THOMASVILLE, Ala., Aug. 8 /PRNewswire-FirstCall/ -- United Security Bancshares, Inc. today reported that net income grew to $1.5 million, or $0.25 per diluted share, for the second quarter ended June 30, 2008, compared with a net loss of $2.7 million, or $(0.44) per diluted share, for the same period of 2007.
"Second quarter net income increased this year due to a lower provision for loan losses and higher non-interest income compared with the second quarter of 2007," stated R. Terry Phillips, President and Chief Executive Officer of United Security Bancshares, Inc. "Last year in the second quarter, our net income was affected by a $5.5 million after tax loss associated with loan irregularities at our subsidiary, Acceptance Loan Company (ALC). Since that time, we have made solid progress in cleaning up ALC's loan portfolio."
"United Security Bancshares and First United Security Bank remain well-capitalized," continued Mr. Phillips. "At the close of the second quarter, our total risk-based capital was 17.9% for the bank, compared with regulatory requirements of 10.0% for a well-capitalized bank and minimum regulatory requirements of 8.0%. Our strong capital base allowed us to increase our cash dividend in the second quarter and repurchase 43,070 shares of United Security Bancshares during the first six months of this year."
Second Quarter Results
Interest income totaled $13.0 million in the second quarter of 2008, compared with $15.2 million in the second quarter of 2007. The decrease in interest income was primarily due to a decline in the average yield and volume of loans outstanding.
"Our net loans were $398.7 million at the end of the second quarter of 2008, down from $427.6 million at year end 2007," noted Mr. Phillips. "Loan demand is soft in some of our markets due to the slowdown in the economy, and we remain focused on maintaining our credit quality as we extend new credit. We are optimistic about increasing our level of loans as the economy improves."
Interest expense declined 11.2% to $4.3 million in the second quarter of 2008, compared with $4.8 million in the second quarter of 2007. The decrease resulted from a decline in rates and volume of interest-bearing deposits, primarily certificates of deposit, compared with the second quarter of 2007.
Net interest income decreased 15.7% to $8.7 million in the second quarter of 2008, compared with $10.4 million in the second quarter of the prior year. Net interest margin declined to 5.83% in the second quarter of 2008, compared with 7.01% in the second quarter of 2007. Yields on loans have fallen faster than rates paid for deposits due to a number of interest rate cuts by the Federal Reserve over the past year.
Provision for loan losses was $2.2 million in the second quarter of 2008, or 2.1% of annualized average loans, compared with $9.9 million, or 8.6% of annualized average loans, in the second quarter of 2007. ALC accounted for approximately 65% of the provision in the 2008 period, compared with almost 99% of the provision in 2007. $7.7 million of the provision for loan losses in 2007 was related to losses identified in the investigation of loan irregularities at ALC.
"Our total non-performing assets increased 5.3% to $34.0 million in the second quarter, compared with $32.3 million sequentially in the first quarter of this year," stated Mr. Phillips. "As a result, we increased our provision for loan losses from the first quarter to reflect the continued slowdown in the economy and higher charge-offs experienced in recent quarters. We remain very aggressive in identifying problem loans in the portfolio to minimize future losses. At the end of the second quarter, our allowance for loan losses was $7.8 million, or 1.9% of loans."
Total non-interest income increased $330,000, or 24.4%, for the second quarter of 2008, to $1.7 million, compared with $1.4 million in the second quarter of the prior year. Growth in non-interest income benefited from higher fees for deposit accounts, growth in credit life insurance income, other income and gain on sale of other real estate owned.
Non-interest expense increased 2.2% to $6.1 million in the second quarter of 2008, compared with $6.0 million in the second quarter of 2007. Salary and benefit costs were down 9.4% to $3.1 million and were offset by higher advertising, legal and professional fees compared with the second quarter of 2007.
Six Months Results
For the first six months of 2008, net income was up substantially from last year to $3.4 million, or $0.56 per diluted share, compared with $310,000, or $0.05 per diluted share, for the first six months of 2007.
For the 2008 six-month period, net interest income was $17.5 million, compared with $20.9 million for the same period last year. The decrease in net interest income was due primarily to a decline in interest earned on loans. The decrease in loan income was due to both lower volume and lower yields.
Provision for loan losses was $3.5 million in the first six months of 2008, compared with $10.9 million in the first six months of 2007. In 2007, $7.7 million of the provision was related to the loan irregularities at ALC.
Non-interest income rose 17% to $3.0 million in the first six months of 2008, compared with $2.6 million in the first six months of 2007. The $440,000 increase in non-interest income benefited from higher service charges and fees on deposit accounts, income on bank-owned life insurance, letters of credit and commitment fees, all other fees and charges and gain from the sale of other real estate owned.
Shareholders' equity totaled $77.7 million, or book value of $12.87 per share, at the end of the second quarter of 2008. Return on average assets for the second quarter of 2008 was 1.02%, and return on average equity was 8.49%. Regular dividends were increased from $0.26 per share in the second quarter of 2007 to $0.27 per share during the second quarter of 2008.
About United Security Bancshares, Inc.
United Security Bancshares, Inc. is bank holding company that operates nineteen banking offices in Alabama through First United Security Bank. In addition, the Company's operations include Acceptance Loan Company, Inc., a consumer loan company, FUSB Reinsurance, Inc., an underwriter of credit life and credit accident and health insurance policies sold to the bank's and ALC's consumer loan customers, and R2Metrics, Inc., a provider of investment and asset and liability management software, analytics and consulting services. The Company's stock is traded on NASDAQ Capital Market under the symbol "USBI."
Forward Looking Statements
This press release contains forward-looking statements as defined by federal securities laws. Statements contained in this press release which are not historical facts are forward-looking statements. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. USBI undertakes no obligation to update these statements following the date of this press release. In addition, USBI, through its senior management, may make from time to time forward-looking public statements concerning the matters described herein. Such forward-looking statements are necessarily estimates reflecting the best judgment of USBI's senior management based upon current information and involve a number of risks and uncertainties. Certain factors which could affect the accuracy of such forward-looking statements are identified in the public filings made by USBI with the Securities and Exchange Commission, and forward looking statements contained in this press release or in other public statements of USBI or its senior management should be considered in light of those factors. There can be no assurance that such factors or other factors will not affect the accuracy of such forward-looking statements.
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands, Except Per Share Data) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 (Unaudited) (Unaudited) INTEREST INCOME: Interest and Fees on Loans $10,832 $13,372 $22,325 $26,704 Interest on Investment Securities 2,208 1,837 4,242 3,639 Total Interest Income 13,040 15,209 26,567 30,343 INTEREST EXPENSE: Interest on Deposits 3,366 3,857 7,127 7,392 Interest on Borrowings 937 991 1,926 2,086 Total Interest Expense 4,303 4,848 9,053 9,478 NET INTEREST INCOME 8,737 10,361 17,514 20,865 PROVISION FOR LOAN LOSSES 2,180 9,863 3,540 10,904 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 6,557 498 13,974 9,961 NON-INTEREST INCOME: Service and Other Charges on Deposit Accounts 815 808 1,606 1,565 Credit Life Insurance Income 171 156 259 254 Other Income 696 388 1,168 774 Total Non-Interest Income 1,682 1,352 3,033 2,593 NON-INTEREST EXPENSE: Salaries and Employee Benefits 3,145 3,471 6,365 7,004 Occupancy Expense 452 424 900 839 Furniture and Equipment Expense 374 343 703 664 Other Expense 2,152 1,751 4,151 3,650 Total Non-Interest Expense 6,123 5,989 12,119 12,157 INCOME (LOSS) BEFORE INCOME TAXES 2,116 (4,139) 4,888 397 PROVISION FOR (BENEFIT FROM) INCOME TAXES 635 (1,408) 1,504 87 NET INCOME (LOSS) $1,481 $(2,731) $3,384 $310 BASIC AND DILUTED NET INCOME (LOSS) PER SHARE $0.25 $(0.44) $0.56 $0.05 DIVIDENDS PER SHARE $0.27 $0.26 $0.54 $0.67 UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in Thousands) June 30, December 31, 2008 2007 (Unaudited) ASSETS Cash and Due from Banks $14,150 $13,247 Interest Bearing Deposits in Banks 13,065 7,427 Investment Securities Available-for-Sale 172,427 144,531 Federal Home Loan Bank Stock 5,236 5,096 Loans, net of allowance for loan losses of $7,846 and $8,535, respectively 398,704 427,588 Premises and Equipment, net 17,990 18,132 Cash Surrender Value of Bank-Owned Life Insurance 11,154 10,946 Accrued Interest Receivable 5,292 6,141 Goodwill 4,098 4,098 Investment in Limited Partnerships 1,956 2,037 Other Assets 25,325 20,653 Total Assets $669,397 $659,896 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $487,541 $478,554 Accrued Interest Expense 3,231 3,936 Short-Term Borrowings 2,535 11,212 Long-Term Debt 90,000 77,518 Other Liabilities 8,368 9,108 Total Liabilities $591,675 $580,328 Shareholders' Equity: Common Stock, par value $0.01 per share, 10,000,000 shares authorized; 7,317,560 shares issued 73 73 Surplus 9,233 9,233 Accumulated Other Comprehensive Income (Loss) (257) 875 Retained Earnings 89,458 89,348 Less Treasury Stock: 1,279,153 and 1,232,368 shares at cost, respectively (20,785) (19,961) Total Shareholders' Equity $77,722 $79,568 Total Liabilities and Shareholders' Equity $669,397 $659,896
