<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
------------------
Commission file number 0-13270
UNB CORP.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Ohio 34-1442295
- ------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
220 Market Avenue, South
Canton, Ohio 44702
- --------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 454-5821
--------------
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 report), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock, $1.00 Stated Value Outstanding at April 30, 1996
5,761,712 Common Shares
<PAGE> 2
UNB CORP.
FORM 10-Q
QUARTER ENDED MARCH 31, 1996
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Interim financial information required by Regulation 210.10-01 of
Regulation S-X is included in this Form 10Q as referenced below:
Page
Number(s)
---------
Consolidated Balance Sheets 1
Consolidated Statements of Income 2
Condensed Consolidated Statements
of Changes in Shareholders' Equity 3
Condensed Consolidated Statements
of Cash Flows 4
Notes to the Consolidated Financial Statements 5-12
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-23
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of
Security Holders 24
Item 5 - Other Information 24
Item 6 - Exhibits and Reports on Form 8-K 24
Signatures 24
<PAGE> 3
UNB CORP.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands) MARCH 31, December 31,
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 24,275 $ 31,735
Federal funds sold 1,600 4,300
Interest bearing deposits with banks 255 515
Securities, net (Fair value:
$65,971 and $65,116, respectively)(Note 2) 65,971 65,129
Mortgage-backed securities (Fair value:
$57,405 and $63,399, respectively)(Note 2) 57,183 63,087
Loans:
Total loans (Notes 3 and 6) 562,218 518,730
Allowance for loan losses (Note 4) (7,510) (7,242)
- ---------------------------------------------------------------------------------------------------
Net loans 554,708 511,488
Premises and equipment, net 8,713 8,811
Intangible assets 7,121 7,376
Accrued interest receivable and other assets 7,271 7,203
- ---------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 727,097 $ 699,644
===================================================================================================
LIABILITIES
Deposits:
Noninterest bearing deposits $ 68,312 $ 73,708
Interest bearing deposits 496,458 473,479
- ---------------------------------------------------------------------------------------------------
Total deposits 564,770 547,187
Fed funds purchased and short-term borrowings 60,698 49,659
Federal Home Loan Bank advances (Note 6) 28,360 31,360
Accrued taxes, expenses and other liabilities 6,639 6,111
- ---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 660,467 634,317
SHAREHOLDERS' EQUITY
Common stock ($1.00 stated value, 5,000,000 shares authorized;
2,880,858 and 2,873,977 issued and outstanding, respectively) 2,881 2,874
Paid-in capital 31,867 31,603
Retained earnings 31,251 30,005
Unrealized gain/(loss) on securities available for sale 631 845
- ---------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 66,630 65,327
- ---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 727,097 $ 699,644
===================================================================================================
</TABLE>
See Notes to the Consolidated Financial Statements
1
<PAGE> 4
UNB CORP.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands) THREE MONTHS ENDED
MARCH 31,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans:
Taxable $ 11,919 $ 9,039
Tax exempt 60 69
Interest and dividends on investments & mortgage-backed securities:
Taxable 1,837 2,049
Tax exempt 15 48
Interest on bank deposits and federal funds sold 94 116
- --------------------------------------------------------------------------------------------------
Total interest income 13,925 11,321
- --------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits 5,049 3,665
Interest on short-term borrowings 682 489
Interest on FHLB advances 513 436
- --------------------------------------------------------------------------------------------------
Total interest expense 6,244 4,590
- --------------------------------------------------------------------------------------------------
NET INTEREST INCOME 7,681 6,731
PROVISION FOR LOAN LOSSES (NOTE 4) 630 360
- --------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 7,051 6,371
OTHER INCOME:
Service charges on deposits 585 586
Trust Department income 573 546
Other operating income 278 208
Securities gains(losses), net 0 6
Gains on loans originated for resale and sold 0 11
- --------------------------------------------------------------------------------------------------
Total other income 1,436 1,357
- --------------------------------------------------------------------------------------------------
OTHER EXPENSES:
Salary, wages and benefits 2,877 2,439
Occupancy 261 305
Equipment 533 504
Other operating expense 1,763 2,073
- --------------------------------------------------------------------------------------------------
Total other expenses 5,434 5,321
- --------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 3,053 2,407
PROVISION FOR INCOME TAXES 1,031 805
- --------------------------------------------------------------------------------------------------
NET INCOME $ 2,022 $ 1,602
==================================================================================================
EARNINGS PER SHARE (NOTE 1):
Primary $ 0.34 $ 0.27
Fully diluted $ 0.34 $ 0.27
==================================================================================================
DIVIDENDS PER SHARE (NOTE 1) $ 0.14 $ 0.12
==================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING (NOTE 1):
Primary 5,883,949 5,854,394
Fully diluted 5,886,592 5,854,394
==================================================================================================
</TABLE>
NOTE: Per share data is based on the average number of shares outstanding
adjusted for all stock dividends and splits.
See Notes to the Consolidated Financial Statements
2
<PAGE> 5
UNB CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
THREE MONTHS ENDED
3/31/96 3/31/95
-------- --------
<S> <C> <C>
Balance at beginning of period $ 65,327 $ 58,640
Net Income 2,022 1,602
Shares issued through dividend reinvestment 255 0
Stock options exercised 16 16
Cash dividends $0.14 and $0.12 per share, respectively* (776) (689)
Change in market value on investment securities
available for sale, net of deferred taxes (214) 539
-------- --------
Balance at end of period $ 66,630 $ 60,108
======== ========
<FN>
*Earnings per share data adjusted for April, 1996 100% stock dividend.
</TABLE>
See Notes to the Consolidated Financial Statements
3
<PAGE> 6
UNB CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands) THREE MONTHS ENDED MARCH 31,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,022 $ 1,602
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 184 172
Provision for loan losses 630 360
Net securities gains 0 (6)
Net accretion on securities (51) (204)
Amortization of intangible assets 255 278
Loans originated for resale 0 (618)
Proceeds from sale of loan originations 0 702
Changes in:
Interest receivable (248) 102
Interest payable 237 330
Other assets and liabilities, net 584 (41)
Deferred income (3) (4)
- ------------------------------------------------------------------------------------------------------------------------
Net cash from operating activities 3,610 2,673
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest bearing deposits with banks 260 (913)
Net (increase)/decrease funds sold 2,700 (4,100)
Investment and mortgage-backed securities:
Proceeds from sales of securities available for sale 0 3,129
Proceeds from maturities of securities held to maturity 7,678 5,005
Proceeds from maturities of securities available for sale 8,970 5,065
Purchases of securities held to maturity (7,723) (4,938)
Purchases of securities available for sale (10,006) (3,126)
Principal payments received on mortgage-backed securities held to maturity 2,457 1,371
Principal payments received on mortgage-backed securities available for sale 3,413 601
Net increase in loans made to customers (43,042) (24,207)
Loans purchased (845) (873)
Purchases of premises and equipment, net (86) (208)
Principal payments received under leases 37 35
- ------------------------------------------------------------------------------------------------------------------------
Net cash from investing activities (36,187) (23,159)
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 17,583 (13,224)
Cash dividends paid, net of shares issued through dividend reinvestment (521) (689)
Proceeds from issuance of stock 16 16
Net increase in short-term borrowings 11,039 15,691
Proceeds from FHLB advances 0 25,035
Repayments of FHLB advances (3,000) (10,065)
- ------------------------------------------------------------------------------------------------------------------------
Net cash from financing activities 25,117 16,764
- ------------------------------------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (7,460) (3,722)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 31,735 30,211
- ------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 24,275 $ 26,489
========================================================================================================================
</TABLE>
See the Notes to the Consolidated Financial Statements
4
<PAGE> 7
UNB CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies
- ---------------------------------------------------
The accompanying consolidated financial statements include the accounts of UNB
Corp. and its wholly owned subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation.
These interim financial statements are prepared without audit and reflect all
adjustments of a normal recurring nature which, in the opinion of Management,
are necessary to present fairly the consolidated financial position of UNB Corp.
at March 31, 1996, and its results of operations and cash flows for the periods
presented. The accompanying consolidated financial statements do not purport to
contain all the necessary financial disclosures required by generally accepted
accounting principles that might otherwise be necessary in the circumstances.
The Annual Report for UNB Corp. for the year ended December 31, 1995, contains
consolidated financial statements and related notes which should be read in
conjunction with the accompanying consolidated financial statements.
For consolidated financial statement classification and cash flow reporting
purposes, cash and cash equivalents include currency on hand and non-interest
bearing deposits with banks. For the three months ended March 31, 1996, and
March 31, 1995, UNB Corp. paid interest in the amount of $6.0 million and $4.3
million, respectively. For the same three month period, federal income taxes
paid totaled $145,000 and $90,000, respectively.
The Corporation accounts for its investment portfolio under the provisions of
Statement of Financial Accounting Standards No. 115 (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.
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. The Corporation held no
trading securities during the periods reported.
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.
On January 1, 1995, the Corporation adopted Financial Accounting Standards Board
Statements No. 114, "Accounting by Creditors for Impairment of a Loan", and No.
118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures." SFAS No. 114 specifies that the allowances for loan losses on
impaired loans be measured at the present value of expected future cash flows,
discounted at the loan's original effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral, if the loan is collateral
5
<PAGE> 8
UNB CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
------------------------------------------------------
dependent. SFAS No. 118 allows a creditor to use existing methods for income
recognition on an impaired loan.
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.
Impaired loans are fully or partially charged off when in Management's opinion
an event or events have occurred which provide reasonable certainty that a loss
is probable. When Management determines that a loss is probable, 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.
SFAS No. 118 allows a creditor to use existing methods for income recognition on
an impaired loan. All impaired loans for purposes of SFAS No. 114 are placed on
non-accrual status. However, all non-accrual loans are not considered impaired
because non-accrual loans which have been brought current are included on
non-accrual status for six months and would not be considered impaired.
Under this standard, loans considered to be impaired are reduced to the present
value of expected future cash flows or to the fair value of collateral by
allocating a portion of the allowance for loan losses to such loans. Any
reduction in carrying value through impairment or any change in impairment based
on cash payments received or revised cash flow estimates as determined on a
quarterly basis would be applied against the unallocated portion of the
allowance for loan losses and become a specific allocation of the allowance or
as an addition to the provision for loan losses if the unallocated portion of
the allowance was insufficient to cover the impairment.
Primary and fully diluted earnings per share at March 31, 1996 and 1995 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 UNB Corp.'s stock for the periods 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 period
end.
The Corporation declared a 100% stock dividend to shareholders of record on
April 16, 1996, payable on April 30, 1996. This was recorded by a transfer from
retained earnings to common stock at stated value. All earnings per share and
cash dividends per share have been adjusted for this stock dividend.
6
<PAGE> 9
UNB CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
------------------------------------------------------
Note 2 - Investment Securities
- ------------------------------
The amortized cost and estimated fair value of the investment and
mortgage-backed securities, available for sale and held to maturity, as
presented on the consolidated balance sheet at March 31, 1996, and December 31,
1995, are as follows:
<TABLE>
<CAPTION>
March 31, 1996
-----------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(in thousands of dollars) Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury securities $ 24,075 $ 48 ($ 70) $ 24,053
Obligations of U.S. government
agencies and corporations 28,011 48 (252) 27,807
Securities held to maturity:
Obligations of U.S. government
agencies and corporations 3,009 -- (13) 2,996
Obligations of state and political
subdivision 1,237 5 -- 1,242
Corporate bonds and other debt
securities 1,135 10 (1) 1,144
-------- ------ ----- --------
Total debt securities 57,467 111 (336) 57,242
Equity securities available for sale 7,360 1,370 0 8,730
-------- ------ ----- --------
Total investment securities 64,827 1,481 (336) 65,972
Mortgage-backed securities
available for sale 37,095 133 (321) 36,907
Mortgage-backed securities
held to maturity 20,276 223 (1) 20,498
-------- ------ ----- --------
Total mortgage-backed securities 57,371 356 (322) 57,405
-------- ------ ----- --------
Total investment and mortgage-
backed securities $122,198 $1,837 ($658) $123,377
======== ====== ===== ========
</TABLE>
7
<PAGE> 10
UNB CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(in thousands of dollars) Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Securities available for sale
U.S. Treasury securities $ 22,093 $ 111 $ (33) $ 22,171
Obligations of U.S. government
agencies and corporations 28,966 72 (226) 28,812
Securities held to maturity:
Obligations of U.S. government
agencies and corporations 3,007 -- (3) 3,004
Obligations of state and
political subdivisions 1,238 6 -- 1,244
Corporate bonds and other debt
securities 2,131 10 (26) 2,115
-------- -------- -------- --------
Total debt securities 57,435 199 (288) 57,346
Equity securities available for sale 6,275 1,495 -- 7,770
-------- -------- -------- --------
Total investment securities 63,710 1,694 (288) 65,116
Mortgage-backed securities
available for sale 40,497 139 (278) 40,358
Mortgage-backed securities
held to maturity 22,729 319 (7) 23,041
-------- -------- -------- --------
Total mortgage-backed securities 63,226 458 (285) 63,399
-------- -------- -------- --------
Total investment and mortgage-
backed securities $126,936 $ 2,152 $ (573) $128,515
======== ======== ======== ========
</TABLE>
During the three month period ended March 31, 1996, there were no sales of
securities designated as available for sale. For the three month period ended
March 31, 1995, the proceeds from sales of securities available for sale were
$3,129,244 with gross gains of $6,210 recognized on the sales. For the first
three months of 1996, the net unrealized decrease in market value on available
for sale securities was approximately $325,000. There were no sales or transfers
of securities classified as held-to-maturity.
The amortized cost and estimated fair value of mortgage-backed and debt
securities at March 31, 1996, by contractual maturity, are shown on page 9.
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.
8
<PAGE> 11
UNB CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
------------------------------------------------------
<TABLE>
<CAPTION>
March 31, 1996
-----------------------------------
Estimated Weighted
Amortized Fair Average
(in thousands of dollars) Cost Value Yield
---- ----- -----
<S> <C> <C> <C>
Securities available for sale:
U.S. Treasuries
Due in one year or less $ 9,997 $ 10,010 5.75%
Due after one year through five years 14,078 14,043 5.74
-------- -------- ----
Total 24,075 24,053 5.75
U.S. Government agencies and corporations
Due in one year or less 11,003 10,971 5.00
Due after one year through five years 17,008 16,836 5.47
-------- -------- ----
Total 28,011 27,807 5.32
Total debt securities available for sale $ 52,086 $ 51,860 5.52%
======== ======== ====
Securities held to maturity:
U.S. Government agencies and corporations
Due in one year or less $ 3,009 $ 2,996 5.08%
-------- -------- ----
Total 3,009 2,996 5.08
Obligations of state and political subdivisions
Due in one year or less 932 937 4.76
Due after one year through five years 305 305 4.65
-------- -------- ----
Total 1,237 1,242 4.73
Corp bonds and other debt securities
Due in one year or less 393 393 0.00
Due after one year through five years -- -- --
Due after five years through ten years 492 501 8.79
Due after ten years 250 250 8.50
-------- -------- ----
Total 1,135 1,144 5.69
-------- -------- ----
Total securities held to maturity $ 5,381 $ 5,382 5.13%
======== ======== ====
Mortgage-backed and collateralized
mortgage obligations available for sale $ 37,095 $ 36,907 6.04%
Mortgage-backed and collateralized
mortgage obligations held to maturity 20,276 20,498 7.83
-------- -------- ----
Total mortgage-backed and debt securities $114,838 $114,647 6.08%
======== ======== ====
</TABLE>
9
<PAGE> 12
UNB CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
------------------------------------------------------
At March 31, 1996 there were no holdings of securities of any one issuer, other
than the U.S. government and its agencies and corporations with an aggregate
book value which exceeds 10% of stockholders' equity.
Note 3 - Loans
- --------------
Total loans as presented on the balance sheet are comprised of the following
classifications:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(in thousands of dollars)
<S> <C> <C>
Commercial, financial and agricultural $ 71,479 $ 59,638
Commercial, tax exempt 5,166 5,173
Commercial real estate 64,627 60,478
Residential real estate 189,545 172,283
Consumer loans 231,401 221,158
------- -------
Total loans $562,218 $518,730
======== ========
</TABLE>
The balance of impaired loans at March 31, 1996 was $547,519. Of this amount,
$134,037 in impaired loans required no allocation of the allowance for loan
losses. The remaining balance of impaired loans, $413,482, had specific reserves
for their full amount allocated to them, however the entire allowance is
available for the charge-offs of any loan. The average balance of impaired loans
for the first quarter of 1996 was $553,462. Interest income recognized on
impaired loans for the first quarter of 1996 was $18,042, which included $15,604
of interest income recognized on a cash basis. There were no loans identified as
impaired at March 31, 1995.
At March 31, 1996 and December 31, 1995, loans on non-accrual status and/or past
due more than 90 days approximated $1,439,000 and $1,320,000, respectively. The
Other Real Estate Owned balance, net of allowance, at March 31, 1996, is
$325,000.
Note 4 - Allowance for Loan Losses
- ----------------------------------
A summary of activity in the allowance for loan losses for the three months
ended March 31, 1996, and March 31, 1995, are as follows:
<TABLE>
<CAPTION>
(in thousands of dollars) 1996 1995
---- ----
<S> <C> <C> <C>
Balance - January 1 $7,242 $6,348
Provision charged to operating expense 630 360
Loans charged off, net of recoveries (362) (122)
------- -------
Balance - March 31 $7,510 $6,586
------ ------
</TABLE>
10
<PAGE> 13
UNB CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
------------------------------------------------------
Note 5 - Concentrations of Credit Risk and
- ------------------------------------------
Financial Instruments With Off-Balance Sheet Risk
-------------------------------------------------
The Corporation offers commercial and consumer credit products to customers
within Stark and surrounding counties. The Corporation maintains a diversified
credit portfolio, with residential and commercial real estate and consumer loans
comprising approximately 86.2% of the portfolio. Indirect loans accounted for
90.4% of installment loans and 81.6% of all consumer loans at March 31, 1996.
The dealer network from which the indirect loans are generated includes 135
active relationships, the largest of which was responsible for 11.1% of total
indirect dollar volume for the year-to-date 1996.
The Corporation is a party to financial instruments with off-balance sheet risk.
These instruments are required 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. At March
31, 1996, the contract or notional amounts of these instruments, which primarily
include commitments to extend credit, standby letters of credit and financial
guarantees, and interest rate swaps totaled $145,490,000.
At March 31, 1996, the Corporation held one interest rate swap agreement with a
notional amount of $6.3 million. The notional amount of the interest rate swap
does not represent an amount exchanged by the parties and is not a measure of
the Corporation's exposure through its use of derivatives. The amounts exchanged
are determined by reference to the notional amount 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 27, 2000. Variable interest payments
received are based on the three month LIBOR rate which is adjusted on a
quarterly basis. The LIBOR rate in effect at March 31, 1996 was 5.27% while the
fixed rate to be paid through the remainder of the contract is 2.88%. The income
from this agreement for the three months ended March 31, 1996 was $45,400. For
the three months ended March 31, 1995 the income was $46,600. The market value
of this swap at March 31, 1996 was a positive $410,000. Under the terms of this
contract, future changes in LIBOR will affect the payments received, the income
or expense generated by the swap and its market value.
Note 6 - FHLB Advances
- ----------------------
Long-term debt at March 31, 1996 is comprised of advances from the Federal Home
Loan Bank (FHLB). Pursuant to collateral agreements with the FHLB, advances are
secured by all FHLB stock and qualifying first mortgage loans. Advances at March
31, 1996 have original principal balances totaling $28,360,000. Interest expense
on FHLB advances for the three months ending March 31, 1996 was approximately
$513,000.
11
<PAGE> 14
UNB CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
------------------------------------------------------
A summary of FHLB advances outstanding follows (in thousands):
<TABLE>
<CAPTION>
Maturity Interest Amount
--------------------------------------------------------------------
<S> <C> <C>
1996 4.90%-6.50% $ 5,245
1997 5.15%-5.30% 2,260
1998 5.35%-7.85% 4,775
1999 5.50%-7.95% 4,785
2000 6.00%-8.00% 10,300
2001 6.10% 315
2002 6.25% 330
2003 6.25% 350
--------------------------------------------------------------------
Total $28,360
====================================================================
</TABLE>
12
<PAGE> 15
UNB CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
-------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
INTRODUCTION
- ------------
The following areas of discussion pertain to the consolidated financial
statements of UNB Corp. at March 31, 1996, compared to December 31, 1995, and
the results of operations for the year-to-date period ending March 31, 1996,
compared to the same period in 1995. It is the intent of this discussion to
provide the reader with a more thorough understanding of the consolidated
financial statements and supporting schedules, and should be read in conjunction
with those consolidated financial statements and schedules.
UNB Corp. is not aware of any trends, events, or uncertainties that might have a
material effect on the soundness of operations; neither is UNB Corp. aware of
any proposed recommendations by regulatory authorities which would have a
similar effect if implemented.
FINANCIAL CONDITION
- -------------------
Total assets at March 31, 1996 were $727,097,000, an increase of $27,453,000, or
3.9%, over year-end 1995. Decreases in cash and cash equivalents, Federal Funds
Sold and interest bearing deposits with banks of $7,460,000, $2,700,000 and
$260,000, respectively, combined for a total decrease of $10,420,000 in highly
liquid balances. A net reduction of $5,062,000 in the investment and
mortgage-backed securities portfolios combined with the reduction of liquid
balances was used to fund a portion of the loan portfolio growth of $43,488,000
since year-end 1995, an increase of 8.4%.
All of the major loan categories experienced continued loan growth for the first
three months of the year. The residential mortgage loan portfolio increased by
$17,262,000, or 10%, over year-end 1995 levels. The consumer loan portfolio
increased by $17,449,000, or 8.2%, over year-end 1995 levels, excluding a
one-time shift of approximately $7.2 million in business installment loans from
the consumer loan portfolio to the commercial loan portfolio during the first
quarter of 1996. Earnings assets at March 31, 1996 increased to $687,227,000
from $651,761,000 at December 31, 1995, an increase of $35,466,000 or 5.4%. The
ratio of earning assets to total assets increased slightly from 93.2% at
year-end 1995 to 94.5% at March 31, 1996.
Total deposits at March 31, 1996 increased by $17,583,000, or 3.2%, from
year-end 1995. Non-interest bearing deposits declined $5,396,000, displaying a
normal seasonal trend caused by business demand deposit customers managing their
cash balances and balance sheet composition for their year-end financials.
Interest bearing demand balances remained fairly constant for the period.
Savings balances increased by $2,029,000, or 1.3%, from year-end levels,
influenced to a great extent by the popularity of the new Money Market Access
account which is a variable rate savings product whose tiered rate structure
fluctuates weekly with the 13 Week U.S. Treasury Bill rate. Balances raised
through Money Market Access were partially offset by transfers from passbook and
statement savings accounts to higher earning certificates of deposit and
alternative investments found outside the banking
13
<PAGE> 16
UNB CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------------------
industry.
Certificate of Deposit balances grew by $21,124,000, or 8.7%. The majority of
this growth, $15,000,000, came from the issuance of brokered certificates of
deposit through Merrill Lynch. Another significant factor in the growth was the
24 and 36 month Anniversary CD product introduced in the first quarter of 1996,
which allows customers to raise their interest rate on the anniversary of the
certificate to the current rate in effect on certificates with the same original
maturity term. Another significant source of funding for balance sheet growth
during the first quarter of 1996 was term and sweep repurchase agreements which
grew $10,360,000, or 23.3% from year-end 1995.
In March of 1996, Management recommended and the Board approved an amendment to
the loan policy, for the calculation of the loan-to-deposit ratio. The ratio was
redefined as gross loans divided by total deposits plus Federal Home Loan Bank
borrowings. The limit was set at 95%, with a provision that allows Management to
exceed the limit for 30 consecutive days without being in violation of the
policy. This was done to reflect what is becoming an industry norm, dependence
on these borrowings as a source of balance sheet funding which are considered to
be less volatile than deposits. Advances with varying maturities are considered
more stable than the most stable of bank deposits, certificates of deposit,
which are liable to early withdrawal and are difficult to attract in longer
maturity ranges even at rates competitive to other market instruments. The Board
agreed that the changes in funding alternatives experienced by the Bank make the
new measure a more accurate indication of actual risk.
The loan-to-deposit ratio at March 31, 1996 was 94.8% compared to 89.7 at
December 31 1995. The growth in this ratio for the quarter reflects continued
strong loan demand and the Bank's dependence on short-term borrowings to fund
that growth. The Bank continues to face the difficulty of raising local deposits
due to strong local market competition and the attractive rates found on
alternative forms of investment offered outside the banking industry, especially
mutual funds. Depositors' aversion to extending maturities on deposits as well
as the ability to raise deposits at relatively attractive rates with longer
maturities in the national market will encourage the use of brokered deposits to
fund balance sheet growth in the near future.
Total shareholders' equity at March 31, 1996 was $66,630,000, which was an
increase of $1,303,000, or 2.0%, from year-end 1995. The major contributor to
this increase was net income for the first three months of 1996 of $2,022,000.
Additional increases to capital were the result of new shares issued through the
dividend reinvestment program and the exercise of executive stock options. These
increases were partially offset by the payment of $776,000 in quarterly cash
dividends and the net decrease in market value, net of deferred taxes, of
investment securities available for sale of $214,000.
RESULTS OF OPERATIONS
- ---------------------
UNB Corp.'s net income for the first quarter of 1996 was $2,022,000, or $0.34
per share, compared with $1,602,000, or $0.27 per share for the first quarter of
1995, an increase of 26.2%. Net interest income continues to be the major reason
for this
14
<PAGE> 17
UNB CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------
positive performance, a result of the growth in balance sheet size and the shift
in asset mix from lower earning cash, cash equivalents and investment securities
to higher yielding loans. Net interest income grew to $7,681,000, an increase of
$950,000, or 14.1%, from the same period in 1995. Total interest income for the
first quarter was $13,925,000, an increase of 23% over the same period last
year. Total interest expense increased by $1,654,000, or 36%, over the same
period last year.
The net interest margin for the first quarter of 1996 was 4.64%, a decrease from
4.91%, or 27 basis points, from the first quarter of 1995. At the Bank level,
several areas contributed to the decline in margin, even though overall yields
on earning assets increased by 19 basis points between the two periods. Returns
on the investment portfolio decreased, the result of repricing of variable rate
mortgage-backed securities and the rollover of maturities at lower market rates.
Overall yields in the loan portfolio increased, led by increases in the
installment loan portfolio due to a shift in product mix from new to used
vehicles and in the commercial real estate portfolio. The change in earning
asset mix from the investment portfolio to loans also offsets some of the
reductions in yields due to the differential in yields earned on the respective
portfolios. While some of these factors increased the interest margin, the most
significant impact on the net interest margin rate has been in the cost of
funds. The overall rate paid on interest bearing liabilities increased 54 basis
points between the first quarter of 1995 and 1996. The new Money Market Access
product, paying a tiered rate based on the 13 Week U.S. Treasury Bills has
attracted some funds out of the lower rate money market account as well as
regular savings products. Rates offered on certificates of deposit throughout
1995 were kept at very competitive levels to attract funding for strong loan
demand. These rates coupled with a decrease of 10 basis points on savings rates
redirected some savings balances into certificates of deposit. Due to the
aversion to extend maturities in the deposit markets, the Bank turned to
brokered certificates of deposit and Federal Home Loan Bank advances to lengthen
liability maturities and lock in spreads on the loans being funded.
The aggressive growth in balance sheet size and the resulting decrease in the
net interest margin has been an Asset/Liability management decision. The
resulting increase in overall revenue has enabled the Corporation to leverage
capital and increase the return on equity. Return on equity for the first
quarter of 1996 was 12.25% compared to 11.00% for the same period last year.
Return on assets, meanwhile has increased from 1.08% for the first quarter of
1995 to 1.15% for the first quarter of 1996.
Non-interest income for the first quarter of 1996 shows an increase of $79,000,
or 5.8% over the same period in 1995. The most significant factor for the
increase in non-interest income was the receipt of a $97,500 outstanding claim
plus costs to recover from the Resolution Trust Company which arose as part of
the Transohio Federal Savings acquisition. The claim was originally expensed in
the fourth quarter of 1994 when its collectibility was uncertain. Service
charges on deposits have remained stable between the two periods even with the
elimination of the pass through of FDIC insurance premiums to business demand
deposit customers which accounted for $11,500 in deposit service charge income
for the first quarter of 1995. Trust Department income has increased $27,000, or
4.9%, from the same period last year. No gains on sales of loans in the
secondary market were recorded for the first quarter
15
<PAGE> 18
UNB CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------
of 1996 due to an unfavorable interest rate environment and the mix of mortgage
loan products generated in the first quarter. In the future, as the interest
rate environment creates opportunities for gains on the sales of mortgages, the
Bank will take advantage of them.
Non-interest expense for the first quarter of 1996 was $5,434,000, an increase
of 2.1% from the first quarter of 1995. Increases in salaries, benefits and
equipment expenses were partially offset by reductions in occupancy and other
operating expenses such as FDIC premiums, marketing expenses and office
supplies.
The Corporation anticipates that during 1996 it will be affected by a plan
adopted by the Federal Deposit Insurance Corporation (FDIC) for a one time
assessment to recapitalize the Savings Association Insurance Fund (SAIF) which
insures approximately $127,000,000 in deposits which the Bank acquired in "Oakar
transactions" from the Resolution Trust Company (RTC) in the First Savings and
Loan Company, F.A. of Massillon and the Transohio Federal Savings Bank branch
acquisitions. The proposed assessment rate and percentage exclusion for deposits
acquired through Oakar transactions are currently unknown as they are part of
the continuing negotiations between Congress and the President to finalize a
national budget bill. The Corporation estimates its share of the assessment to
be approximately $700,000. It is anticipated that once the assessment is paid,
the Bank's regular assessment on SAIF insured deposits would decrease to
possibly as low as $0.04 per $100 of deposits or lower from the current rate of
$0.23 per $100 of deposits. This would be based on the current premiums being
paid on deposits insured under the Bank Insurance Fund (BIF) of the FDIC which
are determined on the basis of capital adequacy and other regulatory risk
assessments.
Primary earnings per share for the first quarter of 1996 increased $0.07 to
$0.34 (after adjustment for the April, 1996 100% stock dividend), or 25.9%, over
the same period in 1995. On a fully diluted basis, earnings per share also
increased 25.9% for the first quarter over the same period last year.
The Bank has continued involvement in legal proceedings concerning a parcel of
OREO property located 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. An additional sight assessment has
been completed by the engineering firm contracted by the responsible party and
is expected to be filed with the State in the second quarter of 1996. Once this
report has been filed, the Bank will receive a copy and through legal council
make efforts to speed the resolution of the situation. 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 cleanup 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 Corporation's Consolidated Balance Sheet.
16
<PAGE> 19
UNB CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------
ALLOWANCE FOR LOAN LOSSES
- -------------------------
The provision for loan losses for the three month period ended March 31, 1996,
of $630,000 was an increase of $270,000 over the same period in 1995, primarily
due to the increase in the loan portfolio size. The Bank's reserve-to-loan ratio
decreased to 1.33%, or 7 basis points from 1995 year-end, also a result of
increased loan volume. The provision for loan losses charged to operating
expense was based on Management's evaluation of the loan portfolio, the adequacy
of the allowance for loan losses under current economic conditions and current
and anticipated loan growth. An analyses of the allowance for loan losses is
provided on page 22. 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 continues to use the
same three methodologies it has historically used to determine the allocation of
the allowance, however, it now selects 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. An analysis
of the allocation of the allowance for loan losses is found on page 23.
The balance of impaired loans at March 31, 1996 was $547,519. This is a
reduction of $18,750 from the impaired loan balance at December 31, 1995.
Non-performing loans, which include non-accrual loans and loans past due 90 days
or more, were $1,439,000 at March 31, 1996 compared to $1,320,000 at December
31, 1995. The ratio of non-performing loans to total loans outstanding at March
31, 1996 was unchanged from year-end 1995 at 0.25% and compared favorably to the
ratio of the Bank's peer group, all insured commercial banks having assets
between $500 million and $1 billion, which was 0.76%. For the first quarter of
1996, net-chargeoffs as a percentage of average loans outstanding was 0.07%
versus 0.03% for the same period in 1995, a result of increased net chargeoffs
in the installment loan and home equity loan portfolios.
CAPITAL RESOURCES
- -----------------
Shareholders' equity totaled $66,630,000 at March 31, 1996, an increase of
$1,303,000, or 2.0%, compared to the balance at December 31, 1995 of
$65,327,000. The ratio of equity-to-assets at March 31, 1996 was 9.16% versus
9.34% at December 31, 1995, with the decrease of 18 basis points reflecting the
impact of continued balance sheet growth through growth of the loan portfolio.
The rate of primary capital (shareholders' equity plus the allowance for loan
losses less intangible assets) to total adjusted assets was 12.78%. The
risk-based capital ratio was 12.30% while the Tier 1 and core leverage ratios
reached 11.06% and 8.17%, respectively. The levels achieved in these ratios are
substantially above required regulatory minimums and maintain the Corporation in
the "well capitalized" category under the guidelines of the Federal Deposit
Insurance Corporation Act of 1991 (FDICIA).
The dividend of $0.135 per share (adjusted for the April, 1996 100% stock
dividend) for the first quarter of 1996 was a 12.5% increase over the $0.12
dividend paid for the same period in 1995. The dividend, representing 38.4% of
the first quarter's
17
<PAGE> 20
UNB CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------
earnings, falls within the Corporation's dividend policy which provides for cash
dividend payouts within a range of 35% to 45% of earnings.
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", requires that securities which the Bank has classified as
"Available-for-Sale" are recorded at market value with any adjustments recorded
to equity. The reduction in the investment balances of the Available for Sale
portfolio along with the rise in interest rates over the first quarter of 1996
has reduced the unrealized gain in market value of these securities. At March
31, 1996, an unrealized gain of $631,000, reflects a decrease in shareholders'
equity of $214,000 since year-end 1995.
On April 16, 1996, the Corporation's Board of Directors declared a 100% stock
dividend on the Corporation's common stock, payable to shareholders of record as
of April 30, 1996.
LIQUIDITY
- ---------
Liquidity measures the Corporation's ability to meet the cash demands and credit
needs of its customers and is provided by the ability to readily convert assets
to cash and raise funds in the market place. Total cash, federal funds sold and
investments available for sale (including money market investments) of
$114,898,000 represent 15.8% of total assets at March 31, 1996. Of the
investments available for sale, $51,861,000 are held in U.S. Treasury and Agency
securities, 40.5% of which mature within one year. Approximately $92,849,000 of
total Corporate securities is pledged as collateral to secure public funds or
other obligations. The Corporation's ability to raise funds in the market place
is provided by the Bank's branch network which services its strong deposit base,
in addition to the availability of Federal Home Loan Bank (FHLB) advance
borrowing, brokered deposits, Federal Funds purchased and securities sold under
agreement to repurchase. The strong loan demand experienced throughout the first
quarter of 1996 coupled with the funding of a large portion of that growth
through FHLB borrowings and repurchase agreements in the first quarter of 1996
have resulted in a loan-to-deposit ratio of 94.8%, up from the 1995 year-end
ratio of 89.7%.
For the near future, FHLB advances will be the preferred means to fund balance
sheet growth over brokered deposits until the SAIF issue is decided in Congress.
This is because brokered deposits are included in the Bank's total deposit base.
The growth of the deposit base is used to determine a growth factor to be
applied to the SAIF deposit base which is assessed SAIF FDIC premiums and the
special one-time assessment to recapitalize the SAIF insurance fund.
The liquidity needs of the Holding Company, primarily cash dividends and other
corporate purposes, are met through cash, short term investments and dividends
from the Bank.
INTEREST RATE SENSITIVITY
- -------------------------
Interest rate sensitivity measures the potential effects on earnings and capital
to changes in market interest rates. The objective of the Corporation's Asset
and Liability Management Policy is to help Management establish a profit plan
for the
18
<PAGE> 21
UNB CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------
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 maximize
profitability while minimizing the adverse effects on net interest margin and
capital 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 Bank uses a modified
GAP position in which the majority of traditional savings and NOW account
balances are placed in the five year time frame which considers this portion of
these deposits to be rate insensitive. The remainder are placed in the one month
time frame reflecting the assumption that they are sensitive to changing
interest rates and will reprice into certificates of deposits with rising
interest rates. The Bank periodically analyzes the historical sensitivity of
these liability products to validate its modified GAP assumptions and will
redefine its modified GAP position should it be warranted.
The GAP position 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 in a rising rate environment.
The reverse is also true for each of these.
The Bank's cumulative GAP position at March 31, 1996 reflects a 6.98% liability
sensitive position in the time frame of less than one year. In its Asset and
Liability Policy, the Bank has set limits of +/10% for the one year time frame
and attempts to manage its portfolio of rate sensitive assets and liabilities to
remain within those limits. It is unclear what impact this negative GAP position
will have on the Bank's net interest margin in the near future given the mixed
signals of various recently reported economic indicators and the uncertainty
they have created in financial markets as to the future direction of interest
rates. See the GAP table on page 21 for more detailed data on the Bank's GAP
position.
CONCENTRATION OF CREDIT RISK
- ----------------------------
The Corporation maintains a diversified credit portfolio, with relatively
smaller balance, homogeneous consumer installment, credit card and residential
mortgage loans comprising 74.9% of total loans outstanding at March 31, 1996.
Commercial and commercial real estate loans comprise the remaining 13.6% and
11.5% of loans outstanding, respectively. The largest industry concentration
identified within the commercial loan portfolio is the medical industry at 2.2%
of total loans outstanding. Within the commercial real estate portfolio, real
estate is mainly held as collateral while the cash flows of the business are
considered the primary source of repayment on
19
<PAGE> 22
UNB CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------
the loans. With all loan types, Management attempts to balance credit risk
versus return by employing conservative credit standards and comprehensive
underwriting guidelines in addition to the loan review function which monitors
credits during and after the approval process.
IMPACT OF FDICIA
- ----------------
The Federal Deposit Insurance Corporation Improvement Act (FDICIA) applies to
banks with total assets in excess of $500 million. Management has spent
considerable time ensuring compliance with requirements for documenting internal
control reporting. The 1995 Annual Report contained 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 attested to the
accuracy of Management's assertions regarding internal control systems over
financial reporting.
20
<PAGE> 23
UNITED NATIONAL BANK & TRUST
12 MO CUM ADJ GAP TREND
[GRAPHIC]
GAP Analysis Ratios:
<TABLE>
3/95 4/95 5/95 6/95 7/95 8/95 9/95 10/95 11/95 12/95 1/96 2/96 3/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cumulative Bank GAP 62,386 66,085 70,554 66,272 70,254 71,293 74,051 71,341 71,805 73,340 77,756 77,688 76,731
Rate Sensitive Asset
to Rate Sensitive
Liability (%) 112.64% 113.40% 113.90% 112.90% 113.74% 113.74% 114.01% 113.20% 113.11% 113.24% 113.95% 113.52% 113.09%
Adjusted GAP
Percentage:
3 Months Cum GAP % -6.06% -7.93% -5.12% -3.13% -4.10% -4.79% -4.55% -4.17% -4.38% -5.20% -9.07% -9.17% -11.38%
6 Months Cum GAP % -6.47% -5.82% -3.23% -3.38% -5.71% -5.43% -6.25% -4.33% -5.98% -7.15% -12.27% -13.34% -13.60%
12 Months Cum GAP % -0.92% 0.02% 2.03% -2.44% -7.48% -6.14% -5.95% -4.18% -3.28% -5.52% -7.77% -5.50% -6.98%
<FN>
United Bank policy/guideline limits: +/- 10%
</TABLE>
21
<PAGE> 24
UNB CORP.
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
(VALUATION RESERVES)
MARCH 31, 1996
(000'S omitted)
<TABLE>
<S> <C>
Balance at December 31, 1995 $ 7,242
Charge-Offs (Domestic):
Commercial, Financial, Agricultural $ 0
Real Estate - Commercial 0
Real Estate - Residential 0
Consumer Loans 592
------
Total Charge-Offs $ 592
======
Recoveries (Domestic):
Commercial, Financial, Agricultural $ 1
Real Estate - Commercial 31
Real Estate - Residential 0
Consumer Loans 198
------
Total Recoveries $ 230
======
Net Charge-Offs $ 362
======
Additions Charged to Operations $ 630
Balance at March 31, 1996 $ 7,510
======
Ratio of net charge-offs during this
quarter to average loans outstanding .07%
Allowance as a percentage of total loans 1.34%
======
</TABLE>
22
<PAGE> 25
UNB CORP.
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
MARCH 31, 1996
(000'S omitted)
<TABLE>
<CAPTION>
Percent of
loans
in each category
Amount to total loans
------ --------------
<S> <C> <C>
Domestic:
Commercial, Financial, Agricultural $2,802 13.63%
Real Estate - Commercial 695 11.50%
Real Estate - Residential 142 33.71%
Consumer Loans 2,370 41.16%
Foreign: -0- N/A
Unallocated: 1,501 N/A
------ -------
Valuation Reserve on March 31, 1996 $7,510 100.00%
====== =======
</TABLE>
23
<PAGE> 26
UNB CORP.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
UNB Corp. held its Annual Meeting of Shareholders on April 16, 1996, for the
purpose of electing directors and to adopt a proposed amendment to the Articles
of Incorporation to increase the number of no par value Common Shares from the
5,000,000 currently authorized to 15,000,000 shares. 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 adoption of the proposed amendment required the
affirmative vote of the holders of 66-2/3% of the outstanding shares of the
Corporation. Shareholders received proxy materials containing the information
required by this item. Results of shareholder voting on these issues were as
follows:
<TABLE>
<CAPTION>
Election of Directors Proposed Amendment to
E. Lang D'Atri Robert L. Mang Articles of Incorporation
-------------- -------------- -------------------------
<S> <C> <C> <C>
For 2,514,690 2,514,690 2,512,615
Against 9,896 9,896 61,724
Abstain 31,449
Shares not
voted by Brokers 85,375 85,375 85,375
</TABLE>
Item 5 - Other Information
- --------------------------
N/A
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
<TABLE>
<CAPTION>
A. Exhibit
Number Exhibit
------ -------
<S> <C>
27 Financial Data Schedule (1)
</TABLE>
B. Reports - Form 8-K - No reports on Form 8-K were filed by the Registrant
during the first three months of 1996.
(1)Filed only in electronic format pursuant to Item 601(b)(27) of Regulation
S-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNB CORP.
(Registrant)
Date_______________________________ ___________________________________
James J. Pennetti
(Duly authorized officer and
Treasurer, UNB Corp.)
24
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 24,275
<INT-BEARING-DEPOSITS> 255
<FED-FUNDS-SOLD> 1,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 97,497
<INVESTMENTS-CARRYING> 25,657
<INVESTMENTS-MARKET> 25,880
<LOANS> 562,218
<ALLOWANCE> 7,510
<TOTAL-ASSETS> 727,097
<DEPOSITS> 564,770
<SHORT-TERM> 60,698
<LIABILITIES-OTHER> 6,639
<LONG-TERM> 28,360
<COMMON> 2,881
0
0
<OTHER-SE> 63,749
<TOTAL-LIABILITIES-AND-EQUITY> 727,097
<INTEREST-LOAN> 11,979
<INTEREST-INVEST> 1,852
<INTEREST-OTHER> 94
<INTEREST-TOTAL> 13,925
<INTEREST-DEPOSIT> 5,049
<INTEREST-EXPENSE> 6,244
<INTEREST-INCOME-NET> 7,681
<LOAN-LOSSES> 630
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,434
<INCOME-PRETAX> 3,053
<INCOME-PRE-EXTRAORDINARY> 3,053
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,022
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
<YIELD-ACTUAL> 4.64
<LOANS-NON> 1,287
<LOANS-PAST> 152
<LOANS-TROUBLED> 295
<LOANS-PROBLEM> 1,318
<ALLOWANCE-OPEN> 7,242
<CHARGE-OFFS> 592
<RECOVERIES> 230
<ALLOWANCE-CLOSE> 7,510
<ALLOWANCE-DOMESTIC> 6,009
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,501
</TABLE>
