Aug 7 2010
United Security Bancshares, Inc. (Nasdaq: USBI) today reported a net loss attributable to USBI of $348,000, or $0.06 per diluted share, for the second quarter ended June 30, 2010, compared with net income of $2.9 million, or $0.48 per diluted share, for the same period of 2009.
"We reported continued growth in our net interest income in the second quarter of 2010 due to higher average loan balances and an improved net interest margin compared with the second quarter of last year; however, this growth was more than offset by an increase in our provision for loan losses related to the soft economy," stated R. Terry Phillips, President and Chief Executive Officer of United Security Bancshares, Inc. "The increase in our provision for loan losses was the primary reason for our second quarter loss and was due to higher charge-offs as we wrote down the value of certain real estate loans that were foreclosed on during the quarter to reflect lower prices for commercial properties in our markets. We are very fortunate and believe that our strong capital base provides United Security with an important buffer against potential losses related to loan charge-offs in the future."
"The soft economy continues to have a negative effect on real estate in our market. It has resulted in lower demand and weak prices for properties, as well as reduced loan demand to fund residential and commercial real estate purchases. Our primary focus for the immediate future, particularly in light of the current economic climate, continues to be on improving asset quality rather than building our loan portfolio. In the 2010 second quarter, we reduced our non-performing assets by $5.0 million, a 10.4% decrease to $42.9 million compared with the 2010 first quarter. The reduction was due to a combination of write-offs and foreclosed property sales during the quarter. We believe that these are important steps to strengthen our balance sheet and grow future earnings," continued Mr. Phillips.
Second Quarter Results
Interest income totaled $11.2 million in the second quarter of 2010, compared with $11.9 million in the second quarter of 2009. The decrease in interest income was due primarily to lower interest rates charged on loans and lower interest earned on investment securities compared with the same period last year.
Interest expense declined 27.0% to $2.5 million in the second quarter of 2010, compared with $3.4 million in the second quarter of 2009. The decrease resulted from lower interest rates paid on certificates of deposit and borrowed funds compared with the second quarter of 2009.
Net interest income increased 1.8% to $8.7 million in the second quarter of 2010, compared with $8.5 million in the second quarter of 2009. Net interest margin rose to 5.73% in the second quarter of 2010, a 12 basis point improvement from 5.61% in the second quarter of 2009 and a 24 basis point increase from the first quarter of 2010.
Provision for loan losses was $3.7 million in the second quarter of 2010, or 3.5% of annualized average loans, compared with $1.5 million, or 1.4% of annualized average loans, in the second quarter of 2009. The increase in the provision for loan losses was due primarily to a higher level of charge-offs in 2010. Net charge-offs rose to $4.3 million in the second quarter of 2010, compared with $1.8 million in the second quarter of 2009.
"We are taking a very aggressive approach in identifying impairment in our loan portfolio to account for changes in values arising from the current economic climate and our customers' business prospects," stated Mr. Phillips. "The charge-offs this quarter were due to loans being written down to account for changes in market conditions and to properly reflect those changes in values on our balance sheet."
Total non-interest income was $1.2 million for the second quarter of 2010, compared with $4.0 million in the second quarter of 2009. The decline in non-interest income was due primarily to $2.7 million in proceeds from the settlement of a lawsuit included in non-interest income for the second quarter of 2009. There was no comparable amount received in the second quarter of 2010. Other income for the second quarter of 2010 included a $291,000 loss on sale of other real estate owned, compared with a loss of $121,000 in the second quarter of 2009.
Non-interest expense increased 3.9% to $7.0 million in the second quarter of 2010, compared with $6.7 million in the second quarter of 2009. Salary and benefit costs rose by $139,000, and FDIC insurance and assessments increased $95,000, both compared with the second quarter of 2009. These increases were offset partially by lower legal and professional fees compared with the second quarter of 2009.
Six Months Results
For the first six months of 2010, net income attributable to USBI was $2.9 million, or $0.49 per diluted share, compared with $4.1 million, or $0.69 per diluted share, for the first six months of 2009. The 2010 results include $4.2 million, or $0.43 per share, of non-interest income from an insurance settlement, and the 2009 results include $2.7 million, or $0.31 per share, of non-interest income related to the settlement of a lawsuit.
For the six months ended June 30, 2010, net interest income increased 0.5% to $17.0 million, compared with $16.9 million for the same period of 2009. Net interest margin improved to 5.61% for the first six months of 2010 from 5.57% in the first six months of 2009.
Provision for loan losses was $5.4 million in the first six months of 2010, compared with $3.4 million in the first six months of 2009.
Non-interest income rose 25.4% to $6.5 million for the first six months of 2010, compared with $5.2 million in 2009. The $1.3 million increase in non-interest income resulted from a $4.2 million insurance settlement received in 2010, offset partially by $2.7 million in proceeds from the settlement of a lawsuit in 2009 that was not recurring in 2010.
Non-interest expense was up 10% to $14.0 million, compared with $12.7 million in the first six months of 2009. The increase was due to higher salary and employee benefit expense and expenses related to FDIC insurance premiums and assessments compared with the same period in 2009.
Shareholders' equity increased to $83.2 million, or $13.84 per share, for the six months ended June 30, 2010, compared with $80.8 million, or $13.43 per share, for the six months ended June 30, 2009. Regular quarterly dividends were $0.11 per share for the second quarter of 2010.
Source:
United Security Bancshares, Inc.