<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
--------------
Commission file number 2-78572
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UNITED BANCORPORATION OF ALABAMA, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-0833573
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
P.O. Drawer 8, Atmore, AL 36504
- --------------------------------------------------------------------------------
(Address of principal executive offices)
334-368-2525
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code:)
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 report(s), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as March 31, 1999.
<TABLE>
<S> <C>
Class A Common Stock....... 516,385 Shares
Class B Common Stock....... -0- Shares
</TABLE>
<PAGE> 2
UNITED BANCORPORATION OF ALABAMA, INC.
FORM 10-Q
For the Quarter Ended March 31, 1999
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
- ------------------------------ ----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Earnings and Comprehensive Income 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Market Risk Disclosures 12
PART II - OTHER INFORMATION 15
- ---------------------------
</TABLE>
Item 6. (a) Exhibit 3.1.1 Certification of Amendment to Restated
Certificate of Incorporation of the
Corporation
Exhibit 10.3 1998 Stock Option Plan of United Bancorporation
of Alabama, Inc.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
2
<PAGE> 3
ITEM 1. UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED
STATEMENT OF CONDITION
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
Unaudited Audited
<S> <C> <C>
Assets
Cash and due from banks $ 6,839,027 $ 8,385,901
Federal funds sold 0 645,000
------------ ------------
Cash and cash equivalents 6,839,027 9,030,901
Securities available for sale (amortized cost of $52,695,745
and $53,735,446 respectively) 52,826,921 54,210,192
Securities held to maturity (market values of $16,767,495 16,481,938 17,045,566
and $17,375,946 respectively)
Loans 118,126,079 104,624,631
Less: Unearned income 70,475 106,471
Allowance for loan losses 1,571,603 1,428,492
------------ ------------
Net loans 116,484,001 103,089,668
Premises and equipment, net 3,468,101 2,894,882
Interest receivable and other assets 2,519,205 2,922,032
------------ ------------
Total assets $198,619,193 $189,193,241
============ ============
Liabilities and Stockholders' Equity
Deposits:
Non-interest bearing $ 26,324,491 $ 26,953,055
Interest bearing 131,557,109 125,873,484
------------ ------------
Total deposits 157,881,600 152,826,539
Securities sold under agreements to repurchase 11,487,619 11,810,188
Other borrowed funds 11,757,509 6,447,356
Accrued expenses and other liabilities 1,214,835 2,061,183
------------ ------------
Total liabilities 182,341,563 173,145,266
Stockholders' equity:
Class A common stock. Authorized 975,000
shares of $.01 par value; 548,160
shares issued 5,482 5,482
Class B common stock of $.01 par value.
Authorized 250,000 shares;
-0- shares issued and outstanding. 0 0
Preferred stock of $.01 par value. Authorized
250,000 shares; -0- shares issued
and outstanding. 0 0
Surplus 3,476,518 3,476,518
Accumulated other comprehensive
income 78,707 284,877
Retained earnings 13,182,513 12,746,688
------------ ------------
16,743,220 16,513,565
Less 31,775 and 31,775 treasury shares, at cost 465,590 465,590
------------ ------------
Total stockholders' equity 16,277,630 16,047,975
------------ ------------
Total liabilities and stockholders' equity $198,619,193 $189,193,241
============ ============
</TABLE>
3
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UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1999 1998
<S> <C> <C>
Interest income:
Interest and fees on loans $2,684,715 $2,239,439
Interest on investment securities available for sale:
Taxable 634,564 601,835
Nontaxable 110,576 74,086
Interest on investment securities held to maturity:
Taxable 91,086 213,999
Nontaxable 138,951 129,533
---------- ----------
Total investment income 975,177 1,019,453
Other interest income 30,745 82,100
---------- ----------
Total interest income 3,690,637 3,340,992
Interest expense:
Interest on deposits 1,420,916 1,402,045
Interest on other borrowed funds 233,603 175,543
---------- ----------
Total interest expense 1,654,519 1,577,588
Net interest income 2,036,118 1,763,404
Provision for loan losses 199,000 60,000
---------- ----------
Net interest income after
provision for loan losses 1,837,118 1,703,404
Noninterest income:
Service charge on deposits 263,099 241,234
Commission on credit life 16,285 11,537
Investment securities gains and (losses), net 22,025 0
Other 87,817 84,996
---------- ----------
Total noninterest income 389,226 337,767
Noninterest expense:
Salaries and benefits 921,841 789,758
Net occupancy expense 212,769 218,120
Other 516,154 442,390
---------- ----------
Total non-interest expense 1,650,764 1,450,268
Earnings before income tax expense 575,580 590,903
Income tax expense 139,784 165,945
---------- ----------
Net earnings $ 435,796 $ 424,958
========== ==========
Basic earnings per share $ 0.84 $ 0.82
Weighted average shares outstanding 516,385 516,385
========== ==========
1999 1998
Statement of Comprehensive Income
Net Income $ 435,796 $ 424,958
Other Comprehensive Income, net of tax:
Unrealized holding gains arising during the period (206,142) (6,723)
Less: Reclassification adjustment for gains (losses)
included in net income -- --
---------- ----------
Comprehensive income $ 229,654 $ 418,235
========== ==========
</TABLE>
4
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UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Operating Activities
Net Income $ 435,796 $ 424,958
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Provision for Loan Losses 199,000 60,000
Depreciation on Premises and Equipment 72,347 74,259
Amortization of Investment Securities held to maturity 13,652 17,550
Amortization of Investment Securities Available for Sale 59,387 32,716
(Gain) Loss on Sale of Investment Securities Available for Sale (22,025) --
(Gain) Loss on Disposal of Premises and Equipment -- (3,500)
(Increase) Decrease in Interest Receivable
and Other Assets 540,275 (262,163)
Decrease in Accrued Expenses
and Other Liabilities (846,368) (1,431,761)
------------ ------------
Net Cash Provided (Used) by Operating Activities 452,064 (1,087,941)
------------ ------------
Investing Activities
Proceeds From Interest-bearing Deposits in
Other Financial Institutions -- 477
Proceeds From Sales of Investment Securities Available for Sale 2,037,207 --
Proceeds From Maturities of Investment Securities held to maturity 549,976 2,972,706
Proceeds From Maturities of Investment Securities Available for Sale 5,581,005 4,698,203
Purchases of Investment Securities held to maturity -- (690,201)
Purchases of Investment Securities Available for Sale (6,615,873) (23,275,049)
Net Increase in Loans (13,593,333) (1,229,312)
Purchases of Premises and Equipment (645,566) (276,779)
Proceeds From Sales of Premises and Equipment -- 3,500
Proceeds From Sales of Other Real Estate -- 37,500
------------ ------------
Net Cash Used by Investing Activities (12,686,584) (17,758,955)
------------ ------------
Financing Activities
Net Increase in Deposits, 5,055,061 16,259,181
Net Increase in securities sold under
agreement to repurchase (322,569) 752,412
Increase in Other Borrowed Funds 5,310,154 1,366,425
------------ ------------
Net Cash Provided by Financing Activities 10,042,646 18,378,018
------------ ------------
Decrease in Cash and Cash Equivalents (2,191,874) (468,878)
Cash and Cash Equivalents at Beginning of Period 9,030,901 11,175,030
------------ ------------
Cash and Cash Equivalents at End of Period $ 6,839,027 $ 10,706,152
============ ============
Supplemental disclosures
Cash paid during the year for:
Interest $ 1,710,118 $ 1,582,867
============ ============
Income Taxes $ 3,543 $ --
============ ============
</TABLE>
5
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UNITED BANCORPORATION OF ALABAMA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 1 - General
The consolidated financial statements in this report have not been audited,
except for the Condensed Consolidated Statement of Condition dated December 31,
1998. In the opinion of management, all adjustments necessary to present fairly
the financial position, the results of operations and the statement of cash
flows for the interim periods have been made. All such adjustments are of a
normal recurring nature. The results of operations are not necessarily
indicative of the results of operations for the full year or any other interim
periods. For further information, refer to the consolidated financial
statements and footnotes included in the Corporation's annual report on Form
10-K for the year ended December 31, 1998.
NOTE 2 - New Accounting Pronouncements
Earnings per share are computed in accordance with Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share." SFAS No. 128
requires the replacement of previously reported primary and fully diluted
earnings per share under Accounting Principles Board Opinion No. 15 with basic
earnings per share and diluted earnings per share. Basic earnings per share are
computed on the weighted average number of shares outstanding. As of March 31,
1999 the Company did not have stock option plans or other stock-based
compensation plans that would result in potential common shares and thus
diluted earnings per share for the quarter were identical to basic earnings per
share. The stockholders of the Corporation approved the United Bancorporation
of Alabama, Inc. Stock Option Plan at the Annual Meeting of Stockholders on May
5, 1999, pursuant to which stock options had been granted subject to
stockholder approval.
Effective January 1, 1998, the Corporation adopted the SFAS No. 130 "Reporting
Comprehensive Income", which requires disclosure, in financial statement
format, all non-owner changes in equity. Adoption of this statement requires
the presentation of comprehensive income, which includes the unrealized gain of
loss on investment securities.
In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information". SFAS 131 establishes new standards for the
disclosures about operating segments. Disclosure of selected information about
operating segments. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. SFAS 131 is
effective for financial statements for years beginning after December 15, 1997.
The Corporation operates in only one segment - commercial banking.
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities", SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that an
entity recognizes all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS 133 is effective for financial statements for the first quarter of fiscal
years beginning after June 15, 1999. Management is evaluating the impact of
SFAS 133 on the financial statements of the Corporation.
6
<PAGE> 7
Note 3 - Subsequent Events
On May 5, 1999, the Corporation announced a two-for-one stock split to be
effected in the form of stock dividend payable May 17, 1999 to shareholders of
record on April 30, 1999. Basic earnings per share on a restated basis was
$0.42 for March 31, 1999 and $0.41 for March 31, 1998.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The following financial review is presented to provide an analysis of the
results of operations of United Bancorporation of Alabama, Inc. (the
"Corporation"), and its subsidiary for the three months ended March 31, 1999,
and 1998, comparatives. This review should be used in conjunction with the
consolidated financial statements included in the Form 10-Q.
Net income after taxes for the three months ended March 31, 1999, increased
$10,838, or 2.55%, as compared to the same period in 1998. This increase is a
result of a lower effective tax rate due to a higher level of tax exempt
income.
Total interest income increased by $349,645, or 10.47% in 1999. This increase
was caused by loan interest income increasing $445,276 or 19.88% and a decrease
of $95,631 or 8.68% in income from other interest earning assets. Average
interest earning assets were $184,624,977 for the first quarter of 1999 as
compared to $161,247,219 for the same period in 1998, an increase of
$23,377,758 or 14.50%. The average rate earned in 1999 was 8.11% as compared to
8.40% in 1998, reflecting the lowering of rates by the Federal Reserve in the
fall of 1998, and resulting in higher yielding bonds being called in the latter
part of 1998. Thus, the majority of the increase in total interest income in
1999 is attributed to the increase in volume of earning assets. The net
interest margin increased to 4.47% for the first quarter of 1999, as compared
to 4.43% for the same period in 1998.
Total interest expense increased by $76,931, or 4.88%, in 1999. Average
interest bearing liabilities increased to $152,999,633 in 1999, from
$142,466,082 in 1998, an increase of $10,533,551, or 7.39%. The average rate
paid during the first quarter of 1999 was 4.39% as compared to 4.80% for the
same period in 1998. The increase in interest expense is attributed to the
increase in interest bearing liabilities but was affected somewhat by the
decrease in the interest rate paid. The Bank received approximately 15,000,000
in 1998, in interest bearing checking accounts based on a floating rate of
61.8% of prime. The account is currently paying 4.79%. These deposits were a
competitive bid on public funds, the contract runs for three years.
The provision for loan losses increased to $199,000 for the first three months
of 1999, as compared to $60,000 for the same period in 1998. The growth in the
provision for loan loss of 231.66% was due to the growth in the loan portfolio
of $13,510,817. The allowance for loan losses is maintained at a level which,
in management's opinion, is appropriate to provide for estimated losses in the
portfolio at the balance sheet date. 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 loan losses at a level indicative of
the associated risk, as determined by management, of the current portfolio.
8
<PAGE> 9
The allowance for loan losses consists of two portions: the classified portion
and the nonclassified portion. The classified portion is based on identified
problem loans and is calculated based on an assessment of credit risk related
to those loans. Specific loss estimate amounts are included in the allowance
based on assigned classifications as follows: substandard (10%), doubtful
(50%), and loss (100%).
The nonclassified portion of the allowance is for inherent losses which
probably exist as of the evaluation date even though they may not have been
identified by the more objective processes for the classified portion of the
allowance. This is due to the risk of error and inherent imprecision in the
process. This portion of the allowance is particularly subjective and requires
judgments based upon qualitative factors which do not lend themselves to exact
mathematical calculations. Some of the factors considered are changes in credit
concentrations, loan mix, historical loss experience, and general economic
environment in the Corporation's markets.
While the total allowance is described as consisting of a classified and a
nonclassified portion, these terms are primarily used to describe a process.
Both portions are available to support inherent losses in the loan portfolio.
Management realizes that general economic trends greatly effect loan losses,
and no assurances can be made that future charges to the allowance for loan
losses 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 charges to income.
Management does, however, consider the allowance for loan losses to be
appropriate for the reported periods.
Net charged-off loans for the first quarter of 1999 were $55,889, as compared
to $148,534 net charge-offs in the first quarter of 1998.
The allowance for loan losses represents 1.33% of gross loans at March 31,
1999, as compared to 1.37% at year-end 1998. Loans on which the accrual of
interest had been discontinued amounted to $395,814 at March 31, 1999, as
compared to $420,192 at December 31, 1998.
Total non-interest income increased to $389,226 for the first quarter of 1999,
as compared to $337,767 for the same period of 1998, an increase of $51,459, or
15.24%. Service charges on deposits increased $21,865, or 9.06%. Commissions on
credit life increased by $4,748 in 1999, or 4.12%. Other income increased
during the first quarter of 1999 to $87,817 from $84,996 in 1998 or 3.32%.
Total non-interest expense increased $200,496, or 13.82% during the first
quarter of 1999. Salaries and benefits increased $132,083 or 16.72% in 1999.
The Corporation has added one new branch since March of 1998, which accounted
for a majority of the increase in salaries and benefits. Occupancy expense
decreased $5,351, or 2.45%. Other expense increased $63,714 or 14.40% during
the first quarter of 1999. The majority of this increase can be traced to
professional services that increased $19,692 and supplies, which increased
$15,684.
9
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Earnings before taxes for the first quarter of 1999 decreased $15,323, or
2.59%, compared to the same period of 1998. Income tax expense decreased to
$139,784 in 1999 from $165,945 in 1998, a decrease of $26,161, or 15.76%. The
effective tax rate decreased from 28.08% to 24.29% as a result increased
interest income from tax-free bonds.
Financial Condition and Liquidity
Total assets on March 31, 1999, had increased $9,425,951 or 4.75% as compared
to December 31, 1998. Average total assets for the first quarter of 1999 were
$196,037,952 as compared to $171,119,129 for the same period in 1998. Net loans
increased by $13,394,333 or 12.99% at March 31, 1999, from December 31, 1998.
This growth in loans has occurred in the Baldwin County markets of the
Corporation, and the growth is primarily in the commercial real estate type
loans. The net loan to deposit ratio on March 31, 1999 was 73.78%, as compared
to 68.46% on December 31, 1998.
Fed Funds Sold decreased $645,000 as of March 31, 1999, as the bank has a
borrowed position in Fed Funds, due to loan demand exceeding deposit growth. At
the end of March the Corporation had $4,905,000 in federal funds borrowed at a
rate of 4.98%. The investment securities available for sale decreased by
$1,383,271 or 2.55% in the first quarter of 1999, from December 31, 1998. The
investment securities held to maturity decreased by $563,528 or 3.31% at March
31, 1999 from December 31, 1998.
Non-performing Assets: The following table sets forth the Corporation's
non-performing assets at March 31, 1999 and December 31, 1998. 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.
<TABLE>
<CAPTION>
March December
Description 1999 1998
(Dollars in Thousands)
<S> <C> <C>
(A) Loans accounted for on a $395 $420
nonaccrual basis
(B) Loans which are contractually
past due ninety days or more as
to interest or principal payments
(excluding balances included in
(A) above). 34 13
(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. 38 41
(D) Other non-performing assets 217 248
</TABLE>
10
<PAGE> 11
Total deposits increased $5,055,061, or 3.31%, at March 31, 1999, from December
31, 1998. Non-interest bearing deposits decreased $628,564 or 2.33% at quarter
end from the year-end total. Interest bearing deposits increased $5,683,625, or
4.52%, at March 31, 1999, from December 31, 1998. Average total deposits for
the first quarter of 1999 were $157,187,762, as compared to $141,084,491 for
the same period in 1998.
The Corporation relies primarily on internally generated capital growth to
maintain capital adequacy. Total stockholders' equity on March 31, 1999, was
$16,277,651, an increase of $229,676, or 1.43%, from $16,047,975 at year-end
1998.
Primary capital to total assets at March 31, 1999, was 8.19%, as compared to
8.48% at year-end 1998. Total capital and allowances for loan losses to total
assets at March 31, 1999, were 8.99%, as compared to 9.24% at December 31,
1998. The Corporation's bank subsidiary, United Bank, had risk based capital of
$17,137,000, or 13.89%, at March 31, 1999, as compared to $16,557,000, or
14.85% at year end 1998. The minimum requirement is 8.00%. Based on
management's projection, internally generated capital should be sufficient to
satisfy capital requirements in the foreseeable future, for existing
operations, but the continual growth into new markets may require the Bank to
access external funding sources.
Year 2000 Issues
The Federal Financial Institutions Examination Council (FFIEC) issued an
interagency statement on May 5, 1997, providing an outline for institutions to
effectively manage Year 2000 challenges. As a result, the Bank formed its Year
2000 committee in May of 1997. The board of directors has established Year 2000
compliance as a strategic initiative. The Bank has also established an ongoing
action plan designed to ensure that its operational and financial systems will
not be adversely effected by software failures due to processing errors
resulting from the Year 2000 issues. The status of the Bank's initiative as of
March 31, 1999 is as follows:
PROBLEM AWARENESS-The Bank is aware of the problems that could
potentially arise from Year 2000 problems and has analyzed internal
systems (information technology and non-information technology) as
well as services provided by third parties. The Bank will maintain
initiatives focusing on customer awareness throughout 1999.
11
<PAGE> 12
ASSESSMENT PHASE-The Bank has identified all mission critical
applications and determined the respective systems which were not Year
2000 compliant. The Bank's third party service providers have been
contacted to determine their Year 2000 status. The Bank is in the
process of reviewing test results to determine if the providers are
Year 2000 compliant. These results should be completed by the end of
the second quarter.
RENOVATION PHASE-As of March 31, 1999, the renovation of all mission
critical systems, other than the Bank's third party data processing
center, was essentially complete. The Bank's third party data
processing center is currently reviewing testing results from late
March and early April testing and is expected to complete its
renovation phase in the second quarter.
VALIDATION-The only mission critical system for which testing
renovation is currently not complete, is the Bank's third party data
processing center, is expected to be completed by June of 1999.
IMPLEMENTATION-Replacement of non-compliant mission critical systems
is essentially complete. Results from testing, all of which has been
completed, will be thoroughly reviewed and remedial actions, if
necessary, will be taken.
Through March 31, 1999, the Bank has incurred approximately $18,689 in
conjunction with its Year 2000 efforts. Additional expenditures are expected to
approximate $48,000. The Bank's internal costs associated with the Year 2000
have not been separately identified. The Bank has an established contingency
plan with the third party data processing center, as well as for internal
operations. Which has been tested for Year 2000 issues.
Item 3. Market Risk Disclosures
Market risk is the risk of loss from adverse changes in market prices and
rates. The Bank's market risk arises principally from interest rate risk
inherent in its lending, deposit and borrowing activities. Management actively
monitors and manages its interest rate risk exposure. Although the Bank manages
other risk, such as credit quality and liquidity risk, in the normal course of
business, management considers interest rate risk to be its most significant
market risk. Interest rate risk could potentially have the largest material
effect on the Bank's financial condition and results of operations. Other types
of market risks, such as foreign currency exchange rate risk and commodity
price risk, do not arise in the Bank's normal course of business activities.
The Bank's profitability is affected by fluctuations in interest rates.
Management's goal is to maintain a reasonable balance between exposure to
interest rate fluctuations and earnings. A sudden and substantial increase in
interest rates may adversely impact the Bank's earnings to the extent that the
interest rates on interest-earning assets and interest-bearing liabilities do
not change at the same speed, to the same extent or on the same basis.
12
<PAGE> 13
The Bank's Asset Liability Management Committee ("ALCO") monitors and considers
methods of managing the rate and sensitivity repricing characteristics of the
balance sheet components consistent with maintaining acceptable levels of
changes in the net portfolio value ("NPV") and net interest income. NPV
represents the market values of portfolio equity and is equal to the market
value of assets minus the market value of liabilities, with adjustments made
for off- balance sheet items over a range of assumed changes in market interest
rates. A primary purpose of the Bank's ALCO is to manage interest rate risk to
effectively invest the Bank's capital and to preserve the value created by its
core business operations. As such, certain management monitoring processes are
designed to minimize the impact of sudden and sustained changes in interest
rates on NPV and net interest income.
The Bank's exposure to interest rate risk is reviewed on a quarterly basis by
the Board of Directors and the ALCO. Interest rate risk exposure is measured
using interest rate sensitivity analysis to determine the Bank's change in NPV
in the event of hypothetical changes in interest rates. Further, interest rate
sensitivity gap analysis is used to determine the repricing characteristics of
the Bank's assets and liabilities. The ALCO is charged with the responsibility
to maintain the level of sensitivity of the Bank's net interest margin within
Board approved limits.
Interest rate sensitivity analysis is used to measure the Bank's interest rate
risk by computing estimated changes in NPV of its cash flows from assets,
liabilities, and off-balance sheet items in the event of a range of assumed
changes in market interest rates. This analysis assesses the risk of loss in
market risk sensitive instruments in the event of a sudden and sustained 100 -
400 basis points increase or decrease in the market interest rates. The Bank
uses the Sendero Model Level II, which takes the current rate structure of the
portfolio and shocks for each rate level and calculates the new market value
equity at each level. The Bank's Board of Directors has adopted an interest
rate risk policy, which establishes maximum allowable decreases in net interest
margin in the event of a sudden and sustained increase or decrease in market
interest rates. The following table presents the Bank's projected change in NPV
for the various rate shock levels as of March 31, 1999. All market risk
sensitive instruments presented in this table are held to maturity or available
for sale. The Bank has no trading securities.
13
<PAGE> 14
<TABLE>
<CAPTION>
CHANGE IN CHANGE IN
CHANGE IN MARKET MARKET MARKET
INTEREST RATES VALUE VALUE VALUE
(BASIS POINTS) EQUITY EQUITY EQUITY (%)
-------------- -------- --------- ----------
<S> <C> <C> <C>
400 11,068.2 (6,075.7) (35.4)
300 12,475.6 (4,668.2) (27.2)
200 13,950.5 (3,193.4) (18.6)
100 15,502.6 (1,641.2) (9.6)
0 17,143.9 0 0
(100) 18,888.8 1,744.9 10.2
(200) 20,764.8 3,611.4 21.1
(300) 22,764.8 5,620.9 32.8
(400) 24,587.9 7,444.0 43.4
</TABLE>
The preceding table indicates that at March 31, 1999, in the event of a sudden
and sustained increase in prevailing market interest rates, the Bank's NPV
would be expected to decrease, and that in the event of a sudden decrease in
prevailing market interest rates, the Bank's NPV would be expected to increase.
The recent growth in loans has caused the caused the Corporation to become more
liability sensitive over the period of a year, but the net interest margin
remains stable in all interest rate environments tested.
Computation of prospective effects of hypothetical interest rate changes
included in these forward-looking statements are subject to certain risks,
uncertainties, and assumptions including relative levels of market interest
rates, loan prepayments and deposit decay rates, and should not be relied upon
as indicative of actual results. Further, the computations do not contemplate
any actions the Bank could undertake in response to changes in interest rates.
Forward Looking Statements
When used or incorporated by reference herein, the words "anticipate",
"estimate", "expect", "project", "target", "goal", and similar expressions, are
intended to identify forward-looking statements within the meaning of Section
27A of the Securities Act of 1933. Such forward-looking statements are subject
to certain risks, uncertainties, and assumptions including those set forth
herein. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those expected or projected. These forward-looking statements
speak only as of the date they are made. The Corporation expressly disclaims
any obligations or undertaking to publicly release any updates or revisions to
any forward-looking statement contained herein to reflect any change in the
Bank's expectations with regard to any change in events, conditions or
circumstances on which any such statement is based.
14
<PAGE> 15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of United Bancorporation
of Alabama, Inc. was held on May 5, 1999.
(b) The following nominees were re-elected as Directors of the
Corporation, to serve until the 2002 Annual Meeting of
Stockholders, by the votes indicated:
<TABLE>
<CAPTION>
Nominee For Against
-------------------- ----------- ---------------
<S> <C> <C>
Robert R. Jones, III 331,937 8
Bobby W. Sawyer 331,837 108
</TABLE>
The Directors of the Corporation whose terms of office
continued after the 1999 Annual Meeting are as follows below:
<TABLE>
<CAPTION>
To Serve Until the Annual
Director Meeting of Stockholders in the year
------------------- -----------------------------------
<S> <C>
L. Walker Crim 2000
H. Leon Esneul 2000
William J. Justice 2000
William C. Grissett 2001
David D. Swift 2001
</TABLE>
(c) The stockholders of the Corporation approved an amendment of
the Certificate of Incorporation of the Corporation to
increase the authorized Class A Common Stock of the
Corporation from 975,000 to 5,000,000 shares, by the
following vote:
<TABLE>
<CAPTION>
For Against Abstain
------- ------- -------
<S> <C> <C>
326,771 4,461 713
</TABLE>
(d) The stockholders of the Corporation approved the 1998 Stock
Option Plan of United Bancorporation of Alabama, Inc. (the
"Plan") by the following vote:
<TABLE>
<CAPTION>
For Against Abstain
------- ------- -------
<S> <C> <C>
323,714 7,284 947
</TABLE>
A copy of the Plan is attached hereto as Exhibit 10.3.
15
<PAGE> 16
Item 5. Other Information.
The Board of Directors of the Corporation declared a two-for-one split
of the Class A Common Stock ("Class A Stock") of the Corporation, to be
effected as a 100% stock dividend payable on May 17, 1999 to stockholders of
record on April 30, 1999, subject to approval of an amendment to the
Certificate of Incorporation of the Corporation to increase the Class A Stock
from 975,000 to 5,000,000 shares. The increase in authorized stock was approved
by the stockholders of the Corporation at the Annual Meeting of Stockholders
held on May 5, 1999.
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
Exhibit 3.1.1 Certificate of Amendment to Restated Certificate of
Incorporation of the Corporation.
Exhibit 10.3* 1998 Stock Option Plan of United Bancorporation of
Alabama, Inc.
* Management contracts and compensatory plans and arrangements
are identified by an asterisk (*).
Exhibit 27 Financial Data Schedule
</TABLE>
(B) During the three months ended March 31, 1999, the Corporation
did not file a Form 8-K Current Report with the Securities
and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED BANCORPORATION OF ALABAMA, INC.
Dated: May 13, 1999 /s/ ROBERT R. JONES, III
------------- ---------------------------------------
Robert R. Jones, III
President
16
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
Exhibit 3.1.1 Certificate of Amendment to Restated Certificate of
Incorporation of the Corporation.
Exhibit 10.3 1998 Stock Option Plan of United Bancorporation of
Alabama, Inc.
Exhibit 27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 3.1.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
United Bancorporation of Alabama, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of United
Bancorporation of Alabama, Inc. resolutions were duly adopted setting forth a
proposed amendment to the Restated Certificate of Incorporation of said
corporation, declaring said amendment to be advisable and calling a meeting of
the stockholders of said corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that the Restated Certificate of Incorporation of the
Corporation be amended by amending in its entirety Section 4.01 of
Article IV thereof so that as amended said Section 4.01 shall be and
read as follows:
4.01 The total number of shares of all classes of capital
stock ("Shares") which the Corporation shall have the authority to
issue is 5,500,000, consisting of the following classes:
(1) 5,000,000 Shares of Class A common stock, $.01
par value per share ("Class A Common Stock");
<PAGE> 2
(2) 250,000 Shares of Class B common stock, $.01 par
value per share ("Class B Common Stock"); and
(3) 250,000 Shares of preferred stock, $.01 par
value per share ("Preferred Stock").
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, an annual meeting of the stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said United Bancorporation of Alabama, Inc. has
caused this certificate to be signed by Robert R. Jones, III, its President,
this 5th day of May, 1999.
UNITED BANCORPORATION OF ALABAMA, INC.
By /s/ Robert R. Jones, III
------------------------------------
Robert R. Jones, III
President
<PAGE> 1
Exhibit 10.3
1998 STOCK OPTION PLAN
OF
UNITED BANCORPORATION OF ALABAMA, INC.
1. PURPOSES OF THE PLAN
The purposes of the 1998 Stock Option Plan ("Plan") of United Bancorporation of
Alabama, Inc., a Delaware corporation (the "Company"), are to:
(a) Encourage selected employees and directors, upon whose efforts the
Company is largely dependent for its success, to improve operations
and increase profits of the Company;
(b) Assist the Company in attracting and retaining employees and directors
of the Company or its Affiliates; and
(c) Increase the interest of selected employees and directors in the
Company's welfare and align the interests of such individuals with
those of the stockholders of the Company, by allowing participation in
the growth in value of the common stock of the Company (the Class A
common stock, $.01 per share, of the Company being referred to herein
as the "Common Stock").
Options granted under this Plan ("Options") may be "incentive stock options"
("ISOs") intended to satisfy the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder (the "Code"),
or "nonstatutory options" ("NSOs") not intended to satisfy the requirements for
ISOs.
2. ELIGIBLE PERSONS
Every person who at the date of grant of an Option is an employee of the
Company or of any Affiliate (as defined below) of the Company is eligible to
receive NSOs or ISOs under this Plan. Every person who at the date of grant is
a nonemployee director of the Company or any Affiliate (as defined below) of
the Company is eligible to receive NSOs under this Plan. The term "Affiliate"
as used in this Plan means a parent or subsidiary corporation as defined in the
applicable provisions (currently Sections 424(e) and (f), respectively) of the
Code. The term "employee" includes an officer or director who is an employee of
the Company or any Affiliate. The Administrator (as defined below) may elect to
award options only to directors, officers, or other key employees of the
Company or any Affiliate upon whose judgment, initiative or effort the
Companies relies for the successful conduct of its business, as determined in
the Administrator's discretion.
3. STOCK SUBJECT TO THIS PLAN; MAXIMUM NUMBER OF GRANTS
Subject to the provisions of Section 6.1.1 of this Plan, the total number of
shares of stock which may be issued under Options granted pursuant to this Plan
shall not exceed Seventy-seven Thousand (77,000) shares of Common Stock. The
shares covered by the portion of any grant under this Plan which expires,
terminates or is cancelled unexercised shall become available again for grants
under this Plan. Where the exercise price of an Option is paid by means of the
optionee's surrender of previously owned shares of Common Stock or the
Company's withholding of shares otherwise issuable upon exercise of the Option
as permitted herein, only the net number of shares issued and which remain
outstanding in connection with such exercise shall be deemed "issued" and no
longer available for issuance under this Plan.
<PAGE> 2
4. ADMINISTRATION
4.1 Administrator. This Plan shall be administered by the Board of Directors of
the Company (the "Board") or by a committee (the "Committee") to which
administration of this Plan, or of part of this Plan, is delegated by the Board
(in either case, the "Administrator"). The Board shall appoint and remove
members of the Committee in its discretion in accordance with applicable laws.
If necessary in order to comply with Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and Section 162(m) of the Code,
the Committee shall, in the Board's discretion, be comprised solely of
"nonemployee directors" within the meaning of said Rule 16b-3 and "outside
directors" within the meaning of Section 162(m) of the Code. The foregoing
notwithstanding, the Administrator may delegate nondiscretionary administrative
duties to such employees of the Company as it deems proper and the Board, in
its absolute discretion, may at any time and from time to time exercise any and
all rights and duties of the Administrator under this Plan.
4.2 Authority. Subject to the other provisions of this Plan, the Administrator
shall have the authority, in its discretion: (a) to grant Options; (b) to
determine the fair market value of the Common Stock subject to Options; (c) to
determine the exercise price of Options granted; (d) to determine the persons
to whom, and the time or times at which, Options shall be granted, and the
number of shares subject to each Option; (e) to construe and interpret the
terms and provisions of this Plan and of any option agreement and all Options
granted under this Plan; (f) to prescribe, amend, and rescind rules and
regulations relating to this Plan; (g) to determine the terms and provisions of
each Option granted (which need not be identical), including but not limited
to, the time or times at which Options shall be exercisable; (h) with the
consent of the optionee, to modify or amend any Option; (i) to reduce the
exercise price of any Option; (j) to accelerate or defer (with the consent of
the optionee) the exercise date of any Option; (k) to authorize any person to
execute on behalf of the Company any instrument evidencing the grant of an
Option; and (l) to make all other determinations deemed necessary or advisable
for the administration of this Plan or any option agreement or Option. The
Administrator may delegate nondiscretionary administrative duties to such
employees of the Company, as it deems proper. The Administrator may employ
attorneys, consultants, accountants or other persons, and shall be entitled to
rely upon the advice, opinions or evaluations of such persons.
4.3 Interpretation. All questions of interpretation, implementation, and
application of this Plan or any option agreement or Option shall be determined
by the Administrator, which determination shall be final and binding on all
persons. No person acting as or on behalf of the Administrator shall be
personally liable for any action, determination or interpretation made in good
faith with respect to this Plan, and all members of the Board or any Committee
shall be fully protected by the Company in respect of any such action,
determination or interpretation.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
5.1 Time Limit for Grants. No Options shall be granted under this Plan after 10
years from the date of adoption of this Plan by the Board.
5.2 Written Agreement. Each Option shall be evidenced by a written stock option
agreement, in form satisfactory to the Administrator, executed by the Company
and the person to whom such Option is granted. In the event of a conflict
between the terms or conditions of an option agreement and the terms and
conditions of this Plan, the terms and conditions of this Plan shall govern.
5.3 Option Type. The stock option agreement shall specify whether each Option
it evidences is an NSO or an ISO, provided, however, all Options granted under
this Plan to nonemployee directors and consultants of the Company are intended
to be NSOs.
5.4 Prospective Grantees. Subject to Section 6.3.3 with respect to ISOs, the
Administrator may approve the grant of Options under this Plan to persons who
are expected to become employees or directors of the Company, but are not
employees or directors at the date of approval, and the date of approval shall
be deemed to be the date of grant unless otherwise specified by the
Administrator.
<PAGE> 3
6. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NSOs shall be also subject to the terms
and conditions set forth in Section 6.2, but not those set forth in Section
6.3. ISOs shall also be subject to the terms and conditions set forth in
Section 6.3, but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. All Options granted
under this Plan shall be subject to the following terms and conditions:
6.1.1 Changes in Capital Structure. Subject to Section 6.1.2, if the stock of
the Company is changed by reason of a stock split, reverse stock split, stock
dividend, recapitalization, combination or reclassification, or if the Company
effects a spinoff of the Company's subsidiary, appropriate adjustments shall be
made by the Board, in its sole discretion, in (a) the number and class of
shares of stock subject to this Plan and each Option outstanding under this
Plan, and (b) the exercise price of each outstanding Option; provided, however,
that the Company shall not be required to issue fractional shares as a result
of any such adjustments.
6.1.2 Corporate Transactions. In the event of a Corporate Transaction (as
defined below), the Administrator shall notify each optionee at least 30 days
prior thereto or as soon as may be practicable. To the extent not previously
exercised, (a) all Options shall become exercisable immediately prior to the
Corporate Transaction, even if such Options would not otherwise have been
exercisable, and (b) all outstanding Options shall be assumed or equivalent
options substituted by an applicable successor corporation or any Affiliate of
the successor corporation in the event of a Corporate Transaction (such
substituted option to be deemed to pertain to the securities which a holder of
the number of shares of common stock subject to the Option would have been
entitled as a result of the Corporate Transaction). A "Corporate Transaction"
means a liquidation or dissolution of the Company, a merger or consolidation of
the Company with or into another corporation or entity, a sale of all or
substantially all of the assets of the Company, a purchase of more than 50
percent of the outstanding capital stock of the Company in a single transaction
or a series of related transactions by one "person" (as that term is used in
Section 13(d) of the Exchange Act) or more than one person acting in concert,
or any other "Change of Control" of the Company, a "Change of Control" being
deemed to have occurred if any person becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 30 percent or more of the
combined voting power of the Company's then outstanding securities or if a
majority of the Board is comprised of persons other than present directors of
the Company or persons directly or indirectly nominated by such present
directors.
6.1.3 Time of Option Exercise. Subject to Section 5 and Section 6.3.4, an
Option granted under this Plan shall be exercisable (a) immediately as of the
effective date of the stock option agreement granting the Option, or (b) in
accordance with a schedule or performance criteria as may be set by the
Administrator and specified in the written stock option agreement relating to
such Option. To the extent that an option agreement provides for vesting of
Options in accordance with a schedule, such agreement shall provide for
accelerated vesting of Options under the agreement in the event of the death,
disability or retirement of the optionee. In any case, no Option shall be
exercisable until a written stock option agreement in form satisfactory to the
Company is executed by the Company and the optionee.
6.1.4 Option Grant Date. The date of grant of an Option under this Plan shall
be the effective date of the stock option agreement granting the Option.
6.1.5 Nontransferability of Option Rights. Except with the express written
approval of the Administrator which approval the Administrator is authorized to
give only with respect to NSOs, no Option granted under this Plan shall be
assignable or otherwise transferable by the optionee except by will or by the
laws of descent and distribution. During the life of the optionee, an Option
shall be exercisable only by the optionee.
<PAGE> 4
6.1.6 Payment. Except as provided in this Section 6.1.6 and in Section 7.1
below, payment in full, in cash, shall be made for all stock purchased at the
time written notice of exercise of an Option is given to the Company, and
proceeds of any payment shall constitute general funds of the Company. The
Administrator, in the exercise of its absolute discretion after considering any
tax, accounting and financial consequences, may authorize any one or more of
the following additional methods of payment:
(a) Subject to the discretion of the Administrator and the terms
of the stock option agreement granting the Option, delivery
by the optionee of shares of Common Stock already owned by
the optionee for all or part of the Option price, provided
the fair market value (determined as set forth in Section
6.1.9) of such shares of Common Stock is equal on the date of
exercise to the Option price, or such portion thereof as the
optionee is authorized to pay by delivery of such stock;
(b) Subject to the discretion of the Administrator, through the
surrender of shares of Common Stock then issuable upon
exercise of the Option, provided the fair market value
(determined as set forth in Section 6.1.9) of such shares of
Common Stock is equal on the date of exercise to the Option
price, or such portion thereof as the optionee is authorized
to pay by surrender of such stock; and
(c) By means of so-called cashless exercises as permitted under
applicable rules and regulations of the Securities and
Exchange Commission and the Federal Reserve Board.
6.1.7 Withholding and Employment Taxes. In the case of an employee exercising
an NSO, at the time of exercise and as a condition thereto, or at such other
time as the amount of such obligation becomes determinable, the optionee shall
remit to the Company in cash all applicable federal and state withholding and
employment taxes. Such obligation to remit may be satisfied, if authorized by
the Administrator in its sole discretion, after considering any tax, accounting
and financial consequences, by the optionee's (i) tendering to the Company
previously owned shares of Common Stock or other securities of the Company with
a fair market value equal to the required amount, or (ii) agreeing to have
shares of Common Stock (with a fair market value equal to the required amount)
which are acquired upon exercise of the Option withheld by the Company.
6.1.8 Other Provisions. Each Option granted under this Plan may contain such
other terms, provisions, and conditions not inconsistent with this Plan as may
be determined by the Administrator, and each ISO granted under this Plan shall
include such provisions and conditions as are necessary to qualify the Option
as an "incentive stock option" within the meaning of Section 422 of the Code.
6.1.9 Determination of Value. For purposes of this Plan, the fair market value
of Common Stock or other securities of the Company shall be determined as
follows:
(a) If the Common Stock is listed on a securities exchange or is
regularly quoted by a recognized securities dealer, and
selling prices are reported, its fair market value shall be
the closing price of such stock on the date the value is to
be determined, but if selling prices are not reported, its
fair market value shall be the mean between the high bid and
low asked prices for such stock on the date the value is to
be determined (or if there are no quoted prices for the date
of grant, then for the last preceding business day on which
there were quoted prices).
(b) In the absence of an established market for the Common Stock,
the fair market value thereof shall be determined in good
faith by the Administrator, with reference to the Company's
net worth, prospective earning power, dividend paying
capacity, and other relevant factors, including the goodwill
of the Company, the economic outlook in the Company's
industry, the Company's position in the industry, the
Company's management, and the values of stock of other
corporations in the same or a similar line of business, and
may specifically take into account information available to
it as to recent transaction prices for Common Stock.
6.1.10 Option Term. Subject to Section 6.3.4, no Option shall be exercisable
more than 10 years after the date of grant, or such lesser period of time as is
set forth in the stock option agreement with respect to such Option (the end of
<PAGE> 5
the maximum exercise period stated in the stock option agreement being referred
to in this Plan as the "Expiration Date").
6.2 Terms and Conditions to Which Only NSOs Are Subject. Options granted under
this Plan which are designated as NSOs shall be subject to the following terms
and conditions:
6.2.1 Exercise Price. The exercise price of an NSO shall be the amount
determined by the Administrator as specified in the option agreement with
respect to such NSO.
6.2.2 Termination of Employment. Except as otherwise provided in the pertinent
stock option agreement, if for any reason an optionee ceases to be employed by
the Company or any of its Affiliates, Options that are NSOs held at the date of
termination (to the extent then exercisable) may be exercised in whole or in
part at any time within three months of the date of such termination (but in no
event after the Expiration Date). For purposes of this Section 6.2.2,
"employment" includes service as a director. For purposes of this Section
6.2.2, an optionee's employment shall not be deemed to terminate by reason of
sick leave, military leave or other leave of absence approved by the
Administrator, if the period of any such leave does not exceed 90 days (or, if
the optionee has a right to reemployment by the Company or any Affiliate for a
longer period, either contractually or by statute, for such longer period).
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options granted under
this Plan which are designated as ISOs shall be subject to the following terms
and conditions:
6.3.1 Exercise Price. (a) The exercise price of an ISO shall be not less than
the fair market value (determined in accordance with Section 6.1.9) of the
stock covered by the Option at the time the Option is granted. (b) The exercise
price of an ISO granted to any Ten Percent Stockholder shall in no event be
less than 110% of the fair market value (determined in accordance with Section
6.1.9) of the stock covered by the Option at the time the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired by exercise of an ISO
granted pursuant to this Plan is disposed of in a "disqualifying disposition"
within the meaning of Section 422 of the Code (a disposition within two years
from the date of grant of the Option or within one year after the transfer of
such stock on exercise of the Option), the holder of the stock immediately
before the disposition shall promptly notify the Company in writing of the date
and terms of the disposition and shall provide such other information regarding
the Option as the Company may reasonably require.
6.3.3 Grant Date. If an ISO is granted in anticipation of employment as
provided in Section 5.4, the Option shall be deemed granted, without further
approval, on the date the grantee assumes the employment relationship forming
the basis for such grant, and, in addition, satisfies all requirements of this
Plan for Options granted on that date.
6.3.4 Term. Notwithstanding Section 6.1.10, no ISO granted to any Ten Percent
Stockholder shall be exercisable more than five years after the date of grant.
6.3.5 Termination of Employment. Except as otherwise provided in the stock
option agreement, if for any reason an optionee ceases to be employed by the
Company or any of its Affiliates, Options that are ISOs held at the date of
termination (to the extent then exercisable) may be exercised in whole or in
part at any time within three months of the date of such termination (but in no
event after the Expiration Date). For purposes of this Section 6.3.5, an
optionee's employment shall not be deemed to terminate by reason of sick leave,
military leave or other leave of absence approved by the Administrator, if the
period of any such leave does not exceed 90 days (or, if the optionee has a
right to reemployment by the Company or any Affiliate for a longer period,
either contractually or by statute, for such longer period).
<PAGE> 6
6.3.6 Limitation. To the extent required by the Code, the aggregate fair market
value (determined as of the grant date) of shares of Common Stock with respect
to which an ISO is exercisable for the first time by an optionee during any
calendar year (under all plans of the Company and affiliates) shall not exceed
$100,000.
7. MANNER OF EXERCISE
7.1 Notice of Exercise; Payment. Except as otherwise provided in the stock
option agreement, (a) an optionee wishing to exercise an Option shall give
written notice to the Company at its principal executive office, to the
attention of the officer of the Company designated by the Administrator,
accompanied by payment of the exercise price and withholding taxes as provided
in Sections 6.1.6 and 6.1.7, and (b) the date the Company receives written
notice of an exercise hereunder accompanied by payment of the exercise price
will be considered as the date such Option was exercised.
7.2 Issuance of stock. Promptly after receipt of written notice of exercise of
an Option and the payments called for by Section 7.1, the Company shall,
without stock issue or transfer taxes to the optionee or other person entitled
to exercise the Option, deliver to the optionee or such other person a
certificate or certificates for the requisite number of shares of stock.
8. EMPLOYMENT OR STOCKHOLDER RELATIONSHIP
8.1 No Right of Employment. Nothing in this Plan or any Option granted
hereunder shall interfere with or limit in any way the right of the Company or
of any of its Affiliates to terminate any optionee's employment at any time,
nor confer upon any optionee any right to continue in the employ of the Company
or any of its Affiliates.
8.2 No Stockholder Rights. An optionee or permitted transferee of the Option
shall not have any rights or privileges as a stockholder with respect to any
shares of stock covered by the Option until the date of issuance (as evidenced
by the appropriate entry on the books of the Company or a duly authorized
transfer agent) of such shares.
9. CONDITIONS UPON ISSUANCE OF SHARES
Shares of Common Stock shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended (the
"Securities Act"). Options may be granted and exercised under this Plan only
after there has been compliance with all applicable federal and state
securities laws.
10. NONEXCLUSIVITY OF THIS PLAN
The adoption of this Plan shall not be construed as creating any limitations on
the power of the Company to adopt such other incentive arrangements as it may
deem desirable, including, without limitation, the granting of stock options
other than under this Plan.
11. RESALE RESTRICTION IN CERTAIN EVENTS
Each optionee, if so requested by the Company or any representative of the
underwriters in connection with any registration of the offering of any
securities of the Company under the Securities Act, shall not sell or otherwise
transfer any shares of Common Stock acquired upon exercise of Options during
the 180-day period following the effective date of a registration statement of
the Company filed under the Securities Act; provided, however, that such
restriction shall apply only to the first registration statement of the Company
to become effective under the Securities Act after the date of adoption of this
Plan which includes securities to be sold on behalf of the Company to the
public in an underwritten public offering under the Securities Act. The Company
may impose stop transfer instructions with respect to securities subject to the
foregoing restriction until the end of such 180-day period.
<PAGE> 7
12. CHANGES TO PLAN
The Board may at any time amend, alter, suspend or discontinue this Plan.
Without the consent of an optionee, no amendment, alteration, suspension or
discontinuance may adversely affect outstanding Options granted to such
optionee except to conform this Plan and ISOs granted under this Plan to the
requirements of federal or other tax laws relating to incentive stock options.
No amendment, alteration, suspension or discontinuance shall require
stockholder approval unless (a) stockholder approval is required to preserve
incentive stock option treatment for federal income tax purposes or (b) the
Board otherwise concludes that stockholder approval is advisable.
13. EFFECTIVE DATE OF PLAN; TERMINATION
This Plan shall become effective upon adoption by the Board provided, however,
that no Option shall be exercisable unless and until approval of stockholders
of the Company voting at a validly called stockholders' meeting is obtained
within twelve months after adoption of this Plan by the Board. If any Options
are so granted and stockholder approval shall not have been obtained within
twelve months of the date of adoption of this Plan by the Board, such Options
shall terminate retroactively as of the date they were granted. This Plan shall
terminate on the date ten years from the date of its adoption by the Board
unless earlier terminated.
ADOPTED by the Board of Directors of United Bancorporation of Alabama, Inc. on
December 22, 1998.
/s/ David D. Swift
-----------------------------
David D. Swift
Secretary
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S INTERIM FINANCIAL STATEMENTS FOR PERIOD 3-31-99 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 6,839,027
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 52,826,921
<INVESTMENTS-CARRYING> 16,481,938
<INVESTMENTS-MARKET> 16,767,495
<LOANS> 118,126,079
<ALLOWANCE> 1,571,603
<TOTAL-ASSETS> 198,619,193
<DEPOSITS> 157,881,600
<SHORT-TERM> 4,905,000
<LIABILITIES-OTHER> 1,214,835
<LONG-TERM> 6,852,509
0
0
<COMMON> 5,482
<OTHER-SE> 16,272,148
<TOTAL-LIABILITIES-AND-EQUITY> 198,619,193
<INTEREST-LOAN> 2,684,715
<INTEREST-INVEST> 975,177
<INTEREST-OTHER> 30,745
<INTEREST-TOTAL> 3,690,637
<INTEREST-DEPOSIT> 1,420,916
<INTEREST-EXPENSE> 233,603
<INTEREST-INCOME-NET> 2,036,118
<LOAN-LOSSES> 199,000
<SECURITIES-GAINS> 22,025
<EXPENSE-OTHER> 1,650,764
<INCOME-PRETAX> 575,580
<INCOME-PRE-EXTRAORDINARY> 575,580
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 435,796
<EPS-PRIMARY> .84
<EPS-DILUTED> .84
<YIELD-ACTUAL> 8.11
<LOANS-NON> 395,000
<LOANS-PAST> 34,000
<LOANS-TROUBLED> 38,000
<LOANS-PROBLEM> 6,934,011
<ALLOWANCE-OPEN> 1,428,492
<CHARGE-OFFS> 68,300
<RECOVERIES> 12,412
<ALLOWANCE-CLOSE> 1,571,603
<ALLOWANCE-DOMESTIC> 1,571,603
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
