<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
Commission File Number 0-13270
UNB Corp.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Ohio 34-1442295
- ---------------------------------------- -------------------
State or other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
220 Market Avenue South, Canton, Ohio 44701
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 454-5821
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Stated Value
--------------------------------
(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
--- ---
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 8, 1996: $134,042,166.
The number of shares outstanding of each of the Registrant's common stock, as
of March 8, 1996: 2,874,899 shares of $1.00 per share stated value common
stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1995 UNB Corp. Annual Report to Shareholders (Exhibit 13) is
incorporated into Part I, Item 1(c), 1(e) and Part II, Items 5, 6, 7, and 8.
Portions of the Definitive Proxy Statement of UNB Corp. dated February 23,
1996, for the Annual Shareholders Meeting to be held on April 16, 1996, are
incorporated into Part III, Items 10, 11, 12, and 13.
Total Number of Pages is 80
----
Exhibit Index is on Page 22
----
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UNB CORP.
FORM 10-K
1995
<TABLE>
<S> <C>
PART I Page
- ------ ----
Item 1 Business 3-15
Item 2 Properties 16
Item 3 Legal Proceedings 16
Item 4 Submission of Matters to a Vote of Security Holders 16
PART II
- -------
Item 5 Market Price of and Dividends on the Common Equity and Related
Shareholder Matters 16
Item 6 Selected Financial Data 16-17
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 17
Item 8 Financial Statements and Supplementary Data 17
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 17
PART III
- --------
Item 10 Directors and Executive Officers of the Registrant 18
Item 11 Executive Compensation 18
Item 12 Security Ownership of Certain Beneficial Owners and Management 18
Item 13 Certain Relationships and Related Transactions 18
PART IV
- -------
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 18-19
Signatures 20-21
Exhibit Index 22
</TABLE>
2
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PART I
Item 1 - Business
- -----------------
a. General Development of Business
-------------------------------
UNB Corp. (Registrant) was incorporated under the laws of the State of Ohio
during 1983. Its principal business is to act as a bank holding company
for the United National Bank & Trust Company (Bank). Effective October 1,
1984, in a transaction accounted for as an internal reorganization, the
Registrant acquired all of the outstanding stock of the United National
Bank & Trust Company. The Corporation exchanged two shares of common stock
for each previously outstanding share of the United National Bank & Trust
Company. The Registrant did not have any operations prior to the business
combination. UNB Corp. is registered under the Bank Holding Company Act of
1956, as amended. A substantial portion of UNB Corp.'s revenue is derived
from cash dividends paid by the Bank.
b. Financial Information About Industry Segments
---------------------------------------------
The Registrant and its subsidiary bank are engaged in commercial and retail
banking. Reference is hereby made to Item 1(e), "Statistical Disclosure",
and Item 8 of this Form 10-K for financial information pertaining to the
Registrant's banking business.
c. Description of UNB Corp.'s Business
-----------------------------------
The Bank is a full-service bank offering a wide range of commercial and
personal banking services primarily to customers in northern Stark and
southern Summit Counties of Ohio. These services include a broad range of
loan, deposit and trust products and various miscellaneous services. Loan
products include commercial and commercial real estate loans, a variety of
mortgage and construction loan products, installment loans, home equity
lines of credit, MasterCard lines of credit, accounts receivable and lease
financing. Deposit products include interest and non-interest bearing
checking accounts, various savings accounts, certificates of deposit, and
IRAs. The Trust Department provides services in the areas of employee
benefits and personal trusts. Miscellaneous services include safe deposit
boxes, night depository, United States savings bonds, traveler's checks,
money orders and cashier checks, bank-by-mail service, money transfers,
wire services, utility bill payments and collections, notary public
services, discount brokerage services and alternative investments. In
addition, the Bank has correspondent relationships with major banks in New
York, Pittsburgh and Detroit pursuant to which the Bank receives various
financial services. The Bank accounts for substantially all (98%) of UNB
Corp.'s consolidated assets at December 31, 1995.
The Bank's primary lending area consists of Stark County, Ohio, and its
contiguous counties. Loans outside the primary lending area are considered
for creditworthy applicants. Lending decisions are made in accordance with
written loan policies designed to maintain loan quality.
Retail lending products are comprised of credit card loans, overdraft
lines, personal lines of credit and installment loans. Credit cards are
unsecured credit accounts, on which the credit limits are determined by
analysis of two criteria, the borrowers debt service and gross income.
Overdraft lines of credit are lines attached to checking accounts to cover
overdrafts and/or allow customers to write themselves a loan. Credit
limits are based on a percentage of gross income and average deposits.
Personal lines of credit
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include lines secured by junior mortgages (home equity) and Private Banking
lines which are generally secured by junior mortgages but may be unsecured
or secured by other collateral. The lines have a five year draw period and
may then be renewed or amortized over ten years. Credit limits are
determined by comparing three criteria, appraised value, debt service and
gross income. Criteria for determining credit limits on private banking
products also consider the applicant's annual income, net worth and average
deposits. Installment loans include both direct and indirect loans. The
term can range from three to 180 months, depending upon the collateral
which includes new and used automobiles, boats and recreational vehicles as
well as junior mortgages and unsecured personal loans. Retail lending
underwriting guidelines include evaluating the entire credit using the Five
C's of Credit, character, capacity, capital, condition and collateral.
Credit scoring, analysis of credit bureau ratings and debt to income ratios
are the major tools used by the lender in the underwriting process.
The Bank offers a variety of mortgage loan programs, including a variety of
fixed and adjustable rate mortgages ranging from 120 to 360 months. The
Bank also offers some specialty products such as jumbo mortgages, Mortgage
Assistance Programs for low income individuals, construction and bridge
loans. The underwriting guidelines include those for consumer loans and
those necessary to meet secondary market guidelines. The Bank may sell
loans to the secondary market when it deems it profitable and desirable to
do so. Residential real estate decisions focus on loan to value limits,
debt to income ratio, housing to income ratio, credit history, and in some
cases, whether private mortgage insurance is obtained.
Business credit products include commercial loans and commercial real
estate loans, Business Manager and leases. Commercial loans include lines
and letters of credit, fixed, and adjustable rate term loans, demand and
time notes. Commercial real estate loans include fixed, and adjustable
mortgages. Loans are generally to owner occupied businesses. The
portfolio also includes loans to churches, residential rental property,
shopping plazas and residential development loans. Loans to businesses
often entail greater risk because the primary source of repayment is
typically dependent upon adequate cash flow. Cash flow of a business can
be subject to adverse conditions in the economy or a specific industry.
Should cash flow fail, the lender looks to the assets of the business
and/or the ability of the comakers to support the debt. Commercial lenders
consider the Five C's of Credit, character, capacity, capital, condition
and collateral in making commercial credit decisions. Business Manager is
a system which the Bank uses to assist creditworthy businesses with
accounts receivable management. It is a hybrid program combining funding
and billing with cash management, monitoring and reporting functions. The
Bank purchases creditworthy receivables at full recourse with a flexible
reserve. The Bank may earn a discount, interest and/or fees. The Bank has
provided both direct and indirect leasing on a limited basis. The direct
leases are for specific equipment and may be open-end or closed-end.
Indirect leases are established by granting a lease line to a dealer, while
the Bank holds title and files a UCC lien for an assignment of the lease.
Each vehicle has its own amortization.
In addition to the underwriting guidelines followed for specific loan
types, the Bank has underwriting guidelines common to all loan types. With
regard to collateral, the Bank follows supervisory limits set forth in
Regulation H for transactions secured by real estate. Loans in excess of
these guidelines are reported to the Board of Directors on a monthly basis.
Loans not secured by real estate are analyzed on a loan by loan basis,
based on collateral type guidelines set forth in the loan policy.
Appraisal policies follow and comply with provisions outlined under Title
XI of FIRREA. All appraisals are done by
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outside independent appraisers approved by the Board of Directors. The
Bank, as a general rule, gets an appraisal on all real estate transactions
even when not required by Title XI. The Bank may occasionally rely on a
tax appraisal. Senior Loan Committee has the option of requiring equipment
appraisals. Approval procedures include loan authorities approved by the
Board of Directors for individual lenders and loan committees. Retail and
residential loans are centrally underwritten by their respective
departments. Business credits can be approved by the individual commercial
lender or taken to Loan Committee if it exceeds individual approval limits.
Senior Loan Committee approves aggregate loan commitments in excess of the
lender's authority up to $1 million. Executive Loan Committee approves
aggregate loan commitments in excess of $1 million up to the Bank's legal
lending limit. Loans to Directors and Executive Officers are approved by
the Board of Directors. Business loans within a lender's authority are
reported in the Senior Loan Committee minutes. Retail and residential real
estate loan transactions are also reported to Senior Loan Committee at
certain dollar limits. Exceptions and/or overrides are tracked and
reported to Senior Loan Committee.
The Loan Quality Review Committee meets on a monthly basis. The Committee
reviews Bank lending trends, the Past Due Report, the Watch List and
various other reports in order to monitor and maintain credit quality. The
Committee also reviews on a relationship basis, customers on the Bank's
Watch List and credits with aggregate commitments in excess of $1 million.
Revenues from loans accounted for 75%, 73%, and 71% of consolidated
revenues in 1995, 1994, and 1993, respectively. Revenues from interest and
dividends on investment and mortgage-backed securities accounted for 14%,
13%, and 14%, of consolidated revenues in 1995, 1994, and 1993,
respectively.
The Registrant formed the United Credit Life Insurance Company (United
Credit Life) to engage in the underwriting of credit life and credit
accident and health insurance directly related to the extension of credit
by the Bank to its customers. United Credit Life commenced business in
May, 1986. The insurance is currently written by Union Fidelity Life
Insurance Company; however, United Credit Life has entered into reinsurance
treaties with Union Fidelity Life Insurance Company whereby United Credit
Life assumes up to $25,000 of liability on each life policy.
In September, 1994, the Bank purchased four branch offices of the former
TransOhio Federal Savings Bank headquartered in Cleveland, Ohio, from the
Resolution Trust Corporation (RTC). Included in this purchase were $70.4
million in deposits and other liabilities assumed and $0.6 million in cash,
premises and equipment, and other assets. The intangible assets acquired in
the transaction amounted to $6.6 million.
The business of the Registrant is not seasonal to any material degree, nor
is it dependent upon a single or small group of customers whose loss would
result in a material adverse effect on the Registrant or its subsidiaries.
Regulation and Supervision
--------------------------
UNB Corp. is a bank holding company under the Bank Holding Company Act of
1956, as amended, which restricts the activities of the Corporation and the
acquisition by the Corporation of voting stock or assets of any bank,
savings association or other company. The Corporation is also subject to
the reporting requirements of, and examination and regulation by, the Board
of Governors of the Federal Reserve system (Federal Reserve Board).
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on transactions with
affiliates, including any loans
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or extensions of credit to the bank holding company or any of its
subsidiaries, investments in the stock or other securities thereof and the
taking of such stock or securities as collateral for loans to any borrower;
the issuance of guarantees, acceptances or letters of credit on behalf of
the bank holding company and its subsidiaries; purchases or sales of
securities or other assets; and the payment of money or furnishing of
services to the bank holding company and other subsidiaries. Banks and
bank holding companies are prohibited from engaging in certain tie-in
arrangements in connection with extensions of credit or provision of
property or services.
Bank holding companies are prohibited from acquiring direct or indirect
control of more than 5% of any class of voting stock or substantially all
of the assets of any bank holding company without the prior approval of the
Federal Reserve. In addition, acquisitions across state lines are limited
to acquiring banks in those states specifically authorizing such interstate
acquisitions. However, in September 1995, federal law permitted interstate
acquisitions of banks, if the acquired bank retains its separate charter.
As a national bank, United National Bank & Trust Co. is supervised and
regulated by the Comptroller of the Currency (Comptroller). The deposits
of the Bank are insured by the Bank Insurance Fund (BIF) and the deposits
assumed from savings and loans in 1994 and 1991 are insured by the Savings
Association Insurance Fund (SAIF) of the Federal Deposit Insurance
Corporation (FDIC). The Bank is subject to the applicable provisions of
the Federal Deposit Insurance Act. Various requirements and restrictions
under the laws of the United States and the State of Ohio affect the
operations of the Bank, including requirements to maintain reserves against
deposits, restrictions on the nature and amount of loans which may be made
and the interest which may be charged thereon, restrictions relating to
investments and other activities, limitations on credit exposure to
correspondent banks, limitations on activities based on capital and
surplus, limitations on payment of dividends, and limitations on branching.
Under current laws, the Bank may establish branch offices throughout the
State of Ohio. Pursuant to recent federal legislation, the Bank may branch
across state lines, if permitted by the law of the other state. In
addition, effective June 1997, such interstate branching by the Bank will
be authorized, unless the law of the other state specifically prohibits the
interstate branching authority granted by federal law.
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies. The risk-based capital guidelines include both a
definition of capital and a framework for calculating risk-based assets by
assigning assets and off-balance sheet items to broad risk categories. The
required minimum ratio of capital to risk-weighted assets (including
certain off-balance sheet items, such as standby letters of credit) was
10.00% at December 31, 1995 as disclosed in Note 14 of UNB Corp.'s 1995
Annual Report (See Exhibit 13). At least half of the total regulatory
capital is to be comprised of common stockholders' equity, including
retained earnings, noncumulative perpetual preferred stock, a limited
amount of cumulative perpetual preferred stock, and minority interests in
equity accounts of consolidated subsidiaries less goodwill (Tier 1
capital). The remainder (Tier 2 capital) may consist of, among other
things, mandatory convertible debt securities, a limited amount of
subordinated debt, other preferred stock and a limited amount of allowance
for loan and lease losses. The Federal Reserve Board has also imposed a
minimum leverage ratio (Tier 1 capital to total assets) of 4% for bank
holding companies that meet certain specified conditions, including no
operational, financial or supervisory deficiencies, and including those
having the highest regulatory (CAMEL) rating. The minimum leverage ratio
is 1.0-2.0% higher for other holding companies based on their
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particular circumstances and risk profiles and those experiencing or
anticipating significant growth. National banks are subject to similar
capital requirements adopted by the Comptroller.
UNB Corp. and its subsidiaries currently satisfy all regulatory capital
requirements. Failure to meet the capital guidelines could subject a
banking institution to a variety of enforcement remedies available to
federal regulatory authorities, including dividend restrictions and the
termination of deposit insurance by the FDIC.
Under an outstanding proposal of the Comptroller and the FDIC, the Bank may
be required to have additional capital if its interest rate risk exposure
exceeds acceptable levels provided for in the regulation. In addition,
those regulators have established regulations governing prompt corrective
action to resolve capital deficient banks. Under these regulations, banks
which become undercapitalized become subject to mandatory regulatory
scrutiny and limitations, which increase as capital continues to decrease.
Such banks are also required to file capital plans with their primary
federal regulator, and their holding companies must guarantee the capital
shortfall up to 5% of the assets of the capital deficient bank at the time
it becomes undercapitalized.
The ability of UNB Corp. to obtain funds for the payment of dividends and
for other cash requirements is largely dependent on the amount of dividends
which may be declared by the Bank. However, the Federal Reserve expects
UNB Corp. to serve as a source of strength to its subsidiaries, which may
require it to retain capital for further investment in the subsidiaries,
rather than for dividends for shareholders of the Corporation. Generally,
United National Bank & Trust Co. must have the approval of its regulatory
authority if a dividend in any year would cause the total dividends for
that year to exceed the sum of current year's net profits and retained net
profits for the preceding two years, less required transfers to surplus. A
national bank may not pay a dividend in an amount greater than its net
profits then on hand after deducting its losses and bad debts or, if less
than 1/10 of net profits for the preceding six months, for a quarterly or
semiannual dividend, or the preceding year for an annual dividend, was
transferred to surplus. The Bank may not pay dividends to the Corporation
if, after such payment, it would fail to meet the required minimum levels
under the risk-based capital guidelines and the minimum leverage ratio
requirements. Payment of dividends by the Bank may be restricted at any
time at the discretion of the regulatory authorities, if they deem such
dividends to constitute an unsafe and/or unsound banking practice or if
necessary to maintain adequate capital for the bank. These provisions
could have the effect of limiting the Corporation's ability to pay
dividends on its outstanding common shares.
Management is not aware of any recommendations by regulatory authorities
which, if they were to be implemented, would have a material effect on the
Registrant.
Government Monetary Policies
----------------------------
The earnings and growth of UNB Corp. are affected not only by general
economic conditions, but also by the fiscal and monetary policies of the
federal government and its agencies and regulatory authorities,
particularly the Federal Reserve Board. Its policies influence the growth
and mix of bank loans, investments and deposits and the interest rates
earned and paid thereon, and thus have an effect on earnings of the
Corporation.
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Due to the changing conditions in the economy and the activities of
monetary and fiscal authorities, no predictions can be made regarding
future changes in interest rates, credit availability or deposit
levels.
Competition
-----------
The Bank competes with nine state and national banks located in Stark and
Summit Counties as well as an additional four in Summit County alone. The
Bank also competes with a large number of other financial institutions,
such as savings and loan associations, savings banks, insurance companies,
consumer finance companies, credit unions, mortgage banking companies, and
commercial finance and leasing companies, for deposits, loans and financial
services business. Money market mutual funds, brokerage houses, and
similar organizations provide many of the financial services offered by the
Bank. Many competitors have substantially greater resources than the Bank.
In the opinion of management, the principal methods of competition are the
rates of interest charged for loans, the rates of interest paid for
deposits and borrowing, the fees charged for services, the availability and
quality of services provided and the convenience of its branch locations.
Effects of Compliance with Environmental Regulations
----------------------------------------------------
Compliance with Federal, State and local provisions regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment has not had a material effect upon the
capital expenditures, earnings or competitive position of the Registrant or
its subsidiaries. The Registrant anticipates, based on the nature of its
business, that it will have no material capital expenditures for the
purpose of protecting the environment in the foreseeable future. From time
to time the Bank may be required to make capital expenditures for
environmental control facilities related to properties acquired through
foreclosure proceedings. Currently the Bank owns such a parcel of OREO
property in the northwest quadrant of Stark County. The Bank continues to
negotiate with a large national petroleum company, owner of the facility at
the date it was taken out of service and also the party responsible for the
cleanup according to the State of Ohio's Bureau of Underground Storage
Tanks (BUSTER) regulations. Environmental assessments by the Bank and the
petroleum company have been filed with the State agency, which has
requested further validation of the Bank's assessment. Upon completion of
the second assessment report, the Bank will ask for another ruling by the
State. The outcome will determine whether the Bank can proceed with the
marketing of the property for sale and/or any legal action against the
national oil company to remediate the contamination of the property. The
estimated costs, should they become the responsibility of the Bank, are not
material to the business or financial condition of the Registrant and have
been set up as an allowance against the property's value on the
Registrant's Consolidated Balance Sheet.
Employees
---------
As of December 31, 1995, UNB Corp. and its subsidiaries had 263 full-time
employees and 65 part-time employees. UNB Corp. and its subsidiaries are
not a party to any collective bargaining agreement and management considers
its relationship with its employees to be good.
d. Financial Information About Foreign and Domestic Operations and Export
----------------------------------------------------------------------
Sales
-----
The Registrant and its subsidiaries do not have any offices located in
foreign countries and they have no foreign assets, liabilities, or related
income and expense for the years presented.
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e. Statistical Disclosure
----------------------
The following section contains certain financial disclosures related to the
Registrant as required under the Securities and Exchange Commission's
Industry Guide 3, "Statistical Disclosures by Bank Holding Companies", or a
specific reference as to the location of the required disclosures in the
Registrant's 1995 Annual Report to Shareholders, portions of which are
incorporated in this Form 10-K by reference.
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UNB CORP.'S STATISTICAL INFORMATION
-----------------------------------
I. DISTRIBUTION OF ASSETS, LIABILITIES, AND SHAREHOLDERS' EQUITY; INTEREST
-----------------------------------------------------------------------
RATES AND INTEREST DIFFERENTIAL
-------------------------------
A. & B. The average balance sheet information and the related analysis of net
interest earnings for the years ending December 31, 1995, 1994, and
1993 are included in Table 4 - "Average Balance Sheet and Related
Yields", within Management's Discussion and Analysis of Financial
Condition and Results of Operations found on page 31 of the
Registrant's 1995 Annual Report to Shareholders and is incorporated
into this Item I by reference.
All interest is reported on a fully taxable equivalent basis using a
marginal tax rate of 35%. Nonaccruing loans, for the purpose of the
computations, are included in the daily average loan amounts outstanding.
Loan fees in the amount of $2,901,438 are included in interest on loans.
C. Tables setting forth the effect of volume and rate changes on interest
income and expense for the years ended December 31, 1995 and 1994 are
included in Table 2 - "Changes in Net Interest Differential - Rate/Volume
Analysis", within Management's Discussion and Analysis of Financial
Condition and Results of Operations found on Page 29 of the Registrant's
1995 Annual Report to Shareholders and is incorporated into this Item I by
reference. For purposes of these tables, changes in interest due to volume
and rate were determined as follows:
Volume Variance - change in volume multiplied by the previous year's
rate.
Rate Variance - change in rate multiplied by the previous year's
volume.
Rate/Volume Variance - change in volume multiplied by the change in
rate.
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.
II. INVESTMENT PORTFOLIO
--------------------
A. Investment Securities
The carrying value of investment and mortgage-backed securities at the dates
indicated are summarized below:
<TABLE>
<CAPTION>
December 31,
(Dollars in thousands) 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
U.S. Treasury securities and securities
of U.S. Government agencies and corporations $ 53,991 $ 63,070 $ 44,619
Obligations of states and political subdivisions 1,238 3,439 3,126
Mortgage-backed securities 63,087 61,586 42,472
Other securities 9,900 11,414 9,159
------- ------- -------
Total investment and mortgage-backed securities $128,216 $139,509 $ 99,376
======= ======= ========
</TABLE>
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B. The carrying value and weighted average interest yield for each investment
category listed in Part A at December 31, 1995 which are due (1) in one
year or less, (2) after one year through five years, (3) after five years
through ten years, and (4) after ten years are presented in Note 3 -
Securities, found on page 18 in the Notes to Consolidated Financial
Statements in the Registrant's 1995 Annual Report to Shareholders and is
incorporated herein by reference. The weighted average yields have been
computed by dividing the total interest income adjusted for amortization of
premiums or accretion of discount over the life of the security by the par
value of the securities outstanding. The weighted average yields of tax
exempt obligations are presented on an after tax basis.
C. Excluding those holdings of the investment portfolio in U.S. Treasury
Securities and other agencies and corporations of the U.S. Government,
there were no investments in securities of any one issuer which exceeded
10% of the consolidated shareholder's equity of the Registrant at December
31, 1995.
III. LOAN PORTFOLIO
--------------
A. Types of Loans - Total loans on the balance sheet are comprised of the
following classifications at December 31,
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial $ 64,811 $ 61,094 $ 61,209 $ 69,935 $ 66,835
Commercial real estate 60,478 53,252 46,723 n/a n/a
Residential real estate 172,283 115,354 81,495 110,957 128,645
Consumer loans 221,158 182,822 161,041 140,046 106,002
------- ------- ------- ------- -------
Total loans $518,730 $412,522 $350,468 $320,938 $301,482
======= ======= ======= ======= =======
</TABLE>
The dollar amounts of loans contained in the Commercial real estate
category are not available for the years ending December 31, 1992 and 1991.
Balances for this category of loans are included in the Commercial and
Residential real estate loan categories for those years.
B. Maturities and Sensitivities of Loans to Changes in Interest Rates - The
following is a schedule of contractual maturities and repayments excluding
residential real estate mortgage and installment loans, as of December 31,
1995:
<TABLE>
<CAPTION>
(Dollars in thousands) Commercial and
Commercial Real Estate
------------------------
<S> <C>
Due in one year or less $ 27,000
Due after one year, but within five years 35,824
Due after five years 62,465
--------
Total $125,289
=======
</TABLE>
The following is a schedule of fixed rate and variable rate commercial and
commercial real estate loans due after one year (variable rate loans are
those loans with floating or adjustable interest rates):
<TABLE>
<CAPTION>
(Dollars in thousands) Fixed Rate Variable Rate
---------- -------------
<S> <C> <C>
Total commercial, and commercial real estate
loans due after one year $13,062 $85,227
</TABLE>
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C. Risk Elements
1. Nonaccrual, Past Due and Restructured Loans - The following schedule
summarizes nonaccrual, past due, and restructured loans:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994 1993 1992 1991
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 1,066 $ 1,039 $ 605 $ 29 $ 2,094
Accrual loans past due 90 days 254 19 40 200 449
Restructured loans 212 375 689 530 3
------ ------ ------ ------- --------
Total 1,532 1,433 1,334 759 2,546
Potential problem loans 1,075 5,386 5,521 2,855 2,426
----- ----- ------ ----- -----
Total $2,607 $6,819 $6,855 $ 3,614 $ 4,972
====== ====== ====== ======= =======
</TABLE>
For the year ended December 31, 1995, $17,799 of interest income would
have been earned under the original terms of those loans classified as
nonaccrual. The policy for placing loans on nonaccrual status is to
cease accruing interest on loans when management believes that the
collection of interest is doubtful, or when loans are past due
as to principal or interest ninety days or more. The loans must be
brought current and kept current for six consecutive months before
being removed from nonaccrual status. When loans are charged-off, any
accrued interest recorded in the current fiscal year is charged
against interest income. The remaining balance is treated as a loan
charge-off.
The Corporation adopted SFAS No. 114 and SFAS No. 118 effective
January 1, 1995. At December 31, 1995, loans totaling $566 thousand
were classified as impaired. All loans classified as impaired at
December 31, 1995 were also classified as nonaccrual loans, and
therefore the adoption of SFAS No. 114 and SFAS NO. 118 had no effect
on the comparability of non-performing assets at December 31, 1995 to
prior periods.
2. Potential Problem Loans - As shown in the table above, at December
31, 1995, there are approximately $1.1 million of loans not otherwise
identified which are included on management's watch list.
Management's watch list includes both loans which management has some
doubt as to the borrowers' ability to comply with the present
repayment terms and loans which management is actively monitoring due
to changes in the borrowers financial condition. These loans and
their potential loss exposure have been considered in management's
analysis of the adequacy of the allowance for loan losses.
3. Foreign Outstandings - There were no foreign outstandings at December
31, 1995, 1994, or 1993.
4. Loan Concentrations - As of December 31, 1995, indirect installment
loans comprise 33.4% of loans. The dealer network from which the
indirect loans are generated included 162 active relationships at
December 31, 1995, the largest of which was responsible for 7% of
total indirect volume for 1995. There are no additional
concentrations of loans greater than 10% of total loans which are not
otherwise disclosed as a category of loans pursuant to Item III. A.
above. Also refer to the Note 1, Concentrations of Credit Risk,
found on Page 16 of the 1995 Annual Report incorporated herein by
reference.
5. No material amount of loans that have been classified by regulatory
examiners as loss, substandard, doubtful, or special mention have
been excluded from the amounts disclosed as nonaccrual, past due 90
days or more, restructured, or potential problem loans.
12
<PAGE> 13
D. Other Interest Bearing Assets - As of December 31, 1995, there are no
other interest bearing assets that would be required to be disclosed
under Item III C.1 or 2 if such assets were loans. The Registrant
had Other Real Estate Owned at December 31, 1995, in the amount of
$325,000.
IV. SUMMARY OF LOAN LOSS EXPERIENCE
-------------------------------
A. The following schedule presents an analysis of the allowance for loan
losses, average loan data, and related ratios for the years ended December
31,
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average loans outstanding during the
period (net of unearned income) $ 464,314 $ 385,619 $ 339,468 $ 310,562 $ 266,011
========== ========== ========= ========== =========
Allowance for loan losses
at beginning of year $ 6,348 $ 6,056 $ 4,355 $ 3,221 $ 2,972
Loans charged off:
Commercial 26 13 37 518 2,270
Commercial real estate 20 52 11 n/a n/a
Residential real estate 71 3 11 37 7
Consumer loans 1,441 1,095 822 1,313 747
--------- --------- -------- -------- --------
Total charge-offs 1,558 1,163 881 1,868 3,024
Recoveries:
Commercial 29 52 69 187 111
Commercial real estate 26 7 - n/a n/a
Residential real estate 71 11 7 - -
Consumer loans 576 365 311 315 88
-------- --------- --------- ----------- ---------
Total recoveries 702 435 387 502 199
-------- --------- --------- --------- --------
Net charge-offs 856 728 494 1,366 2,825
Additions from loans acquired - - - - 387
Addition to provision for loan
loss charged to operations 1,750 1,020 2,195 2,500 2,687
------- -------- -------- -------- -------
Allowance for loan losses at end of year $ 7,242 $ 6,348 $ 6,056 $ 4,355 $ 3,221
======== ======== ======= ======== =======
Ratio of net charge-offs to average
loans, net of unearned income 0.18% 0.19% 0.15% 0.44% 1.06%
======= ======= ======= ======= =======
</TABLE>
The allowance for loan losses balance and the provision charged to expense
are judgmentally determined by management based upon the periodic review
of the loan portfolio, an analysis of impaired loans, past loan loss
experience, economic conditions, anticipated loan portfolio growth, and
various other circumstances which are subject to change over time. In
making this judgment, management reviews selected large loans as well as
delinquent loans, nonaccrual loans, problem loans, and loans to industries
experiencing economic difficulties. The collectability of these loans is
evaluated after considering the current financial position of the
borrower, the estimated market value of the collateral, guarantees, and
the Company's collateral position versus other creditors. Judgments,
which are necessarily subjective, as to the probability of loss and the
amount of such loss, are formed on these loans, as well as other loans in
the aggregate.
13
<PAGE> 14
B. The following schedule is a breakdown of the allowance for loan losses
allocated by type of loan and related ratios:
<TABLE>
<CAPTION>
Allocation of the Allowance for Loan Losses
----------------------------------------------------------------------------
Percentage Percentage
of Loans of Loans
in Each in Each
Allowance Category to Allowance Category to
Amount Total Loans Amount Total Loans
------ ----------- ------ -----------
(Dollars in thousands)
December 31, 1995 December 31, 1994
------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
Commercial $2,160 12.5% $1,660 14.9%
Commercial real estate 782 11.7 840 13.0
Residential real estate 129 33.2 1,257 28.2
Consumer 2,174 42.6 2,129 43.9
Unallocated 1,997 -- 462 --
------ ------ ------ -----
Total $7,242 100.0% $6,348 100.0%
====== ====== ====== =====
December 31, 1993 December 31, 1992
--------------------------------- ------------------------------------
Commercial $1,638 17.5% $ 877 21.8%
Commercial real estate 701 13.3 N/A N/A
Residential real estate 1,230 23.2 953 34.6
Consumer 1,412 46.0 1,490 43.6
Unallocated 1,075 - 1,035 -
------ ------ ------ -----
Total $6,056 100.0% $4,355 100.0%
====== ====== ====== =====
December 31, 1991
--------------------------------
Commercial $1,526 22.2%
Commercial real estate N/A N/A
Residential real estate 152 42.7
Consumer 834 35.1
Unallocated 709 -
------ ------
Total $3,221 100.0%
====== ======
</TABLE>
A comparison of allocations of the allowance for loan losses between
December 31, 1995 and prior year ends shows a significant shift in the
dollars allocated to each of the four loan categories. During the third
quarter of 1995, a change in the methodology used to determine the
allocation of the allowance for loan losses among the various loan
categories was approved by the Executive Committee of the Board of
Directors and instituted by management. Management will continue to use
the same three methodologies it has historically used to determine the
allocation of the allowance, however, it will select the single
methodology that results in the highest aggregate calculation for
allocation of the allowance among the various loan categories, and not the
highest specific allocation for each loan category from among the three
methodologies. Management believes this change reflects a more reliable
analysis of the Bank's risk of loan loss.
At December 31, 1995, $188 thousand was specifically allocated to
commercial loans in connection with the adoption of SFAS No. 114. Because
management's analysis of problem loans would have provided a similar
allocation prior to
14
<PAGE> 15
adopting SFAS No. 114, the adoption of SFAS No. 114 had no impact on the
comparability of the December 31, 1995 allowance for loan loss allocation
to prior periods.
While management's periodic analysis of the adequacy of the allowance for
loan loss may allocate portions of the allowance for specific problem loan
situations, the entire allowance is available for any loan charge-offs
that occur.
V. DEPOSITS
--------
The following is a schedule of average deposit amounts and average rates
paid on each category for the periods included:
<TABLE>
<CAPTION>
(Dollars in thousands) Years Ended December 31,
-------------------------------------------------------------------
1995 1994 1993
---- ---- ----
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing
demand deposits $ 66,329 - $ 58,788 - $ 52,342 -
Interest bearing
demand deposits 68,361 1.92% 66,667 1.91% 63,118 2.31%
Savings 151,229 2.63 151,768 2.47 144,707 2.82
Certificates and other
time deposits 216,187 5.67 149,771 4.40 144,459 4.38
------- ------- -------
$502,106 $426,994 $404,626
======= ======= =======
</TABLE>
The following table summarizes time deposits issued in amounts of $100,000
or more as of December 31, 1995 by time remaining until maturity:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Maturing in:
Under 3 months $ 11,178
Over 3 to 6 months 9,931
Over 6 to 12 months 5,967
Over 12 months 8,303
-------
$ 35,379
=======
</TABLE>
VI. RETURN ON EQUITY AND ASSETS
---------------------------
Information required by this section is incorporated by reference to the
information appearing in the table under the caption "Five-Year Summary of
Selected Data" located on Page 38 of the Registrant's 1995 Annual Report
to Shareholders.
VII. SHORT-TERM BORROWING
--------------------
Information required by this section is incorporated by reference to Note
8 - "Short-term Borrowing" on Page 20 of the 1995 Annual Report to
Shareholders incorporated herein by reference.
15
<PAGE> 16
Item 2 - Properties
-------------------
The Bank's main office in the United Bank Building at 220 Market Avenue
South, Canton, Ohio, housing its executive offices and the Corporation's
executive offices, is leased through 2003 with five three-year options
extending through 2018. The properties occupied by fourteen of the Bank's
branches are owned by the Bank, while properties occupied by its remaining
six branches are leased with various expiration dates running through 2002
with renewal options. Property has been purchased to consolidate the two
branch offices in Hartville, Ohio, into a new facility with construction
to begin the first quarter of 1996.
The Bank's Operations Center, at 624 Market Avenue North, Canton, Ohio, is
owned by the Bank which leases approximately 13,000 square feet of this
facility to a law firm. There is no mortgage debt owing on any of the
above property owned by the Bank. A listing of all branch offices is
located under the caption "Banking Centers" found on page 8 of the
Registrant's 1995 Annual Report to Shareholders, and is incorporated
herein by reference. With the new Hartville facility and scheduled
renovations and enhancements to the Bank's Belden Village, Wales Square
and Beach City offices as well as its Operations Center, management
considers its properties to be satisfactory for its current operations.
Item 3 - Legal Proceedings
- --------------------------
The Company is subject to various pending and threatened lawsuits in which
claims for monetary damages are asserted in the ordinary course of
business. While any litigation involves an element of uncertainty, in the
opinion of management, liabilities, if any, arising from such litigation
or threat thereof will not have a material effect on the Company.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
During the fourth quarter of the year ended December 31, 1995, there were
no matters submitted to a vote of security holders.
PART II
Item 5 - Market Price of and Dividends on the Common Equity and Related
- -----------------------------------------------------------------------
Shareholder Matters
-------------------
The information required under this item is incorporated by reference to
the information appearing under the caption "Market Price Ranges for
Common Stock" located on Page 37 of the Registrant's 1995 Annual Report to
Shareholders. In addition, attention is directed to the caption "Capital
Resources" within Management's Discussion and Analysis located on page 33
of the Registrant's 1995 Annual Report to Shareholders and to Note 14
"Commitments and Contingencies" located on page 23 therein. Such
information is incorporated herein by reference.
Item 6 - Selected Financial Data
- --------------------------------
The information required under this item is incorporated by reference to
the information appearing under the caption "Five Year Summary of Selected
Data"
16
<PAGE> 17
located on page 38 of the 1995 Annual Report to Shareholders. See Note 1
under the caption "Allowance for Loan Losses" on page 15 and Note 4 -
Loans on page 19 of the 1995 Annual Report to Shareholders, incorporated
herein by reference for a discussion of the impact of the adoption on
January 1, 1995 of SFAS No. 114 and No. 118, "Accounting by Creditors for
Impairment of a Loan". See Note 2 on page 17 of the 1995 Annual Report to
Shareholders for a discussion of the impact on the Registrant of the
acquisition of certain assets and assumption of certain deposits and other
liabilities of the former TransOhio Federal Savings Bank from the
Resolution Trust Company in 1994. See Note 1 under the caption "Federal
Income Taxes" on page 16 of the Annual Report to Shareholders for a
discussion of the impact of adopting SFAS No. 109, "Accounting for Income
Taxes", on the Registrant's Consolidated Statement of Income in 1993.
Item 7 - Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
---------------------
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" appears on pages 27 through 36 of the Registrant's 1995
Annual Report to Shareholders and is incorporated herein by reference.
Item 8 - Financial Statements and Supplementary Financial Data
- --------------------------------------------------------------
The Registrant's Report of Independent Auditors and Consolidated Financial
Statements are listed below and are incorporated herein by reference to
UNB Corp.'s 1995 Annual Report to Shareholders (Exhibit 13), pages 10
through 26. The supplementary financial information specified by Item 302
of Regulation S-K, selected quarterly financial data, is included in Note
17 to the consolidated financial statements found on page 26.
Report of Independent Auditors
Consolidated Balance Sheets
December 31, 1995 and 1994
Consolidated Statements of Income
For the three years ended December 31, 1995
Consolidated Statements of Changes in Shareholders' Equity
For the three years ended December 31, 1995
Consolidated Statements of Cash Flows
For the three years ended December 31, 1995
Notes to Consolidated Financial Statements
Item 9 - Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
--------------------
Crowe, Chizek and Company LLP, Certified Public Accountants, served as
independent public accountants for the purpose of auditing the
Corporation's Annual Consolidated Financial Statements and for the
preparation of consolidated tax returns for the fiscal years ending
December 31, 1995, 1994, and 1993. The appointment of independent public
accountants is approved annually by the Board of Directors. For the year
1996, the Board of Directors has again authorized the engagement of Crowe,
Chizek and Company LLP as independent auditors.
17
<PAGE> 18
PART III
Information relating to the following items is included in the Registrant's
definitive proxy statement for the annual meeting of shareholders to be held
Tuesday, April 16, 1996, ("1995 Proxy Statement") filed with the Commission
pursuant to Section 14(A) of the Securities Exchange Act of 1934 and is
incorporated by reference into this Form 10-K Annual Report (Exhibit 22).
Item 10 - Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Item 11 - Executive Compensation
- --------------------------------
Item 12 - Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
Item 13 - Certain Relationships and Related Transactions
- --------------------------------------------------------
PART IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
- --------------------------------------------------------------------------
A. Financial Statement Schedules
-----------------------------
1. Financial Statements
--------------------
The following consolidated financial statements of the Registrant
appear in the 1995 Annual Report to Shareholders (Exhibit 13) on the
pages referenced and are specifically incorporated by reference under
Item 8 of this Form 10-K:
<TABLE>
<CAPTION>
Annual Report
Page Numbers
-------------
<S> <C>
Report of Independent Auditors 10
Consolidated Balance Sheets, December 31, 1995 and 1994 11
Consolidated Statements of Income,
For the three years ended December 31, 1995 12
Consolidated Statements of Changes in Shareholders' Equity,
For the three years ended December 31, 1995 13
Consolidated Statements of Cash Flows,
For the three years ended December 31, 1995 14
Notes to Consolidated Financial Statements 15-26
</TABLE>
2. Financial Statement Schedules
-----------------------------
Financial statement schedules are omitted as they are not required or
are not applicable, or the required information is included in the
financial statements found in the Registant's 1995 Annual Report to
Shareholders.
18
<PAGE> 19
3. Exhibits
--------
Reference is made to the Exhibit Index which is found on Page 22 of
this Form 10-K.
B. Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the last quarter of the year
ending December 31, 1995.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
UNB Corp.
By /s/ Robert L. Mang
----------------------------------
Robert L. Mang, President and CEO
Date March 25, 1996
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Robert L. Mang
- --------------------------------- President, CEO March 25, 1996
Robert L. Mang and Director
(Principal Executive Officer)
/s/ James J. Pennetti
- --------------------------------- Vice President March 14, 1996
James J. Pennetti and Treasurer
(Principal Financial
and Accounting Officer)
/s/ Donald W. Schneider
- --------------------------------- Chairman of March 14, 1996
Donald W. Schneider the Board
/s/ E. Lang D'Atri
- --------------------------------- Director March 14, 1996
E. Lang D'Atri
/s/ Edgar W. Jones, Jr.
- --------------------------------- Director March 14, 1996
Edgar W. Jones, Jr.
</TABLE>
20
<PAGE> 21
SIGNATURES (continued)
UNB Corp.
<TABLE>
<S> <C> <C>
__________________________________ Director ___________________
James A. O'Donnell
/s/ John D. Regula March 14, 1996
__________________________________ Director ___________________
John D. Regula
/s/ James P. Rodman March 14, 1996
__________________________________ Director ___________________
James P. Rodman
</TABLE>
21
<PAGE> 22
EXHIBIT INDEX
--------------
<TABLE>
<CAPTION>
Exhibit Number Exhibit Description
- -------------- ---------------------------------------------------------------------------------------------
<S> <C>
11 Statement regarding Computation of Per Share Earnings (included in Note 1 to the Consolidated
Financial Statements, 1995 Annual Report to Shareholders under the caption "Earnings and
Dividends Declared Per Share").
13 Annual Report to Shareholders of UNB Corp. for the Fiscal Year Ended December 31, 1995
21 Subsidiaries of the Registrant (exhibit is filed herewith).
22 Proxy Statement of UNB Corp. dated February 23, 1996, for the Annual Meeting of Shareholders
on April 16, 1996.
27 Financial Data Schedule (submitted as part of electronic filing only)
</TABLE>
22
<PAGE> 1
Exhibit 13
<PAGE> 2
UNB CORP.
ANNUAL REPORT 1995
<PAGE> 3
SUMMARY OF SELECTED DATA
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FOR THE YEAR 1995 1994 % OF CHANGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Interest Income $49,758,657 $37,699,575 31.99%
Total Interest Expense 21,805,511 13,508,156 61.42%
Net Income 7,379,466 6,628,089 11.34%
AT YEAR END
- -----------------------------------------------------------------------------------------------
Assets $699,643,837 $601,083,685 16.40%
Deposits 547,187,160 486,770,515 12.41%
Total Net Loans 511,487,786 406,174,009 25.93%
Investment Securities 128,216,265 139,508,976 -8.09%
Shareholders' Equity 65,326,883 58,640,442 11.40%
PER COMMON SHARE*
- -----------------------------------------------------------------------------------------------
Net Income $2.52 $2.32 8.62%
Cash Dividends Paid 1.05 0.96 9.37%
Book Value 22.73 20.43 11.26%
PERFORMANCE RATIOS
- -----------------------------------------------------------------------------------------------
Return on Assets 1.14% 1.24% -8.06%
Total Risk-Based Capital 12.67% 13.65% -7.18%
Capital Leverage 8.26% 8.73% -5.38%
Allowance for Loan Losses/Total Loans 1.40% 1.54% -9.09%
<FN>
*Per share data has been adjusted for any stock dividends and splits.
</TABLE>
<TABLE>
<CAPTION>
UNB CORP. AT YEAR END
COMMON STOCK 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Market Value - Bid $44.00 $38.50 $29.00 $24.00
Market-to-Book Premium 193.6% 188.4% 147.5% 139.9%
</TABLE>
TABLE OF CONTENTS
President's Message............................... 1
Board of Directors................................ 5
Community Advisory Boards......................... 6
Management........................................ 7
Banking Centers................................... 8
Report of Management ............................. 9
Report of Independent Auditors.................... 10
Consolidated Financial Statements................. 11
Notes to Consolidated Financial Statements ....... 15
Management's Discussion and Analysis.............. 27
Market Price Ranges for Common Stock.............. 37
Five Year Summary of Selected Data................ 38
<PAGE> 4
1
PRESIDENT'S
MESSAGE
To Our Shareholders:
- -------------------------------------------------------------------------------
Mergers and acquisitions seemed to be one of the activities that was prominent
in our industry in 1995. Around the United States and even in our own backyard,
banks purchased other banks in attempts to grow and increase profitability -
often at the expense of their customers, employees and communities. However,
United Bank's focus during the year was continued enhancement of products,
customer service and increasing shareholder value while remaining a locally
owned and independent community bank. It is my pleasure to present the
financial and other highlights that illustrate the success we achieved in 1995.
Net income for the year reached a record high of $7.38 million, up 11.3
percent over 1994. Total assets for UNB Corp. at year-end were nearly $700
million, an increase of 16.4 percent over year-end 1994. Cash dividends were
$1.05 per share in 1995, representing a 9.4 percent increase over a year ago.
At year-end, the market value of UNB Corp. stock had increased to $44.00 per
share, a 14.3 percent increase over the previous year-end. This marked the 21st
consecutive year-end at which the value of UNB Corp. stock was greater than the
previous year-end. The total return to shareholders in 1995 including dividends
and appreciation was 17.3 percent. The cumulative three year return was an
impressive 78.6 percent.
Interest rates increased in early 1995 and then began to moderate in the
fourth quarter. Due to favorable interest rates and excellent performance by
all lending areas, the total loan portfolio of United Bank grew to $519
million, an increase of $106 million or 25.7 percent over 1994. The consumer
loan portfolio accounted for $221 million of total loans in 1995, an increase
of 21.1 percent over 1994. Much of this growth can be attributed to our success
in indirect lending through automobile, boat and recreational vehicle dealers.
United Bank continued to expand the geographic area where indirect loans were
made as well as increasing the number of dealer relationships.
The Bank's existing home equity loan product was revised and improved in 1995.
The new product, named Equity100(TM), enables homeowners to borrow up to 100
percent of the equity they have in their home. In addition, Equity100 features
very attractive tiered interest rates indexed to the Prime Rate, and a lower
minimum monthly payment amount. With interest rates expected to fall, the Bank
anticipates increased activity in the use of Equity100 in 1996.
United Bank was Stark County's leading mortgage lender in 1995 as reported by
the Realty Industry's PACE report. The mortgage department made 841 loans in
1995 to lead all other financial institutions and mortgage companies that
originated loans within Stark County. Mortgage loan originations totaled $80.0
million in 1995. United Bank's Mortgage Assistance Program (MAP), which
provides mortgage assistance for low-to-moderate income families in the
communities we serve, reached a new record of $1.9 million. I am pleased to
report that United Bank's MAP loan program assisted 51 families who might not
have been able to afford housing, move into their own homes last year.
[FIGURE]
Robert L. Mang
President and Chief Executive Officer
<PAGE> 5
2
- -------------------------------------------------------------------------------
The Business Manager lending product was launched in 1995. Designed to provide
immediate cash flow for businesses by purchasing their accounts receivables,
Business Manager loan volume has met expectations to date. Aggressive growth
goals for 1996 will be supported by enhanced marketing efforts.
To help support United Bank's initiative to be the primary bank for new and
growing businesses in Stark County, a new low-documentation loan program was
created in 1995. Designed for locally owned businesses that need faster
turnaround on applications for term loans and lines of credit, this new product
features the "Rapid Application," a smaller, easy-to-complete document that can
be faxed to a commercial lender or business development officer for quick
review and approval. This new product will be marketed actively in 1996 through
direct mail and direct sales efforts.
United Bank's nonperforming loans and delinquencies continue to compare very
favorably with financial institutions in its peer group. Nonperforming loans
for 1995 were $1.3 million compared to $1.1 million at year-end 1994. Total
loan delinquency was 1.24 percent compared to 1.93 percent for our peer group.
The Bank's excellent record on nonperforming loans can be attributed to
adherence to strict lending guidelines and enhanced management reporting
capabilities and monitoring.
United Bank will continue to enhance revenues by increasing non-interest
income in 1996. This includes aggressively pursuing income from the sales of
mutual funds, annuities, and life insurance products. In 1995, United Bank
joined with a third-party provider to sell these products in our bank lobbies.
Customers will know the new company as "Investors MarketPlace" and will be
served by Account Executives and United Bank employees.
Perhaps no where else have the consolidations by regional banks had a greater
impact on customers than in the area of Personal Trust services. Our
competitors continue to move their Trust officers and operations out of the
county. United Bank's Trust Department now remains the only locally owned and
managed Trust company in Stark County. The challenge for us will be to
familiarize local Trust clients with the many benefits and advantages derived
from our local operation. For example, our Trust Department manages individual
portfolios for each client based on investment goals established through
personal consultation with the client. No common pooled funds or bank-operated
mutual funds are used. This gives clients more control over their accounts. Our
Trust Department provides this customized service at a fraction of the cost
other Trust companies charge to deliver standard mutual fund investments with
average returns. It is our goal to continue to provide good local management of
investment accounts, living trusts, estate planning and estate administration,
charitable trusts, and employee benefit planning and administration.
Predictions for the banking industry have stated that of the thousands of
banks, savings and loans, and credit unions in business today, only a few
hundred will survive the merger and acquisition activity and be in business in
the next 10 years. To help chart a successful course to the turn of the
century, United Bank's Management team and Board of Directors spent several
weeks in 1995 creating a Vision Statement called "Vision 2000" and a long range
Strategic Plan to guide us through these critical years.
VISION 2000
OUR VISION IS THAT UNITED NATIONAL BANK & TRUST COMPANY SHALL BE:
* A LOCALLY OWNED AND OPERATED
COMMUNITY BANK PROVIDING FINANCIAL PRODUCTS AND SERVICES TO THE
COMMUNITIES IT SERVES;
* A ONE BILLION DOLLAR FINANCIAL SERVICES COMPANY WITH AN ROE OF
NO LESS THAN 17.5%, AN ROA OF 1.3% OR GREATER, AND A CAPITAL RATIO OF
AT LEAST 7.5%;
* AN EFFICIENT AND PRODUCTIVE ORGANIZATION WITH AN EFFICIENCY RATIO
BELOW 50%;
* A TECHNOLOGY-DRIVEN ORGANIZATION WITH A DIVERSIFIED, HIGHLY
SKILLED WORK FORCE; AND
* AN ORGANIZATION THAT IS LED BY VISIONARY DIRECTORS AND MANAGERS
WORKING IN CONCERT WITH EACH OTHER TO ACHIEVE COMMON STRATEGIC GOALS.
The long range Strategic Plan sets specific Return On Equity (ROE), Return On
Assets (ROA), and efficiency ratio goals that will be necessary to meet in
order to remain a profitable and independent bank in 2000 and sets forth
general plans to help the Bank successfully
<PAGE> 6
3
- --------------------------------------------------------------------------------
reach these goals. The long range Strategic Plan will be reviewed annually and
supported by yearly strategic plans to help the Bank reach its annual goals on
the way to the year 2000. As part of Vision 2000 and the 1996 Strategic Plan,
the Bank is committed to remaining an independent community bank. It is
Management's belief that the best return on our shareholders' investment will
be gained by maintaining United Bank as a locally owned, independent bank.
In the 1994 Annual Report, we described a new bank-wide, performance-based
incentive plan for all employees. The United Bank "Stakeholder Incentive Plan"
was implemented to create a "team-oriented environment which promotes and
rewards employee initiative, development and contribution." This program is
based on meeting certain key performance levels which can be identified with
specific profit goals. In 1995, the Bank met and exceeded the performance
standards established in the Stakeholder program, and all employees received a
cash incentive based on performance. It is our belief that rewarding employees
in this manner will lead to increased motivation, higher efficiency and
increased shareholder value.
To remain competitive in the rapidly changing banking environment, United Bank
is constantly evaluating the condition, location and service of its retail
delivery network, including Automated Teller Machines (ATMs). Currently United
Bank covers Stark and southern Summit Counties with 20 offices and 19 ATMs.
After an extensive evaluation, Management concluded that the two offices in
Hartville should be consolidated into a new facility on State Route 619 which
will enable us to better serve our customers. Construction of the new financial
center will begin in the spring of 1996. This financial center will feature
private offices for financial counseling, drive-up teller lanes, safe deposit
boxes, a night depository and a drive-up ATM. Building a new United Bank
facility emphasizes Lake Township's importance as a growing financial market
and reaffirms our commitment to serve the Hartville community and our customers
there.
One of the Bank's busiest branches is located at Belden Village on Whipple
Avenue, N.W. After extensive analysis of the market and this office, Management
has determined that renovation of the office was necessary. The renovation will
take place in the spring of 1996 and will include a number of customer service
refinements. In addition, renovations and enhancements are planned for the
Wales Square office in Massillon and the Beach City office.
As the Bank continues to grow, our processing and support requirements
increase as well. The United Bank Center, which is the home of the Operations
Center of the Bank, is currently undergoing renovation. The renovations will
add new office space, provide updated technology for computers and telephones,
and include the construction of a special area for a new centralized telephone
service. This new service will be dedicated to providing enhanced customer
service over the telephone, including the opening of accounts by telephone.
- -----------------------------------------------------------------------------
Through the strategic placement of
banking facilities, United Bank will
maintain its competitive
edge in customer service.
- -----------------------------------------------------------------------------
As Stark County experiences tremendous growth in Lake Township, North Canton,
Green and other locations, United Bank will continue to evaluate current
locations and potential new branch sites. In addition, with the growing
popularity of free-standing drive-up ATM units, the Bank will explore new
locations for these as well. The goal of this analysis, construction and
consolidation is to make certain that United Bank is providing convenient
access to financial services for people in the communities we serve. Through
the strategic placement of banking facilities, United Bank will maintain its
competitive edge in customer service.
Equally important as the analysis and maintenance of the Bank's facilities is
the evaluation of new financial products and services for our customers. To
maintain our competitiveness in the market, United Bank must meet and exceed
the expectations of our customers. To this end, Management is constantly
reviewing new products for possible implementation. As mentioned earlier, the
Bank is currently setting up a new telephone center to handle the growing
demand for service by telephone. While telephone service will be accessible
from anywhere in the United States via a toll-free telephone number, the
service will continue to be provided locally at the Bank's Operations Center.
It is our goal to enable customers to perform more of their routine banking
tasks over the telephone and eventually the computer, without leaving their
home or office. Telephone services may include paying bills, making loan
payments, trans-
<PAGE> 7
4
- -------------------------------------------------------------------------------
ferring funds between accounts, checking balances, opening new accounts and
taking loan applications.
The Bank launched a new product in 1995 called the United Bank MasterMoney
card. This enhanced ATMcard features a MasterCard(R) logo and is linked to a
personal checking account. The MasterMoney card has all the features of an
ATMcard, plus it allows customers to make card purchases at any MasterCard
merchant. The purchases are deducted automatically from the customer's checking
account and listed in detail on the monthly checking account statement,
eliminating the need to write checks or carry cash to make purchases. The
positive response from customers who received the new card in December
indicates the MasterMoney card will be a popular customer service.
Another product enhancement that was introduced in 1995 was a Certificate of
Deposit (CD) Renewal Letter Program. This expanded renewal notice is mailed to
customers whose CD is about to mature. The enhanced notice gives customers more
information about their CD and includes a form which enables them to make
changes to the CD or open a new one through the mail. This may save the customer
a trip to the bank and enables the Bank to offer greater service.
More and more people are setting up home computers and inquiring about
computer banking. We are taking the first steps toward providing a computer
link for these early-adopters by exploring the establishment of a Home Page on
the World Wide Web. Many banks have already initiated these "electronic
billboards" for their companies with some offering to open new accounts via the
Internet. While this method of banking is in relatively low demand right now,
the banking industry foresees strong growth and increasing demand for
electronic links from homes and businesses directly to the bank. We feel
confident that in the near future, United Bank will be listing its World Wide
Web address for you to gain electronic access to the Bank.
The demand for the option to gain access to accounts electronically is already
growing among United Bank's business customers. To satisfy their needs, we are
in the process of setting up new methods by which our commercial customers can
handle their financial transactions. Two new Automated Clearing House (ACH)
services will allow customers to initiate wire transfers and other transactions
by either telephone or personal computer. These confidential electronic methods
of access will help our commercial customers keep pace with the growing demands
to manage assets quickly and efficiently.
None of these new products and services can be established and provided to
customers without employees who have the skills and resources to develop, sell
and maintain them. United Bank is proud to have excellent employees, and it is
our goal to make certain we maintain a highly skilled, team-oriented and
efficient work force. To assist in providing a motivational atmosphere,
Management has conducted an ongoing Corporate Culture Survey in each of the
past two years to receive input from all employees on how to motivate and
reward employee initiative, development and contribution. The results of the
1995 survey indicated that the steps Management took to enhance employee
satisfaction and morale over the past year were successful. We will continue to
monitor our corporate culture through this annual survey and make the necessary
changes to maintain an efficient and motivated work force.
I would like to take this opportunity to thank our employees, officers,
directors, community advisory board members, and shareholders for their
continued dedication and support in 1995. In particular, I would like to give
my thanks and best wishes to Joanna Pietrocola who retired January 1, 1996
after a 48-year career, the last six years of which were spent with United
Bank. Joanna served as a Vice President and Trust Officer at the Mount Union
office and was an excellent ambassador for United Bank in the Alliance
community. We all wish her a long and happy retirement.
With revolutionary changes taking place in the banking industry, it will be
necessary for United Bank to stay true to the course that Management and the
Board of Directors have set forth in our Vision 2000. I am confident that by
recommitting ourselves to the principles that have guided the Bank successfully
over the years, United Bank will maintain its local, independent ownership,
continue to increase shareholder value, and provide outstanding customer
service.
Sincerely,
/s/ Robert L. Mang
Robert L. Mang
President
Chief Executive Officer
<PAGE> 8
5
UNB CORP. AND
UNITED NATIONAL BANK & TRUST CO.
Board of Directors
- ------------------------------------------------------------------------------
DONALD W. SCHNEIDER
Chairman of the Board
UNB Corp. & United National Bank & Trust Co.
President, Schneider Lumber Co.
LOUIS V. BOCKIUS III
United National Bank & Trust Co.
Chairman, Bocko, Inc.
E. LANG D'ATRI
UNB Corp. & United National Bank & Trust Co.
Attorney at Law, Day, Ketterer, Raley, Wright & Rybolt
EDGAR W. JONES, JR.
UNB Corp. & United National Bank & Trust Co.
President, Hal Jones Construction Co.
HAROLD M. KOLENBRANDER, PH.D.
United National Bank & Trust Co.
President, Mount Union College
RUSSELL W. MAIER
United National Bank & Trust Co.
Chairman and Chief Executive Officer,
Republic Engineered Steels, Inc.
ROBERT L. MANG
President and Chief Executive Officer, UNB Corp.
President and Chief Executive Officer,
United National Bank & Trust Co.
JAMES A. O'DONNELL
UNB Corp. & United National Bank & Trust Co.
Retired President, United National Bank & Trust Co.
JOHN D. REGULA
UNB Corp. & United National Bank & Trust Co.
Partner and Manager, Regula Brothers Transportation
JAMES P. RODMAN
UNB Corp. & United National Bank & Trust Co.
Chief Engineer, Rodman Research
JOSEPH J. SOMMER
United National Bank & Trust Co.
Retired Attorney, Government Leader, and Businessman
ABNER A. YODER
United National Bank & Trust Co.
President, Stark Trust Co.
HONORARY DIRECTORS EMERIT
John F. Andrews
Robert L. Hammond
F. E. Henry III
Edgar W. Jones
Thomas C. Lavery
Richard O. Parker
David W. Reed, Jr.
Joseph C. Sommer
W. W. Steele, Jr.
George N. Swallow
Leroy L. Zang
<PAGE> 9
6
Community Advisory Boards
- -------------------------------------------------------------------------------
ALLIANCE
Thomas C. Lavery, Chairman Mark M. Henschen
Carol A. Barnett Keith J. Hochadel
Carol L. Cardinal Harold M. Kolenbrander
W. Jeffrey Egli David C. McAlister
Richard C. Elliott Richard C. Sherer
Bradley Goris George K. Weimer, Jr.
BEACH CITY/BREWSTER
Robert W. Andrews, Chairman John D. Regula
John F. Andrews C. Waid Spidell
Dorothy G. Beals George F. Stertzbach
Marion Belloni David E. Stucki
Charles B. Hawk John A. Yoder
Milo J. Miller
CANAL FULTON
George C. Mizarek, Chairman James F. Kling
Donald W. Aaron Roland C. Lindsay, Sr.
Corita C. Childs Ken L. Schalmo
Janet M. Dixon Joseph J. Sommer
Benjamin R. Easterling Scott Vandenberg
David C. Ewing
LAKE TOWNSHIP
George N. Swallow, Chairman Christian D. Ramsburg
E. Lang D'Atri Lynn E. Stuhldreher
Edward DiGiacomo Jane Tortola
Rosalee Haines David A. Vanderkaay
Daniel K. Hanlon Barbara K. Wentz
Hall B. Miles, Jr. Jeffrey K. Zellers
Howard Miller, Jr.
MASSILLON
Randall A. Hutsell, Chairman Richard G. Leffler, Jr.
Deborah J. Bachtel Mark R. Percival
Marilyn Fogle James D. Snively
Robert J. Groenke, Jr. Joseph J. Sommer
Thomas L. Jackson Walter J. Telesz
Jacque E. Jones Robert K. Yund
Nancy A. Johnson
<PAGE> 10
7
Management
- -------------------------------------------------------------------------------
MANAGEMENT
UNB CORP.
Robert L. Mang
President
Chief Executive Officer
James J. Pennetti
Vice President
Treasurer
Robert M. Sweeney
Secretary
UNITED NATIONAL
BANK & TRUST CO.
EXECUTIVE OFFICER
Robert L. Mang
President
Chief Executive Officer
BANK
ADMINISTRATION
GROUP
James J. Pennetti
Senior Vice President
Executive Officer
ADMINISTRATIVE
SERVICES
John J. Kennedy
Vice President
Susan L. Anderson
Administrative
Services Officer
OPERATIONS
James H. Gumpp
Vice President
Wendy S. Blackburn
Assistant Vice President
Rebecca R. Geis
Assistant Vice President
Paula J. Lightbody
Assistant Vice President
RETAIL SALES AND SERVICE/
BUSINESS DEVELOPMENT
Derek G. Williams
Vice President
Charleen A. Davidson
Assistant Vice President
Business Development Officer
Randall W. Geis
Assistant Vice President
Business Development Officer
Edward C. Koch
Assistant Vice President
Business Development Officer
Eileen G. Douglas
Assistant Vice President
Kimberly S. Robinson
Business Development Officer
Electronic Banking
SECURITY/COMPLIANCE
Duane J. Shamp
Assistant Vice President
BANKING GROUP
Leo E. Doyle
Senior Vice President
Executive Officer
COMMERCIAL LENDING
Richard F. Kress
Vice President
Ronald P. Dezenzo
Vice President
Robert P. Nelson
Vice President
David M. Roberts
Vice President
William F. Schumacher
Vice President
CONSUMER LENDING
Daryl L. Marshall
Vice President
Kevin W. Nelson
Assistant Vice President
Deborah A. Davis
Collection Officer
Paul E. Ibsen
Consumer Loan Officer
CREDIT AND
LOAN REVIEW
Jeffery Hasapis
Assistant Vice President
Paul J. Durbak, Jr.
Loan Review Officer
MORTGAGE LENDING
Scott E. Dodds
Vice President
FINANCIAL GROUP
Charles J. Berry
Senior Vice President
Chief Financial Officer
Sheldon F. Everhart
Vice President
Methods Analyst
Loretta M. Higgins
Assistant Vice President
INVESTMENTS
Vanessa M. Richards
Assistant Vice President
Janice A. Stavroff
Investment Officer
HUMAN RESOURCES GROUP
Darla K. Prince
Vice President
Barbara M. Heinricher
Training/Customer
Relations Officer
SALES GROUP
Don A. Sultzbach
Senior Vice President
MARKETING
Stephen J. Badman
Vice President
Sarah E. Howes
Advertising Officer
TRUST SERVICES GROUP
Robert M. Sweeney
Senior Vice President
Executive Officer
Robert J. Barnes
Vice President
Trust Investment Manager
Phillip L. Francis
Vice President
Managing Trust Officer, Alliance
Marc B. Inboden
Vice President
Trust Investment Officer
Marcia L. Kendle
Vice President
Personal Trust Manager
Samuel M. Lincoln
Vice President
Employee Benefits Trust Manager
Joanna Pietrocola
Vice President
Trust Officer
Mary L. Lee
Assistant Vice President
Trust Operations Manager
Wendy S. Blosser
Personal Trust Officer
Perry S. Lazich
Trust Investment Officer
Richard J. Reiland,Jr.
Employee Benefits Trust Officer
Robert L. Hammond
Trust Investment Officer
AUDIT
Robert L. Young
Vice President
Chief Internal Auditor
Thomas L. Friedman
Senior Auditor
William F. Haldi
Auditor
<PAGE> 11
8
Banking Centers
- -------------------------------------------------------------------------------
CANTON
United Bank Plaza Office
Julie A. Schlemmer
Sales and Service Manager
Rotunda Office
Karen J. Mathes
Sales and Service Officer
Raff/West Tusc. Office
Dan M. Friedman
Assistant Vice President
Sales and Service Officer
Belden Village Office
Scott H. Berkeley
Sales and Service Officer
Hillsdale Office
Terri L. King
Sales and Service Manager
Lake Cable Office
Patricia A. Hoopes
Sales and Service Officer
34th & Cleveland Office
Susan L. Kraus
Sales and Service Officer
ALLIANCE
Mt. Union Office
Velma A. Traphagen
Assistant Vice President
Sales and Service Officer
BEACH CITY
Beach City Office
Ruth M. Wisselgren
Sales and Service Officer
BREWSTER
Brewster Office
Ruth M. Wisselgren
Sales and Service Officer
CANAL FULTON
Canal Fulton Office
Deborah J. Miller
Sales and Service Manager
HARTVILLE
Edison Park Office
Toni L. Kutz
Sales and Service Manager
Hartville Office
Toni L. Kutz
Sales and Service Manager
MANCHESTER
Manchester Office
Deborah J. Miller
Sales and Service Manager
MASSILLON
Downtown Office
Cynthia E. Strong
Sales and Service Manager
Amherst Office
Regina Kinlow-Thompson
Sales and Service Manager
Perry Office
Ruth A. Patterson
Sales and Service Manager
Wales Square Office
Regina Kinlow-Thompson
Sales and Service Manager
NORTH CANTON
North Canton Office
Peggy J. Leno
Sales and Service Manager
UNIONTOWN
Uniontown Office
Joyce A. Midkiff
Sales and Service Manager
<PAGE> 12
9
Report of Management
- -------------------------------------------------------------------------------
The Management of UNB Corp. is responsible for the preparation, accuracy and
fair presentation of the financial statements and related information presented
in the Annual Report.
The Corporation maintains a system of internal controls designed to provide
reasonable assurance that assets are safeguarded. These controls include
written policies and procedures which establish and maintain effective internal
controls through proper delegation of authority and division of responsibility,
proper recording of transactions and fair presentation of financial results in
accordance with generally accepted accounting principles. These systems of
controls are reviewed by our internal auditors and independent auditors who
have free access to the Audit Committee.
Management assessed the Corporation's internal control structure and believes
that the system provides reasonable assurances that financial transactions are
recorded properly, and that the Corporation is in compliance with federal and
state laws and regulations as well as safety and soundness laws and
regulations.
/s/ Robert L. Mang
Robert L. Mang
President and Chief Executive Officer
UNB Corp. and United National Bank & Trust Co.
/s/ Charles J. Berry
Charles J. Berry
Senior Vice President and Chief Financial Officer
United National Bank & Trust Co.
<PAGE> 13
10
[LOGO]
Report of Independent Auditors CROWE CHIZEK
- -------------------------------------------------------------------------------
Board of Directors and Shareholders
UNB Corp.
Canton, Ohio
We have audited the accompanying consolidated balance sheets of UNB Corp. as
of December 31, 1995 and 1994, and the related consolidated statements of
income, changes in shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of UNB Corp. as of December 31, 1995
and 1994, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 1, the Corporation changed its method of accounting for
impaired loans in 1995 and for income taxes and certain investment securities
in 1993 to comply with new accounting guidance.
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Cleveland, Ohio
January 19, 1996
<PAGE> 14
11
Consolidated Statements
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Consolidated Balance Sheets
December 31, 1995 and 1994 1995 1994
<S> <C> <C>
ASSETS
Cash and cash equivalents (Note 14) $ 31,735,149 $ 30,210,684
Federal funds sold 4,300,000 600,000
Interest bearing deposits with banks 514,509 167,369
Securities, net (Fair value:
1995 - $65,115,982; 1994 - $77,859,549) (Note 3) 65,129,167 77,922,931
Mortgage-backed securities (Fair value:
1995 - $63,398,898; 1994 - $60,855,400) (Note 3) 63,087,098 61,586,045
Loans originated and held for sale - 144,200
Loans:
Total loans (Notes 4 and 9) 518,729,789 412,522,228
Less allowance for loan losses (Note 5) (7,242,003) (6,348,219)
- ----------------------------------------------------------------------------------------------------------------------------
Net loans 511,487,786 406,174,009
Premises and equipment, net (Note 6) 8,810,551 8,597,330
Intangible assets (Note 2) 7,376,421 8,470,758
Accrued interest receivable and other assets 7,203,156 7,210,359
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 699,643,837 $601,083,685
============================================================================================================================
LIABILITIES
Deposits:
Noninterest bearing demand deposits $ 73,707,817 $71,014,730
Interest bearing deposits (Note 7) 473,479,343 415,755,785
- ----------------------------------------------------------------------------------------------------------------------------
Total deposits 547,187,160 486,770,515
Short-term borrowings (Note 8) 49,659,159 34,896,942
FHLB advances (Note 9) 31,360,000 16,660,000
Accrued taxes, expenses, and other liabilities 6,110,635 4,115,786
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 634,316,954 542,443,243
============================================================================================================================
Commitments and contingencies (Note 14)
SHAREHOLDERS' EQUITY (Note 1)
Common stock - $1.00 stated value, 5,000,000 shares
authorized; 2,873,977 and 2,870,383 shares issued and
outstanding at December 31, 1995 and 1994, respectively 2,873,977 2,870,383
Paid-in capital 31,603,160 31,568,652
Retained earnings 30,004,825 25,642,036
Unrealized gain (loss) on securities available for sale, net of tax 844,921 (1,440,629)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS EQUITY 65,326,883 58,640,442
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $ 699,643,837 $601,083,685
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 15
12
<TABLE>
<CAPTION>
Consolidated Statements of Income
For the three years ended December 31, 1995 1995 1994 1993
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans:
Taxable $ 41,217,982 $ 31,476,499 $ 29,115,400
Tax-exempt 274,256 304,755 275,244
Interest and dividends on investments and mortgage-backed securities:
Taxable 7,561,905 5,275,683 5,586,200
Tax-exempt 142,382 199,014 227,246
Interest on deposits with banks 100,957 290,471 50,740
Interest on federal funds sold 461,175 153,153 125,589
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest income 49,758,657 37,699,575 35,380,419
- ----------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits (Note 7) 17,534,235 11,617,580 11,873,591
Interest on short-term borrowings 2,233,608 1,018,039 676,851
Interest on FHLB advances 2,037,668 872,537 108,877
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 21,805,511 13,508,156 12,659,319
- ----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 27,953,146 24,191,419 22,721,100
PROVISION FOR LOAN LOSSES (NOTE 5) 1,750,000 1,020,000 2,195,000
- ----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 26,203,146 23,171,419 20,526,100
OTHER INCOME:
Service charges on deposits 2,367,481 2,420,938 2,260,096
Trust Department income 2,508,601 2,162,962 2,138,349
Other operating income 667,627 817,067 1,206,373
Gains on loans originated for resale 67,087 38,031 362,951
Securities gains 6,189 204,804 41,121
- ----------------------------------------------------------------------------------------------------------------------------------
Total other income 5,616,985 5,643,802 6,008,890
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries and wages 8,013,393 7,533,070 6,953,770
Retirement and other employee benefits (Note 10) 2,130,255 1,643,954 1,657,965
Occupancy expense 1,213,108 1,125,680 1,077,393
Equipment expense 2,225,466 1,976,455 1,937,569
Other operating expenses (Note 12) 7,072,953 6,531,085 6,013,599
- ----------------------------------------------------------------------------------------------------------------------------------
Total other expenses 20,655,175 18,810,244 17,640,296
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING METHOD 11,164,956 10,004,977 8,894,694
PROVISION FOR INCOME TAXES (NOTE 13) 3,785,490 3,376,888 2,910,668
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD 7,379,466 6,628,089 5,984,026
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES (NOTE 1) - - 353,830
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 7,379,466 $ 6,628,089 $ 6,337,856
==================================================================================================================================
EARNINGS PER COMMON SHARE (NOTE 1):
Primary earnings per share:
Before cumulative effect of a change
in accounting for income taxes $ 2.52 $ 2.32 $ 2.24
Cumulative effect of accounting change - - 0.13
- ----------------------------------------------------------------------------------------------------------------------------------
Primary net income per share $ 2.52 $ 2.32 $ 2.37
==================================================================================================================================
Fully diluted earnings per share:
Before cumulative effect of a change
in accounting for income taxes $ 2.51 $ 2.22 $ 2.14
Cumulative effect of accounting change - - 0.13
- ----------------------------------------------------------------------------------------------------------------------------------
Fully diluted net income per share $ 2.51 $ 2.22 $ 2.27
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 16
13
Consolidated Statements of Changes in Shareholders' Equity For the three
years ended December 31, 1995
<TABLE>
<CAPTION>
Unrealized
Gain/(Loss)
on Securities Total
Common Paid-in Retained Available Shareholders'
Stock Capital Earnings for Sale Equity
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $4,159,426 $ 19,592,789 $ 19,058,623 $ 42,810,838
Net income for year 6,337,856 6,337,856
Change in par value of common stock (2,921,580) 2,921,580
100% stock dividend 1,252,124 (1,252,124)
Cash dividends ($0.88 per share) (2,388,004) (2,388,004)
Shares issued through dividend
reinvestment 29,947 687,299 717,246
Stock issued 300,000 7,200,000 7,500,000
Stock options exercised 13,717 109,493 123,210
Unrealized gain on securities
available for sale, net of tax $ 604,887 604,887
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993 2,833,634 30,511,161 21,756,351 604,887 55,706,033
Net income for year 6,628,089 6,628,089
Cash dividends ($0.96 per share) (2,742,404) (2,742,404)
Shares issued through dividend
reinvestment 22,595 716,453 739,048
Stock options exercised 2,906 26,094 29,000
Stock issued for benefit plans 11,248 314,944 326,192
Change in unrealized gain (loss) on
securities available for sale, net of tax (2,045,516) (2,045,516)
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 2,870,383 31,568,652 25,642,036 (1,440,629) 58,640,442
Net income for year 7,379,466 7,379,466
Cash dividends ($1.05 per share) (3,016,677) (3,016,677)
Stock options exercised 3,594 34,508 38,102
Change in unrealized gain (loss) on
securities available for sale, net of tax 2,285,550 2,285,550
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 $ 2,873,977 $ 31,603,160 $ 30,004,825 $ 844,921 $ 65,326,883
=================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 17
14
Consolidated Statements of Cash Flows
For the three years ended December 31, 1995
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,379,466 $ 6,628,089 $ 6,337,856
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 789,359 636,647 612,522
Provision for loan losses 1,750,000 1,020,000 2,195,000
Valuation adjustment for other real estate owned - - (325,000)
Net securities gains (6,189) (204,804) (41,121)
Net (accretion) amortization on securities (461,821) (90,869) 317,109
Amortization of intangible assets 1,094,337 641,665 536,863
Deferred income tax benefit (309,785) (43,127) (752,661)
Loans originated for resale (4,932,548) (2,904,216) (37,178,454)
Proceeds from sale of loan originations 5,143,835 6,318,228 37,358,869
Changes in:
Interest receivable (505,356) (812,429) 451,675
Interest payable 1,017,789 145,706 (189,261)
Other assets and liabilities, net 627,463 655,922 (671,747)
Deferred income (5,464) 11,294 (157)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash from operating activities 11,581,086 12,002,106 8,651,493
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest bearing deposits with banks (347,140) 3,613,954 (3,523,367)
Net change in federal funds sold (3,700,000) 200,000 1,700,000
Investment and mortgage-backed securities:
Proceeds from sales of securities available for sale 4,722,672 3,272,621 5,060,362
Proceeds from maturities of securities held to maturity 38,952,889 17,250,053 75,812,929
Proceeds from maturities of securities available for sale 30,133,841 20,373,878 -
Purchases of securities held to maturity (38,258,110) (52,024,592) (86,461,997)
Purchases of securities available for sale (32,273,495) (48,065,388) -
Principal payments received on
mortgage-backed securities held to maturity 7,819,035 1,171,428 25,447,690
Principal payments received on
mortgage-backed securities available for sale 4,126,844 15,085,208 -
Net increase in loans made to customers (103,205,753) (60,188,481) (30,419,516)
Loans purchased (4,065,650) (399,700) -
Purchases of premises and equipment, net (1,002,580) (698,290) (555,167)
Purchases of assets to be leased - (193,958) (539,411)
Principal payments received under leases 140,539 145,935 185,308
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash from investing activities (96,956,908) (100,457,332) (13,293,169)
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 60,416,645 13,536,682 (6,579,136)
Cash and cash equivalents received in
assumption of deposits, net of assets acquired (Note 2) - 63,517,056 -
Cash dividends paid, net of shares issued
through dividend reinvestment (3,016,677) (2,003,356) (1,670,758)
Proceeds from issuance of stock 38,102 355,192 7,623,210
Net increase (decrease) in short-term borrowings 14,762,217 8,568,157 (4,955,004)
Proceeds from FHLB advances 25,000,000 28,345,000 8,820,000
Repayments of FHLB advances (10,300,000) (20,505,000) -
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash from financing activities 86,900,287 91,813,731 3,238,312
- -----------------------------------------------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,524,465 3,358,505 (1,403,364)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 30,210,684 26,852,179 28,255,543
- -----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 31,735,149 $ 30,210,684 $ 26,852,179
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 18
15
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
accounts of UNB Corp. (Corporation) and its wholly owned subsidiaries,
the United National Bank & Trust Company (Bank), 620 Market Community Urban
Development Corp. and United Credit Life Insurance Company. All significant
intercompany balances and transactions have been eliminated in consolidation.
INDUSTRY SEGMENT INFORMATION: UNB Corp. is a bank holding company engaged in
the business of commercial and retail banking and trust and investment
services, with operations conducted through its main office and branches
located throughout Stark and southern Summit Counties of Ohio. Stark and
southern Summit Counties provide the source for substantially all of the
Corporation's deposit, loan and trust activities. The majority of the
Corporation's income is derived from commercial and retail business lending
activities and investments.
CASH AND CASH EQUIVALENTS: Cash equivalents include cash and noninterest
bearing deposits with banks. UNB Corp. reports net cash flows for interest
bearing deposits with banks, federal funds sold, customer loan transactions,
deposit transactions and short-term borrowings.
For the years ended December 31, 1995, 1994 and 1993, the Corporation paid
interest of $20,787,722, $13,362,450 and $12,848,580, respectively, and income
taxes of $4,290,000, $3,560,250 and $4,485,000, respectively.
INVESTMENT AND MORTGAGE-BACKED SECURITIES: Effective December 31, 1993, the
Corporation adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." SFAS No. 115 requires the Corporation to classify debt and
equity securities as held to maturity, trading or available for sale. The
cumulative effect on retained earnings at December 31, 1993 of adopting SFAS
No. 115, is included as a separate component of shareholders' equity in the
consolidated statement of changes in shareholders' equity and represents the
after-tax effect of adjusting securities available for sale to fair value.
Prior to the adoption of SFAS No. 115, the Corporation recorded investment and
mortgage-backed securities at amortized cost.
Securities classified as held to maturity are those that management has the
positive intent and ability to hold to maturity. Securities classified as
available for sale are those that management intends to sell or that could be
sold for liquidity, investment management, or similar reasons, even if there is
not a present intention for such a sale. Trading securities are purchased
principally for sale in the near term and are reported at fair value with
unrealized gains and losses included in earnings. During 1995 and 1994, the
Corporation held no trading securities.
Securities held to maturity are stated at cost, adjusted for amortization
of premiums and accretion of discounts. Securities available for sale are
carried at fair value with unrealized gains and losses included as a separate
component of shareholders' equity, net of tax. Gains or losses on dispositions
are based on net proceeds and the adjusted carrying amount of securities sold,
using the specific identification method.
LOANS HELD FOR SALE: Residential mortgage loans originated by the Bank and
intended for sale in the secondary market are carried at the lower of cost or
estimated market value in the aggregate. Net unrealized losses are recognized
in a valuation allowance by charges to income. To mitigate interest rate risk,
the Bank generally obtains fixed price commitments on loans held for sale. The
Bank retains the servicing rights on loans sold and incurs no recourse
obligation in connection with the loan sales or servicing activities.
ALLOWANCE FOR LOAN LOSSES: Because some loans may not be repaid in full, an
allowance for loan losses is recorded. This allowance is increased by
provisions charged to earnings and is reduced by loan charge-offs, net of
recoveries. Estimating the risk of loss on any loan is necessarily subjective.
Accordingly, the allowance is maintained by Management at a level considered
adequate to cover possible losses that are currently anticipated based on
Management's evaluation of several key factors including information about
specific borrower situations, their financial position and collateral values,
current economic conditions, changes in the mix and levels of the various types
of loans, past charge-off experience and other pertinent information. The
allowance for loan losses is based on estimates using currently available
information, and ultimate losses may vary from current estimates due to changes
in circumstances. These estimates are reviewed periodically and, as adjustments
become necessary, they are reported in earnings in the periods in which they
become known. While Management may periodically allocate portions of the
allowance for specific problem situations, the entire allowance is available
for any charge-offs that occur. Charge-offs are made against the allowance for
loan losses when Management concludes that loan amounts are likely to be
uncollectible. After a loan is charged-off, collection efforts continue and
future recoveries may occur.
Statement of Financial Accounting Standards No. 114 and No. 118 were
adopted January 1, 1995 and require recognition of loan impairment. Loans are
considered impaired if full principal or interest payments are not anticipated.
Impaired loans are carried at the present value of expected cash flows
discounted at the loan's effective interest rate or at the fair value of the
collateral if the loan is collateral dependent. A portion of the allowance for
loan losses is allocated to impaired loans. The effect of adopting these
standards is included in the 1995 provision for loan losses, and was not
material.
Management analyzes loans on an individual basis and classifies a loan as
impaired when an analysis of the borrower's operating results and financial
condition indicates that underlying cash flows are not adequate to meet its
debt service requirements. Often this is associated with a delay or shortfall
in payments of 30 days or more. Smaller-balance homogeneous loans are evaluated
for impairment in total. Such loans include residential first mortgage loans
secured by one-to-four family residences, residential construction loans and
consumer automobile, boat, home equity and credit card loans with balances less
than $300,000. In addition, loans held for sale and leases are excluded from
consideration as impaired. Loans are generally moved to nonaccrual status when
90 days or more past due. These loans are often also considered impaired.
Impaired loans, or portions thereof, are charged off when deemed uncollectible.
The nature of disclosures for impaired loans is considered generally comparable
to prior nonaccrual loans and non-performing and past due asset disclosures.
<PAGE> 19
16
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
calculated over the estimated useful lives of the assets, limited in the case
of leasehold improvements to the lease terms, or useful lives, whichever is
less, using primarily the straight-line method. Maintenance and repairs are
charged to expenses as incurred and major improvements are capitalized.
OTHER REAL ESTATE: Other real estate owned is included in other assets on
the consolidated balance sheets at the lower of cost or fair value, less
estimated costs to sell. Any reduction in fair value is reflected in a
valuation allowance account established by a charge to income. Costs incurred
to carry the real estate are charged to expense. Other real estate, net of the
valuation reserve totaled $325,000 and $334,000 at December 31, 1995 and 1994,
respectively.
INTEREST AND FEES ON LOANS: Interest income on loans is accrued primarily
over the term of the loans based on the principal balances of loans
outstanding. Loan origination fees and certain direct origination costs are
deferred and amortized over the contractual life of the related loan using the
level yield method. The net amount of fees and costs deferred is reported in
the consolidated balance sheets as a part of loans.
The accrual of interest on loans is suspended when, in Management's
opinion, the collection of all or a portion of the loan principal has become
doubtful. When a loan is placed on non-accrual status, accrued and unpaid
interest at risk is charged against income. Payments received on non-accrual
loans are applied against principal until recovery of the remaining balance is
reasonably assured. The carrying value of loans classified as impaired is
periodically adjusted to reflect cash payments, revised estimates of future
cash flows and increases in the present value of expected cash flows due to the
passage of time. Cash payments representing interest income are reported as
such and other cash payments are reported as reductions in carrying value.
Increases or decreases in carrying value due to changes in estimates of future
payments or the passage of time are reported as reductions or increases in the
provision for loan losses.
FEDERAL INCOME TAXES: Effective January 1, 1993, the Corporation adopted
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes," which requires that the Corporation follow the liability method in
accounting for income taxes. The liability method provides that deferred tax
assets and liabilities are recorded based on the difference between the tax
basis of assets and liabilities and their carrying amounts for financial
reporting purposes, referred to as "temporary differences."
The effect on years prior to 1993 of changing to this method was $353,830,
which is reflected in the consolidated statements of income as the cumulative
effect of change in accounting method. This change had no significant effect on
the provision for income taxes for 1993.
CONCENTRATIONS OF CREDIT RISK: The Corporation, through its subsidiary
Bank, grants residential, consumer, and commercial financing to customers
located primarily in Stark County. Commercial loans, commercial real estate
loans, mortgage loans and consumer loans and leases comprise 12.5%, 11.7%,
33.2% and 42.6% of total loans, respectively at December 31, 1995. Indirect
loans accounted for 78.5% of consumer loans at December 31, 1995.
EARNINGS AND DIVIDENDS PER SHARE: Primary and fully diluted earnings per
share are computed based on the weighted average shares outstanding during the
period. Primary earnings per common share has been computed assuming the
exercise of stock options less the treasury shares assumed to be purchased from
the proceeds using the average market price of UNBCorp.'s stock for the years
presented. Fully diluted earnings per common share represents the additional
dilution related to the stock options due to the use of the market price as of
the year-end.
The primary weighted average shares were 2,928,722, 2,856,171 and 2,674,270
for 1995, 1994 and 1993, respectively. Fully diluted weighted average shares
were 2,936,269, 2,988,848, and 2,795,699 for 1995, 1994 and 1993, respectively.
The Corporation declared a 100% stock dividend in 1993 which was recorded
by a transfer from retained earnings to common stock at par. All per share data
has been adjusted for the stock dividend.
STOCK OPTIONS: The potential effect of exercising outstanding stock options
has been included in the calculation of earnings per share. The excess of the
option price over the par value of the shares issued is added to paid-in
capital when exercised. Any tax benefit realized by the Corporation from the
exercise of non-qualified stock options is added to paid-in capital.
DIVIDEND REINVESTMENT PLAN: The dividend reinvestment plan, effective March
30, 1989, authorized the sale of 289,406 shares of the Corporation's authorized
but previously unissued Common Shares to shareholders who choose to invest all
or a portion of their cash dividends. During 1995, stock was purchased in the
open market at the current market price. In 1994 and 1993, shares totalling
22,595 and 23,830, respectively, were issued by the Corporation pursuant to the
plan. The shares issued were purchased from the Corporation with reinvested
dividends at the current market price, which was the average of the closing bid
and asked prices for the last business day immediately preceding the purchase
date. The number of shares has been adjusted to reflect the 1993 stock
dividend.
TRUST DEPARTMENT ASSETS AND INCOME: Property held by the Corporation in a
fiduciary or other capacity for its trust customers is not included in the
accompanying consolidated financial statements since such items are not assets
of the Corporation. Income from the Trust Department is reported on the accrual
basis of accounting.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS: Management must
make estimates and assumptions in preparing the consolidated financial
statements that affect the amounts reported and the disclosures provided. These
estimates and assumptions may change in the future and future results could
differ.
Areas involving the use of Management's estimates and assumptions include
the allowance for loan losses, the realization of deferred tax assets, fair
value of certain securities, the determination and carrying value of impaired
loans, the post retirement benefit obligation, the determination of
other-than-temporary reductions in the fair value of securities, depreciation
of premises and equipment, the carrying value and amortization of intangibles,
the fair value of financial instruments, the actuarial present value of pension
benefit obligations and the net periodic pension expense and prepaid pension
costs recognized in the Corporation's consolidated financial statements.
Estimates that are more susceptible to change in the near term include the
allowance for loan losses and the fair value of certain securities.
FINANCIAL STATEMENT PRESENTATION: Certain previously reported consolidated
financial statement amounts have been reclassified to conform to the 1995
presentation.
<PAGE> 20
17
NOTE 2 - ACQUISITIONS AND INTANGIBLE ASSETS
Effective September 16, 1994, the Bank acquired from the Resolution Trust
Corporation (RTC) certain assets and assumed certain deposits and other
liabilities of the former Transohio Federal Savings Bank, (Transohio),
headquartered in Cleveland, Ohio, in accordance with a purchase and assumption
agreement of the same date.
The Transohio acquisition has been accounted for using the purchase method
of accounting. Accordingly, the assets acquired and liabilities assumed have
been recorded based on their estimated fair market values at the date of
acquisition. A summary of assets acquired and liabilities assumed follows:
<TABLE>
<S> <C>
Cash and cash equivalents received $ 375,000
Premises and equipment 224,000
Accrued interest receivable and other assets 2,000
Funds receivable from Resolution Trust Corporation 63,142,000
Intangible assets/purchase premium paid 6,630,000
- ---------------------------------------------------------------
Total Assets $ 70,373,000
===============================================================
Deposit liabilities $ 69,244,000
Accrued interest payable and other liabilities 1,129,000
- ---------------------------------------------------------------
Total Liabilities $ 70,373,000
===============================================================
</TABLE>
The effect of the Transohio acquisition is included in the results of
operations prospectively from the date of acquisition. The pro forma effect of
this acquisition on prior periods is not shown herein due to a lack of
continuity of operations and the fact that the assistance received by Transohio
from the RTC reduces the relevance of past information.
The intangible assets arising from acquisitions, and included in intangible
assets in the accompanying consolidated balance sheets are summarized as
follows at December 31, net of accumulated amortization:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Core deposit intangible $2,262,062 $2,707,324
Goodwill 5,114,359 5,763,434
- ---------------------------------------------------------------
Total intangible assets $7,376,421 $8,470,758
===============================================================
</TABLE>
The core deposit intangibles are being amortized on accelerated methods
over periods ranging from 8 to 10 years, while the good-will is being amortized
over the estimated remaining lives of the assets acquired, or 120 months.
Amortization expense for these intangible assets totaled $1,094,337 in 1995,
$641,665 in 1994, and $536,863 in 1993.
NOTE 3 - SECURITIES
The amortized cost and estimated fair value of investment and
mortgage-backed securities available for sale and held to maturity, as
presented in the consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
December 31, 1995
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury securities $ 22,093,333 $ 111,329 $ (33,222) $ 22,171,440
Obligations of U.S. government agencies
and corporations 28,965,997 72,388 (225,932) 28,812,453
Securities held to maturity:
Obligations of U.S. government agencies
and corporations 3,007,410 - (3,124) 3,004,286
Obligations of state and political subdivisions 1,237,673 5,828 - 1,243,501
Corporate bonds and other debt securities 2,130,532 9,541 (25,430) 2,114,643
- ------------------------------------------------------------------------------------------------------------------------------------
Total debt securities 57,434,945 199,086 (287,708) 57,346,323
Equity securities available for sale 6,275,302 1,494,357 - 7,769,659
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment securities 63,710,247 1,693,443 (287,708) 65,115,982
Mortgage-backed securities available for sale 40,496,523 139,201 (277,935) 40,357,789
Mortgage-backed securities held to maturity 22,729,309 319,271 (7,471) 23,041,109
- ------------------------------------------------------------------------------------------------------------------------------------
Total mortgage-backed securities 63,225,832 458,472 (285,406) 63,398,898
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment and mortgage-backed securities $ 126,936,079 $ 2,151,915 $ (573,114) $ 128,514,880
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 21
18
<TABLE>
<CAPTION>
December 31, 1994
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury securities $ 19,148,556 $ (552,108) $ 18,596,448
Obligations of U.S. government agencies
and corporations 45,815,073 $ 10,449 (1,351,597) 44,473,925
Securities held to maturity:
Obligations of state and political subdivisions 3,438,851 33,570 (503) 3,471,918
Corporate bonds and other debt securities 6,581,474 10,051 (106,500) 6,485,025
- ------------------------------------------------------------------------------------------------------------------------------------
Total debt securities 74,983,954 54,070 (2,010,708) 73,027,316
Equity securities available for sale 3,960,079 872,154 - 4,832,233
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment securities 78,944,033 926,224 (2,010,708) 77,859,549
Mortgage-backed securities available for sale 32,201,449 79,739 (1,241,409) 31,039,779
Mortgage-backed securities held to maturity 30,546,266 - (730,645) 29,815,621
- ------------------------------------------------------------------------------------------------------------------------------------
Total mortgage-backed securities 62,747,715 79,739 (1,972,054) 60,855,400
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment and mortgage-backed securities $ 141,691,748 $ 1,005,963 $ (3,982,762) $ 138,714,949
====================================================================================================================================
</TABLE>
Mortgage-backed securities consist of fixed and variable rate CMOs and
government guaranteed mortgage-backed securities issued by FHLMC, FNMA, and
GNMA. CMOs totaled $56,411,659 and $53,274,441 and government guaranteed
mortgage-backed securities totaled $6,675,439 and $8,311,604 at December 31,
1995 and 1994, respectively.
The amortized cost and estimated fair value of debt securities at December
31, 1995, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
December 31, 1995
Estimated Weighted
Amortized Fair Average
Cost Value Yield
<S> <C> <C> <C>
Securities available for sale:
U.S. Treasuries
Due in one year or less $13,030,972 $13,043,090 5.68
Due after one year
through five years 9,062,361 9,128,350 5.86
- ---------------------------------------------------------------
Total $22,093,333 $22,171,440 5.75
- ---------------------------------------------------------------
U.S. Government agencies
and corporations
Due in one year or less $11,980,225 $11,928,201 5.07
Due after one year
through five years 16,985,772 16,884,252 5.50
- ---------------------------------------------------------------
Total $28,965,997 $28,812,453 5.32
- ---------------------------------------------------------------
Total securities
available for sale $51,059,330 $50,983,893 5.51
===============================================================
Securities held to maturity:
U.S. Government agencies
and corporations
Due in one year or less $ 3,007,410 $ 3,004,286 5.61
- ---------------------------------------------------------------
Total $ 3,007,410 $ 3,004,286 5.61
===============================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
Estimated Weighted
Amortized Fair Average
Cost Value Yield
<S> <C> <C> <C>
Obligations of state and
political subdivisions
Due in one year or less $ 932,673 $ 938,501 5.09
Due after one year
through five years 305,000 305,000 4.65
- ---------------------------------------------------------------
Total $ 1,237,673 $ 1,243,501 4.98
- ---------------------------------------------------------------
Corporate bonds and other
debt securities
Due in one year or less $ 388,906 $ 388,906 0.00
Due after one year
through five years 1,000,000 999,570 5.90
Due after five years
through ten years 491,626 501,167 8.79
Due after ten years 250,000 225,000 8.50
- ---------------------------------------------------------------
Total $ 2,130,532 $ 2,114,643 5.79
- ---------------------------------------------------------------
Total securities
held to maturity $ 6,375,615 $ 6,362,430 5.55
===============================================================
Mortgage-backed
and collateralized
mortgage obligations
available for sale $ 40,496,523 $ 40,357,789 6.08
- ---------------------------------------------------------------
Mortgage-backed and
collateralized mortgage
obligations held
to maturity $ 22,729,309 $ 23,041,109 7.77
- ---------------------------------------------------------------
Total mortgage-backed
and debt securities $120,660,777 $120,745,221 6.13
===============================================================
</TABLE>
Proceeds from sales of debt and mortgage-backed securities during 1995,
1994 and 1993 were $4,722,672, $3,020,246 and $5,060,362, respectively. Gross
gains of $6,189, $4,309 and $41,121, respectively, were realized on those
sales. Proceeds from sales of marketable equity securities totaled $252,375 in
1994 with
<PAGE> 22
19
gross gains of $200,495 realized on those sales. All securities sold in
1995 and 1994 were classified as available for sale.
At December 31, 1995, there were no holdings of securities of any one
issuer, other than the U.S. government and its agencies and corporations, in an
amount greater than 10% of shareholders' equity.
Investments with a carrying value of approximately $84.6 million and $60.1
million as of December 31, 1995 and 1994, respectively, were pledged to
secure public funds or other obligations.
NOTE 4 - LOANS
Loans are comprised of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Commercial, financial
and agricultural $ 64,810,976 $ 61,094,079
Commercial Real Estate 60,478,074 53,251,719
Real estate 172,282,619 115,353,701
Consumer 220,738,840 182,262,910
Leases 419,280 559,819
- ---------------------------------------------------------------
Total loans $518,729,789 $412,522,228
===============================================================
</TABLE>
The balance of impaired loans was $566,269 at December 31, 1995. Of this
amount, $378,693 in impaired loans required no allowance for loan loss
allocation. The remaining impaired loans of $187,576 had $187,576 of the
allowance for loan losses allocated to them, although the entire allowance
remains available for charge-offs of any loan.
The average balance of impaired loans for 1995 was $603,068. Interest
income recognized on impaired loans during 1995 was $53,130, which included
$52,300 of interest income recognized on a cash basis.
Loans on non-accrual status at December 31, 1994 approximated $1,039,000. A
loan is considered to be non-accrual once it is ninety days past due and is
kept on non-accrual status until it has been current six consecutive months or
is charged off. If interest had been accrued on non-accrual loans, interest
income would have increased by $18,516 in 1994 and $11,854 in 1993.
Additionally, loans past due more than 90 days and still accruing income
totaled approximately $19,000 at December 31, 1994.
Components of the investment in direct financing leases at December 31,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Total minimum lease payments
and unguaranteed residual $419,280 $559,819
===============================================================
</TABLE>
Future minimum annual rentals under the direct financing leases at December
31, 1995, are as follows:
<TABLE>
<S> <C>
1996 $139,902
1997 119,910
1998 99,257
1999 60,211
- ---------------------------------------------------------------
Total $419,280
===============================================================
</TABLE>
Certain directors, executive officers and principal shareholders of UNB
Corp. and its subsidiaries were loan customers of the subsidiary bank. A
summary of aggregate related party loan activity, for loans aggregating $60,000
or more to any one related party, is as follows for the year ended December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Balance, January 1 $ 12,492,000 $ 8,410,000
New loans 1,639,000 3,928,000
Repayments (5,714,000) (1,365,000)
Other changes - 1,519,000
- --------------------------------------------------------------
Balance, December 31 $ 8,417,000 $12,492,000
==============================================================
</TABLE>
Other changes include adjustments for loans applicable to one reporting
period that are excludable from the other reporting period.
In 1996, the Corporation is required to adopt the provisions of SFAS No.
122, "Accounting for Mortgage Servicing Rights." This statement requires
lenders who sell originated loans and retain the servicing rights to recognize
as separate assets the rights to service mortgage loans for others. It also
requires that capitalized mortgage servicing rights be assessed for impairment
based on the fair value of those rights. Management does not anticipate that
this pronouncement will have a material impact on the Corporation's financial
condition or results of operations upon adoption.
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses for the years ended December
31, are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance at January 1 $ 6,348,219 $ 6,055,843 $ 4,354,674
Provision charged
to expense 1,750,000 1,020,000 2,195,000
Loans charged off (1,558,440) (1,162,972) (881,626)
Recoveries on loans
previously charged off 702,224 435,348 387,795
- -----------------------------------------------------------------
Balance at
end of year $ 7,242,003 $ 6,348,219 $ 6,055,843
=================================================================
</TABLE>
NOTE 6 - PREMISES AND EQUIPMENT
The components of premises and equipment at December 31, are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land $ 1,766,353 $ 1,565,117
Buildings 5,639,090 5,625,339
Furniture and fixtures 6,423,172 5,713,275
Leasehold improvements 1,294,017 1,294,015
- --------------------------------------------------------------
Total premises and
equipment 15,122,632 14,197,746
Accumulated depreciation
and amortization (6,312,081) (5,600,416)
- --------------------------------------------------------------
Premises and
equipment, net $ 8,810,551 $ 8,597,330
==============================================================
</TABLE>
At December 31, 1995, the Corporation was obligated for the next five years
for rental commitments under non-cancelable operating leases on the main and
branch offices and equipment as follows:
<TABLE>
<S> <C>
1996 $ 973,248
1997 717,065
1998 516,495
1999 523,191
2000 485,552
- --------------------------------------------------------------
Total $3,215,551
==============================================================
</TABLE>
Rental expense amounted to approximately $1,043,000, $943,000 and $750,000
in 1995, 1994 and 1993, respectively.
<PAGE> 23
20
NOTE 7 - INTEREST BEARING DEPOSITS
Total interest bearing deposits as presented on the consolidated balance
sheets are comprised of the following classifications:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Interest bearing demand $ 74,201,892 $ 73,063,663
Savings 151,069,955 157,326,971
Time:
In denominations
under $100,000 212,828,971 169,288,213
In denominations of
$100,000 or more 35,378,525 16,076,938
- ---------------------------------------------------------------
Total interest bearing
deposits $ 473,479,343 $ 415,755,785
===============================================================
</TABLE>
Interest expense on deposits is summarized below:
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Interest bearing
demand $ 1,316,274 $ 1,274,616 $ 1,457,267
Savings 3,969,075 3,747,474 4,081,979
Time:
In denominations
under $100,000 10,681,937 5,977,108 5,744,956
In denominations of
$100,000 or more 1,566,949 618,382 589,389
- ---------------------------------------------------------------
Total interest
on deposits $ 17,534,235 $ 11,617,580 $ 11,873,591
===============================================================
</TABLE>
NOTE 8 - SHORT-TERM BORROWINGS
Short-term borrowings consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Securities sold under
repurchase agreements $ 44,372,238 $ 29,059,245
Federal funds purchased 1,451,000 1,302,000
U.S. Treasury tax and
loan notes 3,835,921 4,535,697
- --------------------------------------------------------------
Total short-term
borrowings $ 49,659,159 $ 34,896,942
- --------------------------------------------------------------
Weighted average interest
rate at period end 5.0% 4.6%
- --------------------------------------------------------------
Average amount outstanding
during year $ 44,852,000 $ 30,572,000
- --------------------------------------------------------------
Approximate weighted average
interest rate during the year 5.0% 3.4%
- --------------------------------------------------------------
Maximum amount outstanding
as of any month-end $ 50,588,103 $ 36,356,938
==============================================================
</TABLE>
NOTE 9 - FHLB ADVANCES
The Bank has entered into various borrowing agreements with the Federal
Home Loan Bank (FHLB) of Cincinnati. Pursuant to collateral agreements with the
FHLB, advances are secured by all stock invested in the FHLB and qualifying
first mortgage loans. At December 31, 1995, FHLB advances were comprised of the
following:
<TABLE>
<CAPTION>
MATURITY INTEREST RATE AMOUNT
- ---------------------------------------------------
<S> <C> <C>
1996 4.85% - 6.50% $ 8,245,000
1997 5.15% - 5.30% 2,260,000
1998 5.35% - 7.85% 4,775,000
1999 5.50% - 7.95% 4,785,000
2000 6.00% - 8.00% 10,300,000
2001 6.10% 315,000
2002 6.25% 330,000
2003 6.25% 350,000
- ---------------------------------------------------
TOTAL $ 31,360,000
===================================================
</TABLE>
NOTE 10 - RETIREMENT PLANS
PENSION PLAN - The Corporation has a noncontributory defined benefit
pension plan covering substantially all of its employees. In general, benefits
are based on years of service and the employee's compensation. The
Corporation's policy is to fund the plan sufficiently to meet the minimum
funding requirement set forth in the Employee Retirement Income Security Act of
1974, plus such additional amounts as the Corporation may determine to be
appropriate up to the maximum amount that can be deducted for federal tax
purposes. Contributions are intended to provide not only for benefits
attributed to service date but also for those expected to be earned in the
future. For financial reporting purposes, pension expense is calculated using
the projected unit cost method. The following table sets forth the plan's
funded status and amounts recognized in the Corporation's consolidated
financial statements at December 31, respectively:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Actuarial present value of
accumulated benefit obligation,
including vested benefits of
$3,445,045 and $3,138,608 at
December 31, 1995 and 1994,
respectively $ 3,518,992 $ 3,206,361
- --------------------------------------------------------------
Plan assets at fair value, primarily
U.S. Government securities,
corporate bonds and invest-
ment in equity funds 5,191,462 3,874,700
Actuarial present value of
projected benefit obligation
for services rendered to date (5,423,923) (4,828,039)
- --------------------------------------------------------------
Projected benefit obligation
in excess of plan assets (232,461) (953,339)
Unrecognized net loss 510,757 1,040,100
Unrecognized transition asset,
net of amortization (110,700) (142,600)
Unrecognized prior service cost 97,604 104,374
- --------------------------------------------------------------
Prepaid pension asset $ 265,200 $ 48,535
==============================================================
</TABLE>
<PAGE> 24
21
Net pension expense included the following:
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Service cost-benefits
earned during
the year $ 371,991 $ 337,877 $ 251,874
Interest cost on
benefit obligation 352,562 362,939 348,498
Return on plan assets (922,074) 125,516 (154,178)
Net amortization
and deferral 607,062 (508,135) (233,736)
- --------------------------------------------------------------
Net pension expense $ 409,541 $ 318,197 $ 212,458
==============================================================
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Significant assumptions used:
Discount rate 7.5% 7.5% 7.5%
Rate of increase in
compensation levels 5.0% 5.0% 5.0%
Long-term rate
of return on assets 7.5% 7.5% 7.5%
</TABLE>
PROFIT SHARING PLAN - The UNB Tax-Deferred Savings Plan covers all
qualified employees. The annual plan expense is based upon discretionary
matching of employees' voluntary pre-tax contributions. The Corporation's
contributions are invested in UNB Corp. common stock, and become vested after
three years of service. Employee voluntary contributions are fully vested at
all times. Employee contributions are invested in a money market fund, a
balanced stock and bond fund, or in UNB Corp. common stock based on employee
investment elections. The expense related to this plan totaled $219,000,
$231,000 and $273,960 in 1995, 1994 and 1993, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - The Corporation sponsors a
defined benefit postretirement medical plan. Employees who retire on or after
completion of 10 years of service and attainment of age 55 are eligible to
receive postretirement medical benefits. The retiree may also receive coverage
for dependents. Prior to the attainment of age 65, coverage is provided under
the Corporation's group major medical insurance plan. At age 65, coverage is
provided under a Medicare supplement plan.
The Corporation's plan is contributory. Retirees under age 65 pay a lower
premium than retirees who have attained age 65.
The following table sets forth the plan's funded status reconciled with the
amounts shown in the Corporation's consolidated balance sheets at December 31:
Accumulated postretirement benefit obligation:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Retirees $ (238,720) $ (268,259)
Fully eligible active
plan participants (314,901) (294,300)
Other active plan participants (1,020,835) (866,733)
- --------------------------------------------------------------
Accumulated postretirement
benefit obligation (1,574,456) (1,429,292)
Unrecognized gain (539,090) (590,246)
Unrecognized transition
obligation 1,222,480 1,298,884
- --------------------------------------------------------------
Accrued postretirement
benefit $ (891,066) $ (720,654)
==============================================================
</TABLE>
Net periodic postretirement benefit expense for 1995, 1994 and 1993 included
the following components:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Service cost-benefits
attributed to service
during the period $ 93,431 $ 82,683 $ 129,802
Interest cost on
accumulated postretire-
ment benefit obligation 100,050 77,908 120,892
Amortization on transition
obligation over 20 years 76,404 76,404 76,404
- ---------------------------------------------------------------
Total $ 269,885 $ 236,995 $ 327,098
===============================================================
</TABLE>
Benefit payments of $48,317, $42,759 and $37,840 were made for
postretirement medical benefits in 1995, 1994 and 1993, respectively.
For measurement purposes, a 13% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1995, 1994 and 1993. The
rate was assumed to gradually decrease to 7% after four years in 1995, 7% after
six years in 1994 and 7% after 25 years in 1993. The health care cost trend
assumption has a significant effect on the amounts reported. An increase in the
assumed health care cost trends rates by 1% in each year would increase the
accumulated postretirement benefit obligation by approximately $205,000 and
$194,000 at December 31, 1995 and 1994, respectively, and the aggregate of the
service and interest cost components of net periodic postretirement benefit
cost for the year then ended by approximately $25,000, $23,000 and $57,000 for
1995, 1994 and 1993, respectively.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7%, 7% and 6% at December 31, 1995,
1994 and 1993, respectively.
NOTE 11 - STOCK OPTION AND PERFORMANCE UNIT PLAN
In 1987, the shareholders approved a Stock Option and Performance Unit Plan
reserving 191,010 shares of common stock for the granting of options to
executive officers and other senior Management personnel. Options are not
exercisable for at least three years from the date of grant and are not fully
exercisable until five years from the date of grant. The duration of the
exercise period is ten years. As such options are exercised, shareholders'
equity will be credited with the proceeds.
As of December 31, 1995, there were 4,868 shares exercisable at $14.04,
15,292 shares exercisable at $14.47, 15,216 shares exercisable at $15.55, 7,455
shares exercisable at $16.78 and 4,184 shares exercisable at $19.05. In January
1996, options to purchase 13,841 shares were granted at a price of $44.00.
<PAGE> 25
22
NOTE 11 - CONTINUED
<TABLE>
<CAPTION>
Number of Shares
-----------------------------------------
Available Range of Option
for Grant Exercised Outstanding Price per Share
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 98,526 2,200 90,284 $ 13.39 $ 19.05
Granted (45,384) 45,384 24.00 24.00
Exercised 13,915 (13,915) 13.39 14.04
- ----------------------------------------------------------------------------------------------
Balance, December 31, 1993 53,142 16,115 121,753 13.39 24.00
Granted (11,598) 11,598 29.00 29.00
Exercised 3,475 (3,475) 13.39 16.78
- ----------------------------------------------------------------------------------------------
Balance, December 31, 1994 41,544 19,590 129,876 14.04 29.00
Granted (11,922) 11,922 38.50 38.50
Exercised 4,194 (4,194) 14.04 19.05
- ----------------------------------------------------------------------------------------------
Balance, December 31, 1995 29,622 23,784 137,604 14.04 38.50
==============================================================================================
</TABLE>
In 1996, the Corporation is required to adopt the provisions of SFAS No.
123, "Accounting for Stock-Based Compensation." This statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans. Upon adoption of this statement, the Corporation will
disclose the pro forma effect on earnings per share of recognizing the
compensation cost for stock options based on the fair value method. Management
does not anticipate that this pronouncement will have a material impact on the
Corporation's result of operations or earnings per share upon adoption.
NOTE 12 - OTHER OPERATING EXPENSES
Other operating expenses are summarized as follows:
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
<S> <C> <C>
FDIC deposit
insurance $ 691,872 $ 902,432 $ 910,659
Ohio franchise and
other taxes 724,387 691,405 603,756
Stationery, supplies
and postage 1,017,029 908,607 805,667
Marketing expense 573,016 556,842 505,419
Contributions 191,808 55,883 166,282
Professional Fees 531,766 366,370 675,985
Intangible
amortization 1,094,334 641,665 536,863
Other expenses 2,248,741 2,407,881 1,808,968
- ----------------------------------------------------------------
Total other operating
expenses $ 7,072,953 $ 6,531,085 $ 6,013,599
================================================================
</TABLE>
NOTE 13 - INCOME TAXES
Income taxes consist of the following:
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Current tax expense $ 4,095,275 $ 3,420,015 $ 3,663,329
Deferred tax benefit (309,785) (43,127) (752,661)
- ---------------------------------------------------------------
Total income taxes $ 3,785,490 $ 3,376,888 $ 2,910,668
===============================================================
</TABLE>
The sources of gross deferred tax assets and gross deferred tax liabilities
at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Items giving rise to
deferred tax assets:
Allowance for loan
losses in excess of
tax reserve $ 2,183,861 $1,800,426 $ 1,661,244
Deferred loan
fees and costs 24,736 91,176 136,296
Postretirement benefits 333,400 255,200 191,960
OREO writedown 94,180 94,180 94,180
Unrealized loss on
securities available
for sale - 742,143 -
Intangible amortization 104,058 16,478 -
Other 140,323 43,552 167,268
Items giving rise to
deferred tax liabilities:
Depreciation (775,211) (788,503) (743,707)
Loan basis
from acquisition (429,148) (362,745) (507,619)
FHLB Stock (162,234) (61,764) (15,572)
Unrealized gain
on securities
available for sale (435,262) - (311,612)
Other (368,712) (252,532) (296,417)
Valuation allowance
for deferred tax assets - - -
- ---------------------------------------------------------------
Net deferred tax asset $ 709,991 $1,577,611 $ 376,021
===============================================================
</TABLE>
Based on prior taxes paid, the deferred tax asset is more likely than not
to be realized.
<PAGE> 26
23
The difference between the provision for income taxes and amounts computed
by applying the statutory income tax rate of 34% to income before taxes is as
follows:
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Income taxes computed
at the statutory tax rate
on pretax income $ 3,796,085 $ 3,401,692 $ 3,024,196
Add tax effect of:
Tax exempt income (123,336) (154,035) (148,885)
Other 112,741 129,231 35,357
- ----------------------------------------------------------------------------
Total income
taxes $ 3,785,490 $ 3,376,888 $ 2,910,668
============================================================================
</TABLE>
Taxes attributable to securities gains approximated $2,104 in 1995, $69,633
in 1994 and $13,981 in 1993.
NOTE 14 - COMMITMENTS AND CONTINGENCIES
RESERVE REQUIREMENTS: The Corporation's subsidiary bank is required to
maintain approximately $11.6 million of cash on hand or on deposit with the
Federal Reserve to meet regulatory reserve requirements at December 31, 1995.
These balances do not earn interest.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Corporation is a
party to financial instruments in the normal course of business to meet the
financial needs of its customers. The contract or notional amounts of these
instruments are not included in the consolidated financial statements. The
exposure to credit loss in the event of nonperformance by the other party to
the financial instruments for commitments to make loans is represented by the
contractual amounts of these instruments. The Corporation does not anticipate
any material losses from these transactions. The contract or notional amounts
of these instruments on December 31, are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Commitments to
extend credit $124,829,000 $88,011,000
Standby letters of credit
and financial guarantees 6,362,000 2,273,000
Interest rate swaps 6,625,000 7,875,000
</TABLE>
The amounts above represent contracts entered into by the Corporation. The
Corporation has not participated any portions to other financial institutions.
At December 31, 1995, $18,259,000 of the commitments to extend credit were
fixed rate and $106,570,000 were adjustable rate. In addition, all of the
standby letters of credit were adjustable rate.
The Corporation uses the same credit policies in extending commitments and
letters of credit and financial guarantees as it does for on-balance-sheet
financial instruments. The Corporation controls its exposure to loss from these
agreements through credit approval processes and monitoring procedures. Letters
of credit and commitments to extend credit are generally issued for one year or
less. The total commitment amounts do not necessarily represent future cash
disbursements, as many of the commitments expire without being drawn upon. The
Corporation may require collateral in extending commitments, which may include
cash, accounts receivable, securities, and real or personal property.
INTEREST RATE SWAP: The Corporation has entered into an agreement to assume
variable interest payments in exchange for fixed interest payments (interest
rate swaps). At December 31, 1995 and 1994 the notional amount of the interest
rate swap agreement was $6,625,000 and $7,875,000, respectively. The notional
amounts of the interest rate swaps do not represent amounts exchanged by the
parties and are not a measure of the Corporation's exposure through its use of
derivatives. The amounts exchanged are determined by reference to the notional
amounts and the other terms of the interest rate swap. The agreement calls for
quarterly reductions in the notional amount with a final expiration of November
26, 2000. Variable interest payments received are based on the 3 month LIBOR
rate which is adjusted on a quarterly basis. The net income (cost) of this
agreement for 1995 and 1994 was approximately $219,000 and ($152,000),
respectively, which was included in income.
CONTINGENCIES: The nature of the Corporation's business results in a
certain amount of litigation. Management, after reviewing with counsel all
actions and proceedings pending against or involving UNB Corp. and its
subsidiaries, considers that the aggregate liability or loss, if any, resulting
from them will not be material to the Corporation's financial position.
DIVIDEND AND REGULATORY CAPITAL REQUIREMENTS: Dividends paid by the Bank
are the primary source of funds available to the Corporation for payment of
dividends to shareholders and for other working capital needs. The payment of
dividends by the subsidiary bank to the Corporation is subject to restrictions
by regulatory authorities. These restrictions generally limit dividends to the
current and prior two year's retained earnings. At December 31, 1995,
approximately $12,270,000 of the Bank's retained earnings were available for
dividends to the Corporation under these guidelines. In addition to these
restrictions, as a practical matter, dividend payments cannot reduce regulatory
capital levels below the Corporation's regulatory capital requirements and
minimum regulatory guidelines. These restrictions do not presently limit the
Corporation from paying normal dividends.
The Corporation's regulatory capital requirements and ratios at December
31, 1995 follow:
<TABLE>
<CAPTION>
Regulatory UNB Corp.
Minimum 1995
<S> <C> <C>
Tier I Risk-Based Capital 6% 11.42%
Total Risk-Based Capital 10% 12.67%
Leverage Ratio 3.0% - 5.0% 8.26%
</TABLE>
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
CASH AND SHORT-TERM INVESTMENTS - For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
INVESTMENT SECURITIES - For investment securities and mortgage backed
securities, fair values are based on quoted market prices or dealer quotes.
LOANS - The fair value of loans is estimated by discounting future cash
flows using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities. The fair
value of unrecorded commitments was not material at December 31, 1995 and 1994.
<PAGE> 27
24
DEPOSIT LIABILITIES - The fair value of demand deposits, savings accounts,
and certain money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed-maturity certificates of deposit is
estimated by discounting future cash flows using the rates currently offered
for deposits of similar remaining maturities.
INTEREST RATE SWAPS - The fair value of the interest rate swap reflects the
amount that the Corporation would receive or pay to terminate the swap at the
reporting date based on a dealer quote.
Below are the estimated fair values of the Corporation's financial
instruments at December 31, 1995 and 1994, respectively:
<TABLE>
<CAPTION>
1995 ESTIMATED 1994 Estimated
CARRYING FAIR Carrying Fair
VALUE VALUE Value Value
<S> <C> <C> <C> <C>
Financial assets:
Cash equivalents $ 31,735,149 $ 31,735,149 $ 30,210,684 $ 30,210,684
Short-term investments 4,814,509 4,814,509 767,369 767,369
Securities 128,216,265 128,514,880 139,508,976 138,714,949
Loans held for sale - - 144,200 144,200
Loans, net 507,333,632 469,365,000 403,250,178 383,627,186
Accrued interest receivable 4,170,096 4,170,096 3,664,740 3,664,740
Financial liabilities:
Demand and savings deposits (298,979,664) (298,979,664) (301,405,364) (301,405,364)
Time deposits (248,207,496) (250,823,000) (185,365,151) (180,913,358)
Short-term borrowings (5,286,921) (5,286,921) (5,837,697) (5,837,697)
Repurchase agreements (44,372,238) (44,372,238) (29,059,245) (29,059,245)
FHLB advances (31,360,000) (32,352,000) (16,660,000) (14,076,000)
Accrued interest payable (3,334,210) (3,334,210) (2,316,421) (2,316,421)
Off-balance-sheet instruments:
Commitments to extend credit 124,829,000 124,829,000 88,011,000 88,011,000
Standby letters of credit 6,362,000 6,362,000 2,273,000 2,273,000
Interest rate swaps - 367,544 - 1,022,415
</TABLE>
NOTE 16 - PARENT COMPANY
Condensed financial information of UNB Corp. (parent company only) follows:
Condensed Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 638,609 $ 195,416
Interest bearing deposit in subsidiary bank 36,545 34,776
Other securities 9,473,050 10,361,906
Marketable equity securities 2,677,263 1,441,937
Investment in subsidiaries, at equity in underlying
value of net assets 53,209,263 46,567,942
Other assets (705,267) 38,465
- -------------------------------------------------------------------------------------------------------------
Total Assets $ 65,329,463 $ 58,640,442
=============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Other Liabilities $ 2,580 -
Shareholders' equity 65,326,883 $ 58,640,442
- -------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 65,329,463 $ 58,640,442
=============================================================================================================
</TABLE>
<PAGE> 28
25
<TABLE>
<CAPTION>
Condensed Statements of Income
For the three years ended December 31, 1995 1995 1994 1993
<S> <C> <C> <C>
Income
Cash dividends from subsidiary $ 2,128,900 $ 3,740,500 $ 1,455,000
Interest on deposit in subsidiary bank 3,046 13,891 20,823
Dividends on marketable equity securities 49,352 33,134 45,572
Interest on investments and mortgage-backed securities 569,140 421,578 154,916
Securities gains (25) 200,495 -
- -------------------------------------------------------------------------------------------------------------------
Total income 2,750,413 4,409,598 1,676,311
- -------------------------------------------------------------------------------------------------------------------
EXPENSES
Other expenses 237,236 149,188 159,009
- -------------------------------------------------------------------------------------------------------------------
Total expenses 237,236 149,188 159,009
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAXES AND EQUITY
IN UNDISTRIBUTED NET INCOME OF SUBSIDIARIES 2,513,177 4,260,410 1,517,302
FEDERAL INCOME TAX EXPENSE 113,945 176,769 21,183
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EQUITY IN UNDISTRIBUTED NET
INCOME OF SUBSIDIARIES 2,399,232 4,083,641 1,496,119
EQUITY IN UNDISTRIBUTED NET INCOME OF SUBSIDIARIES 4,980,234 2,544,448 4,841,737
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 7,379,466 $ 6,628,089 $ 6,337,856
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
For the three years ended December 31, 1995 1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,379,466 $ 6,628,089 $ 6,337,856
Equity in undistributed net income of subsidiaries (4,980,234) (2,544,448) (4,841,737)
Net security (gains) losses 25 (200,495) -
Other, net 171,926 77,305 (6,146)
- -------------------------------------------------------------------------------------------------------------------
Net cash from operating activities 2,571,183 3,960,451 1,489,973
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest
bearing deposits in subsidiary bank (1,769) 884,830 (761,650)
Proceeds from sale and maturities of securities 36,483,943 13,547,439 3,291,760
Purchase of securities (35,631,589) (16,610,710) (10,441,282)
- -------------------------------------------------------------------------------------------------------------------
Net cash from investing activities 850,585 (2,178,441) (7,911,172)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends (3,016,677) (2,742,404) (2,388,004)
Proceeds from shares issued through
dividend reinvestment - 739,048 717,246
Proceeds from issuance of stock 38,102 355,192 7,623,210
- -------------------------------------------------------------------------------------------------------------------
Net cash from financing activities (2,978,575) (1,648,164) 5,952,452
- -------------------------------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 443,193 133,846 (468,747)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 195,416 61,570 530,317
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 638,609 $ 195,416 $ 61,570
===================================================================================================================
</TABLE>
<PAGE> 29
26
NOTE 17 - QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a consolidated
summary of quarterly information:
<TABLE>
<CAPTION>
In thousands (except for per share data)
Quarters Ended
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
1995
INTEREST INCOME $ 11,321 $ 12,281 $ 12,748 $ 13,409
NET INTEREST INCOME 6,731 6,933 7,003 7,286
PROVISION FOR LOAN LOSSES 360 380 480 530
NET INCOME 1,602 1,791 1,964 2,022
EARNINGS PER COMMON SHARE:
PRIMARY 0.55 0.61 0.67 0.69
FULLY DILUTED 0.54 0.61 0.67 0.69
1994
Interest income $ 8,460 $ 8,822 $ 9,526 $ 10,892
Net interest income 5,653 5,854 6,061 6,623
Provision for loan losses 300 240 240 240
Net income 1,409 1,639 1,734 1,846
Earnings per common share:
Primary 0.50 0.57 0.61 0.64
Fully diluted 0.47 0.55 0.58 0.62
1993
Interest income $ 9,127 $ 8,842 $ 8,785 $ 8,626
Net interest income 5,782 5,587 5,665 5,687
Provision for loan losses 525 525 300 845
Net income 1,843 1,443 1,562 1,490
Earnings per common share:
Primary 0.74 0.56 0.56 0.51
Fully diluted 0.74 0.54 0.53 0.46
</TABLE>
All per share data has been adjusted for any stock dividends and splits.
<PAGE> 30
27
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
INTRODUCTION
The following is Management's discussion and analysis of the financial
condition and results of the operations of UNB Corp. (the Corporation). It is
intended to amplify certain financial information regarding UNB Corp. and
should be read in conjunction with the Consolidated Financial Statements,
related Notes, and the Five Year Summary of Selected Data included in this
report.
UNB Corp. is a locally owned and operated one-bank holding company whose
principal subsidiary is the United National Bank and Trust Company (the Bank).
The Bank is a full service commercial bank offering a complete range of
personal, trust, and business financial products and services through its
twenty branch network located in Stark and southern Summit Counties.
On September 16, 1994, UNB Corp., acting through the Bank, successfully
acquired four branches of the former Transohio Federal Savings Bank (Transohio)
from the Resolution Trust Corporation (RTC). Transohio was a federal savings
and loan association headquartered in Cleveland, Ohio which was placed in
receivership by the Office of Thrift Supervision and operated by the RTC as
conservator. The Bank acquired certain assets of cash and options to acquire
certain fixed assets and received cash from the RTC equal to the difference
between the liabilities assumed by the Bank and the value of the assets
purchased. The Bank assumed approximately $70.4 million in deposit liabilities
and received certain assets and cash from the RTC less a premium paid to the
RTC. Performance in 1995 reflected a full year of the impact of this
acquisition.
RESULTS OF OPERATIONS
UNB Corp.'s net income for 1995 was $7,379,466 which represents an 11.3%
increase over 1994 net income of $6,628,089, which in turn represented a 4.6%
increase over 1993 net income of $6,337,856. Primary earnings per share for
1995 was $2.52, an increase of $.20 per share from 1994, whereas 1994 primary
earnings per share of $2.32 represented a $.05 decrease from 1993. On a fully
diluted basis, earnings per share for 1995 were $2.51, compared to $2.22 for
1994 and $2.27 for 1993, respectively.
Return on average assets was 1.14%, 1.24%, and 1.29% for 1995, 1994, and
1993, respectively. The Corporation's return on average equity, which is to a
great extent effected by its strong capital base, was 11.98%, 11.45% and 12.63%
for the same periods. The reduction in primary and fully diluted earnings per
share and return on average equity from 1993 to 1994 reflects the impact of the
adoption of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," in addition to the impact of the inclusion of the 1993 stock offering
in average equity for a full year in 1994 and 1995. This additional equity was
raised to position the Corporation to take advantage of future acquisition and
expansion opportunities, such as the Transohio branches acquired in 1994.
NET INTEREST INCOME
Net interest income, the primary source of earnings for the Corporation, is
the difference between interest and loan fee income generated on earning assets
and the interest expense paid on deposits and borrowed funds (Table 1). For
1995, net interest income increased to $27,953,146 from $24,191,419 in 1994, an
increase of 15.5%. For 1994, net interest income increased to $24,191,419 from
$22,721,100 in 1993, an increase of 6.5%. These annual increases are primarily
attributable to the growth in interest earning assets exceeding the growth in
interest bearing liabilities. Cost of funds rates continued to increase more
rapidly in 1995 than earning asset yields. While this difference between the
funding cost and earnings yield has decreased, strong earning asset growth has
prevented an adverse impact on net interest income.
Total interest income in 1995 increased by $12,059,082, or 32.0%, over
1994. This compares to a $2,319,156, or 6.6% increase from 1993 to 1994. In
1995, the most significant factor to impact the level of interest income was
the growth in average earning assets to $600,130,000 from $495,711,000 in 1994.
In 1995, the Bank was positioned to take advantage of strong loan demand
attributable to a low interest rate environment. Strong deposit growth combined
with the proceeds from the assumption of Transohio deposits in 1994 which were
placed in the Securities Portfolio and whose cash flows and maturities
supported the 1995 loan growth contributed to the strong performance. Comparing
1993 to 1994, growth was attributed to increased earning assets funded by
deposits assumed from the Transohio branch acquisition and strong loan growth
concentrated in the Consumer Loan Portfolio. The yield on earning assets
increased by
[FIGURE]
NET INCOME millions
91 92 93 94 95
3.601 4.779 6.338 6.628 7.379
[FIGURE]
RETURN ON EQUITY percent
91 92 93 94 95
12.93 12.32 12.63 11.45 11.98
[FIGURE]
EARNINGS PER SHARE dollars
91 92 93 94 95
1.89* 2.03* 2.37* 2.32 2.52
*Adjusted for any stock dividends and splits
<PAGE> 31
28
Table 1
<TABLE>
<CAPTION>
Net Interest Income Years ended December 31,
(In thousands of dollars) 1995 1994 1993
<S> <C> <C> <C>
Interest income $ 49,759 $ 37,699 $ 35,380
Interest expense 21,806 13,508 12,659
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income 27,953 24,191 22,721
Tax equivalent adjustments* 139 183 161
================================================================================================================================
Net interest income (fully taxable equivalent basis) $ 28,092 $ 24,374 $ 22,882
Net interest income (F.T.E.) as percent of average earning assets 4.68% 4.92% 5.09%
<FN>
*The tax equivalent adjustment is computed by stating non-taxable income
on a tax equivalent basis using the statutory tax rate of 35% and adjusted
for non-deductible interest expense for 1995, 1994 and 1993.
</TABLE>
67 basis points in 1995, a result of higher yields in mortgage-backed and
other securities and loans. From 1993 to 1994, the yield on earning assets
decreased by 26 basis points as a result of lower yields earned on tax-exempt
and other securities and loans.
Total interest expense increased in 1995 by $8,297,355, or 61.4%, over
1994. This compares to a $848,837, or 6.7% increase from 1993 to 1994. Average
interest bearing liabilities grew to $511,255,000, an increase of $96,458,000
or 23.3% over 1994. This compares to a $30,477,000, or 7.9% increase from 1993
to 1994. In 1995, interest expense was impacted for the entire year by more
expensive Transohio deposits which contained a higher percentage of deposits in
more expensive Certificates of Deposit. The Bank's core deposit to total
deposit percentage declined in 1995 as the Bank became more reliant on more
expensive Certificates of Deposit and Federal Home Loan Bank Advances to fund
the strong loan growth. Passbook and Statement Savings deposits continued to
decline as depositors sought higher yields in Certificates of Deposit and
alternative investments outside the banking industry. During the second half of
the year, the Bank's emphasis on funding asset growth was directed toward
attracting and retaining Certificates of Deposit. During this period, the Bank
offered very competitive rates in all maturity ranges. The increase from 1993
to 1994 was significantly impacted by the Transohio acquisition, since rates on
Transohio deposits, on average, were higher than those paid on the Bank's own
deposits.
Net interest margin is the measure of the net yield on average earning
assets on a fully taxable basis. The net interest margin is calculated by
dividing net interest income on a fully taxable basis by average earning
assets. The net interest margin is affected by the level and mix of earning
assets and supporting deposits and borrowings and the interest rate spread
between them. The Bank's net interest margin decreased to 4.68% in 1995. From
1993 to 1994, the net interest margin decreased from 5.09% to 4.92% (Table 1).
The decline for these two periods was the net result of a smaller increase in
the yields received on interest earning assets than the increase in rates paid
on interest bearing liabilities.
OTHER INCOME
Other income for 1995 totaled $5,616,985, a decrease of $26,817, or less
than 1.0%, from 1994. This compares to a decrease of $365,088, or 6.1% from
1993 to 1994 (Table 3). Service charges on deposits decreased $53,457, or 2.2%,
in 1995. The Bank's deposit accounts were restructured in 1994. This
restructuring afforded depositors the opportunity to avoid service charges by
carrying minimum balances in their accounts. While this restructuring reduced
service charges, deposit balances and average account balances increased. From
1993 to 1994, service charges increased $160,842, or 7.1%. This growth is the
result of the increase in the deposit base, primarily from the Transohio
deposit acquisition.
Trust Department earnings showed continued growth in 1995 with income up
$345,639, or 16.0%, from 1994. A new fee structure instituted in the second
half of 1994 had a significant impact on 1995 income. Managed assets increased
to $489.0 million compared to $391.4 million and $392.6 million in 1994 and
1993, respectively. This increase in managed assets in 1995 was the primary
contributor to the increase in Trust income. The reduction in managed assets
from 1993 to 1994 was partially the result of the decline in market values
prompted by the effect of rising interest rates on fixed income assets.
Other operating income for 1995 was $667,627, a decrease of $149,440, or
18.3% compared to 1994. The primary factor contributing to the decline in 1995
was the reduction in fee income from the sales of annuities and mutual funds
investments. In 1995, the Bank switched third party providers which left the
program without sales support for a portion of the year. The Bank has since
joined with Essex Corporation and anticipates increased income in 1996. From
1993 to 1994, operating income declined $389,000 or 32.3%. In 1993, income
benefited significantly from a $325,000 one-time positive valuation adjustment
on other real estate owned.
In 1994, a one-time gain was taken to recognize a portion of the market
appreciation in the Corporation's equity portfolio. Gains on mortgage loans
originated for resale in 1995 contributed $67,087 compared to $38,031 in 1994.
In 1994, gains declined $324,920 compared to 1993. This was due to the
unfavorable impact of the rising interest rate environment in 1994. Should
interest rates rise in 1996, there will be little opportunity to improve on
1995's performance.
OTHER EXPENSE
Total other expense of $20,655,175 in 1995 increased over 1994 by
$1,844,931, or 9.8%. From 1993 to 1994, expenses increased by $1,169,948, or
6.6% (Table 3). Total employee compensation, including salaries, wages and
benefits, grew 10.5% from 1994. From 1993 to 1994, the increase was 6.6%.
For 1995, total employee compensation accounted for 49.1% of Other Expense
compared to 48.8% in both 1994 and 1993. A major contributor to this increase
was a full year's cost of staff additions which resulted from the Transohio
branch acquisition. In addition, the Bank's incentive payout from the
performance based Stakeholder Program increased in 1995. While salary and
benefits per employee increased in 1995, total employee com-
<PAGE> 32
29
pensation equaled only 1.7% of average earning assets compared to 1.9% in 1994
and 1.9% in 1993. Management monitors employee compensation closely through a
well defined salary administration program and merit increases tied to the
Bank's "pay for performance" program.
The one-time expenses in 1994 associated with the Transohio branch
acquisition were substantially matched in 1995 by a full year's amortization of
the Transohio goodwill and core deposit intangible assets recorded as part of
the transaction.
In 1995, new risk based deposit insurance premiums went into effect as
part of the Federal Deposit Insurance Corporation Improvement Act (FDICIA)
passed by Congress in 1991. The annual assessment for each institution is now
determined on the basis of capital adequacy and other regulatory risk
assessments. Due to the Bank's capital levels and supervisory ratings and the
overcapitalization of the Bank Insurance Fund (BIF), the premium on BIF insured
deposits decreased from $0.23 per $100 of deposits to $0.04 effective in June
of 1995. For at least the first six months of 1996, the premium on BIFinsured
deposits has been reduced to $0. Deposits of the Bank that were acquired
through the purchase of savings and loan branches from the RTC, and are insured
by the Savings Association Insurance Fund (SAIF), continue to be assessed
premiums at the rate of $0.23 per $100 of deposits. The FDIC premium expense
reduction to the Bank amounted to $210,560 in 1995. In 1996, Management
anticipates, based on legislation currently pending in Congress, that the Bank
will be required to pay a one-time assessment of approximately $700,000 on
deposits acquired through the RTC and insured by the SAIF fund. This assessment
will be used to recapitalize the SAIF fund which insures these deposits. After
paying the assessment, the premium on those deposits is expected to decline. In
1997, if the FDIC continues to assess deposits at the lower premium rates,
Management expects expense savings approximating the amount of the one-time
assessment.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained by Management at a level
considered adequate to cover possible future losses. The amount of the
provision for loan losses charged to operating expenses is the amount
necessary, in the opinion of Management, to maintain the allowance for loan
losses at an adequate level. Management determines the adequacy of the
allowance based on past experience, changes in portfolio size and mix, relative
quality of the Loan Portfolio and the rate of loan growth, assessments of
current and future economic conditions, information about specific borrower
situations, including their financial position and collateral values, and other
factors and estimates, which are subject to change over time. While
Management's periodic analysis of the allowance for loan losses may dictate
portions of the allowance be allocated to specific problem loans, the entire
amount is available for any loan charge-offs that may occur.
The allowance for loan losses on December 31, 1995, was $7,242,003, or
1.40% of outstanding loans, compared to $6,348,219, or 1.54%, at year-end
1994, and $6,055,843, or 1.73%, at year-end 1993.
The provision for loan losses charged to operating expense was $1,750,000
in 1995 compared to $1,020,000 in 1994 and $2,195,000 in 1993. The increase in
1995 was a direct result of strong loan growth. The provision declined in 1994
compared to 1993 due to Management's decision in 1993 to fund the allowance so
that as a percentage of total loans outstanding, the allowance was comparable
to the Bank's peers. Management continued to maintain the allowance at a level
comparable to the Bank's peers in 1994 and 1995.
Table 2
<TABLE>
<CAPTION>
Changes In Net Interest Differential - Rate/Volume Analysis December 31,
1995, 1994 and 1993
(In thousands of dollars) 1995 vs. 1994 1994 vs. 1993
Increase (Decrease) Increase (Decrease)
Due To Change In Due To Change In
Volume Rate Total Volume Rate Total
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Interest earning deposits with other banks $ (230) $ 39 $ (191) $ 148 $ 93 $ 241
Federal funds sold 241 67 308 (22) 50 28
Securities:
Taxable 378 287 665 (82) 7 (75)
Tax exempt (56) (25) (81) (4) (25) (29)
Other investments 110 62 172 (14) (161) (175)
Mortgage-backed securities 1,105 345 1,450 (77) 16 (61)
Loans 6,892 2,801 9,693 3,866 (1,454) 2,412
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest income 8,440 3,576 12,016 3,815 (1,474) 2,341
INTEREST EXPENSE:
Interest bearing demand deposits 34 8 42 78 (260) (182)
Savings (13) 235 222 192 (527) (335)
Certificates and other time deposits 3,433 2,220 5,653 234 27 261
Short-term borrowings 590 626 1,216 16 325 341
Long-term borrowings 937 228 1,165 755 9 764
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest expense 4,981 3,317 8,298 1,275 (426) 849
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income $ 3,459 $ 259 $ 3,718 $ 2,540 $(1,048) $ 1,492
=================================================================================================================================
</TABLE>
<PAGE> 33
30
Table 3
<TABLE>
<CAPTION>
Other Income and Other Expense Years ended December 31,
(In thousands of dollars) 1995 1994 1993
<S> <C> <C> <C>
OTHER INCOME:
Service charges on deposits $ 2,368 $ 2,421 $ 2,260
Trust Department income 2,509 2,163 2,138
Other operating income 667 817 1,207
Gains on loans originated for resale 67 38 363
Securities gains, net 6 205 41
- ---------------------------------------------------------------------------------------------------------------------------------
Total other income $ 5,617 $ 5,644 $ 6,009
=================================================================================================================================
OTHER EXPENSE:
Salaries and wages $ 8,013 $ 7,533 $ 6,954
Retirement and other employee benefits 2,130 1,644 1,658
Occupancy expense 1,213 1,126 1,077
Equipment expense 2,226 1,976 1,937
Other operating expense 7,073 6,531 6,014
- ---------------------------------------------------------------------------------------------------------------------------------
Total other expense $ 20,655 $18,810 $ 17,640
=================================================================================================================================
</TABLE>
Net charge-offs for 1995 were $856,000, compared to $728,000 for 1994 and
$494,000 for 1993. Net charge-offs as a percentage of average loans outstanding
for 1995 was 0.18% compared to 0.19% in 1994 and 0.15% for 1993.
Impaired loans totaled $566,269 at December 31, 1995. Non-performing loans
at year-end 1995 were $1,320,000 compared to $1,061,000 at year-end 1994 and
$645,000 at year-end 1993. Non-performing loans consist of loans past due 90
days or more and loans which have been placed on nonaccrual status. As of
December 31, 1995, 21.4% of non-performing loans were Commercial and Commercial
Real Estate Loans, 55.2% were Residential Mortgage Loans, and 23.4% were
Consumer Loans. This compares to 10.3%, 47.5%, and 42.2%, respectively, for the
same categories at year-end 1994. The ratio of non-performing loans to total
loans was 0.25% for 1995 and 0.39% for 1994. This ratio compares very favorably
to that of the Bank's peer group at 0.78%. Due to anticipated loan growth built
into the 1996 Profit Plan, Management anticipates increasing the provision to
maintain a similar reserve-to-loan ratio to that of the past year.
On January 1, 1995, the Corporation adopted Financial Accounting Standards
Board (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan."
SFASNo. 114 and 118 address the accounting by creditors for impairment of all
loans identified for evaluation, uncollateralized as well as collateralized,
except for large groups of small balance, homogenous loans that collectively
are evaluated for impairment.
Under SFAS 114, when Management determines that a loss is possible, a full
or partial charge-off is recorded for the amount the book value of the impaired
loan exceeds the present value of the cash flows or the fair value of the
collateral, for collateral dependent loans. Under SFAS 118, Management has
classified all impaired loans as nonaccrual status. Loans which were classified
as nonaccrual and have been brought current must remain current for six months
before removal from nonaccrual status and are not considered impaired for
purposes of these Statements.
INCOME TAXES
The provision for income taxes for 1995 was $3,785,490, up from
$3,376,888 and $2,910,668 in 1994 and 1993, respectively. This increase is the
result of higher taxable income and lower tax-exempt income for 1995. Management
anticipates that in the future it will continue to encounter limited
opportunities for obtaining tax-free investments with attractive tax-equivalent
yields and desired maturities due to changing tax regulations and competitive
market conditions. In addition, the stated federal tax rate increased from 34%
to 35% for pretax earnings in excess of $10 million. As the Bank continues to
grow, incremental earnings will be taxed at the higher rate. In 1995, the
effective federal income tax rate for the Corporation equaled 33.9% compared to
33.8% in 1994 and 32.7% in 1993.
Effective January 1, 1993, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Under SFAS
No. 109, deferred tax expense is computed following the liability method.
Adopting SFAS No. 109 resulted in a positive effect on earnings for 1993 of
$353,830.
FINANCIAL CONDITION
Total assets were $699,643,837 at year-end 1995, compared to $601,083,685
at December 31, 1994, an increase of $98,560,152, or 16.4%, over 1994. Earning
assets at December 31, 1995 were $651,760,563, an increase of $98,817,790, or
17.9%, over 1994 year-end. Earning assets equaled 93.2% and 92.0% of total
assets at year-end 1995 and 1994, respectively. The composition of earning
assets also changed in 1995, as the mix of Consumer, Mortgage and Commercial
Loans changed. Liquidity in the Securities Portfolio was used to fund loan
growth.
At December 31, 1995, Federal Funds Sold were $4,300,000, an increase of
$3,700,000 from December 31, 1994. Total Investments and Mortgage-Backed
Securities decreased $11,292,711, or 8.1%, from 1994. Total Loans increased
$106,207,561, or 25.7%, over 1994 with growth concentrated in the areas of
indirect Consumer Loans,Mortgage Loans, and Commercial Real Estate Loans.
United Bank continues to serve the business and professional communities and to
satisfy the credit needs of its customers.
Total deposits on December 31, 1995 were $547,187,160, compared to
$486,770,515 at year-end 1994. This 12.4% increase is primarily attributable to
a $62,842,345 increase in Certificates of Deposit. Short-term Borrowings at
year-end 1995 increased $14,762,217 over year-end 1994.
<PAGE> 34
31
FHLB advances increased $14,700,000 over 1994, attributable to borrowings
in the first half of 1995 used to fund strong loan growth. The Bank's
loan-to-deposit ratio at December 31, 1995 increased to 93.5% versus 83.4% at
year-end 1994.
LOANS
Total net loans were $511,487,786 at year-end 1995 compared to $406,174,009
at year-end 1994. This represents an increase of $105,313,777, or 25.9%, over
1994. Loans comprised 77.4% of the Corporation's average earning assets during
1995, compared to 77.8% in 1994 and 75.5% in 1993. The product mix in the loan
portfolio shows Consumer Loans, Mortgage Loans, Commercial Loans and Commercial
Real Estate comprising 42.6%, 33.2%, 12.5% and 11.7%, respectively, at December
31, 1995, compared with 44.2%, 28.0%, 14.9%, and 12.9%, respectively, at
December 31, 1994. This change in the loan portfolio mix reflects the Bank's
continuing strategy of increasing the retail loan portfolio through increased
Consumer and Mortgage lending. Business loan demand continued to be fairly weak
in 1995 and competition for quality loans became more intense. In 1994,
preceded by a substantial interest rate decline in 1993, the demand for new
fixed rate mortgages and refinancing of existing variable and fixed rate loans
increased dramatically. By offering competitive rates, the Bank was able to
increase its mortgage loan portfolio. This growth was the main reason for the
change in loan mix. The loan portfolio is diverse, covering a wide range of
borrowers. There are no loans outstanding which in total could be considered a
concentration of lending in any particular industry or group of industries.
Loans contributed 83.4% of total interest income in 1995 compared to 84.3%
in 1994 and 83.1% in 1993. Loan yield was 8.96% in 1995, 69 basis points higher
than 1994 and 65 basis points higher than the average rate for earning assets.
Management recognizes that while the loan portfolio holds some of the Bank's
highest yielding assets, it is inherently the most risky portfolio.
Accordingly, Management attempts to balance credit risk versus return with
conservative credit standards. Management has developed and maintains
comprehensive underwriting guidelines and a loan review function which monitors
credits during and after the approval
Table 4
<TABLE>
<CAPTION>
Average Balance Sheet and Related Yields Years ended December 31, 1995, 1994
and 1993
(In thousands of dollars) 1995 1994 1993
AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE* BALANCE INTEREST RATE* BALANCE INTEREST RATE*
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Interest earning deposits $ 1,735 $ 101 5.82% $ 5,784 $ 292 5.05% $ 2,118 $ 51 2.41%
Federal funds sold 7,877 461 5.85 3,518 153 4.35 4,185 125 2.99
Investment securities:
Taxable 53,827 2,975 5.53 46,673 2,310 4.95 48,339 2,385 4.93
Tax exempt 2,452 190 7.75 3,146 271 8.61 3,184 300 9.42
Other securities 11,858 729 6.15 10,008 557 5.57 10,213 732 7.17
Mortgage-backed securities 58,067 3,858 6.64 40,963 2,408 5.88 42,277 2,469 5.84
Loans (net of unearned interest) 464,314 41,584 8.96 385,619 31,891 8.27 339,468 29,479 8.68
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 600,130 49,898 8.31 495,711 37,882 7.64 449,784 35,541 7.90
- ----------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS:
Cash and due from banks 25,120 23,858 27,266
Other nonearning assets 26,441 21,100 18,446
Allowance for loan losses (6,829) (6,246) (5,170)
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 644,862 $ 534,423 $ 490,326
===================================================================================================================================
INTEREST BEARING LIABILITIES:
Demand deposits $ 68,361 1,315 1.92% $ 66,667 $ 1,275 1.91% $ 63,118 $ 1,457 2.31%
Savings deposits 151,229 3,970 2.63 151,768 3,747 2.47 144,707 4,082 2.82
Time deposits 216,187 12,249 5.67 149,771 6,595 4.40 144,459 6,334 4.38
Short-term debt 44,858 2,234 4.98 30,572 1,018 3.33 29,875 677 2.27
Long-term debt 30,620 2,038 6.66 16,019 873 5.45 2,161 109 5.04
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest bearing
liabilities 511,255 21,806 4.27 414,797 13,508 3.26 384,320 12,659 3.29
- -----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST BEARING LIABILITIES
Demand deposits 66,329 58,788 52,342
Other liabilities 5,661 2,944 3,492
Shareholders' equity 61,617 57,894 50,172
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and equity $ 644,862 $ 534,423 $ 490,326
===================================================================================================================================
Net interest income $ 28,092 $24,374 $ 22,882
===================================================================================================================================
Net yield on earning assets 4.68% 4.92% 5.09%
===================================================================================================================================
</TABLE>
*Average rates of all categories including tax-free income are stated on a
fully taxable equivalent basis.
<PAGE> 35
32
process. To minimize risks associated with changes in the borrowers' future
repayment capacity, the Bank generally requires scheduled periodic principal
payments on all types of loans and normally requires collateral. To reduce the
risk of volatility in collateral values, Management usually requires down
payments on its Mortgage and Consumer Loans and seeks a reasonable and
continuing level of equity in commercial customers' businesses.
Consumer Loans increased to $220,738,840 on December 31, 1995 from
$182,262,910 on December 31, 1994. Management continued to expand its dealer
network both geographically as well as the number of dealers. Dealer paper was
purchased using strict underwriting guidelines with an emphasis on quality, not
quantity. Indirect loans comprise 78.5% of the Consumer Loan Portfolio in 1995
compared to 78.1% in 1994. In 1995, the Consumer Loan Department implemented a
credit scoring system which helped to maintain the high credit standards
already in place. In addition, credit scoring helped by improving customer
service through quicker response times, improving management reporting and
assisting the Bank in meeting its regulatory responsibilities.
Home Equity Line of Credit outstandings were $17,896,153 at December 31,
1995, or an increase of 25.4% over 1994. This product was redesigned in 1995 to
enable homeowners to borrow up to 100% of the equity they have in their home.
It also features a very attractive tiered interest rate based on the Prime Rate
and a lower monthly payment amount than previously offered. Management views
the current product as one which will make the Bank very competitive in this
market segment.
Residential Mortgage Loans increased to $172,282,619 at December 31, 1995,
up from $115,353,701 in 1994. The Bank increased its realtor base
significantly, with strong growth coming from eastern Stark County. A small
correspondent program initiated toward the end of 1994 helped to increase
mortgage loan penetration in southern Summit County. The Bank sold $5.1 million
of fixed rate mortgages in the secondary market while retaining the servicing
rights to the loans as a source of fee income. The offering of very competitive
rates, combined with a favorable rate environment, helped the Bank's Mortgage
Loan Department attain the distinction of being Stark County's number one
mortgage lender in 1995. In 1995, the Bank's Mortgage Assistance Program
provided approximately $1.9 million in loans to low-to-moderate income
individuals to purchase homes. This program now has approximately $8.7 million
in loans outstanding. If interest rates remain low or decline further,
Management anticipates an increase in mortgage loan refinancings. By offering
competitive rates and innovative products, the Bank should be able to attract
new loans while retaining existing loans.
[FIGURE]
TOTAL ASSETS millions
91 92 93 94 95
475.9 488.3 497.6 601.1 699.6
Commercial Loans at December 31, 1995 were $64,810,976, compared to
$61,094,079 for year-end 1994. This increase was particularly gratifying
because of the intense competition in the Bank's market and the fact that
Commercial Loan balances remained relatively constant from year-end 1993 to
year-end 1994. The Bank's strategic plan targeted Commercial Real Estate loans
as a product which had strong growth potential. As of December 31, 1995,
Commercial Real Estate outstandings increased $7,226,355, or 13.6%, compared to
year-end 1994. Since 1993, outstandings have increased by 29.4%. During 1995,
the Bank introduced the new Business Manager lending product. This product
provides business customers with immediate cash flow by selling their accounts
receivable to the Bank. Management feels that there is a strong demand for this
product in its market and anticipates continued growth in 1996.
INVESTMENTS
The Bank's Investment Portfolio provides a degree of liquidity for the
Bank, while it also generates interest income. The Investment Portfolio
consists primarily of U.S. Treasury and Agency Securities, various types of
Asset-backed Securities and Collateralized Mortgage Obligations, and various
types of short term money market instruments. At the holding company level, a
small portfolio of Collateralized Mortgage Obligations, common stocks, money
market instruments and tax-exempt securities is maintained. At December 31,
1995, the Corporation's consoli-dated Investment Portfolio was $128,216,265
versus $139,508,976 at year-end 1994.
The Bank continues to purchase securities which are eligible to be pledged
against the deposited funds of public entities and for use as collateral in
Repurchase Agreements. At year-end, there were $84,609,074 of securities
pledged for these purposes compared $60,087,996 at year-end 1994.
Management utilizes the Investment Portfolio as a source of income and
liquidity. During the first three quarters of the year, maturities and
principal repayments were used to fund loan growth. As the Bank experienced a
seasonal slowing of loan demand late in the year, funds were invested primarily
in shorter term securities that will provide a source of funds for additional
loan growth in 1996.
Under the requirements of Financial Accounting Standards Board Statement
No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
the securities in the Corporation's portfolio are classified as either
Available for Sale or Held to Maturity. Securities in the Available for Sale
account are marked to market at the end of each quarter, with the gain or loss
shown as an adjustment to shareholders' equity. At year end 1995, the adjust-
Table 5
<TABLE>
<CAPTION>
Total Loans Years ended December 31, Increase or (Decrease)
(In thousands of dollars) 1995 1994 Dollars Percentage
<S> <C> <C> <C> <C>
Commercial $ 64,811 $ 61,094 $ 3,717 6.1%
Commercial Real Estate 60,478 53,252 7,226 13.6%
Real Estate 172,283 115,354 56,929 49.4%
Consumer 220,739 182,262 38,477 20.0%
Leases 419 560 (141) -25.2%
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans $ 518,730 $ 412,522 $ 106,208 25.7%
=================================================================================================================================
</TABLE>
<PAGE> 36
33
Table 6
<TABLE>
<CAPTION>
Investments YEARS ENDED DECEMBER 31, INCREASE OR (DECREASE)
(In thousands of dollars) 1995 1994 Dollars Percentage
<S> <C> <C> <C> <C>
U.S. Treasury $ 22,171 $ 18,596 $ 3,575 19.2%
U.S. Government agencies and corporations 31,820 44,474 (12,654) -28.5%
Mortgage-backed securities 63,087 61,586 1,501 2.4%
Obligations of state and political subdivisions 1,238 3,439 (2,201) -64.0%
Corporate bonds and other securities 9,900 11,414 (1,514) -13.3%
- -----------------------------------------------------------------------------------------------------------------------
Total investment securities $ 128,216 $ 139,509 $(11,293) -8.1%
=======================================================================================================================
</TABLE>
ment to shareholders' equity for unrealized gain on the portfolio was $844,921,
compared to an unrealized loss of $1,440,629 in the previous year. This
represents an increase to shareholders' equity at December 31, 1995 of 1.30%.
The increase was due in part to a significant decrease in market rates during
1995, as well as a change in the composition of the portfolio as securities
purchased during a period of lower interest rates matured and were replaced at
current levels. In general, increases in interest rates will cause a decline in
the market values of fixed rate securities. The market values of equity
securities are subject to other factors that are not necessarily related to
interest rates, and will not change in a predictable manner.
DEPOSITS
Deposits are the Bank's primary source for funding its earning assets. The
Bank offers a wide variety of products designed to attract and retain its
customers, with a primary focus on core deposits. Total deposits at December
31, 1995 were $547,187,160, an increase of $60,416,645 from 1994. In 1995,
Management actively pursued retaining the Bank's maturing Certificates of
Deposits as well as attracting new deposits. A portion of the funds from the
deposits assumed in the 1994 Transohio branch acquisition were invested short
term in the Investment Portfolio, which provided some liquidity in 1995 to
support loan growth. The Bank introduced two new products in 1995. The
MasterMoney product allows customers to make purchases at any MasterCard
merchant with the amount of the purchase automatically deducted from the
customer's checking account. The Money Market Access account, introduced in the
fourth quarter of 1995, has a tiered interest rate indexed to the 13- week
Treasury Bill rate. This product offers customers liquidity as well as a
competitive rate of return.
The Bank's noninterest bearing Checking Account balances increased to
$73,707,817 at December 31, 1995 from $71,014,730 at December 31, 1994, an
increase of 3.8%. Interest bearing NOW Accounts grew to $74,201,892 at December
31, 1995, a 1.6% increase. At December 31, 1995, Savings Accounts totaled
$151,069,955, a decline of 4.0% from year-end 1994 while Certificates of
Deposit were $248,207,496, an increase of 33.9% over year-end 1994. The
decrease in Savings balances and corresponding increase in Certificates of
Deposit reflects depositors searching for higher yields available in both
Certificates of Deposit and in alternative investments found outside the
banking industry, specifically mutual funds.
Core deposit growth remains a primary objective of the Bank's deposit
strategy for 1996. As in the past, the level and direction of interest rates
will play a key role in the growth and mix of deposits in 1996. Market rates
began to decline late in 1995. If rates continue their downward trend in 1996,
the mix of deposits could shift to more liquid deposit products.
CAPITAL RESOURCES
Capital represents shareholder ownership in the Corporation. It serves as a
cushion against potential losses and provides a base for asset growth. The
capital adequacy of the Bank and the Corporation is monitored closely by
Management, regulators and investors. The adequacy of capital is an important
indicator of financial stability and performance. The assessment of capital
adequacy depends on such factors as asset quality, liquidity, earnings
performance, competition and economic conditions.
FDICIA, which was enacted in December, 1991, set the guidelines for a
financial institution to be "well capitalized." These guidelines require a
minimum total risk-based capital ratio of 10% and a Tier 1 capital ratio of 6%
and leverage ratio of 5%. All of the Corporation's assets, which include
various risk-weighted percentages of assets on the balance sheet, as well as
off-balance sheet exposures, are expressed as a percentage of risk-adjusted
assets and compared to its capital. Tier 1 capital consists of shareholders'
equity and such items as mandatory convertible debt, subordinated debt, and the
allowance for loan losses. As of December 31, 1995, UNBCorp. had a total
risk-based capital ratio of 12.67%, with a Tier 1 capital ratio of 11.42%. Both
of these risk-based capital ratios are well above minimum regulatory
requirements.
In addition to risk-based capital, a leverage ratio test must also be met.
This ratio evaluates capital adequacy on the basis of Tier 1 capital-to-total
assets (unadjusted for risk). On December 31, 1995, UNBCorp.'s leverage ratio
was 8.26%, which substantially exceeds the Corporation's minimum regulatory
requirement.
Table 7
<TABLE>
<CAPTION>
Deposits YEARS ENDED DECEMBER 31, INCREASE OR (DECREASE)
(In thousands of dollars) 1995 1994 Dollars Percentage
<S> <C> <C> <C> <C>
Noninterest bearing $ 73,708 $ 71,015 $ 2,693 3.8%
Interest bearing:
Demand 74,202 73,064 1,138 1.6%
Savings 151,070 157,327 (6,257) -4.0%
Time 248,207 185,365 62,842 33.9%
- --------------------------------------------------------------------------------------------------
Total Deposits $ 547,187 $ 486,771 $ 60,416 12.4%
==================================================================================================
</TABLE>
<PAGE> 37
34
Total shareholders' equity equaled $65,326,883 on December 31, 1995,
compared to $58,640,442 on December 31, 1994. These amounts include market
value adjustments under SFAS No. 115 of $844,921 and $(1,440,629) at year-end
1995 and 1994, respectively. The book value per share of stock was $22.73 at
year-end 1995 compared to $20.43 at year-end 1994, an 11.3% increase.
Cash dividends paid to shareholders of UNBCorp. during the year ended
December 31, 1995 totaled $3,016,675 or $1.05 per share. This compared to
$2,742,404, or $0.96 per share for the year ended December 31, 1994. In
addition to the regular dividend of $1.00 per share, a special cash dividend of
$0.05 per share was declared by the Board of Directors and paid in December,
1995. The dividends per share represent an increase of 9.4% over 1994.
Dividends paid in 1995 represented a payout ratio of 40.9% of net income
compared to 41.4% in 1994. This is within the guidelines established by
UNBCorp.'s Board of Directors for a dividend payout ratio of 35% to 45% of net
income. As discussed in Note 14 to the Consolidated Financial Statements, the
Corporation's primary source of funds for the payment of dividends is its Bank
subsidiary. The Bank is limited by regulation as to the amount of dividend
which can be paid. Currently, this restriction will not preclude the Bank from
paying sufficient dividends to fund the usual quarterly dividends paid to the
Corporation's shareholders.
Including dividends and appreciation, the stock returned 17.3% to its
shareholders during 1995. At year-end 1995, the market value of the stock was
193.6% of the year-end book value compared to 188.4% at year-end 1994.
Participation in UNBCorp.'s Dividend Reinvestment Plan continued to grow in
1995. This plan allows shareholders to reinvest all or a portion of their
dividends automatically in the purchase of additional shares. Currently, there
are 922 shareholders participating with 33.4% of the dividend paid being
reinvested in the plan. Management will continue to promote this plan because
it provides the opportunity to generate new Tier 1 capital for the Corporation
and allows shareholders to increase their holdings of stock without paying
brokers' fees and commissions.
ASSET AND LIABILITY MANAGEMENT
A volatile banking environment, shrinking interest margins, increasing
expenses and regulatory mandates make Asset and Liability Management imperative
for the Management of UNB Corp. Management has established and maintains loan,
investment, deposit and borrowed funds policies and strategies based on sound
Asset and Liability Management principles in order to achieve its goal of
consistent growth in earnings, independent of volatile interest rates, amid
deregulation of the financial industry and the uncertainties of the national
and local economies.
The objective of the Corporation's Asset and Liability Management Policy is
to help Management establish a profit plan for the Corporation through the
coordination of asset mix and volume controls, liquidity, capital and dividend
policies, interest margin management, sound investment and loan portfolio
management, loan pricing policies, purchased funds policies and cash management
techniques. This profit plan seeks to maximizing profitability while minimizing
the adverse effects on net interest margin resulting from fluctuations in
interest rates.
All assets and liabilities are designated as being either rate sensitive or
non-rate sensitive during some assigned time period such as one month or one
year. Interest rate sensitivity relates to that time period when assets and
liabilities can be repriced. Management attempts to match rate sensitive assets
and rate sensitive liabilities in an effort to maintain an acceptable net
interest margin regardless of the level or direction of interest rates for both
assets and liabilities. The GAP measures the variance in this matching process
and is defined as the difference between rate sensitive assets and rate
sensitive liabilities within an assigned time frame. The GAP can be either
positive or negative, and is viewed as the dollar measure of the Bank's
exposure to changes in interest rates over a certain time frame. A negative GAP
benefits net interest income when rates are decreasing, while a positive GAP
benefits net interest income when rates are increasing. The reverse is also
true for each of these.
The Bank monitors its GAP using certain adjustments to deposits that have
no specified maturity date. Some of these deposits are scheduled to reprice in
one month and others are assumed to be less rate sensitive and are repriced in
a later period, based on the Bank's actual experience. The Bank's three month,
six month and twelve month modified adjusted cumulative GAP's were -5.20%,
- -7.15%, and -5.52% at year-end 1995 (Table 8), which represents a decline in
liability sensitivity from year-end 1994. Part of the decrease can be
attributed to the gradual assimilation of deposits acquired late in 1994 from
the former Transohio into the
[FIGURE]
NET LOANS millions
91 92 93 94 95
296.5 316.1 344.3 403.3 507.3
[FIGURE]
TOTAL DEPOSITS millions
91 92 93 94 95
401.9 410.6 404.0 486.8 547.2
<PAGE> 38
35
Bank's various deposit products. In addition, as interest rates showed
signs of declining during the year, there was a shift in Certificate of Deposit
maturities to terms longer than twelve months. The Bank's Asset and
Liability Management Policy specifies a plus 10% to minus 10% range for the
twelve month modified adjusted cumulative GAP, and the uncertainty of the
interest rate environment in 1996 mandates that the Bank continue to manage the
GAP within these tolerances.
Management uses static GAP analysis as one technique to measure and
minimize interest rate risk. In addition to GAP management, the Bank also uses
the more dynamic techniques of simulation and duration. Simulation is the
process of measuring the amount that net interest income and the market value
of the Bank's equity will change over a twelve month time horizon given a
specified movement in interest rates. Duration is a method used to estimate the
market value sensitivity of the various financial assets and liabilities
contained on the balance sheet by quantifying relative interest rate risk among
assets with different coupons, maturities, cash flows and repricing
characteristics. The comparison of the duration of the Bank's assets and
liabilities, both individually and in total, provides another measure of the
potential impact of changes in rates on the Bank's financial position.
The Bank has access to a variety of funding and hedging instruments to
insulate earnings from changes in interest rates. These include Federal Home
Loan Bank advances as well as various off-balance-sheet products such as
interest rate swaps, caps and floors. At year-end 1995, the Bank was paying a
fixed rate of 2.88% and receiving a variable rate of 5.875% on an interest rate
swap with a notional principal balance of $6,625,000. The variable rate resets
quarterly at three-month LIBOR and the notional principal balance amortizes
quarterly according to a predetermined schedule that corresponds to the
expected prepayments on the underlying mortgage loans.
LIQUIDITY MANAGEMENT
Liquidity is a measure of the Corporation's ability to fund loan
commitments and meet deposit maturities and withdrawals in a timely and
cost-effective manner. The Bank's Asset and Liability Committee actively
analyzes and manages the Corporation's liquidity. Principal sources of
liquidity for the Corporation and the Bank are cash and cash equivalents,
federal funds sold, short-term money market investments, the cash flows
provided by maturities and amortizations in the Loan and Investment Portfolios
and the strong core deposit base.
On December 31, 1995, cash and cash equivalents equaled $31,735,149 or 4.5%
of total assets. The change in cash and cash equivalents is shown in the
Consolidated Statement of Cash Flows and arises from operating, investing and
financing activities. These activities are summarized for the three years ended
December 31, 1995 in Table 9.
The adjustments to reconcile net income to net cash from operating
activities primarily consisted of $1,750,000 in provision for loan losses,
$1,094,337 from amortization of intangible assets, $789,359 from depreciation
and amortization of fixed assets and $461,821 in net accretion of discounts in
the Investment Portfolio. These items represent income and expense included in
net income which did not represent an expenditure or receipt of cash.
Cash flows from investing activities related primarily to changes in loans
and investments. During 1995, $107,271,403 of net loan purchases and additions
and an increase in the balance of Federal Funds Sold of $3,700,000 were the
primary uses of cash through investing activities. The primary source of cash
through investing activities was a net reduction in the Investment Portfolio of
$15,223,676.
Net cash from financing activities totaled $86,900,287. The major cash
sources from financing activities in 1995 were net increases in deposits,
borrowings with the Federal Home Loan Bank and short-term borrowings of
$60,416,645, $14,700,000 and $14,762,217, respectively. The payment of
$3,016,677 in cash dividends was the only use of cash from financing
activities. The net result of these cash flows was an increase of cash and
cash equivalents from year-end 1994 to 1995 of $1,524,465. Management is not
aware of any trend or event that is reasonably likely to occur or will result
in the Corporation being unable to meet all current and projected cash needs.
IMPACT OF FDICIA
The Federal Deposit Insurance Corporation Improvement Act (FDICIA) applies
to banks with total assets in excess of $500 million. During the second half of
1994 and throughout 1995, Management spent considerable time ensuring
compliance with requirements for documenting internal control reporting. This
year's Annual Report contains a statement from Management attesting to the
internal control structure of the Corporation, including policies, procedures
and compliance with laws and regulations within the Banking industry. In
addition, the Bank's independent external auditor has attested to the accuracy
of Management's assertions regarding internal control systems over financial
reporting.
[FIGURE]
SHAREHOLDER'S EQUITY
PER SHARE dollars
91 92 93 94 95
15.46* 17.16* 19.66* 20.43 22.73
*Adjusted for any stock dividends and splits
[FIGURE]
CASH DIVIDENDS
PER SHARE dollars
91 92 93 94 95
.64* .73* .88* .96 1.05
*Adjusted for any stock dividends and splits
[FIGURE]
MARKET VS. BOOK
VALUE dollars
<TABLE>
<CAPTION>
91 92 93 94 95
M B M B M B M B M B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19.05* 15.46* 24.00* 17.16 29.00* 19.66* 38.50 20.43 44.00 22.73
<FN>
*Adjusted for any stock dividends and splits
</TABLE>
<PAGE> 39
36
Table 8
<TABLE>
<CAPTION>
Asset and Liability Interest Rate Sensitivity
(In thousands of dollars) Within Within Within Within Over
One Month Three Months Six Months One Year One Year
<S> <C> <C> <C> <C> <C>
Cumulative Dollar Sensitivity GAP
Rate sensitive assets:
Interest bearing deposits $ 378 - - - -
Federal funds sold 4,300 - - - -
Loans 100,456 $ 22,952 $ 28,341 $ 46,738 $ 308,847
Securities
Taxable 12,995 7,986 7,000 11,000 12,570
Tax exempt - - 310 620 3
Other securities - 4,621 - 250 472
Mortgage-backed securities 6,150 3,172 6,969 11,289 30,378
- ---------------------------------------------------------------------------------------------------------------------------------
Total rate sensitive assets 124,279 38,731 42,620 69,897 352,270
Rate sensitive liabilities:
Interest bearing deposits
Demand deposits 74,267 - - - -
Savings deposits 155,859 - - - -
Time deposits 21,074 32,961 55,642 52,677 80,575
Borrowed funds
Short-term debt 48,030 - - - -
Long-term debt - 3,000 - 5,245 23,115
- ---------------------------------------------------------------------------------------------------------------------------------
Total rate sensitive liabilities 299,230 35,961 55,642 57,922 103,690
Net interest rate swap position - 6,275 (375) (750) (5,150)
Cumulative maturity/rate sensitivity GAP (174,951) (165,906) (179,303) (168,078) 75,352
GAP adjustments:
Interest bearing deposits 130,170 130,170 130,170 130,170 (130,170)
Cumulative adjusted GAP between
assets and liabilities $(44,781) $(35,736) $(49,133) $(37,908) $(54,818)
Cumulative adjusted GAP as a percent of total assets -6.52% -5.20% -7.15% -5.52% -7.98%
</TABLE>
IMPACT OF INFLATION
Consolidated financial data included herein has been prepared in accordance
with generally accepted accounting principles (GAAP). Presently, GAAP requires
UNB Corp. to measure financial position and operating results in terms of
historical dollars, except for securities available for sale which are carried
at fair value. Changes in the relative value of money due to inflation or
recession are generally not considered.
In Management's opinion, changes in interest rates affect the financial
condition of UNB Corp. to a far greater degree than changes in the inflation
rate. While interest rates are greatly influenced by changes in the inflation
rate, they do not move concurrently. Rather, interest rate volatility is based
on changes in the expected rate of inflation, as well as changes in monetary
and fiscal policy. A financial institution's ability to be relatively
unaffected by changes in interest rates is a good indicator of its capability
to perform in today's volatile economic environment. In an effort to insulate
itself from the effects of interest rate volatility, UNB Corp. works toward the
goal of having rate sensitive assets and liabilities respond to interest rate
changes in a similar time frame and to a similar degree.
Table 9
<TABLE>
<CAPTION>
Liquidity Management
(In thousands of dollars) 1995 1994 1993
<S> <C> <C> <C>
Net income $ 7,379 $ 6,628 $ 6,338
Adjustments to reconcile net income to net cash from operating activities 4,202 5,374 2,314
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash from operating activities 11,581 12,002 8,652
Net cash used in investing activities (96,957) (100,457) (13,293)
Net cash from financing activities 86,900 91,814 3,238
- ----------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 1,524 3,359 (1,403)
Cash and cash equivalents at beginning of year 30,211 26,852 28,255
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 31,735 $ 30,211 $ 26,852
==================================================================================================================================
</TABLE>
<PAGE> 40
37
Market Price Ranges for Common Stock
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 BID
---------
QUARTER HIGH LOW DIVIDEND RATE
<S> <C> <C> <C>
FIRST $ 38.50 $ 38.50 $ .24
SECOND 39.00 38.50 .25
THIRD 40.00 39.00 .25
FOURTH 44.00 40.00 .31
</TABLE>
<TABLE>
<CAPTION>
1994 BID
--------
QUARTER HIGH LOW DIVIDEND RATE
<S> <C> <C> <C>
First $ 31.00 $ 29.00 $ .22
Second 32.00 31.00 .23
Third 34.50 32.00 .23
Fourth 38.50 34.50 .28
</TABLE>
The shares of Common Stock, stated value $1.00 per share, of UNB Corp. are
traded on the over-the-counter market primarily with brokers in the
Corporation's service area.
The above quoted market prices reflect inter-dealer prices, without
adjustments for retail markups, markdowns, or commissions and may not represent
actual transactions.
As of December 31, 1995, UNB Corp. had 1,268 shareholders of record.
<PAGE> 41
38
Five Year Summary of Selected Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands of dollars, except per share data)
Years ended December 31,
1995 1994 1993 1992 1991
<S> <C>
EARNINGS:
Net interest income $ 27,953 $ 24,191 $ 22,721 $ 22,465 $ 17,672
Provision for possible loan losses 1,750 1,020 2,195 2,500 2,688
Income before federal income taxes 11,165 10,005 8,895 7,136 5,235
Federal income taxes 3,785 3,377 2,911 2,357 1,634
Net income 7,379 6,628 6,338 4,779 3,601
Cash dividends declared 3,017 2,742 2,388 1,712 1,205
PER SHARE DATA:*
Net income-primary $ 2.52 $ 2.32 $ 2.37 $ 2.03 $ 1.89
Net income-fully diluted 2.51 2.22 2.27 1.91 1.64
Cash dividends 1.05 0.96 0.88 0.73 0.64
Book value 22.73 20.43 19.66 17.16 15.46
AVERAGE BALANCES:
Total assets $ 644,861 $ 534,423 $ 490,326 $ 472,582 $ 415,949
Total earning assets 600,130 495,710 449,784 435,352 382,500
Total deposits 435,777 426,994 404,626 398,487 342,357
Net loans 464,314 385,618 339,468 306,718 263,232
Shareholders' equity 61,617 57,894 50,172 38,779 27,852
FINANCIAL RATIOS:
Net income as a percentage of:
Average assets 1.14% 1.24% 1.29% 1.01% .87%
Average shareholders' equity 11.98 11.45 12.63 12.32 12.93
Cash dividends as a percentage of net income 40.88 41.37 37.68 35.81 33.47
Average shareholders' equity as a percentage
of average assets 9.56 10.83 10.23 8.21 6.70
Net loans/assets 72.51 67.57 69.17 64.73 62.31
Net loans/deposits 93.48 83.44 85.23 76.99 73.79
Allowance for loan losses/total loans 1.40 1.54 1.73 1.36 1.08
Net loans/equity 7.83 X 6.93 x 6.18 x 7.38 x 10.04 x
Deposits/equity 8.38 X 8.30 x 7.25 x 9.59 x 13.60 x
YEAR-END BALANCES:
Total assets $ 699,644 $ 601,084 $ 497,821 $ 488,334 $ 475,888
Long-term debt 31,360 16,660 8,820 - 10,000
Total shareholders' equity 65,327 58,640 55,706 42,811 29,539
</TABLE>
Note: This summary should be read in conjunction with the related consolidated
financial statements and notes included herein.
*Per share data has been adjusted for any stock dividends and splits.
FORM 10-K
A copy of form 10-K, as filed with the Securities and Exchange Commission,
will be furnished, free of charge, to shareholders, upon written request to
the Secretary of UNB Corp., P.O. Box 24190, Canton, Ohio 44701.
<PAGE> 1
Exhibit 21
Subsidiaries of UNB Corp.
<TABLE>
<CAPTION>
Registrant Percent of Ownership
----------
<S> <C> <C>
I. UNB Corp.
A. United National Bank & Trust Company 100%
(National Banking Association)
1. 620 Market Community Redevelopment Corporation 100%
B. United Credit Life Insurance Company 100%
</TABLE>
<PAGE> 1
Exhibit 22
<PAGE> 2
UNB Corp.
United Bank Plaza
220 Market Avenue South
Canton, Ohio 44702
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 16, 1996
The 1996 Annual Meeting of the Shareholders of UNB Corp. (the Corporation)
will be held in the Banquet Room of the Hartville Kitchen, 1015 Edison Street
Northwest, Hartville, Ohio, on Tuesday, April 16, 1996, at 12:30 p.m., for the
following purposes:
(1) To elect two directors, each to serve for a term of three years.
(2) To amend the Articles of Incorporation to increase the number of no
par value Common Shares that the Corporation is authorized to issue
from 5,000,000 to 15,000,000 shares.
(3) To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only those Shareholders of record at the close of business February 15,
1996, shall be entitled to notice of and to vote at said meeting or any
adjournment thereof.
We urge you to sign and return the enclosed proxy card as promptly as
possible whether or not you plan to attend the meeting in person. If you do
attend the meeting, you may then withdraw your proxy.
BY:/S/ROBERT M. SWEENEY
--------------------
ROBERT M. SWEENEY
Secretary
Canton, Ohio
February 23, 1996
<PAGE> 3
UNB Corp.
United Bank Plaza
220 Market Avenue South
Canton, Ohio 44702
VOTING AND PROXY SOLICITATION MATTERS
This statement is furnished to Shareholders of UNB Corp. in connection with
the solicitation of proxies for use at the Annual Meeting of Shareholders to be
held in the Banquet Room of the Hartville Kitchen, 1015 Edison Street
Northwest, Hartville, Ohio, on Tuesday, April 16, 1996, at 12:30 p.m.
This proxy statement and proxy are being mailed on or about February 23,
1996. The accompanying proxy is solicited by the Board of Directors. It is
contemplated that solicitation of proxies will be by use of the mails only.
However, in addition, solicitation may be made by telephone, telegraph, or
facsimile by officers or by employees of UNB Corp., or by officers or by
employees of the United National Bank & Trust Co. (the Bank). The cost of such
solicitation will be borne by the Corporation. UNB Corp. may reimburse
brokerage firms and nominees for reasonable expenses incurred by them, and
approved by UNB Corp., in forwarding proxy materials to beneficial owners. You
may revoke your proxy at any time prior to its exercise at the Annual Meeting
by giving written or oral notice to the secretary of the meeting.
Shareholders of record at the close of business on February 15, 1996, are
entitled to notice of and to vote at the meeting. Shareholders of record will
be entitled to one vote for each share held by them on the record date for all
matters which come before the meeting. Shareholders have no cumulative voting
rights. The number of no par value shares outstanding as of January 31, 1996,
including 73,387 shares acquirable within sixty days through the exercise of
stock options, was 2,947,363.
The Trust Department of the United National Bank & Trust Co. holds shares of
UNB Corp. stock with voting authority in various fiduciary capacities. The
total number of shares held by the Trust Department on January 31, 1996, was
535,263 shares representing 18.2% of the shares outstanding. The number of
shares held by the Trust Department as sole trustee or executor, which will not
be voted in the election of directors, was 32,524 shares (1.1% of the shares
outstanding). Voting rights of the remaining 502,739 shares (17.1% of the
shares outstanding) will be passed through to the various trust donors,
beneficiaries, or others pursuant to terms of the Trust documents. All
directors and officers as a group beneficially own 394,069 shares (13.4% of the
shares outstanding). This includes 73,387 shares which are acquirable within
sixty days through the exercise of stock options. No individual beneficially
owns over 5% of the shares outstanding.
ELECTION OF DIRECTORS
Under the Code of Regulations of UNB Corp., the Board of Directors is
divided into three classes, designated as Class I, Class II, and Class III,
with each class consisting of approximately one-third of the total number of
directors as fixed from time to time by the Board of Directors. Currently,
that number has been fixed at seven. The directors serve staggered three-year
terms, so that directors of only one class are elected at each Annual Meeting.
At the forthcoming Annual Meeting, the Shareholders will be asked to elect two
directors of Class II. Those nominees receiving the greatest number of votes
will be elected as directors. There is no minimum number of votes required to
elect a director.
The nominees for election at the forthcoming Annual Meeting are Messrs. E.
Lang D'Atri and Robert L. Mang. The nominees are presently directors of the
Corporation.
The persons named in the enclosed form of proxy will vote the proxy in
accordance with the choices specified. If no choices are specified, it is the
intention of the persons named in the enclosed form of proxy to vote for the
two nominees named above. Proxies cannot be voted for a greater number of
persons than the number of nominees named.
<PAGE> 4
INFORMATION AS TO NOMINEES
The names of the nominees for the election as directors, together with
specific information about the nominees, are as follows:
<TABLE>
<CAPTION>
UNB Corp.
Shares % of
Owned Board and
Year of Beneficially(1) Committee
Principal Occupation Initial (January 31, % of Meetings
Name Age (Past Five Years) Election 1996) Outstanding Attended
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS II
(TERM EXPIRES IN 1999)
E. Lang D'Atri 57 Attorney at Law, Day, 1978 21,534 .73% 85%
Ketterer, Raley, Wright
& Rybolt
Robert L. Mang 63 Director, President, 1976 67,470 (2) 2.30% 97%
and Chief Executive
Officer of UNB Corp.
Director, President,
and Chief Executive
Officer of the
United National Bank &
Trust Co.
Director, President of
United Credit Life
Insurance Company
</TABLE>
INFORMATION AS TO DIRECTORS WHOSE TERMS OF OFFICE WILL
CONTINUE AFTER THE 1996 ANNUAL MEETING
The names of the remaining directors, together with specific information
about the directors, are as follows:
<TABLE>
<CAPTION>
UNB Corp.
Shares % of
Owned Board and
Year of Beneficially(1) Committee
Principal Occupation Initial (January 31, % of Meetings
Name Age (Past Five Years) Election 1996) Outstanding Attended
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS III
(TERM EXPIRES IN 1997)
John D. Regula 69 Partner and Manager 1988 8,272 .28% 86%
Regula Brothers
Transportation
James P. Rodman 69 Chief Engineer 1964 5,312(3) .18% 97%
Rodman Research
CLASS I
(TERM EXPIRES IN 1998)
Edgar W. Jones, Jr. 53 President, Hal Jones 1979 35,944 1.20% 81%
Construction Co.
James A. O'Donnell 66 Retired President 1969 2,894 .10% 69%
of UNB Corp.
Retired President
of the United National
Bank & Trust Co.
Donald W. Schneider 65 President, Schneider 1967 107,059 3.63% 82%
Lumber Company
</TABLE>
(1) Included in the shares set forth in the tables above are shares owned by
the nominee or director, his wife, minor children, and certain other
family members, and shares over which the nominee or director has full,
or shares, voting control and power of disposition. Percentages of
outstanding shares are calculated using 2,873,976 shares outstanding plus
73,387 shares acquirable within sixty days through the exercise
of stock options.
(2) Includes 34,704 shares which Mr. Mang has the right to acquire within
sixty days through the exercise of stock options.
(3) Includes 1,876 shares owned by Mr. Rodman's wife for which he disclaims
economic interest.
<PAGE> 5
PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION
The Board of Directors of the Corporation believes that it would be in the
best interest of the Corporation and its Shareholders that the Articles of
Incorporation be amended to increase the number of no par value Common Shares
from the 5,000,000 shares presently authorized to 15,000,000 shares. The number
of no par value shares outstanding as of January 31, 1996, including 73,387
shares acquirable within sixty days through the exercise of stock options, was
2,947,363. One Hundred Ninety-One Thousand and Ten (191,010) Common Shares have
been authorized or reserved for issuance pursuant to the 1987 Stock Option and
Performance Unit Plan. An additional Two Hundred Eighty-Nine Thousand Four
Hundred and Six (289,406) Common Shares have been authorized or reserved for
issuance pursuant to the 1989 Dividend Reinvestment Plan.
The purposes for increasing the number of authorized Common Shares are to
have additional shares available for issuance in the future for stock splits,
stock dividends, acquisitions, and other corporate purposes. These additional
shares may be issued on authorization of the Board of Directors without further
approval of Shareholders, except as may be required by law. The Board of
Directors has no present agreements, commitments, or understandings for the
issuance of any such shares, with the exception of shares which may be issued
pursuant to the 1987 Stock Option and Performance Unit Plan or the 1989
Dividend Reinvestment Plan.
The adoption of the proposed amendment will require the affirmative vote of
the holders of 66-2/3% of the outstanding shares of the Corporation. If so
adopted, a Certificate of Amendment to the Corporation's Articles of
Incorporation will be filed with the Secretary of the State of Ohio.
THE BOARD OF DIRECTORS UNANIMOUSLY APPROVES AND RECOMMENDS TO THE
SHAREHOLDERS THE ADOPTION OF THIS PROPOSED AMENDMENT TO THE ARTICLES OF
INCORPORATION.
THE BOARDS OF DIRECTORS AND THEIR COMMITTEES
In 1995, there were a total of four regularly scheduled or special meetings
of the Board of Directors of UNB Corp. All UNB Corp. Board members served on
the Board of Directors of the United National Bank & Trust Co., the
Corporation's wholly owned subsidiary. Also, Messrs. Louis V. Bockius III,
Abner A. Yoder, Harold M. Kolenbrander, Russell W. Maier, and Joseph J. Sommer
served on the Board of Directors of the United National Bank & Trust Co. In
1995, there were a total of twelve regularly scheduled or special meetings of
the Board of Directors of the Bank.
Messrs. D'Atri, Mang, Schneider, Yoder, and Sommer also served on the Board
of Directors of the United Credit Life Insurance Company, a wholly owned
subsidiary of UNB Corp. This Board met one time in 1995.
The Executive Committee of UNB Corp. consisted of Messrs. Schneider, Mang,
and D'Atri. The Committee did not meet in 1995.
The Nominating Committee of UNB Corp. consisted of Messrs. Mang, Schneider,
and D'Atri. The Nominating Committee will consider nominees recommended by
Shareholders and submitted in writing to Mr. Mang. No nominees for director
will be accepted from the floor at the Annual Meeting. The Committee met one
time in 1995.
The Compensation and Pension Committee of UNB Corp. consisted of Messrs.
Bockius III, Rodman, and Schneider. The Committee met five times in 1995.
The United National Bank & Trust Co. has an Audit Committee, a Compensation
and Pension Committee, a Trust Committee, a Nominating Committee, an Executive
Committee, an Acquisition Committee, and a Succession Committee.
The Audit Committee consisted of Messrs. Rodman, Kolenbrander, Regula, and
Schneider. The functions of the Audit Committee are to review the results of
the external audit performed by Crowe, Chizek and Company, to oversee the scope
and results of the audit procedures performed by the internal audit staff, and
to review the adequacy of the Corporation's system of internal controls. The
Committee met four times in 1995.
The Compensation and Pension Committee consisted of Messrs. Yoder, Bockius
III, Rodman, and Schneider. The function of the Compensation and Pension
Committee is to review salaries and benefits of officers and employees. The
Committee met five times in 1995.
The Trust Committee included Messrs. Maier, Mang, D'Atri, and Bockius III.
The Trust Committee oversees the Trust Department function. The Committee met
four times in 1995.
The Nominating Committee consisted of Messrs. D'Atri, Schneider, and Mang.
The function of the Nominating Committee is to recommend nominees for the Board
of Directors of the Bank. The Committee met one time in 1995.
<PAGE> 6
The Executive Committee consisted of Messrs. Schneider, Sommer, Mang,
D'Atri, and Yoder. The Executive Committee of the Bank is authorized to act in
the absence of the Board of Directors in all Board-related matters. The
Committee met thirty-seven times in 1995.
The Acquisition Committee consisted of Messrs. D'Atri, Regula, Sommer,
Yoder, Maier, Mang, and Schneider. The function of the Acquisition Committee is
to develop and implement the Board of Directors' acquisition strategy. The
Committee met two times in 1995.
The Succession Committee consisted of Messrs. Bockius III, D'Atri,
Kolenbrander, Mang, and Schneider. The function of the Succession Committee is
to plan for management succession to ensure the continued successful operation
of the Corporation and the Bank. The Committee did not meet in 1995.
Each non-employee director of UNB Corp.'s Board of Directors is paid $150
per UNB Corp. Board meeting attended. The Bank pays each non-employee director
$150 per month plus $150 per Bank Board meeting attended. Each non-employee
member of the Bank's Executive Committee also receives $250 per month.
Non-employee members of all other committees receive $75 per meeting attended.
The Chairman of the Boards of Directors of UNB Corp. and the United National
Bank & Trust Co. receives a fee of $1,800 per month.
COMPENSATION AND PENSION COMMITTEE REPORT
JANUARY 1996
The Compensation and Pension Committee's Report to the Shareholders
which follows was approved and adopted by the Committee and by the Board of
Directors on January 18, 1996. The members of the Compensation and Pension
Committee are all independent directors.
UNB Corp. did not incur any salary expense in 1995 nor did it provide
pensions, profit sharing, tax-deferred savings plans, an incentive compensation
plan, or any other benefits to any of its officers or directors. All such
expenses are paid for, and any type of compensation or benefit plan is provided
by, UNB Corp.'s wholly owned subsidiary, the United National Bank & Trust Co.
All executive officers of the Corporation are also executive officers of the
Bank.
The Compensation Plan for the executive officers listed in the table below
consisted of these components: a base salary; the United Bank Stakeholder
Incentive Plan; and the 1987 Stock Option and Performance Unit Plan. Also, the
executive officers listed below are eligible for the UNB Tax Deferred Savings
Plan (401-K) and the UNB Corp. and Affiliates Deferred Compensation Plan.
On November 18, 1993, the Board of Directors of the United National Bank &
Trust Co. adopted the United Bank Stakeholder Incentive Plan. This Plan, which
is based on the achievement of multiple financial and other goals by the Bank
and individual Bank departments, will allow all United Bank employees an
opportunity to earn an incentive over and above their base salaries. In 1995,
the performance of the executive officers listed in the table below was
evaluated under the United Bank Stakeholder Incentive Plan.
The base salary and the cash incentive paid under the United Bank
Stakeholder Incentive Plan to the Chief Executive Officer are based on the
achievement of specific performance objectives established by the Compensation
and Pension Committee and approved by the Board of Directors. The Chief
Executive Officer's performance objective is related directly to corporate
performance as measured by the Corporation's Return on Equity and the actual
net income of the Corporation compared to a targeted net income figure as
approved by the Board of Directors upon recommendation of the Compensation and
Pension Committee.
Base salaries and cash incentives paid under the United Bank Stakeholder
Incentive Plan to the other executive officers also are determined, in part, by
the overall performance of the Corporation as measured by the Corporation's
Return on Equity and the achievement of net income and other objectives. In
addition, executive officers' salaries are based on the achievement of other
specific functional, managerial, and individual objectives which are
established each year by the Chief Executive Officer and approved by the
Compensation and Pension Committee.
The United Bank Stakeholder Incentive Plan provides for a percentage of the
Bank's income to be available for distribution to all eligible employees of the
Bank based on achieving a certain level of net income and on other key
performance indicators. The underlying principle of this Plan is to reward for
specific performance. Eligibility and allocation of incentive awards are
determined by the Compensation and Pension Committee and approved by the Board
of Directors; incentive awards are paid in February of the year following the
year in which the performance objectives were achieved.
<PAGE> 7
The 1987 Stock Option and Performance Unit Plan was designed to benefit the
Corporation and its Shareholders by enabling the Corporation and the Bank to
attract and retain a strong management group. It is a long-term incentive
compensation plan designed to provide a competitive incentive and reward
program for the participants who remain with the company on a long-term basis;
the Stock Option and Performance Unit Plan's grants do not fully vest until
five years after being awarded. The grants are based on the achievement of
financial and other corporate goals which are established by the Compensation
and Pension Committee and approved by the Board of Directors.
Effective October 1, 1984, the Bank established the UNB Tax-Deferred Savings
Plan (401-K) to which it may make contributions. Qualification of the Plan was
received on May 22, 1987. All full-time employees are eligible to participate
in the Plan, subject to certain eligibility requirements established by the
Plan. The Chief Executive Officer and the other executive officers are
participants in the Plan on the same basis as all other eligible employees.
Participants are permitted to make voluntary contributions to their accounts in
the Plan. Participants' contributions are invested, by their choice, in one of
four funds. All employees of UNB Corp., or its subsidiaries, as of December 31,
1989, are 100% vested in the Bank's future contributions. All employees hired
after December 31, 1989, must accumulate three years of service to achieve 100%
vesting of the Bank's contributions.
The UNB Corp. and Affiliates Deferred Compensation Plan provides an
opportunity for the participants to accumulate supplemental funds for
retirement on a tax-deferred basis. The purpose of this Plan is to aid the Bank
in attracting and retaining senior officers and directors of exceptional
ability by providing such individuals with the benefits of deferring
compensation under such a Plan. There is no financial contribution to this Plan
by either UNB Corp. or the Bank. Mr. Mang is currently participating in this
Plan.
Louis V. Bockius III, Chairman Donald W. Schneider
Abner A. Yoder James P. Rodman
<PAGE> 8
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------
Annual Compensation Awards Payouts
- -----------------------------------------------------------------------------------------------------------------------
Securities
Underlying
Name and Other Restricted Options/Stock Long Term All
Principal Annual Stock Appreciation Incentive Other
Position Year Salary Bonus Compensation Awards Rights (#)* Plan Payouts Compensation
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Mang, 1995 $199,728 $60,282 $4,063 -0- -0- options $-0- $21,089(1)
President & Chief 1994 $190,217 $51,896 $4,339 -0- -0- options $-0- $21,239(2)
Executive Officer 1993 $179,011 $56,096 $2,500 -0- 34,118 options $-0- $23,483(3)
UNB Corp. and
United National Bank
& Trust Co.
Leo E. Doyle, 1995 $107,905 $24,494 - -0- 2,916 options $-0- $5,112(4)
Senior Vice 1994 $102,767 $19,900 - -0- 2,834 options $-0- $5,596(4)
President and 1993 $ 96,950 $21,600 - -0- 2,754 options $-0- $7,017(4)
Executive Officer
United National Bank
& Trust Co.
James J. Pennetti, 1995 $103,676 $23,534 - -0- 2,798 options $-0- $4,911(4)
Vice President 1994 $ 98,739 $19,100 - -0- 2,720 options $-0- $5,392(4)
Treasurer 1993 $ 93,155 $21,100 - -0- 2,642 options $-0- $6,740(4)
UNB Corp.
Senior Vice
President and
Executive Officer
United National Bank
& Trust Co.
Robert M. Sweeney, 1995 $ 93,138 $21,608 - -0- 2,638 options $-0- $4,375(4)
Secretary 1994 $ 91,312 $15,800 - -0- 2,564 options $-0- $4,905(4)
UNB Corp. 1993 $ 87,910 $17,700 - -0- 2,490 options $-0- $6,342(4)
Senior Vice
President and
Executive Officer
United National Bank
& Trust Co.
</TABLE>
*NOTE: THERE WERE NO STOCK APPRECIATION RIGHTS GRANTED IN THE FISCAL YEARS
ENDING DECEMBER 31, 1995, 1994, AND 1993.
(1) The total represents $14,489 paid by the Bank under a split-dollar life
insurance arrangement and $6,600 paid by the Bank under the UNB Tax
Deferred Savings Plan.
(2) The total represents $14,489 paid by the Bank under a split-dollar life
insurance arrangement and $6,750 paid by the Bank under the UNB Tax
Deferred Savings Plan.
(3) The total represents $14,489 paid by the Bank under a split-dollar life
insurance arrangement and $8,994 paid by the Bank under the UNB Tax
Deferred Savings Plan.
(4) The total represents payment by the Bank under the UNB Tax Deferred
Savings Plan.
<PAGE> 9
FIVE YEAR SHAREHOLDER RETURN COMPARISON
The Securities and Exchange Commission requires that UNB Corp. include in
this proxy statement a line graph presentation comparing cumulative, five-year
shareholder returns on an indexed basis with a broad equity market index and
either a nationally recognized industry standard or an index of peer companies
selected by the Corporation.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN(1) AMONG UNB CORP.,
THE S&P 500 STOCK INDEX, AND THE DOW JONES REGIONAL BANK INDEX
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Dow Jones Regional Bank Index(2) $100 $174.78 $233.64 $245.89 $236.64 $378.45
S&P 500 Stock Index(2) $100 $130.46 $140.40 $154.55 $156.59 $215.45
UNB Corp.(2) $100 $117.57 $152.92 $190.83 $260.57 $305.60
</TABLE>
(1) Assumes a reinvestment of dividends and a $100 initial investment on
December 31, 1990, in UNB Corp., the S&P 500 Stock Index, and the
Dow Jones Regional Bank Index.
(2) Based on quarterly dividends and quarterly closing stock prices.
1987 STOCK OPTION AND PERFORMANCE UNIT PLAN
Pursuant to its 1987 Stock Option and Performance Unit Plan (the Stock
Option Plan) which was approved by the Shareholders at the 1987 Annual Meeting,
there are outstanding options to purchase an aggregate of 151,445 shares of
Common Stock of UNB Corp. at a price equal to 100% of the fair market value of
the Common Stock on the respective dates on which the options were granted.
The outstanding options expire ten years from the date of grant.
The Compensation and Pension Committee of the Bank's Board of Directors has
exclusive power to determine which employees participate in the Stock Option
Plan and the type and amount of awards to be made under the Stock Option Plan.
Options granted under the Stock Option Plan qualify as "incentive stock
options" as determined under the Internal Revenue Code. No awards may be made
under the Stock Option Plan after February 11, 1997.
Once awarded, each option cannot be exercised sooner than three years from
the date of grant nor later than ten years from the date of grant. An option
may be exercised only while an optionee is an employee of the Corporation (or a
subsidiary) or within ninety days after termination of employment for any
reason other than death or total disability, but only to the extent that it was
exercisable at the date of termination. If the optionee is terminated by
reason of total disability, his options may be exercised in full or in part, to
the extent not previously exercised, within one year following termination of
employment (but not later than the expiration date of such option). If the
optionee shall cease to be employed by the Corporation by reason of normal
retirement (as defined in the Corporation's Pension Plan), the option shall
terminate and may no longer be exercised,
<PAGE> 10
except that within the period of ninety days following such retirement, but not
later than the expiration date of the option, the option may be exercised in
full or in part to the extent not previously exercised. If an optionee's
employment is terminated by death or if he dies within ninety days after
cessation of employment, a person entitled by will or by the laws of descent
and distribution to exercise the options may exercise the options in full or in
part at any time prior to the expiration date of the options to the extent not
previously exercised.
Once an option is awarded, the optionee, after the third consecutive year of
employment following the grant, may exercise the option and purchase up to 25%
of the total number of shares allowed by the option. After the fourth
consecutive year of employment following the grant, the optionee may exercise
the option and purchase up to 50% of the total number of shares allowed by the
option. The option shall be fully exercisable and the optionee may exercise
the option and purchase 100% of the total number of shares allowed by the
option after the fifth consecutive year of employment following the grant.
Payment for shares upon exercise of an option under the Stock Option Plan
may be made in cash or by delivery of previously issued shares of Common Stock
of the Corporation having a fair market value equal to the exercise price, or a
combination of cash and shares. There is reserved for issuance upon exercise
of stock options granted under the Stock Option Plan a total of 191,010 Common
Shares of the Corporation.
OPTIONS/STOCK APPRECIATION RIGHTS GRANTED IN 1995
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
- ---------------------------------------------------------------------------------------------------------------------
% of Total
Number of Options/Stock
Securities Underlying Appreciation
Options/Stock Rights Granted
Appreciation to Employees Exercise Expiration
Name Rights Granted (#)* in 1995 Price Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Leo E. Doyle, 2,916 options 24.5% $38.50/ January 19, 2005 $ 70,596 $178,926
Senior Vice share
President and
Executive Officer
United National Bank
& Trust Co.
James J. Pennetti, 2,798 options 23.5% $38.50/ January 19, 2005 $ 67,740 $171,685
Vice President share
Treasurer
UNB Corp.
Senior Vice
President and
Executive Officer
United National Bank
& Trust Co.
Robert M. Sweeney, 2,638 options 22.1% $38.50/ January 19, 2005 $ 63,866 $161,868
Secretary share
UNB Corp.
Senior Vice
President and
Executive Officer
United National Bank
& Trust Co.
</TABLE>
*NOTE: THERE WERE NO STOCK APPRECIATION RIGHTS GRANTED IN THE FISCAL YEAR
ENDING DECEMBER 31, 1995.
<PAGE> 11
AGGREGATED OPTIONS/STOCK APPRECIATION RIGHTS EXERCISED IN 1995 AND
FISCAL YEAR-END 1995 OPTIONS/STOCK APPRECIATION RIGHTS VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options/Stock In-The-Money Options/
Appreciation Rights* at Stock Appreciation Rights*
Shares Fiscal Year-End 1995 (#) at Fiscal Year-End 1995
Acquired Value
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Robert L. Mang, 1,000 $24,460 21,181 42,395 $603,893 $896,478
President & Chief shares
Executive Officer
UNB Corp. and
United National Bank
& Trust Co.
Leo E. Doyle, 750 $18,720 9,030 12,045 $257,397 $205,216
Senior Vice shares
President and
Executive Officer
United National Bank
& Trust Co.
James J. Pennetti, 872 $22,552 8,838 11,556 $252,193 $196,878
Vice President shares
Treasurer
UNB Corp.
Senior Vice
President and
Executive Officer
United National Bank
& Trust Co.
Robert M. Sweeney, 900 $22,014 7,437 10,896 $210,922 $185,640
Secretary shares
UNB Corp.
Senior Vice
President and
Executive Officer
United National Bank
& Trust Co.
</TABLE>
*NOTE: THERE WERE NO STOCK APPRECIATION RIGHTS EXERCISED IN 1995 NOR WERE
THERE ANY STOCK APPRECIATION RIGHTS OUTSTANDING AT FISCAL YEAR-END 1995.
PENSION PLAN
UNB Corp. does not have an Employee Pension Plan. However, executive
officers of UNB Corp. and the United National Bank & Trust Co. are participants
in the United National Bank & Trust Co.'s Pension Plan (the Plan) which is a
Defined Benefit Plan for all eligible full-time employees as defined by the
Plan.
The following table sets forth retirement benefits at various levels of
compensation and years of service based upon retirement at age 65. For this
table, benefits are based on 1995 Plan provisions using a male born in 1935.
<PAGE> 12
PENSION PLAN TABLE
<TABLE>
<CAPTION>
REMUNERATION YEARS OF SERVICE
------------ ----------------
15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$125,000 $38,875 $51,834 $64,792 $64,792 $64,792
$150,000 $47,313 $63,084 $78,855 $78,855 $78,855
$175,000 $47,313 $63,084 $78,855 $78,855 $78,855
$200,000 $47,313 $63,084 $78,855 $78,855 $78,855
$225,000 $47,313 $63,084 $78,855 $78,855 $78,855
$250,000 $47,313 $63,084 $78,855 $78,855 $78,855
$300,000 $47,313 $63,084 $78,855 $78,855 $78,855
$400,000 $47,313 $63,084 $78,855 $78,855 $78,855
$450,000 $47,313 $63,084 $78,855 $78,855 $78,855
$500,000 $47,313 $63,084 $78,855 $78,855 $78,855
</TABLE>
*NOTE: BENEFITS LISTED DO NOT INCLUDE SOCIAL SECURITY BENEFITS.
THE MAXIMUM ANNUAL SALARY ALLOWABLE FOR 1995 IS $150,000 FOR A DEFINED
BENEFIT PLAN.
A participant's remuneration covered by the Plan is his or her annual
compensation as defined by the Plan averaged over the three highest consecutive
compensation periods as defined in the Plan. For the named executives as of
the end of the last calendar year, the covered compensation is: Mang,
$150,000; Doyle, $123,041; Pennetti, $118,423; Sweeney, $108,028. The
estimated years of service for each named executive is as follows: Mang,
nineteen years; Doyle, nineteen years; Pennetti, twenty-three years; Sweeney,
twenty-six years. Benefits are computed as a straight-life annuity beginning
at age 65.
CHANGE OF CONTROL AGREEMENTS
On November 16, 1995, the Boards of Directors of the Corporation and the
Bank approved the recommendation of the Compensation and Pension Committee and
adopted and entered into Change of Control Agreements (the Agreements) with the
four executive officers of the Bank, namely Robert L. Mang, Leo E. Doyle, James
J. Pennetti, and Robert M. Sweeney. The Agreements become effective only upon a
change of control of the Corporation as defined in the Agreements. If, prior to
a change of control, the executive's employment with the Corporation or the
Bank is terminated by death, retirement, disability, resignation, or dismissal
for any reason, the Agreements will terminate.
The Boards of Directors approved and adopted these Agreements in order to
help to assure the objectivity of these executive officers in evaluating a
potential change of control and in advising the Board of Directors of the
Corporation whether or not a potential change of control would be in the best
interests of the Corporation and its Shareholders. Further, these Agreements
will help to assure the present and future continuity of executive management
and will be an inducement for these four key officers to remain in the
employment of the Corporation and the Bank should a change of control occur.
The Change of Control Agreements provide that upon termination of
employment, as defined in the Agreements, within two years following a change
of control, unless the executive is terminated for good cause as defined in the
Agreements, the executive will be entitled to severance compensation. The
Agreements also provide that if the executive voluntarily terminates employment
not earlier than six months and not later than nine months following a change
of control, the executive will be entitled to severance compensation.
In the event of the termination of the executive's employment as described
above, the executive shall be entitled to receive either a lump sum cash
payment equal to two years of compensation (base salary plus incentive) or upon
the executive's election, two years of compensation (base salary plus
incentive) payable in equal monthly payments, in cash, without interest.
Following the termination of the executive's employment, the Corporation
shall continue the executive's coverage in the Bank's health, disability, and
life insurance plans, at the same levels that had been provided the executive
immediately prior to his termination of employment, for a period of two years.
Payments made to an executive under the terms of the Agreements shall be
included within the definition of compensation for all qualified and
non-qualified retirement plans of the Corporation or the Bank. The benefit
period as defined in the Agreements shall be included within the computation of
any and all years of service and/or age requirements for the determination of
the amount of or vesting of benefits under the Corporation's or the Bank's
qualified and non-qualified retirement plans.
<PAGE> 13
In the event of the termination of employment of the executive as defined in
the Agreements, the executive shall be entitled to one year of out-placement
services following termination of employment. All costs of such services shall
be paid for by the Corporation.
Under the terms of the Agreements, the Corporation and the executive agree
to arbitrate any issue, misunderstanding, disagreement, or dispute in
connection with the terms of the Agreement in accordance with the rules of the
American Arbitration Association. Any and all costs associated with the
executive's enforcement of the provisions of the Agreements through arbitration
shall be borne by the Corporation.
TRANSACTIONS WITH MANAGEMENT AND RELATED PARTIES
Some of the directors and officers of UNB Corp., and the companies with
which they are associated, were customers of the Bank, and had banking
transactions with the Bank in the ordinary course of business during 1995, and
expect to have such banking transactions in the future. All loans and
commitments for loans included in such transactions were made in the ordinary
course of business, on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with other persons, and in the opinion of the management of the Bank, did not
involve more than normal risk of collectibility or present other unfavorable
features. The aggregate amount of such loans and commitments outstanding at
December 31, 1995, was $5,978,133, or 9.2%, of the Corporation's equity at
year-end 1995.
Director E. Lang D'Atri is a partner in the law firm Day, Ketterer, Raley,
Wright & Rybolt. In the ordinary course of business, UNB Corp. and the United
National Bank & Trust Co. have retained the legal services of this firm in the
past and may retain its services in the future. In 1995, the Corporation and
the Bank paid a total of $18,965 to Day, Ketterer, Raley, Wright & Rybolt for
legal services rendered by the firm.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
During the fiscal years ended December 31, 1995, 1994, and 1993, no
director, officer, or other person required to file such reports failed to file
reports required by Section 16(a) of the Exchange Act or failed to file such
reports in a timely manner.
LEGAL PROCEEDINGS
There are no pending legal proceedings, other than ordinary routine
litigation incidental to the business of UNB Corp. and the United National Bank
& Trust Co., to which the Corporation or the Bank is a party. There are no
pending legal proceedings to which any director, officer, affiliate of the
Corporation, any owner of record, or beneficiary of more than five percent (5%)
of the Common Stock of the Corporation, or any associate of any such director,
officer, affiliate of the Corporation, or security holder is a party adverse to
the Corporation or any of its subsidiaries or has an interest adverse to that
of the Corporation or any of its subsidiaries.
INDEPENDENT PUBLIC ACCOUNTANTS
Crowe, Chizek and Company, Certified Public Accountants, served as
independent public accountants for the purposes of auditing the Corporation's
Annual Consolidated Financial Statements and for the preparation of
consolidated tax returns for the fiscal year ended December 31, 1995. The
appointment of independent public accountants is approved annually by the Board
of Directors. The decision of the Board of Directors is based on the
recommendation of the Audit Committee. In making its recommendation, the Audit
Committee reviewed both the audit scope and estimated fees for professional
services for the coming year. On February 15, 1996, the Board of Directors
authorized the engagement of Crowe, Chizek and Company as independent public
accountants for the year 1996.
One or more representatives of Crowe, Chizek and Company will attend the
Annual Meeting and will have the opportunity to make a statement if they so
desire. They will also be available to respond to appropriate questions.
<PAGE> 14
SHAREHOLDERS' PROPOSALS
Proposals of Shareholders which are to be presented at the 1997 Annual
Meeting of Shareholders of the Corporation must be received by the Corporation
no later than October 15, 1996, for inclusion in the Corporation's proxy
statement and form of proxy relating to such meeting. Proposals should be sent
by certified mail, return receipt requested, to Robert M. Sweeney, Secretary,
UNB Corp., P.O. Box 24190, Canton, Ohio 44701.
OTHER BUSINESS
Management, at present, knows of no other business to be brought before the
meeting. If any other business is presented at such meeting, the proxy will be
voted in accordance with the recommendations of the Board of Directors.
By order of the Board of Directors,
By: /s/ Robert M. Sweeney
---------------------
Canton, Ohio ROBERT M. SWEENEY
February 23, 1996 Secretary
----------------------------------
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO
ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY.
<PAGE> 15
UNB CORP.
UNITED BANK PLAZA, 220 MARKET AVENUE SOUTH, CANTON, OHIO 44702
The undersigned hereby appoints Robert L. Hammond, Todd S. Bundy, and George
N. Swallow, or any one of them (with full power to act alone), my true and
lawful attorney(s) for me and in my name, place and stead, to vote all shares
of Common Stock of UNB Corp. which the undersigned is entitled to vote at the
Annual Meeting of Shareholders to be hold on April 16, 1996, or at any
adjournments thereof, with all the powers the undersigned would possess if
personally present as follows:
1. Election of Directors.
<TABLE>
<S> <C>
______ FOR all nominees listed below. ______ WITHHOLD AUTHORITY to vote for
(Except as directed to the contrary below) all nominees listed below.
</TABLE>
E. Lang D'Atri; Robert L. Mang
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below:
________________________________________________________________________
2. To amend the Articles of Incorporation to increase the number of no par
value Common Shares that the Corporation is authorized to issue from
5,000,000 to 15,000,000 shares.
_____ FOR _____ AGAINST _____ ABSTAIN
3. To vote, in their discretion, upon such other business as may properly
come before the meeting.
(Continued, and to be signed and dated on other side)
(Continued from other side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S), IF NO INSTRUCTION IS INDICATED, AUTHORITY IS
GRANTED TO VOTE "FOR" ALL THE NOMINEES LISTED ABOVE WITH RESPECT TO THE
ELECTION OF DIRECTORS AND TO VOTE "FOR" THE PROPOSED AMENDMENT TO THE ARTICLES
OF INCORPORATION. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MAY BE REVOKED PRIOR TO EXERCISE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" ALL THE NOMINEES LISTED ABOVE AND A VOTE "FOR" THE PROPOSED AMENDMENT TO
THE ARTICLES OF INCORPORATION.
Please sign exactly as name(s) appears below.
<TABLE>
<S> <C> <C> <C>
Dated Dated
Sign Here ___________________ __________________,1996 Sign Here ___________________ __________________,1996
When shares are hold by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee, or guardian,
please give full title as such. If a corporation, please sign in full
corporate name by the President or other authorized officer. If a
partnership, please sign in the partnership name by an authorized person.
PLEASE SIGN, DATE, AND RETURN IMMEDIATELY USING THE ENCLOSED
ENVELOPE.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE REGISTRANT FOUND IN THE 1995 ANNUAL
REPORT TO SHAREHOLDERS (EXHIBIT 13) INCORPORATED BY REFERENCE UNDER ITEM 8 OF
THIS FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 31,735,149
<INT-BEARING-DEPOSITS> 514,509
<FED-FUNDS-SOLD> 4,300,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 99,111,341
<INVESTMENTS-CARRYING> 29,104,924
<INVESTMENTS-MARKET> 29,403,539
<LOANS> 518,729,789
<ALLOWANCE> 7,242,003
<TOTAL-ASSETS> 699,643,837
<DEPOSITS> 547,187,160
<SHORT-TERM> 49,659,159
<LIABILITIES-OTHER> 6,110,635
<LONG-TERM> 31,360,000
<COMMON> 2,873,977
0
0
<OTHER-SE> 62,452,906
<TOTAL-LIABILITIES-AND-EQUITY> 699,643,837
<INTEREST-LOAN> 41,492,238
<INTEREST-INVEST> 7,704,287
<INTEREST-OTHER> 562,132
<INTEREST-TOTAL> 49,758,657
<INTEREST-DEPOSIT> 17,534,235
<INTEREST-EXPENSE> 21,805,511
<INTEREST-INCOME-NET> 27,953,146
<LOAN-LOSSES> 1,750,000
<SECURITIES-GAINS> 6,189
<EXPENSE-OTHER> 20,655,175
<INCOME-PRETAX> 11,164,956
<INCOME-PRE-EXTRAORDINARY> 11,164,956
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,379,466
<EPS-PRIMARY> 2.52
<EPS-DILUTED> 2.51
<YIELD-ACTUAL> 4.68
<LOANS-NON> 1,066,000
<LOANS-PAST> 254,000
<LOANS-TROUBLED> 212,000
<LOANS-PROBLEM> 1,075,000
<ALLOWANCE-OPEN> 6,348,219
<CHARGE-OFFS> 1,558,440
<RECOVERIES> 702,224
<ALLOWANCE-CLOSE> 7,242,003
<ALLOWANCE-DOMESTIC> 5,245,003
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,997,000
</TABLE>
