United Security Bancshares - $4.1 Million Net Income for 2008

FRESNO, Calif., Feb 09, 2009 /PRNewswire-FirstCall via COMTEX/ -- UBFO | Quote | Chart | News | PowerRating -- Dennis R. Woods, President and Chief Executive Officer of United Security Bancshares http://www.unitedsecuritybank.com/ (Nasdaq: UBFO | Quote | Chart | News | PowerRating) reported today the results of operation for the 4th quarter and twelve months ended December 31, 2008.

The Company earned $842,000 for the 4th quarter of 2008, as compared with net income of $689,000 for the 4th quarter in 2007. Basic and diluted earnings per share for the 4th quarter 2008 were $0.07 compared with $0.06 for the 4th quarter 2007. For the twelve months ended December 31, 2008, net income was $4,070,000 compared with $11,257,000 in 2007. For the twelve months ended December 31, 2008, return on average equity was 4.93% and the return on average assets was .52%. For the same period in 2007, return on average equity was 13.73% and return on average assets was 1.47%. 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 1st quarter 2009 stock dividend of one percent (1%). The 1st quarter 2009 stock dividend replaces the quarterly cash dividend and reflects a similar value. The stock dividend was paid to shareholders of record on January 9, 2009 and the shares were issued on January 21, 2009.

Woods added, "We've watched, with great interest, the US Government's several attempts to unlock the credit markets and stem the tide of real estate foreclosures by pouring billions of dollars into the financial rescue of Wall Street and the nation's largest financial institutions. Very few dollars have been directed towards the millions of struggling homeowners and small business owners. The bailout dollars for banks are a short-term fix to assist through difficult times. Essentially the bailout dollars are ten-year loans, at 5% after tax, (8.62% pre- tax equivalent) for the first five years moving up to 9% (15.52% pre-tax equivalent) after five years. Along with the high rates of interest, the TARP (Treasury Asset Recovery Plan) dollars come with restrictions, a US Government right to buy shares (warrants) in the Company, and the TARP agreement provides for the US Government to change any part of the deal in the future. The Board will weight all factors prior to making a decision regarding TARP.

We are confident the new administration in Washington is focused on helping struggling homeowners and stimulating the economy and expect legislation will be passed aimed more directly at resolving those problems. In the meantime, we continue to strengthen our balance sheet and ask that our customers do the same. We remain committed to providing the very best banking services to business and individuals in the communities we serve. We'll let the US Government focus on rescuing the economy."

Shareholders' equity at quarter end was $79.6 million. During the past 12 months, dividends of $4.6 million were paid out of shareholders' equity to shareholders and $1.2 million was utilized to purchase and retire shares of Company stock at an average price of $13.70 per share.

Net interest income for the 4th quarter 2008 was $7.07 million, down $1.7 million from the 4th quarter of 2007 for a decrease of 19.6%. The net interest margin decreased from 4.92% in the 4th quarter of 2007 to 4.02% in the 4th quarter of 2008. For the twelve months ended December 31, 2008 net interest income was $30.2 million, down $6.4 million from $36.6 million for the same period in 2007. The net interest margin decreased from 5.35% for the twelve months in 2007 to 4.33% for the same period in 2008. The lower interest rate environment and increase in nonaccrual loans are the primary factors for the declines.

Noninterest income for the 4th quarter of 2008 was $2,697,000, up $587,000 from $2,110,000 in 2007 for an increase of 27.8%. The increase resulted from the gain from the fair value adjustment to the carrying amount of Trust Preferred Securities during the 4th quarter of 2008 that was up $629,000 compared with the 4th quarter of 2007. For the twelve months ended December 31, 2008, noninterest income was $8,343,000, down $1,321,000 from $9,664,000 for the same period in 2007. The net result of a gain from the fair value adjustment to the carrying amount of Trust Preferred Securities and a drop in ATM fees account for most of the net decline in noninterest income in 2008, compared to 2007.

Other operating expenses for the three months ended December 31, 2008 were $6,253,000 and $6,724,000 for 2007, a decrease of $474,000 or 7%. For the twelve months ended December 31, 2008, other operating expenses totaled $23,279,000, up $548,000 from $22,731,000 for the same period in 2007. Several expense items in combination account for the differences. For the 4th quarter, OREO write-downs and OREO expense were up $960,000 while salaries and benefits declined by $449,000 during the 4th quarter 2008 compared with the same period in 2007. The drop in salaries and benefits in 2008 were primarily the result of reversals of accruals for bonuses and no accruals for 401k and ESOP were expensed for the period. For the year 2008, the primarily difference with 2007 results from OREO write-downs and OREO expenses that were up $1,096,000 along with a loss from the fair value adjustment to the carrying value of core- deposit intangibles that was up $648,000. Offsetting these increases in expense were lower salaries and benefits by $220,000 and a decline in loss on write-downs on assets of $820,000 that occurred in 2007 but did not occur in 2008.

The provision for loan loss was $2,383,000 for the 4th quarter of 2008 and $3,337,000 for 4th quarter of 2007. For the twelve months ended December 31, 2008, the provision was $9,598,000 compared with $5,697,000 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 December 31, 2008 to be adequate. Non-performing assets increased to 10.68% of total assets on December 31, 2008 from 7.96% on September 30, 2008.

United Security Bancshares is a $760+ million bank holding company. United Security Bank, its 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) December 31, December 31, 2008 2007 Cash & nonint.-bearing deposits in banks $19,426 $25,300 Interest-bearing deposits in banks 20,431 2,909 Federal funds sold 0 0 Investment securities AFS 92,749 89,415 Loans, net of unearned fees 548,742 596,481 Less: allowance for loan losses (15,071) (10,901) Loans, net 533,671 585,580 Premises and equipment, net 14,285 15,574 Intangible assets 13,417 15,038 Other assets 67,097 37,899 TOTAL ASSETS $761,077 $771,715 Deposits: Noninterest-bearing demand & NOW 190,363 184,506 Savings & Money Market 133,367 148,282 Time 184,756 301,829 Total deposits 508,486 634,617 Borrowed funds 155,045 32,280 Other liabilities 6,010 9,047 Junior subordinated debentures 11,926 13,341 TOTAL LIABILITIES $681,467 $689,285 Shareholders' equity: Common shares outstanding: 12,010,372 at Dec. 31, 2008 11,855,192 at Dec. 31, 2007 $34,811 $32,587 Retained earnings 47,722 49,997 Fair Value Adjustment - Hedge 0 (2) Accumulated other comprehensive income (2,923) (151) Total shareholders' equity $79,610 $82,430 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 761,077 771,715 United Security Bancshares Consolidated Statements of Income (dollars in 000's, except per share Three Months Three Months Twelve Months Twelve Months amounts) Ended Ended Ended Ended (unaudited) December 31, December 31, December 31, December 31, 2008 2007 2008 2007 Interest income $10,036 $14,245 $45,146 $57,156 Interest expense 2,967 5,450 14,937 20,573 Net interest income 7,069 8,795 30,209 36,582 Provision for loan losses 2,383 3,337 9,598 5,697 Other income 2,698 2,110 8,343 9,664 Other expenses 6,254 6,724 23,279 22,731 Income before income tax provision 1,130 845 5,675 17,818 Provision for income taxes 289 156 1,605 6,561 NET INCOME $842 $689 $4,070 $11,257 United Security Bancshares Selected Financial Data Three Three Twelve Twelve (dollars in 000's except Months Months Months Months per share amounts) Ended Ended Ended Ended December 31, December 31, December 31, December 31, 2008 2007 2008 2007 Basic Earnings Per Share $0.07 $0.06 $0.34 $0.93 Diluted Earning Per Share $0.07 $0.06 $0.34 $0.92 Annualized Return on: Average Assets 0.43% 0.34% 0.52% 1.47% Average Equity 4.18% 3.22% 4.93% 13.73% Net Interest Margin 4.02% 4.92% 4.33% 5.35% Net Charge-offs to Average Loans 2.31% 2.18% 0.92% 0.90% December 31, December 31, 2008 2007 Book Value Per Share $6.63 $6.95 Tangible Book Value Per Share $5.51 $5.71 Efficiency Ratio 60.38% 47.38% Non Performing Assets to Total Assets 10.68% 3.66% Allowance for Loan Losses to Total Loans 2.75% 1.83% Shares Outstanding - period end 12,010,372 11,855,192 Basic Shares - YTD average weighted 12,048,728 12,165,475 Diluted Shares - YTD average weighted 12,052,150 12,200,920

SOURCE United Security Bancshares

http://www.unitedsecuritybank.com

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