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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
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 44702
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 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 15, 1998: $227,078,795.
The number of shares outstanding of each of the Registrant's common stock, as of
March 15, 1998: 5,785,447 shares of $1.00 per share stated value common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1997 UNB Corp. Annual Report to Shareholders (Exhibit 13) is
incorporated into Part I, Item 1(c), 1(e), Item 2, and Part II, Items 5, 6, 7,
and 8.
Portions of the Definitive Proxy Statement of UNB Corp. dated February 20, 1998
and Notice of Annual Meeting of Shareholders to be held on April 21, 1998, are
incorporated into Part III, Items 10, 11, 12, and 13.
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UNB CORP.
FORM 10-K
1997
<TABLE>
<CAPTION>
PART I
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Page
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Item 1 Business 3
Item 2 Properties 17
Item 3 Legal Proceedings 17
Item 4 Submission of Matters to a Vote of Security Holders 17
PART II
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Item 5 Market for Registrant's Common Equity and Related Shareholder
Matters 18
Item 6 Selected Financial Data 18
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 18
Item 7A Quantitative and Qualitative Disclosures About Market Risk 18
Item 8 Financial Statements and Supplementary Data 22
Item 9 Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 22
PART III
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Item 10 Directors and Executive Officers of the Registrant 22
Item 11 Executive Compensation 22
Item 12 Security Ownership of Certain Beneficial Owners and Management 22
Item 13 Certain Relationships and Related Transactions 22
PART IV
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Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 23
Signatures 24
Exhibit Index 26
</TABLE>
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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. At December 31, 1997, UNB Corp. and its affiliates had total
consolidated assets of $826.3 million and total consolidated
shareholders' equity of $76.5 million.
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
-----------------------------------
UNB Corp.'s main affiliate, the United National Bank & Trust Company, is
a full-service banking organization with 22 banking offices offering a
wide range of commercial and retail and fiduciary 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 and VISA business lines of credit, accounts
receivable, lease and floor plan financing. Deposit products include
interest and non-interest bearing checking products, various savings
products, certificates of deposit and IRAs. The Trust Department
provides fiduciary services in the areas of employee benefit trusts,
personal trusts and investment management services. Miscellaneous
services offered include safe deposit boxes, night depository, United
States savings bonds, traveler's checks, money orders and cashier
checks, bank-by-mail, bank-by-phone and bank by personal computer
services, wire transfer service, selected utility bill payments,
collections and notary services. Services provided for Bank customers
through third party vendors include those of discount brokerage and the
sale of mutual funds, annuities and life insurance. In addition, the
Bank has correspondent relationships with major banks in New York,
Pittsburgh and Detroit pursuant to which the Bank receives and provides
to its customers various financial services.
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
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written loan policies designed to maintain loan quality.
Retail lending products are comprised of credit card loans, demand
deposit lines of credit (overdraft protection), personal lines of credit
and installment loans. Credit cards are unsecured credit accounts, on
which the credit limits are determined by analysis of two primary
criteria, the borrowers debt service and gross income. Demand deposit
lines of credit are lines attached to checking accounts to cover
overdrafts and/or allow customers to write themselves a loan within an
approved credit limit. Credit limits are based on a percentage of gross
income and average deposits. Personal lines of credit 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 wide variety of mortgage loan products and services,
including a variety of fixed and adjustable rate mortgages with
maturities 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 originate
loans for sale 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 financing 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
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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 outside independent
appraisers approved by the Board of Directors. The Bank, as a general
rule, obtains 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 $2.5 million.
Executive Loan Committee approves aggregate loan commitments in excess
of $2.5 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 Loan Quality
Review 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 78% of consolidated revenues in 1997
and 1996, and 75% in 1995. Revenues from interest and dividends on
investment and mortgage-backed securities accounted for 11% of
consolidated revenues in 1997 and 1996, and 14% in 1995.
In the first half of 1997, UNB Corp. received permission from the State
of Ohio Department of Commerce, Division of Consumer Finance, for a
license to establish and operate a consumer finance company, regulated
under the Ohio Mortgage Loan Act, as a wholly owned subsidiary of the
Corporation. Management believes that the addition of a finance company
will contribute to its continuing efforts to maximize shareholder value.
United Banc Financial Services, Inc. was capitalized with a $500,000
investment in June, 1997 and began operations on July 1, 1997. Its
products include real estate and non-real estate secured loans, as well
as personal note loans and indirect, retail loans. Underwriting and
pricing standards are determined by credit
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risk scores, credit bureau ratings, debt to income ratios and assets of
the consumer. Minimum credit risk scores and maximum debt to income
ratios have been established for all products. Loan to value ratios for
real estate secured loans are determined by amount financed and credit
risk scores. Generally, a higher risk loan will reflect a higher
interest rate, lower loan to value ratio and greater required equity
investment on the part of the borrower. Amortization terms on real
estate secured loans may extend up to 360 months. Personal, unsecured,
non-real estate and indirect, retail loans may amortize up to 60 months.
All real estate secured loans are interest bearing while non-real estate
loans have interest calculated under the Rule of 78s. Total loans
outstanding, net of unearned income, at December 31, 1997 is $841,000.
Real estate lien products accounted for 65.5% of outstandings while the
remaining 34.5% is derived from non-real estate loans. The results of
operations for United Banc Financial Services for 1997 did not have a
material impact on the earnings of UNB Corp. in 1997.
During the third quarter of 1997, the UNB Corp. Board of Directors
authorized the formation of United Mortgage Corporation, an affiliate of
UNB Corp. to operate as a mortgage banking organization. Management
believes consolidating elements of the Corporation's mortgage function
under a separate mortgage company will increase shareholder value by
leading to greater opportunities to increase fee income, expand the base
of mortgage products offered, expand in new geographic markets and
provide more accurate measurement of the profitability of the
Corporation's mortgage function. Operations of United Mortgage
Corporation are anticipated to begin in the third quarter of 1998.
In the fourth quarter of 1997, the Registrant liquidated its affiliate,
the United Credit Life Insurance Company (United Credit Life). United
Credit Life was originally formed 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. Prior to the liquidation, insurance was
underwritten by Union Fidelity Life Insurance Company with which United
Credit Life entered into reinsurance treaties whereby United Credit Life
assumed up to $25,000 of liability on each life policy. Income and
expenses related to the liquidation had no material effect of the
earnings of the Registrant in 1997.
Also in the fourth quarter of 1997, UNB Corp. took steps to activate its
affiliate, the United Insurance Agency, Inc., which was chartered on
August 23, 1990 and is currently licensed to issue life, accident and
health, and variable annuity insurance. The Registrant has also filed
with the State of Ohio to obtain an amendment to this affiliate's
charter to be licensed to issue property and casualty insurance.
Operations are expected to begin in the first quarter of 1998 and are
anticipated to aid UNB Corp. in its ability to compete with other
providers of financial services in offering its customers a wide variety
of products to fulfill their financial needs.
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
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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 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 five percent 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. The Federal Reserve is authorized
to approve the ownership of shares by a bank holding company in any
company the activities of which the Federal Reserve has determined to be
so closely related to banking or to managing or controlling banks as to
be a proper incident thereto. The Federal Reserve has by regulation
determined that certain activities are closely related to banking within
the meaning of the Bank Holding Company Act. These activities include
among others, operating a mortgage company or finance company;
performing certain data processing operations; providing investment and
financial advice and acting as an insurance agent for certain types of
credit-related insurance.
UNB Corp. is under the jurisdiction of the Securities and Exchange
Commission for matters relating to its securities and is subject to the
disclosure and regulatory requirements of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, as
administered by the Commission regulation.
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) while deposits
purchased 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.
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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 8.00% at December 31, 1997 as disclosed in Note
14 of UNB Corp.'s 1997 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 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. 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
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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 effecting the earnings of the
Corporation.
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
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The Bank competes with other state, regional and national banks which do
business within Stark and Summit Counties of Ohio. 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. Mergers between financial institutions have
added to the competitive pressure. In addition, money market mutual
funds, brokerage houses, and similar organizations provide many of the
financial services offered by the Bank and other affiliates of the
Corporation. 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 borrowings, the competitive prices
charged for and the availability and quality of products and 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.
The Bank has continued involvement in legal proceedings concerning a
seven and one half acre parcel of property acquired through foreclosure
and located in the northwest quadrant of Stark County. A large national
petroleum company,
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owner of the facility at the date it was taken out of service, is the
party responsible for the contamination cleanup according to the State
of Ohio's Bureau of Underground Storage Tanks (BUSTER) regulations.
After several environmental assessments by the Bank and the petroleum
company were filed with the State agency, the State is now in agreement
with the petroleum company's findings, that the levels of contaminants
are such that immediate remediation is not required. The contamination
will remediate itself over time which is the method the petroleum
company wishes to pursue. The State will allow the site to sit for
another year and to re-measure the contamination level at that time in
the hope it will drop below state standards which require any
remediation activity. Counsel for the Bank is working with the petroleum
company to obtain a hold harmless agreement to help assist the Bank in
the sale of the property. The Bank continues to list the property for
sale and follows up on all inquiries which are made. 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
Corp.'s Consolidated Balance Sheet.
Employees
---------
As of December 31, 1997, UNB Corp. and its subsidiaries had 285
full-time employees and 55 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
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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.
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 1997 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. The average balance sheet information and the related analysis of net
& interest earnings for the years ending December 31, 1997, 1996 and 1995
B. 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 34 of the Registrant's 1997 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 $3,108,000, $3,478,000 and
$2,901,000 are included in interest on loans for the years ended
December 31, 1997, 1996, and 1995.
C. Tables setting forth the effect of volume and rate changes on interest
income and expense for the years ended December 31, 1997 and 1996 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 32 of the
Registrant's 1997 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) 1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
U.S. Treasury securities and securities
of U.S. government agencies and corporations $ 53,637 $ 75,817 $ 53,991
Obligations of states and political subdivisions 951 1,051 1,238
Mortgage-backed securities 67,845 42,907 63,087
Other securities 18,405 13,111 9,900
-------- -------- --------
Total investment and mortgage-backed securities $140,838 $132,886 $128,216
======== ======== ========
</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, 1997 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 19 in the Notes to
Consolidated Financial Statements in the Registrant's 1997 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 a
non-taxable basis, prior to adjustment to a fully taxable equivalent
basis or consideration of related non-deductible interest expense.
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, 1997.
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) 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial $ 85,102 $ 78,563 $ 64,811 $ 61,094 $ 61,209
Commercial real estate 70,896 65,875 60,478 53,252 46,723
Residential real estate 260,190 242,652 172,283 115,354 81,495
Consumer loans 214,230 230,512 221,158 182,822 161,041
------- ------- ------- ------- -------
Total loans $630,418 $617,602 $518,730 $412,522 $350,468
======= ======= ======= ======= =======
</TABLE>
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 consumer loans, as of
December 31, 1997:
<TABLE>
<CAPTION>
(Dollars in thousands)
Commercial and
Commercial Real Estate
----------------------
<S> <C>
Due in one year or less $ 38,794
Due after one year, but within five years 40,732
Due after five years 76,472
--------
Total $155,998
</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):
12
<PAGE> 13
(Dollars in thousands)
<TABLE>
<CAPTION>
Fixed Variable
----- --------
Interest Rates Interest Rates
-------------- --------------
<S> <C> <C>
Total commercial, and commercial real estate
loans due after one year $26,528 $90,676
</TABLE>
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) 1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 854 $ 708 $1,066 $1,039 $ 605
Accrual loans past due 90 days 91 130 254 19 40
Restructured loans 424 237 212 375 689
------ ------ ------ ------ ------
Total 1,369 1,075 1,532 1,433 1,334
Potential problem loans 1,722 1,699 1,075 5,386 5,521
------ ------ ------ ------ ------
Total $3,091 $2,774 $2,607 $6,819 $6,855
====== ====== ====== ====== ======
</TABLE>
For the year ended December 31, 1997, $4,100 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 Statements of Financial Accounting
Standards (SFAS) No. 114 and SFAS No. 118 effective January 1,
1995. At December 31, 1997, loans totaling $281 thousand were
classified as impaired. All loans classified as impaired at
December 31, 1997 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, 1997 to prior periods.
2. Potential Problem Loans - As shown in the table above, at
December 31, 1997, there are approximately $1.7 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, 1997, 1996, or 1995.
4. Loan Concentrations - As of December 31, 1997, indirect
installment loans comprise 25.2% of loans outstanding. The dealer
network from which indirect loans were purchased in 1997 included
135 dealers, the largest of which was
13
<PAGE> 14
responsible for 10% of total indirect volume for 1997. 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 17 of the 1997 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.
D. Other Interest Bearing Assets - As of December 31, 1997, 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, 1997, 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) 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average loans outstanding during the
period (net of unearned income) $629,514 $582,418 $464,314 $385,618 $339,468
======== ======== ======== ======== ========
Allowance for loan losses
at beginning of year $ 8,335 $ 7,242 $ 6,348 $ 6,056 $ 4,355
Loans charged off:
Commercial 258 106 26 13 37
Commercial real estate - - 20 52 11
Residential real estate 15 156 71 3 11
Consumer loans 2,638 2,900 1,441 1,095 822
-------- -------- -------- -------- --------
Total charge-offs 2,911 3,162 1,558 1,163 881
Recoveries:
Commercial 190 5 29 52 69
Commercial real estate 8 39 26 7 -
Residential real estate 86 71 71 11 7
Consumer loans 1,013 1,000 576 365 311
-------- -------- -------- -------- --------
Total recoveries 1,297 1,115 702 435 387
-------- -------- -------- -------- --------
Net charge-offs 1,614 2,047 856 728 494
Provision for loan loss
charged to operations 2,929 3,140 1,750 1,020 2,195
-------- -------- -------- -------- --------
Allowance for loan losses at end of year $ 9,650 $ 8,335 $ 7,242 $ 6,348 $ 6,056
======== ======== ======== ======== ========
Ratio of net charge-offs to average
loans, net of unearned income 0.26% 0.35% 0.18% 0.19% 0.15%
======== ======== ======== ======== ========
</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
collectibility of these loans is evaluated after considering the
current financial position of the borrower, the estimated market value
of
14
<PAGE> 15
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. The reduction in
provision from 1996 to 1997 was a result of slower, more selective loan
growth in 1997 coupled with the decrease in net charge-offs.
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, 1997 December 31, 1996
----------------------------- ---------------------------
<S> <C> <C> <C> <C>
Commercial $3,344 13.5% $2,064 12.7%
Commercial real estate 781 11.2 663 10.7
Residential real estate 261 41.3 244 39.3
Consumer 2,316 34.0 4,420 37.3
Unallocated 2,948 -- 944 --
------ ------ ------ ------
Total $9,650 100.0% $8,335 100.0%
====== ====== ====== ======
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
-----------------------------
<S> <C> <C>
Commercial $1,638 17.5%
Commercial real estate 701 13.3
Residential real estate 1,230 23.2
Consumer 1,412 46.0
Unallocated 1,075 -
------ ------
Total $6,056 100.0%
====== ======
</TABLE>
A comparison of allocations of the allowance for loan losses between
the five years presented 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
15
<PAGE> 16
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, 1997 there was no specific allocation to any loan
category in connection with the adoption of SFAS No. 114 due to the
adequacy of the collateral values relative to the balance of impaired
loans outstanding at year-end 1997. At December 31, 1996 and 1995,
$135,000 and $188,000, respectively, 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 adopting SFAS No. 114, the adoption of SFAS
No. 114 had no impact on the comparability of the December 31, 1997,
1996 and 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,
------------------------------------------------------------------------
1997 1996 1995
---- ---- ----
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing
demand deposits $ 76,523 - $ 71,263 - $ 66,329 -
Interest bearing
demand deposits 72,770 1.68% 71,078 1.98% 68,361 1.92%
Savings 174,789 3.14 157,662 2.85 151,229 2.63
Certificates and other
time deposits 290,854 5.76 271,351 5.73 216,187 5.67
-------- -------- --------
$614,936 $571,354 $502,106
======== ======== ========
</TABLE>
The following table summarizes time deposits issued in amounts of
$100,000 or more as of December 31, 1997 by time remaining until
maturity:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Maturing in:
Under 3 months $ 8,215
Over 3 to 6 months 7,483
Over 6 to 12 months 10,410
Over 12 months 22,360
-------
$48,468
</TABLE>
16
<PAGE> 17
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 42 of the Registrant's 1997
Annual Report to Shareholders.
VII. SHORT-TERM BORROWING
--------------------
Information required by this section is incorporated by reference to
Note 7 - "Short-term Borrowings" on Page 21 of the 1997 Annual Report
to Shareholders incorporated herein by reference.
Item 2 - Properties
- -------------------
UNB Corp.'s executive offices as well as the executive offices and the
main branch office of United National Bank are located in the United
Bank Building at 220 Market Avenue, South, Canton, Ohio. This property
is leased through 2003 with five three-year options extending through
the year 2018. The properties occupied by fourteen of the Bank's
branches are owned by the Bank, while properties occupied by its
remaining eight branches are leased with various expiration dates
running through the year 2021 with renewal options. In addition to the
leased branches, the Corporation is also leasing office space for the
operations of the Bank's mortgage loan department which will become UNB
Corp.'s affiliate United Mortgage Corporation in 1998 and the office of
United Banc Financial Services, Inc. These leases are for ten and five
years, respectively, with renewal options extending to the years 2007
and 2012, respectively.
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 10
of the Registrant's 1997 Annual Report to Shareholders, and is
incorporated herein by reference. Management considers its properties
to be satisfactory for its current operations.
Item 3 - Legal Proceedings
- --------------------------
The nature of UNB Corp.'s business results in a certain amount of
litigation. Accordingly, the corporation and its subsidiaries are
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 Corporation.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
During the fourth quarter of the year ended December 31, 1997, there
were no matters submitted to a vote of security holders.
17
<PAGE> 18
PART II
Item 5 - Market Price of and Dividends on the Common Equity and Related
- -----------------------------------------------------------------------
Shareholder Matters
- -------------------
Shares of the Common Stock of the Registrant are traded on the
over-the-counter market primarily with brokers in the Corporation's
service area. 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 41 of the Registrant's
1997 Annual Report to Shareholders. In addition, attention is directed
to the caption "Capital Resources" within Management's Discussion and
Analysis located on page 38 of the Registrant's 1997 Annual Report to
Shareholders and to Note 14 - "Dividend and Regulatory Capital
Requirements" located on page 25 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" located on page 42 of the 1997 Annual Report to
Shareholders. See Note 1 under the caption "Allowance for Loan Losses"
on page 16 and Note 3 - "Loans" on page 20 of the 1997 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".
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 30 through 40 of the
Registrant's 1997 Annual Report to Shareholders and is incorporated
herein by reference.
Item 7A.- Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------
The Corporation's primary market risk exposure is interest rate risk,
which is defined as the potential loss of income or capital as a result
of changes in interest rates. The nature of the banking business means
that some level of interest rate risk will always be present, but the
Corporation has the responsibility to manage that risk to minimize the
negative impact on both the earnings and capital. Evaluating the
Corporation's exposure to changes in interest rates includes assessing
both the management process used to control interest rate risk and the
calculated level of risk. The Corporation maintains the appropriate
policies, procedures, management information systems and internal
controls as required by the Joint Agency Policy Statement on Risk. The
Corporation's exposure to interest rate risk is calculated on a monthly
basis and reviewed by Senior Management and the Board of Directors.
The Corporation uses a number of methods to calculate and measure
interest rate risk. The asset/liability gap compares the dollar amounts
of assets and liabilities that will mature or reprice in a given time
period to determine the level and direction of interest rate
sensitivity. The Corporation is considered asset sensitive if more
assets than liabilities mature or reprice in
18
<PAGE> 19
the specified time frame and liability sensitive if more liabilities
than assets mature or reprice in that same period. Asset sensitivity,
or a positive gap, indicates that the Corporation's exposure is to
falling rates, since more assets than liabilities could reprice or be
reinvested at lower levels. Liability sensitivity, or a negative gap,
means that the Corporation's exposure is to rising rates since more
liabilities than assets could reprice at higher rates.
The Corporation makes a number of assumptions when calculating its gap
position. The most significant assumption is the assignment of deposit
balances without a stated maturity date to specific time frames. Since
these deposits are subject to withdrawal on demand, and have rates that
can be changed at any time, they could be considered immediately
repriceable and assigned to the shortest maturity, resulting in a
significant level of liability sensitivity. However, actual practice
indicates that balances are withdrawn and replaced over a much longer
time frame, and rates are modified less frequently and in smaller
increments than changes which occur in financial market rates. To
compensate for these extremes, the Corporation uses multiple deposit
distribution assumptions to provide a range of interest rate risk
measurements that it uses as a guide for managing various assets and
liabilities. At year-end the Corporation's modified twelve month
cumulative gap was 1.25%, indicating slight asset sensitivity. One of
the shortcomings of the gap analysis is that the use of a static
balance sheet results in a measure of interest rate risk at one
specific point in time. Another limitation is the implied assumption
that assets and liabilities in the same time period will reprice by the
same magnitude.
Simulation analysis provides a more dynamic interpretation of the
impact of rates on the Corporation's forecasted income and net present
value of assets, liabilities and capital. The Corporation makes certain
assumptions regarding the level of interest rates, prepayments on
assets with imbedded options including loans and asset backed
securities, and the behavior of deposits without contractual maturity
dates. These assumptions, in addition to actual rates and maturity and
repricing dates on loans, investments and deposits, are incorporated
into a computer model which calculates forecasted net income and
discounts the projected cash flows of rate sensitive assets and
liabilities to determine the present value of the Corporation's
capital. The model then applies a predetermined immediate parallel
increase or decrease in the level of interest rates to forecast the
impact on both net interest income and capital one year forward. At
year-end, the Corporation's interest rate shock forecasted a change in
net interest income of +3.21% to -3.39% based on a 200 basis point
change in rates. The forecasted change in the market value of equity
was -1.69% to 3.20% for the same period. While this methodology
provides a more comprehensive appraisal of interest rate risk, it is
not necessarily indicative of actual or expected financial performance.
Changes in interest rates that affect the entire yield curve equally at
a single point in time are not typical. The residential mortgage
prepayment assumptions are based on industry medians and could differ
from the Corporation's actual results due to non-financial prepayment
incentives and other local factors. Moreover, the model does not
include any interim changes in strategy the Corporation might undertake
in response to shifts in interest rates.
Interest rate risk can be managed by using a variety of techniques,
including selling existing assets or repaying liabilities, pricing
loans and deposits to attract preferred maturities, developing
alternative sources of funding or
19
<PAGE> 20
structuring new products to hedge existing exposures. In addition to
these balance sheet strategies, the Corporation can also use derivative
financial instruments such as interest rate swaps, caps, and floors to
minimize the potential impact of adverse changes in interest rates.
The following table provides information about the Corporation's
financial instruments that are sensitive to changes in interest rates.
The expected maturity dates for residential mortgage loans and
securities backed by or indexed to residential mortgage loans were
calculated by adjusting the contractual maturity for prepayments
corresponding to median industry data. Installment loan prepayment
speeds were based on historical experience. Deposit accounts without
contractual maturity dates were stratified by expected decay rates
according to historical analysis. The Corporation has one pay fixed
amortizing interest rate swap that was executed in 1993 as hedge
against fixed rate mortgages held in the portfolio.
20
<PAGE> 21
<TABLE>
<CAPTION>
UNB CORP.
QUANTITATIVE DISCLOSURE OF MARKET RISK
ONE YEAR TWO YEARS THREE YEARS FOUR YEARS
BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
- ------
Short Term Investments 8,642 5.50%
Securities 35,262 6.11% 12,595 6.60% 3,276 6.60% 1,791 6.62%
Collateralized Mortgage Obligations 11,836 6.96% 11,286 6.96% 12,143 6.84% 10,124 6.80%
and Mortgage Backed Securities (1)
Fixed Rate Loans (2) (3) 93,530 8.88% 60,875 9.06% 43,360 9.01% 31,100 8.64%
Variable Rate Loans (4) (5) (6) 40,685 8.45% 34,619 8.37% 29,231 8.29% 44,983 8.55%
LIABILITIES
- -----------
Interest Bearing Demand & Savings (7) 23,961 3.35% 25,570 3.36% 32,112 3.03% 23,994 3.39%
Time Deposits 164,246 5.50% 90,977 6.05% 26,638 6.20% 16,243 6.05%
Repurchase Agreements 51,289 4.78%
Short Term Borrowings 5,222 5.50%
FHLB Advances 7,498 6.04% 17,848 6.38% 6,226 6.31% 3,188 6.33%
OFF-BALANCE SHEET
- -----------------
Interest Rate Swap (8) 1,300 1,250 1,200
Average Pay Rate (Fixed) 2.88% 2.88% 2.88%
Average Receive Rate (Variable) 5.50% 5.50% 5.50%
FIVE YEARS MORE THAN 5 YEARS TOTAL FAIR
BALANCE RATE BALANCE RATE BALANCE RATE VALUE
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
- ------
Short Term Investments 8,642 0.055 8,642
Securities 1,354 6.69% 18,715 0.0622 72,993 0.0637 72,999
Collateralized Mortgage Obligations 5,659 6.84% 16,797 0.0639 67,845 0.0677 67,922
and Mortgage Backed Securities (1)
Fixed Rate Loans (2) (3) 18,487 8.61% 65,573 0.0842 312,925 0.0879 308,981
Variable Rate Loans (4) (5) (6) 20,062 8.15% 140,453 0.0801 310,033 0.0829 309,819
LIABILITIES
- -----------
Interest Bearing Demand & Savings (7) 41,524 2.95% 113,846 0.022 261,007 0.0288 261,007
Time Deposits 6,164 6.32% 2,033 0.0611 306,301 0.0578 303,710
Repurchase Agreements 51,289 0.0478 51,289
Short Term Borrowings 5,222 0.055 5,222
FHLB Advances 330 6.25% 350 0.0625 35,440 0.0629 35,736
OFF-BALANCE SHEET
- -----------------
Interest Rate Swap (8) 171
Average Pay Rate (Fixed)
Average Receive Rate (Variable)
<FN>
(1) Expected cash flows on Collateralized Mortgage Obligations and Mortgage Backed Securities are revised monthly based on median
estimates of prepayment speeds developed by major broker dealers as published by Bloomberg Financial Markets.
(2) For residential mortgage loans, prepayments are revised monthly based on the median prepayment speeds developed by major
broker dealers as published by Bloomberg Financial Markets. The prepayment rates are assigned based on the interest rate on
the loan and the number of months elapsed since the loan was originated.
(3) For installment loans, prepayments are revised monthly based on actual historical cash flow and equate to approximately 12% to
24%.
(4) Substantially all of the variable rate commercial loans are repriced based on the prime rate.
(5) Variable rate commercial real estate loans are based on prime or the three year constant maturity treasury rate.
(6) Substantially all the variable rate residential mortgage loans reprice based on the one year or three year constant maturity
treasury rate subject to various periodic and lifetime caps and floors.
(7) For deposits without contractual maturity dates, decay rates are calculated annually by individual product type based on the
current age of the accounts.
(8) At year end 1997, the notional principal amount of the interest rate swap was $1,350 and the market value was $171. The
notional amount will amortize quarterly according to a predetermined schedule until its maturity on 11/26/00. The Company pays
a fixed rate of 2.88% and receives a variable rate of three month LIBOR reset quarterly, which at year-end was 5.875%.
</FN>
</TABLE>
21
<PAGE> 22
Item 8 - Financial Statements and Supplementary Financial Data
- --------------------------------------------------------------
The Registrant's Report of Independent Auditors and Consolidated
Financial Statements and accompanying notes are listed below and are
incorporated herein by reference to UNB Corp.'s 1997 Annual Report to
Shareholders (Exhibit 13, pages 11 through 29). The supplementary
financial information specified by Item 302 of Regulation S-K, selected
quarterly financial data, is included in Note 18 - "Quarterly Financial
Data (Unaudited)" to the consolidated financial statements found on
page 29.
Report of Independent Auditors
Consolidated Balance Sheets
December 31, 1997 and 1996
Consolidated Statements of Income
For the three years ended December 31, 1997
Consolidated Statements of Changes in Shareholders' Equity
For the three years ended December 31, 1997
Consolidated Statements of Cash Flows
For the three years ended December 31, 1997
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, 1997, 1996, and 1995. The appointment of independent
public accountants is approved annually by the Board of Directors. For
the year 1998, the Board of Directors has again authorized the
engagement of Crowe, Chizek and Company LLP, as independent auditors.
PART III
Information relating to the following items is included in the Registrant's
Definitive Proxy statement and Notice of Annual Meeting of Shareholders to be
held Tuesday, April 21, 1998, ("1997 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
- ------------------------------------------------------------------------
22
<PAGE> 23
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 1997 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 11
Consolidated Balance Sheets, December 31, 1997 and 1996 12
Consolidated Statements of Income,
For the three years ended December 31, 1997 13
Consolidated Statements of Changes in Shareholders' Equity,
For the three years ended December 31, 1997 14
Consolidated Statements of Cash Flows,
For the three years ended December 31, 1997 15
Notes to Consolidated Financial Statements 16-29
</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 Registrant's
1997 Annual Report to Shareholders.
3. Exhibits
--------
Reference is made to the Exhibit Index which is found on Page 26
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, 1997.
23
<PAGE> 24
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/ Roger L. Mann
--------------------------------------
Roger L. Mann, President and CEO
Date March 12, 1998
------------------------------------
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/ Rober L. Mann President, CEO March 12, 1998
- ------------------------------ and Director -----------------------------
Roger L. Mann (Principal Executive Officer)
/s/ James J. Pennetti Vice President March 12, 1998
- ------------------------------ and Treasurer -----------------------------
James J. Pennetti (Principal Financial
and Accounting Officer)
/s/ Donald W. Schneider Chairman of March 13, 1998
- ------------------------------ the Board and -----------------------------
Donald W. Schneider Director
/s/ Louis V. Bockius III Director March 13, 1998
- ------------------------------ -----------------------------
Louis V. Bockius III
/s/ E. Lang D'Atri Director March 12, 1998
- ------------------------------ -----------------------------
E. Lang D'Atri
/s/ Edgar W. Jones, Jr. Director March 12, 1998
- ------------------------------ -----------------------------
Edgar W. Jones, Jr.
</TABLE>
24
<PAGE> 25
SIGNATURES(continued)
<TABLE>
<S> <C> <C>
Absent Director
- ------------------------------ -----------------------------
Harold M. Kolenbrander, Ph.D.
/s/ Russell W. Maier Director March 12, 1998
- ------------------------------ -----------------------------
Russell W. Maier
/s/ Robert L. Mang Director March 12, 1998
- ------------------------------ -----------------------------
Robert L. Mang
/s/ James A. O'Donnell Director March 12, 1998
- ------------------------------ -----------------------------
James A. O'Donnell
/s/ Abner A. Yoder Director March 12, 1998
- ------------------------------ -----------------------------
Abner A. Yoder
</TABLE>
25
<PAGE> 26
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Regulation S-K
Exhibit Number Exhibit Description
- -------------- ---------------------------------------------------------------------------
<S> <C> <C>
10.a Change of Control Agreement of Leo E. Doyle, dated November 16, 1995
10.b Change of Control Agreement of Robert L. Mang, dated November 16, 1995
10.c Change of Control Agreement of James J. Pennetti, dated November 16, 1995
10.d Change of Control Agreement of Robert M. Sweeney, dated November 16, 1995
10.e UNB Corp. 1997 Stock Option Plan (incorporated by reference from Exhibit 22
to the Form 10-K filed by the Registrant on March 27, 1997)
10.f Amendment to the Change of Control Agreement of Leo E. Doyle, dated January
16, 1997
10.g Amendment to the Change of Control Agreement of Robert L. Mang, dated
January 16, 1997
10.h Amendment to the Change of Control Agreement of James J. Pennetti, dated
January 16, 1997
10.i Amendment to the Change of Control Agreement of Robert M. Sweeney, dated
January 16, 1997
10.j Employment Contract by and between William J. Devolve and UNB Corp., dated
January 30, 1997
10.k Employment Contract by and between Roger L. Mann and UNB Corp. and United
National Bank and Trust Co., dated April 17, 1997
</TABLE>
26
<PAGE> 27
EXHIBIT INDEX(Continued)
------------------------
<TABLE>
<S> <C> <C>
10.l Change of Control Agreement of Charles J. Berry, dated May 15, 1997
10.m Change of Control Agreement of Roger L. Mann, dated June 1, 1997
10.n Amendment to the Change of Control Agreement of Roger L. Mann, dated
December 10, 1997
10.o Amendment to the Change of Control Agreement of Leo E. Doyle, dated December
10, 1997
10.p Amendment to the Change of Control Agreement of James J. Pennetti, dated
December 10, 1997
10.q Amendment to the Change of Control Agreement of Robert M. Sweeney, dated
December 10, 1997
11 Statement regarding Computation of Per Share Earnings (included in Note 1 to
the Consolidated Financial Statements, 1997 Annual Report to Shareholders
under the caption "Earnings and Dividends Declared Per Share").
13 UNB Corp. Annual Report to Shareholders for the Fiscal Year Ended December
31, 1997.
21 Subsidiaries of the Registrant (exhibit is filed herewith).
22 Proxy Statement of UNB Corp. and Notice for the Annual Meeting of
Shareholders on April 21, 1998 (Incorporated by reference to Form Definitive 14.A
filed by the Registrant February 20, 1998)
27.a Financial Data Schedule for 1997(submitted as part of electronic filing
only)
27.b Restated Financial Data Schedule for Fiscal 1996(submitted as part of
electronic filing only)
27.c Restated Financial Data Schedule for Fiscal 1995(submitted as part of
electronic filing only)
</TABLE>
27
<PAGE> 1
Exhibit 10.a
CHANGE OF CONTROL AGREEMENT
This is an Agreement (the "AGREEMENT") made by and between UNB Corp.
("Company") and Leo E. Doyle ("EXECUTIVE").
RECITALS
1) COMPANY is a bank holding company whose principal subsidiary is engaged
in the business of banking and businesses incidental thereto.
2) EXECUTIVE possesses unique skills, knowledge and experience relating to
the business of the COMPANY.
3) COMPANY desires to recognize the past and future services of EXECUTIVE,
and, in that connection, EXECUTIVE desires to be assured that, in the
event of a change in the control of COMPANY, EXECUTIVE will be provided
with an adequate severance payment for termination without cause or as
compensation for Executive's Severance because of a material change in
his duties and functions.
4) COMPANY desires to be assured of the objectivity of EXECUTIVE in
evaluating a potential change of control and advising whether or not a
potential change of control is in the best interest of the COMPANY and
its shareholders.
5) COMPANY desires to induce EXECUTIVE to remain in the employ of the
COMPANY (as hereinafter defined) following a change of control to provide
for continuity of management.
NOW, THEREFORE, in consideration of the premises and of their mutual
covenants expressed in this AGREEMENT, the parties hereto make the following
agreement, intending to be legally bound thereby:
SECTION 1 - DEFINITIONS.
A. Exchange Act - "Exchange Act" means The Securities Exchange Act of 1934.
------------
B. Change in Control - "Change in Control" shall result if:
-----------------
1. Any person or group (as such terms are used on connection with
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) and 13(d)(5) under
the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of
the Company's then outstanding securities; or
2. Company is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of
which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter; or
<PAGE> 2
Exhibit 10.a (continued)
3. During any period of 24 consecutive months, individuals who at the
beginning of such period constitute the Board of Directors cease
for any reason to constitute at least a majority of the Board of
Directors. Solely for purposes of this subparagraph, any new
director during such period shall be presumed to have been serving
at the beginning of such period if: (i) such new director's
nomination for election or appointment was approved by a vote of
at least one-half of the directors then still in office who were
directors at the beginning of such period, or (ii) such new
director was serving as a director of United National Bank & Trust
Co. at the beginning of such period.
Notwithstanding the foregoing, no Trust Department or designated
fiduciary or other trustee of such Trust Department of the Company or a
subsidiary of the Company, or other similar fiduciary capacity of the Company
with direct voting control of the stock shall be included or considered.
Further, no profit-sharing, employee stock ownership, employee stock purchase
and savings, employee pension, or other employee benefit plan of the Corporation
or any of its subsidiaries, and no Trustee of any such plan in its capacity as
such Trustee, shall be included or considered.
C. CODE - "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
D. COMPANY - "Company" shall include the United National Bank & Trust Co.
and any members of its Affiliated Group, over which Executive has
managerial control, as that term is defined in Section 1504 of the Code,
and shall include any predecessor corporations of the Company and its
Affiliated Group.
E. BOARD - "Board" shall mean the Board of Directors of the Company.
SECTION 2 - TERM OF AGREEMENT.
A. This Agreement shall be effective from the date of this Agreement until
the Agreement Termination Date, which is the earliest of:
1. The date this Agreement is mutually rescinded;
2. The date prior to a Change in Control on which the Executive's
employment with the Company is terminated by death, retirement,
disability, resignation, or dismissal for any reason;
3. The date Executive is terminated for Good Cause (as hereinafter
defined in Section 2(C) after a Change in Control;
4. The date which is two (2) years after a Change in Control.
5. The date which the Company, the United National Bank & Trust Co.,
or any other member of its Affiliated Group, and over which
Executive has managerial control, which is a depository
institution which is insured by an agency of any state or the
United States Federal Government:
2
<PAGE> 3
Exhibit 10.a (continued)
a. becomes insolvent; or
b. has appointed any conservator or receiver; or
c. is determined by an appropriate federal banking agency to be
in a troubled condition, as defined in the applicable law
and regulations governing the appropriate federal banking
agency; or
d. is assigned a composite rating of 4 or 5 by the appropriate
federal banking agency or is informed in writing by the
Federal Deposit Insurance Corporation that it is rated a 4
or 5 under the Uniform Financial Institution's Rating System
of the Federal Financial Institutions Examination Council;
or
e. has initiated against it by the Federal Deposit Insurance
Corporation a proceeding to terminate or suspend deposit
insurance; or
f. reasonably determines in good faith and with due care that
the payments called for under this Agreement, or other
obligations and promises assumed and made under this
Agreement have become proscribed under applicable law or
regulations. Provided, however, if such law or regulations
apply prospectively only, or for some other reason do not
apply to this Agreement, then this Agreement shall not be
deemed by Company to be proscribed under this Subsection
(f).
B. This Agreement shall not change, alter or amend any rights which either
Company or Executive may have in respect of the termination of the
employment of Executive by Company prior to a Change in Control. Nothing
contained in this Agreement shall be construed to create any additional
right or obligation of Executive to be employed by Company. If the
employment of Executive by Company is terminated by Company or by
Executive, for any reason whatsoever, prior to a Change in Control,
Executive and Company shall have only such rights and obligations in
respect of such termination as either of them would have had if this
Agreement had not been effected.
C. For purposes of this Agreement, the employment of Executive by Company
shall be deemed to have been terminated for good cause only if such
employment is terminated by Company by reason of Executive's dishonest
conduct materially detrimental to Company, conviction of a felony, or
willful or material violation of any of the obligations imposed upon
Executive under this Agreement.
SECTION 3 - REDUCTION IN COMPENSATION PROSCRIBED AFTER A CHANGE IN CONTROL.
During the term of this Agreement as defined by Section 2 and after the date of
a Change in Control, Executive shall receive as compensation, while still
employed by Company, a salary at a rate no less than that in effect as of the
Change in Control, and shall, in addition, be entitled to receive a bonus
3
<PAGE> 4
Exhibit 10.a (continued)
equal to at least the average of the last three years bonuses paid. In addition,
during such period, the Company shall pay and provide for Executive at no cost
to Executive, all of his then-current fringe benefits, including but not limited
to health, disability, dental, life insurance, club memberships, etc., all of
which shall be at levels and amounts no less favorable than levels and amounts
in effect as of the Change in Control.
SECTION 4 - PAYMENT UPON TERMINATION OF EMPLOYMENT AFTER A CHANGE IN CONTROL.
A. If during the term of this Agreement as defined by Section 2 and after
the date of a Change in Control, Executive is discharged without good
cause or Executive resigns because he has: (i) been demoted, (ii) had his
compensation materially reduced, (iii) had his principal place of
employment transferred away from Stark County Ohio or a county contiguous
thereto, or (iv) had his job title, status or responsibility materially
reduced, then the Company shall make the payments to Executive set forth
in subsection D of this Section 4.
B. If Executive voluntarily terminates employment not earlier than six (6)
months and not later than nine (9) months following a Change in Control,
then the Company shall make the payments to Executive set forth in
subsection D of this Section 4.
C. If Executive is discharged by Company other than for good cause and there
is a Change of Control within two years of the discharge, then the
Company shall make the payments to Executive set forth in subsection D of
this Section 4.
D. In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled to
receive either: (i) a lump sum cash payment equal to two (2) years of
Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) two (2) years of Compensation payable in equal monthly
payments, in cash, without interest. The lump sum cash payment or the
first monthly cash payment, as the case may be, shall be paid at the end
of the first month commencing after the Executive's termination of
employment in the case of a benefit entitlement under Subsection A, B or
C above, and in the event of the election by Executive to receive monthly
payments, shall continue each consecutive month thereafter until 24
payments have been made. If Executive's employment is terminated as
described in Subsection A or Subsection B above, then in addition to the
above cash payment(s), Company shall continue at no cost to Executive for
the term of the Benefit Period as defined below, Executive's coverage in
Company's health, disability, dental, life insurance, and club
memberships at the same levels that had been provided immediately prior
to his termination of employment. The Benefit Period shall commence on
the date of termination of the Executive's employment and shall end on
the earlier of:
1. The last day of the 24th consecutive whole month thereafter, or
2. The termination date of this Agreement as defined in Section 2(A).
4
<PAGE> 5
Exhibit 10.a (continued)
In the event Executive dies after benefits have commenced but before the
end of the benefit period, then the remaining payments shall be paid to
the person or persons as stated in the last designation of beneficiary
concerning this Agreement signed by Executive and filed with the Company,
and if not, then to the personal representative of Executive.
E. As used herein, "Compensation" shall mean the sum of employee base salary
plus any bonuses for the last whole calendar year preceding Executive's
termination of employment. Compensation shall not include any amount,
other than base salary and bonuses, included in Executive's taxable
compensation for federal income tax purposes and reported to Executive
and Internal Revenue Service ("IRS") such as the reporting of previously
deferred compensation or gain realized upon exercise of any nonqualified
stock options. In the event the payments required under this Agreement
together with the other benefits provided for hereunder would be deemed
by the IRS to result in an "Excess Parachute Payment," as that term is
defined in Section 280G of the Code, then the amount of the lump sum
payment shall be reduced, or in the event of the election by the
Executive to receive monthly payments, the monthly cash payments shall be
reduced, to the highest amount which will not result in the total of all
benefits provided for hereunder being deemed by the IRS to result in a
"Excess Parachute Payment," as that term is defined in Section 280G of
the Code, rounded down to the nearest even $10 multiple.
SECTION 5 - QUALIFIED AND NONQUALIFIED RETIREMENT PENSION PLANS.
Nothing in this Agreement, including this Section 5, shall reduce any pension
benefits or benefits from other qualified or non-qualified retirement plans
maintained by Company to which Executive is otherwise entitled without regard to
this Agreement. The Company shall take such actions as necessary in order to
amend any and all qualified and non-qualified retirement plans of the Company,
or of any of its subsidiaries, in order to provide for the inclusion of payments
made to Executive under the terms of this Agreement within the definition of
compensation for all such plans and to provide for the inclusion of the Benefit
Period within the computation of any and all years of service and/or age
requirements for the computation of the amount of, or vesting of, benefits under
the Company's qualified and non-qualified retirement plans.
SECTION 6 - PROVISION FOR OUT PLACEMENT SERVICES.
In the event of the termination of employment of Executive pursuant to Section 4
of this Agreement, Executive shall be entitled to one year of out placement
services following termination of employment. Such services shall include
employment counseling, resume services, executive placement services and similar
services generally provided to executives by professional executive out
placement services providers. All costs of such out placement services shall be
paid for by the Company.
SECTION 7 - ARBITRATION.
The parties hereto agree to arbitrate any issue, misunderstanding, disagreement
or dispute in connection with the terms in effect in this
5
<PAGE> 6
Exhibit 10.a (continued)
Agreement in accordance with the Rules of the American Arbitration Association,
before one arbitrator mutually agreeable to the parties hereto. If after two
weeks, Executive determines that Company and Executive have been unable to agree
upon one arbitrator, then Executive may appoint one arbitrator and require
Company to appoint a second arbitrator. Whereupon, the two appointed arbitrators
shall appoint a third arbitrator mutually agreeable to them. The arbitration
shall occur in Canton, Ohio, or such other place as mutually agreed upon. Any
and all costs associated with Executive's enforcement of the provisions of this
Agreement through arbitration as provided herein shall be borne by the Company.
The Company shall bear such expenses regardless of the nature of the dispute or
the outcome of such dispute. Such costs include, but are not limited to,
attorneys' fees, arbitration fees and costs, and expenses of settlement.
SECTION 8 - RIGHT TO OTHER BENEFITS.
Nothing in this Agreement shall abridge, eliminate, or cause Executive to lose
Executive's right or entitlement to any other Company benefit to which Executive
may be entitled due to his status as an employee under any plan or policy of
Company on such terms and conditions as are required of any employee under any
plan or policy of Company. Further, nothing in this Agreement shall create in
Executive any greater rights or entitlements, except as specified in this
Agreement. The plans and policies referred to in this Section 8 include, but are
not limited to, life insurance plans, dental, disability, or health insurance
benefits, severance policies, club memberships, and accrued vacation pay.
SECTION 9 - PROTECTION OF BUSINESS.
Notwithstanding anything to the contrary contained elsewhere in this Agreement:
A. Executive will not at any time (during or after employment with Company)
divulge, disclose, reveal or communicate to any person, firm,
corporation, partnership, joint venture or other entity, directly or
indirectly, any trade secrets or other information which Executive may
have obtained during the course of his employment by Company in respect
of any matters affecting or relating to the banking business of Company
including, without limitation, any of its plans, policies, business
practices, finances, methods of operation or other information known to
Executive to be historically considered by Company to be confidential
information.
B. In addition to any action for damages, the restrictions imposed upon
Executive under this Section 9 may be enforced by the Company by an
action for an injunction and it is hereby agreed that (in view of the
general practical difficulty of determining by computation or legal proof
the exact amount of damages, if any, resulting to Company from a
violation by Executive of the provisions of this Section 9) there would
be no adequate remedy at law for any breach by Executive of any such
restriction.
6
<PAGE> 7
Exhibit 10.a (continued)
C. The obligations imposed upon Executive by this Section 9 shall survive
the termination of this Agreement pursuant to Section 2 hereof.
SECTION 10 - NOTICES AND PAYMENTS.
All payments required or permitted to be made under the provisions of this
Agreement, and all notices and other communications required or permitted to be
given or delivered under this Agreement to Company or to Executive, which
notices or communications must be in writing, shall be deemed to have been given
if delivered by hand, or mailed by first-class mail, addressed as follows:
A. If to Company:
UNB Corp.
c/o United National Bank & Trust Co.
220 Market Avenue South
P. O. Box 24190
Canton, OH 44701
B. If to Executive:
Leo E. Doyle
c/o United National Bank & Trust Co.
220 Market Avenue South
P. O. Box 24190
Canton, OH 44701
Company or Executive may, by notice given to the other from time to time and at
anytime, designate a different address for making payments required to be made,
and for the giving of notices or other communications required or permitted to
be given, to the party designating such new address.
SECTION 11 - PAYROLL TAXES.
Any payment required or permitted to be made or given to Executive under this
Agreement shall be subject to the withholding and other requirements of
applicable laws, and to the deduction requirements of any benefit plan
maintained by Company in which Executive is a participant, and to all reporting,
filing and other requirements in respect of such payments, and Company shall use
its best efforts promptly to satisfy all such requirements.
SECTION 12 - GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Ohio.
SECTION 13 - DUPLICATE ORIGINALS.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be a duplicate original, but all of which, taken together, shall
constitute a single instrument.
7
<PAGE> 8
Exhibit 10.a (continued)
SECTION 14 - CAPTIONS.
The captions contained in this Agreement are included only for convenience of
reference and do not define, limit, explain or modify this Agreement or its
interpretations, construction or meaning and are in no way to be construed as a
part of this Agreement.
SECTION 15 - SEVERABILITY.
If any provision of this Agreement or the application of any provision to any
person or any circumstances shall be determined to be invalid or unenforceable,
such provision or portion thereof shall nevertheless be effective and
enforceable to the extent determined reasonable. Such determination shall not
affect any other provision of this Agreement or the application of said
provision to any other person or circumstance, all of which other provisions
shall remain in full force and effect, and it is the intention of Company and
Executive that if any provision of this Agreement is susceptible of two or more
constructions, one of which would render the provision enforceable and the other
or others of which would render the provisions unenforceable, then the
provisions shall have the meaning which renders it enforceable.
SECTION 16 - NUMBER AND GENDER.
When used in this Agreement, the number and gender of each pronoun shall be
construed to be such number and gender as the context, circumstances or its
antecedent may require.
SECTION 17 - SUCCESSOR AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the successors
and assigns (including successive, as well as immediate, successors and assigns)
of Company; provided, however, that Company may not assign this Agreement or any
of its rights or obligations hereunder to any party other than a corporation
which succeeds to substantially all of the business and assets of Company by
merger, consolidation, sale of assets or otherwise. This Agreement shall inure
to the benefit of and be binding upon the successor and assigns (including
successive, as well as immediate, successors and assigns) of Executive;
provided, however, that the right of Executive under this Agreement may be
assigned only to his personal representative or trustee or by will or pursuant
to applicable laws of descent and distribution.
8
<PAGE> 9
Exhibit 10.a (continued)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on and to be effective on NOVEMBER 16, 1995.
In the Presence of:
Rebecca L. Kintz /s/ Leo E. Doyle
- -------------------------- -------------------------------
Leo E. Doyle, Executive
Kathy Tripp
- --------------------------
In the Presence of: UNB Corp.
(as to both signatures)
Rebecca L. Kintz /s/ Donald W. Schneider
- -------------------------- -------------------------------
Donald W. Schneider, Chairman
Kathy Tripp /s/ Robert M. Sweeney
- -------------------------- -------------------------------
Robert M. Sweeney, Secretary
9
<PAGE> 1
Exhibit 10.b
CHANGE OF CONTROL AGREEMENT
This is an Agreement (the "AGREEMENT") made by and between UNB Corp.
("Company") and Robert L. Mang ("EXECUTIVE").
RECITALS
1) COMPANY is a bank holding company whose principal subsidiary is engaged
in the business of banking and businesses incidental thereto.
2) EXECUTIVE possesses unique skills, knowledge and experience relating to
the business of the COMPANY.
3) COMPANY desires to recognize the past and future services of EXECUTIVE,
and, in that connection, EXECUTIVE desires to be assured that, in the
event of a change in the control of COMPANY, EXECUTIVE will be provided
with an adequate severance payment for termination without cause or as
compensation for Executive's Severance because of a material change in
his duties and functions.
4) COMPANY desires to be assured of the objectivity of EXECUTIVE in
evaluating a potential change of control and advising whether or not a
potential change of control is in the best interest of the COMPANY and
its shareholders.
5) COMPANY desires to induce EXECUTIVE to remain in the employ of the
COMPANY (as hereinafter defined) following a change of control to provide
for continuity of management.
NOW, THEREFORE, in consideration of the premises and of their mutual
covenants expressed in this AGREEMENT, the parties hereto make the following
agreement, intending to be legally bound thereby:
SECTION 1 - DEFINITIONS.
A. Exchange Act - "Exchange Act" means The Securities Exchange Act of 1934.
------------
B. Change in Control - "Change in Control" shall result if:
-----------------
1. Any person or group (as such terms are used on connection with
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) and 13(d)(5) under
the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of
the Company's then outstanding securities; or
2. Company is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of
which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter; or
<PAGE> 2
Exhibit 10.b (continued)
3. During any period of 24 consecutive months, individuals who at the
beginning of such period constitute the Board of Directors cease
for any reason to constitute at least a majority of the Board of
Directors. Solely for purposes of this subparagraph, any new
director during such period shall be presumed to have been serving
at the beginning of such period if: (i) such new director's
nomination for election or appointment was approved by a vote of
at least one-half of the directors then still in office who were
directors at the beginning of such period, or (ii) such new
director was serving as a director of United National Bank & Trust
Co. at the beginning of such period.
Notwithstanding the foregoing, no Trust Department or designated
fiduciary or other trustee of such Trust Department of the Company or a
subsidiary of the Company, or other similar fiduciary capacity of the Company
with direct voting control of the stock shall be included or considered.
Further, no profit-sharing, employee stock ownership, employee stock purchase
and savings, employee pension, or other employee benefit plan of the Corporation
or any of its subsidiaries, and no Trustee of any such plan in its capacity as
such Trustee, shall be included or considered.
C. CODE - "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
D. COMPANY - "Company" shall include the United National Bank & Trust Co.
and any members of its Affiliated Group, over which Executive has
managerial control, as that term is defined in Section 1504 of the Code,
and shall include any predecessor corporations of the Company and its
Affiliated Group.
E. BOARD - "Board" shall mean the Board of Directors of the Company.
SECTION 2 - TERM OF AGREEMENT.
A. This Agreement shall be effective from the date of this Agreement until
the Agreement Termination Date, which is the earliest of:
1. The date this Agreement is mutually rescinded;
2. The date prior to a Change in Control on which the Executive's
employment with the Company is terminated by death, retirement,
disability, resignation, or dismissal for any reason;
3. The date Executive is terminated for Good Cause (as hereinafter
defined in Section 2(C) after a Change in Control;
4. The date which is two (2) years after a Change in Control.
5. The date which the Company, the United National Bank & Trust Co.,
or any other member of its Affiliated Group, and over which
Executive has managerial control, which is a depository
institution which is insured by an agency of any state or the
United States Federal Government:
2
<PAGE> 3
Exhibit 10.b (continued)
a. becomes insolvent; or
b. has appointed any conservator or receiver; or
c. is determined by an appropriate federal banking agency to be
in a troubled condition, as defined in the applicable law
and regulations governing the appropriate federal banking
agency; or
d. is assigned a composite rating of 4 or 5 by the appropriate
federal banking agency or is informed in writing by the
Federal Deposit Insurance Corporation that it is rated a 4
or 5 under the Uniform Financial Institution's Rating System
of the Federal Financial Institutions Examination Council;
or
e. has initiated against it by the Federal Deposit Insurance
Corporation a proceeding to terminate or suspend deposit
insurance; or
f. reasonably determines in good faith and with due care that
the payments called for under this Agreement, or other
obligations and promises assumed and made under this
Agreement have become proscribed under applicable law or
regulations. Provided, however, if such law or regulations
apply prospectively only, or for some other reason do not
apply to this Agreement, then this Agreement shall not be
deemed by Company to be proscribed under this Subsection
(f).
B. This Agreement shall not change, alter or amend any rights which either
Company or Executive may have in respect of the termination of the
employment of Executive by Company prior to a Change in Control. Nothing
contained in this Agreement shall be construed to create any additional
right or obligation of Executive to be employed by Company. If the
employment of Executive by Company is terminated by Company or by
Executive, for any reason whatsoever, prior to a Change in Control,
Executive and Company shall have only such rights and obligations in
respect of such termination as either of them would have had if this
Agreement had not been effected.
C. For purposes of this Agreement, the employment of Executive by Company
shall be deemed to have been terminated for good cause only if such
employment is terminated by Company by reason of Executive's dishonest
conduct materially detrimental to Company, conviction of a felony, or
willful or material violation of any of the obligations imposed upon
Executive under this Agreement.
SECTION 3 - REDUCTION IN COMPENSATION PROSCRIBED AFTER A CHANGE IN CONTROL.
During the term of this Agreement as defined by Section 2 and after the date of
a Change in Control, Executive shall receive as compensation, while still
employed by Company, a salary at a rate no less than that in effect as of the
Change in Control, and shall, in addition, be entitled to receive a bonus
3
<PAGE> 4
Exhibit 10.b (continued)
equal to at least the average of the last three years bonuses paid. In addition,
during such period, the Company shall pay and provide for Executive at no cost
to Executive, all of his then-current fringe benefits, including but not limited
to health, disability, dental, life insurance, club memberships, etc., all of
which shall be at levels and amounts no less favorable than levels and amounts
in effect as of the Change in Control.
SECTION 4 - PAYMENT UPON TERMINATION OF EMPLOYMENT AFTER A CHANGE IN CONTROL.
A. If during the term of this Agreement as defined by Section 2 and after
the date of a Change in Control, Executive is discharged without good
cause or Executive resigns because he has: (i) been demoted, (ii) had his
compensation materially reduced, (iii) had his principal place of
employment transferred away from Stark County Ohio or a county contiguous
thereto, or (iv) had his job title, status or responsibility materially
reduced, then the Company shall make the payments to Executive set forth
in subsection D of this Section 4.
B. If Executive voluntarily terminates employment not earlier than six (6)
months and not later than nine (9) months following a Change in Control,
then the Company shall make the payments to Executive set forth in
subsection D of this Section 4.
C. If Executive is discharged by Company other than for good cause and there
is a Change of Control within two years of the discharge, then the
Company shall make the payments to Executive set forth in subsection D of
this Section 4.
D. In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled to
receive either: (i) a lump sum cash payment equal to two (2) years of
Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) two (2) years of Compensation payable in equal monthly
payments, in cash, without interest. The lump sum cash payment or the
first monthly cash payment, as the case may be, shall be paid at the end
of the first month commencing after the Executive's termination of
employment in the case of a benefit entitlement under Subsection A, B or
C above, and in the event of the election by Executive to receive monthly
payments, shall continue each consecutive month thereafter until 24
payments have been made. If Executive's employment is terminated as
described in Subsection A or Subsection B above, then in addition to the
above cash payment(s), Company shall continue at no cost to Executive for
the term of the Benefit Period as defined below, Executive's coverage in
Company's health, disability, dental, life insurance, and club
memberships at the same levels that had been provided immediately prior
to his termination of employment. The Benefit Period shall commence on
the date of termination of the Executive's employment and shall end on
the earlier of:
1. The last day of the 24th consecutive whole month thereafter, or
2. The termination date of this Agreement as defined in Section 2(A).
4
<PAGE> 5
Exhibit 10.b (continued)
In the event Executive dies after benefits have commenced but before the
end of the benefit period, then the remaining payments shall be paid to
the person or persons as stated in the last designation of beneficiary
concerning this Agreement signed by Executive and filed with the Company,
and if not, then to the personal representative of Executive.
E. As used herein, "Compensation" shall mean the sum of employee base salary
plus any bonuses for the last whole calendar year preceding Executive's
termination of employment. Compensation shall not include any amount,
other than base salary and bonuses, included in Executive's taxable
compensation for federal income tax purposes and reported to Executive
and Internal Revenue Service ("IRS") such as the reporting of previously
deferred compensation or gain realized upon exercise of any nonqualified
stock options. In the event the payments required under this Agreement
together with the other benefits provided for hereunder would be deemed
by the IRS to result in an "Excess Parachute Payment," as that term is
defined in Section 280G of the Code, then the amount of the lump sum
payment shall be reduced, or in the event of the election by the
Executive to receive monthly payments, the monthly cash payments shall be
reduced, to the highest amount which will not result in the total of all
benefits provided for hereunder being deemed by the IRS to result in a
"Excess Parachute Payment," as that term is defined in Section 280G of
the Code, rounded down to the nearest even $10 multiple.
SECTION 5 - QUALIFIED AND NONQUALIFIED RETIREMENT PENSION PLANS.
Nothing in this Agreement, including this Section 5, shall reduce any pension
benefits or benefits from other qualified or non-qualified retirement plans
maintained by Company to which Executive is otherwise entitled without regard to
this Agreement. The Company shall take such actions as necessary in order to
amend any and all qualified and non-qualified retirement plans of the Company,
or of any of its subsidiaries, in order to provide for the inclusion of payments
made to Executive under the terms of this Agreement within the definition of
compensation for all such plans and to provide for the inclusion of the Benefit
Period within the computation of any and all years of service and/or age
requirements for the computation of the amount of, or vesting of, benefits under
the Company's qualified and non-qualified retirement plans.
SECTION 6 - PROVISION FOR OUT PLACEMENT SERVICES.
In the event of the termination of employment of Executive pursuant to Section 4
of this Agreement, Executive shall be entitled to one year of out placement
services following termination of employment. Such services shall include
employment counseling, resume services, executive placement services and similar
services generally provided to executives by professional executive out
placement services providers. All costs of such out placement services shall be
paid for by the Company.
SECTION 7 - ARBITRATION.
The parties hereto agree to arbitrate any issue, misunderstanding, disagreement
or dispute in connection with the terms in effect in this
5
<PAGE> 6
Exhibit 10.b (continued)
Agreement in accordance with the Rules of the American Arbitration Association,
before one arbitrator mutually agreeable to the parties hereto. If after two
weeks, Executive determines that Company and Executive have been unable to agree
upon one arbitrator, then Executive may appoint one arbitrator and require
Company to appoint a second arbitrator. Whereupon, the two appointed arbitrators
shall appoint a third arbitrator mutually agreeable to them. The arbitration
shall occur in Canton, Ohio, or such other place as mutually agreed upon. Any
and all costs associated with Executive's enforcement of the provisions of this
Agreement through arbitration as provided herein shall be borne by the Company.
The Company shall bear such expenses regardless of the nature of the dispute or
the outcome of such dispute. Such costs include, but are not limited to,
attorneys' fees, arbitration fees and costs, and expenses of settlement.
SECTION 8 - RIGHT TO OTHER BENEFITS.
Nothing in this Agreement shall abridge, eliminate, or cause Executive to lose
Executive's right or entitlement to any other Company benefit to which Executive
may be entitled due to his status as an employee under any plan or policy of
Company on such terms and conditions as are required of any employee under any
plan or policy of Company. Further, nothing in this Agreement shall create in
Executive any greater rights or entitlements, except as specified in this
Agreement. The plans and policies referred to in this Section 8 include, but are
not limited to, life insurance plans, dental, disability, or health insurance
benefits, severance policies, club memberships, and accrued vacation pay.
SECTION 9 - PROTECTION OF BUSINESS.
Notwithstanding anything to the contrary contained elsewhere in this Agreement:
A. Executive will not at any time (during or after employment with Company)
divulge, disclose, reveal or communicate to any person, firm,
corporation, partnership, joint venture or other entity, directly or
indirectly, any trade secrets or other information which Executive may
have obtained during the course of his employment by Company in respect
of any matters affecting or relating to the banking business of Company
including, without limitation, any of its plans, policies, business
practices, finances, methods of operation or other information known to
Executive to be historically considered by Company to be confidential
information.
B. In addition to any action for damages, the restrictions imposed upon
Executive under this Section 9 may be enforced by the Company by an
action for an injunction and it is hereby agreed that (in view of the
general practical difficulty of determining by computation or legal proof
the exact amount of damages, if any, resulting to Company from a
violation by Executive of the provisions of this Section 9) there would
be no adequate remedy at law for any breach by Executive of any such
restriction.
6
<PAGE> 7
Exhibit 10.b (continued)
C. The obligations imposed upon Executive by this Section 9 shall survive
the termination of this Agreement pursuant to Section 2 hereof.
SECTION 10 - NOTICES AND PAYMENTS.
All payments required or permitted to be made under the provisions of this
Agreement, and all notices and other communications required or permitted to be
given or delivered under this Agreement to Company or to Executive, which
notices or communications must be in writing, shall be deemed to have been given
if delivered by hand, or mailed by first-class mail, addressed as follows:
A. If to Company:
UNB Corp.
c/o United National Bank & Trust Co.
220 Market Avenue South
P. O. Box 24190
Canton, OH 44701
B. If to Executive:
Robert L. Mang
c/o United National Bank & Trust Co.
220 Market Avenue South
P. O. Box 24190
Canton, OH 44701
Company or Executive may, by notice given to the other from time to time and at
anytime, designate a different address for making payments required to be made,
and for the giving of notices or other communications required or permitted to
be given, to the party designating such new address.
SECTION 11 - PAYROLL TAXES.
Any payment required or permitted to be made or given to Executive under this
Agreement shall be subject to the withholding and other requirements of
applicable laws, and to the deduction requirements of any benefit plan
maintained by Company in which Executive is a participant, and to all reporting,
filing and other requirements in respect of such payments, and Company shall use
its best efforts promptly to satisfy all such requirements.
SECTION 12 - GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Ohio.
SECTION 13 - DUPLICATE ORIGINALS.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be a duplicate original, but all of which, taken together, shall
constitute a single instrument.
7
<PAGE> 8
Exhibit 10.b (continued)
SECTION 14 - CAPTIONS.
The captions contained in this Agreement are included only for convenience of
reference and do not define, limit, explain or modify this Agreement or its
interpretations, construction or meaning and are in no way to be construed as a
part of this Agreement.
SECTION 15 - SEVERABILITY.
If any provision of this Agreement or the application of any provision to any
person or any circumstances shall be determined to be invalid or unenforceable,
such provision or portion thereof shall nevertheless be effective and
enforceable to the extent determined reasonable. Such determination shall not
affect any other provision of this Agreement or the application of said
provision to any other person or circumstance, all of which other provisions
shall remain in full force and effect, and it is the intention of Company and
Executive that if any provision of this Agreement is susceptible of two or more
constructions, one of which would render the provision enforceable and the other
or others of which would render the provisions unenforceable, then the
provisions shall have the meaning which renders it enforceable.
SECTION 16 - NUMBER AND GENDER.
When used in this Agreement, the number and gender of each pronoun shall be
construed to be such number and gender as the context, circumstances or its
antecedent may require.
SECTION 17 - SUCCESSOR AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the successors
and assigns (including successive, as well as immediate, successors and assigns)
of Company; provided, however, that Company may not assign this Agreement or any
of its rights or obligations hereunder to any party other than a corporation
which succeeds to substantially all of the business and assets of Company by
merger, consolidation, sale of assets or otherwise. This Agreement shall inure
to the benefit of and be binding upon the successor and assigns (including
successive, as well as immediate, successors and assigns) of Executive;
provided, however, that the right of Executive under this Agreement may be
assigned only to his personal representative or trustee or by will or pursuant
to applicable laws of descent and distribution.
8
<PAGE> 9
Exhibit 10.b (continued)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on and to be effective on NOVEMBER 16, 1995.
In the Presence of:
Rebecca L. Kintz /s/ Robert L. Mang
- -------------------------- -------------------------------
Robert L. Mang, Executive
Kathy Tripp
- --------------------------
In the Presence of: UNB Corp.
(as to both signatures)
Rebecca L. Kintz /s/ Donald W. Schneider
- -------------------------- -------------------------------
Donald W. Schneider, Chairman
Kathy Tripp /s/ Robert M. Sweeney
- -------------------------- -------------------------------
Robert M. Sweeney, Secretary
9
<PAGE> 1
Exhibit 10.c
CHANGE OF CONTROL AGREEMENT
This is an Agreement (the "AGREEMENT") made by and between UNB Corp.
("Company") and James J. Pennetti ("EXECUTIVE").
RECITALS
1) COMPANY is a bank holding company whose principal subsidiary is engaged
in the business of banking and businesses incidental thereto.
2) EXECUTIVE possesses unique skills, knowledge and experience relating to
the business of the COMPANY.
3) COMPANY desires to recognize the past and future services of EXECUTIVE,
and, in that connection, EXECUTIVE desires to be assured that, in the
event of a change in the control of COMPANY, EXECUTIVE will be provided
with an adequate severance payment for termination without cause or as
compensation for Executive's Severance because of a material change in
his duties and functions.
4) COMPANY desires to be assured of the objectivity of EXECUTIVE in
evaluating a potential change of control and advising whether or not a
potential change of control is in the best interest of the COMPANY and
its shareholders.
5) COMPANY desires to induce EXECUTIVE to remain in the employ of the
COMPANY (as hereinafter defined) following a change of control to provide
for continuity of management.
NOW, THEREFORE, in consideration of the premises and of their mutual
covenants expressed in this AGREEMENT, the parties hereto make the following
agreement, intending to be legally bound thereby:
SECTION 1 - DEFINITIONS.
A. Exchange Act - "Exchange Act" means The Securities Exchange Act of 1934.
------------
B. Change in Control - "Change in Control" shall result if:
-----------------
1. Any person or group (as such terms are used on connection with
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) and 13(d)(5) under
the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of
the Company's then outstanding securities; or
2. Company is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of
which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter; or
<PAGE> 2
Exhibit 10.c (continued)
3. During any period of 24 consecutive months, individuals who at the
beginning of such period constitute the Board of Directors cease
for any reason to constitute at least a majority of the Board of
Directors. Solely for purposes of this subparagraph, any new
director during such period shall be presumed to have been serving
at the beginning of such period if: (i) such new director's
nomination for election or appointment was approved by a vote of
at least one-half of the directors then still in office who were
directors at the beginning of such period, or (ii) such new
director was serving as a director of United National Bank & Trust
Co. at the beginning of such period.
Notwithstanding the foregoing, no Trust Department or designated
fiduciary or other trustee of such Trust Department of the Company or a
subsidiary of the Company, or other similar fiduciary capacity of the Company
with direct voting control of the stock shall be included or considered.
Further, no profit-sharing, employee stock ownership, employee stock purchase
and savings, employee pension, or other employee benefit plan of the Corporation
or any of its subsidiaries, and no Trustee of any such plan in its capacity as
such Trustee, shall be included or considered.
C. CODE - "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
D. COMPANY - "Company" shall include the United National Bank & Trust Co.
and any members of its Affiliated Group, over which Executive has
managerial control, as that term is defined in Section 1504 of the Code,
and shall include any predecessor corporations of the Company and its
Affiliated Group.
E. BOARD - "Board" shall mean the Board of Directors of the Company.
SECTION 2 - TERM OF AGREEMENT.
A. This Agreement shall be effective from the date of this Agreement until
the Agreement Termination Date, which is the earliest of:
1. The date this Agreement is mutually rescinded;
2. The date prior to a Change in Control on which the Executive's
employment with the Company is terminated by death, retirement,
disability, resignation, or dismissal for any reason;
3. The date Executive is terminated for Good Cause (as hereinafter
defined in Section 2(C) after a Change in Control;
4. The date which is two (2) years after a Change in Control.
5. The date which the Company, the United National Bank & Trust Co.,
or any other member of its Affiliated Group, and over which
Executive has managerial control, which is a depository
institution which is insured by an agency of any state or the
United States Federal Government:
2
<PAGE> 3
Exhibit 10.c (continued)
a. becomes insolvent; or
b. has appointed any conservator or receiver; or
c. is determined by an appropriate federal banking agency to be
in a troubled condition, as defined in the applicable law
and regulations governing the appropriate federal banking
agency; or
d. is assigned a composite rating of 4 or 5 by the appropriate
federal banking agency or is informed in writing by the
Federal Deposit Insurance Corporation that it is rated a 4
or 5 under the Uniform Financial Institution's Rating System
of the Federal Financial Institutions Examination Council;
or
e. has initiated against it by the Federal Deposit Insurance
Corporation a proceeding to terminate or suspend deposit
insurance; or
f. reasonably determines in good faith and with due care that
the payments called for under this Agreement, or other
obligations and promises assumed and made under this
Agreement have become proscribed under applicable law or
regulations. Provided, however, if such law or regulations
apply prospectively only, or for some other reason do not
apply to this Agreement, then this Agreement shall not be
deemed by Company to be proscribed under this Subsection
(f).
B. This Agreement shall not change, alter or amend any rights which either
Company or Executive may have in respect of the termination of the
employment of Executive by Company prior to a Change in Control. Nothing
contained in this Agreement shall be construed to create any additional
right or obligation of Executive to be employed by Company. If the
employment of Executive by Company is terminated by Company or by
Executive, for any reason whatsoever, prior to a Change in Control,
Executive and Company shall have only such rights and obligations in
respect of such termination as either of them would have had if this
Agreement had not been effected.
C. For purposes of this Agreement, the employment of Executive by Company
shall be deemed to have been terminated for good cause only if such
employment is terminated by Company by reason of Executive's dishonest
conduct materially detrimental to Company, conviction of a felony, or
willful or material violation of any of the obligations imposed upon
Executive under this Agreement.
SECTION 3 - REDUCTION IN COMPENSATION PROSCRIBED AFTER A CHANGE IN CONTROL.
During the term of this Agreement as defined by Section 2 and after the date of
a Change in Control, Executive shall receive as compensation, while still
employed by Company, a salary at a rate no less than that in effect as of the
Change in Control, and shall, in addition, be entitled to receive a bonus
3
<PAGE> 4
Exhibit 10.c (continued)
equal to at least the average of the last three years bonuses paid. In addition,
during such period, the Company shall pay and provide for Executive at no cost
to Executive, all of his then-current fringe benefits, including but not limited
to health, disability, dental, life insurance, club memberships, etc., all of
which shall be at levels and amounts no less favorable than levels and amounts
in effect as of the Change in Control.
SECTION 4 - PAYMENT UPON TERMINATION OF EMPLOYMENT AFTER A CHANGE IN CONTROL.
A. If during the term of this Agreement as defined by Section 2 and after
the date of a Change in Control, Executive is discharged without good
cause or Executive resigns because he has: (i) been demoted, (ii) had his
compensation materially reduced, (iii) had his principal place of
employment transferred away from Stark County Ohio or a county contiguous
thereto, or (iv) had his job title, status or responsibility materially
reduced, then the Company shall make the payments to Executive set forth
in subsection D of this Section 4.
B. If Executive voluntarily terminates employment not earlier than six (6)
months and not later than nine (9) months following a Change in Control,
then the Company shall make the payments to Executive set forth in
subsection D of this Section 4.
C. If Executive is discharged by Company other than for good cause and there
is a Change of Control within two years of the discharge, then the
Company shall make the payments to Executive set forth in subsection D of
this Section 4.
D. In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled to
receive either: (i) a lump sum cash payment equal to two (2) years of
Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) two (2) years of Compensation payable in equal monthly
payments, in cash, without interest. The lump sum cash payment or the
first monthly cash payment, as the case may be, shall be paid at the end
of the first month commencing after the Executive's termination of
employment in the case of a benefit entitlement under Subsection A, B or
C above, and in the event of the election by Executive to receive monthly
payments, shall continue each consecutive month thereafter until 24
payments have been made. If Executive's employment is terminated as
described in Subsection A or Subsection B above, then in addition to the
above cash payment(s), Company shall continue at no cost to Executive for
the term of the Benefit Period as defined below, Executive's coverage in
Company's health, disability, dental, life insurance, and club
memberships at the same levels that had been provided immediately prior
to his termination of employment. The Benefit Period shall commence on
the date of termination of the Executive's employment and shall end on
the earlier of:
1. The last day of the 24th consecutive whole month thereafter, or
2. The termination date of this Agreement as defined in Section 2(A).
4
<PAGE> 5
Exhibit 10.c (continued)
In the event Executive dies after benefits have commenced but before the
end of the benefit period, then the remaining payments shall be paid to
the person or persons as stated in the last designation of beneficiary
concerning this Agreement signed by Executive and filed with the Company,
and if not, then to the personal representative of Executive.
E. As used herein, "Compensation" shall mean the sum of employee base salary
plus any bonuses for the last whole calendar year preceding Executive's
termination of employment. Compensation shall not include any amount,
other than base salary and bonuses, included in Executive's taxable
compensation for federal income tax purposes and reported to Executive
and Internal Revenue Service ("IRS") such as the reporting of previously
deferred compensation or gain realized upon exercise of any nonqualified
stock options. In the event the payments required under this Agreement
together with the other benefits provided for hereunder would be deemed
by the IRS to result in an "Excess Parachute Payment," as that term is
defined in Section 280G of the Code, then the amount of the lump sum
payment shall be reduced, or in the event of the election by the
Executive to receive monthly payments, the monthly cash payments shall be
reduced, to the highest amount which will not result in the total of all
benefits provided for hereunder being deemed by the IRS to result in a
"Excess Parachute Payment," as that term is defined in Section 280G of
the Code, rounded down to the nearest even $10 multiple.
SECTION 5 - QUALIFIED AND NONQUALIFIED RETIREMENT PENSION PLANS.
Nothing in this Agreement, including this Section 5, shall reduce any pension
benefits or benefits from other qualified or non-qualified retirement plans
maintained by Company to which Executive is otherwise entitled without regard to
this Agreement. The Company shall take such actions as necessary in order to
amend any and all qualified and non-qualified retirement plans of the Company,
or of any of its subsidiaries, in order to provide for the inclusion of payments
made to Executive under the terms of this Agreement within the definition of
compensation for all such plans and to provide for the inclusion of the Benefit
Period within the computation of any and all years of service and/or age
requirements for the computation of the amount of, or vesting of, benefits under
the Company's qualified and non-qualified retirement plans.
SECTION 6 - PROVISION FOR OUT PLACEMENT SERVICES.
In the event of the termination of employment of Executive pursuant to Section 4
of this Agreement, Executive shall be entitled to one year of out placement
services following termination of employment. Such services shall include
employment counseling, resume services, executive placement services and similar
services generally provided to executives by professional executive out
placement services providers. All costs of such out placement services shall be
paid for by the Company.
SECTION 7 - ARBITRATION.
The parties hereto agree to arbitrate any issue, misunderstanding, disagreement
or dispute in connection with the terms in effect in this
5
<PAGE> 6
Exhibit 10.c (continued)
Agreement in accordance with the Rules of the American Arbitration Association,
before one arbitrator mutually agreeable to the parties hereto. If after two
weeks, Executive determines that Company and Executive have been unable to agree
upon one arbitrator, then Executive may appoint one arbitrator and require
Company to appoint a second arbitrator. Whereupon, the two appointed arbitrators
shall appoint a third arbitrator mutually agreeable to them. The arbitration
shall occur in Canton, Ohio, or such other place as mutually agreed upon. Any
and all costs associated with Executive's enforcement of the provisions of this
Agreement through arbitration as provided herein shall be borne by the Company.
The Company shall bear such expenses regardless of the nature of the dispute or
the outcome of such dispute. Such costs include, but are not limited to,
attorneys' fees, arbitration fees and costs, and expenses of settlement.
SECTION 8 - RIGHT TO OTHER BENEFITS.
Nothing in this Agreement shall abridge, eliminate, or cause Executive to lose
Executive's right or entitlement to any other Company benefit to which Executive
may be entitled due to his status as an employee under any plan or policy of
Company on such terms and conditions as are required of any employee under any
plan or policy of Company. Further, nothing in this Agreement shall create in
Executive any greater rights or entitlements, except as specified in this
Agreement. The plans and policies referred to in this Section 8 include, but are
not limited to, life insurance plans, dental, disability, or health insurance
benefits, severance policies, club memberships, and accrued vacation pay.
SECTION 9 - PROTECTION OF BUSINESS.
Notwithstanding anything to the contrary contained elsewhere in this Agreement:
A. Executive will not at any time (during or after employment with Company)
divulge, disclose, reveal or communicate to any person, firm,
corporation, partnership, joint venture or other entity, directly or
indirectly, any trade secrets or other information which Executive may
have obtained during the course of his employment by Company in respect
of any matters affecting or relating to the banking business of Company
including, without limitation, any of its plans, policies, business
practices, finances, methods of operation or other information known to
Executive to be historically considered by Company to be confidential
information.
B. In addition to any action for damages, the restrictions imposed upon
Executive under this Section 9 may be enforced by the Company by an
action for an injunction and it is hereby agreed that (in view of the
general practical difficulty of determining by computation or legal proof
the exact amount of damages, if any, resulting to Company from a
violation by Executive of the provisions of this Section 9) there would
be no adequate remedy at law for any breach by Executive of any such
restriction.
6
<PAGE> 7
Exhibit 10.c (continued)
C. The obligations imposed upon Executive by this Section 9 shall survive
the termination of this Agreement pursuant to Section 2 hereof.
SECTION 10 - NOTICES AND PAYMENTS.
All payments required or permitted to be made under the provisions of this
Agreement, and all notices and other communications required or permitted to be
given or delivered under this Agreement to Company or to Executive, which
notices or communications must be in writing, shall be deemed to have been given
if delivered by hand, or mailed by first-class mail, addressed as follows:
A. If to Company:
UNB Corp.
c/o United National Bank & Trust Co.
220 Market Avenue South
P. O. Box 24190
Canton, OH 44701
B. If to Executive:
James J. Pennetti
c/o United National Bank & Trust Co.
220 Market Avenue South
P. O. Box 24190
Canton, OH 44701
Company or Executive may, by notice given to the other from time to time and at
anytime, designate a different address for making payments required to be made,
and for the giving of notices or other communications required or permitted to
be given, to the party designating such new address.
SECTION 11 - PAYROLL TAXES.
Any payment required or permitted to be made or given to Executive under this
Agreement shall be subject to the withholding and other requirements of
applicable laws, and to the deduction requirements of any benefit plan
maintained by Company in which Executive is a participant, and to all reporting,
filing and other requirements in respect of such payments, and Company shall use
its best efforts promptly to satisfy all such requirements.
SECTION 12 - GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Ohio.
SECTION 13 - DUPLICATE ORIGINALS.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be a duplicate original, but all of which, taken together, shall
constitute a single instrument.
7
<PAGE> 8
Exhibit 10.c (continued)
SECTION 14 - CAPTIONS.
The captions contained in this Agreement are included only for convenience of
reference and do not define, limit, explain or modify this Agreement or its
interpretations, construction or meaning and are in no way to be construed as a
part of this Agreement.
SECTION 15 - SEVERABILITY.
If any provision of this Agreement or the application of any provision to any
person or any circumstances shall be determined to be invalid or unenforceable,
such provision or portion thereof shall nevertheless be effective and
enforceable to the extent determined reasonable. Such determination shall not
affect any other provision of this Agreement or the application of said
provision to any other person or circumstance, all of which other provisions
shall remain in full force and effect, and it is the intention of Company and
Executive that if any provision of this Agreement is susceptible of two or more
constructions, one of which would render the provision enforceable and the other
or others of which would render the provisions unenforceable, then the
provisions shall have the meaning which renders it enforceable.
SECTION 16 - NUMBER AND GENDER.
When used in this Agreement, the number and gender of each pronoun shall be
construed to be such number and gender as the context, circumstances or its
antecedent may require.
SECTION 17 - SUCCESSOR AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the successors
and assigns (including successive, as well as immediate, successors and assigns)
of Company; provided, however, that Company may not assign this Agreement or any
of its rights or obligations hereunder to any party other than a corporation
which succeeds to substantially all of the business and assets of Company by
merger, consolidation, sale of assets or otherwise. This Agreement shall inure
to the benefit of and be binding upon the successor and assigns (including
successive, as well as immediate, successors and assigns) of Executive;
provided, however, that the right of Executive under this Agreement may be
assigned only to his personal representative or trustee or by will or pursuant
to applicable laws of descent and distribution.
8
<PAGE> 9
Exhibit 10.c (continued)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on and to be effective on NOVEMBER 16, 1995.
In the Presence of:
Rebecca L. Kintz /s/ James J. Pennetti
- -------------------------- -------------------------------
James J. Pennetti, Executive
Kathy Tripp
- --------------------------
In the Presence of: UNB Corp.
(as to both signatures)
Rebecca L. Kintz /s/ Donald W. Schneider
- -------------------------- -------------------------------
Donald W. Schneider, Chairman
Kathy Tripp /s/ Robert M. Sweeney
- -------------------------- -------------------------------
Robert M. Sweeney, Secretary
9
<PAGE> 1
Exhibit 10.d
CHANGE OF CONTROL AGREEMENT
This is an Agreement (the "AGREEMENT") made by and between UNB Corp.
("Company") and Robert M. Sweeney ("EXECUTIVE").
RECITALS
1) COMPANY is a bank holding company whose principal subsidiary is engaged
in the business of banking and businesses incidental thereto.
2) EXECUTIVE possesses unique skills, knowledge and experience relating to
the business of the COMPANY.
3) COMPANY desires to recognize the past and future services of EXECUTIVE,
and, in that connection, EXECUTIVE desires to be assured that, in the
event of a change in the control of COMPANY, EXECUTIVE will be provided
with an adequate severance payment for termination without cause or as
compensation for Executive's Severance because of a material change in
his duties and functions.
4) COMPANY desires to be assured of the objectivity of EXECUTIVE in
evaluating a potential change of control and advising whether or not a
potential change of control is in the best interest of the COMPANY and
its shareholders.
5) COMPANY desires to induce EXECUTIVE to remain in the employ of the
COMPANY (as hereinafter defined) following a change of control to provide
for continuity of management.
NOW, THEREFORE, in consideration of the premises and of their mutual
covenants expressed in this AGREEMENT, the parties hereto make the following
agreement, intending to be legally bound thereby:
SECTION 1 - DEFINITIONS.
A. Exchange Act - "Exchange Act" means The Securities Exchange Act of 1934.
------------
B. Change in Control - "Change in Control" shall result if:
-----------------
1. Any person or group (as such terms are used on connection with
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) and 13(d)(5) under
the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of
the Company's then outstanding securities; or
2. Company is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of
which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter; or
<PAGE> 2
Exhibit 10.d (continued)
3. During any period of 24 consecutive months, individuals who at the
beginning of such period constitute the Board of Directors cease
for any reason to constitute at least a majority of the Board of
Directors. Solely for purposes of this subparagraph, any new
director during such period shall be presumed to have been serving
at the beginning of such period if: (i) such new director's
nomination for election or appointment was approved by a vote of
at least one-half of the directors then still in office who were
directors at the beginning of such period, or (ii) such new
director was serving as a director of United National Bank & Trust
Co. at the beginning of such period.
Notwithstanding the foregoing, no Trust Department or designated
fiduciary or other trustee of such Trust Department of the Company or a
subsidiary of the Company, or other similar fiduciary capacity of the Company
with direct voting control of the stock shall be included or considered.
Further, no profit-sharing, employee stock ownership, employee stock purchase
and savings, employee pension, or other employee benefit plan of the Corporation
or any of its subsidiaries, and no Trustee of any such plan in its capacity as
such Trustee, shall be included or considered.
C. CODE - "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
D. COMPANY - "Company" shall include the United National Bank & Trust Co.
and any members of its Affiliated Group, over which Executive has
managerial control, as that term is defined in Section 1504 of the Code,
and shall include any predecessor corporations of the Company and its
Affiliated Group.
E. BOARD - "Board" shall mean the Board of Directors of the Company.
SECTION 2 - TERM OF AGREEMENT.
A. This Agreement shall be effective from the date of this Agreement until
the Agreement Termination Date, which is the earliest of:
1. The date this Agreement is mutually rescinded;
2. The date prior to a Change in Control on which the Executive's
employment with the Company is terminated by death, retirement,
disability, resignation, or dismissal for any reason;
3. The date Executive is terminated for Good Cause (as hereinafter
defined in Section 2(C) after a Change in Control;
4. The date which is two (2) years after a Change in Control.
5. The date which the Company, the United National Bank & Trust Co.,
or any other member of its Affiliated Group, and over which
Executive has managerial control, which is a depository
institution which is insured by an agency of any state or the
United States Federal Government:
2
<PAGE> 3
Exhibit 10.d (continued)
a. becomes insolvent; or
b. has appointed any conservator or receiver; or
c. is determined by an appropriate federal banking agency to be
in a troubled condition, as defined in the applicable law
and regulations governing the appropriate federal banking
agency; or
d. is assigned a composite rating of 4 or 5 by the appropriate
federal banking agency or is informed in writing by the
Federal Deposit Insurance Corporation that it is rated a 4
or 5 under the Uniform Financial Institution's Rating System
of the Federal Financial Institutions Examination Council;
or
e. has initiated against it by the Federal Deposit Insurance
Corporation a proceeding to terminate or suspend deposit
insurance; or
f. reasonably determines in good faith and with due care that
the payments called for under this Agreement, or other
obligations and promises assumed and made under this
Agreement have become proscribed under applicable law or
regulations. Provided, however, if such law or regulations
apply prospectively only, or for some other reason do not
apply to this Agreement, then this Agreement shall not be
deemed by Company to be proscribed under this Subsection
(f).
B. This Agreement shall not change, alter or amend any rights which either
Company or Executive may have in respect of the termination of the
employment of Executive by Company prior to a Change in Control. Nothing
contained in this Agreement shall be construed to create any additional
right or obligation of Executive to be employed by Company. If the
employment of Executive by Company is terminated by Company or by
Executive, for any reason whatsoever, prior to a Change in Control,
Executive and Company shall have only such rights and obligations in
respect of such termination as either of them would have had if this
Agreement had not been effected.
C. For purposes of this Agreement, the employment of Executive by Company
shall be deemed to have been terminated for good cause only if such
employment is terminated by Company by reason of Executive's dishonest
conduct materially detrimental to Company, conviction of a felony, or
willful or material violation of any of the obligations imposed upon
Executive under this Agreement.
SECTION 3 - REDUCTION IN COMPENSATION PROSCRIBED AFTER A CHANGE IN CONTROL.
During the term of this Agreement as defined by Section 2 and after the date of
a Change in Control, Executive shall receive as compensation, while still
employed by Company, a salary at a rate no less than that in effect as of the
Change in Control, and shall, in addition, be entitled to receive a bonus
3
<PAGE> 4
Exhibit 10.d (continued)
equal to at least the average of the last three years bonuses paid. In addition,
during such period, the Company shall pay and provide for Executive at no cost
to Executive, all of his then-current fringe benefits, including but not limited
to health, disability, dental, life insurance, club memberships, etc., all of
which shall be at levels and amounts no less favorable than levels and amounts
in effect as of the Change in Control.
SECTION 4 - PAYMENT UPON TERMINATION OF EMPLOYMENT AFTER A CHANGE IN CONTROL.
A. If during the term of this Agreement as defined by Section 2 and after
the date of a Change in Control, Executive is discharged without good
cause or Executive resigns because he has: (i) been demoted, (ii) had his
compensation materially reduced, (iii) had his principal place of
employment transferred away from Stark County Ohio or a county contiguous
thereto, or (iv) had his job title, status or responsibility materially
reduced, then the Company shall make the payments to Executive set forth
in subsection D of this Section 4.
B. If Executive voluntarily terminates employment not earlier than six (6)
months and not later than nine (9) months following a Change in Control,
then the Company shall make the payments to Executive set forth in
subsection D of this Section 4.
C. If Executive is discharged by Company other than for good cause and there
is a Change of Control within two years of the discharge, then the
Company shall make the payments to Executive set forth in subsection D of
this Section 4.
D. In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled to
receive either: (i) a lump sum cash payment equal to two (2) years of
Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) two (2) years of Compensation payable in equal monthly
payments, in cash, without interest. The lump sum cash payment or the
first monthly cash payment, as the case may be, shall be paid at the end
of the first month commencing after the Executive's termination of
employment in the case of a benefit entitlement under Subsection A, B or
C above, and in the event of the election by Executive to receive monthly
payments, shall continue each consecutive month thereafter until 24
payments have been made. If Executive's employment is terminated as
described in Subsection A or Subsection B above, then in addition to the
above cash payment(s), Company shall continue at no cost to Executive for
the term of the Benefit Period as defined below, Executive's coverage in
Company's health, disability, dental, life insurance, and club
memberships at the same levels that had been provided immediately prior
to his termination of employment. The Benefit Period shall commence on
the date of termination of the Executive's employment and shall end on
the earlier of:
1. The last day of the 24th consecutive whole month thereafter, or
2. The termination date of this Agreement as defined in Section 2(A).
4
<PAGE> 5
Exhibit 10.d (continued)
In the event Executive dies after benefits have commenced but before the
end of the benefit period, then the remaining payments shall be paid to
the person or persons as stated in the last designation of beneficiary
concerning this Agreement signed by Executive and filed with the Company,
and if not, then to the personal representative of Executive.
E. As used herein, "Compensation" shall mean the sum of employee base salary
plus any bonuses for the last whole calendar year preceding Executive's
termination of employment. Compensation shall not include any amount,
other than base salary and bonuses, included in Executive's taxable
compensation for federal income tax purposes and reported to Executive
and Internal Revenue Service ("IRS") such as the reporting of previously
deferred compensation or gain realized upon exercise of any nonqualified
stock options. In the event the payments required under this Agreement
together with the other benefits provided for hereunder would be deemed
by the IRS to result in an "Excess Parachute Payment," as that term is
defined in Section 280G of the Code, then the amount of the lump sum
payment shall be reduced, or in the event of the election by the
Executive to receive monthly payments, the monthly cash payments shall be
reduced, to the highest amount which will not result in the total of all
benefits provided for hereunder being deemed by the IRS to result in a
"Excess Parachute Payment," as that term is defined in Section 280G of
the Code, rounded down to the nearest even $10 multiple.
SECTION 5 - QUALIFIED AND NONQUALIFIED RETIREMENT PENSION PLANS.
Nothing in this Agreement, including this Section 5, shall reduce any pension
benefits or benefits from other qualified or non-qualified retirement plans
maintained by Company to which Executive is otherwise entitled without regard to
this Agreement. The Company shall take such actions as necessary in order to
amend any and all qualified and non-qualified retirement plans of the Company,
or of any of its subsidiaries, in order to provide for the inclusion of payments
made to Executive under the terms of this Agreement within the definition of
compensation for all such plans and to provide for the inclusion of the Benefit
Period within the computation of any and all years of service and/or age
requirements for the computation of the amount of, or vesting of, benefits under
the Company's qualified and non-qualified retirement plans.
SECTION 6 - PROVISION FOR OUT PLACEMENT SERVICES.
In the event of the termination of employment of Executive pursuant to Section 4
of this Agreement, Executive shall be entitled to one year of out placement
services following termination of employment. Such services shall include
employment counseling, resume services, executive placement services and similar
services generally provided to executives by professional executive out
placement services providers. All costs of such out placement services shall be
paid for by the Company.
SECTION 7 - ARBITRATION.
The parties hereto agree to arbitrate any issue, misunderstanding, disagreement
or dispute in connection with the terms in effect in this
5
<PAGE> 6
Exhibit 10.d (continued)
Agreement in accordance with the Rules of the American Arbitration Association,
before one arbitrator mutually agreeable to the parties hereto. If after two
weeks, Executive determines that Company and Executive have been unable to agree
upon one arbitrator, then Executive may appoint one arbitrator and require
Company to appoint a second arbitrator. Whereupon, the two appointed arbitrators
shall appoint a third arbitrator mutually agreeable to them. The arbitration
shall occur in Canton, Ohio, or such other place as mutually agreed upon. Any
and all costs associated with Executive's enforcement of the provisions of this
Agreement through arbitration as provided herein shall be borne by the Company.
The Company shall bear such expenses regardless of the nature of the dispute or
the outcome of such dispute. Such costs include, but are not limited to,
attorneys' fees, arbitration fees and costs, and expenses of settlement.
SECTION 8 - RIGHT TO OTHER BENEFITS.
Nothing in this Agreement shall abridge, eliminate, or cause Executive to lose
Executive's right or entitlement to any other Company benefit to which Executive
may be entitled due to his status as an employee under any plan or policy of
Company on such terms and conditions as are required of any employee under any
plan or policy of Company. Further, nothing in this Agreement shall create in
Executive any greater rights or entitlements, except as specified in this
Agreement. The plans and policies referred to in this Section 8 include, but are
not limited to, life insurance plans, dental, disability, or health insurance
benefits, severance policies, club memberships, and accrued vacation pay.
SECTION 9 - PROTECTION OF BUSINESS.
Notwithstanding anything to the contrary contained elsewhere in this Agreement:
A. Executive will not at any time (during or after employment with Company)
divulge, disclose, reveal or communicate to any person, firm,
corporation, partnership, joint venture or other entity, directly or
indirectly, any trade secrets or other information which Executive may
have obtained during the course of his employment by Company in respect
of any matters affecting or relating to the banking business of Company
including, without limitation, any of its plans, policies, business
practices, finances, methods of operation or other information known to
Executive to be historically considered by Company to be confidential
information.
B. In addition to any action for damages, the restrictions imposed upon
Executive under this Section 9 may be enforced by the Company by an
action for an injunction and it is hereby agreed that (in view of the
general practical difficulty of determining by computation or legal proof
the exact amount of damages, if any, resulting to Company from a
violation by Executive of the provisions of this Section 9) there would
be no adequate remedy at law for any breach by Executive of any such
restriction.
6
<PAGE> 7
Exhibit 10.d (continued)
C. The obligations imposed upon Executive by this Section 9 shall survive
the termination of this Agreement pursuant to Section 2 hereof.
SECTION 10 - NOTICES AND PAYMENTS.
All payments required or permitted to be made under the provisions of this
Agreement, and all notices and other communications required or permitted to be
given or delivered under this Agreement to Company or to Executive, which
notices or communications must be in writing, shall be deemed to have been given
if delivered by hand, or mailed by first-class mail, addressed as follows:
A. If to Company:
UNB Corp.
c/o United National Bank & Trust Co.
220 Market Avenue South
P. O. Box 24190
Canton, OH 44701
B. If to Executive:
Robert M. Sweeney
c/o United National Bank & Trust Co.
220 Market Avenue South
P. O. Box 24190
Canton, OH 44701
Company or Executive may, by notice given to the other from time to time and at
anytime, designate a different address for making payments required to be made,
and for the giving of notices or other communications required or permitted to
be given, to the party designating such new address.
SECTION 11 - PAYROLL TAXES.
Any payment required or permitted to be made or given to Executive under this
Agreement shall be subject to the withholding and other requirements of
applicable laws, and to the deduction requirements of any benefit plan
maintained by Company in which Executive is a participant, and to all reporting,
filing and other requirements in respect of such payments, and Company shall use
its best efforts promptly to satisfy all such requirements.
SECTION 12 - GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Ohio.
SECTION 13 - DUPLICATE ORIGINALS.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be a duplicate original, but all of which, taken together, shall
constitute a single instrument.
7
<PAGE> 8
Exhibit 10.d (continued)
SECTION 14 - CAPTIONS.
The captions contained in this Agreement are included only for convenience of
reference and do not define, limit, explain or modify this Agreement or its
interpretations, construction or meaning and are in no way to be construed as a
part of this Agreement.
SECTION 15 - SEVERABILITY.
If any provision of this Agreement or the application of any provision to any
person or any circumstances shall be determined to be invalid or unenforceable,
such provision or portion thereof shall nevertheless be effective and
enforceable to the extent determined reasonable. Such determination shall not
affect any other provision of this Agreement or the application of said
provision to any other person or circumstance, all of which other provisions
shall remain in full force and effect, and it is the intention of Company and
Executive that if any provision of this Agreement is susceptible of two or more
constructions, one of which would render the provision enforceable and the other
or others of which would render the provisions unenforceable, then the
provisions shall have the meaning which renders it enforceable.
SECTION 16 - NUMBER AND GENDER.
When used in this Agreement, the number and gender of each pronoun shall be
construed to be such number and gender as the context, circumstances or its
antecedent may require.
SECTION 17 - SUCCESSOR AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the successors
and assigns (including successive, as well as immediate, successors and assigns)
of Company; provided, however, that Company may not assign this Agreement or any
of its rights or obligations hereunder to any party other than a corporation
which succeeds to substantially all of the business and assets of Company by
merger, consolidation, sale of assets or otherwise. This Agreement shall inure
to the benefit of and be binding upon the successor and assigns (including
successive, as well as immediate, successors and assigns) of Executive;
provided, however, that the right of Executive under this Agreement may be
assigned only to his personal representative or trustee or by will or pursuant
to applicable laws of descent and distribution.
8
<PAGE> 9
Exhibit 10.d (continued)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on and to be effective on NOVEMBER 16, 1995.
In the Presence of:
Rebecca L. Kintz /s/ Robert M. Sweeney
- -------------------------- -------------------------------
Robert M. Sweeney, Executive
Kathy Tripp
- --------------------------
In the Presence of: UNB Corp.
(as to both signatures)
Rebecca L. Kintz /s/ Donald W. Schneider
- -------------------------- -------------------------------
Donald W. Schneider, Chairman
Kathy Tripp /s/ Robert M. Sweeney
- -------------------------- -------------------------------
Robert M. Sweeney, Secretary
9
<PAGE> 1
Exhibit 10.f
AMENDMENT TO THE
CHANGE OF CONTROL AGREEMENT
Whereas, effective NOVEMBER 16, 1995, an Agreement was made by and between UNB
Corp. (Company) and LEO E. DOYLE (Executive).
Now, therefore, effective as of JANUARY 16, 1997, the Company hereby amends this
Agreement as set forth below.
The provisions of the amendment shall take precedence over any conflicting
provisions of the Agreement.
I. Subsection D of Section 4 shall be amended as follows:
In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled
to receive either: (i) a lump sum cash payment equal to two (2) years
of Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) two (2) years of Compensation payable in equal monthly
payments, in cash, without interest. For such election to be effective,
it must be made in writing and delivered to the Company in accordance
with Section 10, prior to the Change in Control.
II. Section 5 shall be deleted in its entirety and replaced as follows:
SECTION 5 - QUALIFIED AND NON-QUALIFIED RETIREMENT PENSION PLANS
----------------------------------------------------------------
A. Nothing in this Agreement, including this Section 5, shall reduce
any benefits from non-qualified retirement plans maintained by
Company to which Executive is otherwise entitled without regard
to this Agreement. The Company shall take such actions as
necessary in order to amend any and all non-qualified retirement
plans of the Company, or of any of its subsidiaries, in order to
provide for the inclusion of payments made to Executive under the
terms of this Agreement within the definition of compensation for
all such plans and to provide for the inclusion of the Benefit
Period within the computation of any and all years of service
and/or age requirements for the computation of the amount of, or
vesting of, benefits under the Company's non-qualified retirement
plans.
B. In addition, Executive shall receive additional compensation in an
amount equal to one-hundred and fifty percent (150%) of the
difference between the lump-sum value of benefits provided under
the United National Bank & Trust Company Pension Plan and Trust
("Pension Plan"), as of the date of termination of employment, and
the lump-sum value of the benefits that would have been provided
if the Pension Plan provided for the inclusion of payments made to
Executive under the terms of this Agreement (excluding additional
compensation described in this Subsection B) within
<PAGE> 2
Exhibit 10.f (continued)
Amendment to the Change of Control Agreement
Dated January 16, 1997
Page 2
the definition of compensation for the Pension Plan and provided
for the inclusion of the Benefit Period within the computation of
the lump-sum value of benefits provided under the Pension Plan.
C. The lump-sum value of benefits provided under the Pension Plan
described in Subsection B will be calculated by the Pension Plan's
actuary, as if the lump-sum amount is payable as of the date of
the Executive's termination of employment.
D. The additional compensation described in Subsection B will be paid
in a lump-sum within 10 days of the Executive's termination of
employment. The additional compensation received will not increase
or decrease any other benefits payable under this Agreement or any
other non-qualified retirement benefit.
In witness whereof, the parties hereto affix their signatures on this 14th day
of February, 1997, in adoption of this aforementioned amendment.
Witnesses: UNB Corp.:
Kathy Tripp /s/ Donald W. Schneider
- -------------------------- -------------------------------
Charity L. Bulso Donald W. Schneider, Chairman of the Board
- -------------------------- ------------------------------------------
(Name and Title)
Witnesses: Executive:
Kathy Tripp /s/ Leo E. Doyle
- -------------------------- -------------------------------
Charity L. Bulso Leo E. Doyle, Sr. Vice President and
- -------------------------- ------------------------------------
Executive Officer
-----------------
(Name and Title)
2
<PAGE> 1
Exhibit 10.g
AMENDMENT TO THE
CHANGE OF CONTROL AGREEMENT
Whereas, effective NOVEMBER 16, 1995, an Agreement was made by and between UNB
Corp. (Company) and ROBERT L. MANG (Executive).
Now, therefore, effective as of JANUARY 16, 1997, the Company hereby amends this
Agreement as set forth below.
The provisions of the amendment shall take precedence over any conflicting
provisions of the Agreement.
I. Subsection D of Section 4 shall be amended as follows:
In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled
to receive either: (i) a lump sum cash payment equal to two (2) years
of Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) two (2) years of Compensation payable in equal monthly
payments, in cash, without interest. For such election to be effective,
it must be made in writing and delivered to the Company in accordance
with Section 10, prior to the Change in Control.
II. Section 5 shall be deleted in its entirety and replaced as follows:
SECTION 5 - QUALIFIED AND NON-QUALIFIED RETIREMENT PENSION PLANS
----------------------------------------------------------------
A. Nothing in this Agreement, including this Section 5, shall reduce
any benefits from non-qualified retirement plans maintained by
Company to which Executive is otherwise entitled without regard
to this Agreement. The Company shall take such actions as
necessary in order to amend any and all non-qualified retirement
plans of the Company, or of any of its subsidiaries, in order to
provide for the inclusion of payments made to Executive under the
terms of this Agreement within the definition of compensation for
all such plans and to provide for the inclusion of the Benefit
Period within the computation of any and all years of service
and/or age requirements for the computation of the amount of, or
vesting of, benefits under the Company's non-qualified retirement
plans.
B. In addition, Executive shall receive additional compensation in an
amount equal to one-hundred and fifty percent (150%) of the
difference between the lump-sum value of benefits provided under
the United National Bank & Trust Company Pension Plan and Trust
("Pension Plan"), as of the date of termination of employment, and
the lump-sum value of the benefits that would have been provided
if the Pension Plan provided for the inclusion of payments made to
Executive under the terms of this Agreement (excluding additional
compensation described in this Subsection B) within
<PAGE> 2
Exhibit 10.g (continued)
Amendment to the Change of Control Agreement
Dated January 16, 1997
Page 2
the definition of compensation for the Pension Plan and provided
for the inclusion of the Benefit Period within the computation of
the lump-sum value of benefits provided under the Pension Plan.
C. The lump-sum value of benefits provided under the Pension Plan
described in Subsection B will be calculated by the Pension Plan's
actuary, as if the lump-sum amount is payable as of the date of
the Executive's termination of employment.
D. The additional compensation described in Subsection B will be paid
in a lump-sum within 10 days of the Executive's termination of
employment. The additional compensation received will not increase
or decrease any other benefits payable under this Agreement or any
other non-qualified retirement benefit.
In witness whereof, the parties hereto affix their signatures on this 14th day
of February, 1997, in adoption of this aforementioned amendment.
Witnesses: UNB Corp.:
Kathy Tripp /s/ Donald W. Schneider
- -------------------------- -------------------------------
Charity L. Bulso Donald W. Schneider, Chairman of the Board
- -------------------------- ------------------------------------------
(Name and Title)
Witnesses: Executive:
Kathy Tripp /s/ Robert L. Mang
- -------------------------- -------------------------------
Charity L. Bulso Robert L. Mang, President and Chief
- -------------------------- -----------------------------------
Executive Officer
-----------------
(Name and Title)
2
<PAGE> 1
Exhibit 10.h
AMENDMENT TO THE
CHANGE OF CONTROL AGREEMENT
Whereas, effective NOVEMBER 16, 1995, an Agreement was made by and between UNB
Corp. (Company) and JAMES J. PENNETTI (Executive).
Now, therefore, effective as of JANUARY 16, 1997, the Company hereby amends this
Agreement as set forth below.
The provisions of the amendment shall take precedence over any conflicting
provisions of the Agreement.
I. Subsection D of Section 4 shall be amended as follows:
In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled
to receive either: (i) a lump sum cash payment equal to two (2) years
of Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) two (2) years of Compensation payable in equal monthly
payments, in cash, without interest. For such election to be effective,
it must be made in writing and delivered to the Company in accordance
with Section 10, prior to the Change in Control.
II. Section 5 shall be deleted in its entirety and replaced as follows:
SECTION 5 - QUALIFIED AND NON-QUALIFIED RETIREMENT PENSION PLANS
----------------------------------------------------------------
A. Nothing in this Agreement, including this Section 5, shall reduce
any benefits from non-qualified retirement plans maintained by
Company to which Executive is otherwise entitled without regard
to this Agreement. The Company shall take such actions as
necessary in order to amend any and all non-qualified retirement
plans of the Company, or of any of its subsidiaries, in order to
provide for the inclusion of payments made to Executive under the
terms of this Agreement within the definition of compensation for
all such plans and to provide for the inclusion of the Benefit
Period within the computation of any and all years of service
and/or age requirements for the computation of the amount of, or
vesting of, benefits under the Company's non-qualified retirement
plans.
B. In addition, Executive shall receive additional compensation in an
amount equal to one-hundred and fifty percent (150%) of the
difference between the lump-sum value of benefits provided under
the United National Bank & Trust Company Pension Plan and Trust
("Pension Plan"), as of the date of termination of employment, and
the lump-sum value of the benefits that would have been provided
if the Pension Plan provided for the inclusion of payments made to
Executive under the terms of this Agreement (excluding additional
compensation described in this Subsection B) within
<PAGE> 2
Exhibit 10.h (continued)
Amendment to the Change of Control Agreement
Dated January 16, 1997
Page 2
the definition of compensation for the Pension Plan and provided
for the inclusion of the Benefit Period within the computation of
the lump-sum value of benefits provided under the Pension Plan.
C. The lump-sum value of benefits provided under the Pension Plan
described in Subsection B will be calculated by the Pension Plan's
actuary, as if the lump-sum amount is payable as of the date of
the Executive's termination of employment.
D. The additional compensation described in Subsection B will be paid
in a lump-sum within 10 days of the Executive's termination of
employment. The additional compensation received will not increase
or decrease any other benefits payable under this Agreement or any
other non-qualified retirement benefit.
In witness whereof, the parties hereto affix their signatures on this 14th day
of February, 1997, in adoption of this aforementioned amendment.
Witnesses: UNB Corp.:
Kathy Tripp /s/ Donald W. Schneider
- -------------------------- -------------------------------
Charity L. Bulso Donald W. Schneider, Chairman of the Board
- -------------------------- ------------------------------------------
(Name and Title)
Witnesses: Executive:
Kathy Tripp /s/ James J. Pennetti
- -------------------------- -------------------------------
Charity L. Bulso James J. Pennetti, Vice President and
- -------------------------- -------------------------------------
Executive Officer
-----------------
(Name and Title)
2
<PAGE> 1
Exhibit 10.i
AMENDMENT TO THE
CHANGE OF CONTROL AGREEMENT
Whereas, effective NOVEMBER 16, 1995, an Agreement was made by and between UNB
Corp. (Company) and ROBERT M. SWEENEY (Executive).
Now, therefore, effective as of JANUARY 16, 1997, the Company hereby amends this
Agreement as set forth below.
The provisions of the amendment shall take precedence over any conflicting
provisions of the Agreement.
I. Subsection D of Section 4 shall be amended as follows:
In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled
to receive either: (i) a lump sum cash payment equal to two (2) years
of Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) two (2) years of Compensation payable in equal monthly
payments, in cash, without interest. For such election to be effective,
it must be made in writing and delivered to the Company in accordance
with Section 10, prior to the Change in Control.
II. Section 5 shall be deleted in its entirety and replaced as follows:
SECTION 5 - QUALIFIED AND NON-QUALIFIED RETIREMENT PENSION PLANS
----------------------------------------------------------------
A. Nothing in this Agreement, including this Section 5, shall reduce
any benefits from non-qualified retirement plans maintained by
Company to which Executive is otherwise entitled without regard
to this Agreement. The Company shall take such actions as
necessary in order to amend any and all non-qualified retirement
plans of the Company, or of any of its subsidiaries, in order to
provide for the inclusion of payments made to Executive under the
terms of this Agreement within the definition of compensation for
all such plans and to provide for the inclusion of the Benefit
Period within the computation of any and all years of service
and/or age requirements for the computation of the amount of, or
vesting of, benefits under the Company's non-qualified retirement
plans.
B. In addition, Executive shall receive additional compensation in an
amount equal to one-hundred and fifty percent (150%) of the
difference between the lump-sum value of benefits provided under
the United National Bank & Trust Company Pension Plan and Trust
("Pension Plan"), as of the date of termination of employment, and
the lump-sum value of the benefits that would have been provided
if the Pension Plan provided for the inclusion of payments made to
Executive under the terms of this Agreement (excluding additional
compensation described in this Subsection B) within
<PAGE> 2
Exhibit 10.i (continued)
Amendment to the Change of Control Agreement
Dated January 16, 1997
Page 2
the definition of compensation for the Pension Plan and provided
for the inclusion of the Benefit Period within the computation of
the lump-sum value of benefits provided under the Pension Plan.
C. The lump-sum value of benefits provided under the Pension Plan
described in Subsection B will be calculated by the Pension Plan's
actuary, as if the lump-sum amount is payable as of the date of
the Executive's termination of employment.
D. The additional compensation described in Subsection B will be paid
in a lump-sum within 10 days of the Executive's termination of
employment. The additional compensation received will not increase
or decrease any other benefits payable under this Agreement or any
other non-qualified retirement benefit.
In witness whereof, the parties hereto affix their signatures on this 14th day
of February, 1997, in adoption of this aforementioned amendment.
Witnesses: UNB Corp.:
Kathy Tripp /s/ Donald W. Schneider
- -------------------------- -------------------------------
Charity L. Bulso Donald W. Schneider, Chairman of the Board
- -------------------------- ------------------------------------------
(Name and Title)
Witnesses: Executive:
Kathy Tripp /s/ Robert M. Sweeney
- -------------------------- -------------------------------
Charity L. Bulso Robert M. Sweeney Vice President and
- -------------------------- ------------------------------------
Executive Officer
-----------------
(Name and Title)
2
<PAGE> 1
Exhibit 10.j
JANUARY 30, 1997
MR. WILLIAM J. DEVOLVE
745 HARVEST DR.
LAKE ZURICH, IL 60047
DEAR BILL;
ON BEHALF OF UNB CORP. AND BOB MANG, I AM PLEASED TO CONFIRM OUR OFFER OF
EMPLOYMENT. THE FOLLOWING INFORMATION IS A REVIEW OF THE OFFER AND SHOULD
CONFIRM THE CONVERSATIONS YOU HAD WITH BOB AND MARK ANGOTT.
WE ARE OFFERING YOU THE POSITION OF EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER
OF UNB CORP.'S NEWLY FORMED FINANCE COMPANY, STARTING MONDAY, FEBRUARY 10, 1997,
AT A MONTHLY BASE SALARY OF $7,416.67 ($89,000.00, WHEN ANNUALIZED). AS PART OF
YOUR COMPENSATION PACKAGE, YOU WILL RECEIVE A BONUS OF $30,000 AT THE END OF THE
FIRST YEAR. FUTURE BONUSES WILL BE BASED ON ACHIEVEMENT OF ESTABLISHED GOALS.
ALTHOUGH THE CORP.'S NEW STOCK OPTION PLAN HAS NOT YET BEEN APPROVED, IT IS OUR
INTENTION TO RECOMMEND THAT YOU BE A PARTICIPANT. FURTHER, IN THE EVENT THAT UNB
CORP. WOULD DECIDE TO DIVEST ITSELF OF THE FINANCE COMPANY BUSINESS, OR IF
SEPARATION WERE TO OCCUR FOR ANY REASON OTHER THAN JUST CAUSE, WITHIN THE FIRST
TWO YEARS OF YOUR EMPLOYMENT, YOU WOULD RECEIVE SIX MONTHS OF SALARY
CONTINUATION.
YOU WILL ALSO BE ELIGIBLE TO PARTICIPATE IN OUR EMPLOYEE BENEFIT PROGRAMS.
MEDICAL AND DENTAL COVERAGE BEGINS THE FIRST OF THE FOLLOWING MONTH FROM DATE OF
HIRE FOR EXEMPT-LEVEL EMPLOYEES. ACCORDING TO OUR VACATION SCHEDULE, AS AN
OFFICER YOU ARE ELIGIBLE FOR THREE (3) WEEKS OF VACATION. IN ADDITION, YOU WILL
RECEIVE A RELOCATION PACKAGE THAT INCLUDES ALL REASONABLE AND CUSTOMARY BENEFITS
ASSOCIATED WITH MOVING, INCLUDING TEMPORARY HOUSING FOR THE FIRST 90 DAYS OF
YOUR EMPLOYMENT, REIMBURSEMENT FOR TRAVEL EXPENSES FOR TWO RETURN TRIPS HOME PER
MONTH, AND MORTGAGE ASSISTANCE, INCLUDING REALTOR FEE AND CLOSING COST
REIMBURSEMENT. CERTAINLY ANY REASONABLE MISCELLANEOUS EXPENSES NOT MENTIONED
HERE WOULD ALSO BE CONSIDERED.
AS AN OFFICER, YOU WILL SERVE AT THE PLEASURE OF THE BOARD OF DIRECTORS OF UNB
CORP. THE EMPLOYMENT RELATIONSHIP AT UNB CORP. IS AT WILL, AND EMPLOYMENT CAN
BE TERMINATED AT ANY TIME, WITH OR WITHOUT NOTICE AND AT THE OPTION OF EITHER
UNB CORP. OR THE EMPLOYEE.
THIS OFFER IS CONTINGENT UPON A SATISFACTORY BACKGROUND CHECK. PLEASE SIGN THE
ACCEPTANCE ACKNOWLEDGEMENT BELOW AND RETURN THE ORIGINAL LETTER TO ME AS SOON AS
POSSIBLE IN THE ENVELOPE PROVIDED.
<PAGE> 2
Exhibit 10.j(continued)
WE LOOK FORWARD TO HAVING YOU AS A MEMBER OF OUR MANAGEMENT TEAM, AND ARE
CONFIDENT THAT YOUR KNOWLEDGE AND EXPERIENCE WILL MAKE A VALUABLE CONTRIBUTION
TO THE GOALS AND OBJECTIVES OF UNB CORP. PLEASE FEEL FREE TO CALL ME AT
(330)830-7239 IF YOU HAVE ANY QUESTIONS.
SINCERELY,
/s/ Candace L. Follen
CANDICE L. FOLLEN
VICE PRESIDENT
HUMAN RESOURCES
ENCLOSURE
CC: ROBERT L. MANG
MARK R. ANGOTT
PLEASE ACKNOWLEDGE YOUR ACCEPTANCE OF THE TERMS AND CONDITIONS AS SET FORTH
ABOVE.
ACCEPTED BY: /s/ William J. Devolve DATE: January 31, 1997
----------------------- ----------------
SIGNATURE
2
<PAGE> 1
Exhibit 10.k
UNB Corp.
April 17, 1997
Mr. Roger Mann
611 Barker Road
Fremont, OH 43420
Dear Roger:
It is a pleasure to extend to you the offer to become President and Chief
Executive Officer of UNB Corp. and Chief Executive Officer of United National
Bank & Trust Co. Continuation of your leadership and vision capabilities
displayed in your previous responsibilities will be essential for success in
this challenging position.
The benefits package, both financial and nonfinancial, that we will provide you
will include the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Base Salary: $180,000
30% Bonus: $ 54,000 (Guaranteed first 12 months; thereafter, as
earned in the Bank's Stakeholder Program)
1,850 Options $ 36,000 (Estimated value over 5 years - Market Value
-------- today is $60,000)
Total $270,000
========
</TABLE>
2. Special Long-Term Cash, Stock, or Options Incentive if Holding
Company reaches 17.5% R.O.E. on or before December 31, 2000:
Formula = Increase in Market Value of Stock from date of
hire to December 31, 2000 X Fixed Factor of 12,000
(Example: Estimated $10.60 per Share Increase
($32.00 to $42.60) X 12,000 = $127,000)
No payment made if Goal is not met.
3. Other Benefits:
1. Participation in Deferred Compensation Plan
2. Change of Control Agreement (2 years - Same as Robert
L. Mang's)
3. Defined Benefit Pension Plan
4. 401(k) Plan
5. Glenmoor Country Club (Bank Corporate Membership)
6. Canton Club
7. Relocation Package (Realtor fees, Pack & Move Expense,
Loan Fees and Points)
8. Other Standard Officer Employee Benefits (Information
attached)
<PAGE> 2
Exhibit 10.k (continued)
Roger Mann
April 17, 1997
Page 2
Roger, this represents the basics of the benefits package. We will review this
with you, answer any questions, or entertain your comments at your convenience.
We would hope that you would be available to start in early May.
Looking forward to your early response.
Sincerely,
/s/ Donald W. Schneider
------------------------
Donald W. Schneider
Chairman of the Board
/s/ Robert L. Mang
------------------------
Robert L. Mang
President
Chief Executive Officer
RLM:kt
Please sign below and return one copy if you accept employment and agree with
the financial package.
Date: May 5, 1996
-----------
/s/ Roger L. Mann
- ----------------------------
Roger L. Mann
2
<PAGE> 1
Exhibit 10.l
CHANGE OF CONTROL AGREEMENT
This is an Agreement (the "AGREEMENT") made by and between UNB Corp.
("Company") and Charles J. Berry("EXECUTIVE").
RECITALS
1) COMPANY is a bank holding company whose principal subsidiary is engaged
in the business of banking and businesses incidental thereto.
2) EXECUTIVE possesses unique skills, knowledge and experience relating to
the business of the COMPANY.
3) COMPANY desires to recognize the past and future services of EXECUTIVE,
and, in that connection, EXECUTIVE desires to be assured that, in the
event of a change in the control of COMPANY, EXECUTIVE will be provided
with an adequate severance payment for termination without cause or as
compensation for Executive's Severance because of a material change in
his duties and functions.
4) COMPANY desires to be assured of the objectivity of EXECUTIVE in
evaluating a potential change of control and advising whether or not a
potential change of control is in the best interest of the COMPANY and
its shareholders.
5) COMPANY desires to induce EXECUTIVE to remain in the employ of the
COMPANY (as hereinafter defined) following a change of control to provide
for continuity of management.
NOW, THEREFORE, in consideration of the premises and of their mutual
covenants expressed in this AGREEMENT, the parties hereto make the following
agreement, intending to be legally bound thereby:
SECTION 1 - DEFINITIONS.
A. EXCHANGE ACT - "Exchange Act" means The Securities Exchange Act of 1934.
B. CHANGE IN CONTROL - "Change in Control" shall result if:
1. Any person or group (as such terms are used on connection with
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) and 13(d)(5) under
the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of
the Company's then outstanding securities; or
<PAGE> 2
Exhibit 10.l (continued)
2. Company is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of
which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter; or
3. During any period of 24 consecutive months, individuals who at the
beginning of such period constitute the Board of Directors cease
for any reason to constitute at least a majority of the Board of
Directors. Solely for purposes of this subparagraph, any new
director during such period shall be presumed to have been serving
at the beginning of such period if: (i) such new director's
nomination for election or appointment was approved by a vote of
at least one-half of the directors then still in office who were
directors at the beginning of such period, or (ii) such new
director was serving as a director of United National Bank & Trust
Co. at the beginning of such period.
Notwithstanding the foregoing, no Trust Department or designated
fiduciary or other trustee of such Trust Department of the Company or a
subsidiary of the Company, or other similar fiduciary capacity of the
Company with direct voting control of the stock shall be included or
considered. Further, no profit-sharing, employee stock ownership,
employee stock purchase and savings, employee pension, or other employee
benefit plan of the Corporation or any of its subsidiaries, and no
Trustee of any such plan in its capacity as such Trustee, shall be
included or considered.
C. CODE - "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
D. COMPANY - "Company" shall include the United National Bank & Trust Co.
and any members of its Affiliated Group, over which Executive has
managerial control, as that term is defined in Section 1504 of the Code,
and shall include any predecessor corporations of the Company and its
Affiliated Group.
E. BOARD - "Board" shall mean the Board of Directors of the Company.
SECTION 2 - TERM OF AGREEMENT.
A. This Agreement shall be effective from the date of this Agreement until
the Agreement Termination Date, which is the earliest of:
1. The date this Agreement is mutually rescinded;
2. The date prior to a Change in Control on which the Executive's
employment with the Company is terminated by death, retirement,
disability, resignation, or dismissal for any reason;
2
<PAGE> 3
Exhibit 10.l (continued)
3. The date Executive is terminated for Good Cause (as hereinafter
defined in Section 2(C) after a Change in Control;
4. The date which is two (2) years after a Change in Control.
5. The date which the Company, the United National Bank & Trust Co.,
or any other member of its Affiliated Group, and over which
Executive has managerial control, which is a depository
institution which is insured by an agency of any state or the
United States Federal Government:
a. becomes insolvent; or
b. has appointed any conservator or receiver; or
c. is determined by an appropriate federal banking agency to
be in a troubled condition, as defined in the applicable
law and regulations governing the appropriate federal
banking agency; or
d. is assigned a composite rating of 4 or 5 by the appropriate
federal banking agency or is informed in writing by the
Federal Deposit Insurance Corporation that it is rated a 4
or 5 under the Uniform Financial Institution's Rating
System of the Federal Financial Institutions Examination
Council; or
e. has initiated against it by the Federal Deposit Insurance
Corporation a proceeding to terminate or suspend deposit
insurance; or
f. reasonably determines in good faith and with due care that
the payments called for under this Agreement, or other
obligations and promises assumed and made under this
Agreement have become proscribed under applicable law or
regulations. Provided, however, if such law or regulations
apply prospectively only, or for some other reason do not
apply to this Agreement, then this Agreement shall not be
deemed by Company to be proscribed under this Subsection
(f).
B. This Agreement shall not change, alter or amend any rights which either
Company or Executive may have in respect of the termination of the
employment of Executive by Company prior to a Change in Control. Nothing
contained in this Agreement shall be construed to create any additional
right or obligation of Executive to be employed by Company. If the
employment of Executive by Company is terminated by Company or by
Executive, for any reason whatsoever, prior to a Change in Control,
Executive and Company shall have only such rights and obligations in
respect of such termination as either of them would have had if this
Agreement had not been effected.
3
<PAGE> 4
Exhibit 10.l (continued)
C. For purposes of this Agreement, the employment of Executive by Company
shall be deemed to have been terminated for good cause only if such
employment is terminated by Company by reason of Executive's dishonest
conduct materially detrimental to Company, conviction of a felony, or
willful or material violation of any of the obligations imposed upon
Executive under this Agreement.
SECTION 3 - REDUCTION IN COMPENSATION PROSCRIBED AFTER A CHANGE IN CONTROL.
During the term of this Agreement as defined by Section 2 and after the date of
a Change in Control, Executive shall receive as compensation, while still
employed by Company, a salary at a rate no less than that in effect as of the
Change in Control, and shall, in addition, be entitled to receive a bonus equal
to at least the average of the last three years bonuses paid. In addition,
during such period, the Company shall pay and provide for Executive at no cost
to Executive, all of his then-current fringe benefits, including but not limited
to health, disability, dental, life insurance, club memberships, etc., all of
which shall be at levels and amounts no less favorable than levels and amounts
in effect as of the Change in Control.
SECTION 4 - PAYMENT UPON TERMINATION OF EMPLOYMENT AFTER A CHANGE IN CONTROL.
A. If during the term of this Agreement as defined by Section 2 and after
the date of a Change in Control, Executive is discharged without good
cause or Executive resigns because he has: (i) been demoted, (ii) had his
compensation materially reduced, (iii) had his principal place of
employment transferred away from Stark County or a county contiguous
thereto, or (iv) had his job title, status or responsibility materially
reduced, then the Company shall make the payments to Executive set forth
in subsection D of this Section 4.
B. If Executive voluntarily terminates employment not earlier than six (6)
months and not later than nine (9) months following a Change in Control,
then the Company shall make the payments to Executive set forth in
subsection D of this Section 4.
C. If Executive is discharged by Company other than for good cause and there
is a Change of Control within two years of the discharge, then the
Company shall make the payments to Executive set forth in subsection D of
this Section 4.
D. In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled to
receive either: (i) a lump sum cash payment equal to one (1) year of
Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) one (1) year of Compensation payable in equal monthly
payments, in cash, without interest. For such election to be effective,
it must be made in writing and delivered to the Company in accordance
with Section 10, prior to the Change in Control. The lump sum cash
payment or the first monthly cash payment, as the case may be, shall
4
<PAGE> 5
Exhibit 10.l (continued)
be paid at the end of the first month commencing after the Executive's
termination of employment in the case of a benefit entitlement under
Subsection A, B or C above, and in the event of the election by Executive
to receive monthly payments, shall continue each consecutive month
thereafter until 12 payments have been made. If Executive's employment is
terminated as described in Subsection A or Subsection B above, then in
addition to the above cash payment(s), Company shall continue at no cost
to Executive for the term of the Benefit Period as defined below,
Executive's coverage in Company's health, disability, dental, life
insurance, and club memberships at the same levels that had been provided
immediately prior to his termination of employment. The Benefit Period
shall commence on the date of termination of the Executive's employment
and shall end on the earlier of:
1. The last day of the 12th consecutive whole month thereafter, or
2. The termination date of this Agreement as defined in Section 2(A).
In the event Executive dies after benefits have commenced but before the
end of the benefit period, then the remaining payments shall be paid to
the person or persons as stated in the last designation of beneficiary
concerning this Agreement signed by Executive and filed with the Company,
and if not, then to the personal representative of Executive.
E. As used herein, "Compensation" shall mean the sum of employee base salary
plus any bonuses for the last whole calendar year preceding Executive's
termination of employment. Compensation shall not include any amount,
other than base salary and bonuses, included in Executive's taxable
compensation for federal income tax purposes and reported to Executive
and Internal Revenue Service ("IRS") such as the reporting of previously
deferred compensation or gain realized upon exercise of any nonqualified
stock options. In the event the payments required under this Agreement
together with the other benefits provided for hereunder would be deemed
by the IRS to result in an "Excess Parachute Payment," as that term is
defined in Section 280G of the Code, then the amount of the lump sum
payment shall be reduced, or in the event of the election by the
Executive to receive monthly payments, the monthly cash payments shall be
reduced, to the highest amount which will not result in the total of all
benefits provided for hereunder being deemed by the IRS to result in a
"Excess Parachute Payment," as that term is defined in Section 280G of
the Code, rounded down to the nearest even $10 multiple.
SECTION 5 - QUALIFIED AND NONQUALIFIED RETIREMENT PENSION PLANS.
A. Nothing in this Agreement, including this Section 5, shall reduce any
benefits from nonqualified retirement plans maintained by Company to
which Executive is otherwise entitled without regard to this Agreement.
The Company shall take such
5
<PAGE> 6
Exhibit 10.l (continued)
actions as necessary in order to amend any and all nonqualified
retirement plans of the Company, or of any of its subsidiaries, in order
to provide for the inclusion of payments made to Executive under the
terms of this Agreement within the definition of compensation for all
such plans and to provide for the inclusion of the Benefit Period within
the computation of any and all years of service and/or age requirements
for the computation of the amount of, or vesting of, benefits under the
Company's nonqualified retirement plans.
B. In addition, Executive shall receive additional compensation in an amount
equal to one-hundred and fifty percent (150%) of the difference between
the lump-sum value of benefits provided under the United National Bank &
Trust Company Pension Plan and Trust ("Pension Plan"), as of the date of
termination of employment, and the lump-sum value of the benefits that
would have been provided if the Pension Plan provided for the inclusion
of payments made to Executive under the terms of this Agreement
(excluding additional compensation described in this Subsection B) within
the definition of compensation for the Pension Plan and provided for the
inclusion of the Benefit Period within the computation of the lump-sum
value of benefits provided under the Pension Plan.
C. The lump-sum value of benefits provided under the Pension Plan described
in Subsection B will be calculated by the Pension Plan's actuary, as if
the lump-sum amount is payable as of the date of the Executive's
termination of employment.
D. The additional compensation described in Subsection B will be paid in a
lump-sum within 10 days of the Executive's termination of employment. The
additional compensation received will not increase or decrease any other
benefits payable under this Agreement or any other nonqualified
retirement benefit.
SECTION 6 - PROVISION FOR OUT PLACEMENT SERVICES.
In the event of the termination of employment of Executive pursuant to Section 4
of this Agreement, Executive shall be entitled to one year of Out placement
services following termination of employment. Such services shall include
employment counseling, resume services, executive placement services and similar
services generally provided to executives by professional executive Out
placement services providers. All costs of such Out placement services shall be
paid for by the Company.
SECTION 7 - ARBITRATION.
The parties hereto agree to arbitrate any issue, misunderstanding, disagreement
or dispute in connection with the terms in effect in this Agreement in
accordance with the Rules of the American Arbitration Association, before one
arbitrator mutually agreeable to the parties hereto. If after two weeks,
Executive determines that Company and Executive have been unable to agree upon
one arbitrator, then Executive may appoint
6
<PAGE> 7
Exhibit 10.l (continued)
one arbitrator and require Company to appoint a second arbitrator. Whereupon,
the two appointed arbitrators shall appoint a third arbitrator mutually
agreeable to them. The arbitration shall occur in Canton, Ohio, or such other
place as mutually agreed upon. Any and all costs associated with Executive's
enforcement of the provisions of this Agreement through arbitration as provided
herein shall be borne by the Company. The Company shall bear such expenses
regardless of the nature of the dispute or the outcome of such dispute. Such
costs include, but are not limited to, attorneys' fees, arbitration fees and
costs, and expenses of settlement.
SECTION 8 - RIGHT TO OTHER BENEFITS.
Nothing in this Agreement shall abridge, eliminate, or cause Executive to lose
Executive's right or entitlement to any other Company benefit to which Executive
may be entitled due to his status as an employee under any plan or policy of
Company on such terms and conditions as are required of any employee under any
plan or policy of Company. Further, nothing in this Agreement shall create in
Executive any greater rights or entitlements, except as specified in this
Agreement. The plans and policies referred to in this Section 8 include, but are
not limited to, life insurance plans, dental, disability, or health insurance
benefits, severance policies, club memberships, and accrued vacation pay.
SECTION 9 - PROTECTION OF BUSINESS.
Notwithstanding anything to the contrary contained elsewhere in this Agreement:
A. Executive will not at any time (during or after employment with Company)
divulge, disclose, reveal or communicate to any person, firm,
corporation, partnership, joint venture or other entity, directly or
indirectly, any trade secrets or other information which Executive may
have obtained during the course of his employment by Company in respect
of any matters affecting or relating to the banking business of Company
including, without limitation, any of its plans, policies, business
practices, finances, methods of operation or other information known to
Executive to be historically considered by Company to be confidential
information.
B. In addition to any action for damages, the restrictions imposed upon
Executive under this Section 9 may be enforced by the Company by an
action for an injunction and it is hereby agreed that (in view of the
general practical difficulty of determining by computation or legal proof
the exact amount of damages, if any, resulting to Company from a
violation by Executive of the provisions of this Section 9) there would
be no adequate remedy at law for any breach by Executive of any such
restriction.
C. The obligations imposed upon Executive by this Section 9 shall survive
the termination of this Agreement pursuant to Section 2 hereof.
7
<PAGE> 8
Exhibit 10.l (continued)
SECTION 10 - NOTICES AND PAYMENTS.
All payments required or permitted to be made under the provisions of this
Agreement, and all notices and other communications required or permitted to be
given or delivered under this Agreement to Company or to Executive, which
notices or communications must be in writing, shall be deemed to have been given
if delivered by hand, or mailed by first-class mail, addressed as follows:
A. If to Company:
UNB Corp.
c/o United National Bank & Trust Co.
220 Market Avenue South
P. O. Box 24190
Canton, OH 44701
B. If to Executive:
Charles J. Berry
c/o United National Bank & Trust Co.
220 Market Avenue South
P. O. Box 24190
Canton, OH 44701
Company or Executive may, by notice given to the other from time to time and at
any time, designate a different address for making payments required to be made,
and for the giving of notices or other communications required or permitted to
be given, to the party designating such new address.
SECTION 11 - PAYROLL TAXES.
Any payment required or permitted to be made or given to Executive under this
Agreement shall be subject to the withholding and other requirements of
applicable laws, and to the deduction requirements of any benefit plan
maintained by Company in which Executive is a participant, and to all reporting,
filing and other requirements in respect of such payments, and Company shall use
its best efforts promptly to satisfy all such requirements.
SECTION 12 - GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Ohio.
8
<PAGE> 9
Exhibit 10.l (continued)
SECTION 13 - DUPLICATE ORIGINALS.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be a duplicate original, but all of which, taken together, shall
constitute a single instrument.
SECTION 14 - CAPTIONS.
The captions contained in this Agreement are included only for convenience of
reference and do not define, limit, explain or modify this Agreement or its
interpretations, construction or meaning and are in no way to be construed as a
part of this Agreement.
SECTION 15 - SEVERABILITY.
If any provision of this Agreement or the application of any provision to any
person or any circumstances shall be determined to be invalid or unenforceable,
such provision or portion thereof shall nevertheless be effective and
enforceable to the extent determined reasonable. Such determination shall not
affect any other provision of this Agreement or the application of said
provision to any other person or circumstance, all of which other provisions
shall remain in full force and effect, and it is the intention of Company and
Executive that if any provision of this Agreement is susceptible of two or more
constructions, one of which would render the provision enforceable and the other
or others of which would render the provisions unenforceable, then the
provisions shall have the meaning which renders it enforceable.
SECTION 16 - NUMBER AND GENDER.
When used in this Agreement, the number and gender of each pronoun shall be
construed to be such number and gender as the context, circumstances or its
antecedent may require.
SECTION 17 - SUCCESSOR AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the successors
and assigns (including successive, as well as immediate, successors and assigns)
of Company; provided, however, that Company may not assign this Agreement or any
of its rights or obligations hereunder to any party other than a corporation
which succeeds to substantially all of the business and assets of Company by
merger, consolidation, sale of assets or otherwise. This Agreement shall inure
to the benefit of and be binding upon the successor and assigns (including
successive, as well as immediate, successors and assigns) of Executive;
provided, however, that the right of Executive under this Agreement may be
assigned only to his personal representative or trustee or by will or pursuant
to applicable laws of descent and distribution.
9
<PAGE> 10
Exhibit 10.l (continued)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on and to be effective on May 15, 1997.
In the Presence of:
Renee Wood /s/ Charles J. Berry
- -------------------------- -------------------------------
Charles J. Berry, Executive
Loretta Higgins
- --------------------------
In the Presence of:
(as to both signatures)
Kathy Tripp /s/ Donald W. Schneider
- -------------------------- -------------------------------
Donald W. Schneider, Chairman
Judith A. O'Neill /s/ Robert M. Sweeney
- -------------------------- -------------------------------
Robert M. Sweeney, Secretary
10
<PAGE> 1
Exhibit 10.m
CHANGE OF CONTROL AGREEMENT
This is an Agreement (the "AGREEMENT") made by and between UNB Corp.
("Company") and Roger L. Mann ("EXECUTIVE").
RECITALS
1) COMPANY is a bank holding company whose principal subsidiary is engaged
in the business of banking and businesses incidental thereto.
2) EXECUTIVE possesses unique skills, knowledge and experience relating to
the business of the COMPANY.
3) COMPANY desires to recognize the past and future services of EXECUTIVE,
and, in that connection, EXECUTIVE desires to be assured that, in the
event of a change in the control of COMPANY, EXECUTIVE will be provided
with an adequate severance payment for termination without cause or as
compensation for Executive's Severance because of a material change in
his duties and functions.
4) COMPANY desires to be assured of the objectivity of EXECUTIVE in
evaluating a potential change of control and advising whether or not a
potential change of control is in the best interest of the COMPANY and
its shareholders.
5) COMPANY desires to induce EXECUTIVE to remain in the employ of the
COMPANY (as hereinafter defined) following a change of control to provide
for continuity of management.
NOW, THEREFORE, in consideration of the premises and of their mutual
covenants expressed in this AGREEMENT, the parties hereto make the following
agreement, intending to be legally bound thereby:
SECTION 1 - DEFINITIONS.
A. EXCHANGE ACT - "Exchange Act" means The Securities Exchange Act of 1934.
B. CHANGE IN CONTROL - "Change in Control" shall result if:
1. Any person or group (as such terms are used on connection with
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) and 13(d)(5) under
the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of
the Company's then outstanding securities; or
2. Company is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of
which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter; or
<PAGE> 2
Exhibit 10.m (continued)
3. During any period of 24 consecutive months, individuals who at the
beginning of such period constitute the Board of Directors cease
for any reason to constitute at least a majority of the Board of
Directors. Solely for purposes of this subparagraph, any new
director during such period shall be presumed to have been serving
at the beginning of such period if: (i) such new director's
nomination for election or appointment was approved by a vote of
at least one- half of the directors then still in office who were
directors at the beginning of such period, or (ii) such new
director was serving as a director of United National Bank & Trust
Co. at the beginning of such period.
Notwithstanding the foregoing, no Trust Department or designated
fiduciary or other trustee of such Trust Department of the Company or a
subsidiary of the Company, or other similar fiduciary capacity of the Company
with direct voting control of the stock shall be included or considered.
Further, no profit-sharing, employee stock ownership, employee stock purchase
and savings, employee pension, or other employee benefit plan of the Corporation
or any of its subsidiaries, and no Trustee of any such plan in its capacity as
such Trustee, shall be included or considered.
C. CODE - "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
D. COMPANY - "Company" shall include the United National Bank & Trust Co.
and any members of its Affiliated Group, over which Executive has
managerial control, as that term is defined in Section 1504 of the Code,
and shall include any predecessor corporations of the Company and its
Affiliated Group.
E. BOARD - "Board" shall mean the Board of Directors of the Company.
SECTION 2 - TERM OF AGREEMENT.
A. This Agreement shall be effective from the date of this Agreement until
the Agreement Termination Date, which is the earliest of:
1. The date this Agreement is mutually rescinded;
2. The date prior to a Change in Control on which the Executive's
employment with the Company is terminated by death, retirement,
disability, resignation, or dismissal for any reason;
3. The date Executive is terminated for Good Cause (as hereinafter
defined in Section 2(C) after a Change in Control;
4. The date which is two (2) years after a Change in Control.
5. The date which the Company, the United National Bank & Trust Co.,
or any other member of its Affiliated Group, and over which
Executive has managerial control, which is a depository
institution which is insured by an agency of any state or the
United States Federal Government:
2
<PAGE> 3
Exhibit 10.m (continued)
a. becomes insolvent; or
b. has appointed any conservator or receiver; or
c. is determined by an appropriate federal banking agency to be
in a troubled condition, as defined in the applicable law
and regulations governing the appropriate federal banking
agency; or
d. is assigned a composite rating of 4 or 5 by the appropriate
federal banking agency or is informed in writing by the
Federal Deposit Insurance Corporation that it is rated a 4 or
5 under the Uniform Financial Institution's Rating System of
the Federal Financial Institutions Examination Council; or
e. has initiated against it by the Federal Deposit Insurance
Corporation a proceeding to terminate or suspend deposit
insurance; or
f. reasonably determines in good faith and with due care that
the payments called for under this Agreement, or other
obligations and promises assumed and made under this
Agreement have become proscribed under applicable law or
regulations. Provided, however, if such law or regulations
apply prospectively only, or for some other reason do not
apply to this Agreement, then this Agreement shall not be
deemed by Company to be proscribed under this Subsection
(f).
B. This Agreement shall not change, alter or amend any rights which either
Company or Executive may have in respect of the termination of the
employment of Executive by Company prior to a Change in Control. Nothing
contained in this Agreement shall be construed to create any additional
right or obligation of Executive to be employed by Company. If the
employment of Executive by Company is terminated by Company or by
Executive, for any reason whatsoever, prior to a Change in Control,
Executive and Company shall have only such rights and obligations in
respect of such termination as either of them would have had if this
Agreement had not been effected.
C. For purposes of this Agreement, the employment of Executive by Company
shall be deemed to have been terminated for good cause only if such
employment is terminated by Company by reason of Executive's dishonest
conduct materially detrimental to Company, conviction of a felony, or
willful or material violation of any of the obligations imposed upon
Executive under this Agreement.
SECTION 3 - REDUCTION IN COMPENSATION PROSCRIBED AFTER A CHANGE IN CONTROL.
During the term of this Agreement as defined by Section 2 and after the date of
a Change in Control, Executive shall receive as compensation, while still
employed by Company, a salary at a rate no less than that in effect as of the
Change in Control, and shall, in addition, be entitled to receive a bonus
3
<PAGE> 4
Exhibit 10.m (continued)
equal to at least the average of the last three years bonuses paid. In addition,
during such period, the Company shall pay and provide for Executive at no cost
to Executive, all of his then-current fringe benefits, including but not limited
to health, disability, dental, life insurance, club memberships, etc., all of
which shall be at levels and amounts no less favorable than levels and amounts
in effect as of the Change in Control.
SECTION 4 - PAYMENT UPON TERMINATION OF EMPLOYMENT AFTER A CHANGE IN CONTROL.
A. If during the term of this Agreement as defined by Section 2 and after
the date of a Change in Control, Executive is discharged without good
cause or Executive resigns because he has: (i) been demoted, (ii) had his
compensation materially reduced, (iii) had his principal place of
employment transferred away from Stark County or a county contiguous
thereto, or (iv) had his job title, status or responsibility materially
reduced, then the Company shall make the payments to Executive set forth
in subsection D of this Section 4.
B. If Executive voluntarily terminates employment not earlier than six (6)
months and not later than nine (9) months following a Change in Control,
then the Company shall make the payments to Executive set forth in
subsection D of this Section 4.
C. If Executive is discharged by Company other than for good cause and there
is a Change of Control within two years of the discharge, then the
Company shall make the payments to Executive set forth in subsection D of
this Section 4.
D. In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled to
receive either: (i) a lump sum cash payment equal to two (2) years of
Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) two (2) years of Compensation payable in equal monthly
payments, in cash, without interest. For such election to be effective,
it must be made in writing and delivered to the Company in accordance
with Section 10, prior to the Change in Control. The lump sum cash
payment or the first monthly cash payment, as the case may be, shall be
paid at the end of the first month commencing after the Executive's
termination of employment in the case of a benefit entitlement under
Subsection A, B or C above, and in the event of the election by Executive
to receive monthly payments, shall continue each consecutive month
thereafter until 24 payments have been made. If Executive's employment is
terminated as described in Subsection A or Subsection B above, then in
addition to the above cash payment(s), Company shall continue at no cost
to Executive for the term of the Benefit Period as defined below,
Executive's coverage in Company's health, disability, dental, life
insurance, and club memberships at the same levels that had been provided
immediately prior to his termination of employment. The Benefit Period
shall commence on the date of termination of the Executive's employment
and shall end on the earlier of:
1. The last day of the 24th consecutive whole month thereafter, or
4
<PAGE> 5
Exhibit 10.m (continued)
2. The termination date of this Agreement as defined in Section 2(A).
In the event Executive dies after benefits have commenced but before the
end of the benefit period, then the remaining payments shall be paid to
the person or persons as stated in the last designation of beneficiary
concerning this Agreement signed by Executive and filed with the Company,
and if not, then to the personal representative of Executive.
E. As used herein, "Compensation" shall mean the sum of employee base salary
plus any bonuses for the last whole calendar year preceding Executive's
termination of employment. Compensation shall not include any amount,
other than base salary and bonuses, included in Executive's taxable
compensation for federal income tax purposes and reported to Executive
and Internal Revenue Service ("IRS") such as the reporting of previously
deferred compensation or gain realized upon exercise of any nonqualified
stock options. In the event the payments required under this Agreement
together with the other benefits provided for hereunder would be deemed
by the IRS to result in an "Excess Parachute Payment," as that term is
defined in Section 280G of the Code, then the amount of the lump sum
payment shall be reduced, or in the event of the election by the
Executive to receive monthly payments, the monthly cash payments shall be
reduced, to the highest amount which will not result in the total of all
benefits provided for hereunder being deemed by the IRS to result in a
"Excess Parachute Payment," as that term is defined in Section 280G of
the Code, rounded down to the nearest even $10 multiple.
SECTION 5 - QUALIFIED AND NONQUALIFIED RETIREMENT PENSION PLANS.
A. Nothing in this Agreement, including this Section 5, shall reduce any
benefits from nonqualified retirement plans maintained by Company to
which Executive is otherwise entitled without regard to this Agreement.
The Company shall take such actions as necessary in order to amend any
and all nonqualified retirement plans of the Company, or of any of its
subsidiaries, in order to provide for the inclusion of payments made to
Executive under the terms of this Agreement within the definition of
compensation for all such plans and to provide for the inclusion of the
Benefit Period within the computation of any and all years of service
and/or age requirements for the computation of the amount of, or vesting
of, benefits under the Company's nonqualified retirement plans.
B. In addition, Executive shall receive additional compensation in an amount
equal to one-hundred and fifty percent (150%) of the difference between
the lump-sum value of benefits provided under the United National Bank &
Trust Company Pension Plan and Trust ("Pension Plan"), as of the date of
termination of employment, and the lump-sum value of the benefits that
would have been provided if the Pension Plan provided for the inclusion
of payments made to Executive under the terms of this Agreement
(excluding additional compensation described in this Subsection B) within
the definition of compensation for the Pension Plan and provided for the
inclusion of the Benefit Period within the computation of the lump-sum
value of benefits provided under the Pension Plan.
5
<PAGE> 6
Exhibit 10.m (continued)
C. The lump-sum value of benefits provided under the Pension Plan described
in Subsection B will be calculated by the Pension Plan's actuary, as if
the lump-sum amount is payable as of the date of the Executive's
termination of employment.
D. The additional compensation described in Subsection B will be paid in a
lump-sum within 10 days of the Executive's termination of employment. The
additional compensation received will not increase or decrease any other
benefits payable under this Agreement or any other nonqualified
retirement benefit.
SECTION 6 - PROVISION FOR OUT PLACEMENT SERVICES.
In the event of the termination of employment of Executive pursuant to Section 4
of this Agreement, Executive shall be entitled to one year of Out placement
services following termination of employment. Such services shall include
employment counseling, resume services, executive placement services and similar
services generally provided to executives by professional executive Out
placement services providers. All costs of such Out placement services shall be
paid for by the Company.
SECTION 7 - ARBITRATION.
The parties hereto agree to arbitrate any issue, misunderstanding, disagreement
or dispute in connection with the terms in effect in this Agreement in
accordance with the Rules of the American Arbitration Association, before one
arbitrator mutually agreeable to the parties hereto. If after two weeks,
Executive determines that Company and Executive have been unable to agree upon
one arbitrator, then Executive may appoint one arbitrator and require Company to
appoint a second arbitrator. Whereupon, the two appointed arbitrators shall
appoint a third arbitrator mutually agreeable to them. The arbitration shall
occur in Canton, Ohio, or such other place as mutually agreed upon. Any and all
costs associated with Executive's enforcement of the provisions of this
Agreement through arbitration as provided herein shall be borne by the Company.
The Company shall bear such expenses regardless of the nature of the dispute or
the outcome of such dispute. Such costs include, but are not limited to,
attorneys' fees, arbitration fees and costs, and expenses of settlement.
SECTION 8 - RIGHT TO OTHER BENEFITS.
Nothing in this Agreement shall abridge, eliminate, or cause Executive to lose
Executive's right or entitlement to any other Company benefit to which Executive
may be entitled due to his status as an employee under any plan or policy of
Company on such terms and conditions as are required of any employee under any
plan or policy of Company. Further, nothing in this Agreement shall create in
Executive any greater rights or entitlements, except as specified in this
Agreement. The plans and policies referred to in this Section 8 include, but are
not limited to, life insurance plans, dental, disability, or health insurance
benefits, severance policies, club memberships, and accrued vacation pay.
6
<PAGE> 7
Exhibit 10.m (continued)
SECTION 9 - PROTECTION OF BUSINESS.
Notwithstanding anything to the contrary contained elsewhere in this Agreement:
A. Executive will not at any time (during or after employment with Company)
divulge, disclose, reveal or communicate to any person, firm,
corporation, partnership, joint venture or other entity, directly or
indirectly, any trade secrets or other information which Executive may
have obtained during the course of his employment by Company in respect
of any matters affecting or relating to the banking business of Company
including, without limitation, any of its plans, policies, business
practices, finances, methods of operation or other information known to
Executive to be historically considered by Company to be confidential
information.
B. In addition to any action for damages, the restrictions imposed upon
Executive under this Section 9 may be enforced by the Company by an
action for an injunction and it is hereby agreed that (in view of the
general practical difficulty of determining by computation or legal proof
the exact amount of damages, if any, resulting to Company from a
violation by Executive of the provisions of this Section 9) there would
be no adequate remedy at law for any breach by Executive of any such
restriction.
C. The obligations imposed upon Executive by this Section 9 shall survive
the termination of this Agreement pursuant to Section 2 hereof.
SECTION 10 - NOTICES AND PAYMENTS.
All payments required or permitted to be made under the provisions of this
Agreement, and all notices and other communications required or permitted to be
given or delivered under this Agreement to Company or to Executive, which
notices or communications must be in writing, shall be deemed to have been given
if delivered by hand, or mailed by first-class mail, addressed as follows:
A. If to Company:
UNB Corp.
c/o United National Bank & Trust Co.
220 Market Avenue South
P. O. Box 24190
Canton, OH 44701
B. If to Executive:
Roger L. Mann
c/o United National Bank & Trust Co.
220 Market Avenue South
P. O. Box 24190
Canton, OH 44701
7
<PAGE> 8
Exhibit 10.m (continued)
Company or Executive may, by notice given to the other from time to time and at
anytime, designate a different address for making payments required to be made,
and for the giving of notices or other communications required or permitted to
be given, to the party designating such new address.
SECTION 11 - PAYROLL TAXES.
Any payment required or permitted to be made or given to Executive under this
Agreement shall be subject to the withholding and other requirements of
applicable laws, and to the deduction requirements of any benefit plan
maintained by Company in which Executive is a participant, and to all reporting,
filing and other requirements in respect of such payments, and Company shall use
its best efforts promptly to satisfy all such requirements.
SECTION 12 - GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Ohio.
SECTION 13 - DUPLICATE ORIGINALS.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be a duplicate original, but all of which, taken together, shall
constitute a single instrument.
SECTION 14 - CAPTIONS.
The captions contained in this Agreement are included only for convenience of
reference and do not define, limit, explain or modify this Agreement or its
interpretations, construction or meaning and are in no way to be construed as a
part of this Agreement.
SECTION 15 - SEVERABILITY.
If any provision of this Agreement or the application of any provision to any
person or any circumstances shall be determined to be invalid or unenforceable,
such provision or portion thereof shall nevertheless be effective and
enforceable to the extent determined reasonable. Such determination shall not
affect any other provision of this Agreement or the application of said
provision to any other person or circumstance, all of which other provisions
shall remain in full force and effect, and it is the intention of Company and
Executive that if any provision of this Agreement is susceptible of two or more
constructions, one of which would render the provision enforceable and the other
or others of which would render the provisions unenforceable, then the
provisions shall have the meaning which renders it enforceable.
SECTION 16 - NUMBER AND GENDER.
When used in this Agreement, the number and gender of each pronoun shall be
construed to be such number and gender as the context, circumstances or its
antecedent may require.
8
<PAGE> 9
Exhibit 10.m (continued)
SECTION 17 - SUCCESSOR AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the successors
and assigns (including successive, as well as immediate, successors and assigns)
of Company; provided, however, that Company may not assign this Agreement or any
of its rights or obligations hereunder to any party other than a corporation
which succeeds to substantially all of the business and assets of Company by
merger, consolidation, sale of assets or otherwise. This Agreement shall inure
to the benefit of and be binding upon the successor and assigns (including
successive, as well as immediate, successors and assigns) of Executive;
provided, however, that the right of Executive under this Agreement may be
assigned only to his personal representative or trustee or by will or pursuant
to applicable laws of descent and distribution.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on and to be effective on JUNE 1, 1997.
In the Presence of:
Kathy Tripp /s/ Roger L. Mann
- -------------------------- -------------------------------
Roger L. Mann, Executive
Judith A. O'Neill
- --------------------------
In the Presence of:
(as to both signatures)
Kathy Tripp /s/ Donald W. Schneider
- -------------------------- -------------------------------
Donald W. Schneider, Chairman
Judith A. O'Neill /s/ Robert M. Sweeney
- -------------------------- -------------------------------
Robert M. Sweeney, Secretary
9
<PAGE> 1
Exhibit 10.n
AMENDMENT TO THE
CHANGE OF CONTROL AGREEMENT
Whereas, effective JUNE 1, 1997, an Agreement was made by and between UNB Corp.
(Company) and ROGER L. MANN (Executive).
Now, therefore, effective as of DECEMBER 10, 1997, the Company hereby amends
this Agreement as set forth below.
The provisions of this Amendment shall take precedence over any conflicting
provisions of the Agreement or prior Amendments.
I. Section (2) (A) (4.) shall be deleted in its entirety and replaced as
follows:
"The date which is three (3) years after a Change in Control."
II. Section (4) (C) shall be deleted in its entirety and replaced as follows:
"If Executive is discharged by Company other than for good cause and
there is a Change of Control within three years of the discharge, then
the Company shall make the payments to Executive set forth in subsection
D of this Section 4."
III. Section (4) (D) shall be deleted in its entirety and replaced as follows:
"In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled to
receive either: (i) a lump sum cash payment equal to three (3) years of
Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) three (3) years of Compensation payable in equal monthly
payments, in cash, without interest. For such election to be effective,
it must be made in writing and delivered to the Company in accordance
with Section 10, prior to the Change in Control. The lump sum cash
payment or the first monthly cash payment, as the case may be, shall be
paid at the end of the first month commencing after the Executive's
termination in employment in the case of a benefit entitlement under
Subsection A, B, or C above, and in the event of the election by
Executive to receive monthly payments, shall continue each consecutive
month thereafter until 36 payments have been made. If Executive's
employment is terminated as described in Subsection A or Subsection B
above, then in addition to the above cash payment(s), Company shall
continue at no cost to Executive for the term of the Benefit Period as
defined below, Executive's coverage in Company's health, disability,
dental, life insurance, and club memberships at the same levels that had
been provided immediately prior to his termination of employment. The
Benefit Period shall commence on the date of termination of the
Executive's employment and shall end on the earlier of:
<PAGE> 2
Exhibit 10.n (continued)
1. The last day of the 36th consecutive whole month thereafter, or
2. The termination date of this Agreement as defined in Section 2(A).
In the event Executive dies after benefits have commenced but before the
end of the benefit period, then the remaining payments shall be paid to
the person or persons as stated in the last designation of beneficiary
concerning this Agreement signed by Executive and filed with the Company,
and if not, then to the personal representative of Executive.
In witness thereof, the parties hereto affix their signatures on this 15th day
of January, 1998, in adoption of this aforementioned amendment.
Witnesses: UNB Corp.
Kathy Tripp /s/ Donald W. Schneider
- -------------------------- -------------------------------
(Signature)
Sandi K. Bennett Donald W. Schneider, Chairman of the Board
- -------------------------- ------------------------------------------
(Name and Title)
Witnesses: Executive:
Kathy Tripp /s/ Roger L. Mann
- -------------------------- -------------------------------
(Signature)
Sandi K. Bennett Roger L. Mann, Chief Executive Officer
- -------------------------- --------------------------------------
(Name and Title)
2
<PAGE> 1
Exhibit 10.o
AMENDMENT TO THE
CHANGE OF CONTROL AGREEMENT
Whereas, effective JUNE 1, 1997, an Agreement was made by and between UNB Corp.
(Company) and LEO E. DOYLE (Executive).
Now, therefore, effective as of DECEMBER 10, 1997, the Company hereby amends
this Agreement as set forth below.
The provisions of this Amendment shall take precedence over any conflicting
provisions of the Agreement or prior Amendments.
I. Section (2) (A) (4.) shall be deleted in its entirety and replaced as
follows:
"The date which is three (3) years after a Change in Control."
II. Section (4) (C) shall be deleted in its entirety and replaced as follows:
"If Executive is discharged by Company other than for good cause and
there is a Change of Control within three years of the discharge, then
the Company shall make the payments to Executive set forth in subsection
D of this Section 4."
III. Section (4) (D) shall be deleted in its entirety and replaced as follows:
"In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled to
receive either: (i) a lump sum cash payment equal to three (3) years of
Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) three (3) years of Compensation payable in equal monthly
payments, in cash, without interest. For such election to be effective,
it must be made in writing and delivered to the Company in accordance
with Section 10, prior to the Change in Control. The lump sum cash
payment or the first monthly cash payment, as the case may be, shall be
paid at the end of the first month commencing after the Executive's
termination in employment in the case of a benefit entitlement under
Subsection A, B, or C above, and in the event of the election by
Executive to receive monthly payments, shall continue each consecutive
month thereafter until 36 payments have been made. If Executive's
employment is terminated as described in Subsection A or Subsection B
above, then in addition to the above cash payment(s), Company shall
continue at no cost to Executive for the term of the Benefit Period as
defined below, Executive's coverage in Company's health, disability,
dental, life insurance, and club memberships at the same levels that had
been provided immediately prior to his termination of employment. The
Benefit Period shall commence on the date of termination of the
Executive's employment and shall end on the earlier of:
<PAGE> 2
Exhibit 10.o (continued)
1. The last day of the 36th consecutive whole month thereafter, or
2. The termination date of this Agreement as defined in Section 2(A).
In the event Executive dies after benefits have commenced but before the
end of the benefit period, then the remaining payments shall be paid to
the person or persons as stated in the last designation of beneficiary
concerning this Agreement signed by Executive and filed with the Company,
and if not, then to the personal representative of Executive.
In witness thereof, the parties hereto affix their signatures on this 15th day
of January, 1998, in adoption of this aforementioned amendment.
Witnesses: UNB Corp.
Kathy Tripp /s/ Donald W. Schneider
- -------------------------- -------------------------------
(Signature)
Sandi K. Bennett Donald W. Schneider, Chairman of the Board
- -------------------------- ------------------------------------------
(Name and Title)
Witnesses: Executive:
Kathy Tripp /s/ Leo E. Doyle
- -------------------------- -------------------------------
(Signature)
Sandi K. Bennett Leo E. Doyle, Executive Vice President
- -------------------------- --------------------------------------
(Name and Title)
2
<PAGE> 1
Exhibit 10.p
AMENDMENT TO THE
CHANGE OF CONTROL AGREEMENT
Whereas, effective JUNE 1, 1997, an Agreement was made by and between UNB Corp.
(Company) and JAMES J. PENNETTI (Executive).
Now, therefore, effective as of DECEMBER 10, 1997, the Company hereby amends
this Agreement as set forth below.
The provisions of this Amendment shall take precedence over any conflicting
provisions of the Agreement or prior Amendments.
I. Section (2) (A) (4.) shall be deleted in its entirety and replaced as
follows:
"The date which is three (3) years after a Change in Control."
II. Section (4) (C) shall be deleted in its entirety and replaced as follows:
"If Executive is discharged by Company other than for good cause and
there is a Change of Control within three years of the discharge, then
the Company shall make the payments to Executive set forth in subsection
D of this Section 4."
III. Section (4) (D) shall be deleted in its entirety and replaced as follows:
"In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled to
receive either: (i) a lump sum cash payment equal to three (3) years of
Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) three (3) years of Compensation payable in equal monthly
payments, in cash, without interest. For such election to be effective,
it must be made in writing and delivered to the Company in accordance
with Section 10, prior to the Change in Control. The lump sum cash
payment or the first monthly cash payment, as the case may be, shall be
paid at the end of the first month commencing after the Executive's
termination in employment in the case of a benefit entitlement under
Subsection A, B, or C above, and in the event of the election by
Executive to receive monthly payments, shall continue each consecutive
month thereafter until 36 payments have been made. If Executive's
employment is terminated as described in Subsection A or Subsection B
above, then in addition to the above cash payment(s), Company shall
continue at no cost to Executive for the term of the Benefit Period as
defined below, Executive's coverage in Company's health, disability,
dental, life insurance, and club memberships at the same levels that had
been provided immediately prior to his termination of employment. The
Benefit Period shall commence on the date of termination of the
Executive's employment and shall end on the earlier of:
<PAGE> 2
Exhibit 10.p (continued)
1. The last day of the 36th consecutive whole month thereafter, or
2. The termination date of this Agreement as defined in Section 2(A).
In the event Executive dies after benefits have commenced but before the
end of the benefit period, then the remaining payments shall be paid to
the person or persons as stated in the last designation of beneficiary
concerning this Agreement signed by Executive and filed with the Company,
and if not, then to the personal representative of Executive.
In witness thereof, the parties hereto affix their signatures on this 15th day
of January, 1998, in adoption of this aforementioned amendment.
Witnesses: UNB Corp.
Kathy Tripp /s/ Donald W. Schneider
- -------------------------- -------------------------------
(Signature)
Sandi K. Bennett Donald W. Schneider, Chairman of the Board
- -------------------------- ------------------------------------------
(Name and Title)
Witnesses: Executive:
Kathy Tripp /s/ James J. Pennetti
- -------------------------- -------------------------------
(Signature)
Sandi K. Bennett James J. Pennetti, Executive Vice President
- -------------------------- -------------------------------------------
(Name and Title)
2
<PAGE> 1
Exhibit 10.q
AMENDMENT TO THE
CHANGE OF CONTROL AGREEMENT
Whereas, effective JUNE 1, 1997, an Agreement was made by and between UNB Corp.
(Company) and ROBERT M. SWEENEY (Executive).
Now, therefore, effective as of DECEMBER 10, 1997, the Company hereby amends
this Agreement as set forth below.
The provisions of this Amendment shall take precedence over any conflicting
provisions of the Agreement or prior Amendments.
I. Section (2) (A) (4.) shall be deleted in its entirety and replaced as
follows:
"The date which is three (3) years after a Change in Control."
II. Section (4) (C) shall be deleted in its entirety and replaced as follows:
"If Executive is discharged by Company other than for good cause and
there is a Change of Control within three years of the discharge, then
the Company shall make the payments to Executive set forth in subsection
D of this Section 4."
III. Section (4) (D) shall be deleted in its entirety and replaced as follows:
"In the event of the termination of the Executive's employment as
described in Subsections A, B, or C above, Executive shall be entitled to
receive either: (i) a lump sum cash payment equal to three (3) years of
Compensation (as defined in Subsection E below), or upon Executive's
election, (ii) three (3) years of Compensation payable in equal monthly
payments, in cash, without interest. For such election to be effective,
it must be made in writing and delivered to the Company in accordance
with Section 10, prior to the Change in Control. The lump sum cash
payment or the first monthly cash payment, as the case may be, shall be
paid at the end of the first month commencing after the Executive's
termination in employment in the case of a benefit entitlement under
Subsection A, B, or C above, and in the event of the election by
Executive to receive monthly payments, shall continue each consecutive
month thereafter until 36 payments have been made. If Executive's
employment is terminated as described in Subsection A or Subsection B
above, then in addition to the above cash payment(s), Company shall
continue at no cost to Executive for the term of the Benefit Period as
defined below, Executive's coverage in Company's health, disability,
dental, life insurance, and club memberships at the same levels that had
been provided immediately prior to his termination of employment. The
Benefit Period shall commence on the date of termination of the
Executive's employment and shall end on the earlier of:
<PAGE> 2
Exhibit 10.q (continued)
1. The last day of the 36th consecutive whole month thereafter, or
2. The termination date of this Agreement as defined in Section 2(A).
In the event Executive dies after benefits have commenced but before the
end of the benefit period, then the remaining payments shall be paid to
the person or persons as stated in the last designation of beneficiary
concerning this Agreement signed by Executive and filed with the Company,
and if not, then to the personal representative of Executive.
In witness thereof, the parties hereto affix their signatures on this 15th day
of January, 1998, in adoption of this aforementioned amendment.
Witnesses: UNB Corp.
Kathy Tripp /s/ Donald W. Schneider
- -------------------------- -------------------------------
(Signature)
Sandi K. Bennett Donald W. Schneider, Chairman of the Board
- -------------------------- ------------------------------------------
(Name and Title)
Witnesses: Executive:
Kathy Tripp /s/ Robert M. Sweeney
- -------------------------- -------------------------------
(Signature)
Sandi K. Bennett Robert M. Sweeney, Executive Vice President
- -------------------------- -------------------------------------------
(Name and Title)
2
<PAGE> 1
ANYTIME, ANYWHERE
UNITED BANK
UNB CORP.
1997 ANNUAL REPORT
<PAGE> 2
ANYTIME, ANYWHERE
UNB CORP.
UNITED BANK
UNITED NATIONAL BANK & TRUST CO.
UNB CORP
1997 ANNUAL REPORT
<PAGE> 3
Table Of Contents
President's Message ..................................... 2
Chairman's Message ...................................... 4
Management Committee .................................... 6
Boards of Directors ..................................... 7
Management .............................................. 8
Community Advisory Boards ............................... 10
Banking Centers ......................................... 10
Report of Management .................................... 11
Report of Independent Auditors .......................... 11
Consolidated Financial Statements ....................... 12
Notes to Consolidated
Financial Statements .................................... 16
Management's Discussion and Analysis .................... 30
Market Price Ranges for Common Stock .................... 41
Five Year Summary of Selected Data ...................... 42
For Investor Relations, call (330) 438-1206.
<TABLE>
<CAPTION>
Summary of Selected Data
Financial Highlights
For The Year 1997 1996 % of Change
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Total Interest Income $63,362 $59,189 7.05%
Total Interest Expense 30,322 27,826 8.97%
Net Income 9,006 8,155 10.44%
At Year-End
- --------------------------------------------------------------------------
Assets $826,313 $809,979 2.02%
Deposits 649,481 600,664 8.13%
Total Net Loans 620,768 609,267 1.89%
Securities 140,838 132,886 5.98%
Shareholders' Equity 76,520 71,335 7.27%
Per Common Share*
- --------------------------------------------------------------------------
Net Income $ 1.56 $ 1.42 9.86%
Cash Dividends Paid 0.65 0.59 10.17%
Book Value 13.23 12.33 7.30%
Performance Ratios
- --------------------------------------------------------------------------
Return on Assets 1.11% 1.08% 2.78%
Total Risk-Based Capital 13.28% 13.00% 2.15%
Capital Leverage 8.24% 7.55% 9.14%
Allowance for Loan
Losses/Total Loans 1.53% 1.35% 13.33%
*Per share data has been adjusted for any stock dividends and splits.
</TABLE>
<TABLE>
<CAPTION>
UNB Corp. Common Stock
At Year-End 1997 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Market Value - Bid $39.25 $30.00 $22.00 $19.25
Market-to-Book Premium 296.7% 243.3% 193.6% 188.4%
</TABLE>
<PAGE> 4
PRESIDENT'S MESSAGE
To Our Shareholders
WE ARE PLEASED TO REPORT that 1997 was a very successful year for UNB Corp.
After-tax profits increased 10.4% from $8.2 million, or $1.42 per share, in 1996
to $9.0 million, or $1.56 per share, in 1997. Assets increased 2.0% from $810.0
million as of December 31, 1996, to $826.3 million as of December 31, 1997. Our
Trust Department experienced significant growth with assets under management
totaling $743.7 million, an increase of 27.9% from December 31, 1996.
Our future plans focus on improving our return on equity while monitoring return
on assets and asset growth. It is apparent that the current interest rate
environment requires a strategy that will maximize returns without locking in
long-term, low-interest-earning assets. We will continue emphasizing fee income
through our Trust Department, Mortgage Loan and Commercial Lending areas.
We continue to pursue growth through our computer banking services, discount
brokerage capability, and future Internet plans. We also plan to open another
in-store banking facility in the remodeled Wal*Mart store in Wooster, Ohio. I am
also pleased to report that our finance company affiliate, United Banc Financial
Services, Inc., opened June 1, 1997, and as of year-end, had assets in excess of
$1.0 million.
We are extremely optimistic about our future as a growth and value organization.
All of our affiliates are committed to a high standard of personalized, quality
customer service that will be maintained as we continue our growth. To further
this commitment, we continue to examine our product offerings, the delivery
channels of those products and, most of all, how we provide our
<TABLE>
<CAPTION>
Net Income
millions of dollars
<S> <C>
1993 $6.338
1994 $6.628
1995 $7.379
1996 $8.155
1997 $9.006
</TABLE>
The increase in net income equates to an annualized growth rate of 13.5%
over the last five years.
"... our employees are the most important resources of UNB Corp."
[Photo]
2
<PAGE> 5
customers with the level of professionalism they deserve. We believe that our
approach to the marketplace will permit us to out-perform our regional and
nationally focused competition.
In our Corporate Vision, we continue to stress the importance of delivering
superior service to our customers. Superior service is attained by keeping our
officers and staff in close contact with customers which results in quick
decision-making and responsiveness. We strive to reinforce the direct link
between employee performance and operating results because we believe that our
employees are the most important resources of UNB Corp.
UNB Corp. and its affiliates are committed to our customers and the communities
we so proudly serve. We believe that teamwork is the ability to work together
towards a common vision and the ability to direct individual accomplishment
toward organizational objectives -- this is the fuel that allows common people
to attain uncommon results. We also believe that quality is never an accident;
it is always the result of high intention, sincere effort, intelligent direction
and skillful execution; it represents the wise choice of many alternatives.
Your continued support through the referral of prospective clients is very
helpful, and we encourage you to continue providing us with these valuable
leads. We are excited about our future opportunities.
Respectfully,
/s/ Roger L. Mann
Roger L. Mann
President
Chief Executive Officer
UNB Corp.
<TABLE>
<CAPTION>
Cash Dividends Per Share*
<S> <C>
1993 $0.44
1994 $0.48
1995 $0.53
1996 $0.59
1997 $0.65
</TABLE>
The increase in dividends per share equates to an annualized growth rate
of 11.9% over the last five years.
*Adjusted for any stock dividends and splits.
<TABLE>
<CAPTION>
UNB Corp. Stock Market
Value-Bid*
<S> <C>
1993 $14.50
1994 $19.25
1995 $22.00
1996 $30.00
1997 $39.25
</TABLE>
The increase in the stock price equates to an annualized growth rate of 26.7%
over the last five years.
*Adjusted for any stock dividends and splits
3
<PAGE> 6
CHAIRMAN'S
MESSAGE...
As an independent financial services holding company, our mission is to
enhance long-term shareholder value...
THE MISSION STATEMENT OF UNB CORP. STARTS WITH THIS PHRASE and sets the
direction of our company. But how does one define and measure shareholder value?
There are a number of ways to answer this question. The traditional ratios of
return on equity (ROE) and return on assets (ROA) give a good indication of
profitability. Additionally, one can look at earnings per share and growth in
the market value of the corporation's stock over a defined period of time as an
indication of the increase in value that we have all experienced. As Chairman of
the Board, I am very pleased to report that no matter how shareholders analyze
their investment in UNB Corp., the evaluation will reveal exceptional present
value and establish a solid basis of optimism for the future growth of the
Corporation.
The most common method of expressing a company's profitability is the earnings
per share. UNB Corp. stock has consistently improved its earnings per share
every year over the last five years, and 1997 was no exception. With an earnings
per share of $1.56, your management team demonstrated that they continue to
effectively employ the resources provided by the shareholders. The efficiency
with which UNB Corp. uses its capital resources can be measured by another
important profitability ratio, return on equity. The improvement in the ROE from
11.89% to 12.20% again indicates aggressive realistic lending and investment
policies. Maintaining a balance of ROE and ROA while managing their growth is a
skilled accomplishment and a sure indicator of the financial ability of your
Management team.
The excellent stock performance for 1997 gives you as a shareholder good reason
to be pleased with your investment in UNB Corp. Cash dividends per share grew
10.2% continuing a trend of several years of consistent dividend growth.
Comparing cash dividends as a percentage of income to other
[PHOTO]
4
<PAGE> 7
peer group financial institutions, UNB Corp. stock continued to outperform our
peers by a substantial margin. Looking at the net worth of your investment in
terms of shareholder equity reveals continued growth to more than $76.5 million
dollars at the end of 1997. Consequently, shareholders' equity per share
increased to $13.23.
Perhaps no other figure signals the strength of a stock or substantiates
optimism for the long-term shareholder more than the market value of the stock.
Our marathon march of more than 20 years of increasing market value continued in
1997 with a year-end market value of $39.25 per share. The market-to-book value
of the stock of 296.7% is not only impressive, it helps insure that UNB Corp.
will maintain its status as Canton's only independent financial institution.
Should an investor have had enough foresight to purchase $100 worth of UNB Corp.
stock 15 years ago, that investment would now be worth $2,044.58 after adjusting
for stock dividends and splits. I think any investor would agree that UNB Corp.
stock stands as a proud performer when compared to other companies. Should
shareholders maintain their confidence in their investment in our Corporation
for the long term? Given our performance, the opportunities of the market and
the skill and experience of our Management team, I sincerely believe there is
more than enough evidence to be optimistic about the future of UNB Corp.
On a more personal note, there were a number of important events that took place
during the past year. Robert Mang's retirement ended a long successful career as
President of our Bank, but he will of course continue on as a director. Bob's
contribution to the Bank was significant and will be long remembered. Two of
your directors retired also. John Regula in his quiet way was a strong ally of
the shareholder, and Joe Sommer, Jr. added a great deal of guidance to our many
decisions. Joe's father, Joe Sr., long-time President and board member of the
Bank passed away last year. Edgar W. Jones, my predecessor as Chairman of the
Board, a position he held for many years, also passed away in 1997. I personally
had a great deal of respect for these gentlemen; they were so important in
helping formulate my values as a young man.
Another significant event of the year was the addition of Roger Mann as your new
President and CEO of UNB Corp. We feel very fortunate indeed to have attracted a
person of Roger's talent to lead us into the 21st century.
/s/ Donald W. Schneider
- ------------------------
Donald W. Schneider
Chairman of the Board
UNB Corp. & United National Bank & Trust Co.
5
<PAGE> 8
[PHOTO]
Roger L. Mann
UNB Corp.
President
Chief Executive Officer
[PHOTO]
Charles J. Berry
United National Bank & Trust Co.
Financial Group
Senior Vice President
Chief Financial Officer
[PHOTO]
William J. Devolve
United Banc Financial Services, Inc.
Executive Vice President
[PHOTO]
Scott E. Dodds
United Mortgage Corporation
Executive Vice President
[PHOTO]
Leo E. Doyle
United National Bank & Trust Co.
Commercial Group
Executive Vice President
[PHOTO]
Candice L. Follen
United National Bank & Trust Co.
Human Resources
Vice President
[PHOTO]
Jeffery Hasapis
United National Bank & Trust Co.
Credit & Loan Administration Group
Vice President
[PHOTO]
James J. Pennetti
United National Bank & Trust Co.
Retail Group
Executive Vice President
[PHOTO]
Robert M. Sweeney
United National Bank & Trust Co.
Trust Services Group
Executive Vice President
MANAGEMENT
COMMITTEE
6
<PAGE> 9
BOARDS...
of Directors...
[PHOTO]
Donald W. Schneider
Chairman of the Board
UNB Corp. &
United National Bank & Trust Co.
President, Schneider Lumber Co.
[PHOTO]
Louis V. Bockius III
UNB Corp. &
United National Bank & Trust Co.
Chairman, Bocko, Inc.
[PHOTO]
E. Lang D'Atri
UNB Corp. &
United National Bank & Trust Co.
Attorney at Law, Day, Ketterer, Raley, Wright & Rybolt
[PHOTO]
Robert J. Gasser
United National Bank & Trust Co.
Consultant, John Gasser &
Son Jewelers
[PHOTO]
Nan B. Johnston
United National Bank & Trust Co.
Director, Stark County
District Library
[PHOTO]
Edgar W. Jones, Jr.
UNB Corp. &
United National Bank & Trust Co.
President, Hal Jones Construction Co.
[PHOTO]
Harold M. Kolenbrander, Ph.D.
UNB Corp. &
United National Bank & Trust Co.
President, Mount Union College
[PHOTO]
Russell W. Maier
UNB Corp. &
United National Bank & Trust Co.
Chairman and CEO,
Republic Engineered Steels, Inc.
[PHOTO]
Robert L. Mang
UNB Corp. &
United National Bank & Trust Co.
Retired President and CEO,
UNB Corp. &
United National Bank & Trust Co.
[PHOTO]
Roger L. Mann
UNB Corp. &
United National Bank & Trust Co.
President and CEO, UNB Corp.
CEO, United National Bank & Trust Co.
[PHOTO]
James A. O'Donnell
UNB Corp. &
United National Bank & Trust Co.
Retired President,
United National Bank & Trust Co.
[PHOTO]
E. Scott Robertson
United National Bank & Trust Co.
President, Robertson Heating
Supply Co.
[PHOTO]
Marc L. Schneider
United National Bank & Trust Co.
Treasurer, Schneider Lumber Co.
[PHOTO]
Abner A. Yoder
UNB Corp. &
United National Bank & Trust Co.
President, Stark Truss Co.
HONORARY DIRECTORS EMERITI
Robert L. Hammond
F. E. Henry III
Thomas C. Lavery
David W. Reed, Jr.
John D. Regula
James P. Rodman
Joseph J. Sommer
W. W. Steele, Jr.
George N. Swallow
Leroy L. Zang
7
<PAGE> 10
MANAGEMENT
UNB CORP.
Roger L. Mann
President
Chief Executive Officer
James J. Pennetti
Vice President
Corporate Treasurer
Robert M. Sweeney
Corporate Secretary
CORPORATE AUDIT
Robert L. Young
Vice President
Chief Internal Auditor
Tammy R. Maricocchi
Audit Operations Officer
Thomas L. Friedman
Senior Auditor
William F. Haldi
Auditor
UNITED BANC
FINANCIAL SERVICES, INC.
Roger L. Mann
President
Chief Executive Officer
Charles J. Berry
Treasurer
James J. Pennetti
Secretary
William J. Devolve
Executive Vice President
UNITED INSURANCE AGENCY,INC.
Roger L. Mann
President
Chief Executive Officer
Charles J. Berry
Treasurer
James J. Pennetti
Secretary
UNITED MORTGAGE CORP.
Roger L. Mann
President
Chief Executive Officer
Charles J. Berry
Treasurer
James J. Pennetti
Secretary
Scott E. Dodds
Executive Vice President
Michele R. Harris
Operations Officer
Jeffrey H. McHenry
Sales Officer
UNITED NATIONAL BANK & TRUST CO.
Roger L. Mann
Chief Executive Officer
COMMERCIAL GROUP
Leo E. Doyle
Executive Vice President
BUSINESS DEVELOPMENT
William F. Schumacher
Vice President
Charleen A. Davidson
Assistant Vice President
Dan M. Friedman
Assistant Vice President
Edward C. Koch
Assistant Vice President
Randall W. Geis
Business Development Officer
COMMERCIAL LENDING
Richard F. Kress
Vice President
Ronald P. Dezenzo
Vice President
Robert P. Nelson
Vice President
INDIRECT LENDING
Daryl L. Marshall
Vice President
PRIVATE BANKING
David M. Roberts
Vice President
8
<PAGE> 11
MANAGEMENT
CREDIT AND LOAN
ADMINISTRATION GROUP
Jeffery Hasapis
Vice President
COLLECTIONS
Deborah A. Davis
Collection Officer
CREDIT
ADMINISTRATION
Vicki L. Williamson
Credit Officer
LOAN OPERATIONS
Paula J. Lightbody
Vice President
LOAN REVIEW
Paul J. Durbak, Jr.
Assistant Vice President
RETAIL
UNDERWRITING
Paul E. Ibsen
Consumer Loan Officer
FINANCIAL GROUP
Charles J. Berry
Senior Vice President
Chief Financial Officer
ACCOUNTING
Loretta M. Higgins
Vice President
ASSET & LIABILITY
MANAGEMENT
Vanessa M. Richards
Vice President
Raymond Hannan
Investment Operations Officer
CORPORATE
PURCHASING
Edward J. Schied
Purchasing Officer
METHOD ANALYST
Sheldon F. Everhart
Vice President
HUMAN RESOURCES
Candice L. Follen
Vice President
TRAINING &
DEVELOPMENT
Barbara M. Heinricher
Assistant Vice President
RETAIL GROUP
James J. Pennetti
Executive Vice President
ADMINISTRATIVE
SERVICES
John J. Kennedy
Vice President
DEPOSIT OPERATIONS
Rebecca A. Geis
Vice President
Betsy J. Cinson
Operations Officer
INFORMATION
SYSTEMS
Robert J. Blackburn
Vice President
Richard D. Gamary
Wide Area Network Officer
Dennis D. Trenger
Data Processing Officer
MARKETING
Stephen J. Badman
Vice President
Sarah E. Howes
Marketing Officer
RETAIL SALES
& SERVICE
Derek G. Williams
Vice President
Eileen G. Halter
Assistant Vice President
Catherine Dluzyn-Hegarty
Business Development Officer
Electronic Banking
Cynthia S. Griffith
Branch Operations Officer
SECURITY/
COMPLIANCE
Duane J. Shamp
Vice President
Monica J. Graves
CRA Officer
TRUST SERVICES GROUP
Robert M. Sweeney
Executive Vice President
Robert J. Barnes
Vice President
Trust Investment Manager
Stephen C. Donatini
Vice President
Personal Trust Manager
Philip L. Francis
Vice President
Managing Trust Officer, Alliance
Marc B. Inboden
Vice President
Trust Investment Officer
Samuel M. Lincoln
Vice President
Employee Benefits Trust Manager
James H. Rutledge
Vice President
Personal Trust Officer
Mary L. Lee
Assistant Vice President
Trust Operations Manager
Perry S. Lazich
Trust Investment Officer
Richard J. Reiland, Jr.
Employee Benefits Trust Officer
Jeffrey D. Roberts
Trust Tax Officer
Robert L. Hammond
Trust Investment Officer
9
<PAGE> 12
COMMUNITY ADVISORY BOARDS
ALLIANCE
Thomas C. Lavery, Chairman
Carol A. Barnett
Carol L. Cardinal
W. Jeffrey Egli
Richard L. Elliott
Bradley Goris
Mark M. Henschen
David C. McAlister
Richard C. Sherer
George K. Weimer, Jr.
CANAL FULTON
George C. Mizarek, Chairman
Corita C. Childs
Benjamin R. Easterling
David C. Ewing
Chester E. Hayes
James E. Kunkle
Gloria G. Mizeres
Charles M. Schwendiman
Glen E. Swigart
Scott W. VanDenberg
John H. Workman
MASSILLON
Randall A. Hutsell, Chairman
Deborah J. Bachtel
Marilyn L. Fogle
Robert J. Groenke, Jr.
Thomas L. Jackson
Nancy A. Johnson
Jacque E. Jones
Richard G. Leffler, Jr.
Mark R. Percival
James D. Snively
Walter J. Telesz, M.D.
Robert K. Yund
BEACH CITY/BREWSTER
Robert W. Andrews, Chairman
Thomas J. Andrews
Dorothy G. Beals
Marion Belloni
Priscilla J. Cunningham
Lee W. Foster, Jr.
Luke W. Grabill
Charles B. Hawk
Milo J. Miller
John D. Regula
C. Waid Spidell
George F. Stertzbach
David E. Stucki
John A. Yoder
LAKE TOWNSHIP
George N. Swallow, Chairman
E. Lang D'Atri
Edmond J. DiGiacomo
Rosalee Haines
Daniel K. Hanlon
Hall B. Miles, III
Howard Miller, Jr.
Christian D. Ramsburg
Lynn E. Stuhldreher
Jane Tortola
David A. Vanderkaay
Barbara K. Wentz
Jeffrey W. Zellers
BANKING CENTERS
ALLIANCE
MOUNT UNION OFFICE
Velma A. Traphagen
Assistant Vice President
Sales and Service Officer
ALLIANCE WAL*MART OFFICE
Toni L. Kutz
Sales and Service Officer
BEACH CITY
BEACH CITY OFFICE
Ruth M. Wisselgren
Assistant Vice President
Sales and Service Officer
BREWSTER
BREWSTER OFFICE
Ruth M. Wisselgren
Assistant Vice President
Sales and Service Officer
CANAL FULTON
CANAL FULTON OFFICE
Tracy A. Murray
Sales and Service Officer
CANTON
NEWMARKET OFFICE
Karen J. Mathes
Sales and Service Officer
ROTUNDA OFFICE
Regina L. Kinlow-Thompson
Sales and Service Officer
RAFF/WEST TUSC. OFFICE
Deborah J. Miller
Sales and Service Officer
BELDEN VILLAGE OFFICE
Scott H. Berkeley
Sales and Service Officer
HILLSDALE OFFICE
Terri L. King
Sales and Service Officer
LAKE CABLE OFFICE
Patricia A. Hoopes
Assistant Vice President
Sales and Service Officer
34TH & CLEVELAND OFFICE
Susan L. Kraus
Sales and Service Officer
GREEN
GREEN IGA OFFICE
Donna M. Brown
Sales and Service Officer
HARTVILLE
HARTVILLE OFFICE
Julie Schlemmer
Sales and Service Officer
MANCHESTER
MANCHESTER OFFICE
Tracy A. Murray
Sales and Service Officer
MASSILLON
DOWNTOWN OFFICE
Jayne A. Fererro
Sales and Service Officer
AMHERST OFFICE
Michelle L. Del Rio
Sales and Service Officer
PERRY OFFICE
Ruth A. Patterson
Sales and Service Officer
WALES SQUARE OFFICE
Michelle L. Del Rio
Sales and Service Officer
NORTH CANTON
NORTH CANTON OFFICE
Peggy J. Leno
Sales and Service Officer
PORTAGE AND FRANK OFFICE
Scott H. Berkeley
Sales and Service Officer
UNIONTOWN
UNIONTOWN OFFICE
Joyce A. Midkiff
Sales and Service Officer
10
<PAGE> 13
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 controls 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/ Roger L. Mann
- -----------------
Roger L. Mann
President and Chief Executive Officer, UNB Corp.
Chief Executive Officer, United National Bank & Trust Co.
/s/ Charles J. Berry
- --------------------
Charles J. Berry
Senior Vice President and Chief Financial Officer
United National Bank & Trust Co.
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
UNB Corp.
Canton, Ohio
[LOGO]
CROWE CHIZEK
We have audited the accompanying consolidated balance sheets of UNB Corp. as of
December 31, 1997 and 1996, 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, 1997. 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, 1997
and 1996, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Crowe, Chizek and Company LLP
- ---------------------------------
Crowe, Chizek and Company LLP
Cleveland, Ohio
January 23, 1998
11
<PAGE> 14
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
(in thousands of dollars) 1997 1996
ASSETS
<S> <C> <C>
Cash and cash equivalents (Note 13) .......................................... $ 28,998 $ 34,762
Federal funds sold ........................................................... 7,500 6,800
Interest bearing deposits with banks ......................................... 1,142 157
Securities (Fair value:
1997-$72,999; 1996-$89,995) (Note 2) .................................... 72,993 89,979
Mortgage-backed securities (Fair value:
1997-$67,922; 1996-$43,058) (Note 2) .................................... 67,845 42,907
Loans held for sale .......................................................... 2,190 --
Loans:
Total loans (Notes 3 and 8) ............................................. 630,418 617,602
Less allowance for loan losses (Note 4) ................................. (9,650) (8,335)
------- -------
Net loans ........................................................... 620,768 609,267
Premises and equipment, net (Note 5) ......................................... 11,727 10,044
Intangible assets ............................................................ 5,339 6,353
Accrued interest receivable and other assets ................................. 7,811 9,710
------- -------
TOTAL ASSETS ................................................... $ 826,313 $ 809,979
========= =========
LIABILITIES
Deposits:
Noninterest bearing demand deposits ..................................... $ 82,173 $ 81,554
Interest bearing deposits (Note 6) ...................................... 567,308 519,110
------- -------
Total deposits ...................................................... 649,481 600,664
Short-term borrowings (Note 7) ............................................... 56,511 68,408
FHLB advances and capital lease (Note 8) .................................... 35,650 62,603
Accrued taxes, expenses, and other liabilities ............................... 8,151 6,969
------- -------
TOTAL LIABILITIES .............................................. 749,793 738,644
------- -------
Commitments and contingencies (Note 13)
SHAREHOLDERS' EQUITY (NOTE 1)
Common stock - $1.00 stated value, 15,000,000 shares authorized; 5,821,369 and
5,785,605 shares issued
at December 31, 1997 and 1996, respectively ................................ 5,821 5,786
Paid-in capital .............................................................. 31,277 32,497
Retained earnings ............................................................ 37,123 31,879
Treasury stock, 37,154 shares at cost ........................................ (1,440) --
Unrealized gain on securities available for sale, net ........................ 3,739 1,173
------- -------
TOTAL SHAREHOLDERS' EQUITY ..................................... 76,520 71,335
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................. $ 826,313 $ 809,979
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE> 15
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
For the three years ended December 31, 1997
(in thousands of dollars) 1997 1996 1995
INTEREST INCOME:
Interest and fees on loans:
<S> <C> <C> <C>
Taxable ................................................... $54,549 $50,951 $41,218
Tax-exempt ................................................ 185 226 274
Interest and dividends on investment and mortgage-backed securities:
Taxable ................................................... 7,746 7,341 7,562
Tax-exempt ................................................ 52 58 143
Interest on deposits with banks .................................... 34 110 101
Interest on federal funds sold ..................................... 796 503 461
------- ------- -------
Total interest income ..................................... 63,362 59,189 49,759
------- ------- -------
INTEREST EXPENSE:
Interest on deposits (Note 6) ...................................... 23,470 21,438 17,534
Interest on short-term borrowings .................................. 2,767 2,784 2,234
Interest on FHLB advances and capital leases ....................... 4,085 3,604 2,038
------- ------- -------
Total interest expense .................................... 30,322 27,826 21,806
------- ------- -------
NET INTEREST INCOME ..................................................... 33,040 31,363 27,953
PROVISION FOR LOAN LOSSES (NOTE 4) ...................................... 2,929 3,140 1,750
------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ..................... 30,111 28,223 26,203
OTHER INCOME:
Service charges on deposits ........................................ 2,493 2,378 2,367
Trust department income ............................................ 3,307 2,714 2,509
Other operating income ............................................. 1,114 897 668
Gains on loans originated for sale ................................. 261 -- 67
Investment securities gains, net ................................... 22 369 6
------- ------- -------
Total other income ........................................ 7,197 6,358 5,617
------- ------- -------
OTHER EXPENSES:
Salaries, wages and benefits (Note 9) .............................. 11,361 10,806 10,144
Occupancy expense .................................................. 1,322 1,170 1,213
Equipment expense .................................................. 3,145 2,595 2,225
Other operating expenses (Note 11) ................................. 7,677 7,582 7,073
------- ------- -------
Total other expenses ...................................... 23,505 22,153 20,655
------- ------- -------
INCOME BEFORE INCOME TAXES .............................................. 13,803 12,428 11,165
PROVISION FOR INCOME TAXES (NOTE 12) .................................... 4,797 4,273 3,786
------- ------- -------
NET INCOME .............................................................. $ 9,006 $ 8,155 $ 7,379
EARNINGS PER COMMON SHARE (NOTE 1): ======= ======= =======
Basic .............................................................. $ 1.56 $ 1.42 $ 1.28
Diluted ............................................................ $ 1.53 $ 1.38 $ 1.26
======= ======= =======
</TABLE>
The accompanying notes are an integral
part of these financial statements
13
<PAGE> 16
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the three years ended December 31, 1997
(in thousands of dollars)
Unrealized
Gain/(Loss)
on Securities Total
Common Paid-In Retained Available Treasury Shareholders'
Stock Capital Earnings for Sale Stock Equity
------- -------- -------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $ 2,870 $31,569 $25,642 $ (1,441) $58,640
Net income for year........................ 7,379 7,379
Cash dividends ($0.525 per share) ......... (3,016) (3,016)
Stock options exercised ................... 4 34 38
Change in unrealized gain (loss)
on securities available for sale ....... 2,286 2,286
------- -------- -------- -------- --------- ---------
BALANCE, DECEMBER 31, 1995 2,874 31,603 30,005 845 65,327
Net income for year ....................... 8,155 8,155
100% stock dividend ....................... 2,881 (2,881)
Cash dividends ($0.59 per share) .......... (3,400) (3,400)
Shares issued through dividend
reinvestment plan ...................... 28 870 898
Stock options exercised ................... 3 24 27
Change in unrealized gain (loss)
on securities available for sale ....... 328 328
------- -------- -------- -------- --------- ---------
BALANCE, DECEMBER 31, 1996 5,786 32,497 31,879 1,173 71,335
Net income for year ....................... 9,006 9,006
Cash dividends ($0.65 per share) .......... (3,762) (3,762)
Shares issued through dividend
reinvestment plan ...................... 4 129 133
Stock options exercised ................... 31 158 189
Change in unrealized gain (loss)
on securities available for sale ....... 2,566 2,566
Treasury stock purchases .................. $(4,873) (4,873)
Treasury stock sold and issued
for stock options ...................... (1,507) 3,433 1,926
------- -------- -------- -------- --------- ---------
BALANCE, DECEMBER 31, 1997 ................... $ 5,821 $31,277 $37,123 $ 3,739 $(1,440) $76,520
======= ======== ======== ======== ========= =========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
14
<PAGE> 17
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three years ended December 31, 1997
(in thousands of dollars) 1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................. $ 9,006 $ 8,155 $ 7,379
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization ........................... 1,046 780 789
Provision for loan losses ............................... 2,929 3,140 1,750
Net securities gains .................................... (22) (369) (6)
Net accretion on securities ............................. (797) (290) (462)
Amortization of intangible assets ....................... 1,014 1,023 1,095
Loans originated for sale ............................... (18,099) -- (4,932)
Proceeds from sale of loan originations ................. 16,125 -- 5,144
Changes in:
Interest receivable ..................................... (249) (59) (505)
Interest payable ........................................ (459) 414 1,018
Other assets and liabilities, net ....................... 3,113 (1,381) 626
Deferred income tax benefit ............................. (644) (785) (310)
Deferred income ......................................... (3) (5) (5)
-------- -------- --------
Net cash from operating activities ................. 12,960 10,623 11,581
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest bearing deposits with banks .......... (985) 358 (347)
Net change in federal funds sold ............................ (700) (2,500) (3,700)
Investment and mortgage-backed securities:
Proceeds from sales of securities available for sale .... 14,113 14,009 4,723
Proceeds from maturities of securities held to maturity . 6,993 22,035 38,953
Proceeds from maturities of securities available for sale 169,015 32,978 30,134
Purchases of securities held to maturity ................ (6,878) (20,903) (38,258)
Purchases of securities available for sale .............. (159,914) (68,659) (32,273)
Purchases of mortgage-backed securities
available for sale .................................... (49,293) (12,638)
Principal payments received on
mortgage-backed securities held to maturity ........... 6,383 9,250 7,819
Principal payments received on
mortgage-backed securities available for sale ......... 16,336 20,413 4,127
Net increase in loans made to customers ..................... (12,730) (98,817) (103,206)
Loans purchased ............................................. (1,494) (2,251) (4,066)
Purchases of premises and equipment, net .................... (2,729) (2,013) (1,003)
Purchases of assets to be leased ............................ (658) -- --
Principal payments received under leases .................... 236 149 140
-------- -------- --------
Net cash from investing activities ................. (22,305) (108,589) (96,957)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits .................................... 48,817 53,477 60,416
Cash dividends paid, net of shares issued
through dividend reinvestment ............................. (3,629) (2,502) (3,016)
Purchase of treasury stock .................................. (4,873)
Sales of treasury stock ..................................... 1,926
Proceeds from stock options exercised ....................... 189 26 38
Net increase/(decrease) in short-term borrowings ............ (11,897) 18,749 14,762
Proceeds from FHLB advances ................................. 10,000 47,000 25,000
Repayments of FHLB advances ................................. (37,163) (15,757) (10,300)
Proceeds from capital lease ................................. 248 -- --
Repayments on capital lease ................................. (37) -- --
-------- -------- --------
Net cash from financing activities ................. 3,581 100,993 86,900
-------- -------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS .......................... (5,764) 3,027 1,524
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ................... 34,762 31,735 30,211
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR ......................... $ 28,998 $ 34,762 $ 31,735
======== ======== ========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
15
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Unless otherwise indicated, amounts are in thousands, except per share data.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of UNB Corp. (Corporation) and its wholly owned subsidiaries, the
United National Bank & Trust Company (Bank), United Banc Financial Services,
Inc., 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, trust and investment services,
and consumer finance, with operations conducted through its main office and
branches located throughout Stark and southern Summit Counties of Ohio. The
majority of the Corporation's income is derived from commercial and retail
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 and long-term borrowings.
For the years ended December 31, 1997, 1996 and 1995, the Corporation paid
interest of $30,781, $27,412 and $20,788, respectively, and income taxes of
$5,005, $5,110 and $4,290, respectively.
INVESTMENT AND MORTGAGE-BACKED SECURITIES: The Corporation classifies debt
and equity securities as held to maturity, available for sale or trading.
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 1997 and 1996, 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 amortized cost 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
sells the servicing rights on loans sold and incurs no recourse obligation in
connection with 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. 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.
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 changes
in impaired loans is included in the 1997, 1996 and 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 and are excluded from reported impaired loans. 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. 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 and renegotiated
loans and non-performing and past-due asset disclosures.
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
expense 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 and $530 at December 31, 1997 and 1996, respectively.
16
<PAGE> 19
GOODWILL AND IDENTIFIED INTANGIBLES: Goodwill is the excess of purchase
price over identified net assets in business acquisitions. Goodwill is expensed
on the straight-line method over no more than 10 years. Identified intangibles
represent the value of depositor relationships purchased and are expensed on
accelerated methods over 8 to 10 years. Goodwill and identified intangibles are
assessed for impairment based on estimated undiscounted cash flows, and written
down if necessary.
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: Income tax expense is the sum of the current year
income tax due or refundable and the change in deferred tax assets and
liabilities. Deferred tax assets and liabilities are the expected future tax
consequences of temporary differences between the carrying amounts and tax bases
of assets and liabilities, computed using enacted tax rates. A valuation
allowance, if needed, reduces deferred tax assets to the amount expected to be
realized.
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 comprise 13.5%, 11.2%, 41.3% and 34.0%
of total loans, respectively at December 31, 1997. Indirect loans accounted for
74.0% of consumer loans at December 31, 1997.
EARNINGS AND DIVIDENDS PER SHARE: Basic and diluted earnings per share are
computed under the provisions of Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share," which was adopted retroactively by the
Corporation at the beginning of the fourth quarter of 1997. All prior amounts
have been restated to be comparable. Basic earnings per share is based on net
income divided by the weighted average number of shares outstanding during the
period. Diluted earnings per share shows the dilutive effect of additional
common shares issuable under stock options 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 years presented.
The basic weighted average shares were 5,781,568, 5,762,941 and 5,745,014
for 1997, 1996 and 1995, respectively. Diluted weighted average shares were
5,893,006, 5,907,200 and 5,856,954 for 1997, 1996 and 1995, respectively. The
Corporation declared a 100% stock dividend in 1996 which was recorded by a
transfer, equal to the stated value of the shares issued, from retained earnings
to common stock. All per share data has been adjusted for the stock dividend.
STOCK OPTIONS: 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.
Expense for employee compensation under stock option plans is based on
Accounting Principles Board (APB) Opinion No. 25, with expense reported only if
options are granted below market price at grant date. Pro forma disclosures of
net income and earnings per share are provided as if the fair value method of
SFAS No. 123 were used for stock-based compensation.
DIVIDEND REINVESTMENT PLAN: The dividend reinvestment plan, effective March
30, 1989, authorized the sale of 578,812 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. Shares totalling 4,224 and 33,385 were
issued pursuant to the plan in 1997 and 1996, respectively, after giving effect
to the 1996 stock dividend. In addition, in 1997, 33,025 treasury shares were
purchased to fund dividend reinvestment. In 1995, stock was purchased in the
open market at the current market price. 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 1996 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.
17
<PAGE> 20
FAIR VALUES OF FINANCIAL INSTRUMENTS: Fair values of financial instruments
are estimated using relevant market information and other assumptions, as more
fully disclosed separately. Fair value estimates involve uncertainties and
matters of significant judgment regarding interest rates, credit risk,
prepayments, and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could
significantly affect the estimates. The fair value estimates of existing on- and
off-balance sheet financial instruments do not include the value of anticipated
future business or the values of assets and liabilities not considered financial
instruments.
FINANCIAL STATEMENT PRESENTATION: Certain previously reported consolidated
financial statement amounts have been reclassified to conform to the 1997
presentation.
NOTE 2 - 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, 1997
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- -------- --------
Securities available for sale:
<S> <C> <C> <C> <C>
U.S. Treasury securities ......................... $ 17,005 $ 42 $ (1) $ 17,046
Obligations of U.S. government
agencies and corporations ....................... 36,476 119 (4) 36,591
Securities held to maturity:
Obligations of state and political subdivisions .. 951 2 (1) 952
Corporate bonds and other debt securities ........ 746 5 -- 751
-------- -------- -------- --------
Total debt securities ......................... 55,178 168 (6) 55,340
Equity securities available for sale ................ 11,581 5,081 -- 16,662
Asset-backed securities available for sale .......... 999 -- (2) 997
-------- -------- -------- --------
Total investment securities ................... 67,758 5,249 (8) 72,999
Mortgage-backed securities available for sale ....... 60,281 527 (97) 60,711
Mortgage-backed securities held to maturity ......... 7,134 79 (2) 7,211
-------- -------- -------- --------
Total mortgage-backed securities .............. 67,415 606 (99) 67,922
-------- -------- -------- --------
Total investment and mortgage-backed securities $135,173 $ 5,855 $ (107) $140,921
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- -------- --------
Securities available for sale:
<S> <C> <C> <C> <C>
U.S. Treasury securities ......................... $ 23,062 $ 65 $ (41) $ 23,086
Obligations of U.S. government
agencies and corporations ....................... 52,366 50 (45) 52,371
Securities held to maturity:
U.S. Treasury securities ......................... 360 5 -- 365
Obligations of state and political subdivisions .. 1,051 4 -- 1,055
Corporate bonds and other debt securities ........ 826 7 -- 833
-------- -------- -------- --------
Total debt securities ......................... 77,665 131 (86) 77,710
Equity securities available for sale ................ 10,514 1,771 -- 12,285
-------- -------- -------- --------
Total investment securities ................... 88,179 1,902 (86) 89,995
Mortgage-backed securities available for sale ....... 29,431 89 (113) 29,407
Mortgage-backed securities held to maturity ......... 13,500 151 -- 13,651
-------- -------- -------- --------
Total mortgage-backed securities .............. 42,931 240 (113) 43,058
-------- -------- -------- --------
Total investment and mortgage-backed securities $131,110 $ 2,142 $ (199) $133,053
======== ======== ======== ========
</TABLE>
18
<PAGE> 21
Mortgage-backed securities consist of fixed and variable rate CMOs and
government guaranteed mortgage-backed securities issued by FHLMC, FNMA, and
GNMA. CMOs totaled $49,452 and $30,207 and government guaranteed mortgage-backed
securities totaled $18,393 and $12,700 at December 31, 1997 and 1996,
respectively.
The amortized cost and estimated fair value of debt securities at December
31, 1997, by contractual maturity, are shown below. Actual 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, 1997
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 ... $15,006 $15,036 5.89%
Due after one year
through five years ....... 1,999 2,010 6.17%
------- ------- -----
Total ..................... 17,005 17,046 5.92%
------- ------- -----
U.S. government agencies
and corporations
Due in one year or less ... 17,473 17,502 6.01%
Due after one year
through five years ....... 19,003 19,089 6.52%
------- ------- -----
Total ..................... 36,476 36,591 6.28%
------- ------- -----
$53,481 $53,637 6.17%
======= ======= =====
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
Estimated Weighted
Amortized Fair Average
Cost Value Yield
------- ------- -----
<S> <C> <C> <C>
Securities held to maturity:
Obligations of state and
political subdivisions
Due in one year or less . $ 951 952 4.23%
------- ------- -----
Total ................... 951 952 4.23%
------- ------- -----
Corporate bonds and other
debt securities
Due after one year
through five years ..... 746 751 8.44%
------- ------- -----
Total ................... 746 751 8.44%
------- ------- -----
$ 1,697 $ 1,703 6.08%
======= ======= =====
Asset-backed securities
available for sale ........ $ 999 $ 997 7.00%
------- ------- -----
Mortgage-backed
and collateralized
mortgage obligations
available for sale ........ 60,281 60,711 6.52%
------- ------- -----
Mortgage-backed and
collateralized mortgage
obligations held
to maturity ............... 7,134 7,211 7.80%
------- ------- -----
$68,414 $68,919 6.66%
======= ======= =====
</TABLE>
Sales of available for sale securities were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
Debt and mortgage-backed securities:
<S> <C> <C> <C>
Proceeds ........................ $14,113 $13,239 $ 4,723
Gross gains ..................... 39 2 6
Gross losses .................... 17 95 --
Equity Securities:
Proceeds ........................ -- $ 770 --
Gross gains ..................... -- 462 --
</TABLE>
At December 31, 1997, there are 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 $103,000 and $93,700 as
of December 31, 1997 and 1996, respectively, were pledged to secure public funds
or other obligations.
19
<PAGE> 22
NOTE 3 - LOANS
Loans are comprised of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
Commercial, financial
<S> <C> <C>
and agricultural................. $ 85,102 $ 78,563
Commercial real estate............ 70,896 65,875
Real estate....................... 260,190 242,652
Consumer.......................... 214,230 230,512
-------- --------
Total loans.................... $630,418 $617,602
======== ========
</TABLE>
Impaired loans are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
Loans with no
allowance for loan losses
<S> <C> <C> <C>
allocated ............... $281 $ 63 $ --
Loans with allowance
for loan losses allocated -- 205 --
Amount of allowance
allocated ............... -- 135 --
---- ---- ----
Average of impaired loans
year-to-date ............ $335 $309 $603
Interest income recognized
during impairment ....... 33 28 53
Cash-basis interest income
recognized year-to-date 32 28 52
</TABLE>
Loans with carrying values of $191 and $214 were transferred to foreclosed
real estate in 1997 and 1996, respectively.
Certain directors, executive officers and principal shareholders of UNB
Corp. and its subsidiaries are loan customers of the subsidiary bank. A summary
of aggregate related party loan activity, for loans aggregating $60 or more to
any one related party, is as follows for the year ended December 31:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Balance, January 1, . $ 14,135 $ 8,417
New loans ........... 3,533 7,290
Repayments .......... (6,895) (1,572)
Other Changes ....... (1,617) --
-------- --------
Balance, December 31, $ 9,156 $ 14,135
======== ========
</TABLE>
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses for the years ended December
31, are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Balance at January 1, . $ 8,335 $ 7,242 $ 6,348
Provision charged
to expense ........... 2,929 3,140 1,750
Loans charged off ..... (2,911) (3,162) (1,558)
Recoveries on loans
previously charged off 1,297 1,115 702
------- ------- -------
Balance at December 31, $ 9,650 $ 8,335 $ 7,242
======= ======= =======
</TABLE>
NOTE 5 - PREMISES AND EQUIPMENT
The components of premises and equipment at December 31, are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Land ................... $ 1,742 $ 1,752
Buildings .............. 6,419 5,388
Furniture and fixtures . 9,696 8,475
Leasehold improvements . 1,710 1,308
Total premises and
equipment .......... 19,567 16,923
Accumulated depreciation
and amortization ... (7,840) (6,879)
-------- --------
Premises and
equipment, net .. $ 11,727 $ 10,044
========= ========
</TABLE>
At December 31, 1997, the Corporation is 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>
<CAPTION>
<S> <C>
1998.................................................$1,822
1999..................................................1,828
2000..................................................1,355
2001....................................................731
2002....................................................657
------
Total.............................................$6,393
======
</TABLE>
Rental expense amounted to approximately $1,755, $1,465 and $1,043 in 1997,
1996 and 1995, respectively.
NOTE 6 - INTEREST BEARING DEPOSITS
Total interest bearing deposits as presented on the consolidated balance
sheets are comprised of the following classifications:
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
Interest bearing demand .... $ 77,361 $ 73,154
Savings .................... 183,646 168,833
Time:
In denominations
under $100,000 ......... 257,833 240,644
In denominations of
$100,000 or more ....... 48,468 36,479
-------- --------
Total interest bearing
deposits ............ $567,308 $519,110
======== ========
</TABLE>
<TABLE>
<CAPTION>
At year-end 1997, stated maturities of time deposits are as follows:
<S> <C>
1998.................................................$164,246
1999...................................................90,977
2000...................................................26,638
2001...................................................16,243
2002....................................................6,164
Thereafter..............................................2,033
--------
Total.............................................$306,301
========
</TABLE>
Related party deposits total $8,003 and $2,430 at year-end 1997 and 1996,
respectively.
20
<PAGE> 23
<TABLE>
<CAPTION>
Interest expense on deposits is summarized below:
Years ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Interest bearing demand $ 1,226 $ 1,409 $ 1,316
Savings ............... 5,496 4,488 3,969
Time:
In denominations
under $100,000 .... 14,270 13,266 10,682
In denominations of
$100,000 or more .. 2,478 2,275 1,567
------- ------- -------
Total interest
on deposits .... $23,470 $21,438 $17,534
======= ======= =======
</TABLE>
NOTE 7 - SHORT-TERM BORROWINGS
Federal funds purchased, securities sold under agreements to repurchase,
and treasury tax and loan deposits are financing arrangements. Physical control
is maintained for securities sold under repurchase agreements. Information
concerning all short-term borrowings is summarized as follows, at December 31:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Securities sold under
repurchase agreements ......... $51,289 $61,618
Federal funds purchased ........ 100 1,628
U.S. Treasury tax and loan notes 5,122 5,162
------- -------
Total short-term borrowings . $56,511 $68,408
------- -------
Weighted average interest
rate at period end ............ 4.8% 4.9%
------- -------
Average amount outstanding
during year ................... $58,731 $58,642
======= =======
Approximate weighted average
interest rate during the year . 4.7% 4.8%
------- -------
Maximum amount outstanding
as of any month-end ........... $68,471 $68,408
======= =======
</TABLE>
NOTE 8 - FHLB ADVANCES AND CAPITAL LEASE
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 by qualifying
first mortgage loans. Scheduled principal payments on amortizing advances are
shown in the year they are due. At December 31, 1997, FHLB advances are
comprised of the following:
<TABLE>
<CAPTION>
Maturity Interest Rate Amount
- -------- ------------- -------
<S> <C> <C>
1998 6.15% - 6.70% $ 7,498
1999 5.35% - 6.70% 17,848
2000 5.50% - 6.85% 6,226
2001 6.00% - 6.70% 3,188
2002 6.25% 330
2003 6.25% 350
-------
Total $35,440
=======
</TABLE>
Based on the Bank's investment in FHLB stock, the maximum dollar amount of
FHLB advance borrowings available to the Bank is $134,598.
During the second quarter of 1997, the Bank entered into capital lease
arrangements in order to finance the acquisition of its computer output to laser
disk technology (COLD) which includes computer hardware and related software in
the amount of $252. The lease terms call for sixty monthly payments of $5 with
the last payment due in March, 2002. The balance outstanding at December 31,
1997 was $210.
NOTE 9 - 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>
1997 1996
<S> <C> <C>
Actuarial present value of
accumulated benefit obligation,
including vested benefits of
$3,432 and $3,998 at
December 31, 1997 and 1996,
respectively ...................... $ 3,521 $ 4,110
------- -------
Plan assets at fair value, primarily
U.S. government securities,
corporate bonds and investment
in equity funds ................... 6,881 6,260
Actuarial present value of
projected benefit obligation
for services rendered to date ..... (5,358) (6,281)
------- -------
Projected benefit obligation
in excess of plan assets .......... 1,523 ( 21)
Unrecognized net (gain)/loss ....... ( 840) 508
Unrecognized transition asset,
net of amortization ............... ( 47) ( 79)
Unrecognized prior service cost .... 84 91
------- -------
Prepaid pension asset .......... $ 720 $ 499
======= =======
</TABLE>
21
<PAGE> 24
Net pension expense included the following:
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Services cost-benefits
earned during the year $ 433 $ 415 $ 372
Interest cost on
benefit obligation ... 464 399 353
Return on plan assets . (1,459) (830) (922)
Net amortization
and deferral ......... 928 381 607
------- ------- -------
Net pension expense ... $ 366 $ 365 $ 410
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
<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 $264, $225 and $219 in 1997, 1996 and
1995, 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>
1997 1996
<S> <C> <C>
Retirees ..................... $ (67) $ (201)
Fully eligible active plan
participants ................ (283) (337)
Other active plan participants (501) (1,198)
-------- --------
Accumulated postretirement
benefit obligation .......... (851) (1,736)
Unrecognized gain ............ (437) (488)
Unrecognized transition
obligation .................. 6 1,146
-------- --------
Accrued postretirement
benefit ..................... $(1,282) $(1,078)
======== ========
</TABLE>
Net periodic postretirement benefit expense for 1997, 1996 and 1995 included
the following components:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits attributed
to service during the period $119 $106 $ 94
Interest cost on accumulated
postretirement benefit
obligation 122 110 100
Amortization on transition
obligation over 20 years 25 76 76
---- ---- ----
Total $266 $292 $270
==== ==== ====
</TABLE>
Benefit payments of $15, $55 and $48 were made for postretirement medical
benefits in 1997, 1996 and 1995, respectively.
For measurement purposes, an 11.5% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1997. In 1996 and
1995, a 13% annual rate of increase in the per capita cost of covered health
care benefits was assumed. The rate was assumed to gradually decrease to 5.5%
after six years in 1997, 7% after three years in 1996, and 7% after four years
in 1995. The health care cost trend assumption has a significant effect on the
amounts reported. An increase in the assumed health care cost trend rate by 1%
in each year would increase the accumulated postretirement benefit obligation by
approximately $124 and $226 at December 31, 1997 and 1996, respectively, and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by approximately $31, $28
and $25 for 1997, 1996 and 1995, respectively.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7% at December 31, 1997, 1996 and 1995.
NOTE 10 - STOCK OPTION AND PERFORMANCE UNIT PLAN
In 1987, the shareholders approved a Stock Option and Performance Unit Plan
reserving 382,020 shares of common stock, adjusted for stock dividends and
splits, for the granting of options to executive officers and other senior
Management personnel. Options are not exercisable for at least four years from
the date of grant and are not fully exercisable until six years from the date of
grant. The duration of the exercise period is ten years. In 1997, the
shareholders approved a Stock Option Plan reserving 500,000 shares of common
stock, for the granting of options to directors and officers of the Corporation
and its affiliates. Non-qualified stock options are immediately exercisable.
Qualified stock options are partially exercisable one year from the date of
grant and become fully exercisable 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.
SFAS No. 123, which became effective for 1996, requires pro forma disclosures
for companies that do not adopt its fair value accounting method for stock-based
employee compensation. Accordingly, the following pro forma information presents
net income and earnings per share had the Standard's fair value method been used
to measure compensation cost for stock option plans. Compensation cost actually
recognized for stock options was $0 for 1997, 1996 and 1995.
22
<PAGE> 25
<TABLE>
<CAPTION>
1987 PLAN Number of Shares
-----------------------------------------
Available Weighted-average Range of Option
for Grant Exercised Outstanding exercise price Price per Share
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 83,088 39,180 259,752 $ 10.06 $ 7.02 $ 14.50
Granted (23,844) -- 23,844 19.25 19.25 19.25
Exercised -- 8,388 (8,388) 7.33 7.02 9.53
--------- --------- ----------
Balance, December 31, 1995 59,244 47,568 275,208 10.94 7.02 19.25
Granted (27,682) -- 27,682 22.00 22.00 22.00
Forfeited 800 -- (800) 22.00 22.00 22.00
Exercised -- 4,700 (4,700) 7.76 7.02 12.00
--------- --------- ----------
Balance, December 31, 1996 32,362 52,268 297,390 11.99 7.02 22.00
Granted (32,800) -- 32,800 30.00 30.00 30.00
Forfeited 1,000 -- (1,000) 30.00 30.00 30.00
Exercised -- 92,584 (92,584) 8.15 7.02 14.50
--------- --------- ----------
Balance, December 31, 1997 562 144,852 236,606 $ 15.84 $ 7.02 $ 30.00
========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
1997 PLAN Number of Shares
-----------------------------------------
Available Weighted-average Range of Option
for Grant Exercised Outstanding exercise price Price per Share
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 1, 1997 500,000 -- --
Granted (8,500) -- 8,500 $ 31.38 $ 31.38 $ 31.38
Exercised -- 700 (700) 31.38 31.38 31.38
--------- --------- ----------
Balance, December 31, 1997 491,500 700 7,800 $ 31.38 $ 31.38 $ 31.38
========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net income as reported........... $9,006 $8,155 $7,379
Pro forma net income............. 8,933 8,124 7,362
Basic earnings per
share as reported............... $1.56 $1.42 $1.28
Pro forma basic
earnings per share.............. 1.54 1.41 1.28
Diluted earnings
per share as reported........... 1.53 1.38 1.26
Pro forma diluted
earnings per share.............. 1.52 1.38 1.26
</TABLE>
In future years, the pro forma effect of not applying this Standard is
expected to increase as additional options are granted.
Options exerciseable at year-end are as follows:
<TABLE>
<CAPTION>
Number Weighted-average
of options exercise price
---------- ----------------
<S> <C> <C>
1995.......................... 93,866.0 $ 7.77
1996.......................... 137,156.5 8.66
1997.......................... 148,309.0 12.84
</TABLE>
The weighted average remaining option life for outstanding options issued
under the 1987 Stock Option Plan at year-end 1997 is 5.8 years. The weighted
average remaining option life for outstanding options issued under the 1997
Stock Option Plan is 9.2 years at year-end 1997.
For options granted during 1997 and 1996, the weighted-average fair values at
grant date are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Options granted
at market price
1987 Plan
Exercise price $ 30.00 $ 22.00
Fair value ... 4.58 2.95
1997 Plan
Exercise price $ 31.38
Fair value ... 3.08
</TABLE>
The fair value of options granted during 1997, 1996 and 1995 is estimated
using the following information:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
1987 Plan
Risk free interest rate 6.32% 5.60% 8.00%
Expected life ......... 6 years 7 years 7 years
Expected volatility of
stock price .......... 6.32% 7.80% 9.30%
Expected dividends .... 2.98% 3.09% 3.18%
1997 Plan
Risk free interest rate 6.34%
Expected life ......... 3 years
Expected volatility of
stock price .......... 5.89%
Expected dividends .... 2.61%
</TABLE>
23
<PAGE> 26
Note 11 - OTHER OPERATING EXPENSES
Other operating expenses are summarized as follows:
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
<S> <C> <C> <C>
FDIC deposit insurance.. $ 132 $ 812 $ 692
State franchise and
other taxes............ 721 807 725
Stationery, supplies
and postage............ 1,042 892 1,017
Marketing expense....... 611 579 573
Contributions........... 198 50 192
Professional fees....... 888 727 530
Intangible amortization 1,014 1,023 1,095
Other expenses.......... 3,071 2,692 2,249
------ ------ ------
Total other
operating expenses.. $7,677 $7,582 $7,073
====== ====== ======
</TABLE>
NOTE 12 - INCOME TAXES
Income taxes consist of the following:
Years ended December 31,
1997 1996 1995
Current tax expense $5,441 $5,058 $4,096
Deferred tax benefit (644) (785) (310)
------ ------ ------
Total income taxes $4,797 $4,273 $3,786
====== ====== ======
The sources of gross deferred tax assets and gross deferred tax liabilities
are as follows at December 31:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Items giving rise to deferred
tax assets:
Allowance for loan losses in
excess of tax reserve ...... $ 3,281 $ 2,675 $ 2,184
Deferred loan fees and costs -- -- 25
Postretirement benefits ..... 502 415 333
OREO writedown .............. 94 94 94
Deferred compensation ....... 421 236 111
Intangible amortization ..... 270 189 104
Other ....................... 186 54 29
Items giving rise to deferred
tax liabilities:
Depreciation ................ (870) (805) (775)
Deferred loan fees and costs (278) (208) --
Loan basis from acquisition . (263) (341) (429)
FHLB stock .................. (443) (286) (162)
Pension ..................... (231)
Unrealized gain on securities
available for sale ......... (1,926) (604) (435)
Other ....................... (95) (93) (369)
------- ------- -------
Net deferred tax asset ......... $ 648 $ 1,326 $ 710
======= ======= =======
</TABLE>
Based on prior taxes paid, the deferred tax asset is more likely than not to
be realized.
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,
1997 1996 1995
<S> <C> <C> <C>
Income taxes computed
at the statutory tax rate
on pretax income.......... $4,693 $4,225 $3,796
Add tax effect of:
Tax exempt income....... (80) (82) (123)
Other................... 184 130 113
------ ------ ------
Total income taxes... $4,797 $4,273 $3,786
====== ====== ======
</TABLE>
Taxes attributable to net securities gains approximated $7 in 1997, $125 in
1996 and $2 in 1995.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
RESERVE REQUIREMENTS: The Corporation's subsidiary bank is required to
maintain approximately $10,800 of cash on hand or on deposit with the Federal
Reserve Bank to meet regulatory reserve requirements at December 31, 1997. These
funds 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>
1997 1996
<S> <C> <C>
Fixed rate commitments to
extend credit...................... $ 47,166 $ 30,954
Variable rate commitments
to extend credit................... 118,086 104,168
Variable rate standby letters
of credit and financial guarantees 7,778 5,974
Interest rate swaps --
notional amount.................... 3,750 5,150
</TABLE>
The amounts above represent contracts entered into by the Corporation, net of
amounts participated to other financial institutions.
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.
24
<PAGE> 27
INTEREST RATE SWAP: The Corporation has entered into an agreement to assume
variable interest payments in exchange for fixed interest payments (interest
rate swaps). The notional amounts of the interest rate swaps do not represent
amounts exchanged by the parties. 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
of this agreement for 1997, 1996 and 1995, was approximately $126, $158 and
$219, 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 consolidated financial position.
NOTE 14 - 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, 1997, approximately $174 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 and Bank are subject to regulatory capital requirements
administered by federal banking agencies. Capital adequacy guidelines and prompt
corrective action regulations involve quantitative measures of assets,
liabilities, and certain off-balance-sheet items calculated under regulatory
accounting practices. Capital amounts and classifications are also subject to
qualitative judgments by regulators about components, risk weightings, and other
factors, and the regulators can lower classifications in certain cases. Failure
to meet various capital requirements can initiate regulatory action that could
have a direct material effect on the consolidated financial statements.
The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized, although these
terms are not used to represent overall financial condition. If adequately
capitalized, regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required. The minimum
requirements are:
<TABLE>
<CAPTION>
Tier 1
Capital to risk- capital to
weighted assets average
Total Tier 1 assets
---------------- ----------
<S> <C> <C> <C>
Well capitalized 10% 6% 5%
Adequately capitalized 8% 4% 4%
Undercapitalized 6% 3% 3%
</TABLE>
At year-end, actual capital levels (in millions) and minimum required levels
are:
<TABLE>
<CAPTION>
Minimum Required
Minimum Required To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
Amount Ratio Amount Ratio Amount Ratio
1997
<S> <C> <C> <C> <C> <C> <C>
TOTAL CAPITAL (TO RISK WEIGHTED ASSETS)
CONSOLIDATED............................. $75.0 13.3% $45.2 8.0% $56.4 10.0%
BANK..................................... $62.7 11.3% $44.5 8.0% $55.6 10.0%
TIER 1 CAPITAL (TO RISK WEIGHTED ASSETS)
CONSOLIDATED............................. $67.9 12.0% $22.6 4.0% $33.9 6.0%
BANK..................................... $42.7 7.7% $22.2 4.0% $33.4 6.0%
TIER 1 CAPITAL (TO AVERAGE ASSETS)
CONSOLIDATED............................. $67.9 8.2% $33.0 4.0% $41.2 5.0%
BANK..................................... $42.7 5.2% $32.6 4.0% $40.7 5.0%
1996
Total capital (to risk weighted assets)
Consolidated............................. $71.3 13.0% $44.0 8.0% $55.1 10.0%
Bank..................................... $59.9 11.0% $43.7 8.0% $54.6 10.0%
Tier 1 capital (to risk weighted assets)
Consolidated............................. $64.4 11.7% $22.0 4.0% $33.0 6.0%
Bank..................................... $40.1 7.3% $21.8 4.0% $32.7 6.0%
Tier 1 capital (to average assets)
Consolidated............................. $64.4 7.6% $34.1 4.0% $42.7 5.0%
Bank..................................... $40.1 5.1% $31.3 4.0% $39.2 5.0%
The Corporation and Bank at year-end 1997 were categorized as well capitalized.
</TABLE>
25
<PAGE> 28
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.
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, 1997 and 1996, respectively:
<TABLE>
<CAPTION>
1997 Estimated 1996 Estimated
Carrying Fair Carrying Fair
Value Value Value Value
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Financial assets:
Cash equivalents ........... $ 28,998 $ 28,998 $ 34,762 $ 34,762
Short-term investments ..... 8,642 8,642 6,957 6,957
Securities ................. 140,838 140,921 132,886 133,053
Loans, net ................. 622,958 618,800 609,267 574,775
Accrued interest receivable 4,479 4,479 4,230 4,230
Financial liabilities:
Demand and savings deposits (343,180) (343,180) (323,541) (323,541)
Time deposits .............. (306,301) (303,710) (277,123) (277,542)
Repurchase agreements ...... (51,289) (51,289) (61,618) (61,618)
Other short-term borrowings (5,222) (5,222) (6,790) (6,790)
FHLB advances .............. (35,440) (35,736) (62,603) (63,673)
Accrued interest payable ... (3,289) (3,289) (3,748) (3,748)
Off-balance-sheet instruments:
Commitments to extend credit 165,252 165,252 135,122 135,122
Standby letters of credit .. 7,778 7,778 5,974 5,974
Interest rate swaps ........ -- 171 -- 294
</TABLE>
26
<PAGE> 29
NOTE 16 - PARENT COMPANY
Condensed financial information of UNB Corp. (parent company only) follows:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(in thousands of dollars) 1997 1996
<S> <C> <C>
ASSETS
Cash and cash equivalents ......................... $ 731 $ 3,306
Interest bearing deposits in subsidiary bank ...... 437 38
Other securities .................................. 8,111 5,036
Marketable equity securities ...................... 7,365 3,499
Investment in subsidiaries, at equity in underlying
value of net assets ............................. 48,801 46,940
Other assets ...................................... 11,075 12,516
------- -------
Total Assets .................................. $76,520 $71,335
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' Equity .............................. $76,520 $71,335
------- -------
Total Liabilities and Shareholders' Equity .... $76,520 $71,335
======= =======
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(in thousands of dollars) 1997 1996 1995
<S> <C> <C> <C>
INCOME
Cash dividends from subsidiary ...................... $7,000 $14,010 $2,129
Interest on deposits in subsidiary bank ............. 6 2 3
Dividends on marketable equity securities ........... 106 100 49
Interest on securities and mortgage-backed securities 222 406 569
Income on subordinated debt ......................... 780 -- --
Other interest income ............................... 5 75 --
Investment securities gains ......................... 5 461 --
----- ------ -----
Total income .................................... 8,124 15,054 2,750
----- ------ -----
EXPENSES
Other expenses ...................................... 278 283 237
----- ------ -----
Total expenses .................................. 278 283 237
----- ------ -----
INCOME BEFORE FEDERAL INCOME TAXES AND EQUITY IN
UNDISTRIBUTED NET INCOME OF SUBSIDIARIES ............... 7,846 14,771 2,513
FEDERAL INCOME TAX EXPENSE ............................... 258 230 114
----- ------ -----
INCOME BEFORE EQUITY IN UNDISTRIBUTED NET INCOME
OF SUBSIDIARIES ......................................... 7,588 14,541 2,399
EQUITY IN UNDISTRIBUTED NET INCOME OF SUBSIDIARIES ....... 1,418 (6,386) 4,980
----- ------ -----
NET INCOME ............................................... $9,006 $8,155 $7,379
====== ====== ======
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(in thousands of dollars) 1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................. $ 9,006 $ 8,155 $ 7,379
Equity in undistributed net income of subsidiaries .......... (1,418) 6,386 (4,980)
Net securities gains ........................................ -- (461) --
Other, net .................................................. 280 (465) 172
------- ------- -------
Net cash from operating activities ...................... 7,868 13,615 2,571
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in interest bearing deposits
in subsidiary bank ........................................ (399) (1) (2)
Proceeds from sale and maturities of securities ............. 10,095 23,931 36,484
Investment in subsidiary bank subordinated note ............. -- (13,000) --
Capitalization of United Banc Financial Services ............ (500) -- --
Liquidation of United Credit Life Insurance Company ......... 457 -- --
Purchase of securities ...................................... (13,709) (19,402) (35,632)
------- ------- -------
Net cash from investing activities ...................... (4,056) (8,472) 850
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends .............................................. (3,762) (3,400) (3,016)
Proceeds from shares issued through dividend reinvestment.... 133 898 --
Treasury stock purchased .................................... (4,873) -- --
Treasury stock sold and issued for stock options ............ 1,926 -- --
Proceeds from issuance of stock ............................. 189 26 38
------- ------- -------
Net cash from financing activities ...................... (6,387) (2,476) (2,978)
------- ------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS .......................... (2,575) 2,667 443
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ................... 3,306 639 196
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR ......................... $ 731 $ 3,306 $ 639
======== ======== ========
</TABLE>
28
<PAGE> 31
NOTE 17 - PENDING ACCOUNTING CHANGES
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income." This Statement establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. This Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. This Statement is effective for fiscal years
beginning after December 15, 1997. The adoption of SFAS No. 130 is not expected
to have a material impact on the results of operations or financial condition of
the Corporation.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. This
Statement is effective for financial statements for periods beginning after
December 15, 1997. The adoption of SFAS No. 131 is not expected to have a
material impact on the results of operations or financial condition of the
Corporation.
NOTE 18 - 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
1997
<S> <C> <C> <C> <C>
INTEREST INCOME .......... $15,378 $15,649 $15,948 $16,387
NET INTEREST INCOME ...... 8,134 8,292 8,064 8,550
PROVISION FOR LOAN LOSSES 675 675 887 692
NET INCOME ............... 2,233 2,408 2,101 2,264
EARNINGS PER COMMON SHARE:
BASIC ................. 0.39 0.42 0.36 0.39
DILUTED ............... 0.38 0.41 0.36 0.38
1996
Interest income .......... $13,925 $14,649 $14,990 $15,625
Net interest income ...... 7,681 7,904 7,915 7,863
Provision for loan losses 630 800 920 790
Net income ............... 2,022 2,190 1,754 2,189
Earnings per common share:
Basic ................. 0.35 0.38 0.31 0.38
Diluted ............... 0.34 0.37 0.30 0.37
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:
Basic ................. 0.28 0.31 0.34 0.35
Diluted ............... 0.27 0.30 0.34 0.35
</TABLE>
29
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share data)
INTRODUCTION
The following is Management's discussion and analysis of the financial
condition and results of the operations of UNB Corp. (the Corporation). It
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. of Canton, Ohio 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-two branch network located in Stark and southern Summit Counties.
In the first half of 1997, UNB Corp. applied for and received permission from
the State of Ohio Department of Commerce, Division of Consumer Finance for a
license to establish and operate a consumer finance company as a wholly owned
subsidiary of the Corporation. United Banc Financial Services, Inc. was
capitalized with a $500 investment by UNB Corp. in June, 1997, and is providing
financing options to loan applicants with special borrowing needs. Operations
began July 1, 1997, and the results of operations of this subsidiary did not
have a material impact on earnings of UNB Corp. in 1997.
During the second quarter of 1997, Robert L. Mang retired as President/Chief
Executive Officer of UNB Corp., and President/Chief Executive Officer of United
National Bank & Trust Co. In June, 1997, Roger L. Mann assumed the positions of
President/Chief Executive Officer of UNB Corp. and Chief Executive Officer of
United National Bank & Trust Co. Prior to this appointment, Mr. Mann served six
years as Chairman/Chief Executive Officer of four Banc One community Banks in
Fremont, Mansfield, Marion and Sidney, Ohio. Total assets of these banks are
approximately $1,200,000 with 35 branch offices. Mr. Mann's 27 year banking
career includes senior management positions in four independent community banks
located in San Diego and La Jolla, California.
During the fourth quarter of 1997, UNB Corp. liquidated its affiliate, the
United Credit Life Insurance Company. United Credit Life was organized and
incorporated as a domestic life and disability reinsurer under the laws of the
State of Arizona on December 15, 1985 and received its Certificate of Authority
to transact business on May 29, 1986. The underwriting of credit life and credit
accident and health insurance was directly related to the extension of credit by
the Bank to its customers. These products are still offered by the Bank through
an outside vendor on a fee basis. Income and expenses related to the liquidation
had no material effect on earnings of the Corporation for 1997.
In the fourth quarter of 1997 UNB Corp. took steps to activate its affiliate,
the United Insurance Agency, Inc., which was chartered on August 23, 1990. This
affiliate is currently licensed to issue life, accident and health, and variable
life annuity insurance. UNB Corp. has also filed with the State of Ohio to
obtain an amendment to this affiliate's charter to be licensed to issue property
and casualty insurance. Operations are expected to begin in the first quarter of
1998. It is not anticipated that the results of operations of this new
subsidiary will have a material impact on earnings of UNB Corp. in 1998.
RESULTS OF OPERATIONS
UNB Corp.'s net income for 1997 was $9,006, which represents a 10.4% increase
over 1996 net income of $8,155, which in turn represented a 10.5% increase over
1995 net income of $7,379. Return on average assets was 1.11%, 1.08%, and 1.14%
for 1997, 1996 and 1995, respectively. The Corporation's return on average
equity, which is to a great extent negatively effected by its strong capital
base, was 12.20%, 11.89% and 11.98% for the same periods.
Basic earnings per share for 1997 were $1.56, an increase of $.14 per share
from 1996, whereas 1996 basic earnings per share of $1.42 represented a $.14
increase from 1995. On a diluted basis, earnings per share for 1997 were $1.53,
compared to $1.38 for 1996 and $1.26 for 1995, respectively. The Corporation's
stock performance has kept pace with the stock market and stocks of other
community based financial institutions, increasing to $39.25 per share at
December 31, 1997, from $30.00 at December 31, 1996, an increase of
<TABLE>
<CAPTION>
NET INCOME
millions of dollars
<S> <C>
1993 $6.338
1994 $6.628
1995 $7.379
1996 $8.155
1997 $9.006
</TABLE>
<TABLE>
<CAPTION>
RETURN ON EQUITY
percent
<S> <C>
1993 12.63%
1994 11.45%
1995 11.98%
1996 11.89%
1997 12.20%
</TABLE>
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE
dollars
<S> <C>
1993 $1.18
1994 $1.16
1995 $1.28
1996 $1.42
1997 $1.56
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
TABLE 1
NET INTEREST INCOME
Years ended December 31,
(In thousands of dollars) .................................... 1997 1996 1995
<S> <C> <C> <C>
Interest income .............................................. $63,362 $59,189 $49,759
Interest expense ............................................. 30,322 27,826 21,806
------- ------- -------
Net interest income .......................................... 33,040 31,363 27,953
Tax equivalent adjustments* .................................. 69 87 139
------- ------- -------
Net interest income (FTE) .................................... $33,109 $31,450 $28,092
======= ======= =======
Net interest income (FTE) as percent of average earning assets 4.30% 4.38% 4.68%
*The tax equivalent adjustment is computed by stating non-taxable income on a
fully tax equivalent basis (FTE) using the statutory tax rate of 35% and
adjusted for non-deductible interest expense for 1997, 1996 and 1995.
</TABLE>
30.8%. This reflects a market-to-book premium of 296.7%, an increase of 21.9%
since year-end 1996. All per share information has been adjusted for the April
30, 1996, 100% stock dividend.
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
1997, net interest income increased to $33,040 from $31,363 in 1996, an increase
of 5.3%. For 1996, net interest income increased by $3,410 from $27,953 in 1995,
an increase of 12.2%. These annual increases are primarily attributable to the
growth in average earning assets of 7.2% and 19.5% for 1997 and 1996,
respectively.
Net interest margin is the measure of the net yield on average earning assets
on a fully taxable basis and 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 4.30% in 1997 from 4.38% in 1996 and 4.68% in 1995 (Table
1).
The most significant impact on the net interest margin in 1997 has been in
the Bank's cost of funds. The average overall rate paid on interest bearing
liabilities increased seven basis points, or 1.5% in 1997 versus 1996 (Tables 2
and 4). The attraction of the Money Market Access product with its tiered rates
pegged to 13-Week U.S. Treasury Bills drew significant new money to the Bank as
well as attracting some funds out of the Bank's more traditional savings
products, causing the overall cost of savings deposits to increase. Deposits
raised through the active marketing of Money Market Access and competitive
certificate of deposit rates reduced the dependence on longer term debt,
primarily Federal Home Loan Bank (FHLB) advances, throughout 1997. The cost of
long-term debt rose 1.0% due to $426 in prepayment penalties incurred in the
early termination of $20,000 in FHLB advances. The cost of long term debt in
1998 is expected to decrease due to the relative rates paid on the advances
terminated, yielding a positive effect on net interest margin in 1998. These
increases in the cost of interest bearing liabilities were partially offset by
several rate reductions in interest bearing transaction and traditional savings
products.
While the cost of funds increased, the overall yield on earning assets
between the 1997 and 1996 remained relatively flat. Overall returns on the
investment portfolio increased, the result of proceeds from sales of securities
at year-end 1996 used to purchase relatively higher yielding taxable and
mortgage-backed securities in 1997 as well as rollovers of maturing government
securities at higher market rates. Overall yields in the loan portfolio declined
slightly from 1996 to 1997, the primary result of narrowing spreads on
commercial, commercial real estate and home equity loans due to increased market
competition, despite a 25 basis point increase in Prime rate during the year.
These declines were partially offset by a slight increase in the yields in
consumer loans brought on by a change in strategy which seeks to decrease the
amount of lower yielding indirect consumer lending and increase higher margin
direct consumer lending. See Table 4 for a more detailed analysis on net
interest margin including average balances and associated yields.
The most significant impact on the change in net interest margin of 30 basis
points between 1996 and 1995 was the increase in the Bank's cost of funds of 30
basis points. Rates on deposit products were kept competitive to attract funding
for strong loan demand. However, since loan growth outpaced deposit growth, the
Bank turned to alternative funding sources such as brokered deposits and FHLB
advances which helped to extend maturities and lock in interest spreads. While
the cost of funds increased, the overall yield on earning assets between 1995
and 1996 declined by five basis points. Declining yields in the loan portfolio
were somewhat offset by change in earning asset mix from the securities
portfolio to higher yielding loans.
OTHER INCOME
Other income for 1997 totaled $7,197, an increase of $839, or 13.2%, from
1996. This compares to an increase of $741, or 13.2%, from 1996 to 1995 (Table
3). Service charges on deposits increased $115, or 4.8%, from 1996, brought on
by product pricing and fee increases put in place in early 1997. From 1995 to
1996, service charges increased $11, or less than 1%, impacted by depositors
switching between deposit products or increasing minimum balances to avoid
service charges. While this kept service charge income relatively flat compared
to 1995, 1996 average account balances in various categories of transaction
accounts increased.
31
<PAGE> 34
Trust Department generated fee income of $3,307, an increase of $593, or
21.8%, from 1996. Trust revenues in 1996 increased 8.2% from those of 1995.
Achievements for 1997 are a direct result of increased market values of debt
obligations due to declining U.S. Treasury rates and record stock market levels
and an increased number of trust accounts, several due in part to the addition
of two trust officers with forty-two years of combined trust experience. The
value of assets managed increased to $743,729, an increase of 27.9%, from 1996.
The value of managed assets increased from 1995 to 1996 by 18.9%.
Other operating income for 1997 was $1,114, an increase of $217, or 24.2%,
compared to 1996. Contributing to the positive results were increases in fee
income of $81 from sales of a full range of financial and insurance products and
financial planning services through American Express Financial Advisors Inc.,
which provides a staff of financial advisors who service Bank customers. Also in
1997, the Bank recognized $266 in surcharge fees to non-bank customers using its
ATM network. Initiated in January, 1997, it is intended to compensate the Bank
for a portion of the costs incurred in maintaining its ATM network. Offsetting
these positive results was the decrease in insurance premium income of $92 for
the unwinding of insurance production in the United Credit Life Company
affiliate. Other operating income in 1996 achieved an increase of $229 over 1995
due, in part, to a $97 reimbursement from the Resolution Trust Company related
to expenses incurred in 1995 from the Transohio acquisition, $121 recognized
from activity in the Corporation's deferred compensation plan which was offset
by an equal amount recognized in operating expense and $42 in gains on the sale
of a branch building.
During 1997, the Bank resumed sales of a portion of its mortgage loan
originations to investors in the secondary market, recognizing $261 in gains on
those sales. Loans, sold on a service-released basis, provided customers with
rates competitive to those available in the national mortgage markets and
allowed the Bank to expand its mortgage product base. In addition, in the last
quarter of 1997, the mortgage loan department began offering and selling
non-conforming mortgage loans to those borrowers not meeting the requirements of
the conforming secondary market. No gains from the sale of loans in the
secondary market were recorded in 1996, due to Management's decision to retain
originations, which were for the most part adjustable rate or non-conforming
fixed rate loans. In 1995, gains recorded on the sale of mortgage loans in the
secondary market were $67.
OTHER EXPENSE
Total other expense of $23,505 in 1997 was an increase over 1996 of $1,352,
or 6.1%. From 1995 to 1996, other expenses increased by $1,498, or 7.2% (Table
3). As a percentage of average assets, other expense was 2.90% in 1997 compared
to 2.93% in 1996 and 3.20% in 1995, reflecting a more efficient use of resources
as the Corporation has grown.
Total employee compensation, including salaries, wages and benefits, grew
$555, or 5.1%, from 1996. From 1995 to 1996, the increase was 6.5%. The major
reasons for this increase in 1997 were increased salary expense, related payroll
taxes and group insurance.
<TABLE>
<CAPTION>
TABLE 2
CHANGES IN NET INTEREST DIFFERENTIAL -- RATE/VOLUME ANALYSIS December 31, 1997,
1996 and 1995
(In thousands of dollars) 1997 VS. 1996 1996 vs. 1995
INCREASE (DECREASE) Increase (Decrease)
DUE TO CHANGE IN Due To Change In
VOLUME RATE TOTAL Volume Rate Total
-------- -------- -------- -------- -------- --------
Interest income:
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits with other banks $ (66) $ (10) $ (76) $ 25 $ (16) $ 9
Federal funds sold ....................... 270 23 293 93 (51) 42
Investment securities:
Taxable ............................... (116) 134 18 118 79 197
Tax exempt ............................ 1 (10) (9) (88) (26) (114)
Other investments ........................ 65 (64) 1 94 (22) 72
Mortgage-backed securities ............... 142 244 386 (360) (130) (490)
Loans .................................... 4,104 (562) 3,542 10,404 (742) 9,662
-------- -------- -------- -------- -------- --------
Total interest income ................. 4,400 (245) 4,155 10,286 (908) 9,378
Interest expense:
Interest bearing demand deposits ......... 33 (216) (183) 53 41 94
Savings .................................. 514 494 1,008 174 344 518
Certificates and other time deposits ..... 1,123 84 1,207 3,158 134 3,292
Short-term borrowings .................... (17) -- (17) 676 (126) 550
Long-term borrowings ..................... 445 36 481 1,394 172 1,566
-------- -------- -------- -------- -------- --------
Total interest expense ................ 2,098 398 2,496 5,455 565 6,020
-------- -------- -------- -------- -------- --------
Net interest income ................ $ 2,302 $ (643) $ 1,659 $ 4,831 $ (1,473) $ 3,358
======== ======== ======== ======== ======== ========
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
TABLE 3
OTHER INCOME AND OTHER EXPENSE
(In thousands of dollars) Years ended December 31,
1997 1996 1995
OTHER INCOME:
<S> <C> <C> <C>
Service charges on deposits ...... $ 2,493 $ 2,378 $ 2,367
Trust department income .......... 3,307 2,714 2,509
Other operating income ........... 1,114 897 668
Gains on loans originated for sale 261 -- 67
Investment securities gains, net . 22 369 6
------- ------- -------
Total other income ........... $ 7,197 $ 6,358 $ 5,617
======= ======= =======
OTHER EXPENSE:
Salaries, wages and benefits ..... $11,361 $10,806 $10,144
Occupancy expense ................ 1,322 1,170 1,213
Equipment expense ................ 3,145 2,595 2,225
Other operating expenses ......... 7,677 7,582 7,073
------- ------- -------
Total other expenses ......... $23,505 $22,153 $20,655
======= ======= =======
</TABLE>
primarily due to merit increases and the additional personnel costs of three new
branches and United Banc Financial Services, Inc., and an increase in expense
related to the Bank's incentive payout from the performance based Stakeholder
Program. While salary and benefits increased in 1997, total employee
compensation equaled only 1.47% of average earning assets compared to 1.51% in
1996 and 1.69% in 1995.
Occupancy expenses increased by $152, or 13.0%, from 1996 to 1997, while they
declined from 1995 to 1996 by $43, or 3.5%. This increase was primarily due to
the opening of new facilities in 1997. These include the relocation of the
Amherst branch, two new in-store branches in the Green and Alliance communities,
and a new branch, and new offices for United Banc Financial Services and the
Bank's mortgage loan department, all located in the rapidly expanding
Portage-Frank area of northern Stark County. Also impacting 1997 expense is the
full year impact of depreciation on the renovations of United Bank Center and
the new Hartville Branch completed in early 1996.
Equipment expense increased $550, or 21.2%, for 1997 compared to 1996. The
majority of this increase represents a full year's impact of lease payments on a
new computer mainframe, wide area network (WAN), teller and platform computer
systems and related software put in place in the third quarter of 1996.
Increased expenses over 1996 have also been incurred for the installation of new
computer output to laser disk (COLD) technology and additional outside technical
and software support.
Other operating expense increased $95 from 1996 to 1997, an increase of 1.3%.
From 1995 to 1996, other operating expense increased $509, or 7.2%. The major
categories comprising other operating expense are found in Note 11 to the
consolidated financial statements. In 1997, FDIC premiums decreased $680 due to
the special assessment paid in 1996 to the Federal Deposit Insurance Corporation
(FDIC) of $593 to recapitalize the Savings Association Insurance Fund (SAIF)
which insures approximately $116 million 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
acquisitions. Contributions increased by $148 from 1996 to 1997 for a funding of
the United National Bank & Trust Co. charitable trust account, the balance of
which will be used to fund future charitable obligations of the Bank. The
increases of $150 in stationery, supplies and postage from 1996 to 1997 are
attributable to the new branches opened in 1997.
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 expense is the amount necessary, in the
opinion of Management, to maintain the balance in the allowance for loan losses
at an adequate level. Adequacy of the allowance is assessed based on historical
experience, changes in portfolio size and mix, the relative quality of the loan
portfolio and current and expected rates of loan growth. Information about
specific borrower situations, including their financial position and collateral
values, are also important as well as assessments of current and future economic
conditions, 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, 1997, was $9,650, or 1.53%, of
outstanding loans, compared to $8,335, or 1.35%, at year-end 1996. The provision
for loan losses charged to operating expense was $2,929 in 1997 compared to
$3,140 in 1996 and $1,750 in 1995. The reduction in expense for 1997 was a
result of slower, more selective loan growth in 1997, coupled with a decrease in
net charge-offs. Net charge-offs for 1997 were $1,614, a decrease of $433, or
21.2% from the 1996 level of $2,047. Net charge-offs for 1996 increased $1,191,
or 139.1%, over 1995. Net charge-offs as a percentage of average loans
outstanding for 1997 was 0.26% compared to 0.35% in 1996 and 0.18% for 1995. The
consumer loan
33
<PAGE> 36
portfolio experienced the greatest reduction in net charge-offs with a decrease
of $314, or 17.3%, from 1996. The decline in losses in 1997 in the consumer loan
portfolio was the result of stricter underwriting guidelines put in place in
mid-1996 as well as better trend analyses resulting in earlier detection of
delinquent accounts and more proactive collection efforts on potential problem
credits. Although net charge-offs improved in 1997, Management remains cautious
in its expectations for net charge-offs in 1998 especially in the consumer
portfolios due to the record levels of consumer debt outstanding, bankruptcy
filings and the increased levels of consumer loan delinquencies and losses
experienced throughout the financial services industry.
Impaired loans totaled $281 at December 31, 1997 compared to $268 at year-end
1996. Non-performing loans at year-end 1997 were $945 compared to $838 at
year-end 1996 and $1,320 at year-end 1995. Non-performing loans consist of loans
past due 90 days or more and loans which have been placed on nonaccrual status.
The ratio of non-performing loans to total loans was 0.15% for 1997 versus 0.14%
for 1996 and 0.25% for 1995. This ratio compares very favorably to that of the
Bank's peer group at 0.73%. Due to less aggressive loan growth assumptions built
into the 1998 Profit Plan, net charge-off experience in 1997 and the current
level of the reserve-to-loan ratio, Management anticipates the 1998 provision to
be at or below 1997 levels.
<TABLE>
<CAPTION>
TABLE 4
AVERAGE BALANCE SHEET AND RELATED YIELDS
Years ended December 31, 1997, 1996 and 1995
(In thousands of dollars) 1997 1996 1995
AVERAGE Average Average
BALANCE INTEREST RATE* Balance Interest Rate* Balance Interest *Rate*
------- -------- ----- ------- -------- ----- ------- -------- ------
Interest earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning deposits $ 755 $ 34 4.50% $ 2,204 $ 110 4.99% $ 1,735 $ 101 5.82%
Federal funds sold 14,550 796 5.47% 9,592 503 5.24% 7,877 461 5.85%
Investment securities:
Taxable 53,909 3,190 5.92% 55,923 3,172 5.67% 53,827 2,975 5.53%
Tax-exempt 1,186 67 5.65% 1,166 76 6.52% 2,452 190 7.75%
Other securities 14,554 802 5.51% 13,424 801 5.97% 11,858 729 6.15%
Mortgage-backed securities 54,676 3,754 6.87% 52,521 3,368 6.41% 58,067 3,858 6.64%
Loans (net of unearned
interest) 629,514 54,788 8.70% 582,418 51,246 8.80% 464,314 41,584 8.96%
------- ------ ---- ------- ------ ---- ------- ------ ----
Total interest earning
assets 769,144 63,431 8.25% 717,248 59,276 8.26% 600,130 49,898 8.31%
------- ------ ---- ------- ------ ---- ------- ------ ----
Nonearning assets:
Cash and due from banks 25,668 23,427 25,120
Other nonearning assets 25,212 23,542 26,441
Allowance for loan losses (9,025) (7,923) (6,829)
------ ------ ------
Total assets $810,999 $756,294 $644,862
======== ======== ========
Interest bearing liabilities:
Demand deposits 72,770 1,226 1.68% $71,078 $1,409 1.98% $68,361 $1,316 1.92%
Savings deposits 174,789 5,496 3.14% 157,662 4,488 2.85% 151,229 3,969 2.63%
Time deposits 290,854 16,748 5.76% 271,351 15,541 5.73% 216,187 12,249 5.67%
Short-term debt 58,731 2,767 4.71% 59,097 2,784 4.71% 44,858 2,234 4.98%
Long-term debt 56,317 4,085 7.25% 50,183 3,604 7.18% 30,620 2,038 6.66%
------- ------ ---- ------- ------ ---- ------- ------ ----
Total interest bearing
liabilities 653,461 30,322 4.64% 609,371 27,826 4.57% 511,255 21,806 4.27%
------- ------ ---- ------- ------ ---- ------- ------ ----
Noninterest bearing liabilities:
Demand deposits 76,523 71,263 66,329
Other liabilities 7,224 7,069 5,661
Shareholders' equity 73,791 68,591 61,617
------ ------ ------
Total liabilities and equity $810,999 $756,294 $644,862
======== ======== ========
Net interest income $33,109 $31,450 $28,092
======= ======= =======
Net yield on earning assets 4.30% 4.38% 4.68%
==== ==== ====
*Average rates of all categories including tax-free income are stated on a fully
taxable equivalent basis.
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
TOTAL ASSETS
millions of dollars
<S> <C>
1993 $497.6
1994 $601.1
1995 $699.6
1996 $810.0
1997 $826.3
</TABLE>
On January 1, 1995, the Corporation adopted Statement of Financial Accounting
Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan."
SFAS Nos. 114 and 118 address the accounting by creditors for impairment of all
loans identified for evaluation, collateralized as well as uncollateralized,
except for large groups of small balance, homogenous loans that collectively are
evaluated for impairment.
Under SFAS No. 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 No. 118, which
requires the disclosure of information about the investment in certain impaired
loans as well as how interest income on impaired loans is recognized, 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 1997 was $4,797, an increase from $4,273
and $3,786 in 1996 and 1995, respectively. The Corporation's effective tax rates
were 34.8%, 34.4% and 33.9% for the years of 1997, 1996 and 1995, respectively.
This increase in effective rate is the result of a greater percentage of
earnings taxed at the marginal tax rate of 35% as well as lower tax-exempt
income generated from the loan and investments portfolios in 1997.
YEAR 2000 COMPLIANCE
UNB Corp. and its subsidiaries are in the process of conducting a
comprehensive review of all of the hardware, software and any ancillary systems
which may have any type of computer chip in their configuration to identify
potential Year 2000 compliance problems and to test such hardware and software
for compliance. This effort is led by a Year 2000 Compliance Committee which
reports directly to the Board of Directors. This Committee also oversees the
development and implementation of contingency plans for any systems that may not
currently be Year 2000 compliant or which may not be ready for testing until
after December 31, 1998. The Committee is addressing the potential impact on the
Bank of its customers', especially commercial loan customers', Year 2000
compliance and contingency plans to become compliant with Year 2000
requirements.
Based on current information, the Corporation believes that all systems will
be Year 2000 compliant before January 1, 2000, either through the modification
of existing hardware and software or through the purchasing of new hardware and
software. The Committee currently anticipates that the Corporation will spend
approximately $50 to $100 to ensure compliance of all systems by mid year, 1999.
At this time, Management does not believe that there will be a significant
impact to earnings due to this issue. The Year 2000 problem could have a
material impact on the operation of the Corporation if not properly addressed,
but Management anticipates that the problem will be resolved and thus will not
have a significant impact on the Corporation's delivery of products, services,
or its operations.
FINANCIAL CONDITION
Total assets were $826,313 at December 31, 1997 compared to $809,979 at
December 31, 1996, an increase of $16,334, or 2.0%, over 1996. Earning assets at
December 31, 1997 were $782,088, an increase of $24,643, or 3.2%, over 1996
year-end. Earning assets equaled 94.6% of total assets at year-end for 1997
compared to 93.5% at year-end 1996. The composition of earning assets changed
slightly from 1996 to 1997, with securities and loans comprising 18.0% and 80.6%
of earning assets, respectively, in 1997 compared to 17.5% and 81.5%,
respectively, at year-end 1996.
At December 31, 1997, federal funds sold were $7,500, an increase of $700
from December 31, 1996. Total securities increased $7,952, or 6.0%, from 1996.
Total loans, including loans held for sale, increased $15,006, or 2.4%, over
1996 with growth concentrated in mortgage, commercial and commercial real estate
loans.
Earning asset growth was funded mainly through growth in deposits which
increased from year-end 1996 by $48,817, or 8.1%, to $649,481 at December 31,
1997. Less dependence was put on short-term borrowings, including securities
sold under agreement to repurchase, which decreased $11,897, or 17.4% from
year-end 1996. Liquidity raised through deposits in excess of loan growth was
used
<TABLE>
<CAPTION>
TABLE 5
TOTAL LOANS AND LEASES
Years ended December 31, Increase or (Decrease)
------------------------ ----------------------
(In thousands of dollars) ............ 1997 1996 Dollars Percentage
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 85,102 $ 78,563 $ 6,539 8.3%
Commercial Real Estate ............... 70,896 65,875 5,021 7.6%
Real Estate .......................... 260,190 242,652 17,538 7.2%
Consumer ............................. 214,230 230,512 (16,282) (7.1%)
-------- -------- -------- ---------
Total loans and leases .......... $630,418 $617,602 $ 12,816 2.1%
======== ======== ======== =========
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
TABLE 6
SECURITIES
Years ended December 31, Increase or (Decrease)
------------------------ -----------------------
(In thousands of dollars) 1997 1996 Dollars Percentage
------------ -------- --------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury ................................. $ 17,046 $ 23,446 $ (6,400) (27.3%)
U.S. Government agencies and corporations ..... 36,591 52,371 (15,780) (30.1%)
Mortgage-backed securities .................... 67,845 42,907 24,938 58.1%
Obligations of state and political subdivisions 951 1,051 (100) (9.5%)
Corporate bonds and other securities .......... 18,405 13,111 5,294 40.4%
------------ -------- -------- ---------
Total securities ......................... $140,838 $132,886 $ 7,952 6.0%
============ ======== ======== =========
</TABLE>
to prepay relatively higher rate Federal Home Loan Bank advances with
outstanding balances at December 31, 1997 declining by $26,953, or 43.1%, from
year-end 1996 levels.
LOANS
At December 31, 1996, total loans outstanding were $630,418, an increase of
$12,816, or 2.1%, over year-end 1996. This compares with a growth in total loans
of $98,872, or 19.1%, in 1996 over 1995. The product mix in the loan portfolio
shows consumer loans, mortgage loans, commercial loans and commercial real
estate loans comprising 34.0%, 41.3%, 13.5% and 11.2%, respectively, at December
31, 1997, compared with 37.3%, 39.3%, 12.7% and 10.7%, respectively, at December
31, 1996.
Total loan yield was 8.70% in 1997, 10 basis points lower than 1996. The
areas which experienced loan growth in 1997 signaled a change in Management
strategy from past years. Focus was directed to the areas of residential
mortgage and commercial lending. In the consumer portfolio, Management stressed
growth in the direct installment lending and home equity products while
de-emphasizing indirect lending.
Residential mortgage loans increased to $260,190 at December 31, 1997, an
increase of 7.2% from year-end 1996 balances of $242,652. Early in 1997, the
Mortgage Loan Department moved to new facilities in northern Stark County to
position it closer to its customers, realtors, builders and support
professionals in order to improve its customer service. The development of a
broad investor base allowed for sales of a portion of loan production while
enhancing customer service through the expansion of the mortgage products
offered at rates competitive to those in the national markets. As the year
progressed and mortgage rates declined to their lowest levels in five years, the
Bank was able to continue generating loans, selling a greater proportion of
originations in the secondary market, thus avoiding the potential interest rate
risk associated with fixed rate, long-term assets. In addition, a new division
was begun in October, 1997, which offers alternative mortgage financing for
borrowers with special needs which do not meet the requirements of the
conforming secondary market. These loans are being sold to specialized
investors, thus allowing the Bank to provide mortgage products to a new customer
base without adding additional credit risk. In 1997, the Bank's Mortgage
Assistance Program provided approximately $1,555 in loans to low-to-moderate
income individuals. At year-end 1997, this program had approximately $10,618 in
loans outstanding.
Commercial loans at December 31, 1997 were $85,102, an increase of $6,539, or
8.3% from year-end 1996. Commercial real estate loans outstanding at December
31, 1997 were $70,896, an increase of $5,021, or 7.6%, from year-end 1996.
Management continues to place emphasis on growth in these two portfolios because
of their relative yields and pricing features versus its other loan portfolios.
More importantly from a service standpoint, an opportunity exists to provide a
level of service, with attention to detail and a willingness to customize
business loan products, to the local small and medium size business community
which has been neglected by larger market competitors. These loan portfolios are
diverse, encompassing a wide range of borrowers, without significant
concentration in any one particular industry or group of industries.
At year-end 1997, consumer loans outstanding were $214,230, a reduction of
$16,282, or 7.1%, from year-end 1996. Throughout 1997, Management maintained its
decision made in mid-1996 to slow the growth in the indirect consumer portfolio
by implementing tighter credit standards and controlling growth in higher
quality credits. Indirect outstandings decreased from $182,634 at year-end 1996
to $158,605 at year-end 1997, a decrease of $24,029, or 15.2%. Although emphasis
on the indirect consumer portfolio has declined, the Bank continues to maintain
and benefit from its significant dealer network, which is dependent on the
availability and funding of sub-prime loans. The Bank's goal was to provide this
service to its dealers and customers by securing a sub-prime lending source
which would allow the Bank to compete in this market segment without incurring
credit risk. The Bank has joined in alliance with two national sub-prime lenders
which allow the Bank to earn pass through fee income without credit risk, while
maintaining Bank liquidity.
Within the consumer portfolio, balances in the home equity product increased
from $21,802 at year-end 1996 to $27,422 at December 31, 1997, an increase of
$5,620, or 25.8%. Management's goal is to introduce new home equity products in
1998 in order to benefit from their strong appeal to borrowers because of
potential tax advantages. Also included in the consumer loan portfolio are $841
in loans outstanding, net of unearned income, for United Banc Financial
Services. These loans include consumer loans, retail contracts, and home equity
and personal home owner loans secured by real estate.
Management's focus in 1998 will continue to be on growth in the commercial
and commercial real estate portfolios due to their relative yields and repricing
features versus the overall loan portfolio. In consumer loans, growth in direct
and home equity products will
36
<PAGE> 39
be stressed. Due to relatively low residential mortgage rates, emphasis will be
on sales of originations in the secondary market, enhancing non-interest income
through gains on sales and limiting exposure to interest rate risk.
INVESTMENT PORTFOLIO
The investment portfolio serves a primary role in the overall context of
balance sheet management by the Corporation. The decision to purchase or sell
securities is based upon the current assessment of economic and financial
conditions, including the interest rate environment and other on- and
off-balance sheet positions. The portfolio's scheduled maturities and the
expected cash flows from the mortgage-backed securities represent a significant
source of liquidity for the Corporation.
The Bank's investment portfolio consists primarily of U.S. Treasury and
government securities, various types of mortgage-backed securities and
collateralized mortgage obligations, and short-term money market instruments. At
December 31, 1997, the Corporation's investment portfolio was $140,838 versus
$132,886 at December 31, 1996, a 6.0% increase.
The Bank purchases securities which are eligible to be pledged against the
deposited funds of public entities and for use as collateral for repurchase
agreements. At year-end there were $103,000 of securities pledged for these
purposes, compared to $93,700 at year-end 1996.
In anticipation of lower rates in 1998, the proceeds of maturing securities
were reinvested in instruments with slightly longer terms or delayed repayment
schedules to reduce the volume of funds that would need to be reinvested. As the
Bank continues with its strategy to restructure the balance sheet in a lower
interest rate environment, purchases in 1998 are expected to be of shorter
duration. The Bank sold approximately $14,113 of securities at a net gain of $22
to provide additional funds for seasonal loan demand and other liquidity needs
of the Corporation at various times throughout the year.
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 unrealized
gain or loss, net of deferred tax, shown as an adjustment to shareholders'
equity. At year-end 1997, the adjustment to shareholders' equity for the net
unrealized gain on the portfolio was $3,739 compared to a net unrealized gain of
$1,173 at year-end 1996.
DEPOSITS
In 1997, deposits continued to be 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, 1997 were $649,481 an increase of $48,817, or 8.1%, from
year-end 1996. Management actively worked to retain and expand the Bank's
certificate of deposit base by offering competitive rates to attract new
certificates, rate incentives to retain existing customers and new products such
as the Reward and Pinnacle certificates of deposit to tap new market segments.
Direct mail marketing programs and advertising continued to target non-bank
customers to increase their awareness of the Bank's deposit products, especially
the Money Market Access account, a tiered variable rate savings product tied to
the 13-week Treasury Bill rate. Again in 1997, this product, which offers
customers liquidity as well as a competitive rate of return, experienced
exceptional growth in outstanding balances of 88.1%, from $34,866 at year-end
1996 to $65,220 at year-end 1997.
The Bank's noninterest bearing checking account balances increased to $82,173
at December 31, 1997, or less than 1.0% over year-end 1996. Interest bearing NOW
Accounts increased by $4,207, or 5.7%, from year-end 1996. Savings balances
which include passbook, statement, money market savings and Money Market Access
accounts totaled $183,646, an increase of 8.8% from year-end 1996. Balances
raised through Money Market Access were partially offset by transfers from
passbook and statement savings accounts. Certificates of Deposit reached
$306,301, an increase of 10.5% over year-end 1996. Included in these balances
are approximately $14,946 in brokered certificates with original maturities of
three, four and five years issued through Merrill Lynch. 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
influence the Bank's decisions regarding the future use of brokered deposits to
fund balance sheet growth.
Core deposit growth remains a primary objective of the Bank's deposit
strategy for 1998. Several new products were introduced in 1997 to encourage
continued growth. The U-Bank product line was designed to give customers various
vehicles to manage their deposit account relationships through the use of the
telephone and personal computers. The introduction of a new payment processing
product was designed to give business checking customers quicker access to their
account balances. Beginning in 1998, a fee-based courier service will begin
convenient pick up of deposits for new and existing business customers both
inside and outside the Bank's
<TABLE>
<CAPTION>
TABLE 7
DEPOSITS
Years ended December 31, Increase or (Decrease)
------------------------ -----------------------
(In thousands of dollars) 1997 1996 Dollars Percentage
---------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Noninterest bearing ..... $ 82,173 $ 81,554 $ 619 0.8%
Interest bearing
Demand ............. 77,361 73,154 4,207 5.8%
Savings ............ 183,646 168,833 14,813 8.8%
Time ............... 306,301 277,123 29,178 10.5%
-------- ----------- -------- -----------
Total deposits . $649,481 $600,664 $ 48,817 8.1%
======== =========== ======== ===========
</TABLE>
37
<PAGE> 40
geographic market. Early in 1998, the Bank will roll out the redesign of its
personal interest bearing deposit products with enhanced features and
privileges. As in the past, the level and direction of interest rates, as well
as competitive pressure from the local market and national non-bank financial
institutions offering non-traditional alternative forms of investments, will
play a key role in the levels of growth and deposit mix in 1998.
CAPITAL RESOURCES
Total shareholders' equity was $76,520 at December 31, 1997 compared to
$71,335 at December 31, 1996, an increase of $5,185, or 7.3%. This increase was
primarily attributable to net income for the period of $9,006. An additional
increase came from the increase in unrealized gains, net of deferred tax, on
available for sale securities from year-end 1996 to year-end 1997 of $2,566.
These increases were partially offset by dividends to shareholders, net of
dividend reinvestment, of $3,629, and by $2,947 used for the net purchases of
treasury stock. Treasury stock will continue to be purchased and sold to fund
various plans of the Corporation which require the issuance of its stock. These
include the dividend reinvestment plan and internal benefit plans of the
Corporation which include the employee stock purchase plan, the 401K plan and
the stock option plans of 1987 and 1997. The book value per share of stock was
$13.23 at year-end 1997 compared to $12.33 at year-end 1996, a 7.3% increase.
Cash dividends paid to shareholders of UNB Corp. during the year-ended
December 31, 1997 totaled $3,762 or $0.65 per share. This compared to $3,400, or
$0.59 per share, for the year-ended December 31, 1996. The 1997 dividends per
share represent an increase of 10.2% over 1996. Dividends paid in 1997
represented a payout ratio of 41.8% of net income compared to 41.7% in 1996.
Both ratios are within the guidelines established by UNB Corp.'s Board of
Directors for a dividend payout ratio of 35% to 50% of net income. For 1996, in
addition to cash dividends paid, the Board of Directors approved a 100% stock
dividend to shareholders which was paid on April 30, 1996. Including dividends
and appreciation, the stock returned 33.2% to shareholders in 1997. At year-end
1997, the market value of the stock was 296.7% of the year-end book value
compared to 243.3% at year-end 1996.
As discussed in Note 14 to the Consolidated Financial Statements, the
Corporation's primary source of funds for the payment of dividends is the Bank.
During December of 1997, the Bank paid $7,000 in dividends to the Corporation.
In 1996, the Bank paid $14,010 in dividends to the Corporation. Of this amount,
$1,010 was used to fund the fourth quarter dividend to shareholders. The
remaining $13,000 was upstreamed to the Corporation to provide sufficient
capital to take advantage of future acquisition opportunities, to pay future
cash dividends and to fund future stock buy backs. In order for the Bank to fund
its balance sheet and remain well-capitalized, the Corporation and the Bank
entered into a subordinated debt agreement for $13,000, payable on January 1,
2007 at an interest rate of 6.00%. The Bank, which is limited by regulation as
to the amount of dividend it can pay, remains within these regulatory
guidelines. Currently this restriction will not preclude the Bank from paying
sufficient dividends to fund, as needed, the usual quarterly dividends paid to
the Corporation's shareholders.
Under regulations issued by the Federal Reserve and Comptroller of the
Currency, banks and bank holding companies are required to maintain certain
minimum capital ratios in order to be considered well capitalized. These
guidelines require a minimum total risk-based capital ratio of 10%, 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 other items such as mandatory convertible debt and the
allowance for loan losses. As of December 31, 1997, UNB Corp. had a total
risk-based capital ratio of 13.28%, with a Tier 1 capital ratio of 12.02%,
compared to 13.00% and 11.71%, respectively, at December 31, 1996. 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, 1997, UNB Corp.'s leverage ratio was
8.24%, which substantially exceeds the
<TABLE>
<CAPTION>
NET LOANS
millions of dollars
<S> <C>
1993 $344.3
1994 $403.3
1995 $511.5
1996 $609.3
1997 $620.8
</TABLE>
<TABLE>
<CAPTION>
TOTAL DEPOSITS
millions of dollars
<S> <C>
1993 $404.0
1994 $486.8
1995 $547.2
1996 $600.7
1997 $649.5
</TABLE>
38
<PAGE> 41
Corporation's minimum regulatory requirement. For additional information on the
Corporation and Bank's capital ratios, refer to Note 14 -- Dividend and
Regulatory Capital Requirements.
UNB Corp. continues to offer its shareholders a Dividend Reinvestment Plan
which generates additional capital for the Corporation while allowing
shareholders to increase their holdings of stock without paying brokers' fees
and commissions. This plan allows shareholders to reinvest all or a portion of
their dividends automatically in the purchase of additional shares. Currently,
there are 1,147 shareholders participating with 34.1% of the dividend paid being
reinvested in the plan.
ASSET AND LIABILITY MANAGEMENT
In the normal course of business, the Bank is exposed to interest rate risk
caused by the differences in cash flows and repricing characteristics that occur
in various assets and liabilities as a result of changes in interest rates. The
asset and liability management process is designed to measure and manage that
risk to maintain consistent levels of net interest income and net present value
of equity under any interest rate scenario.
The Bank uses a dynamic computer model to generate earnings simulations,
duration and net present value forecasts and gap analyses, each of which
measures interest rate risk from a different perspective. The model incorporates
a large number of assumptions, including the absolute level of future interest
rates, the slope of the yield curve, various rate spread relationships,
prepayment speeds, repricing opportunities and changes in the volume of multiple
loan, investment and deposit categories. Management believes that individually
and in the aggregate these assumptions are reasonable, but the complexity of the
simulation modeling process and the inherent limitations of the various
methodologies results in a sophisticated estimate, not a precise calculation of
exposure. The Asset and Liability Management Committee reviews updated interest
rate risk position information monthly in addition to regular weekly monitoring
of changes in balance sheet volume, pricing and mix.
At December 31, 1997, assuming an immediate, parallel 200 basis point shift
in market yields, the Bank's net interest income for the next twelve months was
calculated to vary by approximately 3%, implying a fairly neutral interest rate
risk position. For the same period, the net present value of equity was
forecasted to decline by 1.7% in a rising rate environment and to rise by 3.2%
in a falling rate scenario. The duration of total assets exceeded the duration
of total liabilities by less than one month. The modified twelve months
cumulative gap was 1.25% of total assets, indicating a slightly higher balance
of rate sensitive assets than of rate sensitive liabilities.
The strategies that the Bank uses to manage interest rate risk encompass a
number of wholesale funding sources including Federal Home Loan Bank advances
and brokered deposits, and derivative products such as interest rate swaps, caps
and floors in addition to changes in the pricing, maturity and mix of the Bank's
existing balance sheet categories of loans, securities and deposits. Any
strategy to counteract an undesirable level of interest rate risk is evaluated
in terms of its effectiveness and cost and presented to the Asset and Liability
Management Committee for its approval prior to implementation. In general, the
Bank uses wholesale funding as a cost effective method of extending deposit
maturities beyond the terms preferred by the majority of customers, while
derivative products are typically used to offset existing balance sheet
positions that exhibit higher than acceptable risk. These strategies supplement
the ongoing changes in pricing on deposits and loans that form the basis of the
Bank's risk reduction efforts.
At year-end 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 $3,750. The variable rate resets quarterly at three-month LIBOR,
and the notional principal amortizes quarterly according to a predetermined
schedule that corresponds to the expected prepayments on the underlying pool of
mortgage loans being hedged. During the year, the Bank continued its strategy to
gradually restructure the balance sheet by shifting funds from indirect
installment loans to commercial and mortgage loans and to the investment
portfolio. With expectations of relatively low interest rates and a flat yield
curve in 1998, the Bank expects to continue to emphasize variable rate
commercial loans and shorter duration
<TABLE>
<CAPTION>
SHAREHOLDERS EQUITY
PER SHARE dollars
<S> <C>
1993 $9.83
1994 $10.22
1995 $11.37
1996 $12.33
1997 $13.23
Adjusted for any stock dividends and splits
</TABLE>
<TABLE>
<CAPTION>
CASH DIVIDENDS
PER SHARE dollars
<S> <C>
1993 $.44
1994 $.48
1995 $.53
1996 $.59
1997 $.65
Adjusted for any stock dividends and splits
</TABLE>
<TABLE>
<CAPTION>
MARKET Vs. BOOK VALUE
PER SHARE dollars
Market Book
<S> <C> <C>
1993 $14.50 $9.83
1994 $19.25 $10.22
1995 $22.00 $11.37
1996 $30.00 $12.33
1997 $39.25 $13.23
Adjusted for any stock dividends and splits
</TABLE>
39
<PAGE> 42
investment securities rather than longer term fixed rate products, funded by the
proceeds of maturing and prepaying installment and mortgage loans.
LIQUIDITY MANAGEMENT
Management ensures that the liquidity position of the Corporation is adequate
to meet the credit needs and cash demands of its borrowers and depositors in a
timely and cost-effective manner. Through the Bank's Asset and Liability
Management Committee, Management 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 and the cash flows provided by maturities and amortizations in the
loan and investment portfolios. The ability to raise funds in the market place
is provided by the Bank's branch network, in addition to the availability of
Federal Home Loan Bank (FHLB) advance borrowings, brokered deposits, Federal
Funds purchased and securities sold under agreement to repurchase.
In 1996, Management took steps through revision of its loan policy to
redefine internal guidelines for measuring the Bank's overall liquidity level to
include all deposits and FHLB advance borrowings. In this way, Management
acknowledged what has become an industry norm, dependence on advance borrowings
as a source of balance sheet funding considered less volatile than deposits.
Advances with varying maturities and flexible repayment options 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
Corporation's gross loan to deposit (including FHLB advances) ratio at December
31, 1997 was 92.0%, reduced from 93.1% at 1996 year-end. The reason for the
decline was the net growth in deposits and borrowings outpacing the moderate
growth in outstanding loans.
At December 31, 1997, cash and cash equivalents equaled $28,998, or 3.5%, 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, 1997 in Table 8. During 1997, the Corporation generated net cash
flows from operating activities of $12,960, including $9,006 in net profits. The
major portion of cash flows from investing activities were concentrated in a net
use of cash of $14,224 to fund net purchases and additions to the loan portfolio
and for net purchases in the investment portfolio of $3,245. Net cash from
financing activities totaled $3,581. The major cash inflow from financing
activities was a net increase in deposits of $48,817. This was offset by cash
outflows for net decreases in FHLB advances and short-term borrowings of $27,163
and $11,897, respectively. Cash was also used for the payment of $3,629 in net
cash dividends and net purchases of treasury stock of $2,947. The net result of
these cash flows was a decrease of cash and cash equivalents from year-end 1996
to 1997 of $5,764.
The liquidity needs of the Holding Company, primarily cash dividends, are met
through cash, short-term investments and dividends from the Bank. Management is
not aware of any trend or event which will result in or that is reasonably
likely to occur that would result in the Corporation being unable to meet all
current and projected cash needs.
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 protect itself from the
effects of interest rate volatility, UNB Corp. reviews its interest rate risk
position frequently, monitoring its exposure and taking necessary steps to
minimize any detrimental effects on the Corporation's profitability.
<TABLE>
<CAPTION>
TABLE 8
LIQUIDITY MANAGEMENT
(In thousands of dollars) 1997 1996 1995
<S> <C> <C> <C>
Net income ......................................... $ 9,006 $ 8,155 $ 7,379
Adjustments to reconcile net income to net cash from
operating activities ............................. 3,954 2,468 4,202
--------- --------- ---------
Net cash from operating activities ............ 12,960 10,623 11,581
Net cash used in investing activities .............. (22,305) (108,589) (96,957)
Net cash from financing activities ................. 3,581 100,993 86,900
--------- --------- ---------
Net change in cash and cash equivalents ....... (5,764) 3,027 1,524
Cash and cash equivalents at beginning of year ..... 34,762 31,735 30,211
--------- --------- ---------
Cash and cash equivalents at end of year ...... $ 28,998 $ 34,762 $ 31,735
========= ========= =========
</TABLE>
40
<PAGE> 43
<TABLE>
<CAPTION>
MARKET PRICE RANGES FOR COMMON STOCK
1997 BID
--------
QUARTER HIGH LOW DIVIDEND RATE
<S> <C> <C> <C>
FIRST $ 32.00 $ 30.00 $ .15
SECOND 36.00 32.00 .16
THIRD 38.00 36.00 .17
FOURTH 39.25 38.00 .17
1996 BID
--------
QUARTER HIGH LOW DIVIDEND RATE
First $ 23.63 $ 22.00 $.135
Second 26.75 23.63 .140
Third 28.25 26.75 .140
Fourth 30.00 28.25 .175
</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, 1997, UNB Corp. had 1,487 shareholders of record.
41
<PAGE> 44
<TABLE>
<CAPTION>
FIVE YEAR SUMMARY OF SELECTED DATA
(In thousands of dollars, except per share data)
Years ended December 31,
1997 1996 1995 1994 1993
EARNINGS:
<S> <C> <C> <C> <C> <C>
Net interest income $ 33,040 $ 31,363 $ 27,953 $ 24,191 $ 22,721
Provision for possible loan losses 2,929 3,140 1,750 1,020 2,195
Income before federal
income taxes 13,803 12,428 11,165 10,005 8,895
Federal income taxes 4,797 4,273 3,786 3,377 2,911
Net income 9,006 8,155 7,379 6,628 6,338
Cash dividends declared 3,762 3,400 3,016 2,742 2,388
PER SHARE DATA:*
Net income basic $ 1.56 $ 1.42 $ 1.28 $ 1.16 $ 1.18
Net income diluted 1.53 1.38 1.26 1.14 1.17
Cash dividends 0.65 0.59 0.53 0.48 0.44
Book value per share 13.23 12.33 11.37 10.22 9.83
AVERAGE BALANCES:
Total assets $ 810,999 $ 756,294 $ 644,862 $ 534,423 $ 490,326
Total earning assets 769,144 717,248 600,130 495,710 449,784
Total deposits 614,936 500,091 435,777 426,994 404,626
Net loans 620,489 574,495 457,485 385,618 339,468
Shareholders' equity 73,791 68,591 61,617 57,894 50,172
FINANCIAL RATIOS:
Net income as a percentage of:
Average assets 1.11% 1.08% 1.14% 1.24% 1.29%
Average shareholders' equity 12.20 11.89 11.98 11.45 12.63
Cash dividends as a percentage
of net income 41.77 41.69 40.88 41.37 37.68
Average shareholders' equity as
a percentage of average assets 9.10 9.07 9.56 10.83 10.23
Net loans/assets 75.13 75.22 72.51 67.57 69.17
Gross loans/deposits** 92.04 93.12 89.66 81.94 84.88
Allowance for loan losses/
total loans 1.53 1.35 1.40 1.54 1.73
Net loans/equity 8.11x 8.54x 7.83x 6.93x 6.18x
Deposits/equity 8.49x 8.42x 8.38x 8.30x 7.25x
YEAR-END BALANCES:
Total assets $ 826,313 $ 809,979 $ 699,644 $ 601,084 $ 497,821
Long-term debt 35,650 62,603 31,360 16,660 8,820
Total shareholders' equity 76,520 71,334 65,327 58,640 55,706
Note: This summary should be read in conjunction with the related consolidated financial statements and notes included
herein.
<FN>
*Per share data has been adjusted for any stock dividends and splits.
**Deposits include FHLB advances.
</FN>
</TABLE>
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.
42
<PAGE> 1
Exhibit 21
Subsidiaries of UNB Corp.
<TABLE>
<CAPTION>
Registrant Percent of Ownership
----------
I. UNB Corp.
<S> <C>
A. United National Bank & Trust Company 100%
(National Banking Association)
1. 620 Market Community Redevelopment Corporation 100%
B. United Banc Financial Service, Inc. 100%
C. United Insurance Agency, Inc. 100%
D. United Mortgage Corporation 100%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 28,998
<INT-BEARING-DEPOSITS> 1,142
<FED-FUNDS-SOLD> 7,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 132,007
<INVESTMENTS-CARRYING> 8,831
<INVESTMENTS-MARKET> 8,914
<LOANS> 632,608
<ALLOWANCE> 9,650
<TOTAL-ASSETS> 826,313
<DEPOSITS> 649,481
<SHORT-TERM> 56,511
<LIABILITIES-OTHER> 8,151
<LONG-TERM> 35,650
0
0
<COMMON> 5,821
<OTHER-SE> 70,699
<TOTAL-LIABILITIES-AND-EQUITY> 826,313
<INTEREST-LOAN> 54,734
<INTEREST-INVEST> 7,798
<INTEREST-OTHER> 830
<INTEREST-TOTAL> 63,362
<INTEREST-DEPOSIT> 23,470
<INTEREST-EXPENSE> 30,322
<INTEREST-INCOME-NET> 33,040
<LOAN-LOSSES> 2,929
<SECURITIES-GAINS> 22
<EXPENSE-OTHER> 23,505
<INCOME-PRETAX> 13,803
<INCOME-PRE-EXTRAORDINARY> 13,803
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,006
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.53
<YIELD-ACTUAL> 4.30
<LOANS-NON> 854
<LOANS-PAST> 91
<LOANS-TROUBLED> 424
<LOANS-PROBLEM> 1,722
<ALLOWANCE-OPEN> 8,335
<CHARGE-OFFS> 2,911
<RECOVERIES> 1,297
<ALLOWANCE-CLOSE> 9,650
<ALLOWANCE-DOMESTIC> 6,702
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,948
</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 1996 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>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 34,762
<INT-BEARING-DEPOSITS> 157
<FED-FUNDS-SOLD> 6,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 117,149
<INVESTMENTS-CARRYING> 15,737
<INVESTMENTS-MARKET> 15,904
<LOANS> 617,602
<ALLOWANCE> 8,335
<TOTAL-ASSETS> 809,979
<DEPOSITS> 600,664
<SHORT-TERM> 68,408
<LIABILITIES-OTHER> 6,970
<LONG-TERM> 62,603
0
0
<COMMON> 5,786
<OTHER-SE> 65,548
<TOTAL-LIABILITIES-AND-EQUITY> 809,979
<INTEREST-LOAN> 51,176
<INTEREST-INVEST> 7,400
<INTEREST-OTHER> 613
<INTEREST-TOTAL> 59,189
<INTEREST-DEPOSIT> 21,438
<INTEREST-EXPENSE> 27,826
<INTEREST-INCOME-NET> 31,363
<LOAN-LOSSES> 3,140
<SECURITIES-GAINS> 369
<EXPENSE-OTHER> 22,153
<INCOME-PRETAX> 12,428
<INCOME-PRE-EXTRAORDINARY> 12,428
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,155
<EPS-PRIMARY> 1.42
<EPS-DILUTED> 1.38
<YIELD-ACTUAL> 4.38
<LOANS-NON> 709
<LOANS-PAST> 130
<LOANS-TROUBLED> 237
<LOANS-PROBLEM> 1,699
<ALLOWANCE-OPEN> 7,242
<CHARGE-OFFS> 3,162
<RECOVERIES> 1,115
<ALLOWANCE-CLOSE> 8,335
<ALLOWANCE-DOMESTIC> 7,392
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 943
</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>
<RESTATED>
<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
0
0
<COMMON> 2,873,977
<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> 1.28
<EPS-DILUTED> 1.26
<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>
