UBFO United Security Bancshares

FRESNO, Calif., Oct. 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 3rd quarter and nine months ended September 30, 2008. The results were a net loss of $174,000 for the 3rd quarter of 2008, as compared with net income of $3,657,000 for the 3rd quarter in 2007. Basic and diluted earnings per share for the 3rd quarter 2008 were ($0.01) compared with $0.30 for the 3rd quarter 2007. For the nine months ended September 30, 2008, net income was $4,396,000 compared with $10,568,000 in 2007. For the nine months ended September 30, 2008, return on average equity was 7.05% and the return on average assets was .76%. For the same period in 2007, return on average equity was 17.43% and return on average assets was 1.87%. The low interest rate environment, weak real estate market and economy all combined to impact earnings adversely. The Board of Directors of United Security Bancshares declared a 4th quarter 2008 stock dividend of one percent (1%). The 4th quarter 2008 stock dividend replaces the quarterly cash dividend and reflects a similar value. The stock dividend will be paid to shareholders of record on October 10, 2008 and dividend shares will be issued on October 22, 2008. Woods added, "The Company provided $4.4 million to the allowance for loan losses during the 3rd quarter in concert with the continued tight credit markets; weak economy and weak real estate markets. The adequacy of the allowance is based on Management's judgment of several factors including inherent risk in the loan portfolio. Management contracted with an independent credit review company to review the loan portfolio during the third quarter with emphasis on all real estate development loans. The independent review confirmed management's analysis of inherent risk in the portfolio. The large provision resulted in a minimal loss of $174,000 for the quarter. While it's disappointing to record the first-ever quarterly loss in our 21 years of operation, we are very pleased that our core earnings remain strong, and allow us to provide $4.4 million to our allowance with negligible impact on Bank Capital. Additionally, the US Treasury and the Federal Deposit Insurance Corporation recently announced programs available to banks aimed at improving the credit and real estate markets and strengthening regulatory capital of the banking system. Management and the Board of Directors are reviewing these programs and will participate in those that benefit our customers and shareholders." Shareholders' equity at quarter end was $81.02 million. During the past 12 months, dividends of $6.0 million were paid out of shareholders' equity to shareholders and $1.95 million was utilized to purchase and retire shares of Company stock at an average price of $15.59 per share. Net interest income for the 3rd quarter 2008 was $7.4 million, down $1.7 million from the 3rd quarter of 2007 for a decrease of 19.4%. The net interest margin decreased from 5.20% in the 3rd quarter of 2007 to 4.17% in the 3rd quarter of 2008. For the nine months ended September 30, 2008 net interest income was $23 million, down $4.6 million from $27.8 million for the same period in 2007. The lower interest rate environment and increase in nonaccrual loans are the primary factors for the decline. The decrease in the net interest margin in the 3rd quarter of 2008 is attributable to the interest income reversed during the quarter ($282,000) on loans transferred to nonaccrual status, an increase in nonaccrual loans and the low interest rate environment. Without reversal of the interest income for nonaccrual, the net interest margin would have been 4.32% in the 3rd quarter of 2008. Noninterest income for the 3rd quarter of 2008 was $1,591,000, down $2,428,000 from $4,019,000 in 2007 for a decrease of 60.4%. Most of the decrease, $2,158,000, resulted from the gain from the fair value adjustment to the carrying amount of Trust Preferred Securities in 2007 compared with the 3rd quarter of 2008. For the nine months ended September 30, 2008, noninterest income was $5,645,000, down $1,909,000 from $7,554,000 for the same period in 2007. A gain from the fair value adjustment to the carrying amount of Trust Preferred Securities difference of $1,770,000 between periods accounts for most of the change. Other operating expenses for the three months ended September 30, 2008 were $5,266,000 and $5,291,000 for 2007, a decrease of $25,000 or .47%. For the nine months ended September 30, 2008, other operating expenses totaled $17,026,000, up $1,018,000 from $16,008,000 for the same period in 2007. Salaries and benefits increased by $228,000, occupancy expense rose $315,000, and an impairment loss on core deposit intangibles during the 1st quarter 2008 totaling $624,000 were the primary reasons for the increase. The provision for loan loss was $4,403,000 for the 3rd quarter of 2008 and $1,950,000 for 3rd quarter of 2007. For the nine months ended September 30, 2008, the provision was $5,216,000 compared with $2,360,000 for the same period in 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 September 30, 2008 to be adequate. Non-performing assets increased to 7.96% of total assets on September 30, 2008 from 6.67% on June 30, 2008. United Security Bancshares is a $789+ 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) September December September 30 31, 30 2008 2007 2007 Cash & nonint.-bearing deposits in banks $17,872 $25,300 $27,111 Interest-bearing deposits in banks 15,101 2,909 5,255 Federal funds sold 0 0 1,770 Investment securities AFS 96,324 89,415 88,657 Loans, net of unearned fees 606,212 596,481 626,785 Less: allowance for loan losses (14,107) (10,901) (10,121) Loans, net 592,104 585,580 616,664 Premises and equipment, net 14,599 15,574 15,789 Intangible assets 13,677 15,038 13,359 Other assets 39,492 37,899 34,372 TOTAL ASSETS $789,170 $771,715 $802,977 Deposits: Noninterest-bearing demand & NOW 197,004 184,506 197,681 Savings & Money Market 178,129 148,282 185,019 Time 227,151 301,829 286,828 Total deposits 602,284 634,617 669,528 Borrowed funds 86,809 32,280 25,400 Other liabilities 6,275 9,047 10,961 Junior subordinated debentures 12,783 13,341 13,554 TOTAL LIABILITIES $708,151 $689,285 $719,443 Shareholders' equity: Common shares outstanding: 11,915,077 at Sept. 30, 2008 11,914,447 at Sept. 30, 2007 $33,587 $32,587 $33,487 Retained earnings 49,474 49,997 50,791 Fair Value Adjustment - Hedge 0 (2) (15) Accumulated other comprehensive income (2,043) (151) (729) Total shareholders' equity $81,019 $82,430 $83,534 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 789,170 771,715 802,977 United Security Bancshares Consolidated Statements of Three Three Nine Nine Income Months Months Months Months (dollars in 000's, except Ended Ended Ended Ended per share amounts) (unaudited) September September September September 30 30 30 30 2008 2007 2008 2007 Interest income $10,936 $14,712 $35,111 $42,911 Interest expense 3,509 5,495 11,971 15,123 Net interest income 7,427 9,218 23,140 27,787 Provision for loan losses 4,403 1,950 5,216 2,360 Other income 1,591 4,019 5,645 7,554 Other expenses 5,266 5,291 17,026 16,008 Income before income tax provision (651) 5,996 6,544 16,973 Provision for income taxes (477) 2,339 2,148 6,405 NET INCOME ($174) $3,657 $4,396 $10,568 United Security Bancshares Three Three Nine Nine Selected Financial Data Months Months Months Months (dollars in 000's except Ended Ended Ended Ended per share per amounts) Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2008 2007 2008 2007 Basic Earnings Per Share ($0.01) $0.30 $0.37 $0.87 Diluted Earning Per Share ($0.01) $0.30 $0.37 $0.87 Annualized Return on: Average Assets -0.09% 1.74% 0.76% 1.87% Average Equity -0.84% 15.56% 7.05% 17.43% Net Interest Margin 4.17% 5.20% 4.44% 5.50% Net Charge-offs to Average Loans 1.01% 1.14% 0.46% 0.44% Sept. 30, Dec. 31, Sept. 30, 2008 2007 2007 Book Value Per Share $6.80 $6.95 $7.01 Tangible Book Value Per Share $5.65 $5.68 $5.89 Efficiency Ratio 59.15% 49.13% 45.30% Non Performing Assets to Total Assets 7.96% 3.66% 2.45% Allowance for Loan Losses to Total Loans 2.33% 1.83% 1.62% Shares Outstanding - period end 11,915,077 11,855,192 11,914,447 Basic Shares - YTD average weighted 11,938,701 12,043,738 12,101,486 Diluted Shares - YTD average weighted 11,944,146 12,078,485 12,145,213 Basic Shares - QTD average weighted 11,936,636 12,004,921 12,043,166 Diluted Shares - QTD average weighted 11,943,296 12,017,521 12,063,823 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/

Copyright