-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R8LEPpNTYIiCK/Zsnf6PBJ7NcBGbnhvYZ1+iRD2HA1gmnc4lwdsJKY2YeHTW52v1 Q2/ylbWue/efcULMotkFSw== 0000726990-97-000017.txt : 19970805 0000726990-97-000017.hdr.sgml : 19970805 ACCESSION NUMBER: 0000726990-97-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970804 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED SECURITY BANCORPORATION CENTRAL INDEX KEY: 0000726990 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 911259511 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18561 FILM NUMBER: 97650522 BUSINESS ADDRESS: STREET 1: 9506 N NEWPORT HWY CITY: SPOKANE STATE: WA ZIP: 99218-1200 BUSINESS PHONE: 5094676949 MAIL ADDRESS: STREET 1: 9506 N NEWPORT HWY CITY: SPOKANE STATE: WA ZIP: 99218-1200 10-Q 1 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 June 30, 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 July 31, 1997 there were 3,684,341 shares of such stock outstanding. 1 2 UNITED SECURITY BANCORPORATION INDEX TO QUARTERLY REPORT ON FORM 10-Q June 30, 1997 Table of Contents
Page Part I Financial Information Item 1. Financial Statements Consolidated Statements of Condition - June 30, 1997 and December 31, 1996 . . . . . . . . . . . . . . . 3 Consolidated Statements of Income - Three Months and Six Months Ended June 30, 1997 and 1996 . . . . . . 4 Consolidated Condensed Statements of Cash Flows - Six Months Ended June 30, 1997 and 1996 . . . . . . 5 Notes to Consolidated Financial Statements . . . . 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . 9-11 Part II Other Information Item 4. Submission of Matters to Vote of Security Holders . 12 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 12 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2 3 UNITED SECURITY BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION
June 30, December 31, ($ in thousands) 1997 1996 ASSETS (Audited) Cash and due from banks $ 10,862 $ 10,430 Overnight interest bearing deposits with other banks 620 6,223 Federal funds sold 7,025 10,770 --------- ------- - -- Cash and cash equivalents 18,507 27,423 Securities (Note 2) 19,248 15,613 Loans, net of allowance for loan losses of $1,977 in 1997 and $2,034 in 1996 (Notes 3 and 4) 183,133 176,386 Accrued interest receivable 2,231 2,108 Premises and equipment, net 6,051 6,117 Foreclosed real estate and other foreclosed assets 599 205 Life insurance and salary continuation assets 2,466 2,311 Other assets 920 886 --------- ------- - -- TOTAL ASSETS $ 233,155 $ 231,049 ========= ========= LIABILITIES Noninterest bearing - demand deposits $ 29,219 $ 33,281 Interest bearing: NOW and savings accounts 88,330 80,735 Time, $100,000 and over 22,967 24,554 Other time 57,103 58,829 --------- ------- - -- TOTAL DEPOSITS 197,619 l97,399 Federal funds purchased 140 Notes payable 2,596 2,491 Capital lease obligations 742 751 Accrued interest payable 580 630 Other liabilities 1,691 1,765 --------- ------- - -- TOTAL LIABILITIES 203,368 203,036 STOCKHOLDERS' EQUITY Common stock, no par, shares authorized 15,000,000; issued and outstanding 3,684,341 in 1997 and 3,682,341 in 1996 21,014 21,001 Retained earnings 9,246 7,276 Net unrealized loss on securities available- for-sale, net of tax of $178 in 1997 and $136 for 1996 (345) (264) Guaranteed bank loan to Employee Stock Ownership Plan (128) --------- ------- - -- TOTAL STOCKHOLDERS' EQUITY 29,787 28,013 --------- ------- - -- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 233,155 $ 231,049 ========= =========
The accompanying notes are an integral part of these statements. 3 4 UNITED SECURITY BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME ($ in thousands, except per share)
Three Months Ended June 30, Year-To-Date 1997 1996 1997 1996 INTEREST INCOME Interest and fees on loans and leases $ 4,967 $ 4,617 $ 9,753 $ 8,857 Interest on securities 296 305 591 692 Other interest income 230 113 471 253 ------- ------- --- - ---- ------- TOTAL INTEREST INCOME 5,493 5,035 10,815 9,802 ------- ------- --- - ---- ------- INTEREST EXPENSE Interest on deposits 2,103 1,898 4,140 3,758 Interest on notes and capital leases 64 79 139 141 ------- ------- --- - ---- ------- TOTAL INTEREST EXPENSE 2,167 1,977 4,279 3,899 ------- ------- --- - ---- ------- NET INTEREST INCOME 3,326 3,058 6,536 5,903 Provision for loan losses (Note 4) 168 121 321 267 ------- ------- --- - ---- ------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,158 2,937 6,215 5,636 ------- ------- --- - ---- ------- NONINTEREST INCOME Fees and service charges 318 297 583 549 Insurance commissions 295 320 583 632 Securities gains/(losses) 2 (25) 53 Other 139 117 243 247 ------- ------- --- - ---- ------- TOTAL NONINTEREST INCOME 752 736 1,384 1,481 ------- ------- --- - ---- ------- NONINTEREST EXPENSE Salaries and employee benefits 1,431 1,485 2,886 2,900 Occupancy expense, net 159 151 304 297 Equipment expense 169 177 336 368 Other operating expense 629 524 1,086 914 ------- ------- --- - ---- ------- TOTAL NONINTEREST EXPENSE 2,388 2,337 4,612 4,479 ------- ------- --- - ---- ------- INCOME BEFORE TAXES 1,522 1,336 2,987 2,638 FEDERAL INCOME TAX EXPENSE 541 396 1,017 859 ------- ------- --- - ---- ------- NET INCOME $ 981 $ 940 $ 1,970 $ 1,779 ======= ======= ======= ======= Earnings per common share $ .27 $ .26 $ .53 $ .48 Weighted average shares outstanding 3,683,352 3,671,133 3,682,849 3,688,108
The accompanying notes are an integral part of these statements. 4 5 UNITED SECURITY BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEAR-TO-DATE JUNE 30, 1997 AND 1996 ($ in thousands)
1997 1996 Increase in Cash and Cash Equivalents Net income $ 1,970 $ 1,779 Cash flows from operating activities: Provision for loan losses 321 267 Depreciation and amortization 225 270 (Increase)/decrease in assets and liabilities Accrued interest receivable (123) (318) Life insurance and salary continuation assets (155) (235) Other assets (34) (133) Accrued interest payable (50) 23 Other liabilities (74) 296 ------- ------- Net cash provided by operating activities 2,080 1,949 ------- ------- Cash flows from investing activities: Securities: Maturities 325 5,663 Sales 4,577 4,525 Purchases (8,618) (7,135) Net (increase)/decrease in loans and leases (7,068) (24,813) Purchases of premises and equipment (159) (189) Proceeds from sales of premises and equip. 9 Foreclosed real estate activity (394) (123) ------- ------- Net cash provided by investing activities (11,337) (22,063) ------- ------- Cash flows from financing activities: Net increase in deposits 220 17,648 Net increase in federal funds purchased 140 Proceeds from notes payable 2,531 Principal payments on notes payable (23) (20) Principal payments on capital lease obligations (9) (8) Cash received from stock sales 20 200 Cash paid for redemption of fractional shares (7) (7) ------- ------- Net cash provided by financing activities 341 20,344 ------- ------- Net increase/(decrease) in cash and cash equivalents (8,916) 230 Cash and cash equivalents, beginning of year 27,423 15,581 ------- ------- Cash and cash equivalents, end of quarter $18,507 $15,811 ======= =======
The accompanying notes are an integral part of these statements. 5 6 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 June 30, 1997, December 31, 1996, and June 30, 1996, and the results of operations and the changes in financial position for the six month period ended June 30, 1997 and 1996. Certain reclassifications of 1996 balances have been made to conform with the June 30, 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. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 128 (SFAS 128), Earnings Per Share, which establishes new standards for computing and presenting earnings per share. SFAS 128 is effective for financial statements issued for periods ending after December 15, 1997 and requires restatement of all prior-period earnings per share data. Early application of SFAS 128 is not permitted. The Company's adoption of the provision of SFAS 128 will result in the dual presentation of basic and diluted earnings per share. The Company has previously disclosed basic earnings per share. Diluted earnings per share as calculated under SFAS 128 is not expected to materially differ, if at all from previously disclosed earnings per share. 6 7 UNITED SECURITY BANCORPORATION 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 June 30, 1997 and December 31, 1996 were as follows:
June 30, 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 1,800 1,799 1,799 Mortgage backed securities 9,254 9,157 9,157 6,395 6,348 6,348 Obligations of states, municipalities and political subdivisions 3,252 3,092 3,092 3,250 3,099 3,099 Other securities 5,744 5,479 5,479 3,463 3,262 3,262 ------- ------- ------- ------- -- - ---- ------ 18,750 18,228 18,228 15,408 15,008 15,008 Securities held-to-maturity: Obligations of states, municipalities and political subdivisions 1,020 1,023 1,020 605 611 605 ------- ------- ------- ------- --- - ---- ------- Total $19,770 $19,251 $19,248 $16,013 $15,619 $15,613 ======= ======= ======= ======= ======= =======
NOTE 3. LOANS Loan detail by category as of June 30, 1997 and December 31, 1996 were as follows:
($ in thousands) June 30, December 31, 1997 1996 (Audited) Commercial and industrial $104,121 $ 97,086 Agricultural 24,741 25,621 Real estate mortgage 30,652 29,318 Real estate construction 8,556 9,954 Installment 10,550 10,527 Lease financing 3,697 3,038 Bank cards and other 3,294 3,384 -------- ------ - -- Total loans 185,611 178,928 Allowance for loan losses (1,977) (2,034) Deferred loan fees, net of deferred costs (501) (508) -------- ------ - -- Net loans $183,133 $176,386 ======== ========
7 8 UNITED SECURITY BANCORPORATION NOTE 4. ALLOWANCE FOR LOAN LOSSES The allowance for loan loss is maintained at levels considered adequate by management to provide for possible loan losses. The allowance is based on management's assessment of various factors affecting the loan portfolio, including problem loans, business conditions and loss experience, and an overall evaluation of the quality of the underlying collateral. Changes in the allowance for loan loss during the three and six months ended June 30, 1997 and 1996 were as follows:
Three Months Ended June 30, Year-To- Date ($ in thousands) 1997 1996 1997 1996 Balance, beginning of period $2,206 $1,465 $2,034 $1,391 Provision for loan losses 168 121 321 267 Loan charge-offs (404) (19) (429) (92) Loan recoveries 7 3 51 4 ------ ------ ------ -- - ---- Balance, end of period $1,977 $1,570 $1,977 $1,570 ====== ====== ====== ======
NOTE 5. SUBSEQUENT EVENTS Effective July 18, 1997 the Company acquired five branches from Wells Fargo Bank. United Security Bank acquired two of the branches in Moses Lake and Davenport, Washington. Home Security Bank acquired three of the branches in Walla Walla, Mabton, and Naches, Washington. These branches are located in the identified market place for the two Banks. The acquisitions will increase deposits by approximately $35 million, premises and equipment by $1.8 million, and other assets by $2.3 million for the core deposit acquisition cost. These acquisitions will increase the Company's totals beginning in third quarter 1997. The Company previously disclosed a loss due to an embezzlement by a former employee of its subsidiary, Home Security Bank. On July 17, 1997 the Company received from its insurance carrier $637,000. This represents the reconciled amount of the principal portion embezzled, less the insurance policy deductible of $50,000. The income will increase third quarter 1997 results. 8 9 UNITED SECURITY BANCORPORATION Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Preliminary Note Regarding Forward-Looking Statements The information set forth in this item 2 includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, and is subject to the safe harbor created by those sections. Overview A performance summary and detailed discussion regarding the second quarter and year-to-date results in 1997 and 1996 follow this table. UNITED SECURITY BANCORPORATION AND SUBSIDIARIES PERFORMANCE SUMMARY
Three Months Ended June 30, Year-To- Date % % ($ in thousands) 1997 1996 Change 1997 1996 Change Interest income $ 5,493 $ 5,035 9.1% $10,815 $ 9,802 10.3% Interest expense 2,167 1,977 9.6% 4,279 3,899 9.7% ------- ------- ----- ------- - ------- ----- Net interest income 3,326 3,058 8.8% 6,536 5,903 10.7% Provision for loan losses 168 121 38.8% 321 267 20.2% ------- ------- ----- ------- - ------- ----- Net interest income after provision for loan losses 3,158 2,937 7.5% 6,215 5,636 10.3% Noninterest income 752 736 2.2% 1,384 1,481 -6.5% Noninterest expense 2,388 2,337 2.2% 4,612 4,479 3.0% ------- ------- ----- ------- - ------- ----- Income before income taxes 1,522 1,336 13.9% 2,987 2,638 13.2% Income taxes 541 396 36.6% 1,017 859 18.4% ------- ------- ----- ------- - ------- ----- Net income $ 981 $ 940 4.4% $ 1,970 $ 1,779 10.7% ======= ======= ===== ======= ======= ===== Earnings per share $ .27 $ .26 4.0% $ .53 $ .48 10.9% Average shares outstanding 3,683,352 3,671,133 .3% 3,682,849 3,688,108 -.1%
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 11% increase in net income to $1,970,000 for the first six months of 1997 compared to $1,779,000 for the same period in 1996. Earnings per share increased by 11% to $.53 compared to $.48 for 1996. For second quarter 1997, earnings increased 4% to $981,000 compared to $940,000 for the same period in 1996. Earnings per share in second quarter was $.27 in 1997 and $.26 in 1996, an increase of 4%. 9 10 UNITED SECURITY BANCORPORATION Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (continued) Net Interest Income Net interest income grew 11% to $6,536,000 in 1997 compared to $5,903,000 in 1996. The increase is primarily the result of loan growth. Total loans grew 10% to $185,611,000 as of June 30, 1997 compared to $168,533,000 as of June 30, 1996. The net interest margin to average earning assets was 6.14% and 6.33% as of June 30, 1997 and 1996, respectively. Provision for Loan Losses The allowance for loan losses grew 26%, comparing June 30, 1997 to 1996, which represents 1.07% and .93% of loans, respectively. Noninterest Income Noninterest income decreased by 7% to $1,384,000 during the first six months of 1997 compared to $1,481,000 for the same period in 1996. Fees and service charges increased 6% to $583,000 in 1997 from $549,000 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. 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 3% in 1997 compared to first quarter 1996. The Company efficiency ratio was 58.42% for 1997 compared to 60.23% for 1996. Liquidity and Capital Resources The company had $18.5 million of cash and cash equivalents as of June 30, 1997. As described in other subsequent events the Company will receive approximately $31 million in liquid funds from the acquisition of 5 branches in July, 1997. The funds will be initially invested in short-term investments until new loans are originated. The current and future capital resources of the Company are allowing future growth with these acquisitions. 10 11 UNITED SECURITY BANCORPORATION Item 2. Management's Discussion and Analysis of Financial Condition of Operation (continued) Other Subsequent Events Effective July 18, 1997 the Company acquired five branches from Wells Fargo Bank. United Security Bank acquired two of the branches in Moses Lake and Davenport, Washington. Home Security Bank acquired three of the branches in Walla Walla, Mabton, and Naches, Washington. These branches are located in the identified market place for the two Banks. The acquisitions will increase deposits by approximately $35 million, premises and equipment by $1.8 million, and other assets by $2.3 million for the core deposit acquisition cost. These acquisitions will increase the Company's totals beginning in third quarter 1997. The Company previously disclosed a loss due to an embezzlement by a former employee of its subsidiary, Home Security Bank. On July 17, 1997 the Company received from its insurance carrier $637,000. This represents the reconciled amount of the principal portion embezzled, less the insurance policy deductible of $50,000. The income will increase third quarter 1997 results. 11 12 UNITED SECURITY BANCORPORATION Part II Other Information Item 4. Submission of Matters to a Vote of Security-Holders (a) Annual meeting of shareholders was held on May 29, 1997. (b) Proxies for the annual meeting were solicited pursuant to Regulation 14 under the Act. (c) Matters voted upon at the meeting:
Election of Directors For Withhold David C. Blankenship 2,097,099 138,192 Robert J. Gardner 2,097,099 138,192 Robert L. Golob 2,097,099 138,192 James L. Moe 2,091,496 143,795 Dann Simpson 2,097,099 138,192 William Dashiell 2,097,031 138,260 Rand Elliott 2,087,118 148,173 Keith P. Sattler 2,096,187 139,104 Norman J. Traaen 2,093,779 141,512
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None in second quarter 1997. (b) Reports on Form 8-K during second quarter 1997
Date Item # Subject April 4, 1997 Item 5. Embezzlement activities at subsidiary, Home Security Bank May 2, 1997 Item 4. Changes in Registrant's Certifying Accountant Item 6. Resignation of Registrant's Director May 20, 1997 Item 5. United Security Bancorporation Reaches Agreement to Acquire The Wheatland Bank June 10, 1997 Item 4. United Security Bancorporation Selects Moss Adams as Audit Firm June 10, 1997 Item 5. Home Security Bank embezzlement update June 10, 1997 Item 4. Form 8-K/A Changes in Registrant's Certifying Accountant 12 13 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: July 31, 1997 /s/ Chad Galloway ------------- ---------------------------------- Chad Galloway, Vice President and Chief Financial Officer 11
EX-27 2
9 1000 USDOLLARS 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1.00 10862 620 7025 0 18228 1020 1023 185410 1977 233155 197619 140 2271 3338 0 0 21014 8773 233155 9753 591 471 10815 4140 4279 6536 321 (25) 4612 2987 2987 0 0 1970 .53 .53 10.88 1876 1033 0 0 2034 429 51 1977 1977 0 0
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