<PAGE>
FORM 10 - QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR F15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
--------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- ------------
Commission File No. 000-18561
---------
UNITED SECURITY BANCORPORATION
Washington 91-1259511
- --------------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
N. 9506 Newport Highway, Spokane, WA 99218-1200
- --------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (509)467-6949
---------------
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 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
---- ----
The issuer has one class of capital stock, that being common stock. On
November 8, 1995, there were 3,029,854 shares of such stock outstanding.
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<PAGE>
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10 - QSB
SEPTEMBER 30, 1995
Page
------
Part I - Financial Information:
Item 1. Financial Statements
Consolidated Statements of Condition -
September 30, 1995 and December 31, 1994 . . 3
Consolidated Statements of Income - Three and
Nine Months Ended September 30, 1995 and 1994 4
Consolidated Condensed Statements of Cash Flows-
Nine Months Ended September 30, 1995 and 1994 5
Notes to Consolidated Financial Statements . 6 - 8
Item 2. Management's Discussion and Analysis and Plan
of Operations . . . . . . . . . . . 9 - 11
Part II - Other Information
Item 6. Exhibits and Reports on Form 8 - K . . . . 12
Signatures . . . . . . . . . . . . . . . . 13
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<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<Captions>
December 31
September 30 1994
($ in thousands) 1995 (Audited)
------------ ------------
<S> <C> <C>
ASSETS
Cash and Due From Banks $ 7,081 $ 7,983
FEDERAL FUNDS SOLD 3,160 1,478
------------ ------------
CASH AND CASH EQUIVALENTS 10,241 9,461
INTEREST BEARING DEPOSITS WITH OTHER BANKS 3,501
SECURITIES AVAILABLE-FOR-SALE (Note 2) 22,938 23,100
SECURITIES HELD-TO-MATURITY (Note 2) 365 35
LOANS (Note 3) 136,146 122,765
Deferred loan fees, net of deferred costs (451) (438)
Allowance for loan losses (Note 4) (1,382) (1,246)
------------ ------------
NET LOANS 134,313 121,081
ACCRUED INTEREST RECEIVABLE 1,774 1,479
PREMISES AND EQUIPMENT 6,072 5,097
FORECLOSED REAL ESTATE 455 231
LIFE INSURANCE AND SALARY CONTINUATION 2,067 1,913
OTHER ASSETS 1,334 1,514
------------ ------------
TOTAL ASSETS $183,060 $163,911
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS
Noninterest bearing-demand $ 26,775 $ 22,917
Interest bearing 129,373 123,712
------------ -----------
TOTAL DEPOSITS 156,148 146,629
FEDERAL FUNDS PURCHASED 2,725
ACCRUED INTEREST PAYABLE 580 354
NOTES PAYABLE (Note 5) 20 505
CAPITAL LEASE OBLIGATIONS 769 805
OTHER LIABILITIES 1,569 707
------------ ------------
TOTAL LIABILITIES 159,086 151,725
STOCKHOLDERS' EQUITY (Note 6)
Common stock, no par, 5,000,000 shares
authorized; 3,029,854 and 1,764,854 issued
and outstanding, respectively 20,844 10,202
Retained earnings 3,367 2,552
Net unrealized loss on securities
available-for-sale, net of tax (217) (548)
Less guaranteed bank loan of Employee Stock
Ownership Plan (20) (20)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 23,974 12,186
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $183,060 $163,911
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
September 30, Year-To-Date
($ in thousands) 1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans-interest & fees $3,640 $3,076 $10,530 $ 7,998
Investment securities 468 264 1,227 589
Other 131 22 296 181
---------- ---------- ---------- ----------
TOTAL INTEREST INCOME 4,239 3,362 12,053 8,768
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits 1,739 1,161 5,133 2,967
Borrowed funds 21 38 93 145
---------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE 1,760 1,199 5,226 3,112
---------- ---------- ---------- ----------
NET INTEREST INCOME 2,479 2,163 6,827 5,656
PROVISION FOR LOAN LOSSES
(Note 4) 32 59 203 107
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,447 2,104 6,624 5,549
---------- ---------- ---------- ----------
NONINTEREST INCOME
Service charges and
other fees 366 157 954 507
Net realized gains on
sales of available-for-
sale securities 16 49 4
Insurance commissions 382 310 905 930
Life insurance proceeds 1,030
Other 197 147 510 457
---------- ---------- ---------- ----------
TOTAL NONINTEREST INCOME 961 614 3,448 1,898
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Salaries and benefits 1,015 921 3,135 2,630
Occupancy expense, net 168 52 337 184
Equipment expense 104 117 325 358
Insurance benefits expense 379
Other operating expense 724 596 1,994 1,674
---------- ---------- ---------- ----------
TOTAL NONINTEREST EXPENSE 2,011 1,686 6,170 4,846
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 1,397 1,032 3,902 2,601
FEDERAL INCOME TAXES 198 381 898 956
---------- ---------- ---------- ----------
NET INCOME $1,199 $ 651 $3,004 $1,645
========== ========== ========== ==========
Earnings per common share $ .40 $ .37 $ 1.23 $ 1.05
========== ========== ========== ==========
Average Shares Outstanding 3,029,854 1,758,799 2,437,143 1,565,170
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
($ in thousands)
Reconciliation of net income to net cash Year-To-Date September 30,
provided by operating activities 1995 1994
- ------------------------------------------- ------------ -----------
<S> <C> <C>
Net Income $ 3,004 $ 1,645
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 203 107
Depreciation and amortization 333 425
Amortization/accretion of investment securities 46 (130)
(Increase)/decrease in assets and liabilities
Accrued interest receivable (295) (367)
Other assets 66 (2,534)
Deferred loan fees 13 (75)
Accrued interest payable 226 165
Other liabilities 862 543
----------- ----------
Net cash provided by operating activities 4,458 (221)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investment securities 7,347 2,218
Proceeds from maturities of investments 4,591 2,234
Purchases of investment securities (12,152) (1,851)
Purchases of interest-bearing deposits (3,501) 1,214
Principal collected on loans 69,240 91,803
Loans originated or acquired (82,621) (110,359)
Purchases of premises and equipment (1,308) (697)
------------ ----------
Net cash provided by investment activities (18,404) (15,438)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits 9,519 26,717
7,352,332
Federal funds purchased (2,725)
Principal payments on notes payable (485) (204)
Principal payments on capital leases (36) (68)
Cash dividends paid (9) (152)
Cash received from stock offering 8,462 2,181
------------ -----------
Net cash provided by financing activities 14,726 28,474
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 780 12,815
CASH AND CASH EQUIVALENTS, BEGINNING 9,461 10,739
------------ -----------
CASH AND CASH EQUIVALENTS, ENDING $ 10,241 $23,554
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: MANAGEMENT STATEMENT
In the opinion of the Company, the accompanying audited and unaudited
Consolidated Financial Statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly the
financial position of the Company as of September 30, 1995, December 31,
1994, and September 30, 1994, and the results of operations and the
changes in financial position for the three and nine month period ended
September 30, 1995 and 1994.
NOTE 2: INVESTMENT SECURITIES
Most of the investment securities are classified as "available for sale"
and are stated at fair value, and unrealized holding gains and losses,
net of related deferred tax effect, are reported as a separate component
of stockholders' equity. Gains or losses on dispositions reported as a
component of other income are based on the net proceeds and the adjusted
carrying amount of the securities sold, using the specific identification
method. Carrying amounts and approximate market values of investment
securities at September 30, 1995, December 31, 1994 and September 30, 1994
were as follows:
<TABLE>
<CAPTION>
September 30, December 31, September
30,
1995 1994 1994
---------------- ----------------- -----------
- ----
Amortized Fair Amortized Fair Amortized
Fair
($ in thousands) Cost Value Cost Value Cost
Value
------- ------- -------- ------- ------- --
- -----
<S> <C> <C> <C> <C> <C>
<C>
Held-to-maturity securities:
State and political
subdivisions $ 365 $ 371 $ 35 $ 36
======= ======= ======= =======
Available-for-sale securities:
U.S. government agencies and
corporations $ 6,135 $ 6,115 $12,763 $12,599 $10,342
$10,002
State and political
subdivisions 568 467 22 71 57
103
Mortgage backed securities 11,853 11,680 6,861 6,460
Other 4,711 4,676 4,286 3,970 2,860
2,589
------- ------- ------- ------- ------- --
- -----
Total $23,267 $22,938 $23,932 $23,100 $13,259
$12,694
======= ======= ======= ======= =======
=======
</TABLE>
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<PAGE>
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: LOANS
Total loans by category at September 30, 1995, December 31, 1994, and
September 30, 1994 were as follows:
<TABLE>
<CAPTION>
Sept 30, December 31, Sept 30,
1995 1994 1994
($ in thousands) (Audited)
-------- -------- --------
<S> <C> <C> <C>
Commercial and industrial $ 71,223 $ 61,968 $ 50,929
Agricultural 20,719 16,721 14,143
Real estate mortgage 23,368 24,883 39,432
Real estate construction 8,111 8,126
Installment 9,066 7,781 6,567
Lease financing 501
Bank cards and other 3,158 3,286 3,683
-------- -------- --------
Total $136,146 $122,765 $114,754
======== ======== ========
</TABLE>
NOTE 4: ALLOWANCE FOR LOAN LOSSES
Reserves for possible loan losses are maintained at levels considered
adequate by management to provide for possible loan losses. The reserve
is based on management's assessment of various factors affecting the
loan portfolio, including problem loans, business conditions and loss
experience, an overall evaluation of the quality of the underlying
collateral, and holding costs. Changes in the allowance for loan losses
during the three and nine months ended September 30, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30, Year-To-Date
($ in thousands) 1995 1994 1995 1994
------ ----- ------ ----
<S> <C> <C> <C> <C>
Balance, beginning $1,357 $841 $1,246 $802
Provision for loan losses 32 59 203 107
Loans charged off (18) (12) (82) (24)
Loan recoveries 11 2 15 5
------ ---- ------ ----
Balance, end of period $1,382 $890 $1,382 $890
====== ==== ====== ====
</TABLE>
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<PAGE>
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: ALLOWANCE FOR LOAN LOSSES (Continued)
The following table represents the allowance for loan losses by loan
category as of September 30, 1995, based on management's assessment of the
risk associated with the loan categories, and summarizes the percentage
of each loan category to total gross loans.
<TABLE>
<CAPTION>
Loan Categories Percent of
($ in thousands) Allowance Total Loans
---------- -----------
<S> <C> <C>
Commercial $ 723 52%
Agriculture 210 15%
Real estate mortgage 237 17%
Real estate construction 82 6%
Consumer 92 7%
Other 38 3%
------ ----
Total $1,382 100%
====== ====
NOTE 5: NOTES PAYABLE
Notes payable consists of the following at September 30, 1995:
Note payable from the United Security Bancorporation Employee
Stock Ownership Plan to the Bank of Latah, 50% guaranteed
by the Company, payable $100,000 annually plus interest at
Bank's prime (9.75% at September 30, 1995), due in full
December 1995. $20,000
NOTE 7: STOCKHOLDERS EQUITY
Total stockholders' equity was $24.0 million as of September 30, 1995 up
from $12.2 million as of December 31, 1994. The 97.6% increase includes
the $8.5 million May, 1995 common stock sale proceeds. The stockholders'
equity to assets ratio has improved to 13.1% as of September 30, 1995,
compared to 7.4% as of December 31, 1994. In August 1995 a 10% stock
dividend was issued. The Corporation recorded a transfer of $2,189,000
from retained earnings to common stock for the market value of the stock
as of the Board of Directors declaration date for the additional shares
issued. Per share and weighted average shares outstanding have been
retroactively adjusted to reflect stock dividends.
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<PAGE>
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
A performance summary and detailed discussion regarding the results for
year-to-date and third quarter results in 1995 and 1994 are contained
in the following pages.
PERFORMANCE SUMMARY
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Sept 30, Year-To-Date
%
%
($ in thousands) 1995 1994 Change 1995 1994
Change
------ ------ ------ ------- -------
- ------
<S> <C> <C> <C> <C> <C>
<C>
Interest income $4,239 $3,362 26.1% $12,053 $ 8,768
37.5%
Interest expense 1,760 1,199 46.8% 5,226 3,112
67.9%
------ ------ ----- ------ ------
- ------
Net interest income 2,479 2,163 14.6% 6,827 5,656
20.7%
Provision for loan losses 32 59 (45.8%) 203 107
89.7%
------ ------ ----- ------ ------
- ------
Net interest income after
provision for loan losses 2,447 2,104 16.3% 6,624 5,549
19.4%
Noninterest income 961 614 56.5% 3,448 1,898
81.7%
Noninterest expense 2,011 1,686 19.3% 6,170 4,846
27.3%
------ ------ ------ ------ ------
- ------
Income before income taxes 1,397 1,032 35.4% 3,902 2,601
50.0%
Income taxes 198 381 (48.0%) 898 956
(6.1%)
------ ------ ------ ------ ------
- ------
Net income $1,199 $ 651 84.2% $3,004 $1,645
82.6%
====== ====== ====== ====== ======
======
Earnings per share $ .40 $ .37 6.9% $ 1.23 $ 1.05
17.3%
Average shares
outstanding 3,029,854 1,758,799 72.3% 2,437,143
1,565,170 55.7%
</TABLE>
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<PAGE>
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
Results of Operations
The results of operations include the consolidated results of operations
for United Security Bancorporation and its wholly-owned subsidiaries
(Corporation), United Security Bank, USB Leasing, Inc., USB Insurance
Agencies, Inc., USB Mortgage Company and Home Security Bank. This
information should be read in conjunction with the financial statements
and related notes appearing in this report.
United Security Bancorporation and its subsidiaries reported net income
of $3,004,000 for the first nine months of 1995 compared to $1,645,000 for
the same period in 1994. Earnings per share were $1.23 for 1995 and $1.05
for 1994. For the third quarter of 1995 net income was $1,199,000 as
compared to $651,000 for the third quarter of 1994. Earnings per share
were $.40 and $.37, respectively.
The year-to-date results were enhance by $651,000 in second quarter 1995
due to life insurance proceeds received offset by funds due to the
beneficiary.
Per share results for 1995 and 1994 are note directly comparable. In May,
1995 United Security sold 1,150,000 shares of stock in its initial public
offering. In August, 1995 a 10% stock dividend was issued. Per share
amounts and weighted average shares outstanding have been retroactively
adjusted to reflect stock dividends.
Net Interest Income
Net interest income for the first nine months of 1995 was $6,827,000
compared to $5,656,000 for the same period in 1994, reflecting a 20.7%
increase. For the third quarter of 1995 net interest income was
$2,479,000 compared to $2,163,000 for the same period in 1994. The
increase is primarily due to the growth of loans and average earning
assets for the Corporation, which grew to an average of $158,022,000
for the first nine months of 1995 compared to $124,995,000 for 1994.
The net interest margin was 5.86% for the first nine months of 1995, which
compares to 6.13% for 1994. For the third quarter 1995 the net interest
margin was 6.25% compared to 6.18% for 1994.
Provision for Loan Losses
The allowance for loan losses represents management's recognition of
risks in the loan portfolio. The allowance for loan losses grew to
$1,382,000 as of September 30, 1995 representing 1.02% of loans and leases.
Noninterest Income
Noninterest income increased by 81.7% in the first nine months of 1995 to
$3,448,000 due primarily to the receipt of life insurance proceeds
described above. Nearly every category of noninterest income grew during
the first nine months of 1995 with the increase in Corporation activity.
Insurance commissions had a slight decline.
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<PAGE>
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
Noninterest Expense
Noninterest expense grew by 27.3% to $6,170,000 during the first nine
months of 1995 consistent with the general growth of the Corporation.
As described above noninterest expense grew due to the recording of life
insurance beneficiary expense during second quarter 1995.
Income Tax
The Corporation recorded $898,000 of federal income tax expense for the
first nine months of 1995 compared to $956,000 for 1994. The Corporation
has recorded its estimate of tax expense for the first nine months of
1995 and is updating deferred tax assets and liabilities quarterly as
applicable.
Capital Requirements
The Corporation's two bank subsidiaries, United Security Bank and Home
Security Bank are subject to regulatory capital requirements. Both bank
subsidiaries met or exceeded regulatory capital requirements and were
well capitalized at September 30, 1995.
During second quarter 1995 the Corporation sold 1,150,000 shares of its
common stock with proceeds of nearly $8.5 million. The stockholders'
equity to assets ratio has improved to 13.1% as of September 30, 1995,
compared to 7.4% as of December 31, 1994. In August 1995 a 10% stock
dividend was issued. The Corporation recorded a transfer of $2,189,000
from retained earnings to common stock for the market value of the stock
as of the Board declaration date for the additional shares issued.
Per share and weighted average shares outstanding have been retroactively
adjusted to reflect stock dividends.
Liquidity
The primary liquidity needs of the two bank subsidiaries are to fund
customer loan demands and to cover deposit withdrawals. The Corporation
maintains its federal funds and investment positions in a manner
appropriate to meet its liquidity needs.
-11-
<PAGE>
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
Part II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K.
None
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<PAGE>
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
SIGNATURES
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 BANCORPORATION
/s/ William C. Dashiell
----------------------------------
William C. Dashiell, President and
Chief Executive Officer
/s/ Chad Galloway
Date: November 8, 1995 ----------------------------------
Chad Galloway, Vice President and
Chief Financial Officer
-13-
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000726990
<NAME> EDGAR
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 7081
<INT-BEARING-DEPOSITS> 3501
<FED-FUNDS-SOLD> 3160
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 22938
<INVESTMENTS-CARRYING> 365
<INVESTMENTS-MARKET> 371
<LOANS> 135695
<ALLOWANCE> 1382
<TOTAL-ASSETS> 183060
<DEPOSITS> 156148
<SHORT-TERM> 20
<LIABILITIES-OTHER> 2149
<LONG-TERM> 769
<COMMON> 20844
0
0
<OTHER-SE> 3130
<TOTAL-LIABILITIES-AND-EQUITY> 183060
<INTEREST-LOAN> 10530
<INTEREST-INVEST> 1227
<INTEREST-OTHER> 296
<INTEREST-TOTAL> 12053
<INTEREST-DEPOSIT> 5133
<INTEREST-EXPENSE> 5226
<INTEREST-INCOME-NET> 6827
<LOAN-LOSSES> 203
<SECURITIES-GAINS> 49
<EXPENSE-OTHER> 6170
<INCOME-PRETAX> 3902
<INCOME-PRE-EXTRAORDINARY> 3004
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3004
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
<YIELD-ACTUAL> 5.93
<LOANS-NON> 688
<LOANS-PAST> 124
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1246
<CHARGE-OFFS> 82
<RECOVERIES> 15
<ALLOWANCE-CLOSE> 1382
<ALLOWANCE-DOMESTIC> 1382
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
