United Security Bancshares(UBFO) - 2020 Q2 - Quarterly Report

Financial Performance - For the six months ended June 30, 2020, the Company reported net income of $4,768,000 or $0.28 per share, a decrease from $8,104,000 or $0.48 per share for the same period in 2019 [179]. - Total interest income decreased by $3,280,000, or 15.82%, for the six months ended June 30, 2020, compared to the same period in 2019 [190]. - The company reported a decrease in net interest income of $1,726,000 for the three months ended June 30, 2020, compared to the same period in 2019 [188]. - Noninterest income for the quarter ended June 30, 2020, decreased by $515,000 to $1,214,000, a decline of 29.79% compared to the same quarter in 2019 [196]. - Noninterest income for the six months ended June 30, 2020, increased by $544,000 to $3,796,000, a rise of 16.73% compared to the same period in 2019 [197]. - The effective tax rate for the six months ended June 30, 2020, was 28.56%, a slight decrease from 28.89% for the same period in 2019 [202]. Asset and Liability Management - Total assets increased by $74,454,000, or 7.78%, to $1,031,373,000 as of June 30, 2020, compared to $956,919,000 at December 31, 2019 [203]. - Total deposits reached $893,112,000 at June 30, 2020, an increase of $74,750,000, or 9.13%, from $818,362,000 at December 31, 2019 [214]. - The loan to deposit ratio was 71.6% at June 30, 2020, slightly down from 71.9% at December 31, 2019 [270]. - Average interest-bearing liabilities decreased to $518,253,000 for the six months ended June 30, 2020, from $532,617,000 in the same period of 2019 [204]. - The Company held no brokered deposits at June 30, 2020, indicating a conservative funding strategy [193]. Loan Portfolio and Credit Quality - The Company anticipates potential increases in its required allowance for credit loss due to heightened credit risk in the loan portfolio resulting from COVID-19 [168]. - The allowance for credit losses was $9,124,000 for the period, compared to $8,442,000 in the previous year [181]. - Total impaired loans decreased from $17,072,000 at December 31, 2019 to $15,453,000 at June 30, 2020, a reduction of approximately 9.46% [240]. - Nonperforming loans decreased from $14,472,000 at December 31, 2019 to $13,997,000 at June 30, 2020, a decline of about 3.29% [251]. - The allowance for loan losses to nonperforming loans increased from 54.64% at December 31, 2019 to 63.31% at June 30, 2020 [252]. - The total allowance for loan losses increased to $8.86 million as of June 30, 2020, compared to $7.91 million at December 31, 2019 [230]. Economic and Market Conditions - The unemployment rate in Fresno County reached 15.7% as of May 2020, significantly impacting the local economy [167]. - Management recognizes increased risk of loss due to exposure to local and worldwide economic conditions, particularly in light of COVID-19 impacts [259]. - The Company is actively working with COVID-19 affected borrowers to defer payments, interest, and fees, in line with regulatory guidance [169]. - The Company continues to evaluate its strategic business plan in response to changing economic and market factors, focusing on balance sheet management and maintaining market share [178]. Capital Adequacy - As of June 30, 2020, the Company's capital ratios were in excess of all regulatory requirements, indicating sufficient capital to withstand an extended economic recession [170]. - The Company reported a total capital to risk-weighted assets ratio of 17.16%, down from 17.98% in 2019, exceeding the minimum requirement of 10.50% [280]. - The Tier 1 capital to risk-weighted assets ratio for the Company was 15.92% as of June 30, 2020, compared to 16.81% in 2019, above the minimum requirement of 8.50% [280]. - The Common Equity Tier 1 capital to risk-weighted assets ratio was 14.71% as of June 30, 2020, down from 15.39% in 2019, exceeding the minimum requirement of 7.00% [280]. - The Bank's ratio of tangible shareholders' equity to total tangible assets was 12.4% at June 30, 2020, above the required minimum of 9% [278]. Dividends and Shareholder Returns - The Bank paid $4,085,000 in cash dividends to the Holding Company during the six months ended June 30, 2020, funding its operating costs [285]. - A cash dividend of $0.11 per share was declared on June 23, 2020, with approximately $1,866,000 transferred from retained earnings for distribution [286]. - The Board of Directors authorized a stock repurchase program of up to $3,000,000, representing 2.6% of total shareholders' equity as of June 30, 2020 [284].