<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File No. 2-78572
December 31, 1995
UNITED BANCORPORATION OF ALABAMA, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-0833573
- ---------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
P.O. Drawer 8, Atmore, Alabama 36504
----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (334) 368-2525
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [x]
Aggregate market value of voting stock held by nonaffiliates as of February 22,
1996 was $10,327,000, based upon the price at which the stock was sold on that
date and using beneficial ownership of stock rules adopted pursuant to Section
13 of the Securities Exchange Act of 1934 to exclude voting stock owned by
directors and executive officers, some of whom might not be held to be
affiliates upon judicial determination.
Page 1 of 86 pages
Exhibit index on page 85
<PAGE> 2
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the close of the period covered by this report.
<TABLE>
<CAPTION>
Common Stock Par Value Outstanding at March 21, 1996
- ------------ --------- -----------------------------
<S> <C> <C>
Class A..........$.01 516,385 Shares*
Class B..........$.01 -0- Shares
</TABLE>
*Excludes 31,775 shares held as treasury stock.
2
<PAGE> 3
PART I
ITEM 1. BUSINESS
United Bancorporation of Alabama, Inc. (the "Corporation") is a one-bank
holding company with headquarters in Atmore, Alabama. The Corporation was
incorporated under the laws of Delaware on March 8, 1982 for the purpose of
acquiring all of the issued and outstanding capital stock of The Bank of
Atmore, Atmore, Alabama ("Atmore") and Peoples Bank, Frisco City, Alabama
("Peoples"). Atmore was merged into United Bank of Atmore, a wholly-owned
subsidiary of the Corporation, and Peoples was merged into United Bank of
Frisco City ("Frisco City"), also a wholly-owned subsidiary of the Corporation,
later in 1982. Effective March 30, 1984, Frisco City merged into United Bank
of Atmore, which had previously changed its name to simply "United Bank."
The Corporation and its subsidiary, United Bank (herein "United Bank" or the
"Bank"), are in one business segment, commercial banking. United Bank
contributes substantially all of the total operating revenues and consolidated
assets of the Corporation. The Bank serves its customers from four banking
offices located in Atmore, Frisco City, Monroeville and Flomaton, Alabama.
United Bank offers a broad range of banking services. Services to business
customers include providing checking and time deposit accounts and various
types of lending services. Services provided to individual customers include
checking accounts, NOW accounts, money market deposit accounts, statement
savings accounts, and various other time deposit savings programs and loans,
including business, personal, automobile and home improvement loans. United
Bank offers securities brokerage services, Visa and Master Card, multi-purpose,
nationally recognized credit card services, and trust service through Bank
South of Atlanta, Georgia.
Competition - The commercial banking business is highly competitive and United
Bank competes actively with state and national banks, savings and loan
associations and credit unions in its market areas for deposits and loans. In
addition, United Bank competes with other financial institutions, including
personal loan companies, leasing companies, finance companies and certain
governmental agencies, all of which engage in marketing various types of loans
and other services. The regulatory environment affects competition in the
bank business as well.
Employees - The Corporation and its subsidiary had approximately 83 full-time
officers and employees at December 31, 1995. All of the employees are engaged
in the operations of United Bank. The Corporation considers its employee
relations good, and has not experienced and does not anticipate any work
stoppage attributable to labor disputes.
3
<PAGE> 4
Supervision, Regulation and Government Policy - Bank holding companies, banks
and many of their nonbank affiliates are extensively regulated under both
federal and state law. The following brief summary of certain statutes, rules
and regulations affecting the Corporation and the Bank is qualified in its
entirety by reference to the particular statutory and regulatory provisions
referred to below, and is not intended to be an exhaustive description of the
statutes or regulations applicable to the Corporation's business. Any change
in applicable law or regulations could have a material effect on the business
of the Corporation and its subsidiary. Supervision, regulation and examination
of banks by bank regulatory agencies are intended primarily for the protection
of depositors rather than holders of Corporation common stock.
The Corporation is registered as a bank holding company with the Board
of Governors of the Federal Reserve System (the "Federal Reserve") under the
Bank Holding Company Act of 1956, as amended (the "BHC Act"). As such, the
Corporation is subject to the supervision, examination, and reporting
requirements in the BHC Act and the regulations of the Federal Reserve. The
BHC Act prohibits, subject to certain exceptions, a bank holding company from
engaging in or acquiring direct or indirect control of more than 5% of the
voting stock of any company engaged in non-banking activities. Activities
expressly found by the Board of Governors, by order or regulation, to be so
closely related to banking or managing or controlling banks as to be a proper
incident thereto, such as acting as fiduciary or investment or financial
advisor, selling or underwriting insurance coverage directly related to
extensions of credit, and the leasing of real and personal property, are
excepted from this prohibition.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before it may acquire substantially all of the
assets of any bank or control of any voting shares of any bank, if, after such
acquisition, it would own or control, directly or indirectly, more than 5% of
the voting shares of such bank. The BHC Act requires the Federal Reserve to
consider, among other things, anticompetitive effects, financial and managerial
resources and community needs in reviewing such a transaction. Under the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, enacted in
September 1994, bank holding companies are permitted to acquire banks located
in any state without regard to whether the transaction is prohibited under any
state law (except that states may establish a minimum age of not more than five
years for local banks subject to interstate acquisitions by out-of-state bank
holding companies), and interstate branching will be permitted beginning in
1997.
The Alabama Banking Code generally prohibits branching across county
lines within the state, but also provides that with the prior approval of the
Superintendent of the Alabama State Department of Banking ("Superintendent"),
state banks are entitled to all privileges granted to federally chartered or
regulated
4
<PAGE> 5
banks. As a result of action by the Office of the Comptroller of the Currency
to permit branching across county lines in 1990, the Superintendent authorized
branching by Alabama-chartered banks without geographic restriction.
Accordingly, if United Bank desired, it could expand by branching within
Alabama subject to the required approvals described herein.
The Corporation is a legal entity separate and distinct from the Bank.
Various legal limitations restrict the Bank from lending or otherwise supplying
funds to the Corporation, generally limiting such transactions to 10% of the
Bank's capital and surplus. Such transactions, including extensions of credit,
sales of securities or assets and provision of services, also must be on terms
and conditions consistent with safe and sound banking practices, including
credit standards, that are substantially the same or at least as favorable to
the Bank as prevailing at the time for transactions with unaffiliated
companies. Also, as a subsidiary of a bank holding company, the Bank is
generally prohibited from conditioning the extension of credit or other
services, or conditioning the lease or sale of property, on the customer's
agreement to obtain or furnish some additional credit, property or service from
or to such subsidiary or an affiliate.
The Bank is a state bank, subject to state banking laws and
regulation, supervision and regular examination by the Alabama State Department
of Banking (the "Department"), and as a member of the Bank Insurance Fund
("BIF") of the Federal Deposit Insurance Corporation (the "FDIC"), is also
subject to FDIC regulation and examination. Areas subject to federal and state
regulation include dividend payments, reserves, investments, loans, interest
rates, mergers and acquisitions, issuance of securities, borrowings,
establishment of branches and other aspects of operation, including compliance
with truth-in-lending and usury laws, and regulators have the right to prevent
the development or continuance of unsound banking practices or other violations
of law.
Dividends from United Bank constitute the major source of funds for
dividends to be paid by the Corporation. United Bank is subject to state law
restrictions on its ability to pay dividends, including the general
restrictions that dividends in excess of 90% of United Bank's net earnings may
not be declared or paid unless United Bank's surplus is at least equal to 20%
of its capital, and that the prior written approval of the Superintendent of
the Department is required if the total of all dividends declared in any
calendar year exceeds the total of United Bank's net earnings of that year
combined with its retained net earnings of the preceding two years, less any
required transfers to surplus. United Bank is subject to restrictions under
Alabama law which also prohibit any dividends from being made from surplus
without the Superintendent's prior written approval. Federal bank regulatory
agencies also have the general authority to limit the dividends paid by insured
banks and bank holding companies if such payment is deemed to constitute an
unsafe and unsound practice. United Bank's ability to make funds available to
the Corporation also is subject
5
<PAGE> 6
to restrictions imposed by federal law on the ability of a bank to extend
credit to its parent company, to purchase the assets thereof, to issue a
guarantee, acceptance or letter of credit on behalf thereof or to invest in the
stock or securities thereof or to take such stock or securities as collateral
for loans to any borrower.
The Bank is also subject to the requirements of the Community
Reinvestment Act of 1977 ("CRA"). The CRA and the regulations implementing the
CRA are intended to encourage regulated financial institutions to help meet the
credit needs of their local community, including low and moderate income
neighborhoods, consistent with the safe and sound operation of financial
institutions. The regulatory agency's assessment of the bank's records is made
available to the public.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") recapitalized the BIF and included numerous substantially revised
statutory provisions. FDICIA established five capital tiers for insured
depository institutions: "well capitalized", "adequately capitalized",
"undercapitalized", "significantly undercapitalized", and "critically
undercapitalized", as defined by regulations adopted by the Federal Reserve,
the FDIC and other federal depository institution regulatory agencies. At
December 31, 1995, the Bank was "well capitalized", and was not subject to
restrictions imposed for failure to satisfy applicable capital requirements.
BIF premiums for each member financial institution depend upon the risk
assessment classification assigned to the institution by the FDIC. The total
current assessment for the first six months of 1996 for United Bank was $1,000.
Banking is a business that depends on interest rate differentials. In
general, the difference between the interest paid by a bank on its deposits and
other borrowings and the interest rate received by the bank on its loans and
securities holdings constitutes the major portion of the bank's earnings. As a
result, the earnings and business of the Corporation are and will be affected
by economic conditions generally, both domestic and foreign, and also by the
policies of various regulatory authorities having jurisdiction over the
Corporation and the Bank, especially the Federal Reserve. The Federal Reserve,
among other functions, regulates the supply of credit and deals with general
economic conditions within the United States. The instruments of monetary
policy employed by the Federal Reserve for those purposes influence in various
ways the overall level of investments, loans and other extensions of credit and
deposits and the interest rates paid on liabilities and received on assets.
The Congress continues to consider a number of wide- ranging proposals for
altering the structure, regulation and competitive relationships of the
nation's financial institutions. It cannot be predicted whether or in what
form any of these proposals will be adopted or the extent to which the business
of the Corporation may be effected thereby.
6
<PAGE> 7
Selected Statistical Information - The following tables set forth certain
selected statistical information concerning the business and operations of the
Corporation and its wholly owned subsidiary, United Bank, as of December 31,
1995 and 1994. Averages referred to in the following statistical information
are generally average daily balances.
7
<PAGE> 8
AVERAGE CONSOLIDATED BALANCE SHEETS
1995 and 1994
AVERAGES
(Dollars In Thousands)
<TABLE>
<CAPTION>
Assets 1995 1994
---- ----
<S> <C> <C>
Cash and due from banks $ 5,924 6,113
Interest-bearing deposits with
other financial institutions 105 167
Federal funds sold 5,197 3,508
Securities available for sale/taxable 24,608 27,726
Securities available for sale/tax exempt 2,124 1,016
Taxable investment securities 24,320 26,177
Tax-exempt investment securities 4,393 4,819
Loans, net 62,386 55,506
Premises and equipment, net 1,347 1,782
Interest receivable and other assets 2,252 2,081
-------- -------
Total assets $132,656 128,895
======== =======
Liabilities and Stockholders' Equity
Demand deposits - noninterest-
bearing $ 18,376 17,369
Demand deposits - interest-bearing 17,439 17,309
Savings 15,631 19,556
Time 62,121 57,904
Other borrowed funds 642 858
Repurchase agreements 5,760 3,871
Accrued expenses and other liabilities 1,101 822
-------- -------
Total Liabilities 121,070 117,689
Stockholders' equity:
Common stock 5 5
Surplus 3,477 3,477
Retained earnings 8,570 8,243
Less shares held in treasury,
at cost (466) (519)
-------- -------
Total stockholders' equity 11,586 11,206
-------- -------
Total liabilities and
stockholders' equity $132,656 128,895
======== =======
</TABLE>
8
<PAGE> 9
Analysis of Net Interest Earnings: The following table sets forth interest
earned and the average yield on the major categories of the Corporation's
interest-earning assets and interest-bearing liabilities.
<TABLE>
<CAPTION>
(Dollars in Thousands) Average
Interest Rates
Average Income/ Earned/
Balance Expense Paid
<S> <C> <C> <C>
1995
Loans, net (1) $ 62,386 6,704 10.75
Available for Sale Taxable securities 24,608 1,686 6.85
Available for sale Tax Exempt (2) 2,124 195 9.18
Held to Maturity Taxable Securities 24,320 1,421 5.84
Held to Maturity Tax Exempt (2) 4,393 371 8.45
Federal funds sold 5,197 298 5.73
Interest-earning deposits with
other financial institutions 105 11 10.48
-------- ------ ------
Total interest-earning assets $123,133 10,686 8.68%
======== ====== =====
Savings deposits and demand
deposits - interest-bearing $ 33,070 920 2.78%
Time deposits 62,121 3,338 5.37
Other borrowed funds 642 31 4.83
Repurchase agreements 5,760 271 4.70
-------- ------ -----
Total interest-bearing liabilities $101,593 4,560 4.49%
======== ====== =====
Net interest income/net yield
on interest-earning assets $6,126 4.98%
====== =====
1994
Loans, net (1) $ 55,506 5,576 10.05%
Available for Sale Taxable Securities 27,726 1,821 6.57
Available for Sale Tax Exempt (2) 1,016 117 11.52
Held to Maturity Taxable Investment Sec. 26,177 1,452 5.55
Held to Maturity Tax-Exempt Inv. Sec. (2) 4,819 436 9.04
Federal funds sold 3,508 192 5.47
Interest-earning deposits with
other financial institutions 167 17 10.18
-------- ------ -----
Total interest-earning assets $118,919 9,611 8.08%
======== ====== =====
Savings deposits and demand
deposits - interest-bearing $ 36,865 1,035 2.81%
Time deposits 57,904 2,314 4.00
Other borrowed funds 858 21 2.45
Repurchase agreements 3,871 148 3.82
-------- ------ -----
Total interest-bearing liabilities $ 99,498 3,518 3.54%
======== ====== =====
Net interest income/net yield
on interest-earning assets $6,093 5.12%
====== =====
</TABLE>
9
<PAGE> 10
(1) Loans on nonaccrual status have been included in the computation of
average balances.
(2) Yields on tax-exempt obligations have been computed on a full federal
tax-equivalent basis using an income rate of 34% for 1995 and 1994.
10
<PAGE> 11
Analysis of Changes in Interest Income and Interest Expense: The following is
an Analysis of the dollar amounts of changes in interest income and interest
expense due to changes in rates and volume for the periods indicated.
(Dollars in Thousands)
Average Balances
<TABLE>
<CAPTION>
Interest Income
Expense Variance As to
1995 1994 1995 1994 Variance Rate Volume
<S> <C> <C> <C> <C> <C> <C> <C>
62,386 55,506 Loans (Net) 6,704 5,576 1,128 402 726
24,608 27,726 Taxable Securities AFS 1,686 1,821 (135) 82 (217)
2,124 1,016 Tax Exempt Securities AFS (1) 195 117 78 (18) 96
24,320 26,177 Taxable Securities HTM 1,421 1,452 (31) 166 (197)
4,393 4,819 Tax Exempt HTM (1) 371 436 (65) (28) (37)
5,197 3,508 Fed Funds Sold 298 192 106 9 97
105 167 Interest Bearing Deposits 11 17 (6) 1 (7)
123,133 118,919 Total Interest Earning Assets 10,686 9,611 1,075 614 461
33,070 36,865 Savings Deposit 920 1,035 (115) (11) (104)
62,121 57,904 Other Time Deposits 3,338 2,314 1,024 844 180
642 858 Other Borrowed Funds 31 21 10 13 (3)
5,760 3,871 Repurchase Agreements 271 148 123 39 84
101,593 99,498 Total Interest Bearing 4,560 3,518 1,042 885 157
</TABLE>
The variance of interest due to both rate and volume has been allocated
proportionately based on the relationship of the absolute dollar amounts of the
change in each.
(1) Yields on tax-exempt obligations have been computed on a full federal tax
equivalent basis using an income tax rate of 34% for 1994 and 1995.
11
<PAGE> 12
Analysis of Changes in Interest Income and Interest Expense: The following is
an Analysis of the dollar amounts of changes in interest income and interest
expense due to changes in rates and volumes for the periods indicated.
(Dollars in Thousands)
<TABLE>
<CAPTION>
Average Balances
Variance As To
1994 1993 1994 1993 Variance Rate Volume
<S> <C> <C> <C> <C> <C> <C> <C>
55,506 51,157 Loans (Net) 5,576 5,173 403 (30) 433
27,726 3,293 Taxable Securities AFS 1,821 285 1,536 (0) 1,536
1,016 874 Tax Exempt Securities AFS (1) 117 83 34 19 15
26,177 50,271 Taxable Securities HTM 1,452 3,540 (2,088) (630) (1,458)
4,819 6,199 Tax Exempt HTM (1) 436 584 (148) (23) (125)
3,508 4,167 Fed Funds Sold 192 162 30 (19) 49
167 206 Interest Bearing Deposits 17 21 (4) (0) (4)
118,919 116,167 Total Interest Earning Assets 9,611 9,848 (237) (683) 446
36,865 36,908 Saving Deposits 1,035 1,052 (17) (16) (1)
57,904 56,637 Other Time Deposits 2,314 2,257 57 6 51
858 1,014 Other Borrowed Funds 21 25 (4) (0) (4)
3,871 3,593 Repurchase Agreements 148 97 51 43 8
99,498 98,152 Total Interest Bearing 3,518 3,431 87 33 54
</TABLE>
The variance of interest due to both rate and volume has been allocated
proportionately based on the relationship of the absolute dollar amounts of the
change in each.
(1) Yields on tax-exempt obligations have been computed on a full federal tax
equivalent basis using an income tax rate of 34% for 1993 and 1994.
12
<PAGE> 13
Investments - The investment policy of United Bank provides that funds that are
not otherwise needed to meet the loan demand of United Bank's market area can
best be invested to earn maximum return for the Bank, yet still maintain
sufficient liquidity to meet fluctuations in the Bank's loan demand and deposit
structure. Approximately 43% of the Bank's assets are in investment securities
held to maturity and securities available for sale. The Bank's loan policy
establishes a desirable range for its loan to deposit ratio as being between
50% and 70%. This ratio as of December 31, 1995, was above the low end of this
range at 55.23%. Growth in the loan portfolio is driven by general economic
conditions and the availability of loans meeting the Bank's credit quality
standards. Current Bank strategy is to expand the loan portfolio. Management
intends that funding for this growth will come from small deposit growth and
reallocation of maturing investments.
Securities Portfolio - The Bank's investment policy as approved by the Board of
Directors dictates approved types of securities and the conditions under which
they may be held. Attention is paid to the maturity and risks associated with
each investment. The distribution reflected in the tables below could vary
with conditions and maturities. The Corporation believes the level of risks
inherent in the securities portfolio is low.
Due to the adoption of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115")
by the Corporation as of January 1, 1994, the categorization of the
Corporation's investment securities changed dramatically. As noted in the
Consolidated Statements of Cash Flows of the Corporation included under Item 8
below, the Bank transferred $31,145,694 in securities from held to maturity to
available for sale in accordance with FAS 115 on January 1, 1994. In addition,
the Corporation transferred, effective November 30, 1995, investment securities
totaling $7,851,246 from held to maturity to available for sale in conjunction
with the FASB Special Report "A Guide to Implementation of Statement No. 115 on
Accounting for Certain Investments in Debt and Equity Securities - Questions
and Answers" issued in November 1995. For additional information regarding
adoption of FAS 115 see footnote 1 of the Notes to Consolidated Financial
Statements included under Item 8 below.
13
<PAGE> 14
Investment Securities Held to Maturity
December 31, 1995 and 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994
-------------------- -------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 7 0.0% 5,100 16.8%
U.S. Government Agencies 12,727 58.4 15,724 51.6
Mortgage Backed Securities 2,804 12.9 2,005 6.6
State and Municipal 5,749 26.4 6,996 22.9
Other 513 2.3 619 2.1
------- ------- ------ ------
Total $21,800 100.0% 30,444 100.0%
======= ====== ====== ======
</TABLE>
14
<PAGE> 15
Maturity Distribution of Investment Securities Held to Maturity
The following table sets forth the distribution of maturities of investment
securities.
December 31, 1995 and 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
Adjusted Weighted Adjusted Weighted
Cost Avg Yld Cost Avg Yld
<S> <C> <C> <C> <C>
U.S. Treasury Securities
Within one year $ 0 0.00% $ 0 0.00%
1 - 5 years 7 3.64 5,100 4.97
5 - 10 years 0 0.00 0 0.00
------- ----- ------- ------
$ 7 3.64% $ 5,100 4.97%
======= ===== ======= ======
U.S. Government Agencies
Within one year $ 1,497 6.06% $ 1,750 4.28%
1 - 5 years 4,497 5.51 5,995 5.05
5 - 10 years 4,477 6.36 5,474 6.02
after 10 years 2,256 6.70 2,505 6.70
------- ----- ------- -----
$12,727 6.08% $15,724 5.56%
======= ===== ======= =====
State & Municipal (1)
Within one year $ 108 6.44% $ 95 10.94%
1 - 5 years 1,683 7.43 1,749 5.95
5 - 10 years 2,425 8.03 2,175 7.82
after 10 years 1,533 9.89 2,977 5.91
------- ----- ------- -----
Total $ 5,749 8.16% $ 6,996 6.58%
======= ===== ======= ======
Other Securities
Within one year $ 513 4.75% $ 529 7.56%
1 - 5 years 0 0.00 0 0.00
5 - 10 years 0 0.00 90 10.27
after 10 years 0 0.00 0 0.00
------- ----- ------- -----
Total $ 513 4.75% $ 619 7.95%
======= ===== ======= =====
Mortgage Backed
Securities
1 - 5 years $ 0 0.00% $ 0 0.00%
5 - 10 years 21 9.00 24 9.00
after 10 years 2,783 6.81 1,981 6.61
------- ----- ------- -----
Total $ 2,804 6.83% $ 2,005 6.63%
======= ===== ======= ======
</TABLE>
Continued on next page..
15
<PAGE> 16
Continued from previous page
<TABLE>
<S> <C> <C> <C> <C>
Total Yield 6.61% 5.81%
===== =====
Total Adjusted Cost $21,800 $30,444
======= =======
</TABLE>
(1) Yields on tax-exempt obligations have been computed on a full federal
tax-equivalent basis using an income tax rate of 34% for 1995 and 1994.
Investment Securities Available for Sale
December 31, 1995 and 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994
--------------------- -------------------
Adjusted % Adjusted %
Cost Cost
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 8,576 22.4% 5,094 19.4%
U.S. Government Agencies 14,000 36.6 9,240 35.2
Mortgage Backed Securities 7,728 20.2 7,534 28.7
Collateralized Mortgage
Obligations 1,443 3.8 1,451 5.5
State and Municipal 6,221 16.3 2,651 10.1
Other 250 0.7 250 1.1
------- ------ ------ ------
Total $38,218 100.0% 26,220 100.0%
======= ====== ====== ======
</TABLE>
16
<PAGE> 17
Maturity Distribution of Investment Securities Available for Sale
The following table sets forth the distribution of maturities of investment
securities available for sale.
December 31, 1995 and 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994
----------------------- ----------------------
Adjusted Weighted Adjusted Weighted
Cost Avg Yld Cost Avg Yld
<S> <C> <C> <C> <C>
U.S. Treasury Securities
Within one year $ 998 4.73% 1,020 6.98%
1 - 5 years 7,578 6.11 3,511 5.30
5 - 10 years 0 0.00 563 7.54
------- ----- ------ -----
$ 8,576 5.95% $5,094 5.88%
======= ===== ====== =====
U.S. Government Agencies
excluding Mortgage Backed
Securities
Within one year $ 750 5.64% 0 0.00%
1 - 5 years 9,996 6.20 5,226 6.21
5 - 10 years 3,254 6.26 4,014 6.50
------- ----- ------ -----
Total $14,000 6.18% 9,240 6.34%
======= ===== ===== =====
Mortgage Backed Securities
Within one year $ 0 0.00% 0 0.00%
1 - 5 years 1,572 6.18 634 7.57
5 - 10 years 2,063 7.22 2,953 6.75
after 10 years 4,093 7.80 3,947 8.11
------- ----- ------ -----
Total $ 7,728 7.32% 7,534 7.53%
======= ===== ===== =====
Collateralized Mortgage
Obligations
After 10 years $ 1,443 5.92% 1,451 6.89%
------- ----- ------ -----
Total $ 1,443 5.92% 1,451 6.89%
======= ===== ===== =====
State & Municipal (1)
1 - 5 years 1,596 8.61% 1,047 9.26
5 - 10 years 1,948 6.53 842 6.17
after 10 years 2,677 7.94 762 6.69
------- ----- ------ -----
Total $ 6,221 7.67% 2,651 7.53%
======= ===== ===== =====
</TABLE>
Continued on next page..
17
<PAGE> 18
Continued from previous page
<TABLE>
<CAPTION>
1995 1994
--------------------- ---------------------
Adjusted Weighted Adjusted Weighted
Cost Avg Yld Cost Avg Yld
<S> <C> <C> <C> <C>
Other Securities
1 - 5 years 250 9.375 250 9.375%
------- ------ ------ ------
Total $ 250 9.375% 250 9.375%
======= ====== ====== ======
Total Yield 6.41% 6.77%
===== =====
Total adjusted cost $38,218 26,220
======= ======
</TABLE>
(1) Yields on tax-exempt obligations have been computed on a full federal
tax-equivalent basis using an income tax rate of 34% for 1995 and 1994.
Relative Lending Risk - United Bank is located in a rural market composed of
lower to middle income families. The primary economic influence in the area is
timber and agricultural production, and the Bank's loan portfolio is reflective
of this market. The Bank's ratio of loans to assets or deposits is at or above
the average of banks serving this market.
The risks associated with the Bank's lending are primarily interest rate risk
and risks from concentrations or types of loans.
Interest rate risk is a function of the maturity of the loan and method of
pricing. The Bank's loan maturity distribution reflects 28.04% of the
portfolio maturing in one year or less. In addition, 31.08% of all loans float
with an interest rate index. The maturity distribution and floating rate loans
help protect the Bank from unexpected interest rate changes.
Loan concentrations present different risk profiles depending on the type of
loan. The majority of all types of loans offered by the Bank are
collateralized. Regardless of the type of loan, collateralized lending is
based upon an evaluation of the collateral and repayment ability of the
borrower. Independent evaluations are utilized to determine appropriate loan
amounts. Loan policy, as approved by the Board of Directors of the bank
subsidiary, establishes collateral guidelines for each type of loan.
Small banks located in one community experience a much higher risk due to the
dependence on the economic viability of that single community. United Bank is
more geographically diverse than its local competitors. With offices in four
communities, the Bank is somewhat insulated from the effects of major economic
disruptions in one community. This geographic diversity affects all types of
loans and plays a part in the Bank's risk management.
18
<PAGE> 19
Each type of loan exhibits unique profiles of risk that could threaten
repayment.
Commercial loans, which comprised 27.42% of the portfolio, require an
understanding of the customers' business and financial performance. This
Bank's commercial customers are primarily small to middle market enterprises.
The larger commercial accounts are managed by the Senior Loan Officer. Risks
in this category are primarily economic. Shifts in local and regional
conditions could have an effect on individual borrowers; but, as previously
mentioned, the Bank spreads this risk by serving multiple communities. As with
the other categories, these loans are typically collateralized by assets of the
borrower. In most situations, the personal assets of the business owners also
collateralize the credit.
Agricultural lending is a specialized type of lending for the Bank. Due to the
unique characteristics in this type of loan, the Bank has a loan officer
dedicated to this market. Collateral valuation and the experience of the
borrower play heavily into the approval process. This loan category would
include financing of equipment, crop production, timber, dairy operations and
others. Given the broad range of loans offered, it is difficult to generalize
risks in agricultural lending. The area of greatest attention and risk would
be crop production loans. Risks associated with catastrophic crop losses are
mitigated by crop insurance, government support programs, experience of the
borrower, collateral other than the crop and the borrower's financial
resources. Routine visitations and contact with the borrower help inform the
Bank about crop conditions.
Real estate loans, whether they are construction or mortgage, have a very low
delinquency rate. The Bank does not make long term, fixed rate mortgages;
however, it does offer loans with repayment terms based on amortization of up
to 15 years, but with balloons of shorter durations.
Installment loans comprised 31.02% of the portfolio and are generally
collateralized. Given the small dollar exposure on each loan, risk of a
significant loss is minimized. Pricing and closely monitoring past dues
enhance the Bank's returns from this type of loan and minimize risks.
An average loan in the loan portfolio is approximately $12,127.
19
<PAGE> 20
Maturities and sensitivity to change in interest rates in the Corporation's
loan portfolio are as follows:
LOAN PORTFOLIO MATURITIES
December 31, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
REMAINING MATURITY
-----------------------------------------------
One - After
One Year Five Five
or Less Years Years Total
<S> <C> <C> <C> <C>
Commercial, financial
and agricultural $10,916 12,514 2,653 26,083
Real estate - construction 1,081 149 0 1,230
Real estate - mortgage 1,184 8,189 8,190 17,563
Installment loans to
individuals 5,060 10,808 4,317 20,185
------- ------ ------ ------
Total $18,241 31,660 15,160 65,061
======= ====== ====== ======
</TABLE>
SENSITIVITY TO CHANGES IN INTEREST RATES
LOANS DUE AFTER ONE YEAR
(Dollars in Thousands)
<TABLE>
<CAPTION>
Predetermined Floating
Rate Rate Total
<S> <C> <C> <C>
Commercial, financial
and agricultural $ 4,899 10,268 15,167
Real estate - construction 0 149 149
Real estate - mortgage 14,302 2,077 16,379
Installment loans to
individuals 14,001 1,124 15,125
</TABLE>
Non-performing Assets: The following table sets forth the Corporation's
non-performing assets at December 31, 1995 and 1994. Under the Corporation's
nonaccrual policy, a loan is placed on nonaccrual status when collectibility of
principal and interest is in doubt or when principal and interest is 90 days or
more past due.
The Corporation adopted the provisions of SFAS 114, Accounting by Creditors for
Impairment of a Loan, as amended by SFAS 118, Accounting by Creditors for
Impairment of a Loan--Income
20
<PAGE> 21
Recognition and Disclosures on January 1, 1995. Under the provisions of SFAS
114 and 118, management considers a loan to be impaired when it is probable
that the Corporation will be unable to collect all amounts due according to the
contractual terms of the loan agreement. When a loan is considered impaired,
the amount of impairment is measured based on the present value of expected
future cash flows discounted at the note's effective interest rate. If the
loan is collateral-dependent, the fair value of the collateral is used to
determine the amount of impairment. Impairment losses are included in the
reserve for possible loan losses through a charge to the provision for possible
loan lossess. Subsequent recoveries are added to the reserve. At December 31,
1995, pursuant to the definition within SFAS 114, the Corporation had $186,932
of impaired loans, with a related valuation allowance of $69,560.
<TABLE>
<CAPTION>
Description 1995 1994
(Dollars in Thousands)
<S> <C> <C> <C>
(A) Loans accounted for on $ 333 $ 163
a nonaccrual basis
(B) Loan which are contractually
past due ninety days or more
as to interest or principal
payments (excluding balances
included in (A) above). 30 35
(C) Loans, the term of which have
been renegotiated to provide
a reduction or deferral of
interest or principal because
of a deterioration in the
financial position of the
borrower. 13 0
(D) Other non-performing assets 107 14
</TABLE>
If the loans in (A) above had been current throughout their term, interest
income would have been increased by approximately $9,363 and $5,234 for 1995
and 1994, respectively. Of the assets in (D) above, $81,072 in 1995 was other
real estate owned (OREO), and $26,367 was repossessed collateral, and in 1994
$14,000 was OREO.
As of December 31, 1995, all loans which management had determined were
uncollectible were charged to the allowance for possible loan losses.
At December 31, 1995, approximately 121 loans at $1,915,471 were considered
potential problem loans. Potential problem loans consist of those loans for
which management has serious doubts as to the borrower's ability to comply with
present loan repayment terms.
21
<PAGE> 22
There may be additional loans in the Corporation's portfolio that may become
classified as conditions dictate. However, management is not aware of any such
loans that are material in amount at December 31, 1995. Regulatory examiners
may require the Bank to recognize additions to the allowance based upon their
judgments about information available to them at the time of their examination.
Loan Concentrations: On December 31, 1995, the Corporation had $8,261,708 of
agriculture-related loans. Agriculture loans accounted for $147,661 and
$20,244 of nonaccrual loans in 1995 and 1994, respectively.
Summary of Loan Loss Experience
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Average amount of loans
outstanding, net $ 62,386 55,506 51,157
======== ======= ======
Allowance for possible loan
losses, beginning January 1 1,252 1,174 887
-------- ------- ------
Losses charged off:
Commercial, financial
and agricultural (9) (269) (289)
Real estate - mortgage (17) (3) (11)
Installment loans to individuals (125) (66) (88)
-------- ------- ------
Total charged off (151) (338) (388)
Recoveries during the period:
Commercial, financial and
agricultural 13 71 17
Real estate - mortgage 6 0 6
Installment loans to individuals 20 15 52
-------- ------- ------
Total recoveries 39 86 75
-------- ------- ------
Net loans charged off (112) (252) (313)
Additions to the allowance
charged to operations 204 330 600
-------- ------- ------
Total allowance, ending
December 31 $ 1,344 $ 1,252 $1,174
======== ======= ======
Ratio of net charge offs during
the period to average loans
outstanding .18% .45% .61%
</TABLE>
22
<PAGE> 23
Allowance for Possible Loan Losses: The allowance for possible loan losses is
maintained at a level which, in management's opinion, is adequate to absorb
potential losses in the portfolio. Factors considered in determining the
adequacy of the allowance include historical loan loss experience, the amount
of past due loans, loans classified from the most recent regulatory
examinations and internal reviews, general economic conditions and the current
portfolio mix. The amount charged to operating expenses is that amount
necessary to maintain the allowance for possible loan losses at a level
indicative of the associated risk, as determined by management, of the current
loan portfolio.
The table below reflects an allocation of the allowance for the years ended
December 31, 1995 and 1994. The allocation represents an estimate of each
category of loans based upon historical experience and management's judgement.
Management realizes that general economic trends greatly affect loan losses,
and no assurances can be made that future charges to the loan loss allowance
will not be significant in relation to the amount provided during a particular
period, or that future evaluations of the loan portfolio based on conditions
then prevailing will not require sizable additions to the allowance, thus
necessitating similarly sizable charges to income. Management does consider,
however, the allowance for loan losses to be adequate for the reported periods.
<TABLE>
<CAPTION>
Loans as a
Allowance percent of total
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Commercial,
Financial &
Agricultural $1,008 938 40.1 47.6%
Real Estate -
Construction 0 0 1.9 2.2
Real Estate -
Mortgage 134 126 27.0 22.4
Installment Loans
to Individuals 202 188 31.0 27.8
------ ----- ------ ------
Total Allowance $1,344 1,252 100.0% 100.0%
====== ===== ====== ======
</TABLE>
Delinquent Loan Policy: Installment loans are placed on nonaccrual when the
loan is three payments past due, and any single-date maturity notes are placed
on nonaccrual when such notes are delinquent for ninety days. Exceptions may
be made where there are extenuating circumstances, but any exception is subject
to review by the Board of Directors of the Bank. Delinquent commercial loans
are placed on nonaccrual when the loan is 90 days past due.
23
<PAGE> 24
Loans are considered delinquent if payments of principal or interest have not
been made by the end of periods ranging from one to ten days after the due
date, depending upon the type of loan involved. Installment loans are
considered delinquent if payments of principal and interest are past due for a
period of ten days and commercial loans are considered delinquent if payments
of principal and interest are past due for a period of one day. Single-date
maturity loans are considered delinquent if payments relating to such loans are
not made for a period of one day following the due date of such loans.
Loans are charged off quarterly in March, June, September, and December. If
necessary, loans can be charged of at any time with the approval of the Chief
Executive Officer (CEO). The loan officer responsible for the particular loan
initiates the charge off request which then must be approved by the Bank's
senior loan officer and CEO.
24
<PAGE> 25
DEPOSITS
(Dollars in Thousands)
The following table sets forth the average amount of deposits for the years
1995 and 1994 by category.
<TABLE>
<CAPTION>
Average
rate paid
Deposits 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Noninterest-bearing
demand deposits $18,376 17,369 0 % 0%
======= ====== ===== =====
Interest-bearing
deposits:
Demand $17,439 17,309 2.63% 2.63%
Savings 15,631 19,556 2.96 2.97
Time 62,121 57,904 5.37 4.00
------- ------ ----- -----
$95,191 94,769 3.53% 3.53%
======= ====== ===== =====
</TABLE>
The following shows the amount of time deposits outstanding at December 31,
1995 in amounts of $100,000 or more, classified by time remaining until
maturity.
<TABLE>
<CAPTION>
$100,000
Certificates Other Time
Maturity of deposit deposits
<S> <C> <C>
Three months or less $ 6,436 14,425
Three to six months 3,448 14,827
Six to twelve months 4,416 9,614
Twelve months to five years 1,708 10,479
Over five years 0 2
-------- ------
$ 16,008 49,347
======== ======
</TABLE>
25
<PAGE> 26
<TABLE>
<CAPTION>
Maximum Average
Outstanding Average Interest
At Any Average Interest Ending Rate at
Month End Balance Rate Balance Year-end
----------- ------- -------- ------- --------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C>
1995
- ----
Securities sold $ 8,691 5,760 4.70% 8,691 5.19%
under agreements
to repurchase
Other Short Term $ 1,019 642 4.83 172 5.42
Borrowings
1994
- ----
Securities sold $ 5,874 5,868 3.65 5,874 4.92
under agreements
to repurchase
Other Short Term $ 1,451 872 2.81 307 2.29
Borrowings
1993
- ----
Securities sold $ 5,226 4,047 2.43 4,441 2.39
under agreements
to repurchase
Other Short Term $ 1,244 874 3.38 1,103 3.38
Borrowings
</TABLE>
Return on Equity and Assets: The following table shows the percentage return
on equity and assets of the Corporation for the years ended December 31, 1995
and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Return on average assets .93% .64%
===== =====
Return on average equity 10.62% 7.36%
====== =====
Dividend pay-out ratio 21.00% 31.18%
====== ======
Ratio of average equity
to average assets 8.73% 8.69%
====== ======
</TABLE>
26
<PAGE> 27
ITEM 2. PROPERTIES
The Corporation's bank subsidiary occupies four offices which the subsidiary
owns. The offices are located in Escambia County (cities of Atmore and
Flomaton) and Monroe County (cities of Monroeville and Frisco City), Alabama,
with the principal office located in Atmore, Alabama. The office in Atmore is
a modern, three story, brick building while the other offices are similar,
modern, one story, brick buildings. The subsidiary bank also leases land near
the Atmore office on which a drive through teller facility is located. The
land lease is for twenty years, expiring 2004.
ITEM 3. LEGAL PROCEEDINGS
All material pending legal proceedings described under Item 3 in the
Corporation's Annual Report on Form 10-K for the fiscal year ending December
31, 1994 have been terminated as described therein or in the Corporation's
Quarterly Reports on Form 10-Q for the periods ended June 30, 1995 and
September 30, 1995. There are presently no pending legal proceedings to which
the Corporation or its subsidiary, United Bank, is a party or of which any of
their property is subject, which management of the Corporation, based upon
consultation with legal counsel, believes are likely to have a material adverse
effect upon the financial position of the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the shareholders of the Corporation
during the fourth quarter of the fiscal year.
27
<PAGE> 28
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Corporation's authorized common shares consist of the following:
(1) 975,000 shares of Class A common stock, $.01 par value per share, of
which 516,385 shares were issued and outstanding and held by
approximately 479 shareholders of record, as of March 21, 1996.
(2) 250,000 shares of Class B common stock, $.01 par value per share, none
of which were issued, as of March 21, 1996.
There is no established public trading market for the shares of common stock of
the Corporation and there can be no assurance that any market will develop.
The Corporation paid total cash dividends of $.50 per share in 1995 and $.50
per share in 1994. The Corporation expects to continue to pay cash dividends,
subject to the earnings and financial condition of the Corporation and other
relevant factors; however, dividends on the Corporation's common stock are
declared and paid based on a variety of considerations by the Corporation's
Board of Directors and there can be no assurance that the Corporation will
continue to pay regular dividends or as to the amount of any such dividends.
Payment of future dividends will depend upon business conditions, operating
results, capital and reserve requirements and the Board's consideration of
other relevant factors. In addition, the ability of the Corporation to pay
dividends is totally dependent on dividends received from its banking
subsidiary (see Note 12 to the consolidated financial statements) and is
subject to statutory restrictions on dividends applicable to Delaware
corporations, including the restrictions that dividends generally may be paid
only from a corporation's surplus or from its net profits for the fiscal year
in which the dividend is declared and the preceding year. The Corporation is
subject to state law restrictions on its ability to pay dividends.
28
<PAGE> 29
ITEM 6. SELECTED FINANCIAL DATA
(Amounts in Thousands except per share data)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income statement data:
Interest income $ 10,495 9,423 9,595 10,615 12,184
Interest expense 4,560 3,519 3,431 4,575 6,733
-------- ------- ------- ------- -------
Net interest income 5,935 5,904 6,164 6,040 5,451
Provision for possible
loan losses 204 330 600 1,627 3,800
-------- ------- ------- ------- -------
Net interest income after
provision for possible
loan losses $ 5,731 5,574 5,564 4,413 1,651
======== ======= ======= ======= =======
Investment securities gains/
losses, net $ 32 14 881 428 (672)
======== ======= ======= ======= =======
Net Earnings (Loss) $ 1,230 825 1,370 893 (1,420)
======== ======= ======= ======= =======
Balance sheet data:
Total assets $140,466 131,809 126,780 128,975 128,372
======== ======= ======= ======= =======
Total loans, net $ 62,603 59,094 50,919 54,720 61,826
======== ======= ======= ======= =======
Total deposits $117,743 114,065 108,638 113,352 116,378
======== ======= ======= ======= =======
Total stockholders'
equity $ 12,398 10,671 11,283 10,079 9,724
======== ======= ======= ======= =======
Per share data:
Net earnings (loss)
per share $ 2.38 1.70 2.83 1.84 (2.89)
======== ======= ======= ======= =======
Cash dividends per
share $ .50 .50 .50 1.00 1.00
======== ======= ======= ======= =======
</TABLE>
29
<PAGE> 30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following financial review is presented to provide an analysis of the
consolidated results of operations of the Corporation and its subsidiary. This
review should be read in conjunction with the consolidated financial statements
included under Item 8.
SUMMARY OF OPERATIONS
The Corporation's 1995 net income was $1,230,362, as compared to a net income
in 1994 of $824,549. Average net interest spread declined by .35% from 4.54%
in 1994 to 4.19% in 1995. The decline in average net interest spread, offset
by an increase in average interest earning assets from $118,919,000 in 1994 to
$123,133,000 in 1995, produced a $29,909 increase in net interest income in
1995. Noninterest income decreased by $71,611 from $1,228,297 in 1994 to
$1,156,686 in 1995. Most of this decrease is attributed to the decrease in
other noninterest income from $245,614 in 1994 to $127,830 in 1995. The
provision for loan losses in 1995 was $204,000 as compared to $330,000 in 1994.
Noninterest expenses for 1995 decreased $500,515 from $5,655,541 in 1994 to
$5,155,026 in 1995. This decrease is due to the settlement of the Barnett
Litigation in 1994 which was described under "Item 3. Legal Proceedings, in the
Corporation's Annual Report Form 10K for the year ended December 31, 1994," and
the reduction in the FDIC premiums.
The Corporation's 1994 net income was $824,549, as compared to a net income in
1993 of $1,369,748. Average net interest spread declined by .35% from 4.89% in
1993 to 4.54% in 1994. The decline in average net interest spread, offset by
an increase in average interest earning assets from $116,754,000 in 1993 to
$118,919,000 in 1994, produced a $259,195 decrease in net interest income in
1994. Noninterest income decreased by $710,723 from $1,939,020 in 1993 to
$1,228,297 in 1994. Most of this decrease is attributed to the gain on the
sale of investments which decreased $867,445. The provision for loan losses in
1994 was $330,000 as compared to $600,000 in 1993. Noninterest expenses for
1994 were well in line with 1993, with the exception of legal expenses which
decreased by $672,823. This decrease was offset by the settlement of the
Barnett Litigation which was described under "Item 3. Legal Proceedings, in
1994 10-K."
30
<PAGE> 31
NET INTEREST INCOME
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest income (1) . . . . . . . $10,745 9,651 9,793
Interest expense . . . . . . . . $ 4,560 3,518 3,431
------- ------ ------
Net interest income . . . . . 6,185 6,133 6,362
Provision for possible
loan losses . . . . . . . . . 204 330 600
------- ------ ------
Net interest income after
provision for possible
loan losses . . . . . . . . . 5,981 5,803 5,762
Less: Tax Equivalent
adjustment . . . . . . . . . . 250 228 198
------- ------ ------
Net interest income after
provision for possible
loan losses . . . . . . . . . $ 5,731 5,575 5,564
======= ====== ======
</TABLE>
(1) Yields on tax-exempt obligations have been computed on a full federal
tax-equivalent (FTE) basis using an income tax rate of 34% for 1995, 1994, and
1993.
Total interest income (on a full Federal tax equivalent basis) increased to
$10,745,000 in 1995, from $9,651,000 in 1994, an increase of $1,094,000, or
11.34%. This increase is primarily due to the average earning assets
increasing $4,214,000. Average loans increased $6,880,000 while the average
rate paid increased .70%. The average interest rate (FTE) earned in 1995 rose
to 8.68% from 8.08% in 1994. The interest rate spread decreased from 4.54% in
1994 to 4.19% in 1995, as interest rates increased more rapidly on interest
bearing liabilities than interest earning assets. Average taxable investment
securities for 1995 were $48,928,000, as compared to $53,903,000 for 1994, a
decrease of $4,975,000, or 9.23%. The shift from investments to loans was due
to an increase in the Bank's loan demand. Average tax-exempt investment
securities increased $682,000, or 11.68%, to $6,517,000 in 1995 from $5,835,000
in 1994. The average volume of federal funds sold increased to $5,197,000 in
1995 from $3,508,000 in 1994, an increase of $1,689,000 or 48.15%. Average
interest earning deposits with other financial institutions decreased to
$105,000 in 1995, from $167,000 in 1994.
Total interest expense increased $1,042,000, or 29.62% to $4,560,000 in 1995,
from $3,518,000 in 1994. This increase was primarily due to rising interest
rates during 1995. The average rate paid on interest-bearing liabilities in
1995 was 4.49% as compared to 3.54% in 1994. Average interest-bearing
liabilities increased to $101,593,000 in 1995, from $99,498,000 in 1994, an
increase of $2,095,000, or 2.11%. Average savings and interest-bearing demand
deposits decreased $3,795,000 or 10.29% to $33,070,000 in 1995, from
$36,865,000 in 1994. Average time
31
<PAGE> 32
deposits increased to $62,121,000 in 1995, from $57,904,000 in 1994, an
increase of $4,217,000, or 7.28%. The average rate paid on time deposits
increased to 5.37% in 1995 from 4.00% in 1994. The reason for the increase in
time deposits during 1995 was that the interest rate on savings became less
attractive than the interest paid on time deposits as interest rates rose;
therefore, customers chose the higher interest rate investment available.
Total interest income (on a full Federal tax equivalent basis) decreased to
$9,651,000 in 1994, from $9,793,000 in 1993, a decrease of $142,000, or 1.45%.
This decrease was primarily due to the earning asset mix for the first half of
the year. When loan demand picked up, interest income began to improve. The
average interest rate (FTE) earned in 1994 fell to 8.09% from 8.39% in 1993.
The interest rate spread decreased from 4.89% in 1993 to 4.54% in 1994, as
interest rates increased more rapidly on interest bearing liabilities than
interest earning assets. Average interest earning assets increased by
$2,165,000, or 1.85%, to $118,919,000 in 1994 from $116,754,000 in 1993.
Average taxable investment securities for 1994 were $53,903,000, as compared to
$55,025,000 for 1993, a decrease of $1,122,000, or 2.03%. The shift from
investments to loans was due to an increase in the Bank's loan demand. Average
tax-exempt investment securities decreased $364,000, or 5.87%, to $5,835,000 in
1994 from $6,199,000 in 1993. Average loans increased during 1994 to
$55,506,000, from $51,157,000 in 1993, an increase of $4,349,000, or 8.5%. The
average volume of federal funds sold decreased to $3,508,000 in 1994 from
$4,167,000 in 1993, a decrease of $659,000 or 15.81%. Certificates of deposit
with other financial institutions decreased to $167,000 in 1994, from $206,000
in 1993.
Total interest expense increased $87,000, or 2.54% to $3,518,000 in 1994, from
$3,431,000 in 1993. This increase was primarily due to rising interest rates
during 1994. The average rate paid on interest-bearing liabilities in 1994 was
3.54% as compared to 3.50% in 1993. Average interest-bearing liabilities
increased to $99,498,000 in 1994, from $98,151,000 in 1993, an increase of
$1,347,000, or 1.37%. Average savings and interest-bearing demand deposits
decreased $43,000 or .12% to $36,865,000 in 1994, from $36,908,000 in 1993.
Average time deposits increased to $57,904,000 in 1994, from $56,637,000 in
1993, an increase of $1,267,000, or 2.24%. The average rate paid on time
deposits increased to 4.00% in 1994 from 3.99% in 1993. The reason for the
increase in time deposits during 1994 was that the interest rate on savings
became less attractive than the interest paid on time deposits; therefore,
customers chose the higher interest rate investment available.
PROVISION FOR LOAN LOSSES
The provision for possible loan losses for the year ended December 31, 1995 was
$204,000, as compared to $330,000 in 1994, a decrease of $126,000, or 38.18%.
This decrease in provision reflects improved trends and maintains the allowance
that is adequate by
32
<PAGE> 33
management, and approved by the Board of Directors of the subsidiary bank.
Loans charged-off in 1995 decreased to $150,896, from $338,666 in 1994, a
decrease of $187,770. Recoveries of charged- off loans in 1995 were $38,983, a
decrease of $47,239 as compared to $86,222 in 1994. Net charged-off loans for
1995 were $111,913, as compared to $252,444 for 1994, a decrease of $140,531.
This decrease is a result of improved asset quality in the bank. The allowance
for possible loans losses at December 31, 1995 represents 2.07% of gross loans,
excluding bankers acceptances and commercial paper, as compared to 2.04% at
year end 1994. Loans on which the accrual of interest had been discontinued or
reduced amounted to $333,002 on December 31, 1995, as compared to $162,844 at
year end 1994.
The provision for possible loan losses on December 31, 1994 was $330,000, as
compared to $600,000 in 1993, a decrease of $270,000, or 45.00%. This reserve
amount was determined to be adequate by management, and approved by the Board
of Directors of the subsidiary bank.
Loans charged-off in 1994 decreased to $338,000, from $388,000 in 1993, a
decrease of $50,000. Recoveries of charged-off loans in 1994 were $86,000, an
increase of $12,000 as compared to $75,000 in 1993. Net charged-off loans for
1994 were $252,000, as compared to $313,000 for 1993, a decrease of $62,000.
The allowance for possible loans losses at December 31, 1994 represented 2.04%
of gross loans, excluding bankers acceptances and commercial paper, as compared
to 2.21% at year end 1993. Loans on which the accrual of interest had been
discontinued or reduced amounted to $162,844 on December 31, 1994, as compared
to $350,908 at year end 1993.
The provision for loan losses is based upon management's continuing evaluation
of current economic conditions, changes in the character and size of the loan
portfolio, past loan loss experience, underlying collateral value securing
loans and other factors which deserve recognition in providing a reasonable
allowance for potential credit losses inherent in the portfolio.
While it is the Corporation's policy to charge-off loans on which a loss is
considered probable, there also exists the risk of future losses which cannot
be quantified precisely or attributed to particular loans or classes of loans.
Because this risk is continually changing in response to factors beyond the
control of the Corporation, such as the state of the economy, management's
judgment as to the adequacy of the provision is necessarily approximate and
imprecise. Adjustments to the provision for loan losses and the allowance for
loan losses may also be required by the FDIC or the Alabama Superintendent of
Banks in the course of their examinations of the Corporation's banking
subsidiary where the regulators make credit evaluations different from those
of management. Accordingly, no assurances can be given that continued
evaluations of the loan portfolio in light of economic conditions then
prevailing, results of upcoming regulatory examinations and other factors will
not require significant future additions to the allowance, thus necessitating
similarly sizable charges to income.
33
<PAGE> 34
NONINTEREST INCOME
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Service charges on
deposits . . . . . . . . . . . $ 908,838 872,299 864,587
Commission - credit
life insurance . . . . . . . . 88,151 96,234 74,656
Investment securities
gains, net . . . . . . . . . . 31,867 14,150 881,595
Other . . . . . . . . . . . . . . 127,830 245,614 118,182
---------- --------- ---------
Total . . . . . . . . . . . . $1,156,686 1,228,297 1,939,020
========== ========= =========
</TABLE>
Total noninterest income decreased $71,611 or 5.83%, to $1,156,686 in 1995, as
compared to $1,228,297 in 1994. Net gains on sale of investment securities
during 1995 totalled $31,867, as compared to a gain of $14,150 in 1994. In
1995, the Corporation sold some available for sale investment securities in
order to fund growing loan demand. These securities were mostly mortgage
backed securities which had paid down significantly and which were no longer
cost effective to carry in the portfolio.
Service charge income increased to $908,838 in 1995, from $872,299 in 1994, an
increase of $36,539, or 4.19%. This slight increase is due to a change in the
calculation of analysis charges on certain checking accounts. Commissions on
credit life insurance decreased $8,083, or 8.40%, to $88,151 in 1995, from
$96,234 in 1994. Other income decreased to $127,830 in 1995, from $245,614 in
1994, a decrease of $117,784, or 47.95%. The decrease in other income in 1995
was similarly attributable to a dividend from Risk Associates of approximately
$60,000, and the recognition of deferred income on the sale of other real
estate owned of $66,000, each of which occurred in 1994 and not in 1995.
Total noninterest income decreased $710,723 or 36.65%, to $1,228,297 in 1994,
as compared to $1,939,020 in 1993. Net gains on sale of investment securities
during 1994 totalled $14,150, as compared to a gain of $881,595 in 1993. In
1994, the Corporation sold some investment securities in order to fund growing
loan demand. A gain of $865,209 was realized in 1993 through the sale of GIC
bonds (Executive Life) which had been written down in previous years. The
bonds regained a significant amount of their market value and were sold in
February and March of 1993. This transaction accounted for 98.14% of net gains
in 1993.
Service charge income increased to $872,299 in 1994, from $864,587 in 1993, an
increase of $7,712, or .89%. Commissions on credit life insurance increased
$21,578, or 28.90%, to $96,234 in 1994, from $74,656 in 1993. Other income
increased to $245,614 in 1994, from $118,182 in 1993, an increase of $127,432,
or 107.83%. The majority of the increased income in 1994 resulted from a
dividend from Risk Associates of approximately $60,000, and the recognition of
deferred income on the sale of other real estate owned of $66,000.
34
<PAGE> 35
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Salaries and benefits $2,598,931 2,574,585 2,484,600
Net occupancy 638,798 590,890 612,352
Other 1,917,297 2,490,066 2,449,308
---------- --------- ---------
Total $5,155,026 5,655,541 5,546,260
========== ========= =========
</TABLE>
Total noninterest expense decreased $500,515, or 8.85%, to $5,155,026 in 1995,
from $5,655,541 in 1994. Other expense decreased to $1,917,297 in 1995, from
$2,490,066 in 1994, a decrease of $572,769, or 23.00%. Legal fees associated
with pending litigation, bankruptcy filings and regulatory matters decreased
$222,908 in 1995. Miscellaneous losses decreased $286,543 due to decreased
litigation cost. Other data processing fees increased $162,944, because of
payments to a third party service center for 12 months in 1995 as opposed to 3
months in 1994. FDIC insurance decreased $115,395, because of the BIF fund
becoming fully capitalized in May of 1995 and a corresponding reduction in
premium assessments.
Income tax expense for 1995 was $502,000 as compared to $323,000 in 1994. Net
earnings per share in 1995 were $2.38, as compared to a net earnings per share
of $1.70 in 1994. Return on average assets for 1995 was .93%, as compared .64%
in 1994. Return on average equity was 10.62% in 1995, as compared to 7.36% in
1994.
Total noninterest expense increased $109,281, or 1.97%, to $5,655,541 in 1994,
from $5,546,260 in 1993. Salaries and employee benefits increased $89,985 in
1994, from $2,484,600 in 1993, or 3.6%. The majority of this increase was
attributable to cost of living increases and increased health insurance
premiums. Other expense increased to $2,490,066 in 1994, from $2,449,308 in
1993, an increase of $40,758, or 1.66%.
Income tax expense for 1994 was $323,000 as compared to $587,000 in 1993. Net
earnings per share in 1994 were $1.70, as compared to an earnings per share of
$2.83 in 1993. Return on average assets for 1994 was .64%, as compared 1.09%
in 1993. Return on average equity was 7.36% in 1994, as compared to 12.44% in
1993.
35
<PAGE> 36
LOANS AT DECEMBER 31
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Commercial, financial
and agricultural $26,082,499 29,236,390 27,647,903
Real Estate - construction 1,230,498 1,337,971 697,304
Real Estate - mortgage 17,563,219 13,753,675 12,017,768
Installment loans to
individuals 20,185,236 17,061,301 12,748,063
----------- ---------- ----------
$65,061,452 61,389,337 53,111,038
=========== ========== ==========
</TABLE>
Total loans increased to $65,061,452, at December 31, 1995, from $61,389,337 at
year end 1994, an increase of $3,672,115, or 5.98%. Commercial, financial and
agriculture loans decreased to $26,082,499 at year end 1995, from $29,236,390
at December 31, 1994. Most of the decrease of $3,153,891 can be attributed to
repayments on two major loans in the last half of the year. Installment loans
to individuals increased to $20,185,236 at December 31, 1995, from $17,061,301
at year end 1994, an increase of $3,123,935, or 18.31%. This increase is the
result of more emphasis being placed on consumer loans bankwide, including
hiring of new personnel and expansion of banking hours more accessible for
customers. The ratio of loans, excluding bankers acceptances and commercial
paper, to deposits on December 31, 1995, was 55.26%, as compared to 53.79% in
1994.
Total loans increased to $61,389,327, at December 31, 1994, from $53,111,038 at
year end 1993, an increase of $8,278,299, or 15.59%. Commercial, financial and
agriculture loans increased to $29,236,390 at year end 1994, from $27,647,903
at December 31, 1993. Most of the increase of $1,588,487 wa attributable to an
increase of $956,436 in commercial and industrial loans. Real estate mortgage
loans increased $1,735,907, or 14.44%, to $13,753,675 at December 31, 1994.
Installment loans to individuals increased to $17,061,301 at December 31, 1994,
from $12,748,063 at year end 1993, an increase of $4,313,238, or 33.83%. Some
of that increase was due to loans secured by non-farm and non-residential
properties, which increased $1,607,934. The ratio of loans, excluding bankers
acceptances and commercial paper, to deposits on December 31, 1994, was 53.79%,
as compared to 46.87% in 1993.
LIQUIDITY
"Liquidity" refers to the Corporation's ability to meet its cash flow
requirements and to fund its commitments. The Corporation and its subsidiary
actively manage the levels, types and maturities of earning assets in relation
to the sources available to fund current and future needs in an effort to
ensure the availability of adequate funding at all times. The goal of
liquidity management is to ensure the availability of an adequate level of
funds to meet loan demand and the deposit withdrawal needs of the Corporation's
customers.
36
<PAGE> 37
As of December 31, 1995, the Corporation's liquidity was adequate. In addition
to $7,550,000 in federal funds sold, the Bank's cash and due from banks also
had a balance of $6,225,385. At December 31, 1995 the loan to deposit ratio
was 55.26%, excluding bankers acceptances and commercial paper. The Bank does
not foresee any future problems with liquidity, but if needed, they have a
federal funds line of credit that totals $8,000,000. The Corporation's bank
subsidiary has an Asset and Liability Committee which has as its primary
objective the maintenance of specific funding and investment strategies to
achieve short-term and long-term financial goals.
As revealed in the Consolidated Statement of Cash Flows, the Corporation
generates the majority of its cash flows from financing activities. Financing
activities produced $6,296,136 in cash in 1995, with the majority of this
coming from a net increase in deposits and repurchase agreements. The
investing activities of the Corporation used $7,429,673 of the cash flows of
the Bank. Of this use of cash, $11,806,339 was the net outflow into the loan
portfolio. Investments maturing and proceeds from sales helped to fund these
additional loans. Operations provided $2,137,335 in cash flows for the year
end December 31, 1995.
37
<PAGE> 38
Interest Rate Sensitivity Analysis
Years Ended December 31
<TABLE>
<CAPTION>
1995
Three Three
Months To Six Six Months 1 - 5 5 Years
Or Less Months to One Year Years Or After Total
------- ------ ----------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
- ---------------
Loans, net of unearned
income $ 13,582 7,813 4,961 33,548 4,043 63,947
Taxable securities AFS 250 250 1,248 20,244 12,681 34,673
Tax exempt securities AFS 0 0 0 1,097 2,644 3,741
Taxable securities HTM 1,000 0 1,011 4,608 2,644 16,844
Tax exempt securities HTM 100 0 9 1,683 3,164 4,956
Federal Funds Sold 7,550 0 0 0 0 7,550
Interest bearing deposits
with other banks 0 0 0 104 0 104
-------- ------ ------ ------ ------ -------
TOTAL Interest Earning Assets $ 22,482 8,063 7,229 61,284 32,757 131,815
======== ====== ====== ====== ====== =======
Interest Earning Liabilities
- ----------------------------
Demand Deposits $ 0 0 0 0 11,806 11,806
Savings Deposits 0 0 0 0 14,837 14,837
Certificates of Deposit less
than $100,000 14,425 14,827 9,614 10,479 2 49,347
Certificates of Deposit
greater than $100,000 6,436 3,448 4,416 1,708 0 16,008
Federal Funds Purchased and
securities sold under
agreement to repurchase 8,691 0 0 0 0 8,691
Other Short Term Borrowings 173 0 0 0 0 173
-------- ------ ------ ------ ------ -------
TOTAL Interest Bearing Liabilities $ 29,725 18,275 14,030 12,187 26,645 109,862
======== ====== ====== ====== ====== =======
Non Interest Bearing Source
of Funds 0 0 0 0 20,117 20,117
-------- ------ ------ ------ ------ -------
Interest Sensitivity Gap (7,243) (10,212) (6,801) 49,097 (14,005) 10,836
Cumulative Gap (17,455) (24,256) 24,841 10,836
</TABLE>
38
<PAGE> 39
The Corporation's sensitivity to changes in interest rates in conjunction with
the structure of interest rate spreads determines the impact of interest rates
on the Corporation's performance. Therefore, interest rate shock scenarios are
performed. In a rising interest rate scenario, the Corporation's prime rate
increases 300 basis points over the next twelve months. In the falling
interest rate case, the Corporation's prime rate drops 275 basis points over
the next twelve months. The projected net interest margin in a stable interest
rate environment is 4.92%, as compared to 4.97% in a rising rate scenario and
4.33% in a falling rate scenario. Management considers these interest rate
movements to be worst case scenarios. Any business or strategic plans the
Corporation may implement in a rising or falling rate environment are not taken
into account in developing interest rate scenarios.
CAPITAL RESOURCES
The Corporation relies primarily on internally generated capital growth to
maintain capital adequacy. The average assets to average equity ratio during
1995 was 8.73% as compared to 8.69% in 1994. Total stockholders equity on
December 31, 1995 was $12,397,538, an increase of $1,726,869, or 16.18%, from
$10,670,669 at year end 1994. The Corporation's net operating profit during
1995, less dividends of $258,192 declared to stockholders, plus the FAS 115
adjustment of $754,699, accounted for this increase. The Corporation's bank
subsidiary, United Bank, had risk based capital of $13,297,000, or 15.66%, at
December 31, 1995, well above the minimum risk based capital requirement of
$6,790,000 or 8.0%. Based on management's projections, internally generated
capital should be sufficient to satisfy capital requirements in the foreseeable
future.
39
<PAGE> 40
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Corporation's consolidated financial statements as of December 31, 1995 and
1994 and for each of the years in the three-year period ended December 31, 1995
are included in the following pages shown in the index below.
<TABLE>
<CAPTION>
Index to Financial Statements Page(s)
----------------------------- -------
<S> <C>
Independent Auditors' Report 50
Consolidated Balance Sheets on December 31,
1995 and 1994 51
Consolidated Statements of Operations for
the years ended December 31, 1995, 1994,
and 1993 53
Consolidated Statements of Stockholders'
Equity for the years ended December 31,
1995, 1994, and 1993 55
Consolidated Statements of Cash Flows for
the years ended December 31, 1995, 1994,
and 1993 57
Notes to Consolidated Financial
Statements - December 31, 1995, 1994,
and 1993 60
</TABLE>
40
<PAGE> 41
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
41
<PAGE> 42
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name of each nominee and each
director of the Corporation continuing in office after the 1996 Annual Meeting
of capital stockholders of the capital corporation, a description of his
position and offices, if any, with the Corporation and its subsidiaries, a
brief description of his principal occupation during at least the last five
years, and certain other information, including his age. Each such director
and each nominee is a director of United Bank. David D. Swift is the nephew of
Claude S. Swift.
<TABLE>
<CAPTION>
Date Term
Director As Director Principal Occupation
Name and Age Since Expires During Past Five Years
- ------------ ----- ------- -----------------------------
<S> <C> <C> <C>
H. Leon Esneul (60) 1993 May 1997 Vice Chairman of the Board of the Corporation Pecan
grower; managing partner of the Doris Company.
Elam P. Fayard (70) 1982 May 1998 Chairman of the Board of the Corporation; formerly
President, Fayard Construction Company.
Robert R. Jones, III (44) 1992 May 1996* President of the Corporation since May, 1993; Executive
Vice President of the Corporation from July, 1992 to May
1993; President and Chief Executive Officer of United
Bank since July, 1992; Senior Vice President of United
Bank from January, 1991 to July, 1992.
William J. Justice (56) 1991 May 1997 Vice Chairman of the Board of United Bank; Pharmacist,
President and Chief Executive Officer, Greenlawn
Pharmacy.
Bobby W. Sawyer (42) 1993 May 1996* President, Hammer, Inc., construction company.
</TABLE>
42
<PAGE> 43
<TABLE>
<S> <C> <C> <C>
Claude S. Swift (68) 1994 May 1998* Chairman of the Board of United Bank; President, Swift
Logging Co., Inc.
David D. Swift (45) 1995 May 1998** Secretary, Swift Lumber, Inc; Secretary, Swift Supply,
Inc; Partner, Palustris Products, Inc.
</TABLE>
* nominee for election for a term expiring in May, 1999
The following table lists the executive officers of the Corporation and the
respective positions held by them in the Corporation. Each is a director of
the Corporation, except for Mitchell D. Staples, and information regarding
their other business experience during the past five years and certain other
information is set forth above. Mr. Staples, age 34, has been the Controller
and Cashier of United Bank from October 1992 to present; previously, he was
Controller at United Savings Bank, Anniston, Alabama.
Name Position
- ------------- -----------------
Robert R. Jones, III President
Elam P. Fayard Chairman of the Board
H. Leon Esneul Vice Chairman of the Board
William J. Justice Secretary
Mitchell D. Staples Treasurer
The executive officers of the Corporation are elected annually at the
organizational meeting of the Board of Directors, which follows the annual
meeting of stockholders, to serve until the organizational meeting in the
subsequent year. There are no known arrangements or understandings between any
executive officers and any other person pursuant to which any of the
above-named persons was selected as an officer.
43
<PAGE> 44
ITEM 11. EXECUTIVE COMPENSATION
Officers of the Corporation, and directors who also serve as directors or
officers of United Bank, are remunerated by United Bank. The following Summary
Compensation Table sets forth certain information concerning compensation to
Robert R. Jones, III, the only executive officer of the Corporation who
received total annual salary and bonus for 1995 exceeding $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Annual Compensation
-------------------
All Other
Name and Principal Position Year Salary Bonus Compensation
- --------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Robert R. Jones, III 1995 $105,000 $21,764 $18,659
President of the Corporation; 1994 100,000 21,441 18,664(1)
President of United Bank 1993 95,000 8,247 42,697
- -----------------------
</TABLE>
- --------------
(1) Includes $7,638 contributed on behalf of Mr. Jones as a supplemental
benefit pursuant to an Executive Compensation Agreement; $476 premium
reimbursed by United Bank on a long-term disability insurance policy
for Mr. Jones; $1,273 contributed by United Bank for the account of
Mr. Jones pursuant to United Bank's 401(k) Employee Incentive Savings
Plan (the "401(k) Plan"); $4,060 in fees for attendance at meetings of
United Bank's Board of Directors; and $5,212 in profit-sharing
payments made in 1995 for services in 1994.
No fees are paid to directors of the Corporation for their services as
such. Since all of the Corportion's directors also serve as directors of
United Bank, they are compensated for their services to United Bank.
During 1995 all current directors of the Corporation also served as
directors of United Bank. Each director of United Bank received a standard fee
for such service of $3,500, plus $40 (for directors who were members of the
Atmore Loan Committee) or $50 (for directors who were members of the Monroe
County Loan Committee) for each Board meeeting attended. In 1995, United
Bank's Board of Directors held a total of 60 meetings: 12 monthly, two
quarterly, and two special.
Compensation Committee Interlocks and Insider Participation
Officers of the Corporation, and directors of the corporation who are also
directors of United Bank, are remunerated by United Bank, not by the
Corporation. The Corporation's Board of Directors does not have a compensation
committee or a committee performing similar functions. United Bank's Board of
Directors does have a compensation committee, which makes recommendations to
United Bank's Board of Directors regarding compensation to, among others,
persons who serve as executive officers of the Corporation. Such compensation
committee is composed of five directors, all of whom
44
<PAGE> 45
are outside directors who are not, and never have been, officers or employees
of the Corporation or any subsidiary thereof. United Bank's Board of Directors
determines the compensation of officers, including those persons who serve as
executive officers of the Corporation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 26, 1996, no single person or entity owned of record or, to the
knowledge of the Corporation, was deemed to own beneficially, more than 5% of
the outstanding shares of such Stock.
The table below sets forth, as of March 12, 1996, the number of shares of Class
A Stock owned by each director and by all executive officers and directors as a
group.
<TABLE>
<CAPTION>
Percentage
Amount and Nature of of Outstanding
Name of Individual Beneficial Ownership Class A Stock
- ------------------ -------------------- --------------
<S> <C> <C>
H. Leon Esneul 13,604(1) 2.63%
Elam P. Fayard 13,344(2) 2.58%
Robert R. Jones, III 3,109(3) *
William J. Justice 4,638(4) *
Bobby W. Sawyer 2,600(5) *
Mitchell D. Staples 10 *
Claude S. Swift 25,599(6) 4.96%
David D. Swift 6,493 1.26%
All executive officers 69,397(1)(2)(3)(4) 13.44%
and directors as a (5)(6)
group (8 persons)
</TABLE>
- ---------------------
* less than 1%
(1) Includes 300 shares owned by The Doris Company; and 5,000 shares owned
by his wife, as to which shares Mr. Esneul disclaims beneficial
ownership.
(2) Includes 3,328 shares owned by his wife, as to which shares Mr. Fayard
disclaims beneficial ownership.
(3) Includes 2,045 shares owned jointly with his wife; 32 shares owned
jointly with his son; 500 shares held in his Individual Retirement
Account; 500 shares held by his wife in an Individual Retirement
Account; and 32 shares owned jointly by his wife and his daughter.
45
<PAGE> 46
(4) Includes 2,368 shares owned jointly with his wife; 1,098 shares owned
by his wife, as to which shares Mr. Justice disclaims beneficial
ownership; and 106 shares owned by Mr. Justice for his granddaughter.
(5) Owned jointly with his wife.
(6) Includes 21,333 shares owned jointly with his wife; and 4,266 shares
owned by his wife as to which shares Mr. Swift disclaims beneficial
ownership.
ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
Some Corporation and United Bank directors, officers, and principal
stockholders, and their associates and immediate families were customers of, or
had transactions with, subsidiaries of the Corporation in the ordinary course
of business during 1995. Hammer, Inc., a construction company owned by Bobby
W. Sawyer, was paid $539,448, the majority of which was for construction work
performed to repair the main branch of United Bank in Atmore which sustained
extensive damage from Hurricane Erin in August 1995. This expense was
reimbursable by the bank's insurance carrier. In addition, some Corporation
and United Bank directors are directors, officers, trustees, or principal
security holders of corporations or other organizations that were customers of,
or had transactions with, the Corporation or its subsidiaries in the ordinary
course of business during 1995.
United Bank has issued loans outstanding on behalf of directors, officers, and
principal shareholders, and their associates and immediate families, in the
aggregate amount of $1,919,380, representing approximately 15.5% of the
Corporation's shareholders' equity as of December 31, 1995. All outstanding
loans and other transactions with the Corporation's, and its subsidiaries',
directors, officers, and principal shareholders, and their associates and
immediate families, were made in the ordinary course of business on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and when
made did not involve more than the normal risk of collectibility or present
other unfavorable features. In addition to banking and financial transactions,
the Corporation and its subsidiaries may have had additional transactions with,
or may have used products or services of, various organizations of which
directors of the Corporation or its subsidiaries are directors, officers, or
principal shareholders. The amounts involved in such noncredit transactions
have in no case been material in relation to the business of the Corporation
and its subsidiaries or to such other organizations.
46
<PAGE> 47
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The financial statements listed in the Index to Financial
Statements contained in Item 8 hereof are filed as part of
this Annual Report on Form 10-K.
(2) Financial statement schedules have been omitted as
inapplicable.
(3) The Exhibits listed below are filed as part of this Report.
Management contracts and compensatory plans and arrangements
required to be filed pursuant to Item 14(c) are identified by
an asterisk (*).
3.1 Restated Certificate of Incorporation of the Registrant
(Incorporated by reference herein from Exhibit 3a to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1988).
3.2 Amended and Restated Bylaws of the Registrant (Incorporated by
reference herein from Exhibit 3.2 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1992).
10.1 Form of Executive Compensation Agreement between United Bank
and Robert R. Jones, III (Incorporated by reference herein
from Exhibit 10.1 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1992). *
21 Subsidiary of the Registrant.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the last quarter of the
fiscal year ended December 31, 1995.
47
<PAGE> 48
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) 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 BANCORPORATION OF ALABAMA, INC.
(Registrant)
BY: /s/ Robert R. Jones, III
-------------------------------------
Robert R. Jones, III
President and Chief Executive Officer
March 21, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY IN WHICH SIGNED DATE
<S> <C> <C> <C>
/s/ Robert R. Jones, III President, Chief March 21, 1996
- ------------------------- Executive Officer, and
Robert R. Jones, III Director
/s/ Mitchell D. Staples Treasurer March 21, 1996
- ------------------------- (principal financial and
Mitchell D. Staples principal accounting
officer)
/s/ H. Leon Esneul Director March 21, 1996
- -------------------------
H. Leon Esneul
/s/ David D. Swift, Jr. Director March 21, 1996
- -------------------------
John B. Swift, Jr.
/s/ William J. Justice Director March 21, 1996
- -------------------------
William J. Justice
/s/ Bobby W. Sawyer Director March 21, 1996
- -------------------------
Bobby W. Sawyer
/s/ Claude S. Swift Director March 21, 1996
- -------------------------
Claude S. Swift
Director March 21, 1996
- -------------------------
Elam P. Fayard
</TABLE>
48
<PAGE> 49
Supplemental Information to Be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant
to Section 12 of the Act
The annual report to shareholders covering the registrant's last fiscal year
and the proxy statement, form of proxy and other proxy soliciting material with
respect to the registrant's 1996 annual meeting of shareholders are to be
furnished to shareholders subsequent to the filing of this Annual Report on
Form 10-K. Four copies of such report and proxy material will be furnished to
the Commission when sent to security holders.
49
<PAGE> 50
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
United Bancorporation of Alabama, Inc.:
We have audited the accompanying consolidated financial statements of United
Bancorporation of Alabama, Inc. and subsidiary as listed in Item 8. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of United
Bancorporation of Alabama, Inc. and subsidiary at December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Notes 1 and 9 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. Also as discussed
in Notes 1 and 3 to the consolidated financial statements, the Company changed
its method of accounting for investment securities in 1994 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities.
/s/ KPMG Peat Marwick LLP
Birmingham, Alabama
February 23, 1996
<PAGE> 51
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets 1995 1994
---- ----
<S> <C> <C>
Cash and due from banks (note 2) $ 6,225,385 6,796,587
Federal funds sold 7,550,000 5,975,000
------------- --------------
Cash and cash equivalents 13,775,385 12,771,587
Interest-earning deposits with other
financial institutions 103,897 105,432
Investment securities available for sale,
net (note 3):
Taxable 34,673,010 24,083,275
Nontaxable 3,740,958 1,074,164
------------- --------------
Total investment securities
available for sale 38,413,968 25,157,439
Investment securities held to maturity (note 3):
Taxable 16,844,330 25,973,786
Nontaxable 4,955,658 4,470,442
------------- --------------
Total investment securities
held to maturity 21,799,988 30,444,228
Loans (note 4) 65,061,452 61,389,337
Less: Unearned income 1,114,870 1,043,761
Allowance for loan losses 1,343,636 1,251,549
------------- --------------
Net loans 62,602,946 59,094,027
Premises and equipment, net (note 5) 1,667,135 1,698,946
Interest receivable 1,703,031 1,492,328
Other real estate, net (note 6) 81,072 14,461
Other assets (note 9) 318,799 1,031,056
------------- --------------
Total assets $ 140,466,221 131,809,504
============= ==============
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements.
<PAGE> 52
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Consolidated Balance Sheets, Continued
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1995 1994
---- ----
<S> <C> <C>
Deposits (note 7):
Noninterest bearing $ 20,117,028 19,198,792
Interest bearing 97,625,844 94,866,126
------------ ------------
Total deposits 117,742,872 114,064,918
Securities sold under agreements to
repurchase (note 8) 8,690,856 5,873,654
Other borrowed funds 172,516 371,536
Accrued expenses and other liabilities (note 9) 1,462,439 828,727
------------ ------------
Total liabilities 128,068,683 121,138,835
Stockholders' equity:
Class A common stock. Authorized 975,000
shares of $.01 par value; 548,160 shares
issued and outstanding 5,482 5,482
Class B common stock of $.01 par value.
Authorized 250,000 shares; -0- shares
issued and outstanding -- --
Preferred stock of $.01 par value.
Authorized 250,000 shares; -0- shares
issued and outstanding -- --
Surplus 3,476,518 3,476,518
Retained earnings (note 10) 9,263,715 8,291,545
Net unrealized gain (loss) on investment
securities available for sale (note 3) 117,413 (637,286)
------------ ------------
12,863,128 11,136,259
Less treasury shares of 31,775, at cost, at
December 31, 1995 and 1994 465,590 465,590
------------- ------------
Total stockholders' equity 12,397,538 10,670,669
Commitments and contingencies (note 13 and 14)
------------- ------------
Total liabilities and stockholders' equity $ 140,466,221 131,809,504
============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 53
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 6,703,530 5,575,903 5,172,627
Interest and dividends on investment
securities available for sale:
Taxable 1,685,880 1,820,766 257,398
Nontaxable 129,970 76,944 55,113
------------- ------------ -----------
Total interest and dividends on
investment securities
available for sale 1,815,850 1,897,710 312,511
------------- ------------ -----------
Interest and dividends on investment
securities held to maturity:
Taxable 1,421,913 1,452,147 3,461,630
Nontaxable 244,815 288,505 386,069
------------- ------------ -----------
Total interest and dividends on
investment securities held to
maturity 1,666,728 1,740,652 3,847,699
------------- ------------ -----------
Total investment securities income 3,482,578 3,638,362 4,160,210
------------- ------------ -----------
Other interest income 309,007 209,053 261,687
------------- ------------ -----------
Total interest income 10,495,115 9,423,318 9,594,524
Interest expense:
Interest on deposits (note 7) 4,226,361 3,349,242 3,309,399
Interest on other borrowed funds 334,052 169,283 121,137
------------- ------------ -----------
Total interest expense 4,560,413 3,518,525 3,430,536
------------- ------------ -----------
Net interest income 5,934,702 5,904,793 6,163,988
Provision for loan losses (note 4) 204,000 330,000 600,000
------------- ------------ -----------
Net interest income after
provision for loan losses 5,730,702 5,574,793 5,563,988
Noninterest income:
Service charges on deposits 908,838 872,299 864,587
Commissions on credit life insurance 88,151 96,234 74,656
Investment securities gains, net (note 3) 31,867 14,150 881,595
Other 127,830 245,614 118,182
------------- ------------ -----------
Total noninterest income 1,156,686 1,228,297 1,939,020
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements.
<PAGE> 54
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Consolidated Statements of Operations, Continued
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Noninterest expense:
Salaries and benefits (note 12) 2,598,931 2,574,585 2,484,600
Net occupancy expense 638,798 590,890 612,352
Other (note 15) 1,917,297 2,490,066 2,449,308
------------- ------------ -----------
Total noninterest expense 5,155,026 5,655,541 5,546,260
------------- ------------ -----------
Earnings before income taxes 1,732,362 1,147,549 1,956,748
Income tax expense (note 9) 502,000 323,000 587,000
------------- ------------ -----------
Net earnings $ 1,230,362 824,549 1,369,748
============= ============ ===========
Earnings per share $ 2.38 1.70 2.83
============= ============ ===========
Weighted average shares outstanding 516,385 484,275 484,275
============= ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 55
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Net
unrealized
loss on
investments
Common Retained in mutual
Shares stock Surplus earnings funds
------ ----- ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance December 31, 1992 548,160 $ 5,482 3,476,518 7,196,939 (91,093)
Net earnings 1993 -- -- -- 1,369,748 --
Cash dividends declared
($.50 per share) -- -- -- (257,118) --
Net change in unrealized
loss on investments in
mutual funds -- -- -- -- 91,093
------- ----- --------- --------- -------
Balance December 31, 1993 548,160 5,482 3,476,518 8,309,569 --
Net earnings 1994 -- -- -- 824,549 --
Cash dividends declared
($.50 per share) -- -- -- (257,118) --
Effect of adoption of FASB
Statement No. 115, Account-
ing for Certain Investments
in Debt and Equity Securities -- -- -- -- --
<CAPTION>
Net
unrealized
gain
(loss) on
investment
securities Total
available Treasury stockholders'
for sale stock equity
-------- ----- ------
<S> <C> <C> <C>
Balance December 31, 1992 -- (508,590) 10,079,256
Net earnings 1993 -- -- 1,369,748
Cash dividends declared
($.50 per share) -- -- (257,118)
Net change in unrealized
loss on investments in
mutual funds -- -- 91,093
------- -------- ----------
Balance December 31, 1993 -- (508,590) 11,282,979
Net earnings 1994 -- -- 824,549
Cash dividends declared
($.50 per share) -- -- (257,118)
Effect of adoption of FASB
Statement No. 115, Account-
ing for Certain Investments
in Debt and Equity Securities 491,437 -- 491,437
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements.
<PAGE> 56
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity, Continued
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Net
unrealized
loss on
investments
Common Retained in mutual
Shares stock Surplus earnings funds
------ ----- ------- -------- -----
<S> <C> <C> <C> <C> <C>
Change in unrealized gain (loss)
on investments securities
available for sale, net of
change in deferred tax -- -- -- -- --
Purchase treasury stock -- -- -- -- --
Stock dividend (1 to 15):
29,960 at $18 -- -- -- (539,280) --
2,150 at $20 -- -- -- (43,000) --
Cash dividends payable on
partial shares -- -- -- (3,175) --
------- ----- --------- --------- ---
Balance December 31, 1994 548,160 5,482 3,476,518 8,291,545 --
Net earnings 1995 -- -- -- 1,230,362 --
Cash dividends declared ( $.50 per share) -- -- -- (258,192) --
Change in net unrealized gain
(loss) on investment securities
available for sale, net of
change in deferred tax -- -- -- -- --
-- -- -- -- --
Balance December 31, 1995 548,160 $ 5,482 3,476,518 9,263,715 --
======= ===== ========= ========= ===
<CAPTION>
Net
unrealized
gain
(loss) on
investment
securities Total
available Treasury stockholders'
for sale stock equity
-------- ----- ------
<S> <C> <C> <C>
Change in unrealized gain (loss)
on investments securities
available for sale, net of
change in deferred tax (1,128,723) -- (1,128,723)
Purchase treasury stock -- (539,280) (539,280)
Stock dividend (1 to 15):
29,960 at $18 -- 539,280 --
2,150 at $20 -- 43,000 --
Cash dividends payable on
partial shares -- -- (3,175)
---------- -------- ----------
Balance December 31, 1994 (637,286) (465,590) 10,670,669
Net earnings 1995 -- -- 1,230,362
Cash dividends declared ( $.50 per share) -- -- (258,192)
Change in net unrealized gain
(loss) on investment securities
available for sale, net of
change in deferred tax 754,699 -- 754,699
---------- -------- ----------
Balance December 31, 1995 117,413 (465,590) 12,397,538
========== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 57
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,230,362 824,549 1,369,748
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Provision for loan losses 204,000 330,000 600,000
Depreciation of premises and equipment 229,973 263,525 306,476
Net amortization (accretion) of
premium (discount) on investment
securities and interest-earning deposits 87,812 254,054 (60,476)
Gains on investment securities held
to maturity, net -- -- (147,441)
Gains on sales of investment
securities available for sale, net (31,867) (14,150) (734,154)
Losses (gains) on disposal of
premises and equipment, net 43,446 (4,325) (290)
Writedowns of other real estate -- -- 33,330
(Gains) losses on sale of other
real estate, net -- (11,500) 78,150
(Increase) decrease in interest
receivable and other assets (188,182) (359,167) 131,358
Decrease (increase) in income
tax receivable 226,657 (317,870) 189,213
Increase (decrease) in deferred
income taxes 112,826 (47,936) (72,000)
Increase (decrease) in accrued
expenses and other liabilities 222,308 (213,792) 369,778
------------- -------------- -----------
Net cash provided by
operating activities 2,137,335 703,388 2,063,692
Cash flows from investing activities:
Net decrease in interest-earning deposits
in other financial institutions 1,535 99,534 1,535
Proceeds from maturities, calls, and
principal repayments of investment
securities held to maturity 3,366,485 6,773,563 18,435,283
Proceeds from sales of investment
securities held to maturity -- -- 6,739,219
Purchases of investment securities
held to maturity (2,623,814) (11,066,265) (32,062,375)
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements.
<PAGE> 58
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Proceeds from maturities, calls, and
principal repayments of investment
securities available for sale 4,889,056 4,260,531 1,510,000
Proceeds from sales of investment
securities available for sale 2,764,542 7,751,403 3,491,078
Purchases of investment securities
available for sale (11,806,339) (2,713,906) (3,959,664)
Net (increase) decrease in loans (3,791,685) (8,566,190) 3,159,798
Proceeds from insurance settlement 1,237,589 -- --
Purchases of replacement assets (1,237,589) -- --
Purchases of premises and equipment (241,618) (225,920) (59,493)
Proceeds from sales of premises and equipment 10 4,325 4,424
Proceeds from sales of other real estate 12,155 88,262 758,091
------------- -------------- -----------
Net cash used in investing activities (7,429,673) (3,594,663) (1,982,104)
Cash flows from financing activities:
Net increase (decrease) in deposits 3,677,954 5,492,078 (4,714,248)
Net increase in securities sold under
agreement to repurchase 2,817,202 1,432,448 1,063,707
Cash dividends -- (260,293) (257,118)
Decrease in other borrowed funds (199,020) (797,137) (45,801)
Purchase of treasury stock -- (539,280) --
------------- -------------- -----------
Net cash provided by (used in)
financing activities 6,296,136 5,327,816 (3,953,460)
------------- -------------- -----------
Net increase (decrease) in cash and cash equivalents 1,003,798 2,436,541 (3,871,872)
Cash and cash equivalents at beginning of year 12,771,587 10,335,046 14,206,918
------------- -------------- -----------
Cash and cash equivalents at end of year $ 13,775,385 12,771,587 10,335,046
============= ============== ===========
Supplemental disclosures
Cash paid during the year for:
Interest $ 4,308,312 3,436,623 3,485,084
============= ============== ===========
Income taxes $ 430,000 900,945 363,637
============= ============== ===========
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements.
<PAGE> 59
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Noncash transactions:
Transfer of loans to other real
estate through foreclosure $ 78,766 61,223 41,042
============= ============ ===========
Change in unrealized gain (loss)
on investment securities available
for sale, net of change in
deferred tax $ 754,699 (1,128,723) (91,093)
============= ============ ===========
Investment securities transferred
from held-to-maturity to
available-for-sale $ 7,851,246 31,145,694 --
============= ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 60
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1995, 1994, and 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
financial statements of United Bancorporation of Alabama, Inc.
(the Corporation) and its wholly-owned subsidiary, United Bank
(the Bank), collectively as the Company. Significant
intercompany balances and transactions have been eliminated in
consolidation.
(b) BASIS OF PRESENTATION
The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. In
preparing the financial statements, management is required to
make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the
balance sheet and revenues and expenses for the period.
Actual results could differ significantly from those
estimates.
Material estimates that are particularly susceptible to
significant change in a time period of less than one year
relate to the determination of the allowance for loan losses
and the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans. In connection with
the determination of the allowances for loan losses and real
estate owned, management obtains independent appraisals for
significant properties.
Management believes the allowances for losses on loans and
real estate owned are adequate. While management uses
available information to recognize losses on loans and real
estate owned, future additions to the allowances may be
necessary based on changes in economic conditions,
particularly in Alabama. In addition, various regulatory
agencies, as an integral part of their examination process,
periodically review the Company's allowances for losses on
loans and real estate owned. Such agencies may require the
Company to recognize additions to the allowances based on
their judgments about information available to them at the
time of their examination.
(Continued)
<PAGE> 61
- 2 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(c) CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company
considers due from banks and federal funds sold to be cash
equivalents.
(d) INVESTMENT SECURITIES
On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) 115, Accounting for Certain
Investments in Debt and Equity Securities which requires that
investment securities be held in one of three portfolios: (i)
trading account securities, (ii) held to maturity securities,
and (iii) securities available for sale. Trading account
securities are to be stated at fair value. The Company does
not have trading account securities. Investment securities
held to maturity are stated at cost adjusted for amortization
of premiums and accretion of discounts. With regard to
investment securities held to maturity, management has the
intent and ability to hold such securities until maturity.
Investment securities available for sale are to be stated at
fair value with any unrealized gains and losses reported in a
separate component of stockholders' equity, net of tax effect,
until realized. Once realized, gains and losses on investment
securities available for sale are reflected as adjustments to
current period earnings.
Upon the adoption of SFAS 115, the Company transferred
securities, totaling approximately $31,000,000, to the
available for sale portfolio at January 1, 1994 with a net
unrealized gain of approximately $491,000 included in
stockholders' equity, net of taxes of $285,000.
In November 1995, the Financial Accounting Standards Board
(FASB) issued FASB Special Report, A Guide to Implementation
of Statement No. 115 on Accounting for Certain Investments in
Debt and Equity Securities - Questions and Answers.
Concurrent with the initial adoption of this implementation
guidance, an entity may reassess the appropriateness of the
classifications of all securities held at that time and
account for any resulting reclassifications at fair value.
This one-time reclassification should occur as of a single
date between November 15, 1995 and December 31, 1995, not over
a number of days throughout that period. Reclassifications
from the held-to-maturity category that result from this
one-time reassessment will not call into question the intent
of any entity to hold other
(Continued)
<PAGE> 62
- 3 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(d) INVESTMENT SECURITIES, CONTINUED
debt securities to maturity in the future. In conjunction
with this special report, the Company transferred, effective
November 30, 1995, investment securities held to maturity,
including U.S. Treasury notes, U.S. government agencies, and
state and political subdivisions with a total amortized cost
of $5,072,080, $1,004,117, and $1,775,049, respectively, and
fair value of $5,017,031, $980,919, and $1,962,576,
respectively, to the available-for-sale category. The
unrealized net holding gains on these securities at November
30, 1995, totaled approximately $109,000 and were included as
a separate component of stockholders' equity, net of deferred
taxes of approximately $44,000.
Interest earned on investment securities held to maturity and
investment securities available for sale is included in
interest income. Net gains and losses on the sale of
investment securities available for sale, computed principally
on the specific identification method, are shown separately in
noninterest income in the consolidated statements of
operations. Accretion of discounts and amortization of
premiums are calculated on the effective interest method over
the anticipated life of the security.
A decline in the market value of any security below cost that
is deemed other than temporary is charged to income resulting
in the establishment of a new cost basis for the security.
(e) LOANS
Loans are stated at principal amounts outstanding less
unearned income and the allowance for loan losses. Interest
income on loans is credited to earnings based on the principal
amount outstanding at the respective rate of interest except
for add on installment loans for which interest is recognized
on a method which is not materially different from a
level-yield basis over the terms of the loans. Interest
income on other loans is recognized on a level-yield basis.
(Continued)
<PAGE> 63
- 4 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(e) LOANS, CONTINUED
Accrual of interest on loans is discontinued when a loan
becomes contractually past due by 90 days or more with respect
to interest or principal. When a loan is placed on nonaccrual
status, all interest previously accrued, but not collected, is
reversed against current period interest income. Income on
such loans is then recognized only to the extent that cash is
received and where the future collection or principal is
probable. Interest accruals are recorded on such loans only
when they are brought fully current with respect to interest
and principal and when, in the judgment of management, the
loans are estimated to be fully collectible as to both
principal and interest.
The Company adopted the provisions of SFAS 114, Accounting by
Creditors for Impairment of a Loan, as amended by SFAS 118,
Accounting by Creditors for Impairment of a Loan--Income
Recognition and Disclosures, on January 1, 1995. Under the
provisions of SFAS 114 and 118, management considers a loan to
be impaired when it is probable that the Company will be
unable to collect all amounts due according to the contractual
terms of the loan agreement. When a loan is considered
impaired, the amount of impairment is measured based on the
present value of expected future cash flows discounted at the
note's effective interest rate. If the loan is
collateral-dependent, the fair value of the collateral is used
to determine the amount of impairment. Impairment losses are
included in the reserve for possible loan losses through a
charge to the provision for possible loan losses. Subsequent
recoveries are added to the reserve.
When a loan is considered impaired, cash receipts are applied
under the contractual terms of the loan agreement, first to
principal and then to interest income. Once the recorded
principal balance has been reduced to zero, future cash
receipts are applied to interest income, to the extent that
any interest has not been recognized. Future cash receipts
are recorded as recoveries of any amount previously charged
off.
A loan is also considered impaired if its terms are modified
in a troubled debt restructuring after January 1, 1995. For
those accruing impaired loans, cash receipts are typically
applied to principal and interest receivable in accordance
with the terms of the restructured loan agreement. Interest
income is recognized on these loans using the accrual method
of accounting.
(Continued)
<PAGE> 64
- 5 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(f) ALLOWANCE FOR LOAN LOSSES
Additions to the allowance for loan losses are based on
management's evaluation of the loan portfolio under current
economic conditions, past loan loss experience and such other
factors which, in management's judgment, deserve recognition
in estimating loan losses. The board of directors of the Bank
makes a formal review of the adequacy of the allowance for
loan losses prior to the end of each calendar quarter and
makes appropriate changes to the allowance. Loans are
charged-off when, in the opinion of management, such loans are
deemed to be uncollectible. Regulatory examiners may require
the Bank to recognize additions to the allowance based upon
their judgments about information available to them at the
time of their examination. Recognized losses, net of
recoveries, are charged to the allowance for loan losses.
(g) PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using both the
declining-balance method and the straight-line method over the
estimated useful lives of the assets, which range from three
to thirty years.
(h) OTHER REAL ESTATE
Other real estate represents property acquired through
foreclosure or deeded to the Company in lieu of foreclosure on
real estate mortgage loans on which borrowers have defaulted.
Other real estate is carried at the lower of acquisition cost
or fair value, adjusted for estimated selling costs.
Reductions in the balance of other real estate at the date of
foreclosure are charged to the allowance for losses.
Subsequent changes in fair value, up to the value established
at foreclosure, are recognized as charges or credits to
noninterest expense with an offset to the allowance for losses
on other real estate.
(i) INCOME TAX EXPENSE
As of January 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) 109, Accounting for
Income Taxes. SFAS 109 required a change from the deferred
method of accounting for income taxes of Accounting Principles
Board Opinion No. 11, Accounting for Income Taxes (APB Opinion
11) to the asset and liability method of accounting for income
taxes. Under the
(Continued)
<PAGE> 65
- 6 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(i) INCOME TAX EXPENSE, CONTINUED
asset and liability method of SFAS 109, deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax basis and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS 109, the
effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes
the enactment date.
Effective January 1, 1993, the Company adopted SFAS 109
without restating prior years' financial statements. The
change in accounting method had no material effect on 1993
earnings.
The Company files its federal income tax returns on a
consolidated basis.
(j) RECLASSIFICATIONS
Certain reclassifications have been made in the 1994 and 1993
consolidated financial statements to conform with the
classifications in the 1995 consolidated financial statements.
(k) RECENT ACCOUNTING PRONOUNCEMENTS
In May 1995, the FASB issued SFAS No. 122, Accounting for
Mortgage Servicing Rights an amendment of SFAS Statement No.
65 (SFAS 122). SFAS 122 amends SFAS 65 and requires that a
mortgage banking enterprise recognize as separate assets,
rights to service mortgage loans for others, however those
servicing rights are acquired. SFAS 122 also requires that a
mortgage banking enterprise assess its capitalized mortgage
servicing rights for impairment based on the fair value of
those rights. SFAS 122 is effective for financial statements
issued for fiscal years beginning after December 15, 1995.
The Company does not believe the provisions of SFAS 122 will
have a material impact on the financial statements.
(Continued)
<PAGE> 66
- 7 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(2) CASH AND DUE FROM BANKS
The Corporation's subsidiary bank is required to maintain daily cash
balances with the Federal Reserve. These balances were $801,000 and
$640,000 at December 31, 1995 and 1994, respectively.
(3) INVESTMENT SECURITIES
The amortized cost and approximate fair value of investment securities
held to maturity at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Approximate
cost gains losses fair value
---- ----- ------ -----------
<S> <C> <C> <C> <C>
1995
----
U.S. treasury $ 6,984 -- 102 6,882
U.S. government agencies
excluding mortgage-
backed securities 12,726,541 35,092 97,008 12,664,625
State and political subdivisions 5,748,924 64,239 22,641 5,790,522
Mortgage-backed securities 2,803,881 6,197 23,844 2,786,234
Corporate notes 513,658 -- 3,308 510,350
------------- ---------- --------- -----------
$ 21,799,988 105,528 146,903 21,758,613
============= ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
1994
----
U.S. treasury $ 5,099,768 -- 408,106 4,691,662
U.S. government agencies
excluding mortgage-
backed securities 15,723,983 8,512 1,383,398 14,349,097
State and political subdivisions 6,995,816 139,238 140,735 6,994,319
Mortgage-backed securities 2,005,610 1,947 182,628 1,824,929
Corporate notes 619,051 13,029 29,792 602,288
------------- ---------- ------------ -----------
$ 30,444,228 162,726 2,144,659 28,462,295
============= ========== ============ ===========
</TABLE>
(Continued)
<PAGE> 67
- 8 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(3) INVESTMENT SECURITIES, CONTINUED
Included in investment securities held to maturity at December 31, 1995
are certain U.S. government agency securities whose yields are based on
various interest rate indices or which include various interest rate
step-up provisions. The amortized cost and net unrealized losses on such
securities at December 31, 1995 were $3,497,825 and $5,806, respectively.
The weighted average yield of such securities at December 31, 1995 was
5.41 percent. These securities mature at various dates from January 1997
through November 2000.
The amortized cost and approximate fair value of debt securities
classified as investment securities held to maturity at December 31, 1995
by contractual maturity are shown below. Expected maturities will differ
from contractual because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
Amortized Approximate
cost fair value
---- -----------
<S> <C> <C>
Investment securities held to maturity:
Due in one year or less $ 2,120,025 2,127,474
Due after one year through five years 6,186,979 6,187,674
Due after five years through ten years 6,901,593 6,883,274
Due after ten years 3,787,510 3,773,957
------------ ------------
Subtotal 18,996,107 18,972,379
Mortgage-backed securities 2,803,881 2,786,234
------------ ------------
Total $ 21,799,988 21,758,613
============ ============
</TABLE>
There were no sales of investment securities held to maturity during the
years ended December 31, 1995 or 1994. Proceeds from sales of
investments in debt securities during 1993 were $6,739,219. Gross gains
of $184,565 and gross losses of $37,124 were realized on these sales in
1993.
(Continued)
<PAGE> 68
- 9 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(3) INVESTMENT SECURITIES, CONTINUED
The amortized cost and approximate fair value of investment securities
available for sale at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
1995
----
U.S. treasury $ 8,576,419 -- 48,138 8,528,281
U.S. government agencies
excluding mortgage-
backed securities 13,999,877 122,959 130,670 13,992,166
State and political subdivisions 6,220,645 304,713 80,880 6,444,478
Mortgage-backed securities 7,728,590 90,456 47,242 7,771,804
Collateralized mortgage obligations 1,442,748 -- 40,384 1,402,364
Corporate notes 250,000 24,875 -- 274,875
------------- ---------- --------- ----------
$ 38,218,279 543,003 347,314 38,413,968
============= ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
1994
----
U.S. treasury $ 5,093,902 -- 324,918 4,768,984
U.S. government agencies
excluding mortgage-
backed securities 9,240,046 759 432,025 8,808,780
State and political subdivisions 2,651,050 40,068 9,519 2,681,599
Mortgage-backed securities 7,533,735 33,052 231,147 7,335,640
Collateralized mortgage obligations 1,451,182 -- 145,751 1,305,431
Corporate notes 250,000 7,005 -- 257,005
------------- ---------- ------------ ----------
$ 26,219,915 80,884 1,143,360 25,157,439
============= ========== ============ ==========
</TABLE>
Included in investment securities available for sale at December 31, 1995
are certain U.S. government agency securities and all of the
collateralized mortgage obligations whose yields are based on various
interest rate indices or which include various interest rate step-up
provisions. The amortized cost and unrealized losses on such securities
at December 31, 1995 were $4,442,430 and $126,919, respectively. The
weighted average yield of such securities at December 31, 1995 was 5.54
percent. These securities mature at various dates from March 1998
through February 2020.
(Continued)
<PAGE> 69
- 10 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(3) INVESTMENT SECURITIES, CONTINUED
The amortized cost and approximate fair value of debt securities
classified as investment securities available for sale at December 31,
1995 by contractual maturity are shown below. Expected maturities will
differ from contractual because borrowers may have the right to call or
prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
Amortized Approximate
cost fair value
---- -----------
<S> <C> <C>
Investment securities available for sale:
Due in one year or less $ 2,047,798 2,048,736
Due after one year through five years 19,120,479 19,165,444
Due after five years through ten years 5,202,118 5,167,416
Due after ten years 2,676,546 2,858,204
------------ ----------
Subtotal 29,046,941 29,239,800
Mortgage-backed securities 7,728,590 7,771,804
Collateralized mortgage obligations 1,442,748 1,402,364
------------ ----------
Total $ 38,218,279 38,413,968
============ ==========
</TABLE>
Proceeds from sales of investment securities available for sale during
1995, 1994, and 1993 were $2,764,542, $7,751,403, and $3,491,078,
respectively. Gross gains of $39,240 and gross losses of $7,373 were
realized on those sales in 1995. Gross gains of $34,573 and gross losses
of $20,423 were realized on those sales in 1994. Gross gains of $865,209
and gross losses of $131,055 were realized on those sales in 1993.
Securities with carrying values of $28,153,891 and $22,502,281 at
December 31, 1995 and 1994, respectively, were pledged to secure public
and trust deposits as required by law and for other purposes.
The Company maintains a highly-diversified investment portfolio,
including held to maturity and available for sale securities, with
limited concentration in any given region, industry, or economic
characteristic. At December 31, 1995, the investment portfolio, at
amortized cost consists of securities of the U.S. government or U.S.
government-backed securities (59 percent); mortgage-backed securities (18
percent); collateralized mortgage obligations (2 percent); securities of
state and municipal governments (20 percent); and corporate notes (1
percent). Investments in municipal governments are made throughout the
U.S. with no concentration in any given state.
(Continued)
<PAGE> 70
- 11 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(4) LOANS AND ALLOWANCE FOR LOAN LOSSES
At December 31, 1995 and 1994, the composition of the loan portfolio was
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Commercial, financial and agricultural $ 26,082,499 29,236,390
Real estate - construction 1,230,498 1,337,971
Real estate - 1-4 family residential mortgage 17,563,219 13,753,675
Installment loans to individuals 20,185,236 17,061,301
------------ -----------
$ 65,061,452 61,389,337
============ ===========
</TABLE>
A summary of the transactions in the allowance for loan losses for the
years ended December 31, 1995, 1994, and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 1,251,549 1,173,993 887,157
Provision charged to earnings 204,000 330,000 600,000
Less: Loans charged-off 150,896 338,666 388,150
Loan recoveries (38,983) (86,222) (74,986)
------------ ------------ ----------
Net charge-offs 111,913 252,444 313,164
------------ ------------ ----------
Balance at end of year $ 1,343,636 1,251,549 1,173,993
============ ============ ==========
</TABLE>
In May 1993, the FASB issued SFAS 114, Accounting by Creditors for
Impairment of a Loan. In October 1994, the FASB issued SFAS 118,
Accounting by Creditors for Impairment of a Loan-Income Recognition
and Disclosures, which amends the requirements of SFAS 114 regarding
interest income recognition and related disclosure requirements.
Initial adoption of SFAS 114 and SFAS 118 must be reflected
prospectively. The Company adopted SFAS 114 and SFAS 118 on January
1, 1995 and the impact to the consolidated financial statements was
not material. At December 31, 1995, pursuant to the definition within
SFAS 114, the Company had $186,932 of impaired loans, with a related
valuation allowance of $69,560.
Loans on which the accrual of interest had been discontinued or
reduced amounted to $333,002 and $162,844 as of December 31, 1995 and
1994, respectively. If these loans had been current throughout their
terms, interest income would have been increased by $9,363, $5,234,
and $85,076 for 1995, 1994, and 1993, respectively.
(Continued)
<PAGE> 71
- 12 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(4) LOANS AND ALLOWANCE FOR LOAN LOSSES, CONTINUED
The Company had $8,261,708 and $6,959,260 of agriculture-related loans at
December 31, 1995 and 1994, respectively. Agriculture loans accounted for
$147,661 and $20,244 of nonaccrual loans in 1995 and 1994, respectively.
In assessing the credit risk and related terms of this specialized type of
lending, the Company utilizes the experience of specific personnel in
evaluating collateral and the resources of the borrower. As the Company's
loans, including agriculture loans, are reflective of its geographic
market, the ultimate collectibility of a substantial portion of the loan
portfolio and the recovery of real estate owned are susceptible to changes
in market conditions in the geographic area served by the Company.
During 1995 and 1994, certain executive officers and directors of the
Corporation and its subsidiary, including their immediate families and
companies with which they are associated, were loan customers of the
subsidiary bank. Total loans outstanding to these related parties at
December 31, 1995 and 1994, amounted to $1,919,380 and $3,196,104,
respectively. The change from December 31, 1994 to December 31, 1995
reflects advances amounting to $1,030,591 and payments of $2,307,315 made
during the year. Such loans are made in the ordinary course of business
at normal credit terms, including interest rate and collateral
requirements, and do not represent more than a normal credit risk.
(5) PREMISES AND EQUIPMENT
At December 31, 1995 and 1994, premises and equipment were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 255,749 255,749
Buildings and leasehold improvements 1,796,843 1,810,964
Furniture, fixtures and equipment 1,616,164 2,359,546
Automobiles 131,262 118,350
------------ ---------
3,800,018 4,544,609
Less: accumulated depreciation 2,132,883 2,845,663
------------ ---------
$ 1,667,135 1,698,946
============ =========
</TABLE>
(Continued)
<PAGE> 72
- 13 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(5) PREMISES AND EQUIPMENT, CONTINUED
During the year ended December 31, 1995, certain premises and
equipment with a net book value of $43,456 were disposed of due to
damage sustained from Hurricane Erin. Premises and equipment lost due
to storm damage were covered by insurance so that proceeds received
were adequate to replace lost assets. In addition, the Company
incurred certain expenses relating to damage from the storm including
disposal costs, costs of temporary office and storage space, and other
related items. However, the net effect of such expenses, proceeds,
and disposals did not have a significant impact on the consolidated
financial statements.
(6) OTHER REAL ESTATE
A summary of the transactions in the allowance for losses of other
real estate for the years ended December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Balance at beginning of year $ -- 9,000
Provision charged to income -- --
Charge-offs -- (9,000)
------ -------
Balance at end of year $ -- --
====== =======
</TABLE>
Other real estate, net, as of December 31, 1995 and 1994 totaled
$81,072 and $14,461, respectively.
(7) DEPOSITS
At December 31, 1995 and 1994, deposits were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Noninterest bearing accounts $ 20,117,028 19,198,792
NOW accounts 11,805,998 12,433,092
Money market investment accounts 5,628,649 4,843,517
Savings accounts 14,836,768 17,652,962
Time deposits:
Certificates of deposit less than $100,000 49,346,815 45,245,710
Certificates of deposit greater than $100,000 16,007,614 14,690,845
------------- -----------
Total deposits $ 117,742,872 114,064,918
============= ===========
</TABLE>
(Continued)
<PAGE> 73
- 14 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(7) DEPOSITS, CONTINUED
Interest expense on certificates of deposit greater than $100,000
amounted to $686,521, $457,686, and $472,820 for the years ended
December 31, 1995, 1994, and 1993, respectively.
(8) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The maximum amount of outstanding securities sold under agreements to
repurchase during 1995 and 1994 was $8,690,856 and $5,873,654,
respectively. The weighted average borrowing rate at December 31,
1995 and 1994 was 5.19 percent and 4.92 percent, respectively. The
average amount of outstanding agreements during 1995 and 1994 was
$5,760,265 and $4,074,409, respectively. The weighted average
borrowing rate during the years ended December 31, 1995 and 1994 was
4.70 percent and 3.65 percent, respectively. Securities underlying
these agreements are under the Company's control.
(9) INCOME TAX EXPENSE
Total income tax expense (benefit) for the years ended December 31,
1995, 1994, and 1993 was allocated as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income from continuing operations $ 502,000 323,000 587,000
========== =========== ========
Stockholders' equity, for unrealized
gains (losses) on investment
securities available for sale $ 503,466 (425,190) --
========== =========== ========
</TABLE>
The components of income tax expense for the years ended December 31,
1995, 1994, and 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current income tax expense:
Federal $ 318,000 248,000 521,000
State 70,000 38,000 138,000
---------- ---------- ---------
Total 388,000 286,000 659,000
---------- ---------- ---------
</TABLE>
(Continued)
<PAGE> 74
- 15 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(9) INCOME TAX EXPENSE, CONTINUED
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Deferred income tax expense (benefit):
Federal 119,000 35,000 (80,507)
State (5,000) 2,000 8,507
---------- ---------- ---------
Total 114,000 37,000 (72,000)
---------- ---------- ---------
Total income tax expense $ 502,000 323,000 587,000
========== ========== =========
</TABLE>
Income tax expense was $502,000, $323,000, and $587,000 (effective tax
rates of 28.98 percent, 28.14 percent, and 30.00 percent) for the
years ended December 31, 1995, 1994 and 1993, respectively. The
income tax expense resulting from securities transactions was $4,000
in 1995, $5,000 in 1994, and $325,000 in 1993.
Total income tax expense differed from the amount computed by applying
the statutory federal income tax rate of 34 percent to pretax earnings
for the following reasons:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income tax at statutory rate $ 589,003 390,167 665,294
Increase (decrease) resulting from:
Tax exempt interest (139,049) (147,760) (129,493)
State income tax net of federal
tax benefit 42,900 26,400 109,968
Premium amortization on investment
securities 8,857 10,436 6,964
Deferred compensation 11,785 15,980 17,601
Change in beginning-of-the-year
balance of the valuation allowance
for deferred tax assets allocated
to income tax expense -- -- (81,597)
Other, net (11,496) 27,777 (1,737)
---------- ---------- ---------
$ 502,000 323,000 587,000
========== ========== =========
</TABLE>
(Continued)
<PAGE> 75
- 16 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(9) INCOME TAX EXPENSE, CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Loans, principally due to the allowance for loan losses $ 88,925 83,314
Other real estate, principally due to differences
in carrying value 42,049 19,355
Minimum tax credit carryforward -- 107,308
Accrued expenses, principally due to legal expenses 50,545 55,184
Capital loss carryforward 34,124 34,124
Unrealized loss on investment securities available for sale -- 425,190
Other 4,441 4,668
----------- --------
Total gross deferred tax assets
before valuation allowance 220,084 729,143
Valuation allowance attributable
to capital loss carryforward (34,124) (34,124)
----------- --------
Total deferred tax assets 185,960 695,019
----------- --------
Deferred tax liabilities:
Premises and equipment, principally due to differences
in depreciation and sale of assets 216,160 187,103
Unrealized gain on investment securities available for sale 78,276 --
Accrued employee benefits 21,996 21,997
Other 742 --
----------- --------
Total deferred tax liabilities 317,174 209,100
----------- --------
Net deferred tax (liability) asset $ (131,214) 485,919
=========== ========
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the
level of historical taxable income and projection for future taxable
(Continued)
<PAGE> 76
- 17 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(9) INCOME TAX EXPENSE, CONTINUED
income over the periods which the temporary differences resulting in
the deferred tax assets are deductible, management believes it is more
likely than not that the Company will realize the benefits of these
deductible differences, giving consideration to the valuation
allowance recorded.
The Company has an alternative minimum tax credit carryforward of
approximately $117,000 which is available to reduce future federal
regular income taxes, if any, over an indefinite period.
(10) EMPLOYEE BENEFIT PLANS
The Company adopted a 401(k) Employee Incentive Savings Plan effective
January 1, 1988. Employees become eligible after completing six
months of service and attaining age 201/2. They can contribute a
minimum of one percent up to ten percent of salary to the plan. The
Company contributes twenty-five cents for each dollar the employee
contributes, up to four percent of the employee's salary. Total
Company contributions to the plan during 1995, 1994, and 1993 were
$17,334, $21,569, and $28,027, respectively.
The Company also maintains a profit-sharing plan for eligible
employees. Eligibility requirements for this plan are the same as the
401(k) Employee Incentive Savings Plan. An annual profit sharing
contribution of $60,000 was made in 1995, 1994, and 1993.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 107, Disclosures about Fair Value of Financial Instruments,
requires disclosure of fair value information about financial
instruments, whether or not recognized on the face of the balance
sheet, for which it is practicable to estimate that value. The
assumptions used in the estimation of the fair value of the Company's
financial instruments are explained below. Where quoted market prices
are not available, fair values are based on estimates using discounted
cash flow and other valuation techniques. Discounted cash flows can
be significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. The following fair
value estimates cannot be substantiated by comparison to independent
markets and should not be considered representative of the liquidation
value of the Company's financial instruments, but rather a good-faith
estimate of the fair value of financial instruments held by the
Company. SFAS 107 excludes certain financial instruments and all
non-financial instruments from its disclosure requirements.
(Continued)
<PAGE> 77
- 18 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
(A) CASH, CASH EQUIVALENTS, AND INTEREST EARNING DEPOSITS WITH OTHER
FINANCIAL INSTITUTIONS
Fair value equals the carrying value of such assets.
(B) INVESTMENT SECURITIES
The fair value of investment securities is based on quoted
market prices.
(C) LOANS
The fair value of loans is calculated using discounted cash
flows and excludes lease financing arrangements. The discount
rate used to determine the present value of the loan portfolio
is an estimated market discount rate that reflects the credit
and interest rate risk inherent in the loan portfolio. The
estimated maturity is based on the Company's historical
experience with repayments adjusted to estimate the effect of
current market conditions. The carrying amount of accrued
interest approximates its fair value.
(D) DEPOSITS
As required by SFAS 107, the fair value of deposits with no
stated maturity, such as non-interest bearing demand deposits,
NOW accounts, savings and money market deposit accounts, is
equal to the carrying value. Certificates of deposit have been
valued using discounted cash flows. The discount rate used is
based on estimated market rates for deposits of similar
remaining maturities.
The fair value estimates in the table below do not include the
benefit that results from the low-cost funding provided by the
deposit liabilities compared to the cost of borrowing funds in
the market.
(E) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Due to their short-term nature, the fair value of securities
sold under agreements to repurchase approximates their carrying
value.
(Continued)
<PAGE> 78
- 19 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
(F) OTHER BORROWED FUNDS
Due to their short-term nature, the fair value of the Company's
other borrowed funds equals the carrying value of such
liabilities.
The carrying value and estimated fair value of the Company's financial
instruments are as follows (in thousands):
<TABLE>
<CAPTION>
1995
------------------------
Estimated
Carrying fair
amount value
------ -----
<S> <C> <C>
Financial assets:
Cash and short-term investments $ 13,879 13,879
========== =========
Investment securities $ 60,214 60,173
========== =========
Loans, net of unearned income and
allowance for loan loss $ 62,603 62,858
========== =========
Financial liabilities:
Deposits $ 117,743 118,054
========== =========
Securities sold under
agreements to repurchase $ 8,691 8,691
========== =========
Other borrowed funds $ 173 173
========== =========
</TABLE>
(12) DIVIDENDS FROM SUBSIDIARY
Dividends paid by the subsidiary bank are the primary source of funds
available to the Corporation for payment of dividends to its
stockholders and for other needs. Applicable federal and state
statutes and regulations impose restrictions on the amounts of
dividends that may be declared by the subsidiary bank. In addition,
the subsidiary bank is also required to maintain minimum amounts of
capital to total "risk-weighted" assets, as defined by banking
regulators. Capital adequacy considerations could further limit the
availability of dividends from the subsidiary bank.
(Continued)
<PAGE> 79
- 20 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(13) LITIGATION
The Corporation's subsidiary, United Bank, and certain of its former
officers had been named defendants or were otherwise affected by
proceedings related to the failure of the W. M. Brown Feedyard, a
cattle feedlot in Atmore, Alabama (the "Feedlot"). The majority of
these cases were settled in 1995, one case was settled in February
1996, and one case remains outstanding.
The Corporation and its subsidiary bank are involved in various legal
proceedings, other than those discussed above, arising in connection
with their business. In the opinion of management, based upon
consultation with legal counsel, the ultimate resolution of these
other proceedings will not have a material adverse effect upon the
financial position of the Company.
(14) COMMITMENTS AND CONTINGENCIES
The Corporation's subsidiary bank leases certain equipment for use in
its business. These leases have lease terms generally not in excess
of five years. Future minimum rental payments required under
operating leases which have initial or remaining noncancelable lease
terms total $94,832 for 1996 and 1997 and $31,611 for 1998. Rental
expense for all operating leases charged to earnings aggregated
approximately $94,832, $32,493, and $17,155 for the years ended
December 31, 1995, 1994, and 1993, respectively.
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit, standby letters of credit and financial guarantees.
Such instruments involve elements of credit risk in excess of the
amounts recognized in the consolidated financial statements.
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to
extend credit, standby letters of credit, and financial guarantees
written is represented by the contractual amount of these instruments.
The Company uses the same credit policies in making conditional
obligations as it does for on-balance-sheet instruments.
The financial instruments whose contract amounts represent credit risk
as of December 31, 1995 are as follows:
<TABLE>
<S> <C>
Commitments to extend credit $ 4,198,413
Standby letters of credit $ 556,500
</TABLE>
(Continued)
<PAGE> 80
- 21 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(14) COMMITMENTS AND CONTINGENCIES, CONTINUED
Standby letters of credit are commitments issued by the Company to
guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private
borrowing arrangements. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loan
facilities to customers. The Company holds various assets as
collateral supporting those commitments for which collateral is deemed
necessary.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements.
(15) OTHER NONINTEREST EXPENSE
Components of other noninterest expense exceeding 1 percent of total
revenues include the following for the years ended December 31, 1995,
1994, and 1993, respectively:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Legal fees $ 203,515 426,423 1,096,932
Other data processing fees 222,872 59,928 9,121
FDIC insurance 161,962 277,357 282,829
Fidelity bond insurance 117,998 97,302 77,676
Supplies expenses 203,888 223,914 218,600
Miscellaneous losses 324,494 611,037 209
</TABLE>
Miscellaneous losses expense for 1995 and 1994 was composed primarily
of costs related to the settlement of lawsuits mentioned in note 13.
(Continued)
<PAGE> 81
- 22 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(16) STOCK DIVIDEND
The Company declared a 1:15 stock dividend as of November 15, 1994 to
stockholders of record as of December 31, 1994 payable on January 13,
1995. The stock dividend is to be paid out of treasury shares. The
number of shares outstanding and per share amounts have been
retroactively restated accordingly for all periods presented.
(17) REGULATORY MATTERS
The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) established 5 capital categories for banks and bank holding
companies. The bank regulators adopted regulations defining these 5
capital categories in September 1992. Under the new regulations, each
bank will be classified into 1 of the 5 categories (well capitalized,
adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized) based on its level
of risk-based capital as measured by Tier 1 capital, total risk-based
capital, Tier 1 leverage ratios, and its supervisory ratings. The new
regulations became effective December 1992. FDICIA defines "well
capitalized" banks as entities having a total risk-based capital ratio
of 10 percent or higher, a Tier 1 risk-based capital ratio of 6
percent or higher, and a leverage ratio of 5 percent or higher. At
December 31, 1995, the Bank is classified as a well-capitalized
institution under the FDICIA regulations.
(Continued)
<PAGE> 82
- 23 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(18) PARENT COMPANY
The condensed financial information for United Bancorporation of
Alabama, Inc. (Parent Company Only) is presented as follows:
(Parent Company Only)
Condensed Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets 1995 1994
------ ---- ----
<S> <C> <C>
Cash $ 44,246 5,698
Receivable from subsidiary bank 258,192 --
Investment in subsidiary bank 12,353,487 10,668,296
------------ ------------
Total assets $ 12,655,925 10,673,994
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Other liabilities $ 258,387 3,325
Stockholders' equity:
Class A common stock. Authorized
975,000 shares of $.01 par value;
548,160 shares issued and outstanding 5,482 5,482
Class B common stock of $.01 par value.
Authorized 250,000 shares; -0- shares
issued and outstanding -- --
Preferred stock of $.01 par value.
Authorized 250,000 shares; -0- shares
issued and outstanding -- --
Surplus 3,476,518 3,476,518
Retained earnings 9,263,715 8,291,545
Net unrealized gain (loss) on investment
securities available for sale 117,413 (637,286)
------------ ------------
12,863,128 11,136,259
Less treasury shares of 31,775, at cost,
at December 31, 1995 and 1994 465,590 465,590
------------ ------------
Total stockholders' equity 12,397,538 10,670,669
------------ ------------
Total liabilities and stockholders' equity $ 12,655,925 10,673,994
============ ============
</TABLE>
(Continued)
<PAGE> 83
- 24 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(18) PARENT COMPANY, CONTINUED
(Parent Company Only)
Condensed Statements of Operations
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income:
Cash dividends from subsidiary $ 50,000 332,118 257,118
Expense:
Other 8,322 76,999 40,298
------------ ---------- ---------
Earnings before income tax expense
and equity in undistributed
earnings of subsidiary 41,678 255,119 216,820
Applicable income tax expense -- -- --
------------ ---------- ---------
41,678 255,119 216,820
------------ ---------- ---------
Equity in undistributed earnings
of subsidiary 1,188,684 569,430 1,152,928
------------ ---------- ---------
Net earnings $ 1,230,362 824,549 1,369,748
============ ========== =========
</TABLE>
(Continued)
<PAGE> 84
- 25 -
UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(18) PARENT COMPANY, CONTINUED
(Parent Company Only)
Condensed Statements of Cash Flows
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,230,362 824,549 1,369,748
Adjustments to reconcile net
earnings to net cash provided by
(used in) operating activities:
Equity in undistributed
earnings of subsidiary (1,188,684) (569,430) (1,152,928)
Increase (decrease) in other
liabilities 255,062 (253,979) (16,904)
(Increase) decrease in
receivables (258,192) 257,118 (256,719)
------------- ----------- ----------
Net cash provided by (used
in) operating activities 38,548 258,258 (56,803)
------------- ----------- ----------
Cash flows from financing activities:
Treasury stock purchase -- -- (800)
Dividends paid -- (260,293) (257,118)
------------- ----------- ----------
Net cash used in financing
activities -- (260,293) (257,918)
------------- ----------- ----------
Net increase (decrease) in cash 38,548 (2,035) (314,721)
Cash at beginning of year 5,698 7,733 322,454
------------- ----------- ----------
Cash at end of year $ 44,246 5,698 7,733
============= =========== ==========
</TABLE>
<PAGE> 85
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C>
3.1 Restated Certificate of Incorporation of the Registrant (Incorporated by reference herein from Exhibit
3a to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988)
3.2 Amended and restated Bylaws of the Registrant (Incorporated by reference herein from Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992).
10.1 Form of Executive Compensation Agreement between United Bank and Robert R. Jones, III (Incorporated by
reference herein from Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992).
21 Subsidiary of the registrant
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 21
The following wholly-owned subsidiary of United Bancorporation of Alabama, is
incorporated under the laws of the State of Alabama and does business under the
indicated corporate name:
United Bank
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 12-31-95 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,225,385
<INT-BEARING-DEPOSITS> 103,897
<FED-FUNDS-SOLD> 7,550,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 38,413,968
<INVESTMENTS-CARRYING> 21,799,988
<INVESTMENTS-MARKET> 21,758,613
<LOANS> 65,061,452
<ALLOWANCE> 1,343,636
<TOTAL-ASSETS> 140,466,221
<DEPOSITS> 117,742,872
<SHORT-TERM> 172,516
<LIABILITIES-OTHER> 1,462,439
<LONG-TERM> 0
<COMMON> 5,482
0
0
<OTHER-SE> 12,392,056
<TOTAL-LIABILITIES-AND-EQUITY> 140,466,221
<INTEREST-LOAN> 6,703,550
<INTEREST-INVEST> 3,482,578
<INTEREST-OTHER> 309,007
<INTEREST-TOTAL> 10,495,115
<INTEREST-DEPOSIT> 4,226,361
<INTEREST-EXPENSE> 4,560,413
<INTEREST-INCOME-NET> 5,934,702
<LOAN-LOSSES> 204,000
<SECURITIES-GAINS> 31,867
<EXPENSE-OTHER> 1,917,297
<INCOME-PRETAX> 1,732,362
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,230,362
<EPS-PRIMARY> 2.38
<EPS-DILUTED> 2.38
<YIELD-ACTUAL> 8.68
<LOANS-NON> 333,002
<LOANS-PAST> 30,000
<LOANS-TROUBLED> 13,000
<LOANS-PROBLEM> 1,915,471
<ALLOWANCE-OPEN> 1,252,000
<CHARGE-OFFS> 151,000
<RECOVERIES> 39,000
<ALLOWANCE-CLOSE> 1,344,000
<ALLOWANCE-DOMESTIC> 1,344,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
