U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
( X ) Quarterly report under Section 13 or 15 (d) of
the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
( ) Transition report under Section 13 or 15 (d) of
the Exchange
Act
For the transition period from to
Commission file number 000 - 18561
UNITED SECURITY BANCORPORATION
(Exact Name of Small Business Issuer as Specified in
Its Charter)
Washington 91-1259511
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification
No.)
9506 North Newport Highway, Spokane, WA 99218-1200
(Address of Principal Executive Offices)
(509) 467-6949
(Issuer's Telephone Number, Including Area
Code)
Check whether the issuer: (1) filed all reports required to
be filed by Section 13 or 15 (d) of the Exchange Act during
the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
Yes X No
The issuer has one class of capital stock, that being common
stock. On May 1, 1996, there were 3,332,310 shares of such
stock outstanding.
1
<PAGE> 2
UNITED SECURITY BANCORPORATION
QUARTERLY REPORT ON FORM 10-QSB
March 31, 1996
Table of Contents
<TABLE>
<CAPTION>
Page
<S>
<C>
Part I Financial Information
Item 1. Financial Statements
Consolidated Statements of Condition - March
31, 1996
and December 31, 1995 . . . . . . . . . . . .
. . . 3
Consolidated Statements of Income - Three
Months Ended
March 31, 1996 and 1995 . . . . . . . . . . .
. . . 4
Consolidated Condensed Statements of Cash
Flows -
Three Months Ended March 31, 1996 and 1995 .
. . . 5
Notes to Consolidated Financial Statements .
. . . 6-7
Item 2. Management's Discussion and Analysis or Plan
of
Operation . . . . . . . . . . . . . . . . . .
. . . 8-9
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . .
. . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . .
. . . 11
</TABLE>
2
<PAGE> 3
UNITED SECURITY BANCORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
($ in thousands)
<TABLE>
<CAPTION>
March 31,
December 31,
1996
1995
<S> <C>
<C>
ASSETS
(Audited)
Cash and due from banks $ 7,254 $
7,889
Overnight interest bearing deposits with
other banks 10,043
4,337
Federal funds sold 5,810
3,355
--------- -
- --------
Cash and cash equivalents 23,107
15,581
Securities available-for-sale (Note 2) 22,499
22,036
Securities held-to-maturity (Note 2) 631
365
Loans, net of allowance for loan losses of
$1,465 in 1996 and $1,391 in 1995
(Notes 3 and 4) 152,047
141,861
Accrued interest receivable 1,862
1,635
Premises and equipment, net 6,356
6,383
Foreclosed real estate 351
370
Life insurance and salary continuation assets 2,343
2,315
Other assets 1,196
1,267
--------- -
- --------
Total Assets $ 210,392 $
191,813
=========
=========
LIABILITIES
DEPOSITS
Noninterest bearing - demand deposits $ 27,283 $
25,643
Interest bearing:
NOW and savings accounts 66,141
59,044
Time, $100,000 and over 21,283
21,693
Other time 64,268
57,411
--------- -
- --------
TOTAL DEPOSITS 178,975
l63,791
Accrued interest payable 627
580
Note payable (Note 5) 2,523
Capital lease obligations 763
767
Other liabilities 2,037
1,812
--------- -
- --------
TOTAL LIABILITIES 184,925
166,950
STOCKHOLDERS' EQUITY
Common stock, no par, 5,000,000 shares
authorized; issued and outstanding 3,332,310 20,830
20,837
Retained earnings 4,953
4,114
Net unrealized loss on securities available-
for-sale, net of tax of $162 in 1996 and
$45 for 1995 (316)
(88)
--------- -
- --------
TOTAL STOCKHOLDERS' EQUITY 25,467
24,863
--------- -
- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 210,392 $
191,813
=========
=========
</TABLE>
The accompanying notes are an integral part of these
statements.
3
<PAGE> 4
UNITED SECURITY BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
($ in thousands, except per share)
<TABLE>
<CAPTION>
1996
1995
<S> <C>
<C>
INTEREST INCOME
Interest and fees on loans and leases $ 4,278 $
3,338
Interest on securities 386
338
Other interest income 140
95
------- -
- ------
TOTAL INTEREST INCOME 4,804
3,771
------- -
- ------
INTEREST EXPENSE
Interest on deposits 1,860
1,650
Interest on notes and capital leases 62
37
------- -
- ------
TOTAL INTEREST EXPENSE 1,922
1,687
------- -
- ------
NET INTEREST INCOME 2,882
2,084
Provision for loan losses (Note 4) 146
142
------- -
- ------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 2,736
1,942
------- -
- ------
NONINTEREST INCOME
Fees and service charges 199
186
Insurance commissions 303
320
Securities gains/losses 51
12
Other 166
152
------- -
- ------
TOTAL NONINTEREST INCOME 719
670
------- -
- ------
NONINTEREST EXPENSE
Salaries and employee benefits 1,418
927
Occupancy expense, net 154
77
Equipment expense 191
111
Amortization on noncompete agreements 6
43
FDIC assessments 1
89
State business and occupation tax 67
57
Other operating expense 316
405
------- -
- ------
TOTAL NONINTEREST EXPENSE 2,153
1,709
------- -
- ------
INCOME BEFORE TAXES 1,302
903
FEDERAL INCOME TAX EXPENSE 463
361
------- -
- ------
NET INCOME $ 839 $
542
=======
=======
Earnings per common share $ .25 $
.28
Weighted average shares outstanding 3,332,310
1,940,810
</TABLE>
The accompanying notes are an integral part of these
statements.
4
<PAGE> 5
UNITED SECURITY BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR-TO-DATE MARCH 31, 1996 AND 1995
($ in thousands)
<TABLE>
<CAPTION>
1996
1995
<S> <C>
<C>
Increase in Cash and Cash Equivalents
Net income $ 839 $
542
Cash flows from operating activities:
Provision for loan losses 146
142
Depreciation and amortization 127
72
Amortization of investment securities
(30)
(Increase)/decrease in assets and liabilities
Accrued interest receivable (227)
(1)
Other assets (29)
190
Deferred loan fees (49)
(14)
Accrued interest payable 47
134
Other liabilities 225
307
------- --
- -----
Net cash provided by operating activities 1,079
1,342
------- --
- -----
Cash flows from investing activities:
Investment securities:
Maturities 2,332
1,010
Sales 3,306
1,039
Purchases (6,595)
(1,388)
Net increase in loans and leases (10,211)
(3,285)
Purchases of premises and equipment (100)
(246)
Foreclosed real estate activity 19
69
------- --
- -----
Net cash provided by investing activities (11,249)
(2,801)
------- --
- -----
Cash flows from financing activities:
Net increase in deposits 15,184
3,893
Federal funds purchased
(1,065)
Proceeds from notes payable 2,531
Principal payments on notes payable (8)
(14)
Principal payments on capital lease
obligations (4)
(24)
Cash paid for redemption of fractional
shares (7)
------- --
- -----
Net cash provided by financing activities 17,696
2,790
------- --
- -----
Net increase/(decrease) in cash and
cash equivalents 7,526
1,331
Cash and cash equivalents, beginning of year 15,581
9,461
------- --
- -----
Cash and cash equivalents, end of quarter $23,107
$10,792
=======
=======
</TABLE>
The accompanying notes are an integral part of these
statements.
5
<PAGE> 6
UNITED SECURITY BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Management Statement
In the opinion of the Company, the accompanying audited and
unaudited Consolidated Financial Statements present fairly
the financial position of the Company as of March 31, 1996,
December 31, 1995, and March 31, 1995, and the results of
operations and the changes in financial position for the
three month period ended March 31, 1996 and 1995.
NOTE 2. Investment Securities
Most of the investment securities are classified as
available-for-sale and are stated at fair value, and
unrealized holding gains and losses, net of related deferred
taxes, are reported as a separate component of stockholders'
equity. Gains or losses on available-for-sale securities
sales are reported as part of noninterest income based on
the net proceeds and the adjusted carrying amount of the
securities sold, using the specific identification method.
Carrying amount and fair values at March 31, 1996 and
December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996
1995
Amortized Fair
Amortized Fair
($ in thousands) Cost Value
Cost Value
<S> <C> <C> <C>
<C>
Securities available-for-sale:
U.S. Treasury securities $
1,251 $ 1,251
Obligations of federal government
agencies $ 4,125 $ 4,103
2,814 2,800
Mortgage backed securities 11,419 11,403
13,550 13,545
Obligations of states, municipalities
and political subdivisions 3,246 3,004
Other securities 4,187 3,989
4,554 4,440
------- ------- ----
- --- -------
Total $22,977 $22,499
$22,169 $22,036
======= =======
======= =======
Securities held-to-maturity:
Obligations of states, municipalities
and political subdivisions $ 631 626 $
365 $ 374
======= =======
======= =======
</TABLE>
6
<PAGE> 7
UNITED SECURITY BANCORPORATION
NOTE 3. LOANS
Loan detail by category as of March 31, 1996 and December
31, 1995 were as follows:
<TABLE>
<CAPTION>
($ in thousands) 1996
1995
(Audited)
<S> <C>
<C>
Commercial and industrial $ 80,103
$ 75,011
Agricultural 22,629
19,787
Real estate mortgage 28,210
25,048
Real estate construction 8,783
10,169
Installment 9,393
9,234
Lease financing 1,853
1,336
Bank cards and other 2,997
3,172
--------
- --------
Total loans 153,968
143,757
Allowance for loan losses (1,465)
(1,391)
Deferred loan fees, net of deferred costs (456)
(505)
--------
- --------
Net loans $152,047
$141,861
========
========
</TABLE>
NOTE 4. ALLOWANCE FOR LOAN LOSSES
The allowance for loan loss is maintained at levels
considered adequate by management to provide for possible
loan losses. The allowance is based on management's
assessment of various factors affecting the loan portfolio,
including problem loans, business conditions and loss
experience, and an overall evaluation of the quality of the
underlying collateral. Changes in the allowance for loan
loss during the three months ended March 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
($ in thousands) 1996
1995
<S> <C>
<C>
Balance, beginning of period $1,391
$1,246
Provision for loan losses 146
142
Loan charge-offs (73)
(27)
Loan recoveries 1
2
------
- ------
Balance, end of period $1,465
$1,363
======
======
</TABLE>
NOTE 5. NOTE PAYABLE
Note payable as of March 31, 1996 was a borrowing by United
Security Bancorporation from a bank for five years to
complete the sale of Bank real estate to the Parent Company.
The debt provides for monthly payments of $23,000 including
interest at 8.75%. The debt reprices annually at prime plus
.25%.
7
<PAGE> 8
UNITED SECURITY BANCORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
A performance summary and detailed discussion regarding the
results for first quarter results in 1996 and 1995 are
contained on the following page.
UNITED SECURITY BANCORPORATION AND
SUBSIDIARIES
PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
Three Months
Ended March 31,
%
($ in thousands) 1996 1995
Change
<S> <C> <C>
<C>
Interest income $4,804 $3,771
27.4%
Interest expense 1,922 1,687
13.9%
------ ------
- -----
Net interest income 2,882 2,084
38.3%
Provision for loan losses 146 142
2.8%
------ ------
- -----
Net interest income after provision for
loan losses 2,736 1,942
40.9%
Noninterest income 719 670
7.3%
Noninterest expense 2,153 1,709
26.0%
------ ------
- -----
Income before income taxes 1,302 903
44.2%
Income taxes 463 361
28.3%
------ ------
- -----
Net income $ 839 $ 542
54.8%
====== ======
=====
Earnings per share $ .25 $ .28
(9.8%)
Average shares outstanding 3,332,310 1,940,810
71.7%
</TABLE>
8
<PAGE> 9
UNITED SECURITY BANCORPORATION
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, Home Security Bank, USB Insurance Agencies, Inc., USB
Mortgage Company and USB Leasing, Inc. 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 $839,000 for the first three months of 1996
compared to $542,000 for the same period in 1995. Earnings
per share were $.25 and $.28, respectively. Per share
results for 1996 and 1995 are not directly comparable. In
May and June, 1995, United Security Bancorporation sold
1,150,000 shares of stock in its initial public offering.
Net income grew 54.8% in 1996 compared to 1995, while
average outstanding shares grew by 71.7%.
Net Interest Income
Net interest income grew 38.3% to $2,882,000 in 1996
compared to $2,084,000 in 1995. The increase is primarily
the result of loan growth and interest earning assets
growth. Total loans grew 7.1% to $153,968,000 during the
first quarter. Total earning assets grew 11% to
$192,415,000 during first quarter 1996.
Provision for Loan Losses
The allowance for loan losses represents management's
recognition of risks in the loan and lease portfolio. The
allowance for loan losses grew to $1,465,000 as of March 31,
1996, which is .95% of loans and leases outstanding.
Noninterest Income
Noninterest income increased by 7.3% to $719,000 for first
quarter 1996. This compares to $670,000 for first quarter
1995. Each category of income was higher than 1995 with the
exception of insurance commissions, which was 5.3% lower
than 1995.
Noninterest Expense
Noninterest expense increased by 26.0% in 1996 reflecting
the opening of two new Bank branches in Downtown Spokane and
Yakima, Washington for United Security Bank and Home
Security Bank, respectively. USB Mortgage and USB Leasing
have also significantly increased their activity and
expenses, while improving the net profitability of the
Corporation.
Federal Income Tax Expense
Reflecting the increase in Corporation profitability,
federal income tax expense increased by 28.3% comparing 1996
tax expense to 1995.
9
<PAGE> 10
UNITED SECURITY BANCORPORATION
Part II
Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and Reports on Form 8-K.
None in first quarter 1996.
10
<PAGE> 11
UNITED SECURITY BANCORPORATION
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
Date: May 1, 1996 /s/ Chad Galloway
Chad Galloway, Vice
President and
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 7254
<INT-BEARING-DEPOSITS> 10043
<FED-FUNDS-SOLD> 5810
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 22499
<INVESTMENTS-CARRYING> 631
<INVESTMENTS-MARKET> 626
<LOANS> 153512
<ALLOWANCE> 1465
<TOTAL-ASSETS> 210392
<DEPOSITS> 178975
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2664
<LONG-TERM> 3286
<COMMON> 20830
0
0
<OTHER-SE> 4637
<TOTAL-LIABILITIES-AND-EQUITY> 210392
<INTEREST-LOAN> 4278
<INTEREST-INVEST> 386
<INTEREST-OTHER> 140
<INTEREST-TOTAL> 4804
<INTEREST-DEPOSIT> 1860
<INTEREST-EXPENSE> 1922
<INTEREST-INCOME-NET> 2882
<LOAN-LOSSES> 146
<SECURITIES-GAINS> 51
<EXPENSE-OTHER> 2153
<INCOME-PRETAX> 1302
<INCOME-PRE-EXTRAORDINARY> 1302
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 839
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
<YIELD-ACTUAL> 10.51
<LOANS-NON> 645
<LOANS-PAST> 211
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1391
<CHARGE-OFFS> 73
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 1465
<ALLOWANCE-DOMESTIC> 1465
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
