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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One):
| x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]. |
For the fiscal year ended December 31, 2003
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]. |
For the transition period from to
Commission file number 0-14549
A. Full title of the plan and the address of the plan, if different from that of the issuer named below: United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions)
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: United Security Bancshares, Inc., 131 West Front Street, P.O. Box 249, Thomasville, Alabama 36784
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United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions)
Audited Financial Statements and Supplemental Schedule – (Modified Cash Basis)
As of December 31, 2003 and 2002 and for the year ended December 31, 2003
| 1 | ||
Audited Financial Statements | ||
| 3 | ||
| 4 | ||
| 5 | ||
Supplemental Schedule | ||
Schedule H, Line 4i, Schedule of Assets (Held at End of Year) | 10 | |
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Report of Independent Registered Public Accounting Firm
Audit Committee of United Security Bancshares, Inc.
We have audited the accompanying statement of net assets available for benefits (modified cash basis) of the United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions) as of December 31, 2003, and the related statement of changes in net assets available for benefits (modified cash basis) for the year then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions) for the year ended December 31, 2002, were audited by other auditors whose report dated October 1, 2003, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As described in Note 1, these financial statements and the supplemental schedule were prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than U.S. generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in all material respects, information regarding the Plan’s net assets available for benefits (modified cash basis) as of December 31, 2003, and the changes in its net assets available for benefits (modified cash basis) for the year ended December 31, 2003, on the basis of accounting described in Note 1.
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Our audit was performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2003, is presented for purpose of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
Birmingham, Alabama
June 23, 2004
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United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions)
Statements of Net Assets Available for Benefits (Modified Cash Basis)
| December 31 | ||||||
| 2003 | 2002 | |||||
Assets | ||||||
Cash, and cash equivalents | $ | 11,621 | $ | 28 | ||
Investments, at fair value | 11,532,764 | 6,513,283 | ||||
Dividends receivable | 44,923 | 40,869 | ||||
Net assets available for benefits | $ | 11,589,308 | $ | 6,554,180 | ||
See accompanying notes.
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United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions)
Statement of Changes in Net Assets Available for Benefits (Modified Cash Basis)
| Year ended December 31, 2003 | |||
Additions | |||
Company contributions | $ | 453,700 | |
Participant contributions | 569,927 | ||
Rollovers and transfers | 22,542 | ||
Interest and dividend income | 201,871 | ||
Net appreciation in fair value of investments | 4,092,890 | ||
| 5,340,930 | |||
Deductions | |||
Payments to participants | 304,178 | ||
Life insurance premiums | 1,624 | ||
| 305,802 | |||
Net increase | 5,035,128 | ||
Net assets available for benefits at beginning of year | 6,554,180 | ||
Net assets available for benefits at end of year | $ | 11,589,308 | |
See accompanying notes.
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United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions)
1. Summary of Significant Accounting Policies
Basis of Presentation
The financial statements of the United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions) (the Plan) have been prepared on the modified cash basis of accounting, which is a comprehensive basis of accounting other than U.S. generally accepted accounting principles. The modified cash basis of accounting is an acceptable alternative method of reporting under regulations issued by the Department of Labor. Income on securities is recorded on the accrual basis and investments are recorded at fair value as stated below. All other transactions are recorded on the cash basis.
Reclassifications
Certain amounts in the prior years’ financial statements have been reclassified to conform to the 2003 presentation. These reclassifications had no effect on net assets available for benefits.
Investment Valuation
The Plan’s investments in cash equivalents are stated at fair value, which approximates cost. The shares of mutual funds, pooled bond funds, and common stock are valued at quoted market prices on the last business day of the plan year.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.
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United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions)
Notes to Financial Statements (continued)
2. Description of the Plan
The following description of the Plan provides only general information. Participants should refer to the Plan Document for a more complete description of the Plan’s provisions.
General
The Plan is a controlled group defined contribution plan, which provides savings benefits for substantially all employees of the following controlled group of United Security Bancshares, Inc. (collectively, the Company):
United Security Bancshares (parent company)
First United Security Bank
Acceptance Loan Company
First Courier Corporation
The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Contributions
Each year, participants may contribute up to a total of 15% of pretax annual compensation, as defined in the Plan. Participants may also rollover amounts representing distributions from other qualified defined benefit or defined contribution plans and conduit IRAs. The Company may, at its discretion, match 100% of the participants’ pretax deferrals up to a total of 6% of base compensation that a participant contributes to the Plan.
Participant Accounts
Each participant’s account is credited with the participant’s contributions, the Company’s match and Plan earnings. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account. There are no non-participant directed investments within the Plan.
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United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions)
Notes to Financial Statements (continued)
2. Description of the Plan (continued)
Vesting
Employees are eligible to participate in the Plan on the first day of the month following their initial date of service. Effective January 1, 2003, participants are immediately vested in their contributions, the Company matching contributions and the earnings thereon. Prior to January 1, 2003, participants are immediately vested in their contributions, but are subject to a 6-year vesting schedule in employer contributions.
Forfeitures
Prior to January 1, 2003, Participants who were not credited with at least 1,000 hours of service during the Plan year forfeited any employer contributions received for that Plan year. The forfeitures are used to reduce future employer contributions to the Plan. Effective January 1, 2003, participants are immediately vested in their contributions; therefore, the Plan no longer has forfeitures to reduce future employer contributions to the Plan.
Payment of Benefits
Upon termination of service, death, disability or retirement, a participant may receive a lump sum amount or a benefit in the form of an annuity equal to the vested value of his or her account. As of December 31, 2003, $17,032 had been requested, approved and processed for payment but not yet paid.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. Participants are always 100 percent vested in their contributions.
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United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions)
Notes to Financial Statements (continued)
3. Investment Information
During 2003, the Plan’s investments (including investments bought, sold, as well as held during the year) appreciated (depreciated) in fair value as determined by quoted market prices as follows:
U.S. government securities | $ | (2,096 | ) | |
Common stock, United Security Bancshares, Inc. | 3,553,695 | |||
Mutual funds | 517,353 | |||
Total | $ | 4,068,952 | ||
The fair values of individual investments that represent 5% or more of the Plan’s net assets are as follows:
| 2003 | 2002 | |||||
Common stock, United Security Bancshares, Inc. | $ | 7,222,272 | $ | 3,841,492 | ||
American Century 20th Century Ultra Advanced Fund | 1,155,390 | 827,103 | ||||
4. Transactions with Parties-in-Interest
During the year ended December 31, 2003, the Plan purchased 3,348 shares at a cost of $150,000 and sold 7,089 shares for $19,228 of United Security Bancshares Inc. Common Stock.
On July 24, 2003, the Plan received shares of United Security Bancshares, Inc., Common Stock as result of a 2-for-1 stock split declared on June 19, 2003 to shareholders of record at the close of business on June 30, 2003.
The Company pays for all legal, accounting and other services on behalf of the Plan.
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United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions)
Notes to Financial Statements (continued)
5. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service dated June 21, 2002, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the “Code”) and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the Internal Revenue Service, the Plan was amended and restated. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The plan sponsor has indicated that it will take the necessary steps, if any, to bring the Plan’s operations into compliance with the Code.
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Supplemental Schedule
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United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions)
(Plan Number 001)
(Employer Identification Number 63-0318800)
Schedule of Assets (Held at End of Year)
December 31, 2003
(a) | (b) Identity of Issue, Borrower, Lessor, or Similar Party | (c) Description of Investment including Maturity Date, | (d) Cost | (e) Current Value | ||||||
* | United Security Bancshares, Inc. Common Stock | 249,474 shares | * | * | $ | 7,222,272 | ||||
Accessor US Gov’t Money Market Fund | 139,314 shares | * | * | 139,314 | ||||||
Federated Prime Obligation Fund | 790,918 shares | * | * | 790,918 | ||||||
GNMA Pool 9% due 1/15/2018 | 1,080 shares | * | * | 1,208 | ||||||
GNMA Pool 9% due 8/15/2017 | 2,846 shares | * | * | 3,181 | ||||||
Accessor Aggressive Growth Fund | 3,880 shares | * | * | 50,244 | ||||||
Accessor Growth Fund | 5,304 shares | * | * | 72,241 | ||||||
Accessor Balanced Fund | 4,598 shares | * | * | 66,159 | ||||||
American Century 20th Century Ultra Fund | 43,765 shares | * | * | 1,155,390 | ||||||
American Century 20th Century Int’l Fund | 18,100 shares | * | * | 143,531 | ||||||
Dreyfus S&P 500 Index Fund | 8,321 shares | * | * | 269,836 | ||||||
Federated Stock Trust | 14,797 shares | * | * | 507,091 | ||||||
Federated Kaufman Fund | 45,801 shares | * | * | 227,174 | ||||||
Federated Capital Appreciation Fund | 7,064 shares | * | * | 168,608 | ||||||
Goldman Sachs Short Duration Fund | 41,608 shares | * | * | 416,085 | ||||||
Accessor Income & Growth Fund | 2,663 shares | * | * | 39,496 | ||||||
Accessor Income Allocation Fund | 1,233 shares | * | * | 18,856 | ||||||
Federated Total Return Bond Fund | 22,247 shares | * | * | 241,160 | ||||||
| $ | 11,532,764 | |||||||||
| * | Party-in-interest |
| ** | Column (d) has not been presented as this information is not applicable. |
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SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the plan administrator has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: June 28, 2004.
| Plan Administrator of the United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions): | ||
By: | /s/ Larry M. Sellers | |
Larry M. Sellers | ||
| Vice President, Secretary and Treasurer of United Security Bancshares, Inc. | ||
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Exhibit Index
| Exhibit 23 | Consent of Independent Auditor |