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United Security Bancshares, Inc. Reports $5.4 Million in 2008 Net Income
Posted by: gurufocus (IP Logged)
Date: February 11, 2009 04:04PM

Press Release: United Security Bancshares, Inc. Reports $5.4 Million in 2008 Net Income

THOMASVILLE, Ala., Feb. 11 /PRNewswire-FirstCall/ -- United SecurityBancshares, Inc. (Nasdaq: USBI) today reported that net income rose to $5.4million, or $0.89 per diluted share, compared with net income of $349,000, or$0.06 per diluted share in 2007. Net income for the fourth quarter of 2008was $583,000, or $0.10 per diluted share, compared with $1.9 million, or $0.31per diluted share, for the same period of 2007.

"We reported significant growth in net income in 2008 compared with lastyear due to a lower loan loss provision, growth in non-interest income andlower non-interest expenses," stated R. Terry Phillips, President and ChiefExecutive Officer of United Security Bancshares, Inc. "We ended the year withrecord assets and record deposits. We also maintained our very strong capitalposition without any funding from the U.S. Treasury. At year-end 2008, ourtotal risk-based capital was 17.49%, significantly above our peer group andwell above the minimum requirements of 10.0% to achieve the highest rating of'well-capitalized.'"

"Our fourth quarter earnings did not reach last year's levels dueprimarily to declining interest rates in 2008 that reduced our interest incomeon loans, our largest revenue source. The Federal Reserve lowered the fundsrate by 4.25% during 2008, and that had a direct impact on the rates we chargeon loans. We also experienced increased competition for deposits in thesecond half of 2008 from certain banks in our market that resulted in higherdeposit costs than normal," continued Mr. Phillips.

Fourth Quarter Results

Interest income totaled $12.7 million in the fourth quarter of 2008,compared with $14.6 million in the fourth quarter of 2007. The decrease ininterest income was primarily due to a $2.1 million decrease in interestearned on loans due to the overall decline in the average yield and volume ofloans outstanding since last year. Net interest margin declined to 5.84% inthe fourth quarter of 2008, a 59 basis point decline since the fourth quarterof last year.

"Total net loans are down from last year by 6.6% to $399.5 million,reflecting lower loan demand as the economy entered the recession and ourtighter underwriting standards in light of the weak economy," noted Mr.Phillips. "We continue to make new loans as evidenced by the slight increasein net loans since the third quarter of 2008; however, our growth rate for newloans slowed considerably in the second half of 2008 as the real estate marketcontinued to weaken."

Interest expense declined 20.8% to $3.9 million in the fourth quarter of2008, compared with $4.9 million in the fourth quarter of 2007. The declinein interest expense was due primarily to lower average rates paid on interest-bearing deposits, offset somewhat by higher average balances in interest-bearing accounts.

"Our deposits rose to $485.1 million in 2008, a new record for UnitedSecurity Bancshares," stated Mr. Phillips. "We experienced higher growth indeposits during the second half of 2008 as customers sought out sound bankswith a strong capital position that provided increased protection for theirliquid assets. We also benefited from the increase in FDIC insurance thatexpanded significantly the coverage for our depositors."

Net interest income decreased 8.5% to $8.8 million in the fourth quarterof 2008, compared with $9.7 million in the fourth quarter of the prior year.The decline in net interest income was due to yields on loans declining fasterthan rates paid for deposits.

Provision for loan losses was $3.4 million in the fourth quarter of 2008,or 3.4% annualized of average loans, compared with $3.5 million, or 3.2%annualized of average loans, in the fourth quarter of 2007.

"Although our loan loss provision was slightly lower than the fourthquarter of last year, it is up from the third quarter of 2008 due to anincrease in non-performing assets and charge-offs in the latest three months,"stated Mr. Phillips.

"We added $616,000 to our allowance for loan losses in the fourth quarterto strengthen our reserves to 2.09% of total loans. We expect continuedpressure on our loan portfolio as the economy remains soft and real estatecollateral values decline. As a result, we remain very proactive inidentifying problem loans to mitigate potential losses and protect our capitalbase."

Total non-interest income increased $447,000, or 31.0%, for the fourthquarter of 2008, to $1.9 million, compared to $1.4 million in the fourthquarter of the prior year. Growth in non-interest income resulted from highercredit life insurance income and other income, offset somewhat by lower feeson deposit accounts.

Non-interest expense increased 6.2% to $6.8 million in the fourth quarterof 2008, compared with $6.4 million in the fourth quarter of 2007, primarilydue to increased accounting and legal fees. Salary and employee benefits roseonly 0.7%, and costs were down for occupancy expense and furniture andequipment expense compared with the fourth quarter of 2007 due to improvedcost control measures.

Twelve Month Results

For the twelve months ended December 31, 2008, net income increased to$5.4 million, or $0.89 per diluted share, compared with $349,000, or $0.06 perdiluted share, for the twelve months ended December 31, 2007.

For the twelve months ended December 31, 2008, net interest incomedecreased 13.1% to $35.2 million, compared with $40.5 million for the sameperiod in 2007. The decrease in net interest income was due primarily to adecline in interest earned on loans related to lower volume and yieldscompared with 2007.

Provision for loan losses declined to $8.9 million for the twelve monthsended December 31, 2008, or 2.1% annualized of average loans, compared with$21.2 million, or 4.7% annualized of average loans, for the twelve monthsended December 31, 2007. Last year, approximately $12.5 million of theprovision for loan losses was related to losses identified in theinvestigation of loan irregularities at Acceptance Loan Company (ALC).

Non-interest income rose 16.1% to $6.5 million for year-end 2008, comparedwith $5.6 million for the same period in 2007. The increase in non-interestincome resulted from higher service charges and fees on deposit accounts,credit life insurance commissions, letters of credit and commitment fees andall other fees and charges.

Non-interest expense declined 2.1% to $25.3 million compared with $25.8million in 2007. United Security benefited from lower costs for salaries andbenefits due to lower incentive accruals and lower occupancy costs comparedwith 2007 as a result of cost-saving measures and increased operationalefficiency.

Shareholders' equity totaled $78.7 million, or book value of $13.07 pershare, as of December 31, 2008. Return on average assets for the twelvemonths ended December 31, 2008, was 0.80%, and return on average equity was6.83%. Regular quarterly dividends were $0.27 per share for the fourthquarter of 2008, compared to $0.26 per share for the fourth quarter of 2007.

About United Security Bancshares, Inc.

United Security Bancshares, Inc. is a bank holding company that operatesnineteen banking offices in Alabama through First United Security Bank. Inaddition, the Company's operations include Acceptance Loan Company, Inc., aconsumer loan company, and FUSB Reinsurance, Inc., an underwriter of creditlife and credit accident and health insurance policies sold to the bank's andALC's consumer loan customers. The Company's stock is traded on the NasdaqCapital Market under the symbol "USBI."

Forward-Looking Statements

This press release contains forward-looking statements, as defined byfederal securities laws. Statements contained in this press release which arenot historical facts are forward-looking statements. These statements mayaddress issues that involve significant risks, uncertainties, estimates andassumptions made by management. USBI undertakes no obligation to update thesestatements following the date of this press release, except as required bylaw. In addition, USBI, through its senior management, may make from time totime forward-looking public statements concerning the matters describedherein. Such forward-looking statements are necessarily estimates reflectingthe best judgment of USBI's senior management based upon current informationand involve a number of risks and uncertainties. Certain factors which couldaffect the accuracy of such forward-looking statements are identified in thepublic filings made by USBI with the Securities and Exchange Commission, andforward-looking statements contained in this press release or in other publicstatements of USBI or its senior management should be considered in light ofthose factors. There can be no assurance that such factors or other factorswill not affect the accuracy of such forward-looking statements.

                     (Dollars in Thousands, Except Per Share Data)

                                 Three Months Ended      Twelve Months Ended
                                    December 31,            December 31,
                                 2008        2007        2008         2007
                                     (Unaudited)      (Unaudited)
    Interest and Fees on Loans  $10,421     $12,557     $43,281      $52,317
    Interest on Investment
     Securities                   2,294       2,000       8,835        7,666
      Total Interest Income      12,715      14,557      52,116       59,983
    Interest on Deposits          2,933       3,993      13,107       15,497
    Interest on Borrowings          938         894       3,805        3,967
      Total Interest Expense      3,871       4,887      16,912       19,464

    NET INTEREST INCOME           8,844       9,670      35,204       40,519

    PROVISION FOR LOAN LOSSES     3,434       3,462       8,901       21,152

      PROVISION FOR LOAN LOSSES   5,410       6,208      26,303       19,367

    Service and Other Charges on
     Deposit Accounts               837         859       3,285        3,280
    Credit Life Insurance Income    466         261       1,020          701
    Other Income                    586         322       2,158        1,585
      Total Non-Interest Income   1,889       1,442       6,463        5,566

    Salaries and Employee
     Benefits                     3,335       3,312      12,976       13,508
    Occupancy Expense               435         533       1,838        1,943
    Furniture and Equipment
     Expense                        341         377       1,405        1,396
    Other Expense                 2,640       2,137       9,054        8,957
      Total Non-Interest Expense  6,751       6,359      25,273       25,804

     TAXES                          548       1,291       7,493         (871)

     INCOME TAXES                   (35)       (615)      2,123       (1,220)

    NET INCOME                     $583      $1,906      $5,370         $349

      PER SHARE                   $0.10       $0.31       $0.89        $0.06

      DIVIDENDS PER SHARE         $0.27       $0.27       $1.08        $1.19

                 (Dollars in Thousands, Except Per Share Data)

                                                     December 31, December 31,
                                                          2008        2007

    Cash and Due from Banks                              $13,246     $13,247
    Interest-Bearing Deposits in Other Banks                 126       7,427
         Cash and Cash Equivalents                        13,372      20,674
    Federal Funds Sold                                     1,105           0
    Investment Securities Available-for-Sale             184,213     144,531
    Federal Home Loan Bank Stock                           5,236       5,096
    Loans, net of allowance for loan losses of $8,532
     and $8,535, respectively                            399,483     427,588
    Premises and Equipment, net                           17,495      18,132
    Cash Surrender Value of Bank-Owned Life Insurance     11,724      10,946
    Accrued Interest Receivable                            4,844       6,141
    Goodwill                                               4,098       4,098
    Investment in Limited Partnerships                     1,993       2,037
    Other Real Estate Owned                               18,131      11,156
    Other Assets                                           6,308       9,497
         Total Assets                                   $668,002    $659,896

    Deposits                                            $485,117    $478,554
    Accrued Interest Expense                               3,402       3,936
    Short-Term Borrowings                                  2,294      11,212
    Long-Term Debt                                        90,000      77,518
    Other Liabilities                                      8,525       9,108
         Total Liabilities                              $589,338    $580,328
    Shareholders' Equity:
    Common Stock, par value $0.01 per share,
     10,000,000 shares authorized;
     7,317,560 shares issued; 6,018,154
     and 6,085,192 shares
     outstanding, respectively                                73          73
    Surplus                                                9,233       9,233
    Accumulated Other Comprehensive Income                 2,476         875
    Retained Earnings                                     87,999      89,348
    Less Treasury Stock:  1,299,406 and 1,232,368
     shares at cost, respectively                        (21,117)    (19,961)

         Total Shareholders' Equity                      $78,664     $79,568

         Total Liabilities and Shareholders' Equity     $668,002    $659,896

Source: PRNewsWire

Stocks Discussed: UBFO, USBI,
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