United Security Bancshares(UBFO) - 2023 Q3 - Quarterly Report

Financial Performance - Net income decreased to $3.9 million for Q3 2023, down from $4.5 million in Q3 2022[139] - The Company reported net income of $14.4 million for the nine months ended September 30, 2023, compared to $10.3 million for the same period in 2022[143] - Return on average assets (ROAA) was 1.21% for Q3 2023, compared to 1.28% for Q3 2022[139] - Return on average equity (ROAE) was 13.06% for Q3 2023, down from 15.61% for Q3 2022[139] - The Company's effective tax rate for Q3 2023 was 28.78%, a decrease from 29.14% in Q3 2022[168] Asset and Deposit Trends - Total assets decreased by 2.0% to $1.27 billion as of September 30, 2023, compared to $1.30 billion at December 31, 2022[139] - Total deposits decreased by 15.3% to $987.6 million compared to $1.17 billion at December 31, 2022[139] - Total average assets decreased from $1,383,157 thousand in September 2022 to $1,266,644 thousand in September 2023[148] - Total deposits decreased to $987.6 million at September 30, 2023, down $177.9 million, or 15.3%, from $1.17 billion at December 31, 2022[184] - Average total deposits decreased by $131.4 million, or 10.8%, year-to-date compared to the same period in 2022[186] Loan and Credit Quality - The allowance for credit losses as a percentage of gross loans increased to 1.61%, up from 1.04% at December 31, 2022[139] - Net loans decreased by $12.8 million, or 1.3%, from December 31, 2022, totaling $972.9 million as of September 30, 2023, but increased by $12.3 million, or 1.3%, year-over-year[172] - Nonperforming assets decreased to $18.7 million at September 30, 2023, from $19.4 million at December 31, 2022, with nonaccrual loans at $14.2 million[193] - The allowance for loan losses to nonperforming loans increased to 110.5% at September 30, 2023, from 68.8% at December 31, 2022[193] - Net charge-offs for the nine months ended September 30, 2023, totaled $1,352,000, compared to $488,000 for the same period in 2022, indicating a significant increase of 177.6%[203] Interest Income and Expense - Total interest income increased by $1.8 million, or 13.4%, for the three months ended September 30, 2023, compared to the same period in 2022[152] - The average yield on total interest-earning assets increased by 102 basis points, driven by higher yields on treasury, corporate, and mortgage-backed securities[152] - The annualized average cost of deposits was 0.71% for Q3 2023, compared to 0.22% for Q3 2022[139] - Total interest expense increased approximately $5.7 million, or 294.8%, for the nine months ended September 30, 2023, compared to the same period in 2022[157] - The average yield on total interest-earning assets increased by 145 basis points due to increases in loan yields and investment yields[154] Capital and Dividends - The Tier 1 Capital Ratio for the Bank was 11.42% at September 30, 2023, up from 9.55% at September 30, 2022, exceeding the minimum requirement of 5.00%[213] - The Company declared a cash dividend of $0.12 per share on September 26, 2023, with approximately $2.1 million transferred from retained earnings to dividends payable[219] - 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[220] - Cash dividends may require prior approval from the Commissioner if the above test is not met, with a cap on the amount not exceeding the net income for the last fiscal year or the current fiscal year[220] Other Financial Metrics - The prime rate increased from 4.75% at September 30, 2022, to 8.50% at September 30, 2023, impacting both interest income and expense[150] - The total shareholders' equity increased from $113,828 thousand in September 2022 to $117,401 thousand in September 2023[148] - The weighted average interest rate for student loans was 12.14%, with an average balance per borrower of approximately $106,000[180] - The student loan portfolio balance decreased to $39.6 million as of September 30, 2023, from $42.1 million at December 31, 2022[183]