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United Security Bancshares, Inc. Reports 2009 Results

THOMASVILLE, Ala., Feb. 19 /PRNewswire-FirstCall/ -- United Security Bancshares, Inc. (Nasdaq: USBI) today reported net income of $4.8 million, or $0.79 per diluted share, for the twelve months ended December 31, 2009, compared with net income of $5.4 million, or $0.89 per diluted share, for the 2008 fiscal year.  Net loss for the fourth quarter of 2009 was ($414,000), or ($0.07) per diluted share, compared with net income of $583,000, or $0.10 per diluted share, for the fourth quarter of 2008.  

"United Security was solidly profitable in 2009; however, our earnings were lower than in 2008 due to higher credit costs related to the weak economy," stated R. Terry Phillips, President and Chief Executive Officer of United Security Bancshares, Inc.  "We remain very proactive in monitoring our loan portfolio to minimize future losses and protect our capital base."  

"We are pleased that United Security and First United Security Bank continue to be rated as 'well-capitalized,' the highest regulatory rating.  We achieved this rating without any government loans or backing, and our capital position continues to be much stronger than that of many of our peer banks.  We believe that our strong capital position highlights the safety and soundness of our banking operations," continued Mr. Phillips.  

Twelve Month Results

For the year ended December 31, 2009, net income was $4.8 million, or $0.79 per diluted share, compared with $5.4 million, or $0.89 per diluted share, for the year ended December 31, 2008.

Net interest income was $34.3 million in 2009, compared with $35.2 million in 2008.  The decrease in net interest income was due primarily to a decline in interest earned on loans related to lower average volume and yields compared with 2008.

Provision for loan losses increased to $9.1 million in 2009, or 2.2% annualized of average loans, compared with $8.9 million, or 2.1% annualized of average loans, in 2008.  Net charge-offs totaled $7.6 million in 2009, compared with $8.9 million in 2008.

Non-interest income rose 20.6% to $7.8 million in 2009, compared with $6.5 million in 2008. The increase in non-interest income resulted primarily from $2.7 million in proceeds from the settlement of a lawsuit, which was included in other income, partially offset by lower service charges and fees on deposit accounts and credit life insurance commissions, compared with 2008.

Non-interest expense rose 5.5% to $26.7 million in 2009, compared with $25.3 million in 2008.  The increase was due to higher salary and benefits, FDIC insurance and assessment costs, partially offset by lower legal expenses.

Shareholders' equity totaled $81.5 million, or book value of $13.54 per share, as of December 31, 2009.  Return on average assets as of December 31, 2009 was 0.70%, and return on average equity was 5.90%.  

Fourth Quarter Results

United Security reported a net loss of ($414,000), or ($0.07) per diluted share, for the fourth quarter of 2009, compared with net income of $583,000, or $0.10 per diluted share, for the fourth quarter of 2008.  

"United Security's fourth quarter loss was due primarily to an increase in the provision for loan losses to account for a higher level of charge-offs and the strengthening of our allowance for loan losses," stated Mr. Phillips.  "In our year-end review of our loan portfolio, we tightened our criteria for grading loans in light of the heightened regulatory scrutiny in the current environment and the prolonged weakness in the economy.  We added $2.0 million to our allowance for loan losses in the fourth quarter based on our year-end reviews. We believe that our conservative approach in building our reserves was warranted in light of the economy's impact on real estate values and our concentration of real estate loans."

Interest income totaled $11.8 million in the fourth quarter of 2009, compared with $12.7 million in the fourth quarter of 2008. The decrease in interest income was due primarily to lower interest earned on loans and securities due to a decline in average interest rates.  

"Net loans increased 1.2% in the fourth quarter to $402.5 million at year-end 2009," stated Mr. Phillips.  "New loan demand remains weak in most of our markets due to the effects of the economy and the increase in unemployment rates.  We expect loan demand to remain soft until the economy improves and real estate values stabilize."

Interest expense declined 25.3% to $2.9 million in the fourth quarter of 2009, compared with $3.9 million in the fourth quarter of 2008.  The decline in interest expense was due primarily to lower average rates paid on interest bearing deposits, offset somewhat by higher average balances in interest bearing accounts. Average deposits increased 2.9% to a record $502.1 million, compared with $488.2 million in the fourth quarter of 2008.

Net interest income rose 0.2% to $8.9 million in the fourth quarter of 2009, compared with $8.8 million in the fourth quarter of the prior year.  The increase in net interest income was due to an increase in average loans, partially offset by a 13 basis point decrease in the net interest margin, compared with the fourth quarter of 2008.  Net interest margin improved 25 basis points to 5.71% from the linked third quarter of 2009 but was down 13 basis points from the fourth quarter of 2008 net interest margin of 5.84%.

"This was our second consecutive quarterly increase in our net interest margin," continued Mr. Phillips.  "The increase resulted from lower cost of funds, partially offset by excess liquidity due to growth in our deposit base and the increase in non-accrual loans, compared with 2008."

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