United Security Bancshares(UBFO) - 2023 Q2 - Quarterly Report

Financial Performance - Net income increased to $4.4 million for Q2 2023, up from $3.4 million in Q2 2022, reflecting a growth of 29.4%[137] - Net interest income before provision for credit losses increased by 20.1% to $12.5 million for Q2 2023, compared to $10.4 million in Q2 2022[137] - Total interest income increased by $4.1 million, or 37.2%, for the three months ended June 30, 2023, compared to the same period in 2022[149] - Noninterest income for the quarter ended June 30, 2023, increased by $409,000 to $1,011,000, a 67.9% increase compared to the same quarter in 2022[157] - Noninterest income for the six months ended June 30, 2023, increased by $2.1 million to $2.5 million, a 522.8% increase compared to the same period in 2022[159] - Total interest income increased by $5.4 million, or 27.9%, to $8.7 million for the six months ended June 30, 2023, compared to the same period in 2022[151] Asset and Liability Management - Total assets decreased by 0.8% to $1.29 billion as of June 30, 2023, compared to $1.30 billion at December 31, 2022[137] - Total loans decreased by 2.0% to $960.1 million, down from $980.2 million at December 31, 2022[137] - Total deposits decreased by 10.2% to $1.05 billion, compared to $1.17 billion at December 31, 2022[137] - Average interest-earning assets decreased by $69.8 million, with a $133.2 million decrease in balances held at the Federal Reserve Bank, partially offset by a $48.2 million increase in loan balances and a $15.1 million increase in investment securities[149] - Total average assets for the three months ended June 30, 2023, were $1,270,149 thousand, a decrease from $1,337,498 thousand in the same period of 2022[143] - Total interest-bearing liabilities amounted to $749,261 thousand for the three months ended June 30, 2023, compared to $748,012 thousand for the same period in 2022[143] Credit Quality and Losses - The allowance for credit losses as a percentage of gross loans increased to 1.68%, up from 1.04% at December 31, 2022, due to a $6.6 million adjustment related to the CECL accounting standard[137] - The allowance for credit losses increased to $15,644 thousand for the three months ended June 30, 2023, from $9,302 thousand in the same period of 2022[143] - The allowance for credit losses increased to $16,110,000 at June 30, 2023, up from $9,713,000 at June 30, 2022, marking a 65.5% increase[200] - Net charge-offs for the six months ended June 30, 2023, totaled $902,000, compared to $37,000 for the same period in 2022, indicating a significant increase in charge-offs[202] - The net loan charged-off to total average loans (annualized) was 0.19% for the six months ended June 30, 2023, compared to 0.01% for the same period in 2022[200] Capital and Equity - Capital position remains strong with an 11.16% Tier 1 Leverage Ratio, up from 10.10% as of December 31, 2022[137] - Return on average assets (ROAA) was 1.68% for the six months ended June 30, 2023, compared to 0.89% for the same period in 2022[140] - Return on average equity (ROAE) was 19.32% for the six months ended June 30, 2023, compared to 10.19% for the same period in 2022[140] - The Tier 1 Capital Ratio for the Bank was 11.18% at June 30, 2023, compared to 9.55% at June 30, 2022, reflecting improved capital adequacy[212] Dividend Policy - The Company declared a cash dividend of $0.12 per share on June 27, 2023, with approximately $2.1 million transferred from retained earnings for distribution[218] - The Bank is subject to dividend restrictions under the California Financial Code, limiting cash dividends to the lesser of retained earnings or net income for the last three fiscal years minus distributions to the Holding Company[219] - Cash dividends may only be paid with prior approval from the Commissioner if the above test is not met, and cannot exceed the net income for the last fiscal year or the current fiscal year[219] - Stock dividends do not require the satisfaction of any tests or approval from the Commissioner[219] - The Commissioner can prohibit dividend payments if the Bank's shareholders' equity is deemed inadequate or if paying a dividend is considered unsafe or unsound[219] - The Reserve Bank may also impose limits on dividends paid by the Bank[219] Market and Economic Conditions - The prime rate increased from 4.75% at June 30, 2022, to 8.25% at June 30, 2023, impacting both interest income and expense[147] - The overall average yield on the loan portfolio rose to 5.59% for the six months ended June 30, 2023, up from 4.28% in the prior year[152] - The net interest margin increased to 4.38% for the six months ended June 30, 2023, compared to 3.23% for the same period in 2022[153] Other Financial Metrics - Noninterest-bearing checking accounts decreased to $390,953 thousand for the three months ended June 30, 2023, from $465,926 thousand in the same period of 2022[143] - Total shareholders' equity decreased to $107,730 thousand for the three months ended June 30, 2023, from $113,977 thousand in the same period of 2022[143] - Total noninterest expense for the quarter ended June 30, 2023, increased by $537,000 to $6.2 million, a 9.5% increase compared to the same quarter in 2022[160] - Total noninterest expense for the six months ended June 30, 2023, increased by $863,000 to $12.4 million, a 7.4% increase compared to the same period in 2022[162] - The Company's effective tax rate for the six months ended June 30, 2023, was 29.07%, compared to 28.67% for the same period in 2022[165]