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

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

                Net Income Rises 79% to $3.9 Million for 2013

Business Wire

THOMASVILLE, Ala. -- March 19, 2014

United Security Bancshares, Inc. (NASDAQ: USBI) today reported a 78.9%
increase in net income to $3.9 million, or $0.65 per diluted share, for the
year ended December 31, 2013, compared with $2.2 million, or $0.36 per diluted
share, for the year ended December31, 2012. Net income for the fourth quarter
of 2013 rose 8.2% to $955,000, or $0.16 per diluted share, compared with net
income of $883,000, or $0.15 per diluted share, for the fourth quarter of
2012.

“We made solid progress in building our profitability and reducing problem
assets since last year,” stated James F. House, President and CEO of United
Security Bancshares, Inc. “At the close of 2013, we marked our seventh
consecutive quarter of positive income as we benefited from our program to
reduce non-performing loans, other real estate owned (OREO) and expenses
related to OREO. The fourth quarter of 2013 also marked our sixth consecutive
quarter of reducing OREO and our fifth consecutive quarter of reducing
non-performing assets. Our non-performing assets were down 44% to $21.5
million compared with the fourth quarter of last year.”

“We have seen some indications of improvement in our local economy, primarily
related to rising timber prices and improvements in certain customer balance
sheets. However, economic conditions remain weak in certain other sectors,
including real estate development and construction. Furthermore, while we
continue our program of reducing non-performing loans, competition in the
commercial lending space remains fierce. As a result of the mixed economic
conditions and the competitive environment, new loan production remained below
the level of loan payoffs and reduction in problem assets for the year. We
expect this trend to continue to restrain our earnings growth in 2014. Our
primary focus in 2014 will be to add quality loans while continuing to reduce
non-performing loans. We believe that making progress in these areas will be
key to building future profitability. We are fortunate to have a strong
capital base that is well above the minimum regulatory requirements and that
will support our future growth,” continued Mr. House.

Fourth Quarter Results

Interest income totaled $8.3 million in the fourth quarter of 2013, compared
with $9.7 million in the fourth 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 fourth quarter of 2012.

Net loans totaled $300.9 million in the fourth quarter of 2013, compared with
$337.4 million in the fourth quarter of 2012. The decrease in net loans was
due to loan payoffs and write-downs outpacing new loan demand. An overall weak
economy in our markets, primarily centered in the real estate sector, has been
a significant factor in lower loan demand over the past year.

Interest expense declined 23.8% to $677,000 in the fourth quarter of 2013,
compared with $888,000 in the fourth quarter of 2012. The decrease resulted
primarily from lower interest rates paid on deposits compared with the fourth
quarter of 2012.

Net interest income was $7.7 million in the fourth quarter of 2013, compared
with $8.8million in the fourth quarterof 2012. The decline in net interest
income was due to lower earning assets, primarily loans, combined with an 80
basis point decline in net interest margin, compared with the fourth quarter
of 2012. Net interest margin was 5.86% in the fourth quarter of 2013, compared
with 6.66% in the fourth 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 declined due
to the early payoff of certain higher yielding bonds compared with the fourth
quarter of the prior year.

Provision for loan losses was a credit of $1.4 million in the fourth quarter
of 2013, compared with a charge of $1.2 million in the fourth quarter of 2012.
The credit to the provision for loan losses was due primarily to adjustments
to the allowance for loan losses resulting from approximately $3.0 million in
recoveries of loans previously charged off. Charge-offs were $1.4million in
the fourth quarter of 2013, compared with $2.0 million in the fourth quarter
of 2012.

Total non-interest income was $723,000 in the fourth quarter of 2013, compared
with $1.5 million in the fourth quarter of 2012. The decrease in non-interest
income was due to lower service charges, credit life insurance income and
other income, all compared with the fourth quarter of 2012. Service charges
for the fourth quarter of 2013 included approximately $566,000 in service
charges that were refunded to customers for a product that was discontinued.
The refunded service charges were initially recorded as non-interest income
from the first quarter of 2011 through the third quarter of 2013.

Total non-interest expense increased 12% to $8.6 million in the fourth quarter
of 2013, compared with $7.7million in the fourth quarter of 2012. The
increase in non-interest expense was due primarily to an increase in salaries
and employee benefits, and increased write-downs on OREO, compared with the
fourth quarter of 2012. The increase in salary and employee benefits expense
was primarily attributable to cost of living adjustments, salaries paid to new
officers hired in 2013, increases in health insurance expenses and increases
in accruals for incentive payouts. OREO write-downs rose $429,000 to $1.0
million in the fourth quarter of 2013, compared with $593,000 in the fourth
quarter of 2012. The increase in OREO write-downs was due primarily to routine
reappraisals of OREO in the fourth quarter of 2013 that showed lower appraised
values than when the assets were previously appraised in accordance with the
Company’s appraisal policies. Total OREO declined to $9.3 million at December
31, 2013, a 30% decline from $13.3 million at December 31, 2012, representing
the sixth 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 December
31, 2013. Total risk-based capital was19.20% for the Company and 19.34% 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 10.88%for the Company and 10.97% for the Bank,
significantly above the requirement of 5.0%for a well-capitalized institution
and minimum regulatory requirement of 3.0%.

Twelve Months Results

For the year ending December 31, 2013, net income rose to $3.9 million, or
$0.65 per diluted share, compared with $2.2 million, or $0.36 per diluted
share, for the year ended December 31, 2012.

Net interest income for the year ended December 31, 2013, was $30.7 million,
compared with $34.2million for the same period of 2012. Net interest margin
declined to 5.95% in 2013 from 6.21% in 2012. The decrease in net interest
margin from 2012 was due primarily to the overall decline in interest earned
on loans and investments since last year.

Provision for loan losses dropped to a credit of $642,000 in 2013, compared
with a charge of $4.3 million in 2012. The credit to the provision for loan
losses was due primarily to adjustments to the allowance for loan losses
resulting from approximately $3.9 million in recoveries of loans previously
charged off, including $3.0 million received in the fourth quarter of 2013.
Charge-offs totaled $13.1million in 2013, compared with $9.0 million in 2012.

Non-interest income declined to $4.9 million for 2013, compared to $5.6
million in 2012, primarily due to lower service charges in 2013 compared to
2012. The decrease in service charges was due primarily to the reversal of
approximately $566,000 in service charges that were refunded to customers in
the fourth quarter of 2013 for a product that was discontinued. The refunded
service charges were initially recorded as non-interest income from the first
quarter of 2011 through the third quarter of 2013.

Non-interest expense declined 5.2% to $30.8 million in 2013, compared with
$32.5 million in 2012. Non-interest expense declined in every major category
in 2013 compared with the prior year, except for salary and employee benefits
expense, which was up 11.5% compared with 2012, and occupancy expense, which
was up 2.6% compared with 2012. The increase in salary and employee benefits
expense was primarily attributable to cost of living adjustments, salaries
paid to new officers hired in 2013, increases in health insurance expense and
increases in accruals for incentive payouts. Write-downs on OREO declined $2.5
million from 2012.

Shareholders’ equity rose to $70.1 million, or $11.63 per share, at December
31,2013, compared with $68.6 million, or $11.40per share, at December 31,
2012. The increase in shareholders’ equity from retained earnings of $3.9
million was offset somewhat by a $2.6 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 during 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)
                                                                  
                                                   December 31,   December 31,
                                                   2013           2012
                                                   (Unaudited)
ASSETS
                                                                  
Cash and Due from Banks                            $  10,276      $  12,181
Interest-Bearing Deposits in Other Banks             37,444       41,945  
Total Cash and Cash Equivalents                       47,720         54,126
Federal Funds Sold                                    -              5,000
Investment Securities Available-for-Sale, at          135,754        92,614
fair value
Investment Securities Held-to-Maturity, at            35,050         21,136
amortized cost
Federal Home Loan Bank Stock, at cost                 906            936
Loans, net of allowance for loan losses of            300,927        337,400
$9,396 and $19,278, respectively
Premises and Equipment, net                           8,928          8,903
Cash Surrender Value of Bank-Owned Life               13,650         13,303
Insurance
Accrued Interest Receivable                           2,702          3,101
Other Real Estate Owned                               9,310          13,286
Other Assets                                         14,854       17,328  
Total Assets                                       $  569,801    $  567,133 
                                                                  
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits                                           $  484,279     $  489,034
Accrued Interest Expense                              266            413
Other Liabilities                                     8,930          8,401
Short-Term Borrowings                                 1,231          638
Long-Term Debt                                       5,000        -       
Total Liabilities                                    499,706      498,486 
                                                                  
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        529            3,139
tax
Retained Earnings                                     81,214         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                           70,095       68,647  
                                                                  
Total Liabilities and Shareholders’ Equity         $  569,801    $  567,133 
                                                                  

                                                    
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,
                                2013        2012        2013        2012
                                                                      
INTEREST INCOME:
Interest and Fees on Loans      $ 7,374      $ 8,919     $ 30,394     $ 35,373
Interest on Investment           966        748        3,242      3,380
Securities
Total Interest Income             8,340        9,667       33,636       38,753
                                                                      
INTEREST EXPENSE:
Interest on Deposits              669          884         2,884        4,433
Interest on Borrowings           8          4          21         123
Total Interest Expense           677        888        2,905      4,556
                                                                      
NET INTEREST INCOME               7,663        8,779       30,731       34,197
                                                                      
PROVISION (REDUCTION IN          (1,441 )    1,163      (642   )    4,338
RESERVE) FOR LOAN LOSSES
                                                                      
NET INTEREST INCOME AFTER
PROVISION (REDUCTION IN           9,104        7,616       31,373       29,859
RESERVE) FOR LOAN LOSSES
                                                                      
NON-INTEREST INCOME:
Service and Other Charges         (14    )     652         1,720        2,522
on Deposit Accounts
Credit Life Insurance             288          342         806          955
Income
Other Income                     449        513        2,339      2,088
Total Non-Interest Income         723          1,507       4,865        5,565
                                                                      
NON-INTEREST EXPENSE:
Salaries and Employee             4,255        3,678       16,261       14,590
Benefits
Occupancy Expense                 493          483         1,949        1,899
Furniture and Equipment           332          323         1,197        1,293
Expense
Write-downs on Other Real         1,022        593         2,352        4,866
Estate
Other Expense                    2,467      2,575      9,043      9,836
Total Non-Interest Expense       8,569      7,652      30,802     32,484
                                                                      
INCOME BEFORE INCOME TAXES        1,258        1,471       5,436        2,940
PROVISION FOR INCOME TAXES       303        588        1,509      745
NET INCOME                      $ 955       $ 883       $ 3,927     $ 2,195
BASIC AND DILUTED NET           $ 0.16      $ 0.15      $ 0.65      $ 0.36
INCOME PER 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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