Total # of Pages: 21
Exhibit Index: Page 20
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
Commission File Number: 0-16540
-------
UNITED BANCORP, INC.
----------------------
(Exact name of registrant as specified in its Charter.)
Ohio 34-1405357
------ ------------
(State or other jurisdiction of ( I.R.S. Employer
incorporation or organization) Identification No.)
Fourth at Hickory Street, Martins Ferry, Ohio 43935
----------------------------------------------------
(Address of principal executive offices)(Zip Code)
(614) 633-0445
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
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 the number of shares outstanding of the issuer's classes of
common stock as of the latest practicable date.
Common Stock, $1.00 Par Value 1,847,942 shares as of August 10, 1995.
<PAGE>
<TABLE>
United Bancorp, Inc.
Table of Contents
Form 10-Q
<S> <C> <S> <C>
Part I Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets...June 30, 1995
and December 31, 1994. 3
Condensed Consolidated Statements of Income...Three
And Six Months Ended June 30, 1995 and 1994. 4
Condensed Consolidated Statements of Cash Flows...
Six Months Ended June 30, 1995 and 1994. 5
Notes to Condensed Consolidated Financial Statements...
June 30, 1995. 6 - 14
Item 2 Management's Discussion and Analysis of Financial
Condition And Results of Operations 15 - 19
Part II Other Information
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
</TABLE>
Part I - Financial Information
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
ASSETS
<S> <C> <C>
Cash & due from banks $ 5,402 $ 6,680
Federal funds sold 475 50
------- -------
Total cash & cash equivalents 5,877 6,730
Investment securities available
for sale 14,134 13,243
Investment securities held to
maturity (estimated Fair value
of $48,745 at 06/30/95 and
$49,580 at 12/31/94) 48,179 51,261
Loans
Commercial loans 9,685 8,816
Commercial Real Estate loans 31,558 28,515
Real estate loans 32,141 32,585
Installment loans 42,656 38,521
------- -------
Total loans 116,040 108,437
Unearned income (21) (46)
Allowance for loan losses (1,586) (1,438)
------- -------
Net loans 114,433 106,953
Premises and equipment, net 4,789 4,937
Accrued interest receivable
and other assets 2,215 2,510
-------- --------
Total Assets $189,627 $185,634
======== ========
</TABLE>
<PAGE>
<TABLE>
LIABILITIES
<CAPTION>
<S> <C> <C>
Deposits
Non-interest bearing $11,447 $12,782
Interest bearing 153,777 150,531
------- -------
Total deposits 165,224 163,313
Repurchase agreements 4,900 3,311
Borrowed funds 778 1,265
Accrued interest payable 740 743
Other liabilities 477 483
----- -----
Total other liabilities 6,895 5,802
Total liabilities 172,119 169,115
------- -------
</TABLE>
<TABLE>
SHAREHOLDERS' EQUITY
<CAPTION>
<S> <C> <C>
Common stock: ($1 par value)
10,000,000 shares authorized;
issued and outstanding:
1,847,942 shares 1,848 1,848
Additional paid-in-capital 9,359 9,359
Retained earnings 6,142 5,478
Unrealized Gain/(Loss) on
Securities Available For Sale 159 (166)
------ ------
Total shareholders' equity 17,508 16,519
------ ------
Total liabilities and
shareholders' equity $189,627 $185,634
======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of these
condensed consolidated financial statements.
<PAGE>
<TABLE>
United Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
------ ------- ------- -------
Interest Income
<S> <C> <C> <C> <C>
Interest and
Fees on Loans $2,571 $2,018 $4,966 $3,874
Interest on Investment
Securities
Taxable 709 664 1,453 1,306
Tax Exempt 240 244 484 487
Interest on Federal Funds Sold 36 73 49 179
Dividends 1 0 1 0
----- ----- ----- -----
Total Interest Income 3,557 2,999 6,953 5,846
Interest Expense
Deposits 1,584 1,303 3,082 2,564
Other 63 20 121 35
----- ----- ----- -----
Total Interest Expense 1,647 1,323 3,203 2,599
----- ----- ----- -----
Net Interest Income 1,910 1,676 3,750 3,247
Provision For Loan Losses (98) (48) (169) (111)
----- ----- ----- -----
Net Interest Income After
Provision For Loan Losses 1,812 1,628 3,581 3,136
Noninterest Income
Service Charges on
Deposit Accounts 143 107 261 205
Investment Security Gains, Net 12 54 12 101
Other 83 73 204 165
--- --- --- ---
Total Noninterest Income 238 234 477 471
Noninterest Expenses
Salaries And Employee Benefits 653 565 1,295 1,123
Premises, Furniture & Equipment 188 192 399 383
Other Operating Expense 487 443 993 902
----- ----- ----- -----
Total Noninterest Expenses 1,328 1,200 2,687 2,408
Income Before Taxes 722 662 1,371 1,199
Provision For Income Taxes (188) (158) (337) (257)
---- ---- ------ ----
Net Income $534 $504 $1,034 $942
==== ==== ====== ====
Earnings Per Common Share $0.29 $0.27 $0.56 $0.51
Average Number of Shares
Outstanding 1,847,942 1,847,942 1,847,942 1,847,942
Dividends Per Common Share $0.100 $0.073 $0.200 $0.146
</TABLE>
[FN]
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
United Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
SIX Months Ended
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income 1,034 942
Adjustments to Reconcile Net Income
to Net Cash From Operating Activities
Depreciation and Amortization 198 214
Amortization of Intangibles 44 31
Provision for Loan Losses 169 111
Deferred Taxes 55 9
Gain/Loss on Sale/Call
of Investment Securities (12) (101)
Amortization of investment
securities, Net 43 117
Net Changes in:
Other Assets 252 (323)
Other Liabilities (231) (39)
----- ----
Net Cash From Operating Activities 1,552 961
CASH FLOWS FROM INVESTING ACTIVITIES
Investment Securities Available
For Sale
Proceeds From sales of
Investment Securities 500 1,887
Purchase Of Investment Securities (748) 0
Investment Securities Held
To Maturity
Proceeds From sales
of Investment Securities 0 1,212
Proceeds From maturities/
calls of Investment Securities 3,075 4,959
Purchase Of Investment Securities (176) (12,034)
Net Change in Loans (7,649) (12,722)
Property and equipment expenditures (50) (176)
------- --------
Net Cash From Investing Activities (5,048) (16,874)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 1,911 2,811
Net change in Repurchase
Agreements And Borrowed Funds 1,102 (356)
Cash Dividends Paid (370) (269)
----- -----
Net Cash From Financing Activities 2,643 2,186
Net Change In Cash And Cash Equivalents (853) (13,727)
Cash And Cash Equivalents
At Beginning Of year 6,730 19,909
Cash And Cash Equivalents
At End Of Period $5,877 $6,182
====== ======
</TABLE>
[FN]
The accompanying notes are an integral part of these
condensed consolidated financial statements.
<PAGE>
United Bancorp, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1 Summary Of Significant Accounting Policies
The following is a summary of significant accounting
policies followed in the preparation of the accompanying
condensed consolidated financial statements.
Basis of Presentation
The accompanying condensed consolidated financial
statements include the accounts of United Bancorp, Inc.
(Company) and its wholly owned subsidiaries, The Citizens
Savings Bank of Martins Ferry, Ohio, (Citizens-Martins Ferry)
and The Citizens-State Bank of Strasburg, Ohio,
(Citizens-Strasburg). For purposes of consolidation, all
material intercompany balances and transactions have been
eliminated. The results of operations for the period ended
June 30, 1995, are not necessarily indicative of the operating
results for the full year of 1995.
These interim financial statements are prepared
without audit and reflect all adjustments which, in the opinion
of management, are necessary to present fairly the consolidated
financial position of the Company at June 30, 1995 and its
results of operations and statement of cash flows for the
periods presented. The accompanying condensed consolidated
financial statements do not purport to contain all the necessary
financial disclosures required by generally accepted accounting
principles that might otherwise be necessary in the
circumstances and should be read in conjunction with the 1994
United Bancorp, Inc. consolidated financial statements and
related notes thereto included in its Annual Report to
Shareholders for the year ended December 31, 1994.
Investment Securities
The Company classifies securities into
held-to-maturity, available-for-sale and trading categories.
Held-to-maturity securities are those which the Company has the
positive intent and ability to hold to maturity, and are
reported at amortized cost. Available-for-sale securities are
those which the Company may decide to sell if needed for
liquidity, asset/liability management, or other reasons.
Available-for-sale securities are reported at fair value, with
unrealized gains or losses included as a separate component of
equity, net of tax. Trading securities are bought principally
for sale in the near term and are reported at fair value with
unrealized gains or losses included in earnings. The Company
had no trading securities through June 30, 1995.
Realized gains or losses are determined based on the
amortized cost of the specific security sold. Interest and
dividend income, adjusted by amortization of purchase premium or
discount is included in earnings.
Interest And Fees On Loans
Interest income on loans is accrued over the term of
the loans based on the principal amount outstanding. Where no
account activity occurs for 90 consecutive days, the accrual of
interest is discontinued and adjusted back to the date of non
payment. Loan fees and direct costs associated with originating
or acquiring loans are deferred and recognized over the life of
the related loan as an adjustment of the yield. The net amount
of fees and costs deferred is reported in the condensed
consolidated balance sheets as part of loans.
<PAGE>
Allowance For Loan Losses
The allowance for loan losses represents that amount
which management estimates is adequate to provide for inherent
losses in its loan portfolio. The allowance balance and the
annual provision charged to expense are judgmentally determined
by management based upon past loan loss experience, economic
conditions and various other circumstances that are subject to
change over time. The collectibility of the loans is based upon
factors including the financial position of the borrower, the
estimated market value of the collateral at the current time,
guarantees and the Company's collateral position versus other
creditors.
The Company adopted Statement of Financial Accounting
Standards, ("SFAS") No. 114, "Accounting By Creditors For
Impairment Of A Loan" and SFAS No. 118, " Accounting By
Creditors For Impairment Of A Loan - Income Recognition And
Disclosures" at January 1, 1995. Under SFAS No. 114, loans
considered to be impaired are reduced to the present value of
expected future cash flows or to the fair value of collateral,
by allocating a portion of the allowance for loan losses to such
loans. If these allocations cause the allowance for loan losses
to increase, such increases are reported as bad debt expense.
SFAS No. 118 allows existing methods to recognize interest
income on impaired loans. The effect of adopting these
standards had no impact on the Company's financial statements.
Historical loss information and local economic conditions are
considered in establishing allowances on the remaining
portfolio. The allowance is reduced by charging off loans
deemed uncollectible by management. The allowance is increased
by provisions charged to expense and recoveries of previous
charge-offs. After a loan is charged off, collection efforts
continue.
Premises And Equipment
Premises and equipment are stated at cost less
accumulated depreciation. Premises and related components are
depreciated using the straight-line method with lives ranging
primarily from 20 to 50 years. Furniture and equipment are
depreciated using the straight-line method, with lives ranging
primarily from 5 to 15 years. Maintenance and repairs are
expensed and major improvements are capitalized. At the time of
sale or disposition of an asset, the applicable cost and
accumulated depreciation amounts are removed from the accounting
records.
Other Real Estate
Other real estate is included in other assets at the
lower of cost or fair market value, less estimated costs to
sell. Any reduction from the carrying value of the related loan
to estimated fair value at the time the property is acquired is
accounted for as a loan charge-off. Any subsequent reductions
in the estimated fair value are reflected in a valuation
allowance through a charge to other real estate expense.
Expenses incurred to carry other real estate are charged to
operations as incurred. There was no other real estate held at
June 30, 1995 and December 31, 1994.
Income Taxes
The Company follows the liability method in
accounting for income taxes. The liability method provides that
deferred tax assets and liabilities are recorded based on the
difference between the tax basis of assets and liabilities and
their carrying amounts for financial reporting purposes.
<PAGE>
Earnings And Dividends Per Common Share
Earnings per common share have been computed based on
the weighted average number of shares outstanding during the
periods presented. The weighted average number of shares used
in the computation of earnings per share was 1,847,942 for the
comparative periods presented.
On August 11, 1994, a 10% stock dividend was approved
for all shareholders of record on August 19, 1994 and
distributed on September 9, 1994. This stock dividend was
recorded by transferring the fair market value of the shares
issued from Retained Earnings to Common Stock and
Additional-Paid-In-Capital. On November 16, 1993, the Board of
Directors declared a 100% stock split effected in the form of a
stock dividend to shareholders of record as of November 30,
1993. The dividends were distributed on December 10, 1993.
This transaction was recorded by transferring the par value of
the shares issued from retained earnings to common stock. All
per share data has been retroactively adjusted for the stock
dividend and stock split.
Statement Of Cash Flows
For purposes of the Statements of Cash Flows, the
Company considers "cash and cash equivalents" to include cash,
noninterest bearing deposits with financial institutions and
Federal funds sold. The Company reports net cash flows for
Federal funds sold, customer loan transactions, deposit
transactions, securities sold under agreements to repurchase and
other borrowed funds. For the periods ended June 30, 1995 and
June 30, 1994, the Company paid $3,207,000 and $2,622,000 in
interest on deposits and other borrowings and $294,000 and
$274,000 for income taxes, respectively.
Financial Statement Presentation
Certain reclassifications have been made in prior
period financial statements to conform to the June 30, 1995
presentation. The reclassifications had no effect on total
assets, shareholders' equity or net income as previously
reported.
Industry Segment Information
The single industry in which the Company is involved
through the activities of its two subsidiary banks is commercial
community banking serving the financial needs of local
commercial, individual and public entity customers. Revenue
received by the Company is derived primarily from upstream
dividends paid by the two subsidiary banks with disbursement to
shareholders through United Bancorp, Inc. dividends. Subsidiary
income is generated from activities specific to the commercial
banking industry.
Future Accounting Pronouncements
The Financial Accounting Standards Board ("FASB")
issued SFAS No. 122, "Accounting for Mortgage Servicing Rights,"
in May 1995, effective for fiscal years beginning after December
15, 1995. It requires companies to recognize, as separate
assets, rights to service mortgage loans for others, regardless
of how these rights are acquired. A company that acquires
mortgage servicing rights through either the purchase or
origination of mortgage loans and sells or securitizes those
loans with servicing rights retained should allocate the total
cost of the mortgage loans to mortgage servicing rights and to
loans (without the mortgage servicing rights) based on their
relative fair values. Mortgage servicing rights
recorded as a separate asset will be amortized in proportion to,
and over the period of, estimated net servicing income. This
pronouncement has no impact on the Company at the present time
due to the Company not selling any loans or acquiring servicing
rights to date.
<TABLE>
Investment Securities
<CAPTION>
The amortized cost and estimated fair values of
investment securities are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gain Loss Value
---------- ---------- ---------- --------
<S><C> <S> <C> <C> <C> <C>
Investment Securities
Available For Sale
U.S. Treasury Obligations $ 2,435,617 $ 81,258 0 $ 2,516,875
U.S. Agency Obligations 10,952,037 145,560 0 11,097,597
State/Municipal Obligations 336,311 13,422 0 349,733
Other Investments 169,700 0 169,700
---------- -------- ---- ----------
Total Investment Securities
Available For Sale $ 13,893,665 $ 240,240 $ 0 $ 14,133,905
============ ========= === ============
Investment Securities
Held To Maturity
U.S. Treasury Obligations $ 5,484,107 $ 74,033 $ 0 $ 5,558,140
U.S. Agency Obligations 25,365,547 0 (118,596) 25,246,951
State/Municipal Obligations 17,295,438 609,120 0 17,904,558
Other Investments 33,868 1,944 0 35,812
----------- -------- ---------- -----------
Total Investment Securities
Held To Maturity $ 48,178,960 $ 685,097 $(118,596) $ 48,745,461
============ ========= ========== ============
</TABLE>
<TABLE>
December 31, 1994
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Loss Value
---------- ---------- ---------- ---------
Investment Securities
Available For Sale
<S><C> <S> <C> <C> <C> <C>
U.S. Treasury Obligations $ 2,427,438 0 $(27,282) $ 2,400,156
U.S. Agency Obligations 10,686,024 $ 2,830 (217,334) 10,471,520
State/Municipal Obligations 336,207 0 (10,422) 325,785
Other Investments 45,100 45,100
---------- ------- --------- ----------
Total Investment Securities
Available For Sale $ 13,494,769 $ 2,830 $ (255,038) $ 13,242,561
============ ======= =========== ============
Investment Securities
Held To Maturity
U.S. Treasury Obligations $ 5,475,051 $ 991 $ (157,167) $ 5,318,875
U.S. Agency Obligations 27,925,802 8,283 (1,285,462) 26,648,623
State/Municipal Obligations 17,824,316 279,229 (525,531) 17,578,014
Other Investments 35,850 (1,513) 34,337
------------ ------- ----------- -----------
Total Investment Securities
Held To Maturity $ 51,261,019 $ 288,503 $ (1,969,673) $ 49,579,849
============ ========= ============= ============
</TABLE>
<PAGE>
Total proceeds from sales of investment securities
classified as available-for-sale for the six months ended June
30, 1995 were $500,312. Gross gains of $11,778 were realized on
those sales.
During the six months ended June 30, 1994,
Citizens-Strasburg sold $1,018,860 in U.S. government agency
obligations from the held-to-maturity category. The proceeds
were then invested in U.S. Treasury Notes classified as
held-to-maturity. This sale and repurchase was mandated to
satisfy state auditor comments from an examination of a local
school district, which holds a depository relationship with
Citizens-Strasburg. U.S. Agency obligations pledged against the
school district deposits were cited during their audit as being
in violation of the Ohio Revised Code. This transaction
corrected any potential exposure to criticism to other school
districts which have a depository relationship with the Bank.
The securities were sold for $1,027,813 for a recognized gain of
$8,953.
There was one sale of equity securities during the
quarter ended March 31, 1994. These equity securities were held
with the intent of a possible expansion opportunity for the
Company. After further review, the expansion opportunity
appeared remote and, therefore, the securities were sold.
Proceeds from the sale of these securities were $184,500, with
$47,000 recorded as gross gains associated with the sale.
Total proceeds from sales of investment securities
classified as available-for-sale for the six months ended June
30, 1994 were $1,886,468. Gross gains of $45,436 were realized
on those sales.
<PAGE>
The amortized cost and estimated fair value of
investment securities at June 30, 1995, by contractual maturity
is shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to
call or repay obligations with or without call or prepayment
penalties. The average interest rates are based on coupon rates
adjusted for amortization and accretion. Yields on tax-exempt
securities have been computed on a tax equivalent basis.
<TABLE>
Investment Securities
Available For Sale
Estimated Weighted
Amortized Fair Average Average
Cost Value Maturity Yield
---------- --------- -------- -------
<S> <C> <C> <C> <C>
U.S. Treasury Notes
Within One Year
One Thru Two Years $ 1,498,173 $ 1,522,968 18 Mos. 6.68%
Two Thru five Years 937,444 993,907 40 Mos. 7.75%
----------- ----------- ------- -----
Total 2,435,617 2,516,875 27 Mos. 7.09%
U.S. Agency
Within One Year
One Thru Two Years 1,991,303 2,043,188 18 Mos. 7.57%
Two thru Five Years 3,213,234 3,314,409 35 Mos. 7.62%
Five Thru Ten Years 5,747,500 5,740,000 107 Mos. 6.60%
---------- ---------- -------- -----
Total 10,952,037 11,097,597 67 Mos. 7.08%
State & Municipal
Obligations
Within One Year
One Through Two Years
Two through Five Years
Five Through Ten Years 268,246 278,656 110 Mos. 8.31%
Over Ten Years 68,065 71,077 125 Mos. 8.59%
------- ------- -------- ------
Total 336,311 349,733 113 Mos. 8.37%
Other Investments
Five Through Ten Years
Other 169,700 169,700 5.00%
------- ------- -------- -----
Total Investment
Securities $13,893,665 $14,133,905 63 Mos. 7.11%
=========== =========== ======= =====
</TABLE>
<TABLE>
Investment Securities
Held to Maturity
Estimated Weighted
Amortized Fair Average Average
Cost Value Maturity Yield
---------- --------- -------- -------
<S> <C> <C> <C> <C>
US Treasury Notes
Within One Year $1,999,762 1,998,437 06 Mos. 5.41%
One Through Two Years 1,250,158 1,256,328 18 Mos. 5.84%
Two Through Five Years 2,234,187 2,303,375 42 Mos. 6.75%
---------- --------- ------- -----
Total 5,484,107 5,558,140 24 Mos. 6.05%
U S Agency
Within One Year 5,536,566 5,557,968 06 Mos. 6.52%
One Through Two Years 5,017,227 5,034,844 19 Mos. 6.12%
Two Through Five Years 14,311,960 14,140,389 39 Mos. 5.65%
Five Through Ten Years 499,794 513,750 71 Mos. 8.71%
---------- ---------- ------- -----
Total 25,365,547 25,246,951 28 Mos. 5.99%
State/Municipal Obligations
Within One Year 1,436,902 1,437,576 06 Mos. 6.36%
One Through Two Years 971,922 972,914 18 Mos. 6.44%
Two Through Five Years 2,675,148 2,797,618 44 Mos. 8.76%
Five Through Ten Years 11,912,028 12,383,866 85 Mos. 8.30%
Over Ten years 299,438 312,584 124 Mos. 8.60%
---------- ---------- -------- -----
Total 17,295,438 17,904,558 69 Mos. 8.11%
Other Investments
Five Through Ten Years 33,868 35,812 69 Mos. 7.46%
Total Investment
Securities $48,178,960 $48,745,461 43 Mos. 6.76%
=========== =========== ======= =====
</TABLE>
Securities with a par value of approximately
$21,519,000 at June 30, 1995 and $20,972,000 at December 31,
1994 were pledged to secure public deposits, repurchase
agreements and other liabilities as required or permitted by
law.
<PAGE>
3 Loans
Nonaccrual loans at June 30, 1995 and December 31,
1994 totaled $263,410 and $61,882, respectively.
The gross interest income that would have been
recorded on nonaccrual loans as of June 30, 1995 and June 30,
1994, if the loans had been current in accordance with their
original terms and had been outstanding throughout the period or
since origination, if held for part of the period was $5,983 and
$3,369, respectively. The interest income that was recorded on
those loans as of June 30, 1995 and June 30, 1994 was $819 and
$1,154, respectively. It is the Company's policy to place loans
in the nonaccrual status when the collection of the interest due
is highly doubtful, or when the loan has no account activity for
90 consecutive days. When loans are charged-off, any accrued
interest recorded in the current fiscal year is charged against
interest income, with the remaining balance treated as a loan
charge-off.
The Company has, and expects to have in the future,
banking transactions with directors and officers of the Company
and its subsidiaries. Loans to such borrowers, their immediate
families, affiliated corporations, and other entities in which
they own more than a 10% voting interest are summarized below:
<TABLE>
<S> <C>
Aggregate balance - December 31, 1994 $2,471,043
New loans 306,525
Repayments (673,036)
-----------
Aggregate balance - June 30, 1995 $2,104,532
===========
</TABLE>
4 Allowance For Loan Losses
<TABLE>
The activity in the allowance for loan losses is
summarized as follows:
<CAPTION>
1995 1994
--------- ----------
<S> <C> <C>
Balance - 1/01/95 and 1/01/94 $1,437,734 $1,256,322
Provision charged to
operating expense 169,000 281,000
Loans charged-off (33,083) (123,312)
Recoveries 12,419 23,724
---------- ----------
Balance - 6/30/95 and 12/31/94 $1,586,070 $1,437,734
========== ==========
</TABLE>
<PAGE>
5 Premises And Equipment
<TABLE>
Premises and equipment, at cost, and accumulated
depreciation and amortization as of June 30, 1995 and December
31, 1994 are as follows:
1995 1994
---------- ----------
<S> <C> <C>
Buildings and land $5,270,009 $5,261,772
Furniture and equipment 2,065,864 2,033,267
Computer software 321,984 318,490
---------- ----------
Total 7,657,857 7,613,529
Accumulated depreciation
and amortization 2,868,782 2,676,253
---------- ----------
Premises and equipment (net) $4,789,075 $4,937,276
========== ==========
</TABLE>
6 Commitments And Contingencies
The Company's subsidiaries are parties to financial
instruments with off-balance sheet risk in the normal course of
business, to meet the financing needs of their customers. These
financial instruments include lines of credit and commitments to
make loans. The Company's exposure to credit loss in the event
of nonperformance by the other party to the financial instrument
for commitments to make loans and standby letters of credit is
represented by the contractual amount of those instruments. The
Company follows the same credit policy to make such commitments
as is followed for those loans recorded in the financial
statements.
As of June 30, 1995 and December 31, 1994,
commitments to extend credit (at market rates) and commitments
under outstanding standby letters of credit amounted to
approximately $12,705,000 and $8,542,000 respectively. Since
many commitments to make loans expire without being used, the
amount does not necessarily represent future cash commitments.
The Company does not anticipate any losses as a result of these
commitments. In addition, commitments to extend credit are
agreements to lend to a customer as long as there is no
violation of any condition established in the contract.
Collateral obtained upon the exercise of the commitment is
determined using the Company's evaluation of the borrower, and
may include business assets, real estate and other items.
At June 30, 1995, the Company has lines of credit
enabling it to borrow up to $6.5 million with Mellon Bank,
Pittsburgh, Pennsylvania, National City Bank, Cleveland, Ohio,
National Bank Detroit, Detroit, Michigan. The Company also has
the ability to borrow up to $10 million under a borrowing
agreement with the Federal Home Loan Bank (FHLB), Cincinnati,
Ohio. Borrowings under this agreement are collateralized by the
Company's FHLB stock and a blanket pledge of the Company's 1-4
family residential real estate loans.
The Company, on an ongoing basis, is a defendant in
legal actions arising from normal business activities.
Management believes that those actions are without merit or that
the ultimate liability, if any, resulting from them will not
materially affect the Company's financial statements.
At June 30, 1995 and December 31, 1994, the Company
was required to have $641,000 and $581,000, respectively, of
cash on hand or on deposit with the Federal Reserve Bank to meet
regulatory reserve requirements. These balances do not earn
interest.
<PAGE>
7 Concentration Of Credit Risk
The Bank's grant commercial, real estate and
installment loans to customers mainly in Belmont, Tuscarawas and
Carroll Counties and the surrounding localities. Substantially
all loans are secured by specific items of collateral including
business assets, consumer assets, commercial real estate and
residential real estate.
At June 30, 1995, total commercial loans make up
approximately 35.5% of the loan portfolio with 34.5% of these
commercial loans secured by commercial and residential real
estate and business assets in the Columbus, Ohio area.
Installment loans account for approximately 36.8% of the loan
portfolio and are secured by consumer assets including
automobiles which account for 74.5% of the installment loan
portfolio. Real estate loans comprise 27.7% of the loan
portfolio and primarily include first mortgage loans on
residential properties and home equity lines of credit.
Included in cash and due from bank and Federal funds
sold is $1,567,509 on deposit with National City Bank,
Cleveland, Ohio and $2,204,394 on deposit with Mellon Bank,
N.A., Pittsburgh, Pennsylvania.
8 Dividend Restriction
Dividends paid by the subsidiary banks are the
primary source of funds available to the Company for payment of
dividends to shareholders and for other working capital needs.
Applicable state statutes and regulations impose restrictions on
the amount of dividends that may be declared by the Company.
Those restrictions generally limit dividends to earnings
retained in the current and prior two years, as defined by
regulations. In addition to these restrictions, as a practical
matter, dividend payments cannot reduce regulatory capital
levels below minimum regulatory guidelines. These restrictions
would not limit the Company's ability to pay normal dividends.
As of June 30, 1995, $3,066,123 was available for dividend
payments under the more restrictive of the two limitations.
9 Branch Acquisition
Effective December 2, 1994, the Company, acting
through its wholly owned subsidiary, Citizens-Strasburg,
acquired from National City Bank of Cleveland, Ohio certain
assets and assumed certain deposit and other liabilities of a
branch banking facility located in Dellroy, Ohio.
Citizens-Strasburg purchased the National City Bank branch's
cash, various loans, and premises and equipment and assumed
substantially all deposit liabilities. The transaction was
accounted for as a purchase, and accordingly, the acquired
assets and liabilities have been recorded based on their
respective fair market values at the date of acquisition. A
summary of assets acquired and liabilities assumed follows:
<TABLE>
Assets Liabilities
<S> <C> <S> <C>
Cash and Cash Equivalents Received $6,255,044 Noninterest Bearing Deposits $1,457,187
Loans 570,957 Interest Bearing Deposits 5,785,705
Premises And equipment 275,000 Total Deposits 7,242,892
Intangible assets 140,000
Other Assets 4,171 Other Liabilities 2,280
---------- ----------
Total Assets $7,245,172 Total Liabilities $7,245,172
========== ==========
</TABLE>
Introduction
In the following pages, Management presents an
analysis of United Bancorp, Inc.'s financial condition at June
30, 1995 compared to December 31, 1994 and results of operations
for the three and six month periods ended June 30, 1995 compared
to the same periods ended June 30, 1994. This discussion is
designed to provide shareholders with a more comprehensive
review of the operating results and financial position than
could be obtained from an examination of the financial
statements alone. This analysis should be read in conjunction
with the financial statements and related footnotes and the
selected financial data included elsewhere in this report.
United Bancorp, Inc. is a multi-bank holding company
located in Martins Ferry, Ohio. The Company originally became
incorporated as a one bank holding company in July of 1983,
through the acquisition of 100% of the voting stock of The
Citizens Savings Bank of Martins Ferry, Ohio. As a shell
holding company, the Company is headquartered at the main office
location of The Citizens Savings Bank at 4th at Hickory Street,
Martins Ferry. Ohio. The Company became a multi-bank holding
company in December of 1986, through the purchase of 100% of the
voting stock of The Citizens-State Bank of Strasburg, Ohio.
United Bancorp, Inc. has been traded on the Nasdaq Small Cap
Market since February of 1993 under the trading symbol UBCP.
The markets served by both bank subsidiaries are rich
in diversity and widespread in geographic location.
Citizens-Martins Ferry meets the commercial banking needs of a
customer base within the greater Ohio Valley area on the eastern
border of Ohio. The decline of heavy industry, mining and rail
transportation in the local area within the last decade has seen
an erosion of the younger population base necessary for economic
revitalization. Citizens-Martins Ferry has developed lending
markets within the Columbus, Ohio region, while continuing to
meet the economic needs of its traditional local customer base.
Citizens-Strasburg's market is primarily centered within a light
industrial, residential area of north eastern Ohio, south of the
Akron and Canton, Ohio metro areas. Both bank subsidiaries are
postured to continue to serve the traditional needs of their
respective customer bases and also to introduce new products and
services to meet the ever-changing needs of today's service and
value oriented customer.
Results Of Operations
Net income for the three and six months ended June
30, 1995 increased by $30,932, or 6.14% and $92,315, or 9.80%
respectively, over the comparable prior year periods, yielding
an annualized Return On Average Assets of 1.10% and a Return On
Average Equity of 12.16%. The most significant factor affecting
the increase in earnings is the strong loan growth experienced
at both subsidiary banking locations.
Net interest income, by definition, is the difference
between interest income generated on interest earning assets and
the interest expense incurred on interest bearing liabilities.
Various factors contribute to changes in net interest income,
including volumes, interest rates and the composition or mix of
interest earning assets in relation to interest bearing
liabilities. Net interest income for the three and six months
ended June 30, 1995 increased $234,837, or 14.02% and $503,028,
or 15.49%.
<PAGE>
The increase was the result of the growth of the
Company's average earning assets as well as an increase in the
yield on these earning assets. The increased yield was due to
the upward movement in market interest rates which began in the
second quarter of 1994 after reaching the lowest levels in many
years. Interest rates have now begun to soften slightly in
response to recent Federal interest rate downward adjustments.
Additionally, the Company increased its yield by shifting
resources from lower earning funds to higher earning investment
securities and loans. The Company has continued to employ
aggressive marketing and pricing concepts to increase volume
throughout 1995 with the goal of generating a higher yielding
product mix.
Total interest income for the three month period
ended June 30, 1995 compared to the same period in 1994
increased by $558.249, or 18.61%. The six month comparison for
total interest income shows an increase of $1,107,015, or
18.94%. Average earning assets increased $14,357,504, or 8.86%
over June 30, 1994 totals. A significant portion of the growth
was from the investment of funds acquired from
Citizens-Strasburg's branch bank acquisition of the Dellroy,
Ohio office of National City Bank in December of 1994. Interest
and fee income on loans for the three months ended June 30,
1995, increased $551,855, or 27.42% over the June 30, 1994
activity. Interest and fee income on loans for the six months
ended June 30, 1995, increased $1,092,412, or 28.28% over the
same six month period in 1994. These comparative increases were
partially offset by declines in Fed funds interest income for
the three and six months ended June 30, 1995 of $36,842, or
50.30% and $130,366, or 72.68%, respectively. Funds previously
generating lower yields on short term Federal funds investments
were utilized for funding the continued increases in loan growth
experienced by both subsidiary banks.
Total interest expense for the three and six months
ended June 30, 1995 increased by $323,412, or 24.44% and
$603,987, or 23.24%, respectively over the same periods ended
June 30, 1994. Average interest bearing liabilities increased
$11,881,711, or 8.20% over June 30, 1994 average balances. The
increase in interest expense was due to both increased volume as
well as the increase in the Company's overall cost of funds
which began during the second quarter of 1994.
Noninterest Income And Expense
Noninterest income increased slightly for the three
and six month periods ended June 30, 1995 as compared to the
same three and six month periods in 1994. Service charges on
deposit accounts increased 33.77% and 27.27% for the three and
six month comparative periods, reflecting the benefits derived
from a realignment of service charges during the second quarter
of 1995. The increase in service charges was offset by a
decline in security gains due to less sales activity within the
investment securities portfolio.
Noninterest expenses for the three and six months
ended June 30, 1995 compared to three and six months ended June
30, 1994 increased $126,903, or 10.58% and $278,476, or 11.56%.
The most significant change was within salaries and employee
benefits reflecting a 15.51% and 15.33% increase for the three
and six months ended June 30, 1995. Other operating expenses
also increased 9.84% and 10.03%, respectively over the prior
year periods. These increases in expenses resulted from
incremental salary increases implemented at the beginning of
1995, increased overhead expenses at the newly acquired Dellroy
branch banking facility, (December 1994) and the Company's costs
associated with the newly implemented employee 401 K program
which began March 10, 1995.
<PAGE>
The Company will soon see a significant reduction in
other operating expenses as the Federal Deposit Insurance
Corporation (FDIC) reduced deposit insurance premiums in
response to the deposit insurance fund reaching its required
funding level of $1.25 per $100 of deposits. The premiums will
be reduced to $0.04 per $100 from $0.23. Although the Banks have
already been billed for the third quarter at the higher rate,
the FDIC has said it will determine in September any refunds due
for overpayment.
Financial Condition
Total assets of the Company increased to
$189,627,340 at June 30, 1995, a 2.15% increase over
$185,634,119 at December 31, 1994. The most significant portion
of the increase was due to continued loan growth which increased
by 6.99% from December 31, 1994. Installment loans grew 10.76%
and Commercial real estate loans grew 10.67% over December 31,
1994 totals. The modest growth was funded through deposit
growth and retention of earnings. Total deposit growth during
the six months ended June 30, 1995 was 1.17%, with certificates
of deposit greater than $100,000 increasing 10.26% over December
31, 1994 totals.
Capital Resources
Internal capital growth, through the retention of
earnings, is the primary means of maintaining capital adequacy
for the Company. Shareholder equity at June 30, 1995 was
$17,507,855 compared to $16,518,060 at December 31, 1994, a
5.99% increase. This increase includes a $158,558 increase in
equity due to the after tax change in the fair value of
securities categorized as available-for-sale as compared to a
$166,458 reduction in equity for the period ended December 31,
1994. The ratios for Average Equity-to-Average total Assets at
June 30, 1995 and December 31, 1994 were 9.05% and 9.07% ,
respectively.
Regulatory standards require banks and bank holding
companies to maintain capital based on "risk adjusted" assets so
that categories of assets with potentially higher credit risk
require more capital backing than assets with lower risk.
Additionally, banks and bank holding companies are required to
maintain capital to support, on a risk-adjusted basis, certain
off-balance sheet activities such as standby letters of credit
and interest rate swaps.
In order to monitor relative levels of risk
throughout the financial industry, the Federal Reserve Board
classifies capital into two tiers. Tier 1 capital consists of
common shareholders' equity, noncumulative and cumulative
perpetual preferred stock, and minority interests less goodwill.
Tier 2 capital consists of allowance for loan and lease losses,
perpetual preferred stock (not included in Tier 1), hybrid
capital instruments, term subordinated debt, and
intermediate-term preferred stock. All banks are required to
meet a minimum ratio of 8.0% of qualifying total capital to
risk-adjusted total assets. The Tier 1 capital ratio must be at
least 4.0%. Capital qualifying as tier 2 capital is limited to
100% of Tier 1 capital. The minimum leverage ratio for a bank
holding company is 3.0% calculated by dividing Tier 1 capital by
adjusted total assets.
<PAGE>
The Federal Deposit Insurance Corporation Improvement
Act of 1991 (FDICIA) required banking regulatory agencies to
revise risk-based capital standards by June 19, 1993 to ensure
that they take adequate account of interest rate, concentration
of credit and nontraditional banking activities. The following
table illustrates the Company's risk-weighted capital ratios at
June 30, 1995:
<TABLE>
June 30, 1995
-------------
<S> <C>
Common Shareholders' Equity $17,507,855
Tier 1 Capital $17,070,484
Text>Tier 2 Capital $1,586,070
Tier 1 and 2 Capital $18,656,554
Adjusted Total Assets $189,064,833
Total Risk-Adjusted Assets $120,707,429
Leverage Ratio 9.03%
Tier 1 Risk-Based Capital Ratio 14.14%
Tier 1 and Tier 2 Risk-Based Capital Ratio 15.46%
</TABLE>
<PAGE>
Liquidity
The Company's objective in managing liquidity is to
maintain the ability to continue to meet the cash flow needs of
its customers, such as borrowings or deposit withdrawals, as
well as its own financial commitments. The principal sources of
liquidity are net income, loan payments, maturing investment
securities, investment securities available-for-sale, Federal
funds sold and cash and deposits with banks. Along with its
liquid assets, the Company has additional sources of liquidity
available to ensure that adequate funds are available as needed
which include, but are not limited to, the purchase of Federal
funds, the ability to borrow funds under line of credit
agreements with correspondent banks and a borrowing agreement
with the Federal Home Loan Bank of Cincinnati, Ohio, and the
adjustment of interest rates to obtain depositors. Management
feels that it has the capital adequacy, profitability and
reputation to meet the current and projected needs of its
customers.
For the period ended June 30, 1995, the adjustments
to reconcile net income to net cash from operating activities
consist mainly of depreciation and amortization of premises and
equipment and intangibles, the provision for loan losses, gain
on sales of investment securities, net amortization of
investment securities and net changes in other assets and
liabilities. The most significant outflow of cash from
investing activities was $7,649,000 used due to the net change
in loans. This use of funds was partially offset by a net cash
infusion of $1,911,000 in deposits. For a more detailed
illustration of the Company's sources and uses of cash, refer to
the condensed consolidated statements of cash flows.
<PAGE>
Inflation
Substantially all of the Company's assets and
liabilities relate to banking activities and are monetary in
nature. The consolidated financial statements and related
financial data are presented in accordance with Generally
Accepted Accounting Principles (GAAP). GAAP currently requires
the Company to measure the financial position and results of
operations in terms of historical dollars, with the exception of
securities available-for-sale which are measured at fair value.
Changes in the value of money due to rising inflation can cause
purchasing power loss.
Management's opinion is that movements in interest
rates affects the financial condition and results of operations
to a greater degree than changes in the rate of inflation. It
should be noted that interest rates and inflation do effect each
other, but do not always move in correlation with each other.
The Company's ability to match the interest sensitivity of its
financial assets to the interest sensitivity of its liabilities
in its asset/liability management may tend to minimize the
effect of change in interest rates on the Company's performance.
Regulatory Review
The Company is subject to the regulatory requirements
of The Federal Reserve System as a multi-bank holding company.
The affiliate banks, Citizens-Martins Ferry and
Citizens-Strasburg are subject to regulations of The Federal
Deposit Insurance Corporation (FDIC) and the State of Ohio,
Division of Banks. Citizens-Martins Ferry was subject to a FDIC
regulatory safety and soundness review on July 10, 1995 as of
the close of business on March 31, 1995. There were no
significant findings, which upon implementation, would have a
material effect on the holding company or its subsidiary banks.
<PAGE>
<TABLE>
Part I I - Other Information
<S> <C> <S>
Item 1. Legal proceedings
Not applicable.
Item 2. Changes in securities
Not applicable.
Item 3. Defaults upon senior securities
Item 4. Submission of matters to a vote of security holders
The following matters were submitted to a vote of
security holders at the Annual Meeting of
Shareholders' on April 19, 1995:
</TABLE>
<TABLE>
Compensation for Outside Directors to continue to be
set at $1,000 per year as retainer and $150 per meeting attended.
<S> <C> <C> <S> <C> <S> <C> <C>
Roll Call: Ayes: 1,434,956 Nays: 13,970 Abstaining: 57,530
</TABLE>
<TABLE>
Number of Directors to be set at a minimum of nine and a maximum
of thirteen.
<S> <C> <C> <S> <C> <S> <C> <C>
Roll Call: Ayes: 1,506,434 Nays: 0 Abstaining: 22
</TABLE>
<TABLE>
Election of Directors for the Class of 1998 to include the
following:
<S> <C> <S> <C> <S> <C> <S> <C> <C>
Herman E. Borkoski Ayes: 1,506,434 Nays: 0 Abstaining: 22
James W. Everson Ayes: 1,506,434 Nays: 0 Abstaining: 22
John M. Hoopingarner Ayes: 1,506,434 Nays: 0 Abstaining: 22
Richard L. Riesbeck Ayes: 1,506,434 Nays: 0 Abstaining: 22
</TABLE>
<TABLE>
Crowe, Chizek and Company, Independent Certified
Public Accountants to continue to serve as the Company's
external audit firm for the fiscal year 1995.
<S> <C> <S> <C> <S> <C> <S> <C> <C>
Roll Call: Ayes: 1,492,398 Nays: 12,594 Abstaining: 1,464
</TABLE>
Item 5. Other Information
Not applicable.
Item 6. Exhibits and reports on Form 8 K
(a) Exhibits
(b) Reports on Form 8 K
The Company filed no Form 8 K's with the
Securities Exchange Commission during the
quarter ending June 30, 1995.
<PAGE>
Signatures
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
By: James W. Everson
President and Chief Executive Officer
August 10, 1995
By: Ronald S. Blake
Treasurer
August 10, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 5402
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 475
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14134
<INVESTMENTS-CARRYING> 48179
<INVESTMENTS-MARKET> 48745
<LOANS> 116019
<ALLOWANCE> 1586
<TOTAL-ASSETS> 189627
<DEPOSITS> 165224
<SHORT-TERM> 5678
<LIABILITIES-OTHER> 1217
<LONG-TERM> 0
<COMMON> 1848
0
0
<OTHER-SE> 15660
<TOTAL-LIABILITIES-AND-EQUITY> 189627
<INTEREST-LOAN> 4966
<INTEREST-INVEST> 1938
<INTEREST-OTHER> 49
<INTEREST-TOTAL> 6953
<INTEREST-DEPOSIT> 3082
<INTEREST-EXPENSE> 3203
<INTEREST-INCOME-NET> 3750
<LOAN-LOSSES> 169
<SECURITIES-GAINS> 12
<EXPENSE-OTHER> 2687
<INCOME-PRETAX> 1371
<INCOME-PRE-EXTRAORDINARY> 1371
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1034
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
<YIELD-ACTUAL> 4.2
<LOANS-NON> 263
<LOANS-PAST> 98
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1438
<CHARGE-OFFS> 33
<RECOVERIES> 12
<ALLOWANCE-CLOSE> 1586
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 536
</TABLE>
