UBFO United Security Bancshares

FRESNO, Calif., April 16 /PRNewswire-FirstCall/ -- Dennis R. Woods, President and Chief Executive Officer of United Security Bancshares http://www.unitedsecuritybank.com/ (NASDAQ:UBFO) reported today the results of operation for the 1st quarter 2008. Net income was $2,500,000 for 2008, as compared with $3,603,000 in 2007. Basic and diluted earnings per share for the 1st quarter 2008 were $0.21 compared with $0.30 for 2007. For the three months ended March 31, 2008, return on average equity was 11.79% and the return on average assets was 1.29%. For the same period in 2007, return on average equity was 19.02% and return on average assets was 2.04%. These key ratios are indicative of the Company's strong performance and ability to build shareholder value during strained economic times. The 78th consecutive quarterly cash dividend of $0.13 per share, up from $0.125 for a 4.0% increase from a year ago, was declared on March 25, 2008, to be paid on April 23, 2008, to shareholders of record on April 11, 2008. Woods said, "During the 1st quarter of 2008, we recognized a loss on core deposit intangible assets and a fair value gain of the Company's Trust Preferred Securities. Last year, during the 1st quarter of 2007, we collected interest on a loan previously on nonaccrual status and expensed merger related costs. Subtracting those amounts from both years provides a view of core earnings. During the 1st quarter of 2008, the Company recognized a pretax impairment loss on core deposit intangible assets of $623,615 ($364,191 after tax) and a fair value gain on trust preferred securities of $539,000 ($314,776 after tax). During the 1st quarter 2007, the Company collected interest on a loan previously on nonaccrual status in the amount of $1,136,571 ($666,086 after tax) and expensed merger related costs of $191,000 ($111,935 after tax). Without the additional items referenced above, proforma net income would have been $2,550,000 for 2008 and $3,048,000 for 2007" Woods added, "The Company is not involved in sub-prime mortgage lending activities. The loan portfolio and investment portfolio contained no sub prime mortgages at March 31, 2008. We have not seen significant changes in real estate prices in our markets during the 1st quarter and additions to the loan loss reserve provided during the 4th quarter of 2007 remain adequate. Some local sources are expecting a turnaround in real estate prices to start in the next few months. We are primarily focused on maintaining a fortress balance sheet. The decreases in interest rates reduced interest income significantly but improved most of the borrowers' ability to service debt by reducing their interest costs, thereby strengthening credit quality of the Bank's loan portfolio. The interest rate decreases hindered the Company's ability to grow earnings, due to a lag time in repricing liabilities relative to asset repricing, however, the opposite scenario will emerge when interest rates begin to increase. In essence, it's a timing difference." Shareholders' equity at quarter end was $82.8 million. During the past 12 months, dividends of $5.9 million were paid out of shareholders' equity to shareholders and $8.3 million was utilized to purchase and retire shares of Company stock at an average price of $18.91. Net interest income for the 1st quarter 2008 was $8.0 million, down $1.7 million from the 1st quarter of 2007 for a decrease of 18.0%. The net interest margin decreased from 6.20% in 2007 to 4.62% in 2008. The decrease in the net interest margin in the 1st quarter of 2008 is attributable in part to the interest income collected on a previously nonaccrual loan during the 1st quarter of 2007. Without the interest income collected during the 1st quarter of 2007, net interest income would have been $8.6 million, or $612,000 over 2008. Without the additional interest income in 2007, the net interest margin would have been 5.48% in 2007. The decrease in net interest income and lower net interest margin in 2008 is primarily attributable to the 3% drop in interest rates by the Federal Reserve Bank over the last 6 months. The interest rate declines for interest-earning assets were significant over the short time frame and outpaced interest rate decreases on interest-bearing liabilities for the quarter. Noninterest income for the 1st quarter of 2008 was $2,333,000, up $752,000 from $1,581,000 in 2007 for an increase of 47.6%. $539,000 of the increase resulted from the fair value gain of the Company's Trust Preferred Securities. Operating expenses for the three months ended March 31, 2008 were $6,116,000 and $5,200,000 for 2007, an increase of $916,000 or 17.2%. $623,000 of the increase resulted from an impairment loss on core deposit intangible assets. The provision for loan loss was $265,000 for the 1st quarter of 2008 and $202,000 for 1st quarter of 2007. In determining the adequacy of the allowance for loan losses, Management's judgment is the primary determining factor for establishing the amount of the provision for loan losses and management considers the allowance for loan and lease losses at 3/31/2008 to be adequate. Non-performing assets increased to 3.90% of total assets on March 31, 2008 from 2.11% at March 31, 2007. At year-end 2007 non-performing assets were 3.66% of total assets. United Security Bancshares is a $760+ million bank holding company. United Security Bank, it's principal subsidiary is a state chartered bank and member of the Federal Reserve Bank of San Francisco. FORWARD-LOOKING STATEMENTS This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended and the Company intends such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management's knowledge and belief as of today and include information concerning the Company's possible or assumed future financial condition, and its results of operations, business and earnings outlook. These forward-looking statements are subject to risks and uncertainties. A number of factors, some of which are beyond the Company's ability to control or predict, could cause future results to differ materially from those contemplated by such forward-looking statements. These factors include (1) changes in interest rates, (2) significant changes in banking laws or regulations, (3) increased competition in the company's market, (4) other-than-expected credit losses, (5) earthquake or other natural disasters impacting the condition of real estate collateral, (6) the effect of acquisitions and integration of acquired businesses, (7) the impact of proposed and/or recently adopted changes in regulatory, judicial, or legislative tax treatment of business transactions, particularly recently enacted California tax legislation and the subsequent Dec. 31, 2003, announcement by the Franchise Tax Board regarding the taxation of REITs and RICs; and (8) unknown economic impacts caused by the State of California's budget issues. Management cannot predict at this time the severity or duration of the effects of the recent business slowdown on our specific business activities and profitability. Weaker or a further decline in capital and consumer spending, and related recessionary trends could adversely affect our performance in a number of ways including decreased demand for our products and services and increased credit losses. Likewise, changes in interest rates, among other things, could slow the rate of growth or put pressure on current deposit levels and affect the ability of borrowers to repay loans. Forward-looking statements speak only as of the date they are made, and the company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the statements are made, or to update earnings guidance including the factors that influence earnings. For a more complete discussion of these risks and uncertainties, see the Company's Annual Report on Form 10-K for the year ended December 31, 2007, and particularly the section of Management's Discussion and Analysis. United Security Bancshares Consolidated Balance Sheets (unaudited) (dollars in thousands) March 31 March 31 Cash & noninterest-bearing deposits in 2008 2007 other banks $21,914 $24,680 Interest-bearing deposits in other banks 2,740 7,953 Federal funds sold 0 7,277 Investment securities AFS 102,757 98,026 Loans, net of unearned fees 576,511 561,005 Less: allowance for loan losses (10,924) (9,702) Loans, net 565,586 551,303 Premises and equipment, net 15,295 16,205 Intangible assets 14,136 13,915 Other assets 39,660 44,464 TOTAL ASSETS $762,089 $763,823 Deposits: Noninterest-bearing demand & NOW $181,134 $196,732 Savings & Money Market 165,625 203,544 Time 267,736 240,061 Total deposits 614,495 640,337 Borrowed funds 43,000 10,000 Other liabilities 9,002 11,069 Junior subordinated debentures 12,777 16,712 TOTAL LIABILITIES $679,274 $678,118 Shareholders' equity: Common shares outstanding: 11,833,566 at March 31, 2008 12,220,121 at March 31, 2007 $32,238 $39,850 Retained earnings 50,958 46,808 Fair Value Adjustment - Hedge (0) (77) Accumulated other comprehensive income (380) (875) Total shareholders' equity $82,815 $85,705 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $762,089 $763,823 United Security Bancshares Three Three Consolidated Statements of Income Months Months (dollars in 000's, except per share amounts) Ended Ended (unaudited) March March 2008 2007 Interest income $12,744 $14,236 Interest expense 4,759 4,503 Net interest income 7,985 9,733 Provision for loan losses 265 202 Other income 2,333 1,581 Other expenses 6,116 5,200 Income before income tax provision 3,937 5,912 Provision for income taxes 1,437 2,309 NET INCOME $2,500 $3,603 United Security Bancshares Three Three Selected Financial Data Months Months (dollars in 000's except per share amounts) Ended Ended 03/31/2008 03/31/2007 Basic Earnings Per Share $0.21 $0.30 Diluted Earning Per Share $0.21 $0.30 Annualized Return on: Average Assets 1.29% 2.04% Average Equity 11.79% 19.02% Net Interest Margin 4.62% 6.20% Net Charge-offs to Average Loans 0.04% 0.02% 03/31/2008 03/31/2007 Book Value Per Share $7.00 $5.86 Tangible Book Value Per Share $5.83 $5.59 Efficiency Ratio 59.27% 47.23% Non Performing Assets to Total Assets 3.90% 1.50% Allowance for Loan Losses to Total Loans 1.89% 1.67% Shares Outstanding - period end 11,833,566 12,220,121 Basic Shares - average weighted 11,845,927 11,947,319 Diluted Shares - average weighted 11,855,264 12,006,111 DATASOURCE: United Security Bancshares CONTACT: Dennis R. Woods, President and Chief Executive Officer of United Security Bank, +1-559-248-4928 Web site: http://www.unitedsecuritybank.com/

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