SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
Commission File Number 333-77593
UNITED AMERICAS BANKSHARES, INC.
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(Exact name of Small Business Issuer as specified in its charter)
Georgia 58-2399917
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3789 Roswell Road, Atlanta, Georgia 30342
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (404) 240-0101
Securities registered pursuant to Section 12(b) of the Act: NONE.
Securities registered pursuant to Section 12(g) of the Act: 1,200,000
SHARES OF COMMON STOCK, NO PAR VALUE PER SHARE.
Check whether the registrant (1) has 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 / /
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. /X/
State the Issuer's revenue for its most recent fiscal year: $243,474.
State the aggregate market value of the voting stock held by
non-affiliates: AS OF MARCH 22, 2000, 847,500 SHARES OF COMMON STOCK, NO PAR
VALUE PER SHARE (THE "COMMON STOCK"), WITH AN AGGREGATE VALUE OF $8,475,000
(BASED UPON APPROXIMATE MARKET VALUE OF $10.00/SHARE) (THE LAST SALE PRICE KNOWN
TO THE REGISTRANT FOR THE COMMON STOCK, FOR WHICH THERE IS NO ESTABLISHED
TRADING MARKET).
State the number of shares outstanding of each of the issuer's classes
of Common Stock as of the latest practicable date: AS OF MARCH 22, 2000, THERE
WERE 1,200,000 SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK.
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INDEX
PAGE
PART I ................................................................1
Item 1. Description of Business......................................1
Item 2. Description of Property......................................9
Item 3. Legal Proceedings ...........................................9
Item 4. Submission of Matters To a Vote of
Security Holders........................................9
PART II ...............................................................9
Item 5. Market for Common Equity and Related
Stockholder Matters.....................................9
Item 6. Management's Discussion and Analysis or
Plan of Operation.......................................10
Item 7. Financial Statements........................................11
Item 8. Changes In and Disagreements With
Accountants on Accounting and Financial
Disclosure.............................................12
PART III..............................................................13
Item 9. Directors, Executive Officers, Promoters,
and Control Persons; Compliance With
Section 16(a) of The Exchange Act......................13
Item 10. Executive Compensation......................................13
Item 11. Security Ownership of Certain Beneficial
Owners and Management ................................16
Item 12. Certain Relationships and Related
Transactions...........................................17
Item 13. Exhibits and Reports on Form 8-K............................17
(i)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
This Form 10-KSB, both in the Management's Discussion and Analysis
section and elsewhere, contains forward-looking statements under the Private
Securities Litigation Reform Act of 1995 that involve risks and uncertainties.
Although we believe the assumptions underlying the forward-looking statements
contained in the discussions are reasonable, any of the assumptions could be
inaccurate; therefore, no assurance can be made that any of the forward-looking
statements included in this discussion will be accurate. Factors that could
cause actual results to differ from results discussed in forward-looking
statements include, but are not limited to: economic conditions (both generally
and in the markets where we operate); competition from other providers of
financial services; government regulation and legislation; changes in interest
rates; material unforeseen changes in the financial stability and liquidity of
our credit customers; material unforeseen complications related to the Year 2000
issues for us, our suppliers, customers, and governmental agencies; and other
risks detailed in our filings with the Securities and Exchange Commission, all
of which are difficult to predict and which may be beyond our control. We
undertake no obligation to revise forward-looking statements to reflect events
or changes after the date of this discussion or to reflect the occurrence of
unanticipated events.
THE REGISTRANT
United Americas Bankshares, Inc., a Georgia corporation, was organized
on May 14, 1998, to serve as a bank holding company. On September 20, 1999, we
acquired all of the outstanding common stock of United Americas Bank, N.A.
("United Americas Bank" or the "Bank"), which operates in the Buckhead area of
Atlanta. The Bank is chartered and regulated by the Office of the Comptroller of
the Currency (the "OCC"), and it commenced operations on September 20, 1999.
We operate a full-service commercial banking business through United
Americas Bank, the only bank in Georgia organized specifically to provide
specialized customer service to Hispanics.
SERVICES
United Americas Bank is a community-oriented bank with an emphasis on
Hispanic, commercial, and retail banking. The Bank offers such traditional
banking services as consumer and commercial checking accounts, NOW accounts,
savings accounts, certificates of deposit, daily money market accounts, lines of
credit, and money transfers. The Bank finances commercial and consumer
transactions, makes secured and unsecured loans, and provides a variety of other
banking services.
In addition to deposit and loan services, United Americas Bank offers
banking, cash management services, safe deposit boxes, travelers' checks, direct
deposit of payroll and social security checks, and automatic drafts for various
accounts.
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Additionally, United Americas Bank offers specialized services to
targeted commercial customers, including a courier service, inbound and outbound
international funds transfers, foreign exchange, foreign collections, and import
and export letters of credit.
United Americas Bank offers private banking services to both domestic
and non-domestic individuals and corporations establishing business operations
in Atlanta, including currency exchange, international funds transfers, and
arranging personal lines of credit. The Bank also provides international banking
services to foreign businesses operating in Atlanta and to their executives and
employees. United Americas Bank employs personnel with the requisite language
and cultural skills suited to serve foreign nationals who are often unfamiliar
with banking practices in the United States. The Bank also maintains contacts
with correspondent financial services and general businesses in international
trade markets for introduction to qualified foreign nationals conducting
business in the United States.
DEPOSITS
United Americas Bank offers a full range of deposit services to both
consumers and small- to medium-sized businesses. At December 31, 1999, the
Bank's deposit base, totaling approximately $2,713,000, consisted of
approximately $523,000 in non-interest bearing demand deposits (19% of total
deposits), approximately $117,000 in interest bearing demand deposits (4% of
total deposits), approximately $706,000 in savings deposits (26% of total
deposits), approximately $415,000 in time deposits in amounts less than $100,000
(15% of total deposits), and approximately $952,000 in time deposits of $100,000
or more (36% of total deposits). Management believes the Bank's time deposits of
$100,000 or more are customer relationship-oriented and represent a reasonably
stable source of funds.
LOANS
United Americas Bank offers a full range of short- to medium-term
commercial and consumer loans, including both secured and unsecured loans, to
individuals and small- to medium-sized businesses for working capital, business
expansion, and purchase of equipment and machinery. Secured loans include first
and second real estate mortgage loans. United Americas Bank offers government
guaranteed loans under the Small Business Administration loan program. The Bank
also makes direct installment loans to consumers on both a secured and unsecured
basis. At December 31, 1999, loans totaled $147,846.
LENDING POLICY
Our current lending strategy is to make loans to persons who reside,
work, or own property in the metropolitan Atlanta area. Unsecured loans normally
are made only to persons who maintain depository relationships with United
Americas Bank. Secured loans are made to persons who are well established and
have net worth, collateral, and cash flow to support the loan. Real estate loans
are normally made when such loans are secured by real property located in the
metropolitan Atlanta area.
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United Americas Bank provides each lending officer with written
guidelines for lending activities. Lending authority is delegated by the Board
of Directors of the Bank to loan officers, each of whom is limited in the amount
of secured and unsecured loans that they can make to a single borrower or
related group of borrowers. All unsecured loans in excess of $400,000 and all
secured loans in excess of $750,000 must have the approval of the loan
committee.
Making loans to businesses to fund working capital is a traditional
function of commercial banks. Such loans are expected to be repaid out of the
cash flow of the commercial entity, and the ability of the borrower to service
its debt is dependent upon the success of the commercial enterprise. It is our
policy to secure these loans with collateral. Many of United Americas Bank's
commercial loans are secured by real estate collateral because such collateral
is superior to other types of collateral available to small businesses. Loans
secured by commercial real estate, however, particularly if collateral
dependent, are subject to certain inherent risks. Commercial real estate may be
substantially illiquid, and commercial real estate values are difficult to
ascertain and subject to wide fluctuation depending upon economic conditions.
The inter-agency guidelines adopted by federal bank regulators,
including the OCC, mandate that financial institutions establish real estate
lending policies and establish certain minimum real estate loan-to-value
standards. United Americas Bank has adopted these federal standards as its
minimum standards. These standards require maximum loan-to-value ratios for
various types of real estate loans as set forth below. The Bank may make
exceptions to the minimum standards, which exceptions must be accounted for and
tracked.
Loan-to-
LOAN CATEGORY VALUE LIMIT
Raw land 65%
Land development 5%
Construction:
Commercial, multifamily <F1> and
other nonresidential 80%
1- to 4-family residential 85%
Improved Property 85%
Owner-occupied 1- to 4-family and
home equity <F2>%
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[FN]
<F1> Multifamily construction includes condominiums and cooperatives.
<F2> A loan-to-value limit has not been established for permanent mortgage
or home equity loans on owner-occupied, 1-to 4-family residential
property. For any such loan with a loan-to-value ratio that equals or
exceeds 90 percent at origination, however, appropriate credit
enhancement in the form of either mortgage insurance or readily
marketable collateral is required.
</FN>
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LOAN REVIEW AND NON-PERFORMING ASSETS
United Americas Bank engages an independent consultant to perform its
loan review function and to review its loan portfolio to determine deficiencies
and corrective action to be taken. The results of the reviews are presented to
the President and the Executive Committee of the Bank. On at least an annual
basis, reviews are conducted for all loans over $50,000, plus all loans that are
past due for more than 30 days. Past due loans are reviewed at least weekly by
lending officers and by the chief credit officer, and a summary report is
reviewed monthly by the Board of Directors.
ASSET/LIABILITY MANAGEMENT
A committee composed of officers of United Americas Bank is charged
with managing its assets and liabilities. The committee attempts to manage asset
growth, liquidity, and capital to maximize income and reduce interest rate risk.
The committee directs the Bank's overall acquisition and allocation of funds. At
quarterly meetings, the committee reviews and discusses the monthly asset and
liability funds budget in relation to the actual flow of funds; peer group
comparisons; the ratio of the amount of rate-sensitive assets to the amount of
rate-sensitive liabilities; the ratio of the allowance for loan losses to
outstanding and non-performing loans; and other variables, such as expected loan
demand, investment opportunities, core deposit growth within specified
categories, regulatory changes, monetary policy adjustments, and the overall
state of the economy.
COMPETITION
The banking business is highly competitive and our profitability
depends on our ability to compete successfully. United Americas Bank competes as
a financial intermediary with numerous other lenders and deposit-takers,
including other commercial banks, thrift institutions, credit unions, finance
companies, mutual funds, insurance companies, and brokerage companies and
investment banking firms. United Americas Bank competes primarily with other
financial institutions in Atlanta, but may also compete with Internet banks and
financial institutions located throughout the United States for products such as
large certificates of deposit. All of the Bank's competitors actively solicit
business from residents of Atlanta and many are increasingly offering services
in Spanish and adding Spanish-speaking employees. Some of these institutions are
not subject to the same degree of regulation as the Bank is and have greater
resources than the Bank has available. Some of United Americas Bank's
competitors have substantially greater resources and lending limits than the
Bank and provide other services, such as extensive and established branch
networks and trust services, that United Americas Bank does not provide. As a
result of these competitive factors, United Americas Bank may pay higher rates
of interest to attract depositors or extend credit with lower interest rates to
attract borrowers.
United Americas Bank differentiates itself from other financial
institutions by providing personalized, first-class service to Hispanic
individuals and businesses in the Atlanta area. The Atlanta market is not
currently served by a bank organized specifically to serve the needs of the
Hispanic community. Furthermore, United Americas Bank employs a staff of
directors, managers, and employees fluent in both English and Spanish to serve
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the significant portion of the Hispanic population that is unfamiliar or
uncomfortable with using traditional banking facilities. We believe that through
education and marketing programs sponsored by United Americas Bank, a
cross-section of the Hispanic community will become more inclined to utilize the
services of United Americas Bank. Finally, United Americas Bank focuses on
providing international services to small to medium-sized businesses which we
believe are currently under-served by the large regional banks.
EMPLOYEES
As of December 31, 1999, United Americas Bank had 14 full-time
employees and one part-time employee. We have no employees who are not also
employees of the Bank. United Americas Bank is not a party to any collective
bargaining agreement, and management believes that relations with employees are
satisfactory.
SUPERVISION AND REGULATION
GENERAL. We are a registered bank holding company subject to regulation
by the Board of Governors of the Federal Reserve System (the "Federal Reserve")
under the Bank Holding Company Act of 1956, as amended (the "Act"). We are
required to file financial information with, and are subject to examination by,
the Federal Reserve.
The Act requires every bank holding company to obtain the Federal
Reserve's prior approval before (1) it may acquire direct or indirect ownership
or control of more than 5% of the voting shares of any bank that it does not
already control; (2) it or any of its non-bank subsidiaries may acquire all or
substantially all of the assets of a bank; and (3) it may merge or consolidate
with any other bank holding company. In addition, a bank holding company is
generally prohibited from engaging in, or acquiring, direct or indirect control
of the voting shares of any company engaged in non-banking activities. This
prohibition does not apply to activities listed in the Act or found by the
Federal Reserve, by order or regulation, to be closely related to banking or
managing or controlling banks as to be a proper incident thereto. Some of the
activities that the Federal Reserve has determined by regulation or order to be
closely related to banking are:
o making or servicing loans and certain types of leases;
o performing certain data processing services;
o acting as fiduciary or investment or financial advisor;
o providing brokerage services;
o underwriting bank eligible securities;
o underwriting debt and equity securities on a limited basis
through separately capitalized subsidiaries; and
o making investments in corporations or projects designed
primarily to promote community welfare.
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In addition, bank holding companies whose banking subsidiaries are all
well-capitalized and well-managed may apply to become a financial holding
company. Financial holding companies have the authority to engage in activities
that are "financial in nature" that are not permitted for other bank holding
companies. Some of the activities that the Act provides are financial in nature
are:
o lending, exchanging, transferring, investing for others or
safeguarding money or securities;
o insuring, guaranteeing, or indemnifying against loss, harm,
damage, illness, disability, or death, or providing and
issuing annuities, and acting as principal, agent, or broker
with respect thereto;
o providing financial, investment, or economic advisory
services, including advising an investment company;
o issuing or selling instruments representing interests in pools
of assets permissible for a bank to hold directly; and
o underwriting, dealing in, or making a market in securities.
We have no immediate plans to register as a financial holding company.
We must also register with the Georgia Department of Banking and
Finance ("DBF") and file periodic information with the DBF. As part of such
registration, the DBF requires information with respect to our and United
Americas Bank's financial condition, operations, management and intercompany
relationships and related matters. The DBF may also require such other
information as is necessary to keep itself informed as to whether the provisions
of Georgia law and the regulations and orders issued thereunder by the DBF have
been complied with, and the DBF may examine us and the Bank.
We are an "affiliate" of United Americas Bank under the Federal Reserve
Act, which imposes certain restrictions on (i) loans by the Bank to us, (ii)
investments in our stock or securities by the Bank, (iii) the Bank taking the
stock or securities of an "affiliate" as collateral for loans by the Bank to a
borrower, and (iv) the purchase of assets from us by the Bank. Further, a bank
holding company and its subsidiaries are prohibited from engaging in certain
tie-in arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services. United Americas Bank is regularly examined
by the Federal Deposit Insurance Corporation (the "FDIC"). The Bank as a
national banking association is subject to the supervision of, and are regularly
examined by, the OCC. Both the FDIC and the OCC must grant prior approval of any
merger, consolidation, or other corporation reorganization involving the Bank. A
bank can be held liable for any loss incurred by, or reasonably expected to be
incurred by, the FDIC in connection with the default of a commonly-controlled
institution.
PAYMENT OF DIVIDENDS. We are a legal entity separate and distinct from
United Americas Bank. Most of our revenues result from dividends paid to us by
the Bank. There are statutory and regulatory requirements applicable to the
payment of dividends by the Bank, as well as by us to our shareholders.
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As a national bank, United Americas Bank is required by federal law to
obtain the prior approval of the OCC before payments of dividends if the total
of all dividends declared by the Board of Directors in any year will exceed (i)
the total of the Bank's net profits (as defined and interpreted by regulation)
for that year, plus (ii) the Bank's retained net profits (as defined and
interpreted by regulation) of the preceding two years, less any required
transfers to surplus.
The payment of dividends by us and the Bank may also be affected or
limited by other factors, such as the requirement to maintain adequate capital
above regulatory guidelines. In addition, if, in the opinion of the applicable
regulatory authority, a bank under its jurisdiction is engaged in or is about to
engage in an unsafe or unsound practice (which, depending upon the financial
condition of a bank, could include the payment of dividends), such authority may
require, after notice and hearing, that such bank cease and desist from such
practice. The FDIC and the OCC have issued policy statements providing that
insured banks should generally only pay dividends out of current operating
earnings. At December 31, 1999, the Bank had no retained earnings from which
dividends could be paid. We do not intend to pay dividends any time in the near
future.
MONETARY POLICY. The results of operations of the Bank are affected by
credit policies of monetary authorities, particularly the Federal Reserve. The
instruments of monetary policy employed by the Federal Reserve include open
market operations in U.S. government securities, changes in the discount rate on
bank borrowings and changes in reserve requirements against bank deposits. In
view of changing conditions in the national economy and in the money markets, as
well as the effect of actions by monetary and fiscal authorities, including the
Federal Reserve, no prediction can be made as to possible future changes in
interest rates, deposit levels, loan demand, or the business and earnings of the
Bank.
CAPITAL ADEQUACY. The Federal Reserve and the OCC have implemented
substantially identical risk-based rules for assessing bank and bank holding
company capital adequacy. These regulations establish minimum capital standards
in relation to assets and off-balance sheet exposures as adjusted for credit
risk. Banks and bank holding companies are required to have (1) a minimum level
of total capital (as defined) to risk-weighted assets of 8%; (2) a minimum Tier
One Capital (as defined) to risk-weighted assets of 4%; and (3) a Tier One
Capital to average assets of 4%. In addition, the Federal Reserve and the OCC
have established a minimum 3% leverage ratio of Tier One Capital to total assets
for the most highly-rated banks and bank holding companies. "Tier One Capital"
generally consists of common equity not including unrecognized gains and losses
on securities, minority interests in equity accounts of consolidated
subsidiaries, and certain perpetual preferred stock less certain intangibles.
The Federal Reserve and the OCC will require a bank holding company and a bank,
respectively, to maintain a leverage ratio greater than 3% if either is
experiencing or anticipating significant growth or is operating with less than
well-diversified risks in the opinion of the Federal Reserve. The Federal
Reserve and the OCC use the leverage ratio in tandem with the risk-based ratio
to assess the capital adequacy of banks and bank holding companies. The FDIC,
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the OCC, and the Federal Reserve amended, effective January 1, 1997, the capital
adequacy standards to provide for the consideration of interest rate risk in the
overall determination of a bank's capital ratio, requiring banks with greater
interest rate risk to maintain adequate capital for the risk. The revised
standards have not had and are not expected to have a significant effect on our
capital requirements.
In addition, Section 38 to the Federal Deposit Insurance Act implements
prompt corrective action provisions that set forth 5 regulatory zones in which
all banks are placed largely based on their capital positions. Regulators are
permitted to take increasingly harsh action as a bank's financial condition
declines. Regulators are also empowered to place in receivership or require the
sale of a bank to another depository institution when a bank's capital leverage
ratio reaches 2%. Better capitalized institutions are generally subject to less
onerous regulation and supervision than banks with lesser amounts of capital.
The OCC has adopted regulations implementing the prompt corrective
action provisions, which place financial institutions in the following 5
categories based upon capitalization ratios: (1) a "well capitalized"
institution has a total risk-based capital ratio of at least 10%, a Tier One
risk-based ratio of at least 6%, and a leverage ratio of at least 5%; (2) an
"adequately capitalized" institution has a total risk-based capital ratio of at
least 8%, a Tier One risk-based ratio of at least 4%, and a leverage ratio of at
least 4%; (3) an "undercapitalized" institution has a total risk-based capital
ratio of under 8%, a Tier One risk-based ratio of under 4%, or a leverage ratio
of under 4%; (4) a "significantly undercapitalized" institution has a total
risk-based capital ratio of under 6%, a Tier One risk-based ratio of under 3%,
or a leverage ratio of under 3%; and (5) a "critically undercapitalized"
institution has a leverage ratio of 2% or less. Institutions in any of the 3
undercapitalized categories would be prohibited from declaring dividends or
making capital distributions. The OCC regulations also establish procedures for
"downgrading" an institution to a lower capital category based on supervisory
factors other than capital. Under the OCC's regulations, the Bank was a "well
capitalized" institution at December 31, 1999.
See Note 12 of the consolidated financial statements for details
related to the Bank's capital ratios as of December 31, 1999.
RECENT LEGISLATIVE AND REGULATORY ACTION
On November 12, 1999, President Clinton signed the Gramm-Leach-Bliley
Act, a very significant piece of legislation intended to modernize the financial
services industry. The bill repeals the anti-affiliation provisions of the 1933
Glass-Steagall Act to allow for the merger of banking and securities
organizations and permits banking organizations to engage in insurance
activities including insurance underwriting. The bill also allows bank holding
companies to engage in financial activities that are "financial in nature or
complementary to a financial activity." The act lists the expanded areas that
are financial in nature and includes insurance and securities underwriting and
merchant banking among others. The bill also:
o prohibits non-financial entities from acquiring or
establishing a thrift while grandfathering existing thrifts
owned by non-financial entities.
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o establishes state regulators as the appropriate functional
regulators for insurance activities but provides that state
regulators cannot "prevent or significantly interfere" with
affiliations between banks and insurance firms.
o contains provisions designed to protect consumer privacy. The
bill requires financial institutions to disclose their policy
for collecting and protecting confidential information and
allows consumers to "opt out" of information sharing except
with unaffiliated third parties who market the institutions'
own products and services or pursuant to joint agreements
between two or more financial institutions.
o provides for functional regulation of a bank's securities
activities by the Securities and Exchange Commission.
Various portions of the bill have different effective dates, ranging
from immediately to more than a year for implementation.
ITEM 2. DESCRIPTION OF PROPERTY
Our main office is located at 3789 Roswell Road, Atlanta, Georgia,
30224, a 6,100 square-foot facility, and it is owned by us. Our telephone number
at that office is (404) 240-0101. United Americas Bank distributes all of its
services through a full-service banking office located at the same address.
ITEM 3. LEGAL PROCEEDINGS
We are not aware of any material pending legal proceedings to which we
are or the Bank is a party or to which any of our property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our security holders during the
fourth quarter of 1999.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
STOCK. There is no established public trading market for our common
stock. As of March 22, 2000, we had 450 shareholders of record. Management is
not aware of any sales of our common stock in 1999 other than our initial public
offering.
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DIVIDENDS. In 1999, we did not declare cash dividends. We do not intend
to pay cash dividends in the near future. If we do start paying dividends, the
amount and frequency of dividends will be determined by our Board of Directors
in light of earnings, capital requirements, and our financial condition, and no
assurances can be given that dividends will be paid in the future. Information
on restrictions on the amount of dividends payable by us appears in Note 12 to
our consolidated financial statements.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
United Americas Bankshares, Inc. was organized on May 14, 1998 and from
that date until September 20, 1999 its principal activities have been related to
its organization, the conduct of its initial public offering, the pursuit of
approvals from the OCC and FDIC of its application to charter United Americas
Bank, and the pursuit of approvals from the Federal Reserve Board for the
Company to acquire control of the Bank.
On August 27, 1999, the Company concluded its offering in which it sold
1,200,000 shares of common stock at $10.00 per share. The offering provided the
Company with $11,536,000 in capital after deducting offering expenses of
$464,000. After receiving all applicable regulatory approvals and satisfying
pre-opening examination procedures, the Bank opened for business to the public
on September 20, 1999 in banking facilities located on Roswell Road in Atlanta,
Georgia. These facilities were purchased and serve as the main office of the
Company and the Bank.
FINANCIAL CONDITION AT DECEMBER 31, 1999
Total assets at December 31, 1999, were $13,398,000, principally
composed of $4,724,000 in cash and cash equivalents, $6,721,000 in investment
securities, and $1,343,000 in premises and equipment. In addition to the capital
of $10,643,000, these assets are funded by $2,713,000 in deposits. Deposit
composition at December 31, 1999 included $523,000 of demand deposits, $822,000
in interest-bearing demand and savings deposits, and $1,367,000 in certificates
of deposit.
RESULTS OF OPERATIONS
The results of operations of the Company and the Bank are dependent on
net interest income, which is the difference between interest earned on
interest-earning assets and the interest paid on interest-bearing liabilities,
and the ability to minimize loan losses and to control operation expenses.
The Company's net loss was $670,000 for the period ended December 31,
1999. Interest income for the period was $239,000, while interest expense was
$78,000. At December 31, 1999, investment securities had a weighted average
yield of 5.86%, and certificates of deposit had a weighted average interest rate
of 4.71%.
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Other expenses totaled $835,000 and primarily consisted of salaries and
employee benefits of $480,000 and other operating expenses of $260,000. Some of
the most significant amounts of other operating expenses were for professional
fees ($92,000) and data processing fees ($27,000).
No income tax benefit was provided for the tax effect of the net loss,
as the recognition of this benefit is heavily dependent on future taxable
income. For more information about the tax attributes of the Company at December
31, 1999, see note 6 to the consolidated financial statements.
LIQUIDITY
The Bank must maintain a certain portion of its assets in funds that
are readily available to pay deposit withdrawals and to meet expected loan
demands. Cash and cash equivalents totaled $4,724,000 at December 31, 1999. Cash
outflows related to operations totaled $686,000, while outflows totaled
$8,591,000 from investing activities which were primarily investment purchases
and purchases of premises and equipment. Inflows from financing activities
totaled $13,993,000 and resulted principally from increases in deposits and the
stock sale. For more detailed information about the cash sources and uses for
the period ended December 31, 1999, see the statement of cash flows included in
the consolidated financial statements.
CAPITAL RESOURCES
The Company and the Bank are required to maintain minimum amounts of
capital to total "risk- weighted" assets, as defined by the banking regulators.
At December 31, 1999, the Company was required to have Tier 1 and Total Capital
to "risk-weighted" assets ratios of 4% and 8%, respectively. The Company's and
the Bank's ratios as of December 31, 1999 were in excess of these requirements.
Additionally, the Company and the Bank are required to maintain a Tier 1
leverage ratio of at least 4%. At December 31, 1999, the leverage ratio was
approximately 85%. For more information about the actual and required capital
ratios of the Company and the Bank, see note 12 to the consolidated financial
statements. While the current level of capital meets the regulatory requirements
and the Company's current and foreseeable needs, management will continue to
evaluate the capital needs of the Company as the Bank experiences growth.
ITEM 7. FINANCIAL STATEMENTS
The financial statements and the report of independent certified public
accountants are included in this report beginning at page F-1.
11
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
For the year ended December 31, 1999, the accounting firm of Porter
Keadle Moore, LLP was our principal accountant. We had no disagreements with our
accountants on any matters of accounting principle or practices or financial
statement disclosure.
12
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
ITEM 10. EXECUTIVE COMPENSATION.
The following table provides information regarding the compensation
paid or accrued by us and United Americas Bank for the fiscal year ended
December 31, 1999, to or on behalf of the Chief Executive Officer. No other
executive officer earned greater than $100,000. Mr. Cater is referred to in this
annual report as the "Named Executive Officer."
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------------------------------------------------------
Securities All
Name and Principal Offices Underlying Other
Held During 1999 Year Salary Bonus Other Options Compensation
----------------
--------- ---------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Vincent D. Cater 1999 135,000 $0.00 <F1> 25,000 $1,836.00<F2>
President and Chief Executive
Officer
- ---------------------------
<FN>
<F1> Perquisites do not meet the Securities and Exchange Commission
threshold for disclosure, which is the lesser of $50,000 or 10% of the
total salary and bonus for any named executive.
<F2> Represents insurance premiums of $1,836 paid by United Americas Bank on
behalf of Mr. Cater on a life insurance policy, the beneficiary of
which is the Bank.
</FN>
</TABLE>
We have never granted restricted stock, stock appreciation rights, or
similar awards to any of our present or past executive officers, other than
awards of stock options under our 1999 Incentive Stock Option Plan (the "1999
Plan").
COMPENSATION OF DIRECTORS
Our directors do not receive any payment for attending board meetings.
Certain members of our Board of Directors also serve as members of the Boards of
Directors of United Americas Bank, for which they are not compensated by United
Americas Bank.
13
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock options
granted to the Named Executive Officer under the 1999 Plan during fiscal year
1999 and the projected value of those options at assumed annual rates of
appreciation.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------- --------------------------------------
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Appreciation for Option Term<F2>
Individual Grants
- ------------------------------------------------------------------------------- --------------------------------------
Number of Percent of Total
Securities Options Granted to
Underlying Options Employees in Expiration
Name Granted<F1> Fiscal Year Date 5% 10%
- --------------------- -------------------- -------------------- --------------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Vincent D. Cater 25,000 52.08% 09/20/09 $40,722.37 $64,843.56
- --------------------- -------------------- -------------------- --------------- ---------------- ---------------------
- --------------------------
<FN>
<F1> 40% of the options were vested at the end of the first year after the date
of grant and an additional 20% vest at each of the next three anniversaries
of the date of grant. The exercise price of the options is $10.00 per
share, the fair market value on the date of grant of the options.
<F2> "Potential Realizable Value" is disclosed in response to SEC regulations
that require such disclosure for illustration only. The values disclosed
are not intended to be, and should not be interpreted as, representations
or projections of the future value of our Common Stock or of the stock
price. Amounts are calculated at 5% and 10% assumed appreciation of the
value of the Common Stock (compounded annually over the option term) and
are not intended to forecast actual expected future appreciation, if any,
of the Common Stock. The potential realizable value to the optionee is the
difference between the exercise price and the appreciated stock price at
the assumed annual rates of appreciation multiplied by the number of shares
underlying the options.
</FN>
</TABLE>
OPTION FISCAL YEAR-END VALUES
Shown below is information with respect to options exercised during
1999 and unexercised options to purchase the Common Stock granted under the 1999
Plan to the Named Executive Officer and held by him at December 31, 1999.
<TABLE>
<CAPTION>
- ---------------------------- --------------------------------------------- ------------------------------------------
Value of Unexercised in the Money
Number of Unexercised Options at Fiscal Options at Fiscal Year End <F1><F2>
Name Year End Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------------------- --------------------------------------------- ------------------------------------------
<S> <C> <C>
Vincent D. Cater 10,000/15,000 Not Applicable
- ---------------------------- --------------------------------------------- ------------------------------------------
- ----------------------
<FN>
<F1> Market price at time of exercise less option exercise price.
<F2>Based on $10.00 per share, the last sale price of the Common Stock on
February 1, 2000.
</FN>
</TABLE>
ANNUAL INCENTIVE COMPENSATION
No annual incentive compensation was paid in 1999.
14
<PAGE>
1999 STOCK INCENTIVE PLAN
Options to acquire 48,000 shares of Common Stock were awarded under the
1999 Plan in fiscal 1999, including options to acquire 25,000 shares of Common
Stock awarded to Mr. Cater by the Compensation Committee.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors held eleven meetings during 1999. All of the
directors attended at least 75% of the meetings of the Board and meetings of the
committees of the Board on which they sat that were held during their tenure as
directors.
The Board of Directors does not have a standing nominating committee.
The compensation committee of the Board of Directors is comprised of all members
of the Board who are not employees of United Americas Bank. The compensation
committee makes compensation decisions for executive officers and key employees
and administers the 1999 Plan.
The audit committee is comprised of five directors and is responsible
for recommending the selection of independent auditors; meeting with the
independent auditors to review the scope and results of the audit; reviewing
with management and the internal auditor the system of internal control and
internal audit reports; ensuring that the books, records, and external financial
reports of the Company are in accordance with generally accepted accounting
principles; and, reviewing all reports of examination made by regulatory
authorities and ascertaining that any and all operational deficiencies are
satisfactorily corrected. The audit committee did not meet during 1999.
15
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
For purposes of determining the aggregate market value of our voting
stock held by nonaffiliates, shares held by all our directors and executive
officers have been excluded. The exclusion of such shares is not intended to,
and shall not, constitute a determination as to which persons or entities may be
our "Affiliates" as defined by the SEC.
The following table sets forth as of February 1, 2000, beneficial
ownership of our Common Stock, by each director or nominee, by each named
executive officer, and by all directors and officers as a group. As of February
1, 2000, there were no "persons" (as that term is defined by the SEC) known by
us to be the beneficial owner of more than 5% of our Common Stock other than
indicated in the table below.
<TABLE>
<CAPTION>
- --------------------------------------------- -------------------------------------------- ---------------------------
Name and Address Number of Shares Beneficially Owned Percentage of Total
- --------------------------------------------- -------------------------------------------- ---------------------------
<S> <C> <C>
Vincent D. Cater 10,000 *
Salvador Diaz-Verson, Jr. 130,000<F1> 10.83%
Alex E. Suarez 10,200<F2> *
Reinaldo Pascual 10,000 *
Luis A. Caceres 22,000 1.83%
Rene M. Diaz 10,300<F3> *
Norberto Sanchez 22,500<F4> 1.88%
Ignacio Luis Taboada 10,000 *
Filiberto Prieto 10,000 *
Sam Zamarripa 10,000 *
Eduardo G. Martinez 102,500<F5> 8.54%
Jorge Forment 5,000<F6> *
All directors and officers as a group 250,000<F7> 20.83%
- ----------------------
* less than 1%
<FN>
<F1> Includes 10,000 shares held by the John B. Amos Insurance Trust .
<F2> Includes 100 shares held by Mr. Suarez as custodian for his daughter
and 100 shares held by Mr. Suarez as custodian for his son.
<F3> Includes 300 shares held by Mr. Diaz as guardian to his son.
<F4> Includes 500 shares owned by each of Mr. Sanchez's three daughters.
<F5> Includes 100,000 shares held by Mr. Martinez jointly with his wife and
2,500 shares held by Mr. Martinez jointly with his sister.
<F6> Includes 3,400 shares held by Mr. Forment jointly with his wife, 600
shares held in Mr. Forment's Individual Retirement Account, and 1,000
shares held by Mr. Forment as trustee for his daughter.
<F7> See notes 1, 2, 3, 4, and 6.
</FN>
</TABLE>
16
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Bank has and expects to have in the future, banking transactions in
the ordinary course of business with our directors and officers and their
associates, including corporations in which such officers or directors are
shareholders, directors and/or officers, on the same terms (including interest
rates and collateral) as those prevailing at the time for comparable
transactions with unaffiliated third parties. Such transactions have not
involved more than the normal risk of collectability or presented other
unfavorable features.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
We submit herewith as exhibits to this report on Form 10-KSB the
exhibits required by Item 601 of Regulation S-B, subject to Rule 12b-32 under
the Securities Exchange Act of 1934.
Exhibit
NO. Description
- ------- -----------
3.1 Articles of Incorporation of United Americas
Bankshares, Inc., as amended. (Included as Exhibit
3.1 to the Company's Registration Statement on Form
SB-2, File No. 333-77593)
3.2 Bylaws of United Americas Bankshares, Inc., as
amended. (Included as Exhibit 3.2 to the Company's
Registration Statement on Form SB-2, File No.
333-77593).
4.1 See Exhibits 3.1 and 3.2 for provisions of Articles
of Incorporation and Bylaws, as amended, which define
the rights of the holders of common stock of United
Americas Bankshares, Inc..
10.1 Purchase Agreement for main office property dated
August 31, 1998 (Included as Exhibit 10.1 to the
Company's Registration Statement on Form SB-2, File
No. 333-77593).
10.2 Employment Agreement dated May 20, 1998, as amended
and restated on January 7, 1999, among United
Americas Bank, N.A. (In Organization), United
Americas Bankshares, Inc., and Vincent D. Cater.
(Included as Exhibit 10.2 to the Company's
Registration Statement on Form SB-2, File No.
333-77593).
10.3 Form of United Americas Bankshares, Inc. Organizers'
Warrant Agreement (Included as Exhibit 10.4 to the
Company's Registration Statement on Form SB-2, File
No. 333-77593).
10.4 United Americas Bankshares 1999 Stock Incentive Plan
(Included as Exhibit 10.5 to the Company's
Registration Statement on Form SB-2, File No.
333-77593).
21.0 Subsidiaries of United Americas Bankshares, Inc.
(Included as Exhibit 3.2 to the Company's
Registration Statement on Form SB-2, File No.
333-77593).
24.0 A Power of Attorney is set forth on the signature
pages to this Form 10-KSB.
27.0 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
None.
17
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Certified Public Accounts F-1
Consolidated Balance Sheet - December 31, 1999 F-2
Consolidated Statement of Operations F-3
for the Year Ended December 31, 1999
Consolidated Statement of Comprehensive Loss F-4
for the Year Ended December 31, 1999
Consolidated Statement of Changes in Shareholders' Equity F-5
for the Year Ended December 31, 1999
Consolidated Statement of Cash Flows F-6
for the Year Ended December 31, 1999
Notes to Consolidated Financial Statements F-7
F-(i)
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
United Americas Bankshares, Inc.
We have audited the accompanying consolidated balance sheet of United Americas
Bankshares, Inc. and subsidiary as of December 31, 1999, and the related
consolidated statements of operations, comprehensive loss, changes in
shareholders' equity, and cash flows for the year ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of United Americas
Bankshares, Inc. and subsidiary as of December 31, 1999 and the results of their
operations and their cash flows for the year ended December 31, 1999 in
conformity with generally accepted accounting principles.
/s/ PORTER KEADLE MOORE, LLP
Atlanta, Georgia
February 25, 2000
F-1
<PAGE>
UNITED AMERICAS BANKSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
Assets
------
<S> <C>
Cash and due from banks $ 333,512
Federal funds sold 4,390,000
------------
Cash and cash equivalents 4,723,512
Investment securities available for sale 6,720,689
Other investments 330,000
Loans, net 147,846
Premises and equipment, net 1,343,329
Accrued interest receivable and other assets 132,466
------------
$ 13,397,842
============
Liabilities and Shareholders' Equity
------------------------------------
Deposits:
Noninterest-bearing demand $ 523,466
Interest-bearing demand 116,657
Savings 705,483
Time 415,166
Time over $100,000 952,012
------------
Total deposits 2,712,784
Accrued interest payable and other liabilities 41,673
------------
Total liabilities 2,754,457
------------
Commitments
Shareholders' equity:
Preferred stock, no par value, 1,500,000 shares authorized;
no shares issued and outstanding --
Common stock, no par value, 5,000,000 shares authorized;
1,200,000 shares issued and outstanding --
Additional paid-in capital 11,535,961
Accumulated deficit (855,427)
Accumulated other comprehensive loss (37,149)
------------
Total shareholders' equity 10,643,385
------------
$ 13,397,842
============
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
United Americas Bankshares, Inc. and Subsidiary
Consolidated Statement of Operations
for the Year Ended December 31, 1999
Interest income:
Interest and fees on loans $ 2,140
Interest on investment securities 87,911
Interest on other investments 17,596
Interest on interest-bearing deposits 67,642
Interest on federal funds sold 63,291
-----------
Total interest income 238,580
-----------
Interest expense:
Interest on deposits 17,092
Interest expense on borrowings 61,405
-----------
Total interest expense 78,497
-----------
Net interest income 160,083
-----------
Other income:
Service charges on deposit accounts 3,519
Other 1,375
-----------
Total other income 4,894
-----------
Other expenses:
Salaries and employee benefits 480,334
Occupancy and equipment 94,289
Other operating 260,265
-----------
Total other expenses 834,888
-----------
Net loss $ (669,911)
===========
Net loss per share $ (.56)
===========
Outstanding shares 1,200,000
===========
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
United Americas Bankshares, Inc. and Subsidiary
Consolidated Statement of Comprehensive Loss
for the Year Ended December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Net loss $(669,911)
---------
Other comprehensive loss:
Unrealized holding losses on investment securities
available for sale (56,286)
Income tax benefit related to unrealized holding losses
on investment securities available for sale 19,137
---------
Total other comprehensive loss, net of tax (37,149)
---------
Total comprehensive loss $(707,060)
=========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
United Americas Bankshares, Inc. and Subsidiary
Consolidated Statement of Changes in Shareholders' Equity
for the Year Ended December 31, 1999
Accumulated
Other
Common Additional Accumulated Comprehensive
Stock Paid-in Capital Deficit Loss Total
--------- --------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 $ -- -- (185,516) -- (185,516)
Proceeds from stock offering,
net of offering costs of
$ 464,039 -- 11,535,961 -- -- 11,535,961
Change in unrealized loss on
securities available for sale -- -- (37,149) (37,149)
Net loss -- -- (669,911) -- (669,911)
--------- ----------- -------- -------- ---------
Balance, December 31, 1999 $ -- 11,535,961 (855,427) (37,149) 10,643,385
======== ========== ======== ======= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
United Americas Bankshares, Inc. and Subsidiary
Consolidated Statement of Cash Flows
for the Year Ended December 31, 1999
<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C>
Net loss $ (669,911)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation, amortization and accretion (4,201)
Change in:
Accrued interest receivable and other assets (53,135)
Accrued interest payable and other liabilities 41,673
------------
Net cash used by operating activities (685,574)
------------
Cash flows from investing activities:
Proceeds from calls and maturities of investment securities available for sale 8,933
Purchases of investment securities available for sale (6,767,024)
Purchases of other investments (330,000)
Net change in loans (147,846)
Purchase of premises and equipment (1,354,932)
------------
Net cash used by investing activities (8,590,869)
------------
Cash flows from financing activities:
Net change in deposits 2,712,784
Repayment of organization loan (255,347)
Proceeds from the sale of common stock, net of offering costs of $464,039 11,535,961
------------
Net cash provided by financing activities 13,993,398
------------
Net change in cash and cash equivalents 4,716,955
Cash and cash equivalents at beginning of year 6,557
------------
Cash and cash equivalents at end of year $ 4,723,512
============
Supplemental schedule of noncash investing and financing activities:
Change in unrealized loss on investment
securities available for sale, net of tax $ (37,149)
============
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 67,924
============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
UNITED AMERICAS BANKSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of United
Americas Bankshares, Inc. (the "Company") and its wholly owned
subsidiary, United Americas Bank (the "Bank"). The Company raised
$12,000,000 through an offering of its stock at $10 per share of which
$11,000,000 was used to capitalize the Bank. The Company was reported as
a development stage company through June 30, 1999. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
The Bank commenced business on September 20, 1999 upon receipt of its
banking charter from the Office of Comptroller of the Currency (the
"OCC"). The Bank is primarily regulated by the OCC and the Federal
Deposit Insurance Corporation and undergoes periodic examinations by
these regulatory agencies. The Company is regulated by the Federal
Reserve Bank and also is subject to periodic examinations. The Bank
provides a full range of commercial and consumer banking services
throughout the Fulton County area in Georgia.
The accounting principles followed by the Company and the Bank, and the
methods of applying these principles, conform with generally accepted
accounting principles ("GAAP") and with general practices in the banking
industry. In preparing the 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 these 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 or in lieu of foreclosure on loans,
and valuation allowances associated with the realization of deferred tax
assets, which are based on future taxable income.
Investment Securities
---------------------
The Company classifies its investment 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. At December 31, 1999, there were no
trading or held to maturity securities.
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 operations 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.
Other Investments
-----------------
Other investments include Federal Reserve Bank stock and other equity
securities with no readily determinable fair value. These investments
are carried at cost, which approximates fair value.
F-7
<PAGE>
UNITED AMERICAS BANKSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Loans and Allowance for Loan Losses
-----------------------------------
Loans are stated at principal amount outstanding net of allowance for
loan losses. Unearned interest on discounted loans is recognized as
income over the term of the loans using a method which approximates a
level yield. Interest on other loans is calculated by using the simple
interest method on daily balances of the principal amount outstanding.
A loan is considered impaired when, based on current information and
events, it is probable that all amounts due according to the contractual
terms of the loan agreement will not be collected. Impaired loans are
measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, or at the loan's
observable market price, or at the fair value of the collateral of the
loan if the loan is collateral dependent. Accrual of interest is
discontinued on a loan when management believes, after considering
economic and business conditions and collection efforts, that the
borrower's financial condition is such that collection of interest is
doubtful.
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the allowance
for loan losses when management believes that the collectibility of the
principal is unlikely. The allowance represents an amount which, in
management's judgment, will be adequate to absorb probable losses on
existing loans that may become uncollectible.
Management's judgment in determining the adequacy of the allowance is
based on evaluations of the collectibility of loans. These evaluations
take into consideration such factors as changes in the nature and volume
of the loan portfolio, current economic conditions that may affect the
borrower's ability to pay, overall portfolio quality and review of
specific problem loans.
Management believes no allowance for loan losses is necessary at
December 31, 1999. While management uses available information to
recognize losses on loans, future additions to the allowance may be
necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses. Such agencies
may require the Bank to recognize additions to the allowance based on
judgments different than those of management.
Premises and Equipment
----------------------
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the
estimated useful lives of the assets. Major additions and improvements
are charged to the asset accounts while maintenance and repairs that do
not improve or extend the useful lives of the assets are expensed
currently.
Depreciation expense is computed using the straight-line method over the
following estimated useful lives:
Buildings and improvements 15 - 40 years
Furniture and equipment 5 - 10 years
Income Taxes
------------
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
F-8
<PAGE>
UNITED AMERICAS BANKSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Income Taxes, continued
-----------
In the event the future tax consequences of differences between the
financial reporting bases and the tax bases of the assets and
liabilities results in deferred tax assets, an evaluation of the
probability of being able to realize the future benefits indicated by
such asset is required. A valuation allowance is provided for the
portion of the deferred tax asset when it is more likely than not that
some portion or all of the deferred tax asset will not be realized. In
assessing the realizability of the deferred tax assets, management
considers the scheduled reversals of deferred tax liabilities, projected
future taxable income, and tax planning strategies.
Net Loss Per Share
------------------
Net loss per share is based on the weighted average number of common
shares outstanding during the period while the effects of potential
common shares outstanding during the period are included in diluted
earnings per share.
For 1999, net loss per share is calculated by dividing net loss by the
number of common shares sold in the initial public offering, which are
considered outstanding for all periods presented. The Company currently
has no dilutive common stock instruments due to the net loss.
Recent Accounting Pronouncements
--------------------------------
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for hedging activities and for
derivative instruments including derivative instruments embedded in
other contracts. It requires the fair value recognition of derivatives
as assets or liabilities in the financial statements. This statement
will become effective for the Company during the quarter ended June 30,
2000, and initial application of the statement must be made as of the
beginning of the quarter. At the date of initial application, an entity
may transfer any held-to-maturity security into the available-for-sale
or trading categories without calling into question the entity's intent
to hold other securities to maturity in the future. The Company believes
the adoption of this statement will not have a material impact on its
financial position, results of operations or liquidity.
(2) INVESTMENT SECURITIES
Investment securities available for sale at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C>
U.S. Government agencies $5,794,455 -- 47,556 5,746,899
Mortgage-backed securities 982,520 -- 8,730 973,790
---------- ------ --------- ---------
$6,776,975 -- 56,286 6,720,689
========== ====== ========= =========
</TABLE>
F-9
<PAGE>
UNITED AMERICAS BANKSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(2) Investment Securities, Continued
--------------------
The amortized cost and estimated fair value of investment securities at
December 31, 1999, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
---- ----------
<S> <C> <C>
U.S. Government agencies:
Within 1 year $ 1,988,478 1,981,726
1 to 5 years 3,805,977 3,765,173
----------------------------
5,794,455 5,746,899
Mortgage-backed securities 982,520 973,790
---------- ----------
$ 6,776,975 6,720,689
========= =========
</TABLE>
There were no sales of securities available for sale during 1999.
(3) LOANS
Major classifications of loans at December 31, 1999 are summarized as
follows:
Commercial, financial and agricultural $ 31,861
Real estate - mortgage 64,800
Consumer 51,185
-------
147,846
Less allowance for loan losses -
-------
$ 147,846
=======
The Bank grants loans and extensions of credit to individuals and a
variety of businesses and corporations located in its general trade area
of the City of Atlanta, Fulton County, Georgia and adjoining counties.
(4) PREMISES AND EQUIPMENT
Major classifications of premises and equipment at December 31, 1999 are
summarized as follows:
Land $ 550,000
Building and improvements 485,843
Furniture and equipment 207,445
Construction in progress 114,724
--------
1,358,012
Less accumulated depreciation 14,683
---------
$ 1,343,329
=========
Depreciation expense amounted to $14,683 in 1999.
(5) DEPOSITS
At December 31, 1999 all time deposits mature in 2000.
F-10
<PAGE>
UNITED AMERICAS BANKSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(6) INCOME TAXES
At December 31, 1999, the Company had federal and state net operating
loss carryforwards of approximately $307,000, which will expire
beginning in 2013 if not utilized. No income tax expense or benefit was
recorded for the year ended December 31, 1999 due to this loss
carryforward.
The following summarizes the components of deferred taxes at December
31, 1999.
<TABLE>
<CAPTION>
<S> <C>
Deferred income tax assets:
Pre-opening expenses $ 192,453
Unrealized loss on securities available for sale 19,137
Operating loss carryforwards 104,273
-------
Total gross deferred income tax assets 315,863
Deferred income tax liabilities, attributable to
premises and equipment (6,652)
---------
Total gross deferred income tax liabilities 309,211
Less valuation allowance (290,074)
-------
Net deferred tax asset $ 19,137
========
</TABLE>
The future tax consequences of the differences between the financial
reporting and tax basis of the Company's assets and liabilities resulted
in a net deferred tax asset. A valuation allowance was established for
the net deferred tax asset, as the realization of these deferred tax
assets is dependent on future taxable income.
(7) OTHER OPERATING EXPENSES
Significant components of other operating expenses in excess of 1% of
interest and other income for the year ended December 31, 1999 are as
follows:
Professional fees $ 91,873
Data processing 27,176
(8) LINES OF CREDIT
At December 31, 1999, the Bank had unused lines of credit totaling
$6,000,000 which represents credit available for overnight borrowings
from financial institutions.
(9) COMMITMENTS
The Bank is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and standby letters of credit. Those instruments involve, to
varying degrees, elements of credit risk in excess of the amount
recognized in the consolidated balance sheet. The contractual amounts of
those instruments reflect the extent of involvement the Bank has in
particular classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amount
of those instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments. In most cases, the Bank requires collateral to support
financial instruments with credit risk. At December 31, 1999, the Bank
has commitments to extend credit of $15,000, but no standby letters of
credit.
F-11
<PAGE>
UNITED AMERICAS BANKSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(10) EMPLOYEE AND DIRECTOR BENEFIT PLANS
In connection with the Company formation and initial offering, 190,000
warrants to purchase common stock were issued to the organizers. The
warrants will be exercisable for a period of ten years following
issuance, but no later than three months after ceasing to serve as a
director, at the initial offering price of $10 per share.
During 1999, the Company adopted the 1999 Stock Incentive Plan covering
up to 50,000 shares of the Company's common stock. This Plan is
administered by a committee of the Board of Directors and provides for
the granting of options to purchase shares of common stock to officers,
directors and key employees of the Company. The exercise price of each
option granted under the Plan will not be less than the fair market
value of the shares of common stock subject to the option on the date of
grant as determined by the Board of Directors. Options will be
exercisable in whole or in part upon such terms as may be determined by
the committee. Options generally vest ratably over a period of three to
five years and expire ten years after the date of grant.
During 1999, the Company granted options to acquire 48,000 shares at $10
per share. All of these options were outstanding at December 31, 1999,
and options for 10,000 shares were exercisable at that date. The
weighted average grant-date fair value of options granted in 1999 was
$3.27. Such options have a weighted average remaining contractual life
of approximately 9.73 years as of December 31, 1999.
The Company is encouraged, but not required, to compute the fair value
of options at the date of grant and to recognize such costs as
compensation expense immediately if there is no vesting period or
ratably over the vesting period of the options. The Company has chosen
not to adopt the cost recognition principles, and therefore no
compensation expense has been recognized in 1999 related to its stock
option plans. Had compensation cost been determined based upon the fair
value of the options at the grant dates, the Company's net loss and net
loss per share would have been increased to the pro forma amounts
indicated below for the year ended December 31, 1999:
NET LOSS
As reported $ (669,911)
Pro forma $ (702,611)
BASIC LOSS PER SHARE
As reported $ (0.56)
Pro forma $ (0.59)
The fair value of each option is estimated on the date of grant using
the Minimum Value pricing model with the following weighted average
assumptions: dividend yield of 0%; risk free interest rate of 6%, and an
expected life of seven years.
F-12
<PAGE>
UNITED AMERICAS BANKSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(11) RELATED PARTY TRANSACTIONS
The Bank conducts transactions with directors and officers, including
companies in which they have a beneficial interest, in the normal course
of business. It is the Bank's policy to comply with federal regulations
that require the Bank to make loan and deposit transactions with
directors and executive officers on substantially the same terms as
those prevailing at the time made for comparable loans and deposits to
other persons. As of December 31, 1999, deposits from directors,
executive officers, and their related interests aggregated approximately
$454,000, and loans totaling $9,850 were outstanding to related parties.
These loans were made and deposits were taken in the normal course of
business at market interest rates.
(12) REGULATORY MATTERS
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the financial
statements. Under certain adequacy guidelines and the regulatory
framework for prompt corrective action, specific capital guidelines that
involve quantitative measures of the assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices must be met. The capital amounts and classification are also
subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts
and ratios (set forth in the table below) of Total Capital and Tier 1
Capital (as defined in the regulations) to risk-weighted assets (as
defined), and of Tier 1 Capital to average assets (as defined).
Management believes, as of December 31, 1999, that the Company and the
Bank meet all capital adequacy requirements to which they are subject.
As of December 31, 1999, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Bank must maintain minimum total
risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in
the table. There are no conditions or events since that notification
that management believes have changed the Bank's category.
The actual capital amounts and ratios are also presented in the table
below. At December 31, 1999, consolidated amounts do not materially
differ from Bank-only capital amounts and ratios.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
for Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------ ------------------ ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total Capital
(to Risk-Weighted Assets) $ 10,364 248% 335 8% 418 10%
Tier 1 Capital
(to Risk-Weighted Assets) $ 10,364 248% 167 4% 251 6%
Tier 1 Capital
(to Average Assets) $ 10,364 85% 488 4% 610 5%
</TABLE>
Dividends paid by the Bank are the primary source of funds available to
the Company. Banking regulations limit the amount of dividends that may
be paid without prior approval of the regulatory authorities. These
restrictions are based on the level of regulatory classified assets, the
prior years' net earnings, and the ratio of equity capital to total
assets. The Bank is currently not allowed to pay dividends to the
Company until it becomes cumulatively profitable.
F-13
<PAGE>
UNITED AMERICAS BANKSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(13) UNITED AMERICAS BANKSHARES (PARENT COMPANY ONLY) FINANCIAL INFORMATION
Balance Sheet
December 31, 1999
Assets
------
<TABLE>
<CAPTION>
<S> <C>
Cash and interest-bearing deposits $ 316,064
Investment in United Americas Bank 10,327,321
------------
$ 10,643,385
Liabilities and Shareholders' Equity
------------------------------------
Shareholders' equity $ 10,643,385
============
Statement of Operations
For the Year Ended December 31, 1999
Interest income $ 67,642
Interest expense 28,404
------------
Net interest income 39,238
------------
Expenses:
Salaries and employee benefits 67,364
Other operating 6,255
------------
Total expenses 73,619
------------
Loss before equity in undistributed loss of subsidiary (34,381)
Equity in undistributed loss of subsidiary (635,530)
------------
Net loss $ (669,911)
============
</TABLE>
F-14
<PAGE>
UNITED AMERICAS BANKSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(13) United Americas Bankshares (Parent Company Only) Financial Information,
Continued
<TABLE>
<CAPTION>
Statement of Cash Flows
For the Year Ended December 31, 1999
<S> <C>
Cash flows from operating activities:
Net loss $ (669,911)
Adjustments to reconcile net loss to net cash provided by operating activities:
Equity in undistributed loss of subsidiary 635,530
Change in other assets 63,274
------------
Net cash provided by operating activities 28,893
------------
Net cash used by investing activities, consisting of
capital infusion into subsidiary (11,000,000)
------------
Cash flows from financing activities, consisting of:
Proceeds from sale of common stock, net of offering costs of $464,039 11,535,961
Net change in organization loan (255,347)
------------
Net cash provided by financing activities 11,280,614
------------
Net increase in cash 309,507
Cash at beginning of year 6,557
------------
Cash at end of year $ 316,064
============
Supplemental schedule of noncash financing and investing activities:
Change in net unrealized loss on securities
available for sale of subsidiary, net of tax $ 37,149
============
Transfer of assets to the Bank $ 3,080
============
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 28,404
============
</TABLE>
F-15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNITED AMERICAS BANKSHARES, INC.
(REGISTRANT)
By: _______________________________
Vincent D. Cater
President and Chief Executive Officer
Dated: March ___, 2000
POWER OF ATTORNEY AND SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Vincent D. Cater and Jorge Forment, or
each of them, his attorney-in-fact, each with full power of substitution, for
him in his name, place and stead, in any and all capacities, to sign any
amendments to this Report on Form 10-KSB, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, and hereby ratifies and confirms all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <S> <C>
/s/ Salvador Diaz-Verson, Jr. Chairman of the Board of Directors March 30, 2000
Salvador Diaz-Verson, Jr.
/s/ Vincent D. Cater President, Chief Executive Officer, and March 30, 2000
Vincent D. Cater Director (principal executive officer)
/s/ Jorge Forment Senior Vice President and Chief Financial
Jorge Forment Officer (principal accounting and
financial officer) March 30, 2000
/s/ Reinaldo Pascual Director and Secretary March 30, 2000
Reinaldo Pascual
/s/ Alex E. Suarez Vice Chairman and Director March 30, 2000
Alex E. Suarez
/s/ Luis A. Caceres Director March 30, 2000
Luis A. Caceres
/s/ Rene M. Diaz Director March 30, 2000
Rene M. Diaz
/s/ Filiberto Prieto Director March 30, 2000
Filiberto Prieto
/s/ Norberto Sanchez Director March 30, 2000
Norberto Sanchez
/s/ Ignacio Luis Taboada Director March 30, 2000
Ignacio Luis Taboada
/s/ Sam Zamarripa Director March 30, 2000
Sam Zamarripa
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
NO. DESCRIPTION
- -------- -----------
3.1 Articles of Incorporation of United Americas
Bankshares, Inc., as amended. (Included as Exhibit
3.1 to the Company's Registration Statement on Form
SB-2, File No. 333-77593)
3.2 Bylaws of United Americas Bankshares, Inc., as
amended. (Included as Exhibit 3.2 to the Company's
Registration Statement on Form SB-2, File No.
333-77593).
4.1 See Exhibits 3.1 and 3.2 for provisions of Articles
of Incorporation and Bylaws, as amended, which define
the rights of the holders of common stock of United
Americas Bankshares, Inc..
10.1 Purchase Agreement for main office property dated
August 31, 1998 (Included as Exhibit 10.1 to the
Company's Registration Statement on Form SB-2, File
No. 333-77593).
10.2 Employment Agreement dated May 20, 1998, as amended
and restated on January 7, 1999, among United
Americas Bank, N.A. (In Organization), United
Americas Bankshares, Inc., and Vincent D. Cater.
(Included as Exhibit 10.2 to the Company's
Registration Statement on Form SB-2, File No.
333-77593).
10.3 Form of United Americas Bankshares, Inc. Organizers'
Warrant Agreement (Included as Exhibit 10.4 to the
Company's Registration Statement on Form SB-2, File
No. 333-77593).
10.4 United Americas Bankshares 1999 Stock Incentive Plan
(Included as Exhibit 10.5 to the Company's
Registration Statement on Form SB-2, File No.
333-77593).
21.0 Subsidiaries of United Americas Bankshares, Inc.
(Included as Exhibit 3.2 to the Company's
Registration Statement on Form SB-2, File No.
333-77593).
24.0 A Power of Attorney is set forth on the signature
pages to this Form 10-KSB.
27.0 Financial Data Schedule (for SEC use only)
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0001084915
<NAME> UNITED AMERICAS BANKSHARES, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 333,512
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,390,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,720,689
<INVESTMENTS-CARRYING> 330,000
<INVESTMENTS-MARKET> 0
<LOANS> 147,846
<ALLOWANCE> 0
<TOTAL-ASSETS> 13,397,842
<DEPOSITS> 2,712,784
<SHORT-TERM> 0
<LIABILITIES-OTHER> 41,673
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> (892,576)
<TOTAL-LIABILITIES-AND-EQUITY> 13,397,842
<INTEREST-LOAN> 2,140
<INTEREST-INVEST> 105,507
<INTEREST-OTHER> 130,933
<INTEREST-TOTAL> 238,580
<INTEREST-DEPOSIT> 17,092
<INTEREST-EXPENSE> 78,497
<INTEREST-INCOME-NET> 160,083
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 834,888
<INCOME-PRETAX> 0
<INCOME-PRE-EXTRAORDINARY> (669,911)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (669,911)
<EPS-BASIC> (0.56)
<EPS-DILUTED> (0.56)
<YIELD-ACTUAL> 5.86
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
