<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
[ ] 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
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UNITED BANCORP, INC.
--------------------
(Exact name of registrant as specified in its charter.)
<TABLE>
<S><C>
OHIO 34-1405357
---- ----------
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
</TABLE>
FOURTH AT HICKORY STREET, MARTINS FERRY, OHIO 43935
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(614) 633-0445
--------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- -----
Indicate the number of shares outstanding of the issuer's classes of
common stock as of the latest practicable date.
COMMON STOCK, $1.00 PAR VALUE 2,033,385 SHARES AS OF OCTOBER 30, 1996
<PAGE> 2
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets . . . September 30, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income . . . Three and Nine Months Ended September 30, 1996 and 1995 . . . . 4
Condensed Consolidated Statements of Cash Flows . . . Nine Months Ended
September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 - 13
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 - 19
PART II OTHER INFORMATION
ITEM 1.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 2.
Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 3.
Default Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 4.
Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 5.
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 6.
Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
2
<PAGE> 3
UNITED BANCORP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
FORM 10-Q (IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 6,604 $ 6,382
Federal funds sold 4,210 600
-------- --------
TOTAL CASH AND DUE FROM BANKS 10,814 6,982
Investment securities available for sale 24,806 27,108
Investment securities held to maturity
(Estimated fair value of $30,985 at 09/30/96 and $29,986 at 12/31/95) 30,718 29,363
LOANS
Commercial loans 10,481 10,802
Commercial real estate loans 40,224 35,510
Real estate loans 34,129 33,294
Installment loans 42,645 43,077
-------- --------
TOTAL LOANS 127,479 122,683
Allowance for loan losses (1,999) (1,775)
-------- --------
Net loans 125,480 120,908
Premises and equipment, net 5,264 4,901
Accrued interest receivable and other assets 2,416 1,938
-------- --------
TOTAL ASSETS $199,498 $191,200
======== ========
LIABILITIES
DEPOSITS
Noninterest bearing $ 13,246 $ 12,617
Interest bearing 157,953 153,987
-------- --------
TOTAL DEPOSITS 171,199 166,604
Short-term borrowings 6,783 4,569
US Treasury note account 746 64
Accrued expenses and other liabilities 1,346 1,511
-------- --------
TOTAL BORROWINGS AND OTHER LIABILITIES 8,875 6,144
TOTAL LIABILITIES 180,074 172,748
-------- --------
SHAREHOLDERS' EQUITY
Common stock:($1 Par Value) 10,000,000 shares authorized; issued and outstanding:
2,032,588 shares at 9/30/96 and 1,847,942 at 12/31/95 2,033 1,848
Additional-paid-in-capital 11,713 9,359
Retained earnings 5,691 6,946
Unrealized gain/(loss) on securities available for sale, net of tax (13) 299
-------- --------
TOTAL SHAREHOLDERS' EQUITY 19,424 18,452
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $199,498 $191,200
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
UNITED BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FORM 10-Q (IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
---------------------- ----------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 2,898 $ 2,737 $ 8,491 $ 7,703
Interest on investment securities
Taxable 538 688 1,703 2,142
Tax exempt 274 242 786 726
Interest on federal funds sold 46 18 127 67
Dividends 18 0 29 0
---------- ---------- ---------- ----------
TOTAL INTEREST INCOME 3,774 3,685 11,136 10,638
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits 1,631 1,581 4,743 4,663
Other 76 95 243 216
---------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE 1,707 1,676 4,986 4,879
---------- ---------- ---------- ----------
NET INTEREST INCOME 2,067 2,009 6,150 5,759
Provision for loan losses (111) (125) (344) (294)
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,956 1,884 5,806 5,465
---------- ---------- ---------- ----------
NONINTEREST INCOME
Service charges on deposit accounts 152 137 453 397
Investment security gains, net - - 27 12
Other 96 73 285 278
---------- ---------- ---------- ----------
TOTAL NONINTEREST INCOME 248 210 765 687
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits 662 658 2,005 1,953
Premises, furniture and equipment expense 221 48 613 447
Other operating expense 475 522 1,384 1,515
---------- ---------- ---------- ----------
TOTAL NONINTEREST EXPENSE 1,358 1,228 4,002 3,915
---------- ---------- ---------- ----------
INCOME BEFORE TAXES 846 866 2,569 2,237
Provision for income taxes (214) (229) (632) (566)
---------- ---------- ---------- ----------
NET INCOME $ 632 $ 637 $ 1,937 $ 1,671
========== ========== ========== ==========
PER SHARE DATA:
Earnings per common share $ 0.31 $ 0.31 $ 0.95 $ 0.82
========== ========== ========== ==========
Average number of shares outstanding 2,032,588 2,032,588 2,032,588 2,032,588
Dividends per common share $0.11 $0.10 $0.32 $0.28
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE> 5
UNITED BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FORM 10-Q (IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
---------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,937 $ 1,671
Adjustments to reconcile net income to net cash
from operating activities
Depreciation and amortization 331 272
Amortization of intangibles 69 66
Provision for loan losses 344 294
Deferred taxes (39) 91
Federal Home Loan Bank stock dividend (29)
Gain on sale/call of investment securities (27) (12)
Amortization of investment securities, net 8 60
Net changes in:
Accrued interest receivable and other assets (521) 19
Accrued expenses and other liabillities 43 (143)
------- -------
Net cash from Operating Activities 2,116 2,318
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment securities available for sale
Proceeds from sales of investment securities 3,623 500
Proceeds from maturities/calls of investment securities 10,000
Purchase of investment securities (11,697) (2,144)
Investment securities held to maturity
Proceeds from maturities/calls of investment securities 3,435 6,224
Purchase of investment securities (4,839) (791)
Net change in loans (4,940) (13,562)
Property and equipment expenditures (707) (114)
------- -------
NET CASH FROM INVESTING ACTIVITIES (5,125) (9,887)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 4,595 3,565
Net change in short-term obligations 2,896 3,871
Cash dividends (650) (573)
------- -------
NET CASH FROM FINANCING ACTIVITIES 6,841 6,863
------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS 3,832 (706)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,982 6,730
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $10,814 $ 6,024
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR:
Interest expense $ 5,018 $ 4,919
Income taxes 710 535
NONCASH ACTIVITIES
Transfers from Loans to Real Estate Owned $ 24 $ -
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE> 6
UNITED BANKCORP, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FORM 10-Q
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
in the preparation of the accompanying condensed consolidated financial
statements.
NATURE OF OPERATIONS
The accompanying condensed consolidated financial statements include the
accounts of United Bancorp, Inc. (COMPANY) and its wholly owned
subsidiaries, The Citizens Savings Bank of Martins Ferry, Ohio
(CITIZENS-MARTINS FERRY) and The Citizens-State Bank of Strasburg,
Strasburg, Ohio (CITIZENS-STRASBURG). For purposes of consolidation, all
material intercompany balances and transactions have been eliminated. The
results of operations for the period ended September 30, 1996 are not
necessarily indicative of the operating results for the full year of 1996.
These interim financial statements are prepared without audit and
reflect all adjustments which, in the opinion of management, are necessary
to present fairly the consolidated financial position of the COMPANY at
September 30, 1996 and its results of operations and statements of cash
flows for the periods presented. These adjustments are of a normal and
recurring nature. The accompanying condensed consolidated financial
statements do not purport to contain all the necessary financial
disclosures required by generally accepted accounting principles that
might otherwise be necessary in the circumstances and should be read in
conjunction with the 1995 United Bancorp, Inc. consolidated financial
statements and related notes thereto included in its Annual Report To
Shareholders for the year ended December 31, 1995.
The COMPANY is engaged in the business of commercial and retail banking
in Belmont, Tuscarawas and Carroll Counties and the surrounding localities
in north eastern and eastern Ohio. The subsidiary 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.
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 through
September 30, 1996.
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.
6
<PAGE> 7
UNITED BANKCORP, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FORM 10-Q
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 the borrowers
past due experience, economic conditions and various other circumstances
that are subject to change over time.
The COMPANY adopted Statement of Financial Accounting Standards ("SFAS")
No. 114, "Accounting By Creditors for Impairment Of A Loan" and SFAS No.
118, "Accounting By Creditors For Impairment Of A Loan - Income
Recognition And Disclosures" at January 1, 1995. Under SFAS No. 114,
loans considered to be impaired are reduced to the present value of
expected future cash flows or to the fair value of collateral, by
allocating a portion of the allowance for loan losses to such loans. If
these allocations cause the allowance for loan losses to increase, such
increases are reported as bad debt expense. 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
requirement. 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 they are 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 nonperforming 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 nonpayment 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 condensed 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 as reductions or increases in bad debt
expense.
7
<PAGE> 8
UNITED BANKCORP, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FORM 10-Q
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 $23,998 in
other real estate held at September 30, 1996 and $0 at December 31, 1995.
INCOME TAXES
The COMPANY follows the liability method in accounting for income taxes.
The liability method provides that deferred tax assets and liabilities are
recorded based on the difference between the tax basis of assets and
liabilities and their carrying amounts for financial reporting purposes.
EARNINGS AND DIVIDENDS PER COMMON SHARE
Earnings per common share have been computed based on the weighted
average number of shares outstanding during the periods presented. On
April 17, 1996, a 10% share dividend was approved for all shareholders of
record on May 20, 1996 and distributed on June 20, 1996. 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. All per share data has been retroactively
adjusted for the stock dividend. The weighted average number of shares
used in the computation of earnings per share was 2,032,588 for all
periods presented. Stock options outstanding do not presently have a
dilutive effect of greater than 3% on earnings per common share and are
therefore not considered for purposes of the earnings per share
disclosure.
STATEMENT OF CASH FLOWS
For purposes of the Statements of Cash Flows, the COMPANY considers
"cash and cash equivalents" to include cash, deposits with financial
institutions and Federal funds sold. The COMPANY reports net cash flows
for customer loan transactions, deposit transactions, securities sold
under agreements to repurchase and other borrowed funds.
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.
8
<PAGE> 9
UNITED BANKCORP, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FORM 10-Q
2. INVESTMENT SECURITIES
The amortized cost and estimated fair values of investment securities
are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
AMORTIZED GROSS GROSS ESTIMATED
COST UNREALIZED GAIN UNREALIZED LOSS MARKET VALUE
----------- ---------------- --------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES AVAILABLE FOR SALE
US Treasury obligations $3,715,419 $51,170 $3,766,589
US Agency obligations 20,031,952 56,604 ($140,497) 19,948,059
State and Municipal obligations 456,588 13,457 470,045
Other investments 620,850 620,850
----------- -------- -------- -----------
TOTAL INVESTMENT SECURITIES AVAILABLE FOR SALE $24,824,809 $121,231 ($140,497) $24,805,543
=========== ======== ======== ===========
INVESTMENT SECURITIES HELD TO MATURITY
US Agency obligations $10,187,612 ($168,334) $10,019,278
State and Municipal obligations 20,530,737 $447,495 (12,135) 20,966,097
----------- -------- -------- -----------
TOTAL INVESTMENT SECURITIES HELD TO MATURITY $30,718,349 $447,495 ($180,469) $30,985,375
=========== ======== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
AMORTIZED GROSS GROSS ESTIMATED
COST UNREALIZED GAIN UNREALIZED LOSS MARKET VALUE
----------- ---------------- --------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES AVAILABLE FOR SALE
US Treasury obligations $6,937,596 $171,964 ($4,061) $7,105,499
US 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
US 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
=========== ======== ======== ===========
</TABLE>
Total proceeds from sales of investment securities classified as
available for sale for the three and nine month periods ended September
30, 1996 were $607,797 and $3,623,266 with $5,416 and $31,936 realized as
gross gains and $5,416 and $0, respectively realized as gross losses on
those sales. Total proceeds from sales of investment securities
classified as available for sale for the three and nine months ended
September 30, 1995 were $0 and $500,312, with gross gains of $0 and
$11,778, respectively realized on those sales.
The amortized cost and estimated fair value of debt securities at
September 30, 1996 by contractual maturity are shown in the following
table. Actual maturities may 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.
9
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UNITED BANKCORP, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FORM 10-Q
<TABLE>
<CAPTION>
INVESTMENT SECURITIES AVAILABLE FOR SALE AMORTIZED ESTIMATED WEIGHTED AVERAGE
SEPTEMBER 30, 1996 COST FAIR VALUE AVERAGE MATURITY YIELD
---------------------------------------- ----------- ----------- ---------------------- -------
<S> <C> <C> <C> <C> <C>
US TREASURY OBLIGATIONS
6 - 12 Months $ 498,515 $ 503,281 6.0 Mos. 7.50%
1 - 2 Years 1,737,618 1,754,246 1 Yr 11.2 Mos. 6.86%
2 - 5 Years 1,479,286 1,509,062 2 Yrs 6.3 Mos. 7.26%
----------- ----------- ---------------------- -------
Total 3,715,419 3,766,589 1 Yr 11.7 Mos. 7.10%
----------- ----------- ---------------------- -------
US AGENCY OBLIGATIONS
3 - 6 Months 1,505,120 1,512,031 5.5 Mos. 6.64%
6 - 12 Months 999,900 1,001,250 8.7 Mos. 6.17%
1 - 2 Years 3,425,800 3,474,143 1 Yr 4.3 Mos. 7.17%
2 - 5 Years 11,098,696 11,027,290 4 Yrs 4.0 Mos. 6.89%
5 - 10 Years 3,002,436 2,933,345 9 Yrs 1.8 Mos. 7.25%
----------- ----------- ---------------------- -------
Total 20,031,952 19,948,059 3 Yrs 11.1 Mos. 6.93%
----------- ----------- ---------------------- -------
STATE AND MUNICIPAL OBLIGATIONS
5 - 10 Years 336,588 347,849 8 Yrs 2.3 Mos. 8.37%
Over 10 Years 120,000 122,196 11 Yrs 2.0 Mos. 8.33%
----------- ----------- ---------------------- -------
Total 456,588 470,045 8 Yrs 11.6 Mos. 8.36%
----------- ----------- ---------------------- -------
OTHER INVESTMENTS
Equity securities 620,850 620,850
----------- ----------- ---------------------- -------
TOTAL INVESTMENT SECURITIES AVAILABLE FOR SALE $24,824,809 $24,805,543 3 YRS 7.5 MOS. 6.98%
=========== =========== ====================== =======
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT SECURITIES HELD TO MATURITY AMORTIZED ESTIMATED WEIGHTED AVERAGE
SEPTEMBER 30, 1996 COST FAIR VALUE AVERAGE MATURITY YIELD
-------------------------------------- ----------- ----------- ---------------------- -------
<S> <C> <C> <C> <C> <C>
US AGENCY OBLIGATIONS
0 - 3 Months $ 500,000 $ 499,219 1.5 Mos. 4.62%
3 - 6 Months 500,000 498,125 4.3 Mos. 4.78%
6 - 12 Months 89,285 89,285 6.7 Mos. 6.10%
1 - 2 Years 5,499,999 5,412,376 1 Yr 7.0 Mos. 5.25%
2 - 5 Years 3,598,328 3,520,273 2 Yrs 9.9 Mos. 5.64%
----------- ----------- ---------------------- -------
Total 10,187,612 10,019,278 1 Yr 10.6 Mos. 5.34%
----------- ----------- ---------------------- -------
STATE AND MUNICIPAL OBLIGATIONS
0 - 3 Months 775,685 776,339 2.2 Mos. 6.62%
6 - 12 Months 290,621 291,943 8.4 Mos. 6.72%
1 - 2 Years 447,728 444,658 1 Yr 3.8 Mos 6.54%
2 - 5 Years 4,777,073 4,943,727 3 Yrs 7.3 Mos 8.59%
5 - 10 Years 13,752,643 14,027,338 6 Yrs 7.9 Mos. 7.98%
Over 10 Years 486,987 482,092 10 Yrs 3.9 Mos. 7.69%
----------- ----------- ---------------------- -------
Total 20,530,737 20,966,097 5 Yrs 7.0 Mos. 8.02%
----------- ----------- ---------------------- -------
TOTAL INVESTMENT SECURITIES HELD TO MATURITY $30,718,349 $30,985,375 4 YRS 4.3 MOS. 7.13%
=========== =========== ====================== =======
</TABLE>
10
<PAGE> 11
UNITED BANKCORP, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FORM 10-Q
2. INVESTMENT SECURITIES (CONTINUED)
Securities with a par value of approximately $23,445,000 at September
30, 1996 and $22,485,000 at December 31, 1995 were pledged to secure
public deposits, repurchase agreements and other liabilities as required
or permitted by law.
3. LOANS
The COMPANY has, and expects to have in the future, banking transactions
with directors and officers of the COMPANY and its subsidiaries. Loans to
such borrowers, their immediate families, affiliated corporations, and
other entities in which they own more than a 10% voting interest are
summarized below:
<TABLE>
<S> <C>
Aggregate balance - December 31, 1995 $2,972,508
New loans 668,857
Repayments (1,541,565)
----------
Aggregate balance - September 30, 1996 $2,099,800
==========
</TABLE>
4. ALLOWANCE FOR LOAN LOSSES
The allowance in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Balance 01/01/96 and 01/01/95 $1,775,383 $1,437,734
Provision charged to operating expense 344,400 465,000
Loans charged-off (160,514) (151,200)
Recoveries 39,337 23,849
---------- ----------
Balance 09/30/96 and 12/31/95 $1,998,606 $1,775,383
========== ==========
</TABLE>
There were no loans at September 30, 1996 and 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 nine
months ended September 30, 1996 and September 30, 1995 was $0 and
$212,000, respectively. There was no interest recognized on a cash
received basis on impaired loans for the nine months ended September 30,
1996. Interest recognized on a cash basis on impaired loans was $9,000
for the nine months ended September 30, 1995. Loans past due 90 days or
more were not significant at September 30, 1996.
5. PREMISES AND EQUIPMENT
Premises and equipment, at cost, and accumulated depreciation and
amortization as of September 30, 1996 and December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Buildings and land $5,297,993 $5,302,750
Furniture and equipment 2,621,001 2,224,331
Computer software 626,774 385,587
---------- ----------
Total 8,545,768 7,912,668
Accumulated depreciation and amortization 3,281,565 3,011,431
---------- ----------
PREMISES AND EQUIPMENT, NET $5,264,203 $4,901,237
========== ==========
</TABLE>
11
<PAGE> 12
UNITED BANKCORP, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FORM 10-Q
6. COMMITMENTS AND CONTINGENCIES
The COMPANY'S subsidiaries are parties to financial instruments with
off-balance sheet risk in the normal course of business, to meet the
financing needs of their customers. These financial instruments include
lines of credit and commitments to make loans. The COMPANY'S exposure to
credit loss in the event of nonperformance by the other party to the
financial instrument for commitments to make loans and standby letters of
credit is represented by the contractual amount of those instruments. The
COMPANY follows the same credit policy to make such commitments as is
followed for those loans recorded in the financial statements.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- -------------
<S> <C> <C>
Commitments to extend credit $10,987,000 $11,833,000
Standby letters of credit 156,000 286,000
</TABLE>
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 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 September 30, 1996 and December 31, 1995, the COMPANY was required to
have $656,000 and $694,000, respectively, of cash on hand or on
deposit with the Federal Reserve Bank to meet regulatory reserve
requirements. These balances do not earn interest.
7. CONCENTRATION OF CREDIT RISK
The Banks grant commercial, commercial real estate, 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
September 30, 1996 and December 31, 1995, total commercial and commercial
real estate loans made up 39.8% and 37.8%, respectively of the loan
portfolio, with 30.9% and 28.4% of these loans secured by commercial and
residential real estate and business assets in the Columbus, Ohio area.
Installment loans account for 33.5% and 35.1% of the loan portfolio and
are secured by consumer assets including automobiles which account for
86.0% and 76.5%, respectively of the installment loan portfolio. Real
estate loans comprise 26.8% and 27.1% of the loan portfolio as of
September 30, 1996 and December 31, 1995, 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 September
30, 1996 and December 31, 1995 is $6,680,503 and $2,313,146,
respectively on deposit with Mellon Bank, NA, Pittsburgh, Pennsylvania.
12
<PAGE> 13
UNITED BANKCORP, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FORM 10-Q
8. BENEFIT PLANS
The COMPANY adopted a nonqualified stock option plan on November 21,
1995, ratified by shareholders on April 17, 1996. 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. As of September 30, 1996, the COMPANY has granted 63,500
in options to buy shares of common stock at an option price of $13.58 per
share adjusted for the 10% stock dividend distributed June 20, 1996.
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 will not adopt 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 in the December 31, 1996 financial
statements.
9. 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 the current and
prior two years earnings, (as defined), totaling $4,263,000 as of
September 30, 1996. 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.
13
<PAGE> 14
UNITED BANCORP, INC.
MANAGEMENT S DISCUSSION AND ANALYSIS
FORM 10-Q
In the following pages, Management presents an analysis of UNITED BANCORP,
INC.'S financial condition at September 30, 1996 compared to December 31, 1995
and results of operations for the three and nine month periods ended September
30, 1996 compared to the same three and nine month periods ended September 30,
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.
UNITED BANCORP, INC. is a multi-bank holding company located in Martins Ferry,
Ohio. The COMPANY originally became incorporated as a one bank holding company
in July of 1983, through the acquisition of 100% of the voting stock of The
Citizens Savings Bank of Martins Ferry, Ohio As a shell holding company, the
COMPANY is headquartered at the main office location of The Citizens Savings
Bank at 4th at Hickory Street, Martins Ferry, Ohio. The COMPANY became a
multi-bank holding company in December of 1986, through the purchase of 100% of
the voting stock of The Citizens-State Bank of Strasburg, Strasburg, Ohio.
UNITED BANCORP, INC.'S common stock has been traded on The Nasdaq SmallCap
Market tier of The Nasdaq Stock Market under the trading symbol of UBCP since
February of 1993.
The markets served by both Bank subsidiaries are rich in tradition, culture and
heritage. CITIZENS-MARTINS FERRY meets the commercial banking needs of
residents, businesses 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.
FINANCIAL CONDITION
EARNING ASSETS
LOANS
At September 30, 1996, gross loans were $127,479,000 compared to $122,683,000
at December 31, 1995, representing an increase of 3.91%. Commercial real
estate lending showed strong growth with a 13.27% increase in volume compared
to December 31, 1995. Real estate lending also experienced growth with a
slight increase of 2.51% over year end volume. Installment lending has
softened somewhat with a decline of less than 1%. This decline in installment
lending growth may possibly reflect the effects of increased consumer debt
burdens and attempts to pay down existing debts before purchasing additional or
replacement consumer items.
The COMPANY maintains a well balanced portfolio with continued involvement in
all types of consumer lending, as well as the more common types of domestic
commercial lending. CITIZENS-MARTINS FERRY continues to be aggressive in the
indirect automobile lending market with recent expansion into the
CITIZENS-STATE market area.
14
<PAGE> 15
UNITED BANCORP, INC.
MANAGEMENT S DISCUSSION AND ANALYSIS
FORM 10-Q
LOANS (CONTINUED)
The indirect lending type of financing carries somewhat more risk than real
estate lending, however, it also provides for higher yields. The targeted
lending areas encompass four metropolitan areas, minimizing the risk to changes
in economic conditions in the communities housing the COMPANY'S eight branch
locations.
The ongoing expansion and development of the commercial lending products at
both subsidiary Banks has provided numerous opportunities for additional market
penetration within the local market and also outside local market areas. The
various types of commercial loans as a mix of the total portfolio continue to
be diverse, with no material concentration in any one industry. Risk
associated with local economic dependence upon a single employer is not
considered to be material.
Out of area loans occur mostly in the Columbus and Akron-Canton, Ohio areas.
Lending beyond the local area has been for low risk projects and for borrowers
with substantial net worth. The majority of these loans are secured by real
estate. A slight concentration of loans continues to develop 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.
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 borrowers past due experience, economic
conditions and various other circumstances that are subject to change over
time.
INVESTMENT SECURITIES
Investment securities available for sale at September 30, 1996 decreased
$2,303,000, or 8.49% from December 31, 1995 totals. This downward movement
resulted partially from the liquidity needs necessary to sustain known and
anticipated loan growth at both Bank subsidiaries as well as increasing
investments in state and municipal obligations held to maturity by $3,566,000.
Investment securities held to maturity increased a net $1,356,000, or 4.62%
over December 31, 1995 totals primarily through the acquisition of municipal
bonds indicated above which were partially offset by $2,210,000 in maturities
of U.S. Government agency obligations.
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. 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 non rated bonds of local schools, townships and
municipalities, based on their known levels of credit risk.
15
<PAGE> 16
UNITED BANCORP, INC.
MANAGEMENT S DISCUSSION AND ANALYSIS
FORM 10-Q
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 $2,354,000 during the nine months ended September 30, 1996
primarily from demand deposit and certificates of deposit less than $100,000.
The COMPANY has a strong deposit base from public agencies, including local
school districts, city and township municipalities, public works facilities and
others which may tend to be more seasonal in nature resulting from the receipt
and disbursement of state and Federal grants. These entities have maintained
fairly static balances with the COMPANY due to non similar 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 September 30, 1996, certificates of deposit over $100,000 increased
$2,250,000, or 19.30% over December 31, 1995 totals.
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. September 30, 1996 total
short-term borrowings increased $2,896,000, or 62.53% over December 31, 1995
totals due primarily to increased daily sweep account balances.
PERFORMANCE OVERVIEW
Net income for the three months ended September 30, 1996 decreased $5,000, or
0.83% over the same three month period in 1995. The decrease in earnings for
the three months ended September 30, 1996 compared to the same three month
period ended September 30, 1995 was primarily the result of realization of
depreciation expense on the new generation data processing and item processing
equipment which became fully operational during the third quarter of 1996.
Costs benefits were derived during the third quarter of 1995 from the fully
depreciated data processing equipment in use at that time. Additionally, the
FDIC Bank Insurance Fund refund occurred during September 1995 which resulted
in a one-time benefit to pretax earnings of $104,649. The nine month
comparison shows an increase for September 30, 1996 of $265,000, or 15.87% over
the same nine month period in 1995. This annualized nine month performance
yielded a Return on Average Assets of 1.33% and a Return on Average Equity of
13.64%. The year-to-date increase resulted from continued loan growth in
higher yielding commercial and commercial real estate portfolios, with only
moderate increases to the cost of funds on depository products. The COMPANY
also had higher levels of fee income related to deposit accounts because of
continued high levels of service charge and overdraft activity. Additionally,
the COMPANY realized security gains of $26,519 on investment securities sold
from the available for sale portion of the portfolio.
Net interest income, by definition, is the difference between interest income
generated on interest earning assets and the interest expense incurred on
interest bearing liabilities. Various factors contribute to changes in net
interest income, including volumes, interest rates and the composition or mix
of interest earning assets in relation to interest bearing liabilities. The
COMPANY has continued to employ aggressive marketing and pricing concepts to
generate a higher yielding product mix within the loan portfolio as well as
increasing the percentage of loans to earning assets to increase interest
income.
16
<PAGE> 17
UNITED BANCORP, INC.
MANAGEMENT S DISCUSSION AND ANALYSIS
FORM 10-Q
PERFORMANCE OVERVIEW (CONTINUED)
Total interest income for the three and nine months ended September 30, 1996
when compared to the same three and nine months ended September 30, 1995
increased $89,000, or 2.43% and $498,000, or 4.69%, respectively. Interest and
fees on loans increased $161,000, or 5.88% and $788,000, or 10.23% for the
three and nine months ended September 30, 1996.
Total interest expense for the three and nine months ended September 30, 1996
increased $32,000, or 1.92% and $107,000, or 2.20% respectively over the same
periods in 1995. Despite a decrease in the COMPANY'S cost of funds, total
interest expense increased due to a higher volume of interest bearing
liabilities.
NONINTEREST INCOME AND EXPENSE
Noninterest income for the three and nine month periods presented increased
$38,000, or 18.09% and $78,000, or 11.35%, respectively. Increases for the
three month period were the result of continued high volumes of service fee
activity. The nine month period includes investment security gains on sales of
securities available for sale.
Noninterest expense for the three months ended September 30, 1996 increased
$130,000, or 10.59% over the three months ended September 30, 1995. The
largest contributor to this change was the additional depreciation expense
recognized on new data processing and item processing equipment which was
installed during the third quarter of 1996. The prior year three month period
had reduced expense due to the original Data Processing equipment being fully
depreciated in May of 1995. Noninterest expense for the nine month comparative
period increased $88,000, or 2.24% due to primarily the same reasons discussed
above.
CAPITAL RESOURCES
Internal capital growth, through the retention of earnings, is the primary
means of maintaining capital adequacy for the COMPANY. Shareholder equity at
September 30, 1996 was $19,424,000 compared to $18,452,000 at December 31,
1995, a 5.27% increase. Equity at September 30, 1996 includes a $13,000
unrecognized loss in equity due to the after tax impact of the fair value of
securities categorized as available for sale as compared to a $299,000 increase
in equity at December 31, 1995. Total shareholder's equity in relation to
total assets was 9.74% at September 30, 1996 compared to 9.65% at December 31,
1995. The ratios for Average Equity-to-Average Total Assets for the nine
months ended September 30, 1996 and the year ended December 31, 1995 were 9.77%
and 9.10%, respectively.
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 brokerage commissions or service charges. 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. To date, all shares
purchased by the Plan except for 797 shares purchased on October 21, 1996 have
been purchased on the open market.
17
<PAGE> 18
UNITED BANCORP, INC.
MANAGEMENT S DISCUSSION AND ANALYSIS
FORM 10-Q
CAPITAL RESOURCES(CONTINUED)
Regulatory standards require banks and bank holding companies to maintain
capital based on "risk adjusted" assets so that categories of assets with
potentially higher credit risk require more capital backing than assets with
lower risk. Additionally, banks and bank holding companies are required to
maintain capital to support, on a risk-adjusted basis, certain off-balance
sheet activities such as standby letters of credit and interest rate swaps.
In order to monitor relative levels of risk throughout the financial
institution industry, the Federal Reserve Board classifies capital into two
tiers. Tier 1 capital consists of common shareholders' equity, non cumulative
and cumulative perpetual preferred stock, and minority interest 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 September 30, 1996:
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------
<S> <C>
Common Shareholders' Equity $ 19,424,219
Tier 1 Capital $ 19,240,260
Tier 2 Capital $ 1,622,463
Tier 1 and 2 Capital $ 20,862,723
Adjusted Total Assets $195,282,340
Total Risk Adjusted Assets $129,797,008
Leverage Ratio 9.85%
Tier 1 Risk-Based Capital Ratio 14.82%
Tier 1 and Tier 2 Risk-Based Capital Ratio 16.07%
</TABLE>
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.
18
<PAGE> 19
UNITED BANCORP, INC.
MANAGEMENT S DISCUSSION AND ANALYSIS
FORM 10-Q
LIQUIDITY(CONTINUED)
For the period ended September 30, 1996, 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 use of the net cash from investing activities was $16,536,000 in
investment security purchases, $4,916,000 used to fund the net change in loans
and $707,000 utilized for the purchase of the next generation of in-house Data
Processing and Item Processing hardware and software. This was partially
offset by $17,058,000 in proceeds from investment securities sold, called or
maturing. Financing activities include net changes in deposits and short-term
borrowings and cash dividends paid. Deposits and Short-term obligations were
the primary sources of funds providing a net cash infusion of $6,841,000. For
a more detailed illustration of the COMPANY'S sources and uses of cash, refer
to the condensed consolidated statements of cash flows.
INFLATION
Substantially all of the COMPANY'S assets and liabilities relate to banking
activities and are monetary in nature. The consolidated financial statements
and related financial data are presented in accordance with Generally Accepted
Accounting principles (GAAP). GAAP currently requires the COMPANY to measure
the financial position and results of operations in terms of historical
dollars, with the exception of securities available-for-sale which are measured
at fair value. Changes in the value of money due to rising inflation can cause
purchasing power loss.
Management's opinion is that movements in interest rates affects the financial
condition and results of operations to a greater degree than changes in the
rate of inflation. It should be noted that interest rates and inflation do
effect each other, but do not always move in correlation with each other. The
COMPANY'S ability to match the interest sensitivity of its financial assets to
the interest sensitivity of its liabilities in its asset/liability management
may tend to minimize the effect of changes 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 are subject to
regulations of the Federal Deposit Insurance Corporation (FDIC) and the State
of Ohio, Division of Financial Institutions.
19
<PAGE> 20
UNITED BANCORP, INC.
OTHER INFORMATION
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 K
(a) Exhibits
(b) Reports on Form 8 K
The COMPANY filed no form 8 Ks with the Securities Exchange
Commission during the quarter ending September 30, 1996.
20
<PAGE> 21
UNITED BANCORP, INC.
OTHER INFORMATION
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
October 30, 1996 By: /s/ James W. Everson
- ---------------- ---------------------------------
Date James W. Everson
President and Chief Executive Officer
October 30, 1996 By: /s/ Ronald S. Blake
- ---------------- ----------------------------------
Date Ronald S. Blake
Treasurer
21
<PAGE> 22
UNITED BANCORP
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
22
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,604
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,210
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,806
<INVESTMENTS-CARRYING> 30,718
<INVESTMENTS-MARKET> 30,985
<LOANS> 127,479
<ALLOWANCE> 1,999
<TOTAL-ASSETS> 199,498
<DEPOSITS> 171,199
<SHORT-TERM> 7,529
<LIABILITIES-OTHER> 1,346
<LONG-TERM> 0
0
0
<COMMON> 2,033
<OTHER-SE> 17,391
<TOTAL-LIABILITIES-AND-EQUITY> 199,498
<INTEREST-LOAN> 8,491
<INTEREST-INVEST> 2,518
<INTEREST-OTHER> 127
<INTEREST-TOTAL> 11,136
<INTEREST-DEPOSIT> 4,743
<INTEREST-EXPENSE> 4,986
<INTEREST-INCOME-NET> 6,150
<LOAN-LOSSES> 344
<SECURITIES-GAINS> 27
<EXPENSE-OTHER> 4,002
<INCOME-PRETAX> 2,569
<INCOME-PRE-EXTRAORDINARY> 2,569
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,937
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.95
<YIELD-ACTUAL> 4.38
<LOANS-NON> 134
<LOANS-PAST> 101
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,775
<CHARGE-OFFS> 160
<RECOVERIES> 39
<ALLOWANCE-CLOSE> 1,999
<ALLOWANCE-DOMESTIC> 1,999
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 969
</TABLE>
