Exhibit 99.1
Union Financial Bancshares, Inc. Announces Results for Quarter Ended December
31, 2003; Planned Restructuring Costs Are Expected to Improve Future Earnings
UNION, S.C.--(BUSINESS WIRE)--Jan. 28, 2004--Union Financial
Bancshares, Inc. (Nasdaq: UFBS), Union, South Carolina, the holding
company for Provident Community Bank, N.A., announced a loss of $1.2
million, or $0.58 diluted earnings per share, for the quarter ended
December 31, 2003 compared to net income of $452,000, or $0.22 diluted
earnings per share, for the quarter ended December 31, 2002. The loss
for the quarter ended December 31, 2003 was primarily due to a balance
sheet restructuring designed to increase the Company's net interest
margin and enhance future earnings. In addition, these steps were
taken to restructure the Bank's balance sheet in connection with the
Bank's conversion to a national bank.
Restructuring Costs
The restructuring consisted primarily of:
-- the sale of $31.3 million of mortgage-backed securities with
an average yield of 2.28% at a loss of $695,000. The
proceeds from that sale were invested in mortgage-backed
and government agency securities with an average yield of
4.00%;
-- the prepayment of $5.0 million of Federal Home Loan Bank
advances with an average rate of 6.25%. The penalty for
prepayment of those borrowings was $381,000; and
-- the write-down of the remaining $100,000 of mortgage
servicing rights as the Company no longer services mortgage
loans.
The loss for the quarter ended December 31, 2003 was also due to
an increase of $545,000 to the provision for loan losses due to two
loans being downgraded and a third loan being charged-off. The
allowance for loan losses at December 31, 2003 was $2.4 million, which
represented 1.51% of total loans and 83.70% of non-performing loans,
compared to an allowance for loan losses of $1.5 million at December
31, 2002, which represented 0.93% of total loans and 68.28% of
non-performing loans.
Financial Condition
Total assets were $330.7 million at December 31, 2003, a $927,000,
or 0.28%, decrease, from $331.6 million at December 31, 2002. Total
loans decreased $6.1 million, or 3.8%, primarily due to increased
principal payments and repayments on mortgage loans because of the low
interest rate environment, which outpaced increased consumer,
commercial and adjustable-rate mortgage loan originations. Cash and
interest-bearing deposits increased $21.8 million, or 313.6%, due to
securities purchased in December 2003 not settling until January 2004.
The timing of the settlement of these securities purchased contributed
to a decrease in investments and mortgage-backed securities of $16.5
million, or 11.8%. Total liabilities were $305.2 million at December
31, 2003, a $1.4 million, or 0.46% increase, from $303.8 million at
December 31, 2002, primarily due to an increase in deposits offset by
a decrease in borrowings. Deposits increased $22.7 million, or 11.3%,
primarily due to deposit generation at the Rock Hill branch office.
Borrowings decreased $20.2 million, or 21.6%, as the additional
deposit growth allowed the Company to prepay $5.0 million of
higher-costing Federal Home Loan Bank advances and allowed the Company
not to renew an additional $6.0 million of borrowings that matured
during the period.
Commenting on the Company's results, Dwight V. Neese, President
and Chief Executive Officer, stated: "We feel the recent
restructuring, while negatively impacting our bottom line for the
quarter, better positions the company for long term growth and
profitability. We will continue to focus on our core operations,
especially our commercial and consumer lines of business, as we move
away from the traditional thrift structure and towards a more
diversified community banking business model. We believe this
represents the best way to maximize long-term value for our
shareholders."
Dividend Declared
The Company declared a quarterly dividend of $0.10 per share on
its outstanding common stock, payable on February 17, 2004 to
shareholders of record January 30, 2004.
Forward-Looking Statements
Statements contained in this news release contain forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are based on the beliefs and
expectations of management as well as the assumptions made using
information currently available to management. Since these statements
reflect the views of management concerning future events, these
statements involve risks, uncertainties and assumptions, including,
among others: changes in market interest rates and general and
regional economic conditions; changes in government regulations;
changes in accounting principles; and the quality or composition of
the loan and investment portfolios and other factors that may be
described in the Company's quarterly reports on Form 10-QSB and in its
annual report on Form 10-KSB, each filed with the Securities and
Exchange Commission, which are available at the Securities and
Exchange Commission's internet website (www.sec.gov) and to which
reference is hereby made. Therefore, actual future results may differ
significantly from results discussed in the forward-looking
statements.
Union Financial Bancshares is the holding company for Provident
Community Bank, N.A., which operates seven banking locations in the
upstate area of South Carolina. At December 31, 2003, Union Financial
had $330.7 million in total assets and stockholders' equity of $25.5
million.
Union Financial Bancshares, Inc.
Period Ending December 31, 2003
Financial Highlights
(Unaudited) ($ in thousands, except share data)
December 31,
--------------------------------------------
Balance Sheet 2003 2002 $ Change % Change
Total assets $330,665 $331,592 ($927) -0.28%
Cash and interest-bearing
deposits 28,702 6,939 21,763 313.63%
Investments &
mortgage-backed
securities 123,789 140,324 (16,535) -11.78%
Loans receivable (net) 153,301 159,354 (6,053) -3.80%
Goodwill and intangible
assets 4,848 5,484 (636) -11.60%
Deposits 223,131 200,422 22,709 11.33%
Advances and other
borrowings 73,500 93,700 (20,200) -21.56%
Trust preferred corporate
obligations 8,000 8,000 0 100.00%
Stockholders' equity 25,508 27,805 (2,297) -8.26%
Number of outstanding
shares 1,966,204 1,963,252 2,952 0.15%
Book value per
share $12.97 $14.16 ($1.19) -8.40%
Tangible book value
per share $10.51 $11.37 ($0.86) -7.58%
Three Months Ended
December 31,
-----------------------------------------
Income Statement 2003 2002 $ Change % Change
Net interest income $1,481 $2,044 ($563) -27.54%
Provision for loan losses 725 180 545 302.78%
Net interest income after
loan loss provision 756 1,864 (1,108) -59.44%
Noninterest income (418) 440 (858) -195.00%
Noninterest expense 2,190 1,695 495 29.20%
Income tax (642) 157 (799) -508.92%
Net income ($1,210) $452 ($1,662) -367.70%
Earnings per share:
Basic ($0.62) $0.23 ($0.85) -369.57%
Earnings per share:
Dilutive ($0.58) $0.22 ($0.80) -363.64%
CONTACT: Union Financial Bancshares, Inc.
Dwight V. Neese, 864-429-1863