U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
( X ) Quarterly report under Section 13 or 15 (d) of the
Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1997 or
--------------
( ) Transition report under Section 13 or 15 (d) of the
Exchange
Act
For the transition period from to
Commission file number 000 - 18561
UNITED SECURITY BANCORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Washington 91-1259511
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
9506 North Newport Highway, Spokane, WA 99218-1200
(Address of Principal Executive Offices)
(509) 467-6949
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) 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
The issuer has one class of capital stock, that being common stock.
On April 30, 1997 there were 3,682,341 shares of such stock
outstanding.
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UNITED SECURITY BANCORPORATION
INDEX QUARTERLY REPORT ON FORM 10-Q
March 31, 1997
Table of Contents
Page
Part I Financial Information
Item 1. Financial Statements
Consolidated Statements of Condition - March 31, 1997
December 31, 1996 . . . . . . . . . . . . . . . .
3
Consolidated Statements of Income - Three Months
Ended
March 31, 1997 and 1996 . . . . . . . . . . . . . .
4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996 . . . .
5
Notes to Consolidated Financial Statements . . . .
6-7
Item 2. Management's Discussion and Analysis or Plan of
Operation . . . . . . . . . . . . . . . . . . . . .
8-9
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . .
10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . .
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UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
March 31, December
31,
($ in thousands) 1997 1996
ASSETS
(Audited)
Cash and due from banks $ 9,882 $
10,430
Overnight interest bearing deposits with
other banks 10,327
6,223
Federal funds sold 9,230
10,770
--------- -------
- --
Cash and cash equivalents 29,439
27,423
Securities (Note 2) 18,825
15,613
Loans, net of allowance for loan losses of
$2,206 in 1997 and $2,034 in 1996
(Notes 3 and 4) 175,356
176,386
Accrued interest receivable 2,114
2,108
Premises and equipment, net 6,014
6,117
Foreclosed real estate and other foreclosed
assets 337
205
Life insurance and salary continuation assets 2,364
2,311
Other assets 916
886
--------- -------
- --
TOTAL ASSETS $ 235,365 $
231,049
=========
=========
LIABILITIES
Noninterest bearing - demand deposits $ 30,855 $
33,281
Interest bearing:
NOW and savings accounts 87,151
80,735
Time, $100,000 and over 24,516
24,554
Other time 58,520
58,829
--------- -------
- --
TOTAL DEPOSITS 201,042
l97,399
Note payable 2,479
2,491
Capital lease obligations 746
751
Accrued interest payable 581
630
Other liabilities 1,628
1,765
--------- -------
- --
TOTAL LIABILITIES 206,476
203,036
STOCKHOLDERS' EQUITY
Common stock, no par, shares authorized
15,000,000; issued and outstanding
3,682,341 in 1997 and 3,665,049 in 1996 20,994
21,001
Retained earnings 8,264
7,276
Net unrealized loss on securities available-
for-sale, net of tax of $190 in 1997 and
$136 for 1996 (369)
(264)
--------- -------
- --
TOTAL STOCKHOLDERS' EQUITY 28,889
28,013
--------- -------
- --
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 235,365 $
231,049
=========
=========
The accompanying notes are an integral part of these statements.
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UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share)
Three Months Ended
March 31,
1997 1996
INTEREST INCOME
Interest and fees on loans and leases $ 4,786 $ 4,240
Interest on securities 295 387
Other interest income 241 140
------- -------
TOTAL INTEREST INCOME 5,322 4,767
------- -------
INTEREST EXPENSE
Interest on deposits 2,037 1,860
Interest on notes and capital leases 75 62
------- -------
TOTAL INTEREST EXPENSE 2,112 1,922
------- -------
NET INTEREST INCOME 3,210 2,845
Provision for loan losses (Note 4) 153 146
------- -------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 3,057 2,699
------- -------
NONINTEREST INCOME
Fees and service charges 265 252
Insurance commissions 288 312
Securities gains/(losses) (25) 51
Other 104 130
------- -------
TOTAL NONINTEREST INCOME 632 745
------- -------
NONINTEREST EXPENSE
Salaries and employee benefits 1,455 1,415
Occupancy expense, net 145 146
Equipment expense 167 191
Other operating expense 457 390
------- -------
TOTAL NONINTEREST EXPENSE 2,224 2,142
------- -------
INCOME BEFORE TAXES 1,465 1,302
FEDERAL INCOME TAX EXPENSE 476 463
------- -------
NET INCOME $ 989 $ 839
======= =======
Earnings per common share $ .27 $ .23
Weighted average shares outstanding 3,682,341 3,665,049
The accompanying notes are an integral part of these statements.
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UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR-TO-DATE MARCH 31, 1997 AND 1996
($ in thousands)
1997 1996
Increase in Cash and Cash Equivalents
Net income $ 989 $ 839
Cash flows from operating activities:
Provision for loan losses 153 146
Depreciation and amortization 114 127
(Increase)/decrease in assets and liabilities
Accrued interest receivable (6) (227)
Life insurance and salary continuation
assets (53) (28)
Other assets (30) (164)
Accrued interest payable (49) 47
Other liabilities (137) 460
------- -------
Net cash provided by operating activities 981 1,200
------- -------
Cash flows from investing activities:
Securities:
Maturities 294 2,332
Sales 4,577 3,306
Purchases (8,189) (6,595)
Net (increase)/decrease in loans and leases 877 (10,332)
Purchases of premises and equipment (11) (100)
Foreclosed real estate activity (132) 19
------- -------
Net cash provided by investing activities ( 2,584) (11,370)
------- -------
Cash flows from financing activities:
Net increase in deposits 3,643 15,184
Proceeds from notes payable 2,529
Principal payments on notes payable (12) (6)
Principal payments on capital lease
obligations (5) (4)
Cash paid for redemption of fractional
shares (7) (7)
------- -------
Net cash provided by financing activities 3,619 17,696
------- -------
Net increase/(decrease) in cash and
cash equivalents 2,016 7,526
Cash and cash equivalents, beginning of year 27,423 15,581
------- -------
Cash and cash equivalents, end of quarter $29,439 $23,107
======= =======
The accompanying notes are an integral part of these statements.
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UNITED SECURITY BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Management Statement
In the opinion of the Company, the accompanying audited and
unaudited Consolidated Financial Statements present fairly the
financial position of the Company as of March 31, 1997, December
31, 1996, and March 31, 1996, and the results of operations and the
changes in financial position for the three month period ended
March 31, 1997 and 1996.
Certain reclassifications of 1996 balances have been made to
conform with the March 31, 1997 presentation; there was no impact
on net income, earnings per share or stockholders' equity. Also
per share amounts and weighted average shares outstanding have been
retroactively adjusted to reflect a previously disclosed stock
split-ups.
NOTE 2. Securities
Most of the securities are classified as available-for-sale and are
stated at fair value, and unrealized holding gains and losses, net
of related deferred taxes, are reported as a separate component of
stockholders' equity. Gains or losses on available-for-sale
securities sales are reported as part of noninterest income based
on the net proceeds and the adjusted carrying amount of the
securities sold, using the specific identification method.
Carrying amount and fair values at March 31, 1997 and December 31,
1996 were as follows:
March 31, 1997 December
31, 1996
Amortized Fair Financial Amortized
Fair Financial
($ in thousands) Cost Value Statements Cost
Value Statements
Securities available-for-sale:
U.S. Treasury securities $ 500 $ 500 $ 500 $ 500 $
500 $ 500
Obligations of federal government
agencies 1,000 999 999 1,800
1,799 1,799
Mortgage backed securities 8,322 8,228 8,228 6,395
6,348 6,348
Obligations of states, municipalities
and political subdivisions 3,252 3,041 3,041 3,250
3,099 3,099
Other securities 5,704 5,452 5,452 3,463
3,262 3,262
------- ------- ------- ------- --
- ---- ------
18,778 18,220 18,220 15,408
15,008 15,008
Securities held-to-maturity:
Obligations of states, municipalities
and political subdivisions 605 607 605 605
611 605
------- ------- ------- ------- ---
- ---- -------
Total $19,393 $18,827 $18,825 $16,013
$15,619 $15,613
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UNITED SECURITY BANCORPORATION
NOTE 3. LOANS
Loan detail by category as of March 31, 1997 and December 31, 1996
were as follows:
($ in thousands) March 31,
December 31,
1997
1996
(Audited)
Commercial and industrial $ 98,607 $
97,086
Agricultural 25,462
25,621
Real estate mortgage 28,815
29,318
Real estate construction 8,208
9,954
Installment 10,437
10,527
Lease financing 3,355
3,038
Bank cards and other 3,147
3,348
-------- ------
- --
Total loans 178,031
178,928
Allowance for loan losses (2,206)
(2,034)
Deferred loan fees, net of deferred costs (469)
(508)
-------- ------
- --
Net loans $175,356
$176,386
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========
NOTE 4. ALLOWANCE FOR LOAN LOSSES
The allowance for loan loss is maintained at levels considered
adequate by management to provide for possible loan losses. The
allowance is based on management's assessment of various factors
affecting the loan portfolio, including problem loans, business
conditions and loss experience, and an overall evaluation of the
quality of the underlying collateral. Changes in the allowance for
loan loss during the three months ended March 31, 1997 and 1996
were as follows:
Three Months Ended
March 31,
($ in thousands) 1997 1996
Balance, beginning of period $2,034 $1,391
Provision for loan losses 153 146
Loan charge-offs (25) (73)
Loan recoveries 44 1
------ ------
Balance, end of period $2,206 $1,465
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UNITED SECURITY BANCORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
A performance summary and detailed discussion regarding the first
quarter
1996 and 1995 follow this table.
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES
PERFORMANCE SUMMARY
Three Months Ended
March 31,
%
($ in thousands) 1996 1995 Change
Interest income $5,322 $4,767 11.6%
Interest expense 2,112 1,922 9.9%
------ ------ ------
Net interest income 3,210 2,845 12.8%
Provision for loan losses 153 146 4.8%
------ ------ ------
Net interest income after
provision for loan losses 3,057 2,699 13.3%
Noninterest income 632 745 -15.2%
Noninterest expense 2,224 2,142 3.8%
------ ------ ------
Income before income taxes 1,465 1,302 12.5%
Income taxes 476 463 2.8%
------ ------ ------
Net income $ 989 $ 839 17.9%
====== ====== ======
Earnings per share $ .27 $.23 17.3%
Average shares outstanding 3,682,341 3,665,049 .5%
Results of Operations
The results of operations include the consolidated results of
operations for United Security Bancorporation and its wholly-owned
subsidiaries (Company), United Security Bank, Home Security Bank,
USB Insurance Agencies, Inc., USB Mortgage Company and USB Leasing,
Inc. This information should be read in conjunction with the
financial statements and related notes appearing in this report.
United Security Bancorporation and its subsidiaries reported an 18%
increase in net income to $989,000 for the first three months of
1997 compared to $839,000 for the same period in 1996. Earnings
per share increased by 17% to $.27 compared to $.23 for 1996.
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UNITED SECURITY BANCORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(continued)
Net Interest Income
Net interest income grew 13% to $3,210,000 in 1997 compared to
$2,845,000 in 1996. The increase is primarily the result of loan
growth. Total loans grew 16% to $178,031,000 as of March 31, 1997
compared to $153,968,000 as of March 31, 1996. The net interest
margin to average earning assets was 6.06% and 6.23% as of March
31, 1997 and 1996, respectively.
Provision for Loan Losses
The allowance for loan losses grew 51%, comparing March 31, 1997 to
1996, which represents 1.24% and .95% of loans, respectively.
Noninterest Income
Noninterest income decreased by 15% to $632,000 during the first
three months of 1997 compared to $745,000 for the same period in
1996. Fees and service charges increased 5% to $265,000 in 1997
from $252,000 in 1996 due to deposit growth patterns. This was
offset by an 8% decline in insurance commissions, a loss on sales
of available-for-sale securities, and a $26,000 decline in other
income. The loss on the sales of securities allowed the Company to
reposition its securities portfolio to improve the yield on the new
securities purchased.
Noninterest Expense
Noninterest expense increased by 4% in 1997 compared to first
quarter 1996. The Company efficiency ratio was 58.47% for first
quarter 1997 compared to 58.83% for the same period in 1996.
The December 31, 1996 Form 10-KSB (Report) disclosed the Company
had reached definitive agreement to purchase five branches in
central and eastern Washington from a commercial bank. The Company
has filed the necessary documents to complete this transaction with
the applicable regulatory agencies. The Report also disclosed an
embezzlement by a former employee of its subsidiary, Home Security
Bank. The Company has filed a claim with its insurance carrier.
No further information is available at this time.
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UNITED SECURITY BANCORPORATION
Part II
Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None in first quarter 1997.
(b) Reports on Form 8-K.
None in first quarter 1997.
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UNITED SECURITY BANCORPORATION
Signatures
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 BANCORPORATION
/s/ William C. Dashiell
-------------------------------
- ---
William C. Dashiell, President
and
Chief Executive Officer
Date: April 30, 1997 /s/ Chad Galloway
---------------- -------------------------------
- ---
Chad Galloway, Vice President
and
Chief Financial Officer
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