<PAGE> 1
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 MARCH 31, 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.
---------------------------------------------------------------------
(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
--------------------------------------------------------
(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 May 1, 2000: 839,211; $0.01 par value.
Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE> 2
UNITY HOLDINGS, INC. AND SUBSIDIARY
- --------------------------------------------------------------------------------
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET - MARCH 31, 2000...........................................................3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (LOSS) - THREE MONTHS ENDED MARCH 31, 2000 AND 1999.........................................4
CONSOLIDATED STATEMENTS OF CASH FLOWS - THREE
MONTHS ENDED MARCH 31, 2000 AND 1999..........................................................5 AND 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................................................7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.........................................................9
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> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITY HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(UNAUDITED)
<TABLE>
ASSETS
<S> <C>
Cash and due from banks $ 2,104,728
Interest-bearing deposits in banks 104,905
Securities available-for-sale, at fair value 7,390,505
Federal funds sold 4,480,000
Loans 38,836,577
Less allowance for loan losses 583,820
-----------
Loans, net 38,252,757
-----------
Premises and equipment 4,421,171
Other assets 896,021
-----------
$57,650,087
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand $ 5,360,023
Interest-bearing demand 9,620,504
Savings 679,799
Time 33,998,311
-----------
Total deposits 49,658,637
Other liabilities 740,767
-----------
Total liabilities 50,399,404
-----------
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 (795,240)
Accumulated other comprehensive loss (38,938)
-----------
Total stockholders' equity 7,250,683
-----------
$57,650,087
===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
UNITY HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans $ 976,073 $ 268,043
Taxable securities 125,795 924
Federal funds sold 57,844 75,863
Deposits in banks 1,424 531
---------- ----------
TOTAL INTEREST INCOME 1,161,136 345,361
---------- ----------
INTEREST EXPENSE ON DEPOSITS 528,962 79,843
---------- ----------
Net interest income 632,174 265,518
PROVISION FOR LOAN LOSSES 64,054 126,000
---------- ----------
Net interest income after provision for loan losses 568,120 139,518
---------- ----------
OTHER INCOME
Service charges on deposit accounts 46,367 12,362
Other operating income 43,636 27,334
---------- ----------
90,003 39,696
---------- ----------
Other expenses
Salaries and employee benefits 337,683 240,946
Equipment and occupancy expenses 87,894 55,177
Other operating expenses 197,703 112,198
---------- ----------
623,280 408,321
---------- ----------
Net income (loss) $ 34,843 $(229,107)
OTHER COMPREHENSIVE LOSS:
Unrealized losses on securities available-for-sale arising
during period (22,348) --
---------- ----------
Comprehensive income (loss) $ 12,495 $ (229,107)
========== ==========
BASIC AND DILUTED EARNINGS (LOSSES) PER COMMON SHARE $ 0.04 $ (0.27)
========== ==========
CASH DIVIDENDS PER SHARE OF COMMON STOCK $ -- $ --
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE> 5
UNITY HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 34,843 $ (229,107)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 33,492 12,924
Provision for loan losses 64,054 126,000
Increase in interest receivable (90,489) (77,655)
Increase in interest payable 202,117 51,407
Other operating activities 15,075 (54,063)
------------ ------------
Net cash provided by (used in) operating activities 259,092 (170,494)
------------ ------------
INVESTING ACTIVITIES
Net increase in interest-bearing deposits in banks (3,061) --
Purchases of securities available-for-sale (1,000,000) (140,609)
Proceeds from maturities of securities available-for-sale 630 0
Net increase in Federal funds sold (40,000) (1,600,000)
Net increase in loans (4,258,308) (10,021,921)
Premiums paid on life insurance policies (125,800) 0
Purchase of premises and equipment (1,200,316) (129,236)
------------ ------------
Net cash used in investing activities (6,626,855) (11,891,766)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits 5,346,767 12,427,088
Net proceeds from the issuance of stock -- 5,000
------------ ------------
Net cash provided by financing activities 5,346,767 12,432,088
------------ ------------
Net increase (decrease) in cash and due from banks (1,020,996) 369,828
Cash and due from banks at beginning of period 3,125,724 381,515
------------ ------------
Cash and due from banks at end of period $ 2,104,728 $ 751,343
============ ============
SUPPLEMENTAL DISCLOSURES Cash paid during the period for:
Interest $ 326,845 $ 28,436
Income taxes $ 2,994 $ --
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE> 6
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 month period ended March 31,
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> 7
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 (the "Bank"), during the periods included in the accompanying
consolidated financial statements.
The Company was incorporated in Georgia on October 8, 1997 as a one
bank holding company for the Bank. The Bank began operations as a
national bank on November 30, 1998 in Cartersville, Georgia. On January
4, 1999, the Bank opened a branch office in Adairsville, Georgia. In
February of 2000, the Bank moved into its permanent bank facility at
its main banking location in Cartersville.
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> 8
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, the liquidity ratio of the Bank, as determined
under guidelines established by regulatory authorities, was
satisfactory.
At March 31, 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
HOLDINGS, NATIONAL REGULATORY
INC. BANK REQUIREMENT
-------- -------- ------------
<S> <C> <C> <C>
Leverage capital ratios 13.56 % 13.52 % 4.00 %
Risk-based capital ratios:
Tier I capital 17.15 17.10 4.00
Total capital 18.40 18.35 8.00
</TABLE>
8
<PAGE> 9
FINANCIAL CONDITION
Following is a summary of the Company's balance sheets for the periods
indicated:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999 INCREASE (DECREASE)
--------- ------------ -----------------------
(DOLLARS IN THOUSANDS) AMOUNT PERCENT
------------------------ ------- -------
<S> <C> <C> <C> <C>
Cash and due from banks $ 2,105 $ 3,126 $(1,021) (32.66)%
Interest-bearing deposits in banks 105 102 3 2.94
Securities 7,390 6,413 977 15.23
Federal funds sold 4,480 4,440 40 0.90
Loans, net 38,253 34,058 4,195 12.32
Premises and equipment 4,421 3,254 1,167 35.86
Other assets 896 673 223 33.14
------- ------- -------
$57,650 $52,066 $ 5,584 10.72
======= ======= =======
Deposits $49,658 $44,312 $ 5,346 12.06 %
Other liabilities 741 516 225 43.60
Stockholders' equity 7,251 7,238 13 0.18
------- ------- -------
$57,650 $52,066 $ 5,584 10.72
======= ======= =======
</TABLE>
As indicated in the above table, the Company's total assets grew at a rate of
10.72%. This high rate of growth is not uncommon for a de novo bank. Deposit
growth of $5,346,000 and a decrease in cash and due from banks of $1,021,000 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 March
31, 2000 was 78.21% as compared to 78.03% at December 31, 1999.
9
<PAGE> 10
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Following is a summary of the Company's operations for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
2000 1999
------- ------
(DOLLARS IN THOUSANDS)
---------------------
<S> <C> <C>
Interest income $1,161 $ 345
Interest expense 529 80
------ -----
Net interest income 632 265
Provision for loan losses 64 126
Other income 90 40
Other expense 623 408
------ -----
Net income (loss) $ 35 $(229)
====== =====
</TABLE>
As indicated in the above table, the Company's net interest income has increased
to $632,000 for the first quarter of 2000 as compared to $265,000 for the same
quarter in 1999. The Company's net interest margin decreased to 5.37% for the
first quarter of 2000 as compared to 7.01% for the first quarter of 1999 and
6.42% for the entire year of 1999. The increase in net interest income is due
primarily to an increase in average loans outstanding. The decrease in net
interest margin is due primarily to an increase in the average balance of
securities, which have lower yields than loans, as a component of total
interest-earning assets.
The provision for loan losses was $64,000 during the first quarter of 2000 as
compared to $126,000 during the first quarter of 1999. The amounts provided are
due primarily to loan growth and inherent risk in the loan portfolio. The
Company's reserve for loan losses amounted to 1.50% at March 31, 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 loan loss experience, 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. Thus, 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.
10
<PAGE> 11
Information with respect to nonaccrual, past due and restructured loans is as
follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------------------
2000 1999
-------------------------
(DOLLARS IN THOUSANDS)
-------------------------
<S> <C> <C>
Nonaccrual loans $ 25 $ 0
Loans contractually past due ninety days or more as to interest
or principal payments and still accruing 0 0
Restructured loans 0 0
Loans, now current 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>
It is the policy of the Bank to discontinue 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> 12
Information regarding certain loans and allowance for loan loss data is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
2000 1999
------- -------
(DOLLARS IN THOUSANDS)
----------------------
<S> <C> <C>
Average amount of loans outstanding $36,068 $ 8,552
======= =======
Balance of allowance for loan losses at beginning of period $ 520 $ 40
------- -------
Loans charged off
Commercial and financial -- --
Real estate mortgage -- --
Instalment -- --
------- -------
-- --
------- -------
Loans recovered
Commercial and financial -- --
Real estate mortgage -- --
Installment -- --
------- -------
-- --
------- -------
Net charge-offs -- --
------- -------
Additions to allowance charged to operating expense during period 64 126
------- -------
Balance of allowance for loan losses at end of period $ 584 $ 166
======= =======
Ratio of net loans charged off during the period to
average loans outstanding --% --%
======= =======
</TABLE>
Other income increased to $90,000 for the first quarter of 2000 as compared to
$40,000 for the first quarter of 1999. Increased service charges of $34,000
associated with the significant increase in deposit growth and increased
mortgage loan origination fees of $14,000 accounted for the majority of the
change in other income.
Other operating expenses increased to $623,000 for the first quarter of 2000 as
compared to $408,000 for the first quarter of 1999. Salaries and employee
benefits have increased by $97,000 due to an increase in the number of full time
equivalent employees to 29 at March 31, 2000 from 19 at March 31, 1999.
Equipment and occupancy expenses have increased by $33,000 due to increases
associated with the occupation of its new banking facilities at the main office
location in February 2000 and the increased costs associated with the
Adairsville branch. Other operating expenses have increased by $85,000 due
primarily 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.
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.
12
<PAGE> 13
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
13
<PAGE> 14
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)
<TABLE>
<S> <C>
DATE: May 12, 2000 BY: /s/ Michael L. McPherson
------------------------- ------------------------------------------------
Michael L. McPherson, President and C.E.O.
(Principal Executive Officer)
DATE: May 12, 2000 BY: /s/ James D. Timmons
------------------------- ------------------------------------------------
James D. Timmons, CFO
(Principal Financial and Accounting Officer)
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,104,728
<INT-BEARING-DEPOSITS> 104,905
<FED-FUNDS-SOLD> 4,480,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,390,505
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 38,836,577
<ALLOWANCE> 583,820
<TOTAL-ASSETS> 57,650,087
<DEPOSITS> 49,658,637
<SHORT-TERM> 0
<LIABILITIES-OTHER> 740,767
<LONG-TERM> 0
0
0
<COMMON> 8,392
<OTHER-SE> 7,242,291
<TOTAL-LIABILITIES-AND-EQUITY> 57,650,087
<INTEREST-LOAN> 976,073
<INTEREST-INVEST> 125,795
<INTEREST-OTHER> 59,268
<INTEREST-TOTAL> 1,161,136
<INTEREST-DEPOSIT> 528,962
<INTEREST-EXPENSE> 528,962
<INTEREST-INCOME-NET> 632,174
<LOAN-LOSSES> 64,054
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 623,280
<INCOME-PRETAX> 34,843
<INCOME-PRE-EXTRAORDINARY> 34,843
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,843
<EPS-BASIC> .04
<EPS-DILUTED> .04
<YIELD-ACTUAL> 5.37
<LOANS-NON> 25,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 520,000
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 584,000
<ALLOWANCE-DOMESTIC> 584,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
