<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1996
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.)
<TABLE>
<CAPTION>
OHIO 34-1405357
- -------------------------------------------------------------- ----------------------------------
<S> <C>
(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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (614) 633-0445
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
COMMON STOCK, PAR VALUE $1.00 A SHARE NASDAQ REGULAR MARKET (SMALLCAP)
- ------------------------------------- -----------------------------------------
<S> <C>
(Title of class) Name of each exchange on which registered
</TABLE>
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 21, 1997.
COMMON STOCK, $1.00 PAR VALUE: $38,934,806.
-------------------------------------------
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S CLASSES OF COMMON STOCK AS
OF MARCH 21, 1997.
COMMON STOCK, $1.00 PAR VALUE: 2,033,385 SHARES
-----------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE ANNUAL SHAREHOLDERS REPORT FOR THE YEAR ENDED DECEMBER 31, 1996
ARE INCORPORATED BY REFERENCE INTO PARTS I AND II, (INDEX ON PAGE 2).
PORTIONS OF THE PROXY STATEMENT FOR THE ANNUAL SHAREHOLDERS MEETING TO BE HELD
APRIL 16, 1997 ARE INCORPORATED BY REFERENCE INTO PART III (INDEX ON PAGE 2)
<PAGE> 2
UNITED BANCORP, INC. FORM 10-K
INDEX OF ITEMS INCORPORATED BY REFERENCE WITHIN FORM 10-K
<TABLE>
<CAPTION>
FORM 10-K
PAGE # ITEM DESCRIPTION REFERENCE DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3 Part I, Item 1, (a) Incorporated by reference to pages 4 - 5 of the Annual Report To Shareholders.
3 Part I, Item 1, (b) Incorporated by reference to page 25, Note 1 of the Annual Report To Shareholders.
4 Part I, Item 1, I Incorporated by reference to pages 17 -18 of the Annual Report To Shareholders.
5 Part I, Item 1, II, B Incorporated by reference to page 31, Note 2 of the Annual Report To Shareholders.
7 Part I, Item 1, III, C, 4 Incorporated by reference to page 39, Note 11 of the Annual Report To Shareholders.
8 Part I, Item 1, IV Incorporated by reference to page 26, Note 1 of the Annual Report To Shareholders.
10 Part I, Item 1, V, A Incorporated by reference to page 17 of the Annual Report To Shareholders.
11 Part I, Item 2 Incorporated by reference to pages 4 - 5 of the Annual Report To Shareholders.
11 Part I, Item 3 Incorporated by reference to page 38, Note 10 of the Annual Report To Shareholders.
11 Part II, Item 5 Incorporated by reference to pages 42 and 49 of the Annual Report To Shareholders.
11 Part II, Item 6 Incorporated by reference to pages 44 - 45 of the Annual Report To Shareholders.
12 Part II, Item 7 Incorporated by reference to pages 10 - 19 of the Annual Report To Shareholders.
12 Part II, Item 8 Incorporated by reference to pages 16 and 20 - 43 of the Annual Report To Shareholders.
12 Part III, Item 10 Incorporated by reference to pages 2 - 5 of the Proxy Statement
13 Part III, Item 11 Incorporated by reference to pages 7 - 12 of the Proxy Statement
13 Part III, Item 12 Incorporated by reference to pages 2 - 5 of the Proxy Statement
13 Part III, Item 13 Incorporated by reference to page 13 of the Proxy Statement
13 Part IV, Item 14, (a), 1 Incorporated by reference to pages 20 - 43 of the Annual Report To Shareholders.
14 Part IV, Item 14, (a), 2 Incorporated by reference to page 16 of the Annual Report To Shareholders.
14 Part IV, Item 14, (a), 3, Incorporated by reference to page 11 of the Proxy Statement
Exhibit 10
</TABLE>
2
<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 4 - 5, Corporate Profile, in the Annual Report To
Shareholders for the year ended December 31, 1996.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Refer to Page 25, 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's Banks are located in northeastern and eastern Ohio and are
engaged in the business of commercial and retail banking in Belmont,
Jefferson, 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 continue
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.
3
<PAGE> 4
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
(c) NARRATIVE DESCRIPTION OF BUSINESS (CONTINUED)
The Company's two subsidiary banks are both subject to regulation by the
Ohio Division of Financial Institutions and the Federal Deposit Insurance
Corporation (FDIC). The regulations and restrictions affecting the 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.
The 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 continued earnings capabilities if those activities
were removed.
The Company itself, as a shell holding company, has no compensated
employees. Citizens-Martins Ferry has 48 full time employees, with 17 of
these serving in a management capacity and 20 part time employees.
Citizens-Strasburg has 22 full time employees, with 8 serving in a
management capacity and 11 part time employees. The Company considers
employee relations to be good at all 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 Page 17 of the Annual Report To Shareholders.
B Refer to Page 17 of the Annual Report To Shareholders.
C Refer to Page 18 of the Annual Report To Shareholders.
4
<PAGE> 5
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
II INVESTMENT PORTFOLIO
A The following table sets forth the carrying amount of securities at
December 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
AVAILABLE FOR SALE
US Treasury obligations $ 3,799,402 $ 7,105,499 $ 2,400,156
US Agency obligations 23,143,834 19,057,628 10,471,520
State and municipal obligations 475,943 353,241 325,785
Other investments 644,850 591,900 45,100
---------- ----------- -----------
$28,064,029 $27,108,268 $13,242,561
=========== =========== ===========
HELD TO MATURITY
US Treasury obligations $ - $ - $ 5,475,051
US Agency obligations 9,535,396 12,397,123 27,925,802
State and municipal obligations 20,258,388 16,965,114 17,824,316
Other investments - - 35,850
----------- ----------- -----------
$29,793,784 $29,362,237 $51,261,019
=========== =========== ===========
</TABLE>
B Refer to Page 31, Note 2 of the Annual Report To Shareholders.
C Not applicable.
III LOAN PORTFOLIO
A TYPES OF LOANS
The amounts of gross loans outstanding at December 31, 1996, 1995, 1994,
1993 and 1992 are shown in the following table according to types of
loans:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Commercial loans $ 12,415,431 $ 10,802,226 $ 8,815,633 $ 4,532,068 $ 6,076,041
Commercial real estate loans 41,212,569 35,510,290 28,514,760 24,307,113 16,323,301
Real estate loans 33,885,573 33,293,663 32,585,377 30,816,418 28,730,238
Installment loans 45,147,035 43,076,473 38,474,342 28,297,363 29,552,242
------------ ------------ ------------ ----------- -----------
Total loans $132,660,608 $122,682,652 $108,390,112 $87,952,962 $80,681,822
============ ============ ============ =========== ===========
</TABLE>
5
<PAGE> 6
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
III LOAN PORTFOLIO
B MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
The following is a schedule of commercial and commercial real estate
loans at December 31, 1996 maturing within the various time frames
indicated:
<TABLE>
<CAPTION>
ONE YEAR ONE THROUGH AFTER
(In thousands) OR LESS FIVE YEARS FIVE YEARS TOTAL
------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Commercial loans $ 8,527 $ 2,410 $1,478 $12,415
Commercial real estate loans 20,046 15,598 5,569 41,213
------- ------- ------ -------
Total $28,573 $18,008 $7,047 $53,628
======= ======= ====== =======
</TABLE>
The following is a schedule of fixed rate and variable rate commercial
and commercial real estate loans at December 31,1996 due to mature
after one year:
<TABLE>
<CAPTION>
(In thousands) FIXED RATE VARIABLE RATE TOTAL > ONE YEAR
---------- ------------- ----------------
<S> <C> <C> <C>
Commercial loans $1,772 $ 2,116 $ 3,888
Commercial real estate loans 4,758 16,409 21,167
------ ------- -------
Total $6,530 $18,525 $25,055
====== ======= =======
</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, 1996, 1995, 1994,
1993 and 1992:
<TABLE>
DECEMBER 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Nonaccrual basis $ 79,000 $105,000 $61,882 $100,883 $ 39,761
Greater than 90 days 256,000 91,000 27,613 92,558 121,219
Troubled debt restructuring N/A N/A
Impaired loans - - N/A N/A N/A
</TABLE>
No interest was recognized on a cash received basis on impaired loans
during 1996 and $9,000 was recognized on a cash received basis for
1995. No additional interest income was recognized on impaired loans
during 1996 and 1995.
6
<PAGE> 7
UNITED BANCORP, INC. FORM 10-K
ITEM 1. DESCRIPTION OF BUSINESS (CONTINUED)
III LOAN PORTFOLIO (CONTINUED)
1. NONACCRUAL, PAST DUE, RESTRUCTURED AND IMPAIRED LOANS (CONTINUED)
Interest income is not reported when full loan repayment is in doubt,
typically when payments are past due over 90 days. Payments received on
such loans are reported as principal reductions.
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, or when the internal grading system
indicates a doubtful classification. Loan impairment is evaluated in
total for smaller-balance loans of similar nature. Such loans include
residential first mortgage loans secured by one-to-four family
residences, residential construction loans and consumer automobile, boat
and home equity loans. 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. Other cash payments are reported as
reductions in carrying value, while increases or decreases due to
changes in future payments and due to the passage of time are reported
as part of the provision for loan losses.
2. POTENTIAL PROBLEM LOANS
The Company had no potential problem loans as of December 31, 1996
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 39, Note 11 of the Annual Report To Shareholders.
D OTHER INTEREST-BEARING ASSETS
Not applicable.
7
<PAGE> 8
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 26,
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, 1996, 1995, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
LOANS 1996 1995 1994 1993 1992
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Loans outstanding $132,661,000 $122,683,000 $108,390,000 $87,953,000 $80,682,000
Average loans outstanding $126,102,000 $116,331,000 $ 98,599,000 $81,796,000 $79,809,000
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of year $ 1,775,000 $ 1,438,000 $ 1,256,000 $ 1,039,000 $ 847,000
Loan charge-offs:
Commercial 29,000 53,000 - 2,000 52,000
Commercial real estate - - - - -
Real estate - 1,000 - 8,000 2,000
Installment 222,000 98,000 123,000 69,000 74,000
------------ ------------ ------------ ----------- -----------
Total loan charge-offs 251,000 152,000 123,000 79,000 128,000
------------ ------------ ------------ ----------- -----------
Loan recoveries:
Commercial 6,000 5,000 4,000 1,000 5,000
Commercial real estate - - - - -
Real estate 5,000 - - - 3,000
Installment 33,000 19,000 20,000 24,000 10,000
------------ ------------ ------------ ----------- -----------
Total loan recoveries 44,000 24,000 24,000 25,000 18,000
------------ ------------ ------------ ----------- -----------
Net loan charge-offs 207,000 128,000 99,000 54,000 110,000
Provision for loan losses 455,000 465,000 281,000 271,000 302,000
------------ ------------ ------------ ----------- -----------
Balance at end of year $ 2,023,000 $ 1,775,000 $ 1,438,000 $ 1,256,000 $ 1,039,000
============ ============ ============ =========== ===========
Ratio of net charge-offs to average
loans outstanding for the year 0.16% 0.11% 0.10% 0.07% 0.14%
============ ============ ============ =========== ===========
</TABLE>
8
<PAGE> 9
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
IV SUMMARY OF LOAN LOSS EXPERIENCE
B ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table allocates the allowance for possible loan losses at
December 31, 1996, 1995, 1994, 1993 and 1992. The allowance has been
allocated according to the amount deemed to be reasonably necessary to
provide for the possibility of losses being incurred within the following
categories of loans at the dates indicated:
<TABLE>
<CAPTION>
1996 1995
----------------------------- -----------------------------
PERCENTAGE OF PERCENTAGE OF
ALLOWANCE LOANS TO TOTAL ALLOWANCE LOANS TO TOTAL
Loan type AMOUNT LOANS AMOUNT LOANS
---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
Commercial $ 71,000 9.36% $ 109,000 8.81%
Commercial real estate 292,000 31.07% 348,000 28.94%
Real estate 505,000 25.54% 375,000 27.14%
Installment 453,000 34.03% 359,000 35.11%
Unallocated 702,000 N/A 584,000 N/A
---------- ------ ---------- ------
Total $2,023,000 100.00% $1,775,000 100.00%
========== ====== ========== ======
<CAPTION>
1994 1993
----------------------------- -----------------------------
PERCENTAGE OF PERCENTAGE OF
ALLOWANCE LOANS TO TOTAL ALLOWANCE LOANS TO TOTAL
Loan type AMOUNT LOANS AMOUNT LOANS
---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
Commercial $ 45,000 4.96% $ 29,000 5.15%
Commercial real estate 258,000 29.49% 157,000 27.64%
Real estate 205,000 30.05% 180,000 35.04%
Installment 368,000 35.50% 202,000 32.17%
Unallocated 562,000 N/A 688,000 N/A
---------- ------ ---------- ------
Total $1,438,000 100.00% $1,256,000 100.00%
========== ====== ========== ======
<CAPTION>
1992
-----------------------------
PERCENTAGE OF
ALLOWANCE LOANS TO TOTAL
Loan type AMOUNT LOANS
---------- --------------
<S> <C> <C>
Commercial $ 43,000 7.53%
Commercial real estate 83,000 20.23%
Real estate 216,000 35.61%
Installment 183,000 36.63%
Unallocated 514,000 N/A
---------- ------
Total $1,039,000 100.00%
========== ======
</TABLE>
9
<PAGE> 10
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
V DEPOSITS
A SCHEDULE OF AVERAGE DEPOSIT AMOUNTS AND RATES
(1) Refer to Page 17 of the Annual Report To Shareholders
(2) Refer to Page 17 of the Annual Report To Shareholders
(3) Refer to Page 17 of the Annual Report To Shareholders
(4) Refer to Page 17 of the Annual Report To Shareholders
(5) - (8) Not applicable.
B OTHER CATEGORIES
Not applicable.
C FOREIGN DEPOSITS
Not applicable.
D MATURITY ANALYSIS OF TIME DEPOSITS GREATER THAN $100,000.
The following schedule details the maturities of time certificates of
deposit in amounts of $100,000 or more for the year ended December 31,
1996:
<TABLE>
<S> <C>
Three months or less $ 2,945,000
Over three through six months 1,507,000
Over six through twelve months 2,044,000
Over twelve months 7,444,000
-----------
Total $13,940,000
===========
</TABLE>
E TIME DEPOSITS GREATER THAN $100,000 ISSUED BY FOREIGN OFFICES.
Not applicable.
VI RETURN ON EQUITY AND ASSETS
The ratio of net income to daily average total assets and average
shareholders' equity, and certain other ratios, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Percentage of net income to:
Average total assets 1.32% 1.18% 1.11%
Average shareholders' equity 13.49% 12.85% 12.24%
Percentage of dividends declared per common
share to net income per common share 33.83% 34.58% 28.87%
Percentage of average shareholders' equity
to average total assets 9.80% 9.14% 9.07%
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Net Income (In thousands) 1,572 1,728 1,955 2,244 2,584
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Total Assets (In thousands) 164,675 171,682 185,634 191,200 202,365
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Equity Capital (In thousands) 14,079 15,376 16,518 18,452 20,016
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Loans - Net (In thousands) 79,642 86,697 106,952 120,907 130,638
</TABLE>
<PAGE> 12
UNITED BANCORP, INC. FORM 10-K
ITEM 1 DESCRIPTION OF BUSINESS (CONTINUED)
VII SHORT-TERM BORROWINGS
Information concerning securities sold under agreements to repurchase is
summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- -----------
<S> <C> <C> <C>
Average daily balance during the year $6,523,271 $4,801,714 $2,885,949
Average interest rate during the year 5.30% 5.82% 3.40%
Maximum month-end balance during the year $8,667,310 $7,402,282 4,736,836
Weighted average interest rate at 5.63% 5.00% 5.00%
December 31,
</TABLE>
No other individual component of the borrowed funds total comprised more
than 30% of shareholders' equity and accordingly are not disclosed in
detail.
ITEM 2 PROPERTIES
Refer to Page 4 - 5, "Corporate Profile" in the Annual Report To
Shareholders.
ITEM 3 LEGAL PROCEEDINGS
Refer to Page 38, 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.
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Refer to Page 49, "Shareholder Information" and Page 42, Note 14 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.
11
<PAGE> 13
UNITED BANCORP, INC. FORM 10-K
PART II
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Refer to Pages 10 - 19, "Management's Discussion and Analysis" of the
Annual Report To Shareholders.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to Pages 16 and 20 - 43 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
<TABLE>
<S> <C> <C>
Donald A. Davison (79) Chairman of the Board
James W. Everson (58) President and Chief Executive Officer
Harold W. Price (51) Vice President - Administration
Norman F. Assenza, Jr. (51) Vice President - Operations and Secretary
James A. Lodes (51) Vice President - Lending
Ronald S. Blake (45) Treasurer
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
Comm Comm R/E R/E Inst
<S> <C> <C> <C> <C>
Gross Loans (In thousands) 12,415 41,213 33,886 45,147
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Return On Average Assets 1.01% 1.04% 1.11% 1.18% 1.32%
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Return On Average Equity 11.60% 11.73% 12.24% 12.85% 13.49%
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Earanings Per Share 0.77 0.84 0.96 1.10 1.27
</TABLE>
<PAGE> 15
UNITED BANCORP, INC. FORM 10-K
PART III (CONTINUED)
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 previously served as President and Chief Executive
Officer of The Exchange Bank of Canal Fulton from 1979 until 1984 when
it was acquired by The First National Bank of Akron, an affiliate of
First Bancorp, Inc. of Ohio. From 1985 until 1992 he served as
Executive Vice President and a member of the Board of Directors of The
Old Phoenix National Bank of Medina, and from 1992 to 1993, he served as
Executive Vice President and Senior Loan Officer of The Elyria Savings
and Trust Company in Elyria, Ohio. He has served as President and Chief
Executive Officer of The Citizens-State Bank 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 - 12 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 13 of the Proxy Statement.
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 1996 Annual Report To Shareholders and are incorporated
by reference:
<TABLE>
<S> <C>
Independent Auditors' Report Page 20
Consolidated Balance Sheets Page 21
Consolidated Statements of Income Page 22
Consolidated Statements of Shareholders' Equity Page 23
Consolidated Statements of Cash Flows Page 24
Notes To The Consolidated Financial Statements Pages 25 - 43
</TABLE>
13
<PAGE> 16
UNITED BANCORP, INC. FORM 10-K
PART IV (CONTINUED)
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
(a) DOCUMENTS FILED AS PART OF FORM 10-K (CONTINUED)
2. The summary of selected quarterly results of operations
appears on Page 16 in the 1996 Annual Report To
Shareholders and is incorporated by reference.
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 11 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, 1996.
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 the
Securities and Exchange Commission.
21.2 Reference to The Citizens-State Bank of
Strasburg, Strasburg, Ohio, incorporated on
December 31, 1924, previously filed with the
Securities and Exchange Commission.
22 Not applicable.
23 Consents of Experts and Council.
24 Not applicable.
27 Financial Data Schedule
28 Not applicable.
99 Not applicable.
(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.
14
<PAGE> 17
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Dividends Per Share 0.24% 0.25% 0.28% 0.38% 0.43%
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Book Value Per Share 6.93 7.56 8.13 9.08 9.84
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Shareholder Value (In thousands) 15,960 31,080 34,197 25,879 44,226
</TABLE>
<TABLE>
<CAPTION>
Market Value Ranges 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Low 5.68 8.26 16.14 11.59 12.50
High 7.85 15.29 20.45 17.73 21.75
</TABLE>
<PAGE> 18
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 26, 1997
----------------------------
Donald A. Davison, Chairman of the Board
By: March 26, 1997
----------------------------
James W. Everson, President and Chief Executive Officer
By: March 26, 1997
----------------------------
Ronald S. Blake, Treasurer
By: March 26, 1997
----------------------------
Michael J. Arciello
By: March 26, 1997
----------------------------
Herman E. Borkoski
By: March 26, 1997
----------------------------
John H. Clark, Jr.
By: March 26, 1997
----------------------------
Dr. Leon F. Favede
By: March 26, 1997
----------------------------
Premo R. Funari
By: March 26, 1997
----------------------------
John M. Hoopingarner
By: March 26, 1997
----------------------------
Richard L. Riesbeck
By: March 26, 1997
----------------------------
Errol C. Sambuco
By: March 26, 1997
----------------------------
Matthew C. Thomas
15
<PAGE> 19
UNITED BANCORP, INC. FORM 10-K
Exhibit Index
Exhibit No. Description
----------- -----------
13 Annual Report To Shareholders
23 Consents of Experts and Council
27 Financial Data Schedule
16
<PAGE> 1
EXHIBIT 13
Financial Highlights
<TABLE>
<CAPTION>
For The Years Ended December 31,
------------------------------------
1996 1995 % Change
-------- -------- ------
<S> <C> <C> <C>
EARNINGS (IN 000'S)
Total interest income $ 15,006 $ 14,351 4.56%
Total interest expense 6,747 6,575 2.62%
Net interest income 8,259 7,776 6.21%
Net income 2,584 2,244 15.14%
PER SHARE
Net income $ 1.27 $ 1.10 15.45%
Cash dividends paid 0.43 0.38 13.16%
Book value (end of period) 9.84 9.08 8.37%
AT YEAR END (IN 000'S)
Total assets $202,365 $191,200 5.84%
Total assets (average) 195,497 190,976 2.37%
Total deposits 171,512 166,604 2.95%
Securities sold under agreements to repurchase 8,642 4,469 93.38%
Net loans 130,638 120,907 8.05%
Securities 57,858 56,471 2.46%
Shareholders' equity 20,016 18,452 8.48%
Shareholders' equity (average) 19,155 17,463 9.69%
STOCK DATA
Market value (end of period) $ 21.75 $ 12.73 70.86%
Dividend payout ratio 33.83% 34.58% -2.17%
Price earnings ratio 17.13x 10.54x 62.52%
KEY PERFORMANCE RATIOS
Return on average assets 1.32% 1.18% 11.86%
Return on average shareholders' equity 13.49% 12.85% 4.98%
Efficiency Ratio 54.51% 56.62% -3.73%
</TABLE>
Table of Contents
<TABLE>
<S> <C> <C> <C>
Financial Highlights 1 Independent Auditors Report 20
Letter From The President 2 - 3 Financial Statements 21 - 24
Corporate Profile 4 - 5 Notes to Financial Statements 25 - 43
Board of Directors and Corporate Officers 6 - 9 A Decade of Progress 44 - 45
Management's Discussion and Analysis 10 - 19 Banking Locations 46 - 47
Dividend Reinvestment Application 48
Shareholder Information 49
</TABLE>
1
<PAGE> 2
A Letter From The President
Dear Shareholder:
If a good year is measured by improved earnings, increased shareholder value and
new customer services, then we are pleased to report a great year of
performance by United Bancorp, Inc. (UBCP) and its two subsidiary banks, The
Citizens Savings Bank of Martins Ferry and The Citizens-State Bank of
Strasburg.
Our 1996 positive earnings performance of 1.32% Return On Average Assets
and 13.49% Return On Average Equity reflects continued success in maximizing
our interest earning assets and cost effective management of our noninterest
income and noninterest expense. An industry standard used in the measurement
of a bank's ability to manage overhead costs is its efficiency ratio, with
outstanding performance rated between 50% to 60%. In non-accounting terms,
this information reflects how much of each dollar is spent on costs associated
with operating the bank. Obviously, the lower the percentage the better.
UBCP's efficiency ratio was 54.51% in 1996 and 56.62% in 1995, demonstrating
our efforts to control costs.
Shareholder value, calculated as the stock price, (last trade) multiplied
by the number of shares outstanding, grew 87.71% to $44,226,000 at December 31,
1996. The market positively reacted to our earnings performance and the 10%
share dividend paid to shareholders on June 20, 1996. During this past year,
we introduced a Dividend Reinvestment and Cash Deposit Plan to shareholders and
also a Deferred Fee Plan to Directors. These programs allow dividends and fees
to be reinvested in UBCP stock and together with our employee 401(k) program,
all have added to increased trading activity and stock ownership by
Shareholders, Directors, Officers and Employees.
During the first quarter of 1996, we introduced Check Image Processing to
all of our Citizens Bank customers. In place of cumbersome canceled checks,
our customers now enjoy the convenience of receiving images of their checks
arranged on a regular sheet of paper for orderly storage in a loose leaf binder
which we provide as part of this new service. We successfully converted over
12,000 accounts and have received outstanding support and acceptance of this
new service from our entire customer base.
We centralized our Item Processing, Data Processing and Accounting for
both subsidiary banks during the second quarter to our new Operations center in
Martins Ferry. This consolidation of support functions has added to our cost
efficiencies and will permit us to continue to improve our customer service
through extended customer deposit times at each of our banking locations.
During the fourth quarter, we expanded our real estate mortgage operations
area within our Loan Center at Martins Ferry and hired two experienced
Secondary Market real estate loan specialists. We are currently developing a
new portfolio of home loan services and are training our lenders in the
anticipation of an April introduction of these new fixed-rate home loan
products. This "back office" facility will provide at all our banking offices
a full range of home mortgage products. Our vision is to provide home
ownership not only for those with a normal down payment and spotless credit
background, but also for those just starting out with little or no down payment
and additionally for those who may have experienced some degree of credit
problems. Through our newly established Secondary Market investor
relationships, we will be able to provide fixed rate mortgage products without
assuming the credit risk or market risk. We will be able to expand our
customer relationships through our new homeowners making their payments at
their local Citizens Bank office. We project the income generated through this
new program will have a very positive impact on future earnings of UBCP.
On January 23, 1997, we announced the establishment of a new banking
center in St. Clairsville, Ohio, the county seat of Belmont County. This new
facility will be housed inside the
2
<PAGE> 3
A Letter From The President
Riesbeck Food Markets, Inc. store located there at Plaza West. The opening of
this new in-store sales location marks the beginning of a new era in banking
for UBCP, our customers and future customers in this expanded market
area. Services offered in this new facility will include depository banking,
with our full line of product offerings; lending products, including Secondary
Market options as well as our regular full line of loan products.
Additionally, we will feature a full service Automated Teller Machine (ATM).
Regulatory applications are currently being processed and it is anticipated we
will be opening this new full service banking center in May of this year.
At the conclusion of our Annual Meeting in 1996, Albert W. "Pete" Lash
retired from the active Directorship to Director Emeritus of United Bancorp,
Inc. and The Citizens Savings Bank. Pete began his service as a Director of
The Citizens Savings Bank in 1975 near the time we opened our first branch
office located in Colerain, Ohio. As a Colerain resident, active church
member, business and community leader, he was able to bring to our decision
making processes a genuine customer viewpoint. We thank him for his dedication
to the growth and development our Banks and UBCP and wish him good health and
happiness.
All of our accomplishments reflect the dedication of loyal employees,
officers and directors working together to promote our organization. To each I
say "Thank You" for another outstanding year. This dedication to
individualized, courteous and caring customer service combined with the
implementation of the latest banking technologies equates to increased
efficiencies in performance and continued increased shareholder value.
As a banking team, we share many fine memories of past accomplishments,
yet we continue to have dreams refined into attainable goals as we prepare
ourselves to meet the new challenges and opportunities before us.
Very truly yours
James W. Everson
President & Chief Executive Officer
January 31, 1997
3
<PAGE> 4
Corporate Profile
United Bancorp, Inc., (UBCP) is headquartered on the eastern border of Ohio
along the Ohio river in the small industrial town of Martins Ferry, directly
across from Wheeling, West Virginia. As one of the earliest settlements on the
frontier in the late 1700's, the community developed a sense of pride,
determination and courage in the face of many challenges. The Industrial
Revolution dramatically altered the local economic base from agrarian to
manufacturing and mining. The nearby Ohio river provided inexpensive
transportation to the rest of the expanding country and where rivers were not
available, railroads were built to ensure swift delivery of products.
The essence of the local economy has long been tied directly to this base
of industrial manufacturing and mining and has suffered as the Information Age
replaces the Industrial Age. With the closure of many local mills,
manufacturing plants, coal mines and other related businesses, the local
economy has struggled to adapt to changes necessary, not only to survive
locally, but also to compete in a world market. Light manufacturing and
high-tech industries are beginning to fill the void and are seen as essential
building blocks in the foundation of a strong recovery and the growth of the
economic base of the Ohio Valley.
UBCP was created as a single 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. UBCP became a multi-bank holding company in December of
1986 through the purchase of 100% of the voting stock of the Citizens-State
Bank of Strasburg, Ohio. Common stock of UBCP was available through
over-the-counter trading until February 1994 when it began trading on The
Nasdaq SmallCaps Market tier of The Nasdaq Stock Market under the trading
symbol UBCP.
The Citizens Savings Bank, (Citizens-Martins Ferry), originally
established as The German Savings Bank in 1902, remains the lead bank in the
multi-bank holding company and continues as an integral part of the development
of the commercial and residential base in Martins Ferry and other local
communities. The Bank expanded its market through the construction of a full
service branch banking facility six miles west in nearby Colerain, Ohio in
1974. Expansion opportunities continued in 1978 with the construction of
another full service branch bank in Bridgeport, Ohio, located two miles south
of Martins Ferry. A limited service auto-teller facility was opened in Martins
Ferry in 1980, one block south of the former 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.
The main banking facility outgrew the confines of its previous location and
subsequently relocated in 1984 to a newly constructed 21,500 square foot
addition to the auto-teller facility mentioned above.
The Citizens-State Bank of Strasburg, (Citizens-Strasburg) was also
established in 1902 and enjoys a rich legacy of personalized service to
customers in an area of north central Ohio whose economy is supported by
agriculture and light industry. Additionally, it benefits as a "bedroom
community" for the Akron-Canton metropolitan area. Citizens-Strasburg joined
the bank holding company in 1986 through acquisition of 100% of its voting
stock by UBCP. To provide the locations necessary to better serve a growing
market area, Citizens-Strasburg constructed a new full service banking facility
in Dover, Ohio in 1990. This expansion was soon followed with the acquisition
of two branch banking facilities in New Philadelphia and Sherrodsville in 1992.
Additionally, a branch banking facility located in Dellroy, Ohio was acquired
in 1994 This most recent acquisition brought the number of offices to five for
Citizens-Strasburg and eight overall for both Banks.
In October of 1993, a separate Operations Center was opened across the
street from Citizens-Martins Ferry's main office housing Data Processing,
Accounting and Bookkeeping. UBCP's
4
<PAGE> 5
Corporate Profile
management embraced the concept of in-house data processing as part of a
continuing effort to better manage costs and also to provide more flexibility
for future development and introduction of cutting edge technologies critical to
maintaining market share in a highly competitive industry. The information
processing became reality in mid 1990 for the lead bank, Citizens-Martins Ferry
and later in 1991 they also began data processing for Citizens-Strasburg.
Again, as in the past, management realized the need for change and expanded the
data processing activity into a separate Operations Center located directly
across the street from the main banking center in Martins Ferry.
Picture of Holding Company
Officers
With the technology in place and a talented staff ready for the next
challenge, management consolidated all back room support operations for both
banks into the Operations Center in Martins Ferry in mid 1996. Also in mid
1996, management moved forward once again into uncharted waters with the
introduction of check and statement image processing, where the customer would
no longer receive their checks and deposits tickets in their statements, but
would receive an image of each transaction. This new venture in banking was
undertaken with the knowledge that not only would the daily routine of
transaction processing change dramatically, but the customer base at all
banking locations would have to be educated about the benefits of this new
service. A direct marketing approach was taken with audio, video and print
advertisements and direct mailings to customers promoting the new concept. The
successes enjoyed by both banks during the conversion were proof that positive
change can be accomplished without sacrificing the personalized service and
consideration our customers deserve.
Loans by both Banks to individuals and businesses throughout the years
have helped develop strong ties to the local communities and helped create many
of the jobs today. Depository relationships developed over time have helped
people save for the future and through the introduction of The Ohio Company
Brokerage Services onsite in Martins Ferry, investment opportunities are
available as well.
The Banks have maintained their importance to the communities they serve
as "family members," counselors, friends and trusted advisors. Today, as in
the past, the Banks incorporate the philosophy of serving the communities they
call home with products and services specific to the needs of each market.
Additionally, new products and banking concepts are introduced to help keep
pace with the ever changing methods of banking in today's global market.
Management is deeply committed to providing the best possible banking
service to individuals, businesses and municipalities while at the same time
increasing the value of shareholder investment. The development and
implementation of new technologies creates opportunities to better serve
customer needs in cost efficient ways that still enable us to maintain more
personalized customer relationships not evident in so many of today's financial
institutions. Our goal is to continue the development of better banking
services in concert with promoting our customers best interests. This marriage
of new technology and old fashioned concern for our communities has been
successful in the past and will hopefully maintain the steady growth in value
of our stock providing the expected appreciation in value to our shareholders.
5
<PAGE> 6
Directors of United Bancorp, Inc. And Its Subsidiaries
1,3 1,2
Michael J. Arciello Herman E. Borkoski
1,2 1,2 1,2,3
John H. Clark, Jr. Donald A. Davison James. W. Everson
1,2 1,2
Dr. Leon F. Favede Premo R. Funari
1 = United Bancorp, Inc.
2 = The Citizens Savings Bank
3 = The Citizens-State Bank
6
<PAGE> 7
Directors of United Bancorp, Inc. And Its Subsidiaries
3 3 1,3
John R. Herzig Dwain R. Hicks John M. Hoopingarner
3 3
Michael A. Ley Harold W. Price
1,2 1,2 1,2
Richard L. Riesbeck Errol C. Sambuco Matthew C. Thomas
1 = United Bancorp, Inc.
2 = The Citizens Savings Bank
3 = The Citizens-State Bank
7
<PAGE> 8
Directors and Officers of United Bancorp, Inc. And Its subsidiaries
<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) Gen. Mgr., Muskingum Watershed Conservancy Distr., New Philadelphia, Ohio
Richard L. Riesbeck(1,3) President, Riesbeck Food Markets, Inc., St. Clairsville, Ohio
Errol C. Sambuco(2) President, The Ohio Coatings Company, Yorkville, Ohio
Matthew C. Thomas(2) President, M.C. Thomas Insurance, Bridgeport, Ohio
</TABLE>
<TABLE>
<S> <C>
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
</TABLE>
<TABLE>
<S> <C>
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
Richard L. Riesbeck(1) President, Riesbeck Food Markets, Inc., St. Clairsville, Ohio
Errol C. Sambuco(2) President, The Ohio Coatings Company, Yorkville, Ohio
Matthew C. Thomas(2) President, M.C. Thomas Insurance, Bridgeport, Ohio
</TABLE>
Albert W. Lash - Director Emeritus 1975 - 1996 United Bancorp, Inc. and The
Citizens Savings Bank
1 = Executive Committee 2 = Audit Committee 3 = Compensation Committee
8
<PAGE> 9
Directors and Officers of United Bancorp, Inc. And Its subsidiaries
<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 and Secretary
James A. Lodes Senior Vice President - Lending
Ronald S. Blake Vice President - Controller
Cleo S. Dull Vice President - Customer Service
William S. Holbrook Vice President - Administration
Joseph Bednarik Assistant Vice President
Robert T. Donald Assistant Vice President
Raye Lynn Ackerman Assistant Cashier
Scott A. Everson Assistant Cashier
Lloyd G. Hood Assistant Cashier
Judith C. Miller Assistant Cashier
Richard A. Cook Loan Officer
Matthew D. Jenkins Accounting/Customer Service Manager
Michael A. Lloyd Data Processing Manager
Judith A. Stupak Customer Service Officer
Cynthia Williams Loan Officer
</TABLE>
<TABLE>
<S> <C>
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
John R. Herzig(2) President, Toland-Herzig Funeral Homes, Strasburg, Ohio
Dwain R. Hicks President, Hicks Consulting and Investing, New Philadelphia, Ohio
John M. Hoopingarner(1) Gen. Mgr. Muskingum Watershed Conservancy Distr., New Philadelphia, Ohio
Michael A. Ley(2) President and Owner, Robert's Men's Shops, New Philadelphia, Ohio
Harold W. Price(1) President, The Citizens-State Bank, Strasburg, Ohio
</TABLE>
<TABLE>
<S> <C> <C>
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
Martin L. Merryman Vice President
Howard A. Wacker Assistant Vice President
Linda E. Myers Assistant Vice President
Carol L. Rambaud Assistant Cashier
Susan A. Wickham Assistant Cashier
Dinanne M. Cole Assistant Cashier
</TABLE>
1 = Executive Committee 2 = Audit Committee 3 = Compensation Committee
9
<PAGE> 10
Management's Discussion and Analysis
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, 1996 as compared to prior years. 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
EARNING ASSETS - LOANS
Competitive pricing, proactive officer calling programs, wide ranging product
offerings which meet the communities needs and a willingness to seek growth
where none is apparent have all combined to generate another year of
significant loan growth for UBCP. With a well balanced portfolio, both in
variety of product offerings and diversification of risk, the Banks
optimistically view opportunities for continued growth and diversification. At
year-end 1996, gross loans were $132,660,608 compared to $122,682,652 at
year-end 1995, representing an increase of 8.13% over 1995 levels.
Installment loans, with emphasis placed on continued support of indirect
automobile lending, were the largest category of total loans, totaling 34.0% of
all loans at year-end 1996 compared to 35.1% at year-end 1995. This apparent
decline is in fact attributable to significant growth in commercial and
commercial real estate lending activities, thereby reducing the overall
percentage in relation to the total. The indirect lending type of financing
carries somewhat more risk than real estate lending, being offset to some
extent by the potential for higher yields.
The targeted lending areas for both Banks encompass four metropolitan
areas, potentially minimizing the risks inherent in changes in economic
conditions in the communities where UBCP's eight banking centers are located.
Of some concern, however, is the Wheeling-Pittsburgh Steel strike taking place
since October of 1996 within the Martins Ferry market. With no apparent
conclusion to the strike in sight as of the printing of this report, there
remains an unknown element as to how far reaching the effects of this prolonged
strike will be. Citizens-Martins Ferry has installment, mortgage and
commercial loans to individuals and businesses associated with
Wheeling-Pittsburgh Steel in amounts not considered concentrated or reliant
upon a single large employer. Management believes the balance of the allowance
for loan losses currently in place is sufficient to deal with losses
associated with the strike.
Commercial real estate loans comprised 31.1% of total loan volume at
year-end 1996 compared to 28.9% at year-end 1995 with efforts focused on
developing and marketing loan product offerings tailored to the various needs
recognized throughout the diverse markets serviced. 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. Commercial loans were 9.4% and
8.8% of the total portfolio mix at year-end 1996 and 1995 with volumes expected
to remain fairly constant throughout 1997.
Out of area loans occur mostly in the Columbus and Akron-Canton, Ohio
areas. Lending beyond the local area has been for projects and borrowers with
substantial net worth. The majority of these loans are secured by real estate
holdings comprised of hotels, motels and churches located in various geographic
locations minimizing potential risks associated with lending activities
specific to a limited area.
Real estate mortgage loans were 25.5% of total loans at year-end 1996
compared to 27.1% at year-end 1995. Although the percentages indicate a
decline in relation to total loans, actual volume increased slightly with a
moderate decline in volume anticipated throughout 1997 as a result of
UBCP's initiation of Secondary Market lending products by mid-year. Average
loan volume
10
<PAGE> 11
Management's Discussion and Analysis
represented 68.5% of average earning assets in 1996 compared to 64.7% in 1995.
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.
EARNING ASSETS - SECURITIES AND FEDERAL FUNDS SOLD
The securities portfolio is comprised of U.S. Treasury and other U.S.
government agency obligations, tax-exempt obligations of state and political
subdivisions and certain other investments. The Banks do not hold any
collateralized mortgage-backed securities, other than those issued by U.S.
government agencies or other derivative securities. 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.
Securities available for sale at December 31, 1996 increased by $955,761,
or 3.5%, over December 31, 1995 totals. A portion of this growth was offset by
a decrease of approximately $239,000 (before tax effect) in market value
adjustments for year-end 1996 compared to an increase of approximately $706,000
(before tax effect) at year-end 1995 reported as required by Statement of
Financial Accounting Standards ("SFAS") No. 115. This compares to a net
increase in total volume at year-end 1995 of $453,332. The Banks used a
portion of the proceeds from securities sales, calls and maturities to fund
loan demand when deposit growth was insufficient to meet those needs. The
remaining proceeds were reinvested in additional U.S. government agency
obligations and State, County and Municipal Bonds. Average securities
available for sale for 1996 totaled $25,631,000, or 13.8% of average earning
assets. Average securities available for sale for 1995 totaled $14,871,000,
representing 8.3% of average earning assets. Securities held to maturity at
year-end 1996 increased a modest $431,547, or 1.5%, over year-end 1995 totals.
Average securities held to maturity were $30,291,000, representing 16.5% of
average earning assets for 1996. This compares to $46,991,000, or 26.1%, of
average earning assets for 1995.
Short-term federal funds sold are used to manage interest rate sensitivity
and to meet liquidity needs of the Banks. During 1996 these funds represented
1.3% of average earning assets. Federal funds in 1995 represented .8% of
average earning assets.
SOURCES OF FUNDS - DEPOSITS
The Banks primary sources of funds are core deposits from retail and business
customers. These core deposits include interest-bearing and non
interest-bearing deposits, excluding certificates of deposit over $100,000.
Total core deposits at year-end 1996 increased $2,628,895, or 1.7%, compared to
year-end 1995. The largest segment of this increase was from certificates of
deposits less than $100,000.
The Banks maintain 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
maintain fairly static balances due to various funding and disbursement
timeframes. These accounted for 4.72% and 4.50% of total deposits at year-end
1996 and 1995.
11
<PAGE> 12
Management's Discussion and Analysis
FINANCIAL CONDITION
SOURCES OF FUNDS - DEPOSITS
Certificates of deposit over $100,000 are not considered part of core
deposits and as such are used as a tool to manage funds. These deposits tend
to be more rate sensitive and as a result fluctuate in relation to the Banks'
pricing strategies. At year-end 1996, certificates of deposit over $100,000
had increased $2,278,987, or 19.5%, over 1995 year-end totals. Such deposits
represented only 8.1% and 7.0% total deposits at year-end 1996 and 1995.
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 notes payable and Federal Home Loan Bank advances. At year-end
1996, securities sold under agreements to repurchase increased $4,173,572, or
93.4%, over 1995 year-end totals. While these totals are up considerably from
1995 levels, there were approximately $1,500,000 in repurchase agreements that
had not been redeemed at year-end as has been the case in past years.
ASSET/LIABILITY MANAGEMENT
The Banks actively manage their asset and liability portfolios through the
use of software applications specifically designed for the financial industry
to monitor sources and uses of funds, the impact of varying future interest
rate scenarios and changes in anticipated volume of activity in earning assets
and interest bearing liability accounts. Actual monthly information is entered
into the system model, providing instant key performance ratio analysis in
relation to peer banks and Board approved budget levels. Additionally,
variance analysis is accomplished detailing any areas of concern in relation to
interest rate risk and significant volume changes. Several "what if" models
are run on the system, providing the projected end results on a monthly and
year-to-date basis in relation to product pricing and expected yields on loans
and investments.
A rate shock analysis is performed monthly to show the effects of a swing
in interest rates of plus or minus 200 basis points to determine the risk
exposure the Banks would be subjected to if these dramatic rate shifts did
indeed occur. Financial institutions cannot arbitrarily establish growth
targets in earnings and assets and implement pricing changes merely to achieve
these goals without regard to possible future economic changes. Historical
trends are also important factors in determining the most likely result of
various pricing strategies and through the use of sophisticated asset/liability
management models, these risks are highlighted and evaluated.
Market risk is the potential effect external forces have on the value of
the Banks' 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 Banks' 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 Banks assess and
manage market and interest rate risk through monthly Asset/Liability Committee
(ALCO) meetings attended by Senior Management and the Executive Committees of
the Board of Directors.
Asset/liability management also includes GAP measurement which determines,
over various time periods, 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 of time if the amount of its interest-bearing liabilities maturing or
repricing within that period is greater than the total of the interest-earning
assets maturing or repricing within the that same period. When interest rates
increase, banks with a negative interest rate sensitivity GAP will be more
likely to experience increases in the cost of their liabilities faster than the
corresponding yields generated by their earning assets. Following the same
concept, as interest rates decrease, the cost of funds for banks
12
<PAGE> 13
Management's Discussion and Analysis
with a negative interest rate sensitivity GAP usually will decrease more
rapidly than the yields on the earning assets. As a general rule of thumb, the
same changes in interest rates will usually have the opposite effect on banks
structured with a positive interest rate sensitivity GAP.
Interest rate sensitivity varies with various types of interest-earning
assets and interest-bearing liabilities. Overnight federal funds on which the
rates change daily and loans which are tied to variable indices differ markedly
from long-term securities and fixed-rate loans. Time deposits over $100,000
and money market certificates are more interest sensitive than passbook savings
accounts. The shorter-term interest rate sensitivities are critical to
reasonable measurement of interest sensitivity GAP.
The Banks classify a portion of their interest-bearing demand deposit
accounts and passbook savings accounts in the over one year category.
Management has determined this assumption is reasonable based upon historical
experience where these accounts do not materially react to changes in interest
rates.
The following table presents the amounts of interest earning assets and
interest bearing liabilities outstanding at December 31, 1996, which are
scheduled to reprice or mature in each of the indicated time periods. Except
as shown, the amount of assets and liabilities which reprice or mature during a
particular period were calculated in relation to the actual contractual terms
of the asset or liability. The table, however, does not necessarily indicate
the impact of general interest rate changes on the Banks net interest income in
part because the repricing of certain categories of assets and liabilities is
subject to competition and other factors beyond the control of the Banks.
Because of this limitation, certain assets and liabilities depicted as maturing
or repricing within a specific period may in fact mature or reprice at other
times and at different volumes.
<TABLE>
<CAPTION>
ONE YEAR ONE THROUGH FIVE THROUGH OVER
(In thousands) OR LESS FIVE YEARS TEN YEARS TEN YEARS TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Federal funds sold 225 225
Loans 50,340 58,694 23,627 132,661
Securities available for sale 4,986 16,455 5,854 769 28,064
Securities held to maturity 2,173 15,973 11,395 253 29,794
--------- -------- -------- ------- --------
Total interest-earning assets 57,724 91,122 40,876 1,022 190,744
INTEREST-BEARING LIABILITIES
Securities sold under agreements to repurchase 8,642 8,642
Other borrowed funds 522 88 60 34 704
Savings 26,419 23,463 49,882
Interest-bearing demand accounts 10,962 15,853 26,815
Time deposits < $100,000 32,161 29,393 5,937 67,491
Time deposits > $100,000 6,080 5,334 2,526 13,940
--------- -------- -------- ------- --------
Total interest-bearing liabilities 84,786 34,815 47,839 34 167,474
INTEREST RATE SENSITIVITY GAP $ (27,062) $ 56,307 $ (6,963) $ 988 $ 23,270
========= ======== ======== ======= ========
Cumulative interest rate sensitivity GAP $ (27,062) $ 29,245 $ 22,282 $23,270
========= ======== ======== =======
Cumulative interest rate sensitivity GAP as a
percentage of total interest-earning assets -14.19% 15.33% 11.68% 12.20%
========= ======== ======== =======
</TABLE>
13
<PAGE> 14
Management's Discussion and Analysis
PERFORMANCE OVERVIEW
NET INCOME
Net income for 1996 was $2,583,989, representing a 15.14% increase over earnings
for 1995. This reflects a continuation of the positive trend in earnings
performance with previous earnings for 1995 of $2,244,292, or a 14.79%,
increase over 1994 earnings of $1,955,085. The earnings per share performance,
adjusted to reflect the 10% stock dividend distributed in June of 1996, has
also continued upward with year-end achievements of $1.27 per share for 1996,
$1.10 per share for 1995 and $0.96 per share for 1994.
The banking industry relies on various key performance ratios to monitor
the achievements obtained by individual banks, peer groups and the entire
industry as a whole. UBCP's performance level in two of the most frequently
presented of these ratios was 1.32% Return on Average Assets (ROA) and 13.49%
Return on Average Equity (ROE) for 1996. Prior years ROA and ROE percentages
were 1.18% and 12.85% in 1995 and 1.11% and 12.24% in 1994.
NET INTEREST INCOME
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.
Management 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.
Net interest income increased to $8,258,734 in 1996 from $7,776,036 in
1995 and from $6,844,047 in 1994. The net interest margin, which is net
interest income divided by average earning assets, was 4.47% in 1996 compared
to 4.32% in 1995 and 4.16% in 1994. The net interest spread, defined as the
difference between yields on interest-earning assets and costs of
interest-bearing liabilities was 3.98% in 1996 compared to 3.86% in 1995 and
3.79% in 1994. The increase in the net interest margin for 1996 was due to
higher yields on interest-earning assets in conjunction with negligible
increases in the cost of interest-bearing liabilities. Average earning assets
as a percent of total average assets increased to 94.7% in 1996, up from 94.2%
in 1995 and 93.5% in 1994.
TOTAL INTEREST INCOME
Total interest income increased to $15,006,091 in 1996 from $14,351,522 in
1995 and $12,283,260 in 1994. For 1996, average interest-earning assets
increased 2.93% over the 1995 average to $185,111,000 with an overall average
yield of 8.12% overall compared to 7.98% for 1995. This increase in yield
continues to compare favorably against 7.46% for 1994. Of the net $655,000
increase in interest income, $748,000 was from growth in the volume of earning
assets partially offset by a decrease of $93,000 in income due to changes in
the mix of interest rates. Growth in lending, taxable securities available for
sale and an increase in the level of federal funds sold contributed the most
to these changes. For year-end 1995, the total increase in interest income of
$2,068,000 was comprised of $1,499,000 from positive changes in the volume of
interest-earning assets and $569,000 due to increases in interest rates.
Federal Home Loan Bank dividends received by the Banks totaled $43,322 in 1996
compared to $9,751 in 1995 and no dividends in 1994.
14
<PAGE> 15
Management's Discussion and Analysis
TOTAL INTEREST EXPENSE
Total interest expense for the Banks for year-end 1996 increased $172,000
because of increased levels of deposit and borrowing activity. The average
cost of interest-bearing liabilities for 1996 was 4.14% compared to 4.12% in
1995 and 3.67% in 1994. This trend represents a flattening out of interest
rates over the last two years with little or no upward changes anticipated
throughout 1997. The deposit rate structure reflects a low cost of funds,
however, alternative investment opportunities for depositors has made it
difficult to grow deposits in any meaningful way.
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 $455,400 in 1996, $465,000 in 1995 and
$281,000 in 1994. Management has maintained the relative level of the
provision in relation to loan volumes experienced throughout 1996. If events
unfold in ways unforeseen in the Wheeling-Pittsburgh Steel strike mentioned
earlier, changes to the provision amount would be initiated as Management
deemed appropriate.
NONINTEREST INCOME
Total noninterest income is made up of Bank related fees and service
charges, as well as other income producing services provided, including ATM
income, early redemption penalties for certificates of deposits, safe deposit
rental income and other miscellaneous items.
Noninterest income in 1996 was $920,951 compared to $876,285 in 1995 and
$805,355 in 1994. Service charges on deposit accounts increased $45,208 in
1996 over 1995 and $123,417 in 1995 over 1994. The increase in 1995 resulted
from the repricing of fees for depository products and growth in transactional
volume. Security gains were $26,540 in 1996 compared to $10,836 in 1995 and
$103,657 in 1994. Other income for 1996 was $284,997, down slightly from
$301,243 in 1995 and up from $260,909 in 1994.
NONINTEREST EXPENSE
Total noninterest expense for 1996 was $5,289,273 compared to $5,174,452
in 1995 and $4,867,794 in 1994. This slight increase in noninterest expense is
the result of management's ongoing effort to control costs through
consolidation of support functions for all locations, cross training of
personnel to accomplish multi-tasking teams and when feasible, acquisition and
implementation of the latest software and hardware technologies.
Included in the noninterest expense category is the FDIC premium expense
of $4,000 down significantly from 1995 levels of $188,532. Recent changes in
the Bank Insurance Fund (BIF) insurance premium requirements for 1997 and
beyond will require additional premium expenses for the Banks. Total premium
expenses for 1997 are calculated to be approximately $15,000.
Increases in other non interest expenses offset by the FDIC premium
reduction were Ohio Corporate Franchise taxes calculated on capital levels and
increases to the Bank's advertising activities necessary to promote the new era
of Image Statement Processing. Salaries and employee benefits increased
slightly due to normal and anticipated incremental salary and wage adjustments
and the retirement of several long-term employees replaced at lower levels of
compensation.
15
<PAGE> 16
Management's Discussion and Analysis
The following table is a summary of selected quarterly results of
operations for the years ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
1996 (In thousands except per share data)
<S> <C> <C> <C> <C>
Interest and dividend income $ 3,660 $ 3,702 $ 3,774 $ 3,870
Interest expense 1,633 1,646 1,707 1,761
----------- ----------- ----------- -----------
Net interest income 2,027 2,056 2,067 2,109
Provision for loan losses 111 122 111 111
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 1,916 1,934 1,956 1,998
Noninterest income 234 240 229 218
Noninterest expense 1,281 1,320 1,339 1,350
----------- ----------- ----------- -----------
Income before income tax 869 854 846 866
Income tax expense 222 196 214 219
----------- ----------- ----------- -----------
Net income $ 647 $ 658 $ 632 $ 647
=========== =========== =========== ===========
Average number of shares outstanding 2,033 2,033 2,033 2,033
Earnings per share $ 0.32 $ 0.32 $ 0.31 $ 0.32
=========== =========== =========== ===========
Dividends declared per share $ 0.10 $ 0.11 $ 0.11 $ 0.11
=========== =========== =========== ===========
1995
Interest and dividend income $ 3,395 $ 3,557 $ 3,685 $ 3,714
Interest expense 1,555 1,647 1,676 1,697
----------- ----------- ----------- -----------
Net interest income 1,840 1,910 2,009 2,017
Provision for loan losses 71 98 125 171
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 1,769 1,812 1,884 1,846
Noninterest income 225 225 195 231
Noninterest expense 1,345 1,314 1,213 1,302
----------- ----------- ----------- -----------
Income before income tax 649 723 866 775
Income tax expense 149 189 229 202
----------- ----------- ----------- -----------
Net income $ 500 $534 $ 637 $ 573
=========== =========== =========== ===========
Average number of shares outstanding 2,033 2,033 2,033 2,033
Earnings per share $ 0.25 $ 0.26 $ 0.31 $ 0.28
=========== =========== =========== ===========
Dividends declared per share $ 0.09 $ 0.09 $ 0.10 $ 0.10
=========== =========== =========== ===========
</TABLE>
16
<PAGE> 17
Management's Discussion and Analysis
AVERAGE BALANCES, NET INTEREST INCOME AND YIELDS EARNED AND RATES PAID
The following table provides information relating to average balance sheet
information and reflects the average yield on interest-earning assets and the
average cost of interest-bearing liabilities for the years ended December 31,
1996, 1995 and 1994. The yields and costs are calculated by dividing income or
expense by the average balance of interest-earning assets or interest-bearing
liabilities.
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.
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------- -------------------------- --------------------------
(IN THOUSANDS) INTEREST INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
-------- -------- ------- -------- ------- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets
Loans (net of unearned income) $126,102 $ 11,476 9.10% $116,331 $10,496 9.02% $ 98,599 $ 8,440 8.56%
Taxable Securities - available for sale 25,150 1,703 6.82% 14,467 949 6.55% 4,592 317 6.90%
Taxable Securities - held to maturity 10,698 586 5.48% 29,310 1,841 6.28% 37,850 2,341 6.18%
Tax-exempt securities - available for sale 481 24 5.05% 404 19 4.73% 59 4 6.78%
Tax-exempt securities - held to maturity 19,593 1,044 5.33% 17,681 948 5.36% 18,172 970 5.34%
Federal funds sold 2,482 130 5.25% 1,528 89 5.82% 5,354 211 3.94%
FHLB stock 605 43 7.16% 127 9 7.68%
-------- -------- ------- -------- ------- ------ -------- -------- -----
Total interest-earning assets 185,111 15,006 8.12% 179,848 14,351 7.98% 164,626 12,283 7.46%
Noninterest-earning assets
Cash and due from banks 5,183 5,597 5,720
Bank premises and equipment (net) 5,023 4,835 4,785
Other nonearning assets 2,100 2,283 2,238
Less: allowance for loan losses (1,920) (1,587) (1,330)
-------- -------- --------
Total noninterest-earning assets 10,386 11,128 11,413
-------- -------- --------
Total assets $195,497 $190,976 $176,039
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Demand deposits $ 25,587 649 2.54% $24,797 $ 647 2.61% $ 24,309 $605 2.49%
Savings deposits 51,226 1,525 2.98% 52,348 1,578 3.01% 50,561 1,463 2.89%
Time deposits 78,781 4,235 5.38% 76,230 4,041 5.30% 69,720 3,253 4.67%
Repurchase agreements
and other borrowings 7,207 338 4.69% 6,198 309 4.99% 3,464 118 3.41%
-------- -------- ------- -------- ------- ------ -------- -------- -----
Total interest-bearing liabilities 162,801 6,747 4.14% 159,573 6,575 4.12% 148,054 5,439 3.67%
-------- ------- --------
Noninterest-bearing liabilities
Demand deposits 12,058 12,609 10,821
Other liabilities 1,483 1,331 1,193
-------- -------- --------
Total noninterest-bearing liabilities 13,541 13,940 12,014
Total liabilities 176,342 173,513 160,068
Total shareholders' equity 19,155 17,463 15,971
-------- -------- --------
Total liabilities and shareholders' equity $195,497 $190,976 $176,039
======== ======== ========
Net interest income $ 8,259 $ 7,776 $ 6,844
======== ======= ========
Net interest spread 3.98% 3.86% 3.79%
======= ====== =====
Net yield on interest-earning assets 4.47% 4.32% 4.16%
======= ====== =====
</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.
17
<PAGE> 18
Management's Discussion and Analysis
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 interest income and expense during the periods
indicated. For purposes of this table, changes in interest due to volume and
rate were determined using the following methods:
- - Volume variance results when the change in volume is multiplied by the
previous year's rate.
- - Rate variance results when the change in rate is multiplied by the previous
year's volume.
- - Rate/volume variance results when 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 calculations
due to the nominal amount of the loans.
<TABLE>
<CAPTION>
1996 COMPARED TO 1995 1995 COMPARED TO 1994
INCREASE/(DECREASE) INCREASE/(DECREASE)
---------------------------------- ---------------------------------
CHANGE CHANGE CHANGE CHANGE
(In thousands) 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 $ 980 $ 889 $ 91 $2,056 $1,581 $ 475
Taxable securities available for sale 754 714 40 631 648 (17)
Taxable securities held to maturity (1,255) (1,045) (210) (500) (536) 36
Tax-exempt securities available for sale 5 3 2 15 16 (1)
Tax-exempt securities held to maturity 97 102 (5) (22) (26) 4
Federal funds sold 41 51 (10) (122) (194) 72
FHLB stock 33 34 (1) 10 10 -
------ ------- ------ ------ ------ ------
Total interest income 655 748 (93) 2,068 1,499 569
Interest expense
Demand deposits 2 20 (18) 42 12 30
Savings deposits (53) (33) (20) 115 54 61
Time deposits 194 137 57 788 320 468
Repurchase agreements and
other borrowings 29 48 (19) 191 120 71
------ ------- ------ ------ ------ ------
Total interest expense 172 172 0 1,136 506 630
Net interest earnings $ 483 $ 576 $ (93) $ 932 $ 993 $ (61)
====== ======= ====== ====== ====== ======
</TABLE>
CAPITAL RESOURCES
Internal capital growth, through the retention of retained earnings, is
the primary means of maintaining capital adequacy for UBCP. Shareholders'
equity at December 31, 1996 was $20,016,011 compared to $18,451,873 at December
31, 1995, an 8.48% increase. Equity totals include $141,391 in unrealized
gains on securities available for sale, net of tax at year-end 1996, compared
to $299,199 at year-end 1995. Total shareholders' equity in relation to total
assets was 9.89% at year-end 1996 compared to 9.65% at year end 1995.
On February 20, 1996, UBCP issued a Prospectus describing initiation of a
Dividend Reinvestment Plan (The Plan) for shareholders under which UBCP's
common stock will be purchased by The Plan for participants with automatically
reinvested dividends. The Plan does not represent a change in the dividend
policy or a guarantee of future dividends.
18
<PAGE> 19
Management's Discussion and Analysis
Shareholders who do not wish to participate in The Plan will continue to
receive cash dividends, as declared in the usual and customary manner. UBCP
has approved the issuance of 150,000 authorized and unissued shares of the
common stock for purchase under The Plan. To date, all shares purchased by The
Plan, except for 797 shares purchased from UBCP on October 21, 1996, have been
purchased on the open market.
LIQUIDITY
Management'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 securities and
sales of securities available for sale, federal funds sold and cash and
deposits with banks. Along with its liquid assets, the Banks have additional
sources of liquidity available to ensure that adequate funds are available as
needed which include, but are not limited to, the purchase of federal funds,
the ability to borrow funds under line of credit agreements with correspondent
banks and a borrowing agreement with the Federal Home Loan Bank of Cincinnati,
Ohio and the adjustment of interest rates to obtain depositors. Management
feels that it has the capital adequacy, profitability and reputation to meet
the current and projected needs of its customers.
For the year ended December 31, 1996, the adjustment to reconcile net
income to net cash from operating activities consisted mainly of depreciation
and amortization of premises and equipment and intangibles, the provision for
loan losses, gain on sales of securities, net amortization of securities and
net changes in other assets and liabilities. The most significant use of the
net cash from investing activities was $20,550,093 in securities purchases,
$10,210,621 used to fund the net change in loans and $735,677 utilized for the
purchase of the next generation of in-house data processing and image item
processing hardware and software. This cash outflow was partially offset by
the cash infusion of $18,985,031 in proceeds from sales, calls and maturities
of securities. 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
$9,411,385. For a more detailed illustration of sources and uses of cash,
refer to the consolidated statements of cash flows presented elsewhere in the
annual report.
INFLATION
Substantially all of UBCP'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 UBCP 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.
UBCP's ability to match the interest sensitivity of its financial assets to the
interest sensitivity of it liabilities in its asset/liability management may
tend to minimize the effect of changes in interest rates on performance.
19
<PAGE> 20
CROWE CHIZEK
Board of Directors
United Bancorp, Inc.
Martins Ferry, Ohio
We have audited the accompanying consolidated balance sheets of
United Bancorp, Inc. and Subsidiaries, as of December 31, 1996 and 1995,
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, 1996. 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 from 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, 1996 and 1995,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
CROWE, CHIZEK AND COMPANY LLP
Columbus, Ohio
January 17, 1997
20
<PAGE> 21
Consolidated Balance Sheets
<TABLE>
<CAPTION>
---------------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 6,393,703 $ 6,382,420
Federal funds sold 225,000 600,000
------------ ------------
Total cash and cash equivalents 6,618,703 6,982,420
Securities available for sale 28,064,029 27,108,268
Securities held to maturity
(Estimated fair value of $30,252,181 in 1996 and $29,985,912 in 1995) 29,793,784 29,362,237
Total loans receivable 132,660,608 122,682,652
Allowance for loan losses (2,022,987) (1,775,383)
------------ ------------
Net loans receivable 130,637,621 120,907,269
Premises and equipment, net 5,184,782 4,901,237
Accrued interest receivable 1,412,504 1,361,086
Other real estate 24,869
Other assets 628,566 577,009
------------ ------------
Total assets $202,364,858 $191,199,526
============ ============
LIABILITIES
Demand deposits
Non-interest bearing $ 13,384,268 $ 12,617,089
Interest-bearing 26,815,615 25,429,547
Savings deposits 49,881,823 51,391,462
Time deposits - under $100,000 67,490,727 65,505,440
Time deposits - $100,000 and over 13,939,808 11,660,821
------------ ------------
Total deposits 171,512,241 166,604,359
Securities sold under agreements to repurchase 8,642,310 4,468,738
Other borrowed funds 704,492 163,502
Accrued expenses and other liabilities 1,489,804 1,511,054
------------ ------------
Total liabilities 182,348,847 172,747,653
SHAREHOLDERS' EQUITY
Common stock - $1 par value: 10,000,000 shares authorized;
2,033,385 - 1996 and 1,847,942 - 1995 issued and outstanding 2,033,385 1,847,942
Additional paid-in capital 11,726,390 9,358,840
Retained earnings 6,114,845 6,945,892
Unrealized gain on securities available for sale, net of tax 141,391 299,199
------------ ------------
Total shareholders' equity 20,016,011 18,451,873
------------ ------------
Total liabilities and shareholders' equity $202,364,858 $191,199,526
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 22
Consolidated Statements of Income
<TABLE>
<CAPTION> ----------- ----------- -----------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Interest and dividend income
Loans, including fees $11,476,002 $10,496,510 $ 8,439,969
Taxable securities 2,288,783 2,789,968 2,658,586
Non-taxable securities 1,067,703 966,434 973,934
Federal funds sold 130,281 88,859 210,771
Dividends on Federal Home Loan Bank stock 43,322 9,751
----------- ----------- -----------
Total interest and dividend income 15,006,091 14,351,522 12,283,260
Interest expense
Deposits
Demand 648,677 646,829 605,018
Savings 1,524,919 1,577,797 1,463,209
Time 4,235,365 4,041,388 3,252,781
Other borrowings 338,396 309,472 118,205
----------- ----------- -----------
Total interest expense 6,747,357 6,575,486 5,439,213
----------- ----------- -----------
NET INTEREST INCOME 8,258,734 7,776,036 6,844,047
Provision for loan losses 455,400 465,000 281,000
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 7,803,334 7,311,036 6,563,047
Noninterest income
Service charges on deposit accounts 609,414 564,206 440,789
Net realized gain on sales of securities 26,540 10,836 103,657
Other income 284,997 301,243 260,909
----------- ----------- -----------
Total noninterest income 920,951 876,285 805,355
Noninterest expense
Salaries and employee benefits 2,668,348 2,611,670 2,302,837
Occupancy 763,621 702,506 726,775
Insurance 88,372 278,479 464,255
Franchise and other taxes 296,580 244,966 228,081
Advertising 191,842 144,089 140,710
Stationery and office supplies 159,702 138,512 114,345
Other expenses 1,120,808 1,054,230 890,791
----------- ----------- -----------
Total noninterest expense 5,289,273 5,174,452 4,867,794
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 3,435,012 3,012,869 2,500,608
Income tax expense 851,023 768,577 545,523
----------- ----------- -----------
NET INCOME $ 2,583,989 $ 2,244,292 $ 1,955,085
=========== =========== ===========
Earnings per common share $ 1.27 $ 1.10 $0.96
=========== =========== ===========
Weighted average shares outstanding 2,032,740 2,032,588 2,032,588
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE> 23
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
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, 1994 $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 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 - $0.28 per share (563,399) (563,399)
Net 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 - $0.38 per share (776,136) (776,136)
Net 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
Net income 2,583,989 2,583,989
10% Stock dividend 184,646 2,354,237 (2,538,883)
Cash paid in lieu of fractional shares
on 10% stock dividend (2,038) (2,038)
Additional shares issued to fund
Dividend Reinvestment Program 797 13,313 14,110
Cash dividends - $0.43 per share (874,115) (874,115)
Net change in unrealized gain/(loss) on
securities available for sale (157,808) (157,808)
---------- ----------- ----------- ---------- -----------
BALANCE AT DECEMBER 31, 1996 $2,033,385 $11,726,390 $ 6,114,845 $ 141,391 $20,016,011
========== =========== =========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE> 24
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,583,989 $ 2,244,292 $ 1,955,085
Adjustments to reconcile net income to net cash
from operating activities
Depreciation and amortization 452,132 354,291 420,541
Amortization of intangibles 92,521 93,191 67,601
Provision for loan losses 455,400 465,000 281,000
Deferred taxes (14,950) (74,104) 82,850
Federal Home Loan Bank stock dividend (42,775) (9,500)
Net realized gains on available for sale securities (26,540) (10,836) (103,657)
Amortization of securities, net 7,967 68,082 189,340
Net changes in accrued interest receivable and other assets (195,497) 479,299 (829,782)
Net changes in accrued expenses and other liabilities 74,995 117,602 90,092
----------- ----------- -----------
Net cash from operating activities 3,387,242 3,727,317 2,153,070
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale
Proceeds from sales 3,623,266 1,500,313 2,335,375
Proceeds from maturities/calls 10,500,000 1,750,941
Purchases (15,218,563) (3,034,800) (14,042,213)
Securities held to maturity
Proceeds from sales 1,212,313
Proceeds from maturities/calls 4,861,765 9,590,396 11,670,596
Purchases (5,331,530) (1,115,981) (7,512,962)
Net change in loans (10,210,621) (14,419,891) (19,965,781)
Net purchases of premises and equipment (735,677) (318,252) (239,518)
----------- ----------- -----------
Net cash from investing activities (12,511,360) (6,047,274) (26,542,190)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 4,907,882 3,291,877 3,735,120
Net change in short-term borrowings 4,503,503 56,336 1,784,755
Proceeds from long-term debt 216,000
Principal payments on long-term debt (4,941)
Cash and cash equivalents received from deposit assumptions,
net of assets acquired 6,255,044
Cash dividends paid (874,115) (776,136) (563,399)
Cash paid in lieu of fractional shares in stock dividend (2,038) (1,073)
Proceeds from sale of common stock 14,110
----------- ----------- -----------
Net change from financing activities 8,760,401 2,572,077 11,210,447
----------- ----------- -----------
Net change in cash and cash equivalents (363,717) 252,120 (13,178,673)
Cash and cash equivalents at beginning of year 6,982,420 6,730,300 19,908,973
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 6,618,703 $ 6,982,420 $ 6,730,300
=========== =========== ===========
Interest paid $ 6,750,440 $ 6,582,399 $ 5,392,584
Income taxes paid 909,844 768,000 583,500
Non-cash transfer from loans to other real estate owned $ 24,869 $ - $ -
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE> 25
Notes To The Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of United
Bancorp, Inc. (COMPANY) and its wholly owned subsidiaries, (BANKS) The Citizens
Savings Bank of Martins Ferry, Ohio (CITIZENS-MARTINS FERRY) and The
Citizens-State Bank of Strasburg, Strasburg, Ohio (CITIZENS-STRASBURG). All
significant intercompany transactions and balances have been eliminated in
consolidation.
NATURE OF OPERATIONS:
The Company and Bank's revenues, operating income and assets are primarily
from the banking industry. Loan customers are mainly located in Belmont,
Jefferson, Tuscarawas and Carroll Counties and the surrounding localities in
north eastern and eastern Ohio, and include a wide range of individuals,
businesses and other organizations. A major portion of loans are secured by
various forms of collateral including real estate, business assets, consumer
property and other items, although borrower cash flow may also be a primary
source of payment. 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:
To prepare financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions based on
available information. These estimates and assumptions affect the amounts
reported in the financial statements and the disclosures provided and future
results could differ. The collectibility of loans, fair values of financial
instruments and status of contingencies are particularly subject to change.
CASH FLOW REPORTING:
Cash and cash equivalents are defined as cash and due from banks and
federal funds sold. Net cash flows are reported for customer loan and deposit
transactions, securities sold under agreements to repurchase and short-term
borrowings.
SECURITIES:
Securities are classified as held to maturity and carried at amortized
cost when management has the positive intent and ability to hold them to
maturity. Securities are classified as available for sale when they might be
sold before maturity. Securities available for sale are carried at fair value,
with unrealized holding gains and losses reported separately in shareholders'
equity, net of tax. Securities are classified as trading when held for short
term periods in anticipation of market gains and are carried at fair value.
Securities are written down to fair value when a decline in fair value is not
temporary.
Gains and losses on sales are determined using the amortized cost of the
specific security sold. Interest income includes amortization of purchase
premiums and discounts.
25
<PAGE> 26
Notes To The Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
LOANS:
Loans are reported at the principal balance outstanding, net of deferred
loan fees and costs, the allowance for loan losses and charge-offs. Interest
income is reported on the interest method and includes amortization of net
deferred loan fees and costs over the loan term.
Interest income is not reported when full loan repayment is in doubt,
typically when payments are past due over 90 days. Payments received on such
loans are reported as principal reductions.
ALLOWANCE FOR LOAN LOSSES:
The allowance for loan losses is a valuation allowance, increased by the
provision for loan losses and decreased by charge-offs less recoveries.
Management estimates the allowance balance required based on past loan loss
experience, known and inherent risks in the portfolio, information about
specific borrower situations and estimated collateral values, economic
conditions and other factors. Allocations of the allowance may be made for
specific loans, but the entire allowance is available for any loan that, in
management's judgment, should be charged-off.
Effective January 1, 1995, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") Nos. 114 and 118, which modify the
accounting for impaired loans. A loan is considered impaired when management
believes that full collection of principal and interest is not probable. The
Company reduces the carrying value of impaired loans to the present value of
expected future cash flows, or to the fair value of collateral if the loan is
collateral dependent, by allocating a portion of the allowance for loan losses
to such loans. If these allocations should require an increase to the
allowance, such increase is reported as bad debt expense. The effect of
adopting and applying these Standards in 1996 and 1995 did not have a material
impact on the allowance for loan losses.
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, or when
the internal grading system indicates a doubtful classification. Loan
impairment is evaluated in total for smaller-balance loans of similar nature.
Such loans include residential first mortgage loans secured by one-to-four
family residences, residential construction loans and consumer automobile, boat
and home equity loans. 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. Other
cash payments are reported as reductions in carrying value, while increases or
decreases due to changes in future payments and due to the passage of time are
reported as part of the provision for loan losses.
26
<PAGE> 27
Notes To The Consolidated Financial Statements
PREMISES AND EQUIPMENT:
Asset cost is reported net of accumulated depreciation. Depreciation
expense is calculated on the straight-line method over asset useful lives.
These assets are reviewed for impairment when events indicate the carrying
amount may not be recoverable.
OTHER REAL ESTATE:
Real estate acquired in settlement of loans is initially reported at
estimated fair value at acquisition. After acquisition, a valuation allowance
reduces the reported amount to the lower of the initial amount or fair value
less costs to sell. Expenses, gains and losses on disposition and changes in
the valuation allowance are reported in other expenses.
LOAN SERVICING:
The Company became subject to the provisions of SFAS No. 122, "Accounting
for Mortgage Servicing rights," on January 1, 1996. This Standard requires
entities to recognize, as separate assets, rights to service mortgage loans for
others, regardless of how these rights are acquired. Mortgage servicing rights
acquired through either the purchase or the origination of mortgage loans which
are subsequently sold with servicing rights retained should be determined by
allocating the total cost of the mortgage loans to mortgage servicing rights
and to loans (without the mortgage servicing rights) based on their relative
fair values. Mortgage servicing rights recorded as a separate asset are
amortized in proportion to, and over the period of, estimated net servicing
income. This Standard was superseded by SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," which extends the accounting and disclosure rules for mortgage
servicing rights to all servicing rights including mortgage, consumer and
commercial loans. SFAS 122 did not have a material impact on the Company's
financial statements at January 1, 1996. SFAS 125 will be effective on January
1, 1997 and is not expected to have a material impact on the Company's
financial statements.
IDENTIFIED INTANGIBLES:
Identified intangibles include the value of depositor relationships
purchased which are being amortized on an accelerated method over eight years.
Identified intangibles also include a non-compete covenant and capitalized
organizational costs which are being amortized on straight-line method over
five years. Identified intangibles are assessed for impairment based on
estimated undiscounted cash flows and written down if necessary. At year-end
1996 and 1995, identified intangibles net of accumulated amortization totaled
$173,638 and $252,245 and are included in other assets in the accompanying
consolidated balance sheets.
EMPLOYEE BENEFITS:
A defined benefit pension plan covers all employees 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 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.
27
<PAGE> 28
Notes To The Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
EMPLOYEE BENEFITS (CONTINUED)
Beginning March of 1995, the Company began offering a 401(k) plan which
covers 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 contributions become 100%
vested after 5 years of service.
Expense of the defined benefit plan is reported by spreading the expected
contributions to the plan less long-term earnings on plan assets over the
employee's service period. Expense of the 401(k) plan is based on the annual
contribution.
STOCK COMPENSATION
Expense for employee compensation under stock option plans is based on
Opinion 25, with expense reported only if options are granted below market
price at grant date. Pro forma disclosures of net income and earnings per
share are provided in Note 9 as if the fair value method of SFAS No. 123 were
used for stock-based compensation.
INCOME TAXES
Income tax expense is the sum of the current year income tax due or
refundable and the change in deferred tax assets and liabilities. Deferred tax
assets and liabilities are the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance, if
needed, reduces deferred tax assets to the amount expected to be realized.
STOCK DIVIDENDS
Dividends issued in stock are reported by transferring the market value of
the stock issued from retained earnings to common stock and additional
paid-in-capital. Stock splits are recorded by transferring the par value of
shares issued from retained earnings to common stock.
On April 17, 1996, a 10% stock dividend was approved for all shareholders
of record on May 20, 1996 and distributed on June 20, 1996. Additionally, 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.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of financial instruments are estimated using relevant market
information and other assumptions, as more fully disclosed separately. Fair
value estimates involve uncertainties and matters of significant judgment
regarding interest rates, credit risk, prepayments and other factors,
especially in the absence of broad markets for particular items. Changes in
assumptions or in market conditions could significantly affect the estimates.
The fair value estimates of existing on-and off-balance sheet financial
instruments does not include the value of anticipated future business or the
values of assets and liabilities not considered financial instruments.
28
<PAGE> 29
Notes To The Consolidated Financial Statements
EARNINGS AND DIVIDENDS PER COMMON SHARE
Earnings per common share is based on the weighted-average number of
shares outstanding for the year. Stock options outstanding do not presently
have a dilutive effect greater than or equal to 3% on earnings per common
share. All per share data has been retroactively adjusted for the 10% stock
dividends in 1996 and 1994.
RECLASSIFICATIONS
Some items in prior financial statements have been reclassified to conform
with the current presentation.
NOTE 2 - SECURITIES
The amortized cost and estimated fair values of securities are as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------
AMORTIZED GROSS GROSS ESTIMATED
COST UNREALIZED GAINS UNREALIZED LOSSES FAIR VALUE
----------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE 1996
US Treasury obligations $ 3,725,832 $ 73,570 $ 3,799,402
US Agency obligations 23,032,148 146,839 $ (35,153) 23,143,834
State and municipal obligations 456,645 19,298 475,943
Other investments 635,175 9,675 644,850
----------- ---------------- ----------------- -----------
$27,849,800 $ 249,382 $ (35,153) $28,064,029
=========== ================ ================= ===========
AVAILABLE FOR SALE 1995
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
----------- ---------------- ----------------- -----------
$26,654,936 $ 459,172 $ (5,840) $27,108,268
=========== ================ ================= ===========
HELD TO MATURITY 1996
US Agency obligations $ 9,535,396 $ 1,000 $ (84,324) $ 9,452,072
State and municipal obligations 20,258,388 634,056 (92,335) 20,800,109
----------- ---------------- ----------------- -----------
$29,793,784 $ 635,056 $ (176,659) $30,252,181
=========== ================ ================= ===========
HELD TO MATURITY 1995
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
----------- ---------------- ----------------- -----------
$29,362,237 $ 757,907 $ (134,232) $29,985,912
=========== ================ ================= ===========
</TABLE>
29
<PAGE> 30
Notes To The Consolidated Financial Statements
NOTE 2 - SECURITIES
Sales of available for sale securities were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ----------
<S> <C> <C> <C>
Proceeds $3,623,266 $1,500,313 $2,335,375
Gross gains 26,540 10,825 46,186
Gross losses 3,539
</TABLE>
One other 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 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.
During 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 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 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 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.
30
<PAGE> 31
Notes To The Consolidated Financial Statements
Contractual maturities of securities at year-end 1996 were as follows:
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED WEIGHTED AVERAGE
COST FAIR VALUE AVERAGE MATURITY T/E YIELD
----------- ----------- ----------------- ---------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
US Treasury obligations
0 - 3 Months $ 499,262 $ 502,343 3.0 Mos. 7.50%
1 - 2 Years 1,745,361 1,773,309 1 Yr. 8.2 Mos. 6.86%
2 - 5 Years 1,481,209 1,523,750 2 Yrs. 3.3 Mos. 7.26%
----------- ----------- ----------------- ---------
Total 3,725,832 3,799,402 1 Yr. 8.7 Mos. 7.10%
----------- ----------- ----------------- ---------
US Agency obligations
0 - 3 Months 1,502,492 1,506,406 2.5 Mos. 6.64%
3 - 6 Months 499,945 502,031 3.7 Mos. 6.78%
6 -12 Months 2,450,000 2,474,912 10.5 Mos. 6.78%
1 - 2 Years 1,478,489 1,505,625 1 Yr. 3.9 Mos. 7.28%
2 - 5 Years 11,601,807 11,652,716 4 Yrs. 1.0 Mos. 6.89%
5 - 10 Years 5,499,415 5,502,144 8 Yrs. 3.0 Mos. 7.21%
----------- ----------- ----------------- ---------
Total 23,032,148 23,143,834 4 Yrs. 1.6 Mos. 6.96%
----------- ----------- ----------------- ---------
State and municipal obligations
5 - 10 Years 336,645 351,767 7 Yrs. 11.3 Mos. 8.27%
Over 10 Years 120,000 124,176 10 Yrs. 11.0 Mos. 8.33%
----------- ----------- ----------------- ---------
Total 456,645 475,943 8 Yrs. 8.6 Mos. 8.29%
----------- ----------- ----------------- ---------
Other securities
Equity securities 635,175 644,850 7.00%
----------- ----------- ----------------- ---------
Total securities available for sale $27,849,800 $28,064,029 3 Yrs. 9.5 Mos. 7.00%
=========== =========== ================= =========
HELD-TO-MATURITY
US Agency obligations
0 - 3 Months $ 500,000 $ 499,531 1.3 Mos. 4.78%
3 - 6 Months 35,715 35,715 3.7 Mos. 6.10%
6 - 12 Months 999,998 997,189 9.3 Mos. 5.35%
1 - 2 Years 6,499,683 6,433,137 1 Yr. 10.5 Mos. 5.21%
2 - 5 Years 1,500,000 1,486,500 3 Yrs. 6.0 Mos. 6.17%
----------- ----------- ----------------- ---------
Total 9,535,396 9,452,072 1 Yr. 11.0 Mos. 5.36%
----------- ----------- ----------------- ---------
State and municipal obligations
0 - 3 Months 145,174 145,103 4.3 Mos. 5.37%
6 - 12 Months 491,774 491,238 9.7 Mos. 7.07%
1 - 2 Years 792,933 820,022 1 Yr. 10.5 Mos. 8.95%
2 - 5 Years 7,180,615 7,433,927 4 Yrs. 1.9 Mos. 8.42%
5 - 10 Years 11,394,972 11,658,768 6 Yrs. 11.6 Mos. 7.86%
Over 10 Years 252,920 251,051 10 Yrs. 11.0 Mos. 7.31%
----------- ----------- ----------------- ---------
Total 20,258,388 20,800,109 5 Yrs. 7.5 Mos. 8.05%
----------- ----------- ----------------- ---------
Total securities held to maturity $29,793,784 $30,252,181 4 Yrs. 5.3 Mos. 7.19%
=========== =========== ================= =========
</TABLE>
31
<PAGE> 32
Notes To The Consolidated Financial Statements
NOTE 2 - SECURITIES (Continued)
Securities with cost of $25,125,000 at December 31, 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.
During 1995, $13,325,238 of securities were reclassified from held to
maturity to available for sale, based on new interpretations issued for SFAS
No. 115. 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.
NOTE 3 - LOANS
Year-end loans were as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Commercial loans $ 12,415,431 $ 10,802,226
Commercial real estate loans 41,212,569 35,510,290
Real estate loans 33,885,573 33,293,663
Installment loans 45,147,035 43,076,473
------------ ------------
Total loans $132,660,608 $122,682,652
============ ============
</TABLE>
Loans to directors and officers, 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 768,857
Repayments (1,605,800)
----------
Aggregate balance - December 31, 1996 $2,135,565
==========
</TABLE>
The activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
BALANCE JANUARY 1, $1,775,383 $1,437,734 $1,256,322
Provision charged to operating expense 455,400 465,000 281,000
Loans charged-off (251,241) (151,200) (123,312)
Recoveries of previous charge-offs 43,445 23,849 23,724
---------- ---------- ----------
BALANCE DECEMBER 31, $2,022,987 $1,775,383 $1,437,734
========== ========== ==========
</TABLE>
Loans considered impaired under the provisions of SFAS No. 114 were not
material during 1996 and 1995.
32
<PAGE> 33
Notes To The Consolidated Financial Statements
NOTE 4 - PREMISES AND EQUIPMENT
Year-end premises and equipment were as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Buildings and land $5,297,242 $5,302,750
Furniture and equipment 2,649,536 2,224,331
Computer software 637,629 385,587
---------- ----------
Total 8,584,407 7,912,668
Accumulated depreciation and amortization 3,399,625 3,011,431
---------- ----------
Premises and equipment, net $5,184,782 $4,901,237
========== ==========
</TABLE>
NOTE 5 - DEPOSITS
At year-end 1996, scheduled maturities of time deposits less than $100,000
were as follows:
<TABLE>
<S> <C>
1997 $31,618,341
1998 16,940,337
1999 8,307,487
2000 2,680,591
2001 5,673,883
Thereafter 2,270,088
-----------
$67,490,727
===========
</TABLE>
At year-end 1996, scheduled maturities of time deposits greater than
$100,000 were as follows:
<TABLE>
<S> <C>
1997 $ 6,495,885
1998 4,267,375
1999 918,077
2000 632,321
2001 1,065,150
Thereafter 561,000
-----------
$13,939,808
===========
</TABLE>
NOTE 6 - BORROWED FUNDS
Securities sold under agreements to repurchase are financing arrangements
whereby the Banks sell securities and agree to repurchase the identical
securities at the maturities of the agreements at specified prices. Physical
control is maintained for all securities sold under repurchase agreements.
Information concerning securities sold under agreements to repurchase is
summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Average daily balance during the year $6,523,271 $4,801,714
Average interest rate during the year 5.30% 5.82%
Maximum month-end balance during the year $8,667,310 $7,402,282
</TABLE>
33
<PAGE> 34
Notes To The Consolidated Financial Statements
NOTE 6 - BORROWED FUNDS (CONTINUED)
Securities underlying these agreements at year-end were as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Carrying value of securities $9,574,054 $7,219,503
Fair value of securities 9,606,556 7,199,097
</TABLE>
Other borrowed funds consists of a cash management line of credit and
fixed-rate borrowings from the Federal Home Loan Bank ("FHLB") of Cincinnati,
Ohio, as well as a Treasury, Tax and Loan Note. At year-end 1996, the cash
management line of credit enabled the Banks to borrow up to $200,000. The line
of credit must be renewed on an annual basis. Variable-rate borrowings
outstanding on this line of credit with an original maturity of less than 90
days totaled $200,000 and $100,000 at year-end 1996 and 1995. The interest
rate on the borrowings was 7.15% at year-end 1996 and 6.53% at year-end 1995.
Additionally, as members of the Federal Home Loan Bank system, the Banks had
the ability to obtain up to $9,000,000, based on current FHLB stock ownership
or up to 25% of their total assets in advances from the FHLB subject to
increased share ownership of FHLB stock and 1-4 family residential real estate
loan collateral availability.
Citizens-Strasburg had a fixed-rate borrowing totaling $211,059 at
year-end 1996. The interest rate on the borrowing was 6.8% with monthly
principal payments due through May 2016. There were no such borrowings
outstanding at year-end 1995. Advances under the borrowing agreements are
collateralized by a blanket pledge of the Bank's residential mortgage loan
portfolio and FHLB stock.
Borrowings under the Treasury, Tax and Loan Note totaled $293,433 and
$63,502 at year-end 1996 and 1995.
At year-end 1996, required annual principal payments are as follows:
<TABLE>
<S> <C>
1997 $522,578
1998 25,934
1999 23,055
2000 20,475
2001 18,163
Thereafter 94,287
--------
$704,492
========
</TABLE>
At December 31, 1996, the Banks had cash management lines of credit
enabling borrowings up to $6.5 million with various correspondent banks. At
year-end 1996 and 1995, there were no borrowings outstanding under these lines
of credit.
34
<PAGE> 35
Notes To The Consolidated Financial Statements
NOTE 7 - BENEFIT PLANS
Pension expense includes the following:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Service cost of the current period $110,710 $97,200 $84,400
Interest cost on the projected benefit obligation 108,376 88,100 79,300
Return on assets held in the plan (102,887) (91,700) (80,900)
Net amortization of prior service cost, transition liability and net gain 3,900 3,900 3,900
-------- ------- -------
Pension expense $120,099 $97,500 $86,700
======== ======= =======
</TABLE>
The pension plan's funded status at year-end is as follows. Plan assets
consist of common stock and certificates of deposit.
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Actuarial present value of benefit obligation
Vested benefits $ 953,299 $ 989,000
Nonvested benefits 84,644 65,400
---------- ----------
Accumulated benefit obligation 1,037,943 1,054,400
Effect of anticipated future compensation
levels 463,397 323,200
---------- ----------
Projected benefit obligation 1,501,340 1,377,600
Fair value of assets held in plan 1,493,113 1,443,300
---------- ----------
Difference between projected benefit obligation
and fair value of plan assets $ 8,227 $ (65,700)
========== ==========
</TABLE>
Year end components of the (pre-paid)/accrued pension expense consists of
the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Projected benefit obligation in excess of plan assets $ 8,227 $(65,700)
Unamortized prior service cost (9,600) (11,500)
Net unrecognized gain from past experience different than assumed (11,235) 98,200
Unamortized liability at transition (8,900) (10,900)
-------- --------
(Prepaid)/accrued pension expense $(21,508) $ 10,100
======== ========
</TABLE>
Significant assumptions used:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<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% 7.00% 7.50%
</TABLE>
The Company's 401(k) matching percentage was 25% of the employees
contribution for 1996 and 1995. The cash contribution and related expense
included in salaries and employee benefits totaled $24,431 and $19,951 in
1996 and 1995.
The Company entered into special severance agreements with certain holding
company officers in 1995. The original agreements were for a one year
period and extend automatically each year unless notice is given prior to
June 30. No benefits are payable unless there has been change in control
and change in duties of the officers.
35
<PAGE> 36
Notes To The Consolidated Financial Statements
NOTE 8 - INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Current expense $865,973 $842,681 $462,673
Deferred expense/(benefit) (14,950) (74,104) 82,850
-------- -------- --------
Total income tax expense $851,023 $768,577 $545,523
======== ======== ========
</TABLE>
The effective tax rate differs from the statutory federal income tax rate
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- --------
<S> <C> <C> <C>
Statutory rate 34.00% 34.00% 34.00%
---------- ---------- --------
INCOME TAXES COMPUTED AT THE STATUTORY FEDERAL TAXES RATE $1,167,904 $1,024,375 $850,206
Add/(subtract) tax effect of:
Tax exempt interest income (328,508) (291,334) (297,563)
Other 11,627 35,536 (7,120)
---------- ---------- --------
Total income tax expense $ 851,023 $ 768,577 $545,523
========== ========== ========
</TABLE>
The sources of gross deferred tax assets and gross deferred tax
liabilities are as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ITEMS GIVING RISE TO DEFERRED TAX ASSETS
Allowance for loan losses in excess of tax reserve $ 581,657 $ 495,261
Amortization of intangibles 70,067 53,087
Other 4,434 4,910
---------- ----------
Total deferred tax assets $ 656,158 $ 553,258
ITEMTS GIVING RISE TO DEFERRED TAX LIABILITIES
Depreciation $(443,659) $(408,010)
Deferred loan costs, net (171,466) (159,390)
Unrealized gain on securities available for sale (72,838) (154,133)
Accretion (43,707) (26,945)
FHLB stock dividends (17,782) -
Other (8,911) (3,230)
--------- ---------
Total deferred tax liabilities $(758,363) $(751,708)
---------- ----------
Net deferred tax liability $(102,205) $(198,450)
========== ==========
</TABLE>
36
<PAGE> 37
Notes To The Consolidated Financial Statements
NOTE 9 - STOCK OPTIONS
The Company adopted a nonqualified stock option plan for directors and
bank holding company officers in 1995. The plan was subsequently ratified by
shareholders on April 17, 1996. The exercise price for options granted under
this plan will be no less than 100% of the fair market value of the shares on
the date of grant.
A summary of the status of the Company's stock option plan as of year-end
1996 and 1995 and changes during those years is presented below. All per share
amounts have been restated to reflect the 10% stock dividend distributed on
June 20, 1996.
<TABLE>
<CAPTION>
1996 1995
----------------------- ----------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
-------- ------- ------- ----------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 73,150 $ 13.59 - $ -
Granted 1,500 14.26 73,150 13.59
Exercised - - - -
Forfeited (3,300) 13.59 - -
-------- -------
Outstanding at end of year 71,350 13.60 73,150 13.59
======== =======
Remaining shares available for
grant at year-end 30,287 28,487
Options exercisable at year-end - -
</TABLE>
The weighted-average fair value per share of options granted during 1996
and 1995 were $6.28 and $5.50. The fair value of options granted was estimated
using the Black-Scholes options pricing model with the following
weighted-average information: risk-free interest rate of 6.84% and 5.93% for
1996 and 1995, respectively, expected life of 9 years and 3 months for 1996 and
10 years for 1995, expected volatility of stock price of 40.40% and 43.23% for
1996 and 1995, respectively and expected dividends per year of 2.67% and 3.38%
for 1996 and 1995, respectively.
The following table summarized information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
NUMBER NUMBER
EXERCISE OUTSTANDING DATE OF EXERCISABLE
PRICE AT 12/31/96 EXPIRATION AT 12/31/96
-------- ----------- ---------- -----------
<S> <C> <C> <C>
$13.59 69,850 11/21/05 -
14.26 1,500 11/21/05 -
</TABLE>
37
<PAGE> 38
Notes To The Consolidated Financial Statements
NOTE 9 - STOCK OPTIONS (CONTINUED)
The options are first exercisable after February 21, 2005, except in the
event certain financial performance criteria are met, in which case such
options may become exercisable in installment, 40% in 1998, 20% in 1999 and the
balance in 2000. All options become immediately exercisable in the event of a
change in control of the Company.
SFAS No. 123, which became effective for 1996, requires pro forma
disclosures for 1996 and 1995 for options granted in those years for
corporations that do not adopt its fair value accounting method for stock-based
employee compensation. Accordingly, the following pro forma information
presents net income and earnings per share had the Standard's fair value method
been used to measure compensation cost for stock option plans. No compensation
expense was actually recognized for 1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net income as reported $2,583,989 $2,244,292
Pro forma net income 2,556,313 2,241,253
Earnings per share as reported $ 1.27 $ 1.10
Pro forma earnings per share 1.26 1.10
</TABLE>
NOTE 10 - COMMITMENTS, OFF-BALANCE SHEET RISK AND CONTINGENCIES
There are various contingent liabilities that are not reflected in the
financial statements, including claims and legal actions arising in the
ordinary course of business. In the opinion of management, after consultation
with legal counsel, the ultimate disposition of these matters is not expected
to have a material effect on financial condition or results of operations.
Some financial instruments are used in the normal course of business to
meet the financing needs of customers. These financial instruments include
commitments to extend credit, standby letters of credit and financial
guarantees. These involve, to varying degrees, credit and interest-rate risk
in excess of the amount reported in the financial statements.
Exposure to credit loss if the other party does not perform is represented
by the contractual amount for commitments to extend credit, standby letters of
credit and financial guarantees written. The same credit policies are used for
commitments and conditional obligations as are used for loans. The amount of
collateral obtained, if deemed necessary, upon extension of credit is based on
management's credit evaluation. Collateral varies, but may include accounts
receivable, inventory, property, equipment, income-producing commercial
properties, residential real estate and consumer assets.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the commitment.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being used, the total commitments does not necessarily
represent future cash requirements. Standby letters of credit and financial
guarantees written are conditional commitments to guarantee a customer's
performance to a third party.
38
<PAGE> 39
Notes To The Consolidated Financial Statements
A summary of the notional or contractual amounts of financial instruments
with off-balance sheet risk at year-end follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Commitments to extend credit $11,751,000 $11,833,000
Standby letters of credit 156,000 286,000
----------- -----------
$11,907,000 $12,119,000
=========== ===========
</TABLE>
At year-end 1996 and included above, commitments to make fixed-rate loans
at current market rates totaled $80,000 with the interest rates on those
fixed-rate commitments ranging from 7.84% to 9.99%. There were no fixed rate
commitments or standby letters of credit at year-end 1995.
At year-end 1996 and 1995, reserves of $676,000 and $694,000 were required
as deposits with the Federal Reserve or as cash on hand. These reserves do not
earn interest.
NOTE 11 - CONCENTRATIONS 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. The Banks also grant commercial and
commercial real estate loans in the Columbus, Ohio area. 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, 1996, and 1995, total commercial and commercial real estate loans
made up 40.4% and 37.8%, respectively of the loan portfolio, with 29.4% and
28.4% of these loans secured by commercial real estate and business assets in
the Columbus, Ohio area. Installment loans account for 34.0% and 35.1% of the
loan portfolio and are secured by consumer assets including automobiles which
account for 83.1% and 76.5%, respectively of the installment loan portfolio.
Real estate loans comprise 25.5% and 27.1% of the loan portfolio as of December
31, 1996 and 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 December
31, 1996 and 1995, is $3,639,127 and $2,857,419, respectively on deposit with
Mellon Bank, NA, Pittsburgh, Pennsylvania.
NOTE 12 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate fair values
for financial instruments. The carrying amount is considered to estimate fair
value for cash and cash equivalents, deposit liabilities subject to immediate
withdrawal, short-term borrowings, accrued interest and variable-rate loans
that reprice at intervals of less than six months. Securities fair values are
based on quoted market prices or, if no quotes are available, on the rate and
term of the security and on information about the issuer. For fixed-rate loans
that reprice less frequently than each six months, time deposits and long-term
debt, the fair value is estimated by a discounted cash flow analysis using
current market rates for the estimated life and credit risk. Fair values for
impaired loans are estimated using discounted cash flow analyses or underlying
collateral values, where applicable. Fair value of loans held for sale is
based on market estimates. The fair value of off-balance sheet items was not
material at year-end 1996 and 1995.
39
<PAGE> 40
Notes To The Consolidated Financial Statements
NOTE 12 - FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated year-end fair values of financial instruments were:
<TABLE>
<CAPTION>
1996 1995
(Dollars in thousands) CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 6,619 $ 6,619 $ 6,982 $ 6,982
Securities available for sale 28,064 28,064 27,108 27,108
Securities held to maturity 29,794 30,252 29,362 29,986
Loans receivable, net 130,638 131,587 120,907 121,937
Accrued interest receivable 1,412 1,412 1,361 1,361
Financial liabilities
Demand and savings deposits $ (90,082) $ (90,082) $(89,438) $(89,438)
Time deposits (81,431) (82,303) (77,166) (78,695)
Short-term borrowings (9,136) (9,136) (4,632) (4,632)
Long-term debt (211) (216)
Accrued interest payable (734) (734) (737) (737)
</TABLE>
NOTE 13 - REGULATORY MATTERS
The Company and Banks are subject to regulatory capital requirements
administered by federal banking agencies. Capital adequacy guidelines and
prompt corrective action regulations involve quantitative measures of assets,
liabilities and certain off-balance-sheet items calculated under regulatory
accounting practices. Capital amounts and classifications are also subject to
qualitative judgments by regulators about components, risk weightings and other
factors and the regulators can lower classifications in certain cases. Failure
to meet various capital requirements can initiate regulatory action that could
have a direct material effect on the financial statements.
The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized, although these
terms are not used to represent overall financial condition. If adequately
capitalized, regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required. The minimum
requirements are:
<TABLE>
<CAPTION>
TOTAL TIER 1 TIER 1
CAPITAL TO CAPITAL TO CAPITAL
RISK-WEIGHTED RISK-WEIGHTED TO AVERAGE
ASSETS ASSETS ASSETS
------------ ------------- ----------
<S> <C> <C> <C>
Well capitalized 10.00% 6.00% 5.00%
Adequately capitalized 8.00% 4.00% 4.00%
Undercapitalized 6.00% 3.00% 3.00%
</TABLE>
40
<PAGE> 41
Notes To The Consolidated Financial Statements
At year-end, consolidated actual capital levels (in thousands) and minimum
levels were:
<TABLE>
<CAPTION>
MINIMUM REQUIRED
MINIMUM REQUIRED TO BE WELL CAPITALIZED
FOR CAPITAL UNDER PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION REGULATIONS
----------------- ------------------ -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- ----- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
1996
Total capital (to risk weighted assets)
Consolidated $ 21,328 16.6% 10,307 8.0% 12,884 10.0%
Citizens-Martins Ferry 14,920 14.3% 8,340 8.0% 10,425 10.0%
Citizens-Strasburg 5,888 15.7% 3,010 8.0% 3,762 10.0%
Tier 1 capital (to risk weighted assets)
Consolidated $ 19,712 15.3% 5,154 4.0% 7,731 6.0%
Citizens-Martins Ferry 13,617 13.1% 4,170 4.0% 6,255 6.0%
Citizens-Strasburg 5,418 14.4% 1,503 4.0% 2,257 6.0%
Tier 1 capital (to average assets)
Consolidated $ 19,712 9.8% 8,038 4.0% 10,047 5.0%
Citizens-Martins Ferry 13,617 9.8% 5,534 4.0% 6,908 5.0%
Citizens-Strasburg 5,418 8.7% 2,493 4.0% 3,116 5.0%
1995
Total capital (to risk weighted assets)
Consolidated $ 19,476 15.7% 9,934 8.0% 12,418 10.0%
Citizens-Martins Ferry 13,613 15.2% 7,160 8.0% 8,949 10.0%
Citizens-Strasburg 5,214 14.5% 2,870 8.0% 3,588 10.0%
Tier 1 capital (to risk weighted assets)
Consolidated $ 17,921 14.4% 4,967 4.0% 7,451 6.0%
Citizens-Martins Ferry 12,494 14.0% 3,580 4.0% 5,370 6.0%
Citizens-Strasburg 4,763 13.3% 1,435 4.0% 2,153 6.0%
Tier 1 capital (to average assets)
Consolidated $ 17,921 9.0% 7,976 4.0% 9,970 5.0%
Citizens-Martins Ferry 12,494 9.4% 5,330 4.0% 6,663 5.0%
Citizens-Strasburg 4,763 8.5% 2,448 4.0% 3,061 5.0%
</TABLE>
The Company and Banks at year-end 1996 and 1995 were categorized as well
capitalized.
41
<PAGE> 42
Notes To The Consolidated Financial Statements
NOTE 14 - PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
The Company's primary source of funds to pay dividends to shareholders is
the dividends it receives from the Banks. The Banks are subject to certain
restrictions on the amount of dividends that it may declare without prior
regulatory approval. At year-end 1996, $4,708,413 of retained earnings were
available for dividend declaration without prior regulatory approval.
Following are condensed parent company financial statements:
Condensed Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Assets
Cash $ 165,827 $ 156,092
Certificates of deposit 272,330 262,385
Investment in subsidiaries 19,573,305 18,052,600
Other assets 20,177 17,094
----------- -----------
Total assets $20,031,639 $18,488,171
=========== ===========
Liabilities and equity:
Other liabilities $ 15,628 $ 36,298
Shareholders' equity 20,016,011 18,451,873
----------- -----------
Total liabilities and shareholders' equity $20,031,639 $18,488,171
=========== ===========
</TABLE>
Condensed Statements of Income
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Operating income
Dividends from subsidiaries $ 961,831 $ 876,160 $1,014,480
Securities gains 47,000
Other income 12,296 12,346 9,472
---------- ---------- ----------
Total operating income 974,127 888,506 1,070,952
Operating expenses 139,113 142,000 90,962
---------- ---------- ----------
Income before income taxes and equity in undistributed net income 835,014 746,506 979,990
Income tax benefit 57,250 20,399 16,866
---------- ---------- ----------
Income before equity in undistributed earnings of subsidiaries 892,264 766,905 996,856
Equity in undistributed net income of subsidiaries 1,691,725 1,477,387 958,229
---------- ---------- ----------
Net income $2,583,989 $2,244,292 $1,955,085
========== ========== ==========
</TABLE>
42
<PAGE> 43
Notes To The Consolidated Financial Statements
Condensed Statement of Cash Flows
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $2,583,989 $2,244,292 $1,955,085
Adjustments to reconcile net income to net cash
from operating activities:
Equity in undistributed net income of subsidiaries (1,691,725) (1,477,387) (958,229)
Gain on sale of equity investment securities (47,000)
Net change in other assets and other liabilities (28,953) 13,467 (14,503)
Amortization of intangibles 18,412 18,436 31,893
---------- ---------- ----------
Net cash from operating activities 881,723 798,808 967,246
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in certificates of deposit (9,945) 38,813 (206,426)
Proceeds from sale of securities 184,500
Capital contribution to subsidiaries (450,000)
---------- ---------- ----------
Net cash from investing activities (9,945) 38,813 (471,926)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to shareholders (874,115) (776,136) (563,399)
Proceeds from sale of common stock 14,110
Cash paid in lieu of fractional shares (2,038) (1,073)
---------- ---------- ----------
Net cash from financing activities (862,043) (776,136) (564,472)
NET CHANGE IN CASH 9,735 61,485 (69,152)
CASH AT BEGINNING OF YEAR 156,092 94,607 163,759
---------- ---------- ----------
CASH AT END OF YEAR $ 165,827 $ 156,092 $ 94,607
========== ========== ==========
</TABLE>
43
<PAGE> 44
A Decade of Progress
<TABLE>
<CAPTION>
1987 1988 1989 1990
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income $ 8,963,088 $ 9,459,611 $ 11,381,035 $ 11,421,492
Interest expense 5,688,807 5,941,211 7,220,587 7,127,552
------------ ------------ ------------ ------------
NET INTEREST INCOME 3,274,281 3,518,400 4,160,448 4,293,940
Provision for loan losses 36,000 102,000 182,000 240,000
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,238,281 3,416,400 3,978,448 4,053,940
Noninterest income, including secuity gains/(losses) 529,226 464,525 349,829 684,510
Noninterest expense 2,695,250 2,781,577 2,908,875 3,465,803
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 1,072,257 1,099,348 1,419,402 1,272,647
Income taxes 144,189 161,194 304,952 205,997
------------ ------------ ------------ ------------
NET INCOME $ 928,068 $ 938,154 $ 1,114,450 $ 1,066,650
============ ============ ============ ============
- ------------------------------------------------------------------------------------------------------------------
Total assets $111,491,682 $120,728,808 $129,527,455 $132,008,476
Deposits 100,074,388 108,255,872 115,848,920 115,056,983
Equity capital 10,291,906 10,836,323 11,543,373 12,169,023
Loans outstanding, net 39,756,544 43,385,742 56,862,870 71,060,484
Term federal funds 4,378,000 8,059,000 9,105,000 1,500,000
Allowance for loan losses 472,007 478,042 595,160 720,856
Net charge-offs 69,815 95,965 64,882 114,304
Full time employees (average equivalents) 57 57 58 66
Banking locations Four Four Four Five
- ------------------------------------------------------------------------------------------------------------------
Earnings per share $ 0.57 $ 0.46 $ 0.55 $ 0.53
Dividends per share 0.18 0.19 0.20 0.22
Book value per share 5.06 5.33 5.68 5.99
Market value range per share 4.65 - 5.51 4.75 - 5.37 5.06 - 5.68 5.32 - 5.68
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 45
A Decade of Progress
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 11,699,233 $ 12,166,789 $ 11,656,336 $ 12,283,260 $ 14,351,522 $ 15,006,091
6,712,916 5,948,713 5,259,839 5,439,213 6,575,486 6,747,356
------------ ------------ ------------ ------------ ------------ ------------
4,986,317 6,218,076 6,396,497 6,844,047 7,776,036 8,258,734
222,000 302,000 270,500 281,000 465,000 455,400
------------ ------------ ------------ ------------ ------------ ------------
4,764,317 5,916,076 6,125,997 6,563,047 7,311,036 7,803,334
505,476 603,325 878,731 805,355 876,285 920,951
3,625,772 4,457,545 4,799,745 4,867,794 5,174,452 5,289,273
------------ ------------ ------------ ------------ ------------ ------------
1,644,021 2,061,856 2,204,983 2,500,608 3,012,869 3,435,012
361,021 490,352 477,205 545,523 768,577 851,023
------------ ------------ ------------ ------------ ------------ ------------
$ 1,283,000 $ 1,571,504 $ 1,727,778 $ 1,955,085 $ 2,244,292 $ 2,583,989
============ ============ ============ ============ ============ ============
- ----------------------------------------------------------------------------------------
$135,881,746 $164,675,155 $171,682,025 $185,634,119 $191,199,526 $202,364,858
118,059,873 145,648,647 152,334,470 163,312,482 166,604,359 171,512,241
12,990,023 14,078,527 15,375,942 16,518,060 18,451,873 20,016,011
77,137,769 79,642,462 86,696,640 106,952,378 120,907,269 130,637,621
1,000,000 - - - - -
846,824 1,039,360 1,256,322 1,437,734 1,775,383 2,022,987
96,032 109,464 53,538 99,588 127,351 207,796
71 83 80 82 83 84
Five Seven Seven Eight Eight Eight
- ----------------------------------------------------------------------------------------
$ 0.63 $ 0.77 $ 0.85 $ 0.96 $ 1.10 $ 1.27
0.23 0.24 0.25 0.28 0.38 0.43
6.39 6.93 7.56 8.13 9.08 9.84
5.37 - 5.99 5.68 - 7.85 8.26 -15.29 16.14 - 20.45 11.59 - 17.73 12.50 - 21.75
</TABLE>
45
<PAGE> 46
Banking Locations
Pictures of Banking Locations
46
<PAGE> 47
Banking Locations
Pictures of Banking Locations
47
<PAGE> 48
UNITED BANCORP, INC. DIVIDEND REINVESTMENT AND
STOCK PURCHASE PLAN AUTHORIZATION FOR ALL
COMMON SHAREHOLDERS
Please enroll me in the United Bancorp, Inc. Dividend Reinvestment and
Stock Purchase Plan. I direct United Bancorp, Inc. to pay to the Plan
Administrator for my account.
1. PLEASE INITIAL THE APPROPRIATE BLANK FOR OPTION A OR B TO REINVEST
DIVIDENDS:
A. ____ Reinvest dividends on ALL shares of United Bancorp, Inc. common
stock registered in my name.
B. ____ Reinvest dividends on _____ shares of United Bancorp, Inc. common
stock registered in my name.
(Enter number of shares only if you do not want all shares reinvested.)
2. PLEASE INITIAL FOR PARTICIPATION IN VOLUNTARY CASH PAYMENTS OPTION:
(Initialing here enrolls you in Voluntary Cash Payments but does not
obligate you to make a payment
every quarter.)
____ Invest voluntary cash payments as directed on a quarterly basis in amounts
of at least $100.00 but not more than $5,000.00.
I acknowledge all dividends on shares credited to my account under the Plan
will automatically be reinvested.
I hereby appoint WesBanco Bank Wheeling, the Plan Administrator, as my
agent under the Plan and direct the Plan Administrator to apply my dividends on
all United Bancorp securities designated above which are registered in the name
of or credited to my account under the Plan to the purchase of shares of United
Bancorp common stock.
I acknowledge receipt of a copy of United Bancorp's Dividend Reinvestment
and Stock Purchase Plan and agree to the terms and conditions of the Plan as
stated herein.
________________________________|___________________________|___________________
Stockholder's Name(s) Account No. No. Shares
________________________________________________________________________________
________________________________________________________________________________
Address
________________________________________________________________________________
Address
________________________________________________________________________________
Taxpayer Identification Number*
Under penalties of perjury, I certify (1) that the number shown on this form is
my correct taxpayer identification number and (2) that I am not subject to
backup withholding either because I have not been notified that I am subject to
backup withholding as a result of a failure to report all interest or
dividends, or the Internal Revenue Service has notified me that I am no longer
subject to backup withholding.
*IF YOU ARE AN INDIVIDUAL, YOUR TAXPAYER IDENTIFICATION NUMBER IS YOUR SOCIAL
SECURITY NUMBER.
SIGN BELOW TO ENROLL: JOINT ACCOUNTS, SIGN BELOW AND NEXT PANEL
______________________________________________________ _____________________
Signature Date
______________________________________________________ _____________________
Signature (if joint account, both sign) Date
RETURN THIS FORM TO PARTICIPATE IN THE PLAN
-ON JOINT ACCOUNTS, PLEASE REFER TO THE NEXT PANEL
- --------------------------------------------------------------------------------
UNITED BANCORP, INC.
DIVIDEND REINVESTMENT
AND STOCK PURCHASE PLAN
AUTHORIZATION FOR ALL
COMMON SHAREHOLDERS
JOINT ACCOUNT WITH RIGHT OF
SURVIVORSHIP
(Except residents of Louisiana or Texas)
TO:
Dividend Reinvestment Plan Administrator
for United Bancorp, Inc.
P.O. Box 767
Wheeling, WV 26003-0098
With respect to our joint account with right of survivorship, we
confirm that:
1. In all matters pertaining to the account you may act upon orders
and instructions from either of us.
2. Upon death of either of us, all securities, funds and property in
the account shall be the sole property of the survivor.
______________________________________________________ _____________________
Signature Date
______________________________________________________ _____________________
Signature Date
REMINDER: JOINT ACCOUNTS, PLEASE
SIGN BOTH OF THESE FORMS.
<PAGE> 49
Shareholder Information
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 2,033,385 shares outstanding, held among approximately 800
shareholders of record at year-end 1996. The following table sets forth the
quarterly high and low closing prices of UBCP's common stock from January 1,
1996 to December 31, 1996 compared to the same periods in 1995 as reported by
the NASDAQ. The price quotes have been adjusted for comparison purposes for
the 10% stock dividend distributed on June 20, 1996. The price quotations
presented should not necessarily be relied on in determining the value of the
shareholders' investment.
<TABLE>
<CAPTION>
1996 1995
-------------------------------------- --------------------------------
31-MAR 30-JUN 30-SEP 31-DEC 31-MAR 30-JUN 30-SEP 31-DEC
------ ------- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Price Range
High ($) 15 1/8 15 1/2 18 1/4 21 3/4 17 3/4 17 3/4 17 1/4 15
Low ($) 13 1/4 14 1/2 16 17 1/2 15 14 13 5/8 11 5/8
Cash dividends
Quarter $ 0.10 $ 0.11 $ 0.11 $ 0.11 $ 0.09 $ 0.09 $ 0.10 $ 0.10
Cumulative 0.10 0.21 0.32 0.43 0.09 0.18 0.28 0.38
</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,
Martins Ferry, OH 43935
INDEPENDENT AUDITORS
Crowe, Chizek and Company LLP
Certified Public Accountants
10 West Broad Street
Columbus, OH 43215
(614) 469-0001
ANNUAL MEETING:
The Annual Meeting of Shareholders will be held at 2:00 PM, April 16, 1997
at the Corporate Headquarters in Martins Ferry, Ohio.
STOCK TRADING:
McDonald and Company
PO Box 20897
Canton, OH 44701-0897
1-800-962-0537
The Ohio Company
155 East Broad Street
Columbus, OH 43215
1-800-255-1825
Advest, Inc.
340 S. Hollywood Plaza
Steubenville, OH 43952
1-800-761-8008
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 additional details write to:
DRIP Plan Administrator UBCP
PO Box 767
Wheeling, WV 26003
(304) 234-9436 or
1-800-328-3369, Ext. 436
HEADQUARTERS
The Citizens Savings Bank Building
4th at Hickory Streets
Martins Ferry, OH 43935
(614) 633-BANK
(614) 633-1448 (FAX)
TRANSFER AGENT AND REGISTRAR
Trust Department
WesBanco Bank - Wheeling
One Bank Plaza
Wheeling, WV 26003
(304) 234-9422
1-800-328-3369, Ext. 436
49
<PAGE> 1
UNITED BANCORP, INC. FORM 10-K
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 17, 1997 on the
1996 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 26, 1997
17
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,394
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 225
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28,064
<INVESTMENTS-CARRYING> 29,794
<INVESTMENTS-MARKET> 30,252
<LOANS> 130,638
<ALLOWANCE> 2,023
<TOTAL-ASSETS> 202,365
<DEPOSITS> 171,512
<SHORT-TERM> 9,347
<LIABILITIES-OTHER> 1,490
<LONG-TERM> 0
0
0
<COMMON> 2,033
<OTHER-SE> 17,983
<TOTAL-LIABILITIES-AND-EQUITY> 202,365
<INTEREST-LOAN> 11,476
<INTEREST-INVEST> 3,400
<INTEREST-OTHER> 130
<INTEREST-TOTAL> 15,006
<INTEREST-DEPOSIT> 6,409
<INTEREST-EXPENSE> 6,747
<INTEREST-INCOME-NET> 8,259
<LOAN-LOSSES> 455
<SECURITIES-GAINS> 27
<EXPENSE-OTHER> 5,289
<INCOME-PRETAX> 3,435
<INCOME-PRE-EXTRAORDINARY> 2,584
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,584
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.27
<YIELD-ACTUAL> 4.47
<LOANS-NON> 79
<LOANS-PAST> 256
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,775
<CHARGE-OFFS> 251
<RECOVERIES> 43
<ALLOWANCE-CLOSE> 2,022
<ALLOWANCE-DOMESTIC> 2,022
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 702
</TABLE>
