UBFO United Security Bancshares

United Security Bancshares - 14.8% ROE for 1st Quarter of 2004 FRESNO, Calif., April 12 /PRNewswire-FirstCall/ -- Dennis R. Woods, President and Chief Executive Officer of United Security Bancshares (http://www.unitedsecuritybank.com/) reported today the results of operations for the 1st quarter of 2004. Net income was $1,697,000, as compared with $1,753,000 in 2003, a decrease of 3.18%. The decrease resulted primarily from one time expenses associated with the merger of TaftNational Bank into United Security Bank, the preopening and partial month operating costs associated with establishing a new branch, and the elimination of real estate investment trusts tax benefits which the California Franchise Tax Board (FTB) announced will be disallowed pursuant to Senate Bill 614 and Assembly Bill 1601. One time merger costs were $105,000, new branch costs were $85,000 and income tax from legislative changes increased by $157,000. Excluding those events, net income for the 1st quarter 2004 would have been $1,982,000, an increase of $284,000 or 16.2% over the same period in 2003. The effect on basic and diluted earnings per share would have added $.05 per share, resulting in earning per shares of $0.36 basic and diluted for the 1st Quarter 2004, for increases of 12.5% over 2003. Reported basic earnings per share for the 1st quarter were $0.31 compared with $0.32 for 2003, a 3.1% decrease. Diluted earnings per share for the quarter were also $0.31 compared with $0.32 a year ago. Woods added, "The 1st quarter earnings included added costs that resulted in a small decrease in earnings from a year ago. Those expenditures are an important investment in the future and provide the company with a capability to increase future earnings at an accelerated pace over what would otherwise be possible. Merger related expenses will be incurred again in the 2nd quarter and the Convention Center Branch will remain unprofitable for several more months, but earnings increases from reductions in non performing assets and growth in performing assets are expected to offset the added expenses of the 2nd quarter. For the year 2004 as a whole, we continue to forecast another record earnings year." For the three months just ended, return on average equity was 14.8% and the return on average assets was 1.36%. For the same period in 2003, ROAE was 16.9% and ROAA was 1.37%. The stability of these key ratios is indicative of the banks' consistent performance and ability to build shareholder value, even during expansion. The 62nd consecutive quarterly cash dividend of $0.16 per share, up from $0.145 for an 10.3% increase from a year ago, was declared on March 23, 2004 to be paid on April 21, 2004, to shareholders of record on April 9, 2004. Shareholders' equity ended the quarter at $46,130,000, an increase of 11.5% over March 31, 2003. Dividends of $3.2 million were paid out of shareholders' equity to shareholders during the past 12 months and $.66 million was utilized to purchase and retire shares of Company stock at an average price of $23.43. Net interest income for the 1st quarter 2004 was $5.1 million, up $507 thousand from 2003 for an increase of 11.0%. The net interest margin increased from 3.87% in 2003 to 4.48% in 2004. The increase is primarily attributable to the decline in interest paid on deposits and borrowings. Noninterest income for the 1st quarter of 2004 was $1,104,000, down from $1,108,000 in 2003 for a decrease of $4,000 or .36%. The decrease is minimal. 1st quarter operating expenses for the three months ended March 31 were $3,201,000 for 2004 and $2,848,000 for 2003, an increase of $353,000 or 12.4%. The primary factors contributing to the rise were salaries and other employee benefits and merger expenses. The efficiency ratio changed to 51.48% for 2004 from 49.83% in 2003. The provision for loan loss was $243 thousand for the 1st quarter of 2004 and $245 thousand for 2003. The banks model used to determine the adequacy of the allowance for loan losses is the primary factor for establishing the amount of the provision for loan losses and is considered adequate. Non-performing assets decreased to 4.05% of total assets on March 31, 2004 from 4.23% at December 31, 2003 United Security Bancshares is a $510million 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 about the company for which the company claims the protection of the safe harbor provisions 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 deposit interest rates, among other things, could slow the rate of growth or put pressure on current deposit levels. Forward-looking statements speak only as of the datethey 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 Quarterly Report on Form 10-K for the year ended December 31, 2003, and particularly the section of Management's Discussion and Analysis. United Security Bancshares Consolidated Balance Sheets (unaudited) (Dollars in thousands) March 31, March 31, 2004 2003 Cash & noninterest-bearing deposits in----------- ----------- other banks $17,096 $16,537 Interest-bearing deposits in other banks 7,265 9,527 Federal funds sold 24,150 18,140 Investment securities 79,313 98,160 Loans, net of unearned fees 359,849 351,470 Less: allowance for loan losses (5,933) (4,968) ----------- ----------- Loans, net 353,916 346,503 Premises and equipment, net 5,288 2,545 Intangible assets 1,860 2,211 Other assets 21,528 21,342 ----------- ----------- TOTAL ASSETS $510,415 $514,964 ========= ========= Deposits: Noninterest-bearing demand & NOW $125,127 $123,627 Savings 24,529 22,594 Time 294,055 298,754 ----------- ----------- Total deposits 443,711 444,976 Borrowed funds 253 9,550 Other liabilities 20,321 4,077 Junior Subordinated Debentures 15,464 15,000 ----------- ----------- TOTAL LIABILITIES $464,285 $473,603 Shareholders' equity: Common shares outstanding: 5,510,539 at Mar. 31, 2004 5,423,931 at Mar. 31, 2003 $18,033 $17,435 Retained earnings 27,906 23,615 Unallocated ESOP shares (221) (509) Other comprehensive income (loss) $412 $821 ----------- ----------- Total shareholders' equity $46,130 $41,361 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $510,415 $514,964 ========= ========= United Security Bancshares Consolidated Statements of Income (unaudited) Three Three Months Months Ending Ending Mar 31 Mar 31 2004 2003 ----------- ----------- Interest income $6,566 $6,785 Interest expense 1,451 2,178 ----------- ----------- Net interest income 5,114 4,607 Provision for loan losses 243 245 Other income 1,104 1,108 Other expenses 3,201 2,848 ----------- ----------- Income before income taxes 2,774 2,622 Provision for income taxes 1,077 869 ----------- ----------- NET INCOME $1,697 $1,753 United Security Bancshares Selected Financial Data Three Three Months Months Ended Ended 03/31/2004 03/31/2003 ----------- ----------- Basic Earnings Per Share $0.31 $0.32 Diluted earning per share $0.31 $0.32 Annualized Return on: Average Assets 1.36% 1.37% Average Equity 14.81% 16.91% Net Interest Margin 4.48% 3.87% Net Charge-offs to Average Loans 0.11% 0.24% 03/31/2004 03/31/2003 ----------- ----------- Book Value Per Share $8.37 $7.63 Tangible Book Value Per Share $8.03 $7.22 Efficiency Ratio 51.48% 49.83% Non Performing Assets to Total Assets 4.05% 3.82% Allowance for Loan Losses to Total Loans 1.65% 1.41% Shares Outstanding - period end 5,510,539 5,423,931 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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