<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K405
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: December 31, 1995 or
[ ] 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 2-81060-S
UNITED BANCORP
(Exact name of Registrant as specified in its charter)
Oregon 93-0612062
(State of Incorporation) (IRS Employer Identification No.)
555 S.E. Kane St.
Roseburg, OR 97470
(Address of Principal Executive Office)
Registrant's telephone number (541) 440-2629.
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of Each Class on Which Registered
None None
Securities registered pursuant to Section 12(g) of the Act:
None
________________
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by 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 (& 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
The approximate aggregate market value of Registrant's Common Stock held by
non-affiliates of the Registrant at February 29, 1996, was $6,067,163.
The number of shares of Registrant's common stock outstanding on February 29,
1996, was 439,761.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Shareholders for the year ended
December 31, 1995, are incorporated by reference into Parts I and II of this
Report.
The Exhibit index is located beginning at page 30.
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UNITED BANCORP
FORM 10-K
Table of Contents
Part I
Page
Item 1 Business..............................................................3
General...............................................................3
The Company...........................................................3
The Bank..............................................................3
Competition...........................................................4
Supervision and Regulation of United Bancorp..........................4
Supervision and Regulation of Douglas National Bank...................5
Monetary Policies.....................................................5
United Bancorp Statistical Information................................6
Item 2 Properties...........................................................15
Item 3 Legal Proceedings....................................................16
Item 4 Submission of Matters to Vote of Security-Holders....................16
Part II
Item 5 Market for the Registrant's Common Stock and Related
Stockholder's Matters.............................................16
Item 6 Selected Financial Data...........................................16
Item 7 Management's Discussion and Analysis of Financial.Condition and
Results of Operation..............................................16
Item 8 Financial Statements and Supplemental Data........................21
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...............................21
Part III
Item 10 Directors and Executive Officers of the Registrant................22
Item 11 Executive Compensation............................................24
Item 12 Security Ownership of Certain Beneficial Owners and Management....28
Item 13 Certain Relationships and Related Transactions....................29
Part IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K...30
Signatures..................................................................33
Exhibits....................................................................35
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<PAGE> 3
PART I
Item 1 - BUSINESS
General
- -------
United Bancorp (the "Company") is an Oregon corporation organized in 1971. Its
principal continuing business is the coordination of the financial resources
of the consolidated enterprise and the making of investments in and advances
to its subsidiaries to fund portions of their capital and credit requirements.
The business of Douglas National Bank (the "Bank"), a subsidiary of the
Company, is, and is expected for the foreseeable future to continue to be, the
principal source of the Company's revenue. See "The Bank" for a discussion of
its subsidiary, Douglas National Bank Insurance Agency, Inc.("DNBIA").
The Company
- -----------
The Company is a corporation organized under the laws of Oregon in 1971 as a
bank holding company. It owns all the capital stock of the Bank, a national
banking association chartered in 1959.
The Company was formed to permit greater flexibility in the operation of the
Bank and related financial services. In September 1972, through a plan of
reorganization and merger, the Bank became a subsidiary of the Company and the
stockholders of the Bank became the stockholders of the Company. The Company's
principal sources of funds are dividends and interest from the Bank. There
are legal limitations on the extent to which the Bank can pay dividends to the
Company or otherwise supply funds to the Company or its affiliates.
In December 1995, the Company merged with the one other wholly owned
subsidiary, organized as an Oregon corporation: U.B.C. Investment
Corporation. U.B.C. Investment Corporation owned certain of the Bank's
buildings and leased them back to the Bank.
The Company's principal executive offices are located at 555 S.E. Kane Street,
P.O. Box 1007, Roseburg, Oregon 97470, and its telephone number is (541)
440-2629. Unless the context indicates otherwise, references herein to
the Company are to the Company and its subsidiaries, including the Bank.
The Bank
- --------
The Bank is a national banking association chartered in 1959. It is engaged in
the general banking business in Douglas County, Oregon. Its primary service
area is northern Douglas County. Its main office is located at 555 S.E. Kane
Street, Roseburg, and it operates five branch offices in Winston, Sutherlin,
Glide, Drain and Roseburg (Garden Valley) and two off premises automatic
teller machines located in Roseburg and Rice Hill Valley.
The Bank's commercial services include acceptance of demand, savings and other
time deposits, lending of money on secured and unsecured basis to individuals,
partnerships and corporations, and purchase of investment securities and
rendering of services generally connected with commercial banking, except
trust services.
The Bank conducts its operations in Douglas County, Oregon. The economy of the
region is, and has always been closely linked to the forest products industry.
The availability of deposits and the exposure to credit loss can be impacted
by the economic performance in the forest products industry.
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<PAGE> 4
Douglas National Bank Insurance Agency, Inc. (DNBIA) was incorporated January
12, 1988, with the Bank owning 100 percent of DNBIA common stock issued.
DNBIA was organized to provide insurance and related financial products and is
licensed in the State of Oregon to market Life, Health and General Lines of
insurance products. DNBIA is headquartered at the Glide Office of Douglas
National Bank, Glide, Oregon.
Competition
- -----------
All phases of the Company's financial service activities, including banking and
the related businesses in which it is engaged are highly competitive. The Bank
competes with independent locally controlled banks and banks which are
subsidiaries of bank holding companies based inside and outside Oregon. The
Bank competes actively with banks, savings and loans, and credit unions for
deposits and loans, and brokerage firms for deposits. The Bank also competes
with other financial institutions, including personal loan companies, finance
companies and governmental agencies, all of which are actively engaged in
marketing various types of loans and other financial services.
Quality of service to customers and ease of accessibility to facilities are
among the principal methods of meeting competition in the financial services
industries.
Number of Persons Employed
- --------------------------
As of December 31, 1995, the Bank had 51 full-time employees and 22 part-time
employees. None of the Bank's employees is represented by a labor union.
The Bank considers its relationships with its employees satisfactory.
Supervision and Regulation of the Company
- -----------------------------------------
The Company is subject to regulation under the Bank Holding Company Act of 1956
(the "Act"), as amended, and is registered as such with the Federal Reserve
Board. As a bank holding company, the Company is required to file with the
Federal Reserve Board reports and any additional information the Federal
Reserve Board may require. The Federal Reserve Board may make examinations of
the Company and its subsidiaries and it also has the power to issue cease and
desist orders where action or inaction would constitute a threat to the safety,
soundness or stability of the Company.
Under the Act, the Company may not acquire direct or indirect ownership or
control of the voting shares of any company, including a bank, without the
prior approval of the Federal Reserve Board if, after such acquisition, it
would own or control more than 5 percent of the voting shares of such company,
except as specifically authorized. In addition, the Company is generally
prohibited from engaging in, or acquiring direct or indirect control of,
voting shares of any company engaged in nonbanking activities. Subject to the
approval of the Federal Reserve Board, the Company may acquire shares of
nonbanking corporations, the activities of which are deemed by the Federal
Reserve Board to be closely related to banking or managing or controlling
banks.
Some of the activities that the Federal Reserve Board has determined by
regulation to be closely related to banking are, making or servicing loans,
performing certain data processing services, acting as fiduciary or investment
or financial advisor, engaging in mortgage banking, making investments in and
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<PAGE> 5
operating insurance agencies, or making investments in corporations or projects
designed primarily to promote community welfare. In making any such
determination, the Federal Reserve Board is required to consider whether the
performance of such activities by the Company or an affiliate can reasonably be
expected to produce benefits to the public, such as greater convenience,
increased competition or gains in efficiency that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices. The Federal
Reserve Board is also empowered to differentiate between activities commenced
de novo and activities commenced by acquisitions, in whole or in part.
The Federal Reserve Board is prohibited from approving an application by the
Company to acquire voting shares of any commercial bank in another state
unless such acquisition is specifically authorized by the laws of such other
state.
The Company and its subsidiaries are "affiliates" of the Bank within the
meaning of the Federal Reserve Act and regulations of the Federal Deposit
Insurance Corportaion ("FDIC"), which impose restrictions on loans by the Bank
to its affiliates, on investments by the Bank in the stock or securities of its
affiliates, on taking such stock or securities as collateral security for loans
to any borrower, on the guarantee of credit of an affiliate and on the purchase
of assets from an affiliate. The Company, the Bank and their affiliates are
also subject to restrictions on engaging in the business of underwriting or
distributing securities in the United States.
Supervision and Regulation of the Bank
- --------------------------------------
The Bank is subject to supervision and regular examination by the Comptroller
of Currency. It is also subject to regulations issued by the Federal Reserve
Board and FDIC.
There are various requirements and restrictions affecting the Bank and its
operations including: the requirement to maintain reserves against deposits;
restrictions on the nature and amount of loans which may be made by the Bank;
and restrictions relating to investments, branching and other activities of the
Bank; and limitations upon the Bank's ability to declare and pay dividends.
The Bank is a member of the Federal Reserve Bank and FDIC and deposits of
$100,000 or less are insured.
Monetary Policies
- -----------------
The Company and its subsidiaries are affected by the national and regional
economic environment and are also affected directly and indirectly by the
monetary and fiscal policies of the United States Government, including the
Federal Reserve System which regulates the nation's money supply primarily
through control of bank credit. Such regulation has the effect of
influencing the overall growth of bank loans, investments and deposits and
affects interest rates on loans and deposits. The monetary policies of the
Federal Reserve System have had a significant effect on the operating results
of commercial banks in the past and are expected to do so in the future. The
impact of these policies cannot be accurately predicted.
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<PAGE> 6
United Bancorp Consolidated Statistical Information
- ---------------------------------------------------
The following tables present certain financial and statistical information
with respect to United Bancorp and its subsidiaries. Most of the information
is required by Guide 3, "Statistical Disclosure by Bank Holding Companies", of
the Securities and Exchange Commission. The following tables should be read in
conjunction with the Consolidated Financial Statements (including notes)
included in United Bancorp's 1995 Annual Report to Shareholders filed as
Exhibit 13.1 to this report, incorporated herein by reference. Reference is
made to the following financial and statistical information from its Annual
Report to Shareholders for the year ended December 31, 1995:
United Bancorp
Annual Report to Shareholders
Page Number
Investment Securities....................................... 13.1.12
Loans....................................................... 13.1.14
Short-term Borrowings....................................... 13.1.15
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<PAGE> 7
Average Balances (in thousands) and Average Rates Earned and Paid
-----------------------------------------------------------------
The following table shows average balances and interest income or interest
expense (in thousands), with the resulting average yield or rates by category
of average earning asset or interest bearing liability.
<TABLE>
<CAPTION>
____________________________________________Year ended December 31,1995________
Interest Average
Average Income or Yield or
Balance Expense Rates
-------- --------- --------
<S> <C> <C> <C>
Assets:
Interest bearing balances due from banks. $ 955 $ 57 5.97 %
Securities - taxable..................... 40,292 2,828 7.02
Securities - tax-exempt* ................ 8,842 414 6.27
Loans** ................................. 38,206 3,982 10.42
------ ------ -----
Total earning asset/interest income.. 88,295 $ 7,281 8.25
Reserve for loan losses.................. (431)
Cash and due from banks.................. 3,806
Premises and equipment, net.............. 2,851
Other assets............................. 1,153
------
Total assets....................... $ 95,674
=======
Liabilities and Stockholders' Equity:
Savings and interest bearing demand...... $ 39,924 $ 747 1.87 %
Time deposits............................ 12,742 581 4.56
Short-term borrowings.................... 10,875 483 4.44
Long-term debt........................... 9,458 629 6.65
Total interest-bearing liabilities / ------ ------ -----
interest expense...................... 72,999 $ 2,440 3.34
Demand deposits.......................... 11,533
Other liabilities........................ 700
------
Total liabilities.................. 85,232
Stockholders' equity..................... 10,442
------
Total liabilities and stockholders' equity $ 95,674
=======
Net interest income...................... $ 4,841
Net interest spread...................... 4.90 %
Net interest income to earning assets.... 5.48
</TABLE>
* Average yield on non-taxable securities has been computed at a 34%
tax-equivalent rate.
** Nonaccrual loans have been included in the computation of average loans
(1995 - $4 and 1994 - $168). Loan fees recognized during the period and
included in the yield calculation totaled $296 in 1995 and $420 in 1994.
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<PAGE> 8
Average Balances (in thousands) and Average Rates Earned and Paid
-------------------------(Continued)-----------------------------
The following table shows average balances and interest income or interest
expense (in thousands), with the resulting average yield or rates by category
of average earning asset or interest bearing liability.
<TABLE>
<CAPTION>
____________________________________________Year ended December 31, 1994_______
Interest Average
Average Income or Yield or
Balance Expense Rates
-------- --------- --------
<S> <C> <C> <C>
Assets:
Interest bearing balances due from banks. $ 2,363 $ 100 4.23 %
Securities - taxable..................... 51,193 3,013 5.89
Securities - tax-exempt* ............... 7,929 332 5.61
Loans** ................................ 30,815 3,242 10.52
------- ------ -----
Total earning asset/interest income... 92,300 $ 6,687 7.36
Reserve for loan losses.................. (477)
Cash and due from banks.................. 3,917
Premises and equipment, net.............. 2,723
Other assets............................. 1,762
-------
Total assets........................ $100,225
=======
Liabilities and Stockholders' Equity:
Savings and interest bearing demand...... $ 45,449 $ 788 1.73 %
Time deposits............................ 13,138 440 3.35
Short-term borrowings.................... 11,753 422 3.59
Long-term debt........................... 6,885 383 5.56
Total interest-bearing liabilities / ------- ------ ----
interest expense...................... 77,225 $ 2,033 2.63
Demand deposits.......................... 11,716
Other liabilities........................ 1,399
-------
Total liabilities................... 90,340
Stockholders' equity..................... 9,885
------
Total liabilities and stockholders' equity $100,225
=======
Net interest income...................... $ 4,654
Net interest spread...................... 4.73 %
Net interest income to earning assets.... 5.16
</TABLE>
* Average yield on non-taxable securities has been computed at a 34%
tax-equivalent rate.
** Nonaccrual loans have been included in the computation of average loans
(1995 - $4 and 1994 - $168). Loan fees recognized during the period and
included in the yield calculation totaled $296 in 1995 and $420 in 1994.
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<PAGE> 9
<TABLE>
<CAPTION>
Analysis of Changes in Interest Differential
--------------------------------------------
The following table shows the dollar amount of the increase (decrease) in the
Company's consolidated interest income and expense and attributes such dollar
amounts to changes in volume as well as changes in rates. Rate/volume
variances, which were immaterial, have been allocated equally between rate and
volume changes (in thousands).
_______________________________________________________________________________
________________Year ended December 31,_______________
_____1995 over 1994________ _____1994 over 1993_____
Total Amount of Change Total Amount of Change
Inc. Attributed to Inc. Attributed to
(Dec.) Volume Rate (Dec.) Volume Rate
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Interest on deposits-
domestic financial
institutions.......... $ (43) $ (75) $ 32 $ (13) $ (26) $ 13
Interest on securities-
taxable............... (185) (712) 527 (41) (171) 130
Interest on securities-
non-taxable........... 82 44 38 227 168 59
Interest and fees on
loans................. 740 770 (30) 739 612 127
---- ------ ----- ---- ---- ----
Total interest income $ 594 $ 27 $ 567 $ 912 $ 583 $ 329
Interest expense:
Interest on deposits:
Savings and interest
bearing demand....... $ (41) $ (100) $ 59 $(193) $ 5 $(198)
Time deposits.......... 141 (13) 154 (22) (13) (9)
Interest on short-
term borrowings....... 61 (34) 95 182 89 93
Interest on long-term
debt.................. 246 161 85 199 249 (50)
---- ------ ----- ---- ---- ----
Total interest expense $ 407 $ 14 $ 393 $ 166 $ 330 $(164)
Net interest spread. $ 187 $ 13 $ 174 $ 746 $ 253 $ 493
</TABLE>
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<PAGE> 10
INVESTMENT SECURITIES
- ---------------------
At December 31, 1995 the amortized cost, principal amount and weighted average
yields to maturity/call of securities Available-For-Sale were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Par Value Weighted
Amortized Principal Average
Cost Amount Yield
<S> <C> <C> <C>
U.S. Government agencies:
Due after 1 but within 5 years......... $ 6,105 $ 6,166 9.14 %
Due after 5 but within 10 years........ 4,219 4,300 24.07
------- -------
Total U.S. Goverment agencies.......... $ 10,324 $ 10,466
States and Political subdivisions:*
Due within 1 year...................... $ 245 $ 245 7.10 %
Due after 1 but within 5 years......... 1,625 1,605 8.23
Due after 5 but within 10 years........ 6,150 6,150 8.40
Due after 10 years..................... 2,447 2,300 9.07
------- -------
Total states and political subdivisions $ 10,467 $ 10,300
Mortgage Backed securities/Collateralized
Mortgage Obligations:
Due after 1 but within 5 years......... $ 803 $ 801 6.06 %
Due after 5 but within 10 years........ 3,221 3,177 5.79
Due after 10 year...................... 20,074 20,171 6.98
------- -------
Total MBS & CMO's...................... $ 24,098 $ 24,149
Federal Reserve & Federal Home
Loan Bank Stock......................... 1,489 1,489 7.03
Total Securities Available-for-Sale.... $ 46,378 $ 46,404 8.61 %
======= =======
</TABLE>
* Weighted average yield on state & political subdivisions has been
computed at a 34% tax-equivalent rate.
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<PAGE> 11
LOAN PORTFOLIO
- --------------
At December 31, 1995, the maturities of all loans by category were as follows
(in thousands):
<TABLE>
<CAPTION>
Due after one
Due within but within Due after
one year five years five years Total
<S> <C> <C> <C> <C>
Loan category:
Real estate construction.. $ 599 $ 89 $ 421 $ 1,109
Commercial................ 8,925 7,170 11,119 27,214
Real Estate Mortgage...... 761 735 5,782 7,278
Consumer Installment...... 1,411 2,616 404 4,431
------- ------ ------- -------
Total loans by maturity... $ 11,696 $ 10,610 $ 17,726 $ 40,032
</TABLE>
Variable rate loans due after one year totaled $15,623 at December 31, 1995,
and loans with predetermined or fixed rates due after one year totaled $12,713.
NONPERFORMING LOANS
- -------------------
The accrual of interest on a loan is discontinued when, in the opinion of
management, the future collectibility of principal or interest is in serious
doubt. The Bank's policy is to reverse and charge against current income,
interest previously accrued but uncollected. Subsequent interest collected on
such loans is credited to loan principal if, in the opinion of management,
full collectibility of principal is doubtful.
Loans contractually past due 90 days or more on which interest was being
accrued at December 31, 1995 were $81,000, as compared to $97,000 at December
31, 1994.
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<PAGE> 12
SUMMARY OF LOAN LOSS EXPERIENCE
- -------------------------------
The following table shows the Company's loan loss performance for the years
ended December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Loans at year end................................ $ 39,985 $ 33,775
Average loans outstanding........................ 38,206 30,815
Reserve balance, beginning of year............... 483 488
Recoveries:
Commercial and other......................... 14 33
Real estate - construction................... 0 0
Real estate - mortgage....................... 0 0
Installment.................................. 18 12
Credit Cards................................. 8 ---
------- -------
40 45
Loans charged off:
Commercial and other......................... 87 16
Real estate - construction................... 0 0
Real estate - mortgage....................... 0 0
Installment.................................. 31 34
Credit Cards................................. 9 ---
------- -------
127 50
------- -------
Net loans charged off (recoveries)......... 87 5
Provision charged to operations............ 80 0
------- -------
Reserve balance, end of year............. $ 476 $ 483
======= =======
Ratio of net loans charged off to average loans
outstanding..................................... .23 .016
Ratio of reserve for loan losses to loans at year end 1.19 1.43
</TABLE>
An allocation of the reserve for loan losses by loan category at December 31,
1995 is as follows (in thousands):
<TABLE>
<CAPTION>
Percent ofloans in each
Balance at December 31, 1995 category to
applicable to Amount total loans
- ---------------------------- -------- ---------------
<S> <C> <C>
Commercial and other..................... $ 198 41.6 %
Real estate - construction............... 10 2.1
Real estate - mortgage................... 145 30.5
Installment.............................. 65 13.7
Unallocated.............................. 58 12.1
----- ----
$ 476 100 %
=====
</TABLE>
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<PAGE> 13
The Bank follows guidelines of the Office of the Comptroller of Currency in
evaluating adequacy of its allowance for loan and lease losses. As outlined
in Banking Circular 201, dated February 20, 1992, the Bank's policy is to
maintain an allowance for loan and lease losses that is adequate to absorb all
estimated inherent losses. Inherent losses are defined as those loan losses
that are probable.
In assessing the adequacy of the allowance, the Bank's evaluation includes the
following:
1. For individual credits identified with a higher than normal credit risk,
these loans are identified by the Lenders, Credit Administrators, and Loan
Review Officer. The status of the risk associated with these credits is
reviewed quarterly. The factors considered in evaluating the risk for
each loan include: overall financial condition including cash flows
(recent and projected), repayment record, and realizable value of
collateral, if any.
2. All outstanding loans and unfunded commitments including loans listed on
the watchlist with no unusual credit risk, such as commercial lines of
credit, letters of credit, credit cards, and check loans. The loan losses
in pools of loans are based on The Bank's historical loss experience,
adjusted for perceived changes in trends and conditions expected to
occur in the Bank's local area. More specifically, the Bank's
consideration includes, but is not limited to: levels of trends in
delinquencies and nonaccruals; trends in loan volume; terms of loans;
effects of any changes in lending policies and procedures including those
for underwriting, collection, charge-off and recovery; experience, ability,
and depth of lending management and staff; national and local economic
trends and conditions; concentrations of credit (for example, local
industries, their employees and suppliers that might affect loss experience
across one or more components of the portfolio).
3. Potential losses by loan segments, broken down into consumer, commercial,
residential, commercial real estate, and credit cards.
In addition to these known items, the Bank is also maintaining reserves to
cover for local economic exposure. Douglas County's economy is more closely
tied to the forest products industry, which continues to be volatile. The
industry is expected to continue to weaken in the future. The economic climate
impacts both the ability of commercial and consumer borrowers to pay and the
value of real estate properties which serve as collateral on loans. The
unallocated portion of the reserve is intended to cover exposure to credit
losses in anticipation of further weakening of the economy.
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<PAGE> 14
DEPOSITS
- --------
The average amount of domestic deposits by category and the average rates paid
by each deposit category for the years ended December 31 was as follows
(dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
------------------ ------------------
Average Average Average Average
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
Noninterest bearing demand deposits. $ 11,533 N/A $ 11,716 N/A
Interest bearing demand............. 26,009 1.69 % 28,506 1.49 %
Savings............................. 13,915 2.21 16,943 2.14
Time................................ 12,742 4.56 13,138 3.35
</TABLE>
At December 31, 1995, the amount of domestic time certificates of deposit in
amounts of $100,000 or more by time remaining to maturity was as follows
(in thousands):
<TABLE>
<S> <C>
Three months or less......................... $ 317
Over three months through six months......... 224
Over six months through twelve months........ 106
Over twelve months........................... 227
</TABLE>
SHORT TERM BORROWINGS
- ---------------------
Securities sold under agreements to repurchase represent short-term
borrowings with maturities which do not exceed 270 days. The following is a
summary of such short-term borrowings for the years ended December 31, 1995,
and 1994.
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Repurchase Agreements:
Amount outstanding December 31,................. $ 10,467 $ 11,356
Weighted average interest at December 31,....... 4.33 % 4.08 %
Maximum balance outstanding at any month end.... $ 11,225 $ 11,356
Daily average balance outstanding during year... $ 9,740 $ 7,570
Weighted average interest rate during year...... 4.41 % 3.20 %
Fed Funds Purchased and FHLB Bank Line of Credit
Amount outstanding December 31,................. $ 2,646 $ 6,850
Weighted average interest at December 31,....... 6.125 % 6.62 %
Maximum balance outstanding at any month end.... $ 7,975 $ 6,850
Daily average balance outstanding during year... $ 1,009 $ 3,803
Weighted average interest rate during year...... 6.08 % 4.73 %
</TABLE>
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<PAGE> 15
RETURN ON EQUITY AND ASSETS
- ---------------------------
Return on daily average assets and equity for the years ended December 31 are
presented below (dollars in thousands):
<TABLE>
1995 1994
---------- ----------
<S> <C> <C>
Net income............................. $ 1,143 $ 587
Average total assets................... $ 95,674 $ 100,225
RETURN ON AVERAGE ASSETS............... 1.19 % .59 %
Net income............................. $ 1,143 $ 587
Average equity......................... $ 10,442 $ 9,885
RETURN ON AVERAGE EQUITY............... 10.95 % 5.94 %
Average total equity................... $ 10,442 $ 9,885
Average total assets................... $ 95,674 $ 100,225
AVERAGE TOTAL EQUITY TO ASSETS RATIO. 10.91 % 9.86 %
Dividends per share.................... .42 .40
Income per share....................... $ 2.70 $ 1.39
DIVIDENDS PAYOUT RATIO................. 15.56 % 28.80 %
</TABLE>
Item 2 - PROPERTIES
- -------------------
The following table sets forth the location of each property utilized by the
Company in its operations, with the approximate size.
Approximate Size
Location (in Oregon) of Facility in Square Feet
-------------------------------- ----------------
Main Office (Roseburg)..................................... 10,342
Winston..................................................... 7,155
Administration Building (Roseburg)......................... 2,500
Garden Valley.............................................. 3,134
Sutherlin................................................... 2,836
Drain....................................................... 2,607
Glide....................................................... 2,309
The Company owns the Main office, Garden Valley office, Drain office, Winston
office, and Glide office. The Bank leases these facilities from the Company
under a lease expiring December 31, 2001, with the option to purchase or renew.
The office located in Sutherlin is leased from unaffiliated parties pursuant
to lease expiring on September 18, 1997 (with an option to renew the lease for
25 years), with annual lease payments of approximately $16,000. The Bank also
rents space from the Company for a portion of its Administrative Support Staff,
and Drive-up facilities across from its Main office with annual rental payments
of approximately $16,000. Each of the Bank's offices is located in a permanent
structure.
All of the branch buildings have been remodeled within the last six years to
reflect a more modern appearance.
The Company considers its facilities suitable and adequate for its business
purposes. It also considers that they provide sufficient additional space
for growth and expansion.
-15-
<PAGE> 16
Item 3 - LEGAL PROCEEDINGS
- --------------------------
The Company is a party to certain legal proceedings, all of which are ordinary
routine litigation incidental to its business. It is the judgment of
management and Company's legal counsel, Walton, Nilsen, Walker & Johnson, that
the final outcome of these actions will not have a material effect on the
Company's consolidated results of operations, financial position, or cash
flows.
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None
PART II
-------
Item 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
- -------------------------------------------------------------------------
MARKET FOR COMMON STOCK
- -----------------------
The Company's common stock has no established public trading market. The
stock is traded over-the-counter primarily by the Roseburg, Oregon office of
Smith, Barney, Shearson, Inc. The number of beneficial shareholders of common
stock at December 31, 1995, and 1994 was 383 and 393 respectively. The stock
traded at $19.00 and $18.00 per share as of December 31, 1995, and 1994,
respectively.
DIVIDENDS
- ---------
The Company paid a cash dividend of 40 cents per share in 1994, and a cash
dividend of 42 cents per share in 1995. In December 1995, the Company
declared a dividend of 44 cents per share, payable on March 31, 1996, for
shareholders of record as of February 29, 1996.
The Bank is statutorily permitted to pay dividends to the Company subject to
certain limitations based on earnings and capital. The Company obtained funds
from the Bank in order to pay its dividends. At December 31, 1995, the amount
of dividends the Bank could declare without approval was $2.3 million.
Item 6 - SELECTED FINANCIAL DATA
- --------------------------------
Reference is made to "Five Year Summary of Operations" in the 1995 United
Bancorp Annual Report filed as Exhibit 13.1 to this report, which is
incorporated herein by reference.
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
- ------------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
1995 COMPARED TO 1994
- ---------------------
The Company had improved financial results in 1995 with net income up 95
percent from 1994. The increase in net income resulted in a return on average
assets of 1.19% and a return on average equity of 10.95%, up from .59% and
-16-
<PAGE> 17
5.94% respectively in comparison to 1994. Various factors influenced the
increase in net income. Net interest income was up 5 percent or $187,000,
noninterest income was up 14 percent or $105,000, and noninterest expense was
down 13 percent or $558,000 in comparrison to 1994.
The Company repositioned the Investment portfolio in 1994, taking a $366,000
realized loss. This repositioning increased yields on investments for 1995
dramatically. The average yield on taxable securities in 1994 was 5.89
percent, while the average yield in 1995 was 7.02 percent. Although the yield
on the securities increased, total securities decreased by 21 percent or
$12,338,000 in 1995. The Company sold about $10,000,000 in securities to
decrease the volitility in the portfolio. The Company reduced exposure in the
portfolio if rates were to rise substantially. The Company used the proceeds
from the sale of securities and maturities throughout the year to pay off short
term debt and purchase seasoned real estate loans yielding an average interest
rate of 8 percent. Hence, net loans increased over 1994 by $6,217,000 and
interest income on loans increased from $3,242,000 in 1994 to $3,982,000 in
1995. The repositioning of the balance sheet resulted in an increase of
interest income of $594,000 in 1995. The Company also recognized a provision
for loan losses of $80,000 in 1995, compared with no provision in 1994. The
allowance for loan losses was $476,000 at December 31, 1995 which represented
1.19 percent of gross loans, compared with $483,000 or 1.43 percent in 1994.
The loan portfolio continues to be of strong credit quality which reflects the
Companys conservative policys. Non performing loans were $178,604 at year end
compared with $168,000 in 1994. The Company had net charge off loans of
$87,000 in 1995 compared to $5,000 in 1994.
Total debt was reduced by nearly $5,000,000 by year end with the proceeds from
the sale of securities. However, interest expense on these Notes Payable
increased by $246,000 over 1994. This was due in part, to an increased cost of
funds during 1995, whereby the average cost went from 5.56 percent in 1994 to
6.65 percent in 1995, and as a result of an increase in the average balance of
short term borrowings and long term debt for 1995. Total deposits, including
Fed Funds Purchased and Repurchase Agreements fell 9 percent or $7,400,000
during 1995. Bank customers transfered money out of savings and other interest
bearing accounts into Time Certificates, which showed an increase of
$2,001,000. Time Certificates represent higher cost of funds for the Company
which resulted in an increase of interest expense of $100,000 over 1994. The
Company feels the reason for the decline in deposits is largely the result of
customers moving money into annuities and mutual funds where they can earn
higher returns. Net interest income, which is the difference between interest
income and interest expense was up 5 percent as a result of the preceeding
transactions.
In December 1995, the Company took advantage of the amnesty period offered by
FASB 115 to reclassify investment securities from the Held to Maturity (HTM)
portfolio into the Available for Sale (AFS) portfolio with no penalties. The
Company moved its entire Investment Portfolio to Availabe For Sale. At
December 31, 1994 the Investment portfolio was comprised of 46 percent Held to
Maturity securities and 54 percent Available For Sale securities. By moving
all of the securities into the Available For Sale Portfolio, the Company can
better manage liquidity concerns, volitility and net interest margin risks.
The Company has greater exposure to potential reductions in Stockholders Equity
if there is a large unrealized loss in the investment portfolio. However, the
Company feels that with the ability to manage the Investment portfolio, the
potential exposure will be minimized. The fair value of the Companys
Available for Sale securities exceeded its cost by $291,000 at December 31,
-17-
<PAGE> 18
1995 creating an unrealized gain, compared with 1994 which showed an unrealized
loss of $1,276,000. Total Stockholders Equity increased by $1,969,000, mainly
due to earnings and the change in unrealized gains/losses in the Investment
Portfolio.
Noninterest income which represents service charges on deposits and other fees
collected, increased by $105,000, due in part, to increased awareness of
service charges waived and restructuring of deposit product types. Noninterest
expense decreased by $558,000 in 1995 due to the following. The largest
variance was due to realized gains in the Investment Portfolio of $118,000 in
1995, whereas in 1994 there were realized losses of $336,000. FDIC assessments
decreased substantially from 1994. The FDIC lowered the insurance premium for
the Company to the minimum required by any bank. The Company will see the full
effect of this change in 1996 when they will only pay $2,000 a year compared
with the $156,000 paid in 1994. The amount paid in 1995 was $78,000 which
represented a $78,000 decrease in expense. The remainder of noninterest
expenses did not change substantially over 1994.
The Company predicts a prosperous year for 1996, and expects the economy and
the interest rate cycle to remain fairly calm.
- ---------------------
1994 COMPARED TO 1993
- ---------------------
The Company had a 42.8 percent decrease in net income from $1,027,000 in 1993
to $587,000 in 1994. This decrease resulted primarily from the sale of certain
of the Company's investment securities at a loss and the purchase and
installation of a systems upgrade for the Company. Total assets increased from
$97,729,000 in 1993 to $103,857,000 in 1994, a 6.3 percent increase. Total
loans increased by approximately 16.3 percent from $29,052,000 in 1993 to
$33,775,000 in 1994. The increase in loans was due, in part, to the repurchase
from the Oregon Retirement System ("OPERF") of certain seasoned commercial real
estate loans the Bank originally sold to the OPERF. The increase in loans was
also due, in part, to the growth of commercial/agriculture loans. These loans
grew 17.6 percent from $17,211,000 in 1993 to $20,237,000 in 1994. The
allowance for loan losses equaled $483,000 at December 31, 1994 which
represented 1.43 percent of gross loans. At December 31, 1993, the allowance
totaled $488,000 and represented 1.6 percent of gross loans. The Company had
net charge off loans of $5,000 in 1994 compared to $39,000 in 1993. Non
performing loans were $168,000 at December 31, 1994, compared with $3,000
December 31, 1993. The loan portfolio continues to be of strong credit quality
which reflects the Company's conservative policy.
The Company's investment in securities decreased slightly from $60,761,000 in
1993 to $59,007,000 in 1994. The Company continues to increase investments in
state and political subdivisions (e.g., municipal bonds) from $6,266,000 in
1993 to $7,942,000 in 1994 in order to take advantage of the higher returns due
to their tax exempt status. As a result, tax exempt income increased from
$105,000 in 1993 to $332,000 in 1994. Interest income on taxable securities
decreased slightly from $3,054,000 in 1993 to $3,013,000 in 1994. Net interest
income was up $746,000 from $3,908,000 in 1993 to $4,654,000 in 1994, an
increase of 19.1 percent, boosted in large part by the Federal Reserve Board's
action to raise the prime interest rate five times in 1994. On the other hand,
interest expense on deposits decreased by $215,000 from $1,443,000 in 1993 to
$1,228,000 in 1994, a 14.9 percent reduction, while deposits decreased 3.6
percent from $70,930,000 in 1993 to $68,386,000 in 1994. With the increase in
-18-
<PAGE> 19
interest rates, many customers moved their deposit accounts to higher yielding
investments such as treasury bills, annuities, and mutual funds. The bank's
subsidiary, Douglas National Bank Insurance Agency, benefited from the
disintermediation of the deposit accounts as the Bank's customers used such
subsidiary's brokerage services to move their accounts. During the fourth
quarter of 1994, the Company sold a portion of its Available For Sale
securities at a $366,000 loss. The Company originally purchased these
securities when the yields offered were low. It has now replaced them by
purchasing new securities with higher yields. The repositioning of a portion of
the securities portfolio, while resulting in a loss in 1994, in the view of
management, will improve the Company's earnings for 1995 and beyond.
At December 31, 1994, the Company had investment securities with average
maturities of approximately three years. The fair value of the Company's
current portfolio of Available for Sale securities is lower than cost by
$1,276,000, compared to an excess of market cost of $436,000 in 1993. The
fair value of its current portfolio of Held to Maturity securities is also
lower than cost by $1,354,000, compared to an excess of market over cost of
$106,000 in 1993. As a result, Stockholders Equity was decreased by $788,000:
$1,276,000 excess of cost over fair value, less $488,000 deferred income
benefit.
The Company purchased in 1994 computer equipment to support the FIserve
Comprehensive Banking System, a new system upgrade. The purchase of this
equipment is reflected in the increase of Bank Premises from $2,608,000 in
1993 to $2,941,000 in 1994. The systems upgrade includes computers, networking
equipment, etc. and in management's view, will result in increased efficiency
and customer service. Salaries and benefits for employees also increased
from $1,590,000 in 1993 to $2,150,000 in 1994 due to the change in estimate of
retirement benefits and due to the overtime and training costs in connection
with the installation and purchase of the new computer system. Cash flows
for the purchase of premises, furniture, and equipment was up from $108,000 in
1993 to $622,000 in 1994, also due to the installation and purchase of the
systems upgrade. The total noninterest expenses were up 18 percent in 1994
for a total of $4,600,000, representing an annualized ratio of noninterest
expense to total revenue of 62.1 percent in 1994 compared to 59.8 percent in
1993.
- ---------------------
1993 COMPARED TO 1992
- ---------------------
Total assets increased slightly from $97,085,000 in 1992 to $97,729,000 in
1993. Loans, on the other hand, increased by approximately 20 percent from
$24,028,000 in 1992 to $29,052,000 in 1993. The amount of the loans increased
as a result of the Company's commitment to increase its loan-to-deposit ratio
in order to improve the return on its assets. Consumer loans almost doubled
from $4,440,000 in 1992 to $7,264,000 in 1993 and commercial/agricultural
loans jumped up 20 percent from $14,352,000 in 1992 to $17,211,000 in 1993. The
Company reduced the allowance for loan loss by $537,000 to satisfy the
requirements of the Comptroller of Currency, which allowance now represents 1.6
percent of the Company's gross loans. At December 31, 1992, the allowance for
loan loss represented 4.4 percent of the Company's gross loans. The Company
recognized as income the $537,000 reduction in the allowance for loan loss in
1993 as a negative provision for a loan loss. The Company had net charge off
loans of $39,000 in 1993 as compared to net recoveries of $64,000 in 1992.
Non-accrual loans at December 31, 1993, totaled only $3,000 compared with 1992
in which they totaled $315,000.
-19-
<PAGE> 20
The Company's investments in securities increased slightly from $59,535,000 in
1992 to $60,761,000 in 1993. The Company substantially increased investments
in obligations of state and political subdivisions (municipal bonds) from
$1,891,000 in 1992 to $6,266,000 in 1993. Interest income on taxable
securities decreased by $802,000 from $3,856,000 in 1992 to $3,054,000 in 1993,
which represents a 20 percent decrease. This decrease is attributable to the
low interest rate environment, resulting in the early paying off of mortgage
backed products and the repricing of other securities at lower rates. The
Company offset a part of interest income by reducing the cost of deposits.
Interest expense on deposits decreased by $444,000 in 1993, while deposits were
up by less than one percent from $70,087,000 in 1992 to $70,930,000 in 1993.
At December 31, 1993, the Company had investment securities with average
maturities of approximately two years. The Company adopted SFAS 115 at
December 31, 1993, which separates these securities into three categories:
Held-to-Maturity, Available-for-Sale, and Trading Account. At December 31,
1993, the Company had $31,540,000 of the portfolio classified as
"Held-to-Maturity" and $28,785,000 classified as "Available-for-Sale", for
liquidity and asset liability management purposes. The Available-for-Sale
securities are shown at fair value. Stockholders' Equity increased by
$269,000: $437,000 excess of fair value over cost, less $168,000 of deferred
income taxes.
The Company also adopted SFAS 109 "Accounting for Income Taxes" as of January
1, 1993. Under this liability method, deferred tax liabilities and assets
are for differences between the tax basis of assets and liabilities and their
financial reporting amounts at currently enacted tax rates. The Company also
changed its estimate of prior years taxes which increased income in 1993 by
$166,000.
Cash flows from operating activities show the amortization of securities'
discounts and premiums as a net amortization expense rather than a net
accretion into income as occurred in 1992. This is because in 1992, the
Company held large balances of zero coupon discount bonds which accrue income.
These bonds were paid in early 1993.
The Company had an 11 percent decrease in net income from $1,156,000 in 1992
to $1,027,000 in 1993 due to the items described above. The Company also
incurred certain unanticipated expenses in 1993 which affected net income,
including losses resulting from a robbery and the incurrence of additional
professional fees in connection with certain nonrecurring matters.
- ---------
LIQUIDITY
- ---------
Liquidity represents the ability of the Company to insure that adequate funds
are available to meet customer's borrowing needs and fluctuations in deposits.
The most significant volatility, resulting in the need for cash outlays, is
in the purchased funds and time deposits. The Company matches the proceeds
from purchased funds with investments, largely term federal funds, of
approximately the same maturity. Time deposits have varying maturities and are
of varying amounts. The Company can control, to some extent, the balance of
these time deposits by adjusting the rate offered on these funds. Core
deposits represent demand, interest-bearing transactions and savings deposits.
As of December 31, 1995 and 1994, core deposits were $50,688,000 and
$56,966,000 respectively. Core deposits have no stated maturity, but in total
are less volatile than purchased funds and time deposits.
-20-
<PAGE> 21
The Company has the ability to purchase federal funds from other financial
institutions to meet liquidity needs. Investments and interest bearing
deposits with banks with a carrying value of $14,418,000 will mature or payoff
within the next year to meet additional cash requirements and, if necessary,
investment securities which are classified as Available For Sale, can be sold
prior to maturity to meet any unexpected cash demands. The Company can also
control, to some extent, the cash outlays made for new loans to customers.
The Company does, however, have $8,181,000 of commitments to lend under lines
of credit and standby letters of credit which must be met if required. The
Company does not anticipate all such commitments will be exercised, but would
meet these cash demands through the available sources previously discussed.
The Company has implemented a funds management program. These measures are
designed to achieve a minimum level of primary and secondary resources based
upon analysis of the volatility of the deposits and loan demands as well as
asset and liability mixes, yields and maturities.
- -----------------
CAPITAL RESOURCES
- -----------------
Capital resources to the Company represent the sources of liquidity previously
discussed. These sources of liquidity can be obtained at various costs. The
cost of these funds can change as market interest rates change. Capital
resources are needed to meet investing and lending demands of the Company.
The rates at which these funds can be invested (generally in Treasury and
Agency securities or Collateralized Mortgage Obligations) or loaned to
customers also vary as market interest rates change.
Interest rate fluctuations can have a significant impact on the interest
income and interest expense of the Company. The Company has relatively little
control over the rates it can earn on most assets and the rates it must pay on
most liabilities.
Within this environment, management's goal is to assure liquidity to meet the
needs of customers while maximizing the contribution of net interest income
to the Company's operating results without assuming undue risk.
The intent of management is to limit swings in net interest income resulting
from changes in interest rates. An asset or liability is described as rate
sensitive when either it can be repriced (the rate changed) or it matures,
whichever comes first. The difference between the amount of rate sensitive
assets and the amount of rate sensitive liabilities is referred to as the
interest rate sensitivity "gap". If as many assets as liabilities can be
repriced within a specific time interval, the Company is said to be matched.
In general, such a position will result in less volatile swings in net
interest income. It is management's goal to minimize swings in net interest
income due to interest rate fluctuation.
- ----------------------------------------------------
Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The Consolidated Balance Sheets as of December 31, 1995 and 1994, and
Consolidated Statements Of Income, Statement of Stockholders' Equity and
Consolidated Statements Of Cash Flows for the years ended December 31, 1995,
1994, and 1993, together with the Report of Independent Accountants which are
contained in the Company's Annual Report to Stockholders for the year ended
December 31, 1995 are incorporated herein as exhibit 13.1.
-21-
<PAGE> 22
Item 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- ------------------------------------------------------------------------------
None.
PART III
--------
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ------------------
The directors and executive officers of the Company and the Bank are elected
annually and hold office until their successors are elected and qualified.
The directors and executive officers of the Company and the Bank, at February
29, 1996, are listed below, with certain biographical data. The directors of
the Company are also the directors of the Bank.
- ---------
DIRECTORS
- ---------
LANCE C. SHORT. Mr. Short, age 51, has been a director of the Company and the
Bank since 1986. He owns Short Building Co., a residential housing company,
and has been in that business since 1971. Mr. Short is Chairperson of the
Operations Committee and a member of the Loan, and Investment and Funds
Management Committees, and a director of Douglas National Bank Insurance
Agency.
DAVID A. JACKSON. Mr. Jackson, age 59, has been Chairperson of the Company's
and Bank's board since 1987, and has been a director of the Company and Bank
since 1975. Mr. Jackson's principal occupation has been cattle ranching as
president and majority shareholder of Jackson Ranch, Inc., a family-owned
ranching corporation. Mr. Jackson is a member of the Executive, Loan,
Investment and Funds Management, and Sales and Service Committees. He is also
a Trustee of the Profit Sharing Plan and Trust.
GARY L. KJENSRUD. Mr. Kjensrud, age 53, has been a director of the Company
since 1982 and director of the Bank since 1981. Mr. Kjensrud has been an
officer of the Bank and Executive Vice President of the Company since August
1980, and has been President and Chief Executive Officer of the Bank since
April 1981. Mr. Kjensrud serves on the Company's Operations, Loan, Investment
and Funds Management, and Sales and Service Committees. He is President and
Director of Douglas National Bank Insurance Agency, Inc., and serves on
its Suitability Review Committee.
LAUREN D. YOUNG. Mr. Young, age 62, has been a director of the Company and the
Bank since 1986. He has owned and operated Lauren Young Tire Center
(Les Schwab) since 1969. He is a member of the Executive, Sales and Service
and Audit Committees, and is a Trustee of the Profit Sharing Plan and Trust.
M. JOHN LOOSLEY. Mr. Loosley, age 68, has been a director of the Company and
the Bank since 1973. He has been a Vice Chairperson and President of the
company since March 1986. Mr. Loosley was the principal stockholder and
President of Roseburg Paving Company until 1991, when he transferred control to
his children. He, his wife, Jean, and two children are sole equal shareholders
of Beaver State, Inc., a paving company. Mr. Loosley is Chairperson of the
Executive Committee, a member of the Loan, and Investment and Funds Management
Committees, and Chairperson of the Company's Profit Sharing Plan and Trust.
-22-
<PAGE> 23
WILLIAM C. STILES. Mr. Stiles, age 65, has been a director of the Company and
the Bank since December 1979 and Vice President of the Company since March
1986. Mr. Stiles is a professional engineer and the majority owner and
president of Bill Stiles and Associates, a real estate brokerage firm in
Roseburg, Oregon. Mr. Stiles is Chairperson of the Company's Loan, and
Investment and Funds Management Committees, and a member of the Executive
Committee. He is chairperson of the Douglas National Bank Insurance Agency's
Suitability Review Committee, and He is a Trustee of the Profit Sharing Plan
and Trust.
BRIAN R. PARGETER. Mr. Pargeter, age 53, has been a Director of the Company
since November 28, 1995. He also serves as a Director of the Bank. Since 1967
Mr. Pargeter has been with Umpqua Insurance Agency, serving as President and
majority shareholder. Mr. Pargeter is chairperson of the Company's Insurance
Committee, and a member of the Operations and Audit Committees.
RICKAR D. WATKINS. Mr. Watkins, age 50, has been Director of the Company and
the Bank since March of 1989. Mr. Watkins is President and owner of Rick's
Medical Supply since 1978. Mr. Watkins is Chairperson of the Sales and Service
Committee and a member of the Loan, Investment and Funds Management, and
Insurance Committees.
PETE MARTINI. Mr. Martini, age 52, has been a Director of the Company since
March 23, 1993. Mr. Martini has been the president of Elk River Enterprises,
Inc., dba American Laminators, since before 1987. American Laminators is
engaged in laminating structured timbers. Mr. Martini is Chairperson of the
Company's Audit Committee, and a member of the Insurance and Sales and Service
Committees. He is a Director of Douglas National Bank Insurance Agency.
- ------------------
EXECUTIVE OFFICERS
- ------------------
LINDA A. GANIM. Ms. Ganim, age 28, has served as Treasurer since May 1992.
Ms. Ganim is a Certified Public Accountant with banking experience with North
Valley Bank (1984-1986), Bank of America (1987-1988), and an accountant at
Gordon, Odom and Davis, CPA Inc. (1989-1992). Ms. Ganim is the Controller of
the Bank and Treasurer of the Company and its subsidiaries.
PETER H. NILSEN. Mr. Nilsen, age 48, has been Executive Secretary of the
Company since 1986. Mr. Nilsen, a 1972 graduate of the University of Oregon
law school, has practiced law in the Roseburg law firm of Walton, Nilsen, and
Johnson, P.C., since that time. Mr. Nilsen is also the Executive Secretary of
Douglas National Bank Insurance Agency, Inc.
M. NEIL ZICK. Mr. Zick, age 53, serves as Senior Vice President and Director
of Bank Operations. From 1970 to 1989 he served in various operations and
management positions with banking organizations. From 1989 to 1985 he served
as Senior Vice President and Cashier of Bank of Livermore. He serves on the
Administrative Policy Team of the Bank.
DON R. McDONEL. Mr. McDonel, age 54, serves as Vice President and Credit
Administrator since June 1, 1995. From 1971 to 1980 he served in various
lending and management positions with Bank of America. From 1981 to 1985 he
was owner of a mortgage investment firm. From 1985 to 1995 he served in
various lending and management positions for West American Bank and Bank of
Flake County. He serves on the Administative Policy Team of the Bank.
-23-
<PAGE> 24
KURT N. HECKERS. Mr. Heckers, age 37, serves as Vice President and Director
of Retail Banking since January 3, 1994. From 1979 to 1994 he served in
various operations and management positions for Security National Bank and Bank
of America. He serves on the Administrative Policy Team of the Bank.
- ------------------------
OTHER EXECUTIVE OFFICERS
- ------------------------
WILLIAM C. STILES - Please see description under "Directors"
GARY L. KJENSRUD - Please see description under "Directors"
DAVID A. JACKSON - Please see description under "Directors"
M. JOHN LOOSLEY - Please see description under "Directors"
Item 11 - EXECUTIVE COMPENSATION
- --------------------------------
Cash and Non-Cash Compensation Paid to Certain Executive Officers
- -----------------------------------------------------------------
The following table sets forth information concerning the compensation for each
of the fiscal years ended December 31, 1995, December 31, 1994, and December
31, 1993, of the persons who were, during the fiscal year ended December 31,
1995, the Chief Executive Officer (or acting in a similar capacity) of the
Company. The Company did not pay to any other executive officer of the
Company, at December 31, 1995, an amount exceeding $100,000 for such fiscal
year.
-24-
<PAGE> 25
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation Awards
------------------- Award Payouts
(a) (b) (c) (d) (e) (f) (g) (h)
Name and Other
Principal Annual Restricted LTIP All Other
Position (1) Year Salary Bonus Compen- Stock Pay- Compen-
sation Award(s) outs sation
($) ($) ($) (2) ($) (3) ($) ($) (4)
<S> <C> <C> <C> <C> <C> <C> <C>
Gary L. Kjensrud, 1995 $93,924 $ 3,521 $12,412 $ -0- $ -0- $50,282
Vice President of 1994 $93,924 $ 2,865 $ 2,683 $ -0- $ -0- $48,208
the Company and 1993 $93,924 $ 5,848 $ 8,117 $17,380 $ -0- $46,506
Executive Officer
and President of
the Bank
</TABLE>
___________________________________________
(1.) M. John loosley served as Vice Chairperson and President of the
Company and David A. Jackson served as Chairperson of the Board of Directors of
the Company for the four previous fiscal years. The Company did not pay to
them any compensation for their services in these capacities and paid them only
for their services as directors in the manner set forth in this item.
(2.) For this fiscal year ended December 31, 1995, the Company awarded to
Mr Kjensrud $12,412 under the Company's Executive Incentive Plan, $2,683 for
the fiscal year ended December 31, 1994, and $8,117 for the fiscal year ended
December 31, 1993.
(3.) At December 31, 1995, Mr. Kjensrud owned 35,402 shares having a value
of $672,638 under the Executive Incentive Plan. Dividends are paid on all
restricted shares to the same extent as any other shares of the Company's
common stock.
(4.) The Company contributed to its 401(k) Profit Sharing Plan on behalf of
Mr. Kjensrud the amount of $3,091 for the fiscal year ended December 31, 1995,
$3,750 for the fiscal year ended December 31, 1994, and $3,524 for the fiscal
year ended December 31, 1993. The Company paid on behalf of Mr. Kjensrud
insurance premiums in the amount of $17,152 for the fiscal year ended
December 31, 1995, $17,152 for the fiscal year ended December 31, 1994, and
$17,152 for the fiscal year ended December 31, 1993. These amounts include
premiums for whole life insurance and disability insurance. The Company's
Employee Stock Ownership Plan ("ESOP") allocated to Mr. Kjensrud's account
1,581 shares of stock with a dollar value of $30,039 for fiscal year ended
December 31, 1995, 1,517 shares with a dollar value of $27,306 for the fiscal
year ended December 31, 1994, and 1,476 shares with a dollar value of $25,830
for the fiscal year ended December 31, 1993. Mr Kjensrud had 10,260 shares
with a value of $194,940 under the ESOP based on a $19.00 per share price of
the Company's common stock at December 31, 1995.
-25-
<PAGE> 26
- -------------------------
COMPENSATION OF DIRECTORS
- -------------------------
The Company and the Bank pay the amount of $175 per month to each of the
directors for services provided as a director and $225 per month to the
Chairperson of the Board of Directors for such services. The Company and the
Bank also pays to the Committee Chairperson and Secretary an additional $25 per
month for such services provided. DNBIA pays its directors the amount of $100
per meeting and its Chairman of the Board of Directors $150 per meeting for
services provided in those capacities.
- ----------------------------------------------------------------------
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS
- ----------------------------------------------------------------------
The Company and Mr. Kjensrud entered into a Restated Employment Agreement
dated November 29, 1988, by the term of which the Company employed him to
serve as President of the Bank and to perform such other reasonably related
duties as may be designated by the Board of Directors from time to time. In
consideration therefor, the Company pays to him a minimum annual salary in the
amount of $77,600 and any director's fees it pays to him during such year for
his services as a director of the Company. Mr. Kjensrud also receives paid
vacations, pension benefits, medical benefits, disability insurance, and other
benefits as the Company may allow or provide to its employees in general
and receives certain perquisites, such as an automobile, gasoline for such
automobile, and membership in a country club.
The Agreement provides for certain other benefits. First, it provides for
the payment of an annual bonus, determined on the basis of the achievement of
certain goals. If Mr. Kjensrud does not achieve any of the specified goals,
then the Company does not pay him any bonus; if he achieves a percentage of
the goals, then he receives an interpolated percentage based on the proportion
achievement of the goals; if he achieves all such goals, then he receives all
of the bonus; and, if he exceeds such goals, he receives 110 percent of the
specified bonus amount. The amount of the bonus each year for the achievement
of all of the goals equals 25 percent of his annual salary. Mr. Kjensrud may
elect to defer the payment of such bonus until the date of his death, permanent
disability, or termination of employment. If he elects to defer its payment,
the Company will credit to him interest thereon monthly at an interest rate
equal to the interest rate the Company pays on money market instruments for
like amounts of funds. At the date of death, disability, or termination of
employment, Mr. Kjensrud (or his beneficiaries) may receive such amount in a
lump sum or payable in 120 monthly installments.
The Agreement also provides that in the event the Company or the Bank are
sold or merged during the term of Mr. Kjensrud's employment and the Company has
not terminated Mr. Kjensrud for cause prior to the date of such sale and
merger, the Company agrees to pay to him two years additional compensation
equal to his base salary, his allowance for his automobile, and his annual
bonus for the year in which the merger or sale took place. It is payable
beginning as of the date of the sale or merger, even if the Company or the
Bank (or their successor in interest) elects to continue to employ him. Mr.
Kjensrud is also entitled to terminate his employment and receive such
compensation if the Company or the Bank (or their successor in interest) do not
offer to continue to employ him at the same level of duties and authority
taking into account his background and abilities and consistent with his
position before the sale and merger.
-26-
<PAGE> 27
Finally, the Agreement provides that Mr. Kjensrud participate in the Company's
Executive Supplemental Retirement Income Plan which the Company established for
its executives to provide to them supplemental income upon retirement. Under
this Plan, the Company agrees to pay Mr. Kjensrud upon retirement the amount
of $5,192 per month for life or for 180 months, whichever is longer. The
Company purchased an insurance policy upon the life of Mr. Kjensrud to permit
the Company to provide such retirement benefits to him. If Mr. Kjensrud should
become disabled, before retirement, under the Plan, the Company also agrees
to provide to him a maximum monthly benefit of $1,400 for a period of time of
not less than 2 years up until he reaches the age of 65.
- ----------------------------------------------------------------------
ADDITIONAL COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
- ----------------------------------------------------------------------
During 1995, Mr. M. John Loosley, Vice Chairman and President of the Company,
served as a member of the Company's Executive Committee and participated in
deliberations with respect to executive officer compensation. Three directors,
David Jackson, Lauren D. Young, and William C. Stiles, who are also members of
the Executive Committee and participate in deliberations with respect to
executive officer compensation, have relationships and transactions with the
Company. See Item 13, "Certain Relationships and Related Transactions."
-27-
<PAGE> 28
- ------------------------------------------------------------------------
Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The following table sets forth certain information as of February 28, 1995,
regarding beneficial ownership of the Company's common stock (the only class
of outstanding voting securities of the Company) by each person who is known by
the Company to own beneficially more than 5% of the common stock, each of the
Company's directors, each named executive officer named in the summary
compensation table, and all directors and executive officers as a group.
Each named beneficial owner has sole voting and investment power with respect
to the shares listed unless otherwise indicated.
2/29/96
<TABLE>
<CAPTION>
Amount of Percent
Name of Beneficial Owners Address Ownership of Class
- ----------------------------- ------------------- --------- --------
<S> <S> <C> <C>
Employee Stock Ownership Plan PO Box 1007 71,076 16.16 %
Trust (M. John Loosley, Lance C. Roseburg, OR 97470
Short, Lauren D. Young, David A.
Jackson, William C. Stiles and
Donna P. Woolley, trustees)
Gary L. Kjensrud PO Box 308 44,013 * 10.01 %*
Winchester, OR 97495-0308
David A. Jackson PO Box 606 22,813 5.19 %
Winchester, OR 97495
M. John Loosley 245 Carriage Lane 8,279 1.88 %
Roseburg, OR 97470
Lance C. Short PO Box 846 7,186 1.63 %
Winchester, OR 97495-0080
William C. Stiles PO Box 1488 2,350 .53 %
Roseburg, OR 97470
Lauren D. Young 820 Old Garden Valley Rd. 1,438 .33 %
Roseburg, OR 97470
Rickar D.Watkins 1425 NE Hillview 2,025 .46 %
Roseburg, OR 97470
Pete Martini PO Box 297 2,232 .51 %
Drain, OR 97435
Brian R. Pargeter 771 Lower Garden Valley Rd 2,569 .58 %
All directors and executive
officers as a group (9 persons) 92,905 * 21.13 %*
</TABLE>
Does not include:
* (i) Common shares which have vested under the Employee Stock Ownership
plan as follows:
Gary L. Kjensrud 10,260
-28-
<PAGE> 29
- --------------------------------------------------------
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The Bank has had, and expects to have in the future, banking transactions in
the ordinary course of its business with various directors and executive
officers of the Company and of the Bank, their immediate family, and associates
and organizations in which they had or are to have a direct or indirect
material interest, on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with other persons, and not involving more than a normal risk of
collectibility or presenting other unfavorable features. The table following
provides information covering extensions of credit by the Bank to the Company's
directors and officers (including executive officers of the Bank who perform
certain policy-making functions for the Company) and their associated
businesses as of December 31, 1995. All of the loans listed in the table were
current as to the payment of interest and principal as of December 31, 1995.
<TABLE>
<CAPTION>
Highest Ending
Outstanding Balance
Credit Balance December 31,
Name Relationship Limit During 1995 1995 Rate
- ------------------ ------------ --------- ------------ ----------- -----
<S> <S> <C> <C> <C> <C>
Stiles, Neuner, Investment $ 200,000 $ 200,000 $ 16,642 10.25%
Loosley, Taucher Partnership
(Prime Plus 2%)
M. John Loosley Director
William C. Stiles Director
Joseph L. Taucher Director
LCG Properties
M. John Loosley Director $ 149,668 $ 143,175 9.00%
Roseburg Home Center
Lance C. Short Director $ 222,219 $ 200,232 10.30%
Gary L. Kjensrud Director $ 10,000 $ 4,907 15.00%
Rickar D. Watkins Director $ 40,026 $ 33,541 8.90%
Rickar D. Watkins Director $ 24,791 $ 18,503 7.13%
Rickar D. Watkins Director $ 9,647 $ 5,385 7.13%
Rickar D. Watkins Director $ 3,727 $ 1,535 6.00%
William C. Stiles Director $ 12,970 $ 4,939 6.25%
Magnolia Gardens
Limited Partnership
Lauren D. Young Director $ 89,263 $ 89,263 9.25%
</TABLE>
-29-
<PAGE> 30
PART IV
- -------------------------------------------------------------------------
Item 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995
Annual 1995
Report 10-K
Page Page
-------- ----
<S> <C> <C>
(a) The following are filed as part of this report
1.Financial Statements.............................. 35
The following Financial Statements included in
the United Bancorp Annual Report for 1995 filed
as Exhibit 13.1 to this report.
Consolidated Balance Sheets as of December 31,
1995 and 1994.................................. 13.1.1
Consolidated Statements of Income for the Years
ended December 31, 1995, 1994, and 1993........ 13.1.3
Consolidated Statements of Cash Flows for the
Years ended December 31, 1995, 1994, and 1993.. 13.1.5
Statement of Stockholders' Equity for the years
ended December 31, 1995, 1994, and 1993........ 13.1.7
Notes to Consolidated Financial Statements..... 13.1.8
Five Year Summary of Operations................ 13.1.26
Report of Independent Accountants.............. 13.1.27 35
2.Financial Statement Schedules: None
3.Exhibits:
(3) Articles of Incorporation and Bylaws
3(i) Second Restated Articles of Incorporation
(Filed as an exhibit to the Annual Report on Form
10-K for the period ended December 31, 1993, and
by this reference incorporated herein)
3(ii) Bylaws of United Bancorp (filed as an
exhibit to the Annual Report on Form 10-K for the
period ended December 31, 1990, with the Securities
and Exchange Commission and incorporated herein
by reference)
3(iii) Second Restated Bylaws of United Bancorp
(Filed as an exhibit to the Annual Report on Form
10-K for the period ended December 31, 1994, and by
this reference incorporated herein)
(10) Material Contracts
10.1 Employees Stock Ownership Plan (filed
as an exhibit to the Annual Report on Form 10-K for
the period ended December 31, 1990, and by this
reference incorporated herein)
-30-
<PAGE> 31
10.2 Executive Supplement Retirement Income Plan
(filed as an exhibit to the Annual Report on Form
10-K for the period ended December 31, 1990, and
by this reference incorporated herein)
10.3 Restricted Stock Bonus Plan (filed as an
exhibit to the Annual Report on Form 10-K for the
period ended December 31, 1990, and by this
reference incorporated herein)
10.4 Promissory Note & Related Documents -
Federal Home Loan Bank (filed as an exhibit to
the Annual Report on Form 10-K for the period
ended December 31, 1991, and by this reference
incorporated herein)
10.5 Amendment to Restricted Stock Bonus Plan
(filed as an exhibit to the Annual Report on Form
10-K for the period ended December 31, 1991, and
by this reference incorporated herein)
10.6 401(k) Profit Sharing Plan (filed as an
exhibit to the Annual Report on Form 10-K for the
period ended December 31, 1992, and by this
reference incorporated herein)
10.7 Restated Employment Agreement between the
Company and Gary L. Kjensrud dated November 28,
1988 (filed as an exhibit to the Annual Report on
Form 10-K for the period ended December 31, 1992,
and by this reference incorporated herein)
10.8 Restated Employee Stock Option Plan
adopted December 31, 1994 (filed as an exhibit to
the Annual Report on Form 10-K for the period
ended December 31, 1994, and by this reference
incorporated herein)
10.9 Restated 401(k) Plan adopted December 31,
1994 (filed as an exhibit to the Annual Report on
Form 10-K for the period ended December 31, 1994,
and by this reference incorporated herein)
10.10 Second Amendment to United Bancorp
Restricted Stock Bonus Plan adopted February 18,
1994 (filed as an exhibit to the Annual Report on
Form 10-K for the period ended December 31, 1994,
and by this reference incorporated herein)
10.11 Employee Stock Option Plan Business Loan
Agreement & Related Documents - Bank of America
Oregon (filed as an exhibit with this Annual
Report on Form 10-K) 36
(11) Statement Regarding Computation of Per Share
Earnings:
Disclosed in Note 1 to the Financial Statements 6 35
-31-
<PAGE> 32
(13) Annual Report to Security-Holders, Form
10-Q, and Form 10-QSB or Quarterly Report
to Security-Holders:
13.1 United Bancorp Annual Report for 1995
(except for the pages and information expressly
incorporated by reference in this Annual Report
on Form 10-K, the United Bancorp Annual Report
for 1995 is provided solely for the information
of the Securities and Exchange Commission and is
not deemed "filed" as part of the Annual Report
on Form 10-K)
(21) Subsidiaries of the Registrant: Disclosed
in Note 1 to the Consolidated Financial
Statements
(22) Published Report Regarding Matters Submitted
to Vote of Security-Holders:
(b) Reports on Form 8-K: (filed as and exhibit to
this Annual Report on Form 10-K) 37
</TABLE>
-32-
<PAGE> 33
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
UNITED BANCORP
By: \s\David A. Jackson March ________, 1996
----------------
David A. Jackson, Chairman
of the Board of Directors
\s\M. John Loosley March ________, 1996
---------------
M. John Loosley, Vice Chairman,
President, and Director
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
Signatures Date
- ---------- ----
\s\David A. Jackson March ________, 1996
----------------
David A. Jackson, Chairman of the Board of Directors and Director
\s\M. John Loosley March ________, 1996
---------------
M. John Loosley, Vice Chairman, President, and Director
\s\Gary L. Kjensrud March ________, 1996
----------------
Gary L. Kjensrud, Vice President and Director
\s\Linda A. Ganim March ________, 1996
--------------
Linda A. Ganim, Treasurer, Chief Financial Officer and Principal
Accounting Officer
\s\William C. Stiles March ________, 1996
-----------------
William C. Stiles, Vice President and Director
\s\Lance C. Short March ________, 1996
--------------
Lance C. Short, Director
\s\Lauren D. Young March ________, 1996
---------------
Lauren D. Young, Director
\s\Peter Nilsen March ________, 1996
------------
Peter Nilsen, Director
-33-
<PAGE> 34
\s\Rickar D. Watkins March ________, 1996
-----------------
Rickar D. Watkins, Director
\s\Brian R. Pargeter March ________, 1996
-----------------
Brian R. Pargeter, Director
\s\Pete Martini March ________, 1996
------------
Pete Martini, Director
- -------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT
TO SECTION 12 OF THE ACT.
- -------------------------------------------------------------------------------
Except to the extent that portions of the materials enumerated in (1) below
are specifically incorporated into the Annual Report on Form 10K by reference,
the Registrant hereby furnishes to the Securities and Exchange Commission for
its information four copies of the following:
(1) United Bancorp Annual Report for 1995 (filed as Exhibit 13.1 to
this Annual Report on Form 10-K).
-34-
<PAGE>
EXHIBIT 13.1
United Bancorp Annual Report for 1995
-------------------------------------
-35-
<PAGE> 13.1.1
UNITED BANCORP AND SUBSIDIARIES
-------------------------------
UNITED BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks......................... $ 3,899 $ 5,048
Interest bearing deposits with bank............. 0 2,020
----- -------
Total cash and cash equivalents............... 3,899 7,068
Securities:
Held-to-maturity, fair value of $26,197 in 1994. --- 27,551
Available-for-sale.............................. 46,669 31,456
------ ------
Total securities.............................. 46,669 59,007
Loans............................................. 39,985 33,775
Less allowance for loan losses.................. (476) (483)
------ ------
Net loans..................................... 39,509 33,292
Bank premises, furniture and equipment, net....... 2,769 2,941
Accrued interest receivable and other assets...... 1,013 1,134
Deferred income taxes............................. 0 415
------ ------
Total assets.................................. $ 93,859 $103,857
======= =======
LIABILITIES
Deposits:
Demand.......................................... $ 10,947 $ 12,317
Interest bearing................................ 27,057 28,099
Savings......................................... 12,684 16,550
Time certificates of $100 or larger............. 874 1,089
Time certificates less than $100................ 12,547 10,331
------ ------
Total deposits................................ 64,109 68,386
Federal funds purchased and securities sold under
agreements to repurchase......................... 10,467 13,606
Bank line of credit............................... 2,646 4,600
Notes payable..................................... 4,103 7,092
Debt of Employee Stock Ownership Plan............. 233 240
Deferred income taxes............................. 182 ---
Other liabilities................................. 658 441
------ ------
Total liabilities............................. $ 82,398 $ 94,365
------ ------
Commitments (Note 12)
</TABLE>
-13.1.1-
<PAGE> 13.1.2
UNITED BANCORP AND SUBSIDIARIES
-------------------------------
CONSOLIDATED BALANCE SHEETS (CONT.)
December 31, 1995 and 1994
(amounts in thousands of dollars, except share data)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
STOCKHOLDERS' EQUITY
Preferred stock, no par value; 1,000,000 shares
authorized, none issued.......................... --- ---
Common stock; $2.50 par value; 5,000,000 shares
authorized, 440,441 (438,534 in 1994) shares
issued and outstanding........................... $ 1,101 $ 1,096
Additional paid-in capital........................ 3,515 3,484
Retained earnings................................. 6,899 5,940
Unearned Employee Stock Ownership Plan compensation (233) (240)
Net unrealized gains (losses) on securities available-
for-sale, net of $112 liability ($488 benefit in 1994)
for deferred income taxes......................... 179 (788)
------ ------
Total stockholders' equity...................... 11,461 9,492
------ ------
Total liabilities and stockholders' equity.... $ 93,859 $103,857
======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-13.1.2-
<PAGE> 13.1.3
UNITED BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1995, 1994 and 1993
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
INTEREST INCOME
Loans...................................... $ 3,982 $ 3,242 $ 2,503
Federal funds sold and interest bearing
deposits with bank........................ 57 100 113
Securities:
Taxable................................. 2,828 3,013 3,054
Exempt from federal income taxes........ 414 332 105
------ ------ ------
Total interst on securities............. 3,242 3,345 3,159
------ ------ ------
Total interest income................. 7,281 6,687 5,775
INTEREST EXPENSE
Deposits................................... 1,328 1,228 1,443
Federal funds purchased and securities
sold under agreements to repurchase....... 483 422 240
Notes payable.............................. 629 383 184
------ ------ ------
Total interest expense.................. 2,440 2,033 1,867
------ ------ ------
Net interest income................... 4,841 4,654 3,908
Provision (credit) for loan losses.......... 80 0 (537)
------ ------ ------
Net interest income after provision
(credit) for loan losses.............. 4,761 4,654 4,445
------ ------ ------
NONINTEREST INCOME
Service charges on deposit accounts........ 557 520 514
Other service charges, commissions and fees 198 176 248
Other...................................... 134 88 61
------ ------ ------
889 784 823
------ ------ ------
NONINTEREST EXPENSE
Salaries and employee benefits............. 2,132 2,150 1,590
Executive Incentive Plan................... 60 55 77
Contract labor............................. 110 165 274
Net occupancy and equipment................ 588 547 504
Outside data processing services........... 203 194 239
Supplies................................... 126 114 88
FDIC assessment............................ 78 156 156
Professional services...................... 74 90 168
Advertising/public relations............... 87 84 105
Realized (gains) losses on sales
of securities............................. (118) 366 (2)
Other...................................... 741 718 745
------ ------ ------
Total noninterest expense............... 4,081 4,639 3,944
------ ------ ------
</TABLE>
-13.1.3-
<PAGE> 13.1.4
UNITED BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (CONT.)
for the years ended December 31, 1995, 1994, 1993
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Income before income taxes............ $ 1,569 $ 799 $ 1,324
Provision for income taxes.................. 426 212 297
------ ------ ------
Net income........................ $ 1,143 $ 587 $ 1,027
====== ====== ======
Average number of common and common
equivalent shares outstanding............... 423,330 421,453 437,624
======= ======= =======
Net income per common share................. $ 2.70 $ 1.39 $ 2.34
==== ==== ====
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-13.1.4-
<PAGE> 13.1.5
UNITED BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1995, 1994 and 1993
(in thousands of dollars)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
Cash flows from operating activities:
Net income................................. $ 1,143 $ 587 $ 1,027
Reconciliation of net income to net cash
provided by operating activities:
Loss on disposal of furniture and
equipment................................ --- 48 ---
Depreciation.............................. 261 241 255
Provision (credit) for loan losses........ 80 --- (537)
Deferred income tax provision (benefit)... (5) 28 191
Stock dividend received on FHLB stock..... (92) (59) (61)
Amortization of investment securities'
discounts and premiums................... (27) 236 386
Realized (gains) losses on sales of
securities............................... (118) 366 (2)
Change in assets and liabilities:
(Increase) decrease in interest receivable
and other assets......................... 121 (279) 136
Increase (decrease) in other liabilities.. 217 207 (288)
------ ------ ------
Net cash provided by operating activities. 1,580 1,375 1,107
------ ------ ------
Cash flows from investing activities:
Securities:
Available-for-sale:
Maturities............................... 2,912 6,897 ----
Purchases................................ (6,077) (15,471) ----
Proceeds from sales...................... 13,166 10,064 ----
Held-to-maturity:
Maturities............................... 6,037 13,954 ----
Purchases................................ (2,041) (15,963) ----
Maturities of securities................... ---- ---- 23,765
Purchases of securities.................... ---- ---- (26,864)
Proceeds from sales of securities.......... ---- ---- 2,014
Net (increase) decrease in loans........... (6,210) (4,713) (5,063)
Purchase of premises, furniture and equip.. (105) (622) (108)
------ ------ ------
Net cash provided by (used in) investing
activities............................. 7,682 (5,854) (6,256)
------ ------ ------
</TABLE>
-13.1.5-
<PAGE> 13.1.6
UNITED BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT.)
for the years ended December 31, 1995, 1994, 1993
(in thousands of dollars)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in deposits........ $(4,277) $ (2,544) $ 843
Proceeds from issuance of ESOP debt........ 69 159 ----
Stock purchased for ESOP................... (69) (159) ----
Payment of ESOP debt....................... 78 10 60
Net increase (decrease) in federal funds
purchased and securities sold under
repurchase agreements..................... (3,139) 3,712 (4,942)
Net borrowings (repayments) from bank line
of credit................................. (1,954) 3,000 1,600
Advances from FHLB of Seattle.............. 16,800 2,597 10,216
Repayment of debt and advances from FHLB
of Seattle................................ (19,789) (10) (8,229)
Retirement of stock........................ ---- (19) (21)
Proceeds from issuance of stock............ 34 35 24
Cash dividends paid........................ (184) (175) (130)
------ ------ ------
Net cash provided by (used in) financing
activities............................... (12,431) 6,606 (579)
Net increase (decrease) in cash and cash ------ ------ ------
equivalents................................ (3,169) 2,127 (5,728)
Cash and cash equivalents at beginning
of year.................................... 7,068 4,941 10,669
------ ------ ------
Cash and cash equivalents at end of year.... $ 3,899 $ 7,068 $ 4,941
====== ====== ======
NONCASH INVESTING AND FINANCING ACTIVITIES
Change in net unrealized gains (losses) on
securities available-for-sale, net of
deferred income taxes....................... $ 967 $(1,057) $ 269
Transfer of securities from held-to-
maturity to available-for-sale, effective
December 1, 1995, net of unrealized gain
of $128..................................... $23,680 ---- ----
CASH PAID DURING THE YEAR FOR
Interest................................... $ 2,554 $ 2,014 $ 1,908
Income taxes............................... 364 296 341
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-13.1.6-
<PAGE> 13.1.7a
UNITED BANCORP AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1995, 1994 and 1993
(in thousands of dollars)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings
------ -------- -------- --------
<S> <C> <C> <C> <C>
Balances, December 31, 1992....... 436,992 $ 1,092 $ 3,469 $ 4,631
Net income........................ ---- ---- ---- 1,027
Compensation under Employee
Stock Ownership Plan............. ---- ---- ---- ----
Dividends declared-$.30 per share. ---- ---- ---- (130)
Retirement of stock............... (1,302) (3) (18) ----
Dividends reinvested.............. 1,898 5 19 ----
Net unrealized holding gains...... 0 0 0 0
------- ------ ------ ------
Balances, December 31, 1993....... 437,588 1,094 3,470 5,528
Net income........................ ---- ---- ---- 587
Compensation under Employee
Stock Ownership Plan............. ---- ---- ---- ----
Stock purchased for Employee Stock
Ownership Plan................... ---- ---- ---- ----
Dividends declared-$.40 per share. ---- ---- ---- (175)
Retirement of stock............... (1,345) (3) (16) ----
Dividends reinvested.............. 2,291 5 30 ----
Net unrealized holding losses..... 0 0 0 0
------- ------ ------ ------
Balances, December 31, 1994....... 438,534 1,096 3,484 5,940
Net income........................ ---- ---- ---- 1,143
Compensation under Employee
Stock Ownership Plan............. ---- ---- 2 ----
Stock purchased for Employee Stock
Ownership Plan................... ---- ---- ---- ----
Dividends declared-$.42 per share. ---- ---- ---- (184)
Dividends reinvested.............. 1,907 5 29 ----
Net unrealized holding gains...... 0 0 0 0
------- ------ ------ ------ -
Balances, December 31, 1995....... 440,441 $ 1,101 $ 3,515 $ 6,899 $
</TABLE>
FOR TOTALS OF EACH YEARS ACTIVITIES, TABLE IS CONTINUED ON NEXT PAGE.
The accompanying notes are an integral part of these consolidated financial
statements.
-13.1.7a-
<PAGE> 13.1.7b
UNITED BANCORP AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1995, 1994 and 1993
(in thousands of dollars, except share amount)
<TABLE>
<CAPTION>
Unearned
Employee Net
Stock Unrealized
Ownership Gains
Plan (Losses) on
Compensation Securities Total
------------ ----------- ---------
<S> <C> <C> <C>
Balances, December 31, 1992......... $ (151) ---- $ 9,041
Net income.......................... ---- ---- 1,027
Compensation under Employee
Stock Ownership Plan............... 60 ---- 60
Dividends declared-$.30 per share... ---- ---- (130)
Retirement of stock................. ---- ---- (21)
Dividends reinvested................ ---- ---- 24
Net unrealized holding gains........ 0 $ 269 269
----- ------ ------
Balances, December 31, 1993......... (91) 269 10,270
Net income.......................... ---- ---- 587
Compensation under Employee
Stock Ownership Plan............... 10 ---- 10
Stock purchased for Employee Stock
Ownership Plan..................... (159) ---- (159)
Dividends declared-$.40 per share... ---- ---- (175)
Retirement of stock................. ---- ---- (19)
Dividends reinvested................ ---- ---- 35
Net unrealized holding losses....... 0 (1,057) (1,057)
----- ------ ------
Balances, December 31, 1994......... (240) (788) 9,492
Net income.......................... ---- ---- 1,143
Compensation under Employee
Stock Ownership Plan............... 76 ---- 78
Stock purchased for Employee Stock
Ownership Plan..................... (69) ---- (69)
Dividends declared-$.42 per share... ---- ---- (184)
Dividends reinvested................ ---- ---- 34
Net unrealized holding gains........ 0 967 967
----- ------ ------
Balances, December 31, 1995......... (233) $ 179 $11,461
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-13.1.7b-
<PAGE> 13.1.8
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands of dollars)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of United Bancorp
(the Company) and its wholly-owned subsidiaries, Douglas National Bank
(the Bank) (including its wholly-owned subsidiary, Douglas National Bank
Insurance Agency, Inc.) and UBC Investment Corporation,which was merged into
United Bancorp in December 1995. The Company and the Bank provide banking,
commercial financing, mortgage lending and brokerage, investing, insurance
and other services primarily to customers in the Douglas County area of Oregon.
All significant inter-company transations and balances have been eliminated
in consolidation. Substantially all of the Bank's depositors are businesses
and individuals located in Douglas County.
Basis of Presentation
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, amounts due from or deposited with banks, and interest bearing
balances due from banks. Generally, federal funds are sold for one-day
periods.
Securities
On December 31, 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" and reported an increase to December 31, 1993 stockholders'
equity of $269 ($437 before deferred income taxes). Investments in securities
are classified by management as either held-to-maturity, available-for-sale, or
trading. Management determines the appropriate classification of securities
at the time of purchase. On December 1, 1995, the Company transferred all of
its held-to-maturity securities, with an amortized cost and net unrealized gain
of $23,552 and $128, respectively, to the available-for-sale classification.
Investments in debt securities classified as held-to-maturity are acquired
with the intent and ability to hold to maturity, are stated at cost, and are
adjusted for amortization of premiums and accretion of discounts. Securities
sold from the held-to-maturity portfolio within 90 days of maturity when
interest rate risk has been substantially eliminated as a pricing factor
are considered to have matured.
-13.1.8-
<PAGE> 13.1.9
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts in thousands of dollars)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
Securities classified as available-for-sale are to be held for indefinite
periods of time and may be sold in response to movements in market interest
rates, changes in the maturity mix of bank assets and liabilities, or demands
on liquidity. These securities are carried at fair value and unrealized
holding gains and losses (net of deferred income taxes) are reported as a
separate component of stockholders' equity.
Securities classified as trading are to be carried at fair value, with the
unrealized gains and losses included in earnings. The Company has no
securities classified as trading securities.
Interest income on debt securities is included in income using the level yield
method. Gains and losses on sales of securities are recognized on a specific
identification basis.
Loans
Loans are reported at their principal outstanding balance net of charge-offs,
deferred loan fees and costs on originated loans, unearned income, and
unamortized premiums or discounts on purchased loans. Interest income is
generally recognized when income is earned using the interest method. Loan
origination fees and certain direct loan origination costs are deferred and the
net amounts are amortized as adjustments of the loans' yields.
Allowance for Loan Losses
The Bank adopted SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan", on January 1, 1995. Under the new Standard a loan is considered
impaired based on current information and events if it is probable that the
Bank will be unable to collect the scheduled payments of principal or interest
when due according to the contractual terms of the loan agreement. The
measurement of impaired loans is generally based on the present value of
expected future cash flows discounted at the historical effective interest
rate, except that all collateral-dependent loans are measured for impairment
based on the fair value of the collateral.
The adequacy of the allowance for credit losses is periodically evaluated by
the Bank in order to maintain the allowance at a level that is sufficient to
absorb probable credit losses. Management's evaluation of the adequacy of the
allowance is based on a review of the Bank's historical loss experience, known
and inherent risks in the loan portfolio, including adverse circumstances that
may affect the ability of the borrower to repay interest and/or principal, the
estimated value of collateral, and an analysis of the levels and trends of
delinquencies, charge-offs, and the risk ratings of the various loan
categories. Such factors as the level and trend of interest rates and the
condition of the national and local economies are also considered.
-13.1.9-
<PAGE> 13.1.10
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued:
(amounts in thousands of dollars)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
The allowance for credit losses is established through charges to earnings in
the form of a provision for credit losses. Increases and decreases in the
allowance due to changes in the measurement of the impaired loans are included
in the provision for credit losses. Loans continue to be classified as
impaired unless they are brought fully current and the collection of scheduled
interest and principal is considered probable.
When a loan or portion of a loan is determined to be uncollectible, the portion
deemed uncollectible is charged against the allowance and subsequent
recoveries, if any, are credited to the allowance.
Income Recognition on Impaired and Nonaccrual Loans
Loans, including impaired loans, are generally classified as nonaccrual if they
are past due as to maturity or payment of principal or interest for a period of
more than 90 days, unless such loans are well-secured and in the process of
collection. If a loan or a portion of a loan is classified as doubtful or is
partially charged off, the loan is classified as nonaccrual. Loans that are on
a current payment status or past due less than 90 days may also be classified
as nonaccrual if repayment in full of principal or interest is in doubt.
Loans may be returned to accrual status when all principal and interest amounts
contractually due (including arrearages) are reasonably assured of repayment
within an acceptable period of time, and there is sustained period of repayment
performance (generally a minimum of six months) by the borrower, in accordance
with the contractual terms of interest and principal.
While a loan is classified as nonaccrual and the future collectibility of the
recorded loan balance is doubtful, collections of interest and principal are
generally applied as a reduction to principal outstanding. When the future
collectibility of the recorded loan balance is expected, interest income may be
recognized on a cash basis. In the case where a nonaccrual loan had been
partially charged off, recognition of interest on a cash basis is limited to
that which would have been recognized on the recorded loan balance at the
contractual interest rate. Cash interest receipts in excess of that amount are
recorded as recoveries to the allowance for loan losses until prior charge-offs
have been fully recovered.
Bank Premises, Furniture and Equipment
Premises, furniture, equipment, improvements and replacements are stated at
cost. Depreciation is recognized on the straight-line method over the estimated
useful life of the asset. Gains and losses from disposal of assets are
reflected in noninterest expense. Maintenance and repairs are expensed and
betterments are capitalized. Costs of purchased software are amortized over
five years.
-13.1.10-
<PAGE> 13.1.11
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(amounts in thousands)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Income Taxes
The Company files consolidated federal and State of Oregon income tax returns.
Subsidiaries of the Company are allocated a share of the consolidated income
tax provision by use of the separate return method. On January 1, 1993, the
Company prospectively adopted Statement of Financial Accounting Standards No.
109. The cumulative and 1993 effect on net income of adopting SFAS No. 109 was
immaterial. The Statement requires the use of an asset and liability approach
to account for income taxes.
Earnings Per Share
Earnings per share is net income divided by weighted average common shares
outstanding.
Reclassifications
Certain 1993 and 1994 amounts have been reclassified to conform to the 1995
presentation.
-13.1.11-
<PAGE> 13.1.12
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts in thousands of dollars)
2. SECURITIES:
The amortized cost and estimated market values of securities are as follows at
December 31:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains Losses Fair Value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Held-to-Maturity
1994:
U.S. Treasury obligations..... $ 503 ---- ---- $ 503
U.S. Government agencies...... 13,076 ---- $ 690 12,386
Collateralized mortgage obliga-
tions and mortgage-backed
securities................... 8,461 $ 5 261 8,205
Obligations of State and
political subdivisions....... 5,511 0 408 5,103
------ ------- ------ ------
Total....................... $27,551 $ 5 $ 1,359 $ 26,197
====== ======= ======= ======
Available-for-Sale
1995:
U.S. Government agencies....... $10,324 $ 164 $ 65 $ 10,423
Collateralized mortgage obliga-
tions and mortgage-backed
securities.................... 24,098 266 103 24,261
Obligations of State and
political subdivisions........ 10,467 95 66 10,496
Federal Reserve and Federal Home
Loan Bank stock............... 1,489 0 0 1,489
------ ------- ------- ------
Total....................... $46,378 $ 525 $ 234 $ 46,669
====== ======= ======= ======
Available-for-Sale
1994:
U.S. Government agencies....... $ 2,199 ---- $ 174 $ 2,025
Collateralized mortgage obliga-
tions and mortgage-backed
securities.................... 26,612 $ 36 964 25,684
Obligations of State and
political subdivisions........ 2,605 ---- 174 2,431
Federal Reserve and Federal
Home Loan Bank stock.......... 1,316 0 0 1,316
------ ------- ------- ------
Total....................... $32,732 $ 36 $ 1,312 $ 31,456
====== ======= ======= ======
</TABLE>
-13.1.12-
<PAGE> 13.1.13
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued:
(amounts in thousands)
2. SECURITIES, continued:
The carrying amount and approximate market value of debt securities at December
31, 1995 by contractual maturity are shown below. Expected maturities may
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Available-for-Sale
Amortized Approximate
Cost Fair Value
--------- ------------
<S> <C> <C>
Due in one year or less................... $ 245 $ 244
Due after one year through 5 years........ 8,533 8,537
Due after 5 years through 10 years........ 14,733 14,791
Due after 10 years........................ 21,378 21,608
------ ------
$ 44,889 $ 45,180
====== ======
</TABLE>
Summarized information for securities transactions is as follows:
<TABLE>
<CAPTION>
Proceeds Net
from Realized
Sales of Gross Gross Gains
Investments Gains Losses (Losses)
----------- ------ ------ ---------
<S> <C> <C> <C> <C>
1993............................... $ 2,014 $ 2 $ --- $ 2
1994............................... $ 10,064 $ 7 $ (373) $ (366)
1995............................... $ 13,166 $ 241 $ (123) $ 118
</TABLE>
Securities under the control of the Bank with a par value of approximately
$15,285 and $16,413 at December 31, 1995 and 1994, respectively, were pledged
to collateralize repurchase agreements and public funds.
-13.1.13-
<PAGE> 13.1.14
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued:
(amounts in thousands)
3. LOANS AND ALLOWANCE FOR LOAN LOSSES:
The loan portfolio consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Commercial and agricultural.................... $ 27,214 $ 20,237
Real estate mortgage loans..................... 7,278 6,135
Installment and consumer....................... 4,431 5,604
Real estate construction loans................. 1,109 1,826
------- -------
40,032 33,802
Less net deferred loan fees.................... (47) (27)
------- -------
Total loans.................................. $ 39,985 $ 33,775
======= =======
</TABLE>
Allowance for loan loss activity was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Balance, beginning of year............ $ 483 $ 488 $ 1,064
Provision (credit) for loan losses.... 80 --- (537)
Loans charged off..................... (130) (50) (87)
Recoveries............................ 43 45 48
----- ----- ------
Balance, end of year.................. $ 476 $ 483 $ 488
===== ===== ======
</TABLE>
At December 31, 1995, the Bank had no loans requiring a specific valuation
allowance in accordance with SFAS No. 114. During 1995, the Bank did not have
any loans which would be classified as impaired under the guidelines of SFAS
No. 114.
At December 31, 1995 and 1994, the Bank had nonaccrual loans of $4 and $168,
respectively. Interest income of $12 and $11 was recognized on these loans in
1995 and 1994, respectively. Had these loans performed in accordance with
their original terms, additional interest income of $1 and $5 would have been
recorded in 1995 and 1994, respectively.
A substantial portion of the Bank's loans are made to businesses and residents
located in Douglas County, Oregon. The Bank's credit policies require an
evaluation of each borrower's credit worthiness on a case-by-case basis.
Collateral generally consists of real and personal property. At the discretion
of management, personal guarantees of the borrower may be obtained in addition
to the collateral. The ultimate collectibility of a substantial portion of the
Bank's loan portfolio is susceptible to adverse changes in the local market
conditions. It is management's opinion that the allowance for loan losses is
adequate to absorb known and inherent risks in the loan portfolio.
-13.1.14-
<PAGE> 13.1.15
4. BANK PREMISES, FURNITURE AND EQUIPMENT:
Bank premises, furniture and equipment consists of the following at December
31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land, buildings and improvements..................... $ 3,106 $ 3,106
Furniture and equipment.............................. 1,190 1,101
------ ------
4,296 4,207
Less accumulated depreciation................... (1,527) (1,266)
------ ------
$ 2,769 $ 2,941
====== ======
</TABLE>
5. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE:
Securities sold under agreements to repurchase represent short-term borrowings
with maturities which do not exceed 270 days. The following is a summary of
such short-term borrowings for the years ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Daily average balance outstanding during year....... $ 9,740 $ 7,570
Maximum balance outstanding at any month end........ 11,225 11,356
Weighted average interest rate during year........ 4.41% 3.20%
Weighted average interest at December 31.......... 4.33% 4.08%
</TABLE>
6. BANK LINE OF CREDIT:
The bank line of credit is with the Federal Home Loan Bank of Seattle for
$4,716, with $2,646 outstanding at December 31, 1995 with a variable interest
rate of 6.125%. Borrowings are collateralized by a blanket pledge arrangement
which requires the Bank to maintain unencumbered collateral (FHLB stock,
securities and loans). The line of credit expires August 16, 1996.
7. NOTES PAYABLE:
Notes payable consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Advances from Federal Home Loan Bank (FHLB) of Seattle,
monthly principal payments plus interest, maturity of
individual advances between 1996 and 2014, interest rates
between 5.0% to 7.8%, collateralized by a blanket pledge
arrangement which requires the Bank to maintain
unencumbered collateral (FHLB stock, securities and
loans), subject to penalties for prepayments........... $ 4,103 $ 7,092
===== =====
</TABLE>
-13.1.15-
<PAGE> 13.1.16
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued:
(amounts in thousands)
7. NOTES PAYABLE, continued:
The approximate aggregate maturities of notes payable subsequent to December
31, 1995 are as follows:
<TABLE>
<S> <C>
1996............................... $ 303
1997............................... 0
1998............................... 236
1999............................... 151
2000............................... 163
Thereafter......................... 3,250
-----
$ 4,103
</TABLE>
8. INCOME TAXES:
The provision for income taxes is composed of the following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current provision:
Federal.............................. $ 377 $ 135 $ 59
State................................ 54 49 47
Deferred income tax provision (benefit). (5) 28 191
----- ----- -----
$ 426 $ 212 $ 297
===== ===== =====
</TABLE>
The effective income tax rate varies from the expected federal income tax rate.
The reasons for the variance are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Expected federal income tax provision at 34%... $ 533 $ 268 $ 450
State income tax, net of federal income
tax effect.................................... 35 46 58
Interest on obligations of states and political
subdivisions exempt from federal taxation..... (142) (118) (35)
Change in estimate of prior-year taxes......... ---- ---- (166)
Other, net..................................... 0 16 (10)
----- ----- -----
$ 426 $ 212 $ 297
===== ===== =====
</TABLE>
-13.1.16-
<PAGE> 13.1.17
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued:
(amounts in thousands)
8. INCOME TAXES, continued:
An analysis of the components of the deferred provision for income taxes is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Provision for loan losses............... $ (31) ---- $ 206
Federal Home Loan Bank stock dividends.. 35 $ 23 24
Other, net.............................. (9) 5 (39)
----- ----- -----
$ (5) $ 28 $ 191
===== ====== ======
</TABLE>
Deferred tax liabilities and assets result from differences between the tax
and financial reporting bases of assets and liabilities at currently enacted
tax rates. The components of the net deferred tax asset (liability) are as
follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Assets:
Bank premises, furniture and equipment.............. $ 177 $ 184
Nonqualified benefit plans.......................... 118 102
Unrealized losses on securities available-for-sale.. --- 490
Other, net.......................................... 8 13
Less valuation allowance............................ (243) (247)
---- ----
Deferred tax asset.............................. 60 542
---- ----
Liabilities:
Federal Home Loan Bank stock........................ (104) (70)
Loan loss reserves.................................. (26) (57)
Unrealized gains on securities available-for-sale... (112) 0
---- ----
Deferred tax liability.......................... (242) (127)
---- ----
Net deferred tax asset (liability)............ $ (182) $ 415
==== ====
</TABLE>
-13.1.17-
<PAGE> 13.1.18
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued:
(amounts in thousands)
9. CASH AND DIVIDEND RESTRICTIONS:
The Bank is required to maintain reserves in the form of cash on hand or cash
on deposit with the Federal Reserve Bank equal to a percentage of its
reservable deposits. Required reserves at December 31, 1995 were $755.
The Bank, as a National Bank, is subject to the dividend restrictions set forth
by the Comptroller of the Currency. Under such restrictions, the Bank may not,
without the prior approval of the Comptroller of the Currency, declare
dividends in excess of the sum of the current year's earnings (as defined) plus
the retained earnings (as defined) from the prior two years.
The dividends that the Bank could declare, without the approval of the
Comptroller of the Currency, amounted to approximately $2,300 as of December
31, 1995.
10. EMPLOYEE BENEFIT PLANS:
Profit Sharing Plan
The Company's Employee Profit Sharing Plan covers substantially all the
employees of the Company. Annual contributions are determined by the Board of
Directors. During 1995, 1994 and 1993, contributions to the plan were $19, $16
and $17, respectively.
Executive Incentive Plan
The Executive Incentive Plan rewards key officers for performance and
continuity of service. The plan is a long-term deferred compensation plan.
Awards earned under the plan vest ratably over four years and were $36, $14
and $38 in 1995, 1994 and 1993, respectively. Expenses recognized under the
plan were $32, $55 and $76 in 1995, 1994 and 1993, respectively.
Employee Stock Ownership Plan (ESOP) and Debt
The Company sponsors a leveraged employee stock ownership plan (ESOP) that
covers substantially all employees of the Company. The Company makes annual
contributions to the ESOP. The amount of the annual contributions is
discretionary, except that it must be sufficient to enable the ESOP to service
its debt. The ESOP shares initially were pledged as collateral for its debt.
As the debt is repaid, shares are released and allocated to active employees,
based on the proportion of debt paid. The debt of the ESOP is recorded as a
liability and the shares pledged as collateral are reported as unearned ESOP
compensation in the equity section of the balance sheet. As shares are
released from collateral, the Company reports compensation expense equal to the
current market price of the shares for all shares acquired by the ESOP
subsequent to December 31, 1992, and equal to the book value of shares acquired
prior to January 1, 1993. The shares become outstanding for earnings-per-share
(EPS) computations, at the time of allocation to the active employees. ESOP
compensation expense related to the payment of debt was $78, $10, and $60 in
1995, 1994, and 1993, respectively.
-13.1-18-
<PAGE> 13.1.19
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued:
(amounts in thousands)
10. EMPLOYEE BENEFIT PLANS, continued:
ESOP debt is due in quarterly installments through March 15, 2000 with interest
at 90% of each lender's prime rate (prime rate was 8.5% at December 31, 1995).
The Company incurred interest expense on the ESOP debt of $23, $6 and $7 in
1995, 1994, and 1993, respectively.
Shares held by the ESOP as of December 31 were classified as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Allocated shares:
Prior to January 1, 1993.......................... $ 52,666 $ 52,056
Subsequent to December 31, 1992................... 2,212 0
------ ------
54,878 52,056
------ ------
Unallocated shares:
Prior to January 1, 1993.......................... 5,876 6,486
Subsequent to December 31, 1992................... 10,322 8,657
------ ------
16,198 15,143
------ ------
Total ESOP shares.............................. $ 71,076 $ 67,199
====== ======
</TABLE>
11. TRANSACTIONS WITH RELATED PARTIES:
An analysis of directors, officers and employees loans receivable activity is
as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Balance, January 1............................. $ 1,783 $ 1,897
Additions or renewals.......................... 790 358
Collections.................................... (722) (472)
------ ------
Balance, December 31........................... $ 1,851 $ 1,783
====== ======
</TABLE>
In addition, commitments to extend credit to directors, officers and employees
were approximately $440 at December 31,1995.
-13.1.19-
<PAGE> 13.1.20
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued:
(amounts in thousands)
12. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS:
In the ordinary course of business, the Bank issues commitments to extend
credit and standby letters of credit. The Bank applies the same credit
standards to these commitments as it uses in all its lending processes and
considers these commitments in its lending risk evaluations. Off balance sheet
commitments at December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Commitments to extend credit.................. $ 7,889 $ 8,281
Standby letters of credit..................... 292 136
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of the contract agreement. Commitments generally have
fixed expiration dates or other termination clauses and may require payment of
a fee. Commitments may expire without being drawn upon and do not necessarily
represent future cash requirements. Customer creditworthiness is evaluated on
a case-by-case basis with collateral obtained as necessary based on
management's evaluation of the credit. Collateral varies, but may include
accounts receivable, inventory, property, plant and equipment, and income-
producing commercial property.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used by management to estimate the
fair value of each class of financial instrument for which it is practicable
to estimate that value. The resulting estimates of fair value require
subjective judgments and are approximate. Changes in the following
methodologies and assumptions could significantly affect the estimates:
Cash and Cash Equivalents
For cash and cash equivalents, the carrying amount is a reasonable estimate of
fair value.
Investment Securities
For investment securities, the fair value is based on quoted market prices. If
a quoted market price is not available, fair value is estimated using quoted
market prices for similar securities.
-13.1.20-
<PAGE> 13.1.21
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued:
(amounts in thousands)
13. FAIR VALUE OF FINANCIAL INSTRUMENTS, continued:
Loans
The fair value of fixed-rate loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities. Variable
rate loans with rate adjustments have carrying amounts which are a reasonable
estimate of fair value.
Deposits and Repurchase Agreements
The fair value of demand, interest-bearing demand, repurchase agreements and
savings deposits is the amount payable on demand at the reporting date. The
fair value of time deposits is estimated using the interest rates currently
offered for the deposits of similar remaining maturities.
Federal Funds Purchased, Bank Line of Credit, Notes Payable and Debt of ESOP
(Debt)
The fair value of federal funds purchased, bank line of credit borrowings,
notes payable and debt of ESOP (debt) at December 31, 1995 is estimated by
discounting future cash flows at rates currently available for debt with
similar terms and remaining maturities.
Off-Balance-Sheet Financial Instruments
Commitments to extend credit and letters of credit represent the principal
categories of off-balance-sheet financial instruments. The fair value of
these commitments, based on fees currently charged for similar commitments is
not material.
The estimated fair values of financial instruments are as follows at
December 31, 1995:
<TABLE>
<CAPTION>
Carrying Fair
Value Value
<S> <C> <C>
Financial assets:
Cash and cash equivalents.......................... $ 3,899 $ 3,899
Available-for-sale securities...................... 46,669 46,669
Loans.............................................. 39,985 39,842
Financial liabilities:
Deposits and repurchase agreements................. $ 74,576 $ 74,789
Debt............................................... 6,982 7,015
</TABLE>
-13.1.21-
<PAGE> 13.1.22
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts in thousands of dollars)
14. PARENT COMPANY ONLY FINANCIAL INFORMATION:
Presented as follows are the condensed balance sheets and statements of income
and cash flows for United Bancorp as of and for the year ended December 31:
CONDENSED BALANCE SHEETS
(in thousands of dollars)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
ASSETS:
Cash and cash equivalents....................... $ 65 ----
Receivable from subsidiary...................... 10 $ 107
Equity in wholly-owned subsidiaries:
Douglas National Bank......................... 10,471 8,718
UBC Investment Corporation.................... ---- 1,039
Land and buildings, net......................... 1,806 20
Other assets.................................... 216 158
------ ------
Total assets.................................. $12,568 $10,042
====== ======
LIABILITIES:
Debt of ESOP.................................... $ 233 $ 240
Payable to subsidiary........................... 800 253
Other liabilities............................... 74 57
------ ------
Total liabilities............................. 1,107 550
------ ------
STOCKHOLDERS' EQUITY
Common stock.................................... 1,101 1,096
Additional paid-in capital...................... 3,515 3,484
Retained earnings............................... 6,899 5,940
Unearned ESOP compensation...................... (233) (240)
Net unrealized gains (losses), net of income
taxes, on securities available-for-sale by
subsidiary..................................... 179 (788)
------ ------
Total stockholders' equity.................... 11,461 9,492
------ ------
Total liabilities and stockholders' equity.. $12,568 $10,042
====== ======
</TABLE>
-13.1.22-
<PAGE> 13.1.23
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts in thousands of dollars)
14. PARENT COMPANY ONLY FINANCIAL INFORMATION, Continued:
CONDENSED STATEMENTS OF INCOME
(in thousands of dollars)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
INCOME:
Dividends from subsidiaries............ $ 400 $ 315 $ 276
Interest from subsidiaries............. 78 6 7
Other income........................... 89 62 32
------ ------ ------
Total income......................... 567 383 315
------ ------ ------
EXPENSES:
Executive Incentive Plan............... 60 55 77
Directors fees......................... 26 24 26
Depreciation........................... 9 1 2
Interest............................... 23 6 7
Interest to subsidiary................. 73 25 23
Other.................................. 27 36 47
------ ------ ------
Total expenses........................ 218 147 182
------ ------ ------
Income before taxes and equity in
undistributed income of subsidiaries. 349 236 133
Income tax benefit................... (10) (53) (54)
Income before equity in undistributed
income of subsidiaries.............. 359 289 187
------ ------ ------
EQUITY IN UNDISTRIBUTED INCOME OF
SUBSIDIARIES
Douglas National Bank.................. 784 296 551
UBC Investment Corporation............. 0 2 289
------ ------ ------
784 298 840
------ ------ ------
Net income......................... $ 1,143 $ 587 $ 1,027
====== ====== ======
</TABLE>
-13.1.23-
<PAGE> 13.1.24
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts in thousands of dollars)
14. PARENT COMPANY ONLY FINANCIAL INFORMATION, Continued:
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
INCREASE (DECREASE IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
Net income............................... $ 1,143 $ 587 $ 1,027
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation............................. 9 1 2
Equity in undistributed income of
subsidiaries............................ (784) (298) (810)
(Increase) decrease in receivable from
subsidiary.............................. 97 (53) (54)
Increase in other assets................. (58) (30) (33)
Increase (decrease) in other liabilities. 17 (1) 58
------ ------ ------
Net cash provided by operating activities 424 206 190
Cash flows from investing activities: ------ ------ ------
Purchase of preferred stock of subsidiary. --- (47)
Merger of UBC Investment Corporation...... 56 0
Net cash provided by (used in) investing ------ ------
activities.............................. 56 (47)
Cash flows from financing activities: ------ ------
Net proceeds from bank line of credit..... (12) 12
Proceeds from issuance of ESOP debt....... 69 159
Stock purchased for ESOP.................. (69) (159)
Repayment of long-term debt............... (255) (25) (27)
ESOP contribution from Bank............... 78 10 60
Repayment of ESOP debt.................... (76) (10) (60)
Dividends reinvested...................... 34 35 24
Retirement of stock....................... ---- (19) (21)
Cash dividends paid....................... (184) (175) (130)
------ ------ ------
Net cash used in financing activities.... (415) (172) (154)
------ ------ ------
Net increase (decrease) in cash and cash
equivalents................................. 65 (13) 36
Cash and cash equivalents at beginning of year 0 13 7
------ ------ ------
Cash and cash equivalents at end of year..... $ 65 $ 0 $ 43
====== ====== ======
</TABLE>
-13.1.24-
<PAGE> 13.1.25
UNITED BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued:
(amounts in thousands of dollars)
14. PARENT COMPANY ONLY FINANCIAL INFORMATION, continued:
NONCASH INVESTING ACTIVITIES
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Change in net unrealized gains (losses)
on securities available-for-sale, net of
deferred income taxes.................... $ 967 $ (1,057) $ 269
Merger of UBC Investment Corporation:
Increase in cash........................ 30
Increase in fixed assets, net........... (68)
Increase in long-term debt.............. 651
Income from UBC Investment Corporation.. 26
Transfer of fixed assets from Bank
to Bancorp.............................. 99
</TABLE>
-13.1.25-
<PAGE> 13.1.26
UNITED BANCORP AND SUBSIDIARIES
FIVE-YEAR SUMMARY OF OPERATIONS
(amounts in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Interest income............. $ 7,281 $ 6,687 $ 5,775 $ 6,766 $ 7,114
Interest expense............ 2,440 2,033 1,867 2,268 2,785
------- ------- ------- ------ -------
Net interest income......... 4,841 4,654 3,908 4,498 4,329
Provision (credit) for loan
losses..................... 80 0 (537) (71) 102
------- ------- ------- ------ -------
Net interest income after
provision for loan losses.. 4,761 4,654 4,445 4,569 4,227
Noninterest income.......... 889 784 823 811 928
Noninterest expense......... (4,081) (4,639) (3,944) (3,496) (3,494)
------ ------- ------- ------ -------
Income before income taxes.. 1,569 799 1,324 1,884 1,661
Provision for income taxes.. 426 212 297 728 635
------ ------- ------- ------ -------
Net income.................. $ 1,143 $ 587 $ 1,027 $ 1,156 $ 1,026
======= ======= ======= ====== =======
Per share (adjusted for
stock dividends):
Net income............... $ 2.70 $ 1.39 $ 2.34 $ 2.65 $ 2.37
Shareholders' equity..... 26.02 21.64 23.47 22.22 18.27
Dividends................ .42 .40 .30 .25 .20
Average number of shares
outstanding................ 423,330 421,453 437,624 437,044 433,838
Dividends declared.......... $ 184 $ 175 $ 130 $ 123 $ 92
Average assets.............. $ 98,858 $100,225 $ 94,418 $90,225 $ 76,888
</TABLE>
-13.1.26-
<PAGE> 13.1.27
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of United Bancorp:
We have audited the accompanying consolidated balance sheets of United Bancorp
and Subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are
the responsibility of United Bancorp's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United Bancorp
and Subsidiaries as of December 31, 1995 and 1994, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for income taxes and investment securities in 1993.
- ------------------------
Coopers & Lybrand L.L.P.
Eugene, Oregon
January 23, 1996
-13.1.27-
<PAGE> 13.1.28
LETTER TO SHAREHOLDERS:
To our Shareholders and Friends:
It is always a pleasure to report the results of actions that were favorable.
1995 proved to be an almost exact opposite of 1994, with interest rates closing
at a 3-year low. As a result our decision to restructure our investment
portfolio during 1994 was correct, allowing the Bank to lock into higher yields
and increased earnings for 1995. United Bancorp reported net income of
$1,143,000 for the year ended December 31, 1995, a substantial increase over
the $587,000 net earnings in 1994. On a per share basis, earnings for 1995
averaged $2.70 compared to $1.39 for the previous year. Cash dividends declared
per share in 1996, payable to Shareholders of Record on February 29, 1996,
were $.44, compared to $.42 paid in 1995. Our capital position continues to
remain strong and exceeds the 6 percent regulatory requirements. Tier 1 capital
to total risk weighted assets (leverage ratio) was 18.6 percent compared to
15.9 percent for last year. Average assets have increased from $76 million in
1991 to $98 million in 1995 totally supported by internally generated capital.
United Bancorp's book value per share (shareholder's equity) has grown from
$18.27 in 1991 to $26.02 in 1995, a 42 percent increase in shareholder value.
By year-end 1995, loans had increased to $39.9 million, up 18.4 percent over
year-end 1994, primarily due to expanded activity in small business and
agricultural lending. The allowance for loan losses at year end 1995, was at
$476,000 or 1.20 percent of loans, compared to 1.43 percent for year-end 1994.
Loan quality continues to be good. Non-performing loans totaled only $178,604
at December 31, 1995, compared to $416,896 last year.
The investment portfolio is our largest asset at $46.7 million at year-end.
This portfolio is well-diversified and has good asset quality. Last year we
sold bonds purchased during the low interest rate cycle and replaced them with
higher yielding bonds. As a result, our security portfolio book yield to
maturity at December 31, 1995 was 8.6 percent, well in excess of industry
norms. This compares to a book yield of 7.0 percent last year.
The low interest rates during 1995 had an impact on our deposits which were
down $4.2 million. However, we continue to meet our customer's needs by
offering higher yielding mutual funds and annuities through our non-bank
subsidiary, Douglas National Bank Insurance Agency. This company continues to
expand and provide alternative investment choices for our bank customers.
There are two important measures for shareholders to use when determining bank
performance. The first is reviewing net interest income and non-interest
income. These two numbers, when added together, indicate a bank's sales volume
and provide a good analysis of how the bank's revenue stream is progressing.
The company has shown steady net revenue increases going from $5.0 million in
1991 to $5.7 million in 1995. The second important measure of a bank's
performance is its net interest margin. This measures profitability and the
success of the bank's business of banking. That is, collecting deposits and
lending these dollars to customers. Douglas National Bank's net interest margin
in 1995 was 5.20 percent, compared to 5.41 percent in 1991. On a historical
basis, revenue and net interest income has remained strong for the past five
years which is essential in maintaining long-term profitability.
-13.1.28-
<PAGE> 13.1.29
The company's non-interest expenses were down 12.0 percent in 1995 to a total
of $4.1 million, a $558,000 decrease. This represents an annualized ratio of
non-interest expense to total revenue of 50.0 percent, compared to 62.1 percent
a year ago. While substantially improved, this ratio continues to be higher
than industry norms and higher than we would like it to be. We are working to
continue to reduce non-essential expenses. We have emphasized that every
employee should think about the way we work in order to develop more efficient
and cost-effective methods of running our operations and servicing our
customers.
Following our theme of "Banking One on One" we continue to work on
strengthening the service and products we offer. Our expanded investment
products provide a diversified selection of investments available to our
customers. The bank's Checkloan personal line of credit allows qualified
customers to borrow money without applying for each loan. Our investment
deposit accounts enable our customers to earn current market rates on their
deposited funds. We also had success in 1995 with an inflation fighter
"Step Up" certificate of deposit, which helped offset some disintermediation
into mutual funds. And the highly successful Prime Timers program, for the
mature market, offers many benefits and group activities. A recent U.S. Small
Business Administration study found that Douglas National Bank ranked 3rd in
the State of Oregon among banks in lending to small businesses. Douglas
National Bank makes a high percentage of small business loans in Douglas County
and we are proud to earn the distinction as the most user-friendly business
bank in Douglas County. In addition, the bank earned high rankings on two
mystery customer service surveys conducted in 1995.
To emphasize our commitment to service we introduced the "Best of the Best"
award. It is given quarterly to outstanding employees who best exemplify the
high level of quality service and professional standards of the bank. From the
select group of winners, we chose Meddie Kinder to receive the annual award.
We congratulate Meddie for her excellent performance.
We continue to take pride in the substantial investment of time and money we
make in the communities we serve. The Roseburg Chamber of Commerce recognized
Douglas National Bank for our commitment to community service and support of
many organizations. Eleven years ago we established the George Gratke
Community Service Award to encourage a high level of employee involvement in
community service. We are pleased to present this award for 1995 to Henry
"Huck" Zellweger, Prime Timers Manager, for his many contributions to the
senior citizens of Douglas County.
Douglas National Bank has been given the prestigious Blue Ribbon Bank award
again in 1995 by Veribanc, Inc. and is ranked among the highest rated banks
in the United States. We live up to our customers' expectations of safety and
soundness. Our capital ratios are high. Asset quality is sound. Our liquidity
is strong. We have all the components of a very successful bank.
In February, 1995, Bill Roberts, the bank's Credit Administrator for the past
15 years, left the field of banking. Bill served our company with dedication
and integrity. We thank him for the many contributions he made and wish him
continued success in all his future endeavors. Replacing Bill as Credit
Administrator is Don McDonel. He has many years of extensive community bank
experience and uses sound fundamental credit principles in managing the loan
functions of the bank.
-13.1.29-
<PAGE> 13.1.30
In November, 1995, Joseph Taucher retired from the Board of Directors. He
served on the Boards of United Bancorp, Douglas National Bank, U.B.C.
Investment Corporation, and Douglas National Bank Insurance Agency since
joining the Board in 1987. Joe's counsel as a director has been invaluable and
deeply appreciated. The Board of Directors elected Brian Pargeter, President of
Umpqua Insurance Agency, to fill this vacancy. Brian's professional business
background and community involvement will make an important contribution to our
bank.
A message to our shareholders would not be complete without acknowledging the
strong support we receive from our employees, board of directors, and share-
holders. Please continue to refer your friends to us. Douglas National Bank is
YOUR bank, and we want to serve all of YOUR financial services needs.
For the Board of Directors,
___________________________
David A Jackson
Chairman of the Board
United Bancorp
____________________________
Gary L. Kjensrud
President and CEO
Douglas National Bank
-13.1.30-
<PAGE>
EXHIBIT 10.11
Employee Stock Option Plan Business Loan Agreement & Related
Documents - Bank of America Oregon
------------------------------------------------------------
-36-
<PAGE> 10.11.1
- ------------------------------------------------------------------------------
BANK OF AMERICA OREGON BUSINESS LOAN AGREEMENT
- ------------------------------------------------------------------------------
This Agreement dated as of March 27, 1995, is between Bank of America Oregon
(the "Bank") and United Bancorp (the "Borrower").
1. TERM LOAN AMOUNT AND TERMS
1.1 Loan Amount. The Bank agrees to provide a term loan to the Borrower in the
amount of Two Hundred Twenty Seven Thousand Eight Hundred Ninety Two and
13/100 Dollars ($227,892.13) (the "Commitment").
1.2 Availability Period. The loan is available in one disbursement from the
Bank between the date of this Agreement and June 15, 1995 unless the
Borrower is in default.
1.3 Interest Rate.
(a) The interest rate is ninety percent (90%) of the Reference Rate.
(b) The Reference Rate is the rate of interest publicly announced from time to
time by Bank of America National Trust and Savings Association ("BofA
California") in San Francisco, California, as its Reference Rate. The
Reference Rate is set based on various factors, including BofA
California's costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans.
The Bank may price loans to its customers at, above, or below the
Reference Rate. Any change in the Reference Rate shall take effect at the
opening of business on the days specified in the public announcement of
a change in the Reference Rate.
1.4 Repayment Terms.
(a) The Borrower will pay all accrued but unpaid interest on June 15, 1995,
and then quarterly thereafter and upon payment in full of the principal
of this loan.
(b) The Borrower will repay principal in 20 successive equal quarterly
installments of Eleven Thousand Three Hundred Ninety-Four and 61/100
Dollars ($11,394.61) starting June 15, 1995. On March 15, 2000, the
Borrower will repay the remaining principal balance plus any interest
then due.
(c) The Borrower may prepay the loan in full or in part at any time. The
prepayment will be applied to the most remote installment of principal
due under this Agreement.
2. FEES AND EXPENSES
2.1 Loan Fee. The Borrower agrees to pay a Five Hundred Dollar ($500) fee due
upon the execution of this Agreement.
2.2 Expenses. The Borrower agrees to reimburse the Bank for any expenses it
incurs in the preparation of this Agreement and any agreement or
instrument required by this Agreement. Expenses include, but are not
limited to, reasonable attorneys' fees, including any allocated costs of
the Bank's in-house counsel.
-10.11.1-
<PAGE> 10.1.2
3. DISBURSEMENTS, PAYMENTS AND COSTS
3.1 Disbursements and Payments. Each disbursement by the Bank and each
payment by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank from
time to time;
(b) made for the account of the Bank's branch selected by the Bank from time
to time;
(c) made in immediately available funds, or such other type of funds selected
by the Bank;
(d) evidenced by records kept by the Bank. In addition, the Bank may, at its
discretion, require the Borrower to sign one or more promissory notes.
3.2 Banking Days. Unless otherwise provided in this Agreement, a banking day
is a day other than a Saturday or a Sunday on which the Bank is open for
business in Oregon and banks are open for business in California. All
payments and disbursements which would be due on a day which is not a
banking day will be due on the next banking day. All payments received on
a day which is not a banking day will be applied to the credit on the next
banking day.
3.3 Additional Costs. The Borrower will pay the Bank, on demand, for the
Bank's costs or losses arising from any statute or regulation, or any
request or requirement of a regulatory agency. The costs and losses will
be allocated to the loan in a manner determined by the Bank, using any
reasonable method. The costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and commitments for
credit.
3.4 Interest Calculation. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year
and the actual number of days elapsed. This results in more interest or a
higher fee than if a 365-day year is used.
3.5 Interest on Late Payments. At the Bank's sole option in each instance, any
amount not paid when due under this Agreement (including interest) shall
bear interest from the due date at ninety percent (90%) of the Reference
Rate. This may result in compounding of interest.
4. CONDITIONS
The Bank must receive the following items, in form and content acceptable
to the Bank, before it is required to extend any credit to the Borrower
under this Agreement:
4.1 Authorizations. Evidence that the execution, delivery and performance by
the Borrower of this Agreement and any instrument or agreement required
under this Agreement have been duly authorized.
-10.1.2-
<PAGE> 10.1.3
4.2 ESOP Loan Documentation.
(a) An executed copy of the Promissory Note dated as of March 27, 1995 between
the Borrower and the Trustees ("Trustees") of the United Bancorp Employee
Stock Ownership Plan and the Trust (the "Trust") (collectively, the
"ESOP") executed by the Trustees evidencing the loan by the Borrower to
the Trustees ("ESOP Loan") and the Pledge Agreement executed in connection
therewith (collectively, the "ESOP Loan Documents"); and
(b) a copy of the determination letter issued by the Internal Revenue Service
relating to the United Bancorp Employee Stock Ownership Plan.
4.3 Other Items. Any other items that the Bank reasonably requires.
5. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in
full, the Borrower makes the following representations and warranties.
Each request for an extension of credit constitutes a renewed
representation:
5.1 Organization of Borrower. The Borrower is a corporation duly formed and
existing under the laws of the state where organized.
5.2 Authorization. This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's powers, have been duly authorized,
and do not conflict with any of its organizational papers.
5.3 Enforceable Agreement. This Agreement is a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance
with its terms, and any instrument or agreement required hereunder, when
executed and delivered, will be similarly legal, valid, binding and
enforceable.
5.4 Good Standing. In each state in which the Borrower does business, it is
properly licensed, in existence and in good standing, and, where required,
in compliance with fictitious name statutes.
5.5 No Conflicts. This Agreement does not conflict with any law, agreement, or
obligation by which the Borrower is bound.
5.6 Financial Information. All financial and other information that has been
or will be supplied to the Bank, including the Borrower's financial
statement dated as of December 31, 1994, is:
(a) sufficiently complete to give the Bank accurate knowledge of the
Borrower's financial condition.
(b) in form and content required by the Bank.
(c) in compliance with all government regulations that apply.
Since the date of the financial statement specified above, there has been no
material adverse change in the assets or the financial condition of the
Borrower.
-10.1.3-
<PAGE> 10.1.4
5.7 Lawsuits. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower which, if lost, would impair the
Borrower's financial condition or ability to repay the loan, except as
have been disclosed in writing to the Bank.
5.8 Other Obligations. The Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
5.9 Income Tax Returns. The Borrower has no knowledge of any pending
assessments or adjustments of its income tax for any year, except as have
been disclosed in writing to the Bank.
5.10 No Event of Default. There is no event which is, or with notice or lapse
of time or both would be, a default under this Agreement.
5.11 ERISA Plans.
(a) The Borrower has fulfilled its obligations, if any, under the minimum
funding standards of ERISA and the Code with respect to each Plan and is
in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and has not incurred any liability with
respect to any Plan under Title IV of ERISA.
(b) No reportable event has occurred under Section 4043(b) of ERISA for which
the PBGC requires 30 day notice.
(c) No action by the Borrower to terminate or withdraw from any Plan has been
taken and no notice of intent to terminate a Plan has been filed under
Section 4041 of ERISA.
(d) No proceeding has been commenced with respect to a Plan under Section 4042
of ERISA, and no event has occurred or condition exists which might
constitute grounds for the commencement of such a proceeding.
(e) The following terms have the meanings indicated for purposes of this
Agreement:
(i) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(ii) "ERISA" means the Employee Retirement Income Act of 1974, as amended
from time to time.
(iii)"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
(iv) "Plan" means any employee pension benefit plan maintained or
contributed to by the Borrower and insured by the Pension Benefit
Guaranty Corporation under Title IV of ERISA.
5.12 ESOP. The Trust established is a validly organized and existing trust
established by the Borrower, is exempt from Federal income taxes under
Section 501(a) of the Code and satisfies the requirements of Section 403
of ERISA; the ESOP satisfies Sections 401(a) and 4975(e)(7) of the Code
and is in compliance with all other applicable provisions of ERISA and
the Code.
-10.1.4-
<PAGE> 10.1.5
5.13 ESOP Stock The ESOP stock qualifies as "employer securities" within the
meaning of Section 409(1) of the Code.
5.14 Dividends. To the extent dividends paid on the ESOP stock are used by the
ESOP to make payments on the ESOP Loan, such dividends will be fully
deductible by the Borrower under Section 404(k) of the Tax Code.
5.15 Purchase Price of the ESOP Stock. The purchase price for each share of the
ESOP stock has been arrived at in compliance with all applicable
provisions of the ESOP and in compliance with applicable law, including
but not limited to the provisions of Section 401(a)(28)(C) of the Code.
5.16 Loan is Exempt The loan evidenced by the ESOP Loan qualifies for the
exemption set forth in Section 408(b)(3) of ERISA and the regulations
thereunder and in Section 4975(d)(3) of the Code and the regulations
thereunder, and does not constitute a "prohibited transaction" as defined
in Section 406(a) and Section 406(b)(1) and Section 4975(c)(1)(A), (B),
(C), (D) and (E) of the Code and the regulations thereunder.
5.17 ESOP Stock Purchase is Exempt. The purchase of the ESOP stock by the ESOP
from the Borrower pursuant to the ESOP Loan Documents qualifies for the
exemption contained in Section 408(e) of ERISA and Section 4975(d)(13) of
the Code, and does not constitute a "prohibited transaction" as defined in
Section 406(a) and Section 406(b)(1) and Section 4975(c)(1)(A), (B), (C),
(D) and (E) of the Code.
5.18 Authorization. The execution, delivery and performance by the ESOP of its
obligations under the ESOP Loan Documents have been duly authorized by all
necessary action of the Trustee on behalf of the ESOP, require no action
under any federal, state or local law, by or in respect of, or filing
with, any governmental authority or official and do not conflict with, or
result in a breach or other violation of any applicable provision of such
laws or any regulation, order, writ, injunction or decree of any court or
governmental authority thereunder, or any of the terms, conditions or
provisions of any material agreement of instrument, to which the ESOP is
a party or by which the ESOP is bound.
5.19 Actions Against ESOP. There is no pending or threatened action, suit or
proceeding, or any order, writ, judgment, award, injunction or decree,
against or effecting the ESOP before any court, governmental authority or
arbitrator which materially adversely affects the financial condition or
operations of the ESOP or materially adversely effects the ability of the
ESOP to perform its obligations under the ESOP Loan Agreement. The ESOP
is not in violation of or default with respect to (a) any order, writ,
injunction or decree of any court or (b), any applicable provision of any
federal, state or local law, or any order, regulation or demand of any
governmental authority or instrumentality thereunder, which violation or
default materially adversely affects the ability of the ESOP to perform
its obligations under the ESOP Loan Agreement.
5.20 Enforceability. The ESOP Loan Documents have been duly executed and
delivered by the Trustee on behalf of the ESOP and constitute the valid
and binding obligations of the ESOP, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
except as the enforceability thereof may be limited by equitable
principles.
-10.1.5-
<PAGE> 10.1.6
5.21 No Default. The repayment of the ESOP Loan by the ESOP, the acquisition of
the ESOP stock by the ESOP and the ESOP's incurrance of the indebtedness
evidenced by the ESOP Loan Documents do not result in any default under or
violate the conditions of any agreement to which the ESOP is a party or by
which it is bound.
5.22 Consents, Approvals, Etc. The execution, delivery and performance of the
Stock Purchase Agreement and the purchase of the ESOP stock pursuant to
the ESOP Loan Documents (a) will not require any registration with,
consent or approval of, or notice to, or other action by or in respect of
or filing with, any governmental authority or official by the ESOP under
any federal, state or local law (except those routine filings required
after the close of the plan year of the ESOP under the reporting
requirements of the Code and ERISA), and do not contravene or constitute
(with or without the giving of notice or lapse of time or both) a default
under or violation by the ESOP of, (i) any provisions of any applicable
law or regulation of the United States of America, (ii) any agreement or
other instrument binding upon the ESOP or (iii) any judgment, injunction,
order or decree binding upon the ESOP or (b) will not result in the
creation of imposition of any lien on any asset of the ESOP, except the
lien of the Borrower pursuant to the provisions of the ESOP Loan
Agreement.
6. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement
and until the Bank is repaid in full:
6.1 Use of Proceeds. To use the proceeds of the credit only for funding the
purchase price of 12,534 shares of United Bancorp common stock by the
ESOP.
6.2 Financial Information. To provide the following financial information and
statements and such additional information as requested by the Bank from
time to time:
(a) Within 120 days of the Borrower's fiscal year end, the Borrower's annual
financial statements. These financial statements must be audited by a
Certified Public Accountant ("CPA") acceptable to the Bank. The statements
shall be prepared on a consolidating basis.
(b) Copies of the Borrower's Form 10-K Annual Report and Form 10-Q Quarterly
Report within 90 days after the date of filing with the Securities and
Exchange Commission.
(c) Within 60 days of the period's end, the Federal Financial Institutions
Examination Council quarterly call reports for Douglas National Bank.
(d) Within 120 days of the Borrower's fiscal year end, a compliance
certificate of the Borrower signed by an authorized officer of the
Borrower setting forth whether there existed and whether there exists as
of the date of the certificate, any default under this Agreement and, if
any such default exists, specifying the nature thereof and the action the
Borrower is taking and proposes to take with respect thereto.
6.3 Capital Percentage. To maintain total equity equal to at least 5.0% of
total assets for each quarterly accounting period.
-10.1.6-
<PAGE> 10.1.7
6.4 Tangible Net Worth. To maintain on a consolidated basis tangible net worth
equal to at least Seven Million Three Hundred Thousand Dollars
($7,300,000).
"Tangible net worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization
expense, treasury stock, unamortized debt discount and expense, deferred
research and development costs, deferred marketing expenses and other like
intangibles) less total liabilities, including but not limited to accrued
and deferred income taxes, and any reserves against assets.
6.5 Double Leverage Ratio. To maintain a ratio of the Borrower's investment in
Douglas National Bank to the tangible net worth of United Bancorp not
exceeding 1.1:1.0 for each semi-annual accounting period.
6.6 Other Debts. Not to have outstanding or incur any direct or contingent
debts (other than those to the Bank and its affiliates), or become liable
for the debts of others without the Bank's written consent. This does not
prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debts and lines of credit in existence on the date of this Agreement
disclosed in writing to the Bank.
(e) Additional debts for business purposes which do not exceed a total
principal amount of Five Hundred Thousand Dollars ($500,000) outstanding
at any one time.
6.7 Other Liens. Not to create, assume, or allow any security interest or lien
(including judicial liens) on property the Borrower now or later owns,
except:
(a) Deeds of trust and security agreements in favor of the Bank and its
affiliates.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in writing to
the Bank.
(d) Additional purchase money security interests in personal property acquired
after the date of this Agreement if the principal amount of debts secured
by such liens does not exceed Five Hundred Thousand Dollars ($500,000) at
any one time.
6.8 Loans to Officers. Not to make any loans, advances or other extensions of
credit to any of the Borrower's executives, officers, or directors or
shareholders (or any relatives of any of the foregoing).
6.9 Change of Ownership. Not to cause, permit, or suffer any change, direct or
indirect, in the Borrower's capital ownership of Douglas National Bank.
-10.1.7-
<PAGE> 10.1.8
6.10 Notices to Bank. To promptly notify the Bank in writing of:
(a) any lawsuit over Five Hundred Thousand Dollars ($500,000) against the
Borrower.
(b) any substantial dispute between the Borrower and any government authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrower's financial condition or
operations.
(e) any change in the Borrower's name, address or legal structure.
6.11 Books and Records. To maintain adequate books and records.
6.12 Audits. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records are
in the possession of a third party, the Borrower authorizes that third
party to permit the Bank or its agents to have access to perform
inspections or audits and to respond to the Bank's requests for
information concerning such properties, books and records.
6.13 Compliance with Laws. To comply with the laws (including any fictitious
name statute), regulations, and orders of any government body with
authority over the Borrower's business.
6.14 Preservation of Rights. To maintain and preserve all rights, privileges,
and franchises the Borrower now has.
6.15 Maintenance of Properties. To make any repairs, renewals, or replacements
to keep the Borrower's properties in good working condition.
6.16 Cooperation. To take any action requested by the Bank to carry out the
intent of this Agreement.
6.17 Insurance. To maintain insurance as is usual for the business it is in.
6.18 Additional Negative Covenants. Not to, without the Bank's written consent:
(a) engage in any business activities substantially different from the
Borrower's present business.
(b) liquidate or dissolve the Borrower's business.
(c) enter into any consolidation, merger, pool, joint venture, syndicate, or
other combination.
(d) lease, or dispose of all or a substantial part of the Borrower's business
or the Borrower's assets.
(e) acquire or purchase a business or its assets.
(f) sell or otherwise dispose of any assets for less than fair market value,
or enter into any sale and leaseback agreement covering any of its fixed
or capital assets.
-10.1.8-
<PAGE> 10.1.9
6.19 ERISA Plans. To give prompt written notice to the Bank of:
(a) The occurrence of any reportable event under Section 4043(b) of ERISA for
which the PBGC requires 30 day notice.
(b) Any action by the Borrower to terminate or withdraw from a Plan or the
filing of any notice of intent to terminate under Section 4041 of ERISA.
(c) Any notice of noncompliance made with respect to a Plan under Section
4041(b) of ERISA.
(d) The commencement of any proceeding with respect to a Plan under Section
4042 of ERISA.
6.20 Preserve ESOP. The Borrower shall take all actions within its corporate
authority and contractual rights to preserve and keep the ESOP in
existence and in full force and effect and comply in all material
respects with the terms of the ESOP.
6.21 ESOP's Books and Records. The Borrower shall permit any authorized
representative of the Bank to examine at reasonable times the books,
records and other documents relating to the properties and the affairs of
the ESOP in possession of the Borrower and which the Borrower has
authority to disclose and to make memoranda and extracts from such books,
records and other documents, and discuss with any such representative the
affairs, finances and accounts of the ESOP.
6.22 Repayment of ESOP Loan. The Borrower will use its best efforts to cause
all contributions and dividends made to the ESOP to be first applied to
pay reasonable operating expenses of the ESOP and to payment of interest
on and repayment of principal of the loan outstanding from the Borrower
to the ESOP evidenced by the ESOP Loan.
6.23 ESOP Documentation. Whenever required by applicable law, the Borrower will
amend the ESOP documents and seek new determination letters with respect
to the amended ESOP documents. Copies of all material amendments to the
ESOP documents and of any additional determination letters will be
delivered to the Bank.
6.24 ERISA. The Borrower will not:
(a) At any time, maintain, or be or become obligated to contribute on behalf
of its employees to, any pension plan, profit sharing plan, other defined
contribution plan, or any other such qualified plan, other than those
pension plans and profit sharing plans disclosed to the Bank as of the
execution of this Agreement.
(b) At any time, permit any pension plan to:
(i) engage in any non-exempt "prohibited transaction," as such term is
defined in Section 4975 of the Code, if engaged in such prohibited
transaction could reasonably be expected to adversely affect the ESOP's
or the Borrower's ability to perform their respective obligations with
respect to the ESOP Loan or its obligations to the Bank,
(ii) incur any "accumulated funding deficiency," as that term is defined in
Section 302 of ERISA, or
-10.1.9-
<PAGE> 10.1.10
(iii) terminate in a manner which could result in any material liability of
the Borrower to the pension plan or to the PBGC.
(c) At any time, assume any obligations to contribute to any Multiemployer
Plan;
(d) At any time, permit any pension plan to fail to comply with ERISA or other
applicable law in any material respect.
6.25 Prohibited Transactions. To the extent necessary to preserve the character
of the Term Loan as a "securities acquisition loan" within the meaning of
Section 133 (b)(1)(A) of the Code, the Borrower shall not enter into any
"prohibited transaction" as such term is defined in Section 4975(c) of
Code and the regulations promulgated thereunder which is not exempted by
Section 4975(d) of the Code and the regulations promulgated thereunder
relating to the ESOP.
6.26 Changes Relating to ESOP Stock. The Borrower shall not call, nor permit
the conversion of the ESOP stock, nor change the conversion or call rights
with respect to the ESOP stock or otherwise change the rights, privileges
and preferences associated with the ESOP stock without the prior written
consent of the Bank which consent shall not be unreasonably withheld if
such proposed change is accompanied by the written opinion of the
Borrowers ESOP counsel, acceptable to the Bank to the effect that such
change will not jeopardize the interest exclusion available to the Bank
under Section 133 of the Code.
7. DEFAULT
If any of the following events occur, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional
credit available to the Borrower, and require the Borrower to repay its
entire debt immediately and without prior notice. If a bankruptcy petition
is filed with respect to the Borrower, the entire debt outstanding under
this Agreement will automatically become due immediately.
7.1 Failure to Pay. The Borrower fails to make a payment under this Agreement
when due.
7.2 Non-compliance. The Borrower fails to meet the conditions of, or fails to
perform any obligation under:
(a) this Agreement,
(b) any other agreement made in connection with this loan, or
(c) any other agreement the Borrower has with the Bank or any affiliate of the
Bank.
7.3 False Information. The Borrower has given the Bank false or misleading
information or representations.
7.4 Bankruptcy. The Borrower files a bankruptcy petition, a bankruptcy
petition is filed against the Borrower, or the Borrower makes a general
assignment for the benefit of creditors.
-10.1.10-
<PAGE> 10.1.11
7.5 Receivers. A receiver or similar official is appointed for the Borrower's
business, or the business is terminated.
7.6 Lawsuits. Any lawsuit or lawsuits are filed on behalf of one or more trade
creditors against the Borrower in an aggregate amount of Five Hundred
Thousand Dollars ($500,000) or more in excess of any insurance coverage.
7.7 Judgments. Any judgments or arbitration awards are entered against the
Borrower; or the Borrower enters into any settlement agreements with
respect to any litigation or arbitration, in an aggregate amount of Two
Hundred Fifty Thousand Dollars ($250,000) or more in excess of any
insurance coverage.
7.8 Government Action. Any government authority takes action that the Bank
believes materially adversely affects the Borrower's financial condition
or ability to repay.
7.9 Default under Guaranty or Subordination Agreement. Any guaranty,
subordination agreement, security agreement, deed of trust, or other
document required by this Agreement is violated or no longer in effect.
7.10 Material Adverse Change. A material adverse change occurs in the
Borrower's financial condition, properties or prospects, or ability to
repay the loan.
7.11 ERISA Plans. The occurrence of any one or more of the following events
with respect to the Borrower, provided such event or events could
reasonably be expected, in the judgment of the Bank, to subject the
Borrower to any tax, penalty or liability (or any combination of the
foregoing) which, in the aggregate, could have a material adverse effect
on the financial condition of the Borrower with respect to a Plan:
(a) A reportable event shall occur with respect to a Plan which is, in the
reasonable judgment of the Bank likely to result in the termination of
such Plan for purposes of Title IV of ERISA.
(b) Any Plan termination (or commencement of proceedings to terminate a Plan)
or the Borrower's full or partial withdrawal from a Plan.
8. ENFORCING THIS AGREEMENT; MISCELLANEOUS
8.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made
under generally accepted accounting principles, consistently applied.
8.2 Oregon Law. This Agreement is governed by Oregon law.
8.3 Successors and Assigns. This Agreement is binding on the Borrower's and
the Bank's successors and assignees. The Borrower agrees that it may not
assign this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign this loan, and may exchange financial
information about the Borrower with actual or potential participants or
assignees. If a participation is sold or the loan is assigned, the
purchaser will have the right of set-off against the Borrower.
-10.1.11-
<PAGE> 10.1.12
8.4 Arbitration.
(a) This paragraph concerns the resolution of any controversies or claims
between the Borrower and the Bank, including but not limited to those that
arise from:
(i) This Agreement (including any renewals, extensions or modifications of
this Agreement);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business conducted between the
Borrower and the Bank, including claims for injury to persons, property
or business interests (torts).
(b) At the request of the Borrower or the Bank, any such controversies or
claims will be settled by arbitration in accordance with the United States
Arbitration Act. The United States Arbitration Act will apply even though
this Agreement provides that it is governed by Oregon law.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitations, the filing
of an arbitration pursuant to this paragraph is the equivalent of the
filing of a lawsuit, and any claim or controversy which may be arbitrated
under this paragraph is subject to any applicable statute of limitations.
The arbitrators will have the authority to decide whether any such claim
or controversy is barred by the statute of limitations and, if so, to
dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted
to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of the Borrower or the Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral; or
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) a provisional or interim remedy; and/or
(B) additional or supplementary remedies.
(h) The pursuit of or a successful action for provisional, interim, additional
or supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Borrower or the Bank, including
the suing party, to submit the controversy or claim to arbitration if the
other party contests the lawsuit.
-10.1.12-
<PAGE> 10.1.13
(i) If the Bank forecloses against any real property securing this
Agreement, the Bank has the option to exercise the power of sale under
the deed of trust or mortgage, or to proceed by Judicial foreclosure.
8.5 Severability; Waivers. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights,
even if it makes a loan after default. If the Bank waives a default, it
may enforce a later default. Any consent or waiver under this Agreement
must be in writing.
8.6 Costs. If the Bank incurs any expenses in connection with enforcing this
Agreement or administering this Agreement (including in connection with
extending, amending, renewing or modifying this Agreement), or if the Bank
takes collection action under this Agreement, it is entitled to costs and
reasonable attorneys fees, including any allocated costs of in-house
counsel.
8.7 Attorneys' Fees. In the event of a lawsuit or arbitration proceeding, the
prevailing party is entitled to recover costs and reasonable attorneys'
fees (including any allocated costs of in-house counsel) incurred in
connection with the lawsuit or arbitration proceeding, as determined by
the court or arbitrator (and not by a jury). Such costs and attorneys'
fees shall include, without limitation, those incurred on any appeal, as
determined by the appellate court, and any anticipated costs and
attorneys' fees to pursue or collect any judgment.
8.8 One Agreement. This Agreement and any related security or other agreements
required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the Bank
and the Borrower concerning this credit; and
(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other
agreements required by this Agreement, this Agreement will prevail.
8.9 Exchange of Information. The Borrower agrees that the Bank may exchange
financial information about the Borrower with BankAmerica Corporation
affiliates and other related entities.
8.10 Notices. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses
on the signature part of this Agreement, or to such other addresses as the
Bank and the Borrower may specify from time to time in writing.
8.11 Headings. Article and paragraph headings are for reference only and shall
not affect the interpretation or meaning of any provisions of this
Agreement.
8.12 Counterparts. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate counter-
parts each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
-10.1.13-
<PAGE> 10.1.14
8.13 Written Agreements. Under Oregon law, most agreements, promises and
commitments made by the Bank after October 3, 1989, concerning loans and
other credit extensions which are not for personal, family or household
purposes or secured solely by the borrower's residence must be in writing,
express consideration and be signed by that Bank to be enforceable.
This Agreement is executed as of the date stated at the top of the first page.
Bank of America Oregon United Bancorp
______________________________ ______________________________
By: Wayne E. Olsen By: Gary Kjensrud
Title: Vice President Title: Executive Vice President
Address where notices to the Bank Address where notices to the Borrower
are to be sent: are to be sent:
Financial Institutions Department #2094 P.O. Box 1007
P. O. Box 3066 Roseburg, Oregon 97470-0235
Portland, Oregon 97206
-10.1.14-
<PAGE>
EXHIBIT B.1
Reports on Form 8-K
----------------------------------
-37-
<PAGE> B.1
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8 - K
Current Report Pursuant To Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported)
______________________
Commission File Number
2-81060-S
----------------------
UNITED BANCORP
(Exact name of Registrant as specified in its Charter)
OREGON
(State or other jurisdiction of incorporation or organization)
555 S.E. KANE STREET ROSEBURG, OREGON
(Address of principal executive offices)
93-0612062
(IRS Employer Identification Number)
97470
(Zip Code)
(541) 440-2629
(Registrants' telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report.)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Page B.1
<PAGE> B.2
ITEM 5 - OTHER EVENTS
On October 24, 1995, the Registrant's Board ofDirectors elected Brian
Pargeter to the Board of Directors to fill the vacancy left when Joe
Taucher retired in November of 1995. Mr Pargeter has thirty years of
experience in the insurance industry, and he has been the owner and
President of Umpqua Insurance, Inc. since 1980.
Another member of the Registrant's Board of Directors, Donna Woolley, will
retire in January of 1996, after twenty years of service to the
Registrant. David Geddes, a five year Board member, has announced
that he will resign from the Board of Directors in January 1996 for
personal reasons. The Registrant is searching for two new directors to
fill these vacancies on the Board of Directors.
Page B.2
<PAGE> B.3
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned therewith duly authorized.
UNITED BANCORP
(REGISTRANT)
By: ________________________________ January 31, 1996
David A Jackson, Chairman of the
Board of Directors
________________________________ January 31, 1996
M. John Loosley, Vice Chairman,
President, and Director
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
________________________________ January 31, 1996
David A Jackson, Chairman of the
Board of Directors
________________________________ January 31, 1996
M. John Loosley, Vice Chairman
President, and Director
________________________________ January 31, 1996
Gary L. Kjensrud, Vice President
and Director
________________________________ January 31, 1996
Linda A. Ganim, Treasurer, Chief Financial
Officer and Principal Accounting Officer
________________________________ January 31, 1996
William C. Stiles, Vice President
and Director
________________________________ January 31, 1996
Lance C. Short, Director
________________________________ January 31, 1996
Lauren D. Young, Director
________________________________ January 31, 1996
Peter Nilsen, Secretary
________________________________ January 31, 1996
Rickar D. Watkins, Director
________________________________ January 31, 1996
Brian Pargeter, Director
________________________________ January 31, 1996
Pete Martini, Director
Page B.3
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITED
BANCORP'S DECEMBER 31, 1995 10-K AND ANNUAL REPORT TO SHAREHOLDERS, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000101032
<NAME> UNITED BANCORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,899
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 46,669
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 39,985
<ALLOWANCE> 476
<TOTAL-ASSETS> 93,859
<DEPOSITS> 64,109
<SHORT-TERM> 13,113
<LIABILITIES-OTHER> 658
<LONG-TERM> 4,336
0
0
<COMMON> 1,101
<OTHER-SE> 10,360
<TOTAL-LIABILITIES-AND-EQUITY> 93,859
<INTEREST-LOAN> 3,982
<INTEREST-INVEST> 3,242
<INTEREST-OTHER> 57
<INTEREST-TOTAL> 7,281
<INTEREST-DEPOSIT> 1,328
<INTEREST-EXPENSE> 2,440
<INTEREST-INCOME-NET> 4,841
<LOAN-LOSSES> 80
<SECURITIES-GAINS> 118
<EXPENSE-OTHER> 4,199
<INCOME-PRETAX> 1,569
<INCOME-PRE-EXTRAORDINARY> 1,569
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,143
<EPS-PRIMARY> 2.70
<EPS-DILUTED> 2.70
<YIELD-ACTUAL> 8.25
<LOANS-NON> 4
<LOANS-PAST> 81
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 483
<CHARGE-OFFS> 127
<RECOVERIES> 40
<ALLOWANCE-CLOSE> 476
<ALLOWANCE-DOMESTIC> 476
<ALLOWANCE-FOREIGN> 0
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</TABLE>
