Unassociated Document


    United
Security Bancshares –

     

    Response
to Written Agreement Announcement

     

    Yesterday
we reported United Security Bancshares (the "Company") and its wholly owned
subsidiary, United Security Bank (the "Bank"), entered into a written agreement
with the Federal Reserve Bank of San Francisco. Refer to our 8K at
www.sec.gov.

     

    Yesterday
and today various news media are reporting their interpretations of the
information. We are providing this report to enhance the understanding of the
matter for all interested parties.

     

    The
written agreement is the result of an examination in June 2009, about 9 months
ago. The written agreement is a procedural matter regulators employ when certain
conditions warrant and represents a mutual understanding between the Company and
the Federal Reserve. Written agreements attempt to be all inclusive by
addressing the major financial components pertinent to banking even if those
components were not criticized. Capital, Asset Quality, Management, Earnings and
Liquidity are all typically addressed in agreements. Agreements help ensure a
clear understanding between management and regulators for addressing the
deficiencies. The primary condition at the Bank in June 2009 warranting the
procedure for a written agreement was the level of nonperforming
assets.

     

    
      	
               
      

            	
              1.

            	
              Nonperforming
      assets (NPA’s) include:

            


    

     

    
      	
               
      

            	
              a.

            	
              loans
      placed on nonaccrual due to the probability the borrower will be unable to
      pay all principal and interest

            


    

     

    
      	
               
      

            	
              b.

            	
              loans
      90 days past due and still accruing

            


    

     

    
      	
               
      

            	
              c.

            	
              Foreclosed
      real estate

            


    

     

    
      	
               
      

            	
              d.

            	
              Other
      nonperforming assets

            


    

     

    Some of
the Bank’s loans considered NPA’s are not delinquent but contain weaknesses we
believe warrant NPA status.

     

    
      	
               
      

            	
              2.

            	
              The
      written agreement includes a host of other components besides NPA’s, such
      as:

            


    

     

    
      	
               
      

            	
              a.

            	
              submit
      an enhanced written plan to strengthen credit risk and other real estate
      owned

            


    

     

    
      	
               
      

            	
              b.

            	
              maintain
      a sound process for determining, documenting, and recording an adequate
      allowance for loan and lease losses

            


    

     

    
      	
               
      

            	
              c.

            	
              improve
      the management of the Bank's liquidity position and funds management
      policies

            


    

     

    
      	
               
      

            	
              d.

            	
              improve
      the Bank’s earnings and overall
condition

            


    

     

    The
written agreement contained no provisions to increase capital or impose other
financial requirements and will not result in any change to financial results.
We’ve been aware for several months a written agreement is likely and we’ve been
working to complete the requirements an agreement may contain since that time.
Most of the conditions have already been met and we anticipated completing the
remaining components on timely basis. NPA’s, Capital, Earnings and Liquidity
have all improved since the examination date. The task at hand is to continue
this process until the matters contained in the written agreement are fully
addressed.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    We
surmise the 9 month delay for issuing the agreement is partly due to the sheer
number of similar agreements being issued at the present time as required by
regulatory protocol. Estimates are at least 60% of the banks in the 12th Federal
Reserve District have received similar agreements. The Twelfth Federal Reserve
District includes the nine western states—Alaska, Arizona, California, Hawaii,
Idaho, Nevada, Oregon, Utah, and Washington—Guam, American Samoa, and the
Northern Mariana Islands.

    


     

    Contact:

     

    United
Security Bancshares

    Ken
Donahue

    Executive
Vice President and

    Chief
Administrative Officer

    (559)
248-4944