Index to Financial Statements
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 |
For the fiscal year ended December 31, 2006
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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
Index to Financial Statements
UNITED SECURITY BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(With 401(k) Provisions)
FINANCIAL REPORT
DECEMBER 31, 2006
Page | ||
1 | ||
FINANCIAL STATEMENTS | ||
2 | ||
3 | ||
4-8 | ||
9 |
Index to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee
United Security Bancshares, Inc.
Thomasville, Alabama
We have audited the accompanying statements of net assets available for benefits of the United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions) as of December 31, 2006 and 2005, and the related statement of changes in net assets available for benefits for the year ended December 31, 2006. 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 audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits as of December 31, 2006 and 2005, and the changes in its net assets available for benefits for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.
Our audits were 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, 2006 is presented for the 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 audits 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.
Birmingham, Alabama
June 26, 2007
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Index to Financial Statements
UNITED SECURITY BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN (With 401(k) Provisions)
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2006 AND 2005
Assets | 2006 | 2005 | ||||
Investments, at fair value: | ||||||
Participant directed: | ||||||
Common Stock, United Security Bancshares, Inc. | $ | 8,768,971 | $ | 8,203,136 | ||
Mutual funds | 6,468,844 | 5,410,406 | ||||
15,237,815 | 13,613,542 | |||||
Nonparticipant directed: | ||||||
Life insurance contracts, at cash value | 33,761 | 33,433 | ||||
Total Investments | 15,271,576 | 13,646,975 | ||||
Accrued interest and dividends | 69,864 | 65,205 | ||||
Cash | 39,433 | 66,009 | ||||
Net assets available for benefits | $ | 15,380,873 | $ | 13,778,189 | ||
See Notes to Financial Statements.
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Index to Financial Statements
UNITED SECURITY BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN (With 401(k) Provisions)
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2006
Additions to net assets attributed to: | |||
Investment income: | |||
Interest and dividend income | $ | 407,374 | |
Income from life insurance policies | 328 | ||
Net appreciation in fair value of investments | 1,020,292 | ||
1,427,994 | |||
Contributions: | |||
Employer contributions | 513,683 | ||
Participant contributions | 661,684 | ||
Rollovers and transfers | 142,249 | ||
1,317,616 | |||
Total additions | 2,745,610 | ||
Deductions from net assets attributed to: | |||
Benefit payments to participants | 1,139,678 | ||
Life insurance premiums | 3,248 | ||
Total deductions | 1,142,926 | ||
Net increase in net assets available for benefits | 1,602,684 | ||
Net assets available for benefits at beginning of year | 13,778,189 | ||
Net assets available for benefits at end of year | $ | 15,380,873 | |
See Notes to Financial Statements.
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Index to Financial Statements
UNITED SECURITY BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN (With 401(k) Provisions)
NOTE 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 in accordance with U.S. generally accepted accounting principles. Income on securities is recorded on the accrual basis and investments are recorded at fair value as stated below.
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.
Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date.
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.
Payment of Benefits
Benefits are recorded when paid.
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Index to Financial Statements
NOTES TO FINANCIAL STATEMENTS
NOTE 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, Inc. (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 roll over 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.
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 six year vesting schedule in employer contributions.
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Index to Financial Statements
NOTES TO FINANCIAL STATEMENTS
NOTE 2. DESCRIPTION OF THE PLAN (Continued)
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.
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% vested in their contributions.
NOTE 3. INVESTMENTS
The fair values of individual investments that represent 5% or more of the Plan’s net assets are as follows:
2006 | 2005 | |||||
Common Stock, United Security Bancshares, Inc. | $ | 8,768,971 | $ | 8,203,136 | ||
Federated Prime Obligation Fund | 1,188,668 | 929,625 | ||||
American Century 20th Century Ultra Advanced Fund | 907,954 | 1,053,452 | ||||
Federated Stock Trust | 831,091 | — |
For the year ended December 31, 2006, the Plan’s investments (including investments bought, sold, transferred as well as held during the year) appreciated in fair value as determined by quoted market prices as follows:
Common stock, United Security Bancshares, Inc. | $ | 642,662 | |
Mutual funds | 377,630 | ||
Total | $ | 1,020,292 | |
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Index to Financial Statements
NOTES TO FINANCIAL STATEMENTS
NOTE 4. NONPARTICIPANT-DIRECTED INVESTMENTS
Nonparticipant-directed investments consist of life insurance contracts that certain participants have purchased under the terms of the Plan. The life insurance contracts are stated at the current cash surrender value. The participants pay the annual premiums of the insurance policies from their respective participant accounts.
NOTE 5. TRANSACTIONS WITH PARTIES-IN-INTEREST
Plan investments are managed by The Trust Company of Sterne, Agee & Leach, Inc. The Trust Company of Sterne, Agee & Leach, Inc. is the trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. Fees paid by the Plan for investment brokerage services amounted to $6,358 and $4,835 for the years ended December 31, 2006 and 2005, respectively.
During the years ended December 31, 2006 and 2005, the Plan purchased 20,430 and 17,300 shares at a cost of $571,692 and $501,305, respectively, of United Security Bancshares Inc. common stock. During the year ended December 31, 2006, the Plan sold 5,000 shares for $144,682. There were no sales for the year ended December 31, 2005.
The Company pays for all legal, accounting and other services on behalf of the Plan.
NOTE 6. RECONCILIATION OF FINANCIAL STATEMENTS TO THE FORM 5500
The following is a reconciliation of net assets available for benefits per the financial statements at December 31, 2006 and 2005 to the Form 5500:
2006 | 2005 | |||||||||
Net assets available for benefits per the financial statements | $ | 15,380,873 | $ | 13,778,189 | ||||||
Cash to accrual adjustment for accrued interest and dividends | (69,864 | ) | (65,205 | ) | ||||||
Net assets available for benefits per the Form 5500 | $ | 15,311,009 | $ | 13,712,984 | ||||||
The following is a reconciliation of changes in net assets available for benefits per the financial statements at December 31, 2006 to the Form 5500:
Change in net assets available for benefits per the financial statements | 1,602,684 | ||
Cash to accrual adjustment for accrued interest and dividends | (4,659 | ) | |
Change in net assets available for benefits per the Form 5500 | 1,598,025 | ||
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Index to Financial Statements
NOTES TO FINANCIAL STATEMENTS
NOTE 7. INCOME TAX STATUS
The Internal Revenue Service has determined and informed the Company by letter dated June 21, 2002, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). Although the Plan has been amended since receiving the determination letter, the Plan administrator believes the Plan is designed and is currently being operated in compliance with applicable requirements of the IRC.
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Index to Financial Statements
UNITED SECURITY BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN (With 401(k) Provisions)
DECEMBER 31, 2006
(Plan Number 001)
(Employer Identification Number 63-0318800)
Schedule H, Line 4i
Schedule of Assets (Held at End of Year)
(a) | (b) Identity of Issue, Borrower, Lessor, or Similar Party | (c) Description of Investment including Maturity Date, Rate | (d) Cost | (e) Current Value | |||||
* | United Security Bancshares, Inc. Common Stock | 299,999 shares | ** | $ | 8,768,971 | ||||
Accessor U.S. Government Money Market Fund | 113,973 face amount | ** | 113,973 | ||||||
Federated Prime Obligation Fund | 1,188,668 shares | ** | 1,188,668 | ||||||
Accessor Aggressive Growth Fund | 11,229 shares | ** | 206,844 | ||||||
Accessor Balanced Allocation Fund | 13,182 shares | ** | 225,814 | ||||||
Accessor Growth Allocation Fund | 10,466 shares | ** | 190,370 | ||||||
American Century 20th Century Ultra Fund | 34,070 shares | ** | 907,954 | ||||||
American Century 20th Century International Fund | 46,134 shares | ** | 577,141 | ||||||
Dreyfus S&P 500 Index Fund | 13,357 shares | ** | 534,268 | ||||||
Federated Stock Trust | 26,020 shares | ** | 831,091 | ||||||
Federated Equity Kaufman Fund | 96,088 shares | ** | 543,858 | ||||||
Federated Capital Appreciation Fund | 8,609 shares | ** | 210,845 | ||||||
Goldman Sachs Short Duration Fund | 35,513 shares | ** | 343,413 | ||||||
Accessor Income & Growth Fund | 6,628 shares | ** | 107,777 | ||||||
Accessor Income Allocation Fund | 3,224 shares | ** | 47,814 | ||||||
Federated Total Return Bond Fund | 41,652 shares | ** | 439,014 | ||||||
Life insurance contracts | Life insurance policies | *** | 33,761 | ||||||
$ | 15,271,576 | ||||||||
* | Party-in-interest. | ||||||||
** | Cost not included, funds are participant directed. | ||||||||
*** | Investments in life insurance contracts are nonparticipant-directed. The face amount of the policies at December 31, 2006 was $269,008. |
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Index to Financial Statements
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.
UNITED SECURITY BANCSHARES, INC. EMPLOYEE STOCK OWNERSHIP PLAN (WITH 401(K) PROVISIONS) | ||||
Date: June 29, 2007 | By: | /s/ Larry M. Sellers | ||
Larry M. Sellers | ||||
Vice President, Secretary, and Treasurer of United Security Bancshares, Inc., the Plan Administrator of the United Security Bancshares, Inc. Employee Stock Ownership Plan (With 401(k) Provisions) |
Index to Financial Statements
Exhibit Index
Exhibit 23 | Consent of Independent Accountants |