<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
---------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 333-45979
Unity Holdings, Inc.
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(Exact name of small business issuer as specified in its charter)
Georgia 58-2350609
------------------------------------------- -----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
19 South Public Square, Cartersville, Georgia 30120
----------------------------------------------------
(Address of principal executive offices)
(770) 606-0555
--------------------------------------
(Issuer's telephone number
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of November 1, 2000: 839,211; $0.01 par value.
Transitional Small Business Disclosure Format Yes No X
--- ---
<PAGE>
UNITY HOLDINGS, INC. AND SUBSIDIARY
--------------------------------------------------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet - September 30, 2000..................................................... 3
Consolidated Statement of Operations and Comprehensive Income (Loss) -
Three Months Ended September 30, 2000 and 1999 and Nine
Months Ended September 30, 2000 and 1999......................................................... 4
Consolidated Statement of Cash Flows - Nine
Months Ended September 30, 2000 and 1999.......................................................... 5
Notes to Consolidated Financial Statements.......................................................... 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations....................................................... 7
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders............................................ 14
Item 6 - Exhibits and Reports on Form 8-K............................................................... 14
Signatures.............................................................................................. 15
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITY HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Assets
------
<S> <C>
Cash and due from banks $ 2,331,592
Interest-bearing deposits in banks 110,946
Securities available-for-sale, at fair value 9,297,626
Federal funds sold 4,750,000
Loans 52,367,770
Less allowance for loan losses 787,335
----------------------
Loans, net 51,580,435
----------------------
Premises and equipment 5,100,924
Other assets 1,023,429
----------------------
Total assets $ 74,194,952
======================
Liabilities and Stockholders' Equity
------------------------------------
Deposits
Noninterest-bearing demand $ 5,928,729
Interest-bearing demand 12,178,307
Savings 648,338
Time 46,940,488
----------------------
Total deposits 65,695,862
Other liabilities 1,011,753
----------------------
Total liabilities 66,707,615
----------------------
Commitments and contingent liabilities
Stockholders' equity
Preferred stock, par value $.01; 10,000,000 shares authorized;
none issued -
Common stock, par value $.01; 10,000,000 shares authorized;
839,211 shares issued and outstanding 8,392
Capital surplus 8,076,469
Accumulated deficit (542,220)
Accumulated other comprehensive loss (55,304)
----------------------
Total stockholders' equity 7,487,337
----------------------
Total liabilities and stockholders' equity $ 74,194,952
======================
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
UNITY HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 AND
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------- ---------------------------------------
2000 1999 2000 1999
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Interest income
Loans $ 1,431,997 $ 761,498 $ 3,571,896 $ 1,533,057
Taxable securities 153,735 23,555 405,571 24,479
Federal funds sold 107,910 44,300 226,547 181,715
Deposits in banks 1,904 0 4,954 531
------------------ ------------------ ------------------ -----------------
Total interest income 1,695,546 829,353 4,208,968 1,739,782
------------------ ------------------ ------------------ -----------------
Interest expense on deposits 876,276 260,863 2,026,232 492,933
------------------ ------------------ ------------------ -----------------
Net interest income 819,270 568,490 2,182,736 1,246,849
Provision for loan losses 105,300 158,800 273,854 406,800
------------------ ------------------ ------------------ -----------------
Net interest income after
provision for loan losses 713,970 409,690 1,908,882 840,049
------------------ ------------------ ------------------ -----------------
Other income
Service charges on deposit accounts 60,133 34,911 157,271 76,692
Other operating income 55,161 39,651 151,495 112,526
------------------ ------------------ ------------------ -----------------
115,294 74,562 308,766 189,218
------------------ ------------------ ------------------ -----------------
Other expenses
Salaries and employee benefits 365,050 284,319 1,019,215 761,117
Equipment and occupancy expenses 110,185 54,380 297,311 175,310
Other operating expenses 207,598 151,109 613,259 402,175
------------------ ------------------ ------------------ -----------------
682,833 489,808 1,929,785 1,338,602
------------------ ------------------ ------------------ -----------------
Net income (loss) $ 146,431 $ (5,556) $ 287,863 $ (309,335)
Other comprehensive loss:
Unrealized losses on securities available-
for-sale arising during period (16,062) (3,906) (38,714) (3,906)
------------------ ------------------ ------------------ -----------------
Comprehensive income (loss) $ 130,369 $ (9,462) $ 249,149 $ (313,241)
================== ================== ================== =================
Basic and diluted earnings (losses) per common
share $ 0.17 $ (0.01) $ 0.34 $ (0.37)
================== ================== ================== =================
Weighted average shares outstanding
(basic and diluted) $ 839,211 $ 839,211 $ 839,211 $ 839,211
================== ================== ================== =================
Cash dividends per share of common stock $ - $ - $ - $ -
================== ================== ================== =================
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
UNITY HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
--------------------- ----------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 287,863 $ (309,335)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 159,014 72,751
Provision for loan losses 273,854 406,800
Increase in interest receivable (212,291) (226,106)
Increase in interest payable 390,253 209,328
Other operating activities 92,319 39,958
--------------------- ----------------------
Net cash provided by operating activities 991,012 193,396
--------------------- ----------------------
INVESTING ACTIVITIES
Net increase in interest-bearing deposits in banks (9,102) (100,000)
Purchases of securities available-for-sale (2,932,030) (2,225,908)
Proceeds from maturities of securities available-for-sale 9,173 -
Net (increase) decrease in Federal funds sold (310,000) 4,790,000
Net increase in loans (17,795,786) (28,119,129)
Purchase of premises and equipment (2,005,591) (801,675)
Purchase of life insurance policies (125,800) (355,169)
--------------------- ----------------------
Net cash used in investing activities (23,169,136) (26,811,881)
--------------------- ----------------------
FINANCING ACTIVITIES
Net increase in deposits 21,383,992 27,823,339
Net proceeds from the issuance of stock - 5,000
--------------------- ----------------------
Net cash provided by financing activities 21,383,992 27,828,339
--------------------- ----------------------
Net increase (decrease) in cash and due from banks (794,132) 1,209,854
Cash and due from banks at beginning of period 3,125,724 381,515
--------------------- ----------------------
Cash and due from banks at end of period $ 2,331,592 $ 1,591,369
===================== ======================
CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 1,635,979 $ 283,605
Income taxes $ 2,994 $ -
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
UNITY HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The consolidated financial information for Unity Holdings, Inc. (the
"Company") included herein is unaudited; however, such information
reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a
fair statement of results for the interim periods.
The results of operations for the three and nine month periods ended
September 30, 2000 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities".
The effective date of this statement has been deferred by SFAS No. 137
until fiscal years beginning after June 15, 2000. However, the
statement permits early adoption as of the beginning of any fiscal
quarter after its issuance. The Company expects to adopt this
statement effective January 1, 2001. SFAS No. 133 requires the Company
to recognize all derivatives as either assets or liabilities in the
balance sheet at fair value. For derivatives that are not designated
as hedges, the gain or loss must be recognized in earnings in the
period of change. For derivatives that are designated as hedges,
changes in the fair value of the hedged assets, liabilities, or firm
commitments must be recognized in earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings,
depending on the nature of the hedge. The ineffective portion of a
derivative's change in fair value must be recognized in earnings
immediately. Management has not yet determined what effect the
adoption of SFAS No. 133 will have on the Company's earnings or
financial position.
There are no other recent accounting pronouncements that have had, or
are expected to have, a material effect on the Company's financial
statements.
6
<PAGE>
UNITY HOLDINGS, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following is management's discussion and analysis of certain
significant factors which have affected the financial position and
operating results of the Company and its subsidiary, Unity National
Bank, during the periods included in the accompanying consolidated
financial statements.
FORWARD LOOKING STATEMENTS
Certain of the statements made herein under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" ("MD&A") are forward-looking statements for purposes of
the Securities Act of 1933 (the "Securities Act") and the Securities
Exchange Act of 1934 (the "Exchange Act"), and as such may involve
known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company
to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements.
Such forward looking statements include statements using the words
such as "may," "will," "anticipate," "should," "would," "believe,"
"contemplate," "expect," "estimate," "continue," "may," or "intend,"
or other similar words and expressions of the future. Our actual
results may differ significantly from the results we discuss in these
forward-looking statements.
These forward-looking statements involve risks and uncertainties and
may not be realized due to a variety of factors, including, without
limitation: the effects of future economic conditions; governmental
monetary and fiscal policies, as well as legislative and regulatory
changes; the risks of changes in interest rates on the level and
composition of deposits, loan demand, and the values of loan
collateral, securities, and other interest-sensitive assets and
liabilities; interest rate risks; the effects of competition from
other commercial banks, thrifts, mortgage banking firms, consumer
finance companies, credit unions, securities brokerage firms,
insurance companies, money market and other mutual funds and other
financial institutions operating in the Company's market area and
elsewhere, including institutions operating regionally, nationally,
and internationally, together with such competitors offering banking
products and services by mail, telephone, computer, and the Internet.
7
<PAGE>
Liquidity and Capital Resources
As of September 30, 2000, the liquidity ratio of the Company, as determined
under guidelines established by regulatory authorities, was satisfactory.
Management considers the Company's liquidity to be adequate to meet operating
and loan funding requirements. The liquidity ratio (i.e. cash, short-term assets
and marketable assets divided by deposits) for the Company was approximately
25%. As the Company grows, management will continue to monitor liquidity and
make adjustments as deemed necessary.
At September 30, 2000, the capital ratios of the Company and the Bank were
adequate based on regulatory minimum capital requirements. The minimum capital
requirements and the actual capital ratios for the Company and the Bank are as
follows:
<TABLE>
<CAPTION>
Actual
-------------------------------
Unity Unity Regulatory
Holdings, National Minimum
Inc. Bank Requirement
-------------- --------------- -------------
<S> <C> <C> <C>
Leverage capital ratios 10.41 % 10.38 % 4.00 %
Risk-based capital ratios:
Tier I capital 13.61 13.57 4.00
Total capital 15.03 14.99 8.00
</TABLE>
As the Company continues to grow and the loan portfolio increases, the capital
ratios will decrease during the next twelve months to levels closer to, but
still in excess of, regulatory minimum requirements.
8
<PAGE>
Financial Condition
Following is a summary of the Company's balance sheets for the periods
indicated:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999 Increase (Decrease)
---------------- ---------------- ------------------------------------
(Dollars in Thousands) Amount Percent
------------------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 2,332 $ 3,126 $ (794) (25.40) %
Interest-bearing deposits in banks 111 102 9 8.82
Securities 9,298 6,413 2,885 44.99
Federal funds sold 4,750 4,440 310 6.98
Loans, net 51,580 34,058 17,522 51.45
Premises and equipment 5,101 3,254 1,847 56.76
Other assets 1,023 673 350 52.01
---------------- ---------------- ---------------
$ 74,195 $ 52,066 $ 22,129 42.50
================ ================ ===============
Deposits $ 65,696 $ 44,312 $ 21,384 48.26 %
Other liabilities 1,012 516 496 96.12
Stockholders' equity 7,487 7,238 249 3.44
---------------- ---------------- ---------------
$ 74,195 $ 52,066 $ 22,129 42.50
================ ================ ===============
</TABLE>
As indicated in the above table, the Company's total assets grew at a rate of
42.5%. Deposit growth of $21,384,000 was invested primarily in the
interest-earning asset categories of loans and securities. The Company has also
invested in premises and equipment associated with the completion of its main
office facilities in Cartersville and branch office facilities in Adairsville.
The Company's loan to deposit ratio at September 30, 2000 was 79.71% as compared
to 78.03% at December 31, 1999. Stockholders' equity has increased by
year-to-date earnings of $288,000, offset by increased unrealized losses on
securities available-for-sale of $39,000.
9
<PAGE>
Results of Operations For The Three Months Ended September 30, 2000 and 1999 and
for the Nine Months Ended September 30, 2000 and 1999
Following is a summary of the Company's operations for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
Increase
2000 1999 (Decrease)
--------------- ---------------- --------------
(Dollars in Thousands) Amount
----------------------------------- --------------
<S> <C> <C> <C>
Interest income $ 1,695 $ 829 $ 866
Interest expense 876 261 615
--------------- ---------------- --------------
Net interest income 819 568 251
Provision for loan losses 105 159 (54)
Other income 115 75 40
Other expense 683 490 193
--------------- ---------------- --------------
Net income (loss) $ 146 $ (6) $ 152
=============== ================ ==============
<CAPTION>
Nine Months Ended
September 30,
Increase
2000 1999 (Decrease)
--------------- ---------------- --------------
(Dollars in Thousands) Amount
----------------------------------- --------------
<S> <C> <C> <C>
Interest income $ 4,209 $ 1,740 $ 2,469
Interest expense 2,026 493 1,533
--------------- ---------------- --------------
Net interest income 2,183 1,247 936
Provision for loan losses 274 407 (133)
Other income 309 189 120
Other expense 1,930 1,338 592
--------------- ---------------- --------------
Net income (loss) $ 288 $ (309) $ 597
=============== ================ ==============
</TABLE>
As indicated in the above table, the Company's net interest income has increased
by $251,000 and $936,000 for the third quarter and first nine months of 2000 as
compared to the same periods in 1999. The Company's net interest margin
decreased to 5.29% during the first nine months of 2000 as compared to 7.11% for
the first nine months of 1999 and 6.42% for the entire year of 1999. The
increase in net interest income is due primarily to the increased volume of
average loans. The decrease in the net interest margin is due to the increase of
securities as a component of total interest-earning assets which yield less than
loans, coupled with increases in rates paid on deposits. The average rate paid
on deposits was 5.59% for the first nine months of 2000 as compared to 4.20% for
the first nine months of 1999 and 4.63% for the entire year of 1999.
10
<PAGE>
The provision for loan losses decreased by $54,000 and $133,000 for the third
quarter and first nine months of 2000, respectively. The amounts provided are
due primarily to loan growth and inherent risk in the loan portfolio. The
Company's allowance for loan losses as a percentage of total loans amounted to
1.50% at September 30, 2000 and December 31, 1999. The allowance for loan losses
is maintained at a level that is deemed appropriate by management to adequately
cover all known and inherent risks in the loan portfolio. Management's
evaluation of the loan portfolio includes a continuing review of current
economic conditions which may affect the borrower's ability to repay, and the
underlying collateral value. This evaluation is inherently subjective as it
requires estimates that are susceptible to significant change. Ultimately,
losses may vary from current estimates and future additions to the allowance may
be necessary. The Company had minimal nonperforming loans at September 30, 2000
and has had insignificant loan charge-offs. Nevertheless, there can be no
assurance that charge-offs in future periods will not exceed the allowance for
loan losses as estimated at any point in time.
Information with respect to nonaccrual, past due and restructured loans is as
follows:
<TABLE>
<CAPTION>
September 30,
-------------------------------------
2000 1999
----------------- -----------------
(Dollars in Thousands)
-------------------------------------
<S> <C> <C>
Nonaccrual loans $ 10 $ 0
Loans contractually past due ninety days or more as to interest
or principal payments and still accruing 167 0
Restructured loans 0 0
Loans, now current but about which there are serious doubts as to the
ability of the borrower to comply with loan repayment terms 0 0
Interest income that would have been recorded on nonaccrual
and restructured loans under original terms 1 0
Interest income that was recorded on nonaccrual and restructured loans 0 0
</TABLE>
The Company discontinues the accrual of interest income when, in the opinion of
management, collection of such interest becomes doubtful. This status is
accorded such interest when (1) there is a significant deterioration in the
financial condition of the borrower and full repayment of principal and interest
is not expected and (2) the principal or interest is more than ninety days past
due, unless the loan is both well-secured and in the process of collection.
Loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention that have not been included in the table above do not represent
or result from trends or uncertainties which management reasonably expects will
materially impact future operating results, liquidity or capital resources.
These classified loans do not represent material credits about which management
is aware of any information which causes management to have serious doubts as to
the ability of such borrowers to comply with the loan repayment terms.
11
<PAGE>
Information regarding certain loans and allowance for loan loss data is as
follows:
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------------
2000 1999
----------------- -----------------
(Dollars in Thousands)
-------------------------------------
<S> <C> <C>
Average amount of loans outstanding $ 42,425 $ 17,793
================= =================
Balance of allowance for loan losses at beginning of period $ 520 $ 40
----------------- -----------------
Loans charged off
Commercial and financial $ 0 $ 0
Real estate mortgage 0 0
Instalment 7 0
----------------- -----------------
7 0
----------------- -----------------
Loans recovered
Commercial and financial 0 0
Real estate mortgage 0 0
Instalment 0 0
----------------- -----------------
0 0
----------------- -----------------
Net charge-offs 7 0
----------------- -----------------
Additions to allowance charged to
operating expense during period 274 407
----------------- -----------------
Balance of allowance for loan losses at end of period $ 787 $ 447
================= =================
Ratio of net loans charged off during the period to
average loans outstanding .02% - %
================= =================
</TABLE>
Other income increased by $40,000 and $120,000 for the third quarter and first
nine months of 2000 as compared to the same periods in 1999, due primarily to
increased service charges on deposit accounts associated with the overall
deposit growth and increased mortgage loan origination fees.
Other expenses increased by $193,000 and $592,000 for the third quarter and
first nine months of 2000 as compared to the same periods in 1999. Salaries and
employee benefits have increased due to an increase in the number of full time
equivalent employees to 33 at September 30, 2000 from 22 at September 30, 1999.
Equipment and occupancy expenses have increased due to expense increases
associated with the occupation of new banking facilities at the main office and
Adairsville branch. Other operating expenses have increased due to the overall
growth of the Company.
The Company has recorded no provision for income taxes due to cumulative net
operating losses incurred to date.
12
<PAGE>
The Company is not aware of any known trends, events or uncertainties, other
than the effect of events as described above, that will have or that are
reasonably likely to have a material effect on its liquidity, capital resources
or operations. The Company is also not aware of any current recommendations by
the regulatory authorities which, if they were implemented, would have such an
effect.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
None
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITY HOLDINGS, INC.
(Registrant)
DATE: November 10, 2000 BY: /s/ Michael L. McPherson
----------------- ------------------------------------------
Michael L. McPherson, President and C.E.O.
(Principal Executive Officer)
DATE: November 10, 2000 BY: /s/ James D. Timmons
----------------- ------------------------------------------
James D. Timmons, CFO
(Principal Financial and Accounting Officer)
15
