United Security Bancshares, Inc. Reports Growth in Fourth Quarter and 2012 Net Income

  United Security Bancshares, Inc. Reports Growth in Fourth Quarter and 2012
  Net Income

                Net Income Rises to $883,000 in Fourth Quarter

Business Wire

THOMASVILLE, Ala. -- February 21, 2013

United Security Bancshares, Inc. (Nasdaq: USBI) today reported an increase in
net income attributable to USBI for the fourth quarter of 2012 to $883,000, or
$0.15 per diluted share, compared with a net loss attributable to USBI of
($9.5 million), or ($1.58) per diluted share, for the fourth quarter of 2011.
Net income attributable to USBI rose to $2.2 million, or $0.36 per diluted
share, for the year ended December31,2012, compared with a net loss
attributable to USBI of ($9.1 million), or ($1.51) per diluted share, in 2011.

“The fourth quarter of 2012 was our third consecutive quarter to report growth
in net income, which resulted in large part from reduced non-interest
expenses, charges related to other real estate and non-performing loans,
including significant reductions in charge-offs and our provision for loan
losses,” stated James F. House, President and CEO of United Security
Bancshares, Inc. “We have been very successful over the past year in improving
our asset quality, which has been a key driver in our improved earnings
performance."

“We reduced non-performing loans by $8.8 million from the third quarter of
2012. We benefited from increased sales of other real estate owned (OREO) and
successfully resolved a large loan that was placed on non-accrual status in
the third quarter. We are pleased with our progress in reducing the level of
non-performing assets, as highlighted by non-accrual loans declining $8.0
million to $23.6 million and OREO declining $0.3 million to $13.3 million from
the third quarter of 2012. Our charge-offs and write-downs of OREO were also
down from last year. In addition, our loans accruing 90-days past due declined
$0.5 million to $1.6 million as of December 31, 2012, as compared to $2.1
million as of September 30, 2012. Although we made solid progress in reducing
non-performing assets during 2012, they still remain at elevated levels, and
we remain focused on resolving problem loans and selling OREO to improve our
long-term profitability."

“Loan demand is still weak, but we are beginning to see some areas of
recovery,” continued Mr. House. “Our challenge will be to grow our loan
portfolio with quality loans. We believe that our strong capital base will
continue to provide us with the capacity to make new loans and will provide us
with a competitive advantage as the economy improves.”

Fourth Quarter Results

Net income attributable to USBI rose to $883,000, or $0.15 per diluted share,
for the fourth quarter of 2012, compared with a net loss attributable to USBI
of ($9.5 million), or ($1.58) per diluted share, for the fourth quarter of
2011. The 2011 fourth quarter’s results included a $4.1 million non-cash
write-off of goodwill.

“Our improved profitability has added to our strong capital base, and we
continue to be rated “well capitalized,” the highest regulatory rating,”
continued Mr. House. “We maintained our ‘well capitalized,’ rating throughout
the economic downturn and without any financial assistance from the Federal
government. At December 31, 2012, our total risk based capital ratio rose to
17.1% for the Company and 17.2% for the Bank, both well above the regulatory
requirement of 10.0% for a well-capitalized institution and a minimum
regulatory requirement of 8.0%. In addition, our Tier 1 leverage ratio was
10.5%for the Company and 10.6%for the Bank, both measures significantly
above the requirement of 5.0%for a well-capitalized institution and minimum
regulatory requirement of 3.0%.”

Interest income totaled $9.7 million in the fourth quarter of 2012, compared
with $10.6 million in the fourth quarter of 2011. The decrease in interest
income was due primarily to lower earning assets, primarily loans, compared
with the fourth quarter of 2011, partially offset by a 53 basis point increase
in net interest margin to 6.66% in the fourth quarter of 2012, compared with
6.13% in the fourth quarter of 2011.

Net loans totaled $337.4 million in the fourth quarter of 2012, compared with
$381.1 million in the fourth quarter of 2011. The decrease in net loans was
due to loan payoffs and write-downs outpacing new loan demand. An overall weak
economy in the bank’s markets, primarily centered in the real estate sector,
has been a significant factor in lower loan demand over the past year.

Interest expense declined 46% to $888,000 in the fourth quarter of 2012,
compared with $1.6 million in the fourth quarter of 2011. The decline in
interest expense was due primarily to lower average rates paid on interest
bearing deposits.

Net interest income declined 1.9% to $8.8 million in the fourth quarter of
2012, compared with $9.0million in the fourth quarter of the prior year.

Provision for loan losses dropped to $1.2 million in the fourth quarter of
2012, compared with $13.6 million in the fourth quarter of 2011. Net
charge-offs totaled $1.8million in the fourth quarter of 2012, compared with
$6.6 million in thefourth quarter of 2011.

Total non-interest income was $1.5 million in the fourth quarter of 2012,
compared with $3.7 million in the fourth quarter of 2011. The decline in
non-interest income was due primarily to lower gains on the sale of investment
securities in the fourth quarter of 2012 compared with the fourth quarter of
2011.

Non-interest expense declined to $7.7 million in the fourth quarter of 2012,
compared with $14.1million in thefourthquarter of 2011. The 2011 fourth
quarter’s results included a $4.1 million impairment charge to goodwill and
higher expenses related to other real estate. Total expenses related to other
real estate declined $2.7 million to $0.6 million in the fourth quarter of
2012, compared with $3.3 million in the fourth quarter of 2011.

Twelve Month Results

For the year ended December 31, 2012, net income attributable to USBI
increased to $2.2 million, or $0.36 per diluted share, compared with a net
loss attributable to USBI of ($9.1 million), or ($1.51) per diluted share, for
the year ended December31,2011.

Net interest income declined to $34.2million in 2012, compared with
$35.3million in 2011. The decline in net interest income was due primarily to
lower interest earning assets, primarily loans, in 2012 compared with the
prior year. Net loans were down $43.7 million to $337.4 million at December
31, 2012, compared with $381.1 million at December 31, 2011. Net interest
margin increased to 6.21% in 2012 from 6.17% in 2011. Thegrowth in net
interest margin in 2012 resulted from a lower cost of funds compared with
2011.

Provision for loan losses declined to $4.3 million in 2012, or 1.15%
annualized of average loans, compared with $18.8million, or 4.63% annualized
of average loans, in 2011. Net charge-offs totaled $7.3 million in 2012,
compared with $17.5 million in 2011.

Non-interest income declined to $5.6 million in 2012, compared with
$8.7million in 2011, primarily due to lower gains on the sale of investment
securities in 2012 compared with 2011.

Non-interest expense declined 19.4% to $32.5 million in 2012, compared with
$40.3 million in 2011. Non-interest expense declined in every major category
in 2012 compared with the prior year except for salary expense, which was up
0.7%, and furniture and equipment expense, which was up 0.8%, as compared with
2011. Impairment on other real estate declined $2.8 million from 2011.

About United Security Bancshares, Inc.

United Security Bancshares, Inc. is a 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, and 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. The Company’s stock is traded on the 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 that 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, except as required by
law. 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 that 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. Specifically, with respect to statements relating to loan
demand and the adequacy of the allowance for loan losses for USBI, these
factors include, but are not limited to, the rate of growth (or lack thereof)
in the economy, the relative strength and weakness in the consumer and
commercial credit sectors and in the real estate markets and collateral
values. 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 FINANCIAL CONDITION

(Dollars in Thousands, Except Per Share Data)

                                               December 31,   December 31,
                                                 2012             2011
                                                 (Unaudited)
ASSETS
                                                                  
Cash and Due from Banks                          $  12,181        $  9,491
Interest-Bearing Deposits in Banks                 41,945         43,306  
Total Cash and Cash Equivalents                     54,126           52,797
Federal Funds Sold                                  5,000            -
Investment Securities Available-for-Sale, at        92,614           122,170
fair market value
Investment Securities Held-to-Maturity, at          21,136           1,170
cost
Federal Home Loan Bank Stock, at cost               936              2,861
Loans, net of allowance for loan losses of          337,400          381,085
$19,278 and $22,267, respectively
Premises and Equipment, net                         8,902            9,050
Cash Surrender Value of Bank-Owned Life             13,303           12,922
Insurance
Accrued Interest Receivable                         3,101            3,958
Investment in Limited Partnerships                  836              1,456
Other Real Estate Owned                             13,286           16,774
Other Assets                                       16,492         17,567  
Total Assets                                     $  567,132      $  621,810 
                                                                  
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits                                         $  489,034       $  527,073
Accrued Interest Expense                            413              790
Short-Term Borrowings                               638              356
Long-Term Debt                                      -                20,000
Other Liabilities                                  8,400          7,383   
Total Liabilities                                  498,485        555,602 
                                                                  
Shareholders’ Equity:
Common Stock, par value $0.01 per share,
10,000,000 shares authorized; 7,327,560 and
7,322,560 shares issued, respectively;              73               73
6,023,622 and 6,015,737 shares outstanding,
respectively
Surplus                                             9,284            9,259
Accumulated Other Comprehensive Income, net         3,139            3,005
of tax
Retained Earnings                                   77,286           75,091
Less Treasury Stock: 1,303,938 and 1,306,823        (21,123 )        (21,208 )
shares at cost, respectively
Noncontrolling Interest                            (12     )       (12     )
                                                                  
Total Shareholders’ Equity                         68,647         66,208  
                                                                  
Total Liabilities and Shareholders’ Equity       $  567,132      $  621,810 
                                                                  


UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)

                        Three Months Ended        Twelve Months Ended
                          December 31,                December 31,
                          2012      2011            2012       2011
                                                                   
INTEREST INCOME:
Interest and Fees on      $ 8,919     $ 9,365         $ 35,373     $ 37,064
Loans
Interest on                748        1,231         3,380       5,282   
Investment Securities
Total Interest Income       9,667       10,596          38,753       42,346
                                                                   
INTEREST EXPENSE:
Interest on Deposits        884         1,518           4,433        6,260
Interest on                4          127           123         759     
Borrowings
Total Interest             888        1,645         4,556       7,019   
Expense
                                                                   
NET INTEREST INCOME         8,779       8,951           34,197       35,327
                                                                   
PROVISION FOR LOAN         1,163      13,626        4,338       18,802  
LOSSES
                                                                   
NET INTEREST INCOME                                              
(LOSS) AFTER
PROVISION FOR LOAN          7,616       (4,675  )       29,859       16,525
LOSSES
                                                                   
NON-INTEREST INCOME:
Service and Other
Charges on Deposit          652         719             2,522        2,888
Accounts
Credit Life Insurance       342         348             955          924
Income
Other Income               513        2,681         2,088       4,916   
Total Non-Interest          1,507       3,748           5,565        8,728
Income
                                                                   
NON-INTEREST EXPENSE:
Salaries and Employee       3,678       3,253           14,590       14,491
Benefits
Occupancy Expense           483         460             1,899        1,922
Furniture and               323         331             1,293        1,282
Equipment Expense
Impairment on Other         342         2,548           3,583        6,390
Real Estate Owned
Goodwill Impairment         -           4,098           -            4,098
Loss on Sale of Other       251         771             1,283        1,607
Real Estate
Other Expense              2,575      2,648         9,836       10,497  
Total Non-Interest         7,652      14,109        32,484      40,287  
Expense
                                                                   
INCOME (LOSS) BEFORE        1,471       (15,036 )       2,940        (15,034 )
INCOME TAXES
PROVISION FOR
(BENEFIT FROM) INCOME      588        (5,547  )      745         (5,958  )
TAXES
NET INCOME (LOSS)         $ 883       $ (9,489  )     $ 2,195      $ (9,076  )
Less: Net Loss
Attributable to            -          -             -           (1      )
Noncontrolling
Interest
NET INCOME (LOSS)         $ 883       $ (9,489  )     $ 2,195      $ (9,075  )
ATTRIBUTABLE TO USBI
BASIC AND DILUTED NET
INCOME (LOSS)             $ 0.15      $ (1.58   )     $ 0.36       $ (1.51   )
ATTRIBUTABLE TO USBI
PER SHARE
                                                                   
DIVIDENDS PER SHARE       $ 0.00      $ 0.00         $ 0.00       $ 0.04    
                                                                             

Contact:

United Security Bancshares, Inc.
Robert Steen, 334-636-5424
 
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