United Security Bancshares, Inc. Reports Improved First Quarter Results

  United Security Bancshares, Inc. Reports Improved First Quarter Results

                Net Income Rises to $886,000 in First Quarter

Business Wire

THOMASVILLE, Ala. -- May 6, 2013

United Security Bancshares, Inc. (NASDAQ: USBI) today reported an increase in
net income for the first quarter ended March 31, 2013, compared with the first
quarter of 2012. Netincome rose to $886,000, or $0.15 per diluted share, for
the first quarter ended March31, 2013, compared with a net loss of $(1.2)
million, or $(0.21) per diluted share, for the first quarter of 2012.

“We are pleased with United Security’s solid recovery in earnings over the
past year and our progress in reducing non-performing assets,” stated James F.
House, President and CEO of United Security Bancshares, Inc. “This was our
fourth consecutive quarter of positive earnings, third consecutive quarter of
reducing other real estate owned (OREO) and second consecutive quarter of
reducing non-performing assets. We are pleased with the improvement in our
asset quality over the past year, and this has been a key driver in our
improved earnings performance.”

“We reduced non-performing assets 25% from the highs reached last year. We
have reduced OREO, and our non-accrual loans are down over $10 million since
the peak in 2012. Our charge-offs and write-downs of OREO are also down
substantially from the first quarter of last year. We are making noticeable
progress in improving our asset quality and remain focused on resolving
problem loans and selling OREO to improve our earnings potential.”

“We expect that our major challenge in 2013 will be adding quality loans to
replace loans that will pay off this year. Loan demand remains soft in many of
our markets due to weak demand for commercial loans as well as residential and
commercial real estate loans, which historically have been primary drivers for
new loans. We are fortunate to have weathered the recession and emerge with a
strong capital base to support our future growth as the economy improves,”
continued Mr. House.

First Quarter Results

Net income rose to $886,000, or $0.15 per diluted share, for the first quarter
of 2013, compared with a net loss of $(1.2) million, or $(0.21) per diluted
share, for the first quarter of 2012.

“Our improved profitability over the past year has strengthened our capital
ratios. We maintained our ‘well capitalized’ rating, the highest regulatory
rating, throughout the recession without any assistance from the Federal
government,” stated Mr. House. “First quarter 2013 total risk-based capital
rose to 18.1% for the holding company and 18.2% for First United Security
Bank, compared with the regulatory requirement of 10.0% for a well-capitalized
institution and the minimum regulatory requirement of 8.0%. Tier 1 risk-based
capital increased to 16.8% for the holding company and 16.9% for the bank,
both measures significantly above the regulatory requirement of 6.0% for a
well-capitalized institution and the minimum regulatory requirement of 4.0%.
Also, the Tier 1 leverage ratio increased to 10.7% for both the holding
company and the bank.”

Interest income totaled $8.6 million for the quarter ended March 31, 2013,
compared with $10.0 million for the quarter ended March 31, 2012. Net interest
margin improved to 6.1%, compared with 6.0% in the first quarter of 2012. The
increase in net interest margin was due primarily to lower cost of funds
compared with the first quarter of the prior year.

Net loans declined to $321.0 million in the first quarter of 2013, compared
with $337.4 million at December31,2012. The decrease in net loans was due to
loan payoffs and write-downs outpacing new loan production. 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 $789,000 in the first quarter of 2013,
compared with $1.5 million in the first quarter of 2012. The decline in
interest expense was due primarily to lower average rates paid on interest
bearing deposits.

Provision for loan losses declined to $506,000 in the first quarter of 2013,
or 0.6% of annualized average loans, compared with $2.2 million, or 3.8% of
annualized average loans, in the first quarter of 2012. Net charge-offs
declined to $3.0 million in the first quarter of 2013, compared with $3.7
million in the first quarter of 2012.

Total non-interest income increased to $1.6million in the first quarter of
2013, compared with $1.3 million in the first quarter of the prior year. The
increase was due primarily to higher other income that included a $484,000
prepayment penalty from the early payoff of a mortgage backed pool, partially
offset by lower service and other charges on deposit accounts and credit life
insurance income.

Non-interest expense declined to $7.7 million in the first quarter of 2013,
compared with $9.8million in the first quarter of 2012. The decrease in
non-interest expense resulted primarily from a $2.4 million decrease in total
expenses related to OREO compared with the prior year’s first quarter.
Impairment costs for OREO declined 93% to $197,000 in the first quarter of
2013, compared with $2.8 million in the first quarter of 2012. OREO totaled
$12.4 million at March 31, 2013, a 15.4% decline from $14.6 million at March
31, 2012, representing the third consecutive quarterly decrease in OREO.

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, growth and earnings potential 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

(In Thousands of Dollars, Except Per Share Data)

                                                March 31,     December 31,
                                                  2013            2012
                                                  (Unaudited)
ASSETS
                                                                  
Cash and Due from Banks                           $ 9,364         $  12,181
Interest-Bearing Deposits in Other Banks           59,235         41,945  
Total Cash and Cash Equivalents                     68,599           54,126
Federal Funds Sold                                  5,000            5,000
Investment Securities Available-for-Sale, at        92,396           92,614
fair value
Investment Securities Held-to-Maturity, at          26,166           21,136
amortized cost
Federal Home Loan Bank Stock, at cost               681              936
Loans, net of allowance for loan losses of
$16,793 and $19,278,                                321,007          337,400

respectively
Premises and Equipment, net                         8,784            8,903
Cash Surrender Value of Bank-Owned Life             13,392           13,303
Insurance
Accrued Interest Receivable                         2,701            3,101
Investment in Limited Partnerships                  836              836
Other Real Estate Owned                             12,382           13,286
Other Assets                                       12,695         16,492  
Total Assets                                      $ 564,639      $  567,133 
                                                                  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                                                  
Deposits                                          $ 486,782       $  489,034
Accrued Interest Expense                            291              413
Other Liabilities                                   8,165            8,401
Short-Term Borrowings                              399            638     
Total Liabilities                                  495,637        498,486 
Commitments and Contingencies
Shareholders’ Equity:
Common Stock, par value $0.01 per share,
10,000,000 shares authorized; 7,327,560             73               73
shares issued; 6,023,622 shares outstanding
Surplus                                             9,284            9,284
Accumulated Other Comprehensive Income, net         2,608            3,139
of tax
Retained Earnings                                   78,173           77,287
Less Treasury Stock: 1,303,938 shares at cost       (21,123 )        (21,123 )
Noncontrolling Interest                            (13     )       (13     )
                                                                  
Total Shareholders’ Equity                         69,002         68,647  
                                                                  
Total Liabilities and Shareholders’ Equity        $ 564,639      $  567,133 
                                                                             


UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands of Dollars, Except Per Share Data)

                                                      Three Months Ended
                                                        March 31,
                                                        2013      2012
                                                        (Unaudited)
                                                                    
INTEREST INCOME:
Interest and Fees on Loans                              $ 7,910     $ 9,083
Interest on Investment Securities                        684        927    
Total Interest Income                                     8,594       10,010
                                                                    
INTEREST EXPENSE:
Interest on Deposits                                      787         1,375
Interest on Borrowings                                   2          85     
Total Interest Expense                                   789        1,460  
                                                                    
NET INTEREST INCOME                                       7,805       8,550
                                                                    
PROVISION FOR LOAN LOSSES                                506        2,215  
                                                                    
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES       7,299       6,335
                                                                    
NON-INTEREST INCOME:
Service and Other Charges on Deposit Accounts             590         628
Credit Life Insurance Income                              110         119
Other Income                                             923        527    
Total Non-Interest Income                                 1,623       1,274
                                                                    
NON-INTEREST EXPENSE:
Salaries and Employee Benefits                            4,012       3,764
Occupancy Expense                                         461         447
Furniture and Equipment Expense                           283         310
Impairment on Other Real Estate                           197         2,834
Loss on Sale of Other Real Estate                         445         194
Other Expense                                            2,294      2,279  
Total Non-Interest Expense                               7,692      9,828  
                                                                    
INCOME (LOSS) BEFORE INCOME TAXES                         1,230       (2,219 )
                                                                    
PROVISION FOR (BENEFIT FROM) INCOME TAXES                344        (982   )
                                                                    
NET INCOME (LOSS)                                       $ 886       $ (1,237 )
                                                                    
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE           $ 0.15      $ (0.21  )
                                                                    
DIVIDENDS PER SHARE                                     $ -         $ -      
                                                                             

Contact:

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