
Investment securities3.17 %3.07 %2.90 %3.12 %2.89 %
Interest-bearing deposits in other banks5.50 %5.50 %6.11 %5.50 %5.02 %
Total earning assets5.56 %5.52 %5.25 %5.54 %5.16 %
Interest bearing deposits1.26 %1.15 %1.11 %1.21 %0.95 %
Total deposits0.79 %0.72 %0.71 %0.75 %0.58 %
Short-term borrowings5.44 %5.80 %5.20 %5.61 %5.20 %
Junior subordinated debentures6.71 %6.74 %6.31 %6.73 %6.10 %
Total interest-bearing liabilities1.96 %1.82 %1.38 %1.89 %1.16 %
Net interest margin (2)4.28 %4.35 %4.35 %4.31 %4.43 %
(1) Average loans do not include nonaccrual loans but do include interest income recovered from previously charged-off loans, unearned fees, and unamortized loan origination costs.
(2) Net interest margin is computed by dividing annualized net interest income by average interest-earning assets.

8

United Security Bancshares
Condensed - Consolidated Balance Sheets (unaudited)
(In thousands)June 30, 2024March 31, 2024December 31, 2023September 30, 2023June 30, 2023
Cash and cash equivalents$38,757 $43,004 $40,784 $35,297 $58,403 
Investment securities166,316 168,563 184,620 187,857 205,521 
Loans, net of unearned fees and unamortized loan origination costs949,413 929,413 920,042 972,871 960,121 
Allowance for credit losses(15,323)(15,451)(15,658)(15,649)(16,110)
Net loans934,090 913,962 904,384 957,222 944,011 
Other assets80,659 80,875 81,257 92,716 80,884 
Total assets$1,219,822 $1,206,404 $1,211,045 $1,273,092 $1,288,819 
Non-interest-bearing deposits$372,886 $353,151 $403,225 $386,258 $476,387 
Interest-bearing deposits633,728 602,783 601,252 601,373 570,167 
Total deposits1,006,614 955,934 1,004,477 987,631 1,046,554 
Other liabilities85,858 126,286 84,026 170,433 126,585 
Total liabilities1,092,472 1,082,220 1,088,503 1,158,064 1,173,139 
Total shareholders’ equity127,350 124,184 122,542 115,028 115,680 
Total liabilities and shareholder’s equity$1,219,822 $1,206,404 $1,211,045 $1,273,092 $1,288,819 

United Security Bancshares
Condensed - Consolidated Statements of Income (unaudited)
For the Quarters Ended:
(In thousands)June 30, 2024March 31, 2024December 31, 2023September 30, 2023June 30, 2023
Total interest income$14,972 $14,879 $15,405 $15,328 $15,086 
Total interest expense3,450 3,165 3,454 3,407 2,582 
Net interest income11,522 11,714 11,951 11,921 12,504 
Provision for credit losses19 173 873 — 1,091 
Net interest income after provision for credit losses11,503 11,541 11,078 11,921 11,413 
Total non-interest income1,517 1,053 2,997 114 1,011 
Total non-interest expense6,973 6,738 6,872 6,625 6,207 
Income before provision for taxes6,047 5,856 7,203 5,410 6,217 
Provision for taxes on income1,750 1,695 1,803 1,557 1,800 
Net income$4,297 $4,161 $5,400 $3,853 $4,417 

9

United Security Bancshares
Nonperforming Assets (unaudited)
(Dollars in thousands)June 30, 2024December 31, 2023
Real estate - construction and development$12,080 $11,403 
Agricultural20 45 
Total nonaccrual loans12,100 11,448 
Loans past due 90 days and still accruing526 426 
Loan modifications92 — 
Total nonperforming loans12,718 11,874 
Other real estate owned4,582 4,582 
Total nonperforming assets$17,300 $16,456 
Nonperforming loans to total gross loans1.34 %1.29 %
Nonperforming assets to total assets1.42 %1.36 %
Allowance for credit losses to nonperforming loans120.48 %131.87 %


United Security Bancshares
Selected Financial Data (unaudited)
Three months ended June 30,Six months ended June 30,
2024202320242023
Return on average assets1.45 %1.40 %1.42 %1.68 %
Return on average equity13.79 %16.49 %13.64 %19.32 %
Efficiency ratio (1)53.49 %45.76 %53.22 %44.59 %
Annualized net charge-offs to average loans0.16 %0.20 %0.14 %0.19 %
June 30, 2024December 31, 2023
Shares outstanding - period end17,322,758 17,167,895 
Book value per share$7.35 $7.14 
Tangible book value per share$7.09 $6.88 
Net loan-to-deposit ratio92.80 %90.04 %
Allowance for credit losses to total loans1.61 %1.70 %
Tier 1 capital to adjusted average assets (leverage ratio):
Company12.71 %11.82 %
Bank12.67 %11.83 %
(1) Efficiency ratio is total noninterest expense divided by net interest income before provision for credit losses plus total noninterest income.
10

United Security Bancshares
Net Income before Non-Core Reconciliation
Non-GAAP Information (unaudited)
Six months ended June 30,
(Dollars in thousands)20242023Change $Change %
Net income$8,458 $10,542 $(2,084)(19.8)%
Junior subordinated debenture (TRUPs) fair value adjustment (1)
(520)258 
Income tax effect154 (75)
Non-core items net of taxes(366)183 
Non-GAAP core net income$8,824 $10,359 $(1,535)(14.8)%

(1)Junior subordinated debenture fair value adjustment is not part of core income and depending upon market rates, can add to or subtract from core income and mask non-GAAP core income change.

11
v3.24.2
Cover Document
Oct. 30, 2023
Cover [Abstract]  
Document Type 8-K
Document Period End Date Jul. 18, 2024
Entity Registrant Name UNITED SECURITY BANCSHARES
Entity Incorporation, State or Country Code CA
Entity File Number 000-32987
Entity Tax Identification Number 91-2112732
Entity Address, Address Line One 2126 Inyo Street
Entity Address, City or Town Fresno
Entity Address, State or Province CA
Entity Address, Postal Zip Code 93721
City Area Code 559
Local Phone Number 490-6261
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Entity Central Index Key 0001137547
Amendment Flag false
Trading Symbol UBFO
Security Exchange Name NASDAQ
Title of 12(b) Security Common Stock, no par value
United Security Bancshares (NASDAQ:UBFO)
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