<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter Ended September 30, 1996
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 000-27244
USABANCSHARES, INC.
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
PENNSYLVANIA 23-2806495
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
</TABLE>
ONE PENN SQUARE, 30 SOUTH 15TH STREET, PHILADELPHIA, PA, 19102
(Address of Principal Executive Offices)
(Zip Code)
(215) 569-4200
(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Act: None.
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 / /
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Common Stock, $1.00 par value, outstanding on August 31,1996: 542,802
Class B Common Stock, $.01 par value, outstanding on August 31,1996: 10,000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page #
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets 3
Consolidated Statements of Income 4,5
Statements of Changes in Stockholders' Equity 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Change in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and Due from banks $ 85,655 $ 557,625
Interest-bearing deposits with banks 2,966,474 7,536,508
Total cash and cash equivalents ---------- ------------
3,052,129 8,094,133
Investment securities:
Investments available for sale 3,905,969 2,589,532
Investments held to maturity 8,840,847 7,478,613
Total investment securities ----------- ----------
12,746,816 10,068,145
Loans 14,899,835 7,057,197
Allowance for loan losses (185,000) (60,000)
---------- ----------
Loans, net 14,714,835 6,997,197
Premises and Equipment, net 149,754 123,036
Goodwill 180,453 185,492
Other assets 483,864 317,520
----------- ----------
Total assets $31,327,851 $25,785,523
------------ ------------
------------ ------------
LIABILITIES
Deposits:
Demand $ 25,130 $ --
Passbook 2,104,584 2,591,172
NOW accounts 572,676 405,850
Certificates of deposit 21,081,487 17,801,887
----------- -----------
Total deposits 23,783,877 20,798,909
Other borrowed money 2,500,000 --
Other liabilities 129,940 327,772
----------- ---------
Total liabilities $26,413,817 $21,126,681
STOCKHOLDERS' EQUITY
Preferred stock, $1,00 par value;
authorized 5,000,000 shares;
no shares issued and outstanding -- --
Common stock, $1,00 par value;
authorized 10,000,000 shares;
542,802 shares issued and
outstanding and 54,280 shares of
converted and unissued Class B common stock 597,082 597,082
Additional paid-in capital 4,877,701 4,877,701
Accumulated deficit (95,281) (278,843)
Unearned compensation, Class B common stock (452,335) (533,755)
Stock subscription receivable 0 (20,000)
Unrealized gain on securities available for sale (13,133) 16,657
----------- ---------
Total stockholders' equity 4,914,034 4,658,842
----------- ---------
Total liabilities and stockholders' equity $31,327,851 $25,785,523
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------
1996 1995
----------- ----------
<S> <C> <C>
Interest income:
Loans $1,409,126 $ 248,920
Investment securities 562,625 676,039
Interest-bearing deposits and other 173,716 111,611
----------- ----------
2,145,467 1,036,570
Interest expense:
Passbook 46,428 50,444
NOW Accounts 8,378 6,670
Certificates of deposit 785,150 672,163
Other borrowings 5,808 4,638
---------- ----------
845,764 733,916
---------- ----------
Net interest income 1,299,703 302,654
Provision for loan losses (125,000) (1,200)
---------- ----------
Net interest income after provision
for loan losses 1,174,703 301,454
---------- ----------
Non-interest income
Gain on sales of investment securities 22,063 --
Other 74,027 2,420
----------- -----------
96,090 2,420
Non-interest expense:
Compensation 602,988 152,513
Occupancy 82,481 35,019
Data processing 51,502 51,329
Professional fees 54,720 49,685
Advertising 16,071 9,566
Insurance 45,956 8,851
Office 50,666 10,372
Travel & Entertainment 53,204 2,568
Depreciation and Amortization 38,924 16,347
Other 90,719 36,816
----------- -----------
1,087,231 373,065
----------- -----------
Income before income taxes 183,562 (69,191)
Provision for income taxes -- (4,241)
----------- -----------
Net income, (loss) $ 183,562 $ (64,950)
----------- -----------
----------- -----------
Earnings per common share--primary
and fully diluted $ 0.31 $ (0.82)
Weighted average shares outstanding 597,082 79,114
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------------
1996 1995
-------- --------
<S> <C> <C>
Interest income:
Loans $576,531 $ 90,310
Investment securities 211,225 216,916
Interest-bearing deposits and other 29,297 53,205
-------- --------
817,053 360,430
Interest expense:
Passbook 14,174 16,199
NOW Accounts 3,182 2,035
Certificates of deposit 268,707 254,073
Other borrowings 5,808 --
-------- --------
291,871 272,307
-------- --------
Net interest income 525,182 88,123
Provision for loan losses (50,000) --
-------- --------
Net interest income after provision
for loan losses 475,182 88,123
-------- --------
Non-interest income
Gain on sales of investment securities -- --
Other 28,412 2,316
-------- --------
28,412 2,316
Non-interest expense:
Compensation 221,952 52,964
Occupancy 29,815 13,773
Data processing 19,416 13,503
Professional fees 5,229 27,334
Advertising 4,514 2,037
Insurance 20,230 2,976
Office 13,304 4,836
Travel & Entertainment 27,381 975
Depreciation and Amortization 9,217 5,510
Other 36,233 9,086
-------- --------
387,291 132,994
-------- --------
Income before income taxes 116,303 (42,554)
Provision for income taxes -- --
-------- --------
Net income, (loss) $116,303 $(42,554)
-------- --------
-------- --------
Earnings per common share--primary
and fully diluted $ 0.19 $ (0.54)
Weighted average shares outstanding 597,082 79,114
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
UNEARNED NET
ADDITIONAL COMPENSATION STOCK UNREALIZED
COMMON PAID-IN ACCUMULATED CLASS B SUBSCRIPTION GAIN ON
STOCK CAPITAL DEFICIT COMMON STOCK RECEIVABLE AFS SECURITIES TOTAL
-------- ---------- ----------- ------------ ------------ -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $597,082 $4,877,701 ($278,845) ($533,755) ($20,000) $ 16,657 $4,658,842
Net unrealized loss on
securities available-for-sale -- -- -- -- -- (14,585) (14,585)
Amortization of unearned
compensation Class B
common stock -- -- -- 27,140 -- -- 27,140
Receipt of stock subscription
receivable -- -- -- -- 20,000 -- 20,000
Net income -- -- 8,685 -- -- -- 8,685
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1996 597,082 4,877,701 (270,158) (506,615) -- 2,072 4,700,082
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net unrealized loss on
securities available-for-sale -- -- -- -- -- (16,324) (16,324)
Amortization of unearned
compensation Class B
common stock -- -- -- 27,140 -- -- 27,140
Receipt of stock subscription
receivable -- -- -- -- -- -- --
Net income -- -- 58,574 -- -- -- 58,574
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996 $597,082 $4,877,701 $ (211,584) $ (479,475) $ -- $(14,252) $4,769,472
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net unrealized loss on
securities available-for-sale -- -- -- -- -- 1,119 1,119
Amortization of unearned
compensation Class B
common stock -- -- -- 27,140 -- -- 27,140
Net income -- -- 116,303 -- -- -- 116,303
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1996 $597,082 $4,877,701 $ (95,281) $ (452,335) $ -- $(13,133) $4,914,034
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
USA BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 183,562
Adjustments to reconcile net income to cash provided
by operating activities
Depreciation and amortization 31,178
Provision for loan losses 125,000
Amortization of organizational expense 7,746
Gain on sale of investments available for sale (22,063)
Increase in accrued income and other assets (166,343)
Decrease in other liabilities (197,833)
-------------
Net cash from operating activities (38,753)
-------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investment securities available for sale 1,482,188
Purchase of investment securities available for sale (2,492,975)
Purchase of investment securities held to maturity (2,148,094)
Repayments of principal on investment securities 593,671
Net increase in loans (7,842,638)
Purchases of premises and equipment (24,272)
-------------
Net cash from investing activities (10,432,119)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in demand deposits and savings accounts (294,632)
Increase in certificates of deposit 3,279,600
Increase in other borrowings 2,500,000
Repayment of other borrowed funds (56,100)
-------------
Net cash from financing activities 5,428,868
-------------
Net increase (decrease) in cash and cash equivalents (5,042,004)
Cash and cash equivalents, beginning of year 8,094,133
-------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,052,129
-------------
-------------
The accompanying notes are an integral part of these consolidated statements.
(1) The Company has not provided a Pro-forma Consolidated Statement of Cash
Flows for the nine months ended September 30, 1995 because management does
not believe this information would be meaningful.
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The accompanying consolidated financial statements include the accounts
of USABancShares, Inc. (the "Company") and its wholly-owned subsidiary
Peoples Thrift Savings Bank (the "Bank"). All significant intercompany
accounts and transactions have been eliminated. Certain reclassifications
were made to 1995 data to conform to current year presentation.
The interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments including normal
recurring accruals necessary for fair presentation of results of operations
for the interim periods included herein have been made. The results of
operations for the nine months ended September 30 1996, are not necessarily
indicative of results to be anticipated for the full year.
2. ALLOWANCE FOR LOAN LOSSES
The following is a summary of the allowance for loan losses for the nine
months ended September 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
BALANCE, JANUARY 1 $60,000 $ --
-------- -------
Additions:
Allowance of acquired banks -- 8,800
Provision for loan losses 125,000 1,200
-------- -------
Total additions 125,000 10,000
-------- -------
-------- -------
Deductions:
Loan losses 0 0
Less recoveries on loans 0 0
Net loan losses 0 0
-------- -------
BALANCE, SEPTEMBER 30 $185,000 $10,000
-------- -------
-------- -------
</TABLE>
<PAGE>
3. INVESTMENT SECURITIES
Investment securities consisted of the following at September 30, 1996
and December 31, 1995:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------------------
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Government agency securities $2,742,460 $ -- $ 15,335 $2,727,125
Mortgage-backed securities 952,158 -- 4,564 947,594
Other securities 125,000 -- -- 125,000
---------- ---------- -------- ----------
Total available for sale $3,819,618 $ -- $ 19,899 $3,799,719
---------- ---------- -------- ----------
---------- ---------- -------- ----------
HELD TO MATURITY
U.S. Government agency securities $1,498,118 $ -- $ 23,073 $1,475,045
Corporate securities 400,000 26,468 -- 426,468
Mortgage-backed securities 6,942,729 -- 114,478 6,828,551
---------- ---------- -------- ----------
Total held to maturity $8,840,847 $26,468 $137,252 $8,730,064
---------- ---------- -------- ----------
---------- ---------- -------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------------------------------
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
Mortgage-backed securities $2,480,495 $25,237 $ -- $2,505,732
Other securities 83,800 -- -- 83,800
---------- ---------- -------- ----------
Total available for sale $2,564,295 $25,237 $ -- $2,589,532
---------- ---------- -------- ----------
---------- ---------- -------- ----------
HELD TO MATURITY
Mortgage-backed securities $7,478,613 $67,894 $ 12,350 $7,534,157
---------- ---------- -------- ----------
Total held to maturity $7,478,613 $67,894 $ 12,350 $7,534,157
---------- ---------- -------- ----------
---------- ---------- -------- ----------
</TABLE>
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1996
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and related notes and with the
statistical information and financial data appearing in this report as well
as the Company's 1995 Annual Report on Form 10-KSB. Results of operations for
the nine month period ended September 30, 1996 are compared to the unaudited
results of operations, of the Bank only, for the period ended September 30,
1995. Such information is based upon the historical financial information
available as of that date. Results of operations for the nine month period
ended September 30, 1996 are not necessarily indicative of results to be
attained for any other period.
RESULTS OF OPERATIONS
NET INCOME
The Company reported net income of $183,562, or $.31 per share, for the
nine months ended September 30, 1996, compared to a $64,950 loss, for the
nine months ended September 30, 1995, representing a 382.6% increase.
Increased net income was primarily the result of discount accretion on
purchased loans as well as increased net interest margins associated with
interest earning asset growth. Noninterest income rose due to a gain on the
sale of an investment security and additional loan review fees associated
with higher commercial loan volumes. Expenses increased mainly due to costs
associated with the hiring of additional employees as well as the production
of additional earning assets.
NET INTEREST INCOME
The Company's profitability, like that of many financial institutions, is
dependent to a large extent upon net interest income. Net interest income is
the difference between interest income (principally from loans and investment
securities) and interest expense (principally on customer deposits and
borrowings). Changes in net interest income result from changes in volume,
net interest spread and net interest margin. Volume refers to the average
dollar level of interest-earning assets and interest bearing liabilities.
Net interest spread refers to the differences between the average yield on
interest-earning assets and the average cost of interest-bearing liabilities.
Net interest margin refers to net interest income divided by average
interest-earning assets and is influenced by the level and relative mix of
interest-earning assets and interest-bearing liabilities. The Company
is asset sensitive and as interest-earning assets mature or reprice more quickly
than interest-bearing liabilities in a given period, a significant decrease
in the market rates of interest could adversely affect net interest income.
In contrast, a rising interest rate environment could favorably impact the
Company's margin. Net interest income for the nine months ended September 30,
1996, increased $997,049 or 329.4%, to $1,299,703 from $302,654 for the same
period in 1995. Average interest-earning assets increased by $7.3 million,
or 36.0%, to $27.6 million, for the nine months ended September 30, 1996
compared to the same period in 1995. Average interest-bearing liabilities
increased $3.3 million or 17.4% over the same period. The average net
interest spread increased from 1.69% to 5.34%, which was caused by the
increase in average earning assets as discussed above. The Company's net
interest margin for the nine months ended September 30, 1996, was 6.28%,
compared to 1.99% for the same period in 1995. The improvement was primarily
related to discount accretion on purchased loans and higher volumes of
earning assets during the nine months ended September 30, 1996, compared to
the same period in 1995.
<PAGE>
ANALYSIS OF NET INTEREST INCOME
The following table presents information regarding yields on
interest-earning assets, expense on interest-bearing liabilities, and net
yields on interest-earning assets for the periods indicated:
<TABLE>
<CAPTION>
YEAR-TO-DATE
-------------------------------------------------------------------------------------
1996 1995
-------------------------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
ASSETS: BALANCE INTEREST RATE BALANCE INTEREST RATE
------------ -------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets
Loans $ 10,978,516 $1,409,126 $ 17.11% $ 3,530,041 $ 248,920 9.40%
Investment securities 11,351,687 562,625 6.61% 14,530,057 676,079 6.20%
Interest-bearing deposits and other 5,251,491 173,716 4.41% 2,222,277 111,611 6.70%
------------ ---------- --------- ----------- ---------- -----
Total earning assets 27,581,694 2,145,467 10.37% 20,282,376 1,036,570 6.81%
Non interest earning assets 974,993 400,431
------------ -----------
Total assets 28,556,687 20,682,807
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits
Passbook 2,347,878 46,428 2.64% 2,592,375 50,444 2.59%
NOW accounts 489,263 8,378 2.28% 397,163 6,670 2.24%
Certificates of deposit 19,441,687 785,150 5.38% 15,851,036 672,163 5.65%
Other borrowings 140,426 5,807 5.51% 125,000 4,638 4.95%
------------ ---------- ---------- ----------- ---------- ----
Total interest-bearing liabilities 22,419,253 845,764 5.03% 18,965,575 733,916 5.16%
Other liabilities 1,350,995 251,833
------------ -----------
Stockholders' equity 4,786,438 1,465,400
------------ -----------
Total liabilities and stockholders' equity 28,556,687 20,682,807
------------ -----------
Excess of interest earning assets over ------------ -----------
interest-bearing liabilities 5,162,440 1,316,801
------------ ---------- ----------- ----------
------------ ---------- ----------- ----------
Net interest income 1,299,703 302,654
---------- ----------
---------- ----------
Effective interest differential (spread) 5.34% 1.65%
------- -----
Net Yield on average interest earning assets 6.28% 1.99%
------- -----
------- -----
</TABLE>
RATE VOLUME ANALYSIS--NINE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1996 VS 1995
-------------------------------------------
INCREASE OR DECREASE
DUE TO CHANGE IN TOTAL
----------------------------
AVERAGE AVERAGE INCREASE
VOLUME RATE (DECREASE)
----------- ----------- ----------
<S> <C> <C> <C>
Variance in interest income on
Interest-earning assets:
Loans $ 9,129 $ 1,151,077 $ 1,160,206
Investment securities (499,986) 386,572 (113,414)
Interest-bearing deposits and other (23,695) 85,799 62,105
------------ ----------- ------------
Total interest-earning assets (514,551) 1,623,448 1,108,897
Interest-bearing deposits
Deposits
Passbook (35,215) 31,200 (4,016)
NOW accounts (3,931) 5,639 1,708
Certificates of deposit (397,355) 510,342 122,987
Other borrowings (2,901) 4,070 1,169
------------ ----------- ------------
Total interest-bearing liabilities (439,403) 551,251 111,848
------------ ----------- ------------
Change in net interest income (75,149) 1,072,198 997,049
------------ ----------- ------------
</TABLE>
<PAGE>
PROVISION FOR LOAN LOSSES
Management records the provision for loan losses in amounts that result
in an allowance for loan losses sufficient to cover all potential net
charge-offs and risks believed to be inherent in the loan portfolio.
Management's evaluation includes such factors as past loan loss experience as
related to current loan portfolio mix, evaluation of actual and potential
losses in the loan portfolio, prevailing regional and national economic
conditions that might have an impact on the portfolio, regular reviews and
examinations of the loan portfolio conducted by bank regulatory authorities,
and other factors that management believes deserve current recognition.
As a result of these factors, the provision for loan losses increased
$50,000 during the quarter ended September 30, 1996. The allowance for loan
losses as a percentage of loans and leases outstanding was 1.24% at September
30, 1996, compared to .85% at year-end 1995 and .23% at September 30, 1995.
Management believes that the allowance for loan losses, which is a general
reserve, is adequate to cover actual and potential losses in the loan
portfolio under current conditions.
Management is not aware of any significant risks in the current loan
portfolio due to concentrations of loans within any particular industry, nor
of any separate types of loans within a particular category of non-performing
loans that are unusually significant as to possible loan losses when compared
to the entire loan portfolio. No charge-offs on loans were recorded during
the third quarter of 1996 or for the comparable quarter in 1995.
INTEREST EXPENSE
Total interest expense increased $111,848 or 15.24%, compared to the nine
months ended September 30, 1996, due to higher new volumes of certificates of
deposit. The average cost of funds, including other borrowings, was 5.03% for
the first nine months of 1996 compared to 5.16% over the same period in 1995.
NONINTEREST INCOME
Noninterest income increased $93,670 in the first nine months of 1996
compared to the same nine months of 1995. Gains on sales of securities
classified as available for sale increased $22,063 during the period.
Service charges on deposit accounts, other service charges, loan review fees,
letter of credit fees and other miscellaneous income accounted for the
additional $71,607 during the period.
OTHER EXPENSE
Other expense increased $714,166 or 191.4%, compared to the first nine
months of 1995. Compensation expense increased $450,475 mainly as a result
of additions to staff early in the first quarter of 1996. In addition,
occupancy expense increased $47,462 as a result of rental of additional space
for corporate offices. Office, travel and entertainment, advertising,
depreciation and amortization expenses and other miscellaneous expenses
increased $173,916 due to the increased efforts to attract additional
customers. Professional fees increased $5,035 due to an accrual
increase in anticipation of higher year-end audit fees compared to the same
period in 1995.
LIQUIDITY
The Company's primary sources of funds are customer deposits, maturities
of investment securities, sales of "Available for Sale" securities, loan
sales, loan repayments, net income, advances from the Federal Home Loan Bank
of Pittsburgh, and the use of Federal Funds markets. Scheduled loan
repayments are relatively stable sources of funds while deposit inflows and
unscheduled loan prepayments are not. Deposit inflows and unscheduled loan
prepayments are influenced by general interest rate levels, interest rates
available on other investments, competition, economic conditions, and other
factors.
<PAGE>
Deposits are the Company's primary source of new funds. Total deposits
increased to $23.8 million or 14.4% at September 30, 1996, compared to $20.8
million as of December 31, 1995. A concerted effort has been made to attract
deposits in the market area served by the Bank through competitive pricing of
the Bank s retail deposit products. Increases over the period are due to
marketing efforts, and new business development programs initiated by
Company. Management anticipates that the Company will continue to rely on
customer deposits, maturity of investment securities, sales of "Available for
Sale" securities, loan sales, loan repayments, net income, Federal Funds
markets, and FHLB borrowings to provide liquidity. Although deposit balances
have shown historical growth, such balances may be influenced by changes in
the banking industry, interest rates available on other investments, general
economic conditions, competition and other factors. The following table
summarizes the composition of the Bank s deposit portfolio.
<TABLE>
<CAPTION>
September 30, December 31,
1995 1995
------------ -----------
<S> <C> <C>
DEPOSITS:
Demand $ 25,130 $ 4,186
Passbook 2,104,584 2,591,172
NOW Accounts 572,676 401,664
Certificates Under $100,00 18,588,760 16,026,887
Certificates Over $100,000 2,492,727 1,775,000
------------ -----------
Total Deposits $23,783,877 $20,798,909
------------ -----------
------------ -----------
</TABLE>
The following table represents the contractual maturity of time deposits
greater than $100,000 at September 30, 1996.
<TABLE>
<CAPTION>
0-90 91-365 1-5 Over 5
Days Days Years Years Totals
----- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Contractural Maturity $ -- $1,583,508 $782,443 $126,776 $2,492,727
---- ---------- -------- -------- ----------
</TABLE>
Other borrowings increased to $2.5 million at September 30, 1996,
compared to $0.0 as of December 31, 1995. Borrowings may be used on a
short-term basis to compensate for reductions in other sources of funds.
Borrowings may also be used on a long-term basis to support expanded lending
activities and to match maturities or repricing intervals of assets. The
sources of such funds will be Federal Funds purchased and borrowings from the
FHLB.
CAPITAL RESOURCES
Both the Company and the Bank are required to comply with certain
"risk-based" capital adequacy guidelines issued by the Federal Reserve Bank
("FRB") (for the Company) and the FDIC (for the Bank). The risk-based capital
guidelines assign varying risk weights to the individual assets held by a
bank. The guidelines also assign weights to the "credit-equivalent" amounts
of certain off-balance sheet items, such as letters of credit and interest
rate and currency swap contracts. Under these guidelines, institutions are
expected to meet minimum ratios for "qualifying total capital" and Tier 1
capital to risk-weighted assets of 8% and 4% respectively and a minimum
leverage ratio (the ratio of Tier 1 capital to total average assets) of 3%
plus an additional amount equal to between 1% and 2%. As used in the
guidelines, "Tier 1 capital" includes common stockholders' equity, certain
qualifying perpetual preferred stock and minority interests in the equity
accounts of consolidated subsidiaries, less goodwill. "Tier 2 capital"
components (limited in the aggregate to one-half of total qualifying capital)
include allowances for credit losses (within certain limits), certain excess
levels of preferred stock and certain types of "hybrid" capital instruments.
subordinated debt and other preferred stock. The subordinated debt component
of Tier 2 capital is reduced by 20% per year over the last five years of the
term of any subordinated debt.
<PAGE>
The following table sets forth the regulatory capital ratios of the
Company and its subsidiary Peoples Thrift Savings Bank as of September 30,
1996, together with the minimum ratios required under the regulation for an
institution to be deemed "well capitalized".
<TABLE>
<CAPTION>
Tier 1 Capital Total Capital
to Risk-Weighted to Risk-Weighted
Leverage Ratio(1) Assets Ratio Assets Ratio
----------------- ---------------- ----------------
<S> <C> <C>
ENTITY:
The Company 16.24% 32.78% 34.03%
Peoples Thrift Savings Bank 15.17% 31.16% 32.41%
"Well capitalized" institution (under FDIC Regulations) 5.00% 6.00% 10.00%
</TABLE>
- ----------
(1) The "leverage ratio" is the ratio of Tier 1 capital to total average assets.
RECENT DEVELOPMENTS
The Company has reached a tentative agreement to acquire Keystone
Savings Bank. Consummation of the transaction is subject to a number of
conditions including but not limited to, the negotiation of the terms of a
definitive agreement and completion of due diligence. Keystone operates
offices in Malvern and Germantown, Pennsylvania.
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
-----------------
Not Applicable
ITEM 2. CHANGES IN SECURITIES
---------------------
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not Applicable
ITEM 5. OTHER INFORMATION
-----------------
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(A) Exhibits
Page No. in Sequential
Exhibit No. Numbering System
----------- ----------------
4. Articles and Bylaws *
27. Financial Data Schedule
(B) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
_______________________________
* Incorporated by reference from the Registration Statement on Form SB-2
of the Company, as amended, Registration No. 00027244
<PAGE>
SIGNATURES
In accordance with 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, in the City of Philadelphia,
Commonwealth of Pennsylvania.
USABANCSHARES, INC.
Date: November 13, 1996 By: /s/ Kenneth L. Tepper
-------------------------------
Kenneth L. Tepper,
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 13, 1996 By: /s/ David J. Torpey
----------------------------------
David J. Torpey,
Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 85,655
<INT-BEARING-DEPOSITS> 2,966,474
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,905,969
<INVESTMENTS-CARRYING> 8,840,847
<INVESTMENTS-MARKET> 8,730,064
<LOANS> 14,899,835
<ALLOWANCE> 185,000
<TOTAL-ASSETS> 31,327,851
<DEPOSITS> 23,783,877
<SHORT-TERM> 2,500,000
<LIABILITIES-OTHER> 129,940
<LONG-TERM> 0
0
0
<COMMON> 597,082
<OTHER-SE> 4,316,952
<TOTAL-LIABILITIES-AND-EQUITY> 31,327,851
<INTEREST-LOAN> 1,409,126
<INTEREST-INVEST> 562,625
<INTEREST-OTHER> 173,716
<INTEREST-TOTAL> 2,145,467
<INTEREST-DEPOSIT> 839,957
<INTEREST-EXPENSE> 845,764
<INTEREST-INCOME-NET> 1,299,703
<LOAN-LOSSES> 125,000
<SECURITIES-GAINS> 22,063
<EXPENSE-OTHER> 1,087,231
<INCOME-PRETAX> 183,562
<INCOME-PRE-EXTRAORDINARY> 183,562
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 183,562
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.54
<LOANS-NON> 250,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 60,000
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 185,000
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 185,000
</TABLE>
