<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
Form 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarter Ended March 31, 1997
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)
Pennsylvania 23-2806495
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
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 May 14, 1997: 550,697 shares
Class B Common Stock, $.01 par value, outstanding on May 14, 1997: 10,000 shares
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION Page #
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Statements of Changes in Stockholders' Equity 5
Consolidated Statements of Cash Flows 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 1. Legal Proceedings 16
Item 2. Change in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
<PAGE>
USABancShares, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and Due from banks $ 157,881 $ 198,154
Interest-bearing deposits with banks 516,383 4,016,032
------------ ------------
Total cash and cash equivalents 674,264 4,214,186
Investment securities:
Investments available for sale 7,661,474 6,097,627
Investments held to maturity (fair value; 1997 - $11,734,935,
1996 - $10,230,574) 11,812,305 10,227,119
------------ ------------
Total investment securities 19,473,779 16,324,746
FHLB Stock 153,600 250,000
Loans 18,146,907 16,711,562
Allowance for loan losses (207,079) (182,079)
------------ ------------
Loans, net 17,939,828 16,529,483
Premises and Equipment, net 156,627 145,421
Goodwill 125,995 128,285
Other assets 777,777 553,378
------------ ------------
Total assets $ 39,301,870 $ 38,145,499
============ ============
LIABILITIES
Deposits:
Demand $ 85,541 $ 58,659
Passbook 2,135,505 2,029,694
NOW accounts 1,133,183 891,640
Certificates of deposit 27,603,227 24,993,154
------------ ------------
Total deposits 30,957,456 27,973,147
Other borrowed money 3,155,000 5,050,000
Other liabilities 229,331 227,505
------------ ------------
Total liabilities $ 34,341,787 $ 33,250,652
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 (99,610) (152,574)
Unearned compensation, Class B common stock (398,055) (425,195)
Stock subscription receivable 0 0
Unrealized gain (loss) on securities available-for-sale (17,035) (2,167)
------------ ------------
Total stockholders' equity 4,960,083 4,894,847
------------ ------------
Total liabilities and stockholders' equity $ 39,301,870 $ 38,145,499
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE>
USABancShares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1997 1996
--------- --------
Interest income:
<S> <C> <C>
Loans 582,028 231,270
Investment securities 313,638 164,625
Interest-bearing deposits and other 29,360 100,630
--------- --------
925,026 496,525
Interest expense:
Passbook 12,584 16,379
NOW Accounts 3,248 2,643
Certificates of deposit 382,889 258,148
Other borrowings 47,980 --
--------- --------
446,701 277,170
--------- --------
Net interest income 478,325 219,355
Provision for loan losses 25,000 --
--------- --------
Net interest income after provision for loan losses 453,325 219,355
--------- --------
Non-interest income
Gain on sales of investment securities 6,552 22,063
Other 10,845 40,238
--------- --------
17,397 62,301
Non-interest expense:
Compensation 199,932 165,555
Occupancy 39,575 27,226
Data processing 15,455 13,216
Professional fees 31,264 6,265
Advertising 6,571 5,072
Insurance 12,752 5,853
Office 19,241 10,282
Travel & Entertainment 11,771 10,952
Depreciation and Amortization 13,189 14,807
Other 36,962 13,743
--------- --------
386,712 272,971
--------- --------
Income before income taxes 84,010 8,685
Provision for income taxes 31,046 --
--------- --------
Net income (loss) $ 52,964 $ 8,685
========= ========
Earnings per common share - primary and fully diluted $ 0.09 $ 0.01
Weighted average shares outstanding 597,082 597,082
</TABLE>
4
<PAGE>
USABancShares, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the three months ended March 31, 1997
(unaudited)
<TABLE>
<CAPTION>
Unearned Net
Additional compensation unrealized
Common paid-in Accumulated Class B gain on
Stock capital deficit Common Stock AFS securities Total
----- ------- ------- ------------ -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $597,082 $4,877,701 ($152,574) ($425,195) ($2,167) $4,894,847
Net unrealized loss on
securities available-for-sale - - - - (14,868) (14,868)
Amortization of unearned
compensation Class B common stock - - - 27,140 - 27,140
Receipt of stock subscription receivable - - - - - -
Net income - - 52,964 - - 52,964
------- --------- ------- -------- ------- ---------
Balance at March 31, 1997 $597,082 $4,877,701 ($99,610) ($398,055) ($17,035) $4,960,083
======= ========= ======= ======== ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
USABancShares, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF CASH FLOWS
For the three months ended March 31,
(unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net Income $ 52,964 $ 8,685
Adjustments to reconcile net income to cash provided
by operating activities
Depreciation and amortization 10,899 14,807
Net accretion of discounts on purchased loan portfolios (162,613) (13,357)
Provision for loan losses 25,000 --
Net amortization of investment securities premiums/discounts 7,317 4,192
Amortization of Class B Stock 27,140 --
Gain on sale of investments available for sale (6,552) (22,063)
Net (increase) decrease in other assets (224,399) 81,610
Net increase (decrease) in other liabilities 1,826 (169,616)
Decrease in goodwill 2,290 --
------------ -----------
Net cash from operating activities (266,128) (95,742)
------------ -----------
Cash flows from investing activities
Proceeds from sale of investment securities available-for-sale 1,019,458 1,482,188
Purchase of investment securities available-for-sale (2,615,250) (1,742,975)
Purchase of investment securities held-to-maturity (1,846,188) (1,399,500)
Repayments of principal on investment securities held-to-maturity 253,773 351,891
Repayments of principal on investment securities available-for-sale 23,540 34,040
Redemptions of FHLB stock 96,400 --
Net increase in loans (1,272,731) (1,721,361)
Purchases of premises and equipment (22,105) (15,898)
------------ -----------
Net cash from investing activities (4,363,103) (3,011,615)
------------ -----------
Cash flows from financing activities
Net increase in demand deposits and savings accounts 374,236 444,339
Net increase in certificates of deposit 2,610,073 597,165
Net decrease in FHLB borrowings (2,000,000) --
Net increase (decrease) in other borrowed funds 105,000 (56,100)
------------ -----------
Net cash from financing activities 1,089,309 985,404
------------ -----------
Net increase (decrease) in cash and cash equivalents (3,539,922) (2,121,953)
Cash and cash equivalents, beginning of period 4,214,186 8,094,133
------------ -----------
Cash and cash equivalents, end of period $ 674,264 $ 5,972,180
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
6
<PAGE>
USABancShares, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited 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.
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 three months ended
March 31, 1997, are not necessarily indicative of results to be anticipated for
the full year.
2. PER SHARE DATA
Income per common share data is based on the weighted average number of shares
outstanding of 597,082 and 597,082 at March 31, 1997 and 1996 respectively.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
For Three Months Ended
Selected Financial Condition Data: 3/31/97 12/31/96 3/31/96
- ---------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Total assets $ 39,301,870 $ 38,145,499 $ 26,703,743
Loans receivable, net 17,939,828 16,529,483 8,731,915
Securities 19,473,779 16,324,746 11,448,524
Deposits 30,957,456 27,973,147 21,480,413
Total borrowings 3,155,000 5,050,000 --
Stockholders' equity 4,960,083 4,894,847 4,700,082
Selected Operations Data:
- -------------------------
Total interest income $ 925,026 $ 796,679 $ 496,525
Total interest expense 446,701 379,352 277,170
------------ ------------ ------------
Net interest income 478,325 417,327 219,355
Provision for loan losses 25,000 -- --
------------ ------------ ------------
Net interest income after provision for loan losses 453,325 417,327 219,355
Total noninterest income 17,397 7,142 62,301
Total noninterest expense 386,712 413,767 272,971
------------ ------------ ------------
Income before income taxes 84,010 10,702 8,685
Income tax provision 31,046 (a) 67,995 --
------------ ------------ ------------
Net income $ 52,964 $ (57,293) $ 8,685
============ ============= ============
Selected Financial Ratios and Other Data:
- -----------------------------------------
Performance Ratios:
Return on assets (ratio of net income to average total assets) 0.55% -0.66% 0.13%
Return on equity (ratio of net income to average equity) 4.30% -4.67% 0.74%
Tier 1 risk-based capital 23.20% 24.60% 40.06
Total risk-based capital 24.26% 25.60% 15.56
</TABLE>
(a) Represents income tax expense for the entire twelve month period ended
December 31, 1996.
7
<PAGE>
USABancShares, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 1997
This report contains "forward-looking" statements. USABancShares, Inc. (the
"Company") desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Act of 1995 and is including this statement for
the express purpose of availing itself of such safe harbor with respect to such
statements. Examples of forward-looking statements include, but are not limited
to (a) statements of plans and objectives of the Company or its management or
Board of Directors, (b) statements of future economic performance and (c)
statements of assumptions underlying other statements and statements about the
Company or its business. 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 1996 Annual Report on Form 10-KSB. Results of operations
for the three month period ended March 31, 1997 are compared to the unaudited
results of operations for the period ended March 31, 1996. Such information is
based upon the historical financial information available as of that date.
Results of operations for the three month period ended March 31, 1997 are not
necessarily indicative of results to be attained for any other period.
RESULTS OF OPERATIONS
NET INCOME
The Company reported net income of $52,964, or $.09 per share, for the three
months ended March 31, 1997, compared to $8,685, or $.01 per share for the three
months ended March 31, 1996, representing a 509.8% increase. The increase in net
income was primarily the result of an increase in net interest income of
$258,970 due to discount accretion on purchased loans as well as interest
earning asset growth. This was partially offset by a decrease in noninterest
income of $44,904 an increase in noninterest expense of $113,741 an increase in
the provision for loan losses of $25,000 and an increase in income tax expense
of $31,046.
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 the mix of
rates and volume of interest-earning assets and interest-bearing liabilities
that occur over time. 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. Net interest
income for the three months ended March 31, 1997, increased $258,970, or
118.1%, to $478,325 from $219,355 for the same period in 1996. Average
interest-earning assets increased by $11.0 million, or 41.4%, to $37.6 million,
for the three months ended March 31, 1997 compared to the same period in 1996.
Average interest-bearing liabilities increased $10.7 million or 49.3% over the
same period. The average net interest spread increased from 2.35% to 4.32%,
resulting from the increase in average earning assets as discussed above. The
Company's net interest margin for the three months ended March 31, 1997, was
5.09%, compared to 3.29% for the same period in 1996. The improvement was
primarily related to discount accretion on purchased loans and higher volumes of
earning assets during the three months ended March 31, 1997, compared to the
same period in 1996.
8
<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>
Three Months Ended March 31,
---------------------------------------------------------------------------
1997 1996
------------------------------------ ------------------------------------
Average Average Average Average
Assets: Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans $17,429,235 $ 582,028 13.36% 9,494,071 $ 231,270 9.74%
Investment securities 17,910,935 313,638 7.00% 9,971,413 164,625 6,60%
Interest-bearing deposits and other 2,266,207 29,360 5.18% 7,178,093 100,630 5.61%
---------- ------- ---- ---------- ------- ----
Total earning assets 37,606,377 925,026 9.84% 26,643,577 496,525 7.45%
Non interest earning assets 1,117,308 919,578
---------- ----------
Total assets $38,723,685 $27,563,155
========== ==========
Liabilities and Stockholders' Equity:
Deposits:
Passbook 2,082,600 12,584 2.42% 2,638,356 16,379 2.48%
NOW accounts 1,012,412 3,248 1.28% 533,621 2,643 1.98%
Certificates of deposit 26,298,190 382,889 5.82% 18,561,389 258,148 5.56%
Other borrowings 3,000,000 47,980 6.40% 0 0 0.00%
---------- ------- ---- ---------- ------- ----
Total interest-bearing liabilities 32,393,202 446,701 5.52% 21,733,366 277,170 5.10%
Other liabilities 1,403,018 1,431,054
---------- ---------
Stockholders' equity 4,927,465 4,398,735
---------- ----------
Total liabilities and stockholders' equity $38,723,685 $27,563,155
========== ==========
Excess of interest earning assets over ---------- ----------
interest-bearing liabilities $ 5,213,175 $ 4,910,211
========== ========== -------
Net interest income 478,325 219,355
------- -------
Effective interest differential (spread) 4.32% 2.35%
---- ----
Net yield on average interest earning assets 5.09% 3.29%
==== ====
</TABLE>
9
<PAGE>
RATE VOLUME ANALYSIS
The following schedule presents the dollar amount of changes in interest income
and interest expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between changes (a) related to
outstanding balances and (b) due to the changes in interest rates. Information
is provided in each category with respect to: (i) changes attributable to
changes in volume (changes in volume multiplied by prior rate); (ii) changes
attributable to changes in rate (changes in rate multiplied by prior volume);
and (iii) the net change in rate/volume (change in rate multiplied by change in
volume). The changes attributable to the combined impact of volume and rate have
been allocated proportionately to the changes due to volume and the changes due
to rate.
<TABLE>
<CAPTION>
March 31, 1997 vs March 31, 1996
-----------------------------------------------
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 $ 242,951 $ 107,807 $ 350,758
Investment securities 138,466 10,547 149,013
Interest-bearing deposits and other (64,158) (7,112) (71,270)
--------- --------- ---------
Total interest-earning assets 317,259 111,242 428,501
Interest-bearing deposits
Deposits:
Passbook $ (3,369) $ (426) $ (3,795)
NOW accounts 996 (391) 605
Certificates of deposit 112,135 12,606 124,741
Other borrowings 47,980 -- 47,980
--------- --------- ---------
Total interest-bearing liabilities 157,742 11,789 169,531
--------- --------- ---------
Change in net interest income $ 159,517 $ 99,453 $ 258,970
========= ========= =========
</TABLE>
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 management's evaluation of
these factors, the provision for loan losses increased $25,000 during the
quarter ended March 31, 1997. The allowance for loan losses as a percentage of
loans and leases outstanding was 1.14% at March 31, 1997, compared to 1.09% at
December 31, 1996 and .68% at March 31, 1996. 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 with respect to possible loan losses when
compared to the entire loan portfolio. No charge-offs on loans were recorded
during the first quarter of 1997 or for the comparable quarter in 1996.
10
<PAGE>
INTEREST EXPENSE
Total interest expense increased $169,531 or 61.2%, compared to the three months
ended March 31, 1996, due to a higher volume of new certificates of deposit and
Federal Home Loan Bank ("FHLB") Advances. The average cost of funds, including
other borrowings, was 5.52% for the first three months of 1997 compared to 5.10%
over the same period in 1996.
NONINTEREST INCOME
Noninterest income decreased $44,904 or 72.1% in the first three months of 1997
compared to the same three months of 1996. An accrual adjustment recorded during
the quarter ended March 31, 1996, relating to the period ended December 31,
1995, accounted for $30,064 of this decrease. Gains on sales of securities
classified as available-for-sale decreased $15,511 and service charges on
deposit accounts, other service charges, loan review fees, letter of credit fees
and other miscellaneous income increased $671 during the period.
OTHER EXPENSE
Other expense increased an aggregate of $113,741 or 41.7%, compared to the first
three months of 1996. Compensation expense increased $34,377 due to the hiring
of additional personnel. Occupancy expense, office, travel and entertainment,
advertising, depreciation and amortization expenses and other miscellaneous
expenses increased $54,365 as a result of the increased efforts to attract
additional customers. Professional fees increased $24,999 due an increase in
outside consulting and legal services provided during the quarter.
INCOME TAX EXPENSE
Income tax expense increased to $31,046 compared to the first three months of
1996. The Company did not record an income tax provision for the period ended
March 31, 1996 because of prior net operating losses which were utilized during
the first quarter of 1996.
11
<PAGE>
LOAN PORTFOLIO
Loans receivable, (net of the allowance for loan losses, unearned fees and
origination costs and loans in process) were $17.9 million at March 31, 1997
compared to $16.5 million at December 31, 1996. Loans receivable represented
45.6% of total assets and 57.9% of total deposits as of March 31, 1997 compared
to 43.3% and 58.9%, respectively, at December 31, 1996. The following table
summarizes the loan portfolio of the Bank by loan category and amount at March
31, 1997, compared to December 31, 1996:
(Dollars in thousands)
31-Mar-97 31-Dec-96
------------------ ------------------
1997 % 1996 %
------------------ ------------------
Real estate $15,399 85.9% $14,648 88.6%
Commercial and industrial 1,718 9.6% 1,138 6.9%
Other 1,760 9.8% 1,226 7.4%
------- ---- ------- ----
Total loans 18,877 105.3% 17,012 102.9%
Less:
Loans in process 623 3.5% 215 1.3%
Unearned income 107 0.6% 86 0.5%
Allowance for loan losses 207 1.2% 182 1.1%
------- ---- ------- ----
Net loans $17,940 100.0% $16,529 100.0%
====== ===== ====== =====
On March 31, 1997, the net book value of nonaccrual loans was approximately
$244,000 compared to $120,985 at December 31, 1996. These amounts represented
nonaccrual balances on discounted commercial and residential real estate loans
purchased by the Bank from the FDIC during 1996 and not on balances originated
directly by the Bank. There were no troubled debt restructured loans as of March
31, 1997. The Bank will recognize income on nonaccrual loans, under the cash
basis, when the loans are brought current as to outstanding principal and
collateral on the loan is sufficient to cover the outstanding obligation to the
Bank.
The following table summarizes the changes in the Bank's allowance for loan
losses for the period ended March 31, 1997, compared to December 31, 1996:
1997 1996
--------- ---------
Balance at beginning of period $ 182,079 $ 60,000
--------- ---------
Additions:
Allowance of acquired banks -- --
Provision for loan losses 25,000 125,000
--------- ---------
Total additions 25,000 125,000
--------- ---------
Deductions:
Loan losses -- (2,921)
Less recoveries on loans -- --
Net loan losses -- --
--------- ---------
Balance at end of period $ 207,079 $ 182,079
--------- ---------
12
<PAGE>
INVESTMENT PORTFOLIO
The following table presents the book values and estimated market values at
March 31, 1997, and December 31, 1996, respectively, for each major category of
the Bank's investment securities:
<TABLE>
<CAPTION>
March 31, 1997
-------------------------------------------------------------------------
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Available for Sale
U.S. Government agency securities $ 5,362,509 $ -- $ 10,357 $ 5,352,152
Mortgage-backed securities 1,839,902 -- 9,704 1,830,198
Other securities 479,124 -- -- 479,124
----------- -------- ------------ -----------
Total available for sale 7,681,535 $ -- $ 20,061 $ 7,661,474
=========== ======== ============ ===========
Held to Maturity
U.S. Government agency securities $ 3,344,406 $ -- $ 14,574 $ 3,329,832
Mortgage-backed securities 6,562,631 -- 55,543 6,507,088
Other securities 1,905,268 -- 7,253 1,898,015
----------- -------- ------------ -----------
Total held to maturity $11,812,305 $ -- $ 77,370 $11,734,935
=========== ======== ============ ===========
December 31, 1996
-------------------------------------------------------------------------
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ----------- ------------- ------------
Available for Sale
U.S. Government agency securities $ 3,614,740 $ 28,850 $ -- $ 3,643,590
Mortgage-backed securities 1,863,115 6,037 -- 1,869,152
Other securities 623,055 -- 38,170 584,885
----------- ----------- ----------- -----------
Total available for sale $ 6,100,910 $ 34,887 $ 38,170 $ 6,097,627
=========== =========== =========== ===========
Held to Maturity
U.S. Government agency securities $ 1,498,179 $ -- $ 1,884 $ 1,496,295
Other securities 1,908,902 1,737 -- 1,910,639
Mortgage-backed securities 6,820,038 3,602 -- 6,823,640
----------- ----------- ----------- -----------
Total held to maturity $10,227,119 $ 5,339 $ 1,884 $10,230,574
=========== =========== =========== ===========
</TABLE>
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 FHLB, and the use of Federal
Funds markets. Scheduled loan repayments are relatively stable sources of funds
while deposit inflows and unscheduled loan prepayments may fluctuate. 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. Deposits are the Company's primary source of new
funds. Total deposits increased 10.7% to $31.0 million at March 31, 1997,
compared to $28.0 million as of December 31, 1996. The Bank has made a concerted
effort to attract deposits in the market area served by the Bank through
competitive pricing of the its retail deposit products.
13
<PAGE>
Increases over the period were due to marketing efforts, and new business
development programs initiated by Company. Management anticipates that the
Company will continue relying 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 in general, 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>
31-Mar-97 31-Dec-96
----------------------------------- ----------------------------------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Demand $ 85,541 0.28% $ 58,659 0.21%
NOW Accounts 1,133,183 3.66% 891,640 3.19%
Passbook 2,135,505 6.90% 2,029,694 7.26%
Certificates of deposit 27,603,227 89.16% 24,993,154 89.34%
----------- ------- ----------- -------
$30,957,456 100.00% $27,973,147 100.00%
=========== ======= =========== =======
</TABLE>
The following table summarizes the maturity composition of certificates of
deposit at March 31, 1997, compared to December 31, 1996:
<TABLE>
<CAPTION>
31-Mar-97 31-Dec-96
----------------------------------- ----------------------------------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Within one year $13,750,628 49.81% $13,968,430 55.90%
Over one year through two years 6,364,666 23.06% 4,199,501 16.80%
Over two years through three years 4,449,025 16.12% 4,289,518 17.16%
Over three years through five years 1,763,902 6.39% 1,322,451 5.29%
Over five years through ten years 1,275,006 4.62% 1,213,254 4.85%
----------- ------- ----------- -------
$27,603,227 100.00% $24,993,154 100.00%
=========== ======= =========== =======
</TABLE>
Other borrowings decreased to $3.2 million at March 31, 1997, compared to $5.1
million as of December 31, 1996. This decrease was the result of the scheduled
maturity of an FHLB advance during the quarter. 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.
14
<PAGE>
The following table sets forth the regulatory capital ratios for the Bank as of
March 31, 1997 and December 31, 1996 together with the minimum ratios required
under the regulation for an institution to be deemed "well capitalized".
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
For the Bank: Actual: Adequacy Purposes: Action Provisions:
------------- ----------------------- --------------------- ----------------------
As of March 31, 1997: Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(to Risk Weighted Assets) $4,769 24.3% $1,573 8.0% $1,966 10.0%
Tier I Capital
(to Risk Weighted Assets) $4,562 23.2% 786 4.0% $1,180 6.0%
Tier I Capital
(Average Assets) $4,562 11.9% $1,539 4.0% $1,924 5.0%
As of December 31, 1996:
Total Capital
(to Risk Weighted Assets) $4,657 25.6% $1,458 8.0% $1,822 10.0%
Tier I Capital
(to Risk Weighted Assets) $4,475 24.6% $ 729 4.0% $1,093 6.0%
Tier I Capital
(Average Assets) $4,475 12.9% $1,387 4.0% $1,734 5.0%
</TABLE>
RECENT DEVELOPMENTS
On April 11, 1997, the Company consumated the acquisition of the Knox Financial
Services Group, Inc. ("Knox"), a registered securities broker/dealer. The
Company acquired all of the outstanding shares of common stock of Knox in
exchange for 7,895 restricted shares of the Company's common stock. Knox has
been renamed USACapital, Inc. ("USACapital"). USACapital will continue Knox's
retail brokerage business under the direction of its current principals.
15
<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
March 31, 1997.
- ------------------
* Incorporated by reference from the Registration Statement on Form SB-2 of
the Company, as amended, Registration No. 00027244
16
<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: May 14, 1997 By: /s/ Kenneth L. Tepper
-----------------------------------------
Kenneth L. Tepper,
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1997 By: /s/ David J. Torpey
----------------------------------------
David J. Torpey,
Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
17
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 157,881
<INT-BEARING-DEPOSITS> 516,383
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,661,474
<INVESTMENTS-CARRYING> 11,812,305
<INVESTMENTS-MARKET> 11,734,935
<LOANS> 18,146,907
<ALLOWANCE> 207,079
<TOTAL-ASSETS> 39,301,870
<DEPOSITS> 30,957,456
<SHORT-TERM> 3,155,000
<LIABILITIES-OTHER> 229,331
<LONG-TERM> 0
0
0
<COMMON> 597,082
<OTHER-SE> 4,363,001
<TOTAL-LIABILITIES-AND-EQUITY> 39,301,870
<INTEREST-LOAN> 582,028
<INTEREST-INVEST> 313,638
<INTEREST-OTHER> 29,360
<INTEREST-TOTAL> 925,026
<INTEREST-DEPOSIT> 398,721
<INTEREST-EXPENSE> 446,701
<INTEREST-INCOME-NET> 478,325
<LOAN-LOSSES> 25,000
<SECURITIES-GAINS> 6,552
<EXPENSE-OTHER> 386,712
<INCOME-PRETAX> 84,010
<INCOME-PRE-EXTRAORDINARY> 84,010
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,964
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
<YIELD-ACTUAL> 5.09
<LOANS-NON> 244,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 182,079
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 207,079
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 207,079
</TABLE>
