-----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, J1WTbpkvCqo7qHE9cpcw49Bs1k8tTMMjubxuyTKbV6tofdpZxLUSGntJ7SLxE+CQ DJkESwga05QiopOwQJRFSA== /in/edgar/work/20000726/0001092388-00-000425/0001092388-00-000425.txt : 20000921 0001092388-00-000425.hdr.sgml : 20000921 ACCESSION NUMBER: 0001092388-00-000425 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000726 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED SECURITY BANCORPORATION CENTRAL INDEX KEY: 0000726990 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 911259511 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18561 FILM NUMBER: 679012 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 0001.txt FORM 10-Q UNITED STATES 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, 2000 or ( ) Transition report pursuant to Section 13 or 15 (d) of the Securities - Exchange Act of 1934 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 (Registrant's Telephone Number, Including Area Code) 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 --- --- The issuer has one class of capital stock, that being common stock. On July 20, 2000, there were 7,316,760 shares of such stock outstanding. 1 UNITED SECURITY BANCORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q June 30, 2000 Table of Contents Page Independent Accountant's Report 3 Part I Financial Information Item 1. Financial Statements Consolidated Statements of Condition - June 30, 2000 and December 31, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Income - Three and Six Months Ended June 30, 2000 and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Consolidated Condensed Statements of Cash Flows - Six Months Ended June 30, 2000 and 1999 . . . . . . . . . . . . . . . . . . 6 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 7 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 9 - 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . 11 Part II Other Information Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . 11 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 11 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2 UNITED SECURITY BANCORPORATION Independent Accountant's Report Board of Directors and Shareholders United Security Bancorporation We have reviewed the accompanying condensed consolidated statement of condition of United Security Bancorporation and subsidiaries as of June 30, 2000, and the related condensed consolidated statements of income and cash flows for the six months ended June 30, 2000. These financial statements are the responsibility of United Security Bancorporation's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated statement of condition of United Security Bancorporation and subsidiaries as of December 31, 1999, and the related consolidated statements of income, stockholders' equity and cash flows for the year then ended (which are not presented herein), and in our report dated January 21, 2000, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of condition as of December 31, 1999, is fairly presented, in all material respects, in relation to the consolidated statement of condition from which it has been derived. Everett, Washington /s/ Moss Adams LLP July 20, 2000 3
UNITED SECURITY BANCORPORATION UNTIED SECURITY BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION ($ In thousands) JUNE 30, DECEMBER 31, ASSETS 2000 1999 Cash and due from banks $19,321 $21,387 Overnight interest bearing deposits with other banks 5,966 4,632 -------- -------- Cash and cash equivalents 25,287 26,019 Securities 53,231 53,141 Loans, net of allowance for loan losses of $4,300 in 2000 and $4,349 in 1999 453,309 418,210 Accrued interest receivable 5,757 4,494 Premises and equipment, net 13,546 13,133 Foreclosed real estate and other foreclosed assets 1,631 1,179 Life insurance and salary continuation assets 4,231 4,049 Intangible assets 5,998 6,189 Other assets 1,654 1,312 -------- -------- TOTAL ASSETS $564,644 $527,726 ======== ======== LIABILITIES Noninterest bearing - demand deposits $83,247 $82,299 Interest bearing: NOW and savings accounts 200,443 196,513 Time, $100,000 and over 66,943 56,430 Other time 127,713 117,657 -------- -------- TOTAL DEPOSITS 478,346 452,899 Short-term borrowings 18,253 7,508 Capital lease obligations 678 690 Accured interest payable 1,694 1,367 Other liabilities 2,908 2,340 -------- -------- TOTAL LIABILITIES 501,879 464,804 STOCKHOLDERS' EQUITY Common stock, no par, shares authorized 15,000,000; Issued and outstanding 7,316,760 in 2000 and 6,942,439 in 1999 49,652 44,471 Retained earnings 14,334 19,460 Accumulated other comprehensive loss, net of tax (1,221) (1,009) -------- -------- TOTAL STOCKHOLDERS' EQUITY 62,765 62,922 -------- -------- TOTAL LIABILITIES and STOCKHOLDERS' EQUITY $564,644 $527,726 ======== ======== The accompanying notes are an integral part of these statements
4
UNITED SECURITY BANCORPORATION UNTIED SECURITY BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED YEAR-TO-DATE ($ In thousands, except per share) JUNE 30, JUNE 30, 2000 1999 2000 1999 INTEREST INCOME Interest and fees on loans and leases $11,006 $9,758 $21,339 $19,057 Interest on securities 840 909 1,643 2,122 Other interest income 176 86 278 186 --------- --------- --------- --------- TOTAL INTEREST INCOME 12,022 10,753 23,260 21,365 --------- --------- --------- --------- INTEREST EXPENSE Interest on deposits 4,539 3,620 8,802 7,295 Interest on borrowings 180 192 228 231 --------- --------- --------- --------- TOTAL INTEREST EXPENSE 4,719 3,812 9,030 7,526 --------- --------- --------- --------- NET INTEREST INCOME 7,303 6,941 14,230 13,839 Provision for loan losses 307 250 644 517 --------- --------- --------- --------- NET INTEREST INCOME AFTER PROVISIONS FOR LOAN LOSSES 6,996 6,691 13,586 13,322 --------- --------- --------- --------- NONINTEREST INCOME Fees and service charges 644 654 1,240 1,280 Insurance commissions 233 230 467 493 Securities gains/(losses) (6) 24 (12) 66 Other 172 1,597 391 1,931 --------- --------- --------- --------- TOTAL NONINTEREST INCOME 1,043 2,505 2,086 3,770 --------- --------- --------- --------- NONINTEREST EXPENSE Salaries and employee benefits 3,104 2,899 6,233 5,752 Occupancy expense, net 442 400 887 785 Equipment expense 392 349 743 682 Intangible amortization 93 95 191 189 Other operating expense 1,117 1,079 2,314 2,232 --------- --------- --------- --------- TOTAL NONINTEREST EXPENSE 5,148 4,822 10,368 9,640 --------- --------- --------- --------- INCOME BEFORE TAXES 2,891 4,374 5,304 7,452 INCOME TAX EXPENSE 873 1,449 1,496 2,448 --------- --------- --------- --------- NET INCOME $2,018 $2,925 $3,808 $5,004 ========= ========= ========= ========= Basic earnings per common share $0.28 $0.38 $0.51 $0.66 Diluted earnings per common share $0.27 $0.38 $0.51 $0.65 Basic weighted average shares outstanding 7,316,593 7,633,462 7,430,876 7,627,817 Diluted weighted average shares outstanding 7,354,328 7,728,480 7,481,905 7,729,983
The accompanying notes are an integral part of these statements. 5
UNITED SECURITY BANCORPORATION UNITED SECURITY BANCORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS YEAR-TO-DATE JUNE 30, 2000 AND 1999 ($ IN THOUSANDS) 2000 1999 Cash Flows From Operating Activities: Net income $3,808 $5,004 Provision for loan losses 644 517 Depreciation and amortization 540 459 (Increase)/decrease in assets and liabilities: Accrued interest receivable (1,263) (260) Life insurance and salary continuation assets (182) (150) Other assets (85) 165 Accured interest payable 327 (263) Other liabilities 568 (984) ------- ------- Net cash provided by operating activities 4,357 4,488 ------- ------- Cash flows from investing activities: Securities: Maturities 4,687 29,541 Sales 1,512 9,902 Purchases (6,568) (10,461) Net increase in loans (35,743) (36,593) Sales of premises and equipment 26 947 Purchases of premises and equipment (979) (1,169) Foreclosed real estate activity (452) (227) -------- ------- Net cash change in investing activities (37,517) (8,060) -------- ------- Cash flows from financing activiites: Net change in deposits 25,447 (24,079) Proceeds from short-term borrowings 10,745 11,825 Principal payments on capital lease obligations (12) (11) Cash payments for stock repurchases (4,175) Cash received from stock sales 423 194 Cash redemption of fractional shares (17) ------- ------- Net cash provided by financing activities 32,428 (12,088) ------- ------- Net change in cash and cash equivalents (732) (15,660) Cash and cash equivalents, beginning of year 26,019 37,088 Cash and cash equivalents, end of quarter ------- ------- $25,287 $21,428 ======= =======
The accompanying notes are an integral part of these statements. 6 UNITED SECURITY BANCORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. MANAGEMENT STATEMENT The consolidated financial statements include United Security Bancorporation and its wholly owned subsidiaries (USBN), United Security Bank, Home Security Bank, Bank of Pullman, Grant National Bank, AmericanWest Bank, and USB Insurance Agencies, Inc. after eliminating all significant intercompany balances and transactions. The interim unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting only of normal recurring accruals necessary for a fair presentation of the financial condition and the results of operations for the interim periods included herein have been made. The consolidated statement of condition of USBN as of December 31, 1999 has been derived from the audited consolidated statement of condition of USBN as of that date. The results of operations for the six months ended June 30, 2000, are not necessarily indicative of results to be anticipated for the year ending December 31, 2000. For additional information, refer to the consolidated financial statements and footnotes thereto included in USBN's annual report on Form 10-K for the year ended December 31, 1999. 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, 2000 and December 31, 1999 were as follows:
JUNE 30, 2000 DECEMBER 31, 1999 AMORTIZED FAIR FINANCIAL AMORTIZED FAIR FINANCIAL ($in thousands) COST VALUE STATEMENTS COST VALUE STATEMENTS SECURITIES AVAILABLE-FOR-SALE: U.S. Treasury securities $ 2,499 $ 2,494 $ 2,494 $ 2,503 $ 2,503 $ 2,503 Obligations of federal government agencies 18,464 17,777 17,777 16,888 16,317 16,317 Mortgage backed securities 9,800 9,478 9,478 10,014 9,812 9,812 Obligations of states, municipalities and political subdivisions 7,836 7,809 7,809 8,201 8,163 8,163 Other securities 15,776 14,967 14,967 16,356 15,639 15,639 ------- ------- ------- ------- ------- ------- 54,375 52,525 52,525 53,962 52,434 52,434 SECURITIES HELD-TO-MATURITY: Obligations of states, municipalities and political subdivisions 706 691 706 707 699 707 ------- ------- ------- ------- ------- ------- Total $55,081 $53,216 $53,231 $54,669 $53,133 $53,141 ======= ======= ======= ======= ======= =======
7 UNITED SECURITY BANCORPORATION NOTE 3. LOANS Loan detail by category as of June 30, 2000 and December 31, 1999 were as follows:
($ in thousands) JUNE 30, 2000 DECEMBER 31, 1999 Commercial and industrial $280,373 $246,796 Agricultural 78,910 67,025 Real estate mortgage 57,302 66,690 Real estate construction 13,449 14,781 Installment 21,808 21,190 Bank cards and other 6,554 6,939 -------- -------- Total loans 458,396 423,421 Allowance for loan losses (4,300) (4,349) Deferred loan fees, net of deferred costs (787) (862) -------- -------- Net loans $453,309 $418,210 ======== ========
NOTE 4. ALLOWANCE FOR LOAN LOSSES The allowance for loan loss is maintained at levels considered adequate by management to provide for possible loan losses. The allowance is based on management's assessment of various factors affecting the loan portfolio, including problem loans, business conditions and loss experience, and an overall evaluation of the quality of the underlying collateral. Changes in the allowance for loan losses during the three and six months ended June 30, 2000 and 1999 were as follows:
THREE MONTHS ENDED YEAR-TO-DATE ($ in thousands) JUNE 30, JUNE 30, 2000 1999 2000 1999 Balance, beginning of period $4,307 $3,781 $4,349 $3,819 Provision for loan losses 307 250 644 517 Loan charge-offs (345) (173) (747) (505) Loan recoveries 31 138 54 165 ------ ------ ------ ------ Balance, end of period $4,300 $3,996 $4,300 $3,996 ====== ====== ====== ======
NOTE 5. SUBSEQUENT EVENT The Board of Directors approved a stock repurchase program authorizing the repurchase of up to 732,000 shares. If all 732,000 shares are repurchased, it will represent approximately 10% of USBN's outstanding common stock. Shares will be purchased from time to time, depending on market conditions and price, over the next year. Currently, USBN has 7.3 million shares outstanding, following a repurchase of approximately 385,000 shares in first quarter 2000. 8 UNITED SECURITY BANCORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion contains a review of the results of operations and financial condition for second quarter and the year-to-date results in 2000 and 1999. This information should be read in conjunction with the financial statements and related notes appearing in this report. The reader is assumed to have access to USBN's Form 10-K for the year ended December 31, 1999, which contains additional information. This discussion may contain certain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those stated. Readers are cautioned not to place undue reliance on these forward-looking statements. OVERVIEW A performance summary and detailed discussion regarding the second quarter and year-to-date results for 2000 and 1999 follows this table.
UNITED SECURITY BANCORPORATION AND SUBSIDIARIES PERFORMANCE SUMMARY THREE MONTHS ENDED JUNE 30, YEAR-TO-DATE JUNE 30, % % ($ in thousands, except per share) 2000 1999 CHANGE 2000 1999 CHANGE Interest income $12,022 $10,753 11.8% $23,260 $21,365 8.9% Interest expense 4,719 3,812 23.8% 9,030 7,526 20.0% ------- ------- ---- ------- ------- ---- Net interest income 7,303 6,941 5.2% 14,230 13,839 2.8% Provision for loan losses 307 250 22.8% 644 517 24.6% ------- ------- ---- ------- ------- ---- Net interest income after provision for loan losses 6,996 6,691 4.6% 13,586 13,322 2.0% Noninterest income 1,043 2,505 -58.4% 2,086 3,770 -44.7% Noninterest expense 5,148 4,822 6.8% 10,368 9,640 7.6% ------- ------- ---- ------- ------- ---- Income before income taxes 2,891 4,374 -33.9% 5,304 7,452 -28.8% Income taxes 873 1,449 -39.8% 1,496 2,448 -38.9% ------- ------- ---- ------- ------- ---- Net income $2,018 $2,925 -31.0% $3,808 $5,004 -23.9% ======= ======= ===== ======= ======= ===== Basic earnings per common share $0.28 $0.38 -26.3% $0.51 $0.66 -22.7% Diluted earnings per common share $0.27 $0.38 -28.9% $0.51 $0.65 -21.5%
NET INCOME USBN reported net income of $3,808,000 for the first six months of 2000 compared to $5,004,000 for the same period in 1999. Diluted earnings per share were $.51 in 2000 and $.65 in 1999. Second quarter earnings were $2,018,000 for 2000 and $2,925,000 for 1999. Diluted earnings per share were $.27 for 2000 and $.38 for 1999. Second quarter and year-to-date 1999 net earnings were improved by $825,000 and $.11 per share from the gain on the sale of the Bank of the West name. 9 UNITED SECURITY BANCORPORATION NET INTEREST INCOME Year 2000 net interest income grew 3% to $14,230,000 compared to $13,839,000 in 1999. The growth in net interest income was due to loan volume growth, which on an average basis grew to $431 million in 2000 from $377 million in 1999. The net interest margin to average earning assets declined from 6.13% in 1999 to 5.83% in 2000. PROVISION FOR LOAN LOSSES The allowance for possible loan losses is based on management's evaluation of the loan portfolio. The provision for loan losses grew 25% to $644,000 in 2000 compared to $517,000 in 1999. Loans grew by 15% from June 30, 1999 to June 30, 2000. NONINTEREST INCOME Noninterest income declined by $1,250,000 due to a nonrecurring gain from the sale of the Bank of the West name in June 1999. Noninterest income was $2,086,000 in 2000 and $3,770,000 in 1999 including the gain on the sale of the name. Fees and service charges declined slightly to $1,240,000 in 2000 from $1,280,000 in 1999 with a comparative improvement during second quarter 2000 as the fees related to deposits increased. Insurance commissions declined to $467,000 in 2000 compared to $493,000 in 1999. There were nonrecurring securities gains of $66,000 in 1999 and securities losses of $12,000 in 2000 as liquidity was obtained from the securities portfolio to help fund loan growth. Other noninterest income was lower in 2000 primarily due to nonrecurring gains on the sale of the name, escrow servicing and real estate owned. NONINTEREST EXPENSE Noninterest expense increased 8% to $10,368,000 in 2000 from $9,640,000 in 1999. The increase was primarily due to additional expenses for the six new branches opened by USB and BOP in the latter part of 1999 and to accrue expense for a new employee incentive program designed to create and reward productivity. Also expense was incurred for a new Computer Center opened in first quarter 2000. INCOME TAX EXPENSE Income tax expense was lower in 2000 due to a tax credit for the renovation of a historical property and for tax expense on stock options exercised, which didn't qualify as incentive stock options. STOCK REPURCHASE PROGRAM The Board of Directors approved a stock repurchase program authorizing the repurchase of up to 732,000 shares. If all 732,000 shares are repurchased, it will represent approximately 10% of USBN's outstanding common stock. Shares will be purchased from time to time, depending on market conditions and price, over the next year. Currently, USBN has 7.3 million shares outstanding, following a repurchase of approximately 385,000 shares in first quarter 2000. 10 UNITED SECURITY BANCORPORATION Item 3. Quantitative and Qualitative Disclosures About Market Risk. Management considers interest rate risk to be a market risk that could have a significant effect on the financial condition of USBN. There have been no material changes in reported market risks faced by USBN since the end of the most recent fiscal year. Part II Other Information Item 4. Submission of Matters to a Vote of Security Holders (a) Annual meeting of shareholders was held on May 23, 2000. (b) Proxies for the annual meeting were solicited pursuant to Regulation 14 under the Act. (c) Matter voted upon at the meeting:
Election of Directors For Against David C. Blankenship 5,653,662 117,184 Wesley E. Colley 5,727,321 43,525 James Rand Elliott 5,630,069 140,777 David E. Frame 5,726,749 44,097 Robert J. Gardner 5,701,218 69,628 Robert L. Golob 5,647,907 122,939 Norman V. McKibben 5,727,321 43,525 Buddy R. Sampson 5,633,020 137,826 Keith P. Sattler 5,725,261 45,585 Dann Simpson 5,587,313 183,533 Donald H. Swartz, II 5,701,218 69,628 Ronald Wachter 5,630,008 140,838
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 Financial Data Schedule. (b) Reports on Form 8-K
Date Item # Subject April 3, 2000 5 Wes Colley elected President and CEO, Rich Emery retires.
11 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 on July 20, 2000. UNITED SECURITY BANCORPORATION \s\ WES COLLEY ------------------------------------ Wes Colley, President and Chief Executive Officer \s\ CHAD GALLOWAY ------------------------------------ Chad Galloway, Vice President and Chief Financial Officer 12 EX-27 2 0002.txt EXHIBIT 27
9 6-MOS DEC-31-2000 JUN-30-2000 19,321 5,966 0 0 52,525 706 691 457,609 4,300 564,644 478,346 18,253 4,602 678 0 0 49,652 13,113 564,644 21,339 1,643 278 23,260 8,802 9,030 14,230 644 (12) 10,368 5,304 5,304 0 0 3,808 0.51 0.51 5.83 5,485 516 0 0 4,349 747 54 4,300 4,300 0 0
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