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, 1997
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, 1997:
2,137,960.
Total Number of Pages: 14
Exhibit Index at Page:
<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, 1997
(Unaudited), and December 31, 1996 4
Consolidated Statements of Income (Unaudited) for the
Three Months Ended March 31, 1997 and 1996 5
Consolidated Statements of Cash Flows (Unaudited) for
the Three Months Ended March 31, 1997 and 1996 6
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>
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED)
March 31, December 31,
ASSETS 1997 1996
[S] [C] [C]
Cash and due from banks $7,095,766 $ 8,233,120
Federal funds sold 2,200,000 0
TOTAL CASH AND CASH EQUIVALENTS 9,295,766 8,233,120
Investment securities available for sale 155,982,915 150,839,464
Trading account securities 241,281 0
Other investments(Federal Home Loan Bank Stock) 1,283,400 1,034,100
Loans 67,956,832 66,294,023
Less: Unearned interest on loans ( 472,955) ( 529,631)
Less: Allowance for possible loan losses ( 1,192,001) ( 1,191,171)
NET LOANS 66,291,876 64,573,221
Premises and equipment 4,176,528 4,118,562
Accrued interest receivable 1,652,615 1,570,844
Other assets 5,182,337 4,821,812
TOTAL ASSETS $244,106,718 $235,191,123
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand - non-interest bearing $ 26,140,760 $ 24,694,668
Demand - interest bearing 37,286,039 33,425,315
Savings 17,094,483 16,442,903
Time 106,199,151 105,362,841
TOTAL DEPOSITS 186,720,433 179,925,727
U.S. Treasury tax and loan 1,314,937 988,975
Other borrowings - short-term 0 20,000,000
Other borrowings - long-term 25,000,000 0
Federal Funds Purchased 0 1,375,000
Dividend payable 320,694 277,935
Accrued interest payable 788,483 909,313
Other liabilities 1,256,258 2,207,438
Long-term debt 659,722 680,556
TOTAL LIABILITIES 216,060,527 206,364,944
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 ( 551,866) 1,062,247
Retained earnings 23,068,904 22,234,779
Less: Treasury stock-64,100 shares, at cost ( 254,420) ( 254,420)
TOTAL SHAREHOLDERS' EQUITY 28,046,191 28,826,179
$244,106,718 $235,191,123
See Notes to Consolidated Financial Statements.
<PAGE>
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months ended March 31,
1997 1996
INTEREST INCOME
[S] [C] [C]
Interest and fees on loans $1,528,675 $1,282,930
Interest on investment securities
available for sale 3,212,616 2,909,858
Interest on trading securities 2,280 824
Federal Home Loan Bank dividends 20,323 21,330
Interest on federal funds sold 2,923 7,113
Interest on rate swaps 10,963 20,832
TOTAL INTEREST INCOME 4,777,780 4,242,887
INTEREST EXPENSE
Interest on deposits 1,744,288 1,445,825
Interest on short-term borrowings 64,446 334,319
Interest on long-term debt 283,301 12,018
TOTAL INTEREST EXPENSE 2,092,035 1,792,162
Net interest income 2,685,745 2,450,725
Provision for possible loan losses 25,000 9,000
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 2,660,745 2,441,725
NON-INTEREST INCOME
Service and penalty charges on deposit accounts 221,170 192,584
Credit life insurance commissions 4,566 3,590
Other income 133,164 39,874
Securities gains (losses):
Investment securities 100,045 97,640
Trading securities 263 ( 28,750)
Options 93,152 63,143
TOTAL NON-INTEREST INCOME 552,360 368,081
NON-INTEREST EXPENSES
Salaries 767,472 629,755
Employee benefits 98,091 91,557
Occupancy expense 96,117 79,581
Furniture and equipment expense 204,221 157,098
Stationery and operating supplies 39,390 28,668
Telephone expense 65,206 34,576
FDIC assessment 5,248 500
Amortization 32,559 0
Other expenses 288,982 261,803
TOTAL NON-INTEREST EXPENSES 1,597,286 1,283,538
Income before income taxes 1,615,819 1,526,268
Applicable income taxes 461,000 456,000
NET INCOME $1,154,819 $1,070,268
Average number of shares outstanding 2,137,960 2,137,960
Net income per share $ .54 $ .50
See Notes to Consolidated Financial Statements.
<PAGE>
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months ended March 31,
1997 1996
Cash flows from operating activities:
[S] [C] [C]
Net income $ 1,154,819 $ 1,070,268
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 112,888 97,359
Provision for possible loan losses 25,000 9,000
Amortization of intangible assets 81,290 123,095
Investment securities (gains) losses (100,045) (97,640)
Loss on sale of fixed assets 0 4,813
Net securities premium amortization 200,802 188,485
Increase in trading account securities (241,281) 0
(Increase) decrease in:
Interest receivable (81,771) 215,622
Other assets (441,815) (158,011)
Increase (decrease) in:
Interest payable (120,830) 61,162
Other liabilities 17,289 598,414
Net cash provided by operating activities 606,346 2,112,567
Cash flows from investing activities:
Proceeds from sales of investment
securities available for sale 4,357,786 9,469,990
Proceeds from maturities and prepayments of
investment securities available for sale 1,644,952 1,074,521
Purchases of investment securities
available for sale (13,829,529) (21,587,658)
Purchases of other investments (249,300) 0
Net decrease (increase) in loans (1,743,655) 1,376,767
Purchase of premises and equipment (170,854) 0
Net cash used in investing activities (9,990,600) (9,666,380)
Cash flows from financing activities:
Net increase in demand and
savings deposits 5,958,396 2,282,610
Net increase in time deposits 836,310 1,230,330
Net increase (decrease) in short-term
borrowings (1,049,038) 4,573,890
Proceeds of long-term borrowings 5,000,000 0
Repayments of long-term debt (20,833) (20,833)
Dividends paid (277,935) (235,176)
Net cash provided by financing activities 10,446,900 7,830,821
Net increase in cash and cash equivalents 1,062,646 277,008
Cash and cash equivalents, beginning of
period 8,233,120 6,349,922
Cash and cash equivalents, end of period $ 9,295,766 $ 6,626,930
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,212,865 $ 1,731,000
Income taxes $ 0 $ 0
Supplemental schedule of noncash investing
and financing activities:
Dividends declared but unpaid $ 320,694 $ 277,935
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, 1996, of United Security
Bancshares, Inc. and Subsidiary.
Note B - Acquisitions
On August 19, 1996, the Company entered into an agreement to merge with First
Bancshares, Inc. The merger has been approved by all regulatory authorities and
is pending approval by the shareholders. A vote is scheduled for May 20, 1997.
At December 31, 1996 First Bancshares, Inc. had assets of $195.2 million and
shareholders equity of $18.8 million.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
For the Three Months Ended March 31, 1997
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, 1997, to year-end 1996; while comparing
income for the quarter ended March 31, 1997, to income for the quarter ended
March 31, 1996. All yields and ratios presented and discussed herein are based
on the cash basis and not on the tax-equivalent basis.
On June 1, 1996, United Security Bank completed the acquisition of all the
outstanding shares of Brent Banking Company. The acquisition increased United
Security's total assets by $33.7 million. Since the March 31, 1996 Statement
of Income was not effected by the merger, the Statement of Income comparison
will be impacted.
COMPARING THE THREE MONTHS ENDED MARCH 31, 1997, TO THE THREE MONTHS ENDED
MARCH 31, 1996;
Net income increased $86,551 or 7.9% increasing net income per share to $.54
from $.50. The increase is due in part to improved net interest income.
Net interest income increased $219,020 or 8.97% over the first quarter of 1996.
A combination of volume, rate and yield changes, as well as the increased
income generated by the Brent Bank acquisition, contributed to this increase.
Total interest-earning assets increased by $9,552,687 or 4.41% in the first
quarter of 1997 and interest-bearing liabilities increased $9,278,739 during
the same period. Growth in interest earning assets and growth in low interest
deposit products over the first quarter of 1997 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 $299,873 or 16.73% in the first quarter of
1997 compared to the same period in 1996. The increase can be directly
attributed to the increase in interest on deposits of $298,463, much of which
is due to the Brent Bank acquisition. Most of the short-term borrowings have
been reclassified as long-term debt, and the interest expense for each classi-
fication is off-set in the first quarter comparison. Short-term borrowing
consists of U. S. Treasury demand notes in the Treasury, Tax and Loan Accounts,
securities sold under repurchase agreements and federal funds purchased. Long-
term debt consists of loans from the Federal Home Loan Bank.
Net operating income (income excluding taxes and securities transactions)
increased $28,126 or 2.02% in the first quarter of 1997 compared to 1996.
Management's investment strategy continued to be maximizing portfolio returns
commensurate with appropriate risk and liquidity considerations. In July of
1995, United Security reclassified all investment securities from held to
maturity to available for sale to allow more flexibility in managing the
investment portfolio. This investment strategy has resulted in increased yields
and liquidity.
Total non-interest income increased $184,279 or 50.06% in the first quarter of
1997 when compared to the first quarter of 1996. There are three major factors
in the increase. First, securities related income increased $61,427. Secondly,
the increase in deposits bought through the Brent acquisition produced more
service charge income, and third, the Bond Division opened by United Security
Bank in the fourth quarter of 1996 contributed to non-interest income in the
first quarter of 1997.
<PAGE>
Total non-interest expense increased $313,748 or 24.44% in the first quarter of
1997 compared to the first quarter of 1996. This increase is a direct result
of the Brent Bank acquisition and the start-up of the Bond Division.
COMPARING THE ENDING FIGURES MARCH 31, 1997, TO THE ENDING FIGURES DECEMBER 31,
1996:
Total assets increased $8,915,595 or 3.79% to $244,106,718. Net loans increased
$1,718,655 or 2.66%, while investment securities increased by $5,634,032 or
3.71% to $157,507,596.
Deposits continue to show steady growth by increasing $6,794,706 or 3.78% to
$186,720,423 in the first quarter of 1997. $5,306,816 of the deposit growth
was in demand deposits.
On December 31, 1996, Other Borrowings totalled $20 million and consisted of
loans from the Federal Home Loan Bank. These loans were reclassified as long-
term debt in the first quarter of 1997 and increased by $5 million. Investment
securities are pledged to secure these borrowings. Treasury tax and loan
deposits are on demand and increased by $325,962 as in the first quarter of
1997.
Undivided profits increased $834,125 or 3.75%, and net unrealized gain (loss)
on available for sale securities had a total decrease of $1,614,113 in the
first quarter due to an unrealized gain of $1,062,247 at December 31, 1996
and an unrealized loss of $551,866 at March 31, 1997. The unrealized loss
resulted in a decline in Stockholders' Equity of $779,988 or (2.71%) to
$28,046,191.
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 filed
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 August 19, 1996, United Security Bancshares, Inc. entered into an agreement
to merge with First Bancshares, Inc. The application to merge has been approved
by all regulatory authorities and the merger is now pending approval by the
shareholders. The meeting for a shareholder vote is scheduled for May 20, 1997.
<PAGE>
PART II
OTHER INFORMTION
<PAGE>
ITEM 6.
Exhibits and Reports on Form 8-K
(a) Exhibit 27 is filed with this report.
(b) No reports were filed on Form 8-K for the quarter ended March 31, 1997.
<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, 1997
BY: /s/ 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,095,766
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,200,000
<TRADING-ASSETS> 241,281
<INVESTMENTS-HELD-FOR-SALE> 155,982,915
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 67,483,877
<ALLOWANCE> 1,192,001
<TOTAL-ASSETS> 244,106,718
<DEPOSITS> 186,720,433
<SHORT-TERM> 1,314,937
<LIABILITIES-OTHER> 2,365,435
<LONG-TERM> 25,659,722
0
0
<COMMON> 22,021
<OTHER-SE> 28,024,170
<TOTAL-LIABILITIES-AND-EQUITY> 244,106,718
<INTEREST-LOAN> 1,528,675
<INTEREST-INVEST> 3,249,105
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,777,780
<INTEREST-DEPOSIT> 1,744,288
<INTEREST-EXPENSE> 2,092,035
<INTEREST-INCOME-NET> 2,685,745
<LOAN-LOSSES> 25,000
<SECURITIES-GAINS> 193,460
<EXPENSE-OTHER> 1,597,286
<INCOME-PRETAX> 1,615,819
<INCOME-PRE-EXTRAORDINARY> 1,615,819
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,154,819
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
<YIELD-ACTUAL> 4.99
<LOANS-NON> 832,817
<LOANS-PAST> 1,198,049
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,968,562
<ALLOWANCE-OPEN> 1,191,171
<CHARGE-OFFS> 51,392
<RECOVERIES> 27,222
<ALLOWANCE-CLOSE> 1,192,001
<ALLOWANCE-DOMESTIC> 1,192,001
<ALLOWANCE-FOREIGN> 0
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