USBK USA Bank NY (CE)

USA Bank (OTCBB: USBK) reported a net loss of $4.1 million ($0.71 per share) during the three months ended September 30, 2009, as compared to a net loss of $118,000 ($0.02 per share) for the three months ended September 30, 2008. For the nine months ended September 30, 2009 the Bank's net loss was $8.9 million ($1.54 per share) compared to a net loss of $1.2 million ($0.22 per share) for the nine months ended September 30, 2008.

The increase in the loss for the three months ended September 30, 2009 compared with 2008 was mainly due to the negative impact on borrowers resulting from the economic downturn, which required the Bank to record a provision for loan losses of $3.7 million. This provision was required by the $36.7 million increase in nonaccrual loans from $3.9 million at September 30, 2008 to $40.6 million at September 30, 2009, which has resulted in a reduction in interest income on loans and the aforementioned increase in the provision for loan losses. The increase in the loss between periods is also partly attributed to the $438,000 in additional other than temporary impairment charges against earnings, which resulted from projected defaults/losses due to increased delinquencies within the Bank's four private label collateralized mortgage obligations (CMOs), held in the Bank's securities portfolio.

Mr. Ronald J. Gentile, USA Bank's President and Chief Executive Officer, stated that, "Results mostly reflect the downturn in the economy. The increase in non-performing loans is a serious concern, and we have hired an experienced, professional workout specialist to assist us in trying to restore these loans to a performing basis. And, the entire Lending Department has been focusing its efforts on the nonperforming loan portfolio over the past several months, meeting with borrowers, obtaining current financial information on the personal guarantors, ordering new, independent appraisals, etc. Noteworthy, an analysis of the net realizable values of the underlying collateral for these loans compared to the outstanding loan balances, indicated the need for a specific reserve of $2.9 million, and that amount has been recorded in the allowance for loan losses at September 30, 2009. This analysis was based on current appraisal valuations performed by state certified, independent appraisers, and the values assigned clearly represent the declining real estate conditions existing in our market areas."

Mr. Gentile further noted, "I am pleased that our planned reduction in operating expenses (departure from administrative offices in Rye Brook) has somewhat offset the negative impact on earnings resulting from the economic downturn." He also noted that the Bank's average cost of funds continued to decline to 3.30% for the third quarter of 2009, as compared to 4.23% during the third quarter of 2008.

Mr. Gentile commented that, "The recessionary global economic climate and current declining local real estate markets, along with reduced loan demand and the sizeable volume of nonaccrual loans, will make the achievement of profitability in the near term a major challenge." He also said, "We remain optimistic that the closer scrutiny being applied to our large existing commercial real estate and construction loan portfolios, coupled with some pricing stabilization seen in some of our local real estate markets and stepped up collection efforts, should help ameliorate any worsening loan quality problems. Moreover, the Bank's Board of Directors has passed a resolution prohibiting any new commercial construction or 'speculative' commercial lending, until conditions improve. However, any collateral deterioration which may occur if real estate values continue to erode, which cannot be predicted with any certainty, will obviously impact future operations, as it will result in the need to allocate additional provisions for loan losses and possible charge-offs."

The Bank's allowance for loan losses as a percentage of loans has increased from 1.24%, or $1,862,000, at September 30, 2008, to 4.16%, or $7,154,000, at September 30, 2009. USA Bank uses a methodology to calculate the allowance for loan losses which includes the Bank's historical loan loss experience, peer group data, adjustments based on the economic and business climate, severity of past due loans, and other qualitative factors. It also compares the net realizable value of collateral securing loans placed on nonaccrual compared to the Bank's investment or book value of the loan. In the event of a shortfall, a specific reserve is established within the allowance for loan losses. Specific reserves required as of September 30, 2009 totaled $2.9 million compared to a specific reserve of $139,000 being required as of September 30, 2008. The trend in USA Bank's peer group has been to increase the allowance in the past several quarters, and USA Bank's analysis reflects this trend.

The Bank's total assets reached $223.2 million at September 30, 2009, an increase of $13.3 million, or 6.3%, from the $209.9 million at December 31, 2008, and an increase of $27.4 million, or 14.0%, since September 30, 2008. As of September 30, 2009, total gross loans were $172.0 million, which represents an $18.7 million, or a 12.2%, increase from $153.3 million at December 31, 2008, and a $22.4 million, or a 15.0%, increase from $149.6 million at September 30, 2008. As of September 30, 2009, total deposits were $189.2 million, which represents an increase of $19.4 million, or 11.4%, from $169.8 million at December 31, 2008, and an increase of $37.3 million, or 24.6%, from $151.9 million at September 30, 2008. Capital ratios as of September 30, 2009 were as follows: Tier One Capital to average assets of 4.81%, Tier One Capital to risk-weighted assets of 6.20%, and Total Capital to risk-weighted assets of 7.48%.

On September 1, 2009, the Bank contracted the services of Laidlaw & Company (UK), Ltd., an investment banking firm, to develop a capital plan in order to raise an additional $15 to $20 million of capital, pending regulatory and shareholder approval.

"Safe Harbor" Statement under Private Securities Litigation Reform Act of 1995

Some of the statements contained in this press release may include forward-looking statements which reflect our current views with respect to future events and financial performance. Statements which include the words "expect," "intend," "plan," "believe," "project," "anticipate" and similar statements of future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in these statements or that could adversely affect the holders of our common stock.

These factors include, but are not limited to, those outlined in the Bank's Annual Report on Form 10-K for the year ended December 31, 2008, and the Bank's Quarterly Reports on Form 10-Q for the periods ended March 31, 2009, June 30, 2009, and September 30, 2009, which were filed with the Federal Deposit Insurance Corporation and are publicly available from the FDIC's Accounting and Securities Disclosure Section, 550 17th Street, N.W., Washington, D.C. 20429 and on the Bank's website at www.usa-bankers.com.

For more information call: Ronald J. Gentile President & CEO 914-417-3205