<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 June 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.
---------------------------------------------------------------------
(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 August 1, 2000: 839,211; $0.01 par value.
Transitional Small Business Disclosure Format Yes No X
--- ---
<PAGE>
UNITY HOLDINGS, INC. AND SUBSIDIARY
--------------------------------------------------------------------------------
INDEX
-----
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet - June 30, 2000.............. 3
Consolidated Statement of Operations and Comprehensive
Income (Loss) - Three Months Ended June 30, 2000 and
1999 and Six Months Ended June 30, 2000 and 1999...... 4
Consolidated Statement of Cash Flows - Six
Months Ended June 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........................................ 14-15
Item 6 - Exhibits and Reports on Form 8-K................... 15
Signatures.................................................. 16
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITY HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(Unaudited)
Assets
------
<TABLE>
<CAPTION>
<S> <C>
Cash and due from banks $ 2,720,187
Interest-bearing deposits in banks 107,519
Securities available-for-sale, at fair value 7,382,451
Federal funds sold 1,810,000
Loans 45,741,486
Less allowance for loan losses 687,190
----------------------
Loans, net 45,054,296
----------------------
Premises and equipment 5,120,694
Other assets 892,110
----------------------
$ 63,087,257
======================
Liabilities and Stockholders' Equity
------------------------------------
Deposits
Noninterest-bearing demand $ 6,264,669
Interest-bearing demand 10,302,691
Savings 611,128
Time 37,683,713
----------------------
Total deposits 54,862,201
Other liabilities 868,087
----------------------
Total liabilities 55,730,288
----------------------
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 (688,650)
Accumulated other comprehensive loss (39,242)
----------------------
Total stockholders' equity 7,356,969
----------------------
$ 63,087,257
======================
</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 JUNE 30, 2000 AND 1999 AND
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -------------------------------
2000 1999 2000 1999
-------------- ----------- -------------- -------------
Interest income
<S> <C> <C> <C> <C>
Loans $ 1,163,826 $ 503,516 $ 2,139,899 $ 771,559
Taxable securities 126,041 - 251,836 924
Federal funds sold 60,793 61,552 118,637 137,415
Deposits in banks 1,626 - 3,050 531
-------------- ------------ -------------- -------------
Total interest income 1,352,286 565,068 2,513,422 910,429
-------------- ------------ -------------- -------------
Interest expense on deposits 620,994 152,227 1,149,956 232,070
-------------- ------------ -------------- -------------
Net interest income 731,292 412,841 1,363,466 678,359
Provision for loan losses 104,500 122,000 168,554 248,000
-------------- ------------ -------------- -------------
Net interest income after
provision for loan losses 626,792 290,841 1,194,912 430,359
-------------- ------------ -------------- -------------
Other income
Service charges on deposit accounts 50,771 29,419 97,138 41,781
Other operating income 52,698 45,541 96,334 72,875
-------------- ------------ -------------- -------------
103,469 74,960 193,472 114,656
-------------- ------------ -------------- -------------
Other expenses
Salaries and employee benefits 316,482 235,852 654,165 476,798
Equipment and occupancy expenses 99,232 65,753 187,126 120,930
Other operating expenses 207,957 138,868 405,660 251,066
-------------- ------------ -------------- -------------
623,671 440,473 1,246,951 848,794
-------------- ------------ -------------- -------------
Net income (loss) $ 106,590 $ (74,672) $ 141,433 $ (303,779)
Other comprehensive loss:
Unrealized losses on securities available-for-sale
arising during period (304) - (22,652) -
-------------- ------------ -------------- -------------
Comprehensive income (loss) $ 106,286 $ (74,672) $ 118,781 $ (303,779)
============== ============ ============== =============
Basic and diluted earnings (losses) per common
share $ 0.13 $ (0.09) $ 0.17 $ (0.36)
============== ============ ============== =============
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
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
--------------------- ----------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ 141,433 $ (303,779)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 91,120 33,820
Provision for loan losses 168,554 248,000
Increase in interest receivable (133,982) (131,317)
Increase in interest payable 297,652 119,382
Other operating activities 94,264 (11,369)
--------------------- ----------------------
Net cash provided by (used in) operating activities 659,041 (45,263)
--------------------- ----------------------
INVESTING ACTIVITIES
Net increase in interest-bearing deposits in banks (5,675) -
Purchases of securities available-for-sale (1,000,000) (140,609)
Proceeds from maturities of securities available-for-sale 8,380 0
Net decrease in Federal funds sold 2,630,000 2,380,000
Net increase in loans (11,164,347) (18,442,789)
Purchase of premises and equipment (1,957,467) (374,267)
Purchase of life insurance policies (125,800) (355,169)
--------------------- ----------------------
Net cash used in investing activities (11,614,909) (16,932,834)
--------------------- ----------------------
FINANCING ACTIVITIES
Net increase in deposits 10,550,331 17,526,397
Net proceeds from the issuance of stock - 5,000
--------------------- ----------------------
Net cash provided by financing activities 10,550,331 17,531,397
--------------------- ----------------------
Net increase (decrease) in cash and due from banks (405,537) 553,300
Cash and due from banks at beginning of period 3,125,724 381,515
--------------------- ----------------------
Cash and due from banks at end of period $ 2,720,187 $ 934,815
===================== ======================
CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 852,304 $ 112,688
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 six month periods ended
June 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 June 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 22%. As
the Company grows, management will continue to monitor liquidity and make
adjustments as deemed necessary.
At June 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:
Actual
-------------------------------
Unity Unity Regulatory
Holdings, National Minimum
Inc. Bank Requirement
-------------- --------------- -------------
Leverage capital ratios 12.34 % 12.31 % 4.00 %
Risk-based capital ratios:
Tier I capital 11.72 11.69 4.00
Total capital 12.69 12.66 8.00
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>
June 30, December 31,
2000 1999 Increase (Decrease)
--------------- ---------------- -----------------------------------
(Dollars in Thousands) Amount Percent
----------------------------------- -------------- -----------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 2,720 $ 3,126 $ (406) (12.99)%
Interest-bearing deposits in banks 108 102 6 5.88
Securities 7,382 6,413 969 15.11
Federal funds sold 1,810 4,440 (2,630) (59.23)
Loans, net 45,054 34,058 10,996 32.29
Premises and equipment 5,121 3,254 1,867 57.38
Other assets 892 673 219 32.54
--------------- ---------------- --------------
$ 63,087 $ 52,066 $ 11,021 21.17
=============== ================ ==============
Deposits $ 54,862 $ 44,312 $ 10,550 23.81%
Other liabilities 868 516 352 68.22
Stockholders' equity 7,357 7,238 119 1.64
--------------- ---------------- --------------
$ 63,087 $ 52,066 $ 11,021 21.17
=============== ================ ==============
</TABLE>
As indicated in the above table, the Company's total assets grew at a rate of
21.17%. This high rate of growth is not uncommon for a de novo bank. Deposit
growth of $10,550,000 and a decrease in Federal funds sold of $2,630,000 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 June
30, 2000 was 83.38% as compared to 78.03 at December 31, 1999.
9
<PAGE>
Results of Operations For The Three Months Ended June 30, 2000 and 1999 and for
the Six Months Ended June 30, 2000 and 1999
Following is a summary of the Company's operations for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
June 30,
Increase
2000 1999 (Decrease)
--------------- ---------------- --------------
(Dollars in Thousands) Amount
----------------------------------- --------------
<S> <C> <C> <C>
Interest income $ 1,352 $ 565 $ 787
Interest expense 621 152 469
--------------- ---------------- --------------
Net interest income 731 413 318
Provision for loan losses 104 122 (18)
Other income 103 75 28
Other expense 623 441 182
--------------- ---------------- --------------
Net income (loss) $ 107 $ (75) $ 182
=============== ================ ==============
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30,
Increase
2000 1999 (Decrease)
--------------- ---------------- --------------
(Dollars in Thousands) Amount
----------------------------------- --------------
<S> <C> <C> <C>
Interest income $ 2,513 $ 910 $ 1,603
Interest expense 1,150 232 918
--------------- ---------------- --------------
Net interest income 1,363 678 685
Provision for loan losses 168 248 (80)
Other income 193 115 78
Other expense 1,247 849 398
--------------- ---------------- --------------
Net income (loss) $ 141 $ (304) $ 445
=============== ================ ==============
</TABLE>
As indicated in the above table, the Company's net interest income has increased
by $318,000 and $685,000 for the second quarter and first six months of 2000 as
compared to the same periods in 1999. The Company's net interest margin
decreased to 5.45% during the first six months of 2000 as compared to 7.03% for
the first six 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 the increase in rates paid on deposits. The average rate
paid on deposits was 5.31% for the first six months of 2000 as compared to 3.97%
for the first six months of 1999 and 4.63% for the entire year of 1999.
10
<PAGE>
The provision for loan losses decreased by $18,000 and $80,000 for the second
quarter and first six 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
June 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 June 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>
June 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 28 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>
Six Months Ended
June 30,
-------------------------------------
2000 1999
----------------- -----------------
(Dollars in Thousands)
-------------------------------------
<S> <C> <C>
Average amount of loans outstanding $ 38,765 $ 13,317
================= =================
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 1 0
----------------- -----------------
1 0
----------------- -----------------
Loans recovered
Commercial and financial 0 0
Real estate mortgage 0 0
Instalment 0 0
----------------- -----------------
0 0
----------------- -----------------
Net charge-offs 1 0
----------------- -----------------
Additions to allowance charged to
operating expense during period 168 248
----------------- -----------------
Balance of allowance for loan losses at end of period $ 687 $ 288
================= =================
Ratio of net loans charged off during the period to
average loans outstanding - - %
================= =================
</TABLE>
Other income increased by $28,000 and $78,000 for the second quarter and first
six 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 $182,000 and $398,000 for the second quarter and
first six 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 30 at June 30, 2000 from 20 at June 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
(a) The annual meeting of the stockholders of the Company was held on
May 24, 2000.
(b) The following Class II directors were elected at the meeting to
serve terms for three years:
Sam R. McCleskey
Stephen A. Taylor
B. Don Temples
Set forth below is the number of votes cast for, against, or
withheld, as well as the number of abstentions and broker
non-votes, with respect to each nominee for office:
# of
Sam R. McCleskey Shares
----------------
For 469,301
Against -
Abstained -
Not voted 1,300
----------------
Total 470,601
================
# of
Stephen A. Taylor Shares
----------------
For 469,301
Against -
Abstained -
Not voted 1,300
----------------
Total 470,601
================
# of
B. Don Temples Shares
----------------
For 469,301
Against -
Abstained -
Not voted 1,300
----------------
Total 470,601
================
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (Continued)
The terms of the Class III directors expire at the 2001 Annual
Shareholders Meeting. The terms of the Class I directors will
expire at the 2002 Annual Shareholders Meeting. Our directors and
their classes are:
Class I Class II Class III
Donald D. George Sam R. McCleskey Kenneth R. Bishop
John S. Lewis Stephen A. Taylor Jerry W. Braden
Michael L. McPherson B. Don Temples
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
15
<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: August 11, 2000 BY: /s/ Michael L. McPherson
----------------------- -------------------------------------------
Michael L. McPherson, President and C.E.O.
(Principal Executive Officer)
DATE: August 11, 2000 BY: /s/ James D. Timmons
----------------------- -------------------------------------------
James D. Timmons, CFO
(Principal Financial and Accounting Officer)
16
