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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 December 31, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File Number 0-21656
United Community Banks, Inc.
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(Exact name of registrant as specified in its charter)
Georgia 58-180-7304
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(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
59 Highway 515, P.O. Box 398,
Blairsville, Georgia 30512
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (706) 745-2151
Securities registered pursuant to Section 12(b) of the Act: None
Name of exchange on which registered: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
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. / /
Aggregate market value of the voting stock held by non- affiliates
(which for purposes hereof are all holders other than executive officers and
directors) of the Registrant as of February 15, 1999: $215,896,365 based on
5,265,765 shares at $41.00 per share, the last sale price known to the
Registrant for the Common Stock, for which there is no established public
trading market.
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As of February 15, 1999, 7,686,609 shares of Common Stock were issued
and outstanding, par value $1.00 per share, including 140,000 shares deemed
outstanding pursuant to 2006 Debentures and presently exercisable options to
acquire 153,004 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's annual report to shareholders for the
fiscal year ended December 31, 1998, contained in Appendix A to the
Registrant's definitive Proxy Statement for the 1999 Annual Meeting of
Shareholders, to be filed with the Commission, are incorporated by reference
into Parts I and II. Portions of the Registrant's definitive Proxy
Statement for the 1999 Annual Meeting of Shareholders, to be filed with the
Commission, are incorporated into Part III.
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PART I
ITEM 1. BUSINESS.
UNITED AND THE BANKS
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United Community Banks, Inc. ("United") was incorporated under the
laws of Georgia in 1987 and commenced operations in 1988 by acquiring 100%
of the outstanding shares of Union County Bank, now known as United
Community Bank ("UCB"). United is a bank holding company registered under
the Bank Holding Company Act of 1956. All of United's activities are
currently conducted by its wholly-owned subsidiaries: UCB, which was
organized as a Georgia banking corporation in 1950; Carolina Community
Bank, Murphy, North Carolina ("Carolina"), which United acquired in 1990;
Peoples Bank of Fannin County, Blue Ridge, Georgia ("Peoples"), which United
acquired in 1992; Towns County Bank, Hiawassee, Georgia ("Towns"), which
United also acquired in 1992; White County Bank, Cleveland, Georgia
("White"), which United acquired in 1995; and First Clayton Bank and Trust
("First Clayton"), which United acquired in 1997. UCB, Carolina, Peoples,
Towns, White and First Clayton are collectively referred to in this report
as the "Banks". United also operates two consumer finance companies -
United Family Finance Co., which operates two offices in Georgia, and United
Family Finance Co. of North Carolina, which operates two offices in North
Carolina. In this report, both United Family Finance Co. and United Family
Finance Co. of North Carolina are collectively referred to as ("UFFC").
The Banks are community-oriented, and offer a full range of retail and
corporate banking services, including checking, savings and time deposit
accounts, secured and unsecured loans, wire transfers, trust services and
rental of safe deposit boxes. As of December 31, 1998, the Banks operated
a total of 27 locations. In order to emphasize the commitment to community
banking, both UCB and Peoples operate branches under trade names that are
closely identified with the communities in which they are located. UCB
operates two branches in Lumpkin County, Georgia, under the trade name
"United Community Bank of Lumpkin County" and two branches in Habersham
County, Georgia, under the trade name "First Bank of Habersham." Peoples
operates one branch in Gilmer County, Georgia, under the trade name of
"United Community Bank of Gilmer County." The operation of bank branches
under trade names is permissible under current state and federal banking
regulations and requires certain customer disclosures, which both UCB and
Peoples provide.
The Mortgage People Company ("MPC"), a division of UCB, is a full-
service retail mortgage lending operation approved as a seller/servicer for
Federal National Mortgage Association and Federal Home Mortgage Corporation.
MPC was organized to provide fixed and adjustable-rate mortgages. During
1998, MPC originated $145 million of residential mortgage loans for the
purchase of homes and to refinance existing mortgage debt, of which over 99%
were sold into the secondary market with no recourse to MPC.
FORWARD-LOOKING STATEMENTS
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This Form 10-K, both in the Management's Discussion and Analysis
section and elsewhere, contains forward-looking statements under the Private
Securities Litigation Reform Act of 1995 that involve risks and
uncertainties. Although United believes that the assumptions underlying
the forward-looking statements contained in the discussion are reasonable,
any of the assumptions could be inaccurate, and therefore, no assurance can
be made that any of the forward-looking statements included in this
discussion will be accurate. Factors that could cause actual results to
differ from results discussed in forward-looking statements include, but are
not limited to: economic conditions (both generally and in the markets
where United operates); competition from other providers of financial
services offered by United; government regulation and legislation; changes
in interest rates; material unforeseen changes in the financial stability
and liquidity of United's credit customers; material unforeseen
complications related to the Year 2000 issues for United, its suppliers,
customers and governmental agencies; and other risks detailed in United's
filings with the Securities and Exchange Commission, all of which are
difficult to predict and which may be beyond the control of United. United
undertakes no obligation to revise forward-looking statements to reflect
events or changes after the date of this discussion or to reflect the
occurrence of unanticipated events.
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YEAR 2000
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A detailed discussion of United's state of readiness, budget and actual
costs, material risks and contingency plans related to the "Year 2000" issue
is contained in the MANAGEMENT'S DISCUSSION AND ANALYSIS section (Part II,
Item 7) of this report.
RECENT DEVELOPMENTS
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On January 21, 1999, United entered into a definitive agreement to
acquire the stock of Adairsville Bancshares, Inc. ("Adairsville") in Bartow
County, Georgia. This acquisition was closed on March 15, 1999 and was
accounted for as a purchase transaction. As of December 31, 1998,
Adairsville had $37.1 million of total assets and $4.0 million of total
equity.
During 1998, three new branch offices of the Banks were opened. UCB
opened an office in Clarkesville, Georgia, which operates under the trade
name First Bank of Habersham, and Carolina opened new offices in Cherokee
and Etowah, North Carolina. Construction of a new branch office of UCB
located in Murrayville, Georgia, is scheduled for completion during the
third quarter of 1999 and will operate under the trade name of United
Community Bank of Hall County. In February, 1999, Carolina purchased a
vacant banking facility in Brevard, North Carolina that is expected to be
open for business during the second quarter of 1999.
In July, 1998, a statutory business trust ("United Community Capital
Trust") was created by United which in July, 1998, issued guaranteed
preferred beneficial interests in United's junior subordinated deferrable
interest debentures ("Trust Preferred Securities") to institutional
investors in the amount of $21 million. This issuance represented the
guaranteed preferred beneficial interests in $21.7 million in junior
subordinated deferrable interest debentures ("Subordinated Debentures")
issued by United to United Community Capital Trust. For regulatory
purposes, the Trust Preferred Securities will be treated as Tier I capital
of United. The subordinated debentures are the sole assets of United
Community Capital Trust and bear an interest rate of 8.125% with a maturity
date of July 15, 2028, which may be shortened to a date not earlier than
July 15, 2018. If the subordinated debentures are redeemed in part or in
whole prior to July 15, 2008, the redemption price of the Subordinated
Debentures and the Trust Preferred Securities will include a premium ranging
from 4.06% in 2008 to .41% in 2018.
On January 30, 1998, Peoples acquired certain assets and deposit
liabilities of the Ellijay office of The Bank of North Georgia, which had
total loans of $3 million, and total deposits of $23 million. This office
is operated under the trade name of United Community Bank of Gilmer County.
MONETARY POLICY AND ECONOMIC CONDITIONS
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The operating income and net income of the Banks depend to a
substantial extent on the difference between income the Banks receive from
their loans, investments and other earning assets, and the interest the
Banks pay on their deposits and other liabilities. These rates are highly
sensitive to many factors that are beyond the control of the Banks,
including national and international economic conditions and the monetary
policies of various governmental and regulatory authorities.
COMPETITION
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The market for banking and bank-related services is highly competitive.
The Banks actively compete in their respective market areas, which
collectively covers northeastern Georgia and western North Carolina, with
other providers of deposit and credit services. These competitors include
other commercial banks, savings banks, savings and loan associations, credit
unions, mortgage companies and brokerage firms. he following table displays
each of Banks and the respective percentage of total deposits in each county
where the Bank has operations. The table also indicates the ranking by
deposit size in each of the local markets. All information in the table was
obtained from the Federal Deposit Insurance Corporation ("FDIC") Summary of
Deposits as of June 30, 1998.
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UNITED COMMUNITY BANKS, INC.
SHARE OF LOCAL MARKET DEPOSITS (COUNTY)
BANKS AND SAVINGS INSTITUTIONS
MARKET RANK IN
SHARE MARKET
UCB
Habersham 13% 4
Lumpkin 18% 3
Union 85% 1
CAROLINA
Cherokee 43% 1
Clay 61% 1
Graham 38% 2
Haywood 7% 6
Henderson NM NM
Jackson 7% 5
Macon 7% 6
Swain 15% 3
Transylvania 5% 5
PEOPLES
Fannin 57% 1
Gilmer 11% 4
WHITE
White 47% 1
TOWNS
Towns 35% 2
FIRST CLAYTON
Rabun 26% 3
NM = Not Meaningful
LOANS
The Banks make both secured and unsecured loans to individuals, firms
and corporations. Secured loans include first and second real estate
mortgage loans. The Banks also make direct installment loans to consumers
on both a secured and unsecured basis. At December 31, 1998, consumer, real
estate construction, real estate mortgage and commercial loans represented
approximately 12.0%, 11.6%, 67.4% and 9.0% respectively, of United's total
loan portfolio.
Specific risk elements associated with each of the Banks' lending categories
include, but are not limited to:
Commercial Industry concentrations; inability to monitor
the condition of collateral (inventory, accounts
receivable and vehicles); lack of borrower
management expertise, increased competition;
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use of specialized or obsolete equipment as
collateral; insufficient cash flow from
operations to service debt payment.
Real estate - construction Inadequate collateral and long-term financing
agreements
Real estate - mortgage Changes in local economy affecting borrower's
employment; insufficient collateral value due
to decline in property value.
Consumer Loss of borrower's employment; changes in local
economy; the inability to monitor collateral
(vehicles, boats and mobile homes)
Effective March 19, 1993, inter-agency guidelines adopted by federal
bank regulators mandated that financial institutions establish real estate
lending policies with maximum allowable real estate loan-to-value limits,
subject to an allowable amount of non-conforming loans as a percentage of
capital. The Banks adopted the federal guidelines as their maximum
allowable limits; however, policy exceptions are permitted for real estate
loan customers with strong financial credentials.
LENDING POLICY
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The current lending policy of the Banks is to make loans primarily to
persons who reside, work or own property in their primary market areas.
Unsecured loans are generally made only to persons who maintain depository
relationships with the Banks. Secured loans are made to persons who are
well established and have net worth, collateral and cash flow to support the
loan. Exceptions to the policy are permitted on a case-by-case basis and
require the approving officer to document in writing the reason for the
exception. Policy exceptions made for borrowers whose total aggregate loans
exceed the approving officer's credit limit must be submitted to the Bank
Board of Directors for approval.
The Banks provide each lending officer with written guidelines for
lending activities. Lending authority is delegated by the Boards of
Directors of the Banks to loan officers, each of whom is limited in the
amount of secured and unsecured loans which he or she can make to a single
borrower or related group of borrowers. Loans in excess of individual
officer credit authority must either be approved by a senior officer with
sufficient approval authority, or be approved by the Bank Board of
Directors.
LOAN REVIEW AND NONPERFORMING ASSETS
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The Loan Review Department of United reviews each of the Banks' loan
portfolios on an annual basis to determine any weaknesses in the portfolio
and to assess the general quality of credit underwriting. The results of
the reviews by the loan review officers are presented to the Presidents of
each of the Banks, the President and the Chief Credit Officer of United and
the Boards of Directors of each of the Banks. If an individual loan or
credit relationship has a weakness identified during the review process the
risk rating of the loan, or all loans comprising a credit relationship, will
be downgraded to a classification that most closely matches the current risk
level. The review process also provides for the upgrade of loans that show
improvement since the last review. Since each loan in a credit relationship
may have a different credit structure, collateral and other secondary source
of repayment, different loans in a relationship can be assigned different
risk ratings. United utilizes an eight-grade rating system in which grades
one through four are considered "pass", or acceptable, credit risk and
grades five through eight are "adversely classified" credits that require
management's attention. Both the pass and adversely classified ratings,
and the entire eight-grade rating scale, provide for a higher numeric rating
for increased risk. For example, a risk rating of one is the least risky of
all credits and would be typical of a loan that is 100% secured by a deposit
at one of the Banks. Risk ratings of two, three and four in the pass
category each have incrementally more risk. The four adversely classified
credit ratings and rating definitions are:
Five (Watch) - Weaknesses exist that could cause
future impairment, including the
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deterioration of financial ratios, past-due
status and questionable management
capabilities. Collateral values generally
afford adequate coverage, but may not be
immediately marketable.
Six (Substandard) - Specific and well-defined weaknesses that may
include poor liquidity and deterioration of
financial ratios. Loan may be past-due and
related deposit accounts experiencing overdrafts.
Immediate corrective action is necessary.
Seven (Doubtful) - Specific weaknesses characterized by
Substandard that are severe enough to make
collection in full unlikely. No strong secondary
source of repayment.
Eight (Loss) - Same characteristics as Doubtful; however,
probability of loss is certain. Loans classified
as such are generally recommended for charge-off
at the next Bank Board of Directors meeting.
In addition, the Loan Review Department conducts a quarterly analysis
to determine the adequacy of the Allowance for Loan Losses ("ALL") for each
of the Banks. The aggregation of the ALL analyses for the Banks provides
the consolidated analysis for United. The ALL analysis starts by taking
total loans and deducting loans secured by deposit accounts at the Banks,
which effectively have no risk of loss. Next, all loans with an adversely
classified rating are deducted. The remaining loan balance is then
multiplied by the average historical loss rate for the preceding five year
period (1994 through 1998), which provides required minimum ALL for Pass
credits (component "A"). The remaining total loans in each of the four
adversely classified rating categories are then multiplied by a projected
loss factor to determine the ALL allocation for adversely classified credits
(component "B"). The loss factors currently used are: Watch (5%);
Substandard (15%); Doubtful (50%); and Loss (100%). The sum of components A
and B comprises the total allocated ALL. There is no current process
utilized to measure or adjust for differences between the loss factors for
adversely classified loans used in the ALL analysis and actual losses
charged to the ALL.
The difference between the actual ALL (as presented in the consolidated
financial statements) and the allocated ALL represents the unallocated ALL.
The unallocated ALL provides for coverage of credit losses inherent in the
loan portfolio but not provided for in the ALL analysis. United and the
Banks determine the level of unallocated ALL primarily by assessing the
ratio of ALL to total loans of peer bank holding companies and peer banks,
using the Federal Reserve Uniform Bank Performance Report and other bank
industry analytical publications.
ASSET/LIABILITY MANAGEMENT
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Committees composed of officers of each of the Banks and the Chief
Financial Officer and Treasurer of United are charged with managing the
assets and liabilities of the Banks. The committees attempt to manage asset
growth, liquidity and capital in order to maximize income and reduce
interest rate risk. The committees direct each Bank's overall acquisition
and allocation of funds. At monthly meetings, the committees review the
monthly asset and liability funds budget in relation to the actual flow of
funds and peer group comparisons; the ratio of the amount of rate sensitive
assets to the amount of rate sensitive liabilities; the ratio of allowance
for loan losses to outstanding and non-performing loans; and other
variables, such as expected loan demand, investment opportunities, core
deposit growth within specified categories, regulatory changes, monetary
policy adjustments and the overall state of the economy. A more
comprehensive discussion of United's Asset/Liability Management and interest
rate risk is contained in the Management's Discussion and Analysis (Part II,
Item 7) and QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(Part II, Item 7A) sections of this report.
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INVESTMENT POLICY
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The Banks' investment portfolio policy is to maximize income consistent
with liquidity, asset quality and regulatory constraints. The policy is
reviewed from time to time by the Banks' Boards of Directors. Individual
transactions, portfolio composition and performance are reviewed and
approved monthly by the Boards of Directors or a committee thereof. The
Chief Financial Officer of United and the President of each of the Banks
administer the policy and report information to the full Board of Directors
of each of the Banks on a quarterly basis concerning sales, purchases,
maturities and calls, resultant gains or losses, average maturity, federal
taxable equivalent yields and appreciation or depreciation by investment
categories.
EMPLOYEES
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As of December 31, 1998, United and its subsidiaries had an aggregate
of 638 full-time equivalent employees. Neither United nor any of the
subsidiaries is a party to any collective bargaining agreement, and United
believes that employee relations are good. None of United's or the Banks'
executive officers is employed pursuant to an employment contract.
SUPERVISION AND REGULATION
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GENERAL. United is a registered bank holding company subject to
regulation by the Board of Governors of the Federal Reserve System (the
"Federal Reserve") under the Bank Holding Company Act of 1956, as amended
(the "Act"). United is required to file financial information with the
Federal Reserve periodically and is subject to periodic examination by the
Federal Reserve.
The Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before (i) it may acquire direct or indirect
ownership or control of more than 5% of the voting shares of any bank that
it does not already control; (ii) it or any of its subsidiaries, other than
a bank, may acquire all or substantially all of the assets of a bank; and
(iii) it may merge or consolidate with any other bank holding company. In
addition, a bank holding company is generally prohibited from engaging in,
or acquiring, direct or indirect control of the voting shares of any company
engaged in non-banking activities. This prohibition does not apply to
activities found by the Federal Reserve, by order or regulation, to be so
closely related to banking or managing or controlling banks as to be a
proper incident thereto. Some of the activities that the Federal Reserve
has determined by regulation or order to be closely related to banking are:
making or servicing loans and certain types of leases; performing certain
data processing services; acting as fiduciary or investment or financial
advisor; providing discount brokerage services; underwriting bank eligible
securities; underwriting debt and equity securities on a limited basis
through separately capitalized subsidiaries; and making investments in
corporations or projects designed primarily to promote community welfare.
United must also register with the Georgia Department of Banking and
Finance ("DBF") and file periodic information with the DBF. As part of such
registration, the DBF requires information with respect to the financial
condition, operations, management and intercompany relationships of United
and the Banks and related matters. The DBF may also require such other
information as is necessary to keep itself informed as to whether the
provisions of Georgia law and the regulations and orders issued thereunder
by the DBF have been complied with, and the DBF may examine United and each
of the Banks. The North Carolina Banking Commission ("NCBC"), which has
the statutory authority to regulate non-banking affiliates of North Carolina
banks, in 1992 began using this authority to examine and regulate the
activities of North Carolina-based holding companies owning North Carolina-
based banks. Although the NCBC has not exercised its authority to date to
examine and regulate holding companies outside of North Carolina that own
North Carolina banks, it is likely the NCBC may do so in the future.
United is an "affiliate" of the Banks under the Federal Reserve Act,
which imposes certain restrictions on (i) loans by the Banks to United, (ii)
investments in the stock or securities of United by the Banks, (iii) the
Banks' taking the stock or securities of an "affiliate" as collateral for
loans by the Bank to a borrower, and (iv) the purchase of assets from United
by the Banks. Further, a bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in connection with
any extension of credit, lease or sale of property or furnishing of
services. Each of United's subsidiaries is regularly examined by the
Federal Deposit Insurance Corporation (the "FDIC"). UCB, Peoples, White,
Towns and First Clayton, as state banking associations organized under
Georgia law, are subject to the supervision of, and are regularly examined
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by, the DBF. Carolina is subject to the supervision of, and is regularly
examined by, the NCBC and the FDIC. Both the FDIC and the DBF must grant
prior approval of any merger, consolidation or other corporation
reorganization involving UCB, Peoples, White, Towns or First Clayton, and
the FDIC and the NCBC must grant prior approval of any merger, consolidation
or other corporate reorganization of Carolina. A bank can be held liable
for any loss incurred by, or reasonably expected to be incurred by, the FDIC
in connection with the default of a commonly-controlled institution.
PAYMENT OF DIVIDENDS. United is a legal entity separate and distinct
from the Banks. Most of the revenues of United result from dividends paid
to it by the Banks. There are statutory and regulatory requirements
applicable to the payment of dividends by the Banks, as well as by United to
its shareholders.
UCB, Peoples, Towns, White and First Clayton are each state chartered
banks regulated by the DBF and the FDIC. Under the regulations of the DBF,
dividends may not be declared out of the retained earnings of a state bank
without first obtaining the written permission of the DBF, unless such bank
meets all the following requirements:
(a) total classified assets as of the most recent examination of the
bank do not exceed 80% of equity capital (as defined by
regulation);
(b) the aggregate amount of dividends declared or anticipated to be
declared in the calendar year does not exceed 50% of the net
profits after taxes but before dividends for the previous calendar
year; and
(c) the ratio of equity capital to adjusted assets is not less than
6%.
Under North Carolina law, the Board of Directors of Carolina may
declare a dividend for as much of the undivided profits of Carolina as it
deems appropriate, so long as Carolina's surplus is greater than 50% of its
capital.
The payment of dividends by United and the Banks may also be affected
or limited by other factors, such as the requirement to maintain adequate
capital above regulatory guidelines. In addition, if, in the opinion of the
applicable regulatory authority, a bank under its jurisdiction is engaged in
or is about to engage in an unsafe or unsound practice (which, depending
upon the financial condition of the bank, could include the payment of
dividends), such authority may require, after notice and hearing, that such
bank cease and desist from such practice. The FDIC has issued a policy
statement providing that insured banks should generally only pay dividends
out of current operating earnings. In addition to the formal statutes and
regulations, regulatory authorities consider the adequacy of each of the
Bank's total capital in relation to its assets, deposits and other such
items. Capital adequacy considerations could further limit the availability
of dividends to the Banks. At December 31, 1998, net assets available from
the Banks to pay dividends without prior approval from regulatory
authorities totaled approximately $17.2 million. For 1998, United's
declared cash dividend payout to stockholders was 9.1 % of net income.
MONETARY POLICY. The results of operations of the Banks are affected
by credit policies of monetary authorities, particularly the Federal
Reserve. The instruments of monetary policy employed by the Federal Reserve
include open market operations in U.S. government securities, changes in the
discount rate on bank borrowings and changes in reserve requirements against
bank deposits. In view of changing conditions in the national economy and
in the money markets, as well as the effect of actions by monetary and
fiscal authorities, including the Federal Reserve, no prediction can be made
as to possible future changes in interest rates, deposit levels, loan demand
or the business and income of the Banks.
CAPITAL ADEQUACY. The Federal Reserve and the FDIC have implemented
substantially identical risk-based rules for assessing bank and bank holding
company capital adequacy. These regulations establish minimum capital
standards in relation to assets and off-balance sheet exposures as adjusted
for credit risk. Banks and bank holding companies are required to have (1)
a minimum level of total capital (as defined) to risk-weighted assets of
eight percent (8%); (2) a minimum Tier One Capital (as defined) to risk-
weighted assets of four percent (4%); and (3) a minimum stockholders' equity
to risk-weighted assets of four percent (4%). In addition, the Federal
Reserve and the FDIC have established a minimum three percent (3%) leverage
ratio of Tier One Capital to total assets for the most highly-rated banks
and bank holding companies. "Tier One Capital" generally consists of common
equity not including unrecognized gains and losses on securities, minority
interests in equity accounts of consolidated subsidiaries and certain
perpetual preferred stock less certain intangibles. The Federal Reserve and
the FDIC will require a bank holding company and a bank, respectively, to
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maintain a leverage ratio greater than three percent (3%) if either is
experiencing or anticipating significant growth or is operating with less
than well-diversified risks in the opinion of the Federal Reserve. The
Federal Reserve and the FDIC use the leverage ratio in tandem with the risk-
based ratio to assess the capital adequacy of banks and bank holding
companies. The FDIC, the Office of the Comptroller of the Currency (the
"OCC") and the Federal Reserve have amended, effective January 1, 1997, the
capital adequacy standards to provide for the consideration of interest rate
risk in the overall determination of a bank's capital ratio, requiring banks
with greater interest rate risk to maintain adequate capital for the risk.
The revised standards have not had a significant effect on United's capital
requirements.
In addition, effective December 19, 1992, a new Section 38 to the
Federal Deposit Insurance Act implemented the prompt corrective action
provisions that Congress enacted as a part of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (the "1991 Act"). The "prompt
corrective action" provisions set forth five regulatory zones in which all
banks are placed largely based on their capital positions. Regulators are
permitted to take increasingly harsh action as a bank's financial condition
declines. Regulators are also empowered to place in receivership or require
the sale of a bank to another depository institution when a bank's capital
leverage ratio reaches 2%. Better capitalized institutions are generally
subject to less onerous regulation and supervision than banks with lesser
amounts of capital. The FDIC has adopted regulations implementing the
prompt corrective action provisions of the 1991 Act, which place financial
institutions in the following five categories based upon capitalization
ratios: (1) a "well capitalized" institution has a total risk-based capital
ratio of at least 10%, a Tier One risk-based ratio of at least 6% and a
leverage ratio of at least 5%; (2) an "adequately capitalized" institution
has a total risk- based capital ratio of at least 8%, a Tier One risk-based
ratio of at least 4% and a leverage ratio of at least 4%; (3) an
"undercapitalized" institution has a total risk-based capital ratio of under
8%, a Tier One risk-based ratio of under 4% or a leverage ratio of under 4%;
(4) a "significantly undercapitalized" institution has a total risk-based
capital ratio of under 6%, a Tier One risk-based ratio of under 3% or a
leverage ratio of under 3%; and (5) a "critically undercapitalized"
institution has a leverage ratio of 2% or less. Institutions in any of the
three undercapitalized categories would be prohibited from declaring
dividends or making capital distributions. The FDIC regulations also
establish procedures for "downgrading" an institution to a lower capital
category based on supervisory factors other than capital. As of December
31, 1998 and 1997, the most recent notifications from the FDIC categorized
each of the Banks as "well capitalized" under current regulations.
RECENT LEGISLATIVE AND REGULATORY ACTION. On April 19, 1995, the four
federal bank regulatory agencies adopted revisions to the regulations
promulgated pursuant to the Community Reinvestment Act (the "CRA"), which
are intended to set distinct assessment standards for financial
institutions. The revised regulation contains three evaluation tests: (i)
a lending test, which will compare an institution's market share of loans in
low and moderate income areas to its market share of loans in its entire
service area and the percentage of a bank's outstanding loans to low and
moderate-income areas or individuals, (ii) a services test, which will
evaluate the provisions of services that promote the availability of credit
to low and moderate income areas, and (iii) an investment test, which will
evaluate an institution's record of investments in organizations designed to
foster community development, small and minority-owned businesses and
affordable housing lending, including state and local government housing or
revenue bonds. The regulations are designed to reduce some paperwork
requirements of the current regulations and provide regulators, institutions
and community groups with a more objective and predictable manner with which
to evaluate the CRA performance of financial institutions. CRA became
effective on January 1, 1996 and has not had any appreciable impact upon
United and the Banks.
Congress and various federal agencies (including, in addition to the
bank regulatory agencies, the Department of Housing and Urban Development,
the Federal Trade Commission and the Department of Justice) (collectively
the "Federal Agencies") responsible for implementing the nation's fair
lending laws have been increasingly concerned that prospective home buyers
and other borrowers are experiencing discrimination in their efforts to
obtain loans. In recent years, the Department of Justice has filed suit
against financial institutions, which it determined had discriminated,
seeking fines and restitution for borrowers who allegedly suffered from
discriminatory practices. Most, if not all, of these suits have been
settled (some for substantial sums) without a full adjudication on the
merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and specify the factors the agencies will
consider in determining if lending discrimination exists, announced a joint
policy statement detailing specific discriminatory practices prohibited
under the Equal Opportunity Act and the Fair Housing Act. In the policy
statement, three methods of proving lending discrimination were identified:
(1) overt evidence of discrimination, when a lender blatantly discriminates
on a prohibited basis, (2) evidence of disparate treatment, when a lender
treats applicants differently based on a prohibited factor even where there
is no showing that the treatment was motivated by prejudice or a conscious
10
intention to discriminate against a person, and (3) evidence of disparate
impact, when a lender applies a practice uniformly to all applicants, but
the practice has a discriminatory effect, even where such practices are
neutral on their face and are applied equally, unless the practice can be
justified on the basis of business necessity.
On September 23, 1994, President Clinton signed the Reigle Community
Development and Regulatory Improvement Act of 1994 (the "Regulatory
Improvement Act"). The Regulatory Improvement Act contains funding for
community development projects through banks and community development
financial institutions and also numerous regulatory relief provisions
designed to eliminate certain duplicative regulations and paperwork
requirements.
On September 29, 1994, President Clinton signed the Reigle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Federal
Interstate Bill") which amends federal law to permit bank holding companies
to acquire existing banks in any state effective September 29, 1995.
Further, any interstate bank holding company is permitted to merge its
various bank subsidiaries into a single bank with interstate branches after
May 31, 1997. States have the authority to authorize interstate branching
before June 1, 1997, or, alternatively, to opt out of interstate branching
prior to that date. The Georgia Financial Institutions Code was amended in
1994 to permit the acquisition of a Georgia bank or bank holding company by
out-of-state bank holding companies beginning July 1, 1995. On September
29, 1995, the interstate banking provisions of the Georgia Financial
Institutions Code were superseded by the Federal Interstate Bill.
On January 26, 1996, the Georgia legislature adopted a bill (the
"Georgia Intrastate Bill") to permit, effective July 1, 1996, any Georgia
bank or group of affiliated banks under one holding company to establish up
to an aggregate of three new or additional branch banks anywhere within the
State of Georgia, excluding any branches established by a bank in a county
in which it is already located. After July 1, 1998, all restrictions on
state-wide branching were removed. Before adoption of the Georgia
Intrastate Bill, Georgia only permitted branching via merger or
consolidation with an existing bank or in certain other limited
circumstances.
FDIC INSURANCE AND FICO ASSESSMENTS FOR THE BANKS. The Banks are
subject to FDIC deposit insurance assessments for the Bank Insurance Fund
(the "BIF") which provides deposit insurance coverage of up to $100,000 per
bank customer (as defined by the FDIC). There have been no BIF deposit
insurance assessments for the highest-rated depository institutions which
includes all of the Banks - since 1995 when the BIF reached the target
funding level mandated by Congress. All depository institutions covered
by the BIF are, however, required to pay a special assessment to cover
interest on the FICO bonds that were issued to fund the Savings and Loan
industry bailout. The Banks paid total FICO bond assessments of $115
thousand in 1998. United expects to pay total FICO bond assessments of
approximately $140 thousand in 1999 and no BIF assessment due to the
continued strength of the banking industry.
EXECUTIVE OFFICERS OF UNITED
- ----------------------------
Executive officers of United are elected by the Board of Directors
annually in January and hold office until the following January unless they
sooner resign or are removed from office by the Board of Directors.
The executive officers of United, and their ages, positions with United
and the Banks and terms of office as of December 31, 1998, are as follows:
Name (age) Position with United or Banks Officer of United Since
--------- ----------------------------- -----------------------
Jimmy C. Tallent President, Chief Executive Officer and 1988
Director of United; Chief Executive Officer of
UCB; Chairman of the Board of UCB, Towns and
White; Director of Carolina, Peoples, First
Clayton and UFFC.
Thomas C. Gilliland President, Chief Executive Officer and Vice 1992
(50) Chairman of the Board of Peoples; Executive
Vice President and Director of United; Chairman
of the Board of UFFC.
11
Name (age) Position with United or Banks Officer of United Since
---------- ----------------------------- -----------------------
Billy M. Decker Senior Vice President, Director and Secretary of 1988
(55) United and UCB; Director of Carolina.
Guy W. Freeman President, Chief Executive Officer and Director 1995
(63) of Carolina; Senior Vice President of United.
Mr. Freeman served as President, Chief
Executive Officer and Chairman of the Board of
White prior to the merger with United.
Christopher J. Bledsoe Senior Vice President and Chief Financial 1993
(35) Officer of United and UCB; Director of UFFC.
Roger L. Bishop Senior Vice President and Chief Operations and 1998
(49) Information Officer of United since August, 1998;
prior to joining United, he served as Senior Vice
President of Brintech, Inc. of New Smyrna Beach,
Florida, and was a Senior Consultant for Alex
Sheshunoff Management Services, Inc. of Austin, Texas.
L. Gene Sprayberry Executive Vice President of UCB; Assistant 1988
(53) Secretary of United.
Richard E. Martin, Jr. President and Director of Towns; Vice President 1992
(50) of United.
Robert L. Cochran Vice President and Treasurer of United and UCB; 1995
(34) prior to joining United, he was an Accounting
Manager for PNC Bank in Cincinnati, Ohio.
Eugene B. White President and Director of White; Vice President of 1995
(54) United. Prior to joining United in March, 1995,
he served as Executive Vice President of First
National Bank of Habersham in Cornelia, Georgia.
J. Mark Smith President and Chief Executive Officer of First 1996
(47) Clayton; Vice President of United. Mr. Smith
served as President and Chief Executive Officer
of First Clayton prior to the merger with United.
Patrick J. Rusnak Vice President and Controller of United since 1998
(35) September 1998; prior to joining United, he was
Senior Assistant Controller of Trans Financial,
Inc. in Bowling Green, Kentucky.
Andrew M. Williams III President of UCB and Vice President of United since 1998
(45) November , 1998. Prior to joining United, he served
as President and Chief Executive Officer of Eagle
Bancorp, Inc. in Statesboro, Georgia.
12
None of the above officers is related to another and there are no
arrangements or understandings between them and any other person pursuant to
which any of them was elected as an officer, other than arrangements or
understandings with directors or officers of United acting solely in their
capacities as such.
ITEM 2. PROPERTIES.
The executive offices of United are located at 65 Highway 515,
Blairsville, Georgia. United owns this property. The Banks conduct
business from facilities primarily owned by the respective banks, all of
which are in a good state of repair and appropriately designed for use as
banking facilities. The Banks provide services or perform operational
functions at 30 locations, of which 25 locations are owned and 5 are leased.
UFFC conducts operations at four locations, all of which are leased. Note
5 to United's Consolidated Financial Statements includes additional
information regarding amounts invested in premises and equipment.
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of operations, United and the Banks are
defendants in various legal proceedings. In the opinion of management,
there is no pending or threatened proceeding in which an adverse decision
could result in a material adverse change in the consolidated financial
condition or results of operations of United.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the security holders of United
during the fourth quarter of the fiscal year covered by this report.
ITEM 5. MARKET FOR UNITED'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
STOCK. There is no established public trading market for United's
Common Stock. At December 31, 1998, there were 2,874 shareholders of
record.
DIVIDENDS. United declared cash dividends of $.15 per common share in
1998 and $.10 per common share in 1997. Federal and state laws and
regulations impose restrictions on the ability of United and the Banks to
pay dividends. Additional information regarding this item is included in
note 16 to the Consolidated Financial Statements and under the heading of
"Supervision and Regulation" in Part I of this report.
RECENT SALES OF UNREGISTERED SECURITIES. On December 31, 1996,
debentures due December 31, 2006, in the aggregate amount of $3,500,000 were
sold to 26 accredited investors in the States of Georgia and North Carolina
for cash in a transaction not involving a public offering within the meaning
of Section 4(2) of the Securities Act of 1933 and in compliance with
exemptions contained in Rule 506 of Regulation D promulgated thereunder.
All of the purchasers were either existing shareholders, current officers or
directors of United.
13
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for each of the five years ended December 31,
1998 appears under the caption "Selected Financial Data" on page A-2 of
United's Annual Report to Shareholders which is included as the appendix to
the Proxy Statement used in connection with the solicitation of proxies for
United's Annual Meeting of Shareholders to be held on April 15, 1999, to be
filed with the SEC (the "Proxy Statement") and is incorporated herein by
reference.
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and results
of operation appears under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operation" on pages A-1 through A-28
of United's Annual Report to Shareholders, which is included as the appendix
to the Proxy Statement, is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
United's net interest income and the fair value of its financial
instruments (interest earning assets and interest bearing liabilities) are
influenced by changes in market interest rates. United actively manages its
exposure to interest rate fluctuations through policies established by its
Asset/Liability Management Committee (the "ALCO"). The ALCO meets regularly
and is responsible for approving asset/liability management policies,
developing and implementing strategies to improve balance sheet positioning
and net interest income and assessing the interest rate sensitivity of the
Banks.
United utilizes an interest rate simulation model to monitor and
evaluate the impact of changing interest rates on net interest income. The
estimated impact on United's net interest income sensitivity over a one-year
time horizon as of December 31, 1998 and 1997 is indicated in the tables
below. The tables assume an immediate and sustained parallel shift in
interest rates of 100 basis points and no change in the composition of
United's balance sheet.
14
NET INTEREST INCOME SENSITIVITY
DECEMBER 31, 1998
(in thousands)
Percentate Increase (Decrease) in
Interest Income/Expense Given
Principal/Notional Immediate and Sustained Parallel
Amounts of Earning Interest Rate Shifts
Assets, Interest Bearing ------------------------------------
Liabilities and Caps at Down 100 Up 100
December 31, 1998 Basis Points Basis Points
--------------------------- ---------------- ----------------
Assets repricing in:
One year or less $ 693,174
Over one year 693,803
-----------
Total $ 1,386,977 -4.87% 4.85%
===========
Liabilities repricing in:
One year or less $ 974,889
Over one year 274,234
-----------
Total $ 1,249,123 -7.14% 6.55%
===========
Derivative hedge instruments $ 20,000
Net interest income sensitivity -2.71% 3.40%
Does not include swap contracts that expired on January 2, 1999
Percentate Increase (Decrease) in
Interest Income/Expense Given
Principal/Notional Immediate and Sustained Parallel
Amounts of Earning Interest Rate Shifts
Assets, Interest Bearing ------------------------------------
Liabilities and Caps at Down 100 Up 100
December 31, 1997 Basis Points Basis Points
--------------------------- ---------------- ----------------
Assets repricing in:
One year or less $ 705,147
Over one year 344,012
-----------
Total $ 1,049,159 -4.79% 4.72%
===========
Liabilities repricing in:
One year or less $ 795,751
Over one year 133,008
-----------
Total $ 928,759 -7.36% 7.23%
===========
Derivative hedge instruments $ 35,000
Net interest income sensitivity -1.51% 1.52%
15
United's ALCO policy requires that a 100 basis point shift in interest
rates not result in a decrease of net interest income of more than 5%.
The information presented in the tables above is based on the same
assumptions set forth in United's ALCO policy.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Report of Independent Certified Public Accountants, the
consolidated financial statements and notes to the consolidated financial
statements appear on pages A-30 through A-55 of United's Annual Report to
Shareholders, which is included as the appendix to the Proxy Statement, is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
During United's two most recent fiscal years, United did not change
accountants and had no disagreement with its accountants on any matters of
accounting principles or practices or financial statement disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF UNITED.
The information contained under the heading "Information About Nominees
for Director" in the Proxy Statement is incorporated herein by reference.
Pursuant to instruction 3 to paragraph (b) of Item 401 of Regulation S-K,
information relating to the executive officers of United is included in Item
1 of this Report.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the heading "Executive Compensation" in
the Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information contained under the heading "Security Holdings of
Certain Beneficial Owners and Management," in the Proxy Statement is
incorporated herein by reference. For purposes of determining the aggregate
market value of United's voting stock held by nonaffiliates, shares held by
all directors and executive officers of United have been excluded. The
exclusion of such shares is not intended to, and shall not, constitute a
determination as to which persons or entities may be "Affiliates" of United
as defined by the Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the heading "Compensation Committee
Interlocks and Insider Participation" in the Proxy Statement is incorporated
herein by reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) 1. Financial Statements.
--------------------
The following financial statements and notes thereto of United are
incorporated herein by reference:
16
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - December 31, 1998 and 1997
Consolidated Statements of Income for the Years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Comprehensive Income for the Years
ended December 31, 1998, 1997 and 1996.
Consolidated Statements of Changes in Stockholders' Equity
for the Years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
2. Financial Statement Schedules.
-----------------------------
No financial statement schedules are required to be filed as part of
this Report on Form 10-K.
3. Exhibits.
--------
The following exhibits are required to be filed with this Report on
Form 10-K by Item 601 of Regulation S-K:
EXHIBIT NO. EXHIBIT
----------- -------
2.1 Agreement and Plan of Reorganization between
Adairsville Bancshares, Inc. and United Community
Banks, Inc., dated as of January 21, 1999.
3.1 Articles of Incorporation of United, as amended
(included as Exhibit 3.1 to United's Registration
Statement on Form S-4, File No. 33-93286, filed with
the Commission on July 24, 1997 (the "1997 S-4") and
incorporated herein by reference).
3.2 Amended and Restated Bylaws of United, as amended
(included as Exhibit 3.1 to United's Annual Report on
Form 10-K, for the year ended December 31, 1997 (the
"1997 10-K") previously filed with the Commission and
incorporated herein by reference).
4.1(a) Junior Subordinated Indenture of United with The Chase
Manhattan Bank, as Trustee, relating to the Junior
Subordinated Debentures (included as Exhibit 4.1 to
United's Registration Statement on Form S-4, File No.
333-64911, filed with the Commission on September 30,
1998 (the "1998 S-4") and incorporated herein by
reference).
4.1(b) Form of Certificate of Junior Subordinated Debenture
(included as Exhibit 4.2 to the 1998 S-4 previously
filed with the Commission and incorporated herein by
reference).
4.1(c) Certificate of Trust of United Community Capital Trust
(included as Exhibit 4.3 to the 1998 S-4 previously
filed with the Commission and incorporated herein by
reference).
4.1(d) Amended and Restated Trust Agreement for United
Community Capital Trust (included as Exhibit 4.4 to
the 1998 S-4 previously filed with the Commission and
incorporated herein by reference).
4.1(e) Form of New Capital Security Certificate for United
Community Capital Trust (included as Exhibit 4.5 to
17
the 1998 S-4 previously filed with the Commission and
incorporated herein by reference).
4.1(f) Guarantee of United relating to the Capital Securities
(included as Exhibit 4.6 to the 1998 S-4 previously
filed with the Commission and incorporated herein by
reference).
4.1(g) Registration Rights Agreement (included as Exhibit 4.7
to the 1998 S-4 previously filed with the Commission
and incorporated herein by reference).
4.1(h) Form of Floating Rate Convertible Subordinated Payable
In Kind Debenture due December 31, 2006 (included as
Exhibit 4.2 to United's Registration Statement on Form
S-1, File No. 33-93278, filed with the Commission on
June 8, 1995, and incorporated herein by reference).
4.1(i) Form of Subscription Agreement (included as Exhibit A
to United's Form S-1, File No. 333-20887, filed with
the Commission on January 31, 1997 and incorporated by
reference).
4.2(a) See Exhibits 3.1 and 3.2 for provisions of Articles of
Incorporation and By-Laws, as amended, which define
the rights of the Shareholders.
10.1 United's Key Employee Stock Option Plan (included as
Exhibit 10.3 to United's Annual Report on Form 10-K
for the year ended December 31, 1994 (the "1994 10-
K"), previously filed with the Commission and
incorporated herein by reference).*
10.2 Loan Agreement dated April 26, 1995 by and between The
Bankers Bank and United, together with the related
Promissory Note in the principal amount of $12,000,000
and Stock Pledge Agreement (included as Exhibit 10.17
to United's Registration Statement on Form S-1, File
No. 33-93278, filed with the Commission on June 8,
1995 and incorporated herein by reference).
10.3 Split-Dollar Agreement between United and Jimmy C.
Tallent dated June 1, 1994 (included as Exhibit 10.11
to the 1994 10-K, previously filed with the Commission
and incorporated herein by reference).*
10.4 Agreement and Plan of Reorganization by and among
White County Bancshares, Inc., White County Bank and
United, dated as of April 11, 1995 (included as
Exhibit 2.1 to the 1997 S-4, previously filed with the
Commission and incorporated herein by reference).
10.5 Agreement and Plan of Merger by and between Registrant
and White County Bancshares, Inc., dated as of April
11, 1995 (included as Exhibit 2.2 to the 1997 S-4,
previously filed with the Commission and incorporated
herein by reference).
10.6 Agreement and Plan of Merger by and between White
County Bank and White Interim Bank, dated as of June
12, 1995 (included as Exhibit 2.3 to the 1997 S-4,
previously filed with the Commission and incorporated
herein by reference).
10.7 Purchase and Assumption Agreement by and between
Carolina Bank and NationsBank, N.A. dated May 25, 1995
(included as Exhibit 10.16 to United's Registration
Statement on Form S-1, File No. 33-93278, filed with
the Commission on June 8, 1995 and incorporated herein
by reference).
10.8 Broker Dealer Agreement between the Registrant and The
Carson Medlin Company dated January 28, 1997 (included
as Exhibit 10.10 to United's Registration Statement on
Form S-1, File No. 333-20887, previously filed with
the Commission on January 31, 1997, and incorporated
herein by reference)
10.10 Amendment to Broker Dealer Agreement between the
Registrant and The Carson Medlin Company dated March
3, 1997 (included as Exhibit 10.11 to United's
18
Registration Statement on Form S-1, File No. 333-
20887, filed with the Commission on January 31, 1997,
and incorporated herein by reference).
10.11 Agreement and Plan of Merger, dated June 12, 1997, by
and between United and First Clayton Bancshares, Inc.
(included as Appendix A to United's Registration
Statement on Form S-4, File No. 333-31997, filed with
the Commission on July 24, 1997, and incorporated
herein by reference).
12.1 Computation of ratio of earnings to fixed charges
(included as Exhibit 12.1 to the 1998 S-4 previously
filed with the Commission and incorporated herein by
reference).
21.1 Subsidiaries of United
23.1 Consent of Porter Keadle Moore, LLP
24.1 Power of Attorney of certain officers and directors of
United (included on Signature Page)
27.1 Financial Data Schedule
99.1 Notice of Annual Meeting and Proxy Statement of
United, including the Annual Report to Shareholders
attached as Appendix A.
________________________
* Management contract or compensatory plan or arrangement required to be
filed as an Exhibit to this Annual Report on Form 10-K pursuant to Item
14(c) of Form 10-K.
(b) United did not file any reports on Form 8-K during the fourth quarter
of 1998.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
United has duly caused this Report on Form 10-K to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Blairsville,
State of Georgia, on the 17th of March, 1999.
UNITED COMMUNITY BANKS, INC.
(Registrant)
By: /s/ Jimmy C. Tallent
Jimmy C. Tallent
Title: President
POWER OF ATTORNEY AND SIGNATURES
Know all men by these presents, that each person whose signature
appears below constitutes and appoints Jimmy C. Tallent and Robert L. Head,
or either of them, as attorney-in-fact, with each having the power of
substitution, for him in any and all capacities, to sign any amendments to
this Report on Form 10-K and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-
in-fact, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of
United in the capacities set forth and on the 17th of March, 1999.
SIGNATURE TITLE
--------- -----
/s/ Jimmy C. Tallent
Jimmy C. Tallent President and Director
(PRINCIPAL EXECUTIVE OFFICER)
/s/ Robert L. Head, Jr.
Robert L. Head, Jr. Chairman of the Board of Directors
/s/ Billy M. Decker
Billy M. Decker Director
/s/ Thomas C. Gilliland
Thomas C. Gilliland Director
/s/ Charles Hill
Charles Hill Director
20
/s/ Hoyt O. Holloway
Hoyt O. Holloway Director
/s/ P. Deral Horne
P. Deral Horne Director
____________________________
John R. Martin Director
/s/ Clarence William Mason, Sr.
Clarence William Mason, Sr. Director
/s/ Zell B. Miller
Zell B. Miller Director
____________________________
W. C. Nelson, Jr. Director
/s/ Charles E. Parks
Charles E. Parks Director
/s/ Christopher J. Bledsoe
Christopher J. Bledsoe Chief Financial Officer
(PRINCIPAL FINANCIAL OFFICER)
/s/ Patrick J. Rusnak
Patrick J. Rusnak Controller
(PRINCIPAL ACCOUNTING OFFICER)
21
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Reorganization between
Adairsville Bancshares, Inc. and United Community
Banks, Inc., dated as of January 21, 1999.
21 Subsidiaries of United.
23 Consent of Porter Keadle Moore, LLP.
27 Financial Data Schedule (for SEC use only)
99 Notice of Annual Meeting and Proxy Statement of United,
including the Annual Report to Shareholders as Appendix A.
22