USBI shareholders vote down proposal
Sons of original director sought approval to seek merger
Wednesday, May 14, 2008
By KAIJA WILKINSON
Business Reporter
THOMASVILLE Despite impassioned arguments from sibling shareholders who sought approval for United Security Bancshares Inc. to aggressively seek a merger with a "well-managed" company and establish stricter guidelines for electing directors, both measures were voted down during the company's annual meeting Tuesday.
About 100 people, mostly shareholders, attended the meeting, held at Alabama Southern Community College.
Shareholders also approved the election of 12 directors, who will hold office until next year's annual meeting.
J. Patrick Davidson and William R. Davidson, both sons of James Samuel Davidson, an original director of USBI's predecessor bank, proposed the two failed measures.
The brothers cited problems with management of subsidiary Acceptance Loan Corp. as the driver of their proposals. In June 2007, the company reported that loan fraud had been uncovered at Acceptance that would result in at least $3.8 million in losses. The company said the fraud happened at two branches, which it declined to identify, and was related to fraudulent loans or fraudulent handling of repossessed automobiles.
At the time, USBI President R. Terry Phillips assured shareholders that the company was taking the matter very seriously and investigating it fully. USBI has since fired an undetermined number of people and named a new president of Acceptance.
Holders of about 3.4 million shares voted against the proposal to seek a merger, with holders of more than 695,000 shares, or 16.9 percent, voting for it, said secretary Larry Sellers after the votes were tallied. That measure had been proposed by William Davidson.
Meanwhile, holders of
3.8 million shares voted against the measure to implement a new system for nominating, evaluating and electing directors, with holders of 1.2 million voting in favor. J. Patrick Davidson had proposed that measure.
The only tense moment came when moderator Hardie Kimbrough, chairman of the board, would not permit William Davidson to respond to the company's response to Davidson's merger proposal. "No, sir," Kimbrough said when Davidson asked to lodge a brief response. Kimbrough moved quickly on to the next item.
In arguing in favor of the merger proposal, William Davidson said the stewards of USBI have failed shareholders by not recognizing fraud at the subsidiary sooner, which, in turn, had a drastic effect on net income. He said that earnings were less in 2007 than they were in 1997.
Reading from USBI's proxy statement, Kimbrough countered that seeking a merger would "create uncertainty regarding Bancshares' future which could undermine confidence in Bancshares and adversely affect Bancshares' relationships with its employees, its customers and the communities it serves."
On Friday, USBI reported that its first-quarter earnings fell from $3 million in first quarter 2007 to $1.9 million, or 31 cents per diluted share. The company blamed the decline on tough economic conditions, noting that like many other financial institutions, it has felt the effects of both bad loans and a slack demand for loans in some
markets.
USBI (Nasdaq: USBI) is a Delaware corporation that operates 19 banking offices in Clarke, Choctaw, Bibb, Shelby and Tuscaloosa counties through subsidiary First United Security Bank.
Shares closed Tuesday at $17.01, down $1.06 from Monday.
