United Security Bancshares 3rd Quarter Earnings and Trends Improve

November 3, 2009

FRESNO, Calif., Nov. 3 /PRNewswire-FirstCall/ -- Dennis R. Woods, President and Chief Executive Officer of United Security Bancshares http://www.unitedsecuritybank.com/ (Nasdaq: UBFO) reported today the results of operations for the 3rd quarter and nine months ended September 30, 2009.

The net income was $693,000 for the 3rd quarter of 2009, as compared with a net loss of ($1,342,000) for the 3rd quarter in 2008. Basic and diluted earnings per share for the 3rd quarter 2009 were $.06 compared with basic and diluted of ($0.11) for the 3rd quarter 2008. For the nine months ended September 30, 2009, the net loss was ($4,112,000) compared with net income of $3,228,000 in 2008.

For the 3rd quarter 2009, return on average equity was 3.64% and the return on average assets 0.38% compared with a return on average equity was (6.48%) and the return on average assets was (0.68%) for the 3rd quarter 2008. For the nine months ended September 30, 2009, return on average equity was (6.95%) and the return on average assets was (.74%). For the same period in 2008, return on average equity was 5.18% and return on average assets was .56%. Shareholders' equity at quarter end was $76.7 million.

The Board of Directors of United Security Bancshares declared a 4th quarter 2009 stock dividend of one percent (1%). The stock dividend replaces the quarterly cash dividend. The stock dividend is payable to shareholders of record on October 9, 2009 and shares were issued on October 21, 2009.

Woods added, "We are seeing the fruits of significant efforts over the past 12 months, after taking control of and completing various requirements to prepare properties for sale. During the third quarter 15 properties related to nonperforming assets sold for total proceeds of $9.5 million after additional write-downs and (gains)/losses of $459,000 during the 3rd quarter. Since the end of the 3rd quarter through the date of this announcement, 21 properties associated with nonperforming assets closed escrow for total proceeds of $11.5 million after loss of $1,476 on sale of OREO property. Escrows are open on other 14 properties associated with nonperforming assets scheduled to close by November 20, 2009 for additional total proceeds of $10.1 million after estimated write-downs and (gains)/losses of $358,000 on such properties to be taken in the 4th quarter. (Write-downs and (gains)/losses do not include certain carrying costs such as property taxes, repairs, maintenance, costs to prepare properties for sale and similar expenses)."

"Our focused and disciplined approach provides our customers with as much assistance as possible during difficult times while we attempt to avoid contributing to further job loss and property value declines, often associated with ill timed liquidations. We understand, if your neighbors' property is liquidated in a forced sale, your property drops in value and we work to minimize that whenever possible."

"Our employees have a strong commitment to an approach that benefits customers and shareholders alike and parallels our commitment to provide excellent bank services in the communities we serve. Our business plan reduces nonperforming assets, adds to our strong capital base while providing customers with more options. Fortunately, strong core earnings allow us greater flexibility for accomplishing these goals."

Net interest income for the 3rd quarter 2009 was $7.16 million, down $267,000 from the 3rd quarter of 2008 for a decrease of 3.6%. The net interest margin increased from 4.17% in the 3rd quarter 2008 to 4.61% in 2009. For the nine months ended September 30, 2009 net interest income was $21,102,000, down $2,038,000 from $23,140,000 for the same period in 2008 for an 8.81% decline. The net interest margin was 4.44% for the nine month period ended September 30, 2008 and 4.46% for the same period in 2009.

Noninterest income for the 3rd quarter of 2009 was $1,019,000, down $572,000 from $1,591,000 in 2008 for a decrease of 35.9%. For the nine months ended September 30, 2009, noninterest income was $3,438,000, down $2,208,000 from $5,645,000 for the same period in 2008. The largest single noninterest income component within the nine month periods was gain/loss on sale of OREO properties that reduced noninterest income in 2009 by $822,000.

Other operating expenses for the three months ended September 30, 2009 were $6,850,000 and $5,224,000 for 2008, an increase of $1,626,000 or 31.1%. For the nine months ended September 30, 2009, other operating expenses totaled $21,613,000, up $4,532,000 from $17,081,000 for the same period in 2008. Five expense components accounted for the much of differences for the nine month period. 1) FDIC assessments increased by $487,000, 2) write-downs on foreclosed properties were up $835,000, 3) foreclosed property expenses were up $939,000, 4) sundry losses associated with a lawsuit were up $788,000 and 5) a goodwill impairment expense was up $3,026,000 in 2009 over 2008.

The provision for loan loss was $436,000 for the 3rd quarter of 2009 and $6,444,000 for 3rd quarter of 2008. For the nine months ended September 30, 2009, the provision was $8,593,000 compared with $7,160,000 for the same period in 2008. In determining the adequacy of the allowance for loan losses, Management's judgment is the primary determining factor for establishing the amount of the provision for loan losses and management considers the allowance for loan and lease losses at September 30, 2009 to be adequate. Non-performing assets decreased to 12.43% of total assets on September 30, 2009 from 12.62% on June 30, 2009. At year-end 2008 non-performing assets were 10.78% of total assets and on June 30, 2008 6.83%.

United Security Bancshares is a $720+ million bank holding company. United Security Bank, its principal subsidiary is a state chartered bank and member of the Federal Reserve Bank of San Francisco.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended and the Company intends such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management's knowledge and belief as of today and include information concerning the Company's possible or assumed future financial condition, and its results of operations, business and earnings outlook. These forward-looking statements are subject to risks and uncertainties. A number of factors, some of which are beyond the Company's ability to control or predict, could cause future results to differ materially from those contemplated by such forward-looking statements. These factors include (1) changes in interest rates, (2) significant changes in banking laws or regulations, (3) increased competition in the company's market, (4) other-than-expected credit losses, (5) earthquake or other natural disasters impacting the condition of real estate collateral, (6) the effect of acquisitions and integration of acquired businesses, (7) the impact of proposed and/or recently adopted changes in regulatory, judicial, or legislative tax treatment of business transactions, particularly recently enacted California tax legislation and the subsequent Dec. 31, 2003, announcement by the Franchise Tax Board regarding the taxation of REITs and RICs; and (8) unknown economic impacts caused by the State of California's budget issues. Management cannot predict at this time the severity or duration of the effects of the recent business slowdown on our specific business activities and profitability. Weaker or a further decline in capital and consumer spending, and related recessionary trends could adversely affect our performance in a number of ways including decreased demand for our products and services and increased credit losses. Likewise, changes in interest rates, among other things, could slow the rate of growth or put pressure on current deposit levels and affect the ability of borrowers to repay loans. Forward-looking statements speak only as of the date they are made, and the company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the statements are made, or to update earnings guidance including the factors that influence earnings. For a more complete discussion of these risks and uncertainties, see the Company's Annual Report on Form 10-K for the year ended December 31, 2008, and particularly the section of Management's Discussion and Analysis.

    United Security Bancshares
    Consolidated Balance Sheets
    (unaudited)
    (Dollars in thousands)

                                          September    September
                                              30           30
                                             2009         2008
                                             ----         ----
    Cash & nonint.-bearing deposits
     in banks                             $22,274      $17,872
    Interest-bearing deposits in
     banks                                  2,526       15,101
    Federal funds sold                          0            0
    Investment securities AFS              80,754       96,324
    Loans, net of unearned fees           533,252      600,787
     Less: allowance for loan losses      (14,413)     (12,580)
                                          -------      -------
    Loans, net                            518,840      588,207
    Premises and equipment, net            13,362       14,599
    Intangible assets                       9,664       13,677
    Other assets                           74,406       42,222
                                           ------       ------
              TOTAL ASSETS               $721,825     $788,002

    Deposits:
    Noninterest-bearing demand &
     NOW                                  176,657      197,004
    Savings & Money Market                167,493      178,129
    Time                                  227,920      227,151
                                          -------      -------
    Total deposits                        572,070      602,284

    Borrowed funds                         54,360       86,809
    Other liabilities                       7,186        6,275
    Junior subordinated debentures         11,510       12,783
                                           ------       ------
            TOTAL LIABILITIES             $645,127     $708,151

    Shareholders' equity:
    Common shares outstanding:
      12,372,797 at Sep. 30, 2009
      11,914,838 at Sep. 30, 2008         $36,987      $33,587
    Retained earnings                      41,498       48,307
    Fair Value Adjustment - Hedge               0            0
    Accumulated other comprehensive
     income                                (1,787)      (2,043)
                                           ------       ------
    Total shareholders' equity            $76,698      $79,851

                                          -------      -------
    TOTAL LIABILITIES &
    SHAREHOLDERS' EQUITY                  721,825      788,002

    United Security Bancshares
    Consolidated Statements of        Three        Three      Nine      Nine
     Income                           Months       Months    Months    Months
     (dollars in 000's, except        Ended        Ended      Ended     Ended
      per share amounts)              30-Sep       30-Sep    30-Sep    30-Sep
     (unaudited)                      ------       ------    ------    ------
                                       2009        2008      2009      2008
                                       ----        ----      ----      ----
    Interest income                   $8,870     $10,936   $26,824   $35,111
    Interest expense                   1,711       3,509     5,722    11,971
                                       -----       -----     -----    ------
    Net interest income                7,159       7,427    21,102    23,140
    Provision for loan losses            436       6,444     8,593     7,160
    Other income                       1,019       1,591     3,438     5,645
    Other expenses                     6,850       5,224    21,613    17,081
                                       -----       -----    ------    ------
    Income before income tax
     provision                           894      (2,650)   (5,667)    4,544
    Provision for income taxes           200      (1,308)   (1,555)    1,316
                                         ---      ------    ------     -----
    NET INCOME                          $693     ($1,342)  ($4,112)   $3,228

    United Security Bancshares
    Selected Financial Data          Three        Three      Nine      Nine
     (dollars in 000's except per    Months       Months    Months    Months
      share amounts)                 Ended        Ended      Ended     Ended
                                   30-Sep-09    30-Sep-08  30-Sep-09 30-Sep-08
                                   ---------    ---------  --------- ---------
    Basic Earnings Per Share           $0.06      ($0.11)   ($0.33)    $0.26
    Diluted Earning Per Share          $0.06      ($0.11)   ($0.33)    $0.26

        Annualized Return on:
    Average Assets                      0.38%     (0.68%)   (0.74%)     0.56%
    Average Equity                      3.63%     (6.48%)   (6.95%)     5.18%
    Net Interest Margin                 4.61%       4.17%     4.46%     4.44%

    Net Charge-offs to Average
     Loans                              1.70%       1.01%     1.52%     0.46%

                                    30-Sep-09    30-Sep-08
                                    ---------    ---------
    Book Value Per Share               $6.20       $6.70
    Tangible Book Value Per
     Share                             $5.42       $5.55
    Efficiency Ratio                   88.08%      59.15%
    Non Performing Assets to
     Total Assets                      12.43%       8.09%

    Allowance for Loan Losses to
     Total Loans                        2.70%       2.09%

    Shares Outstanding - period
     end                          12,372,797  11,914,838
    Basic Shares  - YTD average
      weighted                    12,372,869  12,423,211
    Diluted Shares - YTD average
     weighted                     12,372,869  12,428,878
    Basic Shares  - QTD average
      weighted                    12,372,797  12,399,402
    Diluted Shares - QTD average
     weighted                     12,372,797  12,406,222

SOURCE United Security Bancshares