SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
( x ) Quarterly Report Pursuant to Section 13 or 15 (2) of the Securities
Exchange Act of 1934
( ) Transition Report Pursuant to Section 13 or 15 (2) of the Securities
Exchange Act of 1934
FOR THE QUARTER ENDED MARCH 31, 1996
Commission File Number 0-14549
UNITED SECURITY BANCSHARES, INC.
(Exact Name of Registrant as Specified in its Charter)
Alabama 63-0843362
(State or Other Jurisdiction of (I R S Employer Identification
Incorporation or Organization) Number)
131 West Front Street (334) 636-5424
Post Office Box 249 (Registrant's Telephone
Thomasville, AL 36784 Number Including Area
(Address and Zip Code of Code)
Principal Executive Offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 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 ( ).
Shares of common stock ($.01 par value) outstanding as of March 31, 1996:
2,137,960.
Total Number of Pages: 12
Exhibit Index at Page: 0
<PAGE>
UNITED SECURITY BANCSHARES, INC AND SUBSIDIARY
INDEX TO FORM 10-Q
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Condition at March 31, 1996 4
(Unaudited), and December 31, 1995
Consolidated Statements of Income (Unaudited) for the 5
Three Months Ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows (Unaudited) for 6
the Three Months Ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE PAGE
Signatures 12
<PAGE>
PART I.
FINANCIAL INFORMATION
<PAGE>
<TABLE>
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED)
March 31, December 31,
1996 1995
ASSETS
<S> <C> <C>
Cash and due from banks $ 6,626,930 $ 5,749,922
Federal funds sold 0 600,000
TOTAL CASH AND CASH EQUIVALENTS 6,626,930 6,349,922
Investment securities available for sale 138,885,009 127,864,402
Other investments(Federal Home Loan Bank Stock) 1,138,200 1,138,200
Loans 54,056,126 55,469,552
Less: Unearned interest on loans (460,135) (487,995)
Less: Allowance for possible loan losses (778,592) (778,391)
NET LOANS 52,817,399 54,203,166
Premises and equipment 3,514,009 3,616,182
Accrued interest receivable 1,378,525 1,594,147
Other assets 2,736,672 2,701,753
TOTAL ASSETS $207,096,744 $197,467,772
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand - non-interest bearing $ 24,093,092 $ 24,365,287
Demand - interest bearing 25,021,518 23,125,800
Savings 15,459,362 14,800,275
Time 85,453,683 84,223,353
TOTAL DEPOSITS 150,027,655 146,514,715
U.S. Treasury tax and loan 593,162 369,272
Other borrowings 22,000,000 22,000,000
Federal Funds Purchased 4,350,000 0
Dividend payable 277,935 235,176
Accrued interest payable 853,239 792,077
Other liabilities 2,187,425 1,563,396
Current portion long-term debt 83,333 83,333
Long-term debt 659,723 680,556
TOTAL LIABILITIES 181,032,472 172,238,525
SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share;
2,400,000 shares authorized; 2,202,060
shares issued 22,021 22,021
Surplus 5,761,552 5,761,552
Net unrealized gain on
available for sale securities 658,986 616,295
Retained earnings 19,876,133 19,083,799
Less: Treasury stock - 64,100 shares, at cost (254,420) (254,420)
TOTAL SHAREHOLDERS' EQUITY 26,064,272 25,229,247
$207,096,744 $197,467,772
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months ended March 31,
1996 1995
INTEREST INCOME
<S> <C> <C>
Interest and fees on loans $1,282,930 $1,315,071
Interest on investment securities:
Taxable 0 181,738
Tax-exempt 0 234,783
0 416,521
Interest on investment securities
available for sale 2,909,858 2,160,305
Interest on trading securities 824 4,610
Federal Home Loan Bank dividends 21,330 16,197
Interest on federal funds sold 7,113 3,214
Interest on rate swaps 20,832 4,112
TOTAL INTEREST INCOME 4,242,887 3,920,030
INTEREST EXPENSE
Interest on deposits 1,445,825 1,281,352
Interest on short-term borrowings 334,319 231,133
Interest on long-term debt 12,018 87,112
TOTAL INTEREST EXPENSE 1,792,162 1,599,597
Net interest income 2,450,725 2,320,433
Provision for possible loan losses 9,000 0
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 2,441,725 2,320,433
NON-INTEREST INCOME
Service and penalty charges on deposit accounts 192,584 199,187
Credit life insurance commissions 3,590 5,092
Other income 39,874 53,682
Securities gains (losses):
Investment securities 97,640 (277,258)
Trading securities (28,750) 15,746
Options 63,143 55,063
TOTAL NON-INTEREST INCOME 368,081 51,512
NON-INTEREST EXPENSES
Salaries 629,755 569,987
Employee benefits 91,557 77,486
Occupancy expense 79,581 78,066
Furniture and equipment expense 157,098 157,925
Stationery and operating supplies 28,668 31,832
Telephone expense 34,576 38,205
FDIC assessment 500 78,780
Other expenses 261,803 225,993
TOTAL NON-INTEREST EXPENSES 1,283,538 1,258,274
Income before income taxes 1,526,268 1,113,671
Applicable income taxes 456,000 317,000
NET INCOME $1,070,268 $ 796,671
Average number of shares outstanding 2,137,960 2,137,960
Net income per share $ .50 $ .37
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months ended March 31,
1996 1995
Cash flows from operating activities:
<S> <C> <C>
Net income $ 1,070,268 $ 796,671
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 97,359 101,116
Provision for possible loan losses 9,000 0
Amortization of intangible assets 123,095 116,402
Investment securities (gains) losses (97,640) 277,258
Loss on sale of fixed assets 4,813 0
Net securities premium amortization 188,485 115,832
(Increase) decrease in:
Interest receivable 215,622 25,924
Other assets (158,011) (799,571)
Increase (decrease) in:
Interest payable 61,162 131,355
Other liabilities 598,414 (119,109)
Net cash provided by operating activities 2,112,567 645,878
Cash flows from investing activities:
Proceeds from maturities and prepayments
of investment securities 0 176,233
Purchases of investment securities 0 (737,250)
Proceeds from sales of investment
securities available for sale 9,469,990 11,446,105
Proceeds from prepayments of
investment securities available for sale 1,074,521 321,551
Purchases of investment securities
available for sale (21,587,658) (13,944,817)
Net decrease (increase) in loans 1,376,767 (388,662)
Purchase of premises and equipment 0 (26,395)
Net cash used in investing activities (9,666,380) (3,153,235)
Cash flows from financing activities:
Net increase in demand and
savings deposits 2,282,610 1,392,665
Net increase in time deposits 1,230,330 3,297,398
Net increase (decrease) in short-term
borrowings 4,573,890 (800,521)
Repayments of long-term debt (20,833) (20,833)
Dividends paid (235,176) (224,486)
Net cash provided by financing activities 7,830,821 3,644,223
Net increase in cash and cash
equivalents 277,008 1,136,866
Cash and cash equivalents, beginning of
period 6,349,922 7,190,823
Cash and cash equivalents, end of period $ 6,626,930 $ 8,327,689
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 1,731,000 $ 1,468,242
Income taxes $ 0 $ 40,000
Supplemental schedule of noncash investing
and financing activities:
Dividends declared but unpaid $ 277,935 $ 235,176
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A - General
The consolidated financial statements include the accounts of United Security
Bancshares, Inc. (Bancshares) and its subsidiary. All significant intercompany
accounts have been eliminated.
The interim financial statements are unaudited but, in the opinion of
management, reflect all adjustments necessary for a fair presentation of results
for such periods. Such adjustments are of a normal, recurring nature. The
results of operation for any interim period are not necessarily indicative of
results for the full year. These financial statements should be read in
conjunction with the financial statements and notes thereto contained in the
Annual Report for the year ended December 31, 1995, of United Security
Bancshares, Inc. and subsidiary.
Note B - Commitments
On January 15, 1996, the Company signed an agreement to acquire all of the
outstanding shares of Brent Banking Company for $7.05 million in cash. This
acquisition was approved by the Brent Shareholders on April 9, 1996 and is
pending final regulatory approval. This acquisition is further detailed in
Management's Discussion and Analysis.
Note C - New Accounting Standards
The Company has adopted the provisions of SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets". The adoption of this standard did not have
a significant effect on the Financial position of the Company.
Note D - Reclassifications
Certain balances in the prior year have been reclassified to conform with the
presentation adopted in the current year.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
For the Three Months Ended March 31, 1996
The following discussion and financial information are presented to aid in an
understanding of the current financial position and results of operations of
United Security Bancshares, Inc. ("United Security"). United Security is the
Parent Holding Company of United Security Bank (the "Bank"), and it has no
operations of any consequence other than the ownership of its subsidiary. The
emphasis of this discussion is a comparison of Assets, Liabilities, and Capital
for the three months ended March 31, 1996, to year-end 1995; while comparing
income for the quarter ended March 31, 1996, to income for the quarter ended
March 31, 1995. All yields and ratios presented and discussed herein are based
on the cash basis and not on the tax-equivalent basis.
COMPARING THE THREE MONTHS ENDED MARCH 31, 1996, TO THE THREE MONTHS ENDED MARCH
31, 1995;
Net income increased $273,597 or 34.34% increasing net income per share to $.50
from $.37. The increase is due in part to improved net interest income.
Net interest income increased $130,292 or 5.61% over the first quarter of 1995.
A combination of volume, rate and yield changes contributed to this increase.
Total interest-earning assets increased by $9,634,840 or 5.29% in the first
quarter of 1996 and interest-bearing liabilities increased $8,338,192 during the
same period. $4,350,000 of the increase in interest-bearing liabilities
represents the increase in federal funds purchased. Volume changes favoring the
interest earning assets coupled with decreased interest rates over the first
quarter of 1995 has contributed to the increased net interest income because of
the spread between the yield on assets and the rates paid on liabilities.
Total interest expense increased $192,565 or 12.04% in the first quarter of 1996
compared to the same period in 1995. Interest expense on short-term borrowings
increased $103,186 during the first quarter of 1996 compared to the first
quarter of 1995. Short-term borrowings consists of U. S. Treasury demand notes
in the Treasury, Tax and Loan Accounts, securities sold under repurchase
agreements and federal funds purchased and are used to satisfy short term
funding needs including arbitrage when advantageous to the Bank. The increase
in interest expense on deposits during the first quarter of 1996 is a direct
result of the increase in total interest bearing deposits of $3,785,135 or 3.1%
during the same period.
Net operating income (income excluding taxes and securities transactions)
increased $74,115 or 5.6% in the first quarter of 1996 compared to 1995.
Management's investment strategy continued to be directed more toward interest
income generation through the investment portfolio by restructuring the fixed
rate portion of the portfolio into floating rates or other fixed rates.
Some losses were accepted in the trading securities in order to secure a better
yield position. This investment strategy was implemented in 1994 and the
increase of total interest income of $322,857 or 8.24% in the first quarter of
1996 is the result. Additionally, non-interest income increased $316,569 due
to an investment securities gain of $97,640 in the first quarter of 1996 as
opposed to a $277,258 loss in the first quarter of 1995.
Total non-interest expense only increased $25,264 or 2%. These non-interest
expenses were held to a minimal increase due to the FDIC assessment reduction
and management's efforts to control expenses.
<PAGE>
COMPARING THE ENDING FIGURES MARCH 31, 1996, TO THE ENDING FIGURES DECEMBER 31,
1995:
Total assets increased $9,628,972 or 4.88% to $207,096,744. Net loans decreased
$1,385,767 or 2.56%, while investment securities increased by $11,020,607 or
8.54% to $140,023,209.
Deposits continue to show steady growth by increasing $3,512,940 or 2.40% to
$150,027,655 in the first quarter of 1996.
Federal funds purchased generally mature within one to four days from the
transaction date and these funds are generally used to satisfy daily funding
needs. At quarter-end, March 31, 1996, the Bank had purchased $4,350,000 in
federal funds. Other borrowings, on the other hand, remained unchanged during
the first quarter of 1996. Other borrowings consist of short-term loans from
the Federal Home Loan Bank in the amount of $22,000,000. Treasury tax and loan
deposits are on demand and increased by $223,890 at quarter-end.
The long-term debt consists of a fixed rate note from the Federal Home Loan Bank
secured by investment securities pledged to the Federal Home Loan Bank. This
debt is used to fund long-term fixed-rate mortgages and the final installment
is due in 2005. The first quarter reduction was $20,833.
Undivided profits increased $792,334 or 4.15%, and net unrealized gain on
available for sale securities realized an increase of $42,691 in the first
quarter, which resulted in a Stockholders' Equity increase of $835,025 or 3.31%
to $26,064,272.
Management is not aware of any current recommendations by the regulatory
authorities which would have any adverse effect on the liquidity, capital
resources or operation of the Bank. However, there were four law suits pending
against the Bank at the end of the first quarter of 1996, which could impact the
Banks future earnings. Management, however does not expect any material
financial impact at this time and the Bank is committed to offer a vigorous
defense in each case.
On January 15, 1996, United Security Bank entered into an agreement to acquire
the stock of Brent Banking Company of Brent, Alabama. At March 31, 1996 Brent
Banking Company had total assets of $36,988,837. The Brent Banking Company
Shareholders met on April 9, 1996 and voted to sell Brent Banking Company's
stock to United Security Bank. The acquisition and merger is pending FDIC
approval, which is expected in May of 1996.
<PAGE>
PART II
OTHER INFORMATION
<PAGE>
ITEM 6.
Exhibits and Reports on Form 8-K
(a) Exhibit 27 is filed with this report.
(b) A report on Form 8-K reporting the execution of an Agreement and Plan
of Share Exchange with Brent Banking Company was filed on January 29,
1996.
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements 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 SECURITY BANCSHARES, INC.
DATE: May 13, 1996
BY:
Larry M. Sellers
Its Vice-President, Secretary, and Treasurer
(Duly Authorized Officer and Principal Financial Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,626,930
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 138,885,009
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 53,595,991
<ALLOWANCE> 778,592
<TOTAL-ASSETS> 207,096,744
<DEPOSITS> 150,027,655
<SHORT-TERM> 27,026,495
<LIABILITIES-OTHER> 3,318,599
<LONG-TERM> 659,723
0
0
<COMMON> 22,021
<OTHER-SE> 26,042,251
<TOTAL-LIABILITIES-AND-EQUITY> 207,096,744
<INTEREST-LOAN> 1,282,930
<INTEREST-INVEST> 2,959,957
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,242,887
<INTEREST-DEPOSIT> 1,445,825
<INTEREST-EXPENSE> 1,792,162
<INTEREST-INCOME-NET> 2,450,725
<LOAN-LOSSES> 9,000
<SECURITIES-GAINS> 68,890
<EXPENSE-OTHER> 1,283,538
<INCOME-PRETAX> 1,526,268
<INCOME-PRE-EXTRAORDINARY> 1,070,268
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,070,268
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
<YIELD-ACTUAL> 5.48
<LOANS-NON> 188,552
<LOANS-PAST> 194,363
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,362,562
<ALLOWANCE-OPEN> 778,391
<CHARGE-OFFS> 19,609
<RECOVERIES> 10,810
<ALLOWANCE-CLOSE> 778,592
<ALLOWANCE-DOMESTIC> 778,592
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
