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USBI shareholders reject proposals promoting merger, revamping of selection of directors United Security Bancshares shareholders Tuesday overwhelmingly re-elected 12 incumbent directors and rejected two proposals that could have altered the Thomasville-based financial institution's direction and future. The proposals came from sons of the late Dr. James S. Davidson, longtime Thomasville physician and a stockholder of USBI's predecessor, the Bank of Thomasville. Today USBI's banking operation is First United Security Bank. The proposals were prompted by USBI's poor financial performances due to fraudulent loan activities discovered at two of USBI's Acceptance Loan Company (ALC) branches, continued sluggish performances due to a slowed economy and the resulting downturn in USBI's stock performance. The ALC losses discovered last year have been staggering for USBI. Initially estimated at $3.8 million, the loan company's losses jumped to over $12 million. USBI's net income plummeted as a result, from just over $14 million in 2006 to a mere $349,000 in 2007. William R. Davison of Breckenridge, Texas proposed that USBI "aggressively seek a merger with a high performing, well managed bank or bank holding company." Davidson spoke for his proposal at the meeting, held at Alabama Southern Community College in Thomasville, charging USBI has opted to become a "status quo, no growth, slow growth bank" and suggesting the officers and directors had been "inadequate stewards." USBI Board Chairman Hardie Kimbrough presided at the meeting and spoke to the board's opposition to the proposal, saying to seek a merger now would provoke "uncertainty regarding the future" and could have an "adverse impact" on the company's operations and shareholders' interests. Over 4.8 million shares out of just over six million total were represented at the meeting. Just over 3.4 million voted against the proposal while 695,330, or 16.9 percent, voted for it. Over 75,000 abstained. J. Patrick Davidson of Annapolis, Maryland, sought to have the board of directors revise the process for nominating, evaluating and electing directors "with a view towards improving the quality of Board composition." Speaking Tuesday, he questioned the compensation and retirement benefits offered directors and the change in 2006 to increase the maximum age of directors from 70 to 75. He said a better "vision and strategic business understanding" is needed at USBI. He questioned the procedures that "led us into a loan company fiasco, twice," questioned ALC reports, calling them "worthless" and recited declining revenue figures. "The flagship is sailing backwards," he said. The board of directors also recommended a "no" vote on this proposal. The proxy statement issued earlier detailed the opposition, claiming the board is "extremely competent" and qualified to meet the challenges faced by USBI. Procedures are in place to ensure that directors nominated are qualified and competent individuals and that nominees elect- ed are evaluated on an annual basis as to their performance. Kimbrough noted Tuesday that the directors are also shareholders. "The directors are not adversarial to you," he told the shareholder audience. Later in remarks Kimbrough admonished the shareholders that they have a stake in the financial well-being of USBI and should do business with the company to help it. He said that some of the shareholders have business relationships with USBI competitors and some in the room have a primary financial relationship with one or more competitors. "That is disappointing, very disappointing," he observed. The proposal to change the way directors are determined was also rejected. It received just over one million votes, or a little over 24 percent, while 3.1 million voted no. Over 81,000 abstained. Twelve of the 13 USBI directors were proposed for re-election. Longtime director Ray Sheffield, whose service as a director goes back to 1982 with the First Bank of Grove Hill, later merged into USBI, retired. He was formally recognized at the meeting. The 12 remaining directors were overwhelmingly re-elected although the votes for each varied slightly. The 12 are Dan R. Barlow, Linda H. Breedlove, Gerald P. Corgill, Wayne C. Curtis, John C. Gordon, William G. Harrison, Hardie B. Kimbrough. Jack W. Meigs, R. Terry Phillips (President and CEO), James C. Stanley, Howard M. Whitted and Bruce N. Wilson. Director Wayne Curtis referenced two lawsuits against the bank but did not detail either one. A former employee in Calera has filed an employee discrimination suit in Shelby County. The other, filed more recently by Butler attorney and USBI shareholder Mark Ezell in Choctaw County, charges mismanagement in allowing his and other shareholders' stock to decline. Ezell seeks unspecified damages. Curtis told shareholders that USBI has filed a claim for $4.75 million on a security bond it has as a result of the ALC problems and is awaiting a response to its claim. President and CEO Terry Phillips addressed stock value and other issues. USBI's stock was $18.07 per share Monday (but closed at $17.01 Tuesday). The 52 week high/low is $15.22/$29.48. That's a percentage decrease of over 38 percent but a chart showed that USBI outperformed 14 out of 22 selected banks. Stock deficits ranged from 11 percent to a high of 77 percent for the banks detailed over the past year, indicating an industry wide slump for financial institutions right now. USBI has continued to pay a strong dividend. Last year dividends increased for the 19th consecutive year to $1.19 per share. Phillips acknowledged the problems of the past year. "Two thousand and seven was not a good year for us and I apologize," he said. The first quarter of 2008 has not been good either, with earnings dropping from $3 million to $1.9 million. USBI increased its loan-loss provision from $1 million to $1.4 million during the quarter. Still, Phillips offered figures that indicate USBI is one of the best capitalized banks in the southeastern United States and remains strong, compared to its peers. He said the bank is solid. Assets are $660 million, up about four percent over the previous year. Deposits grew by over $36 million to nearly $480 million and loans increased slightly to nearly $450 million.
Tuesday's meeting lasted three hours (with nearly an hour break to count votes) and drew one of the largest crowds ever due to concerns about the bank. Still, the only questions during a question and answer session at the end of the meeting came from the Davidson brothers.
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