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| 8-K - 8-K - UNITED SECURITY BANCSHARES | ubfo-8k093013earningsrelea.htm |
United Security Bancshares -
Third Quarter Profits: $1.9 million
FRESNO, CA, October 17, 2013. United Security Bancshares (http://www.unitedsecuritybank.com/) (Nasdaq Global Select: UBFO) reported today unaudited consolidated net income of $1,852,000 or $0.13 per basic and diluted common share for the quarter ended September 30, 2013 and $4,323,000 or $0.30 per basic and diluted common share for the nine months ended September 30, 2013, as compared to $1,366,000 or $0.09 per basic and diluted common shares for the quarter ended September 30, 2012 and $4,591,000 or $0.32 per basic and diluted shares for the nine months ended September 30, 2012.
Annualized return on average equity (ROAE) for the quarter ended September 30, 2013 was 10.14%, compared to 8.25% for the same period in 2012, and was 8.10% for the nine months ended September 30, 2013, compared to 9.43% for the nine months ended September 30, 2012. Annualized return on average assets (ROAA) was 1.14% for the three months ended September 30, 2013, compared to 0.87% for the same period in 2012, and was 0.90% for the nine months ended September 30, 2013 compared to 0.99% for the nine months ended September 30, 2012.
Change in net income on a quarter-to-quarter comparative basis between the third quarters of 2013 and 2012 is largely the result of a negative provision for credit losses of $1,150,000 during the quarter ended September 30, 2013, compared to a $4,000 provision during the same period ended September 30, 2012. Partially offsetting the negative provision during the quarter ended September 30, 2013, compared to the same period ended September 30, 2012, was a decrease of $339,000 in interest income and an increase of $507,000 in non-interest expense. On a nine month comparative basis, changes in income were the result of a $2,130,000 decrease in provision for credit losses and a $1,274,000 decrease in net cost of operation on OREO, offset by a decrease of $1,807,000 on gains realized on the sale of other investments and a $1,943,000 decrease in total interest income.
The Board of Directors of United Security Bancshares declared a third quarter 2013 stock dividend of one percent (1%) on September 24, 2013. The stock dividend was payable to shareholders of record on October 11, 2013, and the shares will be issued on October 23, 2013.
Dennis R. Woods, President and Chief Executive Officer of the Company, states, “We are continuing to see reductions in problem assets, increases in capital, and positive net earnings. We continue to see improvements in both the local and the national economy and look forward to continued success during the fourth quarter of 2013.” Shareholders’ equity at September 30, 2013 was $73,499,000, up $4,058,000 from shareholders’ equity of $69,441,000 at December 31, 2012.
Net interest income before provision for credit losses for the quarter ended September 30, 2013 totaled $5,427,000 and $16,029,000 for the nine months ended September 30, 2013, a decrease of $195,000 from $5,622,000 reported for the quarter ended September 30, 2012 and a decrease of $1,640,000 from the $17,669,000 reported for the nine months ended September 30, 2012, respectively. The net interest margin was 3.83% for the quarter ended September 30, 2013, and 3.90% for the nine months ended September 30, 2013, as compared to 4.25% for the quarter ended September 30, 2012 and 4.53% for the nine months ended September 30, 2012. The Company continues to experience a decline in net interest margin due to decreases in loan and investment income.
Noninterest income for the quarter ended September 30, 2013 totaled $1,413,000, reflecting an increase of $440,000 from $973,000 in noninterest income reported for the quarter ended September 30, 2012. Noninterest income for the nine months ended September 30, 2013 totaled $3,038,000, reflecting a decrease of $1,917,000 from $4,955,000 in noninterest income reported for the nine months ended September 30, 2012. Customer service fees continue to provide the majority of the Company's noninterest income, totaling $873,000 for the quarter ended September 30, 2013, as compared to $902,000 for the quarter ended September 30, 2012, and $2,554,000 and $2,700,000 for the nine months ended September 30, 2013 and 2012, respectively. Changes in noninterest income on a quarter-to-quarter comparative basis between the third quarters of 2013 and 2012 are largely the result of an increase of $312,000 on gains on fair value option of financial assets during the quarter ended September 30, 2013. The Company recorded a $113,000 impairment loss on investments during the quarter ended September 30, 2012, compared to no loss for the same period ended September 30, 2013. On a nine-month comparative basis, non-interest income decreased primarily due to a $1,807,000 gain on sale of investment during the nine months ended September 30, 2012, compared to no gain for the same period ended September 30, 2013.
Noninterest expense totaled $4,954,000 for the quarter ended September 30, 2013, an increase of $507,000 as compared to $4,447,000 reported for the quarter ended September 30, 2012. For the nine months ended September 30, 2013, noninterest expense totaled $13,181,000, a decrease of $1,152,000 as compared to $14,333,000 for the nine months ended September 30, 2012. Between the third quarters of 2013 and 2012, net operating cost on other real estate owned and salaries expenses increased $273,000 and $132,000, respectively, partially offset by decreases in occupancy expenses and professional fees. On a nine month comparative basis, noninterest expense decreased primarily due to a $1,036,000 net gain on OREO during the nine months ended September 30, 2013, compared to a net cost on OREO of $238,000 for the same period ended September 30, 2012.
The Company had a negative provision for loan loss of $1,150,000 for the quarter ended September 30, 2013 and $1,120,000 for the nine months ended September 30, 2013, compared to a provision of $4,000 for the quarter ended September 30, 2012 and $1,010,000 for the nine months ended September 30, 2012. Net loan recoveries totaled $545,000 for the quarter ended September 30, 2013 and net loan charge-offs totaled $112,000 for the nine months ended September 30, 2013 as compared to net charge-offs of $453,000 for the quarter ended September 30, 2012, and $3,498,000 for the nine months ended September 30, 2012. With a modest recovery in the economy and real estate markets within our service area, we have maintained an adequate allowance for loan losses which totaled 2.75% of total loans at September 30, 2013 compared to 2.95% of total loans at December 31, 2012 and 2.97% at September 30, 2012. In determining the adequacy of the allowance for loan losses, Management's judgment is the primary determining factor for establishing the amount of the provision for loan losses and management considers the allowance for loan and lease losses at September 30, 2013 to be adequate.
Non-performing assets, comprised of nonaccrual loans, troubled debt restructures (TDR), other real estate owned through foreclosure (OREO), and loans more than 90 days past due and still accruing interest, decreased approximately $8,344,000 between December 31, 2012 and September 30, 2013. Additionally, nonperforming assets as a percentage of total assets decreased from 7.25% at December 31, 2012 to 5.85% at September 30, 2013. Nonaccrual loans decreased $1,500,000 between December 31, 2012 and September 30, 2013, while OREO, decreased $6,807,000 during the same period. Impaired loans totaled $21,698,000 at September 30, 2013, a decrease of $233,000 from the balance of $21,931,000 at December 31, 2012.
United Security Bancshares is a $650+ million bank holding company headquartered in Fresno, California. United Security Bank, its principal subsidiary is a California state chartered bank with 11 branches serving the Central Valley and Campbell, and is a member of the Federal Reserve Bank of San Francisco.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended and the Company intends such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on management’s knowledge and belief as of today and include information concerning the Company’s possible or assumed future financial condition, and its results of operations, business and earnings outlook. These forward-looking statements are subject to risks and uncertainties. A number of factors, some of which are beyond the Company’s ability to control or predict, could cause future results to differ materially from those contemplated by such forward-looking statements. These factors include (1) changes in interest rates, (2) significant changes in banking laws or regulations, (3) increased competition in the company’s market, (4) other-than-expected credit losses, (5) earthquake or other natural disasters impacting the condition of real estate collateral, (6) the effect of acquisitions and integration of acquired businesses, (7) the impact of proposed and/or recently adopted changes in laws, and regulations on the Company and its business; (8) changing bank regulatory conditions, policies, whether arising as new legislation or regulatory initiatives or changes in our regulatory classifications, that could lead to restrictions on activities of banks generally or as to the Bank, including specifically the formal order between the Federal Reserve Bank of San Francisco and the Company and the Bank, (9) failure to comply with the written regulatory agreement under which the Company is subject and (10) unknown economic impacts caused by the State of California’s budget issues, including the effect on Federal spending do to sequestration required by the Budget Control Act of 2011. Management cannot predict at this time the severity or duration of the effects of the recent business slowdown on our specific business activities and profitability. Weaker or a further decline in capital and consumer spending, and related recessionary trends could adversely affect our performance in a number of ways including decreased demand for our products and services and increased credit losses. Likewise, changes in interest rates, among other things, could slow the rate of growth or put pressure on current deposit levels and affect the ability of borrowers to repay loans. Forward-looking statements speak only as of the date they are made, and the company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the statements are made, or to update earnings guidance including the factors that influence earnings. For a more complete discussion of these risks and uncertainties, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, and particularly the section of Management’s Discussion and Analysis. Readers should carefully review all disclosures we file from time to time with the Securities and Exchange Commission ("SEC").
United Security Bancshares | |||||||
Consolidated Balance Sheets (unaudited) | |||||||
(in thousands) | |||||||
September 30, 2013 | December 31, 2012 | ||||||
Assets | |||||||
Cash and noninterest-bearing deposits in other banks | 28,552 | 27,481 | |||||
Cash and due from Federal Reserve Bank | 153,290 | 114,146 | |||||
Cash and cash equivalents | 181,842 | 141,627 | |||||
Interest-bearing deposits in other banks | 1,513 | 1,507 | |||||
Investment securities (AFS at market value) | 32,577 | 31,844 | |||||
Loans and leases, net of unearned fees | 383,992 | 400,033 | |||||
Less: Allowance for credit losses | (10,552 | ) | (11,784 | ) | |||
Net loans | 373,440 | 388,249 | |||||
Premises and equipment - net | 12,088 | 12,262 | |||||
Other real estate owned | 17,125 | 23,932 | |||||
Goodwill and intangible assets | 4,597 | 4,737 | |||||
Cash surrender value of life insurance | 17,072 | 16,681 | |||||
Deferred income taxes | 10,130 | 9,724 | |||||
Other assets | 11,347 | 18,314 | |||||
Total assets | 661,731 | 648,877 | |||||
Deposits: | |||||||
Noninterest bearing demand deposits | 236,112 | 217,014 | |||||
Money market, NOW, and savings | 244,162 | 246,888 | |||||
Time | 91,202 | 99,385 | |||||
Total deposits | 571,476 | 563,287 | |||||
Accrued interest payable | 57 | 71 | |||||
Other liabilities | 5,895 | 6,010 | |||||
Junior subordinated debentures (at fair value) | 10,804 | 10,068 | |||||
Total liabilities | 588,232 | 579,436 | |||||
Shareholders' equity: | |||||||
Common stock, no par value 20,000,000 shares authorized, 14,653,358 issued and outstanding at September 30, 2013, and 14,217,303 at December 31, 2012 | 45,038 | 43,173 | |||||
Retained earnings | 28,662 | 26,179 | |||||
Accumulated other comprehensive income | (201) | 89 | |||||
Total shareholders' equity | 73,499 | 69,441 | |||||
Total liabilities and shareholders' equity | $ | 661,731 | $ | 648,877 | |||
United Security Bancshares | |||||||||||||||
Consolidated Statements of Income (unaudited) | |||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Interest income: | |||||||||||||||
Interest and fees on loans | $ | 5,545 | $ | 5,670 | $ | 16,565 | $ | 17,678 | |||||||
Interest on investment securities | 157 | 397 | 495 | 1,375 | |||||||||||
Interest on deposits in FRB | 88 | 62 | 223 | 157 | |||||||||||
Interest on deposits in other banks | 2 | 2 | 6 | 22 | |||||||||||
Total interest income | 5,792 | 6,131 | 17,289 | 19,232 | |||||||||||
Interest expense: | |||||||||||||||
Interest on deposits | 301 | 441 | 1,043 | 1,356 | |||||||||||
Interest on other borrowed funds | 64 | 68 | 217 | 207 | |||||||||||
Total interest expense | 365 | 509 | 1,260 | 1,563 | |||||||||||
Net interest income before provision for credit losses | 5,427 | 5,622 | 16,029 | 17,669 | |||||||||||
Provision for credit losses | (1,150) | 4 | (1,120) | 1,010 | |||||||||||
Net interest income | 6,577 | 5,618 | 17,149 | 16,659 | |||||||||||
Non-interest income: | |||||||||||||||
Customer service fees | 873 | 902 | 2,554 | 2,700 | |||||||||||
Increase in cash surrender value of bank owned life insurance | 140 | 147 | 417 | 427 | |||||||||||
Impairment loss on investment securities, other than temporary loss | 0 | (113) | 0 | (284) | |||||||||||
Gain (loss) on Fair Value Option of Financial Assets | 141 | (171) | (519) | (284) | |||||||||||
Loss on sale of securities | 0 | (10) | 0 | (10) | |||||||||||
Gain on sale of other investment | 0 | 0 | 0 | 1,807 | |||||||||||
Other non-interest income | 259 | 218 | 586 | 599 | |||||||||||
Total non-interest income | 1,413 | 973 | 3,038 | 4,955 | |||||||||||
Non-interest expense: | |||||||||||||||
Salaries and employee benefits | 2,210 | 2,078 | 6,684 | 6,676 | |||||||||||
Occupancy expense | 905 | 1,004 | 2,693 | 2,608 | |||||||||||
Data processing | 33 | 15 | 126 | 53 | |||||||||||
Professional fees | 316 | 408 | 1,136 | 1,092 | |||||||||||
Regulatory assessments | 334 | 275 | 1,032 | 1,058 | |||||||||||
Director fees | 58 | 61 | 175 | 196 | |||||||||||
Amortization of intangibles | 47 | 79 | 140 | 248 | |||||||||||
Correspondent bank service charges | 72 | 75 | 229 | 235 | |||||||||||
Loss on California tax credit partnership | 86 | 23 | 151 | 207 | |||||||||||
Net cost (gain) on operation of OREO | 182 | (91) | (1,036) | 238 | |||||||||||
Other non-interest expense | 711 | 520 | 1,851 | 1,722 | |||||||||||
Total non-interest expense | 4,954 | 4,447 | 13,181 | 14,333 | |||||||||||
Income before income tax provision | 3,036 | 2,144 | 7,006 | 7,281 | |||||||||||
Provision for income taxes | 1,184 | 778 | 2,683 | 2,690 | |||||||||||
Net Income | $ | 1,852 | $ | 1,366 | $ | 4,323 | $ | 4,591 | |||||||
United Security Bancshares | |||||||||||
Selected Financial Data (unaudited) | |||||||||||
(in thousands, except per share amounts) | |||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||
Basic earnings per share | $0.13 | $0.09 | $0.30 | $0.32 | |||||||
Diluted earnings per share | $0.13 | $0.09 | $0.30 | $0.32 | |||||||
Weighted average basic shares for EPS | 14,653,358 | 14,507,818 | 14,651,014 | 14,507,818 | |||||||
Weighted average diluted shares for EPS | 14,653,592 | 14,507,818 | 14,651,937 | 14,507,818 | |||||||
Annualized return on: | |||||||||||
Average assets | 1.14% | 0.87% | 0.90% | 0.99% | |||||||
Average equity | 10.14% | 8.25% | 8.10% | 9.43% | |||||||
Yield on interest-earning assets | 4.10% | 4.64% | 4.21% | 4.93% | |||||||
Cost of interest-bearing liabilities | 0.42% | 0.59% | 0.49% | 0.62% | |||||||
Net interest margin | 3.83% | 4.25% | 3.90% | 4.53% | |||||||
Annualized net charge-offs (recoveries) to average loans | (0.55)% | 0.46% | 0.04% | 1.19% | |||||||
September 30, 2013 | December 31, 2012 | ||||||||||
Shares outstanding - period end | 14,653,358 | 14,217,303 | |||||||||
Book value per share | $5.02 | $4.88 | |||||||||
Tangible book value per share | $4.70 | $4.55 | |||||||||
Efficiency ratio | 73.83 | % | 70.47 | % | |||||||
Total nonperforming assets | $38,730 | $47,074 | |||||||||
Nonperforming assets to total assets | 5.85 | % | 7.25 | % | |||||||
Total Impaired loans | $21,698 | $21,931 | |||||||||
Total nonaccrual loans | $11,925 | $13,425 | |||||||||
Allowance for credit losses to total loans | 2.75 | % | 2.95 | % | |||||||