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United Security Bancshares, Inc. Reports Third Quarter Results



  United Security Bancshares, Inc. Reports Third Quarter Results

        Net Income Rises to $3.0 Million for First Nine Months of 2013

Business Wire

THOMASVILLE, Ala. -- November 1, 2013

United Security Bancshares, Inc. (Nasdaq: USBI) today reported net income of
$904,000, or $0.15 per diluted share, for the third quarter ended
September 30, 2013, compared with net income of $1.2 million, or $0.20 per
diluted share, for the third quarter of 2012. Net income for the first nine
months of 2013 rose to $3.0 million, or $0.49 per diluted share, compared with
$1.3 million, or $0.22 per diluted share, for the first nine months of 2012.

“We are pleased to report our sixth consecutive quarter of positive net
income, which highlights our progress in reducing non-performing loans, other
real estate owned (OREO) and expenses related to OREO,” stated James F. House,
President and CEO of United Security Bancshares, Inc. “Our non-performing
assets are down 45% to $26.0 million compared with the third quarter of last
year. This quarter marked our fifth consecutive quarter of reducing OREO and
fourth consecutive quarter of reducing non-performing assets.”

“Although we have made excellent progress in reducing costs related to problem
assets, our earnings growth has been constrained by weak demand for commercial
and real estate loans and increased pricing pressure from other banks in our
market. We remain focused on reducing non-performing assets while positioning
our bank to grow earnings as loan demand recovers in our markets. We have a
strong capital base that is well above the minimum regulatory requirements,
and we believe that we have the capital to support our future growth,”
continued Mr. House.

Third Quarter Results

Interest income totaled $8.3 million in the third quarter of 2013, compared
with $9.3 million in the third quarter of 2012. The decline in interest income
was due primarily to lower earning assets, primarily loans, as well as
reduction in yield, compared with the third quarter of 2012.

Net loans totaled $304.8 million in the third quarter of 2013, compared with
$344.7 million at September 30, 2012. The decrease in net loans was due to
loan payoffs and write-downs outpacing new loan demand. An overall weak
economy, primarily centered in the real estate sector, has been a significant
factor in lower loan demand over the past year.

Interest expense declined 31.9% to $702,000 in the third quarter of 2013,
compared with $1.0 million in the third quarter of 2012. The decrease resulted
primarily from lower interest rates paid on deposits compared with the third
quarter of 2012.

Net interest income was $7.6 million in the third quarter of 2013, compared
with $8.3 million in the third quarter of 2012. The decline in net interest
income was due to lower earning assets, primarily loans, combined with a 15
basis point decline in net interest margin, compared with the third quarter of
2012. Net interest margin was 5.89% in the third quarter of 2013, compared
with 6.04% in the third quarter of 2012. The decline in net interest margin
was due primarily to the overall decline in interest earned on loans and
investments. In addition, the yield on the investment portfolio has declined
due to the early payoff of certain higher yielding bonds.

Provision for loan losses declined to $240,000 in the third quarter of 2013,
or 0.3% of annualized average loans, compared with $492,000, or 0.5% of
annualized average loans, in the third quarter of 2012. Net charge-offs were
$2.6 million in the third quarter of 2013, compared with $0.8 million in the
third quarter of 2012. The increase in net charge-offs was due primarily to
the write-down of certain real estate loans to reflect market valuations.
These loans were previously reserved for in the allowance for loan losses, and
the write-downs had no effect on this quarter’s earnings.

Total non-interest income was $1.3 million in the third quarter of 2013,
compared with $1.5 million in the third quarter of 2012. The decrease in
non-interest income was due to lower service charges, credit life insurance
income and other income compared with the third quarter of 2012.

Total non-interest expense declined 2.6% to $7.4 million in the third quarter
of 2013, compared with $7.6 million in the third quarter of 2012. The decline
in non-interest expense was due primarily to lower OREO-related costs, which
declined $686,000 compared with the third quarter of 2012. Total OREO-related
expenses were $263,000 in the third quarter of 2013, which marked the lowest
quarter of OREO-related expenses in over three years. OREO totaled $11.4
million at September 30, 2013, a 16.4% decline from $13.6 million at September
30, 2012, representing the fifth consecutive quarterly decrease in OREO.

United Security Bancshares, Inc. and First United Security Bank continued to
be rated as “well-capitalized,” the highest regulatory rating, as of September
30, 2013. Total risk-based capital was 20.0% for the Company and 20.1% for the
Bank, compared with a regulatory requirement of 10.0% for a well-capitalized
institution and a minimum regulatory requirement of 8.0%. The Tier 1 leverage
ratio was 11.6% for the Company and 11.7% for the Bank, both measures
significantly above the requirement of 5.0% for a well-capitalized institution
and minimum regulatory requirement of 3.0%.

Nine Months Results

For the first nine months of 2013, net income rose to $3.0 million, or $0.49
per diluted share, compared with $1.3 million, or $0.22 per diluted share, for
the first nine months of 2012.

Net interest income for the nine months ended September 30, 2013, was $23.1
million, compared with $25.4 million for the same period of 2012. Net interest
margin declined to 5.97% for the first nine months of 2013 from 6.07% for the
first nine months of 2012.

Provision for loan losses dropped to $799,000 in the first nine months of
2013, compared with $3.2 million in the first nine months of 2012.

Non-interest income was $4.1 million for the first nine months of both 2013
and 2012.

Non-interest expense declined 10.5% to $22.2 million in the first nine months
of 2013, compared with $24.8 million in the first nine months of 2012. The
decrease was due primarily to reduced impairment costs for OREO and lower loss
on sale of OREO. Total OREO-related expenses were $1.3 million for the first
nine months of 2013, compared with $4.3 million in the first nine months of
2012.

Shareholders’ equity rose to $69.4 million, or $11.51 per share, at
September 30, 2013, compared with $68.6 million, or $11.40 per share, at
December 31, 2012, and $68.1 million, or $11.30 per share, at September 30,
2012. The increase in shareholders’ equity from retained earnings of $3.0
million was offset somewhat by a $2.3 million decrease in accumulated other
comprehensive income, due to a decline in the market value of investment
securities available-for-sale. The Company did not declare a cash dividend on
its common stock for the third quarter of 2013.

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

(Dollars in Thousands, Except Share Data)
                                                                 
                                                  September 30,   December 31,
                                                     2013            2012     
                                                  (Unaudited)
ASSETS
Cash and Due from Banks                           $  12,048       $  12,181
Interest Bearing Deposits in Banks                   31,430          41,945   
Total Cash and Cash Equivalents                      43,478          54,126
Federal Funds Sold                                   5,000           5,000
Investment Securities Available-for-Sale, at         121,744         92,614
fair value
Investment Securities Held-to-Maturity, at           35,108          21,136
amortized cost
Federal Home Loan Bank Stock, at cost                906             936
Loans, net of allowance for loan losses of           304,778         337,400
$9,282 and $19,278, respectively
Premises and Equipment, net                          8,756           8,903
Cash Surrender Value of Bank-Owned Life              13,565          13,303
Insurance
Accrued Interest Receivable                          2,527           3,101
Investment in Limited Partnerships                   819             836
Other Real Estate Owned                              11,372          13,286
Other Assets                                         11,949          16,492   
Total Assets                                      $  560,002      $  567,133  
                                                                   
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits                                          $  476,020      $  489,034
Accrued Interest Expense                             263             413
Other Liabilities                                    7,535           8,401
Short-Term Borrowings                                1,777           638
Long-Term Borrowings                                 5,000           -        
Total Liabilities                                 $  490,595      $  498,486  
Commitments and Contingencies
Shareholders’ Equity:
Common Stock, par value $0.01 per share,
10,000,000 shares authorized; 7,327,560 shares       73              73
issued; 6,028,091 and 6,023,622 shares
outstanding, respectively
Surplus                                              9,284           9,284
Accumulated Other Comprehensive Income, net of       796             3,139
tax
Retained Earnings                                    80,259          77,287
Less Treasury Stock: 1,299,469 and 1,303,938         (20,992  )      (21,123 )
shares at cost, respectively
Noncontrolling Interest                              (13      )      (13     )
                                                                   
Total Shareholders’ Equity                           69,407          68,647   
                                                                   
Total Liabilities and Shareholders’ Equity        $  560,002      $  567,133  

 
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)
                                                          
                                      Three Months Ended   Nine Months Ended
                                      September 30,        September 30,
                                         2013      2012      2013       2012
                                      (Unaudited)          (Unaudited)
                                                                       
INTEREST INCOME:
Interest and Fees on Loans            $  7,413   $ 8,488   $ 23,020   $ 26,454
Interest on Investment Securities        857       840       2,276      2,632
Total Interest Income                    8,270     9,328     25,296     29,086
                                                                       
INTEREST EXPENSE:
Interest on Deposits                     693       1,027     2,215      3,549
Interest on Borrowings                   9         4         13         119
Total Interest Expense                   702       1,031     2,228      3,668
                                                                       
NET INTEREST INCOME                      7,568     8,297     23,068     25,418
                                                                       
PROVISION FOR LOAN LOSSES                240       492       799        3,175
                                                                       
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES                          7,328     7,805     22,269     22,243
                                                                       
NON-INTEREST INCOME:
Service and Other Charges on             586       639       1,734      1,870
Deposit Accounts
Credit Life Insurance Income             239       272       518        613
Other Income                             466       542       1,890      1,575
Total Non-Interest Income                1,291     1,453     4,142      4,058
                                                                       
NON-INTEREST EXPENSE:
Salaries and Employee Benefits           4,029     3,433     12,006     10,912
Occupancy Expense                        495       488       1,456      1,416
Furniture and Equipment Expense          301       317       865        970
Impairment on Other Real Estate          215       377       577        3,241
Loss on Sale of Other Real Estate        48        572       753        1,032
Other Expense                            2,277     2,375     6,576      7,261
Total Non-Interest Expense               7,365     7,562     22,233     24,832
                                                                       
INCOME BEFORE INCOME TAXES               1,254     1,696     4,178      1,469
                                                                       
PROVISION FOR INCOME TAXES               350       517       1,206      157
                                                                       
NET INCOME                            $  904     $ 1,179   $ 2,972    $ 1,312
BASIC AND DILUTED NET INCOME PER      $  0.15    $ 0.20    $ 0.49     $ 0.22
SHARE
                                                                       
DIVIDENDS PER SHARE                   $  0.00    $ 0.00    $ 0.00     $ 0.00

Contact:

United Security Bancshares, Inc.
Thomas S. Elley, 334-636-5424
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