UBFO 10-Q Quarterly Report June 30, 2022 | Alphaminr
UNITED SECURITY BANCSHARES
ALPHAMINR

UBFO 10-Q Quarter ended June 30, 2022

Balance Sheet
Cash Flow
Income Statement
Debt
UNITED SECURITY BANCSHARES
10-Ks and 10-Qs
10-Q
Quarter ended Sept. 30, 2025
10-Q
Quarter ended June 30, 2025
10-Q
Quarter ended March 31, 2025
10-K
Fiscal year ended Dec. 31, 2024
10-Q
Quarter ended Sept. 30, 2024
10-Q
Quarter ended June 30, 2024
10-Q
Quarter ended March 31, 2024
10-K
Fiscal year ended Dec. 31, 2023
10-Q
Quarter ended Sept. 30, 2023
10-Q
Quarter ended June 30, 2023
10-Q
Quarter ended March 31, 2023
10-K
Fiscal year ended Dec. 31, 2022
10-Q
Quarter ended Sept. 30, 2022
10-Q
Quarter ended June 30, 2022
10-Q
Quarter ended March 31, 2022
10-K
Fiscal year ended Dec. 31, 2021
10-Q
Quarter ended Sept. 30, 2021
10-Q
Quarter ended June 30, 2021
10-Q
Quarter ended March 31, 2021
10-K
Fiscal year ended Dec. 31, 2020
10-Q
Quarter ended Sept. 30, 2020
10-Q
Quarter ended June 30, 2020
10-Q
Quarter ended March 31, 2020
10-K
Fiscal year ended Dec. 31, 2019
10-Q
Quarter ended Sept. 30, 2019
10-Q
Quarter ended June 30, 2019
10-Q
Quarter ended March 31, 2019
10-K
Fiscal year ended Dec. 31, 2018
10-Q
Quarter ended Sept. 30, 2018
10-Q
Quarter ended June 30, 2018
10-Q
Quarter ended March 31, 2018
10-K
Fiscal year ended Dec. 31, 2017
10-Q
Quarter ended Sept. 30, 2017
10-Q
Quarter ended June 30, 2017
10-Q
Quarter ended March 31, 2017
10-K
Fiscal year ended Dec. 31, 2016
10-Q
Quarter ended Sept. 30, 2016
10-Q
Quarter ended June 30, 2016
10-Q
Quarter ended March 31, 2016
10-K
Fiscal year ended Dec. 31, 2015
10-Q
Quarter ended Sept. 30, 2015
10-Q
Quarter ended June 30, 2015
10-Q
Quarter ended March 31, 2015
10-K
Fiscal year ended Dec. 31, 2014
10-Q
Quarter ended Sept. 30, 2014
10-Q
Quarter ended June 30, 2014
10-Q
Quarter ended March 31, 2014
10-K
Fiscal year ended Dec. 31, 2013
10-Q
Quarter ended Sept. 30, 2013
10-Q
Quarter ended June 30, 2013
10-Q
Quarter ended March 31, 2013
10-K
Fiscal year ended Dec. 31, 2012
10-Q
Quarter ended Sept. 30, 2012
10-Q
Quarter ended June 30, 2012
10-Q
Quarter ended March 31, 2012
10-K
Fiscal year ended Dec. 31, 2011
10-Q
Quarter ended Sept. 30, 2011
10-Q
Quarter ended June 30, 2011
10-Q
Quarter ended March 31, 2011
10-K
Fiscal year ended Dec. 31, 2010
10-Q
Quarter ended Sept. 30, 2010
10-Q
Quarter ended June 30, 2010
10-Q
Quarter ended March 31, 2010
10-K
Fiscal year ended Dec. 31, 2009
PROXIES
DEF 14A
Filed on April 7, 2025
DEF 14A
Filed on April 3, 2024
DEF 14A
Filed on April 1, 2024
DEF 14A
Filed on April 3, 2023
DEF 14A
Filed on May 18, 2022
DEF 14A
Filed on April 7, 2022
DEF 14A
Filed on April 8, 2021
DEF 14A
Filed on June 11, 2020
DEF 14A
Filed on April 9, 2019
DEF 14A
Filed on April 9, 2018
DEF 14A
Filed on April 11, 2017
DEF 14A
Filed on April 11, 2016
DEF 14A
Filed on April 13, 2015
DEF 14A
Filed on April 15, 2014
DEF 14A
Filed on April 18, 2013
DEF 14A
Filed on April 24, 2012
DEF 14A
Filed on April 15, 2011
DEF 14A
Filed on April 20, 2010
ubfo-20220630
0001137547 12/31 2022 Q2 false P2Y P3Y 0001137547 2022-01-01 2022-06-30 0001137547 2022-07-31 xbrli:shares 0001137547 2022-06-30 iso4217:USD 0001137547 2021-12-31 iso4217:USD xbrli:shares 0001137547 2022-04-01 2022-06-30 0001137547 2021-04-01 2021-06-30 0001137547 2021-01-01 2021-06-30 0001137547 us-gaap:CommonStockMember 2020-12-31 0001137547 us-gaap:RetainedEarningsMember 2020-12-31 0001137547 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001137547 2020-12-31 0001137547 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-03-31 0001137547 2021-01-01 2021-03-31 0001137547 2021-03-31 0001137547 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001137547 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001137547 us-gaap:CommonStockMember 2021-03-31 0001137547 us-gaap:RetainedEarningsMember 2021-03-31 0001137547 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001137547 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-04-01 2021-06-30 0001137547 2021-06-30 0001137547 us-gaap:RetainedEarningsMember 2021-04-01 2021-06-30 0001137547 us-gaap:CommonStockMember 2021-04-01 2021-06-30 0001137547 us-gaap:CommonStockMember 2021-06-30 0001137547 us-gaap:RetainedEarningsMember 2021-06-30 0001137547 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-06-30 0001137547 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-07-01 2021-09-30 0001137547 2021-07-01 2021-09-30 0001137547 2021-09-30 0001137547 us-gaap:RetainedEarningsMember 2021-07-01 2021-09-30 0001137547 us-gaap:CommonStockMember 2021-07-01 2021-09-30 0001137547 us-gaap:CommonStockMember 2021-09-30 0001137547 us-gaap:RetainedEarningsMember 2021-09-30 0001137547 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-09-30 0001137547 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-10-01 2021-12-31 0001137547 2021-10-01 2021-12-31 0001137547 us-gaap:RetainedEarningsMember 2021-10-01 2021-12-31 0001137547 us-gaap:CommonStockMember 2021-10-01 2021-12-31 0001137547 us-gaap:CommonStockMember 2021-12-31 0001137547 us-gaap:RetainedEarningsMember 2021-12-31 0001137547 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001137547 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-03-31 0001137547 2022-01-01 2022-03-31 0001137547 2022-03-31 0001137547 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001137547 us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001137547 us-gaap:CommonStockMember 2022-03-31 0001137547 us-gaap:RetainedEarningsMember 2022-03-31 0001137547 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-03-31 0001137547 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-04-01 2022-06-30 0001137547 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0001137547 us-gaap:CommonStockMember 2022-04-01 2022-06-30 0001137547 us-gaap:CommonStockMember 2022-06-30 0001137547 us-gaap:RetainedEarningsMember 2022-06-30 0001137547 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-06-30 0001137547 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2022-06-30 0001137547 us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember 2022-06-30 0001137547 us-gaap:USTreasurySecuritiesMember 2022-06-30 0001137547 us-gaap:MunicipalBondsMember 2022-06-30 0001137547 us-gaap:CorporateBondSecuritiesMember 2022-06-30 0001137547 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2021-12-31 0001137547 us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember 2021-12-31 0001137547 us-gaap:USTreasurySecuritiesMember 2021-12-31 0001137547 us-gaap:AssetBackedSecuritiesMember 2021-12-31 0001137547 us-gaap:MunicipalBondsMember 2021-12-31 0001137547 us-gaap:CorporateBondSecuritiesMember 2021-12-31 0001137547 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2022-06-30 0001137547 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2022-06-30 ubfo:security ubfo:segment 0001137547 ubfo:CommercialAndBusinessLoansMember ubfo:CommercialAndIndustrialMember 2022-06-30 0001137547 ubfo:CommercialAndBusinessLoansMember ubfo:CommercialAndIndustrialMember 2021-12-31 0001137547 ubfo:GovernmentProgramLoansMember ubfo:CommercialAndIndustrialMember 2022-06-30 0001137547 ubfo:GovernmentProgramLoansMember ubfo:CommercialAndIndustrialMember 2021-12-31 0001137547 ubfo:CommercialAndIndustrialMember 2022-06-30 0001137547 ubfo:CommercialAndIndustrialMember 2021-12-31 0001137547 us-gaap:CommercialRealEstateMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 us-gaap:CommercialRealEstateMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2022-06-30 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2021-12-31 0001137547 ubfo:RealEstateMortgageMember 2022-06-30 0001137547 ubfo:RealEstateMortgageMember 2021-12-31 0001137547 us-gaap:ConstructionLoansMember 2022-06-30 0001137547 us-gaap:ConstructionLoansMember 2021-12-31 0001137547 ubfo:AgriculturalMember 2022-06-30 0001137547 ubfo:AgriculturalMember 2021-12-31 0001137547 us-gaap:ConsumerPortfolioSegmentMember 2022-06-30 0001137547 us-gaap:ConsumerPortfolioSegmentMember 2021-12-31 0001137547 ubfo:CommercialAndIndustrialMember 2022-01-01 2022-06-30 xbrli:pure 0001137547 ubfo:PaycheckProtectionProgramMember us-gaap:UnsecuredDebtMember 2022-06-30 0001137547 ubfo:PaycheckProtectionProgramMember us-gaap:UnsecuredDebtMember srt:MinimumMember 2022-01-01 2022-06-30 0001137547 ubfo:PaycheckProtectionProgramMember us-gaap:UnsecuredDebtMember srt:MaximumMember 2022-01-01 2022-06-30 0001137547 ubfo:PaycheckProtectionProgramMember us-gaap:UnsecuredDebtMember srt:MinimumMember 2022-06-30 0001137547 ubfo:PaycheckProtectionProgramMember us-gaap:UnsecuredDebtMember srt:MaximumMember 2022-06-30 0001137547 ubfo:RealEstateMortgageMember 2022-01-01 2022-06-30 0001137547 us-gaap:ConstructionLoansMember 2022-01-01 2022-06-30 0001137547 ubfo:AgriculturalMember 2022-01-01 2022-06-30 0001137547 us-gaap:ConsumerPortfolioSegmentMember 2022-01-01 2022-06-30 0001137547 us-gaap:CommitmentsToExtendCreditMember 2022-06-30 0001137547 us-gaap:CommitmentsToExtendCreditMember 2021-12-31 0001137547 us-gaap:StandbyLettersOfCreditMember 2022-06-30 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:CommercialAndBusinessLoansMember ubfo:CommercialAndIndustrialMember 2022-06-30 0001137547 ubfo:CommercialAndBusinessLoansMember ubfo:CommercialAndIndustrialMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2022-06-30 0001137547 ubfo:CommercialAndBusinessLoansMember ubfo:CommercialAndIndustrialMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2022-06-30 0001137547 ubfo:GovernmentProgramLoansMember us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:CommercialAndIndustrialMember 2022-06-30 0001137547 ubfo:GovernmentProgramLoansMember ubfo:CommercialAndIndustrialMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2022-06-30 0001137547 ubfo:GovernmentProgramLoansMember ubfo:CommercialAndIndustrialMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2022-06-30 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:CommercialAndIndustrialMember 2022-06-30 0001137547 ubfo:CommercialAndIndustrialMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2022-06-30 0001137547 ubfo:CommercialAndIndustrialMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2022-06-30 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember us-gaap:CommercialRealEstateMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 us-gaap:CommercialRealEstateMember us-gaap:FinancingReceivables60To89DaysPastDueMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 us-gaap:CommercialRealEstateMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 us-gaap:ResidentialMortgageMember us-gaap:FinancingReceivables60To89DaysPastDueMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 us-gaap:ResidentialMortgageMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2022-06-30 0001137547 us-gaap:FinancingReceivables60To89DaysPastDueMember ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2022-06-30 0001137547 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2022-06-30 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 us-gaap:FinancingReceivables60To89DaysPastDueMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 ubfo:RealEstateMortgageMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2022-06-30 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember us-gaap:ConstructionLoansMember 2022-06-30 0001137547 us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2022-06-30 0001137547 us-gaap:ConstructionLoansMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2022-06-30 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:AgriculturalMember 2022-06-30 0001137547 us-gaap:FinancingReceivables60To89DaysPastDueMember ubfo:AgriculturalMember 2022-06-30 0001137547 ubfo:AgriculturalMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2022-06-30 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember us-gaap:ConsumerPortfolioSegmentMember 2022-06-30 0001137547 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2022-06-30 0001137547 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2022-06-30 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember 2022-06-30 0001137547 us-gaap:FinancingReceivables60To89DaysPastDueMember 2022-06-30 0001137547 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2022-06-30 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:CommercialAndBusinessLoansMember ubfo:CommercialAndIndustrialMember 2021-12-31 0001137547 ubfo:CommercialAndBusinessLoansMember ubfo:CommercialAndIndustrialMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0001137547 ubfo:CommercialAndBusinessLoansMember ubfo:CommercialAndIndustrialMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0001137547 ubfo:GovernmentProgramLoansMember us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:CommercialAndIndustrialMember 2021-12-31 0001137547 ubfo:GovernmentProgramLoansMember ubfo:CommercialAndIndustrialMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0001137547 ubfo:GovernmentProgramLoansMember ubfo:CommercialAndIndustrialMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:CommercialAndIndustrialMember 2021-12-31 0001137547 ubfo:CommercialAndIndustrialMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0001137547 ubfo:CommercialAndIndustrialMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember us-gaap:CommercialRealEstateMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 us-gaap:CommercialRealEstateMember us-gaap:FinancingReceivables60To89DaysPastDueMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 us-gaap:CommercialRealEstateMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 us-gaap:ResidentialMortgageMember us-gaap:FinancingReceivables60To89DaysPastDueMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 us-gaap:ResidentialMortgageMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2021-12-31 0001137547 us-gaap:FinancingReceivables60To89DaysPastDueMember ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2021-12-31 0001137547 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2021-12-31 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 us-gaap:FinancingReceivables60To89DaysPastDueMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 ubfo:RealEstateMortgageMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember us-gaap:ConstructionLoansMember 2021-12-31 0001137547 us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0001137547 us-gaap:ConstructionLoansMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:AgriculturalMember 2021-12-31 0001137547 us-gaap:FinancingReceivables60To89DaysPastDueMember ubfo:AgriculturalMember 2021-12-31 0001137547 ubfo:AgriculturalMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember us-gaap:ConsumerPortfolioSegmentMember 2021-12-31 0001137547 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0001137547 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0001137547 us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0001137547 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 ubfo:payment 0001137547 ubfo:CommercialAndBusinessLoansMember ubfo:CommercialAndIndustrialMember 2022-01-01 2022-06-30 0001137547 ubfo:GovernmentProgramLoansMember ubfo:CommercialAndIndustrialMember 2022-01-01 2022-06-30 0001137547 us-gaap:CommercialRealEstateMember ubfo:RealEstateMortgageMember 2022-01-01 2022-06-30 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember 2022-01-01 2022-06-30 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2022-01-01 2022-06-30 0001137547 ubfo:CommercialAndBusinessLoansMember ubfo:CommercialAndIndustrialMember 2021-01-01 2021-12-31 0001137547 ubfo:GovernmentProgramLoansMember ubfo:CommercialAndIndustrialMember 2021-01-01 2021-12-31 0001137547 ubfo:CommercialAndIndustrialMember 2021-01-01 2021-12-31 0001137547 us-gaap:CommercialRealEstateMember ubfo:RealEstateMortgageMember 2021-01-01 2021-12-31 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember 2021-01-01 2021-12-31 0001137547 ubfo:RealEstateMortgageMember 2021-01-01 2021-12-31 0001137547 us-gaap:ConstructionLoansMember 2021-01-01 2021-12-31 0001137547 ubfo:AgriculturalMember 2021-01-01 2021-12-31 0001137547 2021-01-01 2021-12-31 ubfo:loan 0001137547 ubfo:CommercialAndIndustrialMember 2022-03-31 0001137547 us-gaap:CommercialRealEstateMember ubfo:RealEstateMortgageMember 2022-03-31 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember 2022-03-31 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2022-03-31 0001137547 us-gaap:ConstructionLoansMember 2022-03-31 0001137547 ubfo:AgriculturalMember 2022-03-31 0001137547 us-gaap:ConsumerPortfolioSegmentMember 2022-03-31 0001137547 ubfo:CommercialAndIndustrialMember 2022-04-01 2022-06-30 0001137547 us-gaap:CommercialRealEstateMember ubfo:RealEstateMortgageMember 2022-04-01 2022-06-30 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember 2022-04-01 2022-06-30 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2022-04-01 2022-06-30 0001137547 us-gaap:ConstructionLoansMember 2022-04-01 2022-06-30 0001137547 ubfo:AgriculturalMember 2022-04-01 2022-06-30 0001137547 us-gaap:ConsumerPortfolioSegmentMember 2022-04-01 2022-06-30 0001137547 ubfo:CommercialAndIndustrialMember 2021-03-31 0001137547 us-gaap:CommercialRealEstateMember ubfo:RealEstateMortgageMember 2021-03-31 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember 2021-03-31 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2021-03-31 0001137547 us-gaap:ConstructionLoansMember 2021-03-31 0001137547 ubfo:AgriculturalMember 2021-03-31 0001137547 us-gaap:ConsumerPortfolioSegmentMember 2021-03-31 0001137547 ubfo:CommercialAndIndustrialMember 2021-04-01 2021-06-30 0001137547 us-gaap:CommercialRealEstateMember ubfo:RealEstateMortgageMember 2021-04-01 2021-06-30 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember 2021-04-01 2021-06-30 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2021-04-01 2021-06-30 0001137547 us-gaap:ConstructionLoansMember 2021-04-01 2021-06-30 0001137547 ubfo:AgriculturalMember 2021-04-01 2021-06-30 0001137547 us-gaap:ConsumerPortfolioSegmentMember 2021-04-01 2021-06-30 0001137547 ubfo:CommercialAndIndustrialMember 2021-06-30 0001137547 us-gaap:CommercialRealEstateMember ubfo:RealEstateMortgageMember 2021-06-30 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember 2021-06-30 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2021-06-30 0001137547 us-gaap:ConstructionLoansMember 2021-06-30 0001137547 ubfo:AgriculturalMember 2021-06-30 0001137547 us-gaap:ConsumerPortfolioSegmentMember 2021-06-30 0001137547 ubfo:CommercialAndIndustrialMember 2020-12-31 0001137547 us-gaap:CommercialRealEstateMember ubfo:RealEstateMortgageMember 2020-12-31 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember 2020-12-31 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2020-12-31 0001137547 us-gaap:ConstructionLoansMember 2020-12-31 0001137547 ubfo:AgriculturalMember 2020-12-31 0001137547 us-gaap:ConsumerPortfolioSegmentMember 2020-12-31 0001137547 ubfo:CommercialAndIndustrialMember 2021-01-01 2021-06-30 0001137547 us-gaap:CommercialRealEstateMember ubfo:RealEstateMortgageMember 2021-01-01 2021-06-30 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember 2021-01-01 2021-06-30 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2021-01-01 2021-06-30 0001137547 us-gaap:ConstructionLoansMember 2021-01-01 2021-06-30 0001137547 ubfo:AgriculturalMember 2021-01-01 2021-06-30 0001137547 us-gaap:ConsumerPortfolioSegmentMember 2021-01-01 2021-06-30 ubfo:rating 0001137547 srt:MinimumMember ubfo:Grade4And5PassMember 2022-01-01 2022-06-30 0001137547 ubfo:Grade4And5PassMember srt:MaximumMember 2022-01-01 2022-06-30 0001137547 ubfo:CommercialAndIndustrialMember ubfo:Grades1And2Member 2022-06-30 0001137547 ubfo:RealEstateMortgageMember ubfo:Grades1And2Member 2022-06-30 0001137547 us-gaap:ConstructionLoansMember ubfo:Grades1And2Member 2022-06-30 0001137547 ubfo:AgriculturalMember ubfo:Grades1And2Member 2022-06-30 0001137547 ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember ubfo:Grades1And2Member 2022-06-30 0001137547 ubfo:Grade3Member ubfo:CommercialAndIndustrialMember 2022-06-30 0001137547 ubfo:Grade3Member ubfo:RealEstateMortgageMember 2022-06-30 0001137547 ubfo:Grade3Member us-gaap:ConstructionLoansMember 2022-06-30 0001137547 ubfo:Grade3Member ubfo:AgriculturalMember 2022-06-30 0001137547 ubfo:Grade3Member ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember 2022-06-30 0001137547 ubfo:CommercialAndIndustrialMember ubfo:Grade4And5PassMember 2022-06-30 0001137547 ubfo:RealEstateMortgageMember ubfo:Grade4And5PassMember 2022-06-30 0001137547 us-gaap:ConstructionLoansMember ubfo:Grade4And5PassMember 2022-06-30 0001137547 ubfo:AgriculturalMember ubfo:Grade4And5PassMember 2022-06-30 0001137547 ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember ubfo:Grade4And5PassMember 2022-06-30 0001137547 ubfo:CommercialAndIndustrialMember ubfo:Grade6SpecialMentionMember 2022-06-30 0001137547 ubfo:Grade6SpecialMentionMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 ubfo:Grade6SpecialMentionMember us-gaap:ConstructionLoansMember 2022-06-30 0001137547 ubfo:Grade6SpecialMentionMember ubfo:AgriculturalMember 2022-06-30 0001137547 ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember ubfo:Grade6SpecialMentionMember 2022-06-30 0001137547 ubfo:CommercialAndIndustrialMember ubfo:Grade7SubstandardMember 2022-06-30 0001137547 ubfo:Grade7SubstandardMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 us-gaap:ConstructionLoansMember ubfo:Grade7SubstandardMember 2022-06-30 0001137547 ubfo:Grade7SubstandardMember ubfo:AgriculturalMember 2022-06-30 0001137547 ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember ubfo:Grade7SubstandardMember 2022-06-30 0001137547 ubfo:Grade8DoubtfulMember ubfo:CommercialAndIndustrialMember 2022-06-30 0001137547 ubfo:Grade8DoubtfulMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 ubfo:Grade8DoubtfulMember us-gaap:ConstructionLoansMember 2022-06-30 0001137547 ubfo:Grade8DoubtfulMember ubfo:AgriculturalMember 2022-06-30 0001137547 ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember ubfo:Grade8DoubtfulMember 2022-06-30 0001137547 ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember 2022-06-30 0001137547 ubfo:CommercialAndIndustrialMember ubfo:Grades1And2Member 2021-12-31 0001137547 ubfo:RealEstateMortgageMember ubfo:Grades1And2Member 2021-12-31 0001137547 us-gaap:ConstructionLoansMember ubfo:Grades1And2Member 2021-12-31 0001137547 ubfo:AgriculturalMember ubfo:Grades1And2Member 2021-12-31 0001137547 ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember ubfo:Grades1And2Member 2021-12-31 0001137547 ubfo:Grade3Member ubfo:CommercialAndIndustrialMember 2021-12-31 0001137547 ubfo:Grade3Member ubfo:RealEstateMortgageMember 2021-12-31 0001137547 ubfo:Grade3Member us-gaap:ConstructionLoansMember 2021-12-31 0001137547 ubfo:Grade3Member ubfo:AgriculturalMember 2021-12-31 0001137547 ubfo:Grade3Member ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember 2021-12-31 0001137547 ubfo:CommercialAndIndustrialMember ubfo:Grade4And5PassMember 2021-12-31 0001137547 ubfo:RealEstateMortgageMember ubfo:Grade4And5PassMember 2021-12-31 0001137547 us-gaap:ConstructionLoansMember ubfo:Grade4And5PassMember 2021-12-31 0001137547 ubfo:AgriculturalMember ubfo:Grade4And5PassMember 2021-12-31 0001137547 ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember ubfo:Grade4And5PassMember 2021-12-31 0001137547 ubfo:CommercialAndIndustrialMember ubfo:Grade6SpecialMentionMember 2021-12-31 0001137547 ubfo:Grade6SpecialMentionMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 ubfo:Grade6SpecialMentionMember us-gaap:ConstructionLoansMember 2021-12-31 0001137547 ubfo:Grade6SpecialMentionMember ubfo:AgriculturalMember 2021-12-31 0001137547 ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember ubfo:Grade6SpecialMentionMember 2021-12-31 0001137547 ubfo:CommercialAndIndustrialMember ubfo:Grade7SubstandardMember 2021-12-31 0001137547 ubfo:Grade7SubstandardMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 us-gaap:ConstructionLoansMember ubfo:Grade7SubstandardMember 2021-12-31 0001137547 ubfo:Grade7SubstandardMember ubfo:AgriculturalMember 2021-12-31 0001137547 ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember ubfo:Grade7SubstandardMember 2021-12-31 0001137547 ubfo:Grade8DoubtfulMember ubfo:CommercialAndIndustrialMember 2021-12-31 0001137547 ubfo:Grade8DoubtfulMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 ubfo:Grade8DoubtfulMember us-gaap:ConstructionLoansMember 2021-12-31 0001137547 ubfo:Grade8DoubtfulMember ubfo:AgriculturalMember 2021-12-31 0001137547 ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember ubfo:Grade8DoubtfulMember 2021-12-31 0001137547 ubfo:CommercialRiskConstructionAndOtherNonConsumerLoansMember 2021-12-31 0001137547 us-gaap:ResidentialMortgageMember ubfo:NotGradedMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 ubfo:NotGradedMember ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2022-06-30 0001137547 us-gaap:ConsumerPortfolioSegmentMember ubfo:NotGradedMember 2022-06-30 0001137547 ubfo:ConsumerRelatedLoansAndOtherHomogenousLoansMember ubfo:NotGradedMember 2022-06-30 0001137547 us-gaap:ResidentialMortgageMember ubfo:NotGradedMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 ubfo:NotGradedMember ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2021-12-31 0001137547 us-gaap:ConsumerPortfolioSegmentMember ubfo:NotGradedMember 2021-12-31 0001137547 ubfo:ConsumerRelatedLoansAndOtherHomogenousLoansMember ubfo:NotGradedMember 2021-12-31 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember us-gaap:PassMember 2022-06-30 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember us-gaap:PassMember 2022-06-30 0001137547 us-gaap:ConsumerPortfolioSegmentMember us-gaap:PassMember 2022-06-30 0001137547 ubfo:ConsumerRelatedLoansAndOtherHomogenousLoansMember us-gaap:PassMember 2022-06-30 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember us-gaap:PassMember 2021-12-31 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember us-gaap:PassMember 2021-12-31 0001137547 us-gaap:ConsumerPortfolioSegmentMember us-gaap:PassMember 2021-12-31 0001137547 ubfo:ConsumerRelatedLoansAndOtherHomogenousLoansMember us-gaap:PassMember 2021-12-31 0001137547 us-gaap:ResidentialMortgageMember us-gaap:SpecialMentionMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 us-gaap:SpecialMentionMember ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2022-06-30 0001137547 us-gaap:ConsumerPortfolioSegmentMember us-gaap:SpecialMentionMember 2022-06-30 0001137547 ubfo:ConsumerRelatedLoansAndOtherHomogenousLoansMember us-gaap:SpecialMentionMember 2022-06-30 0001137547 us-gaap:ResidentialMortgageMember us-gaap:SpecialMentionMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 us-gaap:SpecialMentionMember ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2021-12-31 0001137547 us-gaap:ConsumerPortfolioSegmentMember us-gaap:SpecialMentionMember 2021-12-31 0001137547 ubfo:ConsumerRelatedLoansAndOtherHomogenousLoansMember us-gaap:SpecialMentionMember 2021-12-31 0001137547 us-gaap:ResidentialMortgageMember us-gaap:SubstandardMember ubfo:RealEstateMortgageMember 2022-06-30 0001137547 us-gaap:SubstandardMember ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2022-06-30 0001137547 us-gaap:ConsumerPortfolioSegmentMember us-gaap:SubstandardMember 2022-06-30 0001137547 ubfo:ConsumerRelatedLoansAndOtherHomogenousLoansMember us-gaap:SubstandardMember 2022-06-30 0001137547 us-gaap:ResidentialMortgageMember us-gaap:SubstandardMember ubfo:RealEstateMortgageMember 2021-12-31 0001137547 us-gaap:SubstandardMember ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember 2021-12-31 0001137547 us-gaap:ConsumerPortfolioSegmentMember us-gaap:SubstandardMember 2021-12-31 0001137547 ubfo:ConsumerRelatedLoansAndOtherHomogenousLoansMember us-gaap:SubstandardMember 2021-12-31 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember us-gaap:DoubtfulMember 2022-06-30 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember us-gaap:DoubtfulMember 2022-06-30 0001137547 us-gaap:ConsumerPortfolioSegmentMember us-gaap:DoubtfulMember 2022-06-30 0001137547 ubfo:ConsumerRelatedLoansAndOtherHomogenousLoansMember us-gaap:DoubtfulMember 2022-06-30 0001137547 us-gaap:ResidentialMortgageMember ubfo:RealEstateMortgageMember us-gaap:DoubtfulMember 2021-12-31 0001137547 ubfo:RealEstateMortgageMember us-gaap:HomeEquityMember us-gaap:DoubtfulMember 2021-12-31 0001137547 us-gaap:ConsumerPortfolioSegmentMember us-gaap:DoubtfulMember 2021-12-31 0001137547 ubfo:ConsumerRelatedLoansAndOtherHomogenousLoansMember us-gaap:DoubtfulMember 2021-12-31 0001137547 ubfo:ConsumerRelatedLoansAndOtherHomogenousLoansMember 2022-06-30 0001137547 ubfo:ConsumerRelatedLoansAndOtherHomogenousLoansMember 2021-12-31 0001137547 ubfo:RealEstateMortgageMember 2022-03-31 0001137547 us-gaap:UnallocatedFinancingReceivablesMember 2022-03-31 0001137547 ubfo:RealEstateMortgageMember 2022-04-01 2022-06-30 0001137547 us-gaap:UnallocatedFinancingReceivablesMember 2022-04-01 2022-06-30 0001137547 us-gaap:UnallocatedFinancingReceivablesMember 2022-06-30 0001137547 ubfo:RealEstateMortgageMember 2021-03-31 0001137547 us-gaap:UnallocatedFinancingReceivablesMember 2021-03-31 0001137547 ubfo:RealEstateMortgageMember 2021-04-01 2021-06-30 0001137547 us-gaap:UnallocatedFinancingReceivablesMember 2021-04-01 2021-06-30 0001137547 ubfo:RealEstateMortgageMember 2021-06-30 0001137547 us-gaap:UnallocatedFinancingReceivablesMember 2021-06-30 0001137547 us-gaap:UnallocatedFinancingReceivablesMember 2021-12-31 0001137547 us-gaap:UnallocatedFinancingReceivablesMember 2022-01-01 2022-06-30 0001137547 ubfo:RealEstateMortgageMember 2020-12-31 0001137547 us-gaap:UnallocatedFinancingReceivablesMember 2020-12-31 0001137547 ubfo:RealEstateMortgageMember 2021-01-01 2021-06-30 0001137547 us-gaap:UnallocatedFinancingReceivablesMember 2021-01-01 2021-06-30 0001137547 ubfo:CommercialAndBusinessLoansMember ubfo:CommercialAndIndustrialMember 2021-06-30 0001137547 ubfo:GovernmentProgramLoansMember ubfo:CommercialAndIndustrialMember 2021-06-30 0001137547 us-gaap:StudentLoanMember 2022-06-30 0001137547 us-gaap:StudentLoanMember 2021-12-31 0001137547 ubfo:SchoolMember us-gaap:StudentLoanMember 2022-06-30 0001137547 ubfo:SchoolMember us-gaap:StudentLoanMember 2021-12-31 0001137547 ubfo:RepaymentDefermentandForbearanceMember us-gaap:StudentLoanMember 2022-06-30 0001137547 us-gaap:StudentLoanMember ubfo:RepaymentMember 2022-06-30 0001137547 ubfo:DefermentMember us-gaap:StudentLoanMember 2022-06-30 0001137547 ubfo:ForbearanceMember us-gaap:StudentLoanMember 2022-06-30 0001137547 ubfo:RepaymentDefermentandForbearanceMember us-gaap:StudentLoanMember 2021-12-31 0001137547 us-gaap:StudentLoanMember ubfo:RepaymentMember 2021-12-31 0001137547 ubfo:DefermentMember us-gaap:StudentLoanMember 2021-12-31 0001137547 ubfo:ForbearanceMember us-gaap:StudentLoanMember 2021-12-31 0001137547 us-gaap:SpecialMentionMember us-gaap:StudentLoanMember 2022-06-30 0001137547 us-gaap:SpecialMentionMember us-gaap:StudentLoanMember 2021-12-31 0001137547 ubfo:NotYetEnteredRepaymentMember us-gaap:StudentLoanMember 2022-06-30 0001137547 ubfo:NotYetEnteredRepaymentMember us-gaap:StudentLoanMember 2021-12-31 0001137547 ubfo:GraceMember us-gaap:StudentLoanMember 2022-06-30 0001137547 ubfo:GraceMember us-gaap:StudentLoanMember 2021-12-31 0001137547 us-gaap:StudentLoanMember 2022-01-01 2022-06-30 0001137547 us-gaap:StudentLoanMember 2022-04-01 2022-06-30 0001137547 us-gaap:StudentLoanMember 2021-04-01 2021-06-30 0001137547 us-gaap:StudentLoanMember 2021-01-01 2021-06-30 0001137547 ubfo:RepaymentandForbearanceMember us-gaap:FinancingReceivables1To29DaysPastDueMember us-gaap:StudentLoanMember 2022-06-30 ubfo:borrower 0001137547 ubfo:RepaymentandForbearanceMember us-gaap:FinancingReceivables1To29DaysPastDueMember us-gaap:StudentLoanMember 2021-12-31 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:RepaymentandForbearanceMember us-gaap:StudentLoanMember 2022-06-30 0001137547 us-gaap:FinancingReceivables30To59DaysPastDueMember ubfo:RepaymentandForbearanceMember us-gaap:StudentLoanMember 2021-12-31 0001137547 us-gaap:FinancingReceivables60To89DaysPastDueMember ubfo:RepaymentandForbearanceMember us-gaap:StudentLoanMember 2022-06-30 0001137547 us-gaap:FinancingReceivables60To89DaysPastDueMember ubfo:RepaymentandForbearanceMember us-gaap:StudentLoanMember 2021-12-31 0001137547 ubfo:FinancialAsset91to120DaysPastDueMember ubfo:RepaymentandForbearanceMember us-gaap:StudentLoanMember 2022-06-30 0001137547 ubfo:FinancialAsset91to120DaysPastDueMember ubfo:RepaymentandForbearanceMember us-gaap:StudentLoanMember 2021-12-31 0001137547 ubfo:RepaymentandForbearanceMember us-gaap:StudentLoanMember 2022-06-30 0001137547 ubfo:RepaymentandForbearanceMember us-gaap:StudentLoanMember 2021-12-31 0001137547 us-gaap:FederalReserveBankAdvancesMember 2022-06-30 0001137547 us-gaap:FederalHomeLoanBankAdvancesMember 2022-06-30 0001137547 ubfo:PNCMember 2022-06-30 0001137547 ubfo:PacificCoastBankersBankMember 2022-06-30 0001137547 ubfo:ZionsFirstNationalBankMember 2022-06-30 0001137547 ubfo:UnionBankMember 2022-06-30 0001137547 us-gaap:FederalReserveBankAdvancesMember 2021-12-31 0001137547 us-gaap:FederalHomeLoanBankAdvancesMember 2021-12-31 0001137547 ubfo:PNCMember 2021-12-31 0001137547 ubfo:PacificCoastBankersBankMember 2021-12-31 0001137547 ubfo:ZionsFirstNationalBankMember 2021-12-31 0001137547 ubfo:UnionBankMember 2021-12-31 ubfo:contract 0001137547 2022-06-28 2022-06-28 0001137547 2022-03-22 2022-03-22 0001137547 us-gaap:JuniorSubordinatedDebtMember 2021-12-31 0001137547 us-gaap:JuniorSubordinatedDebtMember 2022-06-30 0001137547 us-gaap:LondonInterbankOfferedRateLIBORMember us-gaap:JuniorSubordinatedDebtMember 2022-01-01 2022-06-30 0001137547 us-gaap:MeasurementInputDiscountRateMember us-gaap:JuniorSubordinatedDebtMember 2022-06-30 ubfo:pure 0001137547 us-gaap:FairValueInputsLevel1Member 2022-06-30 0001137547 us-gaap:FairValueInputsLevel2Member 2022-06-30 0001137547 us-gaap:FairValueInputsLevel3Member 2022-06-30 0001137547 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2021-12-31 0001137547 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2021-12-31 0001137547 us-gaap:FairValueInputsLevel1Member 2021-12-31 0001137547 us-gaap:FairValueInputsLevel2Member 2021-12-31 0001137547 us-gaap:FairValueInputsLevel3Member 2021-12-31 0001137547 us-gaap:USGovernmentAgenciesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:USGovernmentAgenciesDebtSecuritiesMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:USGovernmentAgenciesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2022-06-30 0001137547 us-gaap:FairValueInputsLevel3Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:FairValueInputsLevel1Member us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2022-06-30 0001137547 us-gaap:FairValueInputsLevel3Member us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:MunicipalBondsMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2022-06-30 0001137547 us-gaap:FairValueInputsLevel1Member us-gaap:MunicipalBondsMember us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:FairValueInputsLevel3Member us-gaap:MunicipalBondsMember us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:FairValueInputsLevel1Member us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2022-06-30 0001137547 us-gaap:FairValueInputsLevel3Member us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:CorporateBondSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:CorporateBondSecuritiesMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:CorporateBondSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2022-06-30 0001137547 us-gaap:FairValueInputsLevel3Member us-gaap:CorporateBondSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2022-06-30 0001137547 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2022-06-30 0001137547 us-gaap:USGovernmentAgenciesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:USGovernmentAgenciesDebtSecuritiesMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:USGovernmentAgenciesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001137547 us-gaap:FairValueInputsLevel3Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:FairValueInputsLevel1Member us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001137547 us-gaap:FairValueInputsLevel3Member us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:AssetBackedSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:AssetBackedSecuritiesMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:AssetBackedSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001137547 us-gaap:FairValueInputsLevel3Member us-gaap:AssetBackedSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:MunicipalBondsMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:FairValueInputsLevel1Member us-gaap:MunicipalBondsMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:MunicipalBondsMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001137547 us-gaap:FairValueInputsLevel3Member us-gaap:MunicipalBondsMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:FairValueInputsLevel1Member us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001137547 us-gaap:FairValueInputsLevel3Member us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:CorporateBondSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:CorporateBondSecuritiesMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:CorporateBondSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001137547 us-gaap:FairValueInputsLevel3Member us-gaap:CorporateBondSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001137547 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001137547 srt:WeightedAverageMember us-gaap:JuniorSubordinatedDebtMember us-gaap:MeasurementInputCreditSpreadMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2022-06-30 0001137547 srt:WeightedAverageMember us-gaap:JuniorSubordinatedDebtMember us-gaap:MeasurementInputCreditSpreadMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2021-12-31 0001137547 us-gaap:SubordinatedDebtObligationsMember 2022-03-31 0001137547 us-gaap:SubordinatedDebtObligationsMember 2021-03-31 0001137547 us-gaap:SubordinatedDebtObligationsMember 2021-12-31 0001137547 us-gaap:SubordinatedDebtObligationsMember 2020-12-31 0001137547 us-gaap:SubordinatedDebtObligationsMember 2022-04-01 2022-06-30 0001137547 us-gaap:SubordinatedDebtObligationsMember 2021-04-01 2021-06-30 0001137547 us-gaap:SubordinatedDebtObligationsMember 2022-01-01 2022-06-30 0001137547 us-gaap:SubordinatedDebtObligationsMember 2021-01-01 2021-06-30 0001137547 us-gaap:SubordinatedDebtObligationsMember 2022-06-30 0001137547 us-gaap:SubordinatedDebtObligationsMember 2021-06-30 0001137547 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2021-12-31 0001137547 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2021-12-31 0001137547 us-gaap:AccumulatedGainLossFinancialLiabilityFairValueOptionAttributableToParentMember 2021-12-31 0001137547 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2020-12-31 0001137547 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-12-31 0001137547 us-gaap:AccumulatedGainLossFinancialLiabilityFairValueOptionAttributableToParentMember 2020-12-31 0001137547 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2022-01-01 2022-06-30 0001137547 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2022-01-01 2022-06-30 0001137547 us-gaap:AccumulatedGainLossFinancialLiabilityFairValueOptionAttributableToParentMember 2022-01-01 2022-06-30 0001137547 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2022-01-01 2022-03-31 0001137547 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2022-01-01 2022-03-31 0001137547 us-gaap:AccumulatedGainLossFinancialLiabilityFairValueOptionAttributableToParentMember 2022-01-01 2022-03-31 0001137547 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2022-06-30 0001137547 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2022-06-30 0001137547 us-gaap:AccumulatedGainLossFinancialLiabilityFairValueOptionAttributableToParentMember 2022-06-30 0001137547 ubfo:YorkMontereyPropertiesIncMember 2022-06-30 0001137547 ubfo:YorkMontereyPropertiesIncMember 2021-12-31 0001137547 ubfo:YorkMontereyPropertiesIncMember ubfo:OtherRealEstateOwnedMember 2022-06-30 0001137547 us-gaap:StandbyLettersOfCreditMember 2021-12-31
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .
Commission file number: 000-32897

UNITED SECURITY BANCSHARES
(Exact name of registrant as specified in its charter)
CALIFORNIA 91-2112732
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
2126 Inyo Street , Fresno , California
93721
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code ( 559 ) 248-4943

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No  ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒
Small reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐  No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, no par value
(Title of Class)

Shares outstanding as of July 31, 2022: 17,040,549
1
TABLE OF CONTENTS

Facing Page

Table of Contents

PART I. Financial Information
PART II. Other Information
Item 1.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2
PART I. Financial Information
Item 1 - Financial Statements


United Security Bancshares and Subsidiaries
Consolidated Balance Sheets – (unaudited)
June 30, 2022 and December 31, 2021
(in thousands except shares) June 30, 2022 December 31, 2021
Assets
Cash and noninterest-bearing deposits in other banks $ 33,701 $ 31,057
Due from Federal Reserve Bank ("FRB") 73,545 188,162
Cash and cash equivalents 107,246 219,219
Investment securities (at fair value)
Available-for-sale ("AFS") securities 212,338 178,902
Marketable equity securities 3,436 3,744
Total investment securities 215,774 182,646
Loans 948,031 869,314
Unearned fees and unamortized loan origination costs - net 1,960 2,219
Allowance for credit losses ( 9,907 ) ( 9,333 )
Net loans 940,084 862,200
Premises and equipment - net 9,069 8,950
Accrued interest receivable 8,265 7,530
Other real estate owned 4,582 4,582
Goodwill 4,488 4,488
Deferred tax assets - net 9,428 3,615
Cash surrender value of life insurance 22,591 22,338
Operating lease right-of-use assets 2,290 2,594
Other assets 15,700 12,782
Total assets $ 1,339,517 $ 1,330,944
Liabilities & Shareholders' Equity
Liabilities
Deposits
Non-interest-bearing $ 473,013 $ 476,749
Interest-bearing 735,181 711,357
Total deposits 1,208,194 1,188,106
Operating lease liabilities 2,401 2,705
Other liabilities 8,432 8,737
Junior subordinated debentures (at fair value) 10,489 11,189
Total liabilities 1,229,516 1,210,737
Shareholders' Equity
Common stock, no par value; 20,000,000 shares authorized; issued and outstanding: 17,040,549 at June 30, 2022 and 17,028,239 at December 31, 2021
59,836 59,636
Retained earnings 63,874 61,745
Accumulated other comprehensive loss ( 13,709 ) ( 1,174 )
Total shareholders' equity 110,001 120,207
Total liabilities and shareholders' equity $ 1,339,517 $ 1,330,944
3
United Security Bancshares and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
(In thousands except shares and EPS) 2022 2021 2022 2021
Interest Income:
Interest and fees on loans $ 9,731 $ 8,748 $ 18,849 $ 16,855
Interest on investment securities 1,004 654 1,795 1,041
Interest on deposits in FRB 258 42 340 104
Total interest income 10,993 9,444 20,984 18,000
Interest Expense:
Interest on deposits 515 468 1,023 895
Interest on other borrowed funds 69 45 114 92
Total interest expense 584 513 1,137 987
Net Interest Income 10,409 8,931 19,847 17,013
Provision for Credit Losses 606 826 611 1,201
Net Interest Income after Provision for Credit Losses 9,803 8,105 19,236 15,812
Noninterest Income:
Customer service fees 776 692 1,429 1,348
Increase in cash surrender value of bank-owned life insurance 114 138 253 269
Unrealized loss on fair value of marketable equity securities ( 127 ) — ( 309 ) ( 60 )
(Loss) gain on fair value of junior subordinated debentures ( 869 ) 377 ( 1,869 ) ( 656 )
Gain on sale of investment securities — — 30 —
Gain on sale of assets — — — 13
Other 708 115 861 248
Total noninterest loss 602 1,322 395 1,162
Noninterest Expense:
Salaries and employee benefits 2,777 2,893 5,826 5,917
Occupancy expense 849 837 1,628 1,693
Data processing 145 148 260 235
Professional fees 919 905 1,868 1,766
Regulatory assessments 187 123 417 289
Director fees 116 92 234 184
Correspondent bank service charges 24 23 50 42
Net cost (gain) on operation and sale of OREO 2 18 ( 6 ) 43
Other 557 606 1,114 1,077
Total noninterest expense 5,576 5,645 11,391 11,246
Income Before Provision for Taxes 4,829 3,782 8,240 5,728
Provision for Taxes on Income 1,394 1,077 2,362 1,613
Net Income $ 3,435 $ 2,705 $ 5,878 $ 4,115
Net Income per common share
Basic $ 0.20 $ 0.16 $ 0.35 $ 0.24
Diluted $ 0.20 $ 0.16 $ 0.34 $ 0.24
Shares on which net income per common shares were based
Basic 17,036,364 17,010,288 17,033,401 17,010,210
Diluted 17,057,755 17,032,878 17,054,742 17,027,477
4
United Security Bancshares and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,
(In thousands except shares and EPS) 2022 2021 2022 2021
Net Income $ 3,435 $ 2,705 $ 5,878 $ 4,115
Unrealized holdings (loss) gain on debt securities ( 8,744 ) 827 ( 20,433 ) ( 247 )
Unrealized gains on unrecognized post-retirement costs 20 26 44 50
Unrealized gain (loss) on junior subordinated debentures 1,292 ( 647 ) 2,594 325
Other comprehensive (loss) income, before tax ( 7,432 ) 206 ( 17,795 ) 128
Tax benefit (provision) related to debt securities 2,585 ( 245 ) 6,040 72
Tax expense related to unrecognized post-retirement costs ( 6 ) ( 8 ) ( 13 ) ( 15 )
Tax expense (benefit) related to junior subordinated debentures ( 382 ) 192 ( 767 ) ( 95 )
Total other comprehensive (loss) income ( 5,235 ) 145 ( 12,535 ) 90
Comprehensive (loss) income $ ( 1,800 ) $ 2,850 $ ( 6,657 ) $ 4,205
5
United Security Bancshares and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
Common Stock
(In thousands except shares) Number of Shares Amount Retained Earnings Accumulated Other Comprehensive (Loss) Income Total
Balance December 31, 2020 (1) 17,009,883 $ 59,397 $ 59,138 $ ( 728 ) $ 117,807
(1) Excludes 11,924 unvested restricted shares
Other comprehensive loss ( 55 ) ( 55 )
Dividends payable ($ 0.11 per share)
( 1,876 ) ( 1,876 )
Restricted stock units released 405 —
Stock-based compensation expense 46 46
Net income 1,411 1,411
Balance March 31, 2021 (2) 17,010,288 $ 59,443 $ 58,673 $ ( 783 ) $ 117,333
(2) Excludes 41,424 unvested restricted shares
Other comprehensive income 145 145
Dividends payable ($ 0.11 per share)
( 1,870 ) ( 1,870 )
Stock-based compensation expense 53 53
Net income 2,705 2,705
Balance June 30, 2021 (3) 17,010,288 $ 59,496 $ 59,508 $ ( 638 ) $ 118,366
(3) Excludes 41,424 unvested restricted shares
Other comprehensive loss ( 30 ) ( 30 )
Dividends payable ($ 0.11 per share)
( 1,871 ) ( 1,871 )
Stock-based compensation expense 53 53
Net income 2,610 2,610
Balance September 30, 2021 (4) 17,010,288 $ 59,549 $ 60,247 $ ( 668 ) $ 119,128
(4) Excludes 41,424 unvested restricted shares
Other comprehensive loss ( 506 ) ( 506 )
Dividends payable ($ 0.11 per share)
( 1,872 ) ( 1,872 )
Restricted stock units released 17,951 —
Tax benefit from RSUs released ( 10 ) ( 10 )
Director stock grant 44 44
Stock-based compensation expense 53 53
Net income 3,370 3,370
Balance December 31, 2021 (5) 17,028,239 $ 59,636 $ 61,745 $ ( 1,174 ) $ 120,207
(5) Excludes 27,949 unvested restricted shares
Other comprehensive loss ( 7,300 ) ( 7,300 )
Dividends payable ($ 0.11 per share)
( 1,874 ) ( 1,874 )
Restricted stock units released 6,168 —
Tax benefit from RSUs released ( 1 ) ( 1 )
Director stock grant 48 48
Stock-based compensation expense 53 53
Net income 2,443 2,443
Balance March 31, 2022 (6) 17,034,407 $ 59,736 $ 62,314 $ ( 8,474 ) $ 113,576
6
(6) Excludes 26,949 unvested restricted shares
Other comprehensive loss ( 5,235 ) ( 5,235 )
Dividends payable ($ 0.11 per share)
( 1,875 ) ( 1,875 )
Restricted stock units released 6,142
Director stock grant 47 47
Stock-based compensation expense 53 53
Net income 3,435 3,435
Balance June 30, 2022 (7) 17,040,549 $ 59,836 $ 63,874 $ ( 13,709 ) $ 110,001
(7) Excludes 26,949 unvested restricted shares
7
United Security Bancshares and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30,
(In thousands) 2022 2021
Cash Flows From Operating Activities:
Net Income $ 5,878 $ 4,115
Adjustments to reconcile net income to cash provided by operating activities:
Provision for credit losses 611 1,201
Depreciation and amortization 627 702
Amortization of operating lease right-of-use assets ( 303 ) ( 260 )
Amortization of premium/discount on investment securities, net 348 481
Gain on sale of investment securities ( 30 ) —
Increase in accrued interest receivable ( 735 ) ( 436 )
Increase (decrease) in accrued interest payable 2 ( 3 )
(Decrease) increase in accounts payable and accrued liabilities ( 227 ) 34
Decrease (increase) in unearned fees and unamortized loan origination costs, net 237 ( 2,010 )
Increase in income taxes receivable ( 6 ) ( 253 )
Unrealized loss on marketable equity securities 309 60
Stock-based compensation expense 201 98
Benefit (provision) for deferred income taxes 214 ( 98 )
Increase in cash surrender value of bank-owned life insurance ( 253 ) ( 269 )
Loss on fair value option of junior subordinated debentures 1,869 656
Net (increase) decrease in other assets ( 963 ) 1,839
Net cash provided by operating activities 7,779 5,857
Cash Flows From Investing Activities:
Purchase of correspondent bank stock ( 2,428 ) ( 8 )
Purchases of available-for-sale securities ( 81,762 ) ( 97,325 )
Principal payments of available-for-sale securities 11,898 11,964
Cash proceeds from sale of investment securities 15,676 —
Net increase in loans ( 78,731 ) ( 186,215 )
Cash proceeds from sales of other real estate owned — 251
Investment in limited partnership — ( 340 )
Purchase of bank-owned life insurance — ( 920 )
Capital expenditures of premises and equipment ( 746 ) ( 469 )
Net cash used in investing activities ( 136,093 ) ( 273,062 )
Cash Flows From Financing Activities:
Net increase in demand deposits and savings accounts 13,743 136,210
Net increase in time deposits 6,347 1,581
Dividends on common stock ( 3,749 ) ( 3,747 )
Net cash provided by financing activities 16,341 134,044
Net decrease in cash and cash equivalents ( 111,973 ) ( 133,161 )
Cash and cash equivalents at beginning of period 219,219 294,069
Cash and cash equivalents at end of period $ 107,246 $ 160,908
8
United Security Bancshares and Subsidiaries - Notes to Consolidated Financial Statements - (Unaudited)
1. Organization and Summary of Significant Accounting and Reporting Policies
The consolidated financial statements include the accounts of United Security Bancshares (Company or USB) and its wholly owned subsidiary United Security Bank (Bank). Intercompany accounts and transactions have been eliminated in consolidation.

These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information on a basis consistent with the accounting policies reflected in the audited consolidated financial statements of the Company included in its 2021 Annual Report on Form 10-K. These interim consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of a normal, recurring nature) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for any other interim period or for the year as a whole.

Impact of New Financial Accounting Standards :

In June 2016, FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326). The FASB is issuing this Update to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The Update requires enhanced disclosures and judgments in estimating credit losses and also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. This original amendment was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In October 2019 FASB unanimously approved a vote to delay the effective date of this Standard to be effective for fiscal years beginning after December 15, 2022. The Company has formed a project team that is responsible for oversight of the Company’s implementation strategy for compliance with provisions of the new standard. An external provider specializing in community bank loss driver and CECL reserving model design as well as other related consulting services has been retained, and the Company continues to evaluate potential CECL modeling alternatives. As part of this process, the Company has determined potential loan pool segmentation and sub-segmentation under CECL, as well as evaluated the key economic loss drivers for each segment. The Company has begun to generate and evaluate model scenarios under CECL in tandem with its current reserving processes for interim and annual reporting. While the Company is currently unable to reasonably estimate the impact of adopting this new guidance, management expects the impact of adoption will be significantly influenced by the composition and quality of the Company’s loan portfolio as well as the economic conditions as of the date of adoption. The Company also anticipates significant changes to the processes and procedures for calculating the reserve for credit losses and continues to evaluate the potential impact on the Company's consolidated financial statements.

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This ASU provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. The ASU is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is in the process of evaluating the provisions of this ASU and its effects on our consolidated financial statements. The Company anticipates impacts to junior subordinated debt and floating rate loans tied to LIBOR.

In March 2022, FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures. This ASU provides new guidance on the treatment of troubled debt restructurings in relation to the adoption of the CECL model for the accounting for credit losses (see note above regarding ASU 2016-13). Previous accounting guidance related to troubled debt restructurings is eliminated and new disclosure requirements are adopted in regard to loan refinancing and restructurings made to borrowers experiencing financial difficulties under the assumption that the CECL model will capture credit losses related to trouble debt restructurings. New disclosures regarding gross write-offs for financing receivables by year of origination are also included in the update. This update will be incorporated along with the implementation of CECL and the Company is currently evaluating the impact this update will have on its consolidated financial statements.

9
2. Investment Securities

Following is a comparison of the amortized cost and fair value of securities available-for-sale, as of June 30, 2022 and December 31, 2021:
(in 000's) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (Carrying Amount)
June 30, 2022
Securities available-for-sale:
U.S. Government agencies $ 9,728 $ 15 $ ( 55 ) $ 9,688
U.S. Government sponsored entities & agencies collateralized by mortgage obligations 117,748 20 ( 10,133 ) 107,635
U.S. Treasury securities 20,141 — ( 609 ) 19,532
Municipal bonds 50,776 — ( 8,600 ) 42,176
Corporate bonds 34,711 2 ( 1,406 ) 33,307
Total securities available for sale $ 233,104 $ 37 $ ( 20,803 ) $ 212,338
(in 000's) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (Carrying Amount)
December 31, 2021
Securities available-for-sale:
U.S. Government agencies $ 33,206 $ 260 $ ( 90 ) $ 33,376
U.S. Government sponsored entities & agencies collateralized by mortgage obligations 64,880 184 ( 329 ) 64,735
U.S. Treasury securities 15,186 1 — 15,187
Asset-backed securities 4,092 38 — 4,130
Municipal bonds 50,872 86 ( 906 ) 50,052
Corporate bonds 11,000 429 ( 7 ) 11,422
Total securities available for sale $ 179,236 $ 998 $ ( 1,332 ) $ 178,902
The amortized cost and fair value of securities available for sale at June 30, 2022, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers have the right to call or prepay obligations with or without call or prepayment penalties. Contractual maturities on collateralized mortgage obligations cannot be anticipated due to allowed pay downs.
June 30, 2022
Amortized Cost Fair Value (Carrying Amount)
(in 000's)
Due in one year or less $ — $ —
Due after one year through five years 34,935 33,755
Due after five years through ten years 66,280 58,897
Due after ten years 14,138 12,049
Collateralized mortgage obligations 117,751 107,637
$ 233,104 $ 212,338

Proceeds and gross realized gains (losses) from sales of investment securities for the periods ended June 30, 2022 and 2021 are shown below:
Available-for-Sale Securities (in 000's) Six Months Ended June 30, 2022 Six Months Ended June 30, 2021
Proceeds from sales or calls 15,676 —
Gross realized gains from sales or calls 78 —
Gross realized losses from sales or calls ( 48 ) —
10

As market interest rates or risks associated with a security’s issuer continue to change and impact the actual or perceived values of investment securities, the Company may determine that selling these securities and using proceeds to purchase securities that better fit with the Company’s current risk profile is appropriate and beneficial to the Company. There were no other-than-temporary impairment losses for the three and six month periods ended June 30, 2022 and June 30, 2021.

At June 30, 2022, available-for-sale securities with an amortized cost of approximately $ 83.0 million (fair value of $ 74.9 million) were pledged as collateral for FHLB borrowings, securitized deposits, and public funds balances.

The following summarizes temporarily impaired investment securities:
(in 000's) Less than 12 Months 12 Months or More Total
June 30, 2022 Fair Value (Carrying Amount) Unrealized Losses Fair Value (Carrying Amount) Unrealized Losses Fair Value (Carrying Amount) Unrealized Losses
Securities available for sale:
U.S. Government agencies $ — $ — $ 7,237 $ ( 55 ) $ 7,237 $ ( 55 )
U.S. Government sponsored entities & agencies collateralized by mortgage obligations 92,965 ( 9,608 ) 3,667 ( 525 ) 96,632 ( 10,133 )
Corporate bonds 30,472 ( 1,406 ) — — 30,472 ( 1,406 )
Municipal bonds 31,650 ( 6,424 ) 10,526 ( 2,176 ) 42,176 ( 8,600 )
U.S. Treasury securities 19,531 ( 609 ) — — 19,531 ( 609 )
Total impaired securities $ 174,618 $ ( 18,047 ) $ 21,430 $ ( 2,756 ) $ 196,048 $ ( 20,803 )
December 31, 2021
Securities available for sale:
U.S. Government agencies $ — $ — $ 9,699 $ ( 90 ) $ 9,699 $ ( 90 )
U.S. Government sponsored entities & agencies collateralized by mortgage obligations 37,258 ( 329 ) 23 — 37,281 ( 329 )
Corporate bonds 5,993 ( 7 ) — — 5,993 ( 7 )
Municipal bonds 39,551 ( 896 ) 228 ( 10 ) 39,779 ( 906 )
U.S. Treasury securities 7,416 — — — 7,416 —
Total impaired securities $ 90,218 $ ( 1,232 ) $ 9,950 $ ( 100 ) $ 100,168 $ ( 1,332 )
Temporarily impaired securities at June 30, 2022, were comprised of forty-six municipal bonds, forty-six U.S. government sponsored entities and agencies collateralized by mortgage obligations securities, nine corporate bonds, four U.S. government agency securities, and three U.S. treasury securities.

The Company evaluates investment securities for other-than-temporary impairment (OTTI) at least quarterly, and more frequently when economic or market conditions warrant such an evaluation. The investment securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities classified as available-for-sale or held-to-maturity are generally evaluated for OTTI under ASC Topic 320, Investments – Debt and Equity Instruments .

The Company considers many factors in determining OTTI, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-
11
temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to the Company at the time of the evaluation.
Additionally, OTTI occurs when the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss. If the Company intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary-impairment shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the other-than-temporary-impairment shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total other-than-temporary-impairment related to the credit loss is recognized in earnings, and is determined based on the difference between the present value of cash flows expected to be collected and the current amortized cost of the security. The amount of the total other-than-temporary-impairment related to other factors shall be recognized in other comprehensive (loss) income, net of applicable taxes. The previous amortized cost basis less the other-than-temporary-impairment recognized in earnings shall become the new amortized cost basis of the investment.

Management periodically evaluates each available-for-sale investment security in an unrealized loss position to determine if the impairment is temporary or other-than-temporary.

At June 30, 2022, the decline in fair value of the securities available for sale is attributable to changes in interest rates, and not credit quality. Because the Company does not intend to sell these impaired securities, and it is more likely than not that it will not be required to sell these securities before its anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2022.

During the six months ended June 30, 2022 and 2021, the Company recognized $ 309,000 and $ 60,000 of unrealized holding losses on marketable equity securities, related to one mutual fund, in the consolidated statements of income. During the quarter ended June 30, 2022, the Company recognized $ 127,000 of unrealized holding losses related to the same mutual fund. There were no losses or gains for the quarter ended June 30, 2021.
The Company had no held-to-maturity or trading securities at June 30, 2022 or December 31, 2021.

3. Loans

Loans are comprised of the following:
(in 000's) June 30, 2022 December 31, 2021
Commercial and industrial:
Commercial and business loans $ 53,773 $ 42,194
Government program loans 208 3,310
Total commercial and industrial 53,981 45,504
Real estate mortgage:
Commercial real estate 351,148 331,050
Residential mortgages 253,269 226,926
Home improvement and home equity loans 70 80
Total real estate mortgage 604,487 558,056
Real estate construction and development 176,839 154,270
Agricultural 64,957 60,239
Installment and student loans 47,767 51,245
Total loans $ 948,031 $ 869,314
The Company's directly originated loans are predominantly in the San Joaquin Valley and the greater Oakhurst/East Madera County area, as well as the Campbell area of Santa Clara County. Although the Company purchases residential mortgage loans and participates in loans with other financial institutions, they are primarily in the state of California.

12
Commercial and industrial loans represent 5.7 % of total loans at June 30, 2022 and are generally made to support the ongoing operations of small-to-medium sized commercial businesses. Commercial and industrial loans have a high degree of industry diversification and provide working capital, financing for the purchase of manufacturing plants and equipment, or funding for growth and general expansion of businesses. A substantial portion of commercial and industrial loans are secured by accounts receivable, inventory, leases, or other collateral including real estate. The remainder are unsecured; however, extensions of credit are predicated upon the financial capacity of the borrower. Repayment of commercial loans is generally from the cash flow of the borrower. Included within the balance of Commercial and industrial loans is $ 133,000 in Paycheck Protection Program ("PPP") loans administrated by the SBA. PPP loans have a two or five year term and earn interest at 1 %. In addition to interest, the Company receives a processing fee ranging from 3 %- 5 % of the loan balance for each PPP loan. The fees are recognized as income over the contractual life of the loan. The Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program.

Real estate mortgage loans, representing 63.8 % of total loans at June 30, 2022, are typically secured by either trust deeds on primarily commercial property or by trust deeds on single family residences. Repayment of real estate mortgage loans generally comes from the cash flow of the borrower and or guarantor(s).

• Commercial real estate mortgage loans comprise the largest segment of this loan category and are available on all types of income producing and non-income producing commercial properties, including: office buildings, shopping centers; apartments and motels; owner occupied buildings; manufacturing facilities and more. Commercial real estate mortgage loans can also be used to refinance existing debt. Commercial real estate loans are made under the premise that the loan will be repaid from the borrower's business operations, rental income associated with the real property, or personal assets.

• Residential mortgage loans are provided to individuals to finance or refinance single-family residences. Residential mortgages are not a primary business line offered by the Company, and a majority are conventional mortgages that were purchased as a pool.

• Home Improvement and Home Equity loans comprise a relatively small portion of total real estate mortgage loans. Home equity loans are generally secured by junior trust deeds, but may be secured by 1 st trust deeds.

Real estate construction and development loans, representing 18.7 % of total loans at June 30, 2022, consist of loans for residential and commercial construction projects, as well as land acquisition and development, or land held for future development. Loans in this category are secured by real estate including improved and unimproved land, as well as single-family residential, multi-family residential, and commercial properties in various stages of completion. All real estate loans have established equity requirements. Repayment on construction loans generally comes from long-term mortgages with other lending institutions obtained at completion of the project or from the sale of the constructed homes to individuals.

Agricultural loans represent 6.9 % of total loans at June 30, 2022 and are generally secured by land, equipment, inventory and receivables. Repayment is from the cash flow of the borrower.

Installment loans, including student loans, represent 5.0 % of total loans at June 30, 2022 and generally consist of student loans, loans to individuals for household, family and other personal expenditures, automobiles or other consumer items. See "Note 4 - Student Loans" for specific information on the student loan portfolio.

In the normal course of business, the Company is party to financial instruments with off-balance sheet risk to meet the financing needs of its customers. At June 30, 2022 and December 31, 2021, these financial instruments include commitments to extend credit of $ 169.9 million and $ 239.1 million, respectively, and standby letters of credit of $ 641,000 at both period ends. These instruments involve elements of credit risk in excess of the amount recognized on the consolidated balance sheet. The contract amounts of these instruments reflect the extent of the involvement the Company has in off-balance sheet financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amounts of those instruments. The Company uses the same credit policies as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer, as long as there is no violation of any condition established in the contract. Substantially all of these commitments are at floating interest rates based on the Prime rate. Commitments generally have fixed expiration dates. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation. Collateral held varies but
13
includes accounts receivable, inventory, leases, property, plant and equipment, residential real estate, and income-producing properties.

Standby letters of credit are generally unsecured and are issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

Past Due Loans

The Company monitors delinquency and potential problem loans on an ongoing basis through weekly reports to the Loan Committee and monthly reports to the Board of Directors.

The following is a summary of delinquent loans at June 30, 2022 (in 000's):
June 30, 2022 Loans
30-60 Days Past Due 		Loans
61-89 Days Past Due 		Loans
90 or More
Days Past Due 		Total Past Due Loans Current Loans Total Loans Accruing
Loans 90 or
More Days Past Due
Commercial and business loans $ — $ — $ — $ — $ 53,773 $ 53,773 $ —
Government program loans — — — — 208 208 —
Total commercial and industrial — — — — 53,981 53,981 —
Commercial real estate loans — — — — 351,148 351,148 —
Residential mortgages 3,069 — — 3,069 250,200 253,269 —
Home improvement and home equity loans — — — — 70 70 —
Total real estate mortgage 3,069 — — 3,069 601,418 604,487 —
Real estate construction and development loans — — 9,021 9,021 167,818 176,839 —
Agricultural loans 174 — 161 335 64,622 64,957 —
Installment and student loans 2,328 88 109 2,525 45,242 47,767 109
Total loans $ 5,571 $ 88 $ 9,291 $ 14,950 $ 933,081 $ 948,031 $ 109

14
The following is a summary of delinquent loans at December 31, 2021 (in 000's):
December 31, 2021 Loans
30-60 Days Past Due 		Loans
61-89 Days Past Due 		Loans
90 or More
Days Past Due 		Total Past Due Loans Current Loans Total Loans Accruing
Loans 90 or
More Days Past Due
Commercial and business loans $ — $ — $ — $ — $ 42,194 $ 42,194 $ —
Government program loans — — — — 3,310 3,310 —
Total commercial and industrial — — — — 45,504 45,504 —
Commercial real estate loans — — — — 331,050 331,050 —
Residential mortgages 6,745 — — 6,745 220,181 226,926 —
Home improvement and home equity loans 12 — — 12 68 80 —
Total real estate mortgage 6,757 — — 6,757 551,299 558,056 —
Real estate construction and development loans — — 9,021 9,021 145,249 154,270 —
Agricultural loans — — 209 209 60,030 60,239 —
Installment and student loans 1,628 328 453 2,409 48,836 51,245 453
Total loans $ 8,385 $ 328 $ 9,683 $ 18,396 $ 850,918 $ 869,314 $ 453

Nonaccrual Loans

Commercial, construction and commercial real estate loans are placed on nonaccrual status under the following circumstances:

- When there is doubt regarding the full repayment of interest and principal.

- When principal and/or interest on the loan has been in default for a period of 90 -days or more, unless the asset is both well secured and in the process of collection that will result in repayment in the near future.

- When the loan is identified as having loss elements and/or is risk rated "8" Doubtful.

Other circumstances which jeopardize the ultimate collectability of the loan including certain troubled debt restructurings, identified loan impairment, and certain loans to facilitate the sale of OREO.

All loans, outside of student loans, where principal or interest is due and unpaid for 90 days or more are placed on nonaccrual and the accrual of interest for financial statement purposes is discontinued. Previously accrued but unpaid interest is reversed and charged against interest income. See Note 4 - Student Loans for specific information on the student loan portfolio.

When a loan is placed on nonaccrual status and subsequent payments of interest (and principal) are received, the interest received may be accounted for in two separate ways.

Cost recovery method : If the loan is in doubt as to full collection, the interest received in subsequent payments is diverted from interest income to a valuation reserve and treated as a reduction of principal for financial reporting purposes.

Cash basis : This method is only used if the recorded investment or total contractual amount is expected to be fully collectible, under which circumstances the subsequent payments of interest are credited to interest income as received.

Loans on non-accrual status are usually not returned to accrual status unless all delinquent principal and/or interest has been brought current, there is no identified element of loss, and current and continued satisfactory performance is expected (loss of the contractual amount not the carrying amount of the loan). Return to accrual is generally demonstrated through the timely receipt of at least six monthly payments on a loan with monthly amortization.

There were no remaining undisbursed commitments to extend credit on nonaccrual loans at June 30, 2022 or December 31, 2021.
15

The following is a summary of nonaccrual loan balances at June 30, 2022 and December 31, 2021 (in 000's).
June 30, 2022 December 31, 2021
Real estate construction and development loans 11,068 11,226
Agricultural loans 161 212
Total nonaccrual loans $ 11,229 $ 11,438

Impaired Loans

The Company applies its normal loan review procedures in making judgments regarding probable losses and loan impairment.

The Company evaluates for impairment those loans on nonaccrual status, graded doubtful, graded substandard or those that are troubled debt restructures. The primary basis for inclusion in impaired status under generally accepted accounting pronouncements is that it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement.

A loan is not considered impaired if there is merely an insignificant delay or shortfall in the amounts of payments and the Company expects to collect all amounts due, including interest accrued, at the contractual interest rate for the period of the delay.

Review for impairment does not include large groups of smaller balance homogeneous loans that are collectively evaluated to estimate the allowance for loan losses. The Company’s present allowance for loan losses methodology, including migration analysis, captures required reserves for these loans in the formula allowance.

For loans determined to be impaired, the Company evaluates impairment based upon either the fair value of underlying collateral, discounted cash flows of expected payments, or observable market price.

-     For loans secured by collateral including real estate and equipment, the fair value of the collateral less selling costs will determine the carrying value of the loan. The difference between the recorded investment in the loan and the fair value, less selling costs, determines the amount of impairment. The Company uses the measurement method based on fair value of collateral when the loan is collateral dependent and foreclosure is probable. For loans that are not considered collateral dependent, a discounted cash flow methodology is used.

-     The discounted cash flow method of measuring the impairment of a loan is used for impaired loans that are not considered to be collateral dependent. Under this method, the Company assesses both the amount and timing of cash flows expected from impaired loans. The estimated cash flows are discounted using the loan's effective interest rate. The difference between the amount of the loan on the Bank's books and the discounted cash flow amounts determines the amount of impairment to be provided. This method is used for most of the Company’s troubled debt restructurings or other impaired loans where some payment stream is being collected.

-     The observable market price method of measuring the impairment of a loan is only used by the Company when the sale of loans or a loan is in process.
The method for recognizing interest income on impaired loans is dependent on whether the loan is on nonaccrual status or is a troubled debt restructure. For income recognition, the existing nonaccrual and troubled debt restructuring policies are applied to impaired loans. Generally, except for certain troubled debt restructurings which are performing under the restructure agreement, the Company does not recognize interest income received on impaired loans, but reduces the carrying amount of the loan for financial reporting purposes.

Loans other than certain homogeneous loan portfolios are reviewed on a quarterly basis for impairment. Impaired loans are written down to estimated realizable values by the establishment of specific reserves for loans utilizing the discounted cash flow method, or charge-offs for collateral-based impaired loans, or those using observable market pricing.
16
The following is a summary of impaired loans at June 30, 2022 (in 000's).
June 30, 2022 Unpaid
Contractual
Principal Balance 		Recorded
Investment
With No Allowance (1) 		Recorded
Investment
With Allowance (1) 		Total
Recorded Investment 		Related Allowance Average
Recorded Investment (2) 		Interest Recognized (2)
Commercial and business loans $ — $ — $ — $ — $ — $ — $ —
Government program loans — — — — — — —
Total commercial and industrial — — — — — — —
Commercial real estate loans — — — — — — —
Residential mortgages 143 — 143 143 5 145 3
Home improvement and home equity loans — — — — — — —
Total real estate mortgage 143 — 143 143 5 145 3
Real estate construction and development loans 11,068 11,068 — 11,068 — 11,147 124
Agricultural loans 671 512 161 673 97 662 16
Installment and student loans — — — — — — —
Total impaired loans $ 11,882 $ 11,580 $ 304 $ 11,884 $ 102 $ 11,954 $ 143

(1) The recorded investment in loans includes accrued interest receivable of $ 2 .
(2) Information is based on six months ended June 30, 2022.

17
The following is a summary of impaired loans at December 31, 2021 (in 000's).
December 31, 2021 Unpaid
Contractual
Principal Balance 		Recorded
Investment
With No Allowance (1) 		Recorded
Investment
With Allowance (1) 		Total
Recorded Investment 		Related Allowance Average
Recorded Investment (2) 		Interest Recognized (2)
Commercial and business loans $ — $ — $ — $ — $ — $ 156 $ —
Government program loans — — — — — 110 —
Total commercial and industrial — — — — — 266 —
Commercial real estate loans — — — — — 538 —
Residential mortgages 146 — 146 146 3 377 6
Total real estate mortgage 146 — 146 146 3 915 6
Real estate construction and development loans 11,226 11,226 — 11,226 — 11,133 272
Agricultural loans 660 453 209 662 127 499 41
Total impaired loans $ 12,032 $ 11,679 $ 355 $ 12,034 $ 130 $ 12,813 $ 319

(1) The recorded investment in loans includes accrued interest receivable of $ 2 .
(2) Information is based on the year ended December 31, 2021.

In most cases, the Company uses the cash basis method of income recognition for impaired loans. In the case of certain troubled debt restructurings for which the loan is performing under the current contractual terms for a reasonable period of time, income is recognized under the accrual method.

The average recorded investment in impaired loans for the quarters ended June 30, 2022 and 2021 was $ 11,914,000 and $ 12,452,000 , respectively. Interest income recognized on impaired loans for the quarters ended June 30, 2022 and 2021 was approximately $ 78,000 for each quarter. For impaired nonaccrual loans, interest income recognized under a cash-basis method of accounting was approximately $ 65,000 and $ 87,000 for the quarters ended June 30, 2022 and 2021, respectively.

The average recorded investment in impaired loans for the six months ended June 30, 2022 and 2021 was $ 11,954,000 and $ 13,427,000 , respectively. Interest income recognized on impaired loans for the six months ended June 30, 2022 and 2021 was approximately $ 143,000 and $ 172,000 , respectively. For impaired nonaccrual loans, interest income recognized under a cash-basis method of accounting was approximately $ 129,000 and $ 156,000 for the six months ended June 30, 2022 and 2021, respectively.

Troubled Debt Restructurings

In certain circumstances, when the Company grants a concession to a borrower as part of a loan restructuring, the restructuring is accounted for as a troubled debt restructuring (TDR). TDRs are reported as a component of impaired loans.

A TDR is a type of restructuring in which the Company, for economic or legal reasons related to the borrower's financial difficulties, grants a concession (either imposed by court order, law, or agreement between the borrower and the Bank) to the borrower that it would not otherwise consider. Although the restructuring may take different forms, the Company's objective is to maximize recovery of its investment by granting relief to the borrower.

A TDR may include, but is not limited to, one or more of the following:

- A transfer from the borrower to the Company of receivables from third parties, real estate, other assets, or an equity interest in the borrower is granted to fully or partially satisfy the loan.
18

- A modification of terms of a debt such as one or a combination of:

◦ The reduction (absolute or contingent) of the stated interest rate.
◦ The extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk.
◦ The reduction (absolute or contingent) of the face amount or maturity amount of debt as stated in the instrument or agreement.
◦ The reduction (absolute or contingent) of accrued interest.
For a restructured loan to return to accrual status there needs to be, among other factors, at least 6 months successful payment history and continued satisfactory performance is expected. To this end, the Company typically performs a financial analysis of the credit to determine whether the borrower has the ability to continue to meet payments over the remaining life of the loan. This includes, but is not limited to, a review of financial statements and cash flow analysis of the borrower. Only after determination that the borrower has the ability to perform under the terms of the loans, will the restructured credit be considered for accrual status. Although the Company does not have a policy which specifically addresses when a loan may be removed from TDR classification, as a matter of practice, loans classified as TDRs generally remain classified as such until the loan either reaches maturity, a conforming loan is renewed at market terms, or its outstanding balance is paid off.

There were no TDR additions or defaults for the quarters or years ended June 30, 2022 and June 30, 2021.

The Company makes various types of concessions when structuring TDRs including rate discounts, payment extensions, and other-than-temporary forbearance. At June 30, 2022, the Company had 4 restructured loans totaling $ 2.4 million as compared to 5 restructured loans totaling $ 2.6 million at December 31, 2021.

The following tables summarize TDR activity by loan category for the quarters ended June 30, 2022 and June 30, 2021 (in 000's).
19
Three Months Ended
June 30, 2022 		Commercial and Industrial Commercial Real Estate Residential Mortgages Home Improvement and Home Equity Real Estate Construction Development Agricultural Installment
and Student Loans 		Total
Beginning balance $ — $ — $ 144 $ — $ 2,126 $ 183 $ — $ 2,453
Additions — — — — — — — —
Principal reductions — — ( 1 ) — ( 79 ) ( 22 ) — ( 102 )
Charge-offs — — — — — — — —
Ending balance $ — $ — $ 143 $ — $ 2,047 $ 161 $ — $ 2,351
Allowance for loan loss $ — $ — $ 5 $ — $ — $ 97 $ — $ 102
Defaults $ — $ — $ — $ — $ — $ — $ — $ —

Three Months Ended
June 30, 2021 		Commercial and Industrial Commercial Real Estate Residential Mortgages Home Improvement and Home Equity Real Estate Construction Development Agricultural Installment
and Student Loans 		Total
Beginning balance $ — $ — $ 362 $ — $ 2,401 $ 448 $ — $ 3,211
Additions — — — — — — — —
Principal reductions — — ( 3 ) — ( 66 ) ( 69 ) — ( 138 )
Charge-offs — — — — — — — —
Ending balance $ — $ — $ 359 $ — $ 2,335 $ 379 $ — $ 3,073
Allowance for loan loss $ — $ — $ 12 $ — $ — $ 161 $ — $ 173
Defaults $ — $ — $ — $ — $ — $ — $ — $ —

Six Months Ended
June 30, 2022 		Commercial and Industrial Commercial Real Estate Residential Mortgages Home Improvement and Home Equity Real Estate Construction Development Agricultural Installment
and Student Loans 		Total
Beginning balance $ — $ — $ 146 $ — $ 2,206 $ 242 $ — $ 2,594
Additions — — — — — — — —
Principal reductions — — ( 3 ) — ( 159 ) ( 81 ) — ( 243 )
Charge-offs — — — — — — — —
Ending balance $ — $ — $ 143 $ — $ 2,047 $ 161 $ — $ 2,351
Allowance for loan loss $ — $ — $ 5 $ — $ — $ 97 $ — $ 102
Defaults $ — $ — $ — $ — $ — $ — $ — $ —

20
Six Months Ended
June 30, 2021 		Commercial and Industrial Commercial Real Estate Residential Mortgages Home Improvement and Home Equity Real Estate Construction Development Agricultural Installment
and Student Loans 		Total
Beginning balance $ — $ — $ 365 $ — $ 2,452 $ 609 $ — $ 3,426
Additions — — — — — — — —
Principal reductions — — ( 6 ) — ( 117 ) ( 230 ) — ( 353 )
Charge-offs — — — — — — — —
Ending balance $ — $ — $ 359 $ — $ 2,335 $ 379 $ — $ 3,073
Allowance for loan loss $ — $ — $ 12 $ — $ — $ 161 $ — $ 173
Defaults $ — $ — $ — $ — $ — $ — $ — $ —

Credit Quality Indicators

As part of its credit monitoring program, the Company utilizes a risk rating system which quantifies the risk the Company estimates it has assumed during the life of a loan. The system rates the strength of the borrower and the facility or transaction, and is designed to provide a program for risk management and early detection of problems.

For each new credit approval, credit extension, renewal, or modification of existing credit facilities, the Company assigns risk ratings utilizing the rating scale identified in this policy. In addition, on an on-going basis, loans and credit facilities are reviewed for internal and external influences impacting the credit facility that would warrant a change in the risk rating. Each credit facility is to be given a risk rating that takes into account factors that materially affect credit quality.

When assigning risk ratings, the Company evaluates two risk rating approaches, a facility rating and a borrower rating as follows:

Facility Rating:

The facility rating is determined by the analysis of positive and negative factors that may indicate that the quality of a particular loan or credit arrangement requires that it be rated differently from the risk rating assigned to the borrower. The Company assesses the risk impact of these factors:

Collateral - The rating may be affected by the type and quality of the collateral, the degree of coverage, the economic life of the collateral, liquidation value and the Company's ability to dispose of the collateral.

Guarantees - The value of third party support arrangements varies widely. Unconditional guaranties from persons with demonstrable ability to perform are more substantial than that of closely related persons to the borrower who offer only modest support.

Unusual Terms - Credit may be extended on terms that subject the Company to a higher level of risk than indicated in the rating of the borrower.

Borrower Rating:

The borrower rating is a measure of loss possibility based on the historical, current and anticipated financial characteristics of the borrower in the current risk environment. To determine the rating, the Company considers at least the following factors:

-    Quality of management
-    Liquidity
-    Leverage/capitalization
-    Profit margins/earnings trend
-    Adequacy of financial records
-    Alternative funding sources
-    Geographic risk
21
-    Industry risk
-    Cash flow risk
-    Accounting practices
-    Asset protection
-    Extraordinary risks

The Company assigns risk ratings to loans other than consumer loans and other homogeneous loan pools based on the following scale. The risk ratings are used when determining borrower ratings as well as facility ratings. When the borrower rating and the facility ratings differ, the lowest rating applied is:

- Grades 1 and 2 – These grades include loans which are given to high quality borrowers with high credit quality and sound financial strength. Key financial ratios are generally above industry averages and the borrower’s strong earnings history or net worth. These may be secured by deposit accounts or high-grade investment securities.

- Grade 3 – This grade includes loans to borrowers with solid credit quality with minimal risk. The borrower’s balance sheet and financial ratios are generally in line with industry averages, and the borrower has historically demonstrated the ability to manage economic adversity. Real estate and asset-based loans assigned this risk rating must have characteristics, which place them well above the minimum underwriting requirements for those departments. Asset-based borrowers assigned this rating must exhibit extremely favorable leverage and cash flow characteristics, and consistently demonstrate a high level of unused borrowing capacity.

- Grades 4 and 5 – These include “pass” grade loans to borrowers of acceptable credit quality and risk. The borrower’s balance sheet and financial ratios may be below industry averages, but above the lowest industry quartile. Leverage is above and liquidity is below industry averages. Inadequacies evident in financial performance and/or management sufficiency are offset by readily available features of support, such as adequate collateral, or good guarantors having the liquid assets and/or cash flow capacity to repay the debt. The borrower may have recognized a loss over three or four years , however recent earnings trends, while perhaps somewhat cyclical, are improving and cash flows are adequate to cover debt service and fixed obligations. Real estate and asset-borrowers fully comply with all underwriting standards and are performing according to projections would be assigned this rating. These also include grade 5 loans which are “leveraged” or on management’s “watch list.” While still considered pass loans (loans given a grade 5), the borrower’s financial condition, cash flow or operations evidence more than average risk and short term weaknesses, these loans warrant a higher than average level of monitoring, supervision and attention from the Company, but do not reflect credit weakness trends that weaken or inadequately protect the Company’s credit position. Loans with a grade rating of 5 are not normally acceptable as new credits unless they are adequately secured or carry substantial endorser/guarantors.

- Grade 6 – This grade includes “special mention” loans which are loans that are currently protected but are potentially weak. This generally is an interim grade classification and these loans will usually be upgraded to an "acceptable" rating or downgraded to a "substandard" rating within a reasonable time period. Weaknesses in special mention loans may, if not checked or corrected, weaken the asset or inadequately protect the Company’s credit position at some future date. Special mention loans are often loans with weaknesses inherent in the loan origination and loan servicing, and may have some technical deficiencies. The main theme in special mention credits is the distinct probability that the classification will deteriorate to a more adverse class if the noted deficiencies are not addressed by the loan officer or loan management.

- Grade 7 – This grade includes “substandard” loans which are inadequately supported by the current sound net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that may impair the regular liquidation of the debt. When a loan has been downgraded to "substandard," there exists a distinct possibility that the Company will sustain a loss if the deficiencies are not corrected. Substandard loans may also include impaired loans.

- Grade 8 – This grade includes “doubtful” loans which exhibit the same characteristics as the "substandard" loans. Additionally, loan weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include a proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans.

22
- Grade 9 – This grade includes loans classified “loss” which are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off the asset even though partial recovery may be achieved in the future.
The Company did not carry any loans graded as loss at June 30, 2022 or December 31, 2021.

The following tables summarize the credit risk ratings for commercial, construction, and other non-consumer related loans for June 30, 2022 and December 31, 2021:
June 30, 2022 Commercial and Industrial Commercial Real Estate Real Estate Construction and Development Agricultural Total
(in 000's)
Grades 1 and 2 $ 389 $ — $ — $ — $ 389
Grade 3 — — — — —
Grades 4 and 5 – pass 53,592 316,449 165,771 60,856 596,668
Grade 6 – special mention — 34,699 — 1,798 36,497
Grade 7 – substandard — — 11,068 2,303 13,371
Grade 8 – doubtful — — — — —
Total $ 53,981 $ 351,148 $ 176,839 $ 64,957 $ 646,925
December 31, 2021 Commercial and Industrial Commercial Real Estate Real Estate Construction and Development Agricultural Total
(in 000's)
Grades 1 and 2 $ 3,447 $ — $ — $ — $ 3,447
Grade 3 — 92 — — 92
Grades 4 and 5 – pass 42,054 301,866 143,044 46,739 533,703
Grade 6 – special mention — 29,092 — 11,197 40,289
Grade 7 – substandard 3 — 11,226 2,303 13,532
Grade 8 – doubtful — — — — —
Total $ 45,504 $ 331,050 $ 154,270 $ 60,239 $ 591,063
The Company follows consistent underwriting standards outlined in its loan policy for consumer and other homogeneous loans but, does not specifically assign a risk rating when these loans are originated. Consumer loans are monitored for credit risk and are considered “pass” loans until some issue or event requires that the credit be downgraded to special mention or worse. Within the student loan portfolio, the Company does not grade these loans individually, but monitors credit quality indicators such as delinquency and program defined status codes such as forbearance.

The following tables summarize the credit risk ratings for consumer related loans and other homogeneous loans for June 30, 2022 and December 31, 2021:
June 30, 2022 December 31, 2021
Residential Mortgages Home
Improvement and Home Equity 		Installment and Student Loans Total Residential Mortgages Home
Improvement and Home Equity 		Installment and Student Loans Total
(in 000's)
Not graded $ 237,567 $ 60 $ 47,442 $ 285,069 $ 211,622 $ 68 $ 50,421 $ 262,111
Pass 15,702 10 216 15,928 15,304 12 371 15,687
Special mention — — — — — — — —
Substandard — — 109 109 — — 453 453
Doubtful — — — — — — — —
Total $ 253,269 $ 70 $ 47,767 $ 301,106 $ 226,926 $ 80 $ 51,245 $ 278,251

23
Allowance for Loan Losses

The Company analyzes risk characteristics inherent in each loan portfolio segment as part of the quarterly review of the adequacy of the allowance for loan losses. The following summarizes some of the key risk characteristics for the ten segments of the loan portfolio (Consumer loans include three segments):

Commercial and industrial loans – Commercial loans are subject to the effects of economic cycles and tend to exhibit increased risk as economic conditions deteriorate, or if the economic downturn is prolonged. The Company considers this segment to be one of higher risk given the size of individual loans and the balances in the overall portfolio.
Government program loans – This is a relatively a small part of the Company’s loan portfolio, but has historically had a high percentage of loans that have migrated from pass to substandard given their vulnerability to economic cycles.
Commercial real estate loans – This segment is considered to have more risk in part because of the vulnerability of commercial businesses to economic cycles as well as the exposure to fluctuations in real estate prices because most of these loans are secured by real estate. Losses in this segment have however been historically low because most of the loans are real estate secured, and the bank maintains appropriate loan-to-value ratios.
Residential mortgages – This segment is considered to have low risk factors both from the Company and peer statistics. These loans are secured by first deeds of trust.
Home improvement and home equity loans – Because of their junior lien position, these loans have an inherently higher risk level.
Real estate construction and development loans –This segment of loans is considered to have a higher risk profile due to construction and market value issues in conjunction with normal credit risks.
Agricultural loans – This segment is considered to have risks associated with weather, insects, and marketing issues. In addition, concentrations in certain crops or certain agricultural areas can increase risk. Additionally, from time to time, California experiences severe droughts, which can significantly harm the business of customers and the credit quality of the loans to those customers. Water resources and related issues affecting customers are closely monitored. Signs of deterioration within the loan portfolio are also monitored in an effort to manage credit quality and work with borrowers where possible to mitigate any losses.

Installment and student loans (Includes consumer loans, student loans, overdrafts, and overdraft protection lines) – This segment is higher risk because many of the loans are unsecured. Additionally, in the case of student loans, there are increased risks associated with liquidity as there is a significant time lag between funding of a student loan and eventual repayment.

COVID-19 – The Company has engaged in more frequent communication with borrowers to better understand their situation and the challenges faced as a result of COVID-19 and its variants. Outside of the student loan portfolio, the Company has not experienced any direct charge-offs related to COVID-19. The allowance for credit loss calculation, and the resulting provision for credit losses, are impacted by changes in economic conditions. Although economic conditions have improved since the pandemic was declared in March 2020, the credit risk in the loan portfolio remains heightened.

The following summarizes the activity in the allowance for credit losses by loan category for the three months ended June 30, 2022 and 2021 (in 000's)

24
Three Months Ended Commercial and Industrial Real Estate Mortgage Real Estate Construction Development Agricultural Installment and Student Loans Unallocated Total
June 30, 2022
Beginning balance $ 559 $ 1,295 $ 2,897 $ 957 $ 2,632 $ 936 $ 9,276
Provision (recapture of provision) for credit losses 277 1 631 143 ( 1 ) ( 445 ) 606
Charge-offs — — — — ( 6 ) — ( 6 )
Recoveries — 2 — 20 9 — 31
Net recoveries (charge-offs) — 2 — 20 3 — 25
Ending balance $ 836 $ 1,298 $ 3,528 $ 1,120 $ 2,634 $ 491 $ 9,907
Period-end amount allocated to:
Loans individually evaluated for impairment — 5 — 97 — — 102
Loans collectively evaluated for impairment 836 1,293 3,528 1,023 2,634 491 9,805
Ending balance $ 836 $ 1,298 $ 3,528 $ 1,120 $ 2,634 $ 491 $ 9,907

Three Months Ended Commercial and Industrial Real Estate Mortgage Real Estate Construction Development Agricultural Installment and Student Loans Unallocated Total
June 30, 2021
Beginning balance $ 528 $ 551 $ 3,830 $ 665 $ 2,724 $ 251 $ 8,549
Provision (recapture of provision) for credit losses 100 531 ( 617 ) 441 249 122 826
Charge-offs — — — — ( 188 ) — ( 188 )
Recoveries 4 5 — — 4 — 13
Net recoveries (charge-offs) 4 5 — — ( 184 ) — ( 175 )
Ending balance $ 632 $ 1,087 $ 3,213 $ 1,106 $ 2,789 $ 373 $ 9,200
Period-end amount allocated to:
Loans individually evaluated for impairment — 12 — 161 — — 173
Loans collectively evaluated for impairment 632 1,075 3,213 945 2,789 373 9,027
Ending balance $ 632 $ 1,087 $ 3,213 $ 1,106 $ 2,789 $ 373 $ 9,200

Six Months Ended Commercial and Industrial Real Estate Mortgage Real Estate Construction Development Agricultural Installment and Student Loans Unallocated Total
June 30, 2022
Beginning balance $ 597 $ 1,174 $ 2,840 $ 1,233 $ 2,720 $ 769 $ 9,333
Provision (recapture of provision) for credit losses ( 29 ) 118 688 ( 149 ) 261 ( 278 ) 611
Charge-offs — — — — ( 364 ) — ( 364 )
Recoveries 268 6 — 36 17 — 327
Net recoveries (charge-offs) 268 6 — 36 ( 347 ) — ( 37 )
Ending balance $ 836 $ 1,298 $ 3,528 $ 1,120 $ 2,634 $ 491 $ 9,907
Period-end amount allocated to:
Loans individually evaluated for impairment — 5 — 97 — — 102
Loans collectively evaluated for impairment 836 1,293 3,528 1,023 2,634 491 9,805
Ending balance $ 836 $ 1,298 $ 3,528 $ 1,120 $ 2,634 $ 491 $ 9,907

25
Six Months Ended Commercial and Industrial Real Estate Mortgage Real Estate Construction Development Agricultural Installment and Student Loans Unallocated Total
June 30, 2021
Beginning balance $ 625 $ 575 $ 3,722 $ 711 $ 2,614 $ 275 $ 8,522
Provision (recapture of provision) for credit losses ( 32 ) 501 ( 509 ) 395 748 98 1,201
Charge-offs — — — — ( 580 ) — ( 580 )
Recoveries 39 11 — — 7 — 57
Net (charge-offs) recoveries 39 11 — — ( 573 ) — ( 523 )
Ending balance $ 632 $ 1,087 $ 3,213 $ 1,106 $ 2,789 $ 373 $ 9,200
Period-end amount allocated to:
Loans individually evaluated for impairment — 12 — 161 — — 173
Loans collectively evaluated for impairment 632 1,075 3,213 945 2,789 373 9,027
Ending balance $ 632 $ 1,087 $ 3,213 $ 1,106 $ 2,789 $ 373 $ 9,200

The following summarizes information with respect to the loan balances at June 30, 2022 and 2021.
June 30, 2022 June 30, 2021
Loans
Individually
Evaluated for Impairment 		Loans
Collectively
Evaluated for Impairment 		Total Loans Loans
Individually
Evaluated for Impairment 		Loans
Collectively
Evaluated for Impairment 		Total Loans
(in 000's)
Commercial and business loans $ — $ 53,773 $ 53,773 $ — $ 43,676 $ 43,676
Government program loans — 208 208 155 12,253 12,408
Total commercial and industrial — 53,981 53,981 155 55,929 56,084
Commercial real estate loans — 351,148 351,148 — 333,288 333,288
Residential mortgage loans 143 253,126 253,269 360 176,141 176,501
Home improvement and home equity loans — 70 70 — 96 96
Total real estate mortgage 143 604,344 604,487 360 509,525 509,885
Real estate construction and development loans 11,068 165,771 176,839 10,940 154,486 165,426
Agricultural loans 673 64,284 64,957 379 53,139 53,518
Installment and student loans — 47,767 47,767 — 56,190 56,190
Total loans $ 11,884 $ 936,147 $ 948,031 $ 11,834 $ 829,269 $ 841,103
4. Student Loans

Included in the installment and student loans segment of the loan portfolio are $ 44.9 million and $ 48.5 million in student loans at June 30, 2022 and December 31, 2021, respectively, made to medical and pharmacy school students. Upon graduation the loan is automatically placed on deferment for 6 months. This may be extended up to 48 months for graduates enrolling in Internship, Medical Residency or Fellowship programs. As approved, the student may receive additional deferment for hardship or administrative reasons in the form of forbearance for a maximum of 36 months throughout the life of the loan. Accrued interest on student loans that are in school or grace totaled $ 2,137,000 at June 30, 2022 and $ 2,338,000 at December 31, 2021. At June 30, 2022 there were 870 loans within repayment, deferment, and forbearance which represented $ 20.6 million, $ 8.5 million, and $ 9.8 million, respectively. At December 31, 2021, there were 901 loans within repayment, deferment, and forbearance which represented $ 23.8 million, $ 9.0 million and $ 8.2 million, respectively. As of June 30, 2022 and December 31, 2021, the reserve against the student loan portfolio was $ 2,561,000 and $ 2,647,000 , respectively. There were no TDRs within the portfolio as of June 30, 2022 or December 31, 2021. At June 30, 2022, there were $ 109,000 in student
26
loans in the substandard category. At December 31, 2021, there were $ 453,000 in student loans included in the substandard category. There were no student loans in the doubtful or loss categories at June 30, 2022 and December 31, 2021. There were no new student loans originated in 2021 and 2022.

ZuntaFi is the third-party servicer for the student loan portfolio. ZuntaFi's services include application administration, processing, approval, documenting, funding, and collection. They also provide borrower file custodial responsibilities. Except in cases where applicants/loans do not meet program requirements, or extreme delinquency, ZuntaFi provides complete program management. ZuntaFi is paid a monthly servicing fee based on the outstanding principal balance. The servicing fee is presented as part of professional fees within noninterest expense.

The following tables summarize the credit quality indicators for outstanding student loans as of June 30, 2022 and December 31, 2021 (in 000's, except for number of borrowers):
June 30, 2022 December 31, 2021
Number of Loans Amount Accrued Interest Number of Loans Amount Accrued Interest
School 127 $ 3,652 $ 1,466 185 $ 6,555 $ 2,021
Grace 54 2,376 671 28 912 317
Repayment 468 20,572 665 500 23,834 715
Deferment 201 8,537 1,149 224 8,984 508
Forbearance 201 9,808 854 177 8,172 1,077
Total 1,051 $ 44,945 $ 4,805 1,114 $ 48,457 $ 4,638

School - The time in which the borrower is still actively in school at least half time. No payments are expected during this stage, though the borrower may begin immediate payments.

Grace - A six month period of time granted to the borrower immediately upon graduation, or if deemed no longer an active student. Interest continues to accrue. Upon completion of the six month grace period the loan is transferred to repayment status. Additionally, if applicable, this status may represent a borrower activated to military duty while in their in-school period, they will be allowed to return to that status once their active duty has expired. The borrower must return to an at least half time status within six months of the active duty end date in order to return to an in-school status.

Repayment - The time in which the borrower is no longer attending school at least half-time, and has not received an approved grace, deferment, or forbearance. Regular payment is expected from these borrowers under an allotted payment plan.

Deferment - May be granted up to 48 months for borrowers who have begun the repayment period on their loans but are (1) actively enrolled in an eligible school at least half time, or (2) are actively enrolled in an approved and verifiable medical residency, internship, or fellowship program.

Forbearance - The period of time during which the borrower may postpone making principal and interest payments, which may be granted for either hardship or administrative reasons. Interest will continue to accrue on loans during periods of authorized forbearance. If the borrower is delinquent at the time the forbearance is granted, the delinquency will be covered by the forbearance and all accrued and unpaid interest from the date of delinquency or if none, from the date of beginning of the forbearance period, will be capitalized at the end of each forbearance period. The term of the loan will not change and payments may be increased to allow the loan to pay off in the required time frame. A forbearance that results in only an insignificant delay in payment, is not considered a concessionary change in terms, provided the borrower affirms the obligation. Forbearance is not an uncommon status designation, this designation is standard industry practice, and is consistent with the succession of students migrating to employed medical professionals. However, additional risk is associated with this designation. In addition to forbearance granted for hardship or administrative reasons, the Company provided up to 18 months of additional disaster forbearance to those borrowers impacted by Hurricane Maria in 2017 and additional forbearance related to COVID-19.

Due to the COVID-19 pandemic, certain Federally guaranteed student loans are provided forbearance in the form of 0% interest and no payments from March 2020 through August 31, 2022. While loans serviced by ZuntaFi are not Federally guaranteed, ZuntaFi in keeping with the spirit of the Federal programs, offers a similar pandemic forbearance. Some student loans are granted additional non-program, no-pay forbearance during this same time frame, up to 90 days for each occurrence when requested, through August 31, 2022. Each request must be justified with the borrower, stating the financial hardship, that it was induced by the pandemic, and the borrower must also reaffirm the debt as part of the documentation for each forbearance
27
period. The loans continue to accrue interest at the note rate under the program requirements. At this time, the expectation is the Pandemic Forbearance will no longer be offered as of August 31, 2022, at which time loans will resume under Repayment status, or be placed in other appropriate status, including program Forbearance or Deferment as qualified and as available.

Student Loan Aging

Student loans are generally charged off at the end of the quarter during which an account becomes 120 days contractually past due. Accrued but unpaid interest related to charged off student loans is reversed and charged against interest income. For the six months ended June 30, 2022, $ 14,000 in accrued interest receivable was reversed, due to charge-offs of $ 353,000 within the student loan portfolio. There were no charge-offs or reversal of accrued interest receivable during the quarter ended June 30, 2022. For the three and six months ended June 30, 2021, $ 21,000 and $ 50,000 in accrued interest receivable was reversed, due to charge-offs of $ 188,000 and $ 568,000 within the student loan portfolio.

The following tables summarize the student loan aging for loans in repayment and forbearance as of June 30, 2022 and December 31, 2021 (in 000's, except for number of borrowers):
June 30, 2022 December 31, 2021
Number of Borrowers Amount Number of Borrowers Amount
Current or less than 31 days 265 $ 27,856 272 $ 29,596
31 - 60 days 19 2,328 10 1,628
61 - 90 days 1 88 3 328
91 - 120 days 1 109 5 453
Total 286 $ 30,381 290 $ 32,005
5. Deposits

Deposits include the following:
(in 000's) June 30, 2022 December 31, 2021
Noninterest-bearing deposits $ 473,013 $ 476,749
Interest-bearing deposits:
NOW and money market accounts 541,166 529,841
Savings accounts 120,082 113,930
Time deposits:
Under $250,000 52,762 46,631
$250,000 and over 21,171 20,955
Total interest-bearing deposits 735,181 711,357
Total deposits $ 1,208,194 $ 1,188,106
6. Short-term Borrowings/Other Borrowings

At June 30, 2022, the Company had collateralized lines of credit with the Federal Reserve Bank of San Francisco totaling $ 412.9 million, as well as Federal Home Loan Bank (FHLB) lines of credit totaling $ 2.4 million. At June 30, 2022, the Company had uncollateralized lines of credit with PNC Bank of $ 40 million, with Pacific Coast Bankers Bank (PCBB) totaling $ 50 million, $ 20 million with Zions First National Bank and $ 10 million with Union Bank. All lines of credit are on an “as available” basis and can be revoked by the grantor at any time. These lines of credit have interest rates that are generally tied to the Federal Funds rate or are indexed to short-term U.S. Treasury rates or LIBOR. FHLB advances are collateralized by the Company’s stock in the FHLB, investment securities, and certain qualifying mortgage loans.

As of June 30, 2022, $ 2.6 million in investment securities at FHLB were pledged as collateral for FHLB advances. Additionally, $ 538.9 million in secured and unsecured loans were pledged at June 30, 2022, as collateral for borrowing lines with the Federal Reserve Bank. At June 30, 2022, the Company had no outstanding borrowings.
At December 31, 2021, the Company had collateralized lines of credit with the Federal Reserve Bank of San Francisco totaling $ 320.6 million, as well as Federal Home Loan Bank (“FHLB”) lines of credit totaling $ 3.1 million. At December 31, 2021, the
28
Company had uncollateralized lines of credit with PNC of $ 40 million, with Pacific Coast Bankers Bank ("PCBB") totaling $ 50 million, $ 20 million with Zions First National Bank, and $ 10 million with Union Bank. All lines of credit are on an “as available” basis and can be revoked by the grantor at any time. These lines of credit generally have interest rates tied to the Federal Funds rate or are indexed to short-term U.S. Treasury rates or LIBOR. FHLB advances are collateralized by the Company’s stock in the FHLB, investment securities, and certain qualifying mortgage loans.

As of December 31, 2021, $ 3.4 million in investment securities at FHLB were pledged as collateral for FHLB advances. Additionally, $ 490.5 million in secured and unsecured loans were pledged at December 31, 2021, as collateral for used and unused borrowing lines with the Federal Reserve Bank. At December 31, 2021, the Company had no outstanding borrowings.
29
7. Leases

The Company leases land and premises for its branch banking offices, administration facilities, and ATMs. The initial terms of these leases expire at various dates through 2032. Under the provisions of most of these leases, the Company has the option to extend the leases beyond their original terms at rental rates adjusted for changes reported in certain economic indices or as reflected by market conditions. Lease terms may include options to extend or terminate the lease when it is reasonably certain the Company will exercise that option. As of June 30, 2022, the Company had 15 operating leases and no financing leases.

The components of lease expense were as follows:
Three Months Ended Six Months Ended
(in 000's) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Operating lease expense $ 184 $ 168 $ 368 $ 336
Variable lease expense — 77 — 157
Total $ 184 $ 245 $ 368 $ 493
Supplemental balance sheet information related to leases was as follows:
(in 000's) June 30, 2022
Operating cash flows from operating leases $ 368
Weighted-average remaining lease term in years for operating leases 4.73
Weighted-average discount rate for operating leases 5.13 %
Maturities of lease liabilities were as follows:
(in 000's) June 30, 2022
2023 $ 743
2024 702
2025 486
2026 268
2027 132
Thereafter 374
Total undiscounted cash flows 2,705
Less: present value discount ( 304 )
Present value of net future minimum lease payments $ 2,401

8. Supplemental Cash Flow Disclosures
Six months ended June 30,
(in 000's) 2022 2021
Cash paid during the period for:
Interest $ 1,135 $ 990
Income taxes 2,920 2,060
Noncash investing activities:
Unrealized gain on unrecognized post retirement costs 44 50
Unrealized loss on available for sale securities ( 20,433 ) ( 247 )
Unrealized gain on junior subordinated debentures 2,594 325
Cash dividend declared 1,874 1,871
9. Dividends on Common Stock

On June 28, 2022, the Company’s Board of Directors declared a cash dividend of $ 0.11 per share on the Company's common stock. The dividend was payable on July 22, 2022, to shareholders of record as of July 8, 2022. Approximately $ 1,874,000 was
30
transferred from retained earnings to dividends payable as of June 30, 2022 to allow for distribution of the dividend to shareholders.

On March 22, 2022, the Company’s Board of Directors declared a cash dividend of $ 0.11 per share on the Company's common stock. The dividend was payable on April 18, 2022, to shareholders of record as of April 6, 2022. Approximately $ 1,874,000 was transferred from retained earnings to dividends payable to allow for distribution of the dividend to shareholders.

The Company has a program to repurchase up to $ 3 million of its outstanding common stock. The timing of the purchases will depend on certain factors, including but not limited to, market conditions and prices, available funds, and alternative uses of capital. The stock repurchase program may be carried out through open-market purchases, block trades, or negotiated private transactions. At this time, no shares have been repurchased.

10. Net Income per Common Share

The following table provides a reconciliation of the numerator and the denominator of the basic EPS computation with the numerator and the denominator of the diluted EPS computation:
Three months ended June 30, Six months ended June 30,
2022 2021 2022 2021
Net income (000's, except per share amounts) $ 3,435 $ 2,705 $ 5,878 $ 4,115
Weighted average shares issued 17,036,364 17,010,288 17,033,401 17,010,210
Add: dilutive effect of stock options 21,391 22,590 21,341 17,267
Weighted average shares outstanding adjusted for potential dilution 17,057,755 17,032,878 17,054,742 17,027,477
Basic earnings per share $ 0.20 $ 0.16 $ 0.35 $ 0.24
Diluted earnings per share $ 0.20 $ 0.16 $ 0.34 $ 0.24
Anti-dilutive stock options excluded from earnings per share calculation 97,000 71,000 97,000 101,000

11. Taxes on Income
The Company periodically reviews its tax positions under the accounting standards related to uncertainty in income taxes, which defines the criteria that an individual tax position would have to meet for some or all of the income tax benefit to be recognized in a taxable entity’s financial statements. Under the guidelines, an entity should recognize the financial statement benefit of a tax position if it determines that it is more likely than not that the position will be sustained on examination. The term “more likely than not” means a likelihood of more than 50 percent. In assessing whether the more-likely-than-not criterion is met, the entity should assume that the tax position will be reviewed by the applicable taxing authority and all available information is known to the taxing authority.

The Company periodically evaluates its deferred tax assets to determine whether a valuation allowance is required based upon a determination that some or all of the deferred assets may not be ultimately realized. At June 30, 2022 and December 31, 2021, the Company had no recorded valuation allowance. The Company is no longer subject to examinations by taxing authorities for years before 2018 and 2017 for Federal and California jurisdictions, respectively.

The Company's policy is to recognize any interest or penalties related to uncertain tax positions in income tax expense. Interest and penalties recognized on uncertain tax positions during the periods ended June 30, 2022 and 2021 were insignificant.

The Company reported a provision for income taxes of $ 2,362,000 for the six months ended June 30, 2022 as compared to the $ 1,613,000 provision reported in the comparable period of 2021. The effective tax rate was 28.67 % for the six months ended June 30, 2022 as compared to 28.16 % for the comparable period of 2021.

31
12. Junior Subordinated Debt/Trust Preferred Securities
The contractual principal balance of the Company's debentures relating to its trust preferred securities is $ 12.0 million as of June 30, 2022 and December 31, 2021. The Company may redeem the junior subordinated debentures at any time at par.

The Company accounts for its junior subordinated debt issued under USB Capital Trust II at fair value. The Company believes the election of fair value accounting for the junior subordinated debentures better reflects the true economic value of the debt instrument on the consolidated balance sheet. As of June 30, 2022, the rate paid on the junior subordinated debt issued under USB Capital Trust II is 3-month LIBOR plus 129 basis points, and is adjusted quarterly.
At June 30, 2022, the Company performed a fair value measurement analysis on its junior subordinated debt using a cash flow model approach to determine the present value of those cash flows. The cash flow model utilizes the forward 3-month LIBOR curve to estimate future quarterly interest payments due over the life of the debt instrument. These cash flows were discounted at a rate which incorporates a current market rate for similar-term debt instruments, adjusted for additional credit and liquidity risks associated with the junior subordinated debt. The 6.22 % discount rate used represents what a market participant would consider under the circumstances based on current market assumptions. At June 30, 2022, the total cumulative gain recorded on the debt is $ 2.04 million.

The net fair value calculation performed as of June 30, 2022 resulted in a net pretax gain adjustment of $ 725,000 for the six months ended June 30, 2022 compared to a net pretax loss adjustment of $ 331,000 for the six months ended June 30, 2021.

For the six months ended June 30, 2022, the net $ 725,000 fair value gain adjustment was separately presented as a $ 1,869,000 loss ($ 1,317,000 , net of tax) recognized on the consolidated statements of income, and a $ 2,594,000 gain ($ 1,827,000 , net of tax) associated with the instrument-specific credit risk recognized in other comprehensive income. For the six months ended June 30, 2021, the net $ 331,000 fair value loss adjustment was separately presented as a $ 656,000 gain ($ 462,000 , net of tax) recognized on the consolidated statements of income, and a $ 325,000 loss ($ 229,000 , net of tax) associated with the instrument-specific credit risk recognized in other comprehensive income. The Company calculated the change in the discounted cash flows based on updated market credit spreads for the periods ended.

The net fair value calculation performed as of June 30, 2022 resulted in a net pretax gain adjustment of $ 422,000 for the quarter ended June 30, 2022 compared to a net pretax loss adjustment of $ 270,000 for the quarter ended June 30, 2021.

For the quarter ended June 30, 2022, the net $ 422,000 fair value gain adjustment was separately presented as a $ 869,000 loss ($ 612,000 , net of tax) recognized on the consolidated statements of income, and a $ 1.3 million gain ($ 910,000 , net of tax) associated with the instrument-specific credit risk recognized in other comprehensive income. For the quarter ended June 30, 2021, the net $ 270,000 fair value loss adjustment was separately presented as a $ 377,000 gain ($ 265,000 , net of tax) recognized on the consolidated statements of income, and a $ 647,000 loss ($ 456,000 , net of tax) associated with the instrument-specific credit risk recognized in other comprehensive income. The Company calculated the change in the discounted cash flows based on updated market credit spreads for the periods ended.

13. Fair Value Measurements and Disclosure
The following summary disclosures are made in accordance with the guidance provided by ASC Topic 825, Fair Value Measurements and Disclosures , which requires the disclosure of fair value information about both on- and off-balance sheet financial instruments where it is practicable to estimate that value.
GAAP guidance clarifies the definition of fair value, describes methods used to appropriately measure fair value in accordance with generally accepted accounting principles and expands fair value disclosure requirements. This guidance applies whenever other accounting pronouncements require or permit fair value measurements.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels (Level 1, Level 2, and Level 3). Level 1 inputs are unadjusted quoted prices in active markets (as defined) for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability, and reflect the reporting entity’s assumptions regarding the pricing of an asset or liability by a market participant (including assumptions about risk).
The table below is a summary of fair value estimates for financial instruments and the level of the fair value hierarchy within which the fair value measurements are categorized at the periods indicated:
32
June 30, 2022
(in 000's) Carrying Amount Estimated Fair Value Quoted Prices In Active Markets for Identical Assets Level 1 Significant Other Observable Inputs Level 2 Significant Unobservable Inputs Level 3
Financial Assets:
Investment securities $ 215,774 $ 215,774 $ 3,436 $ 212,338 $ —
Loans, net 940,084 907,923 — — 907,923
Accrued interest receivable 8,265 8,265 — 8,265 —
Financial Liabilities:
Deposits:
Noninterest-bearing 473,013 473,013 473,013 — —
NOW and money market 541,166 541,166 541,166 — —
Savings 120,082 120,082 120,082 — —
Time deposits 73,933 72,944 — — 72,944
Total deposits 1,208,194 1,207,205 1,134,261 — 72,944
Junior subordinated debt 10,489 10,489 — — 10,489

December 31, 2021
(in 000's) Carrying Amount Estimated Fair Value Quoted Prices In Active Markets for Identical Assets Level 1 Significant Other Observable Inputs Level 2 Significant Unobservable Inputs Level 3
Financial Assets:
Investment securities $ 182,646 $ 182,651 $ 3,744 $ 178,907 $ —
Loans 862,200 854,697 — — 854,697
Accrued interest receivable 7,530 7,530 — 7,530 —
Financial Liabilities:
Deposits:
Noninterest-bearing 476,749 476,749 476,749 — —
NOW and money market 529,841 529,841 529,841 — —
Savings 113,930 113,930 113,930 — —
Time deposits 67,586 67,922 — — 67,922
Total deposits 1,188,106 1,188,442 1,120,520 — 67,922
Junior subordinated debt 11,189 11,189 — — 11,189
The Company performs fair value measurements on certain assets and liabilities as the result of the application of current accounting guidelines. Some fair value measurements, such as investment securities and junior subordinated debt are performed on a recurring basis, while others, such as impairment of loans, other real estate owned, goodwill and other intangibles, are performed on a nonrecurring basis.

The Company’s Level 1 financial assets consist of money market funds and highly liquid mutual funds for which fair values are based on quoted market prices. The Company’s Level 2 financial assets include highly liquid debt instruments of U.S. government agencies, collateralized mortgage obligations, and debt obligations of states and political subdivisions, whose fair values are obtained from readily-available pricing sources for the identical or similar underlying security that may, or may not, be actively traded. The Company’s Level 3 financial assets include certain instruments where the assumptions may be made by the Company or third parties about assumptions that market participants would use in pricing the asset or liability. From time to time, the Company recognizes transfers between Level 1, 2, and 3 when a change in circumstances warrants a transfer. There were no transfers between fair value measurements during the six months ended June 30, 2022.

33
The following methods and assumptions were used in estimating the fair values of financial instruments measured at fair value on a recurring and non-recurring basis:

Investment Securities – Available for sale and marketable equity securities are valued based upon open-market price quotes obtained from reputable third-party brokers that actively make a market in those securities. Market pricing is based upon specific CUSIP identification for each individual security. To the extent there are observable prices in the market, the mid-point of the bid/ask price is used to determine fair value of individual securities. If that data is not available for the last 30 days, a Level 2-type matrix pricing approach based on comparable securities in the market is utilized. Level 2 pricing may include using a forward spread from the last observable trade or may use a proxy bond like a TBA mortgage to come up with a price for the security being valued. Changes in fair market value are recorded through other comprehensive loss as the securities are available for sale.
Impaired Loans - Fair value measurements for collateral dependent impaired loans are performed pursuant to authoritative accounting guidance and are based upon either collateral values supported by third party appraisals and observed market prices. Collateral dependent loans are measured for impairment using the fair value of the collateral. Changes are recorded directly as an adjustment to current earnings.

Other Real Estate Owned - Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned (OREO) are measured at the lower of carrying amount or fair value, less costs to sell.  Fair values are generally based on third party appraisals of the property, resulting in a Level 3 classification.  In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.

Junior Subordinated Debt – The fair value of the junior subordinated debt was determined based upon a discounted cash flows model utilizing observable market rates and credit characteristics for similar debt instruments. In its analysis, the Company used characteristics that market participants generally use, and considered factors specific to (a) the liability, (b) the principal (or most advantageous) market for the liability, and (c) market participants with whom the reporting entity would transact in that market. Cash flows are discounted at a rate which incorporates a current market rate for similar-term debt instruments, adjusted for credit and liquidity risks associated with similar junior subordinated debt and circumstances unique to the Company. The Company believes that the subjective nature of these inputs, and credit concerns in the capital markets and inactivity in the trust preferred markets that have limited the observability of the market spreads, require the junior subordinated debt to be classified as a Level 3 fair value.
The following tables summarize the Company’s assets and liabilities that were measured at fair value on a recurring and non-recurring basis as of June 30, 2022 (in 000’s):
Description of Assets June 30, 2022 Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) 		Significant Other
Observable Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3)
AFS Securities (1):
U.S. Government agencies $ 9,688 $ — $ 9,688 $ —
U.S. Government collateralized mortgage obligations 107,635 — 107,635 —
Municipal bonds 42,176 — 42,176 —
U.S. Treasury securities 19,532 19,532
Corporate bond 33,307 — 33,307 —
Total AFS securities 212,338 — 212,338 —
Marketable equity securities (1) 3,436 3,436 — —
Total $ 215,774 $ 3,436 $ 212,338 $ —
34
Description of Liabilities June 30, 2022 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3)
Junior subordinated debt (1) $ 10,489 — — $ 10,489
Total $ 10,489 — — $ 10,489
(1) Recurring

There were no non-recurring fair value adjustments at June 30, 2022 or December 31, 2021.

The following tables summarize the Company’s assets and liabilities that were measured at fair value on a recurring and non-recurring basis as of December 31, 2021 (in 000’s):
Description of Assets December 31, 2021 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3)
AFS Securities (1):
U.S. Government agencies $ 33,376 $ — $ 33,376 $ —
U.S. Government collateralized mortgage obligations 64,735 — 64,735
Asset-backed securities 4,130 — 4,130
Municipal bonds 50,052 — 50,052
Treasury securities 15,187 15,187
Corporate bonds 11,422 — 11,422 —
Total AFS securities 178,902 — 178,902 —
Marketable equity securities (1) 3,744 3,744 — —
Total $ 182,646 $ 3,744 $ 178,902 $ —
Description of Liabilities December 31, 2021 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3)
Junior subordinated debt (1) $ 11,189 $ — $ — $ 11,189
Total $ 11,189 $ — $ — $ 11,189
(1) Recurring

The following table provides a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring basis at June 30, 2022 and December 31, 2021:
June 30, 2022 December 31, 2021
Financial Instrument Valuation Technique Unobservable Input Weighted Average Financial Instrument Valuation Technique Unobservable Input Weighted Average
Junior Subordinated Debt Discounted cash flow Market credit risk adjusted spreads 6.22 % Junior Subordinated Debt Discounted cash flow Market credit risk adjusted spreads 3.90 %
Management believes that the credit risk adjusted spread utilized in the fair value measurement of the junior subordinated debentures carried at fair value is indicative of the nonperformance risk premium a willing market participant would require under current market conditions, that is, the inactive market. Management attributes the change in fair value of the junior
35
subordinated debentures during the period to market changes in the nonperformance expectations and pricing of this type of debt. Generally, an increase in the credit risk adjusted spread and/or a decrease in the three month LIBOR swap curve will result in positive fair value adjustments (and decrease the fair value measurement).  Conversely, a decrease in the credit risk adjusted spread and/or an increase in the three month LIBOR swap curve will result in negative fair value adjustments (and increase the fair value measurement). The increase in discount rate between the periods ended June 30, 2022 and December 31, 2021 is primarily due to increases in rates for similar debt instruments.

The following tables provide a reconciliation of assets and liabilities at fair value using significant unobservable inputs (Level 3) on a recurring basis at June 30, 2022 and 2021 (in 000’s):
Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 Six Months Ended June 30, 2022 Six Months Ended June 30, 2021
Reconciliation of Liabilities: Junior
Subordinated
Debt 		Junior
Subordinated
Debt 		Junior
Subordinated
Debt 		Junior
Subordinated
Debt
Beginning balance $ 10,887 $ 10,983 $ 11,189 $ 10,924
Gross loss (gain) included in earnings 869 ( 377 ) 1,869 656
Gross (gain) loss related to changes in instrument specific credit risk ( 1,292 ) 647 ( 2,594 ) ( 325 )
Change in accrued interest 25 $ — 25 ( 2 )
Ending balance $ 10,489 $ 11,253 $ 10,489 $ 11,253
The amount of total loss (gain) for the period included in earnings attributable to the change in unrealized gains or losses relating to liabilities still held at the reporting date $ 869 $ ( 377 ) $ 1,869 $ 656
14. Goodwill and Intangible Assets

At June 30, 2022, the Company had goodwill in the amount of $ 4,488,000 in connection with various business combinations and purchases. This amount was unchanged from the balance of $ 4,488,000 at December 31, 2021. While goodwill is not amortized, the Company does conduct periodic impairment analysis on goodwill at least annually or more often as conditions require. The Company performed its analysis of goodwill impairment and concluded goodwill was not impaired as of December 31, 2021 with no material events occurring through the period ended June 30, 2022.

15. Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income, included in shareholders’ equity, are as follows:
June 30, 2022 December 31, 2021
(in 000's) Net unrealized gain (loss) on available for sale securities
Unfunded status of the supplemental retirement plans
Net unrealized (loss) gain on junior subordinated debentures
Net unrealized (loss) gain on available for sale securities
Unfunded status of the supplemental retirement plans
Net unrealized gain (loss) on junior subordinated debentures
Beginning balance $ ( 236 ) $ ( 627 ) $ ( 311 ) $ 630 $ ( 770 ) $ ( 588 )
Current period comprehensive (loss) income, net of tax ( 14,393 ) 31 1,827 ( 866 ) 143 277
Ending balance $ ( 14,629 ) $ ( 596 ) $ 1,516 $ ( 236 ) $ ( 627 ) $ ( 311 )
Accumulated other comprehensive loss $ ( 13,709 ) $ ( 1,174 )

16. Investment in York Monterey Properties

36
As of June 30, 2022 and December 31, 2021, the Bank's investment in York Monterey Properties Inc. totaled $ 5.2 million. York Monterey Properties Inc. is included within the consolidated financial statements of the Company, with $ 4.6 million of the total investment recognized within the balance of other real estate owned on the consolidated balance sheets.

17. Commitments and Contingent Liabilities
Financial Instruments with Off-Balance Sheet Risk: The Company is party to financial instruments with off-balance sheet risk which arise in the normal course of business. These instruments may contain elements of credit risk, interest rate risk and liquidity risk, and include commitments to extend credit and standby letters of credit. The credit risk associated with these instruments is essentially the same as that involved in extending credit to customers and is represented by the contractual amount indicated in the table below:
Contractual Amount
(In thousands) June 30, 2022 December 31, 2021
Commitments to extend credit $ 169,893 $ 239,095
Standby letters of credit $ 641 $ 1,719
Commitments to extend credit are agreements to lend to a customer, as long as there is no violation of any condition established in the contract. Substantially all of these commitments are at floating interest rates based on the prime rate, and most have fixed expiration dates. The Company evaluates each customer's creditworthiness on a case-by-case basis, and the amount of collateral obtained, if deemed necessary, is based on management's credit evaluation. Collateral held varies but includes accounts receivable, inventory, leases, property, plant and equipment, residential real estate, and income-producing properties. Many of the commitments are expected to expire without being drawn upon and, as a result, the total commitment amounts do not necessarily represent future cash requirements of the Company.

Standby letters of credit are generally unsecured and are issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Company’s letters of credit are short-term guarantees and generally have terms from less than one month to approximately 3 years. At June 30, 2022, the maximum potential amount of future undiscounted payments the Company could be required to make under outstanding standby letters of credit totaled $ 641,000 .

In the ordinary course of business, the Company becomes involved in litigation arising out of its normal business activities. Management, after consultation with legal counsel, believes that the ultimate liability, if any, resulting from the disposition of such claims would not be material to the financial position of the Company.

37
Item 2  - Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

Certain matters discussed or incorporated by reference in this Quarterly Report of Form 10-Q are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors: i) adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, inflationary pressures and labor shortages; (ii) the COVID-19 global pandemic, including the effects of the steps being taken to address the pandemic and their impact on the Company’s market and employees; iii) Severe weather or natural disasters, such as wildfires, earthquakes, drought, or flood; iv) competitive pressures in the banking industry and changes in the regulatory environment; v) exposure to changes in the interest rate environment and the resulting impact on the Company’s interest rate sensitive assets and liabilities; vi) decline in the health of the economy nationally or regionally which could reduce the demand for loans or reduce the value of real estate collateral securing most of the Company’s loans; vii) credit quality deterioration that could cause an increase in the provision for loan losses; viii) Asset/Liability matching risks and liquidity risks; ix) volatility and devaluation in the securities markets, x) potential impairment of goodwill and other intangible assets, and xi) technology implementation problems and information security breaches. Therefore, the information set forth therein should be carefully considered when evaluating the business prospects of the Company. For additional information concerning risks and uncertainties related to the Company and its operations, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The Company

United Security Bancshares, a California corporation, is a bank holding company registered under the BHCA with corporate headquarters located in Fresno, California. The principal business of United Security Bancshares is to serve as the holding company for its wholly-owned subsidiary, United Security Bank. References to the “Bank” refer to United Security Bank together with its wholly-owned subsidiary, York Monterey Properties, Inc. References to the “Company” refer to United Security Bancshares together with its subsidiaries on a consolidated basis. References to the “Holding Company” refer to United Security Bancshares, the parent company, on a stand-alone basis. The Bank currently has twelve banking branches, which provide banking services in Fresno, Madera, Kern, and Santa Clara counties in the state of California. In addition to full-service branches, the Bank has several stand-alone ATM and ITM machines within its geographic footprint.

Executive Summary

During 2021 and through the second quarter of 2022, the Company executed a multi-phase strategy to deploy excess liquidity. As part of the cash deployment strategy, during 2021, the Company purchased $201.0 million in residential mortgage loans with a 2.90% weighted average coupon rate and $125.7 million in investment securities with weighted average purchase yield of 1.73%. In 2022, the Company purchased $35.6 million in residential mortgage loans with a 3.06% weighted average coupon rate and $81.5 million in investment securities with a 2.95% weighted average purchase yield.

2022 Highlights

▪ Total assets increased 0.6% to $1.34 billion, compared to $1.33 billion at December 31, 2021.
▪ Total loans, net of unearned fees, increased 9.0% to $950.0 million, compared to $871.5 million at December 31, 2021.
▪ Total investments increased 18.1%, or $33.1 million, to $215.8 million, compared to $182.6 million at December 31, 2021.
▪ Total deposits increased 1.7% to $1.21 billion, compared to $1.19 billion at December 31, 2021.
▪ Net interest income before the provision for credit losses increased 16.66% to $19.8 million for the six months ended June 30, 2022, compared to $17.0 million for the six months ended June 30, 2021.
▪ Book value per share decreased to $6.46, compared to $7.06 at December 31, 2021.
▪ Net charge-offs totaled $37,000, compared to net charge-offs of $523,000 for the six months ended June 30, 2021.
▪ Capital position remains well-capitalized with a 9.70% Tier 1 Leverage Ratio compared to 9.79% as of December 31, 2021.
▪ Return on average assets ("ROAA") was 0.89%, compared to 0.71% for the six months ended June 30, 2021.
▪ Return on average equity ("ROAE") was 10.19%, compared to 7.00% for the six months ended June 30, 2021.

38
Trends Affecting Results of Operations and Financial Position

The Company’s overall operations are impacted by a number of factors, including not only interest rates and margin spreads, which impact the results of operations, but also the composition of the Company’s consolidated balance sheet. One of the primary strategic goals of the Company is to maintain a mix of assets that will generate a reasonable rate of return without undue risk, and to finance those assets with a low-cost and stable source of funds. Liquidity and capital resources must also be considered in the planning process to mitigate risk and allow for growth.

Since the Bank primarily conducts banking operations in California’s Central Valley, its operations and cash flows are subject to changes in the economic condition of the Central Valley. Business results are dependent in large part upon the business activity, population, income levels, deposits and real estate activity in the Central Valley, and declines in economic conditions can have adverse material effects upon the Bank. In addition, the Central Valley remains largely dependent on agriculture. A downturn in agriculture and agricultural-related business could indirectly and adversely affect the Company as many borrowers and customers are involved in, or are impacted to some extent, by the agricultural industry. While a great number of our borrowers are not directly involved in agriculture, they would likely be impacted by difficulties in the agricultural industry since many jobs in our market areas are ancillary to the regular production, processing, marketing and sale of agricultural commodities. The state of California is experiencing a severe drought and water allocations have been significantly reduced for farmers in the Central Valley. Due to these water issues the impact on businesses and consumers located in the Company's market areas is not possible to quantify. In response the California state legislature passed the Sustainable Groundwater Management Act with the purpose to ensure better local and regional management of groundwater use and sustainable groundwater management in California by 2042. The local districts began to develop, prepare, and begin implementation of the Groundwater Sustainability Plans in 2020. The effect of such plans to Central Valley agriculture, if any, is still unknown.

The Company's earnings are impacted by monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Bank ("FRB") has, and is likely to continue to have, an important impact on the operating results of depository institutions through its power to implement national monetary policy, among other things, in order to curb inflation or combat a recession. The FRB affects the levels of bank loans, investments and deposits through its control over the issuance of United States government securities, its regulation of the discount rate applicable to member banks and its influence over reserve requirements to which member banks are subject. The Federal Open Market Committee (" FOMC") has indicated that due to rising inflation it expects to raise interest rates during 2022 and 2023. The FOMC increased the overnight benchmark rate 25bps in March 2022, 50bps in May 2022, and 75bps in June 2022. Further rate hikes are expected during the year to taper record high inflation.

The Company continually evaluates its strategic business plan as economic and market factors change in its market area. Balance sheet management, enhancing revenue sources, and maintaining market share will continue to be of primary importance.

COVID-19

The COVID-19 pandemic has impacted the local economy in the Central Valley. Federal, State and local shelter-in-place recommendations were enacted in our markets in March 2020 causing many businesses to close and workers to be furloughed or lose jobs. Essential purpose entities such as medical professionals, food and agricultural businesses, and transportation and logistical businesses were exempted from the closures; however, unemployment rates have been improving over the last year. As of May 2022, the unemployment rate in Fresno County was 5.20% compared to 9.30% in May 2021. Congress, the President, and the Federal Reserve have taken several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law at the end of March 2020 as a $2 trillion legislative package, and the Consolidated Appropriations Act, 2021 was signed into law at the end of December 2020 as a $900 billion legislative package. While it is not possible to know the full universe or extent of these impacts as of the date this filing, we are disclosing potentially material items of which we are aware.

Financial position and results of operations

Pertaining to the Company's June 30, 2022 financial condition and results of operations, COVID-19 has had an impact on the allowance for credit losses. While the Company has not yet experienced any charge-offs related to COVID-19, its allowance for credit loss calculation and resulting provision for credit losses are significantly impacted by changes in economic conditions resulting from a significant increase in economic uncertainty. Although economic scenarios related to the pandemic have improved since March 2020, the credit risk in the loan portfolio remains heightened resulting in the need for an additional reserve for credit loss. Additionally, the economic uncertainty related to higher inflation in the recent months, significant
39
increase in yield curve along with the recent inversion of yield curve, and magnitude of rate hikes in 2022 warrants the increase in additional reserve for credit losses.

Capital and liquidity

As of June 30, 2022, the Company and Bank's capital ratios were in excess of all regulatory requirements. The Company's management team believes that while the Company and Bank have sufficient capital to withstand an economic recession brought about by COVID-19, its reported and regulatory capital ratios could be adversely impacted by further credit losses. The Company relies on cash on hand as well as dividends from the Bank to service its debt. If the Bank is unable to pay dividends for an extended period of time, the Company may not be able to service its debt.

The Company maintains access to multiple sources of liquidity. If an extended recession caused large numbers of its deposit customers to withdraw their funds, it might become more reliant on volatile or more expensive sources of funding. Wholesale funding markets are available to the Company.

Lending operations and accommodations to borrowers

In keeping with regulatory guidance to work with borrowers during this unprecedented situation, the Company has executed a payment deferral program for our commercial lending clients that are adversely affected by the pandemic. Depending on the demonstrated need of the client, the Company is deferring either the full loan payment or the principal component of the loan payment for up to six months. During 2020, the Company had executed 23 payment deferrals or modifications on outstanding loan balances of $69,814,000 in connection with the COVID-19 relief provided by the CARES Act and interagency guidance issued in March 2020. The Company has not recognized any losses on the loan modifications and as of June 30, 2022, there were no modifications outstanding.

The Company participated in the first and second draw of the Paycheck Protection Program ("PPP"), administered by the Small Business Administration ("SBA"). The PPP program ended on August 8, 2020. PPP loans earn interest at 1% and have either a two or five year term. In addition to interest, the Company receives a processing fee ranging from 3%-5% of the loan balance for each PPP loan. The Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program. As of June 30, 2022, there were three outstanding SBA PPP loans representing $133,000 in balances.

The Company has worked with customers directly affected by COVID-19. The Company has provided short-term assistance in accordance with regulatory guidelines. As a result of the current economic environment, the Company is engaging in more frequent communication with borrowers to better understand their situation and the challenges faced, allowing it to respond proactively as needs and issues arise. The Company is engaging in more frequent communication with the servicer and individual schools participating in the student loan portfolio to better understand the effects of COVID-19 on students in school or in clinical programs. It is possible that the Company’s asset quality measures could worsen at future measurement periods if the effects of COVID-19 are prolonged.

The Company continually evaluates its strategic business plan as economic and market factors change in its market area. There remain shortages in raw materials, manufactured products and labor across many industries resulting in rising prices, which may disrupt business operations and negatively impact financial performance and operating results for the Company's borrowers. Balance sheet management, enhancing revenue sources, and maintaining market share will continue to be of primary importance.

Results of Operations

On a year-to-date basis, the Company reported net income of $5.9 million or $0.35 per share ($0.34 diluted), for the six months ended June 30, 2022, as compared to $4.1 million, or $0.24 per share ($0.24 diluted), for the same period in 2021. The Company’s return on average assets was 0.89% for the six months ended June 30, 2022, as compared to 0.71% for the six months ended June 30, 2021. The Company’s return on average equity was 10.19% for the six months ended June 30, 2022, as compared to 7.00% for the six months ended June 30, 2021. The increase is primarily attributed to growth in interest income as a result of the Company deploying cash into its loan and investment portfolios during 2021 and 2022.

Net Interest Income

40
The following tables present condensed average balance sheet information, together with interest income and yields earned on average interest earning assets, and interest expense and rates paid on average interest-bearing liabilities for the three and six month periods ended June 30, 2022 and 2021.

Table 1. Distribution of Average Assets, Liabilities and Shareholders’ Equity:
Interest rates and Interest Differentials
Three Months Ended June 30, 2022 and 2021

2022 2021
(dollars in thousands) Average Balance Interest Yield/Rate (2) Average Balance Interest Yield/Rate (2)
Assets:
Interest-earning assets:
Loans (1) $ 906,396 $ 9,731 4.31 % $ 762,090 $ 8,748 4.60 %
Investment securities (3) 192,494 1,004 2.09 % 164,908 654 1.59 %
Interest-bearing deposits in FRB 136,898 258 0.76 % 180,061 42 0.09 %
Total interest-earning assets 1,235,788 $ 10,993 3.57 % 1,107,059 $ 9,444 3.42 %
Allowance for credit losses (9,302) (8,552)
Noninterest-earning assets:
Cash and due from banks 34,904 48,415
Premises and equipment, net 9,064 8,950
Accrued interest receivable 7,602 7,949
Other real estate owned 4,579 4,965
Other assets 54,863 54,488
Total average assets $ 1,337,498 $ 1,223,274
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts $ 130,487 $ 37 0.11 % $ 160,053 $ 60 0.15 %
Money market accounts 411,211 382 0.37 % 307,374 273 0.36 %
Savings accounts 124,864 34 0.11 % 107,024 29 0.11 %
Time deposits 70,587 62 0.35 % 62,993 106 0.67 %
Junior subordinated debentures 10,863 69 2.55 % 10,961 45 1.65 %
Total interest-bearing liabilities 748,012 $ 584 0.31 % 648,405 $ 513 0.32 %
Noninterest-bearing liabilities:
Noninterest-bearing checking 465,926 446,352
Accrued interest payable 118 107
Other liabilities 9,465 9,550
Total liabilities 1,223,521 1,104,414
Total shareholders' equity 113,977 118,860
Total average liabilities and shareholders' equity $ 1,337,498 $ 1,223,274
Interest income as a percentage  of average earning assets 3.57 % 3.41 %
Interest expense as a percentage of average earning assets 0.19 % 0.19 %
Net interest margin 3.38 % 3.22 %

41
(1) Loan amounts include nonaccrual loans, but the related interest income has been included only if collected for the period prior to the loan being placed on a nonaccrual basis. Loan interest costs includes loan fee income of approximately $66 for the three months ended June 30, 2022 and loan fee income of $290 for the three months ended June 30, 2021.
(2) Interest income/expense is divided by actual number of days in the period times 365 days in the yield calculation.
(3) Yields on investment securities, aside from marketable equity securities, are calculated based on average amortized cost balances rather than fair value, as changes in fair value are reflected as a component of shareholders' equity.


The following tables present condensed average balance sheet information, together with interest income and yields earned on average interest earning assets, and interest expense and rates paid on average interest-bearing liabilities for the three and six month periods ended June 30, 2022 and 2021.

Table 1. Distribution of Average Assets, Liabilities and Shareholders’ Equity:
Interest rates and Interest Differentials
Six months ended June 30, 2022 and 2021

42
2022 2021
(dollars in thousands) Average Balance Interest Yield/Rate (2) Average Balance Interest Yield/Rate (2)
Assets:
Interest-earning assets:
Loans (1) $ 888,722 $ 18,849 4.28 % $ 716,162 $ 16,855 4.75 %
Investment securities (3) 190,141 1,795 1.90 % 134,243 1,041 1.56 %
Interest-bearing deposits in FRB 156,959 340 0.44 % 219,272 104 0.10 %
Total interest-earning assets 1,235,822 $ 20,984 3.42 % 1,069,677 $ 18,000 3.39 %
Allowance for credit losses (9,408) (8,535)
Noninterest-earning assets:
Cash and due from banks 36,089 45,051
Premises and equipment, net 8,997 8,995
Accrued interest receivable 7,340 7,814
Other real estate owned 4,581 5,019
Other assets 52,239 49,239
Total average assets $ 1,335,660 $ 1,177,260
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
NOW accounts $ 140,249 $ 84 0.12 % $ 155,077 $ 115 0.15 %
Money market accounts 402,436 744 0.37 % 286,153 503 0.35 %
Savings accounts 120,771 66 0.11 % 104,090 57 0.11 %
Time deposits 68,712 129 0.38 % 62,821 220 0.71 %
Junior subordinated debentures 11,009 114 2.09 % 10,929 92 1.70 %
Total interest-bearing liabilities 743,177 $ 1,137 0.31 % 619,070 $ 987 0.32 %
Noninterest-bearing liabilities:
Noninterest-bearing checking 466,097 429,513
Accrued interest payable 115 100
Other liabilities 9,659 9,673
Total liabilities 1,219,048 1,058,356
Total shareholders' equity 116,612 118,904
Total average liabilities and shareholders' equity $ 1,335,660 $ 1,177,260
Interest income as a percentage  of average earning assets 3.42 % 3.39 %
Interest expense as a percentage of average earning assets 0.19 % 0.19 %
Net interest margin 3.23 % 3.20 %

(1) Loan amounts include nonaccrual loans, but the related interest income has been included only if collected for the period prior to the loan being placed on a nonaccrual basis. Loan interest costs includes loan fee income of approximately $366 for the six months ended June 30, 2022 and loan fee income of $936 for the six months ended June 30, 2021.
(2) Interest income/expense is divided by actual number of days in the period times 365 days in the yield calculation.
(3) Yields on investments securities, aside from marketable equity securities, are calculated based on average amortized cost balances rather than fair value, as changes in fair value are reflected as a component of shareholders' equity.

43
The prime rate increased from 3.25% at June 30, 2021 to 4.75% at June 30, 2022. Future increases or decreases will affect both interest income and expense and the resultant net interest margin.

Both the Company's net interest income and net interest margin are affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as "volume change." Both are also affected by changes in yields on interest-earning assets and rates paid on interest-bearing liabilities, referred to as "rate change." The following table sets forth the changes in interest income and interest expense for each major category of interest-earning asset and interest-bearing liability, and the amount of change attributable to volume and rate changes for the periods indicated.

Table 2.  Rate and Volume Analysis
Increase (decrease) for the three months ended
June 30, 2022 compared to June 30, 2021
(in 000's) Total Rate Volume
Increase (decrease) in interest income:
Loans $ 983 $ (611) $ 1,594
Investment securities available for sale 350 228 122
Interest-bearing deposits in FRB 216 299 (83)
Total interest income 1,549 (84) 1,633
Increase (decrease) in interest expense:
Interest-bearing demand accounts 86 29 57
Savings and money market accounts 5 — 5
Time deposits (44) (56) 12
Subordinated debentures 24 24 —
Total interest expense 71 (3) 74
Increase (decrease) in net interest income $ 1,478 $ (81) $ 1,559

For the three months ended June 30, 2022, total interest income increased $1.5 million, or 16.4%, as compared to the three months ended June 30, 2021. In comparing the two periods, average interest earning assets increased $128.7 million, with an increase of $144.3 million in loan balances and an increase of $27.6 million in investment securities, partially offset by a decrease of $43.2 million in balances held at the Federal Reserve Bank. The increase in loan balances is attributed to purchases of residential mortgage pools. Investment securities yields increased 50 basis points and loan yields decreased 29 basis points. The average yield on total interest-earning assets increased 15 basis points. The increase in yields is a result of the purchases of investment securities at higher yields due to market rate increases and increases on yields on overnight deposits related to the increase in the Fed Funds rate, offset by lower loan yields.

Increase (decrease) for the six months ended
June 30, 2022 compared to June 30, 2021
(in 000's) Total Rate Volume
Increase (decrease) in interest income:
Loans $ 1,994 $ (1,814) $ 3,808
Investment securities available for sale 754 256 498
Interest-bearing deposits in FRB 236 378 (142)
Total interest income 2,984 (1,180) 4,164
Increase (decrease) in interest expense:
Interest-bearing demand accounts 210 57 153
Savings and money market accounts 9 — 9
Time deposits (91) (110) 19
Subordinated debentures 22 21 1
Total interest expense 150 (32) 182
Increase (decrease) in net interest income $ 2,834 $ (1,148) $ 3,982

44
For the six months ended June 30, 2022, total interest income increased $3.0 million, or 16.58%, as compared to the six months ended June 30, 2021. In comparing the two periods, average interest earning assets increased $166.1 million, with an increase of $172.6 million in loan balances and an increase of $55.9 million in investment securities, partially offset by a decrease of $62.3 million in balances held at the Federal Reserve Bank. Investment securities yields increased 34 basis points while loan yields decreased 47 basis points. The decrease in loan yields is attributed to the purchased residential mortgage pools, which have a lower yield compared to the rest of the loan portfolio. Interest-bearing deposits in FRB, the Company's lowest-yielding interest-earning asset, comprised 12.7% of the average interest-earning assets for period ended June 30, 2022, compared to 20.49% for the same period ended 2021.

The overall average yield on the loan portfolio decreased to 4.28% for the six months ended June 30, 2022, as compared to 4.75% for the six months ended June 30, 2021. At June 30, 2022, 44.3% of the Company's loan portfolio consisted of floating rate instruments, as compared to 45.8% of the portfolio at December 31, 2021, with the majority of those tied to the prime rate. Approximately 58.9%, or $247.5 million, of the floating rate loans had rate floors at June 30, 2022, making them effectively fixed-rate loans for certain decreases in interest rates. There were no loans with floor spreads of 100 basis points or more.

The Company’s net interest margin increased to 3.23% for the six months ended June 30, 2022, when compared to 3.20% for the six months ended June 30, 2021. The net interest margin increased primarily as a result of growth in average loan and investment balances, partially offset by the decrease in loan yields.

The Company’s disciplined deposit pricing efforts have helped keep the Company's cost of funds low. The rates paid on interest-bearing liabilities decreased to 0.31% for the six months ended June 30, 2022, as compared to 0.32% for the six months ended June 30, 2021. For the six months ended June 30, 2022, total interest expense increased approximately $150,000, or 15.2%, as compared to the six months ended June 30, 2021. Between those two periods, average interest-bearing liabilities increased by $124.1 million due to increases in money market, savings accounts, and time deposits. While the Company may utilize brokered deposits as an additional source of funding, the Company held no brokered deposits at June 30, 2022.

Table 3. Interest-Earning Assets and Liabilities

The following table summarizes the year-to-date (YTD) averages of the components of interest-earning assets as a percentage of total interest-earning assets and the components of interest-bearing liabilities as a percentage of total interest-bearing liabilities:
YTD Average
June 30, 2022
YTD Average
December 31, 2021
YTD Average
June 30, 2021
Loans 71.92% 68.99% 66.96%
Investment securities available for sale 15.39% 13.35% 12.55%
Interest-bearing deposits in FRB 12.69% 17.66% 20.49%
Total interest-earning assets 100.00% 100.00% 100.00%
NOW accounts 18.86% 23.77% 25.05%
Money market accounts 54.15% 48.44% 46.22%
Savings accounts 16.25% 16.20% 16.81%
Time deposits 9.25% 9.90% 10.15%
Subordinated debentures 1.49% 1.69% 1.77%
Total interest-bearing liabilities 100.00% 100.00% 100.00%

Noninterest Income

Table 4. Changes in Noninterest Income

The following tables sets forth the amount and percentage changes in the categories presented for the three and six month periods ended June 30, 2022 and 2021:

45

(in 000's) 		Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 Amount of
Change 		Percent
Change
Customer service fees $ 776 692 $ 84 12.1 %
Increase in cash surrender value of bank-owned life insurance 114 138 (24) (17.4) %
Unrealized loss on fair value of marketable equity securities (127) — (127) (100%)
(Loss) gain on fair value of junior subordinated debentures (869) 377 (1,246) 330.5 %
Other 708 115 593 515.7 %
Total noninterest loss $ 602 $ 1,322 $ (720) (54.5) %

Noninterest income for the quarter ended June 30, 2022 decreased $720,000 to $602,000 when compared to the quarter ended June 30, 2021. Included in the decrease is a loss on the fair value of marketable equity securities of $127,000. The change in fair value of junior subordinated debentures caused a $869,000 loss for the quarter ended June 30, 2022, compared to a $377,000 gain for the quarter ended June 30, 2021, resulting in a difference of $1,246,000. The change in the fair value of junior subordinated debentures was caused by fluctuations in the LIBOR yield curve. Generally, an increase in the three month LIBOR yield curve will result in negative fair value adjustments. Conversely, a decrease in the three month LIBOR yield curve will result in positive fair value adjustments. Also included in noninterest income for the quarter ended June 30, 2022 was $566,000 in nonrecurring income received from The Central Valley Fund II (SBIC), Limited Partnership.


(in 000's)
Six Months Ended June 30, 2022
Six Months Ended June 30, 2021
Amount of
Change 		Percent
Change
Customer service fees $ 1,429 1,348 $ 81 6.0 %
Increase in cash surrender value of bank-owned life insurance 253 269 (16) (5.9) %
Unrealized loss on fair value of marketable equity securities (309) (60) (249) (415.0) %
Loss on fair value of junior subordinated debentures (1,869) (656) (1,213) (184.9) %
Gain on sale of assets — 13 (13) (100.0) %
Gain on sale of investment securities 30 — 30 100.0 %
Other 861 248 613 247.2 %
Total noninterest income $ 395 $ 1,162 $ (767) (66.0) %

Noninterest income for the six months ended June 30, 2022 decreased $767,000 to $395,000 when compared to the six months ended June 30, 2021. Included in the decrease is a loss on the fair value of marketable equity securities of $309,000. The change in fair value of junior subordinated debentures caused a $1,869,000 loss for the six months ended June 30, 2022, compared to a $656,000 loss for the six months ended June 30, 2021, resulting in a difference of $1,213,000. The change in the fair value of junior subordinated debentures was caused by fluctuations in the LIBOR yield curve. Generally, an increase in the three month LIBOR yield curve will result in negative fair value adjustments. Conversely, a decrease in the three month LIBOR yield curve will result in positive fair value adjustments. Also included in noninterest income for the six months ended June 30, 2022 was $566,000 in nonrecurring income received from The Central Valley Fund II (SBIC), Limited Partnership.

Noninterest Expense

Table 5. Changes in Noninterest Expense

The following tables sets forth the amount and percentage changes in the categories presented for the three and six month periods ended June 30, 2022 and 2021:
46

(in 000's) 		Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 Amount of
Change 		Percent
Change
Salaries and employee benefits $ 2,777 $ 2,893 $ (116) (4.0) %
Occupancy expense 849 837 12 1.4 %
Data processing 145 148 (3) (2.0) %
Professional fees 919 905 14 1.5 %
Regulatory assessments 187 123 64 52.0 %
Director fees 116 92 24 26.1 %
Correspondent bank service charges 24 23 1 4.3 %
Net cost on operation of OREO 2 18 (16) (88.9) %
Other 557 606 (49) (8.1) %
Total expense $ 5,576 $ 5,645 $ (69) (1.2) %

Noninterest expense for the quarter ended June 30, 2022 decreased $69,000 to $5,576,000, compared to the quarter ended June 30, 2021. The decrease was primarily attributed to the decrease in salaries and employees benefits, other, and net cost on operation of OREO, partially offset by increase in occupancy expense, professional fees, and regulatory assessments. The increase in regulatory assessments was the result of an increase in the assessment rate and deposit growth. The decrease in salaries and employee benefits was driven by decreases in insurance benefits expense and higher direct loan origination costs related to higher loan origination volume during the quarter ended June 30, 2022 compared to June 30, 2021. Direct loan origination costs related to a lender's compensation and benefits reduce salary and employee benefits expense.

(in 000's) 		Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 Amount of
Change 		Percent
Change
Salaries and employee benefits $ 5,826 $ 5,917 $ (91) (1.5) %
Occupancy expense 1,628 1,693 (65) (3.8) %
Data processing 260 235 25 10.6 %
Professional fees 1,868 1,766 102 5.8 %
Regulatory assessments 417 289 128 44.3 %
Director fees 234 184 50 27.2 %
Correspondent bank service charges 50 42 8 19.0 %
Net cost on operation of OREO (6) 43 (49) (114.0) %
Other 1,114 1,077 37 3.4 %
Total expense $ 11,391 $ 11,246 $ 145 1.3 %

Noninterest expense for the six months ended June 30, 2022 increased $145,000 to $11,391,000, compared to the six months ended June 30, 2021. The increase was attributed to increases in regulatory assessments, professional fees, director fees, and other expenses, offset by a decreases in salaries and employee benefits, net cost on operation of OREO, and occupancy expense. The increase in regulatory assessments was the result of an increase in the assessment rate and the increase in professional fees was the result of increases in consulting fees and servicing fees for purchased real estate loans. The decrease in salaries and employee benefits was driven by decreases in group insurance expense and direct loan origination costs, which reduce salary expense, during the six months ended June 30, 2022. Other expenses increased primarily due to increases in telephone expense.

Income Taxes

The Company’s income tax expense is impacted to some degree by permanent taxable differences between income reported for book purposes and income reported for tax purposes, as well as certain tax credits which are not reflected in the Company’s pretax income or loss shown in the statements of operations and comprehensive income. As pretax income or loss amounts become smaller, the impact of these differences become more significant and are reflected as variances in the Company’s effective tax rate for the periods presented. In general, the permanent differences and tax credits affecting tax expense have a positive impact and tend to reduce the effective tax rates shown in the Company’s statements of income and comprehensive income.

47
The Company reviews its current tax positions at least quarterly based on the accounting standards related to uncertainty in income taxes which includes the criteria that an individual tax position would have to meet for some or all of the income tax benefit to be recognized in a taxable entity’s financial statements. Under the income tax guidelines, an entity should recognize the financial statement benefit of a tax position if it determines that it is more likely than not that the position will be sustained on examination. The term “more likely than not” means a likelihood of more than 50 percent. In assessing whether the more-likely-than-not criterion is met, the entity should assume that the tax position will be reviewed by the applicable taxing authority.
The Company has reviewed all of its tax positions as of June 30, 2022, and has determined that, there are no material amounts to be recorded under the current income tax accounting guidelines.

The Company's effective tax rate for the six months ended June 30, 2022 was 28.67% compared to 28.16% for the six months ended June 30, 2021.

Financial Condition

Total assets increased $8.6 million, or 0.6%, to a balance of $1.34 billion at June 30, 2022, from the balance of $1.33 billion at December 31, 2021, and increased $108.5 million, or 8.8%, from the balance of $1.23 billion at June 30, 2021. Total deposits of $1.2 billion at June 30, 2022, increased $20.1 million, or 1.7%, from the balance reported at December 31, 2021, and $117.8 million, or 10.8%, from the balance of $1.09 billion reported at June 30, 2021. Cash and cash equivalents decreased $112.0 million, or 51.1%, between December 31, 2021 and June 30, 2022. Net loans increased $77.9 million, or 9.0%, to a balance of $940.1 million, and investment securities increased $33,128,000, or 18.1%, to a balance of $215.8 million during the first six months of 2022.

Earning assets averaged $1.24 billion during the six months ended June 30, 2022, as compared to $1.07 billion for the same period in 2021. Average interest-bearing liabilities increased to $743.2 million for the six months ended June 30, 2022, from $619.1 million reported for the comparative period of 2021.

Loans

The Company's primary business is that of acquiring deposits and making loans, with the loan portfolio representing the largest and most important component of earning assets. Loans totaled $948.0 million at June 30, 2022, an increase of $78.7 million, or 9.1%, when compared to the balance of $869.3 million at December 31, 2021, and an increase of $106.9 million, or 11.3%, when compared to the balance of $841.1 million reported at June 30, 2021. Loans on average increased $172.6 million, or 24.1%, between the six months ended June 30, 2021 and June 30, 2022, with loans averaging $888.7 million for the six months ended June 30, 2022, as compared to $716.2 million for the same period of 2021.

Table 6. Loans

The following table sets forth the amounts of loans outstanding by category and the category percentages for the periods presented:
June 30, 2022 December 31, 2021 June 30, 2021
(in 000's) Dollar Amount % of Loans Dollar Amount % of Loans Dollar Amount % of Loans
Commercial and industrial $ 53,981 5.7 % $ 45,504 5.2 % $ 56,084 6.7 %
Real estate – mortgage 604,487 63.7 % 558,056 64.2 % 509,885 60.5 %
RE construction & development 176,839 18.7 % 154,270 17.7 % 165,426 19.7 %
Agricultural 64,957 6.9 % 60,239 6.9 % 53,518 6.4 %
Installment and student loans 47,767 5.0 % 51,245 6.0 % 56,190 6.7 %
Total gross loans $ 948,031 100.00 % $ 869,314 100.00 % $ 841,103 100.00 %

Loan volume continues to be highest in what has historically been the primary lending emphasis: real estate mortgage, and construction lending. Total loans increased $78.7 million during the first six months of 2022. There were increases of $46.4 million, or 8.3%, in real estate mortgage loans, $22.6 million, or 14.6%, in real estate construction and development loans, $8.5 million, or 18.6% in commercial and industrial, and $4.7 million, or 7.8%, in agriculture loans. Installment loans decreased by $3.5 million, or 6.8%. The Bank is subject to internal limits of 115% of capital on the real estate construction and development
48
portfolio and 330% of capital for the non-owner occupied commercial real estate portfolio, which also includes construction and development loans. In addition, there is also a limit of 50% growth over the three years for the non-owner occupied commercial real estate portfolio. At June 30, 2022, the real estate construction and development portfolio totaled 102% of capital. The non-owner occupied commercial real estate totaled 332% of capital and had a three year growth rate of 52.6%. Subsequent to quarter-end, the Bank increased its internal limit for the non-owner occupied commercial real estate portfolio to 345% of capital and 50% growth over three years. The current limits may affect the ability of the Bank to significantly grow these segments of the loan portfolio. The Bank is not approaching internal or regulatory concentration limits in other loan segments.

The real estate mortgage loan portfolio, totaling $604.5 million at June 30, 2022, consists of commercial real estate, residential mortgages, and home equity loans. Commercial real estate loans have remained a significant percentage of total loans over the past year, amounting to 37.0%, 38.1%, and 39.63% of the total loan portfolio at June 30, 2022, December 31, 2021, and June 30, 2021, respectively. Commercial real estate balances increased to $351.1 million at June 30, 2022 from $331.1 million at December 31, 2021. Commercial real estate loans are generally a mix of short to medium-term, fixed and floating rate instruments and are mainly secured by commercial income and multi-family residential properties.

Residential mortgage loans are generally 30-year amortizing loans with an average life of six to eight years. These loans totaled $253.3 million, or 26.7%, of the portfolio at June 30, 2022, $226.9 million, or 26.1%, of the portfolio at December 31, 2021, and $176.5 million, or 21.0%, of the portfolio at June 30, 2021. Dovenmuehle Mortgage, Inc. (“DMI”) is the third-party sub-servicer for the Company's purchased residential mortgage portfolio, with aggregate balances of $222.2 million at June 30, 2022. These loans were purchased in whole loan form, in several pools, beginning in May 2021, through March 2022. DMI’s services include administration, modification (with the Company's approval), escrow management, monitoring and collection. DMI is paid a monthly servicing fee primarily based on the number of loans being serviced, which at June 30, 2022 totaled 235.

Real estate mortgage loans in total increased $46.4 million during 2022 and increased $94.6 million between June 30, 2021 and June 30, 2022. As part of the strategy to deploy excess liquidity, the Company does purchase residential mortgage portfolios and purchased $201.0 million in 2021 and $36.6 million in 2022. Real estate construction and development loans, representing 18.7%, 17.7%, and 19.7% of total loans at June 30, 2022, December 31, 2021, and June 30, 2021, respectively, consist of loans for residential and commercial construction projects, as well as land acquisition and development, or land held for future development. Loans in this category are secured by real estate including improved and unimproved land, as well as single-family residential, multi-family residential, and commercial properties in various stages of completion. All real estate loans have established equity requirements. Repayment on construction loans generally comes from long-term mortgages with other lending institutions obtained at completion of the project or from the sale of the constructed homes to individuals.

Commercial and industrial loans increased $8.5 million between December 31, 2021 and June 30, 2022 and decreased $2.1 between June 30, 2021 and June 30, 2022 as a result of payoffs or forgiveness of SBA PPP loans. Included in commercial and industrial loans as of June 30, 2022 are $133,000 in SBA PPP loans. Agricultural loans increased $4.7 million between December 31, 2021 and June 30, 2022 and increased $11.4 between June 30, 2021 and June 30, 2022. Installment and student loans decreased $3.5 million between December 31, 2021 and June 30, 2022 and decreased $8.4 between June 30, 2021 and June 30, 2022, primarily due to decreases in student loan balances.

Installment and student loans decreased $8.4 million between June 30, 2021 and June 30, 2022, due to paydowns and charge-offs within the student loan portfolio. Included in installment loans are $44.9 million in student loans made to medical and pharmacy school students. The student loan portfolio consists of unsecured loans to medical and pharmacy students currently enrolled in medical and pharmacy schools in the US and the Caribbean.  The medical student loans are made to US citizens attending medical schools in the US and Caribbean, while the pharmacy student loans are made to pharmacy students attending pharmacy school in the US. Upon graduation the loan is automatically placed on deferment for six months. This may be extended up to 48 months for graduates enrolling in internship, medical residency or fellowship. As approved the student may receive additional deferment for hardship or administrative reasons in the form of forbearance for a maximum of 36 months throughout the life of the loan. The outstanding balance of student loans that have not entered repayment status totaled $6.0 million at June 30, 2022. Accrued interest on student loans that are in school or grace totaled $2.1 million at June 30, 2022. At June 30, 2022 there were 870 loans within repayment, deferment, and forbearance which represented $20.6 million, $8.5 million, and $9.8 million in outstanding balances, respectively. There were no new student loans originated in 2021 and 2022.

Repayment of the unsecured student loans is premised on the medical and pharmacy students graduating and becoming high-income earners. Under program guidelines repayment terms can vary per borrower, however repayment occurs on average within 10 to 20 years. Underwriting is premised on qualifying credit scores. The weighted average credit score for the portfolio is in the mid-700s. In addition, there are non-student co-borrowers for roughly one-third of the portfolio that provide additional repayment capacity. Graduation and employment placement rates are high for both medical and pharmacy students. The
49
average student loan balance per borrower as of June 30, 2022 is approximately $98,000. Loan interest rates range from 3.125% to 8.125%, with a weighted average rate of 7.12%.

ZuntaFi is the third-party servicer for the student loan portfolio. ZuntaFi's services include application administration, processing, approval, documenting, funding, and collection. They also provide borrower file custodial responsibilities. Except in cases where applicants/loans do not meet program requirements, or extreme delinquency, ZuntaFi is responsible for complete program management. ZuntaFi is paid a monthly servicing fee based on the outstanding principal balance.

The Company classifies student loans delinquent more than 90 days as substandard. As of June 30, 2022 and December 31, 2021 reserves against the student loan portfolio totaled $2,561,000 and $2,647,000, respectively. There were no TDRs within the portfolio as of June 30, 2022 or December 31, 2021. For the quarter ended June 30, 2022, no accrued interest receivable was reversed due to no charge-offs. For the six months ended June 30, 2022, $14,000 in accrued interest receivable was reversed, due to charge-offs of $353,000 within the student loan portfolio. For the three and six months ended June 30, 2021, $21,000 and $50,000 in accrued interest receivable was reversed, due to charge-offs of $188,000 and $568,000 within the student loan portfolio.

The following table sets forth the Bank's student loan portfolio with activity from December 31, 2021 to June 30, 2022:
(In thousands)
Student Loan Portfolio Balance as of December 31, 2021 $ 48,456
Disbursements —
Capitalized Interest 775
Loan Consolidations/Payoffs (3,392)
Payments Received (541)
Loans Charged-off (353)
Student Loan Portfolio Balance as of June 30, 2022 $ 44,945

Loan participations purchased decreased to $9.49 million, or 1.0% of the portfolio, at June 30, 2022 from $9.59 million at December 31, 2021 and decreased from the $9.69 million reported at June 30, 2021. Loan participations sold decreased from $14.4 million, or 1.7%, of the portfolio at June 30, 2021, to $5.3 million, or 0.6%, of the portfolio, at December 31, 2021, and increased to $25.5 million, or 2.7%, of the portfolio, at June 30, 2022.

Deposits

Deposit balances totaled $1.21 billion at June 30, 2022, representing an increase of $20.1 million, or 1.7%, from the balance of $1.19 billion reported at December 31, 2021, and an increase of $117.8 million, or 10.8%, from the balance of $1.09 billion reported at June 30, 2021.

Table 7. Deposits

The following table sets forth the amounts of deposits outstanding by category at June 30, 2022 and December 31, 2021, and the net change between the two periods presented.
50
(in 000's) June 30, 2022 December 31, 2021 Net
Change 		Percentage
Change
Noninterest-bearing deposits $ 473,013 $ 476,749 $ (3,736) (0.8) %
Interest-bearing deposits:
NOW and money market accounts 541,166 529,841 11,325 2.1 %
Savings accounts 120,082 113,930 6,152 5.4 %
Time deposits:
Under $250,000 52,762 46,631 6,131 13.1 %
$250,000 and over 21,171 20,955 216 1.0 %
Total interest-bearing deposits 735,181 711,357 23,824 3.3 %
Total deposits $ 1,208,194 $ 1,188,106 $ 20,088 1.7 %

The Company's deposit base consists of two major components represented by noninterest-bearing (demand) deposits and interest-bearing deposits, totaling $473.0 million and $735.2 million at June 30, 2022, respectively. Interest-bearing deposits consist of time certificates, NOW and money market accounts, and savings deposits. Total interest-bearing deposits increased $23.8 million, or 3.3%, between December 31, 2021 and June 30, 2022, and noninterest-bearing deposits decreased $3.7 million, or 0.8%, between the same two periods presented. Included in the increase of $23.8 million in interest-bearing deposits during the six months ended June 30, 2022, are increases of $11.3 million in NOW and money market accounts, $6.3 million in time deposits, and $6.2 million in savings accounts.

Core deposits, as defined by the Company as consisting of all deposits other than time deposits of more than $250,000 and brokered deposits, continue to provide the foundation for the Company's principal sources of funding and liquidity. These core deposits amounted to 98.25% and 98.24% of total deposits at June 30, 2022 and December 31, 2021, respectively. The Company held no brokered deposits at June 30, 2022 or December 31, 2021.

On a year-to-date average, the Company experienced an increase of $160.6 million, or 15.5%, in total deposits between the six months ended June 30, 2022 and the six months ended June 30, 2021. Between these two periods, interest-bearing deposits increased $124.0 million, or 20.4%, and noninterest-bearing deposits increased $36.6 million, or 8.5%, on a year-to-date average basis.

Short-Term Borrowings

At June 30, 2022, the Company had collateralized lines of credit with the Federal Reserve Bank of San Francisco totaling $412.9 million, as well as Federal Home Loan Bank (FHLB) lines of credit totaling $2.4 million. At June 30, 2022, the Company had uncollateralized lines of credit with Pacific Coast Bankers Bank (PCBB), PNC, Zion's Bank, and Union Bank totaling $50 million, $40 million, $20 million, and $10 million, respectively. These lines of credit generally have interest rates tied to either the Federal Funds rate, short-term U.S. Treasury rates, or LIBOR. All lines of credit are on an “as available” basis and can be revoked by the grantor at any time. At June 30, 2022 and June 30, 2021, the Company had no outstanding borrowings. The Company had collateralized FRB lines of credit of $320.6 million, collateralized FHLB lines of credit totaling $3.1 million, and uncollateralized lines of credit of $50 million with PCBB, $40 million with PNC, $20 million with Zion's Bank, and $10 million with Union Bank at December 31, 2021.

Asset Quality and Allowance for Credit Losses

Lending money is the Company's principal business activity, and ensuring appropriate evaluation, diversification, and control of credit risks is a primary management responsibility. Losses are implicit in lending activities and the amount of such losses will vary, depending on the risk characteristics of the loan portfolio as affected by local economic conditions and the financial experience of borrowers.

The allowance for credit losses is maintained at a level deemed appropriate by management to provide for known and inherent risks in existing loans and commitments to extend credit. The adequacy of the allowance for credit losses is based upon management's continuing assessment of various factors affecting the collectability of loans and commitments to extend credit; including current economic conditions, past credit experience, collateral, and concentrations of credit. There is no precise method of predicting specific losses or amounts which may ultimately be charged off on particular segments of the loan portfolio. The conclusion that a loan may become uncollectible, either in part or in whole is subjective and contingent upon economic, environmental, and other conditions which cannot be predicted with certainty. When determining the adequacy of
51
the allowance for credit losses, the Company follows, in accordance with GAAP, the guidelines set forth in the Revised Interagency Policy Statement on the Allowance for Loan and Lease Losses (Statement) issued by banking regulators in December 2006. The Statement is a revision of the previous guidance released in July 2001, and outlines characteristics that should be used in segmentation of the loan portfolio for purposes of the analysis including risk classification, past due status, type of loan, industry or collateral. It also outlines factors to consider when adjusting the loss factors for various segments of the loan portfolio, and updates previous guidance that describes the responsibilities of the board of directors, management, and bank examiners regarding the allowance for credit losses. Securities and Exchange Commission Staff Accounting Bulletin No. 102 was released during July 2001, and represents the SEC staff’s view relating to the incurred loss methodologies and supporting documentation for the Allowance for Loan and Lease Losses that should be observed by all public companies in complying with the federal securities laws and the Commission’s interpretations.  It is also generally consistent with the guidance published by the banking regulators.

The allowance for loan losses includes an asset-specific component, as well as a general or formula-based component. The Company segments the loan and lease portfolio into eight (8) segments, primarily by loan class homogeneity and commonality of purpose for analysis under the formula-based component of the allowance. Those loans which are determined to be impaired under current accounting guidelines are not subject to the formula-based reserve analysis, and evaluated individually for specific impairment under the asset-specific component of the allowance.

The Company’s methodology for assessing the adequacy of the allowance for credit losses consists of several key elements, which include:

• The formula allowance
• Specific allowances for problem graded loans identified as impaired; and
• The unallocated allowance

The formula allowance is calculated by applying loss factors to outstanding loans and certain unfunded loan commitments. Loss factors are based on the Company’s historical loss experience and on the internal risk grade of those loans, and may be adjusted for significant factors that, in management's judgment, affect the collectability of the portfolio as of the evaluation date. Factors that may affect collectability of the loan portfolio include:
• Levels of, and trends in delinquencies and nonaccrual loans;
• Trends in volumes and term of loans;
• Effects of any changes in lending policies and procedures including those for underwriting, collection, charge-off, and recovery;
• Experience, ability, and depth of lending management and staff;
• National and local economic trends and conditions and;
• Concentrations of credit that might affect loss experience across one or more components of the portfolio, including high-balance loan concentrations and participations.

Management determines the loss factors for problem graded loans (substandard, doubtful, and loss), special mention loans, and pass graded loans, based on a loss migration model. The migration analysis incorporates loan losses over the previous quarters as determined by management (time horizons adjusted as business cycles or environment changes) and loss factors are adjusted to recognize and quantify the loss exposure from changes in market conditions and trends in the Company’s loan portfolio. For purposes of this analysis, loans are grouped by internal risk classifications and categorized as pass, special mention, substandard, doubtful, or loss. Certain loans are homogeneous in nature and are therefore pooled by risk grade. These homogeneous loans include consumer installment and home equity loans. Special mention loans are currently performing but are potentially weak, as the borrower has begun to exhibit deteriorating trends which, if not corrected, could jeopardize repayment of the loan and result in further downgrades. Substandard loans have well-defined weaknesses which, if not corrected, could jeopardize the full satisfaction of the debt. A loan classified as doubtful has critical weaknesses that make full collection of the obligation improbable. Classified loans, as defined by the Company, include impaired loans and loans categorized as substandard, doubtful, and loss which are not considered impaired. At June 30, 2022, impaired and classified loans totaled $13.5 million, or 1.4%, of gross loans as compared to $13.7 million, or 1.6%, of gross loans at December 31, 2021.

The student loan portfolio is reviewed for allowance adequacy under the same guidelines as other loans in the Company's portfolio, with additional emphasis for specific risks associated with the portfolio. In general, the Company provides an additional reserve for a percentage of loans in forbearance and loans rated substandard.

52
Loan participations are reviewed for allowance adequacy under the same guidelines as other loans in the Company’s portfolio, with an additional participation factor added, if required, for specific risks associated with participations. In general, participations are subject to certain thresholds set by the Company, and are reviewed for geographic location as well as the well-being of the underlying agent bank.

Specific allowances are established based on management’s periodic evaluation of loss exposure inherent in impaired loans. For impaired loans, specific allowances are determined based on the net realizable value of the underlying collateral, the net present value of the anticipated cash flows, or the market value of the underlying assets. Formula allowances for classified loans, excluding impaired loans, are determined on the basis of additional risks involved with individual loans that may be in excess of risk factors associated with the loan portfolio as a whole. The specific allowance is different from the formula allowance in that the specific allowance is determined on a loan-by-loan basis based on risk factors directly related to a particular loan, as opposed to the formula allowance which is determined for a pool of loans with similar risk characteristics, based on past historical trends and other risk factors which may be relevant on an ongoing basis.

The unallocated portion of the allowance is based upon management’s evaluation of various conditions that are not directly measured in the determination of the formula and specific allowances. The conditions may include, but are not limited to, general economic and business conditions affecting the key lending areas of the Company, credit quality trends, collateral values, loan volumes and concentrations, and other business conditions.

Table 8. Allowance for Loan Losses

The following table summarizes the specific allowance, formula allowance, and unallocated allowance at June 30, 2022 and December 31, 2021, as well as classified loans at those period-ends.
(in 000's) June 30, 2022 December 31, 2021
Specific allowance – impaired loans $ 101 $ 130
Formula allowance – classified loans not impaired 474 523
Formula allowance – special mention loans 285 503
Total allowance for special mention and classified loans 860 1,156
Formula allowance for pass loans 8,556 7,408
Unallocated allowance 491 769
Total allowance for loan losses $ 9,907 $ 9,333
Impaired loans 11,884 12,034
Classified loans not considered impaired 1,632 1,645
Total classified and impaired loans $ 13,516 $ 13,679
Special mention loans not considered impaired $ 36,497 $ 40,289

Impaired loans decreased $152,000 between December 31, 2021 and June 30, 2022, and the specific allowance related to impaired loans decreased $29,000 between December 31, 2021 and June 30, 2022. The decrease in impaired loans is primarily due to a decrease in non-performing loans. The formula allowance related to classified and special mention unimpaired loans decreased by $267,000 between December 31, 2021 and June 30, 2022. The unallocated allowance decreased from $769,000 at December 31, 2021 to $491,000 at June 30, 2022. The level of “pass” loans increased approximately $83.0 million between December 31, 2021 and June 30, 2022. The related formula allowance increased $1,148,000 during the same period. The formula allowance for "pass loans" is derived from loss factors using migration analysis and management's consideration of qualitative factors. The increase in formula allowance for "pass loans" was partially attributed to an adjustment in qualitative factor for economic uncertainty

The Company’s methodology includes features that are intended to reduce the difference between estimated and actual losses. The specific allowance portion of the analysis is designed to be self-correcting by taking into account the current loan loss experience based on that portion of the portfolio. By analyzing the estimated losses inherent in the loan portfolio on a quarterly basis, management is able to adjust specific and inherent loss estimates using the most recent information available. In
53
performing the periodic migration analysis, management believes that historical loss factors used in the computation of the formula allowance need to be adjusted to reflect current changes in market conditions and trends in the Company’s loan portfolio. There are a number of other factors which are reviewed when determining adjustments in the historical loss factors. Those factors include: 1) trends in delinquent and nonaccrual loans, 2) trends in loan volume and terms, 3) effects of changes in lending policies, 4) concentrations of credit, 5) competition, 6) national and local economic trends and conditions, 7) experience of lending staff, 8) loan review and Board of Directors oversight, 9) high balance loan concentrations, and 10) other business conditions.

The general reserve requirements (ASC 450-70) decreased with the continued strengthening of local, state, and national economies and their impact on our local lending base, which has resulted in a lower qualitative component for the general reserve calculation. Our stake-in-the-ground methodology requires the Company to use December 31, 2005 as the starting point of the look back period to capture loss history and better capture an entire economic cycle. Time horizons are subject to Management's assessment of the current period, taking into consideration changes in business cycles and environment changes.

Management and the Company’s lending officers evaluate the loss exposure of classified and impaired loans on a weekly/monthly basis. The Company’s Loan Committee meets weekly and serves as a forum to discuss specific problem assets that pose significant concerns to the Company, and to keep the Board of Directors informed through committee minutes. All special mention and classified loans are reported quarterly on Problem Asset Reports and Impaired Loan Reports and are reviewed by senior management. Migration analysis and impaired loan analysis are performed on a quarterly basis and adjustments are made to the allowance as deemed necessary. The Board of Directors is kept abreast of any changes or trends in problem assets on a monthly basis, or more often if required.

The specific allowance for impaired loans is measured based on the present value of the expected future cash flows discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent. The amount of impaired loans is not directly comparable to the amount of nonperforming loans disclosed later in this section. The primary differences between impaired loans and nonperforming loans are: i) all loan categories are considered in determining nonperforming loans while impaired loan recognition is limited to commercial and industrial loans, commercial and residential real estate loans, construction loans, and agricultural loans, and ii) impaired loan recognition considers not only loans 90 days or more past due, restructured loans and nonaccrual loans but may also include problem loans other than delinquent loans.

The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Impaired loans include nonaccrual loans, troubled debt restructures, and performing loans in which full payment of principal or interest is not expected. Management bases the measurement of these impaired loans either on the fair value of the loan's collateral or the expected cash flows on the loan discounted at the loan's stated interest rates. Cash receipts on impaired loans not performing to contractual terms and that are on nonaccrual status are used to reduce principal balances. Impairment losses are included in the allowance for credit losses through a charge to the provision, if applicable.

In most cases, the Company uses the cash basis method of income recognition for impaired loans. In the case of certain troubled debt restructuring, for which the loan has been performing for a prescribed period of time under the current contractual terms, income is recognized under the accrual method. At June 30, 2022, included in impaired loans, were troubled debt restructures totaling $2.35 million, of which $2.21 million were on nonaccrual. The remaining $143,000 in troubled debt restructures were considered current with regards to payments, and were performing according to their modified contractual terms.

Real estate mortgage loans comprised approximately 1.2% of total impaired loan balances at June 30, 2022. Specific collateral related to impaired loans is reviewed for current appraisal information, economic trends within geographic markets, loan-to-value ratios, and other factors that may impact the value of the loan collateral. Adjustments are made to collateral values as needed for these factors. Of total impaired loans at June 30, 2022, approximately $11.2 million, or 94.3%, are secured by real estate. The majority of impaired real estate construction and development loans are for the purpose of residential construction, residential and commercial acquisition and development, and land development. Residential construction loans are made for the purpose of building residential 1-4 single family homes. Residential and commercial acquisition and development loans are made for the purpose of purchasing land, developing that land if required, and developing real estate or commercial construction projects on those properties. Land development loans are made for the purpose of converting raw land into construction-ready building sites.

Table 9. Impaired Loans and Specific Reserves

The following table summarizes the components of impaired loans and their related specific reserves at June 30, 2022 and December 31, 2021.
54
Impaired Loan Balance Reserve Impaired Loan Balance Reserve
(in 000’s) June 30, 2022 June 30, 2022 December 31, 2021 December 31, 2021
Commercial and industrial $ — $ — $ — $ —
Real estate – mortgage 143 5 146 3
RE construction & development 11,068 — 11,226 —
Agricultural 673 97 662 127
Installment and student loans — — — —
Total impaired loans $ 11,884 $ 102 $ 12,034 $ 130

Included in impaired loans are loans modified in troubled debt restructurings (TDRs), where concessions have been granted to borrowers experiencing financial difficulties in an attempt to maximize collection. The Company makes various types of concessions when structuring TDRs including rate reductions, payment extensions, and forbearance. At June 30, 2022, approximately $143,000 of the total $2.4 million in TDRs was comprised of real estate mortgages. An additional $2.0 million was related to real estate construction and development loans. There were no reserve amounts for real estate construction and development impaired loans at December 31, 2021 and June 30, 2022, due to the value of the collateral securing those loans.
Total troubled debt restructurings decreased 9.4% between June 30, 2022 and December 31, 2021. Nonaccrual TDRs decreased by 8.7% and accruing TDRs decreased by 18.8% over the same period. Total residential mortgages and real estate construction TDRs decreased $161,000 to a percentage total of 6.8%.

Table 10. TDRs

The following tables summarize TDRs by type, classified separately as nonaccrual or accrual, which are included in impaired loans at June 30, 2022 and December 31, 2021.
Total TDRs Nonaccrual TDRs Accruing TDRs
(in 000's) June 30, 2022 June 30, 2022 June 30, 2022
Commercial and industrial $ — $ — $ —
Real estate mortgage:
Commercial real estate — — —
Residential mortgages 143 — 143
Total real estate mortgage 143 — 143
RE construction & development 2,048 2,048 —
Agricultural 160 160 —
Total troubled debt restructurings $ 2,351 $ 2,208 $ 143
Total TDRs Nonaccrual TDRs Accruing TDRs
(in 000's) December 31, 2021 December 31, 2021 December 31, 2021
Commercial and industrial $ — $ — $ —
Real estate mortgage:
Commercial real estate — — —
Residential mortgages 146 — 146
Total real estate mortgage 146 — 146
RE construction & development 2,206 2,206 —
Agricultural 242 212 30
Total troubled debt restructurings $ 2,594 $ 2,418 $ 176

55
Of the $2.4 million in total TDRs at June 30, 2022, $2.2 million were on nonaccrual status at period-end. Of the $2.6 million in total TDRs at December 31, 2021, $2.4 million were on nonaccrual status at period-end. As of June 30, 2022, the Company had no commercial real estate (CRE) workouts whereby an existing loan was restructured into multiple new loans.

A restructured loan may return to accrual status after 6 months successful payment history if continued satisfactory performance is expected. The Company typically performs a financial analysis of the credit to determine whether the borrower has the ability to continue to meet payments over the remaining life of the loan. This includes, but is not limited to, a review of financial statements and a cash flow analysis of the borrower. Only after determination that the borrower has the ability to perform under the terms of the loans will the restructured credit be considered for accrual status.

Table 11. Credit Quality Indicators for Outstanding Student Loans

The following table summarizes the credit quality indicators for outstanding student loans as of June 30, 2022 and December 31, 2021 (in 000's, except for number of borrowers):
June 30, 2022 December 31, 2021
Number of Loans Amount Accrued Interest Number of Loans Amount Accrued Interest
School 127 $ 3,652 $ 1,466 185 $ 6,555 $ 2,021
Grace 54 2,376 671 28 912 317
Repayment 468 20,572 665 500 23,834 715
Deferment 201 8,537 1,149 224 8,984 508
Forbearance 201 9,808 854 177 8,172 1,077
Total 1,051 $ 44,945 $ 4,805 1,114 $ 48,457 $ 4,638

Included in installment loans are $44.9 million and $48.5 million in student loans at June 30, 2022 and December 31, 2021, respectively, made to medical and pharmacy school students. At June 30, 2022 there were 870 loans within repayment, deferment, and forbearance which represented $20.6 million, $8.5 million, and $9.8 million, respectively. At December 31, 2021, there were 901 loans within repayment, deferment, and forbearance which represented $23.8 million, $9.0 million and $8.2 million, respectively. As of June 30, 2022 and December 31, 2021 the reserve against the student loan portfolio was $2.6 million and $2.6 million, respectively.

Loan interest rates on the student loan portfolio range from 3.125% to 8.125% and 2.625% to 7.625% at June 30, 2022 and December 31, 2021, respectively.

Table 12. Nonperforming Assets
The following table summarizes the components of nonperforming assets as of June 30, 2022 and December 31, 2021 (in 000's), and the percentage of nonperforming assets to total gross loans, total assets, and the allowance for loan losses:
(in 000's) June 30, 2022 December 31, 2021
Nonaccrual loans (1) $ 11,229 $ 11,438
Restructured loans 143 176
Loans past due 90 days or more, still accruing 109 453
Total nonperforming loans 11,481 12,067
Other real estate owned 4,582 4,582
Total nonperforming assets $ 16,063 $ 16,649
Nonperforming loans to total gross loans 1.21 % 1.39 %
Nonperforming assets to total assets 1.20 % 1.25 %
Allowance for loan losses to nonperforming loans 86.29 % 77.34 %
(1) Included in nonaccrual loans at June 30, 2022 and December 31, 2021 are restructured loans totaling $2,208 and $2,418, respectively.

56
Nonperforming assets, which are primarily related to the real estate loan and other real estate owned portfolio, decreased $586,000 from a balance of $16.6 million at December 31, 2021 to a balance of $16.1 million at June 30, 2022, and remained relatively high compared to peers during the six months ended June 30, 2022. The ratio of the allowance for loan losses to nonperforming loans increased from 77.3% at December 31, 2021 to 86.3% at June 30, 2022.

The following table summarizes the nonaccrual totals by loan category for the periods shown:
Balance Balance Change from
(in 000's) June 30, 2022 December 31, 2021 December 31, 2021
Nonaccrual Loans:
Commercial and industrial $ — $ — $ —
Real estate - mortgage — — —
RE construction & development 11,068 11,226 (158)
Agricultural 161 212 (51)
Installment and student loans — — —
Total nonaccrual loans $ 11,229 $ 11,438 $ (209)

Loans past due more than 30 days receive increased management attention and are monitored for increased risk. The Company continues to move past due loans to nonaccrual status in an ongoing effort to recognize and address loan problems as early and most effectively as possible. As impaired loans, nonaccrual and restructured loans are reviewed for specific reserve allocations, the allowance for credit losses is adjusted accordingly.

Except for the nonaccrual loans included in the above table, or those included in the impaired loan totals, there were no loans at June 30, 2022 where the known credit problems of a borrower caused the Company to have serious doubts as to the ability of such borrower to comply with the present loan repayment terms and which would result in such loan being included as a nonaccrual, past due, or restructured loan at some future date.

Nonaccrual loans, totaling $11.2 million at June 30, 2022, decreased $209,000 from the balance of $11.4 million reported at December 31, 2021, with real estate mortgage and real estate construction loans comprising 98.6% of total nonaccrual loans at June 30, 2022. In determining the adequacy of the underlying collateral related to these loans, management monitors trends within specific geographical areas, loan-to-value ratios, appraisals, and other credit issues related to the specific loans. Impaired loans decreased $152,000 during the six months ended June 30, 2022 to a balance of $11.9 million at June 30, 2022. Other real estate owned through foreclosure remained at $4.6 million for the periods ended June 30, 2022 and December 31, 2021. Nonperforming assets as a percentage of total assets decreased from 1.25% at December 31, 2021 to 1.20% at June 30, 2022.

The following table summarizes various nonperforming components of the loan portfolio, the related allowance for credit losses and provision for credit losses for the periods shown.
(in 000's) June 30, 2022 December 31, 2021 June 30, 2021
Provision for credit losses year-to-date $ 611 $ 2,107 $ 1,201
Allowance as % of nonperforming loans 86.29 % 77.34 % 77.75 %
Nonperforming loans as % total loans 1.21 % 1.39 % 1.41 %
Restructured loans as % total loans 0.25 % 0.30 % 0.37 %

Management continues to monitor economic conditions in the real estate market for signs of deterioration or improvement which may impact the level of the allowance for loan losses required to cover identified losses in the loan portfolio. Focus has been placed on monitoring and reducing the level of problem assets, while working with borrowers to find more options, including loan restructures. Restructured loan balances are comprised of 4 loans totaling $2.35 million at June 30, 2022, compared to 5 loans totaling $2.59 million at December 31, 2021.
57
The following table summarizes special mention loans by type at June 30, 2022 and December 31, 2021.
(in thousands) June 30, 2022 December 31, 2021
Real estate mortgage:
Commercial real estate 34,699 29,092
Total real estate mortgage 34,699 29,092
Agricultural 1,798 11,197
Total special mention loans $ 36,497 $ 40,289
The Company focuses on competition and other economic conditions within its market area and other geographical areas in which it does business, which may ultimately affect the risk assessment of the portfolio. The Company continues to experience increased competition from major banks, local independents and non-bank institutions which creates pressure on loan pricing. The Company continues to place increased emphasis on reducing both the level of nonperforming assets and the level of losses on the disposition of these assets. It is in the best interest of both the Company and the borrowers to seek alternative options to foreclosure in an effort to reduce the impacts on the real estate market. As part of this strategy, the Company enters into troubled debt restructurings, when it improves collection prospects. While business and consumer spending have shown improvement over the last several years, it is difficult to forecast the impact COVID-19 will have on the economy. Local unemployment rates in the San Joaquin Valley have improved as businesses return to pre-pandemic operations. Management recognizes the increased risk of loss due to the Company's exposure to local and worldwide economic conditions, as well as potentially volatile real estate markets, and takes these factors into consideration when analyzing the adequacy of the allowance for credit losses.

The following table provides a summary of the Company's allowance for possible credit losses, provisions made to that allowance, and charge-off and recovery activity affecting the allowance for the six months ended June 30, 2022 and June 30, 2021.

58
Table 13. Allowance for Credit Losses - Summary of Activity
(in 000's) June 30, 2022 June 30, 2021
Total loans outstanding at end of period before deducting allowances for credit losses $ 949,991 $ 842,049
Average loans outstanding during period 888,722 716,162
Balance of allowance at beginning of period 9,333 8,522
Loans charged-off:
Installment and student loans (364) (580)
Total loans charged-off (364) (580)
Recoveries of loans previously charged-off:
Real estate 6 11
Commercial and industrial 304 39
Installment and student loans 17 7
Total loan recoveries 327 57
Net loans charged-off (37) (523)
Provision charged to operating expense 611 1,201
Balance of allowance for credit losses at end of period $ 9,907 $ 9,200
Net loan charged-off to total average loans (annualized) 0.01 % 0.15 %
Net loan charged-off to loans at end of period (annualized) 0.02 % 0.06 %
Allowance for credit losses to total loans at end of period 1.05 % 1.09 %
Net loan charged-off to allowance for credit losses (annualized) 1.49 % 1.42 %
Provision for credit losses to net charged-off (annualized) (3,302.70) % (459.27) %
Provisions for credit losses are determined on the basis of management's periodic credit review of the loan portfolio, consideration of past loan loss experience, current and future economic conditions, and other pertinent factors. Management believes its estimate of the allowance for credit losses adequately covers estimated losses inherent in the loan portfolio and, based on the condition of the loan portfolio, management believes the allowance is sufficient to cover risk elements in the loan portfolio. For the six months ended June 30, 2022, a $611,000 provision was recorded to the allowance for credit losses as compared to a $1,201,000 provision recorded for the six months ended June 30, 2021.

Net charge-offs during the six months ended June 30, 2022 totaled $37,000 as compared to net charge-offs of $523,000 for the six months ended June 30, 2021. The Company charged-off, or had partial charge-offs on 4 loans during the six months ended June 30, 2022, as compared to fourteen loans during the same period ended June 30, 2021, and 39 loans during the year ended December 31, 2021. The annualized percentage of net charge-offs to average loans was 0.01% for the six months ended June 30, 2022. Annualized percentage net charge-offs were 0.07% for the year ended December 31, 2021. Annualized percentage net recoveries were 0.15% for the six months ended June 30, 2021. The Company's loans net of unearned fees increased from $842.0 million at June 30, 2021 to $950.0 million at June 30, 2022.

The allowance at June 30, 2022 was 1.05% of outstanding loan balances at June 30, 2022, as compared to 1.07% at December 31, 2021, and 1.27% at June 30, 2021.

At June 30, 2022 and June 30, 2021, unfunded loan commitment reserves of $475,000 and $538,000 respectively, were reported in other liabilities. Management believes that the 1.05% credit loss allowance at June 30, 2022 is adequate to absorb known and inherent risks in the loan portfolio. No assurance can be given, however, regarding economic conditions or other circumstances which may adversely affect the Company's service areas resulting in increased losses in the loan portfolio not captured by the current allowance for loan losses. Management is not currently aware of any conditions that may adversely affect the levels of losses incurred in the Company’s loan portfolio.

59
Liquidity and Capital Resources

The Company's asset/liability management, liquidity strategy, and capital planning is guided by policies, formulated and monitored by the Asset and Liability Management Committee ("ALCO") and Management, to provide adequate liquidity and maintain an appropriate balance between interest-sensitive assets and interest-sensitive liabilities.

Liquidity

Liquidity management may be described as the ability to maintain sufficient cash flows to fulfill both on- and off-balance sheet financial obligations, including loan funding commitments and customer deposit withdrawals, without straining the Company’s equity structure. To maintain an adequate liquidity position, the Company relies on, in addition to cash and cash equivalents, cash inflows from deposits and short-term borrowings, repayments of principal on loans and investments, and interest income received. The Company's principal cash outflows are for loan origination, purchases of investment securities, depositor withdrawals and payment of operating expenses.

The Company's liquid asset base, which generally consists of cash and due from banks, federal funds sold, and investment securities, is maintained at levels deemed sufficient to provide the cash necessary to fund loan growth, unfunded loan commitments, and deposit runoff. Included in this framework is the objective of maximizing the yield on earning assets. This is generally achieved by maintaining a high percentage of earning assets in loans and investment securities, which are higher yielding assets compared to cash. At June 30, 2022, loans represented 70.9% of total assets and accounted for a loan to deposit ratio of 78.6%, as compared to 65.5% of total assets and a loan to deposit ratio of 73.4% at December 31, 2021. Investment securities represented 16.11% of total assets at June 30, 2022, compared to 13.72% at December 31, 2021. Liquid assets at June 30, 2022 include cash and cash equivalents totaling $107.2 million, as compared to $219.2 million at December 31, 2021.

Liabilities used to fund liquidity sources include core and non-core deposits as well as short-term borrowings capability. Core deposits, which comprised approximately 98.2% of total deposits at June 30, 2022, provide a significant and stable funding source for the Company. At June 30, 2022, unused lines of credit with the Federal Home Loan Bank, Pacific Coast Banker's Bank, Zion's Bank, Union Bank and the Federal Reserve Bank totaling $495.3 million were collateralized in part by certain qualifying loans in the Company’s loan portfolio. The carrying value of loans pledged on these used and unused borrowing lines totaled $538.9 million at June 30, 2022. For a further detail of the Company’s borrowing arrangements, see Note 6 of the consolidated financial statements.

The period-end balances of cash and cash equivalents for the periods shown are as follows ( from Consolidated Statements of Cash Flows – in 000’s):
(in 000's) Balance
December 31, 2020 $ 294,069
June 30, 2021 $ 160,908
December 31, 2021 $ 219,219
June 30, 2022 $ 107,246

Capital and Dividends

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements adopted by the Board of Governors of the Federal Reserve System (the “Board of Governors”).  Failure to meet minimum capital requirements can initiate certain mandates and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.  Under capital adequacy guidelines and the regulatory framework, the consolidated Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Company has adopted a capital plan that includes guidelines and trigger points to ensure sufficient capital is maintained at the Bank and the Company, and that capital ratios are maintained at a level deemed appropriate under regulatory guidelines given the level of classified assets, concentrations of credit, ALLL, current and projected growth, and projected retained earnings. The capital plan also contains contingency strategies to obtain additional capital as required to fulfill future capital requirements for both the Bank, as a separate legal entity, and the Company on a consolidated basis. The capital plan requires
60
the Bank to maintain a Tier 1 Leverage Ratio equal to or greater than 9%. The Bank’s Tier 1 Capital Ratio was 9.69% and 10.28% at June 30, 2022 and 2021, respectively.

The Company uses a variety of measures to evaluate its capital adequacy. Management reviews these capital measurements on a quarterly basis and takes appropriate action to help ensure that they meet or surpass established internal and external guidelines. The following table sets forth the Company’s and the Bank's actual capital positions at June 30, 2022:

Capital Ratios
Ratios at June 30, 2022 Ratios at December 31, 2021 Minimum Requirement to be Well Capitalized Minimum requirement for Community Bank Leverage Ratio (1)
Tier 1 capital to adjusted average assets ("Leverage Ratio")
Company 9.70% 9.79% 5.00% 9.00%
Bank 9.69% 9.64% 5.00% 9.00%
(1) If the subsidiary bank’s Leverage Ratio exceeds the minimum ratio under the Community Bank Leverage Ratio Framework, it is deemed to be “well capitalized” under all other regulatory capital requirements. The Company may revert back to the regulatory framework for Prompt Corrective Action if the subsidiary bank’s Leverage Ratio falls below the minimum under the Community Bank Leverage Ratio Framework.

As of June 30, 2022, the Company and the Bank meet all capital adequacy requirements to which they are subject. Management believes that, under the current regulations, both will continue to meet their minimum capital requirements in the foreseeable future.

Dividends

Dividends paid to shareholders by the Holding Company are subject to restrictions set forth in the California General
Corporation Law. As applicable to the Holding Company, the California General Corporation Law provides that the Holding Company may make a distribution to its shareholders if retained earnings immediately prior to the dividend payout are at least equal to the amount of the proposed distribution or if immediately after the distribution, the value of the Holding Company’s assets would equal or exceed the sum of its total liabilities. The primary source of funds with which dividends will be paid to shareholders will come from cash dividends received by the Company from the Bank.

On April 25, 2017, the Board of Directors announced the authorization of the repurchase of up to $3,000,000 of the outstanding stock of the Holding Company. This amount represents 2.7% of total shareholders' equity of $110.0 million at June 30, 2022. The timing of the purchases will depend on certain factors including, but not limited to, market conditions and prices, available funds, and alternative uses of capital. The stock repurchase program may be carried out through open-market purchases, block trades, or negotiated private transactions. During the six months ended June 30, 2022, the Company did not repurchase any of the shares available.

During the six months ended ended June 30, 2022, the Bank paid $3.9 million in cash dividends to the Holding Company which funded the Holding Company’s operating costs, payments of interest on its junior subordinated debt, and dividend payments to shareholders.

On June 28, 2022, the Company’s Board of Directors declared a cash dividend of $0.11 per share on the Company's common stock. The dividend was payable on July 22, 2022, to shareholders of record as of July 8, 2022. Approximately $1.9 million was transferred from retained earnings to dividends payable to allow for distribution of the dividend to shareholders.

On March 22, 2022, the Company’s Board of Directors declared a cash dividend of $0.11 per share on the Company's common stock. The dividend was payable on April 18, 2022, to shareholders of record as of April 6, 2022. Approximately $1.9 million was transferred from retained earnings to dividends payable to allow for distribution of the dividend to shareholders.

The Bank, as a state-chartered bank, is subject to dividend restrictions set forth in the California Financial Code, as administered by the Commissioner of the Department of Financial Protection and Innovation (Commissioner). As applicable to the Bank, the Financial Code provides that the Bank may not pay cash dividends in an amount which exceeds the lesser of the retained earnings of the Bank or the Bank’s net income for the last three fiscal years (less the amount of distributions to the Holding Company during that period of time). If the above test is not met, cash dividends may only be paid with the prior
61
approval of the Commissioner, in an amount not exceeding the Bank’s net income for its last fiscal year or the amount of its net income for the current fiscal year. Such restrictions do not apply to stock dividends, which generally require neither the satisfaction of any tests nor the approval of the Commissioner. Notwithstanding the foregoing, if the Commissioner finds that the shareholder's equity of the Bank is not adequate or that the declaration of a dividend would be unsafe or unsound, the Commissioner may order the Bank not to pay any dividend. The Reserve Bank may also limit dividends paid by the Bank.


Item 3  - Quantitative and Qualitative Disclosures about Market Risk

The Company’s assessment of market risk as of June 30, 2022 indicates there are no material changes in the quantitative and qualitative disclosures from those in our Annual Report on Form 10-K for the year ended December 31, 2021.

Item 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of June 30, 2022, the end of the period covered by this report, an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures was carried out. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company's internal control over financial reporting that occurred during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all error and fraud.  A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met.  Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  The design of any control procedure is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

62
PART II. Other Information

Item 1. Legal Proceedings

The Company is involved in various legal proceedings in the normal course of business. In the opinion of Management, any liability resulting from such proceedings would not have a material adverse effect on the Company’s financial condition or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None during the quarter ended June 30, 2022.
Item 3. Defaults Upon Senior Securities

Not applicable
Item 4. Mine Safety Disclosures

Not applicable
Item 5. Other Information

Not applicable
Item 6. Exhibits :

(a) Exhibits:
11 Computation of Earnings per Share*
31.1
31.2
32.1
32.2
* Data required by Accounting Standards Codification (ASC) 260, Earnings per Share , is provided in Note 10 to the consolidated financial statements in this report.
63
Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
United Security Bancshares
Date: August 5, 2022 /S/ Dennis R. Woods
Dennis R. Woods
President and Chief Executive Officer
/S/ Bhavneet Gill
Bhavneet Gill
Senior Vice President and Chief Financial Officer
64
TABLE OF CONTENTS