<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 Identification No.)
incorporation or organization)
FOURTH AT HICKORY STREET, MARTINS FERRY, OHIO 43935
- --------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 633-0445
------------------
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $1.00 A SHARE NASDAQ REGULAR MARKET (SMALL CAP)
- ------------------------------------- -----------------------------------------
(Title of class) Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $1.00 A SHARE
-------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 1996.
COMMON STOCK, $1.00 PAR VALUE : $27,257,145.
The number of shares outstanding of the issuer's classes of common stock as of
March 15, 1996.
COMMON STOCK, $1.00 PAR VALUE 1,847,942 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended December 31, 1995
are incorporated by reference into Parts I and II, (Index on page 1).
Portions of the proxy statement for the annual shareholders meeting to be held
April 17, 1996 are incorporated by reference into Part III (Index on page 1).
<PAGE> 2
UNITED BANCORP, INC. FORM 10-K
INDEX OF ITEMS INCORPORATED BY REFERENCE WITHIN FORM 10-K
<TABLE>
<CAPTION>
PAGE # FORM 10 - K ITEM DESCRIPTION REFERENCE DESCRIPTION
<S> <C> <C>
3 Part I, Item 1, (a)................ Incorporated by reference to pages 42-43 of the Annual Report To Shareholders.
3 Part I, Item 1, (b)................ Incorporated by reference to page 15, Note 1 of the Annual Report To
Shareholders.
4 Part I, Item 1, I.................. Incorporated by reference to pages 36-38 of the Annual Report To Shareholders.
4 Part I, Item 1, II, A............. Incorporated by reference to page 16, Note 3 of the Annual Report To
Shareholders. Shareholders.
4 Part I, Item 1, II, B............. Incorporated by reference to page 18, Note 3 of the Annual Report To
Shareholders.
4 Part I, Item 1, III, A............ Incorporated by reference to page 19, Note 4 of the Annual Report To
Shareholders.
6 Part I, Item 1, III, C, 4......... Incorporated by reference to page 24, Note 11 of the Annual Report To
Shareholders.
7 Part I, Item 1, IV................ Incorporated by reference to page 13, Note 1 of the Annual Report To
Shareholders.
8 Part I, Item 1, V, A.............. Incorporated by reference to pages 36-37 of the Annual Report To Shareholders.
9 Part I, Item 1, VI................ Incorporated by reference to pages 1 and 39 of the Annual Report To
Shareholders.
9 Part I, Item 2..................... Incorporated by reference to pages 42-43 of the Annual Report To Shareholders.
9 Part I, Item 3..................... Incorporated by reference to pages 23-24 of the Annual Report To Shareholders.
10 Part II, Item 5.................... Incorporated by reference to pages 24 and 52 of the Annual Report To
Shareholders.
10 Part II, Item 6.................... Incorporated by reference to pages 44-45 of the Annual Report To Shareholders.
10 Part II, Item 7.................... Incorporated by reference to pages 29-41 of the Annual Report To Shareholders.
10 Part II, Item 8.................... Incorporated by reference to pages 8-28 of the Annual Report To Shareholders.
10 Part III, Item 10.................. Incorporated by reference to Proxy Statement, pages 2-5.
11 Part III, Item 11.................. Incorporated by reference to Proxy Statement, pages 7-14.
11 Part III, Item 12.................. Incorporated by reference to Proxy Statement, pages 2-5.
11 Part III, Item 13.................. Incorporated by reference to Proxy Statement, page 15.
12 Part IV, Item 14, (a) 1............ Incorporated by reference to pages 8-28 of the Annual Report To Shareholders.
12 Part IV, Item 14, (a) 3,
Exhibit 10......................... Incorporated by reference to Proxy Statement, page 12.
</TABLE>
Page 1
<PAGE> 3
UNITED BANCORP, INC. FORM 10 - K
PART I
ITEM 1 DESCRIPTION OF BUSINESS
(a) General Development of Business
United Bancorp, Inc. (Company) is a multi-bank holding company
headquartered in Martins Ferry, Ohio. The Company has two subsidiary
banks, The Citizens Savings Bank, Martins Ferry, Ohio
(Citizens-Martins Ferry) and The Citizens-State Bank, Strasburg, Ohio
(Citizens-Strasburg). For additional information about the Company's
location and description of business, refer to Pages 42-43, Our
Hometown Roots, in the Annual Report To Shareholders for the period
ended December 31, 1995.
(b) Financial Information About Industry Segments
Refer to Page 15, Note 1 of the Annual Report To Shareholders.
(c) Narrative Description of Business
The COMPANY is a multi-bank holding company as defined under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"). The BHC Act
regulates acquisitions by the COMPANY of voting shares or assets of
any bank or other company. The COMPANY is subject to the reporting
requirements of, and examination and regulation by, the Board of
Governors of the Federal Reserve System, as well as reporting
requirements under the Securities and Exchange Commission Act of
1934.
The COMPANY is engaged in the business of commercial and retail
banking in Belmont, Tuscarawas and Carroll Counties and the
surrounding localities. The Banks provide a broad range of banking
and financial services, which include accepting demand, savings and
time deposits and granting commercial, real estate and consumer
loans. CITIZENS-MARTINS FERRY conducts its business through its main
office in Martins Ferry, Ohio and two branches located in Bridgeport
and Colerain, Ohio. CITIZENS-STRASBURG conducts its business through
its main office in Strasburg, Ohio and its four branches located in
Dover, New Philadelphia, Sherrodsville and Dellroy, Ohio.
The banking markets in which the Company's subsidiaries operate
continues to be highly competitive. Citizens-Martins Ferry competes
for loans and deposits with other retail commercial banks, savings
and loan associations, finance companies, credit unions and other
types of financial institutions within the Mid-Ohio Valley geographic
area along the eastern border of Ohio, extending into the northern
panhandle of West Virginia. Citizens-Strasburg encounters similar
competition for loans and deposits throughout the Tuscarawas and
Carroll County geographic areas of northeastern Ohio.
The Company's two subsidiary banks are both subject to regulation by
Ohio's Division of Financial Institutions and the FDIC. The
regulations and restrictions affecting the COMPANY and its
subsidiary banks pertain to, among other things, allowable loans,
guidelines for allowance for loan losses, accountability for fair and
accurate disclosures to customers and regulatory agencies,
permissible investments and limitations of risk and regulation of
capital requirements for safe and sound operation of the financial
institution.
Page 2
<PAGE> 4
UNITED BANCORP, INC. FORM 10 - K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
(c) Narrative Description of Business (Continued)
The COMPANY and its subsidiary banks have no single customer or
related group of customers whose banking activities, whether through
deposits or lending, would have a material impact on the COMPANY'S
continued earnings capabilities if those activities were removed.
The COMPANY itself, as a shell holding company, has no compensated
employees. Citizens - Martins Ferry has 49 full time employees,
with 15 of these serving in a management capacity and 15 part time
employees. Citizens-Strasburg has 24 full time employees, with 8
serving in a management capacity and 10 part time employees. The
Company considers employee relations to be good at both subsidiary
locations.
(d) Financial Information About Foreign And Domestic Operations
Not applicable.
I DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS EQUITY; INTEREST
RATES AND INTEREST DIFFERENTIAL
A Refer to Pages 36-37 of the Annual Report To Shareholders.
B Refer to Pages 36-37 of the Annual Report To Shareholders.
C Refer to Page 38 of the Annual Report To Shareholders.
II INVESTMENT PORTFOLIO
A Refer to Page 16, Note 3 of the Annual Report To Shareholders.
B Refer to Page 18, Note 3 of the Annual Report To Shareholders.
C Not applicable.
III LOAN PORTFOLIO
A Types of Loans
Refer to Page 19, Note 4 of the Annual Report To Shareholders.
B Maturities And Sensitivities Of Loans To Changes In Interest Rates
The following is a schedule of commercial and commercial real estate
loans maturing within the various time frames indicated:
<TABLE>
<CAPTION>
ONE YEAR ONE THROUGH AFTER
OR LESS FIVE YEARS FIVE YEARS TOTAL
<S> <C> <C> <C> <C>
---------------------------------------------------
COMMERCIAL LOANS $8,912,000 $784,000 $1,106,000 $10,802,000
COMMERCIAL REAL ESTATE LOANS 17,529,000 8,536,000 9,445,000 35,510,000
---------------------------------------------------
TOTAL $26,441,000 $9,320,000 $10,551,000 $46,312,000
===================================================
</TABLE>
Page 3
<PAGE> 5
UNITED BANCORP, INC. FORM 10 - K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
III LOAN PORTFOLIO (CONTINUED)
B Maturities And Sensitivities Of Loans To Changes In Interest Rates
(Continued)
The following is a schedule of fixed rate and variable rate
commercial and commercial real estate loans due to mature after one
year:
<TABLE>
<CAPTION>
FIXED RATE VARIABLE RATE TOTAL > ONE YEAR
--------------------------------------------
<S> <C> <C> <C>
COMMERCIAL LOANS $1,753,000 $137,000 $1,890,000
COMMERCIAL REAL ESTATE LOANS 7,115,000 10,866,000 17,981,000
--------------------------------------------
TOTAL $8,868,000 $11,003,000 $19,871,000
============================================
</TABLE>
Note: Variable rate loans are those loans with floating or adjustable
interest rates.
C Risk Elements
1. Nonaccrual, Past Due, Restructured and Impaired Loans
The following schedule summarizes nonaccrual loans, accruing loans
which are contractually 90 days or more past due, troubled debt
restructurings and impaired loans at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------------
<S> <C> <C>
Nonaccrual Basis ............ $105,324 $61,882
Greater Than 90 Days ........ 90,800 27,613
Troubled Debt Restructurings. N/A 0
Impaired Loans............... 0 N/A
</TABLE>
Interest recognized on a cash received basis on impaired loans during
1995 was $9,000. No additional interest income was recognized on
impaired loans during 1995. The gross interest income that would
have been recorded on nonaccrual loans as of December 31, 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 $2,499. The interest income that
was recorded on those loans as of December 31, 1994 was $1,757.
Management analyzes commercial and commercial real estate loans on an
individual basis and classifies a loan as impaired when an analysis
of the borrower's operating results and financial condition indicates
the underlying cash flows are not adequate to meet its debt service
requirements. Often this is associated with a delay or shortfall in
payments of 30 days or more. Smaller-balance homogeneous loans are
evaluated for impairment in total. Such loans include residential
first mortgage loans secured by one-to-four family residences,
residential construction loans, consumer automobile, boat and home
equity loans. Loans are generally moved to nonaccrual status when 90
days or more past due. These loans are often also considered
impaired. Impaired loans, or portions thereof, are charged-off when
deemed uncollectible. The nature of disclosures for impaired loans
is considered generally comparable to prior nonaccrual loans and
non-performing and past due asset disclosures.
Page 4
<PAGE> 6
UNITED BANCORP, INC. FORM 10 - K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
III LOAN PORTFOLIO (CONTINUED)
2. Potential Problem Loans
The COMPANY had no potential problem loans as of December 31, 1995
which have not been disclosed in Table C 1., but where known
information about possible credit problems of borrowers causes
management to have serious doubts as to the ability of such borrowers
to comply with the present loan repayment terms and which may result
in disclosure of such loans into one of the problem loan categories.
3. Foreign Outstandings
Not applicable.
4. Loan Concentrations
Refer to Page 24, Note 11 of the Annual Report To Shareholders.
D Other Interest Bearing Assets
Not applicable.
Page 5
<PAGE> 7
UNITED BANCORP, INC. FORM 10 - K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
IV SUMMARY OF LOAN LOSS EXPERIENCE
For additional explanation of factors which influence management's
judgment in determining amounts charged to expense, refer to Page 13,
Note 1 of the Annual Report To Shareholders.
A Analysis of the Allowance for Loan Losses
The following schedule presents an analysis of the allowance for loan
losses, average loan data and related ratios for the years ended
December 31:
<TABLE>
<CAPTION>
LOANS 1995 1994
------------------------------------
<S> <C> <C>
Loans Outstanding, Net of Unearned Income.......... $ 122,682,652 $ 108,390,112
Average Loans Outstanding, Net of Unearned Income.. $ 116,331,358 $ 98,598,626
ALLOWANCE FOR LOAN LOSSES
Balance at Beginning of Year....................... $ 1,438,000 $ 1,256,000
Loan Charge-offs:
Commercial ...................................... 53,000 0
Commercial Real Estate .......................... 0 0
Real Estate ..................................... 1,000 0
Installment ..................................... 98,000 123,000
-------------- --------------
TOTAL LOAN CHARGE-OFFS ....................... 152,000 123,000
-------------- --------------
Loan Recoveries:
Commercial ...................................... 5,000 4,000
Commercial Real Estate .......................... 0 0
Real Estate ..................................... 0 0
Installment ..................................... 19,000 20,000
-------------- --------------
TOTAL LOAN RECOVERIES......................... 24,000 24,000
-------------- --------------
NET LOAN CHARGE-OFFS ......................... 128,000 99,000
Provision for Loan Losses ......................... 465,000 281,000
-------------- --------------
BALANCE AT END OF YEAR ............................ $ 1,775,000 $ 1,438,000
============== ==============
Ratio of Net Charge-offs To Average
Loans Outstanding For The Year ................... 0.11% 0.10%
============== ==============
</TABLE>
Page 6
<PAGE> 8
UNITED BANCORP, INC. FORM 10 - K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
IV SUMMARY OF LOAN LOSS EXPERIENCE (CONTINUED)
B Allocation of the Allowance for Loan Losses
The following schedule is a breakdown of the allowance for loan
losses allocated by loan type and the percentage of each loan type
compared to total loans:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------------------------
LOAN TYPE ALLOWANCE AMOUNT PERCENTAGE OF LOANS
TO TOTAL LOANS
- --------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Real Estate ............ $ 348,000 28.94%
Commercial ........................ 109,000 8.81%
Real Estate ....................... 375,000 27.14%
Installment ....................... 359,000 35.11%
Unallocated ....................... 584,000 N/A
----------------------------------------------
TOTAL ......................... $ 1,775,000 100.00%
==============================================
<CAPTION>
DECEMBER 31, 1994
----------------------------------------------
LOAN TYPE ALLOWANCE AMOUNT PERCENTAGE OF LOANS
TO TOTAL LOANS
- -------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Real Estate ............ $ 258,000 29.49%
Commercial ........................ 45,000 4.96%
Real Estate ....................... 205,000 30.05%
Installment ....................... 368,000 35.50%
Unallocated ....................... 562,000 N/A
----------------------------------------------
TOTAL ......................... $ 1,438,000 100.00%
==============================================
</TABLE>
V DEPOSITS
A Schedule Of Average Deposit Amounts And Rates
(1) Refer to Pages 36 - 37 of the Annual Report To
Shareholders.
(2) Refer to Pages 36 - 37 of the Annual Report To
Shareholders.
(3) Refer to Pages 36 - 37 of the Annual Report To
Shareholders.
(4) Refer to Pages 36 - 37 of the Annual Report To
Shareholders.
(5) - (8) Not applicable.
B Other Categories
Not applicable.
Page 7
<PAGE> 9
UNITED BANCORP, INC. FORM 10 - K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
V DEPOSITS (CONTINUED)
C Foreign Deposits
Not applicable.
D The following schedule details the maturities of time certificates
of deposit in amounts of $100,000 or more for the year ended
DECEMBER 31, 1995:
<TABLE>
<S> <C>
Three Months or Less........... $ 1,466,000
Over Three Through Six Months.. 1,399,000
Over Six Through Twelve Months. 2,198,000
Over Twelve Months............. 6,598,000
-------------
TOTAL ..................... $ 11,661,000
=============
</TABLE>
E Time deposits greater than $100,000 issued by foreign offices.
Not applicable.
VI RETURN ON EQUITY AND ASSETS
Refer to Page 1, "Financial Highlights" and Page 39 "Capital
Resources" in the Annual Report To Shareholders.
VII SHORT-TERM BORROWINGS
Although the total average balance outstanding for Short-Term
Borrowings exceeded 30% of stockholders' equity at December 31, 1995,
no individual component of the Short-Term Borrowings total comprised
more than 30% of shareholders' equity and accordingly are not
disclosed in detail.
ITEM 2 PROPERTIES
Refer to Pages 42 - 43, "Our Hometown Roots" in the Annual Report To
Shareholders.
ITEM 3 LEGAL PROCEEDINGS
Refer to Pages 23 - 24, Note 10 of the Annual Report To Shareholders.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No motions were submitted to shareholders for a vote during this
reporting period.
Page 8
<PAGE> 10
UNITED BANCORP, INC. FORM 10 - K
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Refer to Page 52, "Shareholder Information" and to Page 24, Note 12
of the Annual Report To Shareholders.
ITEM 6 SELECTED FINANCIAL DATA
Refer to Pages 44 - 45, "A Decade of Progress" of the Annual Report
To Shareholders.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Refer to Pages 29 - 41, "Management's Discussion And Analysis" of the
Annual Report To Shareholders.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to pages 8 - 28 of the Annual Report To Shareholders.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There were no changes in or disagreements with accountants.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Refer to Pages 2 - 5 of the Proxy Statement.
(b) Executive Officers of the Registrant:
Donald A. Davison (78) Chairman of the Board
James W. Everson (57) President and Chief Executive
Officer
Harold W. Price (50) Vice President - Administration
Norman F. Assenza, Jr. (50) Vice President - Operations and
Secretary
James A. Lodes (50) Vice President - Lending
Ronald S. Blake (44) Treasurer
Page 9
<PAGE> 11
UNITED BANCORP, INC. FORM 10 - K
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
(1) Each individual has held the position noted during the past five
years, except for the following:
Harold W. Price has served as President and Chief Executive
Officer of The Citizens-State of Strasburg, Strasburg, Ohio and
as Vice President of United Bancorp, Inc. since April 1, 1993.
He has served as Vice President - Administration of United
Bancorp, Inc. since April 19, 1995.
James A. Lodes served as Vice President - Commercial Lending
since December 14, 1992 and as Senior Vice President - Lending
since June 14, 1994 with The Citizens Savings Bank of Martins
Ferry, Ohio and as Vice President - Lending for United Bancorp,
Inc. since April 19, 1995.
ITEM 11 EXECUTIVE COMPENSATION
Refer to Pages 7 - 14 of the Proxy Statement.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Refer to Pages 2 - 5 of the Proxy Statement.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Page 15 of the Proxy Statement.
Page 10
<PAGE> 12
UNITED BANCORP, INC. FORM 10 - K
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of Form 10-K
1. The following consolidated financial statements appear in the
1995 Annual Report To Shareholders and are incorporated by
reference:
Consolidated Balance Sheets, Page 8
Consolidated Statements Of Income, Page 9
Consolidated Statements Of Changes In Shareholders' Equity, Page 10
Consolidated Statements Of Cash Flows, Page 11
Notes To The Consolidated Financial Statements, Pages 12 - 27
Independent Auditors' Report, Page 28
2. Financial Statement Schedules
All schedules are omitted because they are not applicable or the
required information is included in the financial statements
presented in the Annual Report To Shareholders.
3. Exhibits
2 Not applicable.
3 (i)(ii) Articles of Incorporation of United Bancorp, Inc.,
including amendments and By- Laws, previously filed
with the Securities and Exchange Commission on
November 16, 1983.
4 Not applicable.
9 Not applicable.
10 Reference To Special Severance Agreement on Page 12 of
Proxy Statement.
11 Statement regarding computation of per share earnings
(included in Note 1 to the consolidated financial
statements).
12 Not applicable.
13 Reference to the Annual Report To Shareholders for the
fiscal year ended December 31, 1995.
16 Not applicable.
18 Not applicable.
21.1 Reference to The Citizens Savings Bank, Martins Ferry,
Ohio, incorporated on December 31, 1983, previously
filed with Securities and Exchange Commission.
21.2 Reference to The Citizens-State Bank of Strasburg, Ohio,
incorporated on December 31, 1924, previously filed
with Securities and Exchange Commission.
22 Not applicable.
23 Not applicable.
24 Not applicable.
27 Financial Data Schedule.
28 Not applicable.
99 Not applicable.
Page 11
<PAGE> 13
UNITED BANCORP, INC. FORM 10 - K
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
(b) Schedules And Reports On Form 8 - K
The Company filed no reports on SEC Form 8-K during the last quarter
of the period covered by this report.
Page 12
<PAGE> 14
UNITED BANCORP, INC. FORM 10 - K
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.
(REGISTRANT) UNITED BANCORP, INC.
By: March 12, 1996
------------------------------
Donald A. Davison, Chairman of the Board
By: March 12, 1996
------------------------------
James W. Everson, President and Chief
Executive Officer
By: March 12, 1996
------------------------------
Ronald S. Blake, Treasurer
By: March 12, 1996
------------------------------
Michael J. Arciello
By: March 12, 1996
------------------------------
Herman E. Borkoski
By: March 12, 1996
------------------------------
John H. Clark, Jr.
By: March 12, 1996
------------------------------
Dr. Leon F. Favede
By: March 12, 1996
------------------------------
Premo R. Funari
By: March 12, 1996
------------------------------
John M. Hoopingarner
By: March 12, 1996
------------------------------
Albert W. Lash
By: March 12, 1996
------------------------------
Richard L. Riesbeck
By: March 12, 1996
------------------------------
Matthew C. Thomas
Page 13
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit SK Item
No. Description 601 No.
------- ----------------------------- -------
<S> <C> <C>
13 Annual Report to Shareholders 13
23 Consents of Experts and Council 23
27 Financial Data Schedule 27
</TABLE>
<PAGE> 1
EXHIBIT 13
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 % CHANGE
-------- -------- -----------
<S> <C> <C> <C>
EARNINGS (in 000's)
Total Interest Income......................... $ 14,352 $ 12,283 16.84%
Total Interest Expense........................ 6,575 5,439 20.89%
Net Interest Income........................... 7,776 6,844 13.62%
Net Income.................................... 2,244 1,955 14.78%
PER SHARE
Net Income.................................... $1.21 $1.06 14.15%
Cash Dividends Paid........................... 0.42 0.31 35.48%
Book Value (end of period).................... 9.99 8.94 11.74%
AT YEAR END (in 000's)
Total Assets.................................. $191,200 $185,634 3.00%
Total Assets (average)........................ 190,976 176,039 8.49%
Deposits and Short-term Obligations........... 171,237 167,888 1.99%
Net Loans..................................... 120,907 106,952 13.05%
Investment Securities......................... 56,471 64,504 -12.45%
Shareholders' Equity.......................... 18,452 16,518 11.71%
Shareholders' Equity (average)................ 17,463 15,971 9.34%
STOCK DATA
Market Value (end of period)................... $12.75 18.50 -31.08%
Dividend Payout Ratio.......................... 34.58% 28.87% 19.78%
Price Earnings Ratio........................... 10.54X 17.45x
KEY PERFORMANCE RATIOS
Return on Average Assets....................... 1.18% 1.11% 6.31%
Return on Average Shareholders' Equity......... 12.85% 12.24% 4.98%
</TABLE>
1
<PAGE> 2
A MESSAGE FROM THE MANAGEMENT TEAM
[UNITED BANCORP LETTERHEAD]
To The Shareholders of United Bancorp, Inc.
Your Company's Management Team and Directors have achieved another year of
outstanding performance as outlined in the reports that follow. Net income is
up 14.78% with earnings per share moving from $1.06 to $1.21. Our Return on
Average Assets improved to 1.18% and Return on Average Equity improved to
12.85% compared to 1.11% and 12.24% in 1994. You as a shareholder have seen
your cash dividend increase from 31cents. per share to 42cents. per share, an
increase of 35.48%. With this increased dividend payment to our shareholders,
we continue to maintain a strong capital position with a Tier 1 risk based
capital ratio of 14.31%, substantially above the regulatory requirement of Tier
1 capital of 4%.
Contributing to our improved earnings are several factors. Operating
efficiencies are being achieved through the consolidation of the backroom
operations of our two subsidiary banks. We are currently performing the
regulatory reporting process and data processing for both subsidiary banks at
our Martins Ferry Operations Center and will be consolidating the item
processing function in the second quarter of this year. Our focus is to
eliminate costly duplication and maintain separate bank charters which allows
for a local commitment to service and decision making.
Our net interest spread has increased from 3.79% in 1994 to 3.86% in 1995
as a result of increased volume in lending and improved pricing in lending.
Both of our subsidiary banks recently became members of the Federal Home Loan
Bank which will give us greater flexibility in our liquidity management and
real estate mortgage product development. Through this membership, we will be
able to offer a fixed rate product in the residential real estate market to
improve our home loan product mix. We continued the growth trends reported
last year both in commercial and commercial real estate and indirect consumer
lending, with our commercial and commercial real estate loan portfolio growing
from $37.3 million to $46.3 million and our installment loan portfolio growing
from $38.5 million to $43.1 million. Asset quality remains very strong, with
less than .10% of our loan portfolio in a nonaccrual status. With our
continued growth in outstanding loans, our allowance for loan losses was
increased from $1.4 million to $1.8 million after taking net charge-offs in
1995 of $127,000. We are very proud of our loan personnel's attention to
documentation and loan servicing which is reflected in this positive portfolio
performance.
Our Directors held a retreat in November to develop a five year business
plan with a vision towards the 21st Century. A primary objective was the growth
in our shareholder value. With that focus, we have developed a Stock Option
Program for the Officers and Directors of United Bancorp, Inc. which will
reward for "stretch performance." Our goals are set at growing earnings by 15%
per year and assets by 21% per year compounded over the next five years. It is
obvious that your Company will have to continue its acquisition mode to reach
these performance levels. Although ambitious, our Shareholders, Directors and
Officers will all benefit when we are successful in meeting these goals and we
will assure our Company's continued existence as a regional community bank
holding company.
We have retooled our Operations Center to carry us forward in this five
year business plan. In November, we updated our data center to a new NCR 3525
operating system that gives us the capacity to grow with higher speed and
efficiency. Our customers will benefit as we move into our new item processing
systems that will provide for our customer statements to be rendered in check
image format. This new check imaging program will be introduced at our two
banks during the second quarter of this year and will provide a positive step
in distinguishing us from the competition.
2
<PAGE> 3
We are pleased to announce that you now can participate in a United
Bancorp, Inc. Dividend Reinvestment Plan (DRIP). In response to shareholder
recommendation at last year's Annual Shareholder Meeting, we introduced a
program in February 1996 which is Securities and Exchange Commission (SEC)
registered and Depository Trust Company (DTC) eligible. The program will
provide for an economical and convenient method for holders of shares of United
Bancorp stock to purchase additional shares of common stock at market prices
without the payment of brokerage commissions or service charges. Whether you
hold your certificates or have your stock in a brokered account, you may
participate by investing all or a part of your quarterly dividend.
Additionally, those participating directly through our Plan Administrator may
make optional cash purchases up to $5,000 per quarter. To receive a Prospectus
on our Dividend Reinvestment Plan, please write or call our Plan Administrator
listed on the last page of this report.
It is with sadness we report the loss of two friends who dedicated
themselves to the growth of our Company. Director Emeritus Dr. C. Donald
Messerly, who actively served from 1957 through 1987 and Director David W.
Totterdale, who actively served from 1981 through 1995, died during the past
year. Each made a serious commitment to the growth and development of The
Citizens Savings Bank and United Bancorp, Inc. Their counsel, dedication and
friendship will long be cherished and remembered.
Your Company considers its greatest asset to be its dedicated group of
Officers and Employees. To provide for their comfortable retirement, for many
years we have had a Defined Benefit Pension Plan that provides a retirement
income based on years of service with the Company and their compensation near
retirement. To compliment this benefit, we introduced a 401 (k) savings plan
to our staff in March 1995. Each Officer and Employee may now tax defer a
portion of their income into this program with the Company currently matching
the first 6% with 25cents. on each dollar. Those funds directed into the 401
(k) program may be invested in several opportunities including a United
Bancorp, Inc. stock fund. We are pleased to report that many of our employees
are now acquiring Company stock ownership through this new program.
We remain committed to our customers and to our stockholders. Your
Management Team and Directors are committed to increasing shareholder value.
Despite our positive results in 1995, our stock price ended the year lower than
at the start of the year. Our Market Makers tell us this is a result of the
fact that our stock is too infrequently traded. We appreciate the loyalty of
our stockholders and will continue to pay a good dividend as evidenced by this
years increase in cash payment and the 10% and two 100% share dividends paid in
three prior years. Our introduction of our Dividend Reinvestment Plan and 401
(k) Savings Plan brings two new ongoing buyers to the market. We are
communicating more closely with our Market Makers. All this is to increase
interest in our stock with the objective of increasing our trading activity and
produce a higher price on our stock.
Our future is promising and we accept the challenges before us.
Government will continue to regulate, competition from outside the banking
industry will grow and greater pressures will be brought upon all of us here at
the United Bancorp Banks to work harder and smarter. We have a plan, a system
and a bank team in place which are all dedicated to making things happen. We
are excited about our future!
/s/ JAMES W. EVERSON
James W. Everson
President & Chief Executive Officer
February 16, 1996
[Picture of United Bancorp Officers]
The Management Team of United Bancorp, Inc., left to
right: Harold W. Price, Vice President-Administration;
Norman F. Assenza, Jr., Vice President-Operations and
Secretary; James A. Lodes, Vice President-Lending;
James W. Everson, President and Chief Executive
Officer; Ronald S. Blake, Treasurer
3
<PAGE> 4
UNITED BANCORP, INC.
1995
<TABLE>
<CAPTION>
[PERFORMANCE GRAPH]
NET INCOME TOTAL ASSETS
<S> <C> <C> <C>
1995 2,244,292 1995 191,199,526
1994 1,955,085 1994 185,634,119
1993 1,727,778 1993 171,682,025
1992 1,571,504 1992 164,675,155
1991 1,283,000 1991 135,881,746
<CAPTION>
EQUITY CAPITAL LOANS OUTSTANDING (NET)
<S> <C> <C> <C>
1995 18,451,873 1995 120,907,269
1994 16,518,060 1994 106,952,378
1993 15,375,942 1993 86,696,640
1992 14,078,527 1992 79,642,462
1991 12,990,023 1991 77,137,769
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
[PERFORMANCE GRAPH]
CASH DIVIDENDS PAID RETURN ON AVERAGE ASSETS
<S> <C> <C> <C>
1995 776,136 1995 1.18%
1994 564,472 1994 1.11%
1993 512,400 1993 1.04%
1992 483,000 1992 1.01%
1991 462,000 1991 0.95%
<CAPTION>
SHAREHOLDER VALUE RETURN ON AVERAGE EQUITY
<S> <C> <C> <C>
1995 23,561,261 1995 12.85%
1994 34,186,927 1994 12.24%
1993 31,080,000 1993 11.73%
1992 15,960,000 1992 11.60%
1991 12,180,000 1991 10.21%
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
[PERFORMANCE GRAPH]
EARNINGS PER SHARE DIVIDENDS PER SHARE
<S> <C> <C> <C>
1995 1.21 1995 0.42
1994 1.06 1994 0.31
1993 0.94 1993 0.28
1992 0.85 1992 0.26
1991 0.69 1991 0.25
<CAPTION>
BOOK VALUE PER SHARE MARKET VALUE RANGE PER SHARE
<S> <C> <C> <C> <C>
1995 9.99 1995 12.75 19.50
1994 8.94 1994 17.75 22.50
1993 8.32 1993 9.09 16.82
1992 7.62 1992 6.25 8.64
1991 7.04 1991 5.91 6.59
</TABLE>
6
<PAGE> 7
Consolidated Balance Sheets........................................ 8
Consolidated Statements Of Income.................................. 9
Consolidated Statements Of Changes In Shareholders' Equity......... 10
Consolidated Statements Of Cash Flows.............................. 11
Notes To The Consolidated Financial Statements..................... 12 - 27
Independent Auditors' Report....................................... 28
Management's Discussion And Analysis............................... 29 - 41
Our Hometown Roots................................................. 42 - 43
A Decade Of Progress............................................... 44 - 45
Banking Locations.................................................. 46 - 47
Directors And Officers............................................. 48 - 51
Shareholder Information............................................ 52
7
<PAGE> 8
<TABLE>
<CAPTION>
December 31,
-------------------------------
1995 1994
---------- -----------
<S> <C> <C>
ASSETS
Cash And Due From Banks (Notes 10 and 11)........................... $ 6,382,420 $ 6,680,300
Federal Funds Sold.................................................. 600,000 50,000
------------- ------------
TOTAL CASH AND CASH EQUIVALENTS 6,982,420 6,730,300
Investment Securities Available For Sale (Note 3)................. 27,108,268 13,242,561
Investment Securities Held To Maturity (Note 3)
(Estimated Fair Value of $29,985,912 in 1995 and
$49,579,849 in 1994).......................................... 29,362,237 51,261,019
Total Loans (Notes 4 and 8)......................................... 122,682,656 108,436,538
Unearned Interest............................................... (4) (46,426)
Allowance For Loan Losses (Note 5).............................. (1,775,383) (1,437,734)
------------- ------------
Net Loans........................................................... 120,907,269 106,952,378
Premises And Equipment, Net (Note 6)................................ 4,901,237 4,937,276
Accrued Interest Receivable And Other Assets (Note 2)............... 1,938,095 2,510,585
------------- ------------
TOTAL ASSETS $ 191,199,526 $185,634,119
============= ============
LIABILITIES
Non-Interest Bearing Demand Deposits................................ $ 12,617,089 $ 12,781,904
Interest Bearing Demand Deposits.................................... 25,429,547 24,648,603
Savings Deposits.................................................... 51,391,462 54,111,128
Time Deposits - Under $100,000...................................... 65,505,440 61,048,975
Time Deposits - $100,000 And Over................................... 11,660,821 10,721,872
------------- ------------
TOTAL DEPOSITS 166,604,359 163,312,482
Short-Term Obligations
Short-Term Borrowings (Notes 3 And 8)............................. 4,568,738 4,060,752
U. S. Treasury Note Account....................................... 63,502 515,152
Accrued Expenses And Other Liabilities.............................. 1,511,054 1,227,673
------------- ------------
TOTAL BORROWINGS AND OTHER LIABILITIES 6,143,294 5,803,577
------------- ------------
TOTAL LIABILITIES 172,747,653 169,116,059
------------- ------------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
SHAREHOLDERS' EQUITY (NOTES 1 AND 12)
Common Stock ($1 Par Value) 10,000,000 Shares Authorized;
Issued And Outstanding: 1,847,942 Shares In 1995 and 1994......... 1,847,942 1,847,942
Additional Paid-In-Capital.......................................... 9,358,840 9,358,840
Retained Earnings................................................... 6,945,892 5,477,736
Unrealized Gain/(Loss) On Securities Available For Sale, Net
Of Tax............................................................ 299,199 (166,458)
------------- ------------
TOTAL SHAREHOLDERS' EQUITY 18,451,873 16,518,060
------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $191,199,526 $185,634,119
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
8
<PAGE> 9
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
----------- ---------- ------------
<S> <C> <C> <C>
INTEREST INCOME
Interest And Fees On Loans.................................. $10,496,510 $ 8,439,969 $ 7,426,027
Interest On Investment Securities
Taxable.................................................. 2,799,719 2,658,586 2,902,717
Nontaxable............................................... 966,434 973,934 808,542
Interest On Federal Funds Sold.............................. 88,859 210,771 519,050
----------- ----------- -----------
TOTAL INTEREST INCOME 14,351,522 12,283,260 11,656,336
INTEREST EXPENSE
Interest On Deposits
Demand................................................... 646,829 605,018 642,605
Savings.................................................. 1,577,797 1,463,209 1,352,357
Time..................................................... 4,041,388 3,252,781 3,212,725
Other Interest Expense...................................... 309,472 118,205 52,152
----------- ---------- -----------
TOTAL INTEREST EXPENSE 6,575,486 5,439,213 5,259,839
----------- ---------- -----------
NET INTEREST INCOME 7,776,036 6,844,047 6,396,497
PROVISION FOR LOAN LOSSES (NOTE 5)............................ 465,000 281,000 270,500
----------- ---------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES........... 7,311,036 6,563,047 6,125,997
----------- ---------- -----------
NONINTEREST INCOME
Service Charges On Deposit Accounts......................... 564,206 440,789 387,562
Investment Securities Gains, Net............................ 10,836 103,657 286,463
Other ..................................................... 360,672 314,951 204,706
----------- ---------- -----------
TOTAL NONINTEREST INCOME 935,714 859,397 878,731
NONINTEREST EXPENSE
Salaries And Employee Benefits (Note 9)..................... 2,611,670 2,302,837 2,216,409
Occupancy................................................... 761,935 780,817 792,119
Insurance................................................... 278,479 464,255 426,716
Franchise And Other Taxes................................... 244,966 228,081 257,442
Advertising................................................. 144,089 140,710 139,700
Stationery And Office Supplies.............................. 138,512 114,345 125,812
Other....................................................... 1,054,230 890,791 841,547
----------- ---------- -----------
TOTAL NONINTEREST EXPENSE 5,233,881 4,921,836 4,799,745
----------- ---------- -----------
INCOME BEFORE INCOME TAXES AND ACCOUNTING CHANGE.............. 3,012,869 2,500,608 2,204,983
INCOME TAXES (NOTE 7)......................................... 768,577 545,523 504,046
----------- ---------- -----------
INCOME BEFORE ACCOUNTING CHANGE 2,244,292 1,955,085 1,700,937
CUMULATIVE EFFECT OF ACCOUNTING CHANGE........................ 26,841
----------- ---------- -----------
NET INCOME $ 2,244,292 $1,955,085 $ 1,727,778
=========== ========== ===========
EARNINGS PER COMMON SHARE (NOTE 1)
Income Before Accounting Change .......................... $ 1.21 $ 1.06 $ 0.92
Cumulative Effect Of Accounting Change........................ 0.02
----------- ---------- -----------
NET INCOME.................................................... $ 1.21 $ 1.06 $ 0.94
=========== ========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
9
<PAGE> 10
<TABLE>
<CAPTION>
For The Years Ended December 31, 1995, 1994 and 1993
--------------------------------------------------------------------------
UNREALIZED
GAIN/(LOSS)
ADDITIONAL ON SECURITIES TOTAL
COMMON PAID - IN RETAINED AVAILABLE SHAREHOLDERS'
STOCK CAPITAL EARNINGS FOR SALE EQUITY
---------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1993 $ 840,000 $6,000,000 $7,238,527 $14,078,527
Net Income ................................ 1,727,778 1,727,778
100% Stock Split, Effected In The
Form Of A Stock Dividend (Note 1)......... 840,000 (840,000)
Cash Dividends Declared @ $0.28
Per Share................................ (512,400) (512,400)
Unrealized Gain On Securities
Available For Sale At December 31, 1993.. $ 82,037 82,037
---------- ---------- ---------- --------- -----------
BALANCE AT DECEMBER 31, 1993.............. 1,680,000 6,000,000 7,613,905 82,037 15,375,942
Net Income................................. 1,955,085 1,955,085
10% Stock Dividend (Note 1)................ 167,942 3,358,840 (3,526,782)
CASH Paid In Lieu Of Fractional Shares
On 10% Stock Dividend................... (1,073) (1,073)
Cash Dividends Declared @ $0.31
Per Share............................... (563,399) (563,399)
Change In Unrealized Gain/(Loss) On
Securities Available For Sale (248,495) (248,495)
---------- ---------- ---------- --------- -----------
BALANCE AT DECEMBER 31, 1994.............. 1,847,942 9,358,840 5,477,736 (166,458) 16,518,060
Net Income................................. 2,244,292 2,244,292
Cash Dividends Declared @ $0.42
Per Share........................... (776,136) (776,136)
Change In Unrealized Gain/(Loss) On
Securities Available For Sale....... 465,657 465,657
---------- ---------- ---------- --------- -----------
BALANCE AT December 31, 1995.............. $1,847,942 $9,358,840 $6,945,892 $ 299,199 $18,451,873
========== ========== ========== ========= ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
10
<PAGE> 11
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES 1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net Income....................................................... $ 2,244,292 $ 1,955,085 $ 1,727,778
Adjustments To Reconcile Net Income To Net Cash From Operating
Activities
Depreciation And Amortization................................. 354,291 420,541 392,719
Amortization Of Intangibles................................... 93,191 67,601 63,900
Provision For Loan Losses..................................... 465,000 281,000 270,500
Deferred Taxes................................................ (74,104) 82,850 (94,225)
Cumulative Effect Of Accounting Change ....................... (26,841)
Federal Home Loan Bank Stock Dividend......................... (9,500)
Gain On Sale Of Investment Securities, Net.................... (10,836) (103,657) (286,463)
Amortization Of Investment Securities, Net.................... 68,082 189,340 236,107
Net Change In
Accrued Interest Receivable And Other Assets............. 479,299 (829,782) 88,091
Accrued Expenses And Other Liabilities................... 117,602 90,092 (23,705)
----------- ----------- -----------
NET CASH FROM OPERATING ACTIVITIES 3,727,317 2,153,070 2,347,861
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment Securities Available For Sale
Proceeds From Sales Of Investment Securities (Note 3).... 1,500,313 2,335,375
Proceeds From Maturities/Calls Of Investment Securities.. 1,750,941
Purchase Of Investment Securities........................ (3,034,800) (14,042,213)
Investment Securities Held To Maturity
Proceeds From Sales Of Investment Securities (Note 3).... 1,212,313 1,595,107
Proceeds From Maturities/Calls Of Investment Securities.. 9,590,396 11,670,596 14,129,800
Purchase Of Investment Securities........................ (1,115,981) (7,512,962) (17,456,865)
Net Change In Loans........................................... (14,419,891) (19,965,781) (7,324,678)
Property And Equipment Expenditures........................... (318,252) (239,518) (433,546)
----------- ----------- -----------
NET CASH FROM INVESTING ACTIVITIES (6,047,274) (26,542,190) (9,490,182)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change In Deposits........................................ 3,291,877 3,735,120 6,685,823
Net Change In Repurchase Agreements And Borrowed Funds........ 56,336 1,784,755 (873,859)
Cash And Cash Equivalents Received From
Deposit Assumptions, Net Of Assets Acquired (Note 2)....... 6,255,044
Cash Dividends................................................ (776,136) (564,472) (512,400)
----------- ----------- -----------
NET CASH FROM FINANCING ACTIVITIES 2,572,077 11,210,447 5,299,564
----------- ----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS............................ 252,120 (13,178,673) (1,842,757)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR..................... 6,730,300 19,908,973 21,751,730
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR........................... $ 6,982,420 $ 6,730,300 $19,908,973
=========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
11
<PAGE> 12
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
in the preparation of the accompanying consolidated financial statements.
NATURE OF OPERATIONS
The accompanying consolidated financial statements include the accounts
of UNITED BANCORP, INC. (COMPANY) and its wholly-owned subsidiaries, THE
CITIZENS SAVINGS BANK, MARTINS FERRY, OHIO (CITIZENS-MARTINS FERRY) and THE
CITIZENS-STATE BANK OF STRASBURG, OHIO (CITIZENS-STRASBURG). For purposes of
consolidation, all significant intercompany balances and transactions have
been eliminated.
The COMPANY is engaged in the business of commercial and retail banking
in Belmont, Tuscarawas and Carroll Counties and the surrounding localities.
The Banks provide a broad range of banking and financial services, which
include accepting demand, savings and time deposits and granting
commercial, real estate and consumer loans. CITIZENS-MARTINS FERRY conducts
its business through its main office in Martins Ferry, Ohio and two
branches located in Bridgeport and Colerain, Ohio. CITIZENS-STRASBURG
conducts its business through its main office in Strasburg, Ohio and its
four branches located in Dover, New Philadelphia, Sherrodsville and
Dellroy, Ohio.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
In preparing financial statements, management must make estimates and
assumptions. These estimates and assumptions affect the amounts reported
for assets, liabilities, revenues and expenses, as well as affecting the
disclosures provided. Future results could differ from the current
estimates.
Areas involving the use of management's estimates and assumptions
include the allowance for loan losses, fair values of certain securities,
the determination and carrying value of impaired loans, the determination
of other-than-temporary reductions in the fair value of securities,
recognition and measurement of loss contingencies, depreciation of premises
and equipment, the carrying value and amortization of intangibles, the
actuarial present value of pension benefit obligations, net periodic
pension expense and accrued pension costs recognized in the COMPANY'S
financial statements.
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 shareholders' 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 in 1995 or 1994.
At December 31, 1993, the COMPANY adopted Statement of Financial
Accounting Standards ("SFAS") No. 115 and accordingly classified its
securities into the categories discussed above. Prior to this date,
securities were reported at amortized cost except for securities
held-for-sale, which were reported at the lower of cost or market. This
reclassification increased equity by $82,037 at December 31, 1993, the
after-tax effect of the adjustment from amortized cost to fair value for
securities available-for-sale at that date.
12
<PAGE> 13
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENT SECURITIES (CONTINUED)
The Financial Accounting Standards Board ("FASB") issued a Question And
Answer interpretation of SFAS No. 115 in November 1995. Based upon the
reading thereof and in accordance with the provision of this implementation
guidance, the COMPANY performed a one-time reassessment of the
appropriateness of its securities classifications and transferred
$13,325,238 from held-to-maturity to available-for-sale. As a result of
the transfer, shareholders' equity was increased by $63,815, which was the
after tax effect of the net unrealized gain on the securities reclassified.
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.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses represents that amount which management
and the Board of Directors estimates is adequate to provide for inherent
losses in its loan portfolio. The allowance balance and the annual
provision charged to expense are reviewed by management and the Board of
Directors, monthly, using a risk code model that considers past due
experience, economic conditions and various other circumstances that are
subject to change over time.
The COMPANY adopted 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. The effect of
adopting these standards had no impact on the COMPANY'S allowance for loan
losses at January 1, 1995.
Management analyzes commercial and commercial real estate loans on an
individual basis and classifies a loan as impaired when an analysis of the
borrower's operating results and financial condition indicates that
underlying cash flows are not adequate to meet its debt service
requirements. Often this is associated with a delay or shortfall in
payments of 30 days or more. Smaller-balance homogeneous loans are
evaluated for impairment in total. Such loans include residential first
mortgage loans secured by one-to-four family residences, residential
construction loans, consumer automobile, boat and home equity loans.
Loans are generally moved to nonaccrual status when 90 days or more past
due. These loans are often also considered impaired. Impaired loans, or
portions thereof, are charged-off when deemed uncollectible. The nature of
disclosures for impaired loans is considered generally comparable to prior
nonaccrual loans and non-performing and past due asset disclosures.
INTEREST AND FEES ON LOANS
Interest income on loans is accrued over the term of the loans based on
the principal amount outstanding. The accrual of interest is discontinued
and adjusted back to the date of non-payment when, in management's opinion,
the collection of all or a portion of the loan principal has become
doubtful. 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 consolidated balance sheets as part of loans.
Under SFAS No. 114, as amended by SFAS No. 118, the carrying values of
impaired loans are periodically adjusted to reflect cash payments, revised
estimates of future cash flows and increases in the present value of
expected cash flows due to the passage of time. Cash payments representing
interest income are reported as such and other cash payments are reported
as reductions in carrying value. Increases or decreases in carrying value
due to changes in estimates of future payments or the passage of time are
reported reductions or increases in bad debt expense.
13
<PAGE> 14
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 fair 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 December 31, 1995 and 1994.
INCOME TAXES
Effective January 1, 1993, the COMPANY adopted SFAS No. 109,
"Accounting for Income Taxes," which requires that the COMPANY follow 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. The effect on years
prior to 1993 of changing to this method was a $26,841 benefit and this
amount is reflected in the consolidated statements of income as the
cumulative effect of accounting change.
EARNINGS AND DIVIDENDS PER COMMON SHARE
Earnings per common share have been computed based on the weighted
average number of shares outstanding during the years presented. The
weighted average number of shares used in the computation of earnings per
share was 1,847,942 for each of the three years ended December 31, 1995,
1994 and 1993.
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. 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.
STATEMENTS 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. During 1995, 1994 and 1993, the COMPANY paid $6,582,399,
$5,392,584 and $5,295,500 in interest on deposits and short-term borrowings
and $768,000, $583,500 and $600,688 for income taxes, respectively.
Transfers of investment securities from held-to-maturity to
available-for-sale as a part of the one-time transfer allowed by the FASB's
Question And Answer Implementation Guide to SFAS No. 115 were $13,325,238.
Transfers of investment securities held-for-sale to investment securities
available-for-sale were $1,872,031 during 1993 in conjunction with the
initial adoption of SFAS No. 115.
14
<PAGE> 15
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL STATEMENT PRESENTATION
Certain items in the 1994 and 1993 financial statements have been
reclassified to correspond with the 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.
2. BRANCH ACQUISITION
On 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>
<CAPTION>
ASSETS LIABILITIES
<S> <C> <C> <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 ----------
Intangible Assets 140,000 TOTAL DEPOSITS 7,242,892
Other Assets 4,171
---------- Other Liabilities 2,280
TOTAL ASSETS $7,245,172 ----------
========== TOTAL LIABILITIES $7,245,172
==========
</TABLE>
The intangible assets from this acquisition and the previous
acquisition of two branch banking facilities from Society National Bank of
Cleveland, Ohio in March of 1992 are included in Other Assets in the
accompanying consolidated balance sheets and are summarized as follows at
December 31, 1995 and 1994, net of accumulated amortization:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Non-Compete Agreements $ 62,485 $112,489
Core Deposit Intangibles 172,666 206,326
--------- --------
$ 235,151 $318,815
========= ========
</TABLE>
The covenant not to compete is being amortized on a straight-line
method over five years and the core deposit intangibles are being amortized
on an accelerated method over eight years. Amortization expense for these
items totaled $83,664, $62,644 and $62,644, respectively, for the years
ended December 31, 1995, 1994 and 1993.
15
<PAGE> 16
3. INVESTMENT SECURITIES
The amortized cost and estimated fair values of investment securities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES AVAILABLE FOR SALE
U. S. Treasury obligations....................... $ 6,937,596 $ 171,964 $ (4,061) $ 7,105,499
U. S. Agency Obligations......................... 18,789,021 270,386 (1,779) 19,057,628
State And Municipal Obligations.................. 336,419 16,822 353,241
Other Investments................................ 591,900 591,900
------------ --------- ----------- ------------
TOTAL INVESTMENT SECURITIES AVAILABLE FOR SALE.. $ 26,654,936 $ 459,172 $ (5,840) $ 27,108,268
============ ========= =========== ============
INVESTMENT SECURITIES HELD TO MATURITY
U.S. Agency Obligations.......................... $ 12,397,123 $ 8,533 $ (84,591) $ 12,321,065
State And Municipal Obligations.................. 16,965,114 749,374 (49,641) 17,664,847
------------ --------- ----------- ------------
TOTAL INVESTMENT SECURITIES HELD TO MATURITY.... $ 29,362,237 $ 757,907 $ (134,232) $ 29,985,912
============ ========= =========== ============
<CAPTION>
DECEMBER 31, 1994
---------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES AVAILABLE FOR SALE
U.S. Treasury Obligations......................... $ 2,427,438 $ (27,282) $ 2,400,156
U.S. Agency Obligations........................... 10,686,024 $ 2,830 (217,334) 10,471,520
State And Municipal Obligations................... 336,207 (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 And 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>
Total proceeds from sales of investment securities classified as
available-for-sale for the year ended December 31, 1995 were $1,500,313.
Gross gains of $10,825 were realized on those sales. One other investment
security sold during 1995 was classified in the held-to-maturity category at
the time of sale. The sale occurred within 90 days of the maturity date of
the investment security and therefore was considered a maturity under the
provisions of SFAS No. 115 and is classified as such in the consolidated
statements of cash flows. Proceeds from the sale of the security were
$1,007,187, with $11 recorded as gross gains.
16
<PAGE> 17
3. INVESTMENT SECURITIES (CONTINUED)
During the year ended December 31, 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. Government 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 period ended
December 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.
Two additional investment securities sold during 1994 were classified
in the held-to-maturity category at the time of sale. The sales occurred
within 90 days of the maturity date of the investment securities and
therefore were considered maturities under the provisions of SFAS No. 115
and are classified as such in the consolidated statements of cash flows.
Proceeds from the sales of these securities were $2,005,196, with $5,057
recorded as gross gains.
Proceeds from sales of investment securities classified as
available-for-sale during 1994 were $2,335,375. Gross gains of $46,186 and
gross losses of $3,539 were realized on those sales. Proceeds from sales
of investment securities during 1993 were $1,595,107. Gross gains of
$286,463 were realized on those sales.
The amortized cost and estimated fair value of debt securities at
December 31, 1995, by contractual maturity is shown in the following table.
Actual maturities will differ from contractual maturities because issuers
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 investment securities
available-for-sale have been computed on the basis of amortized cost.
Yields on tax-exempt securities have been computed on a tax equivalent
basis.
17
<PAGE> 18
3. INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED WEIGHTED AVERAGE
COST FAIR VALUE AVERAGE MATURITY T/E YIELD
----------- ----------- ----------------------- ------------
<S> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Treasury obligations
Within One Year............................. $ 2,252,294 $ 2,258,905 6.9 Mos. 5.85%
One Through Two Years....................... 1,495,865 1,519,062 1 Yr. 1.7 Mos. 6.70%
Two Through Five Years...................... 3,189,437 3,327,532 2 Yrs. 11.4 Mos. 7.04%
----------- ----------- ---------------------- -----
TOTAL.................................. 6,937,596 7,105,499 1 Yr. 9.7 Mos. 6.59%
=========== =========== ====================== =====
U.S. Agency Obligations
Within One Year............................. 4,009,986 4,059,218 7.0 Mos. 7.36%
One Through Two Years....................... 4,502,690 4,629,846 1 Yr. 7.1 Mos. 6.87%
Two Through Five Years...................... 4,778,701 4,868,408 3 Yrs. 3.9 Mos. 6.605
Five Through Ten Years...................... 5,497,644 5,500,156 8 Yrs. 2.5 Mos. 6.64%
----------- ----------- ---------------------- -----
TOTAL.................................. 18,789,021 19,057,628 3 Yrs. 8.1 Mos. 6.84%
=========== =========== ====================== =====
State And Municipal Obligations
FIVE THROUGH TEN YEARS...................... 336,419 353,241 8 Yrs. 11. 3 Mos. 8.37%
----------- ----------- ---------------------- -----
Other Investments
Equity Securities............................ 591,900 591,900
----------- ----------- ---------------------- -----
TOTAL INVESTMENT SECURITIES AVAILABLE FOR SALE... $26,654,936 $27,108,268 3 Yrs. 3.0 Mos. 6.79%
=========== =========== ====================== =====
HELD TO MATURITY
U.S. Agency Obligations
Within One Year............................ $ 1,500,000 $ 1,495,781 5.7 Mos. 5.39%
One Through Two Years...................... 1,799,104 1,789,202 1 Yr. 6.2 Mos. 5.32%
Two Through Five Years..................... 8,598,211 8,529,831 2 Yrs. 8.6 Mos. 5.26%
Five Through Ten Years..................... 499,808 506,251 5 Yrs. 5.4 Mos. 8.71%
----------- ----------- ---------------------- -----
TOTAL................................. 12,397,123 12,321,065 2 Yrs. 4.6 Mos. 5.42%
=========== =========== ====================== =====
State And Municipal Obligations
Within One Year............................ 1,003,945 1,006,573 9.8 Mos. 6.29%
One Through Two Years...................... 639,359 636,658 1 Yr. 8.5 Mos. 6.68%
Two Through Five Years..................... 4,356,565 4,577,796 4 Yrs. 2.4 Mos. 8.62%
Five Through Ten Years..................... 10,865,245 11,351,106 7 Yrs. 1.3 Mos. 8.28%
Over Ten Years............................. 100,000 92,714 10 Yrs. 10.0 Mos. 7.19%
----------- ----------- ---------------------- -----
TOTAL................................. 16,965,114 17,664,847 5 Yrs. 9.7 Mos. 8.18%
----------- ----------- ---------------------- -----
TOTAL INVESTMENT SECURITIES HELD TO MATURITY.... $29,362,237 $29,985,912 4 Yrs. 4.3 Mos. 7.01%
=========== =========== ====================== =====
</TABLE>
Securities with a par value of approximately $22,485,000 at December
31, 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.
18
<PAGE> 19
4. LOANS
Loan balances by type of loan are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1995 1994
----------------------------
<S> <C> <C>
Commercial Loans..................... $ 10,802,226 $ 8,815,633
Commercial Real Estate Loans......... 35,510,290 28,514,760
Real Estate Loans.................... 33,293,663 32,585,377
Installment Loans.................... 43,076,477 38,520,768
------------ ------------
TOTAL LOANS..................... $122,682,656 $108,436,538
============ ============
</TABLE>
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 businesses, and other entities in which they own more than a 10%
voting interest, are summarized below:
<TABLE>
<S> <C>
Aggregate Balance - January 1, 1995....... $ 2,471,043
New Loans................................. 1,349,075
Repayments................................ (847,610)
-----------
AGGREGATE BALANCE - DECEMBER 31, 1995..... $ 2,972,508
===========
</TABLE>
5. ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ----------
<S> <C> <C> <C>
Balance - January 1,................... $ 1,437,734 $ 1,256,322 $ 1,039,360
Provision For Loan Losses.............. 465,000 281,000 270,500
Loans Charged-Off...................... (151,200) (123,312) (79,131)
Recoveries............................. 23,849 23,724 25,593
------------ ------------ ------------
BALANCE - DECEMBER 31,................. $ 1,775,383 $ 1,437,734 $ 1,256,322
============ ============ ============
</TABLE>
There were no loans at December 31, 1995 for which impairment was
required to be evaluated on an individual, loan by loan basis. The average
outstanding balance of impaired loans for the year ended December 31, 1995
was $159,000. Interest recognized on a cash received basis on impaired
loans during 1995 was $9,000. No additional interest income was recognized
on impaired loans during 1995.
19
<PAGE> 20
6. PREMISES AND EQUIPMENT
Premises and equipment, at cost, and accumulated depreciation are
detailed as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
--------- ----------
<S> <C> <C>
Buildings And Land................................................. $5,302,750 $5,261,772
Furniture And Equipment............................................ 2,224,331 2,033,267
Computer Software.................................................. 385,587 318,490
---------- ----------
TOTAL............................................................ 7,912,668 7,613,529
Accumulated Depreciation And Amortization.......................... 3,011,431 2,676,253
---------- ----------
PREMISES AND EQUIPMENT - NET..................................... $4,901,237 $4,937,276
========== ==========
</TABLE>
7. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Current Expense........................................... $842,681 $462,673 $598,271
Deferred Expense/(Benefit)................................ (74,104) 82,850 (94,225)
-------- -------- --------
TOTAL INCOME TAX EXPENSE............................. $768,577 $545,523 $504,046
======== ======== ========
</TABLE>
The sources of gross deferred tax assets and gross deferred tax
liabilities are as follows:
<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
ITEMS GIVING RISE TO DEFERRED TAX ASSETS
Allowance For Loan Losses In Excess Of Tax Reserve ............. $ 495,261 $ 380,460
Amortization Of Intangibles .................................... 53,087 35,774
Unrealized Loss On Investment Securities Available For Sale .... 85,751
Other .......................................................... 4,910 8,374
--------- ---------
TOTAL DEFERRED TAX ASSETS .................................. 553,528 510,359
ITEMS GIVING RISE TO DEFERRED TAX LIABILITIES
Depreciation ................................................... (408,010) (381,806)
Deferred Loan Costs, Net ....................................... (159,390) (135,894)
Unrealized Gain On Investment Securities Available For Sale .... (154,133)
Investment Accretion ........................................... (26,945) (7,630)
Accrued Incentive Awards ....................................... (17,699)
Other ......................................................... (3,230)
--------- ---------
TOTAL DEFERRED TAX LIABILITIES ............................ (751,708) (543,029)
--------- ---------
NET DEFERRED TAX LIABILITY ................................. $(198,450) $ (32,670)
========= =========
</TABLE>
20
<PAGE> 21
7. INCOME TAXES (CONTINUED)
The differences between the financial statement expense and amounts
computed by applying the Federal income tax rate to income before income
taxes are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- ------- --------
<S> <C> <C> <C>
Statutory Rate.................................................... 34.00% 34.00% 34.00%
Income Taxes Computed At The Statutory Federal Tax Rate........... $1,024,375 $ 850,206 $ 749,694
Add/(Subtract) Tax Effect Of:
Tax Exempt Interest Income...................................... (291,334) (297,563) (255,279)
Other........................................................... 35,536 (7,120) 9,631
---------- --------- ---------
TOTAL INCOME TAX EXPENSE..................................... $ 768,577 $ 545,523 $ 504,046
========== ========= =========
</TABLE>
8. OTHER BORROWINGS
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 and National Bank of Detroit, Detroit, Michigan. At
December 31, 1995 and 1994, there were no borrowings outstanding under
these lines of credit.
The COMPANY'S subsidiary Banks are members of the Federal Home Loan Bank
of Cincinnati, Ohio ("FHLB"). As members of the Federal Home Loan Bank
system, the Banks have the ability to obtain up to 25% of their total
assets in advances from the FHLB based on share ownership and 1-4 family
residential real estate loan collateral availability. At December 31,
1995, CITIZENS-STRASBURG had a $100,000 variable-rate advance with an
original maturity of less than 90 days. The borrowing rate was 6.23% at
December 31, 1995. There were no advances outstanding at December 31,
1994. Advances under the borrowing agreements are collateralized by a
blanket pledge of each Bank's 1-4 family residential real estate loan
portfolio and FHLB stock.
Other borrowings also consist of securities sold under agreements to
repurchase and Federal funds purchased. At December 31, 1995 and 1994,
repurchase agreements totaled $4,468,738 and $3,310,752, respectively.
There were no Federal funds purchased at December 31, 1995. Federal funds
purchased totaled $750,000 at December 31, 1994.
9. BENEFIT PLANS
The COMPANY sponsors a defined benefit pension plan that covers all
employees of the Banks who have completed 1,000 hours of service during an
anniversary year, measured from their date of hire, who have attained age
21 and who were hired before age 60. The plan calls for benefits to be
paid to eligible employees at retirement, based primarily upon years of
service with the COMPANY and compensation rates near retirement.
Contributions to the plan reflect benefits attributed to employees'
services to date, as well as services expected to be earned in the future.
Plan assets consist of primarily common stock and certificates of deposit.
21
<PAGE> 22
9. BENEFIT PLANS (CONTINUED)
Pension expense for 1995, 1994 and 1993 includes the following:
<TABLE>
<CAPTION>
1995 1994 1993
------- -------- ---------
<S> <C> <C> <C>
Service Cost Of The Current Period.......................................... $ 97,200 $ 84,400 $ 80,100
Interest Cost On The Projected Benefit Obligation........................... 88,100 79,300 81,300
Return On Assets Held In The Plan........................................... (91,700) (80,900) (74,500)
Net Amortization Of Prior Service Cost, Transition Liability And Net Gain... 3,900 3,900 3,900
--------- --------- --------
PENSION EXPENSE......................................................... $ 97,500 $ 86,700 $ 90,800
========= ========= ========
</TABLE>
The following sets forth the funded status of the plan and the amounts
included in the accompanying Consolidated Balance Sheets at December 31, 1995
and 1994:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Actuarial Present Value Of Benefit Obligations
Vested Benefits............................................................. $ 989,000 $ 885,200
Nonvested Benefits.......................................................... 65,400 61,600
---------- ----------
Accumulated Benefit Obligation......................................... 1,054,400 946,800
Effect Of Anticipated Future Compensation Levels............................ 323,200 341,300
---------- ----------
Projected Benefit Obligation........................................... 1,377,600 1,288,100
Fair Value Of Assets Held In Plan................................................ 1,443,300 1,276,700
---------- ----------
DIFFERENCE BETWEEN PROJECTED BENEFIT OBLIGATION AND FAIR
VALUE OF PLAN ASSETS...................................................... $ (65,700) $ 11,400
========== ==========
</TABLE>
The components of the prepaid/accrued pension expense consists of the
following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Projected Benefit Obligation In excess Of Plan Assets.......................... $ (65,700) $ 11,400
Unamortized Prior Service Cost................................................. (11,500) (13,400)
Net Unrecognized Gain From Past Experience Different Than Assumed.............. 98,200 10,400
Unamortized Liability At Transition............................................ (10,900) (12,900)
----------- ----------
(PREPAID)/ACCRUED PENSION EXPENSE......................................... $ 10,100 $ (4,500)
=========== ==========
</TABLE>
Significant assumptions used:
<TABLE>
<CAPTION>
1995 1994 1993
------ ----- ------
<S> <C> <C> <C>
Discount Rate................................................................. 7.00% 7.00% 7.00%
Rate Of Increase In Compensation Levels....................................... 4.50% 4.50% 4.50%
Expected Long-Term Rate Of Return On Assets................................... 7.00% 7.50% 7.50%
</TABLE>
The COMPANY uses the straight-line method of amortization for prior service
cost and unrecognized gains and losses.
22
<PAGE> 23
9. BENEFIT PLANS (CONTINUED)
The COMPANY adopted a 401(k) savings plan in March of 1995 covering
all employees who have attained the age of 21 and have completed one year
of service. Eligible employees may contribute up to 15% of their
compensation subject to a maximum statutory limitation. The COMPANY may
make a discretionary matching contribution equal to a percentage of each
participant's elective deferral not to exceed 6% of the participant's
annual compensation. Employee contributions are always vested. Employer
matching contributions become 100% vested after 5 years of service. The
COMPANY'S matching percentage in 1995 was 25% of the employee's
contribution. Contributions made by the COMPANY were $19,951 for the year
ended December 31, 1995.
The COMPANY adopted a nonqualified stock option plan on November 21,
1995, subject to shareholder approval. Options granted under this plan
shall not exceed 5% of the total number of shares of Common Stock
outstanding at the date of grant. The option purchase price shall be
determined by a committee, but shall be no less than 100% of the fair
market value of the shares on the date of grant. Generally, no stock
option will be exercisable after the expiration of ten years from the date
it is granted. The options become exercisable in whole at the end of nine
years and three months except to the extent certain performance goals are
achieved, thereby allowing the options to be exercised in whole or in part
in five years.
The COMPANY entered into special severance agreements with certain
officers on November 21, 1995. The agreements are for a one year period
and shall extend automatically for another year unless notice is given not
later than June 30. No benefits are payable unless there has been a
change in control of the COMPANY and change in duties of the officers.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 encourages, but does not require,
entities to use a "fair value based method" to account for stock-based
compensation plans. If the fair value accounting encouraged by SFAS No.
123 is not adopted, entities must still disclose the pro forma effect on
net income and on earnings per share had the accounting method been
adopted. Fair value of a stock option is to be estimated using an
option-pricing model, such as Black-Scholes, that considers: exercise
price, expected life of the option, current price of the stock, expected
price volatility, expected dividends on the stock, and the risk-free
interest rate. Once estimated, the fair value of an option is not later
changed. This statement is effective for fiscal years beginning after
December 15, 1995. The COMPANY does not anticipate using the fair value
based method to account for the stock option plan, but will disclose the
pro forma effect on net income and on earnings per share had the
accounting method been adopted.
10. 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. A summary
of these commitments and contingent liabilities is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
Commitments To Extend Credit.................. $ 11,833,000 $ 8,371,000
Standby Letters Of Credit..................... 286,000 171,000
</TABLE>
23
<PAGE> 24
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The interest rates on commitments ranged from 6.19% to 11.50% at
December 31, 1995. Loan commitments are for one year or less.
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.
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 December 31 1995 and 1994, the COMPANY was required to have $694,000
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.
11 CONCENTRATION OF CREDIT RISK
The Banks 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 December 31, 1995 and 1994,
total commercial and commercial real estate loans make up 37.8 % and
34.4%, respectively of the loan portfolio with 28.4% and 32.9% of these
loans secured by commercial and residential real estate and business
assets in the Columbus, Ohio area. Installment loans account for 35.1% and
35.5% of the loan portfolio and are secured by consumer assets including
automobiles which account for 76.5% and 71.6%, respectively, of the
installment loan portfolio. Real estate loans comprise 27.1% and 30.1%
of the loan portfolio as of December 31, 1995 and 1994, respectively, and
primarily include first mortgage loans on residential properties and home
equity lines of credit.
Included in cash and due from banks and Federal funds sold as of
December 31, 1995 and 1994, is $1,340,662 and $1,905,191, respectively, on
deposit with National City Bank, Cleveland, Ohio and $2,857,419 and
$2,313,146, respectively, on deposit with Mellon Bank, N.A., Pittsburgh,
Pennsylvania.
12. 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' earnings, 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 December 31, 1995, $3,991,802 was available
for dividend payments under the more restrictive of the two limitations.
24
<PAGE> 25
13. UNITED BANCORP, INC. FINANCIAL INFORMATION (PARENT COMPANY ONLY)
Presented below are condensed financial statements for the parent
company, UNITED BANCORP, INC.
<TABLE>
<CAPTION>
BALANCE SHEETS DECEMBER 31,
-------------------------------------------------------------------------------------------------------
1995 1994
------------ -------------
ASSETS
<S> <C> <C>
Cash .......................................................... $ 156,092 $ 94,607
Certificates Of Deposit ........................................ 262,385 301,198
Investment In Subsidiaries ..................................... 18,052,600 16,122,792
Other Assets ................................................... 17,094 26,661
------------- ------------
TOTAL ASSETS .............................................. $ 18,488,171 $ 16,545,258
============= ============
LIABILITIES
Other Liabilities .............................................. $ 36,298 $ 27,198
SHAREHOLDERS' EQUITY
Capital Stock .................................................. 1,847,942 1,847,942
Additional Paid-In-Capital ..................................... 9,358,840 9,358,840
Retained Earnings .............................................. 6,945,892 5,477,736
Unrealized Gain/(Loss) On Securities Available For Sale,
Net Of Tax.................................................... 299,199 (166,458)
------------- ------------
TOTAL SHAREHOLDERS' EQUITY ................................ $ 18,451,873 $ 16,518,060
------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................ $ 18,488,171 $ 16,545,258
============= ============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------
1995 1994 1993
----------- ------------- ------------
<S> <C> <C> <C>
OPERATING INCOME
Dividends From Subsidiaries .................... $ 876,160 $ 1,014,480 $ 662,400
Investment Gains .............................. 47,000
Other Income ................................... 12,346 9,472 8,599
---------- --------- ----------
TOTAL OPERATING INCOME .................... 888,506 1,070,952 670,999
OPERATING EXPENSES ............................... 142,000 90,962 109,378
---------- --------- ----------
INCOME BEFORE INCOME TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF SUBSIDIARIES ....... 746,506 979,990 561,621
INCOME TAX BENEFIT .............................. 20,399 16,866 51,171
---------- --------- ----------
INCOME BEFORE EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES .............................. 766,905 996,856 612,792
---------- --------- ----------
EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES . 1,477,387 958,229 1,114,986
---------- --------- ----------
NET INCOME .............................. $2,244,292 $1,955,085 $1,727,778
========== ========== ==========
</TABLE>
25
<PAGE> 26
13. UNITED BANCORP, INC. FINANCIAL INFORMATION (PARENT COMPANY ONLY)
(CONTINUED)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
- -------------------------------------------------------------------------------------------------------------------
1995 1994 1993
----------- ---------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income ........................................... $2,244,292 $1,955,085 $1,727,778
Adjustments To Reconcile Net Income To Net Cash
From Operating Activities .........................
Equity In Undistributed Earnings Of Subsidiaries.. (1,477,387) (958,229) (1,114,986)
Gain On Sale Of Equity Investment Securities ..... (47,000)
Change In Other Assets And Other Liabilities ..... 13,467 (14,503) (62,083)
Amortization of Intangibles ...................... 18,436 31,893 41,736
---------- ---------- ----------
NET CASH FROM OPERATING ACTIVITIES .................... 798,808 967,246 592,445
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net Change In Certificates Of Deposit .................. 38,813 (206,426) 111,642
Purchase Of Equity Investment Securities ............... (47,500)
Proceeds From Sale Of Investment Securities ........... 184,500
Capital Contribution to Subsidiaries ................... (450,000)
---------- ---------- ----------
NET CASH FROM INVESTING ACTIVITIES ..................... 38,813 (471,926) 64,142
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends Paid To Shareholders ........................ (776,136) (564,472) (512,400)
---------- ---------- ----------
NET CASH FROM FINANCING ACTIVITIES ..................... (776,136) (564,472) (512,400)
---------- ---------- ----------
NET CHANGE IN CASH ......................................... 61,485 (69,152) 144,187
CASH AT BEGINNING OF YEAR .................................. 94,607 163,759 19,572
---------- ---------- ----------
CASH AT END OF YEAR ....................................... $ 156,092 $ 94,607 $ 163,759
========== ========= ==========
</TABLE>
26
<PAGE> 27
14. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------- -----------------------
(in thousands) CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------- ------- -------- --------
FINANCIAL ASSETS:
<S> <C> <C> <C> <C>
Cash And Cash Equivalents.................. $ 6,982 $ 6,982 $ 6,730 $ 6,730
Investment Securities Available For Sale... 27,108 27,108 13,242 13,242
Investment Securities Held To Maturity..... 29,362 29,986 51,261 49,580
Loans, Net ................................ 120,907 121,937 106,952 105,909
Accrued Interest receivable................. 1,361 1,361 1,434 1,434
--------- --------- --------- ---------
TOTAL FINANCIAL ASSETS..................... $ 185,720 $ 187,374 $ 179,619 $ 176,895
========= ========= ========= =========
FINANCIAL LIABILITIES:
Demand And Savings Deposits:............... $ (89,438) $ (89,438) $ (91,542) $ (91,542)
Time Deposits ............................. (77,166) (78,695) (71,770) (71,777)
Short-term Obligations..................... (4,632) (4,632) (4,576) (4,576)
Accrued Interest Payable................... (737) (737) (744) (744)
--------- --------- --------- ---------
TOTAL FINANCIAL LIABILITIES................ $(171,973) $(173,502) $(168,632) $(168,639)
========= ========= ========= =========
</TABLE>
For purposes of the above disclosures of estimated fair value, the
following assumptions were used as of December 31, 1995 and 1994. The
estimated fair value for cash and cash equivalents is considered to approximate
cost. The estimated fair value for securities is based on quoted market values
for the individual securities or for equivalent securities. Carrying value is
considered to approximate fair value for loans that contractually reprice at
intervals of less than six months, for accrued interest receivable, for
short-term borrowings, for deposit liabilities subject to immediate withdrawal
and for accrued interest payable. The fair values of fixed-rate loans, loans
that reprice less frequently than each six months and time deposits are
approximated by a discount rate value technique utilizing estimated market
interest rates as of December 31, 1995 and 1994. The fair value of unrecorded
commitments at December 31, 1995 and 1994 is not material.
While these estimates are based on management's judgment of the appropriate
valuation factors, there is no assurance that were the COMPANY to have
liquidated such items the estimated fair values would necessarily have been
realized. The estimated fair values should not be considered to apply at
subsequent dates.
Other assets and liabilities of the COMPANY that are not defined as
financial instruments are not included in the above disclosures. These would
include, among others, items such as property and equipment and the intangible
value of the COMPANY'S customer base and profit potential.
27
<PAGE> 28
Board of Directors and Shareholders
United Bancorp, Inc.
Martins Ferry, Ohio
We have audited the accompanying consolidated balance sheets of UNITED
BANCORP, INC. AND SUBSIDIARIES, as of December 31, 1995 and 1994, and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company'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 audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of UNITED
BANCORP, INC. AND SUBSIDIARIES as of December 31, 1995 and 1994, and the
results of its operations and its 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 methods of accounting for impaired loans in 1995 and its method of
accounting for income taxes and certain investment securities in 1993 to comply
with new accounting guidance.
CROWE, CHIZEK AND COMPANY LLP
Columbus, Ohio
January 12, 1996
28
<PAGE> 29
In the following pages, management presents an analysis of UNITED BANCORP,
INC.'S financial condition and results of operations as of and for the year
ended December 31, 1995. 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.
FINANCIAL CONDITION
The following discussion addresses key elements of financial condition,
including earning assets, the source of funds supporting earning assets and
asset/liability management.
EARNING ASSETS
LOANS
At year end 1995, gross loans were $122,683,000 compared to $108,437,000 at
year end 1994. This growth represents an increase of 13.1% over 1994.
Installment loans were the largest category of total loans, representing 35.1%,
commercial real estate loans were 29.0%, real estate mortgage loans were 27.1%
and commercial loans were 8.8% in 1995. In 1994, installment loans were 35.5%
of total loans, commercial real estate loans were 26.3%, real estate mortgage
loans were 30.1%, and commercial loans were 8.1%. Average loans during 1995
represented 64.7% of average earning assets compared to 59.9% in 1994.
The increase in loan volume was funded primarily from maturing or called
investment securities. Future funding will continue to be provided by the
laddered maturity mix of the investment portfolio, in addition to match funding
through FHLB advances. If interest rates continue to decline throughout 1996,
the ability to attract deposit growth may become increasingly difficult,
placing greater emphasis on secondary sources of funding.
The COMPANY is involved in all types of consumer lending, as well as the
more common types of domestic commercial lending. For the past few years,
CITIZENS-MARTINS FERRY has increased its assets through aggressively marketing
indirect automobile lending. Although this type of lending carries somewhat
more risk than real estate lending, it also carries higher yields. In
addition, this lending is marketed over four metropolitan areas which tends
to lessen the BANK'S risk to changes in economic conditions in the two
communities where it has branches. The BANK'S experience with this type of
lending has been very satisfactory in terms of credit quality.
The COMPANY has also expanded its commercial lending portfolio at both of
its subsidiary banks. This expansion has been through intensified local
marketing and lending outside of its local market area. The local commercial
loans are very diverse with no material concentration in any industry. Local
loans are effected by the economic vitality of the local area and two
metropolitan areas served by the two banks are experiencing some growth and
positive trends. Risk associated with local economic dependence upon a single
employer is not considered to be material.
Lending activity outside of the COMPANY'S local area has occurred mostly in
the Columbus and Akron-Canton areas. Lending beyond the local area has been
for low risk projects and for borrowers with substantial net worth. In
addition, the lending is occurring in areas benefiting from excellent growth
and diversification. The greatest majority of these loans are secured by real
estate. A slight concentration of loans is developing in the hotel and motel
industry and in loans for the construction or expansion of churches. None of
the loans in these two industries is delinquent or has been classified and
neither industry exceeded 10% of loans.
29
<PAGE> 30
LOANS (CONTINUED)
The allowance for loan losses represents that amount which management and
the Board of Directors estimates is adequate to provide for inherent losses in
its loan portfolio. The allowance balance and the annual provision charged to
expense are reviewed by management and the Board of Directors monthly, using a
risk code model that considers past due experience, economic conditions and
various other circumstances that are subject to change over time.
The allowance for loan losses increased to $1,775,000, or 1.45% of gross
loans, net of unearned income at the end of 1995 compared to $1,438,000 and
1.33% for the end of 1994. The increase in the allowance during 1995
represented management's decision to maintain the level of the allowance for
loan losses commensurate with increased loan volume and risks associated with
commercial and indirect automobile lending. Management believed it was prudent
to increase the allowance for loan losses even though no deterioration is noted
in the quality of the portfolio. Net charge-offs for 1995 totaled $127,000
compared to $100,000 in 1994. Net charge-offs as a percentage of year end
loans, net of unearned income, was 0.10% for 1995 and 1994.
INVESTMENT SECURITIES
Investment securities declined from $64,504,000 at year end 1994 to
$56,471,000 at year end 1995. As investment securities matured or were called,
the funds were used to fund loan growth. Despite the decrease from year end
1994 to 1995, average investment securities during 1995 actually increased in
volume compared to 1994. For 1995, average investment securities totaled
$61,989,000 compared to $60,673,000 for 1994 representing 34.5% and 36.9% of
average earning assets for 1995 and 1994, respectively. The 1994 year end
balance included approximately $6,000,000 of investment securities purchased in
December from funds acquired in the Dellroy branch acquisition. The COMPANY
reclassified $13,325,000 of its investment securities from the held-to-maturity
category to the available-for-sale category in December of 1995. This
reclassification was in response to the FASB's issuance of a Question and
Answer interpretation of SFAS No. 115 issued in November of 1995 permitting the
reassessment of the appropriateness of securities classifications. The
reclassification of the securities permits the COMPANY greater flexibility in
meeting the funding requirements of increased loan demand.
The investment portfolio is comprised of U.S. Treasury Notes and other U.S.
Government agency-backed securities, tax-exempt obligations of states and
political subdivisions and certain other investments. The COMPANY does not
hold any collateralized mortgage-backed securities or derivatives other than
$6,500,000 of Government sponsored agency multi-step securities with call or
maturity dates within five years. The quality rating of obligations of state
and political subdivisions within Ohio is no less than Aaa, Aa or A, with all
out-of-state bonds rated at AAA. Board policy permits the purchase of certain
nonrated bonds of local schools, townships and municipalities, based on their
known levels of credit risk.
FEDERAL FUNDS SOLD
Short-term Federal funds sold are used to manage interest rate sensitivity
and to meet liquidity needs. During 1995 and 1994, these funds represented
approximately 0.9% and 3.3%, respectively, of average earning assets.
30
<PAGE> 31
SOURCES OF FUNDS
DEPOSITS
The COMPANY'S primary source of funds is core deposits from retail and
business customers. These core deposits include interest-bearing and
noninterest bearing deposits, excluding certificates of deposit over $100,000.
Total core deposits increased 1.5% in 1995. Average interest-bearing core
deposits, comprised of interest-bearing checking accounts, savings, money
market and other time deposit accounts, increased 3.0% in 1995 over 1994.
Average noninterest bearing demand deposits increased 16.5% in 1995 over 1994.
Deposits of the COMPANY from public agencies, including local school districts,
city and township municipalities, public works facilities and others may tend
to be more seasonal in nature resulting from the receipt and disbursement of
state and Federal grants. The entities mentioned above have, however,
maintained fairly static balances with the COMPANY due to nonsimilar funding
and disbursement timeframes.
Certificates of deposit over $100,000 are not considered part of core
deposits and as such are used to balance rate sensitivity as a tool of funds
management. At December 31, 1995, certificates of deposit over $100,000
increased 8.8% over 1994 levels, but still only represent 7.0% of total
deposits.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER SHORT-TERM BORROWINGS
Other interest-bearing liabilities include securities sold under agreements
to repurchase, sweep accounts, Federal funds purchased, Treasury, Tax & Loan
note payable and Federal Home Loan Bank advances. In 1995, these average
short-term borrowings totaled $6,198,000 compared to $3,464,000 in 1994. With
deposit growth lagging behind loan growth, the COMPANY used short-term
borrowings as an alternative source of funding.
ASSET / LIABILITY MANAGEMENT
The COMPANY actively manages its asset and liability portfolios through
sophisticated modeling techniques designed to provide reliable, timely
information in a format useful in making determinations about liquidity and
interest rate risk. The concepts utilized in asset and liability management
involve creating various interest rate scenarios and examining the risks
associated with each to determine the best course of action which will minimize
or avoid risk exposure in the pursuit of growth and income targets. Rate shock
analysis uses rate and volume information presented in terms of the effect a
change in rates would have on net income and the market valuation of the Banks
if those rates were "shocked" or to change in increments up to plus or minus
400 basis points. The resulting information alerts management to areas of risk
which through changes in pricing or volume strategies could be minimized or
eliminated.
Market risk is the potential effect external forces have on the value of
the COMPANY'S assets, liabilities and off-balance sheet positions. This risk
arises from movements in the local, regional and national markets. Interest
rate risk is the threat to net interest income which may arise from repricing
differences in the COMPANY'S assets and liabilities. It is also the threat to
net income arising from fluctuations in market values of financial instruments.
No transaction in the financial industry is without risk. The active
management and assessment of that risk is achieved through the COMPANY'S
monthly Asset/Liability Committee (ALCO) meetings attended by Senior Management
and the Executive Committee of the Boards of Directors of each subsidiary bank.
Asset and liability management also includes GAP measurement which
determines, over various time periods, the amount of interest earning assets
and interest bearing liabilities which are due to reprice at current market
rates. A financial institution will have a negative interest rate sensitivity
gap for a given period if the amount of its interest bearing liabilities
maturing or otherwise repricing within such period exceeds the amount of the
interest earning assets maturing or otherwise repricing within the same period.
In a rising interest rate environment, an institution with a negative interest
rate sensitivity gap generally will experience greater increases in the cost of
its liabilities than in the yield on its assets.
31
<PAGE> 32
ASSET / LIABILITY MANAGEMENT (CONTINUED)
Conversely, in an environment of falling interest rates, the cost of funds
of an institution with a negative interest rate sensitivity GAP generally will
decrease more rapidly than the yield on its assets. Changes in interest rates
generally will have the opposite effect on an institution with a positive
interest rate sensitivity GAP.
The following table sets forth the amounts of interest earning assets and
interest bearing liabilities outstanding at December 31, 1995, which are
scheduled to reprice or mature in each of the time periods shown. Except as
stated below, the amount of assets and liabilities shown which reprice or
mature during a particular period were determined in accordance with the
contractual terms of the asset or liability. The table does not necessarily
indicate the impact of general interest rate movements on the COMPANY'S net
interest income because the repricing of certain categories of assets and
liabilities is subject to competition and other factors beyond the COMPANY'S
control. As a result, certain assets and liabilities indicated as maturing or
otherwise repricing within a stated period may in fact mature or reprice at
different times and in different volumes.
<TABLE>
<CAPTION>
UNDER THREE SIX
(In Thousands) THREE TO SIX TO NINE
MONTHS MONTHS MONTHS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST EARNING ASSETS
Federal Funds Sold..................................... $ 600
Loans, Net of Unearned Interest........................ 22,969 $ 7,950 $ 10,927
Investment Securities Held-To-Maturity................. 500 180 549
Investment Securities Available-For-Sale............... 1,509 1,512 1,548
----------- -------- ---------
TOTAL INTEREST EARNING ASSETS........................ 25,578 9,642 13,024
INTEREST BEARING LIABILITIES
Short-Term Borrowings.................................. 4,569
U.S. Treasury Note Account............................. 64
Savings and NOW Accounts............................... 27,607
Money Market Demand Accounts........................... 8,498
Time Deposits < $100,000............................... 13,620 11,848 5,448
Time Deposits > $100,000............................... 1,466 1,399 1,198
----------- -------- ---------
TOTAL INTEREST BEARING LIABILITIES................... 55,824 13,247 6,646
INTEREST RATE SENSITIVITY GAP........................ $ (30,246) $ (3,605) $ 6,378
=========== ======== ========
Cumulative Interest Rate Sensitivity GAP............... $ (30,246) $(33,851) $(27,473)
Cumulative Interest Rate Sensitivity GAP =========== ======== ========
As A % of Total Interest Earning Assets.............. (16.83%) (18.83%) (15.28%)
<CAPTION>
NINE OVER
(In Thousands) MONTHS TO ONE
ONE YEAR YEAR TOTAL
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST EARNING ASSETS
Federal Funds Sold..................................... $ 600
Loans, Net of Unearned Interest........................ $ 4,002 $ 76,835 122,683
Investment Securities Held-To-Maturity................. 1,275 26,858 29,362
Investment Securities Available-For-Sale............... 1,749 20,790 27,108
-------- --------- --------
TOTAL INTEREST EARNING ASSETS........................ 7,026 124,483 179,753
INTEREST BEARING LIABILITIES
Short-Term Borrowings.................................. 4,569
U.S. Treasury Note Account............................. 64
Savings and NOW Accounts............................... 40,716 68,323
Money Market Demand Accounts........................... 8,498
Time Deposits < $100,000............................... 4,239 30,350 65,505
Time Deposits > $100,000............................... 1,000 6,598 11,661
-------- --------- --------
TOTAL INTEREST BEARING LIABILITIES................... 5,239 77,664 158,620
INTEREST RATE SENSITIVITY GAP........................ $ 1,787 $ 46,819 $ 21,133
======== ========= ========
Cumulative Interest Rate Sensitivity GAP............... $(25,686) $ 21,133
======== =========
Cumulative Interest Rate Sensitivity GAP
As A % of Total Interest Earning Assets.............. (14.29%) 11.76%
======== =========
</TABLE>
Interest rate sensitivity varies with different types of interest earning
assets and interest bearing liabilities. Overnight Federal funds on which
rates change daily and loans which are tied to the prime rate differ
considerably from long term investment securities and fixed rate loans.
Similarly, time deposits over $100,000 and money market certificates are much
more interest sensitive than passbook savings accounts. The shorter term
interest rate sensitivities are the key to measuring the interest sensitivity
GAP, or excess interest sensitive earning assets over interest bearing
liabilities. For purposes of the above table, the COMPANY has classified a
portion of its interest bearing demand deposit accounts and its passbook
savings accounts in the over one year category. Management believes this
assumption is reasonable as, based upon historical experience, these accounts
do not materially react to interest rate changes.
32
<PAGE> 33
Performance Overview
Net income for 1995 was $2,244,000, or $1.21 per share compared to
$1,955,000, or $1.06 per share in 1994 and $1,728,000, or $0.94 per share in
1993. The banking industry relies on two primary performance ratios - return
on average assets (ROA) and return on average equity (ROE). ROA measures the
effectiveness of management in utilizing its earning assets to produce net
income. The ROA for 1995 was 1.18% compared to 1.11% in 1994 and 1.04% in
1993. ROE is the ratio of income earned in relation to average shareholders'
equity. ROE for 1995 was 12.85% compared to 12.24% in 1994 and 11.73% in 1993.
The following discusses the significant components of the increased earnings.
NET INTEREST INCOME
The COMPANY'S primary source of earnings is net interest income, which is
the difference between revenue generated from earning assets and the interest
cost of funding those assets. 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 increased to $7,776,000 in 1995 from $6,844,000 in 1994 and
from $6,396,000 in 1993. Net interest margin, which is net interest income
divided by average earning assets, was 4.32% in 1995 compared to 4.16% in 1994
and 4.10% in 1993. Average earning assets as a percent of total average assets
for the COMPANY increased to 94.2% in 1995 compared with 93.5% in 1994 and
93.6% in 1993. The increase in net interest margin between 1995 and 1994 was
due to a seven basis point increase in the net interest spread as well as
improving the ratio of average interest earning assets to average interest
bearing liabilities. The increase in net interest margin between 1994 and 1993
was primarily due to the increased volume of average earning assets compared to
average interest bearing liabilities.
TOTAL INTEREST INCOME
Total interest income increased to $14,352,000 in 1995 from $12,283,000 in
1994 and $11,656,000 in 1993. The 1995 increase was due to both an increase in
average earning assets and an increase in the yield earned. The increase in
yield reflected the impact of the market interest rate increases which began in
late 1994 and carried into 1995 as well as the increase in average loans as a
percentage of average earning assets. Management has emphasized improving its
loan-to-asset ratio during the past few years. As a result, a larger
percentage of earning assets are yielding the higher rate earned by loans as
compared to the yields earned on investment securities and Federal funds sold.
The laddered structure of the investment portfolio enabled investment
securities which were maturing periodically throughout the year to become
available to fund increases in lending activity. As market rates declined in
the last part of 1995, an increased number of investment securities were also
called by their issuers. As these funds periodically became available, they
too were utilized to fund loan growth with excess amounts reinvested in
investment securities yielding current market rates. The 1994 increase in
interest income was due to the growth in average earning assets. The impact of
the declining rate environment experienced through the first half of 1994 was
mitigated by the shift in funds from lower earning investment securities and
Federal funds sold to higher yielding loans.
33
<PAGE> 34
TOTAL INTEREST EXPENSE
Total interest expense for 1995 increased to $6,575,000 or 20.9% over the
1994 total of $5,439,000. The increase was due to growth in interest bearing
liabilities in addition to a higher cost of funds. The growth in interest
bearing liabilities was primarily due to experiencing the full year impact of
the deposits obtained in the Dellroy branch bank acquisition in December of
1994, as well as an increase in borrowings to fund loan growth. The increase
in the cost of funds was primarily attributable to maturing certificates of
deposits repricing at higher rates, combined with the increased use of other
borrowed funds which typically carry higher interest rates than interest
bearing demand deposits and traditional savings accounts. Total interest
expense in 1994 increased only a moderate 3.4% over the 1993 expense of
$5,260,000. The increase in average interest bearing liabilities more than
offset the slight decline in the cost of funds.
PROVISION FOR LOAN LOSSES
The provision for loan losses is an operating expense recorded to maintain
the related balance sheet allowance for loan losses at an amount considered
adequate to cover losses that may occur in the normal course of lending. The
total provision for loan losses was $465,000 in 1995, $281,000 in 1994 and
$271,000 in 1993. The increase in the provision taken in 1995 reflects
management's decision to increase the allowance for loan losses in response to
the increases experienced in the commercial and commercial real estate loan and
indirect automobile loan portfolios.
NONINTEREST INCOME
Total noninterest income of $936,000 for 1995 increased $77,000, or 9.0%,
compared to $859,000 in 1994. Total noninterest income decreased $20,000 in
1994 compared to 1993. Service charge income increased $123,000, or 28.0% in
1995 over 1994, compared to $53,000, or 13.7% in 1994 over 1993. The increase
in 1995 resulted from the repricing of fees for depository products and growth
in transactional volume. CITIZENS-STRASBURG'S December 1994 branch bank
acquisition resulted in immediate increases in deposit totals for 1994.
However, service charges and other fee income associated with those deposits
were not a contributing factor in the 1994 noninterest income categories. The
1994 increases were primarily the result of increases in basic service charges
on deposit accounts at both subsidiary Banks. Investment security gains were
only $11,000 in 1995, compared to $104,000 and $286,000 in 1994 and 1993,
respectively. Other increases in noninterest income were the result of
continued market presence of The Ohio Company, a well known, highly accredited
full service brokerage firm headquartered in Columbus, Ohio. Their office,
located on the second level of the main office of CITIZENS-MARTINS FERRY,
provides full service brokerage services to the local market area. Services
offered are viewed as an enhancement to existing products and services in the
COMPANY'S existing depository base. Services are provided to all banking
locations of the COMPANY.
34
<PAGE> 35
NONINTEREST EXPENSE
Noninterest expense increased 6.3% in 1995, as compared to a 2.5%
increase in 1994 over 1993 expenses. Salaries and employee benefits in 1995
increased 13.4% compared to a 3.9% increase in 1994 over 1993. Part of the
salaries increase in 1995 was attributable to increased incentive award payouts
due to 1995 earnings performance and additional employee expenses from the
Dellroy branch acquisition. Additionally, 1995 included the employer matching
portion of the COMPANY'S 401 (k) program which began in April of 1995. This
was offset by the reduction in furniture and fixture depreciation expense from
the fully depreciated in-house data processing system located in
CITIZENS-MARTINS FERRY during the third and fourth quarters of 1995.
The change in the premium rate from the Federal Deposit Insurance
Corporation was the primary reason for the decrease in insurance expense of
$186,000 or 40.1%. Additionally, the FDIC announced than no premiums will be
required of banks that are considered well capitalized for the first six months
of 1996 except for a $2,000 minimum fee. The two subsidiary banks are
classified as well capitalized by the FDIC.
AVERAGE BALANCES, NET INTEREST INCOME AND YIELDS EARNED AND RATES PAID
The following table provides information relating to the COMPANY'S average
balance sheet information and reflects the average yield on interest earning
assets and the average cost of interest bearing liabilities for the periods
ended December 31, 1995, 1994 and 1993. The yields and costs are calculated by
dividing income or expense by the average balance of interest earning assets or
interest bearing liabilities, respectively, for the periods presented.
Average balance is computed using the carrying value of securities. The
average yield has been computed using the historical amortized cost average
balance for available-for-sale securities. Average balances are derived from
month-end balances, which include nonaccruing loans in the loan portfolio, net
of the allowance for loan losses. Management does not believe that the use of
month-end balances instead of daily average balances has caused any material
difference in the information presented. Interest income is on a historical
basis without tax equivalent adjustment.
35
<PAGE> 36
<TABLE>
<CAPTION>
1995
------------------------------------------------
INTEREST
AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE
------------------------------------------------
<S> <C> <C> <C>
ASSETS
INTEREST EARNING ASSETS
Loans (Net of Unearned Income)............................. $116,331,358 $10,496,510 9.02%
Taxable Investment Securities - Available For Sale......... 14,594,194 958,137 6.59%
Taxable Investment Securities - Held To Maturity........... 29,310,332 1,841,582 6.28%
Tax-exempt Investment Securities - Available For Sale...... 403,960 18,727 4.71%
Tax-exempt Investment Securities - Held To Maturity........ 17,680,700 947,707 5.36%
Federal Funds Sold (Net of Term Funds)..................... 1,527,732 88,859 5.82%
------------ ----------- ----
TOTAL INTEREST EARNING ASSETS......................... 179,848,276 14,351,522 7.98%
NON-INTEREST EARNING ASSETS
Cash and Due From Banks.................................... 5,596,606
Bank Premises, Equipment (Net)............................. 4,835,203
Other Non-earning Assets................................... 2,282,452
Less: Allowance For Loan Losses........................... (1,587,003)
-----------
TOTAL NON-INTEREST EARNING ASSETS.................... 11,127,258
------------
TOTAL ASSETS.......................................................... $190,975,534
============
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST BEARING LIABILITIES
Demand Deposits............................................ $ 24,797,505 646,829 2.61%
Savings Deposits........................................... 52,347,905 1,577,797 3.01%
Time Deposits.............................................. 76,229,629 4,041,388 5.30%
Short - Term Obligations................................... 6,198,075 309,472 4.99%
------------ ---------- -----
TOTAL INTEREST BEARING LIABILITIES.................... 159,573,114 6,575,486 4.12%
NON-INTEREST BEARING LIABILITIES
Demand Deposits............................................ 12,608,826
Other Liabilities.......................................... 1,330,773
------------
TOTAL NON-INTEREST BEARING LIABILITIES................ 13,939,599
------------
TOTAL LIABILITIES..................................................... 173,512,713
------------
TOTAL SHAREHOLDERS' EQUITY............................................ 17,462,821
------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY.............................. $190,975,534
============
NET INTEREST INCOME................................................... $ 7,776,036
===========
NET INTEREST SPREAD................................................... 3.86%
=====
NET YIELD ON INTEREST EARNING ASSETS.................................. 4.32%
=====
</TABLE>
- - FOR PURPOSES OF THIS SCHEDULE, NONACCRUAL LOANS ARE INCLUDED IN LOANS.
- - NET INTEREST INCOME IS REPORTED ON AN HISTORICAL BASIS WITHOUT TAX-EQUIVALENT
ADJUSTMENT.
- - FEES COLLECTED ON LOANS ARE INCLUDED IN INTEREST ON LOANS.
36
<PAGE> 37
<TABLE>
<CAPTION>
1994 1993
---------------------------------------------- ------------------------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
---------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 98,598,626 $ 8,439,969 8.56% $ 81,795,526 $ 7,426,027 9.08%
4,592,184 317,411 6.91%
37,849,997 2,341,175 6.19% 43,706,076 2,902,717 6.64%
58,703 4,006 6.82%
18,172,574 969,928 5.34% 13,672,461 808,542 5.91%
5,354,231 210,771 3.94% 16,826,392 519,050 3.08%
------------ ----------- ----- ------------ ------------ -----
164,626,315 12,283,260 7.46% 156,000,455 11,656,336 7.47%
5,719,599 4,974,207
4,785,370 4,825,523
2,237,890 2,075,558
(1,330,435) (1,156,025)
------------ ------------
11,412,424 10,719,263
------------ ------------
$176,038,739 $166,719,718
============ ============
$ 24,308,987 605,018 2.49% $ 24,884,150 642,605 2.58%
50,561,557 1,463,209 2.89% 47,768,401 1,352,357 2.83%
69,719,708 3,252,781 4.67% 67,024,580 3,212,725 4.79%
3,463,913 118,205 3.41% 2,509,745 52,152 2.08%
------------ ----------- ----- ------------ ------------ -----
148,054,165 5,439,213 3.67% 142,186,876 5,259,839 3.70%
10,820,578 8,639,094
1,193,316 1,167,142
------------ ------------
12,013,894 9,806,236
------------ ------------
160,068,059 151,993,112
------------ ------------
15,970,680 14,726,606
------------ ------------
$176,038,739 $166,719,718
============ =============
.................. $ 6,844,047 ........................ $ 6,396,497
============ ============
...................................... 3.79% ............................................ 3.77%
===== =====
...................................... 4.16% ............................................ 4.10%
===== =====
</TABLE>
37
<PAGE> 38
RATE/VOLUME ANALYSIS
The table below describes the extent to which changes in interest rates and
changes in volume of interest earning assets and interest bearing liabilities
have affected the COMPANY'S interest income and expense during the periods
indicated.
<TABLE>
<CAPTION>
1995 COMPARED TO 1994 1994 COMPARED TO 1993
INCREASE/(DECREASE) INCREASE/(DECREASE)
-------------------------------------------- -------------------------------------------
CHANGE CHANGE CHANGE CHANGE
TOTAL DUE TO DUE TO TOTAL DUE TO DUE TO
CHANGE VOLUME RATE CHANGE VOLUME RATE
------ ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans............................. $ 2,056,541 $ 1,581,031 $ 475,510 $1,013,942 $1,457,308 $ (443,366)
Taxable Investment Securities
Available For Sale.......... 640,726 657,432 (16,706) 317,411 317,411
Taxable Investment Securities
Held to Maturity............. (499,593) (536,006) 36,413 (561,542) (399,743) (161,799)
Tax-Exempt Investment Securities
Available For Sale........... 14,721 16,396 (1,675) 4,006 4,006
Tax-Exempt Investment Securities
Held To Maturity............. (22,221) (26,349) 4,128 161,386 245,386 (84,000)
Federal Funds Sold................ (121,912) (193,751) 71,839 (308,279) (423,437) 115,158
------------ ------------ ---------- ---------- ---------- ----------
TOTAL INTEREST INCOME........ 2,068,262 1,498,753 569,509 626,924 1,200,931 (574,007)
------------ ------------ ---------- ---------- ---------- ----------
INTEREST EXPENSE
Demand Deposits................... 41,811 12,331 29,480 (37,587) (14,643) (22,944)
Savings Deposits.................. 114,588 52,684 61,904 110,852 80,349 30,503
Time Deposits..................... 788,607 320,552 468,055 40,056 127,115 (87,059)
Short-Term Obligations............ 191,267 120,537 70,730 66,053 24,562 41,491
------------ ------------ ---------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE....... 1,136,273 506,104 630,169 179,374 217,383 (38,009)
------------ ------------ ---------- ---------- ---------- ----------
NET INTEREST EARNINGS........ $ 931,989 $ 992,649 $ (60,660) $ 447,550 $ 983,548 $ (535,998)
============ ============ ========== ========== ========== ==========
</TABLE>
For purposes of this table, changes in interest due to volume and rate
were determined as follows:
VOLUME VARIANCE = The change in volume is multiplied by the previous
year's rate.
RATE VARIANCE = The change in rate is multiplied by the previous
year's volume.
RATE/VOLUME VARIANCE = The change in volume is multiplied by the change in
rate.
NOTE: The Rate/Volume variance was allocated to volume variance and
rate variance in proportion to the relationship of the absolute dollar amount
of the change in each. Nonaccrual loans are ignored for purposes of the above
calculations due to the nominal amount of the loans.
38
<PAGE> 39
CAPITAL RESOURCES
Internal capital growth, through the retention of earnings, is the primary
means of maintaining capital adequacy for the COMPANY. Shareholders' equity at
year end 1995 was $18,452,000 compared to $16,518,000 at year end 1994 or a
11.7 % increase. This increase includes a $299,000 increase in equity due to
the after tax change in the fair value of securities categorized as
available-for-sale at 1995 as compared to a $166,000 reduction in equity at
year end 1994. Total shareholders' equity in relation to total assets was
9.7% at year end 1995 compared to 8.9% at year end 1994. The ratio for average
equity-to-average total assets was 9.1% for 1995 and 1994.
On February 20, 1996, the COMPANY issued a Prospectus describing initiation
of a Dividend Reinvestment Plan (The Plan) for shareholders under which the
COMPANY'S Common Stock will be purchased by the Plan for participants with
automatically reinvested dividends. The Plan provides an economical and
convenient method for the holders of shares of the COMPANY'S Common Stock to
purchase additional shares of Common Stock at market prices and without payment
of a brokerage commission or service charge. The Plan does not represent a
change in the COMPANY'S dividend policy or a guarantee of future dividends.
Shareholders who do not wish to participate in the Plan will continue to
receive cash dividends, as declared in the usual and customary manner. The
COMPANY has approved the issuance of 150,000 authorized and unissued shares of
the COMPANY'S Common Stock for purchase under the Plan.
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 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 1.25% of gross risk-weighted assets. The minimum
leverage ratio for a bank holding company is 3.0% calculated by dividing Tier 1
capital by adjusted total assets. The impact of SFAS 115 is disregarded by
banking regulators in determining compliance with capital requirements.
Under a current regulatory proposal, interest rate risk would become an
additional element in measuring risk-based capital. This proposed change is
not expected to significantly impact the COMPANY'S compliance with capital
guidelines. The following table illustrates the COMPANY'S risk-weighted
capital ratios at December 31, 1995:
Common Shareholders' Equity $ 18,451,873
Tier 1 Capital $ 17,916,312
Tier 2 Capital $ 1,564,730
Tier 1 and Tier 2 Capital $ 19,481,042
Adjusted Total Assets $ 191,250,816
Total Risk-Adjusted Assets $ 125,178,418
Leverage Ratio 9.37%
Tier 1 Risk-Based Capital Ratio 14.31%
Tier 1 and Tier 2 Risk-Based Capital Ratio 15.56%
39
<PAGE> 40
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 and 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 deposits.
Management feels that it has the capital adequacy, profitability and reputation
to meet the current and projected needs of its customers. Items affecting the
COMPANY'S historical sources and uses of cash and their impact on liquidity are
summarized and discussed below.
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- ----------
<S> <C> <C> <C>
Net Income........................................ $ 2,244 $ 1,955 $ 1,728
Adjustments To Reconcile Net Income To Net
Cash From Operating Activities................ 1,483 198 620
---------- --------- ----------
Net Cash From Operating Activities................ 3,727 2,153 2,348
Net Cash From Investing Activities................ (6,047) (26,542) (9,490)
Net Cash From Financing Activities................ 2,572 11,210 5,299
----------- --------- ----------
Net Change In Cash and Cash Equivalents......... 252 (13,179) (1,843)
Cash And Cash Equivalents At Beginning Of Period.. 6,730 19,909 21,752
----------- --------- ----------
Cash And Cash Equivalents At End Of Period........ $ 6,982 $ 6,730 $ 19,909
========== ========= ==========
</TABLE>
For 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 $14,420,000 used to fund the net change in
loans. This use of funds was partially offset by a net cash infusion of
$3,292,000 in deposits and $8,691,000 in proceeds from sales, maturities and
calls of investment securities, net of new purchases. For a more detailed
illustration of the COMPANY'S sources and uses of cash, refer to the
Consolidated Statements of Cash Flows.
40
<PAGE> 41
FAIR VALUES OF FINANCIAL INSTRUMENTS
The COMPANY disclosed the estimated fair values and related carrying values
of its financial instruments at December 31, 1995 and 1994 in Note 14 of the
consolidated financial statements.
The estimated fair value of loans, net of the allowance for loan losses,
increased from 99.0% of the carrying value at December 31, 1994 to 100.9% at
December 31, 1995.
While these estimates of fair value are based on management's judgment of
the most appropriate factors, there is no assurance that, were the COMPANY to
have liquidated such items, the estimated fair values would necessarily have
been realized. The methodologies utilized in evaluating the estimated fair
values at December 31, 1995 and 1994 were consistently applied. The estimated
fair values at December 31, 1995 and 1994, should not be considered to apply at
subsequent dates.
Other assets and liabilities of the COMPANY that are not defined as
financial instruments under SFAS 107, "Fair Values of Financial Instruments,"
are not included in this disclosure. These would include, among others, such
items as property and equipment, the intangible value of the COMPANY'S customer
base and profit potential.
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 affect the
financial condition and results of operations to a greater degree than changes
in the rates 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
Finance. 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 the Bank.
41
<PAGE> 42
UNITED BANCORP, INC.
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, 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, Strasburg, Ohio. Since its
formation, the COMPANY has had continual growth in dividend distribution levels
which includes a 100% share dividend in 1992 and 1993 and a 10% share dividend
distributed in 1994. UNITED BANCORP, INC. has traded on The Nasdaq SmallCaps
Market tier of The Nasdaq Stock Market under the trading symbol UBCP since
February of 1994.
The markets served by both bank subsidiaries are rich in tradition, culture
and heritage. CITIZENS-MARTINS FERRY meets the commercial banking needs of
residents, business and industry of the eastern reaches of the upper Ohio
Valley. This area is experiencing a renaissance through diversification of its
economy. Industry is modernizing while new centers of technology and retail
complexes are strengthening the economic base. CITIZENS-STRASBURG serves the
market area of northeastern Ohio, including the Dover and New Philadelphia
market areas and portions of the Akron-Canton metropolitan areas. The
residential communities of this service area continue to prosper, driven by an
economy fueled by light industry. Both bank subsidiaries serve the traditional
needs of their customers while always reaching toward tomorrow by introducing
new technologies, products and services.
THE CITIZENS SAVINGS BANK
In 1974, CITIZENS-MARTINS FERRY opened a full service branch bank six
miles west of Martins Ferry in Colerain, Ohio, providing the same products and
services as the main office facility, including drive-thru banking convenience.
In 1978, an additional full service branch bank was opened two miles south of
Martins Ferry in Bridgeport, Ohio, also providing a full range of banking
services, plus drive-thru banking. Additionally, a limited service
auto-teller facility was opened in 1980 in Martins Ferry, one block south of
the main office location. An Automated Teller Machine (ATM) began operation
in nearby Aetnaville, Ohio in 1983, providing additional 24 hour limited
banking services to area residents. To better serve the needs of our growing
customer base and to address the needs of our increased staffing and equipment
requirements, a newly constructed main office building was opened in February
of 1984 as a 21,500 square foot addition to the existing auto-teller facility
built in 1980.
In mid-1990, CITIZENS-MARTINS FERRY began operation of an in-house
mainframe data processing system capable of meeting current and future banking
needs. The data processing center was originally installed on the Second Level
of the main office location providing automated, accurate document processing,
complex information retrieval for day-to-day customer servicing, statement
preparation and data for management and regulatory reporting purposes.
In 1991, CITIZENS-MARTINS FERRY began providing third party data processing
services for its affiliate bank CITIZENS-STRASBURG utilizing the extra capacity
available within the system. In 1993, a separate Operations Center was opened
across the street from the CITIZENS-MARTINS FERRY'S main office location
initially housing the Accounting and Bookkeeping Departments for the COMPANY.
In July of 1993 the Upper Level area vacated by the relocation of the
Accounting and Bookkeeping Departments was developed into a Loan Center
providing a central location for CITIZENS-MARTINS FERRY to serve its
installment loan business as well as providing comfortable and confidential
offices for walk-in consumer, mortgage and commercial lending services.
Early in the third quarter of 1993, CITIZENS-MARTINS FERRY added an
Automated Teller Machine (ATM) to a drive-thru lane of its Bridgeport branch
bank location to provide additional 24 hour a day banking services. Also in
1993, CITIZENS-MARTINS FERRY entered into a service branch office rental
agreement with The Ohio Company, a well known, highly accredited full service
brokerage firm headquartered in Columbus, Ohio. Their facilities are located
on the Second Level of the main office in renovated office space specifically
identified as those of The Ohio Company.
42
<PAGE> 43
THE CITIZENS SAVINGS BANK (CONTINUED)
In October of 1995, the Data Processing Department was fully integrated
into the Operations Center across the street from the main office. This move
consolidated all support equipment and staff into a single location providing
streamlined, cost efficient corporate support to all COMPANY locations. The
conversion included the installation of a new NCR 3525 Mainframe Processor and
an NCR 7725 Image Processor for check imaging and statement production
scheduled for phase-in during the second quarter of 1996.
[PHOTO]
THE CITIZENS-STATE BANK
Prior to its acquisition by the COMPANY in 1986, CITIZENS-STRASBURG was a
single location, full service banking facility serving the banking needs of a
growing residential community involving light industrial and agricultural
development. CITIZENS-STRASBURG was able to expand its market presence
through the denovo construction of a full service banking center six miles
south in nearby Dover, Ohio in 1990. This new facility, along with offering
traditional banking services, currently houses the subsidiary Operations Center
tied directly to the Operations Center at CITIZENS-MARTINS FERRY. Portions of
the CITIZENS-STRASBURG operational support function will be consolidated to the
Operations Center in Martins Ferry in the second quarter of 1996.
In the first quarter of 1992, CITIZENS-STRASBURG again expanded its market
presence through the purchase of deposits and branch offices of Society
National Bank of Cleveland, located twelve miles south in New Philadelphia and
ten miles northeast in Sherrodsville, Ohio.
The New Philadelphia branch, located just off the town square in New
Philadelphia, Ohio, is a full service banking facility offering a wide menu of
products and services including drive-thru banking. An Automated Teller
Machine (ATM) located in a walkup foyer adjacent to the main lobby entrance,
offers convenience as well as 24 hour banking.
The Sherrodsville branch is located in a small rural community setting
operating as a full service branch banking facility offering the same wide
variety of products and services, including drive-thru banking convenience.
CITIZENS-STRASBURG acquired an additional branch banking facility within the
Sherrodsville marketplace in Dellroy, Ohio from National City Bank of
Cleveland, Ohio in December of 1994. This purchase developed a larger market
share for CITIZENS-STRASBURG in the Atwood Lake Conservancy District.
43
<PAGE> 44
<TABLE>
<CAPTION>
1986 1987 1988 1989
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Interest Income.......... $8,079,609 $8,963,088 $9,459,611 $11,381,035
Interest Expense......... 5,127,712 5,688,807 5,941,211 7,220,587
---------- ---------- ---------- -----------
NET INTEREST INCOME...... 2,951,897 3,274,281 3,518,400 4,160,448
Provision For Loan
Losses.................. 147,000 36,000 102,000 182,000
---------- ---------- ---------- -----------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES............. 2,804,897 3,238,281 3,416,400 3,978,448
Noninterest Income,
Including Security
Gains/(Losses).......... 503,420 529,226 464,525 349,829
Noninterest Expense...... 2,203,077 2,695,250 2,781,577 2,908,875
---------- ---------- ---------- -----------
INCOME BEFORE
INCOME TAXES............ 1,105,240 1,072,257 1,099,348 1,419,402
Income Taxes............. 89,434 144,189 161,194 304,952
---------- ---------- ---------- -----------
NET INCOME........... $1,015,806 $928,068 $938,154 $1,114,450
========== ========== ========== ===========
- ------------------------------------------------------------------------------------
Total Assets............. $107,662,018 $111,491,682 $120,728,808 $129,527,455
Deposits................. 96,925,876 100,074,388 108,255,872 115,848,920
Equity Capital........... 7,854,612 10,291,906 10,836,323 11,543,373
Loans Outstanding,
Net..................... 38,675,503 39,756,544 43,385,742 56,862,870
Term Federal Funds....... 1,000,000 4,378,000 8,059,000 9,105,000
Allowance For Loan
Losses.................. 505,822 472,007 478,042 595,160
Net Charge-Offs ......... 64,958 69,815 95,965 64,882
Full Time Employees
(Average
Equivalents)............ 55 57 57 58
Number Of Offices........ Four Four Four Four
- ------------------------------------------------------------------------------------
Earnings Per Share....... $0.70 $0.63 $0.51 $0.60
Dividends Per Share...... 0.19 0.20 0.21 0.22
Book Value Per Share..... 5.41 5.57 5.86 6.25
Market Value Range
Per Share............... 3.79 - 5.31 5.12 - 6.06 5.23 - 5.91 5.57 - 6.25
- ------------------------------------------------------------------------------------
Cash Dividends Paid...... $275,000 $297,550 $394,800 $407,400
Return On Average
Assets.................. 1.03% 0.85% 0.82% 0.89%
Return On Average
Equity.................. 13.57% 11.16% 8.88% 9.96%
- ------------------------------------------------------------------------------------
</TABLE>
NOTE: THE ABOVE PER SHARE AMOUNTS HAVE BEEN RESTATED TO REFLECT STOCK
DIVIDENDS BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
FOR EACH YEAR.
44
<PAGE> 45
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
-------------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$11,421,492 $11,699,233 $12,166,789 $11,656,336 $12,283,260 $14,351,522
7,127,552 6,712,916 5,948,713 5,259,839 5,439,213 6,575,486
------------- ----------- ----------- ----------- ----------- -----------
4,293,940 4,986,317 6,218,076 6,396,497 6,844,047 7,776,036
240,000 222,000 302,000 270,500 281,000 465,000
------------- ----------- ----------- ----------- ----------- -----------
7,127,552 6,712,916 5,948,713 5,259,839 5,439,213 6,575,486
4,053,940 4,764,317 5,916,076 6,125,997 6,563,047 7,311,036
------------- ----------- ----------- ----------- ----------- -----------
684,510 505,476 603,325 878,731 859,397 935,714
3,465,803 3,625,772 4,457,545 4,799,745 4,921,836 5,233,881
------------- ----------- ----------- ----------- ----------- -----------
1,272,647 1,644,021 2,061,856 2,204,983 2,500,608 3,012,869
205,997 361,021 490,352 477,205 545,523 768,577
------------- ----------- ----------- ----------- ----------- -----------
$1,066,650 $1,283,000 $1,571,504 $1,727,778 $1,955,085 $2,244,292
============= =========== =========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------
$132,008,476 $135,881,746 $164,675,155 $171,682,025 $185,634,119 $191,199,526
115,056,983 118,059,873 145,648,647 152,334,470 163,312,482 166,604,359
12,169,023 12,990,023 14,078,527 15,375,942 16,518,060 18,451,873
71,060,484 77,137,769 79,642,462 86,696,640 106,952,378 120,907,269
1,500,000 1,000,000 0 0 0 0
720,856 846,824 1,039,360 1,256,322 1,437,734 1,775,383
114,304 96,032 109,464 53,538 99,588 127,351
66 71 83 80 82 83
Five Five Seven Seven Eight Eight
- -----------------------------------------------------------------------------------------------------
$0.58 $0.69 $0.85 $0.94 $1.06 $1.21
0.24 0.25 0.26 0.28 0.31 0.42
6.59 7.04 7.62 8.32 8.94 9.99
5.85 - 6.25 5.91 - 6.59 6.25 - 8.64 9.09 - 16.82 17.75 - 22.50 12.75 - 19.50
- -----------------------------------------------------------------------------------------------------
$441,000 $462,000 $483,000 $512,400 $564,472 $776,136
0.82% 0.95% 1.01% 1.04% 1.11% 1.18%
8.99% 10.21% 11.60% 11.73% 12.24% 12.85%
- -----------------------------------------------------------------------------------------------------
</TABLE>
NOTE: APPLICABLE INCOME TAXES FOR 1993 ARE NET OF CUMULATIVE EFFECT OF
ACCOUNTING CHANGE FOR INCOME TAXES OF $26,841.
45
<PAGE> 46
BANKING LOCATIONS
[PHOTO] [PHOTO]
THE CITIZENS SAVINGS BANK THE CITIZENS SAVINGS BANK OPERATIONS CENTER
Fourth at Hickory Street Fourth at Hickory Street
Martins Ferry, Ohio 43935 Martins Ferry, Ohio 43935
[PHOTO] [PHOTO]
THE CITIZENS SAVINGS BANK THE CITIZENS SAVINGS BANK
Howard at DeKalb Street Sharon Road at St. Route 250
Bridgeport, Ohio 43912 Colerain, Ohio 43916
46
<PAGE> 47
BANKING LOCATIONS
[PHOTO] [PHOTO]
THE CITIZENS-STATE BANK THE CITIZENS - STATE BANK
N. Wooster at 2nd Avenue N. Wooster at Ohio Avenue
Strasburg, Ohio 44680 Dover, Ohio 44622
[PHOTO]
THE CITIZENS-STATE BANK
141 N. Broadway
New Philadelphia, Ohio 44663
[PHOTO] [PHOTO]
THE CITIZENS-STATE BANK THE CITIZEN'S - STATE BANK
15 Sherrod Avenue 2 Smith Street
Sherrodsville, Ohio 44676 Dellroy, Ohio 44620
47
<PAGE> 48
DIRECTORS OF UNITED BANCORP, INC.
AND ITS SUBSIDIARIES
[PHOTO] [PHOTO]
MICHAEL J. ARCIELLO(1),(3) HERMAN E. BORKOSKI(1),(2)
[PHOTO] [PHOTO] [PHOTO]
JOHN H. CLARK, JR.(1),(2) DONALD A. DAVISON(1),(2) JAMES W. EVERSON(1),(2),(3)
[PHOTO] [PHOTO]
DR. LEON F. FAVEDE(1),(2) PREMO R. FUNARI(1),(2)
1=UNITED BANCORP, INC. 2=THE CITIZENS SAVINGS BANK 3=THE CITIZENS-STATE BANK
48
<PAGE> 49
DIRECTORS OF UNITED BANCORP, INC.
AND ITS SUBSIDIARIES
[PHOTO] [PHOTO] [PHOTO]
JOHN R. HERZIG(3) DWAIN R. HICKS(3) JOHN M. HOOPINGARNER(1),(3)
[PHOTO] [PHOTO]
ALBERT W. LASH(1),(2) MICHAEL A. LEY(3)
[PHOTO] [PHOTO] [PHOTO]
HAROLD W. PRICE(3) RICHARD L. RIESBECK(1),(2) MATTHEW C. THOMAS(1),(2)
1=UNITED BANCORP, INC. 2=THE CITIZENS SAVINGS BANK 3=THE CITIZENS-STATE BANK
49
<PAGE> 50
<TABLE>
<S><C>
DIRECTORS OF UNITED BANCORP,INC.
Michael J. Arciello (3) . . . . . . . . . . . . . . . . . . . . . .Vice President of Finance, Nickles Bakeries, Inc., Navarre, Ohio
Herman E. Borkoski (2). . . . . . . . . . . . . . . . . . . . . . . . . President, Borkoski Funeral Homes, Inc., Tiltonsville, Ohio
John H. Clark, Jr. (1,3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foundry Owner, Retired, Wheeling, West Virginia
Donald A. Davison (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Electrical Contractor,Retired, Martins Ferry, Ohio
James W. Everson (1). . . . . . . . . . . . . . . . . . . . . . . . . . . President, The Citizens Savings Bank, Martins Ferry, Ohio
Dr. Leon F. Favede (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Optometrist, Bridgeport, Ohio
Premo R. Funari . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Coal Executive, Retired, Martins Ferry, Ohio
John M. Hoopingarner (3) . . . . . . . . . . . . General Manager, Muskingum Watershed Conservancy District, New Philadelphia, Ohio
Albert W. Lash (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Auto Dealer, Retired, Colerain, Ohio
Richard L. Riesbeck (2,3) . . . . . . . . . . . . . . . . . . . . . President, Riesbeck Food Markets, Inc., Wheeling, West Virginia
Matthew C. Thomas (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .President, M.C. Thomas Insurance, Bridgeport, Ohio
OFFICERS OF UNITED BANCORP, INC.
Donald A. Davison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chairman of the Board
James W. Everson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . President And Chief Executive Officer
Harold W. Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President - Administration
Norman F. Assenza, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President - Operations And Secretary
James A. Lodes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President - Lending
Ronald S. Blake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treasurer
DIRECTORS OF THE CITIZENS SAVINGS BANK, MARTINS FERRY, OHIO
Herman E. Borkoski (2) . . . . . . . . . . . . . . . . . . . . . . . . President, Borkoski Funeral Homes, Inc., Tiltonsville, Ohio
John H. Clark, Jr. (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foundry Owner, Retired, Wheeling, West Virginia
Donald A. Davison (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Electrical Contractor, Retired, Martins Ferry, Ohio
James W. Everson (1) . . . . . . . . . . . . . . . . . . . . . . . . . . President, The Citizens Savings Bank, Martins Ferry, Ohio
Dr. Leon F. Favede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Optometrist, Bridgeport, Ohio
Premo R. Funari . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Coal Executive, Retired, Martins Ferry, Ohio
Albert W. Lash (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Auto Dealer, Retired, Colerain, Ohio
Richard L. Riesbeck (2) . . . . . . . . . . . . . . . . . . . . . . President, Riesbeck Food Markets, Inc., Wheeling, West Virginia
Matthew C. Thomas (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .President, M.C. Thomas Insurance, Bridgeport, Ohio
</TABLE>
1 = Executive Committee 2 = Audit Committee 3 = Compensation Committee
50
<PAGE> 51
<TABLE>
<S><C>
OFFICERS OF THE CITIZENS SAVINGS BANK, MARTINS FERRY, OHIO
Donald A. Davison. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chairman of the Board
James W. Everson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . President and Chief Executive Officer
Norman F. Assenza, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Senior Vice President - Operations
James A. Lodes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Vice President - Lending
Ronald S. Blake. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President - Comptroller
Cleo S. Dull. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President - Customer Service
Lee V. Grafton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President
William S. Holbrook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President - Administration - Cashier
Joseph Bednarik . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President
Robert T. Donald . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President
Raye Lynn Ackerman. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Cashier
Scott A. Everson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Cashier
Lloyd G. Hood, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Cashier
Judith C. Miller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Cashier
Matthew D. Jenkins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounting - Operations Officer
Michael A. Lloyd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..Data Processing Officer
DIRECTORS OF THE CITIZENS-STATE BANK, STRASBURG, OHIO
Michael J. Arciello (1,2) . . . . . . . . . . . . . . . . . . . . . Vice President of Finance, Nickles Bakeries, Inc., Navarre, Ohio
James W. Everson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .President, United Bancorp, Inc., Martins Ferry, Ohio
Harold W. Price (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . President, The Citizens-State Bank, Strasburg, Ohio
John R. Herzig (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . President, Toland-Herzig Funeral Homes, Strasburg, Ohio
Dwain R. Hicks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . President, L.J. Smith, Inc., Bowerston, Ohio
John M. Hoopingarner (1) . . . . . . . . . . . . . General Manager, Muskingum Watershed Conservancy District, New Philadelphia, Ohio
Michael A. Ley (2) . . . . . . . . . . . . . . . . . . . . . . . . President and Owner, Robert's Men's Shops, New Philadelphia, Ohio
OFFICERS OF THE CITIZENS-STATE BANK, STRASBURG, OHIO
Michael J. Arciello . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Chairman of the Board
Harold W. Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .President and Chief Executive Officer
Charles E. Allensworth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Vice President
Brent W. Metzger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Martin L. Merryman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President
Linda E. Myers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President
Dianne M. Cole . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Cashier
Carol L. Rambaud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Cashier
Susan A. Wickham . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Cashier
</TABLE>
1 = Executive Committee 2 = AuditCommittee 3 = Compensation Committee
51
<PAGE> 52
UNITED BANCORP, INC.'S common stock trades on The Nasdaq SmallCap Market
tier of The Nasdaq Stock Market under the symbol UBCP, CUSIP #90991109. There
are currently 1,847,942 shares outstanding, held among approximately 700
shareholders of record as of December 31, 1995. The following table sets forth
the quarterly high and low closing prices of UNITED BANCORP, INC. stock from
January 1, 1995 to December 31, 1995 and January 1, 1994 to December 31, 1994
as reported by the NASDAQ, The price quotes have been adjusted for comparison
purposes for the 10% stock dividend distributed on September 9, 1994. The price
quotations contained in the following table should not necessarily be relied on
in determining the value of the shareholders' investment.
UNITED BANCORP, INC.
COMMON STOCK PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
1995
------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
MARKET PRICE RANGE
High.................................. $19 1/2 $19 1/2 $19 $16 1/2
Low................................... 16 1/2 15 1/2 15 12 3/4
CASH DIVIDENDS
Quarter............................... $0.100 $0.100 $0.110 $0.110
Cumulative............................ 0.100 0.200 0.310 0.420
1994
-------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- ------------- --------------- -------------
MARKET PRICE RANGE
High................................... $21 3/4 $21 1/4 $20 1/2 $22 1/2
Low.................................... 19 17 3/4 18 1/2 18 1/2
CASH DIVIDENDS
Quarter................................ $0.073 $0.073 $0.080 $0.080
Cumulative............................. 0.073 0.146 0.226 0.306
</TABLE>
INVESTOR RELATIONS
A copy of the COMPANY'S Annual Report on Form 10-K, as filed with the SEC, will
be furnished free of charge upon written request to:
Ronald S. Blake, Treasurer
United Bancorp, Inc.
4th at Hickory Streets, P.O. Box 10
Martins Ferry, OH 43935
STOCK TRADING
McDonald and Company
P.O. Box 20897
Canton, OH 44701-0897
CALL: 1-800-962-0537
The Ohio Company
155 East Broad Street
Columbus, OH 43215
CALL 1-800-255-1825
ANNUAL MEETING
The Annual Meeting of Shareholders will be held at 2:00 P.M., April 17, 1996 at
the Corporate Headquarters in Martins Ferry, Ohio.
DIVIDEND REINVESTMENT AND STOCK
PURCHASE PLAN
A dividend reinvestment and stock purchase plan is available to shareholders of
United Bancorp, Inc. The Plan provides an opportunity to invest cash dividends
and optional cash payments in United Bancorp, Inc. stock. For details write to:
DRIP Plan Administrator UBCP
P.O. Box 767
Wheeling, WV 26003
CALL: (304) 234-9436 or
1-800-328-3369 Ext. 436
INDEPENDENT AUDITORS
Crowe, Chizek and Company LLP
Certified Public Accountants
10 West Broad Street
Columbus, OH 43215
(614) 469-0001
HEADQUARTERS
The Citizens Savings Bank Bldg.
4th at Hickory Street
Martins Ferry, OH 43935
(614) 633-BANK
FAX (614) 633-1448
TRANSFER AGENT AND REGISTRAR
Trust Department
WesBanco - Wheeling
One Bank Plaza
Wheeling, WV 26003
(304) 234-9422 or
1-800-328-3369 Ext. 436
52
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the prospectus
constituting part of the registration statement on Form S-3 for United Bancorp,
Inc., Dividend Reinvestment Plan of our report dated January 12, 1996 on the
1995 consolidated financial statements of United Bancorp, Inc., which report is
incorporated by reference in this Form 10-K.
Crowe, Chizek and Company LLP
Columbus, Ohio
March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,382
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 27,108
<INVESTMENTS-CARRYING> 29,362
<INVESTMENTS-MARKET> 29,986
<LOANS> 122,683
<ALLOWANCE> 1,775
<TOTAL-ASSETS> 191,200
<DEPOSITS> 166,604
<SHORT-TERM> 4,632
<LIABILITIES-OTHER> 1,511
<LONG-TERM> 0
0
0
<COMMON> 1,848
<OTHER-SE> 16,604
<TOTAL-LIABILITIES-AND-EQUITY> 191,200
<INTEREST-LOAN> 10,497
<INTEREST-INVEST> 3,766
<INTEREST-OTHER> 89
<INTEREST-TOTAL> 14,352
<INTEREST-DEPOSIT> 6,266
<INTEREST-EXPENSE> 6,576
<INTEREST-INCOME-NET> 7,776
<LOAN-LOSSES> 465
<SECURITIES-GAINS> 11
<EXPENSE-OTHER> 5,234
<INCOME-PRETAX> 3,013
<INCOME-PRE-EXTRAORDINARY> 3,013
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,244
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.21
<YIELD-ACTUAL> 4.32
<LOANS-NON> 105
<LOANS-PAST> 91
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,438
<CHARGE-OFFS> 152
<RECOVERIES> 24
<ALLOWANCE-CLOSE> 1,775
<ALLOWANCE-DOMESTIC> 1,775
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 584
</TABLE>
