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, 1999
OR
[ ] 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 333-77593
UNITED AMERICAS BANKSHARES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2399917
----------------------- ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
3789 Roswell Road
Atlanta, Georgia 30342
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
404-240-0101
------------------
(Telephone Number)
Not Applicable
----------------------------
(Former name, former address
and former fiscal year,
if changed since last report)
Check whether the issurer: (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 /XX/ NO / /
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
1,200,000 shares of common stock, no par value, issued and outstanding as
of November 1, 1999.
Transitional Small Business Disclosure Format (check one): YES / / NO /XX/
<PAGE>
UNITED AMERICAS BANKSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements of United Americas Bankshares, Inc.
(the "Company") are set forth in the following pages.
<PAGE>
UNITED AMERICAS BANKSHARES, INC.
BALANCE SHEET
SEPTEMBER 30, 1999
(Unaudited)
ASSETS
September 30,
1999
-------------
Cash $ 724,487
Federal funds sold 5,380,000
------------
Total cash and cash equivalents 6,104,487
Investments available for sale 3,887,140
Other investments 330,555
Premises and equipment, net 1,313,105
Other assets 79,082
------------
$ 11,714,369
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 76,645
Interest bearing 714,267
------------
Total deposits 790,912
Other liabilities 30,043
------------
Total liabilities 820,955
------------
Stockholders' equity:
Preferred stock, par value 1,500,000 shares authorized;
no shares issued or outstanding --
Common stock, no par value 5,000,000 shares authorized;
1,200,000 issued and outstanding --
Additional paid-in capital 11,535,961
Accumulated deficit (634,486)
Other comprehensive loss (8,061)
------------
Total stockholders' equity 10,893,414
------------
$ 11,714,369
============
See accompanying notes to financial statements.
<PAGE>
UNITED AMERICAS BANKSHARES, INC.
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE AND THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
1999 1999
------------- -------------
<S> <C> <C>
Interest income:
Interest income on federal funds sold
and interest bearing deposits $ 79,858 79,858
Interest income on investment securities 1,479 1,479
--------- --------
Total interest income 81,337 81,337
--------- --------
Interest expense:
Interest bearing deposits 591 591
Other 6,238 28,405
--------- --------
Total interest expense 6,829 28,996
--------- --------
Net interest income 74,508 52,341
Noninterest expenses:
Salaries and employee benefits 136,247 274,713
Occupancy 68,211 77,278
Other 56,842 149,321
--------- --------
Total noninterest expenses 261,300 501,312
--------- --------
Net loss $(186,792) (448,971)
========= ========
Other comprehensive loss:
Unrealized gains on investment securities available for sale:
Holding losses arising during the period, net of taxes
of $0 and $0 (8,061) (8,061)
--------- --------
Comprehensive loss $(194,853) (457,032)
========= ========
Net loss per share $ (0.16) (0.37)
========= =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
UNITED AMERICAS BANKSHARES, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
September 30,
1999
---------------
Cash flows from operating activities:
Net loss $ (448,971)
Adjustments to reconcile net loss to net cash used in
operating activities:
Increase in other assets (18,889)
Increase in other liabilities 30,044
------------
Net cash used in operating activities (437,816)
Cash flows from investing activities:
Purchase of premises and equipment (1,310,024)
Purchase of investment securities (4,225,756)
Payment of organizational expenses (464,039)
------------
Net cash used in investing activities (5,999,819)
Cash flows from financing activities:
Proceeds from the sale of common stock 12,000,000
Increase in deposits 790,912
Repayment of line of credit (255,347)
------------
Net cash provided by financing activities 12,535,565
Net increase in cash 6,097,930
Cash and cash equivalents at the beginning of the year 6,557
------------
Cash and cash equivalents at the end of the year $ 6,104,487
============
Supplemental cash flow information:
Interest paid $ 28,406
============
See accompanying notes to financial statements.
<PAGE>
UNITED AMERICAS BANKSHARES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Organization
------------
United Americas Bankshares, Inc. (the "Company") was incorporated for the
purpose of becoming a bank holding company. On September 20, 1999, the
Company acquired 100% of the outstanding common stock of United Americas
Bank, N.A. (the "Bank"), which operates in the Buckhead area of Atlanta,
Georgia. The Bank is chartered and regulated by the Office of the
Comptroller of Currency and the Federal Deposit Insurance Corporation. The
Bank commenced operations on September 20, 1999.
The Company raised $12,000,000 through an offering of its common stock at
$10 per share of which $11,000,000 was used to capitalize the Bank.
The interim financial statements included herein are unaudited but reflect
all adjustments which, in the opinion of management, are necessary for a
fair presentation of the financial position and results of operations for
the interim period presented. All such adjustments are of a normal
recurring nature. The results of operations for the quarter ended
September 30, 1999 are not necessarily indicative of the results of a full
year's operations.
(2) Basis of Presentation
---------------------
The consolidated financial statements include the accounts of the Company
and the Bank. All intercompany accounts and transactions have been
eliminated in consolidated. The financial statements of the Company
through June 30, 1999 were presented as a Development Stage Corporation.
The accounting principles followed by the Company and its subsidiary, and
the method of applying these principles, conform with generally accepted
accounting principles (GAAP) and with general practices within the banking
industry. In preparing financial statements in conformity with GAAP,
management is required to make estimates and assumptions that affect the
reported amounts in the financial statements. Actual results could differ
significantly from those estimates. Material estimates common to the
banking industry that are particularly susceptible to significant change
in the near term include, but are not limited to, the determination of the
allowance for loan losses, the valuation of real estate acquired in
connection with foreclosures or in satisfaction of loans, and valuation
allowances associated with the realization of deferred tax assets which
are based on future taxable income.
(3) Significant Accounting Policies
-------------------------------
INVESTMENT SECURITIES
The Company classifies its securities in one of three categories: trading,
available for sale, or held to maturity. Trading securities are bought and
held principally for the purpose of selling them in the near term. Held to
maturity securities are those securities for which the Company has the
ability and intent to hold until maturity. All securities not included in
trading or held to maturity are classified as available for sale.
Available for sale securities are recorded at fair value. Held to maturity
securities are recorded at cost, adjusted for the amortization or
accretion of premiums or discounts. Unrealized holding gains and losses,
net of the related tax effect, on securities available for sale are
excluded from earnings and are reported as a separate component of
shareholders' equity until realized. Transfers of securities between
categories are recorded at fair value at the date of transfer.
A decline in the market value of any available for sale or held to
maturity security below cost that is deemed other than temporary is
charged to earnings and establishes a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related securities as adjustments to the yield. Realized gains and losses
for securities classified as available for sale and held to maturity are
included in earnings and are derived using the specific identification
method for determining the cost of securities sold.
<PAGE>
UNITED AMERICAS BANKSHARES, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(3) Significant Accounting Policies, Continued
------------------------------------------
BASIS OF PRESENTATION
The accompanying financial statements have been presented in conformity
with generally accepted accounting principles ("GAAP") for a development
stage corporation. Preparing financial statements in conformity with GAAP
requires that management make certain estimates that may effect the
amounts recorded in the financial statements, and actual results could
differ from those estimates.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Major additions and improvements are capitalized while maintenance and
repairs that do not improve or extend the useful lives of the assets are
expensed. When assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts, and any
gain or loss is reflected in earnings for the period. Depreciation is
completed on a straight-line method over 3 to 30 year lives.
PRE-OPENING EXPENSES
All pre-opening expenses were expensed as incurred.
DEFERRED OFFERING EXPENSES
Costs incurred in connection with the stock offering, consisting of
direct, incremental costs of the offering, were deferred and were offset
against the proceeds of the stock sale as a charge to additional paid in
capital.
PROFORMA NET LOSS PER COMMON SHARE
Proforma net loss per common share is calculated by dividing net loss by
the number of common shares which were sold in the initial public
offering, and would be considered outstanding for all periods presented,
as prescribed in Staff Accounting Bulletin Topic 1:B.
INCOME TAXES
The Company accounts for deferred income taxes using the liability
approach, and when this approach results in a net deferred tax asset,
management evaluates the likelihood of being able to realize that asset.
When management determines that some or all of the net deferred tax asset
is not realizable, a valuation allowance is recorded for that amount. At
September 30, 1999, the Company's only significant deferred tax attribute
was its net operating loss since inception, and this deferred tax asset
has been fully reserved.
(4) Commitments
-----------
The Company has entered into employment arrangements with the individuals
who will serve as its President, its Chief Lending Officer and its Chief
Financial Officer. The agreements would provide for initial annual
salaries for these individuals of $315,000 in the aggregate and entitles
them to the receipt of certain options and warrants upon the occurrence of
certain future events.
Additionally, the Company entered into a contract to acquire a modular
banking facility for $100,000. A site location has not yet been
identified.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-looking Statements
--------------------------
The following is a discussion of the Company's financial condition as of
and for the period ended September 30, 1999. These comments should be read in
conjunction with the Company's condensed consolidated financial statements and
accompanying footnotes appearing in this report.
This report contains "forward-looking statements" relating to, without
limitation, future economic performance, plans and objectives of management for
future operations, and projections of revenues and other financial items that
are based on the beliefs of the Company's management, as well as assumptions
made by and information currently available to the Company's management. The
words "expect," "anticipate," and "believe," as well as similar expressions, are
intended to identify forward-looking statements. The Company's actual results
may differ materially from the results discussed in the forward-looking
statements, and the Company's operating performance each quarter is subject to
various risks and uncertainties that are discussed in detail in the Company's
filings with the Securities and Exchange Commission, including the "Risk
Factors" section in the Company's Registration Statement (Registration Number
333-69973) as filed with and declared effective by the Securities and Exchange
Commission.
The Company was organized on May 14, 1998. The Company's initial principal
activities have been related to its organization, the conducting of its initial
public offering, the pursuit of approvals from the Office of the Comptroller of
the Currency (the "OCC") and Federal Deposit Insurance Corporation (the "FDIC")
of its application to charter the Bank and to obtain deposit insurance, and the
pursuit of approvals from the Federal Reserve Board for the Company to acquire
control of the Bank. By September 20, 1999, the Company received all required
approvals and on that day the Bank commenced operations.
Financial Condition
-------------------
A total of $11,535,961 net of offering costs of $464,039, was used to
capitalize the Company. Of this amount, $11,000,000 was used to capitalize the
Bank and the remainder will be used to pay organization expenses of the Company
and provide working capital, including additional future capital for investment
in the Bank, if needed. The Company believes this amount will be sufficient to
fund the activities of the Bank in its initial stages of operations, and that
the Bank will generate sufficient income from operations to fund its activities
on an ongoing basis.
As of September 30, 1999, the Bank had concluded 10 days of operations, and
the Company has total assets of $11,714,369. During this period, total deposits
had grown to $790,912. The Bank has $4,217,695 in its investment portfolio, with
an additional $5,380,000 in overnight investments at September 30, 1999.
While the Bank builds its loan portfolio, excess funds are invested in
short to intermediate term government and mortgage-backed securities. At
September 30, 1999, $3,887,140 and $330,555 were classified available for sale
and other investments, respectively. Other investments include Federal Reserve
Bank stock. Overnight interest bearing deposits (federal funds sold) were
$5,380,000. The current investment portfolio strategy is primarily to provide
liquidity for funding loans and initial operating expenditures and secondarily
for earnings enhancement. Accordingly, no investment securities have final
maturities greater than five years and all are pledgeable to raise funding
through secured borrowing or repurchase agreements.
Management's long term target for the loan to deposit ratio is 80%. The
interest rates being paid on interest bearing deposits and the service charge
rates for deposit services are comparable to local market rates. Management is
making a concerted effort to develop quality loan business in the local market
and to manage the deposit growth consistent with expected loan demand.
The deposit mix at September 30, 1999 was as follows: $76,645 (10% of total
deposits) in noninterest bearing demand deposits: $38,822 (5% of total deposits)
in interest checking accounts; $217,172 (27% of total deposits) in savings and
money market accounts; and $458,273 (58% of total deposits) in time deposits. As
the Bank continues to grow, management expects the deposit mix to become more
heavily weighted towards the higher cost time deposits, thus increasing the
average cost of funds.
Premises and equipment (net of depreciation) were $1,313,105 and consisted
primarily of main office location as well as furniture and fixtures acquired.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Financial Condition, continued
- -------------------
The Company had an accumulated deficit of $634,486 as of September 30,
1999. During the first nine months of 1999, the Company incurred a net loss of
$448,971 of which $186,792 related to the third quarter. The first three
quarters of 1999 reflected 10 days of banking operations with 13 full-time
employees. Prior to commencing operations, the losses were a result of expenses
incurred in connection with activities related to the organization of the
Company and the Bank.
Net interest income for the nine months ended September 30, 1999 was
$52,341 of which $74,508 related to the third quarter. The Company had interest
expense on interest bearing deposits of $591 and the lines of credit of $28,405
for the first nine months of 1999. Total interest income in the first three
quarters and the third quarter of 1999 was $81,337. Interest expense was $6,829
for the quarter. Interest expense related to deposit activities was not incurred
until the Bank opened on September 20, 1999.
Noninterest expense for the first three quarters of 1999 was $501,312 of
which $261,300 related to the third quarter. Salaries and benefits for the nine
and three months ended September 30, 1999 totaled $274,713 and $136,247,
respectively. At September 30, 1999 the Company had 13 employees. Increase in
noninterest related expenses is reflective of the Company preparing for and
commencing operations.
Management does not expect the Company to make a quarterly profit until the
second half of 2000, while it establishes its position in the local market and
builds its banking services infrastructure. Management continues to believe that
the local market presents good opportunities for business development to support
a growing and profitable community bank. Despite the anticipated initial losses,
the Company expects earnings from loans and investments and other banking
services as well as steady deposit growth to provide sufficient liquidity for
both the short and long term. The Bank intends to manage its loan growth such
that deposit flows will provide funding for all loans as well as cash reserves
for working capital and short to intermediate term, liquid investments.
The Bank has established short-term Federal Funds Purchase lines of credit
with its correspondent banks which total $6,000,000. These lines are unsecured
and designed to provide the Bank with short-term liquidity. These lines may be
revoked at any time by the correspondent bank and is available to the Bank
simply as an accommodation for short-term (two weeks or less) liquidity needs.
In the early years, the investment policies of the Company will limit
investments to highly liquid overnight investments in correspondent banks and
short to intermediate term U.S. Treasury and government agency securities. For
the foreseeable future, the Bank will consider its investment portfolio
primarily as a source for liquidity and secondarily as a source for earnings.
Capability of Data Processing Software to Accommodate the Year 2000
- -------------------------------------------------------------------
Like many financial institutions, we rely upon computers for the daily
conduct of our business and for information systems processing. There is concern
among industry experts that on January 1, 2000, computers will be unable to
"read" the new year and there may be widespread computer malfunctions. In June
1996, the Federal Financial Institutions Examination Council alerted the banking
industry that serious challenges could be encountered with Year 2000 issues. In
addition, the OCC and the FDIC have issued guidelines to require compliance with
Year 2000 issues. In accordance with these guidelines, we have developed and are
executing a plan to ensure that our computer and telecommunication systems do
not have these Year 2000 problems. We generally rely on software and hardware
developed by independent third parties for our information systems. We are a new
company and therefore, despite our reliance upon third parties for many of our
information systems, we believe that by following the procedures that are
outlined below, we have the ability to minimize our Year 2000 risk.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Capability of Data Processing Software to Accommodate the Year 2000, Continued
- -------------------------------------------------------------------
We have entered into an agreement with Fiserv to provide our mission
critical hardware and software and to perform all overnight processing and
reconciliation of our daily transaction data. Fiserv is a well-established
company which provides similar systems and services to hundreds of financial
institutions in the United States. Fiserv has completed testing the system we
will be using with generic data which has been artificially "aged" to simulate
all critical Year 2000 related dates. Banking regulators have approved this type
of testing as a valid means of testing. We have reviewed these tests and are
satisfied that the system tested is similar to ours and that the Fiserv system
did not encounter any Year 2000 problems. We therefore do not expect to
encounter any Year 2000 issues in the Fiserv system. Our agreements with Fiserv
include warranties that their system is Year 2000 compliant in all respects,
although the remedies available under such agreements are limited and
specifically exclude special, incidental, indirect, and consequential damages.
We will require all other significant vendors to provide similar test
results and warranties regarding Year 2000 compliance. Because we have chosen
our information systems and software with the Year 2000 in mind, we do not
believe we will have any significant expenses associated with Year 2000 issues.
CONTINGENCY PLANS. We have developed contingency plans to be implemented as
part of our efforts to identify and correct any Year 2000 problems affecting our
internal systems. Depending on the systems affected, these plans include (a)
accelerated replacement of affected equipment or software; (b) short term use of
backup equipment and software; (c) increased work hours for our personnel or use
of contract personnel to correct, on an accelerated schedule, any Year 2000
problems which arise; and (d) other similar approaches. If we are required to
implement any of these contingency plans, these plans could have a material
adverse effect on our business.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company
is a party or of which any of their property is the subject.
ITEM 2. CHANGES IN SECURITIES
(a) Not applicable
(b) Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to security holders for a vote during
the nine months ended September 30, 1999.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITED AMERICAS BANKSHARES, INC.
/s/ Jorge L. Forment
___________________________________
Jorge L. Forment
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0001084915
<NAME> UNITED AMERICAS BANKSHARES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 724,487
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,380,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 330,555
<INVESTMENTS-CARRYING> 3,887,140
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 11,714,369
<DEPOSITS> 790,912
<SHORT-TERM> 0
<LIABILITIES-OTHER> 30,043
<LONG-TERM> 0
0
0
<COMMON> 11,535,961
<OTHER-SE> (642,547)
<TOTAL-LIABILITIES-AND-EQUITY> 11,714,369
<INTEREST-LOAN> 0
<INTEREST-INVEST> 1,479
<INTEREST-OTHER> 79,858
<INTEREST-TOTAL> 81,337
<INTEREST-DEPOSIT> 591
<INTEREST-EXPENSE> 28,996
<INTEREST-INCOME-NET> 52,341
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 501,312
<INCOME-PRETAX> 0
<INCOME-PRE-EXTRAORDINARY> (448,971)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (448,971)
<EPS-BASIC> (0.37)
<EPS-DILUTED> (0.37)
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
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<ALLOWANCE-FOREIGN> 0
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</TABLE>
