UNITED SECURITY BANCSHARES, INC. REPORTS FIRST QUARTER RESULTS.
First Quarter Highlights
Loan growth - Net loans increased $8.5 million, or 13.3% on an annualized basis, compared to December 31, 2015. The growth in loans was driven by increases at the Company's banking subsidiary, First US Bank ("FUSB" or the "Bank"), which grew net loans by $9.8 million. This growth was partially offset by seasonal decreases at the Bank's finance company subsidiary, Acceptance Loan Company ("ALC"), of approximately $1.2 million.
Asset quality improvement - Non-performing assets decreased by $0.5 million during the first quarter to $8.6 million as of March 31, 2016. Non-performing assets as a percentage of total assets were reduced to 1.50% as of March 31, 2016, compared to 1.59% as of December 31, 2015 and 2.27% as of March 31, 2015.
Branch expansion - During the first quarter, the Bank executed on initiatives to expand its presence in contiguous metropolitan markets by purchasing, for branch expansion, a parcel of land located along U.S. Highway 280 in the Birmingham, Alabama metropolitan area. It is expected that construction of a 40,000 square-foot office complex on the site will begin during the second quarter of 2016. In addition to a retail branch, the office complex will house the Bank's Birmingham-based commercial lending team, as well as certain of the Bank's executive officers. Approximately 25% of the square footage of the office complex will be utilized by the Bank, with the remainder to be leased to commercial tenants. It is expected that the office complex will be operational by mid-2017. Until the new branch becomes operational, the Birmingham commercial lending team will be housed at a newly-opened loan production office in Mountain Brook, Alabama.
"We are pleased to report a second consecutive quarter of loan growth, continued improvement in asset quality, and forward movement in expanding the Bank's presence in the Birmingham area" said James F. House, President and Chief Executive Officer of United Security Bancshares, Inc. "The expansion of our presence in a larger metropolitan market is a significant milestone in our efforts to grow the Bank's commercial loan portfolio."
"Although we have experienced solid growth in the Bank's loan portfolio during the last two quarters, earnings remain constrained. At both the Bank and ALC, management has focused intently over the past several years on problem asset resolution. We have sacrificed some volume and yield as a result of these efforts; however, we believe that we have substantially improved the health of our balance sheet and are now well-positioned for growth at both entities. We are also optimistic that the steps we have taken to open a new branch in Tuscaloosa during the fourth quarter of 2015, and now to expand our presence in Birmingham, will significantly enhance the Bank's opportunities to grow its commercial lending portfolio with high quality assets," continued Mr. House.
Results of Operations
Pre-provision net interest income totaled $6.7 million in the first quarter of 2016, compared to $7.0 million in the prior quarter and $6.7 million in the first quarter of 2015. The decrease compared to the prior quarter was primarily attributable to seasonal reductions in loan volume at ALC and, to a lesser extent, reduction in yield at both the Bank and ALC as management continued efforts to reduce exposure to loans with higher credit risk.
The provision for loan losses totaled $0.2 million in the first quarter of 2016, compared to $0.4 million in the fourth quarter of 2015 and a negative provision (reduction in reserve) of $0.2 million in the first quarter of 2015. The increases in loan loss provisions during the last two quarters have resulted primarily from growth in FUSB's loan portfolio.
Non-interest income totaled $1.0 million in the first quarter of 2016, compared to $1.2 million in the prior quarter and $1.3 million in the first quarter of 2015. The decrease compared to both prior quarters resulted primarily from gains on sale or prepayment of securities that occurred in 2015 and that were not repeated in the first quarter of 2016.
Non-interest expense totaled $7.1 million in the first quarter of 2016, remaining relatively consistent with the results in previous quarters, which totaled $7.2 million in the fourth quarter of 2015 and $7.0 million in the first quarter of 2015.
Balance Sheet Management
Net loans increased to $264.0 million as of March 31, 2016, compared to $255.4 million as of December 31, 2015. The loans were funded through the Bank's available cash balances. In addition, the Bank funded the purchase of land in the Birmingham area, as discussed above, from available cash balances. The purchase price totaled approximately $3.0 million. Total cash and cash equivalents were reduced to $30.5 million as of March 31, 2016, compared to $44.1 million as of December 31, 2015.
Investment securities were maintained at consistent levels during the first quarter of 2016, totaling $231.5 million as of March 31, 2016, compared to $231.2 million as of December 31, 2015. In addition, the Company held $3.0 million in federal funds sold as of March 31, 2016. No amounts were held in federal funds sold as of December 31, 2015. The investment securities portfolio and federal funds sold serve to both enhance interest income and provide additional sources of liquidity.
Deposit levels increased $6.2 million during the first quarter, totaling $485.5 million as of March 31, 2016, compared to $479.3 million as of December 31, 2015. In addition to deposits, the Bank maintains significant external sources of liquidity, including access to funding through federal funds lines, Federal Home Loan Bank advances and brokered deposits.
Shareholders' equity increased to $77.7 million, or $12.87 per common share, at March 31, 2016, compared to $76.3 million, or $12.65 per common share, at December 31, 2015. The increase in shareholders' equity resulted from continued growth in retained earnings, increases in other comprehensive income related to changes in the fair value of investment securities available-for-sale, and the classification of accruals for deferred compensation in equity.
The Bank maintained capital ratios at a higher level than the ratios required to be considered a "well-capitalized" institution under applicable regulations. As of March 31, 2016, the Bank's common equity Tier 1 capital and Tier 1 risk-based capital ratios were 21.66%, its total capital ratio was 22.67%, and its Tier 1 leverage ratio was 12.76%.
The Company declared a cash dividend of $0.02 per share on its common stock in the first quarter of 2016. This amount is consistent with the Company's quarterly dividend declarations for each quarter of 2015.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Article Type:||Financial report|
|Date:||May 9, 2016|
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