United Security Bancshares, Inc. Reports 2011 Results

United Security Bancshares, Inc. (Nasdaq: USBI) today reported a net loss attributable to USBI of ($9.1 million), or ($1.51) per diluted share, for the twelve months ended December 31, 2011, compared with a net loss attributable to USBI of ($3.2 million), or ($0.53) per diluted share, for the 2010 fiscal year. Net loss attributable to USBI for the fourth quarter of 2011 was ($9.5 million), or ($1.58) per diluted share, compared with a net loss attributable to USBI of ($6.5 million), or ($1.08) per diluted share, for the fourth quarter of 2010.

“United Security has completed a difficult period for the Company in the fourth quarter of 2011. However, our growth in net interest income and higher non-interest income for the quarter ended December 31, 2011, is one of the Company’s fundamental strengths,” stated James F. House, President and CEO of United Security Bancshares, Inc. “We also made solid progress in reducing problem assets that will be key to improving our earnings performance in the future.”

“Our management team has made a concerted effort to identify and recognize problem loans across our system, and we believe that we have taken appropriate charge-downs and impairments to recognize these liabilities. We are pleased to report that our non-performing loans are down over 18% to $18.8 million compared to the third quarter of 2011. Our 90-day past due loans declined from $3.1 million at September 30, 2011 to $2.3 million at year-end, and we strengthened our reserves for loan losses during 2011. Other real estate owned (OREO) declined to $16.8 million at the end of the fourth quarter 2011 due to real estate sales and write-downs that more than offset new additions to OREO. This was the fifth consecutive quarterly decrease in OREO. The Bank’s liquidity position is extremely strong compared to industry standards.”

“Our loss for the fourth quarter and 2011 was primarily due to higher charge-offs and write-downs of OREO to reflect the continuation of the soft real estate market. In addition, our fourth quarter and 2011 results included a $4.1 million non-cash write-off of goodwill. The goodwill impairment charge was an accounting adjustment as required by FASB Codification 350 - Goodwill and Other Intangible Assets. It is important to note that the write-off of goodwill is a non-cash charge and does not affect our cash flows, liquidity, tangible book capital, regulatory capital or regulatory capital ratios. Similarly, it will not affect United Security’s future operations,” continued Mr. House.

Twelve Month Results

For the year ended December 31, 2011, net loss attributable to USBI was ($9.1 million), or ($1.51) per diluted share, compared with ($3.2 million), or ($0.53) per diluted share, for the year ended December 31, 2010. The 2011 results include the $4.1 million non-cash write-off of goodwill.

Total deposits rose 4.7% in 2011 to $527.1 million, compared with $503.5 million at year-end 2010. “We are pleased that our strong balance sheet continued to attract new deposit accounts,” stated Mr. House. “We are also pleased to report that our capital remains above the ‘well-capitalized’ guidelines, the highest regulatory rating. We have maintained our high regulatory rating without government loans and remain focused on protecting our capital base for our shareholders and depositors.”

Net interest income rose to $35.3 million in 2011, compared with $34.8 million in 2010. The increase in net interest income was due primarily to an increase in net interest margin to 6.17% in 2011, compared with 5.83% in 2010. The growth in 2011’s net interest margin resulted primarily from a lower cost of funds compared with 2010.

Provision for loan losses declined to $18.8 million in 2011, or 4.63% annualized of average loans, compared with $19.1 million, or 4.64% annualized of average loans, in 2010. Net charge-offs totaled $17.5 million in 2011, compared with $8.2 million in 2010.

Non-interest income declined to $8.7 million in 2011, compared with $10.2 million in 2010, primarily due to the inclusion of a $4.2 million insurance settlement in the 2010 results.

Non-interest expense rose to $40.3 million in 2011, compared with $32.1 million in 2010. The increase was due primarily to a $2.9 million increase in impairment costs on OREO and the $4.1 million non-cash goodwill impairment.

Fourth Quarter Results

United Security reported a net loss attributable to USBI of ($9.5 million), or ($1.58) per diluted share, for the fourth quarter of 2011, compared with a net loss attributable to USBI of ($6.5 million), or ($1.08) per diluted share, for the fourth quarter of 2010. The 2011 fourth quarter’s results include the $4.1 million non-cash write-off of goodwill.

Interest income totaled $10.6 million in the fourth quarter of 2011, compared with $11.0 million in the fourth quarter of 2010. The decrease in interest income was due primarily to lower interest earned on loans and securities due to a decline in average loans and securities for the quarter.

Interest expense declined 24.1% to $1.6 million in the fourth quarter of 2011, compared with $2.2 million in the fourth quarter of 2010. The decline in interest expense was due primarily to lower average rates paid on interest bearing deposits.

Net interest income was up 1.7% to $9.0 million in the fourth quarter of 2011, compared with $8.8 million in the fourth quarter of the prior year. The increase in net interest income resulted from a lower cost of funds compared with 2010, as was reflected in the improvement in the net interest margin rising to 6.13% in the fourth quarter of 2011, compared to 5.83% in the fourth quarter of 2010.

Provision for loan losses was $13.6 million in the fourth quarter of 2011 compared with $12.3 million in the fourth quarter of 2010. Net charge-offs totaled $6.6 million in the fourth quarter of 2011, compared with $1.2 million in the fourth quarter of 2010.

Total non-interest income was $3.7 million in the fourth quarter of 2011, compared with $2.2 million in the fourth quarter of 2010. The growth in non-interest income was primarily due to the $2.1 million gain on sale of investment securities recognized in the fourth quarter of 2011.

Non-interest expense increased to $14.1 million in the fourth quarter of 2011, compared with $9.4 million in the fourth quarter of 2010. The increase was due primarily to a higher level of impairment of OREO and the $4.1 million non-cash goodwill impairment charge.

“Our entire team is focused on improving future earnings while maintaining our high level of customer service,” continued Mr. House. “Our near-term outlook remains cautious, since new loan demand is weak due to the soft real estate market. In the interim, our goal is to reduce the higher than normal level of non-performing loans and OREO as key drivers to improving future profitability. We believe that these strategies will be an important part in our success in building long-term shareholder value,” concluded Mr. House.

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. With respect to 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 INCOME (LOSS)

(Dollars in Thousands, Except Per Share Data)
 
  Three Months Ended   Twelve Months Ended
December 31, December 31,
2011   2010 2011   2010
(Restated) (Restated)
INTEREST INCOME:
Interest and Fees on Loans $ 9,365 $ 9,486 $ 37,064 $ 38,086
Interest on Investment Securities   1,231     1,486     5,282     6,742  
Total Interest Income 10,596 10,972 42,346 44,828
 
INTEREST EXPENSE:
Interest on Deposits 1,518 1,729 6,260 7,600
Interest on Borrowings   127     438     759     2,473  
Total Interest Expense   1,645     2,167     7,019     10,073  
 
NET INTEREST INCOME 8,951 8,805 35,327 34,755
 
PROVISION FOR LOAN LOSSES   13,626     12,320     18,802     19,131  
 

NET INTEREST INCOME (LOSS) AFTER PROVISION FOR LOAN LOSSES

 

(4,675

 

)

 

(3,515

 

)

 

16,525

 

15,624
 
NON-INTEREST INCOME:

Service and Other Charges on Deposit Accounts

719

798

2,888

3,061
Credit Life Insurance Income 348 347 924 939
Other Income   2,681     1,093     4,916     6,166  
Total Non-Interest Income 3,748 2,238 8,728 10,166
 
NON-INTEREST EXPENSE:
Salaries and Employee Benefits 3,253 3,203 14,491 13,765
Occupancy Expense 460 439 1,922 1,860
Furniture and Equipment Expense 331 323 1,282 1,260
Impairment on Other Real Estate Owned 2,548 1,895 6,390 3,538
Goodwill Impairment 4,098 - 4,098 -
Loss on Sale of Other Real Estate 771 1,675 1,607 1,675
Other Expense   2,648     1,904     10,497     10,024  
Total Non-Interest Expense   14,109     9,439     40,287     32,122  
 
LOSS BEFORE INCOME TAXES (15,036 ) (10,716 ) (15,034 ) (6,332 )
BENEFIT FROM INCOME TAXES   (5,547 )   (4,247 )   (5,958 )   (3,026 )
NET LOSS $ (9,489 ) $ (6,469 ) $ (9,076 ) $ (3,306 )

Less: Net Loss Attributable to Noncontrolling Interest
 

-
   

-
   

(1

)
 

(125

)

NET LOSS ATTRIBUTABLE TO USBI

$

(9,489

)

$

(6,469

)

$

(9,075

)

$

(3,181

)

BASIC AND DILUTED NET LOSS ATTRIBUTABLE TO USBI PER SHARE

$

(1.58

)

$

(1.08

)

$

(1.51

)

$

(0.53

)
 
DIVIDENDS PER SHARE $ 0.00   $ 0.11   $ 0.04   $ 0.44  

 
 
 
 

UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31, 2011 AND 2010

(Dollars in Thousands, Except Per Share Data)
 
  2011   2010
(Restated)
ASSETS
Cash and Due from Banks $ 9,491 $ 10,330
Interest-Bearing Deposits in Other Banks   43,306     3,201  
Total Cash and Cash Equivalents 52,797 13,531
Investment Securities Available-for-Sale, at fair market value 122,171 135,877
Investment Securities Held to Maturity, at cost 1,170 1,210
Federal Home Loan Bank Stock, at cost 2,861 5,093
Loans, net of allowance for loan losses of $22,267 and $20,936, respectively 381,085 387,478
Premises and Equipment, net of accumulated depreciation of $17,190 and $19,372, respectively

9,049

16,609
Cash Surrender Value of Bank-Owned Life Insurance 12,922 12,499
Accrued Interest Receivable 3,958 5,110
Goodwill - 4,098
Investment in Limited Partnerships 1,456 1,766
Other Real Estate Owned 16,774 25,632
Other Assets   17,567     12,836  
Total Assets $ 621,810   $ 621,739  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand, Non-Interest-Bearing $ 59,119 $ 54,492
Demand, Interest-Bearing 122,754 116,533
Savings 58,148 49,891
Time, $100,000 and over 135,708 126,383
Other time   151,344     156,231  
Total Deposits 527,073 503,530
Accrued Interest Expense 790 2,235
Other Liabilities 7,383 10,481
Short-Term Borrowings 356 971
Long-Term Debt   20,000     30,000  
Total Liabilities   555,602     547,217  
Shareholders’ Equity:

Common stock, par value $.01 per share; 10,000,000 shares authorized; 7,322,560 shares issued; 6,015,737 shares and 6,011,012 shares outstanding for 2011 and 2010, respectively
73 73
Surplus 9,258 9,233
Accumulated other comprehensive income, net of tax 3,005 3,411
Retained earnings 75,091 84,408

Treasury stock, 1,306,823 and 1,306,548 shares at cost for 2011 and 2010, respectively

(21,208

)

(21,205

)
Noncontrolling Interest   (12 )   (1,398 )
Total Shareholders’ Equity   66,208     74,522  
Total Liabilities and Shareholders’ Equity $ 621,810   $ 621,739  
 

Copyright Business Wire 2010

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