UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
Commission File Number: 0-14549
United Security Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Delaware 63-0843362
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
131 West Front Street
Post Office Box 249
Thomasville, AL. 36784
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (334) 636-5424
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.
Class Outstanding at March 31,
2000
Common Stock, $.01 par value 3,570,431 shares
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Page
ITEM 1. Financial Statements:
Condensed Consolidated Statements of Financial Condition
at March 31, 2000 (unaudited) and December 31, 1999 2
Condensed Consolidated Statements of Income (Unaudited)
for the three months ended March 31, 2000
and 1999 3
Condensed Consolidated Statements of Cash Flows (unaudited)
for the three months ended March 31, 2000 and 1999 4
The Condensed Consolidated Financial Statements furnished
have not been audited by independent public accountants,
but reflect, in the opinion of management, all adjustments
necessary for a fair presentation of financial condition
and the results of operations for the periods presented
ITEM 2. Management's discussion and analysis of Financial
Condition and results of operations 9
PART II. OTHER INFORMATION
OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 11
Signature Page 12
Signatures
UNITED SECURITY BANCSHARES, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
ASSETS
Mar. 31, Dec. 31,
2000 1999
(Unaudited)
Cash and due from banks $ 10,503 $ 12,223
Interest-bearing deposits in banks 175 666
Federal Funds Sold 26 0
Investment securities available for
sale, at fair value 154,572 157,874
Loans, net of allowances for loan
losses of $5,688 and $5,579,
respectively 284,803 276,172
Premises and equipment 9,422 9,541
Other assets 19,951 20,123
Total Assets $479,452 $476,599
Deposits $326,518 $326,751
Borrowings 85,153 82,774
Other Liabilities 5,485 5,404
Total Liabilities 417,156 414,929
Shareholders' Equity:
Common stock, par value $.01 per
share; 10,000,000 shares authorized;
3,634,431 and 3,632,081 shares issued,
respectively 36 36
Surplus 8,769 8,728
Accumulated other comprehensive
loss, net (2,397) (1,753)
Retained earnings 56,140 54,911
Less treasury stock-64,000 shares,
at cost (252) (252)
Total Shareholders' Equity 62,296 61,670
Total Liabilities and
Shareholders' Equity $479,452 $476,599
The accompanying notes are an integral part of these statements.
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
Three Months Ended
March 31,
2000 1999
(Unaudited)
Interest Income:
Interest and fees on loans $9,155 $7,820
Interest on securities 2,806 2,798
Total interest income 11,961 10,618
Interest Expense:
Interest on deposits 3,014 3,020
Interest on borrowings 1,156 649
Total interest expense 4,170 3,669
Net Interest Income 7,791 6,949
Provision for Loan Losses: 1,126 1,014
Net interest income after
provision for loan losses 6,665 5,935
Noninterest Income:
Service and other charges
on deposit accounts 514 462
Other income 482 598
Securities gains, net 7 511
Total noninterest income 1,003 1,571
Noninterest Expense:
Salaries and employee
benefits 2,923 2,557
Occupancy expense 304 266
Furniture and equipment
expense 412 352
Other Expenses 1,209 1,148
Total noninterest
expense 4,848 4,323
Income before income taxes 2,820 3,183
Provision for Income Taxes 770 948
Net Income $2,050 $2,235
Basic Net Income Per Share $.57 $.63
Diluted Net Income Per Share $.57 $.63
Dividends Per Share $.23 $.21
The accompanying notes are an integral part of these statements.
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except per share data)
Three Months Ended
March 31,
2000 1999
(Unaudited)
Cash Flows from Operating Activities
Net Income $2,050 $2,235
Adjustments:
Depreciation 302 226
Amortization of premiums and discounts, net 53 391
Amortization of intangibles 180 175
Provision for losses on loan 1,126 1,014
Gain on securities, net (7) (511)
Changes in assets and liabilities:
Decrease (increase) in other assets (8) 245
(Decrease) increase in other liabilities 467 (1,796)
Total Adjustments 2,113 (256)
Net cash provided by operating activities 4,163 1,979
Cash Flows from Investing Activities:
Proceeds from maturities/calls
securities available for sale 3,097 25,764
Proceeds from sales of securities
available for sale 0 21,010
Purchase of property and equipment, net (183) (936)
Purchase of securities available for sale (871) (61,869)
Purchase of federal funds sold (26) 0
Loan originations, net (9,757) (1,119)
Net cash used by investing activities (7,740) (17,150)
Cash Flows from Financing Activities:
Decrease in customer deposits, net (233) (2,487)
Exercise of stock options 41 132
Dividends paid (821) (745)
Increase in borrowings, net 2,379 1,356
Net cash provided by (used in)
financing activities 1,366 (1,744)
Net decrease in cash and cash equivalents (2,211) (16,915)
Cash and Cash Equivalents, beginning of period 12,889 26,831
Cash and Cash Equivalents, end of period $10,678 $9,916
The accompanying notes are an integral part of these statements.
UNITED SECURITY BANCSHARES, INC AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying unaudited condensed consolidated financial
statements as of March 31, 2000, and 1999 include the accounts of
United Security Bancshares, Inc. and its subsidiaries ("USB").
All significant intercompany transactions and accounts have been
eliminated.
The interim financial statements are unaudited but, in the
opinion of management, reflect all adjustments necessary for a
fair presentation of financial position and results of operations
for such periods presented. Such adjustments are of a normal,
recurring nature. The results of operation for any interim
period are not necessarily indicative of results expected for the
fiscal year ending December 31, 2000. While certain information
and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principals have been condensed or omitted pursuant to
the rules and regulations of the Securities and Exchange
Commission, management believes that the disclosures herein are
adequate to make the information presented not misleading. These
financial statements should be read in conjunction with the
consolidated financial statements and notes thereto contained in
the Annual Report on Form 10-K for the year ended December 31,
1999, of USB. The accounting policies followed by USB are set
forth in the summary of significant accounting policies in USB's
December 31, 1999 consolidated financial statements.
2. Net income per share.
Basic net income per share was computed by dividing net income by
the weighted average number of shares of common stock outstanding
during the three months period ended March 31, 2000 and 1999.
Common stock outstanding consists of issued shares less treasury
stock. Diluted net income per share for the three month period
ended March 31, 2000 and 1999, was computed by dividing net
income by the weighted average number of shares of common stock
and the dilutive effects of the shares awarded under the Stock
Option plan, based on the treasury stock method using an average
fair market value of the stock during the respective periods.
The following table represents the net income per share
calculations for the three-month period ended March 31, 2000 and
1999:
Weighted
Net Average Net Income
For the Three Months Ended Income Shares Per Share
March 31, 2000 ($ in thousands):
Net income $2,050
Basic net income per share:
Income available to
common shareholders 2,050 3,570,314 $.57
Dilutive securities: 0 11,108
Dilutive net income per share: $2,050 3,581,422 $.57
Weighted
Net Average Net Income
For the Three Months Ended Income Shares Per Share
March 31, 1999 ($ in thousands):
Net income $2,235
Basic net income per share:
Income available to common
shareholders 2,235 3,550,841 $.63
Dilutive securities: 0 23,028
Dilutive net income per share: $2,235 3,573,869 $.63
3. COMPREHENSIVE INCOME
USB adopted Statement of Financial Accounting Standards ("SFAS")
No. 130 effective January 1, 1998. SFAS No. 130 established
standards for reporting and display of comprehensive income and
its components.
The Company has classified its securities as available for sale
in accordance with SFAS No. 115. For the three month period
ended March 31, 2000, the net unrealized loss on these securities
increased by $.6 million. Pursuant to Statement No. 115, any
unrealized gain or loss activity of available for sale securities
is to be recorded as an adjustment to a separate component of
shareholders' equity, net of income tax effect. Accordingly, for
the three month period ended March 31, 2000 and 1999, the Company
recognized a corresponding adjustment in the net unrealized
income (loss) component of equity.
Since accumulated other comprehensive income (loss) is a measure
of all changes in equity of an enterprise that result from
transactions and other economic events of the period, this change
in unrealized loss serves to increase or decrease comprehensive
income. The following table represents comprehensive loss for
the three months ended March 31, 2000 and 1999:
Three Months
Ended
March 31,
2000 1999
Net income $2,050 $2,235
Other comprehensive income,
net of tax:
Unrealized gain (loss)
on securities (644) 1,607
Comprehensive income $1,406 $3,842
4. MARKET RISK
There have been no material changes in reported market risks
since year-end.
5. RECENT ACCOUNTING PRONOUNCEMENTS
During 1999, USB adopted Statements of Position 98-1, Accounting
for the Costs of Computer Software Developed or Obtained for
Internal Use. This statement requires capitalization of external
direct costs of materials and services; payroll and payroll
related costs for employees directly associated; and interests
costs during development of computer software for internal use
(planning and preliminary costs should be expensed). Also,
capitalized costs of computer software developed or obtained for
internal use should be amortized on a straight-line basis unless
another systematic and rational basis is more representative of
the software's use. The implementation of this statement did not
have a material effect on the consolidated financial statements.
In June 1998, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. This statement replaces existing
pronouncements and practices with a single, integrated accounting
framework for derivatives and hedging activities requiring
companies to formally record at fair value all derivatives and to
document, designate, and assess the effectiveness of transactions
that receive hedge accounting. During 1999, the FASB issued SFAS
No. 137, Accounting for Derivative Instruments and Hedging
Activities-an amendment of FASB Standard 133. SFAS No. 137
defers the effective date of SFAS No. 133 to fiscal years
beginning after June 15, 2000. Presently, USB has not yet
quantified the effect adoption will have on its consolidated
financial statements.
6. SEGMENT REPORTING
Under SFAS No. 131, Disclosures About Segments of an Enterprise
and Related Information, certain information is disclosed for the
two reportable operating segments of the Company. The reportable
segments were determined using the internal management reporting
system. They are composed of the Company's significant
subsidiaries, First United Security Bank ("FUSB") and Acceptance
Loan Company ("ALC"). The accounting policies for each segment
are the same as those used by the Company as described in Note 2,
Summary of Significant Accounting Policies. The segment results
include certain overhead allocations and intercompany
transactions that were recorded at current market prices. All
intercompany transactions have been eliminated to determine the
consolidated balances. The results for the two reportable
segments of the Company are included in the following table:
For the three
months ended
March 31, Elimina-
2000: FUSB ALC All Other tions Consolidated
(in thousands)
Total interest
income $9,397 $4,185 $65 $(1,686) $11,961
Total interest
expense 4,170 1,686 0 (1,686) 4,170
Net interest
income $5,227 $2,499 $65 $0 $7,791
Provision for
loan losses 0 1,126 0 0 1,126
Total noninterest
income after
provision 5,227 1,373 65 0 6,665
Total noninterest
income 804 196 2,069 (2,066) 1,003
Total noninterest
expense 2,973 1,788 87 0 4,848
Income (loss)
before income
taxes (tax
benefit) 3,058 (219) 2,047 (2,066) 2,820
Provision for
income taxes
(tax benefit) 856 (85) (1) 0 770
Net income
(loss) $2,202 $(134) $2,048 $(2,066) $ 2,050
Other significant
items:
Total assets $472,845 $77,418 $62,343 $(133,154) $479,452
Total investment
securities 150,754 0 3,818 0 154,572
Total loans 290,681 74,780 0 (75,494) 290,491
Investment in
wholly-owned
subsidiaries 1,616 0 56,760 (58,376) 0
Total interest
income from
external
customers 7,711 4,185 65 0 11,961
Total interest
income from
affiliates 1,686 0 0 (1,686) 0
For the three
months ended
March 31, Elimina-
1999: FUSB ALC All Other tions Consolidated
(in thousands)
Total interest
income $8,014 $3,860 $2,290 $(3,546) $10,618
Total interest
expense 3,669 1,312 0 1,312 3,669
Net interest
income 4,345 2,548 2,290 (2,234) 6,949
Provision for
loan losses 70 944 0 0 1,014
Net interest
income after
provision 4,275 1,604 2,290 (2,234) 5,935
Total noninterest
income 1,291 303 6 (29) 1,571
Total noninterest
expense 2,901 1,366 61 5 4,323
Income (loss)
before income
taxes (tax
benefit) 2,665 541 2,235 (2,258) 3,183
Provision for
income taxes
(tax benefit 737 211 0 0 948
Net income
(loss) $1,928 $330 $2,235 $(2,258) $2,235
Other significant
items:
Total assets $437,139 $69,549 $61,924 $(121,059) $447,553
Total investment
securities 173,145 0 2,814 0 175,959
Total loans,
net 234,428 65,899 0 (65,162) 235,165
Investment in
wholly-owned
subsidiaries 1,566 0 55,604 (57,170) 0
Total interest
income from
external
customers 6,726 3,860 32 0 10,618
Total interest
income from
affiliates 1,312 0 0 (1,312) 0
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and financial information are presented
to aid in an understanding of the current financial position and
results of operations of United Security Bancshares, Inc.
("United Security"). United Security is the parent holding
company of First United Security Bank (the "Bank"), and it has no
operations of any consequence other than the ownership of its
subsidiaries.
The emphasis of this discussion is a comparison of Assets,
Liabilities, and Capital as of March 31, 2000 and December 31,
1999; while comparing income for the three months period ended
March 31, 2000, to income for the three months period ended March
31, 1999.
All yields and ratios presented and discussed herein are based on
the cash basis and not on the tax-equivalent basis.
COMPARING THE THREE MONTHS ENDED MARCH 31, 2000, TO THE THREE
MONTHS ENDED MARCH 31, 1999:
Net income decreased $185,000, or 8.3%, resulting in a decrease
in basic net income per share to $.57.
The increase in interest income was due primarily to an increase
in interest on loans. This increase is due to an increase in the
average loans outstanding.
The $525,000, or 12.1%, increase in noninterest expense was
primarily attributed to increases in salaries and employee
benefits expenses of $366,000, or 14.3% and an increase in other
noninterest expenses of $61,000, or 5.3%. A significant portion
of the increase in salaries and employee benefits expenses is
associated with the costs of adding offices to the Acceptance
Loan Company, a wholly owned subsidiary of First United Security
Bank.
COMPARING THE MARCH 31,2000 STATEMENT OF FINANCIAL CONDITION TO
DECEMBER 31, 1999
In comparing the financial condition at December 31, 1999 to
March 31, 2000, the liquidity and capital resources did not
materially change during the period. Total assets increased $2.9
million to $479.5 million, while liabilities increase $2.2
million to $417.2 million. Retained earnings increased $1.2
million, or 2.2%, due to earnings in excess of dividends paid
during the period. This change, net of an increase of $.6
million in accumulated other comprehensive loss on available for
sale securities, increased shareholders' equity by $.6 million to
$62.3 million.
CAPITAL RESOURCES
The Bank's primary sources of funds are customer deposits,
repayments of loan principal, and interest from loans and
investments. While scheduled principal repayments on loans and
mortgage-backed securities are a relatively predictable source of
funds, deposit flows, and loan prepayments are greatly influenced
by general interest rates, economic conditions, and competition.
The Bank manages the pricing of its deposits to maintain a
desired deposit balance. In addition, the Bank invests in short-
term interest-earning assets, which provide liquidity to meet
lending requirements.
The Bank is required to maintain certain levels of regulatory
capital. At March 31, 2000 and December 31, 1999, United
Security and the Bank were in compliance with all regulatory
capital requirements.
Management is not aware of any condition that currently exists
that would have any adverse effects on the liquidity, capital
resources, or operations of United Security. However, United
Security is a defendant in certain claims and legal actions
arising in the ordinary course of business. In the opinion of
management, after consultation with legal counsel, the ultimate
disposition of these matters is not expected to have a material
adverse effect on the financial position of United Security.
YEAR 2000 ISSUES
The Company has not experienced any material effects as a result
of the Year 2000 issues. However, there may be situations where
third party commercial lending customers or vendors could be
adversely affected by the Year 2000 issue. If problems do
materialize with commercial lending customers or vendors, the
customers' ability to repay borrowings to the Company or vendors'
abilities to provide service could be affected. Management
currently believes that the risk of detrimental impact on the
Company's results of operations and financial position because of
the Year 2000 issues is low.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibit 27 is filed with this report.
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
UNITED SECURITY BANCSHARES, INC.
DATE: MAY 10, 2000
BY: /s/Larry M. Sellers
Its Vice-President, Secretary, and Treasurer
(Duly Authorized Officer and Principal Financial Officer)