United Security Bancshares - Record Nine Months Earnings & 17.43% ROE
FRESNO, CA, October 12, 2007 Dennis R. Woods, President and Chief Executive
Officer of United Security Bancshares http://www.unitedsecuritybank.com/
(Nasdaq-GS:UBFO) reported today the results of operations for the 3rd quarter
and nine months ended September 30, 2007.
Woods said, "The third quarter brought new challenges globally and nationally
with credit tightening, loan portfolio losses and the decline in some interest
rates precipitated by the Federal Reserve. These challenges affected the Company
as well during the quarter but overall the impact, taken on whole, was minor."
Net income for the 3rd quarter 2007 was $3,657,000, as compared with $3,461,000
in 2006 for an increase of $196,000 or 5.67%. Net income for the nine months
ended September 30, 2007 was $10,568,000 and $10,387,000 in 2006. The 3rd
quarter and the nine month periods of each year include significant income and
expense items that when eliminated, result in adjusted net income for the 3rd
quarters of $3.2 million for 2007 and $3.3 million for 2006. The adjusted net
income for the nine month periods were $10.5 million for 2007 and $10.3 million
for 2006.
For the 3rd quarter 2006, those significant pretax items included a gain on the
sale of real estate of $1.01 million, a provision for loan loss of $276,000 and
legal and other real estate expenses of $985,000. For the 3rd quarter 2007, the
significant pretax items included a fair value gain on junior subordinated
debentures of $2.1 million , life insurance proceeds of $263,000, a provision
for loan loss of $1.95 million and legal and other real estate expenses of
$329,000.
For the nine month period in 2006, those significant pretax items included a
gain on the sale of real estate of $1.01 million, a gain on the sale of
investment of $1.88 million, a provision for loan loss of $639,000 and legal and
other real estate expenses of $2.07 million. For the nine month period in 2007,
the significant pretax items included a fair value gain on junior subordinated
debentures of $2.2 million , acquistion costs of $191, 000, interest collected
but not previously accrued of $1.1 million, a provision for loan loss of $2.36
million and legal and other real estate expenses of $951,000.
Basic and diluted earnings per share for the 3rd quarter of 2007 were $0.31. For
the 3rd quarter of 2006, basic earning per share was $0.31 and diluted earnings
per share was $0.30. Year to date basic and diluted earning per share for 2007
were $0.88 as compared with $0.91 for year to date 2006.
For the three months ended September 30, 2007 the return on average equity was
17.45% and the return on average assets was 1.85%. For the same period in 2006,
ROAE was 21.69% and ROAA was 2.03%. ROAE and ROAA were 17.43% and 1.87% for the
nine months ended September 30, 2007 and 22.12% and 2.14% for same period in
2006.
The 76th consecutive quarterly cash dividend of $0.125 per share, up from $0.11
for a 13.6% increase from a year ago, was declared on September 25, 2007, to be
paid on October 24, 2007, to shareholders of record on October 12, 2007.
Shareholders' equity at September 30, 2007 was $83,534,000, an increase of
$18,908,000 over September 30, 2006. The merger with Legacy Bank, N.A. added
$21,537,000 to shareholders' equity over September 30, 2006. Dividends of $5.7
million were paid out of shareholders'equity to shareholders during the past 12
months and $9,412,000 was utilized to purchase and retire shares of Company
stock at an average price of $20.30.
Net interest income for the 3rd quarter 2007 was $9.218 million, up $669,000
from 2006 for an increase of 7.8%. The net interest margin for the 3rd quarter
decreased from 5.63% in 2006 to 5.20% in 2007. The decrease in the net interest
margin in 2007 is primarily attributable to increases in the cost of funds.
Interest costs, as a percentage of earning assets, were 3.10% in the 3rd quarter
2007 and 2.60% in the 3rd quarter 2006. The net interest margin for the nine
months ended September 30, 2007 declined by 16 basis points to 5.50% for 2007
from 5.66% for the same period in 2006.
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Noninterest income for the 3rd quarter of 2007 was $4,019,000, up from
$2,331,000 in 2006 for an increase of $1,688,000 or 72.4%. The difference
between a gain on the sale of real estate of $1.01 million in the 3rd quarter of
2006, and a fair value gain on junior subordinated debentures of $2.1 million
along with life insurance proceeds of $0.26 million in the 3rd quarter 2007,
accounted for much of the change between the quarters. Noninterest income for
the nine months ended September 30, 2007 was $7.6 million, up $421,000 or 5.9%
for the same period in 2006.
Operating expenses for the three months ended September 30, 2007 were $5,291,000
and $5,060,000 for the three months ended September 30, 2006, an increase of
$230,000 or 4.6%. Year to date operating expenses for the nine months of 2007
were $16,008,000, up $1,364,000 or 9.3% from the comparable period in 2006. The
addition of the Campbell branch acquired in February 2007 added operating
expenses of $1,598,000 for the nine months of 2007 ended September 30.
The provision for loan loss was $1.95 million for the 3rd quarter of 2007 and
$276 thousand for the comparable period in 2006. For the nine months of 2007 the
provision for loan loss was $2.36 million compared with $639 thousand for the
comparable period in 2006. In determining the adequacy of the allowance for loan
loss, Management's judgment is the primary determining factor for establishing
the amount of the provision for loan losses and is considered adequate for the
current period.
Net loan losses for the 3rd quarter were $1.7 million in 2007 and $278,000 in
2006. Net loan losses for the nine months ended September 30 were $1.9 million
in 2007 and $382,000 in 2006. The 2007 3rd quarter provision for loan loss of
$1.95 million for 2007, in part provided loan loss reserves for the charge-off
of a $1.6 million loan. The decision by management to charge-off the loan,
secured by a 2nd deed of trust on property located in Southern California, was
made late in the 3rd quarter when a decline in market values of the property
became apparent.
Non-performing assets increased to 2.44% of total assets on September 30, 2007
from 1.50% at September 30, 2006.
United Security Bancshares is a $800+ 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, 2006, and
particularly the section of Management's Discussion and Analysis.
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United Security Bancshares
Consolidated Balance Sheets
(unaudited)
(Dollars in thousands)
September 30 September 30
Cash & noninterest-bearing deposits in 2007 2006
------------ ------------
Other banks $ 27,111 $ 24,960
Interest-bearing deposits in other banks 5,255 7,832
Federal funds sold 1,770 14,460
Investment securities AFS 88,657 90,034
Loans, net of unearned fees 626,785 498,333
Less: allowance for loan losses (10,121) (8,005)
======== ========
Loans, net 616,664 490,328
Premises and equipment, net 15,789 13,172
Intangible assets 13,359 3,148
Other assets 34,373 34,077
======== ========
TOTAL ASSETS $802,977 $678,012
-------- --------
Deposits:
Noninterest-bearing demand & NOW $197,681 $198,288
Savings & Money Market 185,024 191,130
Time 286,823 200,709
======== ========
Total deposits 669,528 590,127
Borrowed funds 25,400 0
Other liabilities 10,961 7,796
Junior subordinated debentures 13,554 15,464
======== ========
TOTAL LIABILITIES $719,443 $613,387
Shareholders' equity:
Common shares outstanding:
11,914,447 at September 30, 2007
11,309,698 at September 30, 2006 $ 33,487 $ 20,601
Retained earnings 50,791 45,323
Fair Value Adjustment - Hedge (15) (199)
Accumulated other comprehensive income (729) (1,100)
======== ========
Total shareholders' equity $ 83,534 $ 64,625
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $802,977 $678,012
-------- --------
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United Security Bancshares
Consolidated Statements of Income
(dollars in 000's, except per share amounts)
(unaudited)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
2007 2006 2007 2006
---------- --------- --------- ---------
Interest income $14,712 $12,548 $42,911 $34,509
Interest expense 5,495 3,999 15,123 10,049
======= ======= ======= =======
Net interest income 9,218 8,549 27,787 24,460
Provision for loan losses 1,950 276 2,360 639
Other income 4,019 2,331 7,554 7,132
Other expenses 5,291 5,060 16,008 14,644
======== ======= ======= =======
Income before income tax provision 5,996 5,544 16,973 16,309
Provision for income taxes 2,339 2,083 6,405 5,922
======= ======= ======= =======
NET INCOME $3,657 $3,461 $10,568 $10,387
United Security Bancshares
Selected Financial Data
(dollars in 000's except per share amounts)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
09/30/2007 09/30/2006 09/30/2007 09/30/2006
---------- ---------- ---------- ----------
Basic Earnings Per Share $ 0.31 $ 0.31 $ 0.88 $ 0.91
Diluted Earning Per Share $ 0.31 $ 0.30 $ 0.88 $ 0.91
Annualized Return on:
Average Assets 1.85% 2.03% 1.87% 2.14%
Average Equity 17.45% 21.69% 17.43% 22.12%
Net Interest Margin 5.20% 5.63% 5.50% 5.66%
Net Charge-offs to Average Loans 0.28% 0.06% 0.34% 0.08%
09/30/2007 09/30/2006
----------- -----------
Book Value Per Share $ 7.01 $ 5.71
Tangible Book Value Per Share $ 5.89 $ 5.44
Efficiency Ratio 45.30% 46.35%
Non Performing Assets to Total Assets 2.44% 1.50%
Allowance for Loan Losses
to Total Loans 1.61% 1.61%
Shares Outstanding - period end 11,914,447 11,309,698
Basic Shares - average weighted 11,925,195 11,337,694
Diluted Shares - average weighted 11,945,852 11,454,267
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