[
1
United Security Bancshares -
$4.4 million Net Income for Nine Months - 2008
FRESNO, CA, October 16, 2008 Dennis R. Woods, President and Chief Executive
Officer of United Security Bancshares http://www.unitedsecuritybank.com/ (Nasdaq
Global Select: 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.
1
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.
2
United Security Bancshares
Consolidated Balance Sheets (unaudited)
(Dollars in thousands)
September 30 December 31, September 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
3
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 30 September 30 September 30 September 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 per share amounts) Ended Ended Ended Ended
Sept. 30, 2008 Sept. 30, 2007 Sept. 30, 2008 Sept. 30, 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 4.32% 5.19% 4.43% 5.50%
Net Charge-offs to Average Loans 0.17% 0.09% 0.17% 0.05%
Sept. 30, 2008 Dec. 31, 2007 Sept. 30, 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 11,915,821 12,004,921 12,043,166
Diluted Shares - QTD average weighted 11,922,481 12,017,521 12,063,823
4
United Security Bancshares Three Three Nine Nine
Consolidated Statements of Income Months Months Months Months
(dollars in 000's, except per share amounts) Ended Ended Ended Ended
(unaudited) September 30, September 30, September 30, September 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 per share amounts) Ended Ended Ended Ended
Sept. 30, 2008 Sept. 30, 2007 Sept. 30, 2008 Sept. 30, 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, 2008 Dec. 31, 2007 Sept. 30, 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
5